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| Build Portfolio - Spread your risks Posted: 07 May 2013 08:35 PM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
Time and discipline key to building a perfect portfolio Investing in different economies at various stages of growth makes sense as it is less likely that they will all be affected by global trends at the same time and at the same speed TERE is a wise saying in virtual ly every culture around world, which in English is summed up by "don't put all your eggs in one basket". It seems simple, but very few investors follow its wisdom and this is the main reason why they don't achieve their intended financial goals. Diversification won't guarantee you 100 per cent protection against loss, but it will surely reduce your risk. A good financial adviser will not let you gamble with your money, but when you put all your chips on one lucky number, this is exactly what you do. I believe that most people fail to diversify enough not because they don't want to, but because they don't understand what diversification means.
What asset classes have you invested in? Here we are looking mainly at bonds, stocks, real estate and cash.
When speaking of cash investments, we mostly refer to cash in hand or in a bank account. These are money you must have easy access to. Ideally, you should always have enough money available to cover at least six months of your regular expenditure. As for real estate — like many American and European investors have learned in 2007 — a smart investor will never put all their money in bricks and mortar. What sectors have you invested in? If you are a doctor and you believe that the health sector will see a lot of growth in the near future, by all means invest in it, but bear in mind that even the brightest economists can't guarantee which sectors are going to see the maximum growth. Hence, it makes sense to spread your risk across sectors and across various industries within those sectors. If this is a decision you find hard to make on your own, it may be best to put your money into a mutual fund and let the fund managers make those decisions for you. What is the geographical spread of your investments? While globally India ranks third in terms of preferred investment destinations (just after China and the US), the World Bank revised its growth forecast for the Indian economy in 2013-14 to 6.1 per cent, lower than its 7 per cent estimate six months ago. This is not a problem in itself, because the long-term prospects are still good, and higher economic growth is expected in India next year. However, a country's stocks tend to move in the same direction. By investing in different economies that are at various stages of growth (developed, developing and emerging), it is less likely that they will all be affected by global trends at the same time and at the same speed. After you have done the experiment above, you may still resist the need to diversify more. As human beings, we like to think of ourselves as rational, but the truth is we often make financial decision with our heart and not with our mind. We are creatures of habit and we tend to stick with what is familiar and has worked for us before. Sometimes we just think we know best, despite a different advise received from a specialist. At least this is the theory advanced by many behavioural economists, who try to explain why we don't always make the right investment decisions even when we know what the right decision should be. But if you do decide to diversify more, just bear in mind that it will not happen overnight. It takes time and discipline to build the perfect portfolio for you.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
| Posted: 07 May 2013 05:56 PM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India) What are Gilt Fund? The term 'Gilt' originated to connote British government certifications that had gilded edges. Gilt funds going forward were defined as mutual funds that predominantly invest in government securities (G-Secs). These funds are ideal for retail investors as they allow them an opportunity to directly invest in Government papers, which otherwise are dominated by institutional investors. The basic purpose of investing in Gilt funds is to generate returns at negligible risk as it is highly unlikely that the government will default on the debt raised by it. Returns from Gilt funds are highly dependent on the change in interest rates as there is an inverse relationship between bond prices and interest rates. Hence, when the interest rate falls, prices of government securities go up, benefiting the performance of Gilt funds and vice versa. Government securities include central government dated securities, state government securities and treasury bills.
Performance Gyrations
Since 2009 the returns on these funds have been far from impressive. Around 2009, stocks begun recovering, and there were more lucrative assets to which investors flocked albeit to assets with greater risk. A look at the performance table clearly brings out the gyration in annual returns delivered by Gilt funds. After delivering double digit returns of 27.50% in 2008, the average long term Gilt fund actually delivered a loss to its investors in 2009. However, at the end of 2012 the category average stood at 10.21%. This is because the Reserve Bank of India (RBI), the country's central bank, which since 2010 had been relentlessly raising interest rates owing to rising inflation, has done an about turn, triggering off the process of slashing rates. Since April 2012, the Reserve Bank of India has cut interest rates by 100 bps. Moreover, to improve the liquidity condition, the central bank has reduced the Cash Reserve Ratio by 150 bps to 4.00% from 5.50% in January 2012. Year to date (as on April 29, 2013), the average Gilt fund delivered 13.83% simple annualized return. Gilt funds witnessed appreciation in their net asset value as the interest rate cycle has already peaked and rates are coming down, as a result investors are lured to invest in Gilt funds. This is evident by the corpus mopped up by Gilt funds over the last six months. The Assets under Management (AUM) in these schemes increased to Rs. 8,074 crore in March 2013 from Rs. 3,356 crore in September 2012.
Risk Before committing your money it is imperative for an investor to be absolutely clear about the risks associated with the investment. While it is true that risk in government securities is minimal, there is always the risk of interest rates changing in the economy. When interest rates move up, the price of a bond moves down. Apart from this there are other factors that can push bond prices down. As a lay investor one could keep a look out for certain key indicators to follow the trends in Gilt funds. Cash Reserve Ratio (CRR) and Repurchase rate (Repo) are the most commonly mentioned terms, an increase in either one would bring bond prices down and vice-versa. Bond prices are also sensitive to inflation as the central bank is likely to increase the CRR and Repo lest inflation should spiral out of control. Higher inflation is viewed as a negative and can pull bond prices lower. Apart from this, an increase in government borrowing is also not welcome by traders, off late an increase in government borrowings has been a big dampener to investor confidence. Call rates which are an indicator of short term liquidity in the market again influence bond prices indirectly, if call rates are increasing, traders and banks are likely to sell government securities held by them, triggering a drop in prices. Also instead of bond prices you will find references to the 'yield' of a particular instrument, when bond prices fall the yields increase and vice-versa. While most economic advisors and experts believe that the central bank will continue reducing interest rates during 2013, a spike in inflation could de-rail such rate reductions. Hence investors who have committed their money to Gilt funds, should keenly watch out for the direction that inflation rates take.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
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