World Savings Day – What are the different ways to invest your savings?

Posted by Mehul Kothari | Published on 05 Nov 2018
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World Savings Day – What are the different ways to invest your savings?

World Savings Day – What are the different ways to invest your savings?

The concept of saving is as old as money itself. Once, long ago, we saved our money in jars and pots, under mattresses, and hidden away in secret nooks and crannies. Today, we save it in banks, through savings accounts or recurring deposits.

On World Savings Day, it is important to recognize that while savings are important, it’s just one part of the wealth-creation journey.

Why savings by itself is not enough?

Here’s an important fact: saving without investing actually depletes your wealth. How? The villain is inflation. The money you have today will buy you less tomorrow. If you keep your savings idle, you are actually losing money. So, save by all means. But only to invest it in ways that you can earn a better return than the rate of inflation.

How to move from savings to investments?

Before you plan to make investments, you should keep two important things in mind – what are your financial goals, and how much risk you are willing to take. When it comes to investing, risk and return are directly proportional – the higher the risk, the higher the probability of return.

To ensure you get the returns you seek while minimizing risks, you must diversify your investments. Traditionally, Indians have had a fascination for fixed deposits. While fixed deposits are one of the safest investments, their post-tax returns are often sub-inflation. If you are looking at really long-term, reasonable and safe returns, Public Provident Fund is a good option. But if you have a bit of appetite for risk, then here are six ways to invest your savings.

1. Equities – Equities are one of the most popular asset classes over the long term. There are many benefits of equities – you can start small and gradually increase your exposure; easy to invest; you can invest in a wide range of companies; it’s highly liquid so you can buy and sell at any time; it can be very tax-efficient with proper planning.

2. Mutual Funds – Mutual funds offer a wide array of investment options, including equity mutual funds, debt mutual fund, exchange traded funds, tax-saving funds etc. Depending on your financial needs, return expectation and risk appetite, you can choose a mix of funds. The great thing about mutual funds is you can invest as little as Rs 500. Using the SIP route, you can create long-term wealth with regular investments of small sums.

3. IPO – Initial Public Offers allow investors to buy shares of companies that are new to the stock market. Often, IPOs allow you to buy shares of a promising company at a reasonable price since many companies keep their offer price attractive.

4. Derivatives: Derivatives are instruments or contracts that derive their value from an underlying asset like a stock. Seasoned investors use derivatives to hedge their risks, to benefit from arbitrage and to take leveraged positions. For example, derivatives like Options allow you to take larger positions on equities with lower exposure.

5. Commodities: Commodities are pivotal to any economy. They can also act as a hedge against your equity portfolio, because many commodities have an inverse co-relation with equity. You can trade in commodities like gold, silver, metals, food grains and other agricultural produce just as you do in shares of companies.

6. Currencies: Currency prices keep fluctuating offering investors an opportunity to benefit from the changes. Most traders use derivative contracts to trade in currency. Even individuals and companies use derivatives to hedge their currency risk.

Regardless of where you choose to invest your money, make sure you track it closely, and regularly evaluate whether your portfolio is in line with your life goals.
Keep saving. Keep investing. Happy World Savings Day!

Disclaimer: Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.

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The Importance of Muhurta Trading

Posted by Mehul Kothari | Published on 06 Nov 2018

The Importance of Muhurat Trading It is considered auspicious to trade during muhurat trading, a special session of the stock market held on Diwali Diwali or Deepawali is one of the most important events in the Hindu calendar. It is especially important for businessmen since it is considered the beginning of the New Year (Samvat), and is dedicated to Lakshmi, the goddess of wealth and prosperity. Conducting some business activity on this day is considered auspicious and sets the tenor for the year ahead. For the trading community, Diwali is a time when old account books are closed and new books opened. On this day, traders worship their new account books in a ceremony called `Chopda Poojan’. A Gujarati traditionThe tradition of ‘Muhurat’ (auspicious time) trading on the stock exchange was started by the Gujarati community, which was a pioneer of stock trading in the country and continues to dominate it today.Muhurat trading is held for an hour on Diwali at a time specified by the stock exchanges, usually in the evening. For 2018, Muhurat trading on the NSE and BSE will be held on 7 November between 5pm and 6:40 pm. The offices of the stockbrokers are colourfully decorated, and they and their families hold pujas to pray for a prosperous future. While books used to be worshipped in an earlier age, now the honours are done to the trading terminals. A symbolic `buy’ order is also placed. An optimistic noteInvestors tend to end the trading on an optimistic note to ensure an auspicious start for the year ahead. Many consider this a good time to buy shares for their children, which are held for the long term. Considering the upbeat mood, many day traders also use the opportunity to rake in some profits. Though the functioning of the stock market has changed by leaps and bounds in the past few decades, muhurat trading is still significant for many investors because of its religious and traditional aspect. It is also considered a good time for newbies to enter the market as it is believed to be an auspicious time, particularly, if you want to have a lifetime of success and prosperity. Disclaimer: "Investment in securities market are subject to market risks, read all the related documents carefully before investing."

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  • Commodity Market – Different Types of Commodity Market in India
    Posted by Rushabh H. Mehta | Published on 28 Feb 2020

    The commodity market in India has seen a sharp increase in the volumes over the past few years. Commodities are just another asset class like the bond and equity market. Commodities come from the earth and act as raw material for all types of manufacturing businesses. There are many types of commodities that can be traded in the market. In this article, you will learn about commodity trading in India, types of commodity market and other aspects of the commodity market in India. Let us begin by understanding the meaning of commodity. Meaning of Commodity A commodity is a group of goods or assets that are used in our day to day lives such as metals, agriculture, energy, etc. A commodity can be categorised as movable good that can be purchased and sold, except for money and actionable claims. There are various types of commodities that are traded in India. Let us look at the types of commodities. Types of Commodities Traded In India Agriculture: Wheat, Cotton, Rice, Corn, etc. Metals: Copper, Zinc, Gold, Silver, etc. Energy: Natural Gas, Crude Oil, Heating Oil, etc. Meat and Livestock: Cattle, Egg, etc. Let us now learn how you can invest in the commodity market in India. How to Invest in Commodity Market in India? You can commence commodity trading in India in any of the six major commodity trading exchanges as listed below; Indian Commodity Exchange – ICEX Ace Derivatives Exchange – ACE National Multi Commodity Exchange – NMCE The Universal Commodity Exchange – UCX Multi Commodity Exchange – MCX National Commodity and Derivatives Exchange – NCDEX From the above MCX and NCDEX are the most popular exchanges. List of Commodities Traded on Multi Commodity Exchange (MCX) Metals: Aluminium, Brass, Copper, Zinc, Lead, Nickel. Bullion: Gold, Silver. Agri Commodities: Rubber, Black Pepper, Mentha Oil, Crude Palm Oil, Palmolien, Cardamom, Cotton, Castor Seed. Energy: Natural Gas, Crude Oil. List of Commodities Traded on National Commodity and Derivatives Exchange (NCDEX) Fibres: Cotton, Guar Gum, Guar Seed, Kappa’s Oil and Oilseeds: Crude Palm Oil, Cotton Seed Oil Cake, Castor Seed, Mustard Seed, Refined Soy Oil, Soybean Soft: Sugar Cereals and pulses: Wheat, Barley, Paddy, Chana, Maize Rabi, Maize Kharif / South Spices: Jeera, Turmeric, Coriander, Pepper. Let us now learn about the commodities that are most traded. Most Traded Commodities Natural gas, crude oil, gold, silver, cotton, corn, wheat are among the most traded commodities globally. Crude oil and gold are among the most favourite commodities among the traders and investors community. Crude oil is used for producing diesel, petroleum, etc. It is very volatile during global tensions. OPEC is the consortium of oil-producing nations that determine the supply of crude oil. The main oil-producing nations are Russia, US, Saudi Arabia, etc. Just like crude, gold is among the most popular commodity Indian people invest in. The price of gold has an inverse relationship with the US dollar. When the price of the US dollar falls, the prices of gold increase and when the price of the US dollar increases, the prices of gold falls. Let us now learn about the participants in the commodity market. Participants of Commodity Market Speculators Speculators are traders that constantly monitor the price of commodities and predict the future price movement. If the speculators expect the prices of the commodity to move higher, they purchase commodity contract and sell them when the price goes up. Similarly, when they expect the price to go low, they sell commodity contracts and purchase back when the price falls. Thus, the intention of speculators is to make a profit in any type of market. Hedgers Hedgers are the producers, manufacturers, etc. who safeguard their risk by using the commodity futures market. Like for example, if a cotton farmer expects price fluctuation during crop harvesting, he can hedge his position. To hedge the risk, the farmer enters into a futures contract. If the price of the crop falls in the local market, the farmer can compensate for the loss by making profits in the future market. Similarly, if there is an increase in the price during crop harvesting, the farmer can book loss in the futures market and compensate it by selling his crop at a higher price in the local market. Let us now learn about the benefits of trading in the commodity market. Benefits of Trading in the Commodity Market Management of Risk The Securities and Exchange Board of India (SEBI) ensures that the exchanges have proper risk management procedures in place to protect the investors. Therefore, trading in commodities is regarded as very safe. Transparency Trading on the commodity exchanges is very transparent and the buyers or sellers cannot manipulate the price. The price discovery is done without any manipulation and orders are executed only when there is a match between a buyer’s and seller’s order. The margins in commodity markets are low, therefore traders use this market to hedge their position and for higher leverage. There are many benefits of trading in the commodity market. However, there are some important things that you must know while trading in such a market. Things to Know While Trading in Commodity Market The demand and supply chain determines the prices of commodity and you must have a clear idea about it. The prices of commodities depend on various factors and your strategies must be framed after understanding those factors. As a beginner, it is always advisable to take the help of experts before starting commodity trading. The risk in commodity trading is higher because you get higher leverage. The above mentioned are a few things that one must know before indulging in commodity trading in India. As a beginner or seasoned investor, you can contact IndiaNivesh for any assistance relating to the Indian commodity market. Our experts and professionals can help you in finding the best commodity to trade in India according to your risk-taking ability and financial goals. Our aim is to exceed the client’s expectation in all endeavours and we will be glad to serve you.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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  • Systematic Withdrawal Plans – How to use SWP?
    Posted by Mehul Kothari | Published on 20 Nov 2019

    Mutual Funds are to financial markets what star kids are to Bollywood – the talk of the town. Campaigns like “Mutual Funds Sahi Hain” have helped to spread awareness about the benefits of mutual funds to the masses. One of the most commonly used MF terms is SIP or Systematic Investment Plans. However, not much is known or talked about its better half – Systematic Withdrawal Plans or SWP. SWPs are considered as the opposite of SIP. Read on to know more about SWPs and how it can be beneficial for you. SWP – Meaning in Mutual Fund parlance Systematic Withdrawal Plan is a facility which allows investors to take out a pre-decided amount from their existing Mutual Fund investments at pre-determined time durations. The frequency of withdrawal can be chosen by the investors basis their requirements. It can be monthly, quarterly, bi-annually or annually. Basis the amount withdrawn in SWP, the equivalent units (as per the NAV on the day of withdrawal) are redeemed. Key features of SWP in Mutual Funds: It generates a regular stream of cash inflows Offers flexibility to investors in terms of withdrawal amount and frequency Can be started at the time of starting investment in a Mutual Fund scheme or can be activated at a later date in an existing scheme. Many investors prefer the SWP route to dividends. This is because dividends attract DDT (Dividend Distribution Tax) while long-term capital gains (till Rs. 1 Lakh) under SWP are exempt from tax. There is an option in SWP to customize the withdrawals: Fixed Withdrawal Option - You can decide to take out a specific amount on a periodic basis. Appreciation Withdrawal Option- If you want to preserve your capital, you can decide to withdraw only the amount of capital gains.  Setting up a Systematic Withdrawal Plan is a simple process. All you need to do is fill up the SWP Form (with the details like the amount to be withdrawn, periodicity etc.) and submit to the fund house or your distributor. Benefits of Systematic Withdrawal Plan Mutual Funds:1. A fixed source of income Systematic Withdrawal Plans become a fixed source of income for investors. For working individuals, it helps to supplement salary or business income. It can also be used as a steady source of income post-retirement.2. Discipline Just like Systematic Investment Plans, SWPs also help to instil a sense of disciplined investing. In SIP you need to invest a fixed sum of money on a regular basis. SWPs automatically redeem pre-determined units of mutual funds, irrespective of market levels. One can plan their monthly expenses as per the SWP amount, which will help them to remain within the budget. Secondly, the fixed withdrawal limit protects you from impulse sell or buy decisions in case of market fluctuations.3. Rupee Cost Averaging Rupee Cost Averaging enables investors to eliminate the need to time their market related decisions. Mutual Fund’s Net Asset Value(NAV) keeps on changing from time to time. Through SWP, investors get the average NAV of the MF over a long duration of time. Hence, it protects them from market fluctuations and ensures that investors do not become dependent on any particular NAV.4. Tax efficiencies From a tax perspective, each withdrawal under SWP is treated the same as equity or debt mutual funds. As the tax is applied only on the amount redeemed, SWP becomes a more tax-efficient alternative as compared to Fixed Deposits or lump sum withdrawals. They are preferred to Dividend Plans too for the same reason. Dividend payouts attract DDT (Dividend Distribution Tax) which is deducted by the AMC before the payout. SWP allows  optimising the tax on capital gains by holding the investments for a longer tenure and splitting the income over multiple time periods. How to use SWPs effectively? All investors can benefit from SWP in Mutual Funds. Here are some examples in which you can include them effectively in your financial planning- Retirement Planning SWP is a great strategy to fund financial needs post-retirement. This facility is especially handy for retirees who do not have a pension or other such regular source of income. Supplement salary income Salaried individuals can use SWP as a second source of income. It can help them fund specific financial goals such as children’s education, purchase of consumer goods, paying off loans, etc. Freelancers The biggest challenge faced by freelancers or self-employed professionals is lack of a steady or fixed income. There may be months where they would be minting money but there could be some dry spells as well. In such cases SWPs help to bring stability to one’s financial life. Nearing your financial goals Many investors use SWP in an extremely smart manner, especially when the markets are doing well. They invest in an equity mutual fund as they have the potential to generate higher returns. Once they reach their desired corpus, they can opt for an SWP. Through this facility, they move the funds from the equity investments to a relatively safer/ non-volatile option such as Bank Deposits, etc.   Final Words Systematic Withdrawal Plans help to cultivate a sense of financial discipline. It can be effectively used as a means to fund your monthly expenses or finance your (or your parent’s) retired life. Not only does it offer regular income but also ensures a controlled and budgeted approach to spending. However, you should try to withdraw only the interest part and keep the capital amount intact. In case you are unable to decide how much is too much, it is best to seek the help of an expert like IndiaNivesh. The team at IndiaNivesh can help you choose the right Mutual Fund scheme and the correct SWP amount basis your financial needs and investment tenure. They also offer a wide range of financial solutions related to broking and distribution, institutional equities, strategic investments, investment banking and wealth management. You can read all about them on https://www.indianivesh.in.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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  • Commodity Investment – Reasons to Invest in Commodity Market
    Posted by Mehul Kothari | Published on 07 Nov 2019

    The world of investments has a vast number of financial instruments such as shares, stocks, bonds and many more. Commodities, too, are one such investment option available for investment. Even though the commodity market has grown substantially in the last few years, the participation of retail investors in commodities is still limited. However, the commodity market has huge potential and making the right investments in commodities can help improve the performance of your portfolio. What are commodities? Commodities are tangible goods that are either naturally occurring or can be agriculturally grown.  Commodities are consumed directly or used as raw materials for manufacturing finished goods meant for public consumption. All commodities can be classified under either of the two categories- Soft commodities- Those, that are grown and cannot be stored for an extended period. Examples of soft commodities include agricultural products such as grains, tea, coffee, and livestock. Hard commodities- Those, that are obtained through mining and extraction. Example of hard commodities includes oil, metals and natural gas. Why should you invest in the commodities market? Commodities play an important role in the development process and hence are building blocks of every economy. Commodity investments can help you diversify your portfolio into a different asset class apart from shares and bonds and enhance the overall returns of your investments. For many of you, the general perception is that the commodity market is complex and hence not something that everyone can dabble into. However, commodity investments can fetch you handsome returns.  Here are the top three reasons to invest in commodity markets for all types of investors-1. To diversify your portfolio  One of the key factors that determine the success of your financial planning is diversification. Diversification with regards to investment portfolio means investing in various assets that are not correlated to each other of your portfolio in different asset classes. Most of you would be diversifying your portfolio in five major asset classes which include cash, shares, fixed income securities, real estate, and gold. In times of increased volatility in the markets, you are either holding on to cash or investing in gold. Gold is considered the safest haven for investment in turbulent times and Indians tend to invest in gold because it is considered as a symbol of wealth and has ornamental value. However, in reality, the gold in your portfolio is your investment in commodity and just like all the other commodities the returns from it are independent of the returns generated by stocks and bonds. Just like gold, there are other commodity investments whose returns are not correlated to equities and bond markets. The price of any commodity investment is a function of demand and supply and by doing proper research and analysis you can make profits from commodity market investments.2. To provide a hedge against inflation Inflation is the general rise in the price of goods and services over time. For any investment to be fruitful, it is important that the returns generated beat the rate of inflation.  Higher inflation effectively erodes the real returns generated by your investments in stocks and fixed income securities. However, in the case of commodities, higher inflation relates to the higher price of commodities. So, unlike other investments, your commodity investments will result in a strong performance when inflation is high. Given the current situation when inflation is constantly on the rise, investing in commodities will provide a hedge against inflation.3. To improve potential returns The prices of individual commodities can fluctuate significantly due to several factors such as demand and supply, the impact of natural calamities, exchange rates and the economic health of the nation.  The rise in infrastructure projects in a developing country like ours and also globally has had a positive impact on commodity prices. As the commodity market is still an untapped arena, many of them are trading at a lower price than their actual potential. Proper research and effective implementation of investment strategy in commodities can help investors improve the overall returns on their portfolio. What are the various options to invest in commodities? The commodities market is a very deep market and investors have many investment vehicles to access it.  Let us look at the various options available for investors to buy and sell commodities1) Investing in the physical form Commodities such as gold, silver, etc., are bought by investors in physical form.  However, not all commodities can be bought in physical form as it has its drawbacks of storage and spoilage. Even in the case of precious metals security and insurance increase the cost of your investment. Moreover, most of the time you want to invest in a commodity, not for end-use but to make profits if you anticipate that the price will increase. So, buying a commodity in physical form, except for precious metals, is generally not recommended for retail investors.2) Investment through commodity futures One of the most common ways to trade in commodities is through a commodities futures contract. It is a standardised agreement to buy or sell fixed quantities of the underlying commodity at a predetermined price on a specific date as mentioned in the contract. Also, commodity trades happen electronically through commodity exchanges where investing real-time commodity is possible.  Multi Commodity Exchange of India (MCX), National Commodity and Derivatives Exchange (NCDEX) are two of the many commodity exchanges present in the country which help investors trade in commodities. All the commodity exchanges come under the regulation of the Forward Markets Commission (FMC). 3) Commodity ETFs Commodity ETFs are another popular investment option available for retail investors to diversify their holdings in commodities. Commodity ETFs invest in a single commodity and physically hold and store it, invest in a commodity futures contract or invest in a commodity index that tracks the performance of multiple commodities. Investors can invest in commodity ETFs electronically in their Demat account. 4) Commodity Stocks Investors who are not comfortable with investing in commodity futures or ETFs can diversify their portfolio in commodities is by investing in commodity stocks. Commodity stocks are stocks of those companies which are directly or indirectly related in the manufacturing process of the commodity and hence have a positive correlation with the commodity.  For example, if you feel that the steel prices are going to increase, then you can invest in the stocks of various steel companies listed on the exchange. 5) Mutual funds One of the biggest reasons for an investor to shy away from commodity investment is that commodity investments require a lot of time, knowledge and expertise to make the right investment choices. However, now SEBI has permitted mutual funds to invest in the commodities market through the exchange-traded commodities derivatives (ETCD) route.  Thus, retail investors can now participate in commodity markets in a structured manner through professionally managed mutual funds. Takeaway Commodities are a broad and diversified asset class that offers a great investment opportunity to investors. Given the high inflationary pressure and volatility in the markets, dedicating a small portion of your portfolio to commodities will help enhance the overall performance of your investments. Investing in commodities may look intimidating and you may feel a little hesitant to explore your options, but correct guidance from an experienced financial advisor can help you understand the nuances of commodity markets and make the right investment decisions as per your investment needs. Financial advisors at IndiaNivesh possess the requisite expertise and experience to help and guide you with investments in commodities markets.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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