Here are some factors to be taken into consideration before investing in a mutual fund.

Your Investment style and objective

Every investor invests in a mutual fund to earn substantial profits and not incur losses. However, you need to take into consideration your risk-taking appetite before choosing a mutual fund to invest your money. For instance, if you have a low-risk desire and are satisfied with lower returns without taking many risks, in that case, you should opt for a debt fund. Whereas, if you have a higher risk-taking appetite, you can choose to invest in mutual funds that invest inequities. It is essential to select a mutual fund whose objectives and financial goals are in alignment with yours.

Past Performance of the Mutual Fund

Before you invest in a mutual fund, an investor must examine the fund’s past performance in terms of NAV growth, which is an indicator of the fund’s performance over the past few years. While past performance cannot guarantee future returns, it does indicate that the fund is managed by experienced and knowledgeable fund managers who have the potential of growing the fund in the coming future.

Expense Ratio

Not every rupee you invest in a mutual fund goes into investing, and every mutual fund has an expense ratio that is utilized to covert the expense such as salaries, overheads and other costs involved in managing the fund. A high expense ratio means that a lesser portion of your investment is being invested in the financial markets, which can directly affect your future returns. With this, it is essential to check and compare the expense ratio of different mutual funds before making your investment decision.

 Exit Load

Exit load is another direct cost an investor needs to incur. Exit load is a small percentage of your NAV; thus, a high exit load can leave a substantial dent in your investment value. Exit load comes into action when you plan to sell your units; as a result of this, a higher exit load will erode a portion of your investment. However, it is recommended to stay invested in mutual funds for an extended period of time to ensure healthy returns from any mutual fund.

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Analyze your Debt Situation

It would be best if you analyze your income and debt position. i.e., your monthly outgoing towards servicing your debt and your savings after meeting your monthly expenses and debt servicing. If you have adequate savings after meeting your debt obligations and expenses, you should invest your savings.

Analyze Nature of your Debt

Before investing when you’re in debt, it is vital to analyze the nature of your debt. In your debt comprises of high-interest debts such as personal loans and credit card debt, you should divert your savings to reduce this debt instead of investing, and you can opt to invest your savings if your debt comprises of low-interest debt such as home loan, motor vehicle loans, etc.

Tax Deductible Debt

Particular debt, such as home loan, have tax deduction benefits. For instance, you can avail of tax deduction on interest paid on home loans up to Rs. 2 lakhs per annum Under Section 80EE of the Income Tax Act. If your debt is allowing you to avail of tax deduction benefits, you should continue these debts and invest your savings, whereas if your investments do not offer tax deduction benefits, you can select to invest your savings in reducing their debt rather than making an investment.

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Types of Mutual Funds in India

Equity Funds

These mutual funds invest in the equity market, and the primary object of the fund is to offer maximum returns on investment to the investors. These mutual funds are the high-risk investment, and its performance is linked with the performance of the stock market. These mutual funds are well-suited as a long-term investment.

Sector Funds

Sector funds are mutual funds that invest exclusively in the shares of companies that a selected sector or industry. For instance, a mutual fund might opt to invest only within the tech sector or the oil industry. While these funds can offer high returns, these are also deemed as high risk due to a lack of diversification of investment.

Index Funds

Index funds are mutual funds that invest in the pattern of the market indices, such as the SENSEX, NIFTY, etc. The NAV of these funds can rise and fall based on the performance of the market indices.

Tax Saving Funds

Tax saving mutual funds offer investor tax benefit under section 80C of the Income Tax Act, 1961. Investment in these mutual funds can offer taxpayer rebates of up to Rs. 1.5 lakhs under u/s 80C, thereby reducing their overall taxable income and tax liability. These mutual funds are suitable for individuals who wish to invest for the long-term and avail of tax-saving benefits.

Debt Funds

These mutual funds invest mostly into debt or fixed income securities such as debentures, government securities, corporate bonds, commercial papers, and other forms of money market instruments. Debt funds are suitable for investors who have a low-risk appetite or are seeking a steady regular income

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You might have definitely heard a thousand times from your friends, colleagues, and other sources that mutual funds are the best way to drive wealth. Moreover, most of the investors in India don’t prefer to invest in mutual funds for long terms, as they cannot wait for long to realize the potential of the asset. Believe it or not, investing in equity funds for long periods can lead to better returns. 

Do you know? Mutual funds are also the best way to invest in the future of your kids. Yes, you read it right! As for most of the parents, the future of their child is the biggest concern; they prefer investing early for their child’s bright future. If we talk about good returns out of your long-term investment, then Children’s gift funds are the best solution-oriented scheme that would never let you fall out of your expectations. 

HDFC Mutual Children Gift Fund is the exclusive scheme to invest for your child’s future, such as education and marriage. This scheme has been carefully curated and conceptualized that helps individuals to invest in the assets and grow their invested funds for a long-term period. It is beneficial to create a children’s education corpus through mutual funds.

So, if you are thinking of investing in your child’s future, then go ahead and consult your nearest HDFC Mutual Fund agents for further details. Gift your child a secure future.

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Tax benefits for the mid-class 

The middle-class citizens can’t gripe about this budget since it has filled their pockets with various advantages. The most talked-about among them is the INR 12,500 rebate in tax that has been offered to individuals whose taxable pay is equal to or lower than INR 500,000. This is the main change that benefits the citizens as well as the government equally. It ensures that a considerable segment of the citizens are amazed. 

In the meantime, it likewise ensures that the legislature does not miss out on a lot of income in the light of tax relaxation. The middle-class citizens get the chance to appreciate multiple other perks as well. The regular deduction for the salaried people has been raised from INR 40,000 to INR 50,000. Individuals in this section desired for better rates than what had been declared in 2018. Along these lines, it is normal that they might like it too. 

Individuals who lean toward saving instead of investing have been profited enormously by this budget. TDS basic limit has also been amplified from 10,000 INR to INR 40,000. This is something that is required to address the certifiable worry of citizens who favor saving rather than investing. Aside from this, there has also been a doubling in the gratuity limit. 

Tax changes with double aims 

Some tax changes would enable the legislature to accomplish two objectives with one shot. They are meant to support the citizens and also help in improving the real estate. It should be noted here that this real estate sector out of all the other areas isn’t doing excessively well. This additionally implies that the real estate division needs to get the consideration that it had deserved for a long time. 

It is expected that the alterations made in this regard for this sector would help give it some genuinely necessary boost. The equivalent can’t be said of the corporate and industrial sectors. They need to wait for the final budget to get passed so that they also can get a few benefits.

If the government proceeds with its listed plans as given in the interim union budget 2019-2020, not exclusively is it flagging its certainty about being re-chosen, it is likewise improving a setup asset previously by the other governments. Prior, the legislature had propelled the introduction of the Union budget plan to give government offices a chance to embrace a spending plan from the start of the financial year. Presently it is affecting a comparable flight because an economy which is like the size of our India can’t bear to lose direction in the mediating time frame till another government assumes the responsibility. 

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While balance day trading with your day job can be difficult, here are some strategies which can help you manage to trade with your day job:

Use a Trading Style which Suits You

Using a trading style that suits you and allows you to operate to trade along with your day job. For instance, a swing trading strategy is helpful for a trader to have time limitations in studying and analyzing technical charts and making their trades. Swing trading allows traders to hold shares for a few days, unlike in the case of day-trading.

The swing trading method can help part-time traders to analyze their charts and performance of stocks over the weekend or throughout their free time and accordingly execute their trades.

Invest in a Stock Market that suits your availability

It is not possible for people with regular jobs to consistently track share price movements, analyze and study charts and technical indicators during their working hours. At the same time, getting caught trading in the stock market during your working hours can also cause a problem for you.

While tracking price movements on the NSE and the BSE on a real-time basis can be impractical for most corporate employees, they can also choose a stock market to trade in, which suits their timing. For instance, the LSE closes at 10 PM IST, the NASDAQ and the NYSE close at 1:30 AM IST. Similarly, the Australian Securities Exchange, Korea Exchange, and the Japan Exchange Group’s trading hours start at 5:30 AM IST.

You can select any stock market to make your trade and earn a substantial side-income based upon your working habits and lifestyle

Conclusion 

While not everyone can acquire ample capital to make a living by trading in stocks and shares, it is an excellent option for a side-income while holding on to your regular 9 to 5 job. While trading needs some skill, dedication, working smart can help you manage to trade along with your existing employment and generate an additional source of income.

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Here are some factors small traders and investors need to look into before selecting a stockbroker.

Background Check of the Stock Broker

Conducting a background check of your short-listed stockbrokers is vital. A background check can involve checking the past performance of the broker, their registration with SEBI, their online reviews, etc. A proper background can help small traders and investors to safeguard themselves from fly-by-night brokers, cases of fraud and cheating, etc.

Minimum Balance Requirement

Almost every brokers and broking firms have their minimum balance requirement, which needs to be deposited at the time of account opening and maintained during the operation of the account. It is critical to compare the minimum balance requirement across different brokers and broking firms as it can help you free some of your capital for other activities.

Customer Service 

Customer service and timely availability of a broker refers to offering advisory services, providing suggestions, and answering queries promptly. Prompt and appropriate customer service is vital in making trades at the right time towards ensuring optimal returns on the capital invested.

Cost of Commissions and Other Fees

Each broker, sub-broker, and brokerage firm has different fees and charges for commissions, brokerages, and charges for the services. Commissions and brokerages are charged on each transaction carried out by the customer, and these charges and expenses affect the returns of the traders and investors. This makes comparing the commissions, brokerages, and other fees charged by different brokers and broking firms and before finalizing their broker.

Hidden fees and Charges 

While many broking firms can advertise low rates commissions and brokerages, they can have a multiple of hidden fees and charges which a trader notices only after undertaking a transaction. Hidden fees are often not communicated at the time of signing the customer, and these charges and fees are mentioned in fine-print in lengthy agreements. 

As these hidden fees and charges can adversely impact your returns on your trades and investment, customers need to analyze and evaluate different fees and charges levied by brokers and broking firms.

The Verdict

Every investor and trader has a different financial goal, and as a result of this, no single broker can cater to the needs and requirements of every type of trader and investor. While discount brokers can be suitable for day-traders and part-time investors having substantial knowledge of the financial and stock markets, full-service broking firms are much more ideal for investors and traders who require constant support, advice, and guidance of the brokers.

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Holding Period

Day-traders buy and sell stocks the same day during the working hours of the stock exchanges. Traders hold stocks for a brief period. Whereas long-term investors buy and hold stocks for long terms. The holding period of shares can range from months to years to even decades. Short-term market fluctuations do not affect the investment decision of long-term investors.

Capital Growth

Traders make money by buying stocks at a lower price and selling them at a higher price. Traders time the market to make their trades. Whereas long-term investors create wealth by earning dividends and compounding interest by holding stocks for an extended period.

Risk

Trading and Investing in shares involves market risks. Nonetheless, the degree of risk varies for day-traders and long-term investors. Day-traders are exposed to short-term market fluctuations while the long-term investor is not affected by short-term market fluctuations. However, day-traders can earn substantial profits in a short amount of time, whereas long-term investors need to wait for longer durations to reap their gains.

Art Vs. Skill

While day-trading is like playing T-20 Cricket and long-term investment is like playing a 5-day Test match. Just like in T-20 Cricket, a batsman requires the ability to score at a fast rate, day-traders need the skills to time the market and learn prevailing market trends. On the other hand, a long-term investor requires patience and stay put like a batsman in Test Cricket. Investing involves the art of understanding business fundamentals and the patience and commitment to remain invested in the long-term.

Strategy to Make Gains

Day-traders buy shares for a short period. Traders buy and sell shares the minute the price of shares increases in the stock market. Timing is vital in trading, and missing the right window might lead to losses. Day-trading involves looking at the current performance of companies to book profits in a short duration of time. Whereas long-term investors ignore short-term market fluctuations and trends and hold on to their investment for an extended period to earn a profit.

Both day-traders and long-term investors who achieve their financial goals can be referred to as successful. Day-trading and long-term investment have their pros and cons, and you can choose whether to become a day-trader or a long-term investor based on your financial goals.

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This is the most frequent method to sell insurance. The salesman tells the customer that the insurance policy is reliable and provides immeasurable returns than FD. While this is not accurate. Life insurance policy first gives you protection in case of unfortunate death so that persevering family members receive the sum guaranteed amount from the insurer. It is also called ‘sum assured’ protection profit. The insurance company levies a premium from the customer to give this benefit.

Aside from the security profit, the life insurance product may also have additional advantages that can act like savings in the matter of an unfavorable event. Do not avail of insurance from FD. Additionally, do your calculation accurately as to whether the policy actually gives more savings benefits than FD. Numerous agents talk of false returns to show very engaging rates of returns on the policy. You should beware of the agent’s words. As examples, ‘You will be paid an X-pay premium.’ But the cumulative period of premium payment is not mentioned for receiving such installments. Generally, life insurance policies are long term (longer than 5 years and usually for 10-20 years).

This is more linked to health and accident insurance policies. Even while selling life insurance, the agent should definitely describe under what circumstances the claim is not payable. For example, if the customer smokes and represents himself as a non-smoker as an application, the insurance company may decline to give the family a death claim upon his death.

Agents do not present ‘cost’ and ‘duties’ with the policyholder to avail benefits. The insurer is accountable to respect its side of the agreements made in the product as well as the customer to pay his installment slated for the correct, timely, and entire term of the policy. If the entire term is not fulfilled, there may be charges or deductions that will affect the insurer. Accordingly, the buyer should be ready only for the easily payable premium amount.

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The youth do not think of investment, and that is why the precious time is removed in which the investment made could give an excellent return. The sooner the venture is started, the more likely the profit is increased. If the financial responsibilities of the youth are low, if they invest in an insurance policy, they will have no difficulty in withdrawing their necessary expenses as well as paying the premium of the plan. If you have invested in any scheme, keep reviewing it from time to time. You will not be able to get as many returns as you get on your money when you do not review regularly. You should be fully aware of returns, risks, cost, etc.

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Advisers say any person should spend 70 percent of his salary. During the festive season, if someone has done more shopping and the home budget has been disturbed, there is no panic. You can avoid deteriorating your expenses by removing the money that you have deposited for savings. If you invest only in traditional investment options like FD or PPF, you also get the same kind of returns. But you should put money into the possibilities that give faster returns than just one way of investment options. If you put money through SIP in mutual funds, you will benefit immensely.

If you have a business of your own, don’t be afraid to take risks. Sometimes it proves to be a risk of not taking risks. So, analyze the circumstances thoroughly and invest money. You are not capable of controlling your expenses in overcoming each other and looking attractive, and sometimes you don’t hesitate to borrow to follow the luxury lifestyle. Avoid such habits. It is okay to acquire for home or children’s studies. But never take loans for unnecessary expenses. Many people put money in the stock market without knowledge so that they face losses. If you also spend money like this without knowledge, it is not the right way to invest.

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