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Chance’s Garden: Even You’re Seeking Growth, Aren’t You?

Short term loss long term gain

Investing is an act of faith.

Might some unforeseeable economic shock such as now can trigger another recession so severe that it would destroy our faith in the promise of investing? Excessive confidence in smooth seas can blind us to the risk of storms. There is little certainty in investing. As long term investor, however, we cannot afford to let the short term events frighten us away from the markets. For without risk there is no return. Another word for “risk” is “chance”. Here’s a dialogue by Chance, The Gardener that stuck.

As uncanny as it may seem, the word “chance” struck a chord that reminded me of ‘Chance, The Gardener’. For the ones who have never had the fortune to read this gem of book, ‘Being There’ by Jerzy Kosinski or watch the movie based on it, the plot revolves around a rather simple man – Chance, the gardener whose knowledge about the world is defined by what he has watched on TV and everything he has observed while tending to his garden. By twists of fate, he reaches a situation where he has high-ranking state officials seeking advise from him and interpret his simple words as a metaphor about the economy.

Back to the scene that stuck with me for long – When asked about the stressed state of economy, he said – “In a garden, growth has its season. There are spring and summer, but there is also fall and winter. And then spring and summer again. As long as the roots are strong, all is well and all will be well”.

Well, when you look at markets, economies (and also gardens), you would appreciate the simple yet profound truthfulness of the statement.

In an attempt to draw a parallel, I started rummaging through the internet ocean and found a beautiful illustration (Courtesy: Visual Capitalist) that clearly reflects that as long as the world economy is healthy, financial crises may come and go, but the economy will only bounce back stronger – offering a much larger opportunity each time.

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Perhaps, the fact that the global economy has gone through a longer period in economic crises than uninterrupted growth. However, like Chance put it right, economies and markets only continued to push upwards with periods of crises seeming like nothing more than simple seasonality in hindsight.

I remember reading about at least ten black swan events where the S&P 500 declined by a quantum of anywhere between -5% to -60% only in the past fifty years. Events include the Oil Embargo ’73, Iranian Hostage Crises ’79, Black Monday ’87, Gulf War ’91, 9/11 Attacks ’01, SARS ’03, Sub-Prime Crisis ’08, Intervention in Libya ’11, Brexit ’16, and Pandemic’19. However, it is interesting to note that $100 invested in 1973 in S&P 500 is worth almost $3,000 today – which seems pretty healthy considering the number of financial crises we just recounted.

As an investor, you may choose to focus on the periods where people lost money and redeem with a higher probability of converting notional losses into real losses, or ride the tide only to emerge victorious as the world pushes ahead towards progress.

active, passive and balanced funds

Active, Passive and Balanced funds

Investing can be a scary endeavour without a road map. Each investor has a different mindset when they invest. The final goal of an investor must be to choose funds planned as per his/her financial goals and strategies. Here is the breakdown of how one should opt for active or passive funds when it comes to investment.

What are Active Funds?

Active investing is a strategy that involves buying and selling assets to make profits that outperforms and sets the benchmark in the index. A fund manager is an example of an active investor.

Investors in actively managed funds will have to pay higher annual charges for the expertise of the fund manager, the interest is usually between 0.6% to 1.5%, and sometimes it could be more, depending on the type of the portfolio they are running. So it is up to you to decide whether the cost of a fund investment is worth the potential returns you could receive.

What are Passive Funds?

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cricket and investments

Khelo App ki Cricket Investments Pe

Cricket is the most popular game in the world undoubtedly, and it’s the world’s greatest sport. It’s a gentleman’s sport, full of sportsmanship. An epic journey where players and fans get to know each other over days of play, where respect is the golden rule, and integrity is very much alive. And on the contrary, Investing in the Mutual Fund is helps you to create wealth in the long/short term and helps in achieving your financial goals.
Besides entertainment, Investing is like a game of cricket.

“Your Team→ Your Portfolio
Your Players→ Your Securities.”

In this article, let us use the analogy of a cricket game in investing. When it comes to cricket, We ‘Fans’ always feel like the cricket team could have done a better job, when it comes to us, we fail to create our investment portfolio and financial success.

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Will

The importance of making a Will

Making a will can save your loved ones a large amount of money and stress. A will is a legal document that stipulates your wishes as to who will receive your property and possessions when you die. It is important that you have a valid will to ensure your estate is distributed to those you wish.

The statistical data says that 80% of Indians do not have their wills made and the reasons for it are many. Here are some of them:

  • It’s too early to think about.
  • Making a will is a lengthy process
  • I am not aware of rules and regulations
  • I have told my spouse and children of my intentions that I will do
    And many more…..

While each person’s situation varies, here are seven reasons to have a will:

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Choose between Direct and Regular plan

Direct_plan_Vs_Regular_plan

When you buy something, you will always try to cut expenses. Suppose if we buy any product online, you prefer to have free delivery. Why you do that? In order to reduce costs, you’ll try to cut the additional expenses which you don’t want to incur. Here, you do the same with the Mutual Funds.

In the market, we can buy Mutual funds in 2 ways:

  1. Directly from Asset Management Company (AMC) – Direct Plan
  2. We choose to buy through an intermediary – Regular Plan

In Regular plan, you buy mutual funds through an intermediary such as brokers, distributors or advisors. And these agents will charge a commission for the services they provide where your expenses on investments will be high. As you know that these brokers will never sell you the products that you need. They always try to push the schemes which earn a good profit to them.

Now let’s look at Direct Plans. Direct Plan is a new regulation which is enforced by SEBI on January 1, 2013. In the Direct Plan, as an investor, you can directly buy the mutual funds from the Asset Management Company (AMC), where there will be no involvement of any brokers or intermediaries and these funds which you buy are commission free.

The great advantage of Direct Plans is that NAV (Net Asset Value i.e., the value per share) is more when compared to Regular Plan which means that you earn more on your investments.
For example, if you invest Rs 10 lakhs in both the Direct Plan and Regular Plan. The direct plan offers 17- 19% of returns whereas the Regular Plan offers 14-15% of returns. Thus, With Direct Plans you can earn 1-15% more returns than Regular Plans.

And here you have a platform to make an investment in Direct Plan- MyWay Wealth with zero commission and zero fees. MyWay Wealth offers you a wide range of funds and helps you to choose the right one that suits your investment needs. To look into more features of MyWay Wealth – download the app, complete KYC and get access to top recommended funds.Screen_Shots

How to decide on Direct plan and Regular Plan?

  • If you already have an experience of investing in mutual funds, it is recommendable to go for Direct Plan, since you will have enough knowledge on mutual funds.
  • If you are a beginner then you can opt for Regular Plan and it is recommendable that you can switch to Direct Plan once you gain knowledge and experience in investing.

So don’t miss out on those 1.5% extra return. Choose MyWay Wealth and begin your journey to fulfill your dreams.

You are unique and so is your Investment!

Understand the rules for investing in Equity

equity

Getting equity exposure is about following the rules for holding the portfolio to see index-plus returns( high returns). Take a considerate decision on investing in Equity and understand that the Equities are the best way to create wealth.

Rules for investing in Equity:

  • Have the patience to see consistent returns. If you buy equity with a holding period of 10 years, you’ll be able to see interesting returns(positive returns) in the 7th year of your investing. This happens because the fluctuation in the returns will start reducing and then on average, you’ll see returns which will above 14-15% per year. Thus, have the patience to have investments in the long term.
  • You’ll be at risk if you choose a poor product. If you opt for a poor product with a long holding period and later you find yourself that you did worse than the average product in the market. So, be careful while choosing a product and be very particular on your risk bearing capability.
  • What if you find out yourself frozen in choosing Equity products. Firstly, understand the Equities completely.

There are 3 ways to buy equity:

  1. Direct stock
  2. Market-linked products(ULIP’s)
  3. Mutual Funds.

You can invest in Equity Funds through MyWay Wealth. They are professionally managed by expert professionals who spend quality time in researching about the performance of these funds.

The benefits include:

  1. You can invest in Equity Mutual Funds that have provided returns >15% for the past 5 years.
  2. 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).
  3. Equity mutual fund schemes avail you a facility to invest small sums at regular intervals through systematic investment plans (SIP).
  • Do not invest in any product that locks you in a particular company or asset manager. Always opt for the product where the “Exit” is possible with an easy and cheap procedure. And also look for the “portability” where you should be able to move your money more easily to the better fund investment with minimum cost.
  • If you want to manage your funds by yourself, start learning about the products through online platforms and try to look in the records to know how the funds are performing over the years and then invest. Always remember, “Not investing in Equity” is not your option.

Thus, put your money to work for the long term. If you’re a good financial planner then you would have already planned for your Emergency funds and medical cover. So, you have taken away the need for keeping money in liquid and you can risk for investing in Equity Mutual Funds.

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Here, you have the best platform -“MyWay Wealth” to invest in Equity Funds and create wealth for the long term. Use MyWay Wealth to discover, track and invest in Equity Funds.

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!

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.