How To Invest Rs 10,000 In India for High Returns?

Investing is the only way to consistently grow your hard-earned money. Gone are the days when people kept their fortune buried below their land. Rising inflation and increased consumership has created a need for investing today.

However, when we look around, very few people know how to invest their money intelligently. Most are not even aware of the different investment options available to them in India. Today, we are going to discuss how to invest Rs 10,000 in India for maximum returns. Keep reading.

Invest

There are multiple investment options available in India to invest Rs 10,000 or more to get moderate to high returns. Here are a few of the popular investment options and the expected average annual returns in India:

  1. Savings: 3.5–4% per year
  2. Fixed Deposit: 6–8% per year
  3. Bonds: 7.5-9% per year
  4. Gold: 9-11% per year
  5. Mutual funds: 12–18% per year
  6. Stock Market: 15–25% per year

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen

Besides these, a few other investment options are also available in India are Real Estate, Commodities, Metals, Cryptocurrencies, etc. However, apart from cryptocurrencies, all these other options might not be feasible for an investment of Rs 10,000 in India.

Now, let’s move to the answer to the central question of this post i.e. how to Invest Rs 10,000 In India for High Returns? Among all the options mentioned above, investment in the Stock market is the one that has consistently out-performed all the other investment options in a long duration. Hence, the Stock market is the best option available for an investment of Rs 10,000 to get maximum returns if you’re ready to invest smartly.

Related:- Stock Exit Strategy: What is the Right Time to Exit a Stock?

Become A Better Stock Investor

Thousands of stock market investors just like you are using Trade Brains Portal daily to perform a complete fundamental analysis of stocks. Click here to sign up for Trade Brains Portal and start picking winning stocks.

Now. let us analyze the Indian stock market and find out how much return you might have got, if you had invested Rs 10.000 in a few popular companies, five years ago in terms of their absolute returns.

How To Invest Rs 10,000 In India in Stock Market?

Here are few tips on how to invest Rs 10,000 in India in stocks to get maximum returns:

1) Do the Research Carefully

This is a basic but most important tip that any stock market investor should know. If you don’t want to depend on your luck, research the company before investing. Further, invest in the company, not the share price. If the company is doing great, the stock will also perform well. Research the company carefully before buying a stock.  Understand the company first. Learn about its product, services, business model, competitors, industry, founders, management team, competitive advantage, and more. In short, study the company’s fundamentals of the company before investing.

If you want to read more about how to select a stock, you can read more here: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

2) Prefer Growth Stocks over Value or Dividend Stocks

Growth stocks are those companies that grow at a faster pace in terms of revenue and profit, compared to their competitors or Industry average. Although growth stocks might be riskier compared to value or dividend stocks as the later ones are reputable companies and give regular dividends, however, returns from dividends are lower.

Related:- Fundamental vs Technical Analysis of Stocks ?

3) Invest in just One or Two stock

Everywhere there is a hullabaloo about diversification while investing- ‘Do not put all your eggs in the same basket’. However, in reality, the concept is different if we expect maximum returns from small investments. Do not diversify your portfolio when you are investing just Rs 10,000. Instead, invest in just one or two great stocks max.

Diversification is used when you are investing a huge amount of money like Rs One lakh or above. It’s the big bets which can help you to get great returns with small money. Diversification kills the profit when the investment amount is small.

Let’s understand this with an example. Suppose, you invested Rs 10,000 in a good stock. The stock gave a return of +50% percent in a year. Then, the total return amount will be Rs 15,000.

Now, let us assume another scenario in which you invested Rs 10,000 in 3 stocks. The return on the stocks after a year are +10%, +50%, and +15%. The overall return amount will be Rs 12,500 (+25%). All the three stocks cannot give similar returns and one of them might be potentially strongest. If only you had invested in the strongest among the three, you would have been able to get a double return (from 25% to 50%) on your investment.

In addition, there is not much to lose for small investments like Rs 10,000. People diversify their portfolio so that they won’t lose lakhs of rupees (and go bankrupt) if their investment strategies failed. However, if you are planning to invest just Rs 10,000; then the reason for investment must be that you have extra savings and you want to get high returns on the investment. In such cases, go for a big sure shot.

Like Mohnish Pabrai, the legendary stock market investor and author of the book “The Dhandho Investor” use to say, “Few bets, Big bets, Infrequent bets”

Quick Note: If you do not have a big risk appetite, then ignore this tip and diversify.

4) Invest in Known Brands

You don’t need to find an unknown hidden stock to get multi-bagger returns. There are a number of common well-known stocks (Eicher motors, Symphony, Page Industries, MRF, etc) that have given multiple times returns in the past and will continue doing so in the future.

Look for a growing company around you. Study if they are listed on the stock exchange. Learn the fundamentals of those stocks. And if they are fundamentally healthy, invest in the stocks. This is an effective way to find multi-bagger stocks for common investors. This concept was discussed by the legendary fund manager Peter Lynch in his best-selling book ‘ONE UP ON  WALL STREET’.

5) Invest in Mid-cap Companies

These companies have the potential to become large-cap companies in the long term frame. They have a high growth rate compared to the large caps which have already reached saturation and the chances of large caps giving multiple-time returns are highly unlikely. In addition, Mid-cap companies have good capital to stay out of debt and live a long life. A good growing mid-cap stock can easily become a multi-bagger.

A few people may advise investing in penny stock or small-cap stocks for getting high returns. However, for the small caps, the chances of the company growing broke is also high. Most small-cap companies are not able to sustain in harsh economic conditions which is sure to occur once or twice in the long-term period. Therefore, investing in small-cap companies has more risk than reward.

Closing Thoughts

In this post, we discussed How to invest Rs 10,000 in India for maximum returns. Although Rs 10,000 is not a very huge amount, however, the returns can be huge if invested in the right company. Every day we see thousands of cases where investors with a small investment amount are able to make huge money from the stock market by being invested for a long time. Therefore, buy right and sit tight!

That’s all for this post. Do comment below what do you think about the strategies discussed in this post on how to invest Rs 10,000 in India in the stock market. Further, if you’ve got any doubts or queries, feel free to post them below. We will be happy to help you out. Have a great day and Happy Investing.

Stock Exit Strategy: What is the Right Time to Exit a Stock?

One of the key questions that even experienced investors are not able to answer is What is the Right Time to Exit a Stock? When should you sell the stocks and book profit? Or what should be the stock exit strategy for the investors? Knowing the Answer to this question is crucial if you want to have a successful stock market career.

Do you remember the story of the brave Abhimanyu from Mahabharata? He was a great Warrior, the son of Gandhivdhari Arjun and the student of Almighty Krishna. Although he was one of the best warriors in the legendary story, he went through a fatal end just because he knew how to enter a ‘Chakravyuh’ but didn’t know how to exit.

Exit a Stock

Similarly, the stock market is a Chakravyuh and you should know both how to enter and exit. The selling strategy of a stock is as important as the entry strategy. In this post, we are going to discuss the exit strategy for an intelligent investor. Be with me for the next 5-6 minutes to learn the right time to exit a stock for best returns.

What is not the Right Time to Exit a Stock?

Before looking at the stock exit strategies, first, let us look into when not to sell. That is, what is not the right time to exit a stock.

Imagine a scenario. You bought 20 stocks of a company at price Rs 500 today. Further, let’s also assume that you have done fundamental research and the stock is fundamentally very strong. Next week, the stock price zooms to Rs 550 (+10%). What will you do? Will you sell the stock and exit?

When prices of the stock rise like this, the ‘Greed and Fear’ take charge of your actions. Here, you might think that let’s book the profit. You have already gained Rs 90 per share (+18%). What if the stock prices fell? It’s better to book some profits right now. But, while doing so you are missing out on a few points. Let me highlight them:

You have spent a lot of time analyzing this company, researched the stock carefully and the stock has a potential to give greater returns. It might become a multi-bagger in the future. Why do you want to book a profit of +18%, when you can get +100% profits or more?

You might also think that you will enter the stock again when the price is low. What if the stock price never comes down? I mean, the company is fundamentally strong and might give brilliant results in future. There are chances that you may never be able to enter the stock at a similar buying price. Why do you want to jump from the running train and want to catch it again?

Anyways, let’s imagine the scenario that you re-entered the stock. Don’t you think that in such a scenario you have to give the extra brokerage charge and other charges (including the time that you spend to re-invest)? I mean, you have to pay all the charges 2 times when you first bought and sold the stock. And next two times, when you re-enter and will sell in future. Total double brokerage. Do you really think it’s worth paying this much brokerage just to book a profit of +18%?

Read More:-  Fundamental vs Technical Analysis of Stocks ?

Let me Explain this Concept Further With the help of a personal example.

I’m invested heavily in stocks and bought the stocks of TITAN Company at a price of Rs 314 per share in November 2016. I liked the products of Titan Company. The company is fundamentally very strong and the stock was selling at a discount during that time because of demonetization.

On June 5 2017, the share price of Titan rose +18% in just a day. A positive news regarding GST was out which said that the taxes in jewelry sectors was going to be reduced. The news was taken enthusiastically by the people and that’s why the stock price rose too high of Rs 561 that day. Here is an old screenshot that I used in another post on Trade Brains to explain my investment.

Anyways, I didn’t sell my stocks that day. You might argue that I should have booked a profit (+70% from my entry price within 6 months). However, if you see from my perspective, it wasn’t the right time to sell.

There were a couple of reasons why I didn’t sell my stocks at that time. First, the rise in sudden price was due to good news. However, the fundamental of the company didn’t change. The company will continue to give good results in future.

Second, I might never be able to buy the stock at such bargain price again like the price during the demonetization period.

Third, I didn’t really need the money that time. If I had to sell my stocks, then I had to search again for a better stock to invest, which would have taken a lot of my time & energy.

And it seems my decision was right. The stock did correct its price that year. However, over the long run, the price went on moving forward. As of May 2021, Titan stock is trading at a price of Rs 1,451 per share. A return of over 4.6 times on my investments.

Next, you might say that the above case is a typical situation. I didn’t explain what is the right time to exit a stock? Here are the four cases when you should actually sell the stock.

Read More:- What is Face Value of Share? And Why is it Important?

What is the right time to exit a stock?

Here are a few of the scenarios when you should sell your stocks:

1. When the fundamental of the stock Degrades: Sell the stock when the fundamentals of the company are not the same anymore like when you bought the stock. If the fundamentals of a company are continuously degrading Quarter-on-Quarter or Year-on-Year, like the Revenue/profits are continuously declining, the company is not coming up with any innovative products, Management is not taking the right decision, competitors are doing way better, then it might be time to sell that stock.

For example, if the non-performing assets (NPA) of banking companies start increasing at a high rate compared to when you initially purchased it, then get ready to exit that stock.

2. When the Company Becomes Extremely Overvalued in Short time: In general, the share price of a fundamentally strong company will go high with time. However, if the prices go too high compared to your entry price in a very short time period, you should sell the stock and book profit.

3. When you find a better stock: If you find a company whose fundamentals are better than your current stock and is giving better performance consistently, then it can be the right time to exit a stock. In such scenario, you should sell the previous stock and grab the better opportunity.

4. When you need the money: The reason why you are entering the stock market is to make money. And when you really need that money, you should sell your stocks and exit. (Btw, do not sell the stocks just to keep the money in your saving account.) Sell the stocks when you actually need the money like paying for a new house, new car, and your kid’s tuition fee etc. There cannot be a better time to exit a stock than when you need the money most.

Fundamental vs Technical Analysis of Stocks ?

There are two common approaches to pick stocks and money from the share market. The first is fundamental analysis and the second is technical analysis. However, fundamental analysis and technical analysis follow a completely different route in their strategies.

technical

In this article, we’ll discuss the difference between Fundamental vs Technical Analysis of Stocks to find out which one is better and which one you should learn.

Related:- What is Face Value of Share? And Why is it Important?

Fundamental vs Technical Analysis of Stocks

Both fundamental analysis and technical analysis can be used to determine if an investment in stock is attractive or not and to further forecast the future trends of stocks. For example, if you are evaluating stocks and want to determine which one you should enter, then you can use either fundamental vs technical analysis of stocks.

Fundamental analysis checks how healthy the company is compared to its competitors and economy. It studies everything related to the company like its financial statements (Balance sheet, profit loss statement, etc), Financial Ratios, Management, Competitors, Products, Business models, industry etc. (Also read: How to do Fundamental Analysis on Stocks?)

On the other hand, Technical analysis does not care about the financials or the fundamentals of the stocks. It evaluates the company based on Price action, Past trends, Share price & Volumes. Technical analysts use stock price charts to identify future trends and patterns.

What is the Intrinsic Value of a Company?

Fundamental analysts believe that the current stock price of a company may or may not be the same as its intrinsic value. They evaluate companies to find which one is trading below its true intrinsic value using different studies like financial statements analysis, stock valuation, economic analysis, etc.

Once they find a company that is trading below its intrinsic value (also considered as undervalued stock), Value Investors buy and hold this stock until it reaches its true value. A stock trading below its intrinsic value is considered a good value investment opportunity.

On the other hand, Technical analysts believe that there is no use to analyze companies intrinsic value as the stock price already reflects all relevant pieces of information. They do not care about the financials of a stock. They predict the future performance of a stock based on its past stock price trends.

Related:- Investing in an Equity Mutual Fund? Here are the things !

Fundamental vs Technical Analysis of Stocks: Basic Comparisons

Now that we have little understanding of both fundamental vs technical analysis of stocks, let us discuss both these methodologies in detail. Here, we will compare fundamental vs technical analysis of stocks based on different criteria.

1. Basic Principle

Fundamental analysis analyses all the factors that can affect the stock price of a company in the future like financials, management, industry, etc. It evaluates the intrinsic value of the company to find whether the stock is under-priced or over-priced.

Technical analysis reads the past charts, patterns, and trends of the stocks to predict their future price movement.

2. Time Frame

  • The fundamental analysis approach is used for long-term investments.
  • The technical analysis approach is used for short-term investments.

3. Data Sources

  • Fundamental analysis gathers data from financial statements, annual reports, and other key announcements of the company along with other economic news sources.
  • Technical analysis gathers data from the stock charts.

4. Indicators

Fundamental analysis studies assets, liabilities, earnings, expenses, etc. It also uses various fundamental indicators like PE ratio, PB ratio, Debt/Equity ratio, ROE, etc

Technical analysis uses charts like candlesticks, price data, etc. Various technical indicators that are commonly used are MACD, Simple Moving Average, EMA, RSI, Bollinger Bands, etc.

5. Methodology Used

Fundamental analysis studies the financial data like Balance sheet, Profit and Loss statements, and Cash flow statements. It also examines other factors while evaluating stocks like competitors, company’s management, industry, economy, etc. Fundamental analysis focuses on both qualitative and quantitative analysis to evaluate the past performance and future potential.

Technical analysis studies the market movement and public psychology. It is mostly the analysis of the past price movements of the stock. Technical analysis focuses on the performance chart and the trends of the stock.

6. Strategy

  • Fundamental analysis is used to find the intrinsic value of the company to evaluate whether the stock is overpriced or underpriced and forecast the growth potential of the company.
  • Technical analysis is used to find the right entry and exit time from the stock.

Pros and Cons of Fundamental Analysis

Pros of Fundamental Analysis

Here are a few of the best advantages of fundamental analysis:

  • Fundamental analysis helps to invest for the long-term and their returns are quite huge. Power of compounding is applied to the long-term investments resulting in good returns to the investors.
  • They invest in financially sound companies which is always a good approach.

Cons of Fundamental Analysis

Here are a few of the common disadvantages of fundamental analysis:

  • Fundamental analysis is quite laborious and its methodology is lengthy & complex.
  • There is no clear time frame for long-term investment.
  • As the future potential of the company is considered in the fundamental analysis, various assumptions are made in this approach.
  • As the entry & exit time is not specified in fundamental analysis, you might buy a good stock at a bad time.

Pros and Cons of Technical Analysis

Pros of Technical Analysis

Here are a few of the best advantages of Technical Analysis:

  • Technical analysis is fast and the outcomes can be seen quite early.
  • This approach is comparatively less laborious.
  • Entry and exit time for the stock can be specified.
  • Technical indicators readily give buy or sell indications.

Cons of Technical Analysis

Here are a few of the common disadvantages of the technical analysis approach:

  • As there are a number of technical indicators, it’s tough to select a good indicator.
  • Technical indicators do not study the fundamentals. Hence, you might be investing in a financially unhealthy company.
  • Technical analysis skill requires a lot of accuracy, reliability, and discipline.

Can Fundamental and Technical analysis be used together?

Yes, fundamental analysis and technical analysis can be used together.

Many investors/traders use both approaches. It makes sense to enter a fundamentally strong company at a right time. While fundamental analysis helps to find a healthy company to invest in, technical analysis tells you the right time to enter or exit that stock.

In short, you can use both fundamental and technical analysis of stock together.

Closing Thoughts

Fundamental vs Technical analysis of stocks, both are effective yet quite different methodologies to make money from the stock market. It is really tough to say which one is the better way of making money in stocks. Although a number of books have been written on both fundamental and technical analysis, however this debate on the better way of investing is still going on.

What is Face Value of Share? And Why is it Important?

Some of the Face biggest challenges while entering the world of investing involves dealing with multiple jargons. In this article, we explain a very common confusion in the understanding of Face Value and other related terms.

Face

What is the Face Value of a Share?

The Face Value of a share in simple terms is the value of the share on paper i.e. the original cost of the share. The face value of the shares is also known as the nominal or par value of a share. When it comes to stocks the face value of a share will be mentioned in the share/bond certificate issued. If you already hold shares or know someone who does you can view the face value of the shares in the Demat Account.

The face value for most shares in the Indian stock markets is set at INR 10. For example, here is the face value, market cap, and important value for .

Related:- Investing in an Equity Mutual Fund? Here are the things !

Who sets the Face Value?

The shares of Reliance have a face value of Rs. 10 whereas ITC has a face value of Rs. 1. If we take a look at the global markets Apple has a face value of $0.00001. So who sets this amount or through what computation do we arrive at this figure?

First of all, it is important to understand that there is no fixed method or regulation for setting up the face value. These values are assigned arbitrarily by the company when the company gets listed on a stock exchange through an Initial Public Offer (IPO).

The value however may affect the volatility of the shares in the market post the IPO. Take for example two companies ABC Ltd. and XYZ Ltd opt for an IPO to raise Rs. 1,00.000. ABC Ltd sets its share price at Rs. 10 and XYZ set its price at Rs. 1. This means that post the IPO ABC Ltd. will have 10,000 shares available in the market and XYZ Ltd. 1,00,000 shares. This means that there are more individual shares of XYZ Ltd. for purchase.

What is the difference – Face Value vs Market Value?

Another very important point to note is the difference between the face value and the market value of a share. These two have no relation and do not affect each other except in some special circumstances.

Let’s take again the example of the 3 companies mentioned above. The shares of RelianceITC, and Apple have a market value of Rs. 2005.35, Rs. 213.25 and $127.90 respectively. These values vary greatly from the face values we observed earlier.

The Market Value is arrived at due to the factors of demand and supply for the particular share in the market. A greater demand oversupply would show an increase in the market value and vice versa the price will fall.

The shares we saw above have a high market price because they are highly demanded as long as they maintain good growth and give good return prospects. Their market value may fall too if the company begins performing poorly affecting the demand for the shares. The factors of demand and supply will have no impact on the face value of the shares.

Related:- Why Investing in Stocks is NOT Gambling?

Why is the Face Value Important?

Being a prospective investor you must be wondering if the face value is not the price at which you eventually buy/sell the shares then why is it even important. The Face Value is used in the internal accounting for the company’s stock. One can find the face value used in the balance sheet to arrive at the total equity capital.

In addition to this, face-value also plays a very important role in corporate action. These include corporate actions like dividends, stock splits, reverse stock splits, etc. When it comes to dividends the face value sets a standard for the calculation of return rates or yield. Stock Splits on the other hand are one of the special occasions where both the face value and the market price are affected.

Closing Thoughts

That’s all for this article. Let us know if the article helped in clearing doubts related Face Value of a stock.

You can read the difference between Face Value, Market Value & Book Value to get more insights. Also, comment on which other jargon you would like us to cover in our next post. Welcome to the world of investing.

Investing in an Equity Mutual Fund? Here are the things !

An Equity Fund is one that mainly invests in the shares of various companies. To be classified as an equity fund the scheme will have to have at least 60% of its total assets in the shares of companies. The remaining amount can be invested in other securities available like Debt securities, money market instruments, etc. as per the objectives of the fund.

Funds are further classified in the equity fund category based on the type of equity shares held. They are done on the basis of market cap i.e. large-cap, mid-cap or small-cap funds. Equity funds can also be sectoral or thematic.

Equity

According to AMFI, the Assets Under Management (AUM) have been increased from Rs. 34,000 crores in March 2000 to Rs. 650,000 crores in March 2020. In addition to that equity funds have offered a CAGR of 16% for 2 decades ending March 2020. It is important to note that equity funds are considered to be riskier than debt alternatives available in the markets.

Factors To Consider Before Investing In An Equity Mutual Fund

The factors to consider before investing in an equity fund can be divided into two categories. The first includes drawing your own financial roadmap. The second list of factors helps you select the best funds to meet your needs.   

1. What is Your Investment GOAL?

The very first factor to consider when investing in equity funds is understanding what you want to get out of this investment. And then creating a strategy or selecting investment alternatives accordingly. These goals could vary from simply looking for a good savings scheme, tax reduction, saving for a daughter’s marriage, saving for retirement, etc. Once this aim is set it becomes clear about how much time you have in your hands and the returns to expect to meet these goals.

If you have never considered this before it is best to spend a few hours setting your goals and then looking at where you stand financially. Here you can actually calculate your expenses and then arrive at what you can afford to invest.

2.  Time Availability

Once your financial goals are set the next step is to set a timeline by which you want these goals to be achieved. This is important as this further will help you select a fund that meets your needs. Say for example you are trying to save up for a vacation down the line.

In this case, investment options like liquid or short-duration funds would best suit your goals. On the other hand Equity, Linked Savings Scheme funds would best suit you if you are saving for your long-term goals as they already have a 3-year lock-in period.

Perfect time to invest?

When investing in funds investors often get carried away by trying to find the most optimal investment price. Although this holds true when investing in stocks. But what’s the point of going for a mutual fund when you also have to compute the optimal period as well.

. What is your Risk Appetite?

The risk appetite varies greatly from individual to individual. Hence there is no single formula that will work for everyone. The risk appetite depends greatly on an individual’s financial condition, age, needs, attitude, etc.

Take for example it wouldn’t be ideal for some in their late 40’s saving for their retirement to put all their savings in a Small Cap Fund which comes with increased risk. On the other hand, it also wouldn’t be optimal for a 20-year-old to put all his savings in a debt fund. Hence it is very important to be realistic and invest in options that suit your goals.

Related:- What is AMFI? What are its Role, Objective & Importance?

4. Performance of the Fund

At the end of the day, the performance of the fund holds the most leverage when making investing decisions. The performance of the fund gives you an idea of how well your money will be managed in the years to come. If you take a look at the returns offered by the fund you may observe returns of 7%, 8%, 15%, etc.

But how do you determine based on these numbers you are investing in the best fund to meet your goals. The following standards will help you assess this:

a. Comparison with the benchmark

Every fund sets a benchmark index to track and compare their fund. These benchmark indexes track the performance of a collection of top securities in the market. The basis of grouping these securities is done mostly on Mcap. Say for eg. if you consider investing in a large-cap fund. The fund managers will have set a benchmark since the inception of the fund. In this case, the benchmark would most likely be the Nifty50 or the Sensex 30 index.

The logic behind this is the benchmark represents a collection of securities in the market. A comparison with the benchmark would show us if the manager of an actively managed fund is at least able to beat the returns offered by passively investing in the market. If the investment manager is not able to beat this benchmark then it is better to invest in a fund that simply tracks the Nifty 50 and invests in the same securities that exist in the benchmark.

b. Comparison with its peers

The next comparison that an investor can look into before investing is with the other funds in that category. Say you are investing in Large Cap there are many fund houses that provide similar funds. Here one can observe if the fund an investor is considering performing well enough or the best among its peers.

c. Consistency of these performances

Finally, the fund is worth investing in only if it has maintained its results consistently for a period of time. Hence the above comparisons must be done also for 3, 5,10 year periods. The fund consistently beating the benchmark set and performing well among its competitors is a healthy sign of a good fund.

5. Size and Type of the Fund

By size of the fund, we refer to the total assets under management (AUM). The assets under management refer to the subscriptions that the respective fund has received from investors. A fund with a huge AUM shows that it is highly in demand and increased investor trust in the fund. A larger AUM is also seen to be beneficial when it comes to liquidity. Smaller AUM’s are generally seen in newly set up funds.

However, having a large AuM is not always favorable as funds with huge AUM will find it harder to move around in the market.

There are many different types of Equity Funds. Looking into this is important as these funds hold different levels of risk. They may be classified based on the

  • Market Capitalization: Large Cap, Medium Cap, Small Cap, Multi-Cap Funds, etc.
  • Region: Domestic or Global based on whether the fund invests only in domestic securities or in global markets as well.
  • Sectoral: these funds only invest in specific sectors like IT, Pharmaceutical, etc.
  • Focused: These funds invest in a maximum of 30 securities.

6. Expense Ratio

Another factor that equity investors must closely look at are the Expense Ratios of funds. The expense ratio includes the administration, management, promotion, and distribution expenses of a mutual fund.

Funds that are actively managed by the fund managers have a higher expense ratio than funds that are passively managed. Also, funds that generate high returns consistently charge higher fees than their counterparts. These expenses however have been capped at 2.25% by the SEBI (Securities and Exchange Board of India).

Generally, the management fee is charged as a percentage of the total AUM. But funds also levy performance fees which are variable depending upon the performance. Since these come out of the returns your capital makes it is best to keep track of them. 2% charged over the long-term compounds to huge amounts!

It is also important to consider the means available for you to invest in an equity fund. Directly investing through the equity fund offers the lowest expenses in comparison to using other intermediaries.

Related:- Why Investing in Stocks is NOT Gambling?

7. Tax Benefits

Different funds have their own unique set of features. ELSS (Equity Linked Savings Scheme) a type of equity fund that offers tax exemption up to Rs. 150,000 from your annual income each financial year under Section 80C of the Income Tax Act, 1961. Hence it is best to look into the tax benefits while investing in a fund.

Taxes also play a role while moving out of a fund. Mutual funds in India levy capital gain taxes at the following rates:

LTCG: 10% (No tax if the amount invested is below Rs.1 lakh and held for more than one year)

STCG: 15% (Applicable on funds invested for less than one year)

8. Experience of the fund manager

Before making any investment decision it is also important to look into the background of the fund manager. An experienced fund manager who has previously also delivered results is more preferred in comparison to other alternatives available. Because at the end of the day it is the managers’ expertise and experience that will help navigate the markets to produce the best returns.

9. AMC’s Background 

The Asset Management Company (AMC) or the Fund House is a company that manages these funds. It is important to check how well AMC’s funds have performed in the past and managed its schemes. Examples in India include SBI Mutual Fund, HDFC Mutual Fund, Nippon Mutual Fund, Axis Mutual Fund, Mirae Asset Mutual Fund, ICICI Prudential Mutual Fund, etc.

10. Exit Load and Lock-In

Finding out about the Lock-in period of the Equity funds goes a long way in your financial planning. The Lock-in refers to the period for which the investor is restricted from making redemption of his units from the fund. One example we have seen earlier is ELSSs that have a lock period of 3 years.

Although a part of expenses the Exit Load charges are often overlooked at the time of investing. Exit Loads are charged at the time you exit your fund before a given period.

Why Investing in Stocks is NOT Gambling?

How many times have you been discouraged from investing by being told that it is just another name for “Gambling”? For some of us if we had a dollar every time we heard that we’d have to classify it as a source of income.  we take a closer look at the century-old myth and debunk why investing in stocks is NOT gambling.

Gambling

But before jumping into their differences let us understand what the two words investing and gambling mean.

What is Investing?

The basic purpose of investing is directing your liquid capital towards companies that need it. This however is done with the intention of generating income or profit. But along with this while investing one’s money into a company one also boosts the wealth of the economy as it helps them commit that capital to assets to increase productivity, aid growth, hire more people, etc.

This leads to an increase in the value of the company and an increased value of our investment in it. Investing is not devoid of risk which depends on the factors like the level of research, the period of investment, etc.

Related:-  What is AMFI? What are its Role, Objective & Importance?

What is Gambling?

Gambling, also known as betting is wagering money or something of value on an event whose outcome is uncertain. This is done with the aim of winning the prize money. Some examples of gambling are Lotteries, Card games(poker, blackjack), Slot machines, etc.

Differences between Investing in Stocks and Gambling

Although both of them include a series of decisions, risks and are done with the aim of profitability they have a lot of key differences.

1. Level of Control

Investors and gamblers have varying possibilities of mitigating their losses. After deciding how much they want to invest, investors can choose the asset class they want to invest in which have varying levels of risk. For example assets like bonds have low-risk low returns whereas stocks have a high risk with the possibility of a higher return.

In addition, the size of the companies also offers varying risks, eg. blue-chip stocks have lower risk in comparison to small-cap stocks. In addition, investors also have the option to save their capital. If they find out that their investment has begun making losses they can always decide to sell their investments.

Gambling on the other hand is a sum-zero game. Out of all the money pooled it is only a few or in some cases only one person who wins big at the expense of others. It also diminishes the possibility of you winning your capital back or limiting losses. Take the lottery ticket for eg. if you do not win the lottery you have lost the complete Rs.1000 capital you poured into the ticket.

2. Environment

The environment differs massively between the two. Investing has been made so accessible that one can pursue a career in trading from the luxuries of their homes and investing can simply be done through smartphones.

Gambling on the other hand is a completely different ball game. Although there are online means and lotteries casinos still occupy the greater share. Casinos bring shows, food, drinks, and a lot more to the table. Most casinos are designed in order to play on the weaknesses of human psychology. These include glittering lights, music, and free drinks, all these set at dulling your senses, weaken your decisions, and most importantly keep you there all night long.

3. Stock Exchange vs. The House

For investors stock exchanges simply serve as a medium or platform for investing to take place. They charge minimal amounts for every trade and strive for increased efficiency.

The house in gambling refers to casinos, bookmakers, slot machines, etc. It is a common term in gambling that the house always wins. The games generally have different varied edge over the players with benefits going to the house. In card games, the advantage for the casino might only be 0.5%, but certain types of slot machines might have a 35% edge over a player—other games fall somewhere in between.

Related:- Petrol Prices– Why the prices of Fuel are Rising in India?

4. Time Factor

In investing the longer you stay the lower your odds become of making losses. This is the exact opposite of gambling. it does mean that the more you play, the more the math works against you. There are greater chances of you walking out of the casino with less money than when you came in. Take the examples of slot machines, they have odds ranging from one in 5,000 to one in about 34 million chance of winning the top prize when using the maximum coin play.

The period of participation also differs here, when investing your participation can actually span decades. At the same time even if the shares may not increase significantly in value investors are still rewarded for staying invested in the form of dividends. When it comes to gambling once the game or race or hand is over, your opportunity to profit has gone.

5. Information

Knowledge is power! Information is important for both investing and gambling but it is available in varying amounts. Investing is abundant with information that is ready to use. Company earnings, financial ratios, research analyst reports, can be easily found online before investing. When it comes to gambling the information available is extremely limited and worse it is not always quantifiable.

What is AMFI? What are its Role, Objective & Importance?

As an investor, there are many institutions set up in the market to ensure that you are informed and at the same time to also protect your rights.

AMFI

One such institution is the Association of Mutual Funds in India (AMFI). So What is AMFI and what exactly does AMFI do? Moreover, why AMFI was set up?

What is AMFI – Association of Mutual Funds in India?

The mutual fund industry took birth in India with the formation of  Unit Trust India (UTI) in 1963. Other players entered the market only in 1987. But despite this, the industry suffered from preconceived norms of it being a risky and ambiguous investment due to lack of information.

In order to combat these myths, the Association of Mutual Funds in India (AMFI) was incorporated on 22nd August 1995.

The AMFI is a non-profit government organization that acts as the primary regulator under the SEBI. One of its major functions is to keep the investors informed about the Mutual Fund market and protect the interest of investors.

Currently, it comprises 43 member Asset Management Companies (AMC) that are registered with SEBI.

Related:- Who are the Highest Paid CEOs in India? Find out here!

What are the Objectives of the AMFI?

The Association of Mutual Funds in India (AMFI) has several objectives. Some of them are mentioned below:

  • Ensures that mutual funds operate under a uniform set of ethical and professional standards.
  • Once the standards are defined, AMFI also encourages and ensures that AMC’s and mutual funds follow and maintain them in the due course of business.
  • They also assist all the parties involved like distributors, advisories, agents, asset management companies, and other bodies to comply with their guidelines.
  • AMFI receives guidance from SEBI and works closely with them on matters concerning mutual funds.
  • They represent the government, Finance ministry, RBI, and SEBI on all matters that relate to the mutual fund industry.
  • It also distributes information on mutual funds as investments and also conducts research, workshops on different funds. They also conduct the nationwide investor awareness program.
  • It also takes disciplinary action in the case of a violation of the code of conduct.
  • They safeguard the interests of investors. AMFI has introduced a facility through which investors can put forth grievances or register complaints against fund managers or any fund houses.
  • They also safeguard the interests of AMCs.

What is the ARN and Why is it important to investors?

There are many entities we may come in contact with before investing in mutual funds. These include agents, brokers, and other intermediaries. But how do we know which of these are credible? This is where the ARN comes into play. ARN stands for AMFI Registration Number.

AMFI only authorizes those who are qualified to sell the funds to prospective buyers. If any fund manager, broker agent, or any other company wants to deal with mutual funds they have to get a permit from AMFI to do so. This will be provided to them by AMFI in the form of ARN.

Fund houses and other intermediaries who acquire the ARN from AMFI are credible and have the professional knowledge required to invest in mutual funds. It is a legal offense if anyone sells or recommends mutual fund units to investors without the ARN license.

It only issues the ARN on the clearance of the National Institute of Securities Market (NISM) certification which is valid for three years. The NISM is a training institute that offers certifications related to the securities market.

Related:- Petrol Prices– Why the prices of Fuel are Rising in India?

Closing Thoughts

The Indian mutual fund industry has grown in leaps and bounds. In the 90s a very small fraction of the population invested in mutual funds. The awareness of these investment schemes has grown significantly. Today even the youth take part in these investments thanks to the efforts of institutions like AMFI.

Petrol Prices– Why the prices of Fuel are Rising in India?

The retail petrol prices touched triple digits for the first time in a few areas across the country after the prices were hiked earlier this month. You too might have already noticed your monthly expenditure on fuel is increased.

petrol prices

In this article, we take a look at why the prices of fuel are rising in India. Here, we’ll try to give the reasons why the petrol/diesel prices have increased. Keep Reading to find out.

Why have petrol and diesel prices increased?

When the Union Petroleum and Natural Gas and Steel Minister Dharmendra Pradhan was asked this question he blamed it on the oil-producing countries. When it comes to crude oil India imports over 80% of its crude oil requirement. So any changes in the global prices will directly impact the fuel prices in India.

Pradhan stated that ”There are two main reasons for the fuel price rise. The international market has reduced fuel production and manufacturing countries are producing less fuel to gain more profit. This is making the consumer countries suffer,”. The minister also added that the government has also requested OPEC and OPEC+ countries to increase output.

The oil prices have been on a rise ever since Saudi Arabia along with the rest of the Oil Producing and Exporting Countries (OPEC), its allies the OPEC+ countries and Russia agreed to cut their production by 1 million barrels per day. This caused the oil prices to rise to $63 per barrel – the highest in a year.

But is this the only reason for the high prices in India? Oil prices in countries around the world have been reduced back to pre covid levels but quite the opposite has taken place in India. Prices in the US, China, and Brazil are 7.5%, 5.5%, and 20.6% lower than they were a year ago. A closer look at the price break up reveals some different answers.

Related:- Union Budget 2021 Overview – A Budget for Everyone?

Taxes on Petrol and Diesel

Both the central and the state governments have hiked the central excise duty and sales taxes to increase their revenues. In Delhi, the combined state and central taxes are 180% and 141% of the base price of petrol and diesel respectively. Over two-thirds of what we pay as fuel is tax to the government.

The main reasons for the increased taxes were the nationwide lockdown hurting the revenues of the government. In order to make up for this, fuel prices were taxed heavily. Last year the petrol prices were touched nil but this benefit was not passed on to the consumers in order to make up for the losses the government faced in other areas.

The last time any relief was provided was in 2018 when the excise duty was cut by Rs. 1.50 per litre. The crude oil priced however increased to $40 per barrel between June and October, and now have gone past $60.

When the lockdown was imposed the excise duty was increased by Rs 13 per litre on petrol and Rs 16 per litre on diesel. Between April 1 and December 10, petrol prices were revised upward 67 times. Despite the huge increase in prices the Centre has refused to budge and still maintains the same excise duty.

Value Added Tax (VAT) too has been significantly increased to accommodate the needs of the state governments. After GST the only direct source of revenues that the state governments have is through liquor and fuel. Only a handful of state governments have taken action to control the prices.

Rajasthan reduced (VAT) from 38% to 36%, Assam withdrew the Rs.5 additional tax imposed during the COVID-19 crisis and West Bengal, cut VAT on petrol and diesel by Rs.1. Meghalaya gave the biggest relief by cutting  Rs 7.4 per litre on petrol and Rs 7.1 on diesel.

Related:- Who are the Highest Paid CEOs in India? Find out here!

In Closing

Consumers that directly spend on travel have already been affected due to the high fuel prices. But the concern due to increased fuel prices now extends to other products and services as well. Food inflation has reduced in the last few months but with the transport costs increasing they too may catch the inflationary trend.

Who are the Highest Paid CEOs in India? Find out here!

CEOs Leaders play a very important role in every organization. Sometimes they also manage to inspire millions around the world too. But how important are they their organization and how much are these organizations willing to pay them.

CEOs

In this article, we take a look at the Highest Paid CEOs in India. You’ll be surprised as they beat Mukesh Ambani (15cr.) by crores when it comes to remunerations.

The Highest Paid CEOs in India

1. C.P. Gurnani – Rs 146.19 crores

C.P. Gurnani is the CEO of Tech Mahindra an Indian multinational technology company, providing IT and BPO services. He took home compensation of  Rs. 146.19 crore (inc. benefits and bonuses) for the year 2018. This makes him the highest-paid CEO in India.

Gurnani, a Chemical Engineer has had a career spanning 32 years during which he held leading positions in HCL Hewlett Packard Limited, Perot Systems (India) Limited, and HCL Corporation Ltd.

2. Kalanithi Maran and Kavery Kalanithi- Rs 87.50 crore each

Also known as the “King of South India TV”, Kalanithi Maran is the President and CEO of Sun Group, Syriac and Red FM, Sun Cable Vision, and Sun Pictures. The group is headed by Maran and his wife Kavery, who holds the post of executive director in the company.

They both took home a compensation of ₹87.50 crore which includes ex-gratia/bonus.  This makes Maran the 2nd highest paid CEO and his Kavery the highest-paid woman executive in India.

Maran the grandson of former Tamil Nadu Chief Minister, M. Karunanidhi started the business in 1993. Their leadership has expanded the TV network to have over 32 channels that reach over 95 million households in India.

Related:- Union Budget 2021 Overview – A Budget for Everyone?

3. Pawan Munjal – Rs 80.41 crores

Pawan Munjal is the Chairman, Managing Director, and CEO of Hero Motocorp. He took home a compensation of Rs. 80.41 crores in the financial year 2019. This made him one of the highest-paid CEOs in India. Son of Brigman Lal Mangal joined Hero Honda Motors in the early 1980s as director and took over as MD in 2001. He has been key for the growth, strategic planning, and transition of the group from Hero Honda to Hero Motocorp in 2011.

Pawan Munjal also heads several Committees of CCI, he’s part of the board of IIM, Lucknow, and also a member of the  World Economic Forum.

4. N. Chandrasekaran – Rs. 65.52 crores

Natarajan Chandrasekaran is the chairman of Tata Sons. He was appointed as the CEO of Tata Consultancy Services (TCS) in 2009.  He took home a salary of Rs. 65.52 crores in the Financial Year 2019.

Before serving as the chairman Chandrasekaran was also appointed as COO of TCS, chairman of Tata Motors, and Tata Global Beverages. He also was one of Tata’s youngest and the first non-Parsi CEO to take office in 2009.

5. S N Subrahmanyan – Rs. 48.45 crores

Sekharipuram Narayanan Subrahmanyan is the CEO & Managing Director of Larsen & Toubro. He had a pay package of Rs. 48.45 crores for the year 2019.

He received a bachelor’s in Civil Engineering and also has an MBA from Symbiosis and was part of an Executive Management Programme from the London Business School. He joined the company in 1984 after completing his education and has worked with them for 33 years before he was appointed CEO in 2017.

6. Salil Parekh – Rs 34.27 cores

Salil Parekh is the CEO of India’s second-largest  IT company. He took home compensation of  Rs. 34.27 crore (inc. benefits and bonuses) for the fiscal year 2019-20.

Before joining Infosys Parekh also worked for E&Y and served on the board for Capgemini. He was appointed CEO of Infosys in 2015 and was responsible for overseeing a business cluster comprising Application Services and Cloud Infrastructure Services among others.

7. Rajiv Bajaj – Rs. 32.31 crores

Rajiv Bajaj has been the managing director of Bajaj Auto since 2005. He took home a remuneration of Rs. 32.31 crores in 2019. He joined his family business after completing his studies as an engineer.

Vivek Bajaj is credited with reviving the ailing business. He also was responsible for introducing the Pulsar range of motorcycles into the Indian markets.

Related:- How to Invest in Share Market? A Beginner’s Guide!

8. Sunil Mittal – Rs. 31 crores

Sunil Mittal is the founder and chairperson of Bharti Enterprises. He had a pay package of Rs. 31 crores for the financial year 2019. He was the son of MP Sat Paul Mittal. He founded his first company at the age of 18 with an investment of RS. 20,000.

Today he owns Bharti enterprise which has diversified interests in telecom, insurance, real estate, education, malls, hospitality, Agri, and food among other ventures.

9. Guenter Betschek – Rs 26.29 crores

Guenter Butschek is the CEO and Managing Director of Tata Motors worldwide till Jan 2021. He took home a package of Rs. 26.29 crores for the year 2019. This made him one of the highest-paid employees in India. The German worked with Daimler AG for 25 years and served as the COO of Airbus before being appointed as CEO for Tata motors.

10. Venu Srinivasan – Rs. 23.77 crores

Venu Srinivasan is the Chairman of TVS Group. He took home a package of Rs. 23.77 crores for the financial year 2019. He has come a long way as he started his career as a mechanic in his own garage during vacations. He completed his education as an engineer and also received an MBA from Purdue University (USA).

Closing Thoughts 

In this article, we looked into the profiles of Highest Paid CEOs in India. This list clears those huge responsibilities also come huge paychecks.  An average salaried employee would have to work for months for what they make in an hour. This makes the post all the more lucrative.

Union Budget 2021 Overview – A Budget for Everyone?

The Budget 2021 can be widely considered as one of the most difficult times in Humankind (owing to COVID 19). While presenting her third budget (by far the most challenging), Honourable Finance minister, Nirmala Sitharaman has delivered a budget, that is expected to lay the groundwork for Indian growth and development for years to come.

Budget 2021

The FM budget speech this year was economical in terms of time spent. A shade under an hour and 50 minutes as compared to 2 hr and 40 minutes last year.  In her speech, Honorable FM laid mentioned the budget which is built on the following six pillars:

  • Health and well-being
  • Physical and financial capital and infrastructure
  • Inclusive development for aspirational India,
  • Reinvigorating human capital
  • Innovation and R&D
  • Minimum government-maximum governance

The primary focus of this budget was to create jobs primarily through big infrastructure announcements. Now, let us give you a brief Union Budget 2021 Overview.

Related:- Regulations to Invest in US or Foreign stocks for Indians?

Budget 2021 Overview – Major Budgetary Announcements

Here are some of the key announcements in this budget included:

  • Since the last budget, the nominal GDP has reduced to Rs. 1.94 from 2.24 lakh crore. This is owing to the increase in expenditure to handle the situation of Pandemic, COVID-19
  • For the first time ever, the budget went paperless and it was presented on Made In India tablet. 
  • The total COVID support measures amounted to nearly 13% of the GDP and total COVID-19 support measures by the government and RBI amount to Rs 27.1 lakh crore
  • The PM Atmanirbhar Swasth Bharat Yojana is projected to outlay Rs 64,180 crores over the next six years. The aim of this scheme is to develop the overall healthcare system and develop institutions for the detection and cure of new and emerging diseases
  • The Jal Jeevan Mission Urban to be launched and it has an outlay of Rs. 2.87 lakh crores. The aim of this scheme is to provide Universal water supply, 2.86 crores household tap connections and liquid waste management 500 AMRUT cities
  • A grant of Rs. 35000 crores have been provided for COVID vaccines for the year 2021-22. And if required then the government is committed to spending more.
  • For Railways, a total amount of Rs. 1,10,055 crores have been committed. And this money will be used for overall railway infrastructure development and for 100% electrification of railway broad gauge by 2023
  • The government to allot Rs 1.03 lakh crore for National Highway Projects in Tamil Nadu. Rs 65,000 core for National Highway Projects in Kerala; Rs 25,000 crore for National Highway Projects in West Bengal. The government will also allot additional Rs 34,000 crore for National Highway Projects in Assam.
  • The FM also proposed to divest two PSU banks and one general insurance company in FY22. Further, divestments of BPCL, CONCOR, Pawan Hans, and Air India will be completed in FY22. FY22 Divestment target is at Rs 1.75 lakh crore.
  • The Government also aims at doubling the ship recycling capacity by 2024. More seven port projects worth more than Rs. 20,000 crores to be undertaken in FY 2022 via PPP
  • Social security benefits to be extended to gig and platform workers. Women to be allowed to work in all categories in night shift also
  • The ‘1 Nation 1 Ration Card’ plan is under implementation by 32 States & UTs. The Centre will launch a portal to collect data on migrant workers.
  • Senior citizens to be benefitted. The ones who are having income sources as Interest and Pension income are exempted. The age limit is for citizens above 75 years. Further, the timeline for re-opening of tax returns has been reduced to three years from six years.
  • To reduce hassle for small taxpayers a dispute resolution committee has been proposed. This will be faceless to ensure efficiency and transparency. Anyone with a taxable income up to Rs 50 Lakhs & disputed income up to Rs 10 Lakhs are eligible to approach the committee.
  • Custom duties are aimed at promoting domestic manufacturing and to promote that following steps have been taken: 1)Cutting duty on Copper scrap to 2.5 %, 2) Plan on bringing nylon at par with polyester with respect to taxation, 3)Duty on Naphtha reduced to 2.5%, 4)The plan is to rationalize custom duties on Gold and Silver
  • The power distribution companies across the country are monopolistic and a need to provide choice to the consumers. A framework will be put in place to give consumers alternatives to choose from among more than one distribution company.

Related:- How to Invest in Share Market? A Beginner’s Guide!

Budget 2021 Overview: Major Reactions on the Budget

According to PM Narendra Modi, Budget Will Give Major Boost To Agriculture, Create Employment

Congress leader Anand Sharma said that the “nation needed a bold budget and more direct transfers to the weaker sections to revive demand, restart job creation.”

Union Defence Minister Rajnath Singh hailed Budget 2021 as the budget for an AtmaNirbhar Bharat that will strengthen the economy.

According to Tapati Ghose, Partner, Deloitte India, The budget speech had an undertone of the Government’s focus on ease of doing business in India. Towards the FM reiterated that tax systems to be transparent, efficient and promote investments in our country. The tax rates, surcharge, cess etc. have been left untouched. Even the much-debated Covid Cess was not brought out. This brings stability and certainty to the tax framework. Definitely a positive move.

According to Adar Poonawala, CEO, Serum Institute of India, “Great Budget 2021 announcements, Nirmala Sitharaman ji, especially on healthcare and vaccines; this is the best investment any country can make. A healthier India is a more productive India

According to Harsh Goenka, Chairman of RPG group, “Cong-anti poor,anti-farmer, unimaginative. BJP-innovative,pro-farmer, help all sections of society CII, FICCI-will kickstart economy, encourage investment

Some TV channels-wasted opportunity, will increase inflation Businessmen-pathbreaking, 10/10”