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Mutual funds have nowadays become a standard choice for investments in India in the economic backdrop of falling interest rates on fixed deposits in banks, failing banks, good returns on mutual funds and ease of investing online through a mobile app on an Android device or iPhone. There are several different types of debt mutual funds one of the types we will discuss is the money market mutual fund. The money market mutual fund is an open ended mutual fund scheme which invests in safe and high quality liquid instruments such as treasury bills, commercial paper, certificate of deposits and repurchase agreements, that have a brief maturity period usually less than one year. Money market mutual funds managers try to earn interest for the unit holders with a primary goal at minimising the changes of the Net Asset Value (NAV) of the money market mutual fund. While most investors are aware of the changes in indices, they do not know that they can make their investments work for them by following these stock market indices even for debt funds.

A conservative saver reviewing a scheme for depositing money for up to a year, may consider investing in these money market mutual fund schemes. These funds give slightly enhanced yields than a savings bank account. However, if the duration of the investment is a much shorter period, an investor may ideally choose overnight funds or liquid funds. Corporates as well as individual fund investors, can invest in money market mutual funds. Mutual fund investors looking to invest in a somewhat longer period, may choose debt funds like dynamic bond funds or balanced funds which may offer an optimal portfolio and possibly superior returns. On top of that, there are no lock in periods, so investors can withdraw money from their money market funds.

The money market type of mutual fund scheme may be considered ideal for savers with slight tolerance for risk taking. They invest in instruments with short tenure, and are not very sensitive to interest rate changes in the Indian economy. Though money market mutual fund schemes are relatively safer, there are still risks associated with them which are common to all debt funds such as market risks, interest rate, issuer risk, credit risk, inflation risk, and liquidity risk.

While investing in the money market be sure to select a mutual fund house with a good record for managing debt mutual funds. Also check the fund to be sure that the funds portfolio manager is selecting only investments with short tenure and good credit ratings. Another point to keep in mind while investing in money market mutual funds is to be sure to discuss with your advisor about the expense ratio which is the ratio of the fee charged by the mutual fund house to manage your hard earned money. A savvy mutual fund advisor or distributor will recommend good quality funds with a low expense ratio and this is important since you will be earning only modest returns in the money market mutual fund.

From a taxation point of view keep in mind that money market mutual funds are similar to other debt mutual funds, and if kept for more than three years are eligible for long term capital gains tax through indexation. If money market debt funds are sold before three years, as an investor you will have to pay tax according to your tax bracket.

The information, analysis and opinions expressed herein are for educational purposes only and are not intended to provide specific advice or recommendations for types of money mutual fund schemes. This material is not an offer, solicitation or recommendation to purchase any financial products or services or money market mutual funds. Always remember that all investments, including money market mutual fund investments carry some level of risk, including the potential loss of principal invested.

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Investing in gold is a strong complement to stocks, bonds and other asset portfolios. Gold is a store of wealth and a hedge against stock market risk, currency devaluation and inflation; gold has historically enhanced stock market portfolios risk adjusted returns, produced positive returns, and provided liquidity to meet redemptions in times of stock market stress. This gold investment trend is likely to stay, reflecting pushy political agendas and economic uncertainty, low interest rates and economic worries surrounding stock and bond markets.

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www.qfund.in

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https://setiweb.ssl.berkeley.edu/beta/show_user.php?userid=4522097

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Balanced Mutual funds such as the popular Balanced Advantage Fund are financial instruments which invest in a mixture of both debt and equity segments in specific ratios. Sometimes they are also referred to as hybrid funds since these balanced funds enable investors to diversify their mutual fund portfolio. As they maintain a balance between both debt and equity segments, they provide the best risk-reward ratio at that specific instance in the market and help to maximise the return on investment. Balanced mutual fund, have a variable mixture of allocations that starts; anywhere above 65 per cent in equity going all the way up to almost 80 per cent.

www.qfund.in

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Small cap funds focus on the discovery of high growth companies that are likely to transform into tomorrow’s market leaders resulting in capital appreciation over the long term. As an investor you may have even heard of the terms ‘small-cap funds’, ‘mid-cap funds’, and ‘large-cap funds’. These types of mutual funds provided by asset management companies are characterised by their share market capitalization. Small-cap, mid-cap, or large-cap is not the size of the mutual fund. Here ‘cap’ or capitalisation is indicative of the size of the companies in which the mutual fund invests.

Small businesses are quite often referred to as the pillar of the Indian economy by the media, they exist in multiple sectors engaged primarily in retail, manufacturing, services, construction etc, In recent years, a wide range of schemes and opportunities were set forth by the government of India to encourage these small businesses, and there is a continuous push for modernisation and reinforcement of the economy. Hence, in the long run the share of small companies in the economic growth cycle is likely to increase. If you want to be part of the long term growth journey of young companies in India, some of which may develop to be tomorrow’s leaders or future large-caps then consider investing in a small cap fund.

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Overnight funds are a type of open ended debt mutual fund schemes that invest in debt securities which mature the next day. These funds only invest in CBLOs, overnight reverse repos, and other debt or money market securities that mature in one day. Overnight funds make your money work for you while you sleep and aim to deliver stable returns in a short time interval. To enable the fund to function a mutual fund manager has to sell the maturing securities in the fund portfolio every day and uses the profits to buy new securities for the portfolio maturing the very next day in accordance with SEBI standards, which mandates them to invest only in assets with overnight maturity. Overnight mutual fund schemes are not allowed to invest in deposits or risky debt instruments and hence this approach reduces the risk of default in their bond portfolio. For this reason some investment advisors in Mumbai, India recommend these schemes for investors who want to keep money with the least amount of risk and with minimal returns.

Overnight funds are the safest category of debt funds available and as a mutual fund investor you may purchase these overnight mutual funds in order to keep any cash surplus that is not needed for a couple of days. All mutual funds are risky however the risk of incurring a loss in these funds is negligible however they do not promise returns or security of capital. As these funds are designed to deliver only marginally higher returns than your bank account; overnight funds produce stable returns but may not be ideal to build wealth over the long term. Mutual fund investors should judiciously select the top funds with a stable record, good performance, low fees and should engage with a financial advisor if needed. Investors who purchase overnight funds have to compromise on earnings in exchange for safety and liquidity and hence this sort of investment strategy should be consistent with the investors financial goal and objectives.

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Economic Machine

Mutual investors who plan to be more active in their mutual fund investing; instead of just buying and holding a diversified portfolio of different types of mutual funds, need to understand the historical patterns of the economy, the stock market and how the economy really works. It is this knowledge of historical patterns; which mutual fund investors can make use of to avoid missing out on opportunities that arise from changes in the stock market.

So how does the economy really work? This simple but not simplistic video by Ray Dalio, founder of Bridgewater Associates, shows the basic driving forces behind the economy, and explains why economic cycles occur by breaking down concepts such as credit, interest rates, leveraging and deleveraging. Ray Dalio founded Bridgewater Associates out of his apartment in 1975, is now the longest-running hedge fund and is recognised as the world’s largest by assets under management (AUM) with over $166 billion.

Ray Dalio identifies three principal economic phenomena, which are explained: long run productivity growth as the central driver of increasing economic activity, short-term and long-term debt cycles. The latter two are explained to some detail with reference to money creation, central banking and long term crisis tendencies. With regards to the long run debt cycle, which leads into deleveraging and recession, some policy measures which can smoothen the crisis are discussed.

The economy is like a machine. At the most fundamental level it is a relatively simple machine, yet it is not well understood by most individuals and mutual fund investors. In this 30-minute video, Ray Dalio; billionaire and financial genius, will explain some timeless insights of how the economy works and share his long term market perspectives that illustrate these stock market forces playing out.

The information, analysis and opinions expressed herein are for education purposes only and are not intended to provide specific advice to invest in mutual funds or mutual fund recommendations. This material is not an offer, solicitation or recommendation to purchase any financial products or services. Always remember that all investments carry some level of risk, including the potential loss of principal invested.

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Mutual fund Investors have a clearly defined set of financial goals they want to achieve, such as maximizing their income in retirement, purchasing a second property, funding their children’s education, buying a new car or perhaps a combination of the above.

This broad range of goals is commonly addressed using asset allocation models, focused on optimizing asset class mix in order to get the best risk/return balance for the investor through distributions in mutual fund. Given how diverse these goals are, both in terms of immediacy and importance, it may not be the most effective approach for an investor. This is where goals based approach to investing can offer an advantage.

Typically goals based investing differs from traditional mutual fund asset allocation by linking separate investment portfolios to specific goals. Investors are willing to take different levels of risk with different goals, and by creating a separate portfolio for each goal, each with a different risk profile and time horizon, since it’s possible to tailor the allocation toward achieving a specific goal such as children’s education or purchasing a new car.

Let’s consider an investor who wants to save for an early retirement while simultaneously looking to fund the purchase of a second property. These competing goals come with different time horizons and importance; the amount of risk acceptable for buying that property in five years’ time will be different from a retirement date that’s twenty-five years away.

The traditional mutual fund asset allocation portfolio to cover both of these goals, and any others in between, the short-term focus of the first goal gets built into the risk profile of the asset allocation portfolio and can end up dominating the entire thing. The asset mix toward achieving the near-term goal has resulted in a conservative allocation, making it harder to meet later goals as effectively as possible. Unlike with traditional investing, where success or failure is generally measured against a market index, goals-based investing helps tie the mutual fund portfolio’s performance to life events. This can assist an investor ignore market noise and stay focused on their personal financial goals amid periods of market volatility and uncertainty.

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The stock market is a broad measure of the overall economy in India and is affected by many variables, such as fund flows, interest rates, inflation, oil and geopolitical events. The stock market in India fluctuates every second, and with each change in price there are stock winners and losers, money to be made or lost. Too much volatility means that there is uncertainty in the market which is not good for fund investors. Professional mutual investors and portfolio managers attempt to insulate their fund portfolios from volatility by diversifying their overall investments so that if one stock declines in value another stock picks or vice versa. For example, if they own a tech fund, investing in a health fund or bond mutual fund can act as a counterbalance in case the tech fund suddenly reduces in price.

Stock market volatility can be thought of as is a measure of how much the stock market overall value fluctuates up and down. Individual mutual funds or stocks can be considered volatile as well. Mutual fund investors can calculate volatility by looking at how much a funds price varies from its average price. Standard deviation is the statistical measure commonly used to represent volatility in asset prices.