Are all market crashes bad?

Amit Trivedi of Karmayog Knowledge Academy on why the great Indian securities scam resulted in a better and safer market for the investors. 

Click on the link below to read the article:
Are all crashes bad? 

#RidingTheRollerCoaster

How does one start investing in mutual funds?

Mutual funds are becoming popular vehicles of investing. However, many still have questions regarding how to start. Please click on the link below to read my article on the subject:

How to start investing in mutual funds?

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The English translation of the same is as under:

Someone approached me the other day after an investment seminar and asked, “I understood the importance of mutual funds and that I must start investing. However, I do not know where to start and how. Can you please tell me, how do I invest in mutual funds?”

First of all, if you are starting to invest in mutual funds, or starting to invest altogether, it is better to take help from experts. There are two categories of experts that can be helpful, viz., mutual fund distributors and investment advisers. Both have differences in the way they conduct their business and help investors. However, for a beginner, both could be helpful.

Having said that, it helps to be prepared with the things required even before meeting an expert.

In order to invest in a mutual fund scheme, one must decide why one is investing – there has to be some financial goal – an expense in future for which one invests today’s surplus. The goal could be short term, medium term or long term. Once you know your goal, choosing the options becomes easy.

You must also decide whether you have a lump sum or regular saving to be invested. Mutual funds offer facilities for both.

In order to invest in any financial product, you must complete certain formalities. These are popularly known in the financial markets as KYC – Know Your Customer. This process involves submission of certain documents that prove your identity as well as your address proof. You would be given a confirmation once this is completed. In fact, the regulators have made life simpler for investors through a common KYC for any of the products in the securities markets, i.e. mutual funds, stocks or bonds. The experts that we talked about earlier – the mutual fund distributor or the investment advisor, can also help in completing your KYC.

Once your KYC is completed, you are ready to invest in mutual funds.

The next decision is whether you want to transact online or through an application form.

There are three main online platforms that one can use – MF Utility, NSE NMF II and BSE StarMF. Depending on which platform your mutual fund distributor uses, you can avail of the services. In all these cases, you need to set up your account. This process may take some time. You would not be allowed to transact before such registration.

Most mutual fund companies also offer online transaction facilities through their websites or through mobile apps. Your distributor also may have developed some such facility. Many mutual fund companies allow you to transact even without any registration if your KYC is completed.

Alternately, you can resort the age old practice of filling up an application form and submitting it to the designated offices.

Along with the application form, you would be required to make a payment. In the online mode, the payment would also be online. Hence, you would need to enable your net banking facility. Whereas if you are applying through an application form, you would need to attach a payment instrument along with the form.

Please make sure you are only making the payment from your own bank account, as mutual funds do not allow third party transactions.

So, as one can see, opening an account is a very easy process.

- Amit Trivedi, Author of "Riding The Roller Coaster - Lessons from financial market cycles we repeatedly forget. The book is available in English and Gujarati and is soon launching in Hindi.

 

Humans are Pattern-Seeking Animals! 

A man is a pattern-seeking animal. We see patterns where none may exist. We have seen Ganesh idol in the clouds and we have seen India map on highways between trees.
Those are fine, so long as our lives are not affected. However, when one starts putting serious money while looking at patterns, one may be in for a very big surprise.

Read the full article here ...

 

What are feeder funds?

Here is my article on the subject "What are feeder funds?", published in Mid-day Gujarati edition.

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The English translation is as under:

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In some of our earlier articles, we have talked about gold mutual funds. These come in two varieties – Gold ETFs and Gold Savings Fund. While the former invests in gold, the latter invests in the units of a Gold ETF. Such an arrangement makes it a feeder fund.

A feeder fund is a type of mutual fund that invests in the units of another mutual fund scheme. Unlike a fund of funds, which invests in multiple schemes, a feeder fund invests in only one scheme.

One may wonder:

·      Why should a mutual fund scheme invest into another?

·      Why can’t one launch a new scheme?

The questions are valid and still we have a few feeder funds.

So let us start with what kind of feeder funds we have in India. We have already referred to one category: Gold savings funds that invest in units of Gold ETFs. The second category of funds invests in units of another international mutual fund. An international mutual fund may be investing in various assets outside of India.

First of all, when SEBI allowed mutual funds to buy gold, it was only under the ETF structure. However, as the limitations of ETFs surfaced, the chief among those being that one could not do systematic investing in an ETF, need was felt for an open-ended fund that allowed investment in gold. Instead of going to SEBI for change in regulations, the mutual fund companies found out that even within the existing regulations, it was possible to create a feeder fund structure and that is how gold savings funds came into existence.

The other structure – funds feeding into international mutual funds – was a result of costs involved in managing schemes investing in international markets while being in India and of small size. The costs involved may become prohibitively high and all the potential gains through active management may vanish. So funds innovated and came out with feeder funds feeding into some of the global biggies’ funds – most often, their parent company’s schemes.

Thus, feeder funds came due to one of two reasons: (1) limitations imposed by regulations, or (2) economic viability

In both the cases a feeder fund was the most appropriate option.

- Amit Trivedi, Author of "Riding The Roller Coaster - Lessons from financial market cycles we repeatedly forget"

Blog for the book - now in Hindi

Riding The Roller Coaster - in Hindi now

Coming soon in Hindi

"Riding The Roller Coaster - Lessons from financial market cycles we repeatedly forget"

जल्द ही आ रही है हिंदी में 
keep checking the Hindi blog http://ridingtherollercoasterthebook.blogspot.in/2017/03/blog-post.html

Reviewing portfolio regularly: A comparison of SIP performance

 How do you respond when you come across an article comparing SIP performance across various mutual funds? Read my article to understand further:

Reviewing portfolio regularly: A comparison of SIP performance