Why your portfolio may be underperforming?
Why your portfolio may be underperforming?
Every time the Indian markets, a specific stock, or a sector reaches a new milestone, a new notification from the media appears on our mobile phones. We hear so much about the increasing economic developments as well as the innovations through numerous startups taking place all over the country. These achievements make us believe that we have a higher scope to earn returns. But when we look into our portfolio returns, they make us realize that there is something that is pulling our portfolio down. Often the portfolio returns would be below the high expectations we may have set for ourselves. There could be various reasons behind it. Let us try to understand these reasons one by one:
Your asset allocation plays an important role in the overall performance of the portfolio. It can be impacted by both underexposure and overexposure to a single security or asset type. The asset allocation of your portfolio with time will have the greatest impact on the portfolio performance as different asset classes have different risk and return trade-off. It would be challenging to achieve higher returns with lower allocation to growth assets. Moreover, the portfolio's asset allocation should be closely monitored as many opportunities can be missed over the investment period.
It is important to match the product features with its suitability for you to get the best results. However, if you try to forcefully fit a product in your portfolio, just because you like it, the result is most likely to go unfavorable. Say, for example, you have invested majorly in guaranteed plans and the timeframe for that particular investment is around 15-20 years, it is possible that you may earn lower inflation adjusted returns in the long run.
Any asset class needs a certain time to perform. In a rush to attain quick momentum profits, you may try to transact buy/sell positions frequently. You will most likely cut your winning bets too early. Frequent transactions could not only lead to high risk & costs but could also result in increased tax liability. Ideally, an asset class or product should be given sufficient time to perform in accordance with its suitable investment horizon.
It is a common saying that one should not put all eggs in one basket as it could increase the risk of your portfolio. This is advised to avoid concentrated risk in a portfolio. If you have a higher allocation to a certain sector or security, your portfolio is more likely to go down in an event of a market correction, moreover, you are also exposed to liquidity risk. Hence, ideal diversification helps to reduce the concentration risk in the portfolio. Having said this, too much diversification also means that you are exposing your portfolio to sub-performing and riskier assets/investments.
Your portfolio and investment plans need a periodic review. With time, your financial situations, family composition, lifestyle and needs /desires change. There might also be extreme market movements throwing up opportunities to invest or book profits. Not reviewing your portfolio on a periodic frequency or need /event-based, can put your portfolio on a lower-performing trajectory. Without reviews, you would be also losing sight of your targeted asset allocation and miss the benefits of actively managing your asset allocation.
It is a tendency of an investor to time the market. Quite often most of the investors keep waiting for market corrections before investing and in the process, lose precious time in the market and returns that they could have enjoyed. Although market valuations do have an impact, but timing the market is very difficult. Our focus should be on the period of the investment, rather than timing the market. Many studies have also shown that timing markets as a strategy have a very negligible impact on portfolio performance over the long term.
Most first-time investors enter the markets in the middle of a bull run or when that bull run is coming to an end, after knowing of the huge returns that people made in a short period of time. People expect that markets will continue to perform in a straight upward line and deliver handsome returns on their investments, without really understanding how markets and equity investments function. Thus, you may feel that your portfolio is underperforming when you have set unreasonable return expectations in a short period of time.
Conclusion:
Ensuring that your portfolio asset allocation is optimum and in tune with your risk profile and expectations are the main steps of any investment journey. Next, one should regularly keep reviewing the same and make the necessary changes. Having the right expectations and financial behaviour may also impact your satisfaction levels. Not all of us may have the necessary time, knowledge or ability to do all this consistently over time. This is where a mutual fund distributor can play a very important role in making sure that your needs and your portfolio are aligned to each other and more importantly, your portfolio behaves in line with your expectations over time.
NJ E-wealth
Sovereign Gold Bonds (SGB)
Sovereign Gold Bonds (SGB)
Indians are reputed to hold around 9-11% of the total physical gold in the world. It is estimated that more than 75% of Indian households own gold in some form, spanning across geography and income levels. We are amongst the top consumers of gold globally. For most of us, gold is part of our culture & practices. We also buy gold because of the age-old belief of gold being a good asset class for use in bad times. Our ancestors started saving and investing in gold long before any formal investment or saving avenues were available.
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The Government of India introduced the Sovereign Gold Bond (SGB) Scheme in November 2015 to reduce the demand for physical gold and shift a part of domestic savings for gold into financial markets. SGBs are government securities issued to resident Indian entities by the RBI on behalf of the central government and thus are considered safe. Their value is denominated in multiples of grams of gold. This is a long-term form of market instrument traded on stock exchange. Investors have to pay the issue price in cash and the bonds are redeemed in cash on maturity, meaning that the maturity will not be in physical gold.

Every year RBI offers SGBs in tranches with new series for limited periods during which time new buyers can buy the SGBs. For instance, Sovereign Gold Bond Schemes 2022-23 - Series IV (tranche), the most recent offering from the government, commenced on March 6 and closed on March 10. This was the final batch of SGBs for the last fiscal year. The issue price for one gram of gold had been set by the RBI at Rs 5,611. Let us now understand some of the fundamentals of SGBs.

The Bonds are issued in denominations of one gram of gold and in multiples thereof. Wherein, a maximum limit of subscription for individual and Hindu Undivided Family (HUF) is 4 kg and 20 kg for trusts and similar entities notified by the government from time to time.
The maturity period of SBGs is eight years. However, the exit in SGBs is possible when the government opens the repurchase window after 5 years. One may sell these SGBs on secondary markets in the event of an early redemption, but doing so would subject him to capital gains tax.
The returns from these bonds are in the terms of interest and capital appreciation. The returns earned by the price differentiation of gold price is same for physical as well as sovereign gold bonds. However, SGB investors additionally benefit from a fixed interest rate of 2.5% p.a. payable semi-annually in a financial year. Moreover, such gains are over and above the price return of the gold.
Both interest income and capital gains are taxed differently. The interest return on these bonds will be added to the total income of an investor. While, in case of capital appreciation, if a primary issuance bond is redeemed early (post 5 yrs.) or kept until maturity, there will be no capital gains tax to pay. However, the taxation of the SGB bond will be different if the transaction is made on the secondary markets. The tax rate in this case for bonds sold after three years is 20% with an indexation benefit. While, short-term capital gains tax will be assessed on bond sales made before three years, and this tax will be added to the investor's income. TDS is not applicable on SGBs.
Any Indian resident – individuals, Trusts, HUFs, charitable institutions, and universities – can invest in SGB. One can also invest on behalf of a minor. As it is issued in dematerialized form, investors must have a demat account. For investors without a demat, the government does provide paper certificate choices for investors adhering to the KYC requirements.

Now, one may be curious about how they can purchase or redeem SGBs. So, let us know it how.
Investors have an option to either buy these gold bonds in physical, digital or dematerialized format. The online and offline purchases are allowed through designated post offices, stock exchanges (NSE or BSE) or scheduled banks. There is a discount of ₹50 per gram for investors applying online where the payment is made online.

The investor will be advised one month before maturity of 8 years and on the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record. As said, early encashment/redemption of the bond is allowed after the 5th year from the date of issue on coupon payment dates. The bond are tradable on exchanges, if held in demat form. It can also be transferred to any other eligible investor.
To summarise, SGBs in India offer several benefits for investors, including zero quality risks, no storage costs, no making charges, high liquidity, guaranteed interest earnings, tax benefits and convenience. It can also serve as collateral for loans and carries no default risk. Needless to say, if you are looking at gold as an investment avenue for diversification or as inflation hedge, investing in in the SGB scheme seems like a pretty obvious choice. So if you are interested, keep a watch for the announcement for the next tranch. Till then, share this idea with your spouse and friends too.
NJ E-wealth
How to mitigate your loss due to accidents?
How to mitigate your loss due to accidents?
People generally assume that because they have a health insurance policy (HI), they would not require personal accident insurance as Health Insurance covers hospitalization due to an accident as well. Although this is a correct notion, accidents frequently result in losses that are not typically covered by health insurance.
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One cannot afford to lose his/ her income when there are numerous expenses happening post an accident. This add-on compensates for loss of income due to an accident, by paying a weekly amount for the period the insured person is unable to work. For instance, add-on cover is Rs. 25,000 per week. If an insured is unable to work for about two weeks due to an accident, he/she will receive Rs. 50,000 as a benefit under this add-on.
Usually fractures are excluded from health insurance policies. Whereas, personal accident cover provides it as an added benefit. Further, a claim can be received depending on the severity of the fracture under this add-on. For example, the fracture cover is Rs. 1,00,000. Insured facing a minor fracture can receive an amount of Rs. 25,000 under this add-on.
One would be most negatively affected for loan defaults at the time of an accident. Yet, if the accident resulted in a death, the scenario could become worse. The family of the insured will suffer both a financial and an emotional loss as a result of this incident. Here, the loan protector add-on can offer financial protection by covering a balance due for the holder in the event of a sudden death or total disability.
It could lead from minor to major injury leading an insured to die or get severely injured due to fire or any chemical burns, and other similar burns. Hence, a fixed amount can be provided to the insured if this add-on is opted.
Coma benefits, air ambulance, wheelchair or crutches charges, artificial limb costs, and child tuition benefits are some add-ons available under personal accident insurance.
Along with these advantages, your insurance cover may increase due to a no-claim bonus (approx. 10% - 20%). One would now wonder that covering so many risks and providing numerous benefits could be pricey while buying this insurance. Fortunately, the premiums are affordable. We will understand this with an example.
Mr. Rajinder holds a personal insurance coverage of 50 lakh rupees. In addition, his two children are each protected for Rs. 10 lakhs, along with his wife for Rs. 25 lakhs. He has decided to choose TTD (Temporary Total Disablement) benefits of Rs. 50,000 for himself and Rs. 10,000 for his wife per week. He also included a 10 lakh rupee fracture cover. He pays an annual premium of Rs. 21,231.
Let's check what happens if Mr. Rajinder falls from stairs and his legs get fractured.
Mr. Rajinder has been advised bed rest for 28 days by the doctor. In such a case he is eligible to claim the following from his personal insurance policy.

Benefit Fracture Care (10 Lakhs) 1 fracture paid for 5% of SI 50,000
Calculation Loss on Income Rs. 50,000 per week for 4 weeks 2,00,000
Claim Amount (Rs.) Total Payable 2,50,000
Moreover, the premiums are decided on the basis of occupation of the insured person. The riskier the occupation (job profile) of the insured, higher will be the premium. Unlike health insurance, the premium does not change due to a change in age or city. For example, a doctor is less prone to risk for an accident as compared to manual labour. Hence, the premium for a doctor would be less than that of manual labour. Therefore, the policy has categorized insured into levels of risk classes like Risk Class-I, Risk Class-II and so on. The premiums for the age 18 to 69 years will remain the same. Instead, the premium is varied depending on the profession.
An individual will get personal accident insurance cover according to his/her annual or monthly income. For example, 10 times of the annual income for salaried and 20 times for the self-employed. Also, while purchasing a policy or filing a claim, insurance firms may ask for income-proof documents such as an IT return or a Form 16.
Conclusion:
Personal accident insurance is indeed a good option altogether for covering various accidental risks. These risks can result in modest to substantial losses. In reality, other people's mistakes can also contribute to some of our uncertainties. As a result, one must also be cautious to secure themselves against any costs or losses that may result from such an incident.
loans
  • Eligibility will be calculated against the folios whose holding pattern is the same in E-Wealth / E-MF account with RTA.
    RTA Loan Eligibility
    CAMS & KFin Single Holder and Either or Survivor
  • PAN should be updated against all the Folios.
  • On the CKYC Page client has to select Mobile/email registered with CAMS/KFIN.
  • Loan can not be availed against the Franklin AMC schemes.
  • Select free securities for pledging.
  • Investments in ELSS during the Lock in period cannot be pledged.
Fund Manager INTERVIEW
patner Interview
Mr. Avnish Jain
Head - Fixed Income, Canara Robeco MF
Mr. Avnish Jain is the Head of Fixed Income at Canara Robeco Asset Management Company, Robeco's joint venture in India. Avnish with over 25 years of experience across many segments of the industry is actively involved in managing the fixed income funds which include Canara Robeco Income Fund, Canara Robeco Corporate Bond Fund , Canara Robeco Conservative Hybrid Fund and Canara Robeco Equity Hybrid Fund.
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"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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