What to do if there is a LOSS in Mutual Fund
V6 ARTHGYAN LLP is a leading Financial Services Provider based in Lucknow and Servicing Clients in all Parts of World.We Formed to Create Long term Wealth For investors through various Financial Products like Mutual Fund, Insurance, Fixed Deposit ,Loans & Alternate Investment Asset Products. We started our Journey in 2006 with handful of clients today managing more than 1500 clients and their Families.
Saturday 14 May 2022
Monday 2 May 2022
7 Myths about mutual funds
7 Mutual Funds Myths That You Should Ignore
Do you want to invest in mutual funds? But you don’t have enough understanding about it or do you think that mutual funds are not for you based on what others have said? Well, don’t worry. We are here to bust some of the myths associated with mutual funds.
Myth #1 – SIP Is An Investment Product
Nowadays, a lot of people assume that the Systematic Investment Plan (SIP) is a different investment product, unrelated to mutual funds. However, it is not true. SIP is just another way to invest in mutual funds. There are two main ways to invest in mutual funds: lumpsum or one-time investment and SIP or regular purchases. In SIP, investors can regularly invest in a fund of their choice. Once the SIP mandate is set up, a predefined amount is automatically deducted from your savings account on a pre-defined date.
For example, if you have a SIP of Rs 1,000 in Fund A on the 10th of every month, then on the 10th of each month, Rs 1,000 will be deducted from your bank account and will get invested automatically.
Myth #2 – You Need A Lot Of Money To Invest In Mutual Funds
There is a general misconception that mutual funds are only for people who have a six-figure income and business class people. However, it is entirely false. Many fund houses have made it easier to invest in mutual funds by reducing the minimum investment amount made through lumpsum and the SIP route. You need Rs.100 to invest through SIP and Rs.1,000 for additional investments.
Myth # 3: Investing In Mutual Funds Means Investing In Stock Market
Myth #4: You Need To Be An Expert In Mutual Funds
While direct equities are meant for experts, mutual funds are meant for everyone. You don’t need to be an expert or have investment knowledge to invest in mutual funds. It is because expert fund managers manage these funds. A strong research and investment team backs the fund managers. It is an inexpensive way to get professionals to manage your money.
Myth #5: You Should Only Invest In Mutual Funds
If You Have A Long-Term View If you want to invest in equity mutual funds, then you need to take a long-term view of more than five years. It does not apply to all types of mutual funds. Debt funds especially overnight funds, liquid funds, and ultra-short-term funds allow you to park your money for a short period from a day to three months. You can invest in different types of mutual funds based on your investment horizon and objective.
Myth #6: Investing In A Top-Rated
Mutual Fund Ensures Better Future Returns
Relying solely on the star rating of a mutual fund is the wrong way to predict future returns. The ratings are dynamic and are likely to change. If a fund is rated five stars by various organizations, it does not mean that the fund will deliver better returns than other funds. There have been instances where the value of five-star funds has tumbled due to credit defaults of the invested company.
The best way to track the performance of the fund should be against its benchmark. Evaluate the performance of the mutual funds periodically against the benchmark and other funds in the category to decide whether you should stay invested or not.
Myth #7: It Is Better To Invest In A Fund With A Low Net Asset Value (NAV)
Many investors believe in the myth that investing in a fund with a low unit price (NAV) is better as the appreciation will be more in a fund with a low NAV. It is irrelevant because it only represents the market value of the securities held by the fund and inflows from investors. The capital appreciation will depend on the increase in the value of the underlying securities. These were the seven popular mutual fund myths. If you want to invest in mutual funds and want to get clarity between myths and facts, a financial advisor will be able to help you with that.
Sunday 10 April 2022
5 Mistakes of Investors
5 top financial mistakes to stay away from
To err is human. We make mistakes all the time, whether it is in our professional life or personal life.
These mistakes help us to make the right decisions.
We also make a number of financial mistakes as well. Here are the top five financial mistakes that
you should avoid when investing.
1. Spending before investing
There is a popular notion that we should save the money that is left. The money left with us after
we take away our expenses. But, if this was the case, then most of us would have never had
enough money to save or invest. According to a rule of thumb, one should earmark at least 20% of
the income for saving or investing. If you are not able to invest 20% of your income, then start at
5%. Once you are comfortable or you are able to invest more, then you can gradually increase the
allocation to 20% or 30%.
Automating your investments is a simple and easy way that will help you do to invest a certain
proportion every month. Investing in mutual funds through a systematic investment plan is one such
way to automate your investments and build wealth over the long term.
2. Waiting for the right time to invest
It is seen that most individuals believe that they don’t earn enough money to start investing. They
keep postponing their investments to a later date. Waiting for the right time to invest is another
financial mistake.
Studies have shown that how much money we can invest, depends on how rich we ‘feel’. The focus
word is ‘feel’ not how much money we actually have. Hence, you may earn Rs. 1 lakh a month and
still not feel rich enough to invest. On the other hand, person B with a monthly income of Rs.20,000
might be investing Rs. 5,000 to Rs.10,000 per month.
Hence, there is no right time to start investing. When you invest in mutual funds through a systematic investment plan(SIP), now is the right time to start investing. Moreover, you need a large amount of money to invest through SIP. You can start a SIP with Rs.5,00 per month.
3. Not investing in financial goals
Goals keep us motivated and make us work harder to achieve them. Investing without financial goals is like a ship without its rudder. The ship will easily sway in the direction of the wind or sea currents without having a sense of purpose or direction. Investing is no different. The financial goals can be early retirement, having a sizeable retirement corpus, buying a house or a car, etc. It varies from person to person. Financial goals will make us focused. As a result, we are less likely to take the wrong decision based on short-term news.
4. Constantly jumping to the best performing fund
We all work hard to earn money. Hence, it is logical that we will look for the best funds and the top-performing funds to invest in. However, it is more important to choose the right fund than the best fund. It may not be easy for individual investors to understand the reason behind its spur in performance.
Looking for the top-performing funds to invest in is a common mistake that many people do. Shifting from one fund to another is also an expensive affair, as depending on the fund, exit load and taxation may be applicable.
Instead of focusing on the one-year or one-month performance, look at its long-term performance, consistency, and how well the fund has performed against the benchmark and peers.
Also, concentrate on financial goals rather than chasing the highest performing funds.
5. Redeeming or stopping your investment due to short term volatility
Redeeming or stopping SIP because of short-term volatility are the two most common mistakes that investors make. In the case of equity investment, the ups and downs in the market are a common feature. Hence, you have to take it as a part-and-parcel of your investing life. Sometimes the best thing to do is to do nothing. Instead of being bogged down by the short-term volatilities, focus on your goals.
These were the top five financial mistakes that people make when investing. Talk to a financial advisor if you have any queries.
Tuesday 15 March 2022
HOW TO ACHIEVE FINANCIAL FREEDOM
Freedom sounds sweet. While we have achieved political freedom way back in 1947, many still struggle with financial freedom. Everyone wants to be financially free and it is not something that is exclusive for just a few people. Having said that, financial freedom is not a child’s play. It is a series of steps.
So, here are some of the steps that you need to take towards financial freedom:
SET YOUR GOAL
Having a goal gives a sense of direction and purpose. You will also be able to track your progress. In this aspect, it is essential to understand what financial freedom means to you. Much associate financial freedom with early retirement. Here are some of the other instances of what financial freedom may look like:
- Freedom to choose a career without worrying about money
- Freedom to go on frequent vacations without straining your budget
- Freedom to take care of the needs and wants of other people the way you want Freedom to retire early.
The second step in this journey is having an emergency fund. It is a crucial step, as it will help you to tide over emergencies. No one can predict crises and hence, it is always better to be prepared. Emergencies can include job loss, car repairs, house repairs, etc. Without an emergency corpus, you may have to dip into your savings, which may adversely delay your goals. Or worse, take a loan. Hence, one needs to have an emergency corpus with 3 to 6 months of expenses. The best way to park in an emergency corpus is in a liquid fund. It is crucial to keep a different account, out of your sight so that you are not tempted to use it.
BUDGET :
Having a budget is a crucial part. And this is one step that requires trial and error. A simple yet effective thumb rule is the 50-30-20 rule. According to this thumb rule, you may allocate 50% of your income towards needs, 30% for wants, and save the rest 20%. You can also tweak it according to your convenience. However, it is better to have a higher allocation of investment and savings in the budget.
Secondly, you can also identify your monthly expenses based on the past six months. Later divide your expenses into essential, non-essentials, and junk. Use this list to prioritize and cut whatever is possible. You can also use budget apps to track your expenses. Also, invite every family member to share their concerns regarding the budget.
PAY YOURSELF FIRST:
If you read financial blogs and books, you must have come across the concept of paying yourself first. Even before we receive our salary, many of us start planning ways to spend it. If you want to be free, you should consider paying yourself first. By this, we mean that you should earmark a certain amount of money for investing. You can also automate your investments. Set up a systematic investment plan (SIP), and you can see your money grow over time.
Another way to pay yourself is by investing in yourself through reading books, going to workshops, etc. This will help you to increase your earning potential and to build a second source of income.
SAY BYE TO DEBT :
While people like to segregate debt into good or bad, there is nothing good about debt. There are harmful debt and less harmful debt. Having debt is one of the most significant impediments to financial independence. If you have many loans, look at reducing loans that don’t carry tax benefits. Otherwise, look at repaying the debt with the smallest principal. Once you can repay the smallest loan, you will be more charged up to clear your other debts.
GET A FINANCIAL ADVISOR :
Last but not at least, having a financial advisor can immensely help you in this journey of financial independence. Everything you need to know about finance is available online. But, can you be sure that you will remain disciplined even when the market tumbles or when you are tempted to buy an expensive car to show off to your neighbor instead of focussing on early retirement? Let’s face it that controlling our emotions are a lot harder. And that is why you need a financial advisor.
Tuesday 15 February 2022
All you need to know about Asset Allocation
Things you always wanted to know about asset allocation
Imagine that you have a pizza in front of you. But the pizza has six different types of toppings with different crusts. Would not that be awesome?
Now think that the pizza is your investment portfolio with different assets. This is called asset allocation, which describes where you have put your money. Although there is a high probability that you will like all the different pizza slices, in the case of investment, you need to be sure about where you have put your money and in what proportion. We don’t want you to invest blindly indifferent assets just because your colleague suggested you.
Asset allocation is essential as it helps to reduce the risks associated with an investment option through diversification. Different asset classes such as equities, debt, or commodities react differently to a particular event. While one asset may outperform during a specific time frame, other assets may underperform.
Here are some of the questions that you need to ask yourself to come to the right asset allocation.
When are going to need the money?
This question will determine which asset class you should put in money. If you are likely to need the money within 2 to 3 years, you can invest in conservative investment options such as debt mutual funds. It will be better to stay away from equities as the equity market can be volatile in the short run. But it has been historically seen that equity markets give attractive returns in the long term. Hence, if you won’t need this money for five years or more, investing a higher proportion of inequities would be the right approach.
What are your financial goals?
In addition to your timeline, your financial goals are also essential to determine your ideal asset allocation. For your short-term financial goals, debt mutual funds such as liquid funds, ultra-short-term, and short-term funds are good investment options. Invest in pure equity funds for your long-term financial goals.
How much risk can you take?
What will be your reaction if your investment value drops by 15% in a single day? If you are okay seeing your portfolio swing from one extreme to another, you can digest volatility; equities will be a better investment option. However, you can minimize the risks associated with equities by taking the mutual fund approach. High-risk investment options have the potential to give higher returns.
Now, that you have answered the questions, you begin thinking about allocating your money among the different asset classes. According to a thumb rule, your equity allocation should be 100minus your age. E.g., if you are 25, 75% of your portfolio should be inequities. The younger you are, the higher should be your equity proportion. As you grow older, you can add more debt instruments or cut your equity proportion. It is because as you get older, your risk-taking capacity also decreases.
It is also important to keep a specific proportion of your investment proportion (at least three months) as liquid cash for emergency purposes.
These were a few basics of asset allocation. But asset allocation does not stop with equity, debit, or cash. Sophisticated or seasoned investors can include alternative investment funds in their portfolios. It is becoming a popular asset class among HNI and UHNIs. It has the potential to deliver higher risk-adjusted returns. Alternative investment funds include start-ups, private companies, and hedge funds among others.
Among precious metals, gold is used as a hedging instrument. Gold performs better when the equity markets are in red. Geopolitical tensions and continuous rupee depreciation has made gold one of the must-haves in the investment portfolio of HNIs. However, ideally, gold should not constitute more than 5% of the investment portfolio.
Real estate is another asset that investors can look at to diversify their portfolios. Besides investing in real estate, investors can now invest in real estate investment trust(REIT). Through REITs, investors can invest in high-end commercial real estate.
Conclusion:
Coming up with the optimal asset allocation may not be an easy task as there are various factors at play. Prudent asset allocation can help you to achieve your financial goals, fetch maximum returns, minimize risks, and have sufficient liquidity. If you are not sure where to begin or need further clarity, your financial advisor will be able to help you out.
Sunday 16 January 2022
Tax on SIP
Wednesday 29 December 2021
12 Features of ELSS Funds
Equity Linked Savings Scheme is a type of equity mutual funds that offers tax saving and wealth creation. Here are a few unique characteristics of ELSS that make it an ideal investment option.
1. What are Equity Linked Savings Scheme Funds?
Equity Linked Savings Scheme Funds (ELSS) also known as tax saving funds is an equity mutual fund that invests predominantly in equity stocks. ELSS funds offer tax exemption on a maximum investment amount of up to Rs. 1.50 lakh from your annual taxable income under Section 80C of the Income Tax Act, 1961.
2. Where do ELSS funds invest?
ELSS funds invest in equity instruments such as stocks of listed companies. These funds allocate its investments across large, medium and small-sized companies.
3. Get the power of equities
Historically, equity investments have outperformed other asset classes in the long-term. Investment in equity funds have the potential to help you fulfil your long term financial goals.
4. Avail the dual advantage of wealth creation and save on tax
With ELSS, you can avail the dual advantage of wealth creation and save on taxes. As ELSS funds invest in equities, it has the potential to earn higher returns in the long term. Moreover, your returns from ELSS are deductible from the total income under Section 80C of the Income Tax Act, 1961. Hence, you get tax benefits with attractive returns through your investment in ELSS.
5. No limit on investment
There is no maximum investment limit on ELSS. You can earn market-linked returns on the entire investment amount. However, tax benefits on the investment are available up to Rs. 1.5 lakhs.
6. Achieve your financial goals
As ELSS funds invest in equities with no cap on investment, it can help you achieve your long term financial goals such buying a house, planning for higher education and preparing for retirement.
7. Invest through SIP or onetime lump sum investment
Lump sum and Systematic Investment Plan (SIP) are two popular ways to invest in ELSS funds. You can opt for a mix of both these investment options to gain the maximum advantage of investing in ELSS. In the SIP mode of investment, you need to invest a small amount of money over a period. Whereas, in case of lump sum investment, you invest in one go
8. Systematic Investment Plan (SIP)
Facility If you want to invest in ELSS through SIP, you don’t have to invest a large sum at one time or wait for the last moment. It is because you can plan your tax saving investment at the start of the financial year and invest in ELSS funds through SIP over the financial year. Although monthly SIP is a popular SIP frequency for salaried individuals, investors can opt for weekly, quarterly and half-yearly SIP frequencies as well.
9. Low minimum investment amount
Investment in ELSS is affordable, as the minimum investment amount in ELSS fund through SIP is Rs.500. So, you do not worry about amassing a large corpus for investment. The low minimum amount makes it easy for different investors to invest in ELSS with no issue
10. Lowest lock-in period
The tax saving funds have the lowest lock-in period of 3 years. You can redeem your investments after three years without paying any penalty or exit load or continue to stay invested after the end of lock-in period.
11. No mandatory exit period
There is no mandatory exit period of ELSS. You need not redeem your investments after the lock-in period of 3 years is over. You can stay invested in ELSS beyond this lock-in period until you are ready to redeem your investments.
12. Tax on capital gains
Long Term Capital Gains on equity funds applies on ELSS funds as it has a lock-in period of three years. The capital gains from ELSS funds below Rs.1 lakh in a financial year is tax-free. The long-term capital gains above Rs.1 lakh in a financial year is taxed at the rate of 10%.
Make a smart financial move by investing in ELSS.
This blog is purely for educational purpose and not to be treated as an personal advice. Mutual fund investments are subject to market risks, Read all scheme related documents carefully.
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