June 2020 - VSRK Capital

June 29, 2020May 21, 2024

What is Systematic Investment Plan (SIP) ?

A mutual fund is one of the most popular modes of investment opt by investors desirous of making good returns on the same. There are generally only 2 ways to invest in a mutual funds scheme- Lump sum investment and Systematic Investment Plan.

Lump-sum investment refers to the investment of a good sum of money once into the scheme. It is suitable for times when you have a free load of cash in hand with you. However, the availability of a comparatively huge sum of money is not very common and this is the reason why many potential investors were unable to make investments.

Systematic Investment Plan (SIP) was brought as a mean of making a systematic and regular investment. This requires the investors to invest a fixed amount of funds at stated intervals, regularly. This has dealt with the inability of huge sums and allows the common man a chance to invest.

The return from the mutual funds depends on the market value of the securities present in the portfolio represented by the Net Asset Value (NAV) of the mutual fund scheme. Hence, the NAV keeps fluctuating on a daily basis, which is more prominent under equity mutual funds.

June 10, 2020August 23, 2023

How Do Mutual Funds Work?

Mutual funds are one of the most popular financial instruments in town. Mutual fund is a collection of funds pooled in by investors and managed by a portfolio manager. Such funds are invested into various schemes in accordance to the earlier set objectives.

While the above information is generally available on all the online sites, the actual working of such funds isn’t told with much clarity and we ought to clear all your doubts on the actual working of mutual funds. So, let’s start.

As mentioned earlier mutual funds are a pool of resources instead of being a single resource which means there are multiple investors who have put money in a fund. Each person who has invested their money into the fund gain ownership over a part of the fund, known as a unit. We can also say that the entire fund is subdivided into multiple parts known as units. So, when a person wants to invest in a fund he has to buy these units.

Such mutual funds are of many types like equity funds, debt funds, hybrid funds, income funds, growth funds, index funds etc. Each fund has its own objectives, risk & reward. Different investment bankers offer different schemes. You may select the one which favors your objectives the most.

When you select the scheme you want to invest into, you have to buy the units. Once you buy the units, the investment bankers allocate the money to that fund. Generally, under the umbrella of a mutual fund there are many companies under it. They are known as sub-holdings.

Let’s understand this more clearly with an example of an equity mutual fund. Normally such mutual funds allocate around 70% of the total corpus in equity, 18% in debt and 12% in other securities. Within such umbrella of securities, there are a large number of companies.

The investment of money into a various types of securities a dividend supported by fixed returns. Also, within such types of securities, example- equity, there are a lot of companies existing in various sectors such as banking, refineries, housing finance and construction, etc. This helps the corpus through the benefit of diversification so that if any of these sectors under performs there is a low impact on the overall value of investment.

June 5, 2020August 23, 2023

What are Mutual Funds?

Mutual fund is an investment fund where multiple investors pool their money to purchase securities. Such funds are managed by a highly trained professional commonly known as a fund manager or portfolio manager. This individual invests this corpus of funds into different securities such as stocks, debentures, bonds, gold, etc. as per the objective of the fund and with the aim of reaping profits out of such investment.

Let’s understand this more clearly with an example of a mutual fund known as Hybrid Equity Fund. Normally, all invest such mutual funds around 70% of the total corpus in equity, 18% in debt and 12% in other securities. Within such umbrella of securities, there are a large number of companies.

June 3, 2020May 21, 2024

Top 5 Reasons to Start Investing Money For Future Financial Stability

Investing refers to the process of setting out a certain sum of money for a set purpose and participating in certain securities which help in the achievement of the objective for which such investments are created. The sole purpose of such investment is to earn profits in the course of investment in such funds & securities.

Diversify your assets & associated risks

Economic assets are of essential value to our livelihood especially in times of extreme difficulties such as the ongoing pandemic. Distributing your money into several modes of investment and investing in various securities helps us to minimize the associated risks.

Saving money loses to inflation

After making the necessary expenses a lot of us set aside the amount left. However, due to the effects of inflation and the concept of time value of money such amounts kept in our wallets or savings bank accounts continuously lose their actual value.

For example- If the rate of inflation is 2% per annum and you could buy 1 kg apple for INR 100 toda, the next year it would cost INR 102 for the same 1 kg of apples and similarly after 10 years the same 1 kg apple would cost you around INR 120.

Due to the inherent limitation of time value, saving is not the best option. Investing such saved funds helps you fight the effects of inflation by generating returns in the form of dividend or interests or in such other manner as maybe applicable.

Increases earning potential

Making informed investment helps you in many ways such as reducing the risks of losing all the money by diversification as well as generating revenues in the form of interest, dividend, etc. Such extra income helps in increasing the earning potential in many ways. You may use the extra amount in starting a new venture, initiating a side hustle or just further investing such an amount.

Power of compounding

Compounding is said to be the 8th wonder of the world. The power of compounding could be understood by the following example- if you start investing INR 500 month for the next 40 years at 18% interest rate per annum the total investment over the period would be just INR 2.4 Lac but the accumulated value received would be INR 4.29 Crores.

Get tax benefits

The Income Tax Act provides various exemptions and deductions from the taxable income. So, for example- if you were falling under the 30% tax slab and you make an eligible investment of INR 1 Lac you save around INR 30,000 just by making such an investment as you won’t have to pay the tax on the same.

June 1, 2020August 23, 2023

The Indian GDP and Its Future Estimates

Economic Growth during FY20

In the FY20 GDP growth was mere 4.2 per cent dragged down by the 3.1 percent growth in the January-March quarter. The revised the growth issued by the government for the first three quarters of FY20 are 5.2% in Q1, 4.4% in Q2 and 4.1% in Q3. The growth numbers were the lowest in past decade. In the previous financial year 2019 economy had grown at 6.1 per cent. Together with the contraction of exports by 3%, Private Final Consumption Expenditure contracted to 5.3 percent and the Gross Fixed Capital Formation was also contracted by 2.8 per cent highlighting the weakness of the Indian economy.

Effect of lockdown on Industries

Many industries such as tourism, aviation, hospitality as well as MSME sector were directly burdened by the losses during lockdown and the effect of pandemic on their businesses leading to high losses and loss of jobs within such sectors. Many industries, such as construction and automation were already under huge losses, had to completely stop their production. Talking with numbers, the overall growth was considerably slow for almost all industries. The hospitality sector expanded this year by only 2.6 percent. For the year of FY20, the manufacturing sector recorded nil growth. The agriculture sector grew by 5.9 per cent in the fourth quarter.

Future Estimations

The economic growth at 5 percent for the present fiscal year (FY21) has been estimated as 5% along with a contraction of 45 per cent in the Q1.
The Indian Government has announced a INR 200 Lakh crore package which mainly aims at medium & long term growth and short term stimulus is only INR 20 Lakh crore. In addition to this, a INR 21 lakh crore package has been announced to offer credit guarantee to the falling MSME sector, the repo rate has been reduced to 4 per cent.

Shaktikanta Das, The Governor of RBI, has said that economy has been badly affected by the disruption in supply and compression in demand. The RBI has projected a negavtive growth rate for FY21 and expects that the growth impulses to improve in the second half of the fiscal year.

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Month: June 2020

What is Systematic Investment Plan (SIP) ?

How Do Mutual Funds Work?

What are Mutual Funds?

Top 5 Reasons to Start Investing Money For Future Financial Stability

The Indian GDP and Its Future Estimates

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