Mehul Kothari द्वारा पोस्ट | 19 Sep 2019 को प्रकाशित |
The terms bull and bear market are quintessential in investment circles. Even though these terms are relatively simple and easy to understand, their causes are sophisticated and complex that depict market conditions.
Since the direction of the market plays a significant impact on the portfolio of every investor, it is crucial to understand the meanings of ‘bull’ and ‘bear’ in the larger context. That is knowing its meaning and implications can determine how the bull market and the bear market can affect you.
Understanding bull and bear markets
In the stock market, bull and bear are terminologies that are used to convey the progress of the market and its direction. Typically, a bear market is indicative of falling prices in the stock market, while on the other hand a bull market is a sign that the market is appreciating in value.
The bull and bear market meaning have a tremendous impact on investors. These terms also reveal how the market is shaped by investors' attitudes, ensuing trends and overall market sentiments.
A bull market means the stock market is on the rise. A sustained increase in market share prices is typically seen in a bull market. Under such a scenario, investors are upbeat and optimistic that the rising trend will continue over a long period. A sustained bull market scenario also shows the strength of a country's economy and high employment levels.
On the other hand, a bear market refers to a declining market. In this scenario, company share prices continue to dip, leading to a downward trend. In such a bear market environment, investors believe that the downward trend will perpetuate into a downward spiral. Typically, a prolonged bear market situation also points to a slowdown in the economy and rising unemployment as companies begin to lay off their workforce. It is important to note here that a bear market can be dangerous to invest in, as securities continue to lose their sheen and value.
Bull and bear market characteristics
It is crucial to be aware of the ensuing attributes of a bull and bear market. Here is a list of factors of the various bull and bear market conditions.
Supply and demand
Generally, there is a robust demand and weak supply for securities in a bull market. In such a scenario, most investors look to buy securities, but very few are willing to sell it in an uptrend. Hence, share prices continue to grow, while investors are competing to buy equities that are available in the market. On the other hand, an increasing number of people are looking to sell their equities and securities rather than make purchases. There is a significant low demand for fixed-income securities, while prices of equities rise.
Investor understanding
Investor psychology and sentiment majorly impacts the market price in any scenario. This is because the behaviour of the market is affected and determined by investor behaviour and psychology. In the stock market, performance of share prices and investor psychology are mutually dependent. In a bull market, investors are continually hoping to reap profits; whereas in a bear market there is immense investor negativity and this sentiment shows as money moves out of equities and into fixed-income securities. Investors are cautious in a bear market and look for positive movements, while at the same time refraining from investing in equities. In short, the stock market decline negatively impacts the confidence of investors preventing them from investing in companies, thus causing an overall price decline as the outflow grows.
Correlation between the economy and the stock market
Since companies whose stocks are trading in the stock market are significant players in the country's economy, their performance can influence the economy. Typically, it is seen that a weak economy is associated with a bear market. This is because most companies are unable to show profitability as consumers are spending less. In turn, a downturn in company profitability directly affects stocks and their market values. In a bull market, the opposite takes place, as consumers have adequate money to spend and their expenditure propel and strengthens the country's economy.
Observing market changes
The principal causal factor of whether the market is bullish or bearish is not seen in the short term, but rather its performance in the long run. This means that a bull or bear market is not determined by the stock market’s spontaneous reaction to any specific event. Tiny movements could represent a short-term trend or correction in the market. It is in the extended time frame that determines whether the stock market will turn bull or bear. Sometimes, the stock market may experience an inactive period as it is looking for a direction. Here, a chain of downward and upward movements could, in reality, wipe out gains and losses leading to a flat-market trend.
What you can do in any market
The ideal thing to do in a bull run is to exploit rising prices and purchase stocks early on in the trend if you can. You can then look at selling them when these stocks reach their peak. Any losses that you experience in the bull market would be minor and temporary. You could briskly and comfortably invest in more equities with a higher likelihood of making a profit.
In a bear market, the chance of assuming losses are higher as share prices are continually losing value without an end in sight. Hence, if you are looking to invest in a bear market with the hope that the upturn will be around the corner, you may have to be prepared to take on losses before the positive turnaround takes place. Hence, if you are well-versed in the stock market, you could try short selling, or if you are trying your hand in the stock market for the first time, you may want to stick to safe investments such as fixed-income securities.
Some investors opt for defensive stocks, whose achievements are not affected by the trends in the market. Such stocks can be looked at as stable investments at a time when the economy is in a slump; these stocks are even beneficial in a bull market. Examples of these defensive stocks include utilities that are often government-owned and essentials that consumers buy irrespective of how the country's economy is functioning.
Conclusion
Bull and bear markets play a prominent role on investors’ emotions and investments. Hence, it can be an excellent idea to devote some time in determining how the market is performing before deciding on an investment decision. It is important to note that despite current market sentiments and trends, over the long term, the stock market has always been beneficial for its investors.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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Tax Saving - Know How to save tax using Demat Account
Posted by Mehul Kothari | Published on 19 Sep 2019
There is a popular joke that one can teach their children about taxes by eating one-third of their ice cream. No one likes to pay more tax than they need to. As a result, everyone is on the lookout for ways to reduce or save tax outflows. If you mention the words “how to save tax" in a gathering, you are sure to get the attention of every person around you!In this article, we will share some income tax-saving tips and tricks with the help of your Demat account.What is a Demat account?A Demat or dematerialized account is used to hold shares, securities, bonds and mutual funds in an electronic format. The objective behind this account is to move away from maintaining physical copies or documents for shares or stocks and store them safely in a digital platform. It simplifies and expedites the trading process. One can access all their share certificates at the click of a button.A Demat account is principally similar to a bank passbook. Though it offers a wider range of benefits. When you make any deposits or withdrawals from your bank account, the credit and debit entries are made in your passbook. Similarly, when you buy or sell any shares, etc. it is credited to or debited from the Demat account. According to the SEBI guidelines passed in 1996, to invest in the stock market, one needs to mandatorily have a Demat account. How to save tax using a Demat account?Now you must be wondering how to save tax by using your Demat account. We will solve the mystery for you. There are three ways to save tax through a Demat account.1. DividendListed companies distribute a part of their earned profits amongst their shareholders in the form of a dividend. The dividend percentage is at the discretion of the company’s management. When companies pay a dividend, it is directly transferred to the shareholder’s Demat account. This arrangement can help with tax savings. In the case of a Demat account, tax is levied only for trading transactions i.e. which involve purchasing or selling shares. Dividend income does not fall under the ambit of tax calculations. Hence, this dividend income can be used by investors as an additional source of income. So, your share ownership has dual benefits – you enjoy dividend earnings from time to time and also save on tax outflows.2. Capital Gains• Short-term capital gains (STCG): Any capital gains earned by selling off the shares within the holding period are called short-term capital gains. On the other hand, if the sale transaction is done after the completion of the holding period, the gains get classified as long-term capital gains. Long-term capital gains are not taxable until the value of Rs. One Lakh. Many investors make use of this provision to save on their tax outflows and earn higher net income (total gains minus taxes). So, you can store your shares safely in the Demat account for a longer period and benefit from the tax exemption available on long-term capital gains.• Short-term capital loss (STCL): Usually when you hear the word losses, you can only think of negative things. But there is a way that you can leverage your short-term capital losses to offset or adjust the tax payable on capital gains made in the short-term. So, if you have a Demat account, you can save the tax payable on short-term capital gains by balancing it against the losses incurred (short-term) across any asset class. Additionally, one can also carry forward short-term capital loss (to set-off the short-term capital gains) for eight years. The only pre-requisite is that the loss and gain need to be from the same category of assets.• Long-Term Capital Gains (LTCG) – Earlier, LTCG did not attract any tax obligations. However, with the recent changes, gains of this nature are taxed at 10%, if their value exceeds the limit of one lakh. Still, a Demat account holder can save taxes if their long-term capital gains are less than Rs. One Lakh. • Long-Term Capital Loss (LTCL) –Sometimes, even the fruits of patience are not sweet. Despite remaining invested for a long period, some assets or investments do not yield a positive return and we end up with long-term capital losses. However, just like STCL, one can use their long-term capital losses to offset or adjust the taxes payable due to long-term capital gains.This arrangement helps the Demat account holder to bring down some of their tax obligations.3. Equity Linked Saving Scheme (ELSS):ELSS is best explained with the saying – “killing two birds with one arrow”. ELSS is a type of mutual fund which offers a twin set of benefits to the investors. In addition to the potential of wealth creation and appreciation, in the long run, they also offer tax savings. Investments till Rs. 1.5 Lakh in ELSS qualifies for tax deductions as per Section 80C of the IT Act. So, a Demat account holder can choose to invest in ELSS Mutual Funds and save taxes easily.Compared to other tax-saving tools available currently in the market, ELSS Mutual Funds offers more (or better) benefits. With a shorter lock-in period of three years and the potential of higher returns, they are becoming a preferred choice for many investors. Additionally, it enables novices or first-time investors to make an entry into the world of equity investing.How to open a Demat account?Opening a Demat account is an extremely simple and hassle-free process. One can select any Depository Participant (who is authorized by SEBI). The KYC paperwork requires only basic documents (PAN Card, Aadhar Card, details of residence, income proof) and a photograph of the applicant. While the investor opens the Demat account with the chosen DP, the actual shares are maintained in safe custody by either one of the national depositories i.e. NDSL or CSDL. These institutions are sponsored by government-owned bodies. Hence, one can be assured that their shares are safe in the Demat account. Choosing the right brokerage firm can make the process even more simple and quick. IndiaNivesh, a trusted name in the Indian financial market can become your investment expert in this. Indianivesh has been offering a wide range of financial solutions in the areas of broking, mutual funds, equities, IPO, insurance and wealth management for the last eleven years. Their technological expertise combined with in-depth market knowledge has helped numerous clients to grow and create wealth.Final Thoughts:A smart investor does not stop with merely earning. It is equally important to create wealth and maximize your return by finding out ways to save taxes or other outflows. If you have a Demat account, ensure that you make use of it optimally. It can be a great help not only in trading but also in saving tax outflows. Now that you know these great income tax-saving tips, you can ensure you get the best out of your hard-earned money. Especially with a partner like Indianivesh.And if you know someone who is wondering how to save tax, make sure to share this article with them. After all, sharing is caring!Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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Posted by Mehul Kothari | Published on 19 Sep 2019
Financial and physical health have a lot in common. Both are continuous journeys and not a one-time activity. For instance, it is not enough to reach one’s desired weight but rather maintain it at the same level. Similarly, when it comes to our financial wealth it is not only about earning money. Rather one needs to focus on continuously growing it. Both these journeys become easier and more fruitful when a coach is there is to guide you each step of the way. A physical trainer is to your physical health what a wealth management advisor is to your financial health. What is wealth management?Wealth management is a kind of specialised and customised investment advisory service. It is also referred to as a combination of financial and investment counseling. These services are offered to individuals with high net worth i.e. HNIs. The financial expert who offers these services is known as a wealth manager. Wealth management services in India include services related to accounting, taxation, investment, retirement planning, estate as well as legal planning.Who is considered an HNI in India?An individual who has an investible bank balance of at least Rs. 200 Lakhs (2 crores) is categorised as High Net Worth Individuals. People with an investible surplus of Rs. 25 lakhs (but below 2 crores) are tagged as Emerging HNIs. This is only an indicative figure and can vary from one service provider to another.Wealth Management services in IndiaWealth Management is one of the fastest-growing industries in our country. Numerous factors have contributed to the rapid growth of wealth management products in India. A positive long-term economic potential of the nation, growing income levels, increased consumer awareness and the current low penetration have collectively fueled this growth. A quick look at these factors• Expansion in wealth creationAn Asian Bank report mentioned that India with its 119 billionaires stands just behind the USA and China. This figure is likely to triple in less than a decade. Some of the factors that will lead towards this exponential growth are a spurt in entrepreneurship, a robust educational system, a strong outlook for the IT and ITES sector, increased investment in state-of-the-art asset classes, etc.• Increased awarenessWith the advent of technology, information about new age practices and concepts (such as wealth management products in India) is easily available and accessible. People are more open to seeking help from professional experts to manage and grow their corpus. One key factor behind this increased awareness is also the fact that the high net worth individuals are comparatively younger.• Increase in firms offering wealth management products in IndiaThere is a surge in the number of wealth management service providers in the country. In addition to individual brokers and domestic firms, many global entrants have also forayed into this arena.Though the percentage of HNIs in our country is small when compared to the figures for developed countries, strong growth forecasts coupled with a growing middle class and young population indicate the potential for high asset accumulation soon. India is pegged to become the third-largest global economy by 2030 (according to a Cognizant report). As a result, personal wealth management in India is going to become the need of the hour.As per a recent report published by Capgemini, the wealth management industry is likely to witness a double-digit growth (ranging between 10% and 15%) per year in the coming five years. Key aspects of Wealth Management services in India• Risk AnalysisThe wealth manager analyses the risk-taking capacity of the client by taking into account a host of factors. These include current as well as future financial obligations, investment goals, the stability of income, client personality, etc. Correct risk analysis plays a critical role in formulating a customised investment plan for the client which will meet his/her financial goals.• Asset AllocationAfter the risk analysis, the wealth manager strives to strike the perfect balance between risk and return for the client. The available assets of the client are distributed across the suitable asset categories in sync with their risk quotient and return aspiration. The key asset classes include stocks, debt, real estate, mutual funds, gold, etc.• Investment HorizonA good wealth manager helps in achieving the client’s short-term as well as long-term investment objectives. They offer advisory services that enable the clients to maintain enough liquidity and flexibility to meet their investment goals in the short-term. Additionally, they also work towards securing the financial future of the client and maximise the return on their investments.• Customised Investment ProductsMany wealth managers work closely with the country’s leading banks. As a result, they have access to the entire spectrum of investment products. Sometimes they might even be in a position to offer tailor-made and bespoke investment products as per the client’s requirements. • Continuous market researchWealth management is not a one-time activity that ends with suggesting the right investment avenues or products. Rather it is just the start. Wealth managers continuously scan the market, assess the performance of various products, review the client’s portfolio and try to predict future trends. They apply a host of quantitative and qualitative techniques for this purpose. Additionally, they keep on interacting with the client periodically to analyse if there are any changes in their risk profile, financial obligations, investment goals, etc.Role of a wealth managerWealth Management is principally a simple concept – protect and grow the wealth of the client. However, its execution is a highly complex task. And hence it is done by financial experts known as Wealth Managers. A wealth manager is an expert who makes use of the entire gamut of financial disciplines such as investment / financial advice, accounting and tax-related services, estate planning as well as retirement planning to grow the client’s corpus.Wealth Management Products in IndiaThe product offerings vary from one service provider to another. Though the key products include:• Alternative Asset• Equities• Bonds, debentures, fixed maturity plans• Insurance• Mutual Funds• Loans• PMS (Portfolio management services)• Real Estate Services• Digital Investments• FundraisingWealth Management service providersBroadly speaking, there are three kinds of service providers in the realm of wealth management.• Banks• Brokerage Firms• Boutique Advisory Firms• Individual brokers or sub-brokersSelecting the right advisor is critical. One needs to choose a wealth management service provider who is not only trustworthy and credible but also can offer investment or financial advice as per the client's needs. The alignment of interest is extremely important. One of the most trusted names offering wealth management products in India is IndiaNivesh. It specialises in offering customised solutions for their wealth management clients across income levels. Their client-first approach coupled with their rich experience and technological competence enables them to preserve and grow the client’s net worth. Their "Wealth Cafe" offers an exhaustive database of research ideas and reports for the client's information. More importantly, their presence across a wide range of financial solutions such as broking, institutional equities, strategic investments, insurance, and investment banking helps them gain a holistic view of the markets. This translates into profitable and sustainable investment advisory for clients looking for personal wealth management services in India.Final Words:We hope that this article has addressed a lot of questions. Such as what is wealth management, why you need it along with an overview of the offerings. And now that you know who can help you with managing and growing your corpus, make sure you make the best use of their expertise.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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Posted by Mehul Kothari | Published on 15 Jan 2020
Value investing is the dark horse of stock markets. And this dark horse has created huge wealth for none other than Warren Buffet. Read on to know what value investing is, and what are the critical factors in this strategy.All that glitters is not gold and all that is gold does not always glitter. This holds true for investment decisions as well and forms the core principle of value investing.What is Value Investing?The value investment strategy was popularised by Benjamin Graham along with David Dodd after successfully surviving the period of the great depression. It involves proactively identifying stocks which are trading at a significantly lower value than their intrinsic value. Intrinsic Value refers to the true value of a stock.The two factors behind value investing are market price and value. Price is the amount you pay, and the value is what you get in return. Value investing believes that the stock market does not always remain in an efficient or balanced state. It sometimes overreacts to events such as political announcements, organisational restructuring, economic conditions and results in stock price fluctuations which do not correspond to the company’s actual worth or long-term fundamentals. Hence, there is a good probability that there are undervalued or overvalued stocks in the market.Value Investing and Behavioral FinanceValue Investing and Behavioral Finance are two sides of the same coin. Value investing aims to exploit irrational or impulsive behaviour of investors. Emotions heavily influence investment-related decisions. Greed, fear, peer-pressure lead to poor investment decisions. This creates a huge potential for dispassionate or objective investors. Value investors do not get carried away by market sentiments or herd mentality, instead, they look at the real value of a stock in the long run. They also do not fall into a “growth trap” without actually understanding the history or behaviour of stocks.Fundamentals of Value Investing1. Find the intrinsic valueInvestors who follow value investing strategy are more interested in a stock’s intrinsic value and not just the current market price. There are multiple ways and valuation methods that are used to identify the intrinsic or true value of a stock. Such as discounted cash flow analysis, dividend discount model, Earning per Share valuation, etc. There is also a formula coined by Benjamin Graham to arrive at the true value of a stock. It is: Intrinsic Value = Earnings Per Share (EPS) multiplied by (8.5+ Twice the growth rate of the company in the coming 7-10 years). This formula has been now tweaked to reflect the current market conditions correctly. It is now: Intrinsic Value = [Earnings Per Share (EPS) multiplied by (8.5+ Twice the growth rate of the company in the coming 7-10 years) multiplied by 4.4] divided by current corporate bond (AAA) yield. 4.4 in the above formula referred to the minimum rate of return in the USA in the year 1962. For the purpose of valuation of Indian stocks, 4.4 should be replaced by the corporate bond yield in the same year in India.When the stock’s market value goes below the calculated intrinsic value, investors purchase those stocks. Then they sit back and relax till the time the market corrects itself and the stock price reaches its actual value. 2. Margin of SafetyMargin of Safety enables value investors to manage risks and avoid losses. It is also the key element which distinguishes value investing from mere speculation. It refers to the difference between the stock’s current market price and its intrinsic value. Higher the gap, greater is the safety margin. By investing in a stock with an adequate security margin, investors know that any negative event or volatility will not adversely impact the value of the investment.3. Don’t follow the crowdValue investing is not for those who like to follow the herd. Value investors focus on stocks which are overlooked or avoided by others because of their low valuations but are inherently solid stocks. Are there risks in Value Investing?Yes. Just like all the other things in our life, there are risks involved in Value Investing as well. One of the biggest risks is falling into Value Traps. All cheap stocks do not translate into good investment decisions. Value traps are stocks which seem to cheap due to low PE multiple or cash flows, but never go up in value. It is important to do full due- diligence before investing. This includes not just financial metrics, but also qualitative aspects such as quality of management, stability, competition, etc.Final WordsValue investing is a proven strategy for wealth appreciation in the long run. But it can be an intimidating way of investing without the right support. A partner like IndiaNivesh can make the process smooth and more fruitful for investors. IndiaNivesh is a reputable financial service provider which offers a wide range of services related to Broking, Institutional equities, strategic investments, wealth management, investment banking and corporate finance. With their in-depth understanding of the Indian markets, the organisational experience of three centuries and cutting-edge technological tools, they help investors make well-informed and profitable decisions.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
read more - Online Trading – 5 Essential Tips for Trading Online in 2020
Posted by Mehul Kothari | Published on 14 Jan 2020
Technological advancements and digitalisation have changed the online arena for every business, and the online share trading is no exception to the trend. Over the last few years, online trading has become very popular, especially amongst the millennials and generation Y. Prevalence of smartphones, lower costs, opportunity to earn extra income, low entry barriers, ease of access, etc has had a profound impact on online trading.Even though online stock trading today is huge, and many people are motivated to explore online trading for a rewarding career, by no figment of imagination it should be assumed that it is easy, and they can become financially self-sufficient in a short period.Here are 5 essential online trading tips to help improve your chances of success in your endeavours as a trader-1. Do the research and gain relevant information about the marketsThe economic conditions are constantly changing and it has a significant impact on the stock markets. To be successful in online share trading you have to do your research, collect relevant information and be updated about matters relating to markets. With information being available at the click of a button, it is easy to get access to information from various sources. Keeping your eyes and ears open about the official announcements being made, reading up market-related articles and financial publications can help you ace the game of online stock trading and avoid making whimsical trade calls. 2. Get acquainted with the trading terminologies and toolsGetting yourself familiar with various terminologies and trading tools beforehand is extremely important so that you do not falter when you start trading. Clearing your basics about the important workings, different types of trades, important terms are critical. If you are not clear about the basics, then you may end up placing a wrong order.Once you are trading online, you are investing real capital and you cannot undo the trade. So, it is essential that you must be familiar with the features and the functions of the trading platform which you are going to use. Practice trading on dummy versions to get a hang of the trading interface before you can start with online trading. Once you have enough practice you will not be flustered and confused at the time of real trading.3. Start with small capital and practice risk managementThere are infinite opportunities in the trading world and you do not want one experience to be the deciding factor for you. As online trading is risky, you should always make a small start in the beginning and invest little capital. Even the most successful traders do not put their entire investible surplus for trading but use only the capital which they have to spare after they have put aside for their long-term goals such as retirement. So, invest only the capital which you can afford to lose and which will not affect your financial planning.Another important thing to keep in mind at the time of executing trades is that the risk associated with trading is high and hence you should take adequate measures to minimise risk. Setting a stop-loss to your order will automatically stop a trade if the losses hit a particular mark and help minimise your losses.4. Be patient and disciplinedOnline trading is a great way to make an income and many have successfully made a career out of it. If the success stories of other traders have motivated you to take the plunge, then, let’s be honest, online trading is risky and not for the light-hearted. Moreover, it is not something you can master overnight or become rich overnight on a single trade. To be successful, you need to have the right mindset and should be disciplined in your approach. Make a trade plan and stick to it. Trading out of impulse or greed will not help you become successful but following a plan and trading when you see opportunities can help you achieve the desired results.5. Select the right broker and trading platformLast but not least, choosing the right broker and opening the best trading account online is important, and hence you should be careful about your selection. Choose a trading platform that best meets your needs and has a user-friendly interface. You should be comfortable using their software. Your success rate would be greatly affected by the timely execution of your orders. Other aspects to consider are a level of customer service and satisfaction, market reputation and competitive fee structure. ConclusionWith the above essential online trading tips, you can give your income a boost. We at IndiaNivesh have one of the best online trading platforms at the most competitive price and also offer expert advisory and research to meet your investment needs.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
read more - Tips on Investing Money in Mutual Funds
Posted by Mehul Kothari | Published on 20 Nov 2019
Mutual Funds are the cynosure of the financial world. And rightly so! These investment havens pool in money from multiple investors and then invest the corpus across asset categories in line with the scheme’s objective. They are a great option for retail investors who would otherwise find it difficult to get exposure to such varied investment opportunities.What makes Mutual Funds a good investment tool?· Professional ManagementThe USP of Mutual Funds is that they are managed by a team of experts. They are equipped with the necessary resources and information to continuously monitor the markets, analyze market trends and conduct in-depth research. As a result, the fund managers can devise the best investment strategy for the investors and guide them regarding the best mutual funds to invest in.· Financial DisciplineOne of the common problems faced by investors is that they lack the rigour or discipline to stick to their financial resolutions. Mutual Funds take care of this issue easily. Systematic Investment Plans ensure that investors continue to invest regularly.· FlexibilityMutual Funds offer a great deal of flexibility to investors. You can choose the frequency of contribution as well as opt to increase or reduce the investment amount as per cash flows.· AffordableSystematic Investment Plan (SIP) facility makes Mutual Funds affordable to everyone. One can start mutual fund investments with just Rs. 500. That is basically the cost of one pizza these days! They are perfect for novice investors who are overwhelmed or scared of equities but still want some exposure.· Tax savingsELSS are tax-saving Mutual Funds. Investment in these mutual funds qualifies for tax deductions (till Rs. 1.5 Lakhs) as per Section 80C. Owing to their potential of higher returns and shorter lock-in period, as compared to other tax-saving alternatives, ELSS have become a preferred choice for many investors. Mutual Fund investment tipsNow that you know what makes Mutual Funds a great investment tool, here are some mutual fund investment tips to help you make the most out of your hard-earned money.· Set a goalIt is rightly said that “Dreams do not come true. Goals do”. The same rationale applies to investments too. Investments bring the best results when they have a purpose. So, the first step in mutual fund investments should be setting an investment goal. You should consider factors like budget, investment horizon, financial ambitions and most importantly your risk appetite. · Select the right fund typeWhen it comes to mutual fund investments, one size does not fit all. Just because your friend is investing in a fund does not mean it will benefit you as well. Mutual Funds invest across a range of asset classes. Hence deciding which mutual fund to invest in can be slightly tricky. It is important to choose a scheme that is in sync with your needs and risk profile. For instance, if you are an experienced investor and can afford to take risks, you can easily go for equity funds. However, if you are a novice then most mutual fund tips for beginners will suggest going for debt or balanced funds. It is important to understand the risk-return relationship inherent in each asset category before making a decision. Rule of thumb being – higher the risk, higher the return! The asset allocation should be in sync with your risk appetite.Also, ask yourselves why you are investing in mutual funds. Is it to save taxes? Then ELSS Funds are your best bet. If you have a short investment horizon and want a fund type with high liquidity, then you can go with Liquid Funds.· AMC Credibility CheckThe right fund house can not only help you decide which mutual fund to invest in but optimize the potential of your overall portfolio. It is important to look at factors such as the credentials of the fund managers, expense ratio, components of the portfolio and AUM (Assets Under Management) of the Fund House.· Diversification is the keyYou should not put all your eggs in the same basket. Diversification across asset categories and investment styles is important. It helps to lower the risk quotient as it gets spread over different investments. Even if one fund underperforms, the other can compensate for it. The value of the entire portfolio is not at risk.· SIPs vs Lump-sumOne of the best mutual fund tips for beginners is choose the SIP way. Especially if you are venturing into equity or equity oriented mutual funds. A SIP will allow you to spread out your investments over a longer duration of time. You will invest at different points in the market cycle and hence even out the associated risk.Also, the power of rupee-cost averaging in SIPs helps to generate higher returns in the long-term.· KYCKYC has become a necessity these days. Government of India has mandated KYC for most of the financial transactions including mutual fund investments. So, ensure that you have documents such as PAN Card, valid address proof, etc. before you venture into mutual fund investments.· Have a long-term viewMutual Funds are like a committed relationship and not a one-night stand. You need to remain invested for a longer duration in order to get the best rewards. Especially in the case of equity funds. This is because markets tend to be volatile in the short run but tend to move up in the long-term. The best combination is to invest in a mix of debt and equity to get best of both the worlds. Debt Funds would help to lower the overall risk of the portfolio and could help meet emergency fund requirements in the short run. While your equity funds work on wealth appreciation in the long run.· Ask the ExpertJust like KBC, Mutual Funds also come with a helpline – Ask the Expert! There are so many options available in Mutual Funds. It can become rather overwhelming for a new investor to select the right mutual fund to invest in. A professional expert will not only help to select the right funds and schemes but will also constantly monitor the market on your behalf.One such expert is IndiaNivesh. They offer a wide variety of financial solutions related to broking and distribution, strategic investments, institutional equities, corporate advisory, investment banking and private wealth management. The team at IndiaNivesh has a combined experience of more than 300 years. With their cutting-edge technological and research capabilities, competent team and “client-first” approach, you can be rest assured that you are in safe hands. Final WordsNow that the mystery is solved about how you can select the best mutual funds to invest in, what are you waiting for? Especially when you know that you have a guide like IndiaNivesh available at the click of a button.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
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PREVIOUS STORY
Tax Saving - Know How to save tax using Demat Account
Posted by Mehul Kothari | Published on 19 Sep 2019
There is a popular joke that one can teach their children about taxes by eating one-third of their ice cream. No one likes to pay more tax than they need to. As a result, everyone is on the lookout for ways to reduce or save tax outflows. If you mention the words “how to save tax" in a gathering, you are sure to get the attention of every person around you!In this article, we will share some income tax-saving tips and tricks with the help of your Demat account.What is a Demat account?A Demat or dematerialized account is used to hold shares, securities, bonds and mutual funds in an electronic format. The objective behind this account is to move away from maintaining physical copies or documents for shares or stocks and store them safely in a digital platform. It simplifies and expedites the trading process. One can access all their share certificates at the click of a button.A Demat account is principally similar to a bank passbook. Though it offers a wider range of benefits. When you make any deposits or withdrawals from your bank account, the credit and debit entries are made in your passbook. Similarly, when you buy or sell any shares, etc. it is credited to or debited from the Demat account. According to the SEBI guidelines passed in 1996, to invest in the stock market, one needs to mandatorily have a Demat account. How to save tax using a Demat account?Now you must be wondering how to save tax by using your Demat account. We will solve the mystery for you. There are three ways to save tax through a Demat account.1. DividendListed companies distribute a part of their earned profits amongst their shareholders in the form of a dividend. The dividend percentage is at the discretion of the company’s management. When companies pay a dividend, it is directly transferred to the shareholder’s Demat account. This arrangement can help with tax savings. In the case of a Demat account, tax is levied only for trading transactions i.e. which involve purchasing or selling shares. Dividend income does not fall under the ambit of tax calculations. Hence, this dividend income can be used by investors as an additional source of income. So, your share ownership has dual benefits – you enjoy dividend earnings from time to time and also save on tax outflows.2. Capital Gains• Short-term capital gains (STCG): Any capital gains earned by selling off the shares within the holding period are called short-term capital gains. On the other hand, if the sale transaction is done after the completion of the holding period, the gains get classified as long-term capital gains. Long-term capital gains are not taxable until the value of Rs. One Lakh. Many investors make use of this provision to save on their tax outflows and earn higher net income (total gains minus taxes). So, you can store your shares safely in the Demat account for a longer period and benefit from the tax exemption available on long-term capital gains.• Short-term capital loss (STCL): Usually when you hear the word losses, you can only think of negative things. But there is a way that you can leverage your short-term capital losses to offset or adjust the tax payable on capital gains made in the short-term. So, if you have a Demat account, you can save the tax payable on short-term capital gains by balancing it against the losses incurred (short-term) across any asset class. Additionally, one can also carry forward short-term capital loss (to set-off the short-term capital gains) for eight years. The only pre-requisite is that the loss and gain need to be from the same category of assets.• Long-Term Capital Gains (LTCG) – Earlier, LTCG did not attract any tax obligations. However, with the recent changes, gains of this nature are taxed at 10%, if their value exceeds the limit of one lakh. Still, a Demat account holder can save taxes if their long-term capital gains are less than Rs. One Lakh. • Long-Term Capital Loss (LTCL) –Sometimes, even the fruits of patience are not sweet. Despite remaining invested for a long period, some assets or investments do not yield a positive return and we end up with long-term capital losses. However, just like STCL, one can use their long-term capital losses to offset or adjust the taxes payable due to long-term capital gains.This arrangement helps the Demat account holder to bring down some of their tax obligations.3. Equity Linked Saving Scheme (ELSS):ELSS is best explained with the saying – “killing two birds with one arrow”. ELSS is a type of mutual fund which offers a twin set of benefits to the investors. In addition to the potential of wealth creation and appreciation, in the long run, they also offer tax savings. Investments till Rs. 1.5 Lakh in ELSS qualifies for tax deductions as per Section 80C of the IT Act. So, a Demat account holder can choose to invest in ELSS Mutual Funds and save taxes easily.Compared to other tax-saving tools available currently in the market, ELSS Mutual Funds offers more (or better) benefits. With a shorter lock-in period of three years and the potential of higher returns, they are becoming a preferred choice for many investors. Additionally, it enables novices or first-time investors to make an entry into the world of equity investing.How to open a Demat account?Opening a Demat account is an extremely simple and hassle-free process. One can select any Depository Participant (who is authorized by SEBI). The KYC paperwork requires only basic documents (PAN Card, Aadhar Card, details of residence, income proof) and a photograph of the applicant. While the investor opens the Demat account with the chosen DP, the actual shares are maintained in safe custody by either one of the national depositories i.e. NDSL or CSDL. These institutions are sponsored by government-owned bodies. Hence, one can be assured that their shares are safe in the Demat account. Choosing the right brokerage firm can make the process even more simple and quick. IndiaNivesh, a trusted name in the Indian financial market can become your investment expert in this. Indianivesh has been offering a wide range of financial solutions in the areas of broking, mutual funds, equities, IPO, insurance and wealth management for the last eleven years. Their technological expertise combined with in-depth market knowledge has helped numerous clients to grow and create wealth.Final Thoughts:A smart investor does not stop with merely earning. It is equally important to create wealth and maximize your return by finding out ways to save taxes or other outflows. If you have a Demat account, ensure that you make use of it optimally. It can be a great help not only in trading but also in saving tax outflows. Now that you know these great income tax-saving tips, you can ensure you get the best out of your hard-earned money. Especially with a partner like Indianivesh.And if you know someone who is wondering how to save tax, make sure to share this article with them. After all, sharing is caring!Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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Posted by Mehul Kothari | Published on 19 Sep 2019
Financial and physical health have a lot in common. Both are continuous journeys and not a one-time activity. For instance, it is not enough to reach one’s desired weight but rather maintain it at the same level. Similarly, when it comes to our financial wealth it is not only about earning money. Rather one needs to focus on continuously growing it. Both these journeys become easier and more fruitful when a coach is there is to guide you each step of the way. A physical trainer is to your physical health what a wealth management advisor is to your financial health. What is wealth management?Wealth management is a kind of specialised and customised investment advisory service. It is also referred to as a combination of financial and investment counseling. These services are offered to individuals with high net worth i.e. HNIs. The financial expert who offers these services is known as a wealth manager. Wealth management services in India include services related to accounting, taxation, investment, retirement planning, estate as well as legal planning.Who is considered an HNI in India?An individual who has an investible bank balance of at least Rs. 200 Lakhs (2 crores) is categorised as High Net Worth Individuals. People with an investible surplus of Rs. 25 lakhs (but below 2 crores) are tagged as Emerging HNIs. This is only an indicative figure and can vary from one service provider to another.Wealth Management services in IndiaWealth Management is one of the fastest-growing industries in our country. Numerous factors have contributed to the rapid growth of wealth management products in India. A positive long-term economic potential of the nation, growing income levels, increased consumer awareness and the current low penetration have collectively fueled this growth. A quick look at these factors• Expansion in wealth creationAn Asian Bank report mentioned that India with its 119 billionaires stands just behind the USA and China. This figure is likely to triple in less than a decade. Some of the factors that will lead towards this exponential growth are a spurt in entrepreneurship, a robust educational system, a strong outlook for the IT and ITES sector, increased investment in state-of-the-art asset classes, etc.• Increased awarenessWith the advent of technology, information about new age practices and concepts (such as wealth management products in India) is easily available and accessible. People are more open to seeking help from professional experts to manage and grow their corpus. One key factor behind this increased awareness is also the fact that the high net worth individuals are comparatively younger.• Increase in firms offering wealth management products in IndiaThere is a surge in the number of wealth management service providers in the country. In addition to individual brokers and domestic firms, many global entrants have also forayed into this arena.Though the percentage of HNIs in our country is small when compared to the figures for developed countries, strong growth forecasts coupled with a growing middle class and young population indicate the potential for high asset accumulation soon. India is pegged to become the third-largest global economy by 2030 (according to a Cognizant report). As a result, personal wealth management in India is going to become the need of the hour.As per a recent report published by Capgemini, the wealth management industry is likely to witness a double-digit growth (ranging between 10% and 15%) per year in the coming five years. Key aspects of Wealth Management services in India• Risk AnalysisThe wealth manager analyses the risk-taking capacity of the client by taking into account a host of factors. These include current as well as future financial obligations, investment goals, the stability of income, client personality, etc. Correct risk analysis plays a critical role in formulating a customised investment plan for the client which will meet his/her financial goals.• Asset AllocationAfter the risk analysis, the wealth manager strives to strike the perfect balance between risk and return for the client. The available assets of the client are distributed across the suitable asset categories in sync with their risk quotient and return aspiration. The key asset classes include stocks, debt, real estate, mutual funds, gold, etc.• Investment HorizonA good wealth manager helps in achieving the client’s short-term as well as long-term investment objectives. They offer advisory services that enable the clients to maintain enough liquidity and flexibility to meet their investment goals in the short-term. Additionally, they also work towards securing the financial future of the client and maximise the return on their investments.• Customised Investment ProductsMany wealth managers work closely with the country’s leading banks. As a result, they have access to the entire spectrum of investment products. Sometimes they might even be in a position to offer tailor-made and bespoke investment products as per the client’s requirements. • Continuous market researchWealth management is not a one-time activity that ends with suggesting the right investment avenues or products. Rather it is just the start. Wealth managers continuously scan the market, assess the performance of various products, review the client’s portfolio and try to predict future trends. They apply a host of quantitative and qualitative techniques for this purpose. Additionally, they keep on interacting with the client periodically to analyse if there are any changes in their risk profile, financial obligations, investment goals, etc.Role of a wealth managerWealth Management is principally a simple concept – protect and grow the wealth of the client. However, its execution is a highly complex task. And hence it is done by financial experts known as Wealth Managers. A wealth manager is an expert who makes use of the entire gamut of financial disciplines such as investment / financial advice, accounting and tax-related services, estate planning as well as retirement planning to grow the client’s corpus.Wealth Management Products in IndiaThe product offerings vary from one service provider to another. Though the key products include:• Alternative Asset• Equities• Bonds, debentures, fixed maturity plans• Insurance• Mutual Funds• Loans• PMS (Portfolio management services)• Real Estate Services• Digital Investments• FundraisingWealth Management service providersBroadly speaking, there are three kinds of service providers in the realm of wealth management.• Banks• Brokerage Firms• Boutique Advisory Firms• Individual brokers or sub-brokersSelecting the right advisor is critical. One needs to choose a wealth management service provider who is not only trustworthy and credible but also can offer investment or financial advice as per the client's needs. The alignment of interest is extremely important. One of the most trusted names offering wealth management products in India is IndiaNivesh. It specialises in offering customised solutions for their wealth management clients across income levels. Their client-first approach coupled with their rich experience and technological competence enables them to preserve and grow the client’s net worth. Their "Wealth Cafe" offers an exhaustive database of research ideas and reports for the client's information. More importantly, their presence across a wide range of financial solutions such as broking, institutional equities, strategic investments, insurance, and investment banking helps them gain a holistic view of the markets. This translates into profitable and sustainable investment advisory for clients looking for personal wealth management services in India.Final Words:We hope that this article has addressed a lot of questions. Such as what is wealth management, why you need it along with an overview of the offerings. And now that you know who can help you with managing and growing your corpus, make sure you make the best use of their expertise.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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