Do not stop SIP now

Do not stop SIP now

Dear investors, I request you to please do not stop your mutual fund SIP. Avoid redemption unless it is very urgent. I have got many calls in these days regarding stop SI and redemption as our market indices Nifty and Sensex are going down. Retail investors who have invested in equity through SIP should not end their investment. Many investors may close their SIP plans as they realize that market has not given them returns over the past 12 months.

If retail investor stay invested and continued with their SIP plan, they will end up very good return by compounding power. Since March, 2015 the benchmark indices have lost 18% from their record highs. Investing in SIP like a bamboo tree, which does not grows in the first four years, but goes and touches sky in the fifth year.

During Modi wave, market had grown 30% so now there may be some wait for next rally. Now FIIs are pulling out money but DIIs are pumping money in the market. Central government is taking so many initiatives to get fund which will deliver growth. It is very prudent decision if you stay invested in equity in these tough times.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Direct Equity v/s Equity Mutual Fund

Direct Equity v/s Equity Mutual Fund

I have seen many investors have often not sure whether they should invest in direct equity or invest in equity mutual fund. According to me, both are good instrument to create wealth in long term but both have different type of risk. We will discuss here about these instrument today.

Direct Equity:

Investing in direct equity is suited for those investors who have plenty of time and understanding of finances of companies. It is very good for those who have time to track the financial health of the company. Such investors invest in good companies at very beginning and earn multifold return in long term. You should have large sum to invest in such companies at the starting.

Equity Mutual Fund:

Investing in equity mutual fund is very good instrument for wealth creating in long term. It is very suited to those people who have no time to track the market and companies and also not understanding of finances. One can easily invest in equity mutual fund in lump sum or in step by step in the form of SIP (Systematic Investment Plan). There is no need to have large sum at initial stage of investing like in direct equity. It also give the multifold return in long run on your investment. One can start investing a very small amount like Rs 500 also and gradually increase this as per their income.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

The need of financial freedom

The need of financial freedom

Today, India is celebrating 58th Independence Day. During these years we have achieved many milestones in many areas. We have made progress in each field like science, medicine, defense, infrastructure and many other sectors. But India still has a large population of the poor. A large section of India’s population are struggling for food and basic amenities.

We have still large section of people who have still not life insurance cover which is very essential for every citizen. Around half of the population have no bank account. Financial inclusion is the need of the hour for development and growth. It is very good sign that today during independence day speech our prime minister have shown commitment to open a bank account for each citizen with Rs 1 lakh insurance.

We are great saver but not good investor. Our domestic saving rate is very impressive and one of the top in the all over world. We need financial freedom for every individual. Financial freedom means every citizen should be capable to their future financial goal and leading towards peaceful and joyful life. To achieve financial freedom we will have to change the investment pattern. At present, majority of people invest in debt instrument like fix deposit which is not able to generate return to beat inflation. Before any investment, your target should be generate return which can beat inflation after paying taxes.

Equity investment is the best option for beat the inflation in long run and the long term capital gain is also nil. You can easily fulfill your future goal by investing in equity. We have discussed about this earlier in the past blogs and will discuss more in the next. Lets make a resolution for financial freedom for everyone.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

What should do in this market?

What should do in this market?

In these days, our major market indexes are performing very well (Sensex and Nifty). Market indexes are at their highest points, equity mutual funds also improving performances, investor’s portfolio’s health improving in these days. Now the major questions are why equity market performing are in India and what should an investor or trader do at this point. First we are discussing about the factors which are responsible for market’s current performance.

The reason behind the market rally:

• Some people are expecting the stable and growth oriented government after the election.
• FII (Foreign Institutional Investors) investments in our markets are improving from last few months.
• Indian rupee is appreciating against dollar and it is also the major factor behind this according to me.

What should the investor do?

• If you have already equity portfolio then you must hedge your position. After market any major negative swing wipe out your portfolio valuation so hedging your portfolio are necessary to avoid any loss.
• No doubt, markets will perform good in the next 2-3 year but shot term trader should cautious and do the trade with strict stop loss as near term upside seem not much, Nifty level should not cross the 7200-7300 after even election result.
• If you are investing in equity mutual fund by monthly SIP (Systematic Investment Plan) to achieve your future long term goal then you should stay invested and before two year you should transfer your equity portfolio into debt portfolio.
• Before investing in particular company’s stock, check the company’s fundamental and valuation whether it is overprice or trading at below from fair value at present. There are still many good companies available at good price in spite of market at its life time high.   

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Equity : A broad view as asset class

Equity : A broad view as asset class

There are many investment avenues available in the market like equity investment, fix deposit, debt/ bonds, metal, arts etc. We can divide financial assets in 3 types. These asset types are equity, debt and gold. In this article we will discuss about equity investment.

We are often told that equity investments are subject to risk and in nature it is very volatile. In simple terms, equity means the ownership, investor who own equity in company participate in company’s growth like a promoter. If you hold equity in a particular company, it means you become beneficial owner of that company. As an equity shareholder, you also get the opportunity for the vote on important business decision.

Advantage in equity investment:

Profit making companies share their profit with shareholder as a dividend and it is totally tax free as per the current law. Over a long period you can make a capital gain through increase in share prices by investing in good companies. As per current law, in our country long term capital gain in equity is nil. It has outperformed in terms of return to other asset class over the long period. It has ability to beat inflation and generate super return. It is very crucial investment to achieve long term goal.

It has greater liquidity compare with other assets. The transaction of shares happened on exchanges and it is regulated by SEBI. Equity trading mechanism is very transparent and no room for wrongdoing. Equity investment play very important role in the economic growth of the country. It mobilize funds from public towards various sector which is very crucial for country’s development.

Disadvantage in equity investment:

Return of Investment in equity is not guaranteed. It depends on company’s performance. If company is doing better, you will get higher return but if it is not doing good, then you have risk to lost your capital also. In short run, it is very volatile so it is very risky investment in short term investment point of view. If you have invested in bad companies or enter when the prices are very high then you can lost substantial amount of money.

Equity investment for whom and how we can invest in it. We will discuss about this in next article. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

MCX-SX Exchange : A Younger Index

MCX-SX : Born of one more equity trading exchange

MCX-SX is new entrant in trading exchange space. It trade in equity and equity derivatives segment.  Now in our country the no. of full fledged equity exchange become three. It has begun trading from yesterday with lower volume than expectation. It offer platform for trading 1,116 stocks. MCX-SX benchmark index has 40 stocks. Let us review our other trading exchange’s landmark event.

From 1979 to 1994 BSE (Bombay Stock Exchange) has been dominant player in the exchange trading. When NSE(National Stock Exchange) has commenced trading operation in the Indian share market BSE was the dominant player in the market at that time. BSE was top in the 1993-94 with Rs 84,500 crore turnover. BSE had 40% market share as the total turnover of all exchanges was around 2 lakh crore. Launch of NSE’s online trading platform was turning point for NSE. It has transformed India’s capital market with well managed institution. NSE has also won the people’s trust by providing modern technology and efficient trading platform. Till 1995-96 NSE has become the largest exchange of Indian in terms of turnover. Before launching online platform, the retail investor was not participant in equity market. But it has given the market access to everyone. Anyone can trade in India from anywhere. From 1995 to 2001 cas segment has grown over 10 times.

But from 2000-01 to till date cash segment turnover has not been very good. In fact it is declining from 2010-11. The main reason behind this decline is a new derivative segment has come in the picture from 2000. Future and options  has witnessed a huge success among traders. According to FY 2012 data the turnover size of derivative segment is 35,77,998 crore.

In spite NSE’s effort debt market segment is still waiting for success. There is almost no trading in retail debt market. We hope now MCX-SX will give new boost to the cash market in equity and debt market segment.

If you have any query about investment or financial planning feel free to ask through mail.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Some basic rule for investment - I

How to be successful investor - Part I

There are many types of material available on this subject. Everyone wants success in investment but to get success there is some basic rule. Every investor should follow some basic principles of investing. Today, I am going to share with you some rules of investing which is described by Sir John Templeton (founder and former chairman of The Templeton Funds) and very vital for any type of investors.

1)      Understand Real rate of return: It means the return on investment after taxes and inflation. Investors often fail to consider tax and inflation and at last their goal don’t get fulfill. It is vital to protect the purchasing power of your money. Inflation is the biggest enemy for your investment so keep it in mind when you go for investment.

2)   Recognize the difference between trader and investor: Do not trade or speculate. Be a sincere and patient investor. Do not treat the stock market as a casino. If you trading frequency high then you will give more brokerages and commissions to the broker and government. Avoid this habit and invest in a company after full information of company. Don’t gamble, buy some good stock and hold it till it goes up. In India there is no long term capital gain on equities so get benefited from this rule.

3)   Be open-minded about types of investment: Every asset class give return in cyclical form. It means there is no one kind of investment that is always best. Now a days, in India people are mad about gold investment and real estate investment as it has given decent return from last some year. Keep in mind, if particular industry or type of asset becomes more popular with investors, that popularity will always prove temporary and when lost may not return from many year. There are many times it is better to sit on cash and take advantage of investment opportunities.

4)   Buy at low prices: It is very simple concept but difficult in execution. Never follow the crowd. Buy when most people including experts are pessimistic, and sell when they are actively optimistic. It is extremely difficult to go against the crowd- to buy when everyone else is selling and to buy when things look darkest.

5)   Buy value, not market trends: As a wise investor, you should find the true value of stock. Ultimately it is individual stocks that determine the market. Individual stock can rise in bear market and fall in bull market. Many investor focus too much on the market trend or market outlook. The stock market and the economy do not always in lock step. Bear markets do not always coincide with recessions, and decline in corporate earnings does not always cause a decline in stock prices. So it is very important to choose a quality company. Quality may be strong management team with proven record, quality may be well capitalized company, quality may be high profit margin consumer product, quality may be famous brand. It is difficult to find 100% perfect quality stock but do your best to find value and quality stocks.

    Today we have discussed some rule for success investor. There is many     more which we will discuss further. If you have any query about investment                  and financial planning, feel free to ask.

                           

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Understanding Bonds – Part 1

When we think about investment, the first thing comes in the people’s mind that they should invest in the share market or real estate for making rapid and huge profit. Stories of investors gaining great wealth in the stock market and real estate are common. The other side for bond market, the picture is different and not very exciting for common investor. People are not much excited about bond market due to lack of knowledge and less media coverage. People often think bonds are much more boring - especially during bull markets, when they seem to offer less return compared to stocks.

In the bear market investors want invest in bonds for safety and stability. In my opinion, for many investors it makes sense to have at least part of their portfolio invested in bonds. So we are starting a series of articles related bonds in the many parts to understand  what bonds are, the different types of bonds and their important characteristics, how they behave, how to purchase them.

In our lives we need money at some point and we borrow that money from our relatives, friends or banks. Just like that companies need money for expand of business and government need money for development and welfare for citizen. The solution is to raise required money by issuing bonds (or other debt instruments) to a public market. Basically, A bond is nothing more than a loan for which you are the lender and companies or govt are borrower. The companies and government that sells a bond is known as the issuer (borrower).

As in simple case borrower pay some interest to lender for lending money at predetermined rate and specified time. In case of bond the interest rate is often known as the “coupon rate”. The date on which the issuer (borrower) has to repay the borrowed amount known as “maturity date “ and  borrowed money know as “face value” of bond . Bonds are known as fixed income securities because you know the exact amount of cash you'll get back if you hold the security until maturity. For example, if you buy a bond with a face value of Rs 1,000, a coupon of 8%, and a maturity of 10 years. It means you'll receive a total of Rs 80 (Rs 1,000 * 8%) of interest per year for the next 10 years. If bonds pay interest semi-annually, you'll receive two payments of Rs 40 in a year for 10 years. When the bond matures after 10 year, you'll get your Rs 1,000 back on maturity date.

Difference between Debt and Equity:

The main difference between bonds and equity are that bonds are debt and stocks are equity. By owning equity (stock) an investor becomes an owner in a company. It means owner of stocks has right of voting and the right to share future profits if any.   By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders. In the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder only entitled for principal amount (face value of bond) and interest (coupon amount). Bondholder does not share in the profits if a company does well in future.

It means debts are lower risky instrument with lower return and stocks are higher risky instrument but uncertain return. Now the question is for whom debt instruments are suitable and for whom stocks (equities) are good. For retired person who need fixed income with capital protection debt instruments are ideal. For those who are worried about of stock market volatility in near term and don’t want risk to wipe out of capital amount debt instruments are suitable. These instruments are the best option for short term horizon’s investment with lower risk.

In the next article we will understand bonds in more detail.

Regards,

Arvind Trivedi

Certified Financial planner