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5 Investment Strategies to make money this Diwali

Nutan Gupta

03 Apr 2018

Diwali is the time for a lot of sweets, gifts, crackers and light. It is a time-honoured tradition to invoke the Goddess of Wealth during this time. The Festival of Light is an auspicious occasion to hasten our prayers with wise fiscal planning.

Investment options have become less lucrative with falling interest rates. Let us focus on some all-round investment options.

Public Provident Fund (PPF) - PPF is among the safest long-term investments in the land. Since it is government backed, this investment is completely watertight. Any bank or post office can facilitate the opening of a PPF account. Furthermore, for any annual investment amounting to Rs.1,50,000, the entire interest earned is tax-free.

This is particularly beneficial for long-term investment as it has tenure of 15 years, though withdrawals are allowed before this period.

Systematic Investment Plan (SIP): With the SIP proving a runaway hit in the mutual fund market, it is reasonable that you jump on the bandwagon. SIP means that you keep on investing bite-sized amounts into the mutual fund of your choice periodically. The greatest is that it encourages financial discipline. More than profits, its discipline which would keep your finances in good stead. Also, unlike the lump sum method of investment, it allows us to tide over market downs and get reasonable profits from bullish periods. Studies have shown that SIP’s tend to perform better over time and evens out any losses incurred.

Gold: Buying gold during Diwali is a time-hallowed tradition. Buying gold has long been considered as the best way to welcome Goddess Laxmi. Tradition now gets a boost of modernity as several gold-based investment schemes have been proffered. Both GOLD ETF’s (Exchange Traded Fund) and E-Gold have changed the face of the industry.

GOLD ETF’s or Gold Exchange Traded Funds have become very popular. These are mutual fund schemes which only invest in gold. These units are then held in electronic form by the investors. The value of one unit of ETF has been set as equivalent to one gram of gold. These can be bought and sold like ordinary stocks on the market.

E-GOLD was recently launched by the National Spot Exchange Ltd (NSEL). The main difference it has with Gold ETF’s is that the investor becomes the owner of the gold and not any Asset Management Company (AMC). In this way, we avoid the maintenance charges and other fees levied by the AMC’s.

Equities: The market for equities is always lucrative during festive occasions. Buying stocks and shares have been a traditional investment during Diwali and this fiscal year should be no different. Investors and traders often purchase stocks on Diwali for themselves and also for their families. The BSE (Bombay Stock Exchange) Sensex gained almost 4,000 points or 13 percent since last Diwali. The expectation is strong that 2017 could lead to an even greater spurt of growth. There was some brisk trading in mid and small cap stocks with valuations rising up to 800 percent in some cases. Most sectors, with the noticeable exception of the export-oriented sector, have recorded substantial gains for the fiscal year.

It seems like the perfect time to tweak the strategy and focus on the winning stocks for the year ahead.

Sukanya Samriddhi Account: Under the aegis of the “BetiBachaoBetiPadhao” movement, the government has initiated the Sukanya Samriddhi Account scheme. This scheme explicitly means to encourage girl-child education. You can easily open an account under this scheme in post offices and banks. With a minimum investment of Rs 1000 a year to Rs 1,50,000, the investment is completely tax exempt. The investment period needs to begin before the girl in question is 10 years old and continues till she is 21. It offers a very practical way to ensure the financial security of the little goddesses of our household.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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5 Investment Strategies to make money this Diwali

Nutan Gupta

03 Apr 2018

Diwali is the time for a lot of sweets, gifts, crackers and light. It is a time-honoured tradition to invoke the Goddess of Wealth during this time. The Festival of Light is an auspicious occasion to hasten our prayers with wise fiscal planning.

Investment options have become less lucrative with falling interest rates. Let us focus on some all-round investment options.

Public Provident Fund (PPF) - PPF is among the safest long-term investments in the land. Since it is government backed, this investment is completely watertight. Any bank or post office can facilitate the opening of a PPF account. Furthermore, for any annual investment amounting to Rs.1,50,000, the entire interest earned is tax-free.

This is particularly beneficial for long-term investment as it has tenure of 15 years, though withdrawals are allowed before this period.

Systematic Investment Plan (SIP): With the SIP proving a runaway hit in the mutual fund market, it is reasonable that you jump on the bandwagon. SIP means that you keep on investing bite-sized amounts into the mutual fund of your choice periodically. The greatest is that it encourages financial discipline. More than profits, its discipline which would keep your finances in good stead. Also, unlike the lump sum method of investment, it allows us to tide over market downs and get reasonable profits from bullish periods. Studies have shown that SIP’s tend to perform better over time and evens out any losses incurred.

Gold: Buying gold during Diwali is a time-hallowed tradition. Buying gold has long been considered as the best way to welcome Goddess Laxmi. Tradition now gets a boost of modernity as several gold-based investment schemes have been proffered. Both GOLD ETF’s (Exchange Traded Fund) and E-Gold have changed the face of the industry.

GOLD ETF’s or Gold Exchange Traded Funds have become very popular. These are mutual fund schemes which only invest in gold. These units are then held in electronic form by the investors. The value of one unit of ETF has been set as equivalent to one gram of gold. These can be bought and sold like ordinary stocks on the market.

E-GOLD was recently launched by the National Spot Exchange Ltd (NSEL). The main difference it has with Gold ETF’s is that the investor becomes the owner of the gold and not any Asset Management Company (AMC). In this way, we avoid the maintenance charges and other fees levied by the AMC’s.

Equities: The market for equities is always lucrative during festive occasions. Buying stocks and shares have been a traditional investment during Diwali and this fiscal year should be no different. Investors and traders often purchase stocks on Diwali for themselves and also for their families. The BSE (Bombay Stock Exchange) Sensex gained almost 4,000 points or 13 percent since last Diwali. The expectation is strong that 2017 could lead to an even greater spurt of growth. There was some brisk trading in mid and small cap stocks with valuations rising up to 800 percent in some cases. Most sectors, with the noticeable exception of the export-oriented sector, have recorded substantial gains for the fiscal year.

It seems like the perfect time to tweak the strategy and focus on the winning stocks for the year ahead.

Sukanya Samriddhi Account: Under the aegis of the “BetiBachaoBetiPadhao” movement, the government has initiated the Sukanya Samriddhi Account scheme. This scheme explicitly means to encourage girl-child education. You can easily open an account under this scheme in post offices and banks. With a minimum investment of Rs 1000 a year to Rs 1,50,000, the investment is completely tax exempt. The investment period needs to begin before the girl in question is 10 years old and continues till she is 21. It offers a very practical way to ensure the financial security of the little goddesses of our household.