Saturday, February 23, 2019

7 Things Existing Investors Should Do During Market Volatility Due To Elections

Every election in India brings about some volatility in stock markets. We have experienced this in past 5-6 elections. During the period of elections, the market swings up and down wildly. During this volatility, there are chances that the value of existing investments go down or go suddenly up or it can move both ways.
This causes a lot of anxiety among investors. During this period investors are always in a dilemma whether to continue being invested in markets or to move the investments temporarily in liquid funds (liquid funds has no effect of share market).
1. How long from here you don’t need amount out of your Investments?
In case you don’t need money from your investments for a period of more than 5 years from this point then you should continue with whatever you are currently holding. In case you need a partial amount in the next 2-3 years then you should think of parking some amount out of your investments in relatively saver funds.
2. Decide on the basis of your existing asset allocation-
In case you have a very conservative asset allocation pattern in the sense you have a very little exposure to equities and you may not need your money for next 3 years then you should continue to hold existing Investments. In case you need your money in the next one or one and a half year then you should consider shifting all the amount to debt funds.
3. Decide on the basis of your risk appetite
In case you are aggressively invested and your risk profile has changed in the recent past due to change in your current age then you should think of revisiting your asset allocation. You may want to move some amount in a relatively safer fund.
4. It’s a good idea to continue with whatever you are holding-
Sometimes investors tend to time the markets. Investors feel that they can take the benefit of dips in market during election volatility. Believe me, it is very difficult to time the market. It may not be a great idea to try and push your money during the dips in the market as you may not be able to capture the perfect ones. there is always a high possibility that you will miss both the tips and tops. show a better idea is to continue with whatever you are holding.
5. Do not track your investments often- especially during volatility investor have a tendency to track their investments closely. If they find that their value has eroded or there are negative returns the investors get panic and in such scenario, they are likely to take wrong decisions. Better not to track the Investments closely. It would be a great idea to skip watching your investment portfolio during the period of elections.
6. Judge your requirement of emergency funds– in case you feel you do not have emergency funds set aside currently then you may want to shift amount required for contingency from equity portfolio to debt portfolio.
7. Discuss with your investment advisor
Every investor his emotional about his own money and hence the Investments. Leaving aside the expertise your investment advisor has, he can look at your Investments from neutral perspective. That is why he is in a better position to take right decision about your investment portfolio.

Thursday, January 3, 2019

Liquid Funds: A Superior Alternate to Saving Account

Liquid Fund is a category of Debt Mutual Funds. Debt Mutual Funds who invest in very short-term market instruments such as treasury bills, government securities, bank certificates of deposits and corporate bills are called as Liquid Funds. Most of these instruments contain either no risk or low risk. Liquid funds are an open-ended fund investing in Money Market Instrument having a maturity of up to 91 days.
Liquid Funds objective is to provide a high degree of liquidity and safety of capital to the investor. Because of this, fund manager invests the capital in the high credit quality debt instruments.
Benefits of Liquid Funds:
  • No Lock-in Period
  • Withdrawal from Liquid Funds are processed under 24hours on the business day
  • Double returns than Saving Account
  • No Entry and Exit Load
Returns from the Liquid Funds:
The returns from the liquid funds are double than saving accounts. Usually, the range of returns from the liquid fund is between 6-7%. Investors start earning returns from the date of investment itself thus minimizing any return leakage.
Who should invest in Liquid Funds:
Liquid funds are ideal parking grounds when you have a sudden flood of cash. Instead of keeping it in a savings bank account, you may invest that performance incentive which you received recently or some windfall gains in a liquid fund. You can exit the scheme anytime without any exit load and receive your funds the next day.
Let’s take an example if you sell a plot or house and plan to buy another house within the next 3 months then you get loads of money suddenly into your bank saving account. This temporary money can be invested for the next 3 months in the liquid funds to get more interest than savings accounts.
One more example of Liquid Funds is that you can invest your business funds (rotating funds required for running the business) into Liquid funds. As the business funds are generally kept in the current account where the interest rate is zero, this fund can be invested in the Liquid Funds. As Liquid Funds have high liquidity, you can redeem the funds within 24 Hours.
Another way to use Liquid funds is to invest your lump-sum capital in the Liquid funds and opt for the STP to invest in the Equity Funds of your choice. Generally, you will go for SIP to invest in Equity Funds if you are receiving a monthly income. But if you are getting lump-sum at one go then you can opt for liquid funds for parking the money. In this way, you would save yourself from placing large bets all of a sudden into equity funds and can get the benefit of rupee cost averaging.