Mistakes people make when investing in equities

Today stock markets are at an all-time high. The companies are reporting rise in their profits and are giving out hefty dividends. Yet why are investors not making any money? Why are only a few investors getting richer?

Well, here are the reasons why this happens. Avoid these mistakes and see a rise in your wealth.

• Concentrating a lot on growth: A company may have taken a lot of debts in order to fuel its growth. But its profits may be sinking. This means the company is in big trouble when the recession strikes or when the interest rates go up, as it can make it difficult for the company to meet its obligations. Instead it would be better if the investors pay attention to the company’s financial statements to avert their losses.
• Overconfidence: Many people tend to adopt the same approach to stock investing as mutual funds. They buy more of poor-performing stocks if the stock price goes down, as they would do with a mutual fund. But while mutual fund is a collection of different stocks, direct stock investing involves only one stock. So if the stock is performing poorly, sell it and move on to better performing stock.
• Concentrated portfolio: When a particular sector is doing well, people tend to accumulate more of the companies included in the sector and ignoring others. Similarly if small and mid-caps are doing well, people tend to accumulate more of them and ignore others. This lop-sided portfolio will end up ruining your wealth.
• Excess activity: Different analysts and brokers have different opinions about the stocks in your portfolio. While one broker recommends you sell stock A, another will tell you to buy the same stock. The result – balance sheets of the brokerages go on increasing. And of course, it is from your pocket.

 

No wonder with all these mistakes, people don’t make any wealth in the markets. Stop these mistakes and watch your wealth soar.

To prevent these mistakes and earn your wealth in the stock markets, contact us at questa.mumbai@gmail.com

Why international funds are bad for your financial health

Some years ago, international or global funds were a craze. Many investors were enticed by these funds. This is because they could invest in international companies at a nominal sum. There was no need to get permission from RBI to invest abroad. They did not have to encounter the trouble of foreign currency conversion since the fund house dealt with all these formalities.

However it was seen that all these funds had underperformed Indian mutual funds. In fact, in many cases, investors have lost their money. Why did this happen? Why could these funds not deliver?

Well, here are few of the of the reasons for the failure of the intenrational funds.

• As intenrational funds invest their entire corpus abroad, impact of economic crisis in the country in which they have invested, will lead to fall in the value of the investment.
• Foreign currency exchange will impact the value of the investment. If the foreign currency is stronger than Indian rupee, the worth of your investment will go up and vice versa.
• Taxation varies from country to country. Taxes will impact the value of your investment and will eat into your returns. Besides you’ll have to pay taxes in India as well, since unlike Indian mutual funds, these funds are liable to be taxed.

 

So should you invest in international funds or no? Well, as far as possible, stay away from these funds. But if you choose to do so, just invest a small portion (maximum of 5%) in such funds. However do this only once you have built up a healthy portfolio of domestic funds. This will help you withstand the shocks in the international markets.

For help in selecting the suitable mutual funds for investment, you can contact us at questa.mumbai@gmail.com. We offer you unbiased advice on investments, financial planning and hosts of other financial services.

Is personal loan right for you?

There are many instances in our lives when we may experience sudden cash crunch. It could be due to sudden illness, job loss, death of the main earning member in the family. In such a situation, it is very easy for us to opt for a personal loan in order to tide over our crisis.

Why personal loan? This is because personal loan is easily available. There is no need to submit excess documentation as well as collateral. In certain cases, you can get the loan within 2 minutes on the telephone. Moreover unlike other loans, you are free to use the money for any purpose. You don’t have to declare your purpose to the bank.

But is it right for you? You need to ask this question because as the personal loan does not need any collateral, it becomes an unsecured loan. Any unsecured loan carries high rate of interest than a secured loan like car or home loan. This means EMIs in this case will be higher. You should be comfortable repaying the EMI, failing which you wil be labeled as a defaulter.

So what should do? If you are not able to pay the high EMIs, you can consider other options. Do you have an FD with a bank? If yes, then you can take a loan against FD, as its rate is slightly higher than the rate of FD. If you have shares, you can avail of loan against shares. Nowadays many banks also offer gold loans against your gold jewelry.

Why go for these loans? Simple, they are cheaper. Interest on any secured loan is cheaper than an unsecured loan. This will lower your EMIs and thus save you money.

Tips to invest in volatile markets

Media reports keep on harping about market volatility. This makes prospective investors scared about entering the markets. They shun stocks as they fear that they may end up losing their money. As a result they lose out on golden opportunity to make money in the stocks.

 

But every investor must realize that volatility is an inherent part of stock markets. Instead of shunning volatility, it is very important to make volatility your friend. Here is how.

 

Focus on your long term goal: It is very easy to be affected by the daily market movements. It can make you sell your holding or stop your investments. However this is going to affect your goal achievement. Instead if you keep your eyes on your long-term goal, you will get better returns. Remember “Your time in the market is more important than timing the market” is the key to successful investing. Just take care to review your portfolio periodically.

 

Overcome your fears: It is easy to get scared when the market crashes. But remember what goes up comes down and vice versa. Markets work in cycles and while your stocks may lose value in the short-term, they will recover their lost ground over a period of time. Also when the market crashes, find out if the crash is due to change in fundamentals or due to some event that is not related to your stocks’ fundamentals.

 

Diversification: The secret to protecting your investments is diversification. Spread your investments amongst stocks of different sectors, capitalizations as well as amongst asset classes like bank deposits, gilts, gold, real estate and stocks.

 

Invest in quality stocks: Stocks with strong fundamentals tend to recover faster than those with weak fundamentals. So it is better to invest in such stocks with a long-term perspective ( at least 4-5 years). In fact you can look at any market crash as an opportunity to buy such stocks at cheap prices.

 

In short, don’t let market volatility scare you. It is the nature of the stocks to be volatile. Use it smartly to benefit from it by using the tips mentioned above.

To learn more about protecting your wealth in volatile markets, contact us at questa.mumbai@gmail.com

 

Impact of new tax-code on real estate income

Currently DTC a.k.a Direct Tax Code is in the news. It is set to alter all aspects of our finances. One of the aspects that will be affected will be your personal income. Here we take a look at how DTC will affect real estate income.

Short-term capital gains: Under the new tax code, any profit or loss incurred on the sale of a asset will be taxed. The tax you’ll have to pay will be as per your income tax slab. Currently sale of an asset within 3 years is called as short term.

Long-term capital gains: If the asset is sold after a year, any loss or profit made is liable to attract long term capital gains tax. However now instead of indexation benefit, there will be a new of discounting, which will be used to compute LTCG. Also the new base rate for fixing the cost of acquisition will be April 1, 2000. This will help you if you have invested in real estate between  April 1981 and April 2000, as you won’t have to pay any tax. Moreover instead of paying tax on capital gains at a flat rate of 20% post indexation, now they will be added to your income post indexation and you will have to pay tax as per your tax bracket.  This is bad news for you if you fall in the higher tax bracket of 30%.

Taxation on rental income: The previous draft of DTC had recommended the gross rent at an estimated rate of 6% of  higher of either the market value or the cost of construction or acquisition. But now it will be the actual rent received or receivable for the fiscal. This will help you if you are renting out your home.

Interest on home loans: As per the original version of DTC, tax deduction on interest paid on home loans was eliminated. But under the new DTC, you can avail of tax deduction on the interest paid on home loans up to Rs 150,000 for purchase or development of your home. This will help if you are a new home buyer.

Property not rented: It won’t fetch any tax benefit.

To know more about how the new DTC will impact your finances, get your financial planning done. For a right guidance, you can contact us at questa.mumbai@gmail.com

Best investments for beating inflation

Nowadays we hear the term “inflation” being bandied about by the media. The bad news is that inflation has kept on increasing. With the recent hike in petrol and diesel, the prices are expected to go up further. So the question we all should be asking ourselves is how to invest in order to beat the inflation.

Well, here are some excellent avenues to help you beat inflation.

• Equities and equity mutual funds: Equity and equity mutual funds are the best products available to beat the inflation. Some mutual funds like Quantum Long Term Equity and stocks like Cadilla Healthcare have given returns of 49.85% and 158.9% respectively. They have conveniently beaten inflation which is today at around 16%. However you need to remember that equities can be volatile in the short-term. But over the long-term equities are less risky as the value of the stocks even out.
• Gold: Gold is another investment option available to beat inflation. Invest in gold via gold ETFs instead of physical gold. This is because gold ETF is economical and tax-efficient. Besides gold is also a hedge against market volatility. It is due to this that many people have turned to gold as an investment option. Hence the price of gold has been going upwards.

 

To get the optimal returns, you need to consult a financial planner, who’ll help you allocate your funds between both these alternatives. This will ensure the change in market situation will not affect your returns. For more details contact us at questa.mumbai@gmail.com