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Finance

Common mistakes in mutual fund SIP that one needs to know

Mutual fund investments are no more just a thing for old and seasoned investors. These days, a lot of young investors are considering these market linked schemes as well. The reason behind this is that they can invest small sums regularly in any mutual fund scheme via a Systematic Investment Plan. A lot of investors are becoming aware of the dynamics of SIP investments. The fact that SIP investments are able to create a commendable corpus in the long run only speaks volumes of the fact that it has become a favorite investment tool among the larger audience. However, new investors often end up making some rookie mistakes before starting their SIP mutual fund investments.

If you too are planning on making your first every SIP mutual fund investment, these are the common mistakes that you should avoid:

 

Investing in a low NAV mutual fund scheme

For some reason, a lot of investors believe that if they invest in a mutual fund that has a low NAV (Net Asset Value), they may be able to generate higher returns in the long run. However, how a mutual fund scheme performs has got nothing to do with its NAV. In fact, the only thing that matters is that fund management that is handling the mutual fund as it is their expertise that allows a fund to either perform or underperform.

 

Investing based on past performance

Several young investors choose to start a SIP in a mutual fund scheme based on how the fund has given returns in the past. Although it is a good idea to consider a fund with a proven track record, investors must understand that the past performance of a mutual fund scheme may or may not always determine its current or future performance.

 

Opting for growth plan over dividend plan

Rookie investors feel that they can earn regular returns by opting for a dividend plan but they are missing out on creating long term wealth. They do not realize that the dividends which the fund house offers are taken from the fund’s AUM (Asset Under Management) and in the long run, it can lower a mutual fund’s Net Asset Value. On the other hand, in the growth plan, the interest earned by the mutual fund scheme is reinvested back in the fund. This will not only lead to a rise in the mutual fund’s NAV but will also compound the investor’s sum and allow them to earn better returns in the long haul.

 

Stopping SIPs midway when the markets are bearish

Several mutual fund investors commence their SIP journey with enthusiasm but are often seen backing out midway. They fear that since the markets have turned bearish, their portfolio will underperform, and they may face losses. However, investors must see this as an investment opportunity, and instead of stopping their SIP investments, top-up their monthly SIP sum. When the markets are underperforming, most mutual fund NAVs drop and investors can buy more units at this point in time. When the markets gain momentum, the dropped NAV value will correct itself and so will the value of the once undervalued units. This concept of buying more units when the NAV is low and fewer units when the NAV is high is referred to as rupee cost averaging and can help an individual buy more units in the long run.

Before starting a SIP in a mutual fund scheme, investors can compare their performance to their peers and consider a fund with a low expense ratio.

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Finance

Why is a good Forex broker crucial for a successful trading career?

Forex trading has become one of the most important and popular online businesses that provide huge profits. Each day more than 4 trillion transactions are taking place at one of the most liquid financial markets globally, the Forex market.

People who are into Foreign exchange trading are constantly trying to find new ways to improve their trading skills and increase their daily income. Improving knowledge is one of the critical elements that make one Forex trader stand out from the other.

However, if someone really wants to make a long-term and successful trading career, he must know why a good Forex broker is crucial for that. Let’s get started with how you can spot one reliable and quality broker for your trading business.

Forex broker review will give you all the relevant information.

If you want to get all the relevant information about a specific Forex broker, you should read reviews. One particular Brokeragea broker review is an excellent example of what a quality Forex broker offers his clients.

You’ll get to know general information, including info about the trading platform, accounts, brokerage’s trading products, conditions, funds trading and security, customer service, etc. With this information, you’ll get to know whether it’s an excellent financial company for you or not.

Regulation of a broker is priority number one.

It would be beneficial to remember that your preferred Forex broker needs to be regulated by regulatory agencies. When it comes to Europe, its Forex regulations are under the MiFID II guidelines. Different European countries have other regulatory bodies.

So, in Spain, we have the National Securities Market Commission; in Switzerland, we have the Swiss Financial Market Supervisory Authority in Ireland, its Central bank of Ireland, the German Forex regulatory agency is called the Federal Financial Supervisory Authority, and so on.

In the United States, we are strictly speaking of two relevant regulatory bodies. They are the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC).

The main reason for picking a quality Forex broker

If you wonder why it is mandatory to pick a quality Forex broker for your trading business, the answer is straightforward. On the internet, you can find many suspicious and fraudulent brokers that promise many things but don’t provide half of it.

As a severe trader interested in a long-term, prosperous career, you would like to secure your transactions and money. Also, it’s important to always count on the reliable 24hours customer support of your broker, as well as their great account features that will help you achieve your biggest trading goals!

Bottom Line

Since there are many unregulated and shady financial companies out there, make sure that you research your preferred broker properly before making the final decision.

It’s mandatory that a regulatory agency regulates your broker, that it has a 24 hours available

customer support, that its account features match your needs, and that you can improve your trading skills with the help of their educational material.

Don’t be lazy, and make sure that you’d read all of the vital information from reviews and brokerage forums that can help you decide which broker is right for you! Good luck!

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Finance

ALL YOU NEED TO KNOW ABOUT SIP

Several retail investors are shifting from the traditional savings schemes to the fairly newer investment options such as mutual funds. Why? Well, these traditional savings schemes such as fixed deposits (FDs), recurring deposits, bank savings account, etc. fetch poor returns in comparison to stocks and mutual funds that help to build wealth over time. If you are someone who is highly skilled and knowledgeable about the markets, then you are probably better off with investing directly in stocks. However, if you do not have the resources and time to track the markets and do not have the requisite knowledge to invest directly in stock, you might consider opting for mutual fund investments. There are two distinct methods of investing your funds in mutual funds – either through SIP (systematic investment plans) or lumpsum investment. This article serves as a SIP investment guide for all investors – old or new.

What is SIP?

As mentioned above, SIPs help investors to dedicate their funds in mutual funds in a systematic and planned manner. Under this mode of investment, fixed and regular investments are made towards a scheme on a periodic basis for a fixed period of time. The investment amount, the duration of the investment, the periodic intervals are all pre-decided by the investor before investing in SIP.

When can you start an SIP?

There is no right time to begin investing in SIP. Yes, you heard us right. Unlike lumpsum mode of investment, you do not have to time the markets to attempt entering the markets at the right time. Because, let’s face it – timing the markets is not everyone’s cup of tea – it is easier said than done. In SIP mode of investment, as regular investments are made towards mutual fund schemes, an investor ends up investing across different market cycles. As a result, they would attain greater mutual fund units when the markets are in a slump than when markets are at its peak and vice versa. This helps to average out the gross cost towards buying mutual fund units. This phenomenon is commonly referred to as rupee cost averaging. Hence, an investor can invest in mutual funds via SIP at any time they deem fit right.

How much can you invest in SIP?

There’s no upper limit to invest in SIP. What’s more, SIPs allow investors to invest as low as just Rs 100 per month in mutual funds. This allows for economically backward sections of the society to invest in mutual funds, something they could have never dreamed of earlier.

What will happen if I fail to pay my SIP instalment?

There may be times when due to a financial crunch or any other reason, you do not have the means to pay your SIP instalment. Several investors have a misconception that if they miss their SIP instalments, their future SIP instalements will be cancelled, or they would be asked to pay a penalty. However, that’s a bit misleading. One’s SIP investments would not be cancelled unless an investor fails to make SIP payments consecutively for more than two times. If this happens and you default on your SIP investments, your bank may or may not charge you a penalty, depending on your savings account and bank policies.

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Finance

What is adjusted closing price? An overview on its importance

The original closing or final price is the price of the stock or any other security at the time when the securities market closes. Adjusted closing price is calculated by adjusting the original price to reflect the effect of factors that cause the price to shift after closing the securities market. Some of these factors are dividend payout, stock splits and bonus stock.

Why consider this adjusted closing price?

You as an investor cannot make an informed decision based on the security’s closing price after the factors that alter it have occurred. The closing price on the stock market today will no longer match the stock price tomorrow after the effect of corporate actions.

Adjusted closing price considers the changes in the value of security after the market has closed. This is a more accurate representation of the value of that security.

Factors taken into consideration while adjusting closing price

  • Effect of dividend payout

Once a cash dividend is announced, shareholders receive a certain amount of money. Thus, dividends are reduced from the closing price as the company no longer retains the amount distributed. Hence, it is crucial to calculate the adjusted closing price of stock once a dividend is announced.

  • Effect of bonus issues or stock split

Both bonus issues and stock split have the same effect on the adjusted closing price of shares. Essentially, in both cases, the number of shares per shareholder increases. Shareholders now have more shares with them for the same investment.

Therefore, the price per share of the investor decreases. For instance, consider these simple examples:

  1. Bonus issue: A shareholder has 5 shares that were closed at Rs. 60 each. The company announced a bonus issue of 1 share per 5 shares. Now the adjusted closing price will be Rs. (60×5)/6, i.e., Rs. 50
  1. Stock split: A shareholder has 5 shares that were closed at Rs. 60 each. The company announced a stock split of 2:1. Now the adjusted closing price will be Rs. 60/2, i.e., Rs. 30
  • Effect of reverse stock split

In case of a reverse stock split, the shares are combined. Therefore, the number of shares per shareholder reduces. In such cases, the adjusted closing price of the shares is the sum of the number of shares combined.

Adjusted closing price and its importance while investing

As an investor, it is important to know that such a calculation is generally relevant only on the announcement date. As the stock market adapts to the information available, it automatically adjusts the price on the next day(s). The adjusted closing price is more accurate, current and relevant for an investor as it considers factors not considered in the original closing price.

It is, therefore, necessary to understand the concept of adjusted closing prices while investing in stocks.

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Finance

Perks Of Getting Online Loans With No Credit Check

A plethora of typical money lenders tends to limit how much you can borrow on a short-term loan basis. When emergencies hit the money limit indeed poses a lot of stress. Credit scores are also widely used by several banks globally, and moneylenders and are free to decide if they want to lend the money or not. Due to this, people with favorable credit scores are likely to get loans through typical lenders compared to those with bad credit. In reality, not everyone can maintain a good credit score, and it can be pretty challenging to get loans. But one doesn’t need to stress as they can always avail online loans with no credit check.

Different Types Of No Credit Check Loans

Payday loans are mainly short-term loans that can only be accessed online or through storefront lenders. They tend to be approved in a short time or even in a matter of few minutes at a time. They are mainly repaid from the borrower’s paycheck. People avail these loans for emergencies, and clients can easily access them from borrowers. The payday loans also tend to have shorter repayment, and the most extended allowance here is a month or at least two weeks. Above all, interest rates are pretty high, and there are no additional expenses for late repayments.

Personal Installment Loans

This loan type tends to have a more extended repayment period as compared to payday loans. However, the best part is that they are pretty user-friendly and, of course, more budget-friendly. Above all, they tend to be a safe option for patrons who tend to have low interest rates and more conductive repayment plans. Above all, borrowers can pay in small installments here given a repayment.

Perks Of No Credit Check Loans

The best part about online loans with no credit check is that the lenders don’t pay much attention to the borrower’s credit score. No doubt the bank will indeed don’t allow them to borrow due to their low credit score, but borrowers can surely get a piece of mind when they know they have an option. Above all, no credit check loans offer short-term loans with minimum subjecting to credit inspection.

Convivence

The no credit check loans can be easily accessed online and can also be accessed through an electronic medium. The online application process is quite simple and easy as it can be done whenever one wants. The process is also pretty short, so people don’t need to invest a lot of time here.

Quick Approval

The best part about online loans with no credit check is that they get approved in no time, unlike typical loans that take some days or even weeks to get approved. The online forms only require few details and can be submitted with a click of a button. The application process is quick for people who need emergency funds. Hence these loans are outstanding and here to stay without a doubt.

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Finance

Understanding the exact working behind the SIP calculator

We all must have some figure in our mind, which we want to achieve through saving over a certain duration. For example, if your ultimate financial goal is to buy a dream home by the time you retire, then you may need to build a corpus worth Rs. 50 lakhs. Someone who wants to plan for their wedding in the next seven to ten years may need to build a wedding corpus of Rs. 15 lakhs to Rs. 20 lakhs. Depending on your investment objective and the number of years you have in hand to achieve it, you can decide how much money to invest so that over the long term you are to save enough and create wealth.

Now if you want to calculate how much wealth you can create with your current SIP mutual fund investments, you can refer to a Systematic Investment Plan (SIP) calculator. But before moving to the calculator, let us understand what Systematic Investment Plan is. 

Systematic Investment Plan

Often referred to as SIP, a Systematic Investment Plan is an investment approach followed by investors who want to build a long term corpus by investing small fixed sums in mutual fund schemes. This mode of investing in mutual funds is ideal for anyone who wants to inculcate the discipline of systematic and regular investing. In SIP, the investors get to choose the investment sum and they can decide on which day of the month this amount can be debited from their savings account regularly.

SIP is better than lumpsum investing especially because one doesn’t need to have a large surplus sum to invest in mutual funds via SIP. Some mutual fund schemes are available at a SIP of as low as Rs. 500 per month. 

What is SIP Calculator?

If you want to calculate the maturity value of your SIP mutual fund investments at the end of its tenure, you can use the SIP calculator for calculating this amount. By using a SIP calculator, investors will be able to understand the exact SIP amount which they need to invest regularly to achieve the desired corpus. Irrespective of what your goal is, you achieve it using a SIP calculator by providing these details –

  1. Monthly SIP investment sum
  2. Number of months these investments will be made (ex. 120 months which means 10 years)
  3. Annual expected rate of return from the mutual fund scheme

SIP calculator is based on the following formula – 

M = P × ({[1 + i]n – 1} / i) × (1 + i)

Where –

–     M stands for the amount you receive upon maturity

–     P stands for the amount you invest at regular intervals

–     n stands for the number of payments you have made

–      i stands for the periodic rate of interest

How to use the SIP calculator?

Investors can use the SIP calculator by following these 3 simple steps – 

Determine the SIP sum

Investors need to enter the exact SIP sum which they will be investing at regular intervals which is usually every month. This sum will vary depending on your risk appetite, your current income, and your existing liabilities. 

End the number of months

Now depending on your financial goal (short term or long term), you can decide the number of months you wish to continue investing in mutual funds via SIP. 

Expected rate of return

Every mutual fund scheme delivers returns and investors need to assume returns in percentage which the mutual fund scheme might generate on an average during the investment tenure.

Investors will receive the following details –

– Total investment sum

– Returns earned

– Total corpus earned at the end of the investment journey = total investment sum + returns earned

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Finance

What is an ETF? Should you invest in Exchange traded funds?

The best part about mutual fund investing is that are plenty of investment products under broad categories which makes it possible for almost everyone to find a scheme that is aligned with their investment objective. For example, if building an emergency fund is on your mind you can consider investing in a liquid fund that falls under the debt scheme category and is a mutual fund scheme that offers high liquidity. If your investment objective is to take some higher risk to earn better returns, you can consider investing in a small cap fund. Investors who want to save taxes this fiscal year can consider investing in Equity Linked Savings Scheme (ELSS).

Similarly, investors who wish to invest in a mutual fund scheme whose units can be traded at the live market price are referred to as exchange traded funds (ETFs). 

What is an exchange traded fund?

An ETF is an open ended scheme that can only be traded using a demat account. Exchange Traded Funds are listed at the stock exchange just like company stocks which makes it possible for investors to enter or exit this fund during live trading hours. Investors can book profit and sell their ETF units similar to how traders buy and sell shares at the exchange.

Investors seeking equity exposure can consider investing in exchange traded funds. What distinguishes an ETF from direct equities is that ETFs have a diversified investment portfolio. A diversified portfolio is void of concentration risk whereas investments in direct equities have a very high concentration risk. ETF funds are ideal for long term investing, and investors can target their life’s financial goals which require a large commendable corpus like buying a new house or even a car. 

Difference between exchange traded funds and mutual funds

Parameter ETFs Mutual Funds
Risk management Exchange traded funds are passive funds which follow a passive management strategy Mutual funds offer active risk management
Modes of investing Investors need to have a demat account in order to trade with ETF units One can invest in mutual funds without any demat account
Low expense ratio Since there is very less participation of the fund manager in managing ETFs, they have a relatively low expense ratio Mutual funds that are actively managed have a high expense ratio as compared to passive funds like ETFs
Purchase price ETF units are traded live at the current NAV (net asset value) Mutual fund units can be only bought or sold once in a day at the NAV which is determined at the end of the day
How are returns earned ETFs track the performance of an underlying index or asset class without minimum tracking error Mutual funds earn by investing in a diversified portfolio of securities by generating risk adjusted returns

Should investors consider investing in exchange traded funds?

Investors should not only invest in ETFs because they have a low risk profile or can be traded at the live market price. They must invest if the investment objective of the ETF aligns with their investment goals. Investors must realize ETFs carry a very high investment risk and hence, they should determine their risk appetite before investing. ETFs offer passive management which means investors who are choosing mutual fund investors to benefit from the expertise of season fund managers should reconsider investing.

Those who wish to invest in ETFs must be ready to expose their investment portfolio to the market’s volatile nature. Investors may need to have a very high risk appetite and a long term investment horizon to allow their ETF fund to generate maximum returns.

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Finance

A complete guide to Exchange traded funds

Exchange traded funds are a popular investment tool among mutual fund investors. They can be bought and sold at the current market price during live trading hours. Investors can trade with ETF units just like they trade with stocks of companies. ETFs are listed on the market indices just like any other company stock. Investors get the best of both mutual fund and direct stock investing through exchange traded funds. Since these are passive funds, they have a relatively low expense ratio than active mutual funds. 

What is an exchange traded fund?

An Exchange Traded Fund (ETF) is an open ended scheme whose units can be traded throughout the day during market hours, which means investors can buy and sell these fund units at their current NAV (net asset value). The investment objective of an exchange traded fund is to generate capital appreciation by mimicking the performance of its underlying index or benchmark with minimal tracking error. 

How do ETFs work?

As mentioned earlier, ETFs offer the best of both mutual funds and stocks. They are bought and sold in the form of shares on all the exchanges where they are listed. Investors can enter or exit ETF funds by buying / selling their units at the fund’s live trading price throughout the day. Just like mutual funds, the NAV / market price of an ETF may fluctuate in value depending on the performance of its underlying assets and the basket of securities in which it invests. If the underlying assets of an ETF perform, its market price increases and vice versa.

ETFs are both active and passively managed. The portfolio manager of an active ETF carefully assesses its underlying securities and trades with them daily to help the scheme achieve its investment objective. On the other hand, passive ETF track the market trend of its underlying securities to generate capital appreciation. 

Benefits of investing in ETFs

When you buy shares of a single company, the performance of these shares will only depend on how the company performs in its coming quarters. When you invest in an ETF, you can invest in multiple company stocks thus avoiding any kind of concentration risk. For example, if you invest in an ETF that invests in the top 50 NIFTY companies, you will be able to invest different equities in small quantities rather than investing in just only single company stock.

Mutual funds have high management costs which are recovered through the expense ratio. A high expense ratio can take a significant chunk out of your overall capital gains. On the other hand, ETFs have a relatively low expense ratio which makes them a cost effective investment. ETFs are traded at the stock market and hence carry a relatively low expense ratio as compared to other mutual fund schemes. Investors can only buy or sell their mutual fund units based on their NAV which is declared at the end of the day. However, units of ETFs can be traded throughout the day, making them more liquid than mutual fund units. 

Volatility factor

ETFs may have several benefits over direct stock market investments and even mutual funds, but investors should bear in mind that these are market linked schemes too. The investment risk in ETFs is very high and hence, investors should first determine their risk appetite before investing. Just like any other mutual fund scheme, exchange traded funds do not guarantee returns.

Investors are expected to keep a well diversified investment portfolio and not only invest in any one scheme or asset class for income generation.

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Finance

Roy Gagaza Lists the Benefits Associated With a Principal-Protected Investment 

Roy Y. Gagaza Knows That Not All Investors Are Gamblers. This Is Where Principal Protected Investments Come In

Banks are not paying a lot of interest on cash in your accounts. As such, people are looking to make more money on the cash they have sitting around. However, not everyone wants to gamble their money and try their luck on the stock market or with other riskier types of investments. This is why Roy Gagaza, the CEO and Founder at Journey Wealth Management, LLC, wants to introduce you to principal-protected investments. Here is more information about this type of investment and why you may want to consider it.

Roy Gagaza Says the First Benefit Is a Guaranteed Return

One of the major benefits associated with a principal-protected investment is that it is as close to a guaranteed return as possible. The only other types of investments that are more solid are government bonds, but those do not have a high-interest rate associated with them. Basically, unless a company that is being invested in goes bankrupt, you are going to get your money back and then some. This is not always the case with investments, so this is a major benefit according to Roy Gagaza.

Roy Y. Gagaza Says the Second Benefit is Knowing Exactly How Much You Will Get

The second benefit associated with a principal-protected investment, according to Roy Gagaza, is that you will know exactly what you are getting when you invest. This is pretty rare for investments, as the amount you may get tends to vary. If you are looking to make a specific amount, this is a great way to ensure what you are investing in that nets you the return you are after.

Roy Gagaza Says the Third Benefit Is Higher Interest Rates Than Banks Offer

The final benefit of a principal-protected investment, according to Roy Gagaza is that these types of investments typically have a higher rate of return compared to other secure investments. For example, you can usually earn more by investing in a principal-protected investment compared to a government savings bond, bank savings account or a bank CD. This helps you to make the most of the money you have to invest.

Roy Gagaza is committed to helping people make their financial dreams come true. A key component to this is investing wisely. While no investment is 100 percent foolproof, principal-protected investments are one of the more secure investment options available. This can be a great option for someone who does not want to gamble, and who wants to make a reasonable return on their investment.

Roy Gagaza Says Principal-Protected Investments Can Be Ideal For Those Who Prefer Safer Investment Opportunities.

Click on the link below to schedule a 15-minute Retirement Strategy Session.

https://roygagaza.apptoto.com/

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Finance

What are the advantage and disadvantages of equity funds?

Mutual funds offer diversification as they invest in a basket of securities that may belong to various asset classes and money market instruments. Fund houses that run mutual funds amass financial resources from investors sharing a common investment objective and invest the accumulated sum across money market instruments to generate capital appreciation.

Investors with a very high risk appetite prefer investing in equity funds because they carry a high risk rewards ratio. Today we are going to discuss equity funds and some of the advantages and disadvantages of these market linked schemes

What is an equity fund?

An equity fund is an open ended mutual fund scheme that invests majority of its investible corpus in equity and equity related instruments of publicly listed companies. Equity funds invest in stocks of various companies and build an underlying portfolio that may generate income through diversification of risk.

As they predominantly invest in the stock market, equity funds carry a very high risk profile. Retail investors may have to understand their risk appetite and invest accordingly.

Advantages of equity funds

  • The biggest advantage of equity funds is that they are ideal for achieving long term financial goals like buying a new house, planning for your child’s wedding, or building a corpus for their higher education or any similar long term goals. Equity funds invest in stocks. We all know that investing in the stock market for the short term can prove to be volatile. However, over the long term the stock market has always provided decent returns.
  • Equity funds are the highest grossing mutual fund scheme compared to debt funds, hybrid funds or any other mutual fund scheme. They may be a high volatile investment, but they also have the potential to generate returns who no other investment avenue can offer.
  • Equity funds are professionally managed. Every equity fund has a fund manager, sometimes a team of fund managers who actively buy and sell securities depending on market movement. This is why even a ‘know-nothing’ investor can invest in equity funds as their money is handled by a team of expert fund managers who try their best to help the equity scheme generate returns.
  • If you invest in Equity Linked Savings Scheme (ELSS) a tax saving equity scheme, you can receive tax benefit for an investment of up to Rs. 1.5 lakhs under Section 80C of the Indian Income Tax Act, 1961.

Disadvantages of equity funds

  • Equity funds are highly volatile in nature and over the short term one may even face losses. They carry the highest amount of investment risk as compared to any other mutual fund scheme. Without a long term investment horizon, investing in equity funds may not be a good idea.
  • Equity funds do offer professional fund management but that comes at a high expense ratio. The expense ratio of equity funds is higher than passive funds like index funds. A high expense ratio may devour a large chunk of your capital gains in the long term.
  • An equity scheme like ELSS may come with a tax benefit but it also comes with a predetermined lock-in period of three years. This means investors cannot liquidate their ELSS investments till the lock-in period is over, thus limiting the liquidity offered.

If you are investing in equity funds for the long run and wish to mitigate overall investment risk, you can opt for Systematic Investment Plan (SIP). With SIP one can invest small fixed sums at regular intervals instead of making bulk investments and exposing their entire investment sum to market risk.

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