Category: Blog

In the Equity market, valuations have seen sharp corrections (across several metrics such as relative to other emerging markets, earnings-bond yield gap, Market cap to GDP, and in the mid & small-cap segment). Sentiments, as measured by our proprietary indicator, have moved to the pessimistic extreme, which augurs well for 12 months forward returns. As such, the equity market looks attractive from the forward returns perspective. We expect earnings growth to improve over its average growth of 5% in the last five years but unlikely to meet street expectations of earnings growth of +30% for FY20. Our top-down earnings growth forecast for FY20 is at ~20% led primarily by the financials. Ex of financials, earnings growth is likely to remain muted. Having said that, corporate profits to GDP have touched a multi-decade low and a mean reversion should be in order. Both, the global and domestic environment can’t look gloomier than this but precisely at these points, one should not lose sight of the long-term picture. Since 1982 every year there were one or other crisis markets come across and it’s very normal behavior of the market for which we believe nothing to take seriously. As it’s a normal nature of the market so we need to take it as normal.

 

The list is for your reference. 1982 – the Worst recession in 40 years, debt crisis. 1983 – Market hits record – “Market too high”. 1984 – Record U.S. Federal deficits. 1985 – Economic growth slows. 1986 – Dow nears 2000 – “Market too high” 1987 – The Crash -Black Monday. 1988 – Fear of Recession. 1989 – Junk Bond collapse. 1990 – Gulf War, the worst market decline in 16 years. 1991 – Recession – “Market too high” 1992 – Elections, market flat. 1993 – Businesses continue restructuring. 1994 – Interest rates are going up. 1995 – The market is too high. 1996 – Fear of Inflation. 1997 – Irrational Exuberance. 1998 – Asia Crisis. 1999 – Y2K. 2000 – Technology Correction. 2001 – Recession, World Trade Center Attack. 2002 – Corporate Accounting Scandals. 2003 – War in Iraq. 2004 – the U.S. has massive trade & budget deficits. 2005 – Record oil & gas prices. 2006 – Housing bubble bursts. 2007 – Sub-prime mortgage crisis. 2008 – Banking & Credit crisis. 2009 – Recession – “Credit Crunch” 2010 – Sovereign debt crisis. 2011 – Eurozone crisis. 2012 – U.S. fiscal cliff. 2013 – Federal Reserve to “taper” stimulus. 2014 – Oil prices plunge. 2015 – Chinese stock market sell-off. 2016 – Brexit, U.S. presidential election. 2017 – Stocks at record highs, Bitcoin mania. 2018 – Trade Wars, rising interest rates. 2019 – India GDP at 5 % We strongly believe that when the market in this situation just buys in the sale. because in a good market you need to give premium a today things are available in discount. Current challenges are surely big but not insurmountable.

 

Happy Investing!!!

IMPERIAL MONEY

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Buying insurance policies for investment purpose: 

 

Have you invested your money in an insurance plan to get a return in the future? Big mistake! Out of 100 people I have spoken to, 95 have made this mistake… Very few people understand the difference between term plans, endowment plans, etc. 

Not able to crack the credit card mystery: 

 

Are you paying the minimum amount due on your credit card payment? If yes, you are trapped in a credit card mystery. On the other side, very few people enjoy the benefits like free lounge access, buy one get one movie ticket, etc. 

No idea about the power of compounding:

 

 Everyone has come across the formula of compounding but very few people understand its power. This is the reason people do not start saving early and hence lose out on the power of compounding. Albert Einstein said that the power of compounding is the eighth wonder of the world. 

Buying stocks based on tips without any knowledge: 

 

You will find every Tom, Dick, and Harry giving stock tips over Facebook, Whatsapp, and TV. Unfortunately, a lot of people fall into a trap of these people and invest money without any knowledge. What is the result? They lose everything! 

 

Becoming a victim of lifestyle inflation: 

 

Moving from 2bhk to 3bhk just because you have got a good hike, upgrading your car because you have got some bonus are some of the examples of lifestyle inflation destroying financial lives. Buying things just because they are on discount: From Amazon’s “Great Indian Sale” to Flipkart’s “The Big Billion Days”, everyone is encashing on the weakness of Indians buying things just because it is on discount. The funny thing is now you will find such sales every other month. Getting tempted to go for an exotic vacation just because someone put a post on Facebook and Instagram: Instagram and Facebook are introduced as Social Media Platforms but they are destroying the entire social fabric. Friends are jealous of each other. Most of them are just social media friends. Facebook and Instagram are more of a marketing platform where people post stuff just to get some likes and companies promote their products and services. 

 

Spending a bomb on weekend parties: 

5 days work and 2 days party: This is the new culture in India. Pubs are jam-packed on weekends where people would spend a bomb on drinks. By the end of the month, they are left with no money. No track of cash flow: Very few people keep a track of their expenses. Most of them just don’t know where the money is gone. No emergency budget: Not having any extra money in the case of emergency results in embarrassing situations of borrowing money from friends and relatives. Some people even break their investments and make a big mistake. 

 

No medical insurance: 

 

I have seen people losing out the lifetime savings just because they did not take medical insurance. One accident can shatter all financial dreams. Better be insured. Healthcare cost is rising and it is impossible to manage it without insurance. 

 

No financial plan: 

 

People do not know why they need to save money because they don’t know their financial goals. 

 

No diversification: 

 

Some people would invest all their money in real estate, some would invest all the money in gold, some would just keep it in the locker, some would invest all the money in the stock market. Very few people understand the right way of diversifying investments.

 

Spending all the hard-earned money on children marriage: 

 

Thanks to our Hippocratic society! People save their entire life just to spend all the money on random relatives who only bother about the food and arrangements. What is the topic of discussion at weddings? “Sharma Ji ne to unki beti ko car gift kari. (Mr. Sharma has gifted a car to his daughter)”. “Mehta Ji ne unki beti ko 50 tola sona diya” (Mr. Mehta has gifted 500-gram gold to his daughter.)

 

Buying excessive gold only to keep it in the locker: 

Gold worth lakhs are kept in lockers only to be used once or twice a year. This is resulting in the money getting blocked and hence not getting any returns on it. 

 

An extremely conservative approach with investment: 

 

Traditionally, people have been risk-averse. They would just have an FD and live on 6–7% annual interest. Some would just keep the cash at home. 

 

Lack of clarity between asset and liability: 

 

Having a car is not an asset because it consumes fuel and has a maintenance cost. Its price will only depreciate in the future. Car is a necessity but people spend a lot of money and even take the loan to buy a luxury car over and above their budget. Considering frugal as cheap: A lot of people confuse economic spending with being cheap. An economic spender does not compromise with quality but does his research well enough to buy the product or service at the lowest rate. Procrastinating investment decisions: “I will invest from tomorrow”. But the problem is that tomorrow never comes. 

 

Spending a lot of money on fancy stuff: 

 

A fancy car, a fancy house, a fancy watch, a fancy vacation. People want fancy stuff and willing to pay a premium irrespective of the value it generates. 

 

Lack of patience:

 

 “I can’t wait for my wealth to grow. I want to double my investments in 6 months. I need to invest in the stock market.” A lot of people lose their lifetime of savings because they don’t have the patience to understand the investment option and would blindly trust anyone with their investment. 

 

Depending upon others for investment decisions: 

 

“I don’t know anything about investment. Please manage my money.” Unfortunately, a lot of people are dependent upon others with their hard-earned money. This is the reason we have a lot of self-proclaimed experts giving stock market tips. 

 

Not discussing the money matters in the family: 

 

Discussions related to money are considered taboo in Indian families. Nobody discusses money matters. 

 

Getting too greedy with investment:

 

 People blindly invest their money in penny stocks, day trading, futures, and options. They eventually lose all their hard-earned money. What is the root cause? 

 

GREED Wasting time on unproductive things: 

 

Rather than learning new stuff and growing the skillset, people end up wasting time on social media and YouTube. 

 

Lack of disciplined investment:

 

 Instead of spending what is left after investing, people invest what is left after spending. This results in undisciplined investment. 

 

Root Cause: 

Lack of knowledge about personal financial management!!

 

Happy Investing!!!

IMPERIAL MONEY

Contact Us : 8446686863, 9595889988

Email Us: wecare@imperialfin.com

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Few things which I feel as a professional u need to have an idea that why markets are getting down and how things are moving. So as per our view, the following are the points which I feel that you need to note for the next couple of months.

 

 1) The Indian markets were beaten expensive and trailing PE was around 29.

 2) The valuations of almost all the stocks were sky-high ahead of their earnings.

 3) Mid-caps and small caps have already started correction since FEB-18 as I told in my talk as well.

 4) the USA has stopped doing any quantitative easing and started sucking out the liquidity from across the globe.

 5) So the demand for the US $ has increased which directly makes our currency more volatile and depreciation started occurring in it.

 6) USA economy started achieving good growth no. as high as 4%.

 7) The average wages per hrs. in the USA climb from 7$ to 23$.

 8) So everybody is having money to either invest or to spend so the inflation started picking up.

 9) Trump sir gave soaps of taxes 20% to all corporates. So they again had liquidity which US incorporation will use for either buyback of shares or expansion of the facility.

 10) This massage went the world over and the $ started appreciation compare to all other currencies across the globe.

 11) Remaining issue of correction in markets has been addressed by oil and Iran.

 12) Lection fear and liquidity crunch make Indian investors worries.

 

 Now, what is way ahead?

 

 1) Indian corporates earnings is consistent and will see great growth in quarter 3 as well which will be better than quarter 1.

 2) From a business sentiment perspective nothing has changed in India. All the groups are doing normal business as usual and targets are getting meet normally.

 3) The market after correction is getting a better shape.

 4) Trailing PE is far superior for buying stocks and high-quality business at this point.

 5) We feel this is the time of starting SIP in good multi-cap funds and lump sum in the balanced category or STP in multi-cap funds.

 6) This is a fantastic time to have a good mutual fund in our kitty.

 7) We feel NIFTY to touch 20000 and SENSEX to touch 65000.

 8) The distress sale is going on in India and we need to graph an opportunity.

 9) We feel Steel, Pharma, Consumption, and Banking will be the next BIG Theme in India.

 

Happy Investing!!!

IMPERIAL MONEY

Contact Us : 8446686863, 9595889988

Email Us: wecare@imperialfin.com

Follow Us: https://www.facebook.com/imperialfin/

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When it comes to systematic investment planning in mutual funds of any kind many of us have a basic idea about its way of operation, advantages, and disadvantages associated with it. But still, some get confused as to what exactly it is and how it works.

 

Systematic Investment Plan (SIP)

 So a systematic investment planning allows you as an investor to invest a fixed amount regularly in mutual fund schemes which are mostly related to equity mutual funds. Now what it does to you is it helps you in different ways which we will soon discuss and compare with the benefits associated with the bank recurring deposits.

 

Recurring Deposits (RD)

Recurring deposits are term deposits where people with a regular income can deposit a fixed amount every month for a particular period and on maturity get the principal plus the interest. Although both of them seem similar, there are a lot of differences between the two which we will unfold later.

 

Debt Mutual Funds

The third item in our list is the debt mutual funds. The sole purpose of this article is to talk about the reasons why a SIP in debt funds is better than a bank recurring deposit and to do this we need to understand what exactly debt mutual funds are. Debt mutual funds are mutual funds that invest mainly in a combination of debt or fixed income securities such as, Government Securities, Treasury Bills, Money Market instruments, Corporate Bonds, and other debt securities of different periods as per the convenience of the investor. SIP in Debt Funds Over Bank Recurring Deposits

 

 1: Returns

SIP in debt funds can provide an investor with a return of around 7-8% on average. Whereas a bank recurring deposit would provide a return of 4-5% to the investor. Considering that the risk factor of both the type of investment is similar, a higher return provided by debt funds is more preferable than the investment in bank recurring deposits.

 

 2: Customization

 Although most SIPs require investing a fixed amount every month, the additional feature that comes with SIP’s is that one can customize it according to their requirements. You can easily start SIP for additional amounts or cancel an existing SIP and start a new SIP with a newer amount. This is not possible in the case of recurring deposits where only a fixed amount is invested every month and the interest is paid along with the principal at maturity. Also if any of the installments is delayed, there will be a reduction in the interest payable in the account and that will not be enough or sufficient to reach the maturity value. Therefore, there will be a penalty and the difference in interest from the maturity value will be deducted. The rate of penalty is fixed. So if you are looking for customization, SIP in debt funds is a better option than bank recurring deposits.

 

 3: Rupee Cost Averaging

Another feature of the SIPs is that they help the investors to average their purchase cost and maximize returns accordingly. When the investors invest regularly over some time irrespective of the conditions the market is in, what happens is they get more units when the market conditions are not good and fewer units when the market is booming. In the process what happens is that the purchase cost of your mutual fund units is averaged out.

 

 4: Liquidity

 SIP in debt funds will provide you with the option of more liquidity as compared to bank recurring deposits. As discussed earlier recurring deposit is liquid but premature withdrawal would incur a penalty with a fixed rate. Money can be withdrawn from SIP in debt funds without incurring a penalty on it and the SIP can be closed. In terms of liquidity, a SIP in debt funds is a better option when compared to RD.

 

 5: Lower Taxes

 Up to 3 years, the taxation on debt funds and RD is similar. However, after 3 years of investment, the tax on debt funds is significantly lower than the tax on RD. After 3 years from investment, the tax on debt funds is 10% without indexation plus 3?. At the same time, RD keeps attracting the same rate as before 3 years from the investment – which depends on your income tax bracket.

 

 6: Section 80C Deduction

 Another important feature of investing in SIP in debt funds is that capital gains from the investment can be exempted from tax if the debt fund in which the money is invested is an ELSS (Equity Linked Saving Scheme) fund. Although there is a lock-in period of 3 years in this case. Whereas recurring deposit amounts or the interest earned from them are not exempted from tax. This is another advantage of investing in SIP in debt funds over bank recurring deposits.

 

 7: Compounding

 Another benefit of SIP in debt funds is also known as the eighth wonder of the world that is the power of compounding. Investing over a long period in a SIP can make the investor earn returns on the returns earned by the investment and before they realize the invested money starts compounding. This enables the investors to build a large corpus that will be sufficient to achieve their long-term financial goals with small but regular investments. Although interest is also compounded every quarter in the recurring deposit, it cannot be matched with SIP in debt funds simply because the returns offered by debt funds are much higher – so over time, the difference in returns is greater too.

 

Understanding Debt Funds in Greater Detail

In general, debt securities come with a fixed maturity date & pay a fixed rate of interest. Credit ratings are also assigned to debt securities. These credit ratings help the investors to understand the ability of the issuer of the securities or bonds to repay their debt, over a certain time horizon. There are different rating organizations such as CRISIL, CARE, FITCH, Brickwork, and ICRA that are responsible for issuing the rating to the securities. Fund houses use the ratings to evaluate the ability of the issuer of the security to repay their debts or the creditworthiness of issuers of debt securities. So a simpler way to understand debt funds will be to consider them as a way of passing through the interest income that they receive from the bonds they invest in. But that is not as simple as it looks and there are still some complexities involved in it. Debt Mutual Funds, unlike the FDs that individuals invest in, make investments in bonds or securities that are tradable, just like shares in stock markets are tradable. And similarly to stock markets, the prices of different bonds on the debt markets can rise or fall according to the market conditions prevailing at the time.

 

Read: 10 Debt Funds That Gave Better Returns Than FD

And according to the market conditions the mutual fund house can decide to buy a bond or sell it and if its price subsequently rises, then they can make money over and above what the fund house or the investor could have made out of the interest income. This, in turn, will result in a higher return for investors. But a question would have popped into your mind as to why would bond prices rise or fall? What makes them volatile just like the share prices of the company? So there can be a lot of reasons behind it. But the most important one is the change in interest rates. Not even the actual change but the expectation of such a change could result in rising or falling in bonds or security prices in the debt market. Let us suppose that there is a bond that currently pays out interest at a rate of 9% per annum. Now due to changing market conditions, the interest rates of the economy fall, and newer bonds that are issued pay out interest at 8%. This makes the first bond worth more than earlier as the given amount of money invested in it can earn more money due to higher interest payment and subsequently its price would now rise. Mutual fund houses that keep holding this bond would find their holdings worth more and this would enable them to make additional profits by selling this bond.

 

Conclusion

Having seen all the advantages that investment in SIP has over bank recurring deposits it becomes clear on what to choose when you are confused on what to invest in do make sure to do a thorough analysis before investing in any scheme.

 

Happy Investing!!!

IMPERIAL MONEY

Contact Us : 8446686863, 9595889988

Email Us: wecare@imperialfin.com

Follow Us: https://www.facebook.com/imperialfin/

Follow US: https://in.linkedin.com/company/imperialmoney

Subscribe to YouTube Channel: https://www.youtube.com/c/IMPERIALMONEY