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Thursday, November 28, 2024

November 28, 2024

ARE YOU WORRIED ABOUT MARKET TURBULENCE?


Indian stock market is experiencing a sharp fall for the last one and a half months. When market falls sharply, everyone, who has invested in the market, gets disturbed. It's not possible not to feel fearful in the crashing market. But you need to remind yourself that *This shall also pass*. It has never happened in the last forty five years of the Indian stock market history that it didn't rebounce. Real money is made when you invest in a falling market. If you are fully invested, please sit tight on your current investment. Your loss is just notional. The profits will come back if you are patient. When things get uncertain, it doesn't make sense to get out of the market.Volatility is an inherent characteristic of the market.

If you look back at 16 to 18 years of data, *every year* y ou have had*double digit correction* baring I think, 2 years. When you have below par performance is when you get that big boost. Let's go back in history, from 1994 to 2003. That was the only period in sensex history of nine years, when net return was almost zero. Mind you, SIPs were still able to beat FD returns because of the non-linearity of the stock market. From *2003 to 2007,* the market went up *six times.* So, you have to be patient in equity market. When things get uncertain, it doesn't make sense to get out of the market. All of us understand that one can lose money in the equity market in short term. But the *bigger risk is also not being invested* in equity market. So, one has to manage with risk controls because being out of the market also has its risk. If you look back and analyse 45 years of old data, you find that if you *miss out of 10 best days,* it takes out *2/3rd of your returns* and if you miss out on *30 best days*, you miss out on *90% of the returns*. So, one can't really time the market. The only timing one can do is buy more when markets are falling and book some profits in form of tax harvesting and re-invest if you don't require that money.

Many of you must be new to equity market. With 10% market fall in the last two months, your portfolio might be in *red*. Do you need to worry? Absolutely *NO* if you are a SIP Investor. If you start investing in mutual fund SIPs and the markets start falling, then it is blessings in disguise and *the best* thing that may happen to you. You know why; It is because you keep *accumulating more units at a lower price.* Ultimately, markets have to *go up in the long term* because that is the inherent characteristic of the stock market. The market will generate greed and fear. Stock investment is *more of Psychology and less of intelligence*. One who can control his greed, fear and emotions will win. So, *NOT TO WORRY* about market turbulence and try to take advantage of it by continuing your SIPs and top up your SIPs with lumpsum investment. 

Indian stock market has been experiencing a sharp fall for the last two months.The following factors are currently weighing on investor sentiment.

*Dollar surges to 4-month high*
Donald Trump's victory in the U.S. election has strengthened the dollar index, which has risen by almost 3% in the last one month.

*Continued FPI selling*
The total outflows for November till last Monday is almost ₹22,000 crore, according to the latest Trendlyne data. Throughout October, FPIs remained net sellers, offloading ₹1.14 lakh crore worth of Indian stocks through exchanges. 

*Geopolitical tension*
Due to the geopolitical tension in the Middle East, the market is unsure about the upcoming sessions. This status of uncertainty is also a reason for sharp selling in the Indian stock market.

*Concerns over extreme valuations* Indian stock market is expensive compared to the rest of the emerging markets. Before the fall Nifty 50 was trading at PE of 24.5, midcap 100 at 44.5 and small index was at 34.5. Even after 8 to 9% fall, the nifty 50 is still trading at PE of 22.2 midcap 100 at 41.2 and small index was at 31.4. 

*A Slowdown in Q2 Earnings*
The disappointing Q2 earnings from major companies have also fueled selling pressure on Dalal Street. Q2 results of the 2024 season have remained below market estimates while the falling Indian National Rupee (INR) has fueled buzz for the *pressure on the fiscal deficit* of the Indian economy.

*China's Recent Stimulus Package*
China's recent stimulus measures have attracted overseas investors, hoping that these new initiatives will help Beijing revive its economy, which has been under pressure following the COVID-19 pandemic. Foreign Portfolio Investors (FPIs) are *shifting investments from overheated Indian stocks to cheap Chinese markets*, as they do not see any near-term catalysts to justify maintaining valuations at elevated levels in India.

*Rupee reaches another low*
The strong surge in the US dollar, coupled with persistent FPI outflows, is exerting significant pressure on the Indian rupee, which fell to a new record low of ₹84.41 against the US dollar.

*Concerns over delay in rate cuts*
While major central banks worldwide, including the US Federal Reserve, have already started reducing interest rates, Reserve Bank of India (RBI) has maintained a status quo.

*Rising Inflation in India* 
Rising inflation has been a persistent issue, affecting consumer demand, especially among middle and lower income groups. Inflation can significantly impact the purchasing power of consumers, leading to a decrease in their standard of living. As the prices of goods and services increase, consumers have to spend more money to maintain their current lifestyle, leading to a decrease in their disposable income.


If you are still worried about recent market fall, then I will like to tell you that after every steep fall, market bounce back. Market is looking for some direction right now. It may remain sideways for time being. Stock market returns are slaves of earnings of the companies. Any bad news, market may fall again. Maharashtra win for incumbent government was a short blip. If RBI cuts interest rates, then market should give a thumps up. We may to wait till Jan 25 for Q3 earnings. If the results are better than Q2, then again it's good news for the market. If government takes some steps to boost the consumer sentiments, again market will go up. Stock market movement is always non linear but it will go up in long term because historical data shows us the same. Let's have a look at last 15 years of data. First column is Time period, second is return of BSE 500 and third column shows the next 12 months return.

*Pd*                         *BSE 500*       *1 yr ahead*

Jan 08-Mar 09            -66%                   128%

Jul 11-Oct 11              -13%                   19%

Jun 13-Sep 13             -10%                  60%

Apr 15-Feb 16            -16%                  33%

Oct 16-Jan 17             -11%                 43%        

Apr 18-Nov 18           -8%                   15%

Jun 19-Sep 19           -10%                   10%

Feb 20-Apr 20          -37%                   99%

Nov 21-Jul 22          -17%                    25%

It is clearly evident that every market fall is succeeded by a sharp market rise. Though past data can't guarantee the future returns but it shows some kind of trend of stock market. If funds are available to you at this point, then it is advisable to top up your SIPs to get extra momentum in your investments. Take advantage of lower prices and buy more. You should become greedy when others are fearful (Warren Buffett). 


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November 28, 2024

FINACIAL LANDSCAPE


India’s financial landscape is transforming, driven by technological advancements in digital finance. The shift has democratized access to investments, enabling individuals to manage portfolios and make informed decisions through mobile apps and online platforms. While digital investing offers convenience, it also brings challenges, including cybersecurity threats and fraudulent schemes like Ponzi and pump-and-dump scams. Despite these risks, with a clear understanding of financial goals, risk tolerance, and the importance of diversification, *seeking professional financial guidance* remains essential for navigating this evolving landscape.

The digital finance revolution has largely simplified the investment process. No longer confined to the traditional methods of in-person or telephone trades, investors today can access a plethora of platforms that offer an array of services.

Mobile apps now allow users to open demat and trading accounts easily, execute trades, and monitor their portfolios, providing access to detailed market insights that guide well-informed decisions. The rise of robo-advisors in India is on the rise which is another significant development in digital finance. Having said that, inspite of these mechanisms, Investors may still feel the *need to consult registered financial advisors* which will provide the best of both—people and client experience technology to achieve the best outcomes.

While technology provides efficiency, accessibility, and data-driven insights, it *cannot replace* the empathy, understanding, and personalized touch that a *registered human financial professional* brings. Investors often need more than just algorithms; they seek guidance from experts who can understand their unique aspirations, risk tolerance, and life goals.

A harmonious *blend of technology and human expertise* ensures that investors not only receive efficient and accurate information but also benefit from deep, personalized conversations about their financial well-being. The real magic lies in the *integration of cutting-edge client experience technology with experienced financial professionals* who genuinely care about helping investors align their capital with their values and dreams. This combination enables a more meaningful financial journey, where investors can confidently navigate the complexities of the market while focusing on living the life they have always imagined with their money.
 
Let’s now look at some of the basic yet effective ways of investing:

*Basics of Investing* : While technology has simplified the investment process, it's essential to grasp the *fundamental principles before committing capital*. Here are some key aspects every investor should consider:

*Define Your Financial Goals*

Before starting your investment journey, clearly define your *financial goals*. Are you investing for retirement, a child's education, a down payment on a house, or long-term wealth accumulation? Understanding these objectives will help you choose the *right investment vehicles and strategies*. Goals can be short-term or long-term, and having a clear vision will guide your decision-making process.

*Diversification is the Key*

A cornerstone of *effective and stable investing* is diversification. Spreading your investments across different asset classes, such as equities, fixed income, and real estate, can *mitigate risks and enhance returns*.

*Understand Your Risk Tolerance*

Assessing your risk tolerance is crucial in the investment process. Risk tolerance refers to the degree of variability in investment returns that you are willing to withstand. Younger investors with a longer time horizon may opt for higher-risk assets with greater potential for growth, while those nearing retirement may prefer safer, more stable options.
 
*Consider a Financial Coach*

Navigating the complexities of finance can be challenging. A financial coach can help you *stay focused to your financial plan*, preventing emotional reactions to market fluctuations from derailing your long-term strategy. It is always important to have a human touch to your financial journey. 
 
*Maintain a Long-Term Focus*
 
Investing is a *marathon, not a sprint*. It requires patience and a long-term perspective. Markets will inevitably experience volatility, but historical data demonstrates that long-term investors tend to achieve better returns than those who try to time the market. A young investor with a long-term horizon may choose a high-risk portfolio composed primarily of equities, while someone nearing retirement may prefer a more conservative allocation with a mix of fixed-income securities.


Regards, 
Col Sanjay Datt
Associate Business Partner, 
Investor First

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in


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November 28, 2024

TAX LOSS HARVESTING


Selling off equity investments at a loss in order to offset capital gains from other equity investments and lower the tax burden is known as tax-loss harvesting.

Find the Equity Investment Losing Money: Find out stocks and mutual funds that aren't making money right now. To lower your total taxable income from capital gains, these losses can be offset against profits.

Sell the Losing Investments: Sell the identified losing investments before the end of the financial year to realize the losses. These losses will be considered realized losses and can be offset against capital gains.

Offset Gains with Losses: STCL (short-term capital loss) can be used to offset both STCG and LTCG.

Set off Long-Term Losses: LTCL (long-term capital loss) can only be used to offset LTCG.

Carry Forward Losses: Unutilized losses can be carried forward for 8 assessment years and offset against future capital gains, provided they are declared in your income tax return.

Reinvest the Funds (Optional): Depending on your plan, you can reinvest in the same or different stocks after realizing the loss. Though India doesn't have a strict wash-sale law like the US, you should nevertheless exercise caution when it comes to the "wash-sale" rule, which prohibits selling an asset at a loss and then buying it again right away.

Maintain Records:
When filing income tax return, you'll need to have documentation of every transaction, including the buying and selling of the investments. So, keep track of everything. In your income tax returns (ITR-2 for individuals with capital gains), be sure to include information about both capital gains and losses.

Seek Professional Advice: Harvesting tax losses can be complicated. To make sure that your plan is optimized and that tax regulations are followed, it is advisable to speak with a financial counselor.
                    
Short-term capital losses can be offset against short-term capital gains: For example, if you have a ₹1 lakh short-term capital loss and a ₹1.5 lakh short-term capital gain, you can offset the losses against the gains and only pay taxes on the net gain of ₹50,000 .

Long-term capital losses can be used to offset long-term capital gains: For instance, if you incur a ₹2 lakh long-term capital loss and have a ₹3 lakh long-term capital gain, you can offset the gains by the losses, resulting in a net taxable gain of ₹1 lakh.

If you have both short-term and long-term capital losses and gains, you can offset short-term losses against short-term gains and long-term losses against long-term gains.

Long-term capital losses can be offset for up to eight years against long-term capital gains:
If you have unused capital losses from previous years, tax loss harvesting can be employed to offset gains and fully utilise any carried-forward losses.

Tax-loss harvesting can be a useful strategy to manage tax liabilities, but it requires careful planning and attention to market conditions.

Regards, 
Col Sanjay Datt
Associate Business Partner, 
Investor First

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in


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November 28, 2024

TAX HARVESTING


None of us enjoys paying taxes. Yet we need to pay tax on our income, GST on things we purchase, and since 2018 on the gains we make from our investments in Equity stocks or Equity Mutual Funds.

Investors who have an investment in an equity portfolio will have higher incremental gains. Therefore, if you want to pay low or no taxes, you need to ensure these gains don’t build up far beyond the tax-free limit, and that’s what Tax Harvesting is all about.

Tax Harvesting is the strategy of selling a part of your Equity stocks or Equity oriented mutual fund units to book long-term capital gains and reinvesting the proceeds in the same or different mutual fund scheme.

Under current tax laws, gains of up to ₹1.25 lakh on LTCG from equity investments are exempt from tax. Any gains above ₹1.25 lakh are taxed at 12.5% without indexation. Therefore, you can utilize this ₹1.25 lakh exemption strategically through tax harvesting to further reduce your tax liability.

After realizing the gains, you can repurchase the same or similar investments. Since, you are moving from equity to equity, there is no risk of volatility. This resets your cost base to the new purchase price. This strategy ensures that future gains will start from a higher base, which can help in avoiding taxes in subsequent years as well. You can follow this strategy every year to maximize the ₹1.25 lakh tax exemption.

Your net worth is capital plus profit. Please understand that your net worth will remain same. You must try to increase your capital and decrease your profits to reduce your future tax liability. Actually, your profits may look decreased but part of your capital is profit. The important figure is NET WORTH.  For example, if you have invested ₹5 lakh in equity shares or equity mutual fund and after one year, it becomes ₹6.25 lakh then your Net Worth is ₹6.25 lakh. If you sell this entire portfolio or scheme and realized LTCG of ₹1.25 lakh, then you don't have to pay 12.5% income tax while filling return. Now, when you re-invest this amount of ₹6.25 lakh again, your Net Worth will remain the same. The capital is ₹6.25 lakh and profit now is zero but ₹1.25 lakh of profit is already invested as capital.  The important thing to remember is that you need to reinvest this capital soon to avoid significant loss, if the market goes up before you re-invest. 

I hope this is well understood now. Next, I shall try to explain how to double or triple this amount of tax harvesting. 

Long-Term Capital Gains (LTCG): Gains on equity shares or equity mutual funds held for more than 12 months are classified as LTCG. LTCG above ₹1.25 lakh is taxed at 12.5% without indexation.

This is true for a single mutual fund account. Instead of one account, the investors can have more than one account. Open mutual fund account for every member of the family who is more than 18 years old. For example, if you have two more members in the family i.e. your wife and one child, then you can open 3 mutual fund accounts and your free income tax limit will be 1.25 lakh x 3 i.e. ₹ 3.75 lakh. Mind you, this is profit and does not include capital. If your mutual fund account is 3 to 4 years old then you capital would be as good as your profit. So, in every financial year you can take out approximately ₹7-8 lakh. If you have any requirement of capital, then use this amount otherwise reinvest ASAP in equity market to avoid the loss if market runs up before you invest.

Also, if the income of your wife and child is less than yours then even if they book the profits, either they will be paying less tax than you or no tax.

Important Notes:
Ensure that the investments you are harvesting have been held for more than 12 months to qualify for LTCG.

The tax harvesting strategy only works on equity shares and equity-oriented mutual funds; it doesn't apply to debt funds or other asset classes.

Regards, 
Col Sanjay Datt
Associate Business Partner, 
Investor First

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in

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Saturday, March 30, 2024

March 30, 2024

The Magical Power of Equity Mutual Fund SIPs





Nearly two decades ago, Franklin Templeton introduced Systematic Investment Plans (SIPs) to India. Since then, SIPs invested in reputable funds have produced impressive returns and helped investors become wealthy. SIPs provide a straightforward and methodical approach to long-term wealth accumulation. With the exception of producing better risk-adjusted returns than bank recurring deposits, mutual fund SIPs function similarly to recurring deposits. Retirement planning with mutual funds Systematic Investment Plans (SIP) has several advantages: - 

SIPs' greatest benefit is that they eliminate the need to time the market. Accurately predicting the behavior of markets is impossible. One is invested at both market highs and lows when they make regular investments, such as once a month. SIPs, which average investment costs, perform well in erratic markets.

A disciplined approach to investing is fostered by SIPs. You can create a corpus for your long-term financial needs by investing a set amount of your regular savings. Uninvested money is frequently spent on items you might not need.

Even if the broader index doesn't give any returns for several years, the SIPs will be able to give you better returns than fixed income instruments because of high volatility in the market. That is the beauty of the SIPs. Due to non linear movement of the index, you keep buying at lower levels also and that makes your returns superior to fixed income instruments. 

If you start investing in mutual fund SIPs and the markets start falling, then it is blessings in disguise and *the best* thing that can happen to you. You know why; It is because you keep accumulating the more units at lower price. Ultimately, markets have to go up in long term because that is the inherent characteristic of the stock market. 

Volatility is an inherent characteristic of the market. SIPs help mitigate the impact of market fluctuations by spreading investments over an extended period. Through regular investments, investors benefit from the "Rupee Cost Averaging" approach, where they buy more units when prices are low and fewer units when prices are high. This strategy helps reduce the risk of making large investments at unfavorable market conditions.

SIP is better as it averages out the purchase cost rather than lock up the money at a particular NAV as in lump sum investments. SIP ensures investments are not hurt too much by market falls. You convert market falls into investment opportunity by buying more units.

Recently SIPs have become hugely popular in India with around Rs 19,000 crore flowing into the market every month via SIPs.

SIPs in equity funds over the long term have created wealth for the investors. SIPs benefit from the power of compounding, and therefore the earlier we start our SIP, the greater is the potential for wealth creation. However, it is important to select a good fund for our SIPs. Your financial advisers can help you select a good fund that is suitable for your risk profile. As your risk profile changes over time, you should re-balance your portfolio to align with your risk profile. 

We, at *INVESTOR FIRST* can manage your mutual fund portfolio if you so desire. We have different plans for different people as per their risk appetite and goals. People who are fixed income centric or have moderate risk appetite can be advised and invested accordingly. 

The process of investment will be online only. It will take 1 or 2 days for registration with us. We will give you an *app* for monitoring and execution of your mutual fund investments. If you so desire, you may please contact us at the following address :

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in

Regards, 
Col Sanjay Datt
Associate Business Partner, 
Investor First


*REFERENCES*

https://amc.ppfas.com/media/quotes/the-power-of-sip.php

https://www.advisorkhoj.com/articles/Mutual-Funds/How-Mutual-Fund-SIPs-have-created-wealth-over-the-last-15-years:-Large-Cap-and-Diversified-Equity

https://www.cnbctv18.com/finance/the-power-of-sips-smart-investing-in-indias-current-market-16735471.htm

*DISCLAIMER:* The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 


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Saturday, January 6, 2024

January 06, 2024

HOW TO REMAIN INVESTED IN THE STOCK MARKET FOR LONG TERM

 

It is now very well known that to create wealth in the stock market, the investor needs to remain invested for a long time. This is a proven truth. The various indices have shown that had you remained invested with your investment without interfering too much, you would have made massive wealth. But this is easier said than done. 


The most difficult aspect in the stock market is to sit ideal and  remain invested for a long term. Retail investors do not create wealth because they exit the markets too early. Sometimes, the investors become greedy and cuts off their profit too early and sometimes, the investors become fearful and exit when the investment shows a southward trajectory. Also, over a period of time, the investor sells off all his profit generating good stocks and keeps on averaging loss making stocks thus, having a portfolio of only junk stocks. Most of us, commit the same mistake of riding losers and selling winners. 


The market will generate greed and fear. Stock investment is more of Psychology and less of intelligence. One who can control his greed, fear and emotions will win. So, how do you balance yourself to remain invested for a long term to create wealth. let us discuss the same in the succeeding paragraphs.


1. Hot Tips; Don't get too involved in the market on a daily basis unless you are a trader. Avoid the urge to chase "hot tips"; resisting the lure of penny stocks; and picking a strategy and then sticking to it.


2. Ride a Winner; Peter Lynch famously spoke about "tenbaggers"—investments that increased tenfold in value. He attributed his success to a small number of these stocks in his portfolio. But this required the discipline of hanging onto stocks even after they’ve increased by many multiples if he thought there was still significant upside potential.


3. Sell a Loser; There is no guarantee that a stock will rebound after a protracted decline, and it’s important to be realistic about the prospect of poorly performing investments. And even though acknowledging losing stocks can psychologically signal failure, there is no shame in recognizing mistakes and selling off investments to stem further loss.


4. Tax implication; Always be aware of tax implications. Too much selling and again buying can attract heavy taxes which you realize only at the time of filing income tax return. 


5. NAV Vs Stock Price; Mutual fund investors can remain invested for much longer than direct stock investors because investors never remember the NAV of the scheme but the price of the stock is always there in the mind. So, if your expectations from the market are to earn 14-15% annual returns in the long term, then avoid direct stocks and invest in good quality diversified equity and hybrid mutual funds. Most of us will not be able to beat equity mutual funds returns over a 3 to 5 years time period. 14-15% mutual fund returns are very difficult to beat in the long term. It gives you compounding of unimaginable levels once your portfolio reaches a significant size. After 10 to 12 years, the multiplier effect of compounding takes place and it gives snow balling or parabolic effect in compounding which is huge. Every five years the money is doubling.


6. Reinvesting the Profits;  Even in mutual funds, investors book profits in a bull market but are not able to reinvest when the market is down. Stock Market turns around so fast that it doesn't give you any time to reinvest. 


7. Booking Profits; If you are investing in stocks then it is a good idea to keep booking some profits to the extent that it gives you a good feeling and to give you a tax advantage (Long term capital gains up to 1 lakh are exempted from income tax). But do this only when your portfolio reaches a significant size. Now, what is a significant size. For every investor  it will be different. I think, it should be atleast 2 times your annual income. So, psychologically you are better off. If the market keeps going up, the investor should be happy that the balance of his investments are still growing and he is in the money. And if the market falls, the investor should again be happy that he could take out some profit at the right time and is ready to reinvest. This psychology can make you remain invested for a long time. Make sure, the profit booking should not be too large. 


8.  If you are investing in mutual funds, the above technique can be implemented to take advantage of the LTCG exemption of ₹01 lakh. If you need money, go and spend but you don't require it, reinvest again in terms of small chunks or additional few SIP installments without waiting too long for the market to fall. The profit booking always makes you happy.

 

9. Goals; Match your investments to your goals. If you don't have any goal then wealth creation can also be a goal. If you have enough wealth then think of creating bigger wealth for inter-generation transfer of wealth. You can't spend every penny that you generate and have to leave a portion of it to the next generations.


10. Investment Advisor;  Last but not the least, an investment advisor can always help you to guide through greed and fear in the market. But for that you need to trust him first. There is no shame in taking guidance from someone who knows more than the normal retail investor. Right choices at the right time can only help you generate wealth in the long term.

 

We, at INVESTOR FIRST can manage your mutual fund portfolio if you so desire. The process of investment will be online only. It will take 1 or 2 days for registration with us. We will give you an app for monitoring and execution of your mutual fund investments. If you so desire, you may please contact us at the following address:


Website: https://investorfirst.co.in/


Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.


Contact Numbers: +91-9164046333(personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).


Mail Address: sangam157@gmail.com, info@investorfirst.co.in


Regards, 
Col Sanjay Datt,
Associate Business Partner, 
Investor First.


DISCLAIMER :   The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 
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Wednesday, December 27, 2023

December 27, 2023

IS THERE ANY RISK IN EQUITY MARKET

I think there is no risk in the equity market.  We must understand the difference between risk and volatility in the equity market. 

Risk is where there is danger of permanent loss to the capital whereas volatility is market's nature of rise and fall but no permanent loss to the capital. The beauty is that the volatility will make your profits grow more than the benchmark index. This will keep giving you the opportunity to buy at lower levels.   So, never be afraid of equity market's volatility and make it work in your favour by investing systematically through SIPs and STPs in good quality equity and hybrid mutual funds. 


Let's have a look at the returns of the Sensex from 1980 to 2023: 


Date                 Annual return

01-04-1980        3.50%

01-04-1981      35.25%

01-04-1982      27.12%

02-04-1983       -3.76%

03-04-1984      16.06%

01-04-1985      42.39%

01-04-1986      59.57%

01-04-1987       -8.95%

04-04-1988.     -22.21%

03-04-1989       82.26%

02-04-1990       8.16%

01-04-1991       52.45%

02-04-1992       267.61%

02-04-1993       -47.32%

04-04-1994        63.57%

03-04-1995        -12.28%

02-04-1996         2.81%

01-04-1997           0.51%

01-04-1998       15.83%

01-04-1999          -7.14%

03-04-2000          37.07%

02-04-2001         -29.42%

01-04-2002.         -1.85%

01-04-2003         -11.98%

01-04-2004          86.33%

01-04-2005          15.05%

03-04-2006          75.08%

02-04-2007            7.70%

01-04-2008          25.46%

01-04-2009         -36.63%

01-04-2010.         78.68%

01-04-2011            9.77%

02-04-2012.        -10.00%

01-04-2013             7.93%

01-04-2014         18.99%

01-04-2015         25.90%

01-04-2016.       -10.58%

03-04-2017         18.36%

02-04-2018.        11.18%

01-04-2019         16.89%

01-04-2020        -27.29%

01-04-2021              77%

01-04-2022              18%

01-04-2023          -0.48%


As shown above, it has been pretty rough at times but after every major fall there has been a great recovery. This is volatility. It works in your favour. This is the fundamental nature of the equity market. The sensex started with 100 and today it is above 70,000, a CAGR of approximately 15%. Which other asset class can give you this kind of return with so much of ease, transparency, liquidity and mental peace? Even if the returns are low or negative for one or two years, your SIPs may still give you better than FD returns even during distress due to volatility (regular rise and fall). Don't wait for tomorrow; it never comes. Start today and invest slowly. Increase your investment as your income rises.


Remember one thing very clearly in your mind that your capital will never become zero in equity mutual funds. It may happen in direct stock buying or trading ( Future and Options). What you need is investing in good quality equity and hybrid mutual funds as per your age, risk appetite, goals and need. A good financial advisor can always help to make your journey smooth and profitable by guiding you in the times of hyper activity in the market.


We, at INVESTOR FIRST can manage your mutual fund portfolio if you so desire. The process of investment will be online only. It will take 1 or 2 days for registration with us. We will give you an app for monitoring and execution of your mutual fund investments. If you so desire, you may please contact us at the following address :


Website: https://investorfirst.co.in/


Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.


Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in

DISCLAIMER :   The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 



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Thursday, December 7, 2023

December 07, 2023

DIRECT EQUITY VS MUTUAL FUNDS


Mutual fund (MF) scheme issued by mutual fund houses, collects money from various investors who wish to invest in equities. The fund houses then invest the money collected across various financial instruments to generate high returns. The MFs are professionally managed. You as an investor also have an option to buy these stocks directly from the stock market.

 

There are various benefits of investing through mutual funds, which may not be available if one invests directly through shares. Direct equity investment can be very rewarding, however, the risk of loss in direct equity is also very high. It is not easy to understand equity. One needs to understand the underlying business and industry the business operates in, before investing in equity (stocks).

Most important factors to invest in equities are

- Do you understand equities?

- Do you understand the underlying business and how it earns money?

- Can you figure out the fair value of that business?

- Do you have time to trade & track stocks?

- Do you have discipline to continually allocate time to make investment decisions?

 

Do you want to create wealth in the long term or you want few gains here and there. The most difficult thing in the stock market is to sit tight on your profits. The moment you see your capital doubles, you will sell. Also, when your stock is down, you will try to average it.  Investing is less of intelligence and more of Psychology.

 

Another problem in direct stocks is the sizing. You can make money in direct investing if your allocation to good stocks is very high. Even if your stock rises 4-5 times but your allocation is not large enough, your gains will be limited. You will not be able to increase your allocation in rising stocks. Can you increase your allocation in a stock which has risen 2-3 times its buying price. More often than not, you will sell it before it gives you substantial gains. You will always increase your allocation in stocks which are falling. That's the whole tragedy of direct investing. 

 

Most of the investors buy on tips which you keep getting every day on the mobile.  Even, if  you follow some market expert for stock buying, he may tell you some good shares which are looking good at that point but he may change his view after a while due to many reasons associated with the stock. So, if you want to be in the business of direct stocks then you will have to rely on yourself and not on anybody else. Experts keep changing their views as per the market conditions. But to rely on yourself for buying direct stocks is easier said than done. You need to understand the market thoroughly and must have seen 2-3 bad cycles.

 

Also, you should be able to at least, I say ATLEAST, read and understand the balance sheet, profit and loss account and cash flow statement of the company. This is the minimum requirement of direct stock investing. 

 

Mutual fund investing is low ticket size. You can start with capital  as low as Rs 500/-. In direct equities you require higher capital. Also, exit from mutual fund is easier than in stocks. 

 

Investors may not have the necessary skills to identify the right stocks. Not everyone can dedicate time to do research. Mutual funds, therefore, offer investors the expertise of fund managers with a whole research team. Also, mutual fund investing is easy, less emotional, disciplined, cheap and tax efficient. 

 

It is very easy to have access to information and knowledge about the market and companies but to become wise out of this information and knowledge is MOST DIFFICULT and more often than not, it will be the opposite.  

 

Look at the mutual funds. You will get 14-15% compound annual growth rate without losing your sleep and without looking at the market everyday. The problem in direct investing is the attachment with the stock. You can't sit idle with the stock price. If it goes up, you will sell and if it goes down, you buy and keep averaging. So, over a period of time, you will sell all your good stocks and accumulate junk stocks. Also, buying and selling entails brokerage charges and capital gains. So, your profits will further reduce.

 

Mutual funds do not have stock price but net asset value (NAV) which no body tracks. In fact, whenever the market falls, due to your SIPs investing, you accumulate more units of mutual fund Scheme because of the cheap NAV.  So, you can really sit tight and can keep increasing your allocation in your mutual funds for many years. That is where the power of compounding kicks in. 

 

All humans have urges. Stock investing can also be an urge. If you really want to indulge in direct stocks then allocate 10-20% of your corpus in direct stocks and rest can go to mutual funds. Compare your returns after 3-4 years. If you have made more money in stocks then increase your allocation slowly in stocks. 

 

Also, to reach a target of ₹2 Crores in 20 years, you need to invest ₹10,000/- per month in good quality 2-3 mutual funds with an annual increment of 1,000/- which is easily achievable.

 

Also, to reach a target of ₹5 Crores in 20 years, you need to invest ₹30,000/- per month in good quality 4-5 mutual funds  with an annual increment of ₹2,000/-. This can be easily done without losing your peace of mind.

 

DISCLAIMER :   The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 

 

We are also operating a Mutual Fund Distribution  Firm INVESTOR FIRST. For better understanding of mutual fund investments or Investment Planning for future targets, you can contact us at the following address :

Website: https://investorfirst.co.in/

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in

 

 


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Thursday, September 21, 2023

September 21, 2023

01 CR IN 10 YRS AND 01 LAKH PENSION EVERY MONTH



 SIP : 30k per month

Step up amount : 3k per annum (that means your SIP Amount in 2nd year: 33k, 3rd year: 36k, 4th year: 39k, 5th year: 42k,  so on and so forth till tenth year).

Expected rate of return: 13-15%

Amount after 10 years : 1.07 crore with an expected rate of return of 14%

The expected rate of return from the equity market is 12-15%. I have taken 14%. Conservatively, even if equity markets give 12% rate of return, one may take 11 years to reach the target of 01 Cr. One year will not make much of a difference. The aim is to reach there. 



Now the most important part; HOW TO GET PENSION OF 01 LAKH PER MONTH 

Yes, one can easily withdraw 01 lakh  per month from this account through out your life and your principal of 1.07 crores will remain with you all the time. The logic is very simple. Equity markets are expected to give 12-15% returns in long term. So, if you withdraw 12 lakh per annum (ie 12% of 1 crore), your corpus of one crore will not get effected, since it will fetch you 12 lakh again. Yes! It may not be as simple as it looks here on paper because of volatility of the market but I am sure if you stick with your investment, you can withdraw the above amount per month and your corpus will not get effected in long term. 

DISCLAIMER :   The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 

We are also operating a Mutual Fund Distribution  Firm Investor First. For better understanding of mutual fund investments or Investment Planning for future targets, you can contact us at the following address :

Website: https://investorfirst.co.in/

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in

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Sunday, September 3, 2023

September 03, 2023

HOW TO MAXIMIZE MUTUAL FUND RETURNS

 



In the last article, we compared SIP investment versus lumpsum investment and found out that in most cases SIP investment is a better option for long term investment. In this blog post, I would like to discuss the options available for increasing the probability of maximizing  returns in mutual fund investing.  To maximize  returns from mutual fund investment, the undermentioned Three Pronged approach is probably the better option:


1. SIP

2. Lumsump (switch from liquid or short term fund during falling markets)

3. Step up of SIP


Three Pronged Approach:


SIP. The investor should have a target of Terminal Value (TV) to be achieved in a particular period of time. Minimum ten percent of the terminal value should be accumulated within first 2-3 years of investing. So, if the terminal value in mind is Rs 2 Cr then 20 lakh must be accumulated within first 2-3 years through SIP and lumpsum both. The expected CAGR of 14-15% in the Equity Mutual Funds can double the money in approximately 5 years. The SIPs will take little longer, specially in early years, since the complete amount is not available for compounding. But once a base is made of substantial amount, the power of compounding kicks in, on the base amount and on the increasing amount of SIP every month.


Step Up the SIP every year by 10%. This enhances the power of compounding and helping the investor to increase the base amount on which compounding is happening.


Lumpsum.  During draw downs of the market or market crashes, top up the portfolio with lumpsum investment. This can be done if the amount is available in the bank account or one can maintain a certain    amount of money  in debt funds and use switching   option. Capital Gains will have to be considered before switching. You can take the advice   of your Mutual Fund Advisor to understand the tax implications on short    term and long term capital gains. But it will not be significant, considering the gains in equity. The lumpsum strategy can also be used to top up the  SIPs whenever you have extra cash available.


In the normal SIP approach, the mutual fund investment can double every 5 years, in long term (around 15 years) with an expected CAGR of 14-15%. With the above mentioned three pronged approach, mutual fund investments can double every 3-4 years with an expected CAGR of 14-15% in long term. The data shows that this has happened in the last forty years and if we believe in India’s growth story, the chances of this happening in the next forty years are very bright and better than before. 


Let's illustrate by an example: (normal SIP with Step Up)


SIP and Step Up Only:

Terminal Value (TV) to be achieved: 02 Cr

Time available : 20 years

SIP amount : Rs 10,000/- per month

Step up amount : Rs 1000/- per annum (I am not even considering 10% every year, which  keeps on increasing after first year)


TV after 5 years : Rs 10 lakhs

TV after 10 years: Rs 35 lakhs

TV after 15 years : Rs 89 lakhs

TV after 20 years : Rs 02 Cr


Look at the compounding, after first 05 years, it takes off parabolically. Once you make a base of some substantial amount, the power of compounding kicks in. Look at the parabolic growth. If the SIP amount and Step Up is doubled i.e. SIP amount is increased to Rs 20k per month and step up is Rs 2k per year, you will reach the target of Rs 4 Cr in 20 years. Tweaking of investment is in the hands of investor. Think of the target and start reverse calculation. One can always take the advice of Mutual Fund Distributor for better understanding. You should never be penny wise pound foolish.



This value can be as large as Rs 8 Cr, if you start with a base of Rs 20 lakh and start SIP of Rs 10k over this base and you keep increasing the step up amount by 20% of monthly installment every year and also invest lumpsum amount during markets draw downs. You can use SIP calculators freely available on internet (copy and paste the under mentioned links in the web browser).


https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php#google_vignette

https://www.advisorkhoj.com/tools-and-calculators/mutual-fund-sip-calculator-step-up


If you want to leave your legacy for future generations or start an SIP investment of your children at very early age, then  let me demonstrate the power of compounding for next 20 years for SIP amount of Rs 10k and step Up amount of 1k :


TV after 25 years : 04 Cr

TV after 30 years : 09 Cr

TV after 35 years : 18 Cr

TV after 40 years : 37 Cr


So, if an investor starts his investment journey at the age of 40, with an investment of mere ₹10,000/- per month, by the time time he retires at 60, he would accumulate almost Rs 02 crores. But if he starts his investment journey at the age of 20, he would accumulate almost Rs 37 crores at 60 years of age. He would create huge wealth for his retirement. Time is the most important factor in power of compounding. Even a small amount can create huge corpus, if invested for long time. The sooner one starts the better it is. 


Of course, every one doesn't have that much time left but you can always increase the SIP amount, step up amount and lumpsum amount to reach your realistic target in your time horizon. Mutual fund investment is not for regular income but for future wealth creation. But once the wealth is created, one can draw a healthy monthly income through SWP or STP (to debt funds) or intermittent withdrawal from equity mutual funds. Your Mutual Fund Advisor can help you in planning all your future expenditures, be it for retirement purposes or creating wealth for future generations.


Every Indian leaves some assets for future generations be it land, house, gold or cash. Nothing can be better than leaving your legacy of mutual fund investment for your future generations. You will ensure your future generations will never be poor because besides the huge wealth, they will also realize the power of compounding. 


REFERENCES: NIL


DISCLAIMER :   The opinion  expressed above  is our personal  opinion and  in no  way recommendation  of buying  or selling.  You must  consult  your  financial advisor   before making any fresh investment  in equity market. Please also note that  past   performance of funds does not guarantee future returns. 

We are also operating a Mutual Fund Distribution  Firm Investor First. For any kind of investments in Mutual Funds or Investment Planning for future targets, you can contact us at the following address :


Website: https://investorfirst.co.in/

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Contact Numbers: +91-9164046333 (personal), +91-8410116967(off), +91-6397808084(off), +91-1353520386(off).

Mail Address: sangam157@gmail.com, info@investorfirst.co.in


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