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Investment

Understanding Your Investment Options

A wise investor knows to put all their eggs in just one basket blindly. Rather, they become conversant with several kinds of investments and use that knowledge to make cash in various ways.

As far as investing is concerned, there are many baskets you can choose from. However, it is vital to know all your options before investing your cash and building your portfolio.

Every kind of investment has its downside and upside. The best type of investment depends on your timeline, investment reasons, risk tolerance, and level of understanding of certain markets.

How Investment Works

Your key goal is to make the right financial investment move. If you feel a little bit lost about understanding how investments usually work, know that you’re not alone.

Understanding the way investments work will make financial planning for Australians simple. Learning the basics of managing cash and ways you may use your existing portfolio to develop a bigger nest egg might greatly impact your retirement.

Choosing the Correct Asset Class

Asset allocation basically means dividing your investment into different kinds of investments, all representing a percentage of the whole.

For instance, you may put half your cash in stocks and the rest in bonds. If you want a diverse portfolio, you may expand beyond these two classes and include:

  • International stocks
  • REITs (real estate investment trusts)
  • Forex
  • Commodities

Deciding the Amount of Money to Invest

The amount of cash you should choose to invest depends on the investment goal and when you want to attain it. One of the investment goals is retirement. 

If you own a retirement account at your workplace, such as 401(k), and it provides matching dollars, your milestone for investing is simple.

As the general rule of thumb, you might want to invest around 10% or 15% of your total income every year for retirement. This may sound unreasonable now, but you may work your way up with time.

Rebalancing

With time, your investment portfolio will become too aggressive or conservative because of your investing timeframe, market conditions, and investment needs.

Rebalancing means adjusting asset allocation to align with your investment strategies. Determine if your plans provide an automatic rebalancing option, which enables you to adjust your account and rebalance frequency.

Common Investment Options

Investing normally intimidates many individuals. There are a lot of options, and it might be challenging to determine which investment is suitable when it comes to your portfolio.

For instance, stocks are a simple and most popular form of investment. When you buy stocks, it means you’re also investing in publicly traded companies. Most of the largest companies globally think Facebook, General Motors, and Apple are traded publicly – meaning you may buy stocks from them.

When you invest in stocks, you also hope that the cost will increase so as to sell for a good profit. Of course, the risk is that the cost of stocks may go down, making you lose money. Apart from stocks, you can as well invest in:

  • Bonds
  • ETFs
  • Mutual funds
  • Liquidity
  • Returns

Closing Remarks!

For beginners, it is advisable to start with mutual funds, which have a low initial investment option. They are great since it makes it simple to get started in case you have enough cash.

Plus, mutual funds will enable you to set up a monthly draft to prevent high initial investments.

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Investment

Index fund or ETFs Know how to select better investment

The beauty of mutual fund investments is that they can be rewarding if one is able to choose the right mix of securities and diversify their portfolio across various asset classes. Remember that mutual funds do not generate returns, they are an investment vehicle that allows investors to invest in a diversified portfolio of securities and various commodities, asset classes like gold, debt, real estate as well as in various sectors and industries like IT, pharma, crude oil, etc. Those who wish to generate returns by seeking exposure to international markets can invest in international mutual funds as well. With so many investment options available, sometimes making an investment decision can become a tad confusing especially if you are a first time investor. 

Active funds like ELSS, large cap, liquid funds, etc. are quite popular among investors but a lot of investors are yet to explore passive investing through index funds and exchange traded funds. Today we are going to discuss passive funds and find out the difference between these two.

What are index funds?

While active funds have designated fund managers managing the portfolio and ensuring that it remains in sync with the changing markets, passive funds like index funds aim to generate capital appreciation by tracking the performance of its underlying benchmark like the NIFTY50, BSE30, S&P, etc. with minimal tracking error. The index fund manager invests in securities to match the portfolio of its underlying index.

What are exchange traded funds?

Exchange traded funds invest beforehand in their benchmark in the same way as their underlying securities are invested. ETF units can be traded live at the stock exchange just like company stocks. These mutual funds are listed on almost every index. The NAV (net asset value) of an exchange traded fund is determined by the volume at which they are traded during live trading hours. 

Index funds v/s ETFs: What are the major differences?

ParametersExchange Traded Funds (ETFs)Index Funds
Net Asset Value (NAV)The NAV of an exchange traded fund is available for investors at its current market priceThe NAV of an index fund is determined at the of the day just like other mutual fund schemes
LiquidityInvestors can enter or exit ETFs at during live trading hours. They can buy or sell ETF units end number of times at the exchange thus offering high liquidityOne can either buy or sell index fund units by placing an order to the AMC. They aren’t as liquid as index funds
Intraday tradingSince ETFs are listed just like company stock, intraday trading is possible with ETF unitsIndex funds aren’t listed at exchanges and hence intraday trading is not possible
Cost efficiencyEvery single transaction has brokerage fees as well as management costsOnly management costs are involved
DematOne needs to open a demat account for storing their ETF unitsIndex fund units do not need demat account and can be stored in the regular mutual fund account
Portfolio managementInvestors are responsible for managing their own portfolioFund managers offer passive management and investors get diversification

While index funds can be ideal for those who wish to build a long term corpus by investing in  a scheme that has very less scope for human error, exchange traded funds can be considered by investors who wish to indulge in intraday trading and understand how equity markets function.

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Investment

Know why ETF Investing is ideal for the young investor

If you as an investor is looking to invest in an investment scheme that is passively managed and contains the properties of both mutual fund and stock you can consider investing in exchange traded funds. Also referred to as ETFs, exchange traded funds are listed at almost every stock exchange including the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). What sets them apart from other mutual funds is that investors can buy or sell their ETF units at their current market price during live trading hours. 

ETFs: Why are they ideal for young investors?

These are some of the reasons why exchange traded funds are ideal for young investors:

They are cost efficient

Exchange traded funds are passively managed funds. These are different than actively managed mutual funds where the fund manager is actively involved in managing the scheme’s portfolio. With passive funds like ETFs, the fund manager only reshuffles the portfolio from time to time so that the scheme is able to track its underlying benchmark with minimum tracking error. Since there is no active involvement of the fund manager in managing the ETF portfolio, these funds are known to have a relatively low expense ratio as compared to active funds. A low expense ratio means that very few amounts from your overall capital gains will be deducted which will allow the investor to earn more returns in the long run.

ETFs are highly liquid

Although most mutual fund schemes offer liquidity some schemes like ELSS (Equity Linked Savings Scheme) and retirement mutual funds come with a predetermined lock-in period of three years and five years respectively. ETFs on the other hand do not have any lock in period. This allows investors to enter or exit ETFs at any given time. Also, to buy or sell mutual fund units investors place an order request to the AMC and one can either buy or sell their mutual fund units only once a day. The NAV which is determined at the end of the day is taken into consideration for the purchase/sale of units. In the case of exchange traded funds, one can buy or sell them at their market determined price. Also, investors need not sell their entire investment. They can choose to sell only a few units while the remaining of their money can continue to remain invested in the fund.

ETFs have passive fund management

A lot of investors do not wish to invest in mutual funds because there is scope for human error or emotional buying/selling on behalf of the fund manager. But since there is no active human involvement in managing the portfolio of an ETF scheme, there is no scope for human biases. The ETF scheme generates returns by tracking the performance of its underlying index with minimum tracking error. The fund manager only has the responsibility of ensuring the portfolio resembles securities in the same way they are in the underlying index.

Young investors who can take the risk with their finances can consider investing in ETFs. ETFs also make a great investment option for someone who wants to get a good understanding of how the stock market functions. These days it is also possible to invest in ETFs via SIP. Through SIP young investors can save small sums and create wealth in the long run. A Systematic Investment Plan is a simple and convenient way of investing small fixed sums regularly in ETFs. Investors can even use the SIP calculator which will calculate the approximate future returns which their ETF investments can earn.

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Investment

Gilt Funds – Overview, Investment Process, Risk and Returns

Investing isn’t rocket science, but that doesn’t mean investors should invest in any scheme without understanding its major aspects. A lot of people do not realize that investing is probably of the one most significant investment decisions of their lives and hence they must understand how much risk they can take before investing in any type of scheme. The biggest question that lies in front of first investors is whether they should choose an aggressive investment approach or stick to a conservative mode of investing. However, it is now possible for investors to adopt the conservative investment approach even after investing in modern investment avenues like mutual funds. Investors who do not wish to invest in conventional investment avenues but also want to stay away from the dangers of market volatility can consider investing in gilt funds.

What is a gilt fund?

While equity schemes invest a majority of their investible corpus in equity and equity related instruments of companies, debt funds like gilt funds aim to generate capital appreciation by investing in fixed interest-bearing securities and bonds issued by the Government of India. According to SEBI (Securities and Exchange Board of India), gilt funds “invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt-oriented schemes.

How do guilt funds work?

The GOI (Government of India) visits the RBI (Reserve Bank of India) whenever it needs cash. The RBI reaches out to banks and insurance companies for sourcing finances and then loans the money to the government. In exchange for the loan, the government issues bonds that have a fixed maturity date. A gilt fund invests in such government securities and earns returns by returning these securities upon maturity.

What are the risks involved in investing in gilt funds?

Gilt funds have almost zero risks since they invest in government back securities. Investors get an opportunity to invest in government securities to which they may not have direct access. Since the government always repays its debts, these funds do not carry any credit risk. The government is the issuer of the underlying securities and always ensures that its sticks to its obligation. This is what makes gilt funds ideal for investors with a low-risk appetite. Gilt funds have offered decent returns in the past with very little investment risk.

Who should consider investing in gilt funds?

The government backed securities in which gilt funds invest usually have a medium or long maturity period. They are far less risky than bond funds which allocate a portion of their assets to corporate bonds as well. Investors who want to invest in such fixed-interest generating government securities can consider investing in gilt funds. Not everyone wishes to risk their finances with volatile equity markets and such investors too should consider investing in gilt funds. If you are a mutual fund investor whose mutual fund portfolio is more focused on only a single asset class, you should consider adding gilt funds to your portfolio so that you get the much needed diversification.

Before investing in gilt funds, investors must first consider whether they want to invest via SIP or lumpsum option. A lumpsum investment allows investors to buy more units at the current NAV. A Systematic Investment Plan (SIP) on the other hand ensures that investors get to invest small fixed amounts at regular intervals in gilt funds. They can also decide how much they want to invest so that at the end of the investment journey, they have achieved their investment objective.

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Investment

What ETF should I invest in 2021?

There are a plethora of mutual fund schemes to choose from, but the fact remains is that one should only invest in a scheme which may hold the potential to help with their financial needs. The term wealth creation may have different interpretation for different people. Some may want to be build a long term corpus of Rs. 20 lakhs whereas some may want accumulate corpus worth Rs. 1 crore. If you want to build wealth smartly and without investing hefty amounts all at once, you may have to start investing early. If you are someone who carries a high risk appetite and wish to invest in a scheme that follows a passive investment strategy, you can consider investing in exchange traded funds.

What is an exchange traded fund?

Mutual funds can be broadly categorized as active and passive funds. Active funds are open ended schemes where the fund manager is actively involved in trading with the underlying securities of the scheme to allow it to generate returns over the long term. On the other hand, passive funds like ETFs aim at generating capital appreciation by mimicking the performance of their underlying benchmark.

The units of exchange traded funds (ETFs) can be traded at the stock exchange just like any other company stocks. These are a little different from other mutual fund schemes where the investor can either buy or sell fund units only once in a day. On the contrary, investors can buy / sell their ETF fund units at their current market price during trading hours.

Which ETFs can you invest in 2021?

Depending on your investment objective, risk appetite, investment horizon and existing liabilities you may choose to invest in either (or all) of the following ETFs to target your financial goals.

Equity ETFs – Equity ETFs are open ended schemes that replicate the performance of stocks belonging to a particular index  with minimum tracking error.

Gold ETFs –Gold exchange traded funds can be a smart alternative for investors who wish to invest in gold  without having to do deal with the hassles of owning gold in physical from. One can now invest in gold as an asset class without having to buy it in actual form through gold ETFs.

Debt ETFs – Debt exchange traded funds invest in bonds, fixed income securities and other debt related instruments for generating capital gains.

International ETFs – International exchange traded funds invest in equity and equity related instruments of companies listed outside India. These funds invest in foreign securities or try to replicate the performance of a foreign fund to achieve their investment objective.

Why should you invest in exchange traded funds?

These days investing in conventional investment avenues doesn’t make sense as the interest rate on offer is outrageously low. Also, ETFs are passive funds which means the fund manager only reshuffles the investment portfolio from time to time. Since there is no active participation from the fund manager in managing the fund, the expense ratio of ETFs is relatively low. A low expense ratio means deductions from your capital gains will be less as compared to active funds.

Investors who do not want their investment portfolio to be actively managed, if they do not want the performance of their scheme to get affected by human biasness and want their returns to remain unaffected from human emotion, they can consider investing in ETFs. That’s because ETFs are designed in a way to replicate the performance of its underlying assets by investing in the same way as these securities invest in their benchmark.

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Investment

Investing in Stocks vs. Mutual Funds? Which One Should You Choose?

In the previous year, more than one crore demat accounts were opened. Indians are once again interested in shares, as stock markets are back to all-time highs. However, if you are a first-time investor, is it advisable to directly invest in equities?

Companies issue equities, and they give you part ownership. The returns can be either through dividends or capital appreciation. You also get voting rights, allowing you to participate in corporate decisions.

In comparison, mutual funds (MFs) pool money from several investors. This corpus is then invested in different assets like equity, debt, government securities, and other instruments based on the fund’s objectives.

Stocks vs. mutual funds

We have compared these products based on:

  1. Diversification

One way to mitigate investment risk is to diversify your portfolio across various asset classes. MFs provide in-built diversification, as equity funds cannot take more than 10% exposure in a particular stock. If you invest in stocks, diversification is limited to a few stocks.

  1. Professional management

Mutual funds in India are controlled by experienced fund managers. They are supported by a knowledgeable team of researchers and analysts. However, in stocks. you will have to spend time researching different companies and analyzing the markets. You may not have the time or the understanding to carry in-depth research.

  1. Costs

The large volume of buying and selling stocks provides MFs economies of scale. This benefit improves your returns on investments. Conversely, if you buy direct equities, you will have to incur multiple expenses, such as brokerage fees, transaction charges, Securities Transaction Tax (STT), and Goods and Services Tax (GST), which can reduce your returns.

  1. Investment discipline

Regular investments are important to build wealth over the long term. MFs allow you to invest a certain amount at periodic intervals via Systematic Investment Plans (SIPs). Moreover, you can invest as low as INR 500 in these plans. Although you can invest frequently in stocks, the amount may vary depending on the share price.

  1. Multiple options

You can choose from different types of MF schemes, such as equity, debt, and balanced, among others based on your financial goals and risk appetite. If you invest in equities, you can only invest in company stocks. Although there are thousands of listed companies, the number of investible shares is limited.

Here is a summary of the stock vs. mutual fund online investing:

  Stocks MFs
Diversification Limited In-built
Professional management Not available Available
Costs Can be high Economies of scale
Investment amount May be higher As low as INR 500
Options Limited to investible stocks Wide based on personal needs

With this comparison, it is evident that MFs have an edge over stocks. So, explore the SIP calculator on Mahindra Finance’s website and start investing.

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Investment

Stress, Self-Employment, and Facing the Pandemic as a Performer

Covid-19 has left long-lasting ripples of unemployment in the world of the artist.

The pandemic has swept through every single sector of industry, but it has hit some of us harder than others. While those of us with government jobs or who already worked online have been largely unscathed, the world of the live performer has gone belly-up.

Hundreds of thousands of us work in gig venues, dance venues, as stage performers or as karaoke singers. We are street artists, storytellers, and the bards of modern society. Without this portion of society – who would tell the stories of Covid? Who would put a human face on it? The news?

Self-Employment is Considered Normal in the Entertainment Sector

We operate in an industry where as much as 72% of the musical performers and live talent are self-employed. If you haven’t been self-employed for longer than two years, there was no help from the government during that first – or second – lockdown in the UK. 

This single wave saw thousands of people immediately forced out of work. Not only that, but as an industry, performers have always relied on second jobs to keep a steady income going. When faced with Coronavirus, those second jobs either closed temporarily, shut their doors for good, or involved public facing jobs in the service industry which ultimately put them at risk of infection.

No matter what way you cut it, a whole league of artists, musicians, street performers, singers, dancers, and actors, were all forced out of work. The government made no special allowances. In a world where everything has shut down, what do you do as a performer put out of work by the pandemic? How do you get financial help?

Getting Help as a Struggling Artist

Now that the current economic climate has turned us all into starving artists, how do we take control of the situation?

First things are first, you need to check your mental health. It’s understandable that you would be stressed right now. There are plenty of programs that can help. You can put yourself through to wellbeing training to help you self-manage stress levels, for a start. If you still feel it’s all too much, get in touch with your GP and schedule an appointment with a therapist.

Secondly, we need to take care of the money crisis. Apply for grants and loans, get in touch with your local MP if you must, and explain your situation. As to your business: get online. Reach out to web designers and developers to see if you can do a collab, get on social media and grow your business there. We can’t take to the streets, but we can take to Twitter. 

Get on LinkedIn and look for work, upload a CV and, while you are waiting on someone noticing you, get familiar with the internet. If we want to stop this happening again, this sector of industry needs to be as readily able to switch to the digital as the next one is. Showreels, headshots, CVs and examples of our work can all be centralised on a website. Now’s the time. 

Final Thoughts

We have always, as an industry, had to go out there and create the work when there isn’t any. It is a fundamental rule of performance arts. This time, we just must find ways to make it go online.

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Investment

LOOKING AT THINGS ON THE UPSIDE ALONG WITH THE DOWNSIDE

Downside risk we know—and we know it’s something to be mitigated, avoided, offset, and, worst-case, accepted. Generally, we consider downside risk something to stay as far away from as possible while remaining in the investment arena. But upside risk? You mean the chance that an investment will increase in value beyond my reasonable expectations? Oh, yeah. I can handle as much of that as I can get, is your first instinct.

Actually, modern portfolio theory measures risk in terms of standard deviation of returns. There’s a base line, and both positive returns (above that line) and negative returns (below that line) are considered to be risks in that the results deviated from what was expected based on decades of history. According to portfolio theorists, risk is just variance by another name. 

Fundamental analysis and technical analysis are two basic ways of analyzing past market behavior and making investment predictions for future strategizing. Each of these methods can be used to understand downside and upside risk. Fundamental analysis looks at the state of different industries and of the economy overall, as well as how efficiently a particular company is being run. Technical analysts, by contrast, focus on price movements and trading volume. In either case, there is a benchmark or baseline to which data is compared in judging future risk.

In general, as an individual investor, it’s a good idea to focus on both upside and downside risk. True, if you take on too much risk, focusing exclusively on gains, it can take a long time to break even after a large loss. On the other hand, if you focus exclusively on preserving your capital, chances are you’ll miss out on substantial market gains on the upside.  

Upside beta, used to measure upside risk, uses data only from days when an investment’s benchmark has gone up, and sometimes, an upside risk statistic can serve as a signal that a particular investment manager is taking excessive risks. But whether or not the data lead to that conclusion, comparing the upside and downside risks for a particular stock or bond allows you to assess both potential losses and potential gains. In the course of pursuing positive objectives, we introduce or increase the potential for adverse events, observes Jack Jones of the FAIR Institute.

The term Beta simply describes the baseline to which past investment results are compared, on both the upside and the downside. It’s a reminder that, when we’re making investment choices based on a judgment of what has been “better,” we need to ask “better than what?” To be sure, both upside risk and downside risk are, at best, only partially predictable. Solid decision-making allows for rosy possibilities along with gloomy prospects, looking at things on the upside along with the downside. Sheaff Brock helps both individual and institutional investors make sense of investing.

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Investment

What Is The Best Way to Get Investment Insights?

Investing can be a difficult time for anyone regardless of their experience as many markets are extremely volatile as a result of elections and several other variables. But what is the best way to gain insight into your investments? In this article, we will be providing you with insight into some of the best ways that you can gain investment insight.

Do The Research Yourself

When looking to gain insight into investments you are looking to make, there are several ways that you can conduct research to get the best possible result. However, by doing the research yourself, you are able to get all the information on every aspect that you want to know. By doing the research yourself, you can be as in-depth as you want to be depending on whether you are doing research for personal investment or you are doing your investment research for an investment that your business is looking to make.

Look At The Latest News

In addition to conducting market research, it is important to look at the latest news surrounding the market you are looking to invest in. Whether it is the latest development for Tesla before investing in Tesla stock, or the latest news surrounding the current state of cryptocurrency, this can benefit you when it comes to deciding whether or not this investment will be profitable as any news article could provide you with insight into any future fluctuations.

Use An Investment Research Service

If you are new to investments and are not sure where to start with this, you can enlist the help of an investment insights service to provide you with information before investing. Whether it is a projection of the market at this time or it is information surrounding changes to the investment that you are looking to make, this can all allow you to make the most informed decision surrounding your investment. This is particularly important during this uncertain time as many markets have seen an increased amount of volatility at this time as a result of the pandemic.

Choose Your Investment Platform Carefully

The final element to consider is the investment platform that you are looking to invest on. With many of these providing intelligent AI and investment insights as standard, this is a simple way of getting the insight you need in a short space of time. However, it is important to make sure that you do not rely solely on the AI and investment insight as this can cloud your judgment on important aspects such as the risk and the amount that you should be spending on each investment to ensure as minimal risk as possible regardless of the current state of the market.

Whether this is your first time investing or you have been investing for many years now, there are several ways that you can begin to gain the investment insight that you need, without wasting to much time before making any future investments.

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VAT and their Meanings for You

Being subject to VAT means that you have to charge VAT to your customers for your products or services. Besides the obligation to charge VAT to your customers, you can also as a self-employed person deduct the VAT that you pay on the goods or services that you buy for your business. Indeed, your suppliers also charge you VAT which you can then deduct from that which you pay back to the state.

Who is subject to VAT?

If your company provides, as an economic activity, on a regular and independent basis, goods or services which are described in the VAT Code, you are subject to VAT. Do you recognize yourself there? In this case, it is better to check whether your goods or services are subject to VAT. Some companies are exempt from VAT. Depending on your activities, there are three options:

  • you are subject to VAT and therefore charge VAT to your customers (the majority)
  • you are exempt from VAT and you do not have to charge it
  • you are subject to mixed VAT by a combination of the two above cases

Who is exempt from VAT?

As a self-employed person, there is a good chance that you will be subject to VAT. However, there are exceptions. Some liberal professions and small businesses do not have to charge VAT and may request exemption from VAT returns. For the business calculator this is important.

Exemption for liberal professions and professions of a social nature

Certain liberal professions and the social sector are exempt from VAT. For example:

  • doctors, dentists, physiotherapists, midwives, nurses
  • geriatric institutions
  • homemaking services
  • mutualities
  • care institutions for people with disabilities
  • Schools etc.

Here you will find an overview of all activities exempt from VAT in accordance with Article 44 of the VAT Code.

VAT exemption for small businesses

Does your company record a turnover that does not exceed 25,000 euros? In this case, you can opt for the VAT exemption regime. You do not then have to charge VAT, but you cannot deduct it either. In fact, you are acting more or less like an individual.

If you fall into this category, it is important to think about the best solution. Do you want to be able to deduct VAT? You can then opt for a system of quarterly declarations in order to be able to deduct VAT. Here you will find an overview of the advantages and disadvantages of this exemption, so that you can make the best choice.

Are you subject to VAT as a complementary self-employed person?

To check whether a person is subject to VAT, it does not matter whether this activity is carried out on a complementary or main basis. Depending on the activity you carry out and your turnover, you may also be subject to VAT as a complementary self-employed person.

When are you a mixed taxable person?

If you carry out activities which are exempt from VAT in accordance with Article 44, in combination with activities which do not qualify for exemption from VAT, you are a mixed taxable person. You will only need to charge VAT for transactions subject to VAT. This means that only these transactions give you the right to deduct VAT.