Educational Articles

Balanced advantage meaning a type of hybrid mutual funds which invest in equity and fixed income asset classes. The asset allocation (i.e. mix of equity and fixed income in the portfolio) of balanced advantage funds changes dynamically according to market conditions.

Emotions and instincts often guide investment decisions, but they can be harmful for your financial interests. For example, age old investing wisdom is buying low and selling high. However, instead of “buying low and selling high” investors usually buy when market is high, thinking it will go higher.

We humans like to believe that we are rational beings. But market swing is a daily reminder, that in groups, we are everything but that.

In last module we saw how emotions impact our choices. In this article we shall see how by using Hybrid Funds, an investor may find their place on the emotion continuum and may make still rational decision.

Toss a coin and there is only half a chance it will be heads. That goes for our investments as well ‒ no single asset class, or sub-class therein, can outperform all the time, and so the winners will keep on changing.

These funds have a static asset allocation strategy with the flexibility to keep its asset allocation within prescribed ranges mandated by SEBI. SEBI requires these funds to invest 65 – 80% of their assets in equity or equity related securities and rest in money market or debt securities.

Equity savings fund essentially generate returns by investing in equity, debt and arbitrage opportunities. This last component sets them apart from other hybrid funds. Essentially, the fund manager looks to exploit the pricing inefficiencies in the cash and derivatives segments of the equity market.

Arbitrage is simultaneous buying and selling the same underlying security or its derivatives in different market segments to make risk free profits.

In the last two years, we have deep rate cuts and entire focus was on reviving growth. Pandemic ended with rise of new concerns. Amid weak global signals, rising bond yields, persistent high inflation, uncertainty around the Russia-Ukraine war and rate hikes by the US Fed – market is under pressure.

The latest Wholesale Price Index (WPI) inflation came at 14.55% for March 2022. This is up from 13.11% measured in February 2022. In the similar period, the Consumer Price Index (CPI) inflation for March 2022 was around 6.95%, which is a 17-month high. The domestic fuel prices were up by 34.5% year on year basis in March. These numbers are increasingly indicating that inflation in international energy prices is beginning to show

What is money market? Money market is part of financial markets which deals with very short-term fixed income instruments. Money market instruments have maturity of less than 1 year.

Low Duration Funds are debt Mutual Fund Schemes which as per the SEBI categorisation circular should invest in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 months.

When investing in a debt instrument, the first consideration ‒ and for many of us the only material one ‒ is the yield to maturity (YTM) it offers.

The recent rise in domestic and global bond yields hasspooked investorsof debt funds - anincreasein yields leads to a fall in the value of traded bonds. thereby denting fund returns. However. as with any other asset class. debt instruments have their ups and downs; they closely track the interest rate movement.

Bank fixed deposits (FDs) have traditionally been the most favoured debt investment option among Indians. But not anymore. With interest rates on FDs falling, especially over the past one year, their popularity is waning. In such times, corporate bonds can serve as an alternative to bank FDs for investors looking for low-risk investment options.

Fixed income securities make interest payments at regular intervals and principal payment on maturity.

Ultra short duration funds are fixed income mutual fund schemes which invest debt and money market securities such that the Macaulay Duration of the scheme portfolio is 3 months to 6 months. These funds are suitable for short term investments since they are less volatile and aim to produce more stable income compared to funds with longer duration profiles. Many investors get confused between liquid funds and ultra-short duration funds.

Different investors have different investment needs depending on their financial situations, risk appetites and investment objectives.

Fixed Income or Debt funds offer a greater variety of products across the risk / return spectrum. It is, therefore, important for investors to select the right product according to their specific investment needs, risk appetite and investment tenure.

Debt funds are fixed income mutual fund schemes which invest in debt and money market instruments like CPs, CDs, Corporate Bond, T-Bills, G-Secs etc.

By investing a fixed amount every month (or any other interval) from your regular savings, you can invest over a long period of time and benefit from the power of compounding.

The risk of fixed income instruments is usually lesser than equity because issuer of fixed income instruments is contractually obliged to pay a certain rate of interest and principal on maturity of the instrument.

If you read about fixed income investments in fund factsheets, scheme information documents, fund manager interviews, blogs, etc you will come across some technical terms which you may not understand.

The equity market's stellar performance has beckoned many investors to take huge exposure to the asset class. Though equity is one of the best wealth creators in the long term, it is prudent to include a less risky asset class such as debt to balance the investment portfolio.

Bank fixed deposits and Government small savings schemes have been the traditional investment choice of average Indian households. As per Reserve Bank of India’s Quarterly Estimates of Household Financial Assets and Liabilities, Rs 4,753 billion was invested in bank FDs in FY 2018 (latest year for which data is available from RBI).

The Covid-19 pandemic has had a large bearing on the global as well as domestic financial markets. Even the hitherto steady fixed income space is shaken.

Silver ETF is a financial instrument which tracks the price of pure silver. These instruments invest in physical silver or silver related instruments.

Gold ETF in India were launched for the first time around 15 years back. Since then, the popularity of Gold ETF fund have steadily increased even though most retail investors still prefer to invest in physical gold.

Gold and Silver ETF Fund of Funds is a fund of funds (FOFs) mutual fund scheme, which invests in Gold and Silver Exchange Traded Funds.

Gold ETF is much safer and cost efficient way of investing in Gold. In this article we will discuss about investing in Gold ETF or Gold exchange traded fund.

While awareness about Exchange Traded Funds (ETFs) is quite low in India, these funds are gaining traction amongst investors over the last few years. In the last 5 years, the mutual fund industry assets under management (AUM) in ETFs have grown at a CAGR of more than 100%. In the developed markets, ETFs and index funds are hugely popular with investors.

While traditional investing has focused on financial metrics, sustainable investments aims to combine the best in class practices of traditional investing with insights about society to produce better outcomes for investors in the long term.

Increasing stakeholder activism and globalization is shifting company and investor focus towards sustainable growth and development

The imbalance in the ecosystem is increasingly visible with the rising number of disasters, such as wildfires, floods and droughts, with the latest being the Covid-19 pandemic.

Fund of Funds (FoF) is a mutual fund which invests in the units of other mutual funds including but not limited to index funds and ETFs.

Despite a traditionally higher risk profile, Emerging Market (EM) equities have proven resilient and shown relative strength following 2020’s 1st quarter volatility.

Equity, as an asset class, is an attractive investment avenue for investors with high-risk appetite and a long-term investment horizon. Within the equity universe, the safety quotient draws investors to large cap companies and often away from higher returns promised by small and mid-caps.

In the three months ended April 27, 2020, Nifty 50 TRI and Nifty Next 50 TRI fell just 23% and 19%, respectively, compared with 29-37% by mid-caps and small caps.

A new fund offer or NFO of mutual funds is a first-time subscription offer for a new scheme launched by an asset management company

Liquid funds meaning debt mutual fund schemes which invest in debt or money market instruments that mature within 91 days.

AUM meaning assets under management, which implies the cumulative sum of the market value of total securities held in a mutual fund scheme.

ETF mutual fund or ETF schemes track a benchmark index, example – Sensex or Nifty, etc. ETFs do not aim to beat benchmark index returns; rather they aim to replicate the performance of the benchmark index.

AMCs are SEBI registered entities which manages the assets of mutual funds. In order to understand the working of an AMC, let us first discuss how mutual funds work.

The Government of India constituted the National Savings Organization (now the National Savings Institute) in 1948. This started the history of investment in India. The Post Office Savings Bank is listed in the Constitution of India.

Target maturity funds are passive debt mutual fund schemes, tracking an underlying bond index.

Mutual funds are financial instruments which pool money from a large number of investors and invest them in different securities

The full form of CAGR in mutual fund is compounded annual growth rate. It is also known as annualized returns. In order to understand compounded annual growth rate we should know the concept of compounding

The rates are applicable for the financial year 2022-2023, as per the Finance Act, 2022

Today, we have an interesting topic to talk about. Most of us would have faced a situation where there is an unexpected, unplanned & urgent need of funds. In such confusing times, our go-to source of money is our investments made for long-term goals.

Most of us would have encountered a time when there was an urgent need for funds for an unplanned or unaccounted expense. This could be as sudden as a medical emergency or house repair that needs urgent attention.

When it comes to debt mutual funds, lot of investors think of the underlying securities as being Government bonds (G-Secs), Corporate bonds (NCDs) or money market instruments (e.g. TPTs, CPs, CDs etc). Different debt and money market instruments have different risk and yield profiles.

This is how our world has turned right now. Markets are highly volatile and there are multiple factors like Covid-19, Geo-political scenario, inflation….Forming clouds of uncertainty.

OTM full form is ‘One Time Mandate’ – It is a one-time registration process to be done by the mutual fund investor wherein the investor authorizes his/her banker to execute debits to his bank account up to a certain limit based on requests received from the mutual fund company.

‘IDCW’ is abbreviation of ‘Income Distribution cum Capital Withdrawal’. Mutual fund investors have come across this new term IDCW when SEBI changed the term “Dividend Option” in mutual funds to “IDCW” in April 2021.

SIP and Mutual Funds sound similar, but they are not the same. Most investors get confused with these terminologies and try finding the difference between SIP and mutual fund.

Mutual funds are market linked instruments, which invest in equity or equity related securities, debt and money market instruments. The Net Asset Value (NAV) of a mutual fund scheme depends on the market price of the underlying securities in its portfolio.

Financial planning is the process of defining different financial goals, quantifying these goals factoring in inflation and having an investment plan to meet these goals. Financial planning also prepares you for unexpected risks e.g. untimely death, serious illnesses, sudden loss of employment etc.

Mutual Fund redemption is a process wherein an investor sells his/her mutual fund units back to the mutual fund company (AMC). It means they are withdrawing units (known as redemption in mutual fund parlance) to obtain returns/ principal from the mutual fund scheme

The concept of a Mutual Fund works on pooling resources with one common objective in mind. In other words, a Mutual Fund is made up of money that is pooled together by a large number of investors. Their money is given to a professional (referred as fund manager) to invest in a basket of stocks and/or other financial instruments such as bonds/commodities.

Financial planning is not only about saving and investing. In fact, ensuring cash flow to meet planned expenses is avital component of financial planning. On this account, mutual funds with dividend option have been one of the preferred go-to investment vehicles.

We see an attractive backdrop for emerging market (EM) equity performance in a post Covid-19 world.

Asset allocation is a strategy to balance risk and returns by investing in different asset classes. Historical price movements of different asset classes like equity, fixed income or debt and gold show low or negative correlation among these asset classes.

Fixed Deposits are the traditional investment choice for most Indian households. As per RBI research released in June 2020, 53% of average household financial assets are invested in Bank FDs (as on March 2020).

Bank Fixed Deposits and Mutual Funds are the two most popular investment avenues for retail investors in India. RD or Recurring deposits and mutual fund Systematic Investment Plan (SIPs) are essentially deposit plans from your regular savings which goes to bank RD and mutual fund schemes respectively.

Any financial investment can be said to give two kinds of returns: Investment Returns and Investor Returns. At first, they may seem more or less similar, however, they are quite different.

The rates are applicable for the financial year 2020-21 as per Finance Act, 2020.The Finance Bill, 2020 proposes to abolish income distribution tax and instead proposes to tax income from mutual fund units in the hands of the unit holders.

Price to Earnings Ratio or Price to Earnings Multiple is the ratio of share price of a stock to its earnings per share (EPS). PE ratio is one of the most popular valuation metric of stocks.

Bank Fixed Deposits (FD) is the traditional investment vehicle for most Indian households. According to a recent RBI report nearly 50% of household financial assets in India are in FDs.

Bank fixed deposits and Government small savings schemes have been the traditional investment choice of average Indian households.

Let us understand the importance of asset rebalancing with the help of an example. Let us assume you invested Rs 1 lakh in the proportion of 70% equity and 30% debt in 1998. In the first example, you only did a one-time asset allocation at the time of your investment.

If investors want regular cash flow from their investments the automatic choice for many are bank fixed deposits or postal deposits. However, declining interest rates on these schemes have made investors worry about their future income needs. Mutual funds have a solution for this, called SWP.

Greed & Fear Optimism Excitement Thrill EUPHORIA DESPONDENCY Anxiety Denial Fear Optimism Desperation Panic Depression Hope Relief Point of Maximum Fear & Potential Point of Maximum Greed & Risk Risk and returns are directly related but risk is a double edged sword.

Mutual funds offer two broad types of options – Growth and Dividend. There are several misconceptions about these options among lay investors.

There is an old saying in Wall Street, “Financial markets are driven by two powerful emotions – Greed and Fear”.

Information bias is the tendency to seek and evaluate information, even if it may not be irrelevant from the perspective of the investor’s needs.

Loss aversion is a trait of investor behaviour wherein investors prefer to avoid a loss than to make an equivalent profit.

Recency bias is a psychological phenomenon where we give more importance to recent events compared to what happened a while back.

Investors have their own opinions or pre-conceived notions. Seeking information or opinions that supports their ideas or pre-conceived notions and ignoring information that is contrary to their pre-conceived notions is confirmation bias.

Hindsight bias is a psychological trait which leads to investors overestimating their predictive abilities.

The relationship between risk and return is a foundational concept in investments. You cannot get higher returns without taking risks. A good understanding of risk and risk adjusted returns is required when you evaluate mutual fund performance.

The primary objective of any investment is to get returns. Returns can be in the form of income or capital appreciation or both. The two most popular measures for MF returns are compound annual growth rate (CAGR) and XIRR in mutual funds.

There are different types of mutual funds in India depending on their structure, nature of investment, tax benefits, category of the scheme and investor goals etc.

The cost of higher education in India has been growing in double digits (in percentage terms) over the last 20 years. The cost of 4 year engineering education (B.Tech/B.E) in the top Government institutes is around Rs 9 – 10 lakhs. In some of the top private institutes, cost of engineering education can be as high as Rs 15 – 20 lakhs. The cost of medical education is similar, if not a little higher. In the next 10 years, applying an inflation rate of 10%, the cost of engineering or medical education may be in Rs 25 – 45 lakhs. MBA from one of the top institutes will cost you around Rs 20 lakhs. 10 years from now, you should be prepared to fork out Rs 50 lakhs for your child’s MBA.

SIP or Systematic Investment Plan is a disciplined way of investing in mutual funds wherein you can invest a fixed amount of money in mutual fund schemes of your choice at a fixed interval (it may be daily, weekly, fortnightly, monthly or quarterly).

Good investment advisors are increasingly endeavouring that their investors do not make random investments in mutual funds and instead map these with their various financial goals.

Mutual Fund SIP is a simple tool that helps you to invest regularly in mutual fund schemes of your choice. You can start a SIP with a frequency of your choice: daily, weekly, monthly or quarterly. However, you must check with the AMC in whose scheme you want to start a SIP as all AMCs may not offer all the frequencies mentioned herein.

When it comes to investment, Systematic Investment Plan (SIP) has become a buzz word and investment in mutual funds through SIP has become extremely popular among mutual fund investors. To invest in mutual fund SIPs, there are two way – either you take help of a mutual fund distributor or do it yourself online. However, a large number of investors may still be confused about how to open SIP account online.

There are different types of mutual funds in India depending on their structure, nature of investment, tax benefits, category of the scheme and investor goals etc.

Diversification is one of the most important aspects, if not the most important aspect of financial planning and portfolio management. We will see how you may use mutual funds to diversify your investment portfolio.

Over the past two weeks, investors who follow markets on the web or social media may have come across the term, “Inverted Yield Curve”. In this article we will discuss, what yield curve inversion is and what are implications on markets.

Mutual funds, on the other hand, are one of the most tax friendly investment options available to Indian investors.

Mutual fund is a financial instrument which pools the money of different people and invests them in different financial securities like stocks, bonds etc. Each investor in a mutual fund scheme owns units of the fund, which represents a portion of the holdings of the scheme.

SIP is a method of investing a fixed amount, regularly – monthly or quarterly in a mutual fund scheme. SIP allows you to buy the units of your selected scheme on a date chosen by you. An investor can invest a pre-determined fixed amount in a chosen scheme every month or quarter, depending on his convenience through post-dated cheques or through ECS (auto-debit) facility.heme owns units of the fund, which represents a portion of the holdings of the scheme.

The cost of higher education in India has been growing in double digits (in percentage terms) over the last 20 years. The cost of 4 year engineering education (B.Tech/B.E) in the top Government institutes is around Rs 9 – 10 lakhs. In some of the top private institutes, cost of engineering education can be as high as Rs 15 – 20 lakhs. The cost of medical education is similar, if not a little higher. In the next 10 years, applying an inflation rate of 10%, the cost of engineering or medical education may be in Rs 25 – 45 lakhs. MBA from one of the top institutes will cost you around Rs 20 lakhs. 10 years from now, you should be prepared to fork out Rs 50 lakhs for your child’s MBA.

KYC is an acronym for “Know Your Customer”. In order to invest in any mutual fund, an investor needs to be KYC compliant. The Securities and Exchange Board of India (SEBI) has prescribed certain requirements under the Prevention of Money Laundering Act 2002 for Financial Institutions and Financial Intermediaries including Mutual Funds to know their Customers.

Mutual fund Systematic Investment Plan (SIP) is an effective and convenient way which may create wealth in the long term.

Millennials are a very important demographic segment in India, constituting nearly half of our workforce. Growing up in post liberalization lifestyle and spending habits of millennials are different compared to previous generations.

There are several provisions in the Income Tax Act wherein salaried individuals can save taxes, but Section 80C of the Income Tax 1961 Act provides the biggest tax saving opportunity.

Public Provident Fund (PPF) is one of the popular traditional 80C tax savings options in India. There are several reasons for PPF’s popularity among tax payers.

Don’t get deterred by peaks, equity investing is a long term game. The Indian stock market represented by the S&P BSE Sensex had a fairly good last quarter of 2019, crossing the 40,000 points by the year end and closing above 41,000 points in January.

Retirement planning is one of the most ignored topics among the working population because most people feel that retirement is far away and nearer term priorities seem important. Once they get near the retirement date, many people realize that they have not saved enough for their retirement and fear losing their financial independence. Retirement is the culmination of the decades of hard work you put in your career. This should be the golden period of your life and you should be free from financial worries.

Most Indian investors do not have a structured approach to savings and investments. Most people do not have saving target; the amount of money they save depends on their spending habits. Likewise, most people invest in an ad-hoc way. When they have accumulated a sufficiently large amount of savings, they invest it in bank FDs, Post Office small savings schemes, stocks, bonds, mutual funds etc without any specific goal in mind.

Indians have historically favoured traditional fixed income instruments for their investments (normal as well as tax savings). This, however, does not marry well in terms of prudent financial planning, especially since the country has one of the largest young population in the world. Indeed, the median age of India’s population is far below those of the most comparable economies as well as the world, which means most Indians have a long vesting period of investment.

3 S of financial planning are Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP). SIP is a periodical investment of fixed amount in a particular MF Scheme.

Most investors look at investment whenever they have lump sum amount of money in their hands, however in case of investments in equity, this may go awry especially at times when markets are trending at record highs like currently.

Investing is not only a science, involving numeric analysis, but also an art, involving one's behavior, emotions and attitude. Benjamin Graham, the father of value investing, rightly said: “the investor's chief problem - even his worst enemy - is likely to be himself.

India is a young nation enjoying the gift of demographic dividend with its youth entering the workforce in large numbers. Young investors should have a high risk-taking appetite, but the asset allocation mix of our country is not in sync with the risk profile as bulk of household savings is put in banks’ fixed deposits.

Systematic Investment Plans (SIPs) offered by mutual funds need no introduction. They are quite popular among retail investors - a convenient way to invest regularly. But often, inertia sets in and SIPs do not mirror the rise in income. The industry's new feature Top-up takes care of just that.

Most of us make investments with a single-minded focus on maximizing returns. This often leads to investment mistakes like trying to time the market. Fear and greed become the driving forces so that when markets turn volatile, investors tend to pull out their money or they typically increase their investments when the markets are already over-heated. This results in ill-planned and directionless investing.

Indians have historically favoured traditional fixed income instruments for their investments (normal as well as tax savings). This, however, does not marry well in terms of prudent financial planning, especially since the country has one of the largest young population in the world. Indeed, the median age of India’s population is far below those of the most comparable economies as well as the world, which means most Indians have a long vesting period of investment.

ETFs are types of Mutual Funds that aim to track the performance of a specific index such as NIFTY 50, NIFTY Next 50, NIFTY Bank etc. These ETFs can be based on indices tracking various

The last one month may have been scary for many investors especially those who are facing a full blown bear market for the first time. In the last one month, Nifty 50 has fallen 32% and is trading below 8000.

Systematic Investment Plans, or SIPs as they are popularly called, have caught the fancy of investors in recent years. Average monthly net flow into the investment vehicle has ballooned from Rs 3,122 crore as of April 2016, when the Association of Mutual Funds in India began disclosing the data, to Rs 8,513 crore as of February 2020.

If you have an opportunity to make your own team in IPL, what will you do? Take all the best batsman or make a team of all types of bowlers or make a good mix of batman’s, bowlers and fielders. To win a match it is important to have good mix of players with different skill sets.

Once you start investing, or for that matter even before you start, one question that may have struck you is “What returns will I make from this product?” While there is enough past information available on performance figures, whether short term or long term, it is necessary for you to also understand how exactly are those figures calculated and how do you read them?

When you compare the performance of two investments or check returns of your portfolio, you should not only consider the returns generated by the investments but also the amount of risk taken to earn these returns.

If you sell an asset such as bonds, shares, mutual fund units, property etc; you must pay tax on the profit earned from it. This profit is called Capital Gains.

Mutual funds offer a wide range of investment solutions for different investment needs, tenures and risk appetites. Different investors have different financial goals and risk appetites depending upon their stages of life and financial situations.

Every mutual fund scheme has two plans – Direct and Regular plans. There are three key differences, all inter-related, if you compare direct vs regular mutual funds – how you purchase, the price (NAV) and ongoing cost (total expense ratio).

In fixed income investing, usually two broad types of strategies are employed ‒ hold to maturity or accrual and duration management.

Mutual funds have become one of the most popular investment choices for retail investors in India. At the end of May 2020 total assets under management (AUM) of the mutual fund industry stood at Rs 24 lakh Crores.

Mutual funds offer investment solution for a variety of investment needs for investors in all age groups.

If you are a new mutual fund investor you would like to know what is NAV in mutual fund. NAV or Net Asset Value is the unit price of a mutual fund scheme.

Mutual funds in India are differentiated as two types, based on their investment structure – i.e. whether they are open-ended funds or closed-ended funds. The difference between open ended vs close ended funds is a function of investment flexibility and the ease with which they can or cannot be bought or sold.

The rise in the prices of goods and services and, subsequently, the fall in the purchasing power of each rupee is called inflation. As inflation rises, every rupee will buy a lower quantity of goods.

An investment in knowledge pays the best interest. – Benjamin Franklin Rightly said, it is very important to know why and where are we investing.

Mutual Fund exit load is a fee charged by the mutual fund houses if investors exit a scheme partially or fully within a certain period from the date of investment, as specified in the Scheme Information Document.