A solution for your Emergencies

Emergency funds

Keeping money aside to face your emergencies is important. We all do have a situation where we need money – it can be a medical emergency, sudden job loss, disability or certain health issues which may stop you from earning. One should be very clear on the statement that – Your emergency funds cannot become your savings whereas your savings can be your emergency fund. Your savings and emergency funds are not the same. They are two different things. These two are differentiated based on an individual’s planned and unplanned expenses. Generally, savings are made to meet one’s planned expenses.

For example: Think about buying a car, where you will pull all your savings, take a loan or you borrow from your relatives or friends. These are events you can prepare and plan for. Then what about unplanned expenses? Sudden job loss, huge medical expenses, health issues that stop you from earning all these can be one’s unplanned expenses. This is why we create an Emergency Fund.

Savings and emergency funds are two different categories. Savings provide you the financial freedom to make an investment which can be for a short or a long term and helps you meet your financial needs. Whereas emergency fund provides you the financial security by assisting you in financial crisis.

How much you need for an Emergency Fund?

Roughly keep aside six months of your living expenses including your EMI, rent and school fee. You can increase or decrease this figure based on your personal situations. Say you have decided to have an emergency fund of Rs.1 lakh, in this case, you can put aside money of Rs 5,000 or Rs 10,000 every month. On being more specific:

  1. If you and your spouse both are working and have no dependents, in such cases, 3 months of your living expenses can be kept aside for an emergency fund.
  2. If you are a sole bread earner of in your family and you have many dependents then one year of your living expenses can be kept aside for an emergency fund.
  3. If you are risk-averse, then you can keep a year’s expense like an emergency fund.

Where you keep this money?

The money which you keep aside i.e., an emergency fund cannot be kept idle. So you can move these funds to a place where the accessibility is less and liquidity is high and offers better returns than a savings account. Accessibility is less because more often you cannot take out the money unless its an emergency.
Fixed deposits can be an easy option. Certain banks offer flexible FD’s that will allow you to sweep the money that you need without any additional charges. Hence you can go for it.

Another popular investment option is – “The Mutual Funds”. You can go for short- term debt funds to build an emergency fund. These debt funds offer you a better return when compared with FD’s. These debt funds are more flexible and the incident of tax is very less comparatively.

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Therefore, set yourself a target and plan accordingly. Make a regular monthly credit towards your emergency funds. Hence be prepared for uncertainties of tomorrow. If you don’t have anything saved towards an Emergency Fund, it is not too late to get started. So, start with MyWay Wealth.

The little you put, the more you can do!

Are investments in Real Estate really safe?

equity

We have heard our elders saying that “Invest in Real estate, the future value of the property will fetch you prosperous wealth.” Is it true?

Let us now discuss how a Real estate as an investment option.
Yes, Investment in Real Estate can generate a regular income, and you can see capital appreciation over a period of time. People think Real estate as an investment option is good only because they look only into the returns ignoring the other factors.

There are other factors that you need to consider:

  1. Risk factor: There is more risk involved if you buy a property, and risk comes in the form of property disputes, your property can be grabbed, finding the tenant becomes difficult.
  2. Additional expenses: Incurring more expenses can affect your returns. Expenses such as brokerage chargers, maintenance costs, taxes will be incurred by you. You will pay all these expenses from your returns.
  3. Low liquidity: In case of emergency, to can’t sell a part of your property and make money and also your need for cash can make you sell the property at a lower price than its original cost. Thus, you incur a loss.
  4. Market fluctuations: Yes, there has been a time where you can sell your property more than 10 times its original value but the things are changed and are not the same.

Reasons why an investor should avoid investing in Real Estate

  • An under performing asset class as it gives more or less the same returns as FDs and offers an annual rent between 2-5% which is very less when compared with the returns earned on FDs
  • The value of a property depends on the geographical location of a property which makes a real asset as an unpredictable asset class.
  • The typical mentality of investors where they link properties to memories and emotions ignoring the returns on investment.
  • Liquidity is less because when you need immediate cash, you can’t find buyers easily and need of cash can make you sell the property at a lower cost than its market value.
    They are subjected to more litigation and the risk involved is high because of property disputes or your
  • property can be grabbed.

MyWay Screen shot

Thus, these are the disadvantages of having investments in Real Estate. But is an alternative? Yes! there are better options to invest such as Mutual Funds. Direct Plans, SIPs, Gold Funds or Equity Mutual Funds help you with wealth creation in the long term. Use “MyWay Wealth” to discover, track and invest in Mutual Funds.

Don’t invest in better, invest in the best!

Expose your money to Equity!

Equity investment earns you the best returns when compared with the other investment options. Now, let’s understand the true nature of all the investment options.

Investment options Initial investment Finally earned

(principle+returns)

Fixed deposit 1 lakh 19.35 lakhs
Gold 1 lakh 16.10 lakhs
Public Provident Fund 1 lakh 32.78 lakhs
Equity 1 lakh 2.3 crores

 *A period of investment is considered as 30 years for all the investment options.

Then what are these Equities?

Equities are the stocks/ shares that are listed in the stock exchanges which are traded at the market price. You can invest in Equities in two ways:

  1. Direct investing in Equities-You will directly purchase stocks of listed companies through a demat account.
  2. Investing in Equities through mutual funds.

Why one should not buy Equities directly?

Think, how do you know which companies equities to buy?

Because, if you are new to investing, then opting for the wrong equities will cost your money and peace of mind. When you decide to buy equities through mutual funds, you outsource your decision to the Stock Experts. As an investor, one only needs to invest the desired amount and become a part of the fund holdings, and the professional managers will do this job.

Key advantages of investing in Equities through mutual funds:

  • They are professionally managed by expert professionals spend quality time in researching about the future performance of companies.
  • You get an exposure to various stocks when you are invested in an equity mutual fund scheme
  • They offer you an opportunity to redeem your investments at any time (Except for Equity Linked Saving Schemes-‘ELSS’ which has a lock-in period of 3 years).
  • Equity mutual fund schemes avail you a facility to invest small sums at regular intervals through systematic investment plans (SIP).

How to invest in equity mutual funds through?

You can start investing in Equities Mutual funds through MyWay Wealth. MyWay Wealth provides you smart recommendations to build your wealth scientifically and financially.

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Thus, be smart in choosing your investment option. Always opt for investment that matches your financial goals and risk appetite, choose the scheme that matches your profile. Equities will end dependency on gold, real estate, and FDs.

It is not market timing but time in the market that matters!

YOU HAVE TO MAKE IT COUNT

Good Financial Plan

Everyone will have money to save- from a poor lady who sells vegetables on the roadside to the Big shots in society. We simply don’t have a clue on “How to look for it”. This article will help you to become “A Good Financial Planner”, where you will be able to organize your money and stay stress-free about “Right Investments”.

Generally, we hear people saying- “I have no idea where my money goes”, “I don’t have anything left to save” or they will be worried about not making “good decisions” on investments or considering not having enough for their children and for themselves in the coming years. One of the reasons why we make such a statement is because we don’t have an efficient cash flow system.

The right way to track your money is to have “a good cash flow system”. You would have seen individuals who will record each penny they go through consistently which is an extremely boring job, eventually they get obsessed about money and will stop enjoying their life. Always note that your planning for money what you have isn’t just about spending, it’s also about monitoring all our cash inflows and outflows.

The aim of having a good cash flow is to separate your savings and spending so that you can keep track of your money. There are 3 accounts where you split your money- Income, Spending, and Saving and let’s give 3 different names to these accounts i.e.,

  • Income Account.
  • Spend-it Account.
  • Invest-it Account.

Now, what happens in these accounts?

Once your salary hits Income Account within a short span you will move certain money, keeping the view of all your possible expenses to Spend-it Account and the money left will be moved on to Invest-it Account.

  • The source of money for your Income Account can be your salary, cash gifts received from relatives, bonus, interest earned from investments, rent received, dividends, etc.
  • Next, you are supposed to move money to Spend-it Account. Have a rough figure of all the expenses, including expenses which you may incur in the future. Rent payment, bills, fuel, etc. these are some of the examples of general expenses. Assume in your family there is an aged old man, you can figure out his medical cost, for such costs you can move more cash additionally.
  • Now, whatever left in Income Account, move it to the Invest-it Account. Remember you should be able to move at least 15%-20% of your income to Invest-it Account.

What we are actually trying to do?

By dividing your money, we can create a system where once your money is in its place, you can easily go on with your monthly moves. In the initial stages, you may find it difficult to adopt and following this system, however, eventually, you would adjust to it and develop a steady financial habit.

Table showing the inflow and outflow for 3 different accounts:

Type of Account Percentage Inflow/ Outflow
Income 10%-15% can be maintained as a cash reserve Salary received, rent received, dividends earned
Spending Not more than 45%-50% EMI, credit card bills, utilities
Saving At least 15%-20% Online investments (or) any future investments.

Is it okay to have Joint Accounts?

Always begin with yourself and you might feel getting everyone into the system is a difficult exercise.

Type of Account Individual joint Description
Income yes No It’s good to have a separate Income Account in case your partner is not helping and not supportive.
Spending No Yes Spending can be joint where both of your credits can equal your monthly spendings.
Saving Yes No Each will have different Invest-it Account, even it can be joint, where the primary holder should be the same on whose name the investment will happen.

Keynote:

Moving money from Invest-it to Spend-it is not allowed. Always try to stick to this rule. In the first three months of this practice, you’ll know what’s going on with your money. You will have an idea about your spending. In case, your Invest-it Account is empty, you’ll know that your spending are more.

Outcomes of the system:

  • You’ll start questioning your spending and you’ll realize how much your spending are going to be.
  • Your Invest-it Account will start growing and you can track your spending capacity.

Putting a label on your money will stop you from using it for other purposes. This is what we call “Mental Accounting” which means that separating money based on the purposes and not using it for any other use. Mental Accounting stops us from seeing the same money for two different purposes. We’re training our brains into doing the right things. We have a good and well-established cash flow. Remember we are not investing yet- so the money in your Invest-it Account is ideal.

What do you do with your savings?

You can’t keep your savings idle, so being constructing your wealth. The first thing you do when you have extra cash is creating an emergency fund to meet the unseen future expenses. Then, later you can start investing in various financial products. Things you can do with your savings are:

  1. Plan for goals like child’s education, child’s wedding, vacation
  2. Investing in fixed-income securities
  3. Put money in high-yield products
  4. Invest in mutual funds
  5. Plan for retirement

With MyWay Wealth, you can make all your dreams come true. MyWay Wealth app helps you to save money for a specific purpose and helps the investors to get into the habit of making “goal-based investing”.

MyWay Screen shot

Every Investor has a need, every need leads to a goal and at MyWay Wealth you can have an investment for all your goals such as Mutual Funds for high returns, Term Insurance to Protect Your Family, National Pension Scheme for your Retirement and various other needs.

Don’t Delay, Start Now!

Rules of Equity investing

Equities

“Ups and downs in life are very important to keep us going, because a straight line in ECG means we are not alive.”

—Ratan Tata

Rules of equity investing:

  1. While you are investing in the stock market, give the same patience you give with real estate. A good equity portfolio needs five years of patience, ten years you see consistent returns.
  2. Remember that the risk of choosing poor products will land to bad returns.
  3. Diversify across asset classes to reduce the impact of adverse market movement as all the assets class do not perform in similar fashion at a given period of time.
  4. Do not invest in any product that locks you into a particular company or asset manager.
  5. If you want to invest in managed funds, start learning to know the tactics of the market.

So investors need to remember that if they give the same respect to the equity, which they give to real estate, it would be a smoother ride with fewer costs.

Are Equity shares better than equity funds?

Investing directly into shares has a lot of complexity that an individual person has to take care of. You have to examine stock and assess if the valuation is attractive. Investing in stocks is a dynamic process because the scenario of business is changing frequently because of competition. And one should also understand how the stock exchange like Sensex and nifty functions. So one should need higher initial capital to build a well-diversified portfolio.

If we take the case of equity funds it is a more convenient way to enter stock markets. Where the fund manager would take care of your portfolio. You need not worry about the changes happening in the stock market and other decisions like portfolio management. Moreover, you can start with a systematic investment plan (SIP) in mutual funds with low as Rs 500 every month. In short, you can achieve a similar but a safer level of at a smaller amount.

MyWay

MyWay Wealth gives you the option to invest in Mutual funds are the best way which gives exposure to your investments. So being a smart investor, why to invest in real estate when equity gives the best returns to your investments? Being an investor you have to understand that equity does take time and you need at least seven to ten years of patience to get your returns. You have to understand that you won’t double your money overnight, but you would be surely getting your returns which is between 12-15 percent a year.

Think Smart! Think Equity!

Asset Allocation is the dynamic portfolio of your investment.

Asset allocation

“The intelligent investor is a realist who sells to optimists and buys from pessimists.”

-Benjamin Graham

Asset allocation is mutual funds that are invested in a varied assets class. The asset allocation could be in the form of equity oriented, debt-oriented, or even asset classes like gold, other metals, and commodities. One can say that asset allocation is a balanced combination of a bond, equity, which includes stocks, bonds, real estate, and equity funds.

The work of the fund manager is to keep track of the investments and to make necessary changes based on market performance. We all are aware of that, equities are considered to be the highest return generating asset class. But there is the highest degree of risk involved and also a fixed deposit is considered to be less risky but we also there is a low return on investment. So investing in across different asset classes can earn returns by minimizing the risk.

The magic of diversification:

Diversification is where the money is divided into different investments to reduce the risk. Diversification is a strategy that can be summed as “Don’t put all your eggs in one basket”. You are better diversified if you spread your investments within each asset class. Which means holding a number of different stocks or bonds, and investing in different industry sectors, such as health care, consumer goods, and technology. So if one is doing poorly, you can balance it with other holding sectors that are doing well.

Feature of asset allocation

The main aim of asset allocation is to benefit from more than one asset as well as to reduce the risks that are associated with one particular asset.

Different types of asset allocation funds:

  • Static asset allocation funds
  • Dynamic asset allocation funds

Static allocation funds

Static allocation funds have a decided percentage of fund allocation in the different asset classes. One of the most popular funds is a balanced fund which invests their 65% of their assets in equities and rests in debt.

Dynamic asset allocation funds

These allocation funds return is more than fixed deposits or debt funds because they invest in equity. Dynamic funds are riskier than fixed deposits as well as debt funds. The returns from equity-oriented dynamic asset allocation funds enjoy a favorable tax treatment in comparison to debt or fixed deposits. The returns are tax-free if sold after a year.

Importance of asset allocation funds

  • Diversification

The investor can invest in different asset classes and can diversify their portfolio.

  • The investor can earn better returns

In asset allocation funds the investor can invest in different asset classes and therefore it earns better returns.

Who should invest in asset allocation funds?

We all know the equity asset class helps to beat inflation. But on the other hand equity investment are not stable funds. Asset allocation investment is been divided into two categories one is the funds which are invested into asset clause and others are invested into equities. This helps to generate stable returns while reducing the risk.

Tax for asset allocation

There is 20 percent taxation with indexation, for long term gains of 3 years and over.

The main idea of allocation of asset is to benefit the appreciation of more than one asset as well as to reduce the risk which is associated with one particular asset. However, it’s also important to make investments based on your risk appetite and investment horizon. After all, you are unique and so are your investments.

Think Before You Invest! Happy Investing!

Debt Mutual Funds Classification

Debt funds classification

Debt mutual fund invests mainly in debt or fixed income securities such as treasury bills, corporate bonds, government securities, and money market instruments that have various time horizons. Investors choose these funds as they are unaffected by market volatility, provide stability to asset portfolio, receive a tax deduction and have high liquidity. The reason behind investing in debt fund is to earn interest income and capital appreciation. Here is the debt mutual fund classification.

Types of debt funds:

1. Short term and Ultra short term debt funds

Wherein these debt funds are invested in instruments with shorter maturities, ranging between 1 to 3 years. Short term funds are for conventional investors where are not affected by the movement in interest rate. Ultra short-term mutual funds are those which invest in fixed-income earning instruments of maturity up to six months.

2. Liquid funds

Liquid funds are being invested in debt instruments with maturity, not more than 91 days. Liquid funds are risk-free funds, liquid funds are better than saving your money in the bank account because rarely they have negative returns.

3. Income funds

Income funds can also take a call on interest rates to invest in debt securities with different maturities, but often income funds are for long term maturities. The average maturity of income funds is around 5-6 years.

4. Dynamic bond funds

Dynamic bond funds keep changing portfolio composition according to changing interest. These bonds have a fluctuating average maturity period because it takes interest call into consideration and invests for longer as well as shorter maturities.

5. Gilt funds

Gilt funds are invested in government securities, where high rated securities with low risk. They provide moderate returns as they invest in an asset with better quality. Though the returns are considerable, they are not fixed as they are subjected to change due to interest rate fluctuations.

6. Fixed maturity plan(FMP)

Fixed maturity plans are closed-ended debt funds. These funds also invest in fixed income securities like corporate bonds and government securities. They are lined with time duration. An investor can only invest in the initial offer period. They are considered the same as a fixed deposit which gives tax benefits but doesn’t guarantee the returns.

7. Credit opportunities plans

These funds are newer debt funds. Unlike other debt funds, credit opportunities fund don’t invest according to debt instruments. These funds earn higher returns by taking a call on credit risks or by holding lower-rated bonds. Credit opportunities are risky than debt funds.

MyWay

To get access to top recommended Debt Mutual Funds, MyWay Wealth is a one-stop destination. From liquid debt funds which are lower risk funds, Gilt- a medium and long term which are government securities, short term – where you can park your money for 1-3 years, Ultra short term wherein you can park your money for 3-6 months, and credit opportunities wherein there are corporate bonds and debenture. All you need is a few minutes to complete your KYC process, input your contribution and you’re all set to invest in MyWay Wealth.

Is equity exposure safe?

Equity-Exposure

“Long shots almost always miss the mark.”
—Peter Lynch (American investor and mutual fund manager)

What is an equity fund?

Equity funds generate high returns by investing in the shares of companies of different market capitalization (large cap, mid cap & small cap). They generate high returns than debt funds or fixed deposits. The whole thing depends on is how the companies performance, which results in profit or loss and how much an investor can make based on his shareholdings.

Market Capitalization:

It is the aggregate value of the company based on the current share price and the number of outstanding stocks. Market cap is calculated by multiplying the current market price of the company share with the total outstanding shares of the company.

How does equity fund work?

An equity fund invests 60% or more of its assets in equity shares of companies in varying proportions. It might be the purely large cap, mid cap, or small cap fund or a mixture of market capitalization. The investing may be by value-oriented or growth oriented. Allocating a major portion of equity shares, half will go to debt and money market instruments. This will take care of a sudden fall in the market.

Performance of Equity funds in India:

All most all categories of mutual funds, equity funds deliver the highest returns. On average, equity funds have generated before-tax returns of 15% or more. The returns may fluctuate as per the market movements as well as the economic conditions.
To earn returns with good expectations, you need to choose your equity fund carefully. If you want to invest in Equity, remember the secret is to stay invested for a long period (>5 years).

Features of Equity Funds:

  • 80C tax exemption: Equity Linked Savings Scheme is the only tax-saving investment under Section 80C of the Income Tax Act. With the shortest lock-in period for 3 years.
  • Cost of investment: When one is frequently buying and selling equity shares it often impacts the expense ratio. While currently, SEBI has fixed the limit of expenses ratio at 2.5% for equity funds and they are planning to reduce the rate too.
  • Cost-efficiency and diversification: One who is investing in equity funds can start investing at a nominal amount.
  • Holding period: When one redeems the units of capital funds, one can earn a capital gain. This earned capital is taxable and this rate of taxation depends on how long you stayed invested in equity.

Taxation of Equity Funds:

Capital gains earned on the holding period of up to one year are called short term capital gains (STCG). STCG is taxed at a rate of 15%. Capital gains on the holding of more than 1 year are called long term capital gains (LTCG). LTCG in excess of Rs 1 lakh will be taxed at 10% without the benefit of indexation.

So what is better lump sum or SIP?

1. Systematic Investment Plan (SIP)

A SIP is where the monthly investment happens automatically on the pre-decided date. Where one can start investment from Rs. 500. Where we have to just grant permission to the fund company to deduct the investment from your bank account. SIP gives you the benefit that when the market is high you would be allowed a few units. And when the market is low, you will get more units.

Benefits of SIP:

  • SIP is considered to be a disciplined approach to investment.
  • One can achieve long term financial goal with SIP.
  • SIP can be started with a small amount of money.
  • Reduces risk because of Rupee cost averaging.
  • Timing the market is not necessary.

2. Lump-sum

This method can work over time. Because not everyone is feasible to arrange for a large sum. A SIP allows an investor to invest a fixed amount of money at regular intervals. It also gives an advantage of averaging the cost of units besides providing benefits of compounding. So we can say that opt for SIP rather than Lump sum investment.

You should invest in equity funds as per your investment objectives, your investment capabilities, and your risk-taking ability. Equity funds are not meant for short term investment. Maximum your funds will cook for five years of investment, accepting the versatile market one should invest in mutual funds.

MyWay

MyWay Wealth offers you to invest your funds in Equity. Being a smart investor one should choose the best investment option. One should always opt for investment which matches their financial goals and risk appetite. Equity definitely gives more returns than gold, real estate, and FDs.

Happy Investing!!

Real estate vs Equity Mutual Fund Investment

Real-estate vs equity

Be aware of little expenses, a small leak will sink a great ship.

-Benjamin Franklin

When you think of investing your money, your parents would suggest investing in gold or real estate. But slowly people are getting to know what equity investment is and they select as a good tool to invest in. Earlier people used to see equity as a risky tool to invest in because they used to consider real estate as a safe investment. But the fact is both investments give a gain in the long term. But nowadays due to the instability in the market, equity is the preferred option.

From decades real estate has generated consistent wealth and long term appreciation.
Investing in stock you can receive ownership in a company. When market conditions are good, you can earn a profit.
A good compromise to choose between investing in the stock market or investing in real estate is in the hands of investors, so be wise when you invest.

Demerits of Real Estate:

  1. Low liquidity: Real estate involves risk because in case of emergency one can’t sell the property immediately. Real estate requires time to liquidate the property.
  2. The market is unpredictable: Market changes every now and then, where you can sell your property more than 10 times its original price. But that could go vise versa also. So think twice when you invest in real estate.
  3. Fear factor: There may be chances of property disputes, your property can be seized, so buying property has a fear factor.
  4. Ancillary expenses: Expenses such as maintenance cost, tax to pay, brokerage charges, and many more have to be paid.

Real estate vs. Mutual funds.

  • The risk:

We all know that both mutual fund and real estate belongs to the growth asset category, and in both risks is involved. The performance highly depends on the economy of the country. Where in comparison with real estate equity funds are less risky because equity mutual funds are diversified in nature. Where if there is a sudden change in the stock market the entire portfolio will not affect. One can switch from one stock to another and can also modify if some of the stocks are not performing well. Where diversification and switching are not possible when it comes to real estate.

  • Unpredictability:

Real estate investments are very unpredictable. We have the wrong notion that real estate is always safe to invest into but sometimes the investor may not get the expected returns as per expected him.

Mutual funds seem risky by nature but that is not true. Because there is the various category you get when you start investing in mutual funds.

  • Tracking investment is not feasible:

Unlike a mutual fund, the investor cannot track their investment in real estate.

In mutual fund tracking investments online could be an option where the growth and decline of the investment could be known by the investor.
In real estate, such tracking is not possible. This creates a risk in investment as the investor cannot track the investment.

  • Real estate needs large funds:

Real estate requires an investment of large amounts.

Where one can start with the SIP option while he is investing in mutual funds.

  • Compounding power:

In mutual funds, you have the benefit of compounding. Where this gives very good returns to the investor.

The benefit of the compounding effect will not be there if they invest in real estate. Even today real estate is considered by people as a symbol of security. And this could be debatable. As the above points suggest, that mutual funds are a better option if you consider diversifying your portfolio.

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When one invests into equity mutual fund they do get benefits to tax efficient as compared to other investment types. Investing in a mutual fund required a very small amount of money. Where in the SIP plan, money gets automated debit from ones account. As all mutual fund companies come under SEBI, the investment made in a mutual fund is safe and transparent.

Start investment into Equity Mutual funds, where MyWay Wealth is the best platform to invest your funds.

Think investment!! Think MyWay Wealth.

Understanding Stock Index

Equity Stock

Stock Index is the “performance measurement” section of the stock market. Among the stocks listed in the stock exchange, some similar stock is grouped to form an “index”. And this grouping is done on the basis of certain characteristics like the size of the company, sector or the industry to which it belongs to.

The value of an index is calculated by using the value of the grouped stock ( weighted index method). Thus, any changes in the price of the stock will lead to a change in the index prices. The index is “an indicator” of price change in the stock market which will help “traders” to track the market and calculate the returns on a specific instrument.

When will the Index raise?

In the stock market, prices of some items in an index will go up and down- these ups and downs in the prices will get canceled, whereas price rise on an average is more than the price fall, then the index will rise and we say inflation is rising and vice-versa.
For example, you may buy something in the market which may not reflect the trend of inflation. You go buy milk and find that the price has gone up. But, the index may be down because the price fall in fuel and other things have canceled out the price rise in the milk.

Most of the trading of Indian stock takes place in BSE (Bombay Stock Exchange) and the National Stock Exchange (NSE). In India, the BSE Sensex and NSE Nifty are considered as benchmark indices to evaluate the overall performance of the market.

What is Sensex?

For a better understanding of what is Sensex, let’s take an example of the Indian hockey team. If someone says “Indian hockey is in great form and expected to win against England”. Does it mean that every Indian can perform better than England players?
No, what actually means is that Indian players who are representing our country are performing good and there are expected to win over the other country.
Now taking this as a basis, there are top best 30 countries that are listed in BSE (Bombay Stock Exchange) that are representing the country’s economy. The index is formed taking the stock prices of these 30 companies on a pre-defined basis and it is called “SENSitive indEX”(SENSEX) which means that they are so sensitive to price change. When we say Sensex went up, it means that the prices of these 30 companies are gone up rather than fall and vice versa.
The same happens with Nifty. Nifty is a market indicator of NSE. It has a collection of 50 stocks, but presently it has 51 listed in.

What is Market Capitalization?

Now, let’s learn about market capitalization. Market capitalization (market cap) is calculated by multiplying the outstanding shares of the company to its current market price per share. Companies that are traded in the stock market are grouped into different categories. For example:

     Index Companies
Large-cap index This index will keep track of the prices of large-cap companies.
Mid-cap index The index tracks only the representatives of mid-cap companies.
Small-cap index This index will track the firms which are even smaller than the mid-cap companies.
Bankex index Tracks the stocks which are traded in the banking sector.
PSU index Tracks the prices of PSU(Public Sector Undertakings).
Technology index It will map the prices of tech-related firms.
Infra index Tracks the prices of infrastructure-related stocks.
FMCG index Tracks the prices of Fast Moving Consumer Goods (FMCG).

Why stock prices go up?

Stock prices go up in the long run because as you know that the firms which are listed in the stock exchange trade their goods and services to make good profits and those companies will see good growth. Thus, rising prices reflect the growth and performance of the company.     

Are the stocks are the best route to get inflation-adjusted returns?

When inflation rises, the input cost of the firms will also rise. But, the company will not bear the entire cost. Instead,  this cost will be passed on to the customers in the form of prices. So rise in the input cost will not affect the companies profit. Thus, we can say that stock gets protection from the effect of input price inflation.

Is investing in stock is complex?

Before investing in stock, you have various factors to consider such as size, sector, structure, etc.

All these factors are compared with the macroeconomic conditions in order to assess the capability of fund performance. So, there are speculators who will do this. As an investor, your only job is to invest your hard earned money into the stocks and you have speculators, whose job is to track the market moves.

Thus, investing in stocks through Mutual funds is more advisable. You can get a wide range of benefits by investing in mutual funds.

MyWay Wealth is one such platform where you can get access to a variety of funds in just one app.“MyWay Wealth”, which helps you select the right Mutual Fund according to your investment horizon, risk appetite and financial necessities.

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Start your investments with MyWay Wealth- the best platform for investments.

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