Investment Lessons to Learn From Holi

 Investment Lessons to Learn From Holi

Holi is a festival that we all eagerly wait for, and it is almost here. It is one of the best times of the year to meet and enjoy the day with friends and family. Holi is incomplete without colours and sweets and it celebrates the win over evil. If we compare Holi with our financial life, we see that there are many investments lessons that we can learn from Holi.

Here are some four key investment lessons that we can learn from the festival of colours.

Importance of a diversified portfolio

Holi won’t be Holi without colours. The colours make this spring festival vibrant. Similar to Holi, our investment portfolio also needs colours. The different investment assets such as equities, debt and gold are the main asset classes that colour our portfolio. It helps us to give optimized returns as it reduces the risk associated with a single asset class. Different asset classes play different roles and give different returns at the same time, which helps to minimize the risks.

So, try to maintain a diversified portfolio with different assets as per your investment objectives and risk-taking capacity.

Safety comes first  

Most of us love to play with varied colours. But sometimes some colours may be harmful for our body and hair. In such circumstances, it becomes important to take safety measures.

Investment is no different. Before you invest in riskier assets like equities to achieve your financial goals, it is important to build an emergency fund to take care of unexpected expenses. An adequate emergency fund with at least three to six months of expenses can help you navigate situations such as job loss, car and house repairs among others. Liquid fund which is a type of debt mutual fund invests in low-risk debt securities is one of the best options to build an emergency fund.     

Get rid of the evil

Holi signifies the triumph of good over evil. Holi gets the name from Holika Dehan where Holika was killed in a fire whereas Prahlad, a devotee of Lord Vishnu came out unscathed.

During your investment journey, you may have invested in products that do not suit you and damage your finances. Mixing insurance with investment, investing in schemes that haven’t performed in a while or investing in a high-risk product beyond your risk tolerance are some evils that you may have accumulated throughout the course of your investment journey.

Portfolio evaluation can help you figure out the laggards and evils in your portfolio and weed it out. It will help your investment portfolio to be better aligned with your financial goals.

Be Patient

Desserts such as Gujiya and Thandai are Holi staples. Gujiya is not Maggi and it requires a lot of effort, planning and most importantly, patience.

Patience is also important in the world of investments. Staying patient and disciplined over a long period of time builds wealth as time is a crucial component in the compounding process.

Focus on your financial goals and don’t let short-term movements in the market wreck your goals. If you are getting cold feet because of market volatility, talk to us to help you figure out the best course of action for you. 

Portfolio diversification, being prepared for the unexpected, deleting the harmful aspects and being patient are some of the investment lessons that one can learn from Holi.

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

Raja Bhattacharjee

 

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

https://www.youtube.com/channel/UC1SWOtYMe3azQ7QI0CWKdXA

 

Direct Stocks vs Equity Mutual Funds: Which is Better?

Direct Stocks vs Equity Mutual Funds: Which is Better?

If you ask anyone if they have invested in equities, the most common response that you will get from them is, ‘no baba; it is very risky. I am happy with my fixed deposits.’ Their response stems from what they have seen in their friend circle or what they have experienced. While everyone knows that equities give the highest return on a long-term basis, the risk associated with it deters many investors from investing in equities.

However, what many people do not know that there is another smooth way to take equity exposure, and that is through mutual funds.

Mutual funds pool money from many investors and expert fund managers manage it. While you can pick up the stock of your choice when you are directly investing in equities, the fund manager takes the investment calls in a mutual fund.   

Here’s some of the difference between Mutual Funds and Direct Stocks that will help you to figure out the right option for you.

You don’t need to be an expert to invest in mutual funds

When you invest in equities through mutual funds, you don’t need to be an expert in stock picking. Fund managers pick up stocks that they expect will be the best for their investors according to their investment objectives. In the case of direct equities, you will have to do the research and pick up stocks. In many cases, it is seen that many people invest in stocks as per their friend’s suggestion, and this is where they go wrong and end up with sour memories. Investing in direct stocks requires expertise. If you are new to the world of investing, investing in mutual funds will be the better option for you.

The risk in mutual funds is lesser than investing directly in stocks

The risk associated with direct stocks is higher than investing in mutual funds. Mutual funds have a diversified portfolio, and fund managers invest on an average of 30 stocks across different sectors and market capitalisation. This reduces the risk associated with an individual stock. E.g., if stock A is not performing well due to some sector-specific problem, the underperformance of the stock will be offset by the other stocks in the portfolio.

Moreover, the market regulator has capped the investment in a single listed stock at 10%. That means that if the total assets of the fund is say Rs.100, then the total investment in one stock can’t be more than Rs.10. This reduces the risk when compared to investing in direct stocks, where the total allocation to a single stock in your portfolio would be higher.

Equity mutual funds are for the long run

Equities tend to be volatile in the short term, but in the long term, the returns tend to average out and give attractive returns than other asset classes. Direct stocks can be for trading and investing purposes. However, equity mutual funds are only for the long term. Equity funds may give attractive returns if you stay invested for more than five years.

Fulfil your goals through SIPs in equity mutual funds

One of the most important parts of investing is discipline. Having a disciplined approach will make sure that you can meet your goals. Mutual funds have a facility through which you can invest a fixed sum of money periodically called as a systematic investment plan(SIP).  By investing in equity mutual funds through SIP, you will be investing in a fixed amount of money irrespective of the market levels. Rupee cost averaging is one of the most important benefits of SIP. Through SIPs, you will be allotted lesser units when the market is going up and more units when the market is low. Once the SIP mandate is set, the investment amount will be automatically debited from your bank account. This gives you the best of both worlds. However, in the case of direct stocks, you do not have the option to automate your investments and pay a certain amount of money every month.

Conclusion:

When choosing whether to go for direct equities or through mutual funds, you need to ask yourself what kind of investor are you. Do you have the market knowledge or the time to do extensive market research to pick the right stocks for yourself? Can you bear the risk associated with investing in just a few stocks? If the answer to these questions is a resounding NO, then investing in equities through mutual fund may be the best option for you.

If you want to know more investing in mutual funds, get in touch with a financial advisor. He or she will be able to guide you and clear all your doubts. Happy Investing !

Raja Bhattacharjee

 

Email:  investment.junctions@gmail.com

Phone: 09830146206

Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

 

ELSS

For most Indians, retirement is the most ignored financial goals. From the beginning of career we start chasing short term goals which gives us short term gratification like buying a car, buying a New smartphone, vacation etc. Most of our savings is channelized in achieving our Retirement Goal.

However, we all have a desire to save tax. We can channelize this desire to achieve two goals,

1. Saving Tax
2. Creating Retirement Corpus

Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C. This deduction is allowed to an Individual or a HUF.

To save tax, we normally invest in PPF and other instruments which has a long lock in period. When you are ready to invest for such a long period, investing in equity is better idea, as equity is less risky and more rewarding in long term. You may choose to invest in Equity Linked Savings Schemes (ELSS) of mutual funds to save tax under section 80 ( C ).

What is ELSS?

An Equity Linked Savings Scheme (ELSS) is an open-ended Equity Mutual Fund that doesn't just help you save tax, but also gives you an opportunity to grow your money. It qualifies for tax exemptions under section (u/s) 80C of the Indian Income Tax Act.

Along with the tax deductions, an ELSS offers you the opportunity to grow your money by investing in the equity market. ELSS carries a lock-in period of 3 years. Furthermore, you can also choose to invest through a Systematic Investment Plan and bring discipline to your tax planning.

Here's how it will work. Say, one invests Rs 12,500 monthly in ELSS (Rs 1.5 lakh annually) for 25 years of one's working life towards retirement. Assuming a growth rate of 12 percent a year, the corpus could be nearly Rs 2.12 crores, which could be part of one's retirement portfolio in addition to other investments earmarked for retirement. 

SCHEME NAME	1 Year	2 Year	3 Year	5 Year	7 Year	10 Year	12 Year	15 Year
	Capital Invested
	Rs 1 Lac	Rs 2 Lacs	Rs 3 Lacs	Rs 5 Lacs	Rs 7 Lacs	Rs 10 Lacs	Rs 12 Lacs	Rs 15 Lacs
	Retruns Generated from Various Schemes
Maximum ELSS Return	₹ 1,21,559	₹ 2,75,071	₹ 4,41,203	₹ 8,98,110	₹ 16,13,266	₹ 26,14,434	₹ 35,18,416	₹ 82,92,953
Minimum ELSS Return	₹ 1,00,030	₹ 2,29,534	₹ 3,50,048	₹ 7,25,657	₹ 12,12,686	₹ 19,86,361	₹ 25,83,101	₹ 48,77,739
Average ELSS Return	₹ 1,10,884	₹ 2,51,585	₹ 3,89,498	₹ 8,08,623	₹ 13,58,294	₹ 23,01,979	₹ 30,64,690	₹ 69,33,800
S & P BSE Sensex	₹ 1,13,410	₹ 2,45,862	₹ 3,72,791	₹ 6,97,401	₹ 11,06,090	₹ 17,71,240	₹ 23,53,781	₹ 47,32,426
PPF Calculated @ Actual Rates	₹ 1,07,829	₹ 2,24,307	₹ 3,50,839	₹ 6,37,886	₹ 9,76,743	₹ 15,94,563	₹ 20,93,314	₹ 30,01,347

Past Performance may or may not sustain in future.The above table shows the value of Rs. 1 Lac invested in PPF, Sensex and various ELSS Schemes as on 31ˢᵗ May of every year. (Valuation Date : 31ˢᵗ May 2018) Note: Amount assumed Rs. 1 Lac in PPF & ELSS. However, deduction u/s 80C has been increased from Rs. 1 Lac to Rs. 1.5 Lacs w.e.f 22ⁿᵈ August 2014.

Disclaimer: The information contained in this report has been obtained from various sources. While utmost care has been taken for the preparation of this report, we do not guarantee its validity or completeness. Neither any information nor any opinions expressed constitute an offer, or an invitation to make an offer to buy or sell any fund. Investors should take financial advice with respect to the suitability of investing their monies in any fund discussed in this report. Mutual fund investment are subject to market risk. Please read Scheme Information Document and Statement of Additional Information carefully before investing. 

Raja Bhattacharjee / 9830146206 

AMFI registered mutual fund distributor

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.