Investment
Mutual Funds
- A Mutual Fund (MF) is formed when capital collected by various investors is invested in purchasing company shares, stocks, or bonds. Shared by thousands of investors, mutual funds investments are collectively managed by a professional fund manager to earn the highest possible returns. This is how mutual funds work, not only in India but, anywhere in the world.
- Mutual funds are ideal for investors who want to invest in various kinds of schemes with different investment objectives but do not have sufficient time and expertise to pick winning stocks. Mutual funds give you the advantage of professional management, lower transaction costs, and diversification, liquidity and tax benefits.
Key Benefits of investing in Mutual Funds
- Diversification
- Professional management and well regulated
- Disciplined investment approach
- Low transaction costs
- Liquidity
- Tax benefits
Equity Funds
Equity funds primarily invest in shares of different companies. Your equity funds investment would make a profit when the share prices surge, while they suffer a loss when the share prices fall. Investing in equity funds is apt for those who stay invested for an extended period and are comfortable with moderate to high risk.
Equity funds aim to generate high returns by investing in the shares of companies of different market capitalisation. They produce higher returns than debt funds and fixed deposits. The performance of the company decides the investors’ returns.
An equity fund invests at least 60% of its assets in equity shares of companies in varying proportions. This should be in line with the investment mandate. It might be a purely large-cap, mid-cap, or small-cap fund or a mixture of market capitalisation. Moreover, the investing style may be value-oriented or growth-oriented.
After allocating a significant portion of equity shares, the remaining amount will go into debt and money market instruments. This is to take care of sudden redemption requests as well as bring down the risk level to some extent. The fund manager makes buying or selling decisions to take advantage of the changing market movements and reap maximum returns.
Who should invest
Your decision to invest in equity funds must align to your risk tolerance, investment horizon, and goals. Generally, if you have a long-term goal (say, five years or more), it is better to go for equity funds. It will also give the fund ample time to ride out the market fluctuations.
If you are a budding investor who wants to have exposure to the stock market, then large-cap equity funds may be the right choice. These funds invest in equity shares of the top 100 companies in the stock market. The well-established companies have historically delivered stable returns over the long-term.
In case you are well-versed with the market pulse but want to take calculated risks, you may think of investing in diversified equity funds. These invest in shares of companies across market capitalisation. These give an optimum combination of high return and lesser risk as compared to equity funds that only invest in small-cap/mid-caps.
Features of Equity Funds
– 80C tax exemption
ELSS is the only tax-saving investment under Section 80C of the Income Tax Act that gives you equity exposure (other than NPS). With its shortest lock-in period of three years and high return potential, ELSS has a good track record . You can invest in small but regular instalments or a lump sum as per your affordability.
– Cost of investment
The frequent buying and selling of equity shares often impact the expense ratio of equity funds. Currently, SEBI has fixed the upper limit of expense ratio at 2.5% for equity funds and is planning to reduce it further. A lower expense ratio, of course, translates into higher returns for investors.
– Holding period
When you redeem units of equity funds, you make capital gains. The capital gains are taxable in the hands of investors. The rate of taxation depends on how long you stay invested in equity funds, and this period is called the holding period.
– Cost-efficiency & diversification
By investing in equity funds you can get exposure to a number of stocks by investing a nominal amount.
For instance, if you have Rs 2,000 to invest, then you will be able to buy one stock of a large-cap company or one stock of 2-3 mid-cap companies. However, your portfolio will face concentration risk. But with the same amount, you can get exposure to a lot many stocks when you invest in equity funds. This allows you to diversify and benefit meaningfully.
Debt Funds
Debt funds primarily invest in fixed income government securities such as treasury bills and bonds, or reputed corporate deposits. Investing in debt funds is less risky than equity funds. Debt Funds are apt for those who are risk-averse and looking for a short-term investment.
Buying a debt instrument is similar to giving a loan to the issuing entity. A debt fund invests in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments. The fundamental reason for investing in debt funds is to earn interest income and capital appreciation. The issuer pre-decides the interest rate you will receive as well as the maturity period. Hence, they are also known as ‘fixed-income’ securities.
Debt funds invest in different securities, based on their credit ratings. A security’s credit rating signifies whether the issuer will default in disbursing the returns they promised. The fund manager of a debt fund ensures that he invests in high credit quality instruments. A higher credit rating means that the entity is more likely to pay interest on the debt security regularly as well as pay back the principal amount upon maturity.
Debt funds which invest in higher-rated securities are less volatile when compared to that of low-rated securities. Additionally, maturity also depends on the investment strategy of the fund manager and the overall interest rate regime in the economy. A falling interest rate regime encourages the manager to invest in long-term securities. Conversely, a rising interest rate regime encourages him to invest in short-term securities.
Who should invest
Debt funds try to optimize returns by diversifying across different types of securities. This allows debt funds to earn decent returns. However, there is no guarantee of returns. Debt fund returns often fall in a predictable range. This makes them safer avenues for conservative investors. They are also suitable for people with both short-term and medium-term investment horizons. Short-term ranges from 3 months to 1 year, while medium-term ranges from 3 years to 5 years.
Types of Debt Funds
• Short-Term and Ultra
Short-Term Debt Funds
These are debt funds that invest in instruments with shorter maturities, ranging from 1 to 3 years. Short-term funds are ideal for conservative investors as these funds are not affected by interest rate movements.
• Liquid Funds
Liquid funds invest in debt instruments with a maturity of not more than 91 days. This makes them almost risk-free. Rarely have liquid funds seen negative returns. These funds are better alternatives to savings bank accounts as they provide similar liquidity with higher returns. Many mutual fund companies offer instant redemption on liquid fund investments through unique debt cards.
• Gilt Funds
Gilt Funds invest in only government securities – high-rated securities with very low credit risk. Since the government seldom defaults on the loan it takes in the form of debt instruments; gilt funds are an ideal choice for risk-averse fixed-income investors.
• Credit Opportunities Funds
These are relatively newer debt funds. Unlike other debt funds, credit opportunities funds do not invest according to the maturities of debt instruments. These funds try to earn higher returns by taking a call on credit risks or by holding lower-rated bonds that come with higher interest rates. Credit opportunities funds are relatively riskier debt funds.
• Fixed Maturity Plans
Fixed maturity plans (FMP) are closed-ended debt funds. These funds also invest in fixed income securities like corporate bonds and government securities. All FMPs have a fixed horizon for which your money will be locked-in. This horizon can be in months or years. However, you can invest only during the initial offer period. It is like a fixed deposit that can deliver superior, tax-efficient returns but does not guarantee high returns.
Balanced or Hybrid funds
As the name suggests, balanced or hybrid funds invest in both equity and debt instruments to balance the risk and maintain a specific rate of return. The fund manager decides the ratio to reap the best of both debt and equity instruments.
Hybrid funds invest in both debt instruments and equities to achieve maximum diversification and assured returns. A perfect blend! The choice of a hybrid fund depends on your risk preferences and investment objective.
Hybrid funds aim to achieve wealth appreciation in the long-run and generate income in the short-run via a balanced portfolio. The fund manager allocates your money in varying proportions in equity and debt based on the investment objective of the fund. The fund manager may buy/sell securities to take advantage of market movements.
Who should invest
Hybrid funds are regarded as safer bets than pure equity funds. These provide higher returns than genuine debt funds and are a favourite among conservative investors. Budding investors who are eager to take exposure in equity markets can think of hybrid funds as the first step. As these are an ideal blend of equity and debt, the equity component helps to ride the equity wave.
At the same time, the debt component of the fund provides a cushion against extreme market turbulence. In that way, you receive stable returns instead of a total burnout that might be possible in case of pure equity funds. For the less conservative category of investors, the dynamic asset allocation feature of some hybrid funds becomes a great way to milk the maximum out of market fluctuations.
Bond
What is a bond?
A bond is a debt security, in which the authorised issuer – company, financial institution, or Government, offers regular or fixed payment of interest in return for the money borrowed by the said issuer. It is for a certain period of time.
How do bonds work?
o When you purchase a bond, the authorised issuer borrows money from you for a fixed period of time.
o This money earns you a predetermined interest rate at regular intervals.
o The principal amount is repaid at the end of the maturity period.
How are bonds different from stock
o Bond holders are lenders whereas stock holders are owners in the firm/organisation/company.
o Bonds have a defined term of maturity while stocks have no fixed time period.
Securities investments are subject to risks. Please read the Offer Document/Prospectus, the issue terms and conditions, carefully before taking any investment decision.
Company Fixed Deposits
What are Company Fixed Deposits
The deposits made by investors in companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits. Along with manufacturing companies, financial institutions and Non-Banking Finance Companies (NBFCs) also accept these deposits.
- Benefits of Company Fixed Deposits
- Higher interest rate:The rate of interest is 2-4 percent high, as compared to the interest rate offered by banks on fixed deposits
- Regular income:Depending on the scheme, investors have the option to receive interest at monthly/quarterly/half-yearly/yearly intervals
- Lock-in period:The minimum lock-in period for most of the schemes is six months, i.e. investors can withdraw their money post six months, anytime
- TDS:TDS is not applicable if interest earned is equals to or less than 5,000 for a year in a single company.
- Benefits of Company Fixed Deposits
o Investors must carefully read the application form
o Check the rating of the company before investing
o Do a background check of the company before putting money into it
o Companies may change the interest rates on the fixed deposit schemes without any prior notice
Equity
Looking for an easy and convenient way to invest in equity and take positions in the futures and options market using our research and tools. To start trading in Equity, all you need to do is open an online trading account. You can call us and we will have our representative meet you.
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Commodities
At Athena Fin Corp Pvt. Ltd. we not only have sound global information & knowledge base but also combine this with excellent local knowledge when it comes to commodities. With our extensive nationwide presence and network, our product and market knowledge encompasses diverse commodities and markets. Our specialists are armed with extensive domain knowledge. We understand the pricing dynamics driving these markets and can help you to design trading and hedging solutions that allow you to achieve your targets. Our institutional lineage ensures that we always maintain the highest possible form of regulatory, professional and servicing standards in the business.
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Currency
Our Currencies team offers a special Corporate Trading Desk which engages with you and your business on a day to day basis to help carve out tailor made hedging strategies to manage our business risks. As they say, markets go up the stairs and down the elevator, and we help you time it right.
IPO
IPO or Initial Public Offer presents good opportunities for netting high returns on your investments in a relatively short period of time – if you invest early. Get information on IPO news, Forthcoming IPOs and a lot more.
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