Skip to main content

Index Mutual Funds

Investors can benefit from the India growth story and the trend towards index investing in a systematic manner looks encouraging

 

INVESTORS have been worrying about the uncertain market scenario of the past one week. The question is whether we once again are nearing to a bubble stage. Personally, I have one core belief: neither pundits nor laymen have ever been able to predict market movements correctly in the short term, though like the weatherman, we keep trying.


   In my opinion, the best form of investing is to buy an index fund when you have money, and redeem it only when you require it really badly: or "like your grandmother bought gold" approach to investing. Is the Indian equity market really valuable at the current levels? Well, let's consider a few facts.


   In the short term, the stock markets move more on account of liquidity than fundamentals. It appears as though Indian markets will continue to attract international liquidity because India is not seen as overvalued internationally. The CNX Nifty is trading at 18x FY12 earnings, a shade below its all time high of 21x. But more interestingly, compare this with other indices. Nikkei is at 17x one year forward, and Japan is growing at 0.4% to our 8% or thereabouts.


   The Coal India issue has showed the appetite of investors for Indian IPO/FPOs and there is a pipeline of them in the offing such as PGCIL, ONGC, SAIL, IOC, PFC etc.


   In dollar terms, we have reduced returns year on year. The dollar returns for an FII were 20% year-on-year as compared to 27% absolute returns. Thus the market is not really very expensive for a foreign investor than it was a year ago. Of course, if the dollar appreciates dramatically, the investor would not benefit, but while it remains flat or goes downwards, as it should when compared to a rapidly growing economy like India, he can benefit substantially.


   There is no let up in the liquidity infusion worldwide and much of this liquidity will be chasing assets, such as commodities and, of course, stocks in growth economies.


   An interesting facet of this run up has been the limited participation of retail investors. Mutual funds have not seen strong inflows as they showed in 2006-2007 and retail volumes on the exchange have also been low.


   The apparent cautious approach of retail investors is partly because of the unprecedented volatility that they saw in 2008, but this is not the full story. In the past few years, the systematic investment plan has really come to occupy a significant place in investors' minds and the steady increase in the number of SIPs is witness to this. While SIP does not make for large numbers immediately, they augur well for future stability and this is heartening.


   There are two developing trends that are going to transform equity investing in India in the years to come – systematic investing and index funds.


   In the past, one of the problems with booms has been the proliferation of expert fund managers, who look very good as the market soars but rarely if ever, recover their past glory after a bust. This has made investors really cautious of betting big money behind the latest "Big Bull" or "Star".


   They have also seen that their SIPs often lose much less value than their lump-sum investments made during a boom. The answer to the problem is not to pick fund managers and the only way to do it is to invest in index funds.


   These funds cost less, and their NAV moves with the market; without holding cash, these funds avoid second-guessing the market and failing; they do not depend on the ability of anyone to pick stocks since they just replicate the index; and above all, you can be confident that your SIP will not be stuck in a fund with lots of bad decisions which will never recover.


   Over time, I hope that Indian investors can benefit from the India growth story as much as FIIs have and the trend towards index investing in a systematic manner makes me confident.

 

Popular posts from this blog

Liquidity Adjustment Facility

Liquidity adjustment facility (LAF) is a money market tool used by the central bank of a country (in India it is the Reserve Bank of India ), to infuse funds into the country's banking system when liquidity dries up. Again, in case there is excess liquidity, the central bank uses some tools to help banks manage their surplus liquidity. Usually the RBI uses the repurchase facility (called Repo ) to give short-term loans to banks to meet their temporary liquidity shortage. On the other, hand RBI uses reverse repo facility to help banks park their excess liquidity with it. Banks usually use various securities, which are approved by the RBI, as collateral when they take money from the RBI to meet their short term liquidity requirement     Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara...

Jeevan Labh

 The Life Insurance Corporation of India has announced Jeevan Labh , its limited-premium, with-profits endowment plan .   It comes with a premium paying terms of 10, 15 and 16 years for corresponding policy tenures of 16, 21, and 25 years respectively. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 83...

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

NRI from Canada and US Invest in Mutual Funds in India

Investing in Indian mutual funds by NRIs from US and Canada As of December 2016, eight Indian fund houses were accepting investments from US/Canada-based NRIs Most of the Indian mutual fund houses have stopped accepting funds from US and Canada based NRIs due to regulatory restrictions. This is because the Foreign Account Tax Compliance Act (FATCA) makes it compulsory for all financial institutions in the world to report comprehensive details of all transactions involving US/Canada residents, (including non-resident Indians) to the US & Canada Government. Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund
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