FMCG Funds

The consistent performance of FMCG mutual fund schemes over various time-frames have revived an old debate: Should regular investors opt for them? FMCG fund category has been consistently performing in one-, three-, five- and 10-year time periods. A recent report by Crisil said that the FMCG sector is likely to report 11-12 per cent rise in revenues in fiscal 2019, up 300-400 basis points from 8 per cent in fiscal 2018.

However, despite its consistent performance, most mutual fund advisors are not in favour of retail investors betting big on the sector. "FMCG funds are consistent but they are essentially sector schemes and fundamentally retail investors shouldn't have more than 10 per cent in their portfolio,

The FMCG sector has great prospects with rural consumption growing in India but investors need not bet on specific funds. FMCG sector is going to remain strong in India but the funds are meant to be a topping in your portfolio. During the low phase, they will give you consistent returns but in a bull run, you will miss the rally

The FMCG fund category has returned 21.78 per cent in the last one year, 16.73 per cent in three years, 16.61 per cent in five years and 19.46 per cent in the 10 year time frame. The Nifty FMCG Index has returned 12.83 per cent in the last one year, 12.16 per cent in three years and 10.57 per cent in five years. There are only two schemes investing in the FMCG sector in India: SBI Consumption Opportunities Fund (Erstwhile SBI FMCG Fund) and ICICI Prudential FMCG Fund. Both these schemes have been consistent performers in the long term.

Fast-moving consumer goods (FMCG) falls under the defensive sector category like pharma. Products that people use in their everyday lives come under FMCG sector. Coca-cola, ITC, HUL are some examples of FMCG companies. The FMCG sector is an important contributor to India's GDP growth, with a whopping size of around Rs 500 billion.

Mutual fund advisors believe that FMCG is a strong story in the coming time but why bet on specific sector funds when your fund manager can do that for you. "For small investors, adding more schemes doesn't make sense. If you are investing in a diversified fund, your fund manager is already adding the best sectors to your scheme portfolio. In a diversified fund your fund manager can change the allocation if a certain sector goes down.

You don't have that freedom in the sector scheme

However, you may opt for FMCG if you have deep pockets, say mutual fund advisors. If you have a huge corpus and you have already invested across market caps to meet you goals, you can add an FMCG scheme for consistent returns over years, they say. But if you are a small investor, you should opt for a diversified fund. Those who are betting on these schemes for diversification should get in with a horizon of minimum five years

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

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What is an NFO?

What is an NFO?

NFOs are first-time subscription offers for a new scheme. Many funds launch NFOs to complete their product basket. For example, if an AMC does not have a hybrid fund or multi-cap fund, it could launch an NFO to offer that product to investors. NFOs can be for both open as well as closed-end funds. In a closed-end NFO, you can invest only during the offer period. On the other hand, open-end funds reopen for subscription again and investors have the option to subscribe on any working day at the prevailing net asset value.

Should investors put money in a new fund offer?

Financial planners say investors should invest in an NFO if there is a need for that product in their portfolio, or there is a theme, which can be played only through the new fund. Many investors invest in an NFO because it is priced at ₹10, compared with other existing schemes with higher NAVs. It is a wrong strategy, say financial planners. Investors to stick to open-end schemes, which have a track record. They believe that in an existing scheme, the portfolio and fund manager's style of investing is well known. In comparison, in an NFO one does not know what the portfolio will look like or how much assets the fund will gather.

What is the difference between an equity IPO and a mutual fund NFO?

Equity IPOs are issued by companies seeking capital to expand or to become publicly traded. On the other hand, an NFO from a fund house just pools in money from investors and invests in a set of securities (stocks or bonds or government securities), based on a stated strategy. Rarely are IPOs done at the face value today, as most of them are done at a premium to the face value. On the other hand, an NFO is always available at ₹10.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

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Reinvestment Risk in Bank FDs

Banks keep varying their FD rates and that poses a risk to your investment. A rate of 9% is not only the highest rate offered five years ago, but also one of the highest interest rate levels over the past decade. But what if prevailing rates are on the lower levels at, say, 6.25% – 7%? If the rates go up in future, you will not be able to take advantage of it.

Also, if you had opted for a three-year FD or a one-year FD and gone for renewal, the entire scenario would have been different. You would have had to renew at prevailing rates, which were much lower than your original rate.

Volatility exists in FDs as well, though not as explicitly as in debt funds. Returns may be fixed with FDs. But what looks attractive now may not look good five years down the line when rate (and inflation) scenarios are entirely different.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Should SIPs be Continued When Returns are Negative?

Many investors who started investing in equity mutual funds using SIPs in the past year are seeing negative returns due to the correction in the markets. Find out what they should do in that case:

1. I started SIPs in three equity mutual funds in January, of which two are giving negative returns? What should I do?

Investors should not start evaluating SIP returns in less than a year's time, as they could see disproportionate returns in the near term. For example, in 2017, we saw one-year SIPs in midcap funds delivering as high as 40% return, but right now, some mutual funds are showing negative returns. They should continue with the SIPs with a long-term time frame of 5 to 10 years. During this long cycle, the equity markets will go through a number of ups and down, and in some of these times, they are bound to see negative returns. In the long term, equity market returns follow the nominal GDP growth rates. Hence, investors should continue their SIPs irrespective of the ones giving negative returns.

2. I will continue with my SIP, but does it make sense to change the mutual fund scheme if the existing SIP returns are negative?

Typically, six months is too short a period to judge a scheme and its returns. Ideally, investors should give the fund manager three to five years to perform. If the fund underperforms its benchmark even over a three-year period, then investors could take a closer look at it and shift to another fund. Alternatively, if the mandate of the scheme has changed, or the fund manager has changed, they should discuss this with an advisor before arriving at a decision.

3. How long can you run an SIP for?

Most fund houses stipulate a minimum time frame of 6 months for the SIP.

Investors can choose any tenure they wish, which could be 3, 5 or even 10 years, or link it to their long-term goals.

Investors also have the choice to opt for the perpetual option, which means the SIP will continue till the investor gives an instruction to the fund house to close it. Financial planners suggest investors link each SIP they do to a particular goal and continue with the SIP till the goal is reached.

4. I have money to spare every month post my annual salary hike. Should I increase the allocation?

Do not get disturbed by the volatility in the markets. Use this opportunity of a salary raise to increase your SIP amount proportionately by using the top-up facility provided by the fund house. It is important that as your income grows, so should your investment amount.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

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Investment Strategy of ICICI Pru Bluechip Fund

Classified under large cap funds, ICICI Prudential Bluechip Fund is now mandated to invest predominantly in stocks of top 100 companies by full market capitalization. The fund will maintain a minimum exposure of 80% to Large Cap stocks.

ICICI Pru Bluechip Fund follows process based investment strategy to identify quality large cap stocks forming a part of top 100 companies by market capitalization. While the fund is expected to majorly have a growth oriented approach, it has shown some flair towards value as well. Probably, it is because both the fund managers managing the scheme have different skill set and investment style, which results in blend style of investment. The fund is process driven and depends predominantly on bottom up approach to pick quality stocks for its portfolio. While picking stocks the fund managers look for scalability of the company they are considering to buy and give high weightage to management track record and scope of improving profitability. The fund typically follows buy and hold strategy, looking for long term holding period and keep churning under check.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Invet in Short Term Debt Funds

Following a hike in the repo rate by the Reserve Bank of India (RBI) and expectations of a few more increases in the current financial year, fund managers insist that investors should stick to short-term debt funds. Apart from short-term debt funds, fixed maturity plans (FMPs) and debt-oriented hybrid funds can be opted by investors in current scenario.

The RBI, in its second bi-monthly policy of 2018-19, has raised the key repo rate by 25 basis points to 6.25%. In the past three years, RBI has cut repo rate down by 200 basis points (100 basis points=1%).

The policy was in line with expectations and three key reasons led to increase in rate hike. First is turbulence in emerging markets, then rise in oil prices and finally pick-up in the core inflation last month. These were some of the key reasons for rate hike. Investors should look at short-term products with average maturity of two-three years if they have investment horizon of 18-20 months.

Short-term bond funds invest in debt securities that mature in about a year to three years. They can invest in a mix of short-term instruments like commercial paper and certificates of deposits. In the last one year, short-term debt funds like Franklin India Low Duration Fund, Baroda Pioneer Short Term Bond Fund and Franklin India Short Term Income Plan have given returns in the range of 6.5% to 7.75%

On an average, returns on short-term debt funds were around 5.25% in the past one year, while returns of longer duration funds like income and gild-medium and long-term funds have given average returns of 3.2% and 0.44% respectively. On Wednesday, the 10-year benchmark government securities (G-Sec) closed at 7.92%. Its very unlikely that RBI will stop with just one rate hike. We might see few more in this financial year. So we would suggest investors to stay away from longer duration funds and stay in short-term or money market securities

Market participants also added that, 10- year yield will continue to remain in the range of 7.75-8% in the next two-three months. The prices of fixed income securities are governed by interest rates prevailing in the markets. Interest rates and price of fixed income securities are inversely proportional. When interest rates decline, the prices of fixed income securities increase. Similarly, when there is hike in interest rates, the prices of fixed income securities come down.

Some industry players also think that, fixed maturity plans (FMPs) and hybrid funds are best bet during the current times. "Investors can lock-in money at the higher yields in FMPs at this point of time. Even hybrid funds which have equity exposure of 10-15% can be attractive at this point of time. Such hybrid funds invest in both debt and equity, but around 70-80% of the corpus is invested in debt instruments while remaining in equity.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How to Make Money Work Efficiently

Some people are better investors and financially more secure because they know how to extract more from every rupee. The consequences of right and wrong financial decisions.

Investing for retirement
The simple act of starting to save early can be the difference between a comfortable and constrained life. Mr Right harnesses the power of compounding and after investing Rs 36 lakh in 30 years, he gets a corpus of Rs 3.05 crore. Mr Wrong puts in Rs 45 lakh in 25 years and still gets a lower corpus of Rs 2.5 crore.

Mr Right
Decision: Started investing at 30 years
Calculation:
Amount invested as SIP in an equity fund earning 12% return Rs 10,000 a month
Period of investment: 30 years
Total amount invested: Rs 36 lakh
Corpus amassed: Rs 3.05 crore

Mr Wrong
Decision: Started investing at 35 years
Calculation:
Amount invested as SIP in an equity fund earning 12% return Rs 15,000 a month
Period of investment: 25 years
Total amount invested: Rs 45 lakh
Corpus amassed: Rs 2.52 crore

Investing for child's goal
Most people confuse investment with insurance, buying traditional insurance plans to fund kids' goals. An endowment plan does not make your money work hard, since you pay a higher premium but get a lower corpus due to low returns of 6-7%, while an equity fund offers over 12% returns over the long term.

Mr Right
Decision: Investing in equity mutual funds
Calculation:
SIP amount: Rs 8,000 a month
Term: 20 years
Assumed return: 12%
Corpus amassed: Rs 72.9 lakh

Mr Wrong
Decision: Buying a traditional insurance (endowment) plan
Calculation:
Monthly premium: Rs 8,000
Sum assured: Rs 9.6 lakh
Total premium: Rs 19.2 lakh
Policy term: 20 years
Assumed return: 6%
Corpus amassed: Rs 28.8 lakh

Tax-efficient investments
Make your money work harder by not allowing tax to eat into investment returns. If you pick fixed deposit, the interest is considered as income and subjected to tax as per your tax slab. However, debt fund returns are capital gains, which invite a lower tax of 20% after indexation, if held for over three years.

Mr Right
Decision: Investing in debt funds
Calculation:
Amount invested in debt funds Rs 2 lakh
Amount after 3 years Rs 2.52 lakh @ 8% return
Capital gain after indexation Rs 31,470
Taxed at 20% after indexation
Total tax: Rs 6,293

Mr Wrong
Decision: Investing in fixed deposit
Calculation:
Amount invested in fixed deposit Rs 2 lakh
Amount after 3 years Rs 2.49 lakh @ 7.5% (compounded quarterly)
Avg interest each year Rs 16,648
Taxed in 30% bracket Rs 4,994 per year
Total tax: Rs 14,983

Taking a home loan
The term of a home loan depends on the EMI one can furnish, which is why some home buyers opt for an extended tenure. They will, however, end up repaying a bigger loan because the longer the term, the higher the interest. So, Mr Wrong will end up buying the same house for a higher price, compared with Mr Right.

Mr Right
Decision: Taking a home loan for 20 years
Calculation:
Loan amount: Rs 30 lakh
Interest rate: 9%
Term: 20 years
EMI: Rs 26,992

Total amount repaid: Rs 64.78 lakh
Total interest paid: Rs 34.78 lakh

Mr Wrong
Decision: Taking a home loan for 25 years
Calculation:
Loan amount: Rs 30 lakh
Interest rate: 9%
Term: 25 years
EMI: Rs 25,176

Total amount repaid: Rs 75.53 lakh
Total interest paid: Rs 45.53 lakh

Dealing with volatility
In a fluctuating market, maintain your asset allocation by rebalancing the portfolio because a skewed allocation is bound to affect your returns. So while Mr Right may seem to work against his own interests by paring down his equity holding after a bull run, he will not suffer as serious a loss were the market to take a tumble.

Mr Right
Decision: Rebalancing the portfolio
Calculation:
Worth of portfolio (80% equity, 20% debt) Rs 1 lakh
Rebalancing when market rises 50% equity, 50% debt
Worth of portfolio @13.6% growth (15% equity, 8% debt) Rs 1.13 lakh
Return during market fall (-5% equity, 8% debt) 1.5%
Portfolio value: Rs 1.01 lakh

Mr Wrong
Decision: Not rebalancing the portfolio
Calculation:
Worth of portfolio (80% equity, 20% debt) Rs 1 lakh
When market rises, no rebalancing done
Worth of portfolio @13.6% growth (15% equity, 8% debt) Rs 1.13 lakh
Return during market fall (-5% equity, 8% debt) -2.4%
Portfolio value: Rs 97,600

Buying life cover
The purpose of buying pure life insurance, or term plan, is to secure the finances of your dependants if you were to die. It is not an investment vehicle to get returns. This is why Mr Right secures a Rs 70 lakh term plan at an annual cost of Rs 7,000, while Mr Wrong is paying a high premium of Rs 96,000 to get an inadequate cover of Rs 9.6 lakh.

Mr Right
Decision: Buying a term plan
Calculation:
For a 30-year-old non-smoker earning Rs 7 lakh a year with three dependants.
Sum assured: Rs 70 lakh
Annual premium: Rs 7,000
Term: 30 years
Total premium paid: Rs 2.1 lakh
Benefits: Lump sum to dependants on death of insured

Mr Wrong
Decision: Buying a traditional (endowment) plan
Calculation:
For a 30-year-old non-smoker earning Rs 7 lakh a year with three dependants.
Sum assured: Rs 9.6 lakh
Annual premium: Rs 96,000
Term: 20 years
Total premium paid: Rs 19.2 lakh
Maturity amount: Rs 28.8 lakh

 

 

 

 

 

 

 

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com