Mutual fund are subject to market risk, read all scheme related documents carefully before investing. म्युचुअल फंड बाजार जोखिम के अधीन हैं, निवेश करने से पहले योजना से संबंधित सभी दस्तावेजों को ध्यान से पढ़ें

WHY MUTUAL FUND SAHI HAI

Its not only governments' but our responsibility.

 Every person on earth should invest some money in ESG (Environmental, social, governance) fund for four reasons.

Firstly, will give very good return in years and decades to come as world leaders's focus on this not as a choice but compulsion considering climate change, maintaining ecological balance etc. Every economy will not only promote but incentivise such industries/companies falling under ESG.

Secondly each one of us in some way or the other responsible for this problem and each one of us have to contribute for betterment. Lets's not think it is only a problem of policy makers across globe but every human being on this earth. Planting of tree, no/less usage of plastics, less usage of petrol etc can be other option but if not able to do any of these then at least can invest some amount in ESG fund.

Thirdly with more money flowing in ESG fund it will motivate industrialist/promoters/management to become more ESG conscious and irrespective of government policies will work on improving on this side as not only it will help their equities to grow but also make them more responsible towards the world.

Fourth, each one of us rejoice and celebrate when a new member arrive in our family but has anyone of us ever thought what future we are giving to the newly born? Lets be more responsible towards our next generation and reverse the cycle of damage now.

(Nurture India Consultants initiative on investor guidance) #money #economy #future #climatechange #investment #environmental #invest #india

Equity a long term investment ?

We often hear from experts, Equity is for long term. It's not clear. Which company's equity? Be specific and not generic. What is this long term? 5 years, 10 years, 15 years.........? Who can say of more than 6000 listed stocks how many will survive this vague long term. When we say long term survival with good growth then how many of us are sure that today's quality will be everlasting. Other than some odd 100 companies in India, today can anyone say for sure how many companies can be really called quality companies to last life long? Everything is just a guess.

My observation is for more than 99% of listed companies in India no surety of long term quality continuation. It is only a game on valuation more on short term sentiments. Yes after 10 years or 15 years or 20 years ..... from now we might say X company turned as quality company. History says maximum companies have either failed or growth stalled after some years and only few companies went a long way or still growing.

Think again when someone just says for anything to justify that "Equity investment is for long term".

( Investor guidance effort from Nurture India Consultants Pvt Ltd)

 

Should I invest, should I book profit or should I wait for correction and then invest?

This doubt is in the minds of many normal investors w.r.t investment in equity (direct stock or through equity mutual fund). I am referring here to long term investors and not day traders.

The cause of this doubt is market indices are very high, good return has come last 1 and 2 years so confusion is will market go further up or correction is round the corner?

The concern is more on downside risk. So, let’s talk of action on possibility of that.

Two factors can affect this downside risk: economic and market. Economic factors seem in control and no negative triggers or indication there. Government and its policies are toward growth so no risk is visible from that side as of now. Market risk is always there. Market is dominated by greed and fear. Market moves as per dominant participants behaviour which looks bullish as of now. How long it will remain bullish, difficult to say. When can suddenly it turn into profit booking mode difficult to say? One should know that long term trend of economy and market are positively correlated (behave same way) but short term it can vary. Concern today is of short term and not long term. So tomorrow if for some days or even few months correction happens (downward risk) it might be due to market behaviour in all probability and not economic reasons.

Now what one should do in such scenario.

If anyone requires money in next 1 year and has already reaped a good 1 to 2 years return then better to book profit, move to safer asset (debt). Strategy is protecting your growth.

If anyone wants money in next 1 year onward to say 3 years, Then, correction if happens might leave him with a low return. Maybe he can book profit on 20% of holding, put that in debt. Be watchful and put some limit order range (in percentage terms or price terms) on either side (rise or fall) and keep booking profit of 20% subsequently. Ultimately correction will happen but no one knows, when? If he finds sudden big dip then can move all in one go. Remember the proverb, “There no use of crying over spilt milk”.

If anyone wants money say after 3 years to 7 years then for him correction can put some notional loss but strong economy can help to bounce back and recover this notional loss. Same strategy as above but instead of 20% can have 10% of holding to book profit. In case big dip then value protected but if economic factors remain strong then market will bounce back and might go to greater heights. Can put back money in equity after big dip and restart of next upward trend. Strategy is protecting the growth and getting back to growth path after normalcy.

If someone wants more than 7 years then in my view should not book profit but have patience, stay invested. Be mentally prepared for notional loss if any in short term.

Two things might be coming in the mind of some readers: (1) If for short term need one has ensured through existing debt investment then why to redeem equity as debt is there (2) why there is conviction of correction anytime in next some months.

Let me address first one. Even if you have debt which might have given you say 7% return, in case you liquidate that then that becomes 0 as no investment left and God forbid if loss on equity, then your loss looks more. If you keep that 7% return generating debt intact and book profit for some holding (10% or 20%) from equity then irrespective of indices or price of security/fund move in any direction you gain only vis a vis debt redemption situation.

To 2^nd query it has been observed that historically whenever market indices have given very high return in last 1 or 2 years there has been correction in following year. Higher the return more is the probability of short- term correction. Long term average return is somewhere between 12% to 14% p.a. Any huge swing or deviation from long term average corrects at same stage in short-term.

Some might be thinking Nifty is already above 17500 and may go to 19000 or 21000 or….. Yes, possibility is there but whatever level it goes (say 20000) probability of correction in short term will always be there.

The only thing is, should you wait to repent later or take calculated risk now? Choice is yours.

 Lowering of interest rate and impact on retirees

Last some years many retirees are witnessing lesser money in their pocket in an economy where cost of living is increasing. It has created financial distress to those people. But same is not the case for all retirees. Lets examine in detail why it has happened and what is the solution.

This problem has been faced mainly by those retirees who have invested all or bulk of their money in bank FD. It’s the first mistake done by them.

RBI borrows through issuance of various government securities for meeting deficit (revenue minus expenditure) and also for funding long term government projects. RBI through their various policy measure (CRR, SLR. Credit policy etc) from time to time gives direction to all participants what should be interest rate level within economy. Its natural that any borrower (loan taker) will always want to pay low interest rate and not high. So, its natural that RBI will also like interest rate to be low as RBI is the biggest borrower within economy. Government earns revenue through various taxes. So, if corporates or individuals who take loans from bank if they have to pay lesser interest then they have more profit or surplus. More profit at corporate end means more tax and revenue for government. More surplus in the hand of individual translates into more consumption and spending (helping corporates) or investment. So low interest rate is beneficial for all.

Now why bank interest rate has been reducing? It’s because bank earn from lending and not from deposits. Deposits gives money to bank for lending. But bank earning is basically from margin (lending rate minus deposit rate) so when they reduce lending rate (beneficial for all borrowers) they reduce deposit rate also (depositors suffer). As bank volume of lending increases with a small margin also they gain.

What will be trend ahead? In long term all interest rate within economy will reduce and it short term it can fluctuate.  Facts are before us since 1980s till date. As there will be more and more revenue for government through taxation lesser need for RBI to borrow. Trends again since 1980s point towards that only in long term. Short term again will fluctuate. On cost of living (inflation) as there will be more money in economy and in people pocket (domination of those still earning) this cost will grow which will impact all and more negatively to retirees. Facts are before all to judge. A simple fact is Rs 1 lakh today was worth Rs 386968 some 20 years back. The same 1 lakh of today will be worth Rs 31180.00 after 20 years from now. The above calculation has been taken on past and present inflation rate. So, one can judge how the value of money is getting eroded.

Someone retiring at say 60 years invests for 3- or 5-years bank FD. He gets an interest rate and at maturity he again deposits for similar period but at a lesser rate. He has forgotten that his life and dependence on this money will be till he survives ( till age of 80 or 85 or even 90). So never put all money in bank FD.

What to do now? The first choice of any retiree should be investing in Senior Citizen Savings Scheme and LIC PM Vyay Vandana Yojna. Both giving interest rate @7.4% per annum as of today. This return is guaranteed for next 8 years and 10 years respectively. Maximum limit is 15 lakhs in each under a single name. If spouse has been also working and over 60 years age then she can also invest her retirement money. So, it can be maximum 60 lakh if combined together (subject to what stated). Then one can put 9 lakh (4.5 +4.5) in name of both husband and wife in Post Office MIS. Once this exhausted then some amount can be put in bank account.

Also, some left over amount should be put in mutual fund (debt, hybrid and equity).

Rule should be simple: fixed, regular expense have to be met from fixed regular income (Pension, Interest income from Senior Citizen Saving Scheme, PM Vyay Vandana Yojna, regular and fixed income generating investment etc).

Since one can survives beyond 70 years (longevity has increased) some money should be in equity mutual fund (large cap, large and mid cap, multicap fund) as equity gives best return in long term (> 7 years). This growth can help retirement corpus not to deplete.

Have a withdrawal rate that equals growth rate. So, if 7% is growth then have 7% as withdrawal (you are not eating your capital).

Have bucket strategy. From immediate to short term to mid term to long term requirements investment product choice should be accordingly.