Finsight 1st June to 5th June 2020

Finsight fisdom

Indian Equity Markets ended on a positive note for the week. Nifty was up 6.0% and Sensex by 5.7% respectively.

Weekly Capsule

– Q4 GDP numbers show buoyancy

The GDP data for the quarter ended on 31st March was published on Friday by the NSO. The GDP grew by 3.1% even with lockdown restrictions taking away half of the March month and taking the FY 20 tally to 4.2%. The data can be disheartening if looked at in isolation, but compared to developed countries like Japan and Italy which saw a contraction in GDP for the same period.

– FDI inflows surge by 14% in FY20, at record level of $50 billion.

On the back of government’s untiring efforts to make India as the new hub to attract foreign investments, the FY20 witnessed a sharp surge in the FDI excluding reinvested earnings by 14% at $50 billion. Including the reinvested earnings, the FDI figure stood at $74 billion. Singapore lead the charge with investments worth $14.7 billion with Mauritius coming second with $8.2 billion in investments.

– FIIs back in action.

The last week witnessed foreign institutional investors emerge as net buyers by a figure ~2 thousand crore more than Domestic Investors. The FII infusion was the key driver for the markets in last week which witnessed a sharp rise by ~6%. The involvement of FIIs also shows that Indian arkets are again becoming attractive for foreign investors even when the country is under the most stringent lockdown since past 2 months.

 

Nifty at glance

Finsight

Finsight 1

Mutual Fund News:

Gopal Agarwal quits DSP Mutual Fund: Veteran fund manager Gopal Agarwal announced his exit from DSP Mutual Fund. The fund manager was managing marquee funds like the DSP Top 100 equity, DSP focus fund and equity investments in hybrid funds like the DSP Equity Savings.

Outlook:

Going ahead in the upcoming week markets will take cues from the ending of lockdown. If the lockdown extends obviously there is going to be increased pressure on financial system and hence impact on the overall stock market reaction. Given that markets are forward looking, all the sector specific ifs and buts have already been factored in the current prices.

Top 11 Vaccine Developments in Progress

MyWay 2nd Image [Vaccine infographics]-07-07

Decoding KYC for you – Back to the Basics

Decoding KYC fisdom

Imagine you are Bruce Willis sweeping across with your car across the city of Chicago trying to protect your generic pretty teenage daughter who has found the secret to a terrorist’s plan who has concocted a plan of world domination through KYC. Yes, you are absolutely right to think that KYC isn’t really that exciting initially and real-life is nothing remotely mirroring KYC in that fashion. Although today’s world is fighting a silent marketing war with information and big data, with forefront players being Google and Zuckerberg’s Facebook acquiring multiple IT products with access to user information one after the other, KYC has nothing to do with that.

But, don’t sadden your adventurous heart, because the KYC that we are talking about today is for investing, which is an adventure in itself. Investing is a quest for making our financial dreams come true and shouldn’t be considered anything less than an expedition you can carry out to meander through the world of mutual funds. But where does KYC or Know Your Customer fall into this jigsaw puzzle?

KYC: Your golden ticket to investing in Mutual Funds 

In the labyrinth of investing, mutual funds generally come with the option to choose the risk appetite you are comfortable with. So, it already is customized to the fact whether you are comfortable with being an Ant-Man with lower stakes or Captain America who has to constantly deal with ‘the world is at stake’, kind of situations. So, the true adventure is being explored by the fund managers of mutual funds but at the same time, you are definitely the one in the ride although reaping the benefits from it.

KYC or Know Your Customer is that one thing mandated by the SEBI organization in India that allows you to invest in mutual funds once you have completed it. While there are KYCs in more regular situations in our lives such as telecom services or payment services, investing also requires KYC to protect the interests of all the parties involved, starting from your financial security and income tax calculations, to Government’s interest in maintaining a log to the companies in between, whether it the mutual fund plan from a particular bank or financial institution or the platform where you are using to invest in.in other words, it helps to tremendously reduce the cases of fraudulent activity in a mutual fund market. 

So, how to get KYC done?

On our mutual fund platform, the KYC process is free, user-friendly, and takes about 7-10 minutes taking for granted that you have your basic documentation ready. Here are the steps to having it done on our platform.

  1. Open our App and go to the KYC completion process section.
  2. Fill in the personal details which are asked step-by-step
  3. Upload the documentation, which can be also done with the help of the camera integrated into our platform for your convenience.
  4. Upload an IPV video, where you basically take a video of yourself stating your name and that the video has been made for the purpose of IPV solely.
  5. The signature is easy to deal with as you will be expected to simply touch and add your signature on the screen and upload it.

Once you have provided all the information and uploaded all the required documentation IPV video and your signature the information will be sent for verification, however not pausing your investment process since once you have submitted your complete KYC, you are investment ready and can start enjoying the benefits and the adventures of mutual funds, whether it is in the form of a one-time mutual fund or a monthly SIP.

Why Pick A Side When You Can Win at The Game?

when you can win

“You pay a very high price in the stock market for a cheery consensus”

-Warren Buffet, Forbes magazine (1979)

TL;DR: For every seller who feels a stock price is overvalued, there’s a buyer who believes it is undervalued. The demand-supply keep tugging till they start trading within a narrower range. The only one winning is the one who continues to bet on the game instead of any side in this game of tug-of-war.

economies 1

But, most investors focus on extrapolating instead of considering the probability of mean reversion.

Extrapolation is another technical term which simply means: We find the trend and extrapolate it.

Mean reversion is the expected result. But we don’t estimate mean reversion. Rather, our instinct is to find a trend and extrapolate it. Psychologically we think it will always be winter for some companies and for others it will always be summer. Eventually, fall follows summer and spring follows winter – which, though counter-intuitive, most seem to miss.

What causes mean reversion? How does beaten-down companies’ stock price rise over a period of time?

Benjamin Graham once referred to this as “one of the mysteries of our business”. The microeconomic answer is rather simple.

Undervalued assets and profits attract investors. Value investors and other fundamental investors start to buy stocks and so push up the stock prices. High prices and expensive assets cause investors to sell. The continuous selling pushes down the stock prices.

While the crowd imagines the downwards trend in the stock market will continue, value investors and contrarians or rather smart investors continue to stay on the course and grab these opportunities. This push-pull continues till the prices reach a range where there’s consensus of it being the fair price range, thus creating an equilibrium; or in other words – reverting to the mean.

Investor Takeaways:

• Mean reversion is a part and parcel of investing in equities, in the long run it all moves to a range which includes the fair price point of the stock.
• Mean reversion enables a great opportunity for long term investors to purchase the asset at a lower cost and bring down the average cost of acquisition.
• Mean reversion does not mean that at a certain given point a beaten down stock will resurrect or a blue-chip company will go down the drain.
• Mean reversion cannot be timed, but investors can avail benefits out of it if they continue to systematically invest through the period.

Need regular income: SWP or Dividend?

SWP or dividend

Changes in taxation on dividends:

MF category

Dividend is no longer a great option for investors. Systematic withdrawal plan is a better option for all investors  since it is taxed at a much lower capital gains tax structure.

What is the alternate for investors seeking regular income?

Systematic withdrawal plan is a better option for all investors since it is taxed at a much lower capital gains tax structure.

What is Systematic Withdrawal Plan?

Systematic Withdrawal Plan allows an investor to withdraw a fixed or variable amount from his mutual fund scheme on a present date every month, quarterly, semi-annually or annually as per his needs.

How do you differentiate SWP option visa vis Dividend option?

SWP Dividend parameter

Let us understand the difference with an illustration:

Summary is as follows:

data sheet 2

Key takeaways:

1. Equity investors irrespective of its tax bracket should opt for systematic withdrawal plan (SWP) for regular income.

2. As far as debt-oriented funds which were subject to DDT at 25% (plus surcharge & cess) are concerned, investors falling in lower slab rates would gain by this announcement. Conservative investors especially those nearing retirement can opt for a growth option in debt funds and can consider SWP after 3 years making that option more tax efficient.

(Information gathered and material used in this document is believed to be from reliable sources. We, however, does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments)

RBI’s booster shots to help India’s economy fight the pandemic

RBI boost indian economy against pandemic

“India is expected to post a sharp turnaround and resume its pre-COVID pre-slowdown trajectory by growing at 7.4 per cent in 2021-22.”

– Shaktikanta Das

Governor, RBI on 17th April 2020

Key Highlights: RBI’s booster shots to help India’s economy fight the pandemic

MeasuresObjective
NPA classification will now not include the 90- day moratorium on loansSecuring banks' books & entity classification as RBI rolls out aggressive measures
TLTRO 2.0 worth Rs 50,000 croreLiquidity boost to NBFCs, HFCs & MFIs
Special refinance facilities of Rs 50,000 cr to NHB, SIDBI and NABARDSystemic liquidity support to small enterprises
LCR requirement for SCB to be brought down from 100 percent to 80 percent with immediate effectCommercial banks deposit less with RBI, keep more with themselves for liquidity
Fixed reverse repo rate under LAF cut by 25 bps to 3.75 percent from 4 percent with immediate effectUnattractive for commercial banks to deposit with RBI, might as well lend
For large accounts under default, additional provisioning of 20 percent is required for not implementing resolution in 180 days. This has now been relaxed.Breathing space for banks, leaving more towards the banks' liquidity

PM Modi’s Speech Today: Key Highlights

 

key highlights

1. Lockdown has been extended till May 03,2020. It might be relaxed (limited ) after April 20 in places where hotspots are unlikely to spring up; however if the situation worsens, lockdown might be enforced back again in such places

2. Take special care of elderly, especially those with underlying medical conditions.

3. Follow social distancing, wear masks.

4. Improve immunity.

5. Download Aarogya Setu app

6. Respect police and other authorities in their efforts in their efforts against coronavirus.

7. We are prepared with over 1 lakh beds; over 600 Corona dedicated hospitals; work is going on for more measures

Life & Lifestyle Lessons from The Ultra-Successful

The super-rich and super-successful are so for a reason. “Habits make the man” is an age-old proverb which only goes to reiterate the fact that you are a function of your habits. Successful people have a few common traits and habits which have played a major role in their success.

These four super-successful humans have discovered different keys to success. Here’s what we can learn from them while we continue working towards the success we aspire for.

Warren Buffer, Chairman & CEO of Berkshire  Hathaway | Net Worth: $76.3 billion

Key lessons: First invest from whatever you earn and plan your expenses with whatever’s left

Fun Facts:

  • Warren Buffet lives in modest home he had bought almost 60 years back.
  • He still uses his retro Nokia flip-phone and has no internet to upgrade soon.
  • He stays away from rich folks’ toys like luxury cars & yachts.
  • Warren bought his first stock when he was 11 years old and still regrets for not having started sooner.

 

mark zukerberg

Mark Zuckerberg, CEO of Facebook I Net Worth $ 54.9 billion

Key Lesson: Your focus on spending will haze your vision for success.

Fun Facts:

  • Mark prefers to wear simple T-shirts and jeans to avoid unnecessary distractions and unproductive use of time.
  • He drives a $30,000 Volkswagen hatchback, which is also pretty efficient in mileage and maintenance.
  • He believes in close-knit rejoice instead of lavish parties

 

carlos slim

Carlos Slim: Mexican Business Tycoon I Net Worth: $ 49.0 billion

Key Lesson: Live a simple yet fulfilling lifestyle.

Fun Facts:

  • Carlos lives in the same house since 40 years. He does own other real estates but has no intentions to shift.
  • Carlos does not spend on luxury vehicles and gadgets. He drives himself to work, every single day.
  • Carlos loves to indulge in home-cooked meals with his family.

 

Azib premji

Azim Premji, Chairman of Wipro Ltd I Net Worth: $ 6.1 billion

Key Lesson: Value utility over cost and focus on getting things done.

Fun Facts:

  • Azim Premji drove modest cars like Ford’s escort and Toyota Corolla before upgrading to a used Mercedes.
  • He flies economy and prefers modest hotels over luxury ones.
  • He does not mind walking his way or taking an autorickshaw to nearby places.

Let’s learn from the best to be the best. Start planning your finance now.

Coronavirus opens an unpopular investing opportunity (not about long-term investing!)

Yields have dropped significantly in February. RBI’s initiatives like the LTRO (Long Term Repo Auction) along with the migration of capital to safer harbours like the sovereign bonds have led to a softening in the yields of Indian government securities as well.

G-sec Yield Movement for Feb’20

Cash & cash equivalents have been investor darlings during times of crisis, but considering other developing economics, the love has extended to duration-oriented debt funds as well.

In light of further global trade slowdown and increased probability of rate cut – taking cue from the US Fed’s emergency 50 bps rate cut, there’s a probability that RBI follows suit leading to further softening of the yield. However, we do not believe that the same is an absolute necessity.

Takeaways for debt fund investors

  • Short to medium duration bonds (average effective maturity of 6 to 8 years) could deliver better than average returns.
  • Investors must avoid taking on credit risks as far as possible and move to funds with a higher allocation to sovereign securities.

De-Jargon SIP, STP and SWP

SIP, STP, SWP

Net Asset Value

NAV stands for Net Asset Value. Generally, the “net” arrives only when you remove the cost incurred from the price.

For example: Imagine there are 100 investors and each invested Rs 1,000 in an Equity fund. Each unit price will be Rs 10. Then the sum of Rs 1 lakh is invested in various stocks of mutual funds. A year later the value of Rs 1 lakh will be turned out to Rs 1.5 lakhs, giving a profit of Rs 50k.  If the cost of 10k is removed, then the profit earned is 40k. Then, the unit price will go from Rs 10 to Rs 14. Now, your 100 units worth is Rs 1.400.

Thus,

  • Investors can access the performance of the fund through the NAV differentials.
  • NAV helps to identify potential investment opportunities.
  • One can also use NAV to view the holdings in their portfolio.

Systematic Investment Plan

Why everybody is talking about SIP? What’s this cool new thing that you should know about.

SIP is a Systematic Investment Plan. This is the same as your Recurring deposits where you make periodic investments into mutual funds. Fixed money will be deducted from your bank savings account and will be directed towards the mutual fund for which you have opted for.

The two things which are good about SIP:

  1. Some people make a target for saving in SIP and spend the rest. Thus it’s very useful in building the habit of regular investment.
  2. SIP allows you to average out your price as you invest over the years, either monthly or quarterly.
  3. Also, SIP helps in reducing the risk of the market as it spreads the money throughout the various market cycle.

How SIP is different from a one-time investment:

SIP One- time investment
Periodic investment Lump sum investment
Earns better even when markets are low Earns when markets are high
Protect investment from a market crash Investments will be affected due to the market crash

MyWay Wealth

MyWay Wealth app screen shots

Remember, Systematic Investment Plan is a vehicle, not a goal, you use a SIP to make investments and you can choose to have financial adviser if needed.

You can start investing in SIP with just Rs 100. Here, you have the best investment platform- MyWay Wealth.

STP- Systematic Transfer Plan:

Investors worry about making lump sum investments because of risk appetite. This is where STP helps you to mitigate the risk. In SIP, you will move your money from saving to a mutual fund whereas, in STP,  you will move your money from one fund to another. Instead of investing all in one go, you can put money in a liquid fund and set up a monthly/ weekly/ yearly transfers into different equity schemes.

SWP- Systematic Withdrawal Plan:

Here, you can either choose to withdraw capital gains on your investments or a fixed amount.this way you will not only have money still invested in the scheme but also it can be part of your regular income and returns.

Why SWP?

  1. With the SWP, you can time your withdrawals as per your financial needs. It ensures the availability of funds at the right time.
  2. With this plan, an investor can create a flow of income from an investment that is regular.

Hope this article helped you to understand the various ways of investing. Remember to make a thorough analysis of each before you make your choice. However, the most recommended option is SIP as it allows you to get into the habit of saving and provides the benefit of compounding.

Think Smart! Think MyWay Wealth!