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.

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.

MyWay screen shot

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.

Portfolio

Your Financial Portfolio Debunked!

Portfolio Management is the critical skill required for any investor planning to devise a successful investment mix. To be able to match investments to objectives, investors must first be aware of the various products they would wish to have as a part of their investment portfolio.

Here are three such essential products that investors must consider to include in their investments:

  • Debt
  • Equity
  • Gold

DEBT:

Let’s understand the popular jargon “Debt Investment”: Debt investment includes bonds, NSC (National Saving Certificate), FD (fixed deposits), corporate deposits, PPF(Public Provident Fund), EPF(Employee Provident Fund), etc. These products are mostly money given on loan to an entity by the government, or government-backed organization or other private companies.

The primary reason for investing in debt funds is to earn interest income and capital appreciation. The issuer pre-decides the interest rate you will receive as well as the maturity period. Hence they are termed as ‘Fixed Income’ securities.
In these products, two things have been fixed.

  • How much will you get back?
  • When will you get back?

As you are lending money to the bank or the bond issuer, you are interested in the price of this loan.
The reason behind earning interest on your money:

  • Because you are not utilizing the money today and you have postponed the consumption.
  • Also, you have taken the risk of losing money by value to inflation.
  • By lending money, you also take the risk of the borrower not returning it. And for all this, you need to be compensated, right?

Debt products with guaranteed returns include:

  • Provident fund
  • PPF (Public provident fund)
  • Fixed deposit
  • Corporate deposit
  • EPF (Employees Provident Fund)

Why does the government pay low interest?

The higher the return, the higher the risk because without a benchmark, there is no comparison of returns in finance. If somebody offers you a rate of interest that is much higher than a bank FD, understand that the risk of non-payment of both your investment and the interest on this deal is much higher.

Features of Debt investment:

  • Less risky than equity instrument and hence provide lower interest but consistent returns
  • They are less volatile than common stocks, with few highs and lows in the stock market.
  • Debt is good for stability but not for growth.

EQUITY:

The most trusted instruments such as Fixed Deposits 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.
Here are some benefits of investing in equities:

  • Higher gains: Investments in equities are subjected to market conditions, so one has more potential to earn higher gains when the market price of a share rises.
  • Dividend: If the company you invest in performs extremely well then, as equity shareholders of the company, you are entitled to earn dividends.
  • Authority: Once you invest in shares of the company, you get voting rights in the company, meaning you can exercise control.
  • Easy transfer: The shares are listed in the stock market and hence if you want to sell your shares, you can do so easily, thereby increasing liquidity.
  • Bonus shares: At times, a company can issue additional shares instead of dividends to existing shareholders.
    Higher Claim: Since you are the owner of shares in the company, it also means you get to enjoy a share of the incomes of the company.

All these benefits make you feel so important and prioritized. 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. A trader tracks the market minute to minute and closely monitor the fluctuations in the stock. But as an investor, you must ascertain your investment horizon & financial needs, 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. 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. 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.

GOLD:

Traditionally buying Gold is treated as the oldest kind of investing activity with the view that is an excellent passive instrument, which protects you in bad times. However, possessing Gold as jewelry is not the only option for investors. There are other forms such as:

  • Gold coins and Bars.
  • Gold Exchange Traded Funds (ETF).
  • Bonds issued by the government.
  • Digital Gold (recommended)

Now when you have multiple options, the question arises as to which is the most efficient way to buy Gold? Before we answer this question, let’s understand the demerits of owning physical gold:

  • With physical gold, you need to purchase at least one gram of Gold whose price fluctuates every day
  • Making charges can be as high as 14% of the cost of Gold.
  • Storing Gold at home raises the concern of theft. Hence you need to resort to the option of bank locker that will incur long term storage charges.
  • Also, if you wish to trade physical gold, it could prove inconvenient as you would have to schedule a meeting with your banker or jeweler.

Hence the smart way to possess Gold is via Digital Gold, and MyWay Wealth offers you this option. Here’s why 24K Digital Gold stands out to be a better investment option:

  • You can buy Digital Gold with as low as Rs.1000
  • You can buy, track & sell digital Gold with just one click
  • Get a free & secure locker from BRINK’s, a global leader in Gold custodian services with 100% insurance cover
  • Get hassle-free delivery of gold coins/bars to your doorstep

Hope this article helped you to understand Gold, Equity and Debt as investment options.

Remember! Check the product first to see if it suits your investment goal before you make your investments.