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!

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!!

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.

Build your wealth through MyWay Wealth.

Expense Ratio - Karan Batra

What is an Expense Ratio in Mutual Funds?

An expense ratio is a ratio that measures the per unit cost of managing a fund. The figure is arrived at by dividing the fund’s total expenses by its assets under management. There are various costs the AMC incurs which forms part of the expense ratio. For example, the AMC has a fund management team which consists of highly qualified professionals who track the markets and companies in the portfolio. They make decisions to buy and sell securities to meet the objectives of the scheme. In addition, the asset management company also incurs expenses such as transfer and registrar, custodian, legal, audit fees, and fees to be paid for marketing and distribution of its products. These costs are recovered through its unitholders on a daily basis. The daily net asset values (NAVs) of a fund scheme are reported after deducting such expenses.

There are different components to Expense Ratio.

  • Management fee: A mutual fund is a professionally run scheme so you have professionals who you actually select different schemes and there’s a lot of research that goes into it so the fee which is charged by those professionals is categorized as a management fee.
  • Administrative cost: All the cost associated with customer support, record keeping as well as offices are all categorized under admin cost.
  • Sales and distribution: The cost associated with marketing mutual fund schemes and also the fee which is paid to the different broker’s or distributors are categories under sales and marketing.
Equity Mutual Funds

Equities! A Smart Way to Invest

People normally don’t find it safe to invest in Equity. They consider it a gamble. Why? Because your shares are traded in the stock market which is subjected to market fluctuations. Then why does Monika Halan, consulting Editor for Mint, state “I Love equity funds”  in her book “Let’s Talk Money”.

Let’s look at this picture:

Invest in Equities

 

Surprising! The most trusted instruments such as Fixed Deposit multiplies wealth only by 20 times whereas investments in Equity multiplies it by 260 times.

Equities are stocks, meaning shares of a company. When you invest in equities it means you own the shares of a company and are partial owners of the company

But the hitch is how do you know which company’s stock performs well? How are your shares trending in the market? When to sell or buy?

This arises the need to understand the difference between investors and traders. The work of a trader is to track the market minute to minute and closely monitor the fluctuations in the stock. But as an investor, you must ascertain your investment horizon and financial need, invest in Equities and to stay invested until investment purpose is achieved. Remember, “time in the market” is important not timing the market.

The best option to invest in Equities is through Mutual Funds. Even Monika Halan says that she doesn’t buy shares directly but rather invests in Equity through Mutual Funds. Because when you do so, the decision of picking the right stock is vested with Professional Fund Managers who track the movement of shares closely and rebalance the investment portfolio regularly. They have a tab on the performance of companies, markets, political events, interest rates, and past data that help them to forecast the future of a stock. With Mutual Funds, there is a scheme for every person depending on your risk and investment goal. Say if you are a conservative investor but are willing to take a little bit of risk then, with Mutual funds you can always have your investments primarily in Bonds (Debt) with a little exposure to Stock (Equity).

As an investor one should remember that Equity Investing is no gamble. In a growing economy like India, good investments should outperform in the long run, irrespective of the macroeconomic factors. The Table below will give a clear idea:

Time Period 1 year 3 years 5 years
Amount Invested (INR) 12000 36000 60000
L&T India Value Fund-Direct Plan Growth Option 10,948.02 37,485.68 76,658.66
ICICI Prudential Bluechip Fund-Direct Plan Growth 11,596.35 40,193.66 75,470.58
SBI Bluechip Fund Direct Growth 11,322.36 37,843.27 72,645.74

These are the Top Rated Funds on MyWay Wealth. The Table clearly shows that when Rs 1000 a month invested through SIP in these funds, say L&T India Value Fund-Direct Plan Growth Option for a period of 1 year gives a fund value of Rs. 10,948 which is lesser than the invested amount of Rs. 12000. But when the same process is carried out for a process of 5 years, the fund value is Rs. 76,658.66, which is 27% more than the invested amount Rs. 60000. The same pattern is seen in the other two funds as well.

India is expected to add the fourth-highest number of High Net Worth Individuals in the next five years, only behind the star economies of U.S., China, and Japan yet ahead of the European powerhouse – Germany.

Here’s what the High Net Worth Indians are doing right with their money-

HNI Indians: Source of Wealth

To make life simpler, here’s the inference you should care about – The wealthy have become wealthy through smart investing and by having a very good understanding of equities as an asset class.

Investing & Equity – bring these together and you will discover the secret sauce to wealth creation.

To sum it up, Equities may be volatile in the short run, but over the longer period, volatility will decrease and the returns will increase, thus reducing the risk.

So, Remember!

The thumb rule in Equity is to stay patient and remain invested for a long period to reap its benefits.

Invest in Mutual funds online - Dipika Jaikishan

How to invest in a Mutual fund online?

As the newer generation is moving from manual transaction to online transaction, this video talks about the various advantages of investing online. It also helps in simplifying the process of investment in a fast, effective and efficient way. Mobile apps like MyWay Wealth can be installed and steps are as easy as:

  • Register one time.
  • Complete your KYC(Know Your Customer).
  • Sync your bank account.
  • Select your mutual funds for investment.