Should I stop SIP at Market High?

Should I stop SIP at Market High

The stock markets are making all-time highs. Many think – too fast, too soon! We could sense that all those questions are back such as should I stop my SIPs? Or should I pull out money invested in my funds? Is the time right to add more funds to stocks? Or should invest in gold/real estate? Now the problem arises is that what should be done to find the correct answers for above stated what shall be done. Investing success is about 99% temperament and only 1% about where you invest.

We have huge ocean of investment avenues and various hot ideas that keep floating around, the question is how to react in such times. It is very well said, “Your biggest enemy is yourself.” That’s where thought process of investors comes into picture. Think of a state of mind as a predefined thinking guide but not as a shortcut to meet goals. It is something that makes you behave in a certain manner.

As far as investing and wealth is concerned, the model that works is Asset Allocation. It acts as a FOMO antidote. For your information, FOMO is Feeling of Missing out. At any time, it is difficult to know which investment is best. Asset Allocation allows us to take a chunk of several avenues that is worth investing in and market cycles does wonders.

Any investor rebalances with time, to check that did the portfolio was a thumb-up or a thumb-down. Don’t stress on the positioning of the market, or if product is expensive to get into or get out of.  The idea of allocating in various types of investments wherein few can be highly volatile, & others less. Some active, some passive. It helps you diversify which encourages prudence, risk management and good investment practices.

We live in a world of Volatility, Uncertainty, Complexity and Ambiguity. A diversified portfolio, it acts as a cushion from the impact of unknowns. Investor is aware that there is a chance of finding comfort as the other ones are working towards long term accumulation.

It gets you to act. The portfolio is to be rebalanced periodically based on the rules set before, without getting mixed up in present emotions. It helps in getting Behavioral Alpha. Investments when managed well, the alpha is assured. One never pulls out of markets when it’s all-time high. One never stops SIPs. Invest when there is blood around. One should patiently move from one asset to another, without a fuss.

VSRK suggests that even when markets are at all-time highs, our experts tells us to continue investments as per allocations. Be active in SIPs. Rebalancing of asset allocation is better but one can sell the chunk of the money that is needed urgently. For lumpsum investing, consider the kind of a stomach you have in terms of funds and risk appetite.

5 Things You Should Know Before You Start Investing

Things You Should Know Before You Start Investing

Investment is not a one-step process but an entire series of steps taken to reach the financial goal. It encompasses making various financial decisions and finding the right investment alternative while minimizing any associated risks. Investing is affected by a large number of factors, so it is crucial to keep in mind some financial aspects. Today we will talk about five things you should consider before you leap.

Know Your Investment Goals
Every person who is desirous of investing should have a stated purpose of investment. It could be anything like buying a house, new car, child education and marriage or planning retirement. You should know what you want to save your money for and especially how much you want to save. Your investment goals are a crucial factor to decide the investment alternatives.

Know Your Financial Condition
Any investor, whether she is a billionaire or a new associate in a law firm, has some financial limitations. It is necessary to know how much would you be able to invest in the said period of investment. The purpose of investing funds would be to generate sufficient returns to help you achieve your financial goals, whatever they are. So, it is necessary to know how much investment you would be able to support and where you can cut corners.

Know the Importance of Emergency Funds
One of the main reasons why investments fail is that people consider their investment as emergency funds. However, this is never the case. For example, when you start a fund for buying a new house, then that money is being kept aside for buying that new house only. Now, what people do is that whenever they face any financial emergency, they break these funds, thereby hampering the investment cycle. Such acts lead to lower accumulated wealth. These emergencies, as the name suggests sprung anytime and you have no control over them. So, it is always advisable to consider an emergency fund. It would safeguard you in case of any mishap.

Know Your Asset Allocation
There are various investment avenues available in the market. You can invest in precious metals like gold & silver, stocks, bonds, mutual funds, real estate or a combination of all of the above. You may or may not want to invest in all of them. Each of them has its risks, rewards and characteristics. Therefore, you should be well aware of the investment avenues you have selected. Knowing each kind of investment avenue helps you to create a diversified portfolio and enhances your chances to reach your financial goals.

Know Your Risk Appetite
When someone wants to invest his money, there are majorly only two things in his mind. First is the reward and second is the associated risk of investment into that avenue. Every person has a different risk appetite depending upon his age, financial situation, priorities, etc. You should identify the level of risk you are willing to take to achieve your financial goals. This factor is one of the main aspects when you choose your investment avenues. People who have a high-risk appetite go for equity funds; they are risky but give good returns to its investors. Debt mutual funds are safer but provide low returns and are suitable for people with low-risk appetite. Hybrid mutual funds are known to yield better returns than debt funds and are less risky than equity funds, so they are suitable for moderate risk-takers.

What are Difference between ULIP and Mutual Fund

Difference between ULIP and Mutual Fund

This is one of the most commonly asked questions by a potential investor who is often confused by the mix use of these 2 investment instruments. Many financial planners use these terms interchangeably. However, ULIP and Mutual Fund are two separate concepts.  We have explained the meaning of ULIP and Mutual Fund and the difference between them. 

Mutual fund

Mutual fund is an investment plan where your money is managed by a portfolio manager. He puts your money into multiple companies on the basis of your investment objectives and associated risks. For every investment made in mutual fund, certain units of that fund are allocated to the investor. There are multiple types of mutual funds available in the market; each having its investment objectives, liquidity and risks.

Unit Linked Investment Plans (ULIP)

Unit linked investment plans are a hybrid combination of investment and insurance schemes. Herein, a small portion of the monthly premium goes to secure life insurance and the rest is invested just like a mutual fund. 

Difference between ULIP and Mutual Fund

Basis Mutual Funds ULIP
Regulating Authority SEBI IRDAI
Product Type Investment Insurance
Liquidity Highly liquid Less liquid
Potential Returns High returns subject to market risks Low returns as part of it are invested in the insurance 
Lock-in period Only in ELSS 3 to 5 years
Tax benefits ELSS are eligible for deduction under 80C.

Long Term-

Equity Funds: Tax Free

Debt Funds: 10% or 20%

Deduction under 80C
Charges  Low- 1% to 2.5% No upper limits
Portfolio Disclosure Mandatory Disclosure No such requirement

Regulating Authority and Product Type

Mutual funds are an investment product and are regulated by the Securities Exchange Board of India (SEBI). The Unit linked investment plan is essentially an insurance plan with additional investment option. 

Liquidity and Lock-in Periods

Multiple mutual funds options are available in the markets viz. equity, debt, growth, index, hybrid, etc. Most of the mutual funds are highly liquid as compared to less liquid ULIPs, as ULIPs are meant for a relatively long time. Usually, only ELSS mutual funds have a lock-in period, rest all mutual funds can be redeemed easily almost anytime. 

Potential Risks & Returns  

ULIPs are less prone to market risks are they are insurance instruments. Mutual funds are comparatively riskier as they invest directly into the market which is highly market. This volatility is also the reason why mutual funds give a higher return than ULIPs. ULIPs offer a safer but lower return as a chunk of it is invested in insurance policies. 

Portfolio Disclosure 

As per the rules of SEBI, the companies have to maintain a strict disclosure of transactions and such other information. SEBI has directed all fund managers to send the portfolio statement via email to its unit holders every month. Such rules and regulations help to ensure transparency and accountability. On the other hand, there is no such regulation for ULIPs.

Tax Benefits & Charges

The charges associated with mutual funds are as low as 1% to 2.5% which is far lesser than that of ULIPs. Charges on ULIPs have been reported to be as high as 18% and there are no such upper limits. ULIPs are eligible for deduction under section 80C. The ELLS category of mutual funds is eligible for deduction 80C. Mutual funds options other than ELSS do not have deduction under section 80C but they provide additional tax benefits such as returns on mutual fund up to a certain limit is exempt. Also, as per general reports LTCG on such mutual funds attracts much lesser tax. 

How its Benefits of Investing in Mutual Fund Online

Investing in Mutual Fund Online

Investment in mutual fund online is gaining popularity as the easiest ways of investing. Such investment could be done by accessing our Website or downloading the VSRK mobile application.

Benefit of investing in mutual funds online

There are various benefits of investing in mutual fund online. We have mentioned some of them as following-

  • Online Registration and E-KYC

The customers can register online through filing the necessary information and submitting the required documents viz. PAN card and Aadhar card. Such information is sent to the backend for verification. Once the information is verified you are ready to invest.     

  • Option to Invest in Small Amounts

Investing in mutual fund online gives you the option of investing in various securities in small amount. You have the option to start your SIPs with just rupees 500 per month. By keeping out a small portion of your salary aside you would be able to accumulate a wealth over a long time.

  • Ease of convenience 

Investment in mutual funds online is one of the simplest and the easiest form of investment. in this you just need to have the access to the website or mobile application of your AMC. You can access your portfolio information, current stock rates and various other information just through one click.  

  • Liquidity 

One of the most important benefit of online investment in mutual funds is the liquidity. the investors have the option to redeem the unit at any point of time. However, mutual funds do have factors like pre exit penalty and exit load we should be taken into consideration before redemption. 

  • Security of funds 

All the mutual fund related transaction come under the scope of SEBI. SEBI is a government regulated organization regulates AMCs to maintain transparency and accountability of transactions. Its aim is to safeguard the investors and solve their grievances. Further, SEBI makes it compulsory for all mutual funds to disclose their portfolios every month.

What Is the Debt-Snowball Method?

Debt Snowball Method

Legendary investor, Warren Buffet has called the power of compounding- the eighth wonder of the world. Compounding is the process in which an asset’s earnings are reinvested to generate additional earnings over time. This return can be in the form of interest, dividend or capital gains. Compounding can be explained as interest on interest- the effect of which is to magnify returns to interest over time, this is also known as the “miracle of compounding”. This can very well be understood by the example of a snowball.

Have you thought what happens when you push a small snowball down a hill? When you push it down a hill, it continuously picks up more snow. By the time it reaches the bottom of the hill it is a giant snow boulder. While falling downhill it gets bigger with every revolution. The same happens with money, if you invest INR 100 for 2 years at 10% compound interest p.a., at the end of 1st year you have INR 110. Now, for the second year, the whole INR 110 is reinvested. So you get interest in this INR 110. Therefore, you get INR 121 at the end of the second year.

It is not a secret anymore that you can grow the money you save by investing it to earn a return. You can make your money grow faster if you reinvest the returns along with the principle amount. Various investments like savings accounts, fixed deposits, recurring deposits and bonds pay interest. Such investments provide you with clarity as exactly how much money you’re going to earn. Here, you still benefit from compounding by reinvesting your earnings on other investments, like stocks, mutual funds and exchange-traded funds.
Additionally, Rule 72 is a highly used method for understanding the application of the power of compounding. It is a technique to identify at what period would a particular sum of money double it at a given rate of interest. It requires you to divide the number 72 by the rate of interest. For example- if you invest a sum of money in a fixed deposit at an interest rate of 8% p.a. it would take 9 years for you to double the amount (72/8).

What is Systematic Investment Plan (SIP) ?

Systematic Investment Plan

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.

How Do Mutual Funds Work?

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.

What are Mutual Funds?

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.

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.

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