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How do I modify my existing SIP?

How do I modify my existing SIP?
by Nutan Gupta 05/11/2017

Investing in a Systematic Investment Plan (SIP) is considered to be most favorable as you can invest as low as Rs. 500 in it. This makes it affordable for almost everyone, even those who have recently started working. But is this enough? Inflation rises every year and hence, it is only fair that you increase the amount you invest.

Instead of having your money just lying idle in your savings bank account, you can invest it in Systematic Investment Plan (SIP). This would facilitate the habit of regular saving and also earn you interest.

Doing a SIP top-up

When you get a hike in your work or you have surplus money flowing in, it’s best to invest it. Channelizing your money in mutual fund can be a good option to invest and earn some good profits on it. However, the risk with investing lump-sum is that you might have to time the market. Hence, it is advised to invest in SIPs instead. SIPs offer steady monthly investments and you don’t have to time the market for it. You can increase the amount you invest in SIPs and get better returns on it.

Can top-up be done in an existing SIP?

Ideally, this may not be possible. You fill an Electronic Clearing System (ECS) mandate form when you apply for a new SIP. According to this mandate, you tell your bank to transfer a fixed amount on a fixed day towards your SIP investment every month. Since you have already submitted this mandate to the bank, you may not be able to change it now. Most fund houses also do not allow this change yet.

Is there a way out?

Yes, definitely. You can apply for a top-up at the time of applying for an SIP. While taking a new SIP, you can opt for a periodic top-up of your investment amount. Mutual fund houses allow you to increase your investment amount either every six months or on a yearly basis if you wish to. This, however, should be specified at the start.

How does the periodic top-up work? (IG content)

  • You start investing with Rs. 500 per month.

  • And ask for a yearly top-up of Rs. 500 in your investment amount.

  • After the first year, your SIP amount will go up to Rs. 1,000 per month.

  • After the second year, it would increase to Rs. 1,500 per month.

  • This keeps increasing till the tenure of your SIP.

  • You can stop this by canceling your SIP and starting a new one.

To sum it up

You can top-up your SIP if you specify in the mandate in the start of your investment. You need to choose the amount and frequency of your top-up. Mutual Fund houses prefer the top-up of minimum Rs. 500 onwards. You can check with your SIP distributor if there is any option to modify your existing scheme. Or, you can stop this and start a new one with the mandate to top-up your investment at regular intervals.

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Goal-based investing: How does it work?

Goal-based investing: How does it work?
by Nutan Gupta 05/11/2017

Goal-based investing is just a new way of approaching wealth management. It focuses on investment from a more goal-oriented outlook. You have specific goals in mind that you want to achieve at the end of your investment tenure. And all your investment would channelize in a direction that leads you to that particular goal. There could be a variety of goals you would want to invest for. This could be saving for your child’s education, buying a new home, gifting your spouse on your silver jubilee or saving for retirement.

How does it work?

Traditional form of investing involved people who used to invest their hard-earned money for returns. But, they were not sure about the returns and their investment plan was designed to be risk-oriented. This means their investments had the potential to perform better than the market but wouldn’t be enough for meeting a goal.

Goal-based investing works towards compensating for this. It aims to outperform the market keeping in mind your threshold for risk. For example, you are 30 years old when you decide to start saving for your retirement. You intend to retire when you complete the age of 60 years. Let’s assume you are currently earning Rs. 65,000 and you are willing to invest Rs. 12,582 towards your retirement plan. Even if you calculate the expected inflation at 5% per annum and expected return on investment at 7% per annum, you would have saved a massive corpus. At the end of the tenure, you would have saved for yourself a sum of more than Rs. 1.6 crore.

In goal-based investing, all your individual asset pools are stitched together to focus on your specific goals. To explain this with an example:

Goal

Retirement

Education

Asset Allocation

10% equity, 90% fixed deposits

50% equity, 50% fixed deposits

As you can see, goal-based investing would provide you an asset allocation that supports your goals and helps you achieve them in real time. The risk here is viewed in terms of out-performing the market. It is instead viewed in proportion to how short you would fall in achieving your goal. It will help you get back on track to meet your goals in time.

A short-term goal must have investment in safer options like debt funds. Long term goals like retirement or college education of your new-born kid can have investments in high-risk-high-return type of investment assets. Once you are clear about your goals, a goal-based investment plan can be made. This could be customized according to your risk profile and time taken to achieve your goal. Since, this can be different for different goals, you need to plan this very meticulously.

How should you respond to this?

The best way to tackle this is to know exactly what you need. Be clear and define your goals. Do you know how much amount would you need to renovate your home? Do you know what would be the cost you would have to spend for your child’s marriage? Do you know how much savings you would need after retirement?

Think about all these questions and take into consideration all the factors affecting it. This could involve taking into account the economic condition as well as the inflation among other factors. A good goal-based financial planning would help you answer all of this. This would help you see tangible progress towards your goals. Avoid making impulsive decisions as per market conditions.

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5 Types of Mutual Funds

5 Types of Mutual Funds
by Nutan Gupta 05/11/2017

To put it simply, a pool of money by people with similar risk tolerance, managed by a manager and being invested in a pre-defined financial instrument is known as mutual fund. They do not all necessarily invest in stock market. For example, some mutual funds also invest in gold. One of their advantages is the quick liquidity that they provide. There are various other types of mutual funds. Let us have a glimpse through the various types of mutual funds:

Money Market Funds: Mutual funds that invest in short-term fixed-income securities such as government bonds, treasury bills, bankers’ acceptances, commercial paper and certificates of deposit are known as money market funds. These funds are generally safe; however, their rate of returns is generally lower than those of other funds. These funds are usually open-ended. They are widely considered as safe as bank deposits yet providing a higher yield. Thus, their typical returns are slightly more than what you get with a savings account.

Equity Funds: Equity Funds are funds that invest in stocks. These funds usually grow faster than money market funds. However, the risk involved with these funds is slightly higher as they may be affected by market volatility. It is advisable to invest for long duration in equities. The case is same for equity funds. It is advisable to invest for a long-term even with equity funds. There are various sub-types of equity funds like sector funds, which invest in a particular sector of equities, index funds, which aim to mirror the performance of a particular index, and so on.

Balanced Funds: These funds are basically a hybrid of the above-mentioned two funds. They get you the best of both money market and equity funds. They can be open-ended or interval funds. They tend to negate the effects of the volatile market by investing in fixed-income debt market instruments. Asset allocation fund is a similar type of fund. These funds do not hold a specified percentage of any asset class.

Commodity funds: These are mutual funds that invest neither in money market nor in equities; they invest in commodities. The most common type of commodity fund is Gold Funds. Any commodity fund can be further classified as commodity ETF and commodity sector fund. These funds are usually short-term funds. Commodity funds are essentially a sub-part of specialty fund. The other types of specialty funds are real estate funds, socially responsible investing funds and so on.

Fund of Funds: Funds that invest in other well-performing funds, expecting to mirror their performance, are called fund of funds. They pre-specify the mutual funds that they will buy or the kind of schemes they intend to invest. These are usually open-ended funds.

In a nutshell

Mutual funds, while subject to market risks are very good options when it comes to investing. You get to choose from an array of funds. They have the potential to generate great returns in the long-term.

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The ‘right’ way to exit a losing trade

Exit a losing trade
13/04/2018

Every trader has his share of bad trades in his portfolio and you do not need all your stocks to be multi-baggers to be successful in the share market. While gains from a stock have no upper limit, the loss from a stock is limited to the value invested in it. Exiting a losing stock is not only a financial loss for a trader, but also an emotional or psychological loss. It is human tendency not to accept losses readily. We have a few recommendations that will help you exit a declining trade.

Let’s take a look

Use stops to restrict your financial losses

Stops are calculated, pre-determined price levels at which the investor chooses to go short or sell his stocks to limit losses. When the stock price hits the stop loss price, a sell order is executed and the stock is automatically sold at that price. Stop loss orders work well as they define the losses beforehand and the loss amount is in the control of the investor. Have a personalized stop loss strategy and use it effectively to limit your losses while investing in stocks.

Keep a check on the stock even after exiting to find a re-entry point

Once you exit a position, keep an eye on it to identify any bullish indication of reversal, which can be a potential re-entry point. Using stops, you might sometimes exit your position because of price volatility. In no time, you may find the prices rising again. However, using proper stops is proven to be effective as it limits your losses in most cases. Analyze the charts, study the candlestick patterns, and re-enter, only, if it coincides with your research and not in hope or revenge. If there is no valid reason to re-enter the trade after the initial exit, walk away and search for new opportunities.

Do not emotionally connect with your stock picks

You should accept your wrong picks and move on rather than lingering onto the stock in the hope of a rebound. You need to monitor and notice the developments around your shares continuously, and if stocks are taking the wrong direction, you will sometimes need to book losses and accept your wrong stock picks. Don’t fall in love with your shares, sell them if the fundamentals do not appear correct and restrict your losses. Booking losses or hedging them at an early stage can help minimize losses.

Accept responsibility and analyze your mistakes and find out where your investment plan can be improved

This will help reduce the chances of the same happening again. Handling trading losses well is a leading characteristic of successful investors. Treat a failure as an opportunity to learn and improve it in your next move. Many opportunities are waiting out there in the market for you to find and grab hold of.

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Do’s and Don’ts of Stock Market Investing for Beginners

Do's and Don'ts for beginners
17/10/2019

With a trading account and demat account you are ready to trade. But if you are a beginner in the stock markets, then that is not all. You also need to keep a tab on some major do’s and don’ts before you venture into investing in the stock markets. Let us look at 10 such key dos and don’ts for investors.

10 important do’s and don’ts for investment beginners

Do’s are about doing the right things in the market when you are starting off on your investing journey while the don’ts are the ones to avoid. Here are ten such important dos and don’ts for investing beginners.

  1. Do your research before investing? Remember, research of a stock is not a rocket science and it is all about getting your research process right. Get comfortable reading the balance sheets and income statements of a company. Also read the Management Discussion and Analysis (MDA) of the stock you are planning to invest in.

  2. Start with your goals in mind. You must be clear about how much risk you are willing to take and how much risk you can afford to take. Your equity portfolio should be within the limits defined by your allocation. Always start with a plan.

  3. Don’t put all your eggs in one basket. That is age old wisdom and applies to investing as well. In technical parlance it is called diversification where you effectively spread your equity investments across sectors and themes so that your investment performance is not dependent on any one stock or sector.

  4. Take a long term view and cultivate that habit in the very beginning. It is futile to time the market. Not only that it is hard to consistently get the tops and bottoms of the market right but it hardly makes any difference to your eventual returns.

  5. Try to invest consistently and regularly instead of putting a large corpus in a stock of your choice. The advantage of being regular is that it instils discipline in your investment and also gives the added benefit of rupee cost averaging. That means; over time your average cost of investing comes down.

  6. Even through equity is about the long term, try to get bargains. Even if you are convinced about the long term prospects of Infosys, it makes a lot of business sense to buy at Rs.650 than at Rs.750. Quite often, a market correction creates salivating bargains. Use such corrections to add quality stocks at low prices.

  7. Divide your equity portfolio between core holdings and satellite holdings. Your core holdings are your long term investment portfolio and you don’t sell these stocks at every correction. On the other hand, the satellite portfolios are more of a trading portfolio where you look out for short to medium term opportunities in the market. Have a separate approach to both these types of stocks.

  8. Don’t ignore trading costs. Even if you are a long term investor, take at a close look at your costs. Your cost is not just about brokerage costs but there are a number of other costs too. There are statutory costs, exchange charges, demat AMC, DIS charges, demat and remat charges etc. All these need to be added to calculate your effective cost. Nowadays, it makes a lot of sense to opt for low-cost discount brokers who can give the same execution at a much lower cost.

  9. As a beginner, remember that quality always wins in the end. When we talk about quality we are talking about quality at a number of levels. Look at quality of earnings; more of the earnings must be coming from the core business. Look at profitability; the company must be earning more margins than the peer group. Take stock of asset turnover; it tells you how efficiently the business is using assets. At a qualitative level, prefer companies that have high standard of disclosure and transparency. Large caps or mid caps, this quality approach always works in your favour.

  10. Make effective use of technology and if you are a beginner then you better get used to it early. Ideally use the online trading platform; it gives you a lot more control over your trades. Also, if possible you can download the app on your smart phone which allows you to trade on the run. Get used to reading electronic contract notes and ledgers; they are a lot more convenient and environment friendly than printed stuff.

In an effort to chase stocks, investors tend to forget that investment success is a lot more about discipline than about skills or flair. It is in your hands to make your investments work in a systematic manner.

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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