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Sunday 24 June 2018

When should we redeem our mutual fund investment?

Mutual funds reclassification, rising crude oil prices , trade war worries and a falling rupee have taken toll on mid- and small-cap stocks. some of my friends and clients calling me and asking that should we withdraw our money out? Just falling market should not be the only reason for Exit. When we do start any investment or SIP, it is for a Goal. Market cant move northwards only. It has its own cycle. We all have seen the financial market crash in 2008 and we have also witnessed the recovery it had shown. Who have exited at that time, have exited with loss but who didn't have, earned tremendous return on their investment.




So when should we redeem our mutual fund investment? We must ask following question to ourselves before redemption:

Is my Goal Achieved? : Every investment must have some goal. it would be a very wise decision to exit from then equity investment when you reach near the goal. It will be better to start SWP (Systematic Withdrawal plan) to come out from your investment from equity and keep the proceeds in some fixed asset.

Is my fund is under performing its class or benchmark? : If you fund is under performing its peers and benchmark for one  or two or years consistently then you can switch to some other fund as per your requirement and goal. Many new investors are betting big on small cap schemes. They believe that they will make them rich quickly. and as soon as market turns south word they become impatient. Mostly people compare the fund return with Nifty or Sensex. it is same as comparing Apple with Orange. Investors must compare fund with correct benchmark.

Is the re-balancing required? : Risk profile of any investor can change with time. If someone, having balanced profile, have invested any mid cap fund which have outperformed the market then he can think to redeem some part of investment and move it to Fixed Asset. It can also happen that, fund have changed its investment strategy due to which it does not fit into someone portfolio, then he can exit from the fund.

What is the tax implication? : Investors must consider the exit load before redemption. After the long term capital gain, we need to plan the exit according to your tax bracket. From April 1, LTCG made on transfer of equity mutual funds that have an equity exposure of 65 per cent or more will have to pay a 10 per cent tax on long-term capital gains above Rs 1 lakh a year. This new tax will apply in any financial year whenever there is LTCG on redemption of equity MF, if you have held those units for at least 12 months.


Investors need to remind themselves that investing regularly in a good scheme which suites their risk profile, over a long period is the only way to create wealth.

Sunday 17 June 2018

Website for virtual trading (learning purpose only)

Stock market investment is becoming very fancy day by day. Some people come here for quick money with trading. Most of them leave the market with burnt hand within a year. The people left in the game try to learn from their trades. This learning process never stops in financial market. It keeps changing and become more challenging day by day.  For newcomer it is suggested to learn first about the trading and risk associated then come to trading. For better experience, start with paper trade or Virtual trading app.  As the name suggests, virtual trading allows to trade on real markets but only using virtual money. It’s a good way to boost your confidence before entering the market with real money. The best thing about these virtual trading platforms is the fact that they are free of cost, so you won’t lose a single penny even if your strategy fails. And surprisingly, some of these offer rewards too if you consistently perform in your trading.There are many platforms providing virtual stock trading, but some of the sites, which are highly recommended, are as follows:

  • MoneybhaiIt is a free virtual trading game for Indian stock market. You will have the option to invest in stocks, bonds, fixed deposits and mutual funds. On this platform, you can create a league game with friends and also interact with them as well as other users. 

  • NSE Paathshala: It is also a nice dummy platform to learn trading in National Stock Exchange. It is an initiative of National Stock Exchange of India (NSE) to educate the investors through virtual trading. It has been discontinued for now but will be back soon.
  • Dalal Street Stock Market ChallengeBombay stock exchange (BSE) in collaboration with Dalal Street investment Journal provides this virtual platform to learn to trade in stock market. The Stock market focuses on three types of audience – serious traders, youngsters and those who have lost confidence in the stock market. It has several levels and in each level the difficulty level keeps on increasing. There will be a demo to teach you how to play and also a game master to answer your queries.
  • Trakinvest: The member can create chance to get real jobs or internships by showing their trading skills through this platform. The platform provides tools such as news, Twitter feeds, stock related financial information to analyzing and making decision. You can also track the movements of the best performers and your friends.
  • MarketWatch: Market Watch is a financial website by Dow & Jones Co. providing virtual trading platform in stocks with real time market data. You have the option to create your own game or you can join a game that others have created.
  • Wall Street Survivor: WSS allows you to virtually trade, create and manage your dream portfolio while competing against your friends and other users. You can also learn fundamentals of the trading stocks, bonds, futures, currencies through comprehensive lesson and blogs. You may have an opportunity to earn up to $300 through leagues conducted by them.
  • Investfly: It also a good online trading platform where you can learn and manage your virtual portfolio of stocks and can build your own automated trading strategies. It provides trading tools to the users and conducts monthly trading contests.


But please do remember that there is lot of difference between paper/vertula trading and real trading, as in paper trading you have nothing to lose.  You may not get emotionally attached with it because you are not losing anything in any case, which does not happen in real trade. In real trading, there are psychological emotions involved and plays a very important role which needs to be controlled for long term success.

Hope this helps!….


Sunday 10 June 2018

No Loss Mutual Fund Investment

When it comes to investment in market, most of us first think about safety. Safety of principal amount becomes more crucial if you have a large sum to invest. I must say this in the start of discussion that when we go for safety then we should not expect return more than 7-8% per year, which is very near to standard FD a rate. But the products available in Mutual Funds we can generate alpha over this FD return. We must also need to consider the Liquidity aspect of an investment. This plan is useful for:


  • Investment for Emergency Fund creation.
  • Funds for Down Payment of Home, Car etc.
  • Investments for the proceeds of Redemptions near Goal.  
  • Retired Person.

What is the plan?

Suppose an investor have Rs5,00,000. He needs this money for down payment for home. This means he can’t take risk on this amount. So what does he has as option for the risk free investments? One of the most common answers would be fixed deposits. But if he finalized any property then it will attract the pre-closure penalty. This will reduce the value of investment. If decision takes longer than inflation will also play its role.  This has the same effect on the value of investment.

Now see the option in mutual fund space for this type of investment, where risk should be zero with variable time period. The option is Liquid Funds. it invests primarily in money market instruments like certificate of deposits, treasury bills, commercial papers and term deposits. These funds are designed in such a manner that it helps a fund manager in meeting the redemption demand from investors. We can take out our money any time without any exit load. We can get proceeds of redemption in 1 day. Liquid fund can also give instant payment. Sebi has capped this limit to  90% of your folio's value, whichever is lower. CRISIL Liquid Fund Index has given 6.9% return in one year.  But you can say that where the alpha is then? Let me explain.


Liquid fund investment (rs500000) with 7% CAGR will give about Rs2900 per month. If an investor invests this amount any large cap equity Mutual fund then it will create an alpha with. If the Equity fund give return 12% per year then the investment would be Rs732795 where as Liquid fund alone will give us only Rs704701. But if we choose fund having better return than difference will be more significant. Nifty has a CAGR of 12.1% in last 20 years (since 1997).


You can download the Excel file for your reference from here.




Real estate investments

 In India, our old people have only two options for investment. These are Real State (house or Plot) and Gold. We will talk about gold some ...