Do Not Try This While Investing
Do Not Try This While Investing
If you are an experienced Indian investor in equity markets, you know that investing is a long-term game. It takes discipline, patience, and an understanding of the risks involved to be successful. However, there are many investors that continue to make mistakes. New investors are particularly vulnerable to making investment mistakes, as they may not have a full understanding of the market or the risks involved. In this article, we will discuss eight common mistakes that new investors tend to make and how to avoid them.
One of the biggest mistakes that new investors make is setting wrong expectations. Most new investors enter markets during or once the bull run has reached its peak, attracted by high returns. They may expect to get rich quickly or to see double-digit returns every year. However, the reality is that investing is a long-term game, and there will be ups and downs along the way.
Setting the right and realistic expectations is crucial, especially when you are a new entrant and have seen only double-digit returns on the portfolio. It is not always going to be a straight line. We need to accept that the market can be volatile and that you may experience losses from time to time.
As mentioned earlier, investing is a long-term game. It is important to have a long-term investment horizon especially when investing in the equity market. This means being prepared to hold your investments for at least five to seven years, or even longer. As we increase our investment horizon and invest for the long term with a focus on the basic principles of investing, like diversification and asset allocation, we are likely to see positive returns and fewer chances of losses or negative returns. While doing this, we would also need to avoid reacting to temporary fluctuations and noise in the markets in the short term.
Investing in the equity market involves risk. The value of your investments can go down (or up) as soon as you invest. Thus, it becomes important to understand where you are investing and the risks involved in the same before investing. There are a variety of risks associated with investing in the equity market, including market risk, company risk, sector-specific risks and so on. While some of the risks can be managed by diversification and by investing in mutual funds, some risks will still continue to exist. Further, risks are not limited to just equities and extend to all asset classes, including debt, commodities, and physical assets. When evaluating risks, we need to understand the asset class and the holding period and then evaluate the risks and make informed decisions.
Another common mistake that new investors make is being impatient. They are generally looking to make quick returns, and if the investments do not perform in line with their expectations, they tend to redeem their investments and move to the next one. This is often done in response to market volatility or a temporary decline in the value.
However, it is important to remember that the equity market is a long-term game. Short-term fluctuations should not dictate your investment decisions. If you believe in the long-term prospects of your investment, you should hold on to your investment, ignoring the short-term volatility of the markets. If you have a short-term investment horizon, you are more likely to sell your investments too early and miss out on potential gains.
Social media can be a great source of information, but it can also be a breeding ground for misinformation, noise, and distraction. New investors should be careful about trusting what they see on social media and other media outlets. Remember, they have a daily show to run and have good TRP, while your objective is long-term wealth creation. Lately, there have been some measures being taken where unqualified financial influencers have been found to promote false success and money-making stories in order to gain followers. It is important to do your own study and verify any information you receive from media outlets. You should also be wary of any investment advice that seems too good to be true.
Many new investors try to beat the market by trying to time the market. However, it is extremely difficult to consistently beat the market over time. Even professional investors struggle with this, and rarely do you find someone experienced ever claiming to do it.
Instead of trying to beat the market, invest consistently with discipline as per your risk profile. SIP in mutual funds is perhaps the best way to time the markets where, with recurring investment every month, you buy more mutual fund units when markets are low and buy less when markets are at highs. Over the long term, the ability to hold and stay put has proven to contribute the maximum to your returns.
Trading is the act of buying and selling stocks in the short term with the goal of making quick profits. Investing is the act of buying and holding investments for the long term with the goal of generating wealth over time. Trading is a risky activity that is best left to professionals. Unfortunately, in a world where crypto-currencies are seen as sound investment avenues, there is no surprise that trading, too, is seen by many as an investment activity. There have been numerous media reports on how very few people succeed in making decent profits through trading activities. As new investors, we need to differentiate between the two and see investment for what it is - long-term and patience-driven.
There have been studies that point out that a lot of new investors often churn their portfolio heavily in the initial years. Further, it has been seen that many Do-It-Yourself (DIY) investors often start and stop SIPs very early in the investment journey. There is a constant urge seen in new investors to find the best-performing investment and invest in the same. However, there have been many studies that the top performers (as on date) are never consistent and change very often. Fund selection goes much beyond this. Such type of investment behaviour is often seen when you are not experienced and haven't put in effort to educate yourself and learn. A helping hand from your mutual fund distributor or investment advisor can go a long way in shaping your investment approach in the right manner and avoiding initial setbacks when you start your journey.
Investing is a lifelong activity and can be very rewarding once you are committed to learn and practice the art. The eight points mentioned above are not an exhaustive list but something that we more commonly see. Beyond this, there can be many other Do's and Don'ts and something to learn as we continue our investment journey. As a new investor though, the points covered above can serve as a quick guide to shape the investment approach.
NJ E-wealth
Managing Your Money Through The Lens of Personal Finance Ratios
Managing Your Money Through The Lens of Personal Finance Ratios
In today's fast-paced world, managing personal finances can be a challenging task. Whether you are seeking professional guidance or prefer a do-it-yourself approach, understanding your financial situation is crucial. One effective way to gain insights into your financial strengths and weaknesses is by utilising financial ratios. These ratios provide a quantitative analysis of your financial health and can guide you in making informed decisions regarding the different aspects of your personal finances. In this article, we will explore six common financial ratios that can help you evaluate your current financial standing and create a solid foundation for financial well-being.
Having an emergency fund is a vital component of financial stability. It acts as a safety net, providing you with readily available funds in case of unexpected events such as job loss or other emergencies. The emergency fund ratio measures the number of months your cash savings can cover your monthly non-discretionary (unavoidable) expenses. The idea is simply how many months you can continue to live comfortably in the absence of any income.
To calculate this ratio, divide your cash/liquid savings or investments by your monthly non-discretionary expenses, which include utility bills, rent, educational fees, EMIs and other household expenses. Financial experts generally recommend maintaining an emergency fund equivalent to at least three to six months of these expenses. The higher the emergency fund ratio, the better prepared you are to handle unforeseen circumstances.
Saving and investing money for future financial goals is a crucial aspect of personal finance. Your savings ratio represents the portion of your income that you save and invest beside your financial or life goals like retirement, education for child, purchase of a home /car and so on. It is generally recommended to save at least 10% and 15% of your income each month to build a healthy savings cushion. However, the ideal savings rate may vary depending on your specific goals and age and the amount of savings you can manage. When you are young, the income can be less and expenses more since you are in the consumption phase and thus, the savings can be less. However, when you are in the accumulating phase of your life, with a higher income you should aim for as much as you can possibly manage. Evaluating your savings rate regularly can help you stay on track and make adjustments as needed. By prioritising savings and managing expenses effectively, you can build a strong financial foundation for the future.
The debt to total assets ratio provides insight into the portion of your assets that your lenders own. These debts would include your home loan, car loans, personal loans, credit card outstandings and so on. As you repay these debts, your ratio decreases. This ratio is typically high in younger individuals and gradually declines with age as one builds assets and pays off debt. A lower debt-to-total assets ratio indicates a healthier financial situation, especially as you approach retirement. This can also be a good indicator of personal financial well-being and the debt burden along the lines of the Debt to Equity ratio for companies that research analysts track. The ratio is calculated as your total debt divided by your total assets. The aim should be to have a lower ratio here and is indicative that the debt burden is less.
Your net worth is the difference between your assets and liabilities. It represents the value of what you own after deducting what you owe. The net worth to total assets ratio, also known as the solvency ratio, measures the percentage of your total assets that you own. Tracking this ratio over time allows you to monitor your wealth accumulation and provides motivation during debt repayment. This is similar to the earlier ratio, but the perspective is different as we are evaluating your actual net worth here and not the debt against total assets.
Younger individuals commonly have a net worth to total assets ratio of around 20%, while individuals in retirement should aim for a ratio closer to 90% to 100%. Achieving a higher ratio indicates significant progress in eliminating debts and building wealth.
The liquidity of your portfolio, refers to the proportion of your total net worth held in liquid and disposable assets. This ratio depends on your financial goals and should be evaluated accordingly. If you have short-term goals or goals nearing maturity, a higher proportion of liquid assets is recommended. Quite often, we have seen that wealth or net worth is locked in assets such as land, property, gold, and so on, which cannot be disposed off in times of emergency. Further, for properties used for consumption, like residence, there is some debate as to whether it should be considered at all when calculating this ratio.
To assess the liquidity of your portfolio, divide your liquid assets by your total net worth. It is essential to strike a balance between financial and non-financial assets or liquid and illiquid assets, considering your specific financial objectives. There have been many cases where people have suffered and had to borrow money even though they had sizeable money locked up in illiquid assets.
The Debt Servicing Ratio is a measure of your ability to repay your debt obligations. It is calculated by dividing the monthly debt payments by the monthly income. A good Debt Servicing Ratio is generally considered to be one-third or less. This means that your monthly debt payments, like your EMIs, should not ideally exceed a third of your monthly income. A higher ratio indicates that there exists the risk of financial problems, as one may have difficulty in making debt payments. A higher ratio also means that not enough is left for savings and for meeting discretionary and non-discretionary household expenses. However, the ideal ratio is subjective which will change with time and usually would be higher when one is young and falls when one has higher income levels.
In brief, understanding and utilising personal finance ratios can provide valuable insights into your financial situation and guide you in making informed decisions. By regularly monitoring these ratios and making necessary adjustments, you can create a solid financial plan to achieve your goals. Whether you decide to seek professional advice or take a DIY (Do-It-Yourself) approach, these ratios will help you gain a better understanding of your financial health and focus on areas that require attention. Start evaluating your personal finance ratios today and pave the way for a brighter financial future.
NJ E-wealth
Protecting the 4 Ds of Risks with Insurance
Protecting the 4 Ds of Risks with Insurance
Today, we live in a fast-paced, stress-filled life, and we are knowingly and unknowingly exposed to many risks to life, health, and property. Managing these risks becomes an essential aspect of our wealth management journey in life. Risks can be mitigated in many ways, such as taking precautionary measures, avoiding risks or transferring risks. Insurance is one way of managing risks where we are transferring the financial risk from the insured to the insurer.
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Insurance protects against the financial risks at a personal level arising from the four Ds of death, disease, disability, and damages in a variety of ways.
Life insurance is the most important type of insurance for everyone, regardless of age or income. Life insurance provides financial support to the policyholder's beneficiaries in the event of the policyholder's death. This can help to pay for the comfortable sustenance of the family left behind, cover for the outstanding debts or obligations, and also cover the financial goals for the family to live a respectable life.

The risk of death is typically best covered by pure-term insurance policies. However, life cover can also be obtained under personal accident policies for death occurring due to accidents and traditional life insurance plans, which is a blend of protection and investment and may thus not provide the maximum affordable protection desired.
Health insurance helps to pay for the cost of medical care, including hospitalisation, any operations or surgeries, doctor visits, prescription drugs and so on. This can help to prevent financial hardship in the event of a serious illness or injury. Proper health insurance would also give you access to quality medical care even if your personal finances are limited and thus can prove to be invaluable when needed.

There are two main types of health insurance plans in India: individual health insurance plans and family health insurance plans. Individual health insurance plans cover only one person, while family health insurance plans can help cover the entire family. Critical illness plans are also great to have to protect against the common big lifestyle diseases we are exposed to and are very affordable. The base health insurance policies can be further complemented with top-up and super top-up health plans to extend the coverage available.
Disability can be permanent or temporary and can be partial or full. Disability brings with it its' own challenges in terms of care, the ability to live life normally and the ability to earn. Adequate protection against these risks becomes very crucial for everyone, especially the earning members of the family. Traditionally, disability is a risk most of us often ignore but it can prove to be very costly.

Personal accident policies provide the best cover against disability, whether temporary or permanent. Moreover, such policies are affordable and easy to buy. Further, some health and personal accident policies may even provide you with compensation for your loss of income during hospitalisation or disability. Personal accident policies also provide cover against accidental death and are very affordable - something everyone must have in their insurance portfolio.
A damage or loss to any property/asset can occur due to any reason. There are risks to your car, home, valuables, shop, factory and so on. Adequate protection is required to cover the risk of damages. Thankfully, on motor insurance, at least third-party liability is mandatory for all vehicles in India, which protects the policyholder's interests from damages caused to a property or an individual by the policyholder. We would always suggest one to buy a comprehensive motor insurance policy, though. Home insurance is another product to protect you against damages, and typically cover should be taken for both the structure and the contents. Beyond vehicle and home coverage, there are many other policies available that business owners and professionals can buy depending on their specific requirements and can cover shops, factories, offices, professional indemnity, travel, and so on.
By now, everyone would be familiar with the numerous benefits of insurance. Yet, to summarise, we would highlight the three key benefits offered by insurance….
Insurance can help you to pay for unexpected expenses and emergencies. This can help you avoid going into debt or having to sell assets in order to cover these costs. Insurance acts as your umbrella at a small cost.
Insurance is your hedge against financial shocks. With adequate insurance, financial distress and disruptions in life can be avoided, ensuring continuity of life at comfortable levels, even after the occurrence of the event.
Insurance can give you peace of mind, knowing that you are financially protected in the event of a loss or tragedy. This can allow you to focus on other things, such as your family, your business, or your hobbies. It gives the confidence and the ability to afford critical medical intervention, which may otherwise be difficult in the absence of insurance.
In some cases, premiums paid for insurance can be tax deductible. This can help to reduce your overall tax burden. However, tax savings should never be seen as the primary factor for insurance purchases and should only be seen as a by-product or side benefit.
We hope this article has helped you to understand the different types of risks faced by us and the options available in insurance to protect ourselves against the same. Before choosing the right insurance plan, we would advise you to have a proper understanding of your needs - the type of insurance policies and the amount of coverage required. Next, look out for and compare policies from different insurance companies before you buy. Make sure that you read and understand the terms and conditions of the policy before you sign on the dotted line. We would recommend that you evaluate your insurance portfolio at least every couple of years and update your portfolio as needed. Your trusted insurance advisor /broker can be of great help in the process of understanding your insurance needs and finding suitable products. Needless to say, this is one critical aspect of wealth protection which you cannot afford to ignore.
loans
Customer process mandate at the time of loan application for EMI Collection. A mandate facilitates the seamless deduction of the EMI from the customer's bank account during the tenure of the loan. Approval of the mandate is necessary. Post disbursement, a few of our customers do not provide valid mandates even after their mandates get rejected by their bank.

We have therefore made the following changes with effect from 1st August 2023:

Delayed Mandate Registration Charges: Customers whose loans have been disbursed post 1st August 2023 and where we do not have a registered Mandate at the time of the presentation of their 2nd EMI, would be liable to pay a Delayed Mandate Registration Charge amounting to Rs 200 + GST on every such EMI due date.

This charge is payable even if the customer pays his EMI in advance of the EMI date.

Clause pertaining to Delayed Mandate Registration Charges has been included in the Master Terms and Conditions e-signed by the customer at the time of availing the loan.

We are not intending to earn any large fee by levying the above charges associated with customers with unregistered mandates. We are better off if all mandates are registered. We advise customers to submit registered mandates with us at the earliest.
Fund Manager INTERVIEW
patner Interview
Mr. Amit Ganatra
Head of Equities, Invesco Mutual fund
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Yash Shantaram Khanolkar (ARN-250374)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Yash Khanolkar
  • Financial Assessment
  • Retirement Assessment
  • Child Future Assessment
  • Portfolio Review
  • NRI INVESTMENTS
  • mutual fund : debt/equity/elss
  • insurance : general/health/life
  • realty : plots/villas/flats
  • portfolio management services (pms)
  • fixed deposit : company fixed deposit
  • bonds : tax saving bonds

"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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