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When we buy equities, we start looking at the price next day or next week. For many who call themselves investors, long run is 1 month. But do you think the management of the business of which we buy shares really looks at their business growth in such a short period.
In equities, the rule of Farming applies. This basic rules states that -
But when it comes to equities, we think that HAATHON MEIN HI SARSO UGTI HAI. We want good return in short time. How many of us really think of equities for long horizon? We keep Gold for generations. Grandparents go for bank fixed deposits for their grandchildren, but no one invests in share of banks, say HDFC Bank for their kid's marriage. And, no one plans to invest in equity mutual fund for their retirement.
Fundamental Investing & Speculation
Equity give you two kind of return, one is speculative and another is fundamental growth. 95% of the investors in shares are here for speculative gain, that is gain from the short term price movement of shares. They start TIMING THE MARKET rather giving TIME IN THE MARKET. This approach for short term gains is the real cause of loss. Investment for long run is not only rewarding but also beats inflation by a good margin and creates wealth. Now think of Indian business or Indian Economy for next month, you will be clueless but think of it for next 5 years, 10 years. We know that you are aware of the answer.
Now people call equity risky. Unfortunately, risk is not understood by many investors. In short run, risk is in volatility of price of underlying asset i.e., how much it can rise and fall given a period of time. But in long run risk is not volatility but the risk is to maintain the purchasing power of your money. Look at the price of petrol in last 30 years (in below chart) and then compare it with your return in FDs, Gold, Endowment or Money Back Plans. Why people don't make money in Equities?
Just to give you comparison how equities have delivered returns over last 30 year, look at the graph below. The graph shows you how Rs. 100 invested in different asset class fared over last 30 years ending March 31st 2010.
Looking at the graph above, it must be clear that equities do give returns. But the question still remains unanswered that if Equity gives returns, why people don't make money out of equities. The answer lies in their EMOTIONS. The two basic emotions Greed & Fear will make you feel comfortable when the markets are going up and feel disheartened when the market goes down, even though one really doesn't need to sell at that time. Always remember that equities is a long term investment and after you invest if emotions are making you restless, think about forgetting this investment. Checking daily profit or loss and anticipating the future growth has no meaning and is futile exercise.
In the end, invest in equities, but as a long-term investor and partner the Indian Growth Story.
A government bond is a debt instrument issued by the Central and State Governments of India. Issuance of such bonds occur when the issuing body (Central or State governments) faces a liquidity crisis and requires funds for the purpose of infrastructure development.
Government bond in India is essentially a contract between the issuer and the investor, wherein the issuer guarantees interest earnings on the face value of bonds held by investors along with repayment of the principal value on a stipulated date.
-Government Bonds are one of the most secure forms of investment in India attributed to its Sovereign guarantee. Risk-averse investors who prefer superlative security of their investments devoid of uncertainty created present in market-linked instruments can look to invest in this type of securities.
- It is also a suitable long term investment option for entities that do not have experience in investing in stock market tools.
-Individuals seeking to dilute the risk factor in their overall investment portfolio while also ascertaining higher than average returns on their investments can allocate a stipulated portion of their corpus for investment in Government Bonds as well.
Hence, entities seeking to dilute or diversify their investment portfolio or starting their venture as investors can consider investing in government bonds, the excess corpus they have.
54EC bonds, or capital gains bonds, are one of the best way to save long-term capital gain tax. 54EC bonds are specifically meant for investors earning long-term capital gains and would like tax exemption on these gains. Tax deduction is available under section 54EC of the Income Tax Act.
54EC bonds do not allow any tax exemption on short-term capital gains tax. Invest in 54EC bonds to get benefits of tax deduction.
The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) and IRFC (Indian Railways Finance Corporation Limited).
54EC bonds are popular investment instruments as investing in 54EC bonds allows investors to claim tax deductions on long-term capital gains. 54EC bonds also offer other features.
The exemption under Section 54EC can be claimed by any taxpayer, including
What are Corporate Fixed Deposits (CFDs)?
The deposit placed by the investors with companies for a fixed term & carrying a predefined rate of interest is called Corporate Fixed Deposit. These are majorly issued by Non-Banking Financial Corporations (NBFCs) and Housing Finance Companies (HFCs).
A common misconception is that company fixed deposits are not wise investment choices when the deposit rates offered by the banking institutions are “high”. On the contrary, wisely chosen company fixed deposit products should always have a place in an investor's debt portfolio.
The reason for this is simple - interest rates should not be considered in isolation. Rather, they should be considered in relation to the prevailing inflation rate or the rate at which the rupee is losing value in the market. An astute investor will observe two things - one, whatever be the ongoing annual inflation rate is, the deposit rates offered by institutions are a notch (a couple of percentage points) lower than that and two, the average company deposit offers a slightly better rate than the bank fixed deposit for a comparable term. Putting the two together, an investor will always know that the company fixed deposit gives an interest rate that is closer to the current rate of inflation at a point in time compared to a similar bank FD product.
Of course, the key is, as in all things in life, moderation. The company deposits give a slightly higher interest rate because there is a slightly higher risk associated with them. The “credit risk” associated with a company fixed deposit should be factored into while making a decision on where to invest.
The simple thumb rules to keep in mind are the following:
Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Peer-to-peer lending companies often offer their services online, and attempt to operate with lower overhead and provide their services more cheaply than traditional financial institutions. As a result, lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates
Since P2P lending is a form of well, lending, it comes under the Reserve Bank of India (RBI). RBI has set guidelines around how P2P lending platforms need to work. For instance, any company which wants to offer P2P lending services need to register for an NBFC-P2P license from the RBI.
Like any investment, the return in P2P lending depends on the risk you are willing to take. You can measure the risk in P2P lending on two parameters: one, the borrower's creditworthiness and two, the tenure for which you lend.
The longer the lending period, the higher the returns and, the poor the credit track record of a borrower, the higher the returns.
In P2P lending, investors essentially earn interest from the amount they lend. Thus, just like interest earned from other instruments like FDs, interest income from P2P lending is taxable.
Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure Commission earnings is made at the time of investments. We are not a Registered Investment Advisor and we do not change any fee to our clients.
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