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Quantum Mutual Fund
Quantum Mutual fund is one of the best asset management companies of India and was launched in 2006. We offer simple and easy-to-understand products across asset classes Equity, Liquid/Debt and Gold through Direct & Regular Plans
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How is NAV of a Mutual Fund Scheme Calculated?
The most common objective behind investing in mutual funds is to benefit from capital appreciation and build a substantial corpus to meet various financial goals. While mutual funds are often misconstrued as a complex investment instrument, in reality, their investment strategy is fairly straightforward. They provide a slew of advantages to investors, including diversification, expert money management, economies of scale, transparency, and liquidity.
It is a natural human instinct to examine the pricing of a product or service before purchasing it. Accordingly, when it comes to mutual funds, a similar trend may be seen as many investors end up looking at its price or NAV.
What is a Mutual Fund NAV?
Mutual Fund NAV or Net Asset Value indicates the market value of a single unit of a mutual fund scheme on a certain date. It is the price per unit of a mutual fund scheme at which they are allotted to the investors. In other words, an investor has to pay this price for buying units of a particular mutual fund or receive this price while selling units back to the fund.
Unlike share prices which change constantly during the trading hours, the Mutual Fund NAV is determined on a daily basis. It is computed and disclosed at the end of the every business day on or before 11 p.m. of the same business day, based on the closing price of all the underlying securities that the respective mutual fund scheme holds after adjusting for the expenses. Whereas Fund of Funds are allowed time till 10 a.m. the following business day to update the information.
While the NAV moves up with appreciation in the value of the underlying securities, it moves down if the underlying securities register depreciation in value.
How is Mutual Fund NAV Calculated?
The Mutual Fund NAV calculation is one of the least understood concepts. Many investors do not understand its relevance and even end up making uninformed investment decisions after seeing the change in NAV.
Mutual Fund NAV calculation is nothing but the computed by taking, Market or Fair Value of Scheme's investments (+) Current Assets (-) Current Liabilities and Provisions Divided by No. of Units outstanding under the Scheme on the valuation date .
Mutual Fund NAV = [Total Assets – (Total Liabilities + Expenses)] / Number of Outstanding Units
Here’s an example of Mutual Fund NAV Calculation:
A mutual fund scheme ‘A’ has an investment value of Rs 124 lakh, based on the day's closing prices for each asset. On the other hand, the fund has Rs 3 lakh in short-term liabilities and Rs 1 lakh in expenses. The fund has 6,00,000 units outstanding.
The NAV is calculated as: [Rs 1,24,00,000 – (Rs 3,00,000 + Rs 1,00,000)] / 6,00,000 = Rs 1,20,00,000 / 6,00,000 = Rs 20.
Thus the NAV of Mutual Fund scheme ‘A’ is Rs 20 per unit. So, if you invested Rs 1 lakh in scheme ‘A’, you will be allotted 5,000 units.
However, in reality, the asset and liabilities may be more to define the NAV of a scheme, such as cash equivalents, accrued income and operating expenses, management expenses, distribution, and marketing expenses, etc.
Each mutual fund scheme is a basket of equity and related securities and /or debt & money market instruments held in the portfolio. As equities and debt instruments are traded in the secondary market, their value keeps fluctuating. Any change in the price of the securities held influences the Mutual Fund NAV and determines how many units get allotted to investors for his/her investment amount. This indicates that the Mutual Fund NAV varies based on market conditions and the NAV at which the investor buys units today will not be the same tomorrow. The Mutual Fund NAV today may even depreciate in future due to unfavourable market conditions.
Effective February 1, 2021, mutual fund houses need to distribute units only after the funds have been realised and available to the scheme as per cut off timing. The term 'realization of funds' refers to the fact that the NAV applicable to your transaction will be determined by when the fund house has received your money.
Now, should you base your investment decisions on the NAV of a mutual fund scheme?
Many investors still place greater emphasis on mutual fund schemes NAV. Similarly, some people still feel that schemes with a lower NAV are cheap and can rise at a higher pace. However, a lower NAV does not imply a less expensive scheme, whereas a higher NAV does not mean the scheme is expensive.
Moreover, every mutual fund scheme offers two plans i.e. direct plans and regular plans. Under a direct plan, investors can buy the fund directly from the AMCs, bypassing the fund distributors. As direct plans do not charge any distribution fees, difference in their NAV is genrealy the distribution fees. As a result, the direct plan of a mutual fund scheme will report a higher NAV compared to the regular plan.
It can be concluded that a lower/higher NAV is related to the scheme's worth at a given point in time, or, to put it in another way, the cost of purchasing a mutual fund unit has little to do with its return potential. When choosing a mutual fund scheme, investors should not base their judgments on its NAV.
As a result, whether the NAV is lower or higher shouldn't affect your investing decision. The decision to invest in a mutual fund scheme should be based on its suitability to your risk profile, its performance, investment strategy, and the pedigree of the investment manager.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks,
read all scheme related documents carefully.
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How to Select the Best Mutual Funds to Invest
We all want to have the best in our lives, right from the best school for our kids, to the best car to drive, the best home to live in, and even the best mutual funds to invest in. Mutual funds have now become a popular investment option for novice as well as seasoned investors. Having said that, to meet your investment goals, it is crucial to pick up the right mutual funds. With around 40 mutual fund houses together offering more than 2,500 mutual fund schemes, it can be a daunting task to select the right mutual funds that align with your investment goals.
Many new investors rely on their friends and colleagues to get the names of the c. Some even take a chance and trust the recommendations of the social media and YouTube influencers or ready-made lists available on the internet to invest in the best mutual funds. However, what proves right for your colleague might not even be good for you because different individuals have different investment objectives, goals, styles, risk appetites, financial conditions, etc.
If you are looking to zero in with the best mutual funds to invest here are certain things you should consider while assessing the mutual funds to invest right now.
1. Investment Objective:
If you are looking for suitable mutual funds to invest in your money, you should have a specific goal or objective in your mind. You should know the purpose of the investment, how long you are going to stay invested, and what kind of returns you would expect. Without a well-defined goal, even small fluctuations in your portfolio value might make you want to exit the investment.
Depending upon your investment goal, investment horizon, expected returns, and risk appetite, you can choose the right mutual fund schemes from the suitable mutual fund categories, such as equity mutual funds, debt mutual funds, hybrid mutual funds, etc.
The investment objective of the fund should be in line with your investment objectives. Moreover, while setting a return expectation, you should also understand your risk appetite. As you might already know, equity mutual funds are subject to higher market volatility but have the potential to generate substantially higher returns than other types of mutual funds.
2. Investment Philosophy and Processes:
Many a time, investors ignore this important aspect when choosing mutual funds for investments. However, the investment philosophy, process, and style followed by the fund house play a crucial role in the performance of the schemes you hold in your portfolio. Every fund house has an investment strategy that leads their investment decisions. If the fund’s investment strategy does not match your investment approach, there could be conflicts in the long run, which will ultimately disappoint you and make you exit the investment.
3. Portfolio Quality and Characteristics:
The performance of any mutual fund scheme largely depends upon its underlying portfolio, which is a mix of stocks and other securities. If the underlying portfolio is managed well and the securities appreciate in value, your mutual fund scheme is likely to generate good returns. Therefore, before choosing a diversified mutual fund scheme, you should make sure that the fund manager has spread the corpus across stocks from different sectors to make it a diversified portfolio and maintains a reasonable churning i.e. lower portfolio turnover ratio by not buying and selling the stocks unnecessarily.
4. Past Performance Track Record:
‘Past performance is no indicator of future returns’, you might have seen this disclaimer given by fund houses several times. But, if you consider the past performance over a longer time period, it shows that the fund has gone through multiple market cycles, which impacts its performance. Check whether the funds are managed well to ride the market volatility smoothly through multiple market cycles while reviewing long term returns.
However, while comparing the performance of different mutual funds, it is necessary to do the comparison with the funds from the same category. The returns of the fund should be compared with the returns of the relevant benchmark across market cycles and over various time periods like 1 year, 2 years, 3 years, 5 years, and so on.
5. Risk Reward Ratios:
There are various risk-reward ratios like Standard Deviation, Sharpe Ratio, Sortino Ratio, and Treynor Ratio that can be used to judge the fund’s consistency and ability to generate returns at reasonable risk for investors. The Sharpe, Sortino, and Treynor ratios help you understand the risk-adjusted returns generated by the mutual fund schemes. The higher the Sharpe and Sortino ratio, the better it is. The Standard Deviation measures the volatility of the fund, and so it should be lower. A ratio like Jensons Alpha helps understand the extent to which the fund generates market-beating returns. There are various other ratios, too, like up/down capture ratio, information ratio, etc., which can be used to compare and pick the best fund.
6. Asset under Management:
The Asset Under Management (AUM) of a mutual fund scheme is the composite market value of its underlying assets. In simple words, it indicates the total size of the fund. However, you should know that a high AUM does not mean the fund guarantees higher returns. In the case of the small-cap equity mutual funds, a high AUM can make it challenging for the fund manager to manage the portfolio as entering and exiting the less liquid small-sized companies will become difficult. On the contrary, high AUM can be favourable to liquid and debt funds as the fund becomes less vulnerable to redemption pressure from a chunk of investors.
7. Expense Ratio:
The expense ratio is basically the fund running fee that is charged to the investors by the fund houses for expertly managing their investments. The expense ratio is deducted from the NAV of the fund; hence it makes sense to choose the mutual funds that have lower expense ratios. Although the percentage of expense fee seems negligible, it makes a considerable difference in your entire investment value when calculated in the long run.
To Conclude:
Consider these 7 things while choosing the best mutual funds to invest . Ready-made lists like top mutual funds to invest today, etc. might not be right for everyone as every individual has a different investment approach and investment goals. Hence, it is important to build own portfolio by analysing the points discussed in the article to ensure portfolio goals are in line with personal goals. However, if this analysis is too technical or one can not spend their time analysing these parameters, better consult expert professionals who will do all the analysis and help create a diversified portfolio.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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All You Need to Know About Various Types of Mutual Funds
With easy access to the internet and constant promotion by the AMFI (Association of Mutual Funds In India) through the ‘Mutual Funds Sahi Hai’ campaign, more and more people are becoming aware of mutual fund investment. Especially millennials and gen Z are more open to high-risk investment avenues compared to older generations.
That said, every individual has different financial goals, and hence, their investment objectives are different from one another. There are various types of mutual funds in India available for individual investors, and would be a simple and convenient way to diversify your portfolio. However, before investing in mutual funds, it is crucial to thoroughly understand the concept and know the types of mutual funds schemes that are best suited to your investment objectives to ensure your financial goals are achieved.
Mutual fund schemes can be broadly classified into two categories.
Types of Mutual Funds by Structure
Types of Mutual Funds by Underlying Asset Class
1. Types of Mutual Funds by Structure:
The structure of mutual funds defines the flexibility and ease to buy and sell the units of the mutual fund scheme. Here are the types of mutual funds by structure:
Open-Ended Mutual Funds:
Open-ended mutual funds are available for purchase and redemption throughout the year. These funds neither have a fixed maturity period, nor any kind of limit on when and how much you can invest in them. The purchase and redemption of these funds are carried out continuously at the prevailing Net Asset Values (NAVs). One can get several investment facilities with open-ended mutual funds, such as lump sum investment, Systematic Investment Plan (SIP), Systematic Transfer Plan (STP), Systematic Withdrawal Plan (SWP), etc.
Close-Ended Mutual Funds:
Close-ended mutual funds are open for investment only during the initial offer period. Most of the close-ended funds come with a stipulated maturity period of around 1 month, 1 year, three years, five years, etc., which is specified at the time of launch. Hence, these funds can be redeemed only after the completion of a specified maturity period. However, for liquidity close-ended mutual funds are listed on the stock exchange, from where investor can buy or sell the units of the scheme.
2. Types of Mutual Funds by Underlying Asset Class:
Mutual funds can be categorised based on the underlying asset class as below. These schemes can be open-ended or close-ended, as discussed earlier.
Equity Mutual Funds:
Equity mutual funds predominantly invest in equity stocks with a primary objective of capital appreciation and wealth creation in the long run. The investment in equity funds is considered to have the potential to generate higher returns in long term . Equity mutual fund schemes are comparatively more volatile than Debt Mutual fund schemes. Therefore, equity mutual funds are suitable for long-term investors with a high-risk appetite.
Here are some of the types of Equity Mutual Funds:
Large Cap Funds – They primarily invest in large established companies (First 100 companies on a full market capitalisation basis).
Mid Cap Funds – They invest in medium-sized companies (Companies from 101st to 250th on a full market capitalisation basis).
Small-Cap Funds – They predominantly invest in small-sized companies (251st company onwards on a full market capitalisation basis).
Multi-Cap Funds – They invest in a mix of large, mid, and small-sized companies, with at least 25% in each segment.
Sector Funds – They mainly invest in companies from one particular sector. For example, pharmaceutical funds primarily invest in pharmaceutical companies.
Thematic Funds – They invest in sectors/businesses of a common theme. For example, a thematic fund built on an agriculture theme might invest in equity stocks of core agricultural companies, automobiles, chemicals, fertilisers, etc.
Equity Linked Saving Schemes (ELSS) – These are special category funds that invest in equities and equity-related products and qualify for income tax deduction under Section 80C of the Income Tax Act, 1961.
Debt Mutual Funds:
Debt Mutual Funds are a type of mutual funds that primarily invest in fixed income instruments, such as government bonds, treasury bills, corporate bonds, certificates of deposit, etc. Debt funds are comparatively less volatile than Equity Mutual Funds and range between low to high risk category.
The investment in debt funds is suitable for short or medium-term investors with low to high risk appetites. Even if you prefer to invest in equity mutual funds, a small allocation to debt funds may be considered for portfolio diversification.
Some of the examples of debt mutual funds are Liquid Funds, Dynamic Bond Funds, Short Duration Funds, Corporate Bond Funds, Gilt Funds, etc.
Hybrid Mutual Funds:
As the name suggests, hybrid funds invest in a mix of equity debt and other instruments, thus providing the best of both worlds. These funds are ideal for investors with moderate to high-risk appetites as the volatility level of these funds lies between equity funds and debt funds.
Hybrid mutual funds are further classified as Aggressive Hybrid Funds, Conservative Hybrid Funds, Balanced Advantage Funds, Dynamic Asset Allocation Funds, Multi-Asset Allocation Funds, etc.
To Conclude:
With the availability of several types of mutual funds in India, choosing the right fund that suits your specific requirement can be a daunting task. Therefore, it is advisable to understand your requirement first and set your investment objective accordingly. Once your investment objective is defined, you need to assess how much risk you are willing to take. As discussed earlier, higher returns generating mutual funds are generally considered high-risk investments. Hence, if you are expecting high returns and willing to take that risk, you can invest in carefully selected equity mutual funds.
However, if you expect moderate to high returns, you should consider investing in medium to high -risk taking hybrid mutual funds. When you are investing for multiple financial goals, it makes sense to invest across different types of mutual funds and create a diversified portfolio. If you are not sure or need more clarity on the basics, do not hesitate to take help from professionals who can suggest to you the best suitable mutual funds based on your needs and financial goals.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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An SIP is a systematic investment plan that allows you to invest a fixed stipulated amount every month in a mutual fund of your choice. More and more investors are realizing the benefits of investing through an SIP. The benefit of an SIP is that it is suitable for any wallet size. So though the SIP ticket size may have reduced over the last five years, the amount of SIP collections has increased, indicating greater investor performance. (Source: AMFI)
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3 Ways to Navigate A Volatile Market
1. Invest using SIP over Lumpsum: One of the ways to free oneself from the worry to time the market in a volatile market is to invest using an SIP (Systematic Investment Plan) over a lumpsum. An SIP allows investors to average out their cost of investment allowing them to buy more mutual fund units when markets are falling and less when markets are rising. Investors who want better control over the entry and exit points in a market to take advantage of the opportunities can consider using a lumpsum.
2. Asset Allocation over Concentration: Asset allocation is the process of dividing one’s investment across the three asset classes of equity, debt and gold. Whereas concentration is investing all one’s investment in one asset class. The concentration of investments in one asset class could lead to higher downside risks than a portfolio, that is well diversified with a prudent asset allocation strategy
3. Invest in Mutual Funds over Direct Stocks: The key difference in a mutual fund is that it is professionally managed and generally scheme portfolio is diversified and chances of minimum concentration risk.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
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Mutual Fund Checklist for 2022
Investors need to keep a checklist handy for 2022. Before setting out to invest in mutual funds, set aside a financial backup for emergency purposes in a liquid fund and bank account. Next, diversify your investments as per different asset classes using a robust asset allocation strategy. Finally, invest responsibly using ESG mutual fund incorporating Environmental, Social and Governance parameters.
• Keep a backup for emergency expenses in liquid fund and Bank Account
• Rebalance Portfolio with an Asset Allocation Strategy
• Responsible investing with ESG mutual fund
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
www.Quantumamc.com
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Equity Lessons for 2022
Equity investors can allocate more to equity mutual funds during periods of a market correction and use a diversified equity basket to minimize downside risks. In addition, investors can spend a longer duration of holding investments in the market to meet long-term financial goals. Finally, investors can use an SIP (Systematic Investment Plan) mode of investing in mutual fund and navigate near-term market volatility with asset allocation across three assets of equity, debt and gold.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
www.Quantumamc.com
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SEBI steps for mutual funds in India in 2021
SEBI (The Securities and Exchange Board of India) had come with a new set of rules and regulation in 2021 to bring more transparency for investors. Here are some new regulation and changes that have come into existence in year 2021.
• Two-tier benchmarking plan for mutual fund schemes
• Introduction of Silver ETFs
• Disclosure norms for ESG mutual funds
• ‘Skin in the game’ framework for key employees of AMCs
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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How Mutual Funds performed in India in 2021?
How have mutual funds as an investment avenue performed in 2021? The AUM of mutual fund companies has increased as compared to last calendar year. This year has also seen launch of 100 NFOs and improved investor sentiment have led to rising inflows in mutual funds.
• Industry added Rs. 7 lakh crores to their asset base
• Mutual Funds AUM grew by 24% as of Nov 30, 2021
• More than 100 NFOs have been launched
• 2.65 crore investors have been added
• Net inflows of Rs 1.93 lakh crore as of Nov 2021
• SIPs have seen collection of Rs.1.03 lakh crore
• Gold ETFs have seen 29.3 lakh folios in Nov 2021
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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How Gold will perform in 2022?
Find parameters that will determine the outlook for gold in 2022. Gold generally performs better during periods of macroeconomic stress. While inflation and hastening the tapering process would hurt growth and in turn act as a tailwind for gold, a stronger dollar and improving positive economic indicators will act as a headwind for gold.
Tailwinds
• US consumer inflation has hit a near 40-year high
• Central Bank Gold Purchases likely to continue
• Hasty tapering could hurt growth
Headwinds
• Increasing pace of liquidity tapering by the US Central Bank
• Strengthening of the dollar
• Positive sentiment about economic outlook
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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How to Select the Correct Debt Fund
Debt funds in mutual funds are a type of mutual fund that invests in debt securities such as corporate bonds, money market instruments, commercial paper, certificate of deposit, treasury bills and government securities.
Types of Debt Funds in India
· Dynamic Bond Funds
Dynamic bond funds are a type of debt fund that invest across duration and have different average maturity periods as these funds take investment decisions based on interest rates and invest in instruments of longer as well as shorter maturities.
· Short Duration Funds
These type of debt funds make investments in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years.
· Liquid Funds
Liquid funds are a type of debt funds that invest in debt instruments with a maturity of not more than 91 days. This makes them relatively less risky. They are better alternatives to savings bank accounts as they provide similar liquidity with higher returns.
· Gilt Funds
These type of debt funds make minimum investment in Gsecs- 80% of total assets (across maturity). Gilt funds are perfect for risk-averse fixed-income investors.
· Fixed Maturity Plans
These funds also make investments in fixed income securities like corporate bonds and government securities. All FMPs have a fixed period for which your money will be locked-in. However, one can invest only during the initial offer period thereafter can be purchased or sold through stock exchange platform.
From an investor’s point of view, debt funds in India are regarded as relatively less volatile than equity funds. However, there are different types of risks associated with debt funds.
The following factors should be considered before investing in debt funds.
· Types of Risk in Debt Funds
Debt funds run the risk of credit risk and interest rate risk. In case of credit risk, the fund manager may invest in securities with a poor or risky credit rating with a high probability of default on payment. In case of interest rate risk, the bond prices may fall due to an increase in the interest rates.
· Cost
Debt fund managers levy a certain fee to manage the money called an expense ratio.
· Investment horizon
If you have a short-term investment period of three months to one year, then investing in liquid funds is ideal. The Macaulay duration of underlying investments for short-term bond funds can be one year to three years. In case of investment across duration, dynamic bond funds would be appropriate. The longer the time plan, the better the returns.
· Investment objective
Depending on your financial goals, different types of debt funds could serve your purpose. Investors can park a certain amount of funds in debt funds for liquidity.
· Tax implications
Capital gains - both long term and short term from debt funds are taxable under the Income Tax Act 1961.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
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Different Types of Debt Funds
Debt funds in mutual funds invest in fixed-income securities like treasury bills, corporate bonds, commercial papers, government securities, and many other money market instruments. The NAV or Net Asset Value of Debt Mutual Funds is inversely related to interest rate movement. Generally, when the interest rates rise, the prices of existing fixed income securities in your debt mutual fund portfolio fall and when interest rates drop, such prices increase.
Types of Debt Funds in India
· Dynamic Bond Funds
Dynamic Bond Fund is a type of debt fund where the fund manager adjusts the portfolio as per the fluctuating interest rates. Dynamic bond funds have different average maturity periods as these funds take investment decisions based on interest rates and invest in instruments of longer and as well as shorter maturities.
· Short Duration Debt Funds
These type of debt funds make investments in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years.. Conservative investors prefer these funds, as they are generally not influenced much by interest rate movements.
· Liquid Funds
Liquid funds is a type of debt fund consisting of underlying debt instruments with a maturity of not more than 91 days. This makes them relatively less risky. Liquid funds can be an option to park investor’s surplus fund and can act as emergency funds.
· Gilt Funds
These type of Debt funds make minimum investment in Gsecs- 80% of total assets (across maturity) and considered to have low credit risk. . The government rarely defaults on the loan taken in the form of debt instruments; gilt funds are perfect for risk-averse fixed-income investors.
· Fixed Maturity Plans
These types of Debt funds also make investments in fixed income securities like corporate bonds and government securities. All FMPs have a fixed period for which your money will be locked-in. However, one can invest only during the initial offer period there after can be purchased or sold through stock exchange platform.
From an investor’s point of view, debt funds in India are regarded as relatively less volatile than equity mutual funds.. However, there are different types of risks associated with debt funds.
Credit Risk
Debt funds extend money to companies, banks, and the government. The possibility of loss because of a company defaulting on payment is called credit risk. Banks and the government have a safer credit profile than companies. Certain mutual funds hoping to generate higher returns lend to companies with low credit profiles, which leads to such events. Hence, one should examine the debt fund portfolio before investing.
Liquidity Risk
Certain securities have less liquidity as compared to others or there could be economic issues wherein the liquidity of debt securities decreases. In such cases, the mutual funds cannot sell these securities and repay investors. This is known as liquidity risk.
Interest Rate Risk
This is one of the most common risks involved in debt funds. Increasing interest rates lead to falling bond prices and vice versa. In a falling interest rate environment with rising bond prices, funds with the highest duration do well. If a fund manager, buys bonds with a long duration assuming interest rates will go down, but interest rates go up such a fund will yield low or negative returns. This is an interest rate risk.
To conclude, there are different types of risks associated with debt funds.
The investor should maintain debt funds in mutual funds as a part of the portfolio after evaluating the risks involved and your investment objective.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
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How to Open an SIP Account
Systematic Investment Plan or SIP means a method of investing money in mutual funds.
In an SIP, one invests a fixed amount of money in a mutual fund every month. which is automatically deducted from one’s bank account. To know what amount of monthly SIP you need to invest to achieve a certain money goal, one can use SIP account calculator. A Systematic Investment Plan (SIP) calculator is an online financial mechanism that helps to calculate the potential returns on your SIP investments. The online SIP account calculator tells you how much money should be invested every month to for a target corpus.
A systematic investment plan (SIP) means a plan that gives investors the right to make regular, equal payments into a mutual fund of their choice.
To open an SIP account, the investor should hold an investment account with the fund house. She/he needs to complete KYC verification before operating the SIP account. Once the investor has completed the KYC verification, she/he can open her/his SIP account within the investment account by filling up the ‘Start/Initiate an SIP’ form.
Step 1: Collect necessary documents
The following documents are necessary for KYC registration: PAN card, address proof like driving license/bank statement/utility bill, a passport size photograph, and cheque for the bank details.
Step 2: Be KYC compliant
Any AMC website or RTA website which provides KYC facility can validate KYC. The investor also has to complete FATCA formalities by answering certain questions online.
Step 3: Register with the AMC website
After completing the KYC formalities from the website of the fund house (AMC), she/he should click on the 'Register Now' or a 'New Investor' tab provided on the website; the investor furnishes the PAN number, personal details, nominee details, bank details and answer few FATCA questions. Then a User Id and password is generated for transacting online.
Step 4: Scheme Plan and Investment Amount
The investor chooses the scheme along with the plan and option and decided the SIP amount. Investors can select either regular plans or direct plans and can go for either growth option, IDCW option.
If the investor is certain of the SIP amount that she/he is going to make, then he or she can fill up the investment amount in the given box without using the online SIP calculator.
Step 5: Payment Mode and Date
Once the investor has decided the kind of SIP investment, he/she has to selects date/s and pay the first SIP instalment. The investor decides on the mode of payment; the amount can be auto debited from the investor's account, net banking or NEFT/ RTGS payment.
Step 6: Submit Transaction
After completing details online, it is submitted to the AMC. The AMC sends acknowledges via email and SMS.
The investor can login to his account to check the status of investments etc.
An active SIP account inculcates a sense of financial discipline over time as you are forced to invest a fixed sum at regular intervals.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Why Should Investors Start an SIP Account?
Systematic Investment Plan or SIP account means a method of investing money in mutual funds.
In an SIP, one invests a fixed amount of money in a mutual fund every month. which is automatically deducted from one’s bank account. To know what amount of monthly SIP you need to invest to achieve a certain monetary goal, one can use an SIP account calculator. A Systematic Investment Plan (SIP) calculator is an online financial mechanism that helps one calculate the potential returns a person can earn on your SIP investments. The online SIP calculator tells how much money should be invested every month to for a target corpus.
A systematic investment plan (SIP) means a plan where investors set aside regular, equal payments into a mutual fund.
To open an SIP account, the investor should hold an investment account with the fund house. She/he needs to complete KYC verification before operating the SIP account. Once the investor has completed the KYC verification, she/he can open her/his SIP account within the investment account by filling up the ‘Start/Initiate an SIP’ form.
Why should investors open an SIP Account?
· No need to track the market
New investors are generally unsure of the market. In case of lumpsum investments one loses a large amount if the market crashes. Conversely, one stands to gain if the market rises. With an SIP, the amount is staggered over a period of time, and only a certain portion of the investment will face market instability. However, one should note that investing in SIP are subject to market risk and do not assure a profit or returns or protection against a loss in a downturn market.
· Adjust SIP amounts
SIPs are flexible. For instance, if you start a Rs. 500 SIP in a mutual fund scheme it is not necessary to invest the same amount every month. If one’s savings increase in the future, you can increase the SIP amount or even start a new SIP in the same mutual fund scheme or any other scheme.
You can miss paying the SIP for a few months or even stop the investment as per your choice.
· Rupee cost averaging
When the market falls, the investor can buy more units. Similarly, investor will buy fewer units when the stock markets rise. This reduces the per-unit cost of purchasing the units. This is called rupee cost averaging.
· Habit of investing
If an investor decides to invest through an SIP, this entails putting aside a fixed amount periodically. This inculcates financial discipline.
· Suitable for new investors
An investor, who has just started her /his career, can use an SIP account to enter the world of investing. This way, she/he understands equities with a nominal amount. Later, one can invest in riskier equity schemes according to one’s investment needs and risk appetite.
An active SIP account inculcates a sense of financial discipline over time as you are forced to invest a fixed sum at regular intervals.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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What are the Different Types of Mutual Fund Schemes?
Mutual funds offer one of the clearest and flexible ways to create a diversified portfolio of investments. There are various mutual fund schemes geared to suit investors’ diverse risk appetites. A mutual fund scheme is made up of investments in equities, debt or a mix of both.
An investor should understand the different types of mutual fund schemes in India to make a correct investment decision.
According to SEBI categorization of mutual funds, mutual funds can be classified as:
1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes
4. Solution Oriented Schemes – For Retirement and Children
5. Other Schemes – Index Funds & ETFs and Fund of Funds
1. Equity Schemes
They are popular mutual fund schemes that primarily invest in equities and equity related instruments. Though generally by nature categorised between high-risk to very high investments, these mutual fund schemes have potential to provide good long term risk adjusted return. They are ideal for investors with a high risk appetite and long investment horizon for wealth creation to fuel their financial goals. Normally an equity fund or diversified equity fund makes investments in various sectors to mitigate the risk.
Equity funds are further classified into several categories. Let’s understand three of them:
· Sector-specific funds:
These mutual funds invest in distinct sectors like infrastructure, banking, technology, etc. Investors with a high-risk appetite prefer these funds.
· Value Funds:
Value funds are suitable for investors who want to invest in equity mutual funds but at the same time looking to minimize downside risks Value funds invest in stocks that are undervalued currently compared to historical averages and peers but are expected to perform better over the long term.
· Tax saving funds:
These funds invest atleast 80% in equity and equity-related instruments. offer tax benefits to investors. They are also called Equity Linked Saving Schemes (ELSS). They invest in equities and have a 3-year lock-in period. The investments in the scheme are eligible for tax deduction under sec 80C of the Income-Tax Act, 1961.
2. Fixed income or debt mutual funds:
These funds invest a majority of their funds in debt - fixed income i.e. government securities, bonds, debentures, etc. They are ideal for investors looking for less volatile and short-term investments. However, they cannot escape credit risk. They can be categorized based on the tenure of securities and/or on the basis of the fund management strategies.
a. Liquid funds:
These funds invest in short-term debt instruments with a duration not exceeding 91 days, and provide a reasonable return to investors over a short period. Investors with a low-risk appetite looking to park their surplus funds for a short-term prefer these funds. They offer an alternative to putting money in a savings bank account.
b. Gilt funds:
These funds invest minimum 80% in government securities across maturity. These funds are suitable for investors who are risk averse and do not want any credit risk associated with their investment.
3. Hybrid funds:
These mutual fund schemes allocate their investments between equity and debt. The distribution may keep changing depending on market behaviour. Investors who prefer a combination of moderate returns with comparatively lower risk invest in these funds.
.Investors looking to invest in mutual fund schemes should use the following pointers while comparing the performance of various mutual fund schemes
· Compare returns of one mutual fund scheme with the returns of another mutual fund within the same time frame. Do not compare the five-year return of one fund with the three-year return of another fund.
· Compare fund returns of large-cap funds with the given index like BSE Large-cap and not with BSE Mid-cap index.
· While comparing funds, select mutual fund schemes that have been in the market for a long time. This ensures that the performance of mutual fund has managed to weather the market behaviour for quite some time.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Why Avoid Deferring Your Tax Saving Goals?
Investors need to get a head start on their tax-saving needs from the beginning of the financial year and avoid deferring till the last minute.
Access to Required Funds: Getting the required funds (Rs. 1.5 Lakhs) to make the most of the tax exemption can prove to be a burden.
No Time to Grow Your Investment: There is not sufficient time to grow one’s investment and benefit from the power of compounding if you defer your investment till the last minute.
No Time for Analysis: There is no time to analyze all tax-saving options available effectively.
No Time to Assess Portfolio: There is no time to define the relevance of the tax-saving option to one’s financial goals or investment portfolio.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Parameters to consider before investing in midcap and small cap funds
Market cycles in the small cap space are sharp. Therefore, investors should not go overboard in the mid and small cap spaces. A conservative approach can be to invest in large caps where the sensitivity to market volatility is not that sharp. Investors need to keep a long-term horizon to earn the potential for risk-adjusted returns, regardless of which market capitalization you finalize on. Investors can follow a prudent equity allocation strategy to finalize on the suitable mutual funds to invest. If you are unable to decide, invest in an Equity Fund of Funds that has underlying investments in other equity mutual funds and is not biased towards any market cap, sector, or theme.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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