Skip to main content

The need for capital protection in Investing

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

That there is no return without risk is not mere financial theory, but an investing reality

 


There is an old story about Mulla and his friend. The friend hides his bag of gold coins in a small pit in the garden. Every other day, he digs it up and counts the coins. One day, he runs back to Mulla to report that the bag has been stolen. Mulla tells him in his character istic style, "How does it matter? You weren't using the money anyway." Many of us like to treat our money the way Mulla's friend did. As long as it is there we are happy, even if it is lying unutilised and idle. Our obsession with the protec tion of our capital is harmful for wealth


The returns from investing can come only when the money is made to work When we use the money, we spend it when we let someone else use our mon ey, we invest it. It would be easy for all of us if investment choices were simple straightforward, and came with that one factor that pleases us—no damage to the invested capital. Many investors confi dently declare that they are not asking for too much when they insist on one basic criterion—that they get back their invested money. It is not possible to put the money to use and protect it as well and if we place it in a bag in our backyard like Mulla's friend, it will lose


Anyone who uses our money will build assets with it. The return from these assets will be used to provide us the return on our invested capital. Any asset-building activity is fraught with risk. If the finance textbook tells us that there is no return without risk, it is not mere theory, but a simple statement of investing reality. Anybody who uses our money, including the bank, is using it to build assets, and this activity cannot be done without taking risks.


The student who went to an engineering college and found that the promised job was not there at the end of the course, has also made an investment and is faced with the risk of low returns. The travellers who took the delayed aircraft, tourists who ate a less-than-satisfactory meal, and the people who found that they married the wrong person have all taken risky decisions. There is no rule book that would have helped them make better choices with predictable outcomes.


If we take risks easily when it comes to several critical decisions in our lives, why do we seek the unattainable capital protection in investments?

 

Behavioural have out that we are not too capable of making com plex decisions that involve a lot of vari ables. We simply use rules of thumb that make it easy for us. If the food smells good, we are willing to eat it without stepping into the restaurant's kitchen.


When it comes to finance, we run back to capital protection because the thumb rules we frame in our mind are broken too often and the promise of per formance is too far away in the future How financial assets will perform in the future is an unknown variable both com mon investors and experts grapple with all the time. Even the best-laid plans can fail; the best-managed businesses can collapse; and well-thought out strategies can misfire. When there is a deep fear of the unknown, we choose to clutch on to capital protection. It is our search for simple and easy-to-understand outcome that encourages us to seek capital protection from our investments. Next in line is the fixed rate of return. We term both these needs as 'minimum' displaying our need for anything that we can hold on to, given the complexities in the world of finance.


We are very prone to making errors when we operate from this eager position of seeking unrealistic simplification. We buy into tall claims easily. Someone who prints a brochure listing 'assured' returns is able to mobilise money and run Ponzi schemes. Investors trust these claims even more when the capital is returned as promised. The return of capital, complete and intact, is the sign of a good investment in our minds, when we have shut out all complexity. Fraud sters, therefore, play on this need. We also trust 'experts'. We think that some one else could have figured the complex world of finance, and if they also have track record of success, we can follow blindly. This fits in with our need for simple rules and visible performance.


Soon enough, we have exposed our selves as eager believers of stories that hold these ingredients. The thumb rules spread far and wide. 'You won't lose money in an IPO.' 'You should sell when a fund manager changes.' 'You should buy on a Monday.' 'You should buy before the budget.' None of these rules work consistently.


What is worse is that the unscrupu lous world of finance smiles on benevo lently when we are ripped off our wealth with false promises and premises. From trading portals that encourage specula tion, to distributors who tell us that our money will earn 15%, we, as investors have been exposed to organised lying and cheating. We make money for a short duration and then spend a longer period in complete remorse, having lost even more. We return to our comfort zone where we seek minimum criteria to in vest. It all sounds reasonable to ask for 'at least' capital protection after having lost a fortune with risky investments.


We would be open to understanding risks in investing if we are able to sift out the risk that is avoidable. In a world where we are not shocked by rampant unscrupulousness and fraud, where we are confident about the disclosures made to us, we are able to trust those who ask for our money, we may be ready to learn about risks. Until then, with each shock that we suffer, we will run back to the need for capital protection, however unrealistic

 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Read more

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...
Read more

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
Read more

Birla SunLife Frontline Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   BSL Frontline Equity Fund   Strategy The fund's investment strategy is in line with the BSE 200. This way its allocation is sprinkled across the sectors which brings in stability. Allocation to large caps is close to 75 per cent while market gyrations of last 2 years have seen its allocation to mid- and small-caps come down. Though the fund has the mandate to pick stocks from outside the ambit of BSE 200, it has largely stuck with the benchmark with just 10 to 20 per cent of the investment going outside it over the past 5 years. Sector-wise allocation though is mostly in proportion to the benchmark.   Its dominant sectors include automobiles, FMCG, financial, technology and energy. Banking and FMCG performed well last year which is reflected in performance. Its stock p...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now