Equity Investments are just like growing Chinese bamboo.

Equity Investments are just like growing Chinese bamboo.

 Both require lot of patience and time to grow.

Unlike other trees, growing Chinese bamboo requires lots of time and more passion.  It takes 5 years and 3 months (almost 63 months) for Chinese bamboo to grow to the height of 80 feet. So, what’s so unique about this tree? 

At 80 feet, not just the height to which Chinese bamboo tree grows is unusual, but the way it grows is even more so.  For almost 5 years, you keep watering the place where you have planted the seed of Chinese bamboo on a daily basis without fail, but you don’t even see a shoot growing out of the soil. 5 years of watering and passion!!! Huh!!! That’s long time. Still during all this time, you see nothing but just a small sprout coming out of land which can be measured to couple of inches if you are lucky. In many cases nothing’s visible above the ground for 5 years. After 5 years you can see the first sight of the small green bamboo trying hard to coming out of soil, and that small bamboo which gave its first appearance after watering the soil for 5 years, grows to 80 feet in less than 90 days. Yes, it’s true. 

Sometimes the waiting period fluctuates from 4 to 6 years, but the sure thing about the Chinese bamboo is, it’s definitely going to start growing and once it starts growing the speed is definitely going to be unusual. It definitely will reach the height of 80 feet from ground zero, which is equal to an 8-storey building, in the short period of 6 weeks to 12 weeks.

There are great chances of person quitting the idea of growing Chinese bamboo due to the long waiting period. Everyone can find the soil and plant the seeds and also can start watering it, but when it comes to waiting, sooner or later many drop the idea. Only few who keep watering the soil consistently with full faith, can get the 80 feet high bamboo tree.

Equity investment is also like growing Chinese bamboo tree. One should have passion after planting the seeds. Now we all know that the Chinese bamboo tree takes a time to start growing but once it starts, it grows rapidly to 80 feet. The same way, in case of equity investment also we all know that after investing you should wait for long time but in practical world very few have got that patience to wait it out. 

You to be very disciplined in watering the plant i.e. in regular investments.  In the beginning, neither the market nor your investments could be moving anywhere. In fact, they could start falling and eating away the value of your money. You still wait... And wait.

Year one is over and you are entering the second year.  You are still watering but started becoming a little bit of skeptical about the power of your investment seed to grow. Anyway, you have heard about so many other success stories about many successful people who also invested in the same market and made their fortune. So you kept on watering the seeds by regularly investing in it.

Now, it has been three years and you started wavering and doubting about your choice of investment seed. Some voice inside of you has started telling you that you are a special fool to believe in something which was too farfetched. You start thinking about other possible seeds which you might have planted instead of equity. You wonder why you had to pick up an equity investment only.  You start losing sight of your purpose and your faith starts to diminish…You decided to re-commit yourself for the entire third year.

Now you’re entering into the fourth year. You are becoming more disillusioned and are experiencing a deeper sense of doubt, regret, frustration and anger.  You started wondering,

“Is it when I invested was a wrong time?” or

“Perhaps, I am not Lucky.”

You were going crazy, because you’ve already spent a lot of time and invested a lot of money. So after the years of lot of dedication and effort toward this investment, you have decided to give it a chance for one last more year. 

Finally it is 5 years and you feel they were wasted because you kept on regular watering by investing in it every month, but alas! Nothing happened. So you decided to QUIT and withdrew your money with no or little profit, perhaps less than the interest of bank fixed deposit.

They day your quit, the equity market starts taking small upward leaps, and you wonder what’s happening. Within couple of years the bamboo (equity category) starts growing rapidly and grows to newer heights but unfortunately you couldn’t get anything out of it.

Equity is just like the Chinese bamboo, it’s possible that it doesn’t give you any return for years but then in a very small period of time, it starts growing with an unusual and unbelievable speed which eventually compensates you and your client for all your dedication, passion and faith.

Always remember that equity will never deliver the returns in a linear fashion. Your equity investment might take a time to grow, but once they grow they grow like a Chinese bamboo.

Be faithful and keep watering you Chinese bamboo tree (Your Mutual Fund investments).

Mutual Fund Investments are subject to market risk, Please read all scheme-related documents before investing.

Raja Bhattacharjee/9830146206

investment.junctions@gmail.com

https://linktr.ee/investmentjunctions

 

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4 Ways to Prioritise Your Financial Goals

4 Ways to Prioritise Your Financial Goals

Most of us have many financial goals. Buying a car, buying a house, vacations are few of the different financial goals. However, if we list all our financial goals, we may get overwhelmed looking at the things we want to achieve. Hence, just as we prioritise different aspects of our life, we need prioritise our financial goals.

In this article, we will show you how to prioritise your financial goals in four ways.

Steps to prioritise your financial goals:

Prioritising your financial goals will depend on your importance of your needs and wants. Financial Planning Pyramid is a simple way to prioritise your financial goals and plan for it accordingly.

1.Check your financial health

Before you decide your financial goals, it is important to check where you stand in terms of your income, expenditure, assets and liabilities. These aspects form the foundation of everyone’s finances.

To fulfil your financial goals, it might be important to cut your expenditures to build assets. If you have any bad debt such as credit card or personal loan debt, look at paying off your debt as soon as possible. Check these aspects and determine proper ratios between them. Checking your financial health will also assist you in planning for your goals.

2.Manage your risks

Life is uncertain. Risks such as untimely death, job loss, health problems, and accidents may hurt you and your family’s finances. Situations such as hospitalisation may drain all your lifelong savings. Hence, insuring these risks is the starting point for a stress-free financial life.

List down all such situations and build a plan as per your requirements. E.g. having a backup plan for running EMIs or child’s education plans.

You can park around six months of expenses in an emergency fund to take care of emergencies such as job loss, minor health problems and urgent house repair.An adequate health insurance will help you take care of your hospitalisation expenses. Life insurance or term insurance is important to safeguard one’s life. A life insurance cover will allow your family members and dependents to lead a respectable life and fulfil their goals. 

3.Primary Goals or Important Goals

After you have taken care of the different risk aspects, it is time to invest towards your goals. If you have many financial goals, you can segregate it into two parts: primary goals and secondary goals.

Primary Goals are the important goals that you need to prioritise over secondary goals. Buying a house, retirement planning, planning for children’s education are few of the common primary goals. These goals can differ from person to person. So choose the goals that are important to you.

Once you have made the list of your primary goals, figure out the current cost of these goals and the expected future cost. Also, decide the timeline of these goals.

Now, you need to choose the right investment products to fulfil your goals. Systematically investing in an equity fund through Systematic Investment Plan(SIP) can help you plan and reach your long-term capital goals. 

4.Secondary Goals

Your wants determine your secondary goals. You can postpone these goals with no adverse impact. Foreign holiday, buying a car and second holiday home are few examples of secondary goals. As the list of secondary goals may be endless, you can plan for your secondary goals after you have planned for your primary goals. It is good idea to fund your secondary goals through savings rather than taking loans.

Depending on the goal timeline, you can have a separate investment strategy for your short term and long-term goals. 

Conclusion: Investing for your financial goals is a better option than investing for returns. However, we may have many financial goals and investing for each of these goals may not be the right approach. Prioritising your goals can help you focus on the important aspects and goals before secondary goals. This will streamline your financial life and take care of you and your family members. Consult us to know more. 

This blog is purely for educational purpose and not to be treated as an personal advice. Mutual fund investments are subject to market risks, Read all scheme related documents carefully. 

Raja Bhattacharjee

https://www.investmentjunctions.com/

Everything you need to Know about Dynamic Asset Allocation Funds

Everything you need to Know about Dynamic Asset Allocation Funds

In the past few months, market performance has been volatile. Proper asset allocation is one of the best ways to navigate market uncertainty.  Asset allocation is the process where investors invest indifferent assets like equity and debt as per their risk taking capacity and goals.

Equity and debt allocation in a portfolio serve two different purposes. Equity investments have the potential to generate reasonable returns that help in wealth building. Debt investments aim to protect the capital.

However, for an individual investor like you or me, changing our asset allocation as per the market conditions may be confusing. Dynamic Asset Allocation funds or Balanced Advantage Fund can help us do that and reduce the risks associated with our portfolio. 

What is Dynamic Asset Allocation Fund?

Dynamic Asset Allocation Fund or Balanced Advantage Fund is a type of hybrid mutual fund where fund managers invest in equity and debt assets and manage it dynamically as per the market conditions. Fund managers increase or decrease their allocation to equities/debt based on their market view.

How does Dynamic Asset Allocation fund works?

Past data have shown that different asset classes have low correlation to each other. So, debt and equity will outperform each other under different market conditions. These funds aim to harness the higher performance of equity and debt at different periods of time. 

The fund managers will decide the mix of equity-debt based on various factors. These factors may differ among fund houses. Interest rate cycle, equity valuations, medium to long-term outlook of the asset class are some of the few aspects that fund managers can consider.

So when the valuations of equity markets are low, fund managers may increase their equity allocation in the portfolio and vice versa.

Asset Allocation of Dynamic Asset Allocation

The market regulator SEBI has kept no investment range for investment in equity and debt assets. So, fund managers can take investment calls based on their research and outlook. However, all funds will have a prescribed asset allocation. The investment range of different funds will lie within those limits.

E.g., the prescribed asset allocation of DSP Dynamic Asset Allocation Fund is as below:

• 65% - 100%  in Equity & Equity related instruments
• 0% - 35% Debt and money market instruments

On the other hand, here is the prescribed asset allocation of SBI Dynamic Asset Allocation Fund:

Instruments	Minimum	Maximum
Equity & Equity related instruments including foreign securities and derivatives	0	100%
Debt instruments (including Central and State Government securities, debt derivatives) & Money Market Instruments (including TRIPARTY REPO, Reverse Repo and equivalent)	0%	100%

 

So, the asset allocation pattern of different funds will vary. Hence, it is important for investors to check the asset allocation pattern before investing. 

Who can invest in dynamic asset allocation funds?

These funds can be a good investment option for newbie risk-averse investors who want long-term capital appreciation from equity with less volatility.

Also, investors who are looking to invest in equity and debt as per the market conditions can also invest in these funds.    

Things to keep in mind before investing

• The portfolio allocation between equity and debt asset of these funds will vary amongfund houses.
• The taxation on capital gains will depend on asset allocation of the fund. Funds investing more than 65% of the portfolio in equity or equity-related instruments will be taxed as per equity funds.
• As these schemes invest in a mix of equity or debt assets, it may not be able to outperform pure equity funds with almost 100% allocation in equity assets.
• As the underlying securities may go through frequent rebalancing, the transaction cost(a part of expense ratio) of the fund will be higher. The frequent buying and selling of papers and stocks may also negatively impact the returns generated by the fund.

Conclusion:

Dynamic Asset Allocation Funds are hybrid funds. Fund managers take investment decisions based on market situations, outlook, etc. As these funds invest in equity and debt, it has the potential to provide long-term capital appreciation with reasonable risk. Please consult us to know more.

This blog is purely for educational purpose and not to be treated as an personal advice. Mutual fund investments are subject to market risks, Read all scheme related documents carefully.

https://www.investmentjunctions.com/

 

Why Toppers in School are not Toppers in Life

Why Toppers in School are not Toppers in Life

Why does the Average Student in class who never topped the class emerge as the Shining Star in Life 

1) Think about the boy or Girl who stood first in your Batch

2) Where is he or she today?

3) It is likely that he is doing well and it is equally likely that he is just living an Average Life. Certainly not doing bad but may not be doing extremely well either

4) There is a scientific reason for this. Our Education System is designed to make us Good Workers and Best Professionals but not Good Leaders

5) Toppers prepare themselves to be the Best Professionals

6) Our Education System is Practice Oriented - To make us the Best Doctor, Best Architect, Best Engineer, Best Designer, Best MBA, Best Marketing Director and so on and so forth

7) We are never taught in School to solve People Problems by harnessing the Power & Knowledge of a Diverse set of People under a structure called Organization

8) So the Child Grows with the Ambition of becoming the Best

9) He never grows with the Desire to Discover the Best in others

10) In fact the Burning Desire to be the Best blinds them from seeing the "TALENT" in others

11) They always feel that the other Person is not Good

12) Most Practitioners run down others of their Fraternity

13) A Doctor rarely praises another Doctor, an Engineer rarely praises another Engineer, a Creative Artist rarely praises another Creative Artist, a Trainer rarely praises another Trainer and so on and so forth unless he happens to be an Entrepreneur (Trend Spotter and Talent Spotter). 

14) It is the nature of Professional Practice to be a Winner and Victor all the time and to crush the competition and blow it away if possible. Being the Best is the Path to  Practice

15) Practice is always limited by Human Capacity - A Doctor can only see let's say 20 to 30 Patients in a day because he just has 8 to 10 hours per day to Perform his Skill

16) So the only way to Prosper for a Practitioner  is to Charge High Margins 

17) And only Super Specialists in any field can do so (ie to charge very high margins)

18) For example some rare surgeries can cost upto Rs 10 lac 

19) And this certainly makes the doctor Rich but does it make him Wealthy?  Because this Richness comes at a huge cost of Mental Pressure, Reputation Pressure, Extreme Hardwork & Stress 

20)  This is clearly NOT the Path to Wealth which most Toppers of the Class desire to tread upon

21) Falguni Nayar whose Brand Nykaa after listing made her wealth soar by  Rs 50,000 crore is truly a creator of Wealth

22) Such 'Wealth' is Never  Earned by the Individual Specialists or Experts who use his or her Expertise or Specialty to Extract More out of Individuals

23) I am an Expert (Doctor, Lawyer, Architect, Trainer, CA, Artist etc.) and hence you pay me Unreasonably Higher fees is Perhaps the Way to Money but Certainly not the Way to Wealth 

24) Falguni Nayar, Sachin Bansal or Flipkart or for that matter Rakesh Jhunjhunwala's Path built upon Entrepreneurship and Investing Principles is the Appropriate Way to Wealth

25) This is because they become Wealthy by making others Wealthy and not by Squeezing out Money out of Individuals. 

26) Practice is always a Zero Sum Game whereas Entrepreneurship is a Game of Abundance

27) So how does one become a Rakesh Jhunjhunwala, a Falguni Nayar, a Sachin Bansal of Flipkart or any other Entrepreneur for that matter

27) An Entrepreneur 

a) Wants to Solve a People's Problem first

b) He is willing to Sacrifice in the Beginning; his Time & his Money

c) He is Convinced he can't do it alone and this is the essence of Entrepreneurship

d) He has a Burning desire to Solve the People  Problem

e) This provides him Clarity of Vision

f) He knows he cannot embark upon this mission all by himself whatever be his Talent and Capabilities

g) He understands the Power of Leveraging; Making Use of Other People's Money, Other People's Time, Other People's Talent, Other People's Education, Other People's Talent etc

h) He understands that he needs to be the fevicol that brings all the Factors of together

I) He knows he is like the Music Director who commands the Respect of the Orchestra

j) He knows he has to have the ability to Spot Trends, Spot Talent, Create a Team, Design the Culture that holds them together like Glue and He Needs to Drive them all in Unison and Harmony towards the Collective Goal

k) Hiring the Right People, Providing the Right Inputs to them and making them Super Stars is the Mindset that the Class Toppers  rarely have because our  our Education System and Family Culture rarely Encourage

27) Times have changed and Education needs to keep pace. Hopefully the New Education Policy will encompass some of these practical aspects

28) The way to be Wealthy is to let the market value your worth

29) We may keep saying that Zomato / Nykaa are overvalued till the cows come home

30) Recollect the times when we had felt the same about WhatsApp Valuation or Instagram Valuation or Hotmail Valuation

31) Didn't they all Deliver as per expectation?

32) Never underestimate the Market. It's always a few steps ahead of our thinking abilities

https://www.investmentjunctions.com/

How to Rebalance Your Mutual Fund Portfolio

How to Rebalance Your Mutual Fund Portfolio

 

A mutual fund is a popular investment option through which one can invest in a portfolio of securities such as stocks and debt investments. There are multiple types of mutual funds to cater to your different financial goals and needs. You build a mutual fund portfolio when you invest in different mutual funds such as equity funds, debt funds to achieve your long term and short-term financial goals.

The asset allocation of your mutual fund portfolio is the mix of different assets such as equities and debt. The ideal asset allocation in your mutual fund portfolio will depend on your various parameters such as financial goals, investment horizon and risk tolerance. For instance, your ideal asset allocation of mutual fund portfolio between equity and debt may be 60:40. This means that out of our total investments in mutual funds, 60% of your investment should be invested in equity investments and the rest in debt instruments. 

Rebalancing refers to selling equity investments or buying debt investments, or vice versa, ensuring that the portfolio's asset allocation matches the ideal asset allocation.

Often, rebalancing is considered a part of a long-term investment strategy. In other words, it is an exercise that needs to be undertaken regularly to fulfil long-term financial goals.

How to Rebalance Your Mutual Fund Portfolio?

Here is how you can start with portfolio rebalancing for your mutual funds:

• Set Goals for Asset Allocations:

The initial step in the portfolio rebalancing is to set goals for asset allocation. If your stock or bond ratio seems better to you in the current market scenario and you think it will still have better performance in upturn or downturn, go for the same. However, if you do not have any asset allocation strategy, you must focus on having one. You can seek help from an experienced financial planner to help you figure out your ideal asset allocation.

• Find out About your Current Asset Allocation:

Once you have finalized a strategy for asset allocation, you must find your current asset allocation. Gather all the investment statements you have, and you can calculate to understand the current asset allocation. There are multiple free and paid online tools other than mobile applications that can show the asset allocation breakup of your investments.

• Create a Portfolio Rebalancing Plan:

If your asset allocation goals and the current portfolio are in line, the task is almost done. However, you might have to make some changes. When you decide upon the funds to be added to your portfolio and the units to be sold or bought, you will find that the process is more about trial and error. You might require revaluating the impact of buying or selling some holdings before making the actual trade. Even though your portfolio doesn't need to be a replica of the market, you must find out if it is heavily skewed towards some sector or style.

• Paying Heed to Tax Angle:

Before you rebalance your mutual funds' portfolio, you must consider the tax impact of your investments. Therefore, if you invest in the equity funds, ensure not selling off the units before a year to avoid paying the short-term capital gains taxes. For non-equity mutual funds, any holdings sold within three years from the purchase are subject to the short-term capital gains tax. The capital gains are added to the income and taxed as per the income slab. In contrast, the holdings sold after three years are subject to long-term capital gains tax of 20% after indexation benefits.

How often should you rebalance the portfolio?

There is no right or wrong answer to this question. A significant life event such as marriage, the birth of a child or death may call for portfolio rebalancing in addition to a regular portfolio check-up.

Ideally, you should review your portfolio every year. You can decide on a fixed date that is easily memorable.  You can look at rebalancing your portfolio if there has been an extreme change in the asset allocation mix.  Moreover, consider the expenses before rebalancing your portfolio.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, Read all scheme-related documents carefully.

https://www.investmentjunctions.com/

 

Why Should You Plan for Your Child’s Education?

Saving and planning for your child's education can be a daunting task for many parents. The level of responsibility and the amount of money that one has to save and invest requires a lot of wisdom and knowledge. This blog will look at the need to have a financial plan for your child's education and some easy steps.

If you think that there is enough time to plan for your children's education, think again. The best and first step you need to follow if you want your child's dreams to become a reality is to invest in their education ASAP.

Don’t trust us? Let us look at the figures.

Let us assume you would like it if your daughter does an MBA from a prestigious college in the US. She is too young to understand, but you want to be prepared.

To help you understand the importance of early investing, let us consider two scenarios. In the first scenario, you invest when she is three years old, and on the other hand, you invest when she is ten years old. If we assume that she might want to pursue an MBA at the age of 21, then considering an inflation rate of 5%, you will need to accumulate Rs.2.41 crore and Rs. 1.71 crore respectively.

However, you will require a monthly SIP of around Rs.31,000 when she is three and almost the double SIP amount if you invest when she is 10 years. This is the power of compounding. The sooner you invest, the better.

Now that you understand the necessity of child education planning, let us go over some basics that will assist you in deciding about your child's education.  

 

Know how much time you have

Calculate your child's graduation year and post-graduate years. You can determine the time horizon by estimating the number of years.

Figure out the total education cost

The first step is to determine the overall cost of your child's education. This depends on several things, such as whether your child wants to have a global education or prefers to study somewhere closer to home and the discipline that your child likes.

 

Know where you financially stand

To get a sense of where you are today and how to plan for the future, make a note of all of your assets and liabilities. This can assist you in making better plans. While preparing for your child's education, keep in mind that you should avoid dipping into your investments for other financial goals, particularly your retirement fund.

You should also avoid using funds set aside for your child's education for non-educational purposes, such as house renovations.

Decide how much you need to save/invest

Once you know how much college will cost, you can plan accordingly. Decide how much you need to save right now or how much of a monthly contribution you'll need to meet this goal by the required time.

One simple way is to start a Systematic Investment Plan in a mutual fund and make regular contributions for your child’s education plans.

To make a more significant contribution, you can eliminate unnecessary items from the budget or look for an additional source of income.

Asset allocation and rebalancing

Asset allocation is the breakup of the different assets, such as equities and debt in a portfolio. Proper asset allocation and investing are the smartest way to invest as per the time horizon and risk profile.

You need to make sure that the asset allocation will help to achieve your child's dreams.

If your investment horizon exceeds five years, consider investing in equity funds, which have the potential to deliver higher long-term returns.

Rebalance your investment portfolio gradually towards fixed income or debt as you get closer to your goal.

A well-thought-out asset allocation boosts your portfolio's returns. It can also operate as a shield, protecting your invested amount during times of market volatility.

Conclusion:

If you are a parent or plan to raise a child, you shouldn’t delay investing in their education. With the rising education costs and volatility in the job market, quality education has become imperative. So, start planning for your kid's future today and make their dreams a reality.    

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

call us for more details 

Raja Bhattacharjee 

9830146206

https://www.investmentjunctions.com/

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