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Showing posts with label XIRR. Show all posts
Showing posts with label XIRR. Show all posts

How to avail loan against Mutual Funds instantly?

budget 2019 , dividend mutual funds
How to avail loan against Mutual Funds instantly?


There are many emergencies and in such a situation you may get a situation even to avail loan against mutual funds. How to avail loan against mutual funds instantly? This is now possible and let us look at this possibility in detail.

Recently HDFC Bank started a facility to avail loan against mutual funds instantly through it’s internet banking facility. For this facility, HDFC Bank tied up with CAMS (one among four R&T Agents for Mutual Fund Companies in India).
CAMS manages the accounts for most of the mutual funds in the country and has a 65% market share. Because currently, CAMS serving the below mentioned Mutual Fund Companies as their R&T Agents.
  1. HDFC Mutual Fund
  2. DSPBR Mutual Fund
  3. Birla Sunlife Mutual Fund
  4. HSBC Mutual Fund
  5. ICICI Prudential Mutual Fund
  6. IDFC Mutual Fund
  7. IIFL Mutual Fund
  8. Kotak Mutual Fund
  9. L&T Mutual Fund
  10. Mahindra Mutual Fund
  11. PPFAS Mutual Fund
  12. SBI Mutual Fund
  13. Shriram Mutual Fund
  14. Tata Mutual Fund
  15. Union Mutual Fund
However, currently, HDFC Bank offering this loan against Mutual Funds with 10 Mutual Fund Companies. In coming days, in my view, they will tie up with other R&T Agents and also other Mutual Funds.
Even though you are managing your emergency corpus, there may be some situation you may face where you need more than your emergency corpus immediately.
In such situation, either you have to ask your friends, relatives or liquidate your investments. Also, if you are sure of such emergency is for few months like 2-3 months, then liquidating your investments or stopping SIP may be a bad idea.
In such situation, where even your friends or relatives not helpful for you, then the option is to avail loan on your investments as a last resort.

How the process of loan against Mutual Funds actually works?

Once you decided to avail the loan against mutual funds, then you have to approach the Banks or NBFCs (Non-Banking Financial Companies). The eligibility is usually like below.
  • Usually, loans will be sanctioned to those individuals whose age is above 18 years of age. Few banks set maximum age limit also.
  • Loan against equity funds is allowed to individual holders only but not to Hindu Undivided Families (HUFs), Companies, Partnerships, Sole Proprietors.
  • However, loan against debt funds may be allowed to individual holders and also Hindu Undivided Families (HUFs), Companies, Partnerships, Sole Proprietors.
  • Each Bank or NBFCs set minimum and maximum loan amount.
  • The quantum of loan amount also depends on what type of funds you are holding. In case of equity funds it may be around 50% and in case of debt funds, it may be around 80% to 85%.
  • Banks or NBFCs may charge you some servicing charges also. Hence, cross check with banks for such charges.
  • Usually, the interest rate on loan against Mutual Funds will be around 10% to 11%.
  • Also, all branches of your Bank or NBFCs may not be offering you such facility. Hence, better to cross check with the bank branch.
  • Banks also may charge pledge and De-pledge fees separately to add a lien and remove the same on your Mutual Fund units.

How Lien and remove the Lien on your mutual funds’ units works?

Once you took the loan, then the Bank or NBFCs will write to the mutual fund R&T agents like CAMS or Karvy and ask them to mark a lien on a certain number of units that are being pledged.
The R&T agents, in turn, will mark the lien for your mutual fund units and send a letter Banks or NBFCs with a copy to you (investor) confirming the marking of a lien on the Units.
Once it is done, then you no longer be eligible to sell the units which are in a lien. Even though the units will be in your name, you are eligible only to invest further but not eligible to sell the units which are lined by Banks or NBFCs.
Once the loan is repaid by you, the Bank or NBFCs request for removal of the lien and send a request letter to the mutual fund companies. Your Bank or NBFCs may also request for a partial removal of lien in which case, a lien on some of the units will be removed and these units are ‘Free’ units. You are eligible to liquidate such free units as per your wish. As such thing will happen with doing some part payments.

What if you default in repaying the loan against Mutual Funds?

If you default in repaying interest and principal, then your lender can enforce the lien i.e. send a signed request to the Mutual Fund to redeem the Units and send the proceeds/cheque to them.
Due to the lien on such units, R&T Agents act according to the bank’s instruction. In this way, your lender recovers the loan.

How to avail loan against Mutual Funds instantly?

I hope by now you got the clarity on how the loan against Mutual Funds works. Now let us move on and understand the process to avail loan against Mutual Funds instantly.
As I mentioned above, recently HDFC Bank started to offer instant loan against mutual funds. For this, you have to be HDFC customer and you have CAMS login facility.
Also, as I mentioned above, currently they are offering this facility to around 10 Mutual Fund companies which CAMS serves. The complete list of such approved Funds will be available HERE.
I will explain you the few steps of availing loan against Mutual Funds instantly.
# Visit HDFC Bank Homepage. Click on the link Loan Against securities.
# The next process is to log in to internet banking and then to your CAMS account.
# In CAMS portal you select the funds you want to avail the loan from those.
# Then you will receive an OTP to your registered mobile number.
# Once your OTP verification is successful, then you will see the amount of your loan you can take.
# Then enter the HDFC Bank branch details where you want this OD be required.
# Then again the bank will send one more OTP to confirm the loan application. Once this verification is over, you will receive the loan process confirmed status and also the amount will be visible in your savings account.

Advantages and disadvantages of availing loan against mutual funds

Let us first look for advantages of availing loan against mutual funds.
  • You have instant liquidity from your investment without touching the mutual fund units.
  • Usually, the interest rate is cheaper than the personal loan.
  • It will be handy for your emergencies without touching your investment which you meant for your financial goals.
  • It is a better option than asking your friends, relatives or going for a personal loan.
Now let us look for some of the disadvantages of availing loan against mutual funds.
  • Higher liquidity of such instant loan facility may sometimes lead to some unplanned spending or expenses. Hence, be careful while availing such facility.
  • Create higher emergency corpus in such a way that you no need to face such 10% to 11% loan.
  • You may sometimes end up in paying high interest than what you will earn from the mutual funds.
  • Use such options as a last one but not the first one.
  • Do remember that you will not be eligible to redeem the lien units until you clear the loan.
  • If you default then Banks or NBFCs will directly liquidate the units to recover the units. Hence, you have no option but to sit silently.
  • 10% to 11%+Service Charges is not so cheaper option of loan. Hence, before jumping into this option try other options available with you.
We will be happy to help you to select your mutual fund plan. Get more details here: Mcx Tips, Derivative-Free Trial, Stock tips Call on 9977499927
Capitalstars is a SEBI registered investment advisor. Schedule a call with Capitalstars investment consultant or drop a mail at backoffice@capiltalstars.in and we will get in touch with you. You may also call us on 9977499927

Investment trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647
For more details call on 9977499927 or visit our website www.capitalstars.com
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Axis Children’s Gift Fund-Review

budget 2019 , hybrid mutual funds
Axis Children’s Gift Fund-Review


  1. Investments can be made only in the name of a minor (<18 yrs at the time of investment).
  2. Unit holder till attaining Majority shall be represented by his / her parent or legal guardian.
  3. Parents, guardian, grandparents or relative can invest in the name of minor kid.
  4. You have both Regular and Direct Funds (DEFAULT WILL BE DIRECT).
  5. This plan comes with lock and no lock in facilities. You can opt anyone. In case of lock-in,  investment will be locked-in till the kid is 18 years of age. Investment may be redeemed after kid is 18 years of age or 3 yrs, whichever is later.  In case of no lock-in, investment will not be locked-in till the kid is 18 years of age & can be redeemed at any point of time at NAV based prices subject to exit load.
  6. Exit loads are structured as-3% if exited within 1 year, 2% if exited after 1 year but before 2 years, 1% if exited after 2 years but before 3 years, No exit load after 3 years.
  7. Fund Options-Growth, Dividend (Dividend Payout and Reinvestment Facility-reinvestment option is available under No Lock-in sub-plan only).
  8. Asset allocation will be like 25% to 55% in Debt and money market instruments, 40% to 60% in Equity and Equity related instruments and 5% to 15% in Cash-Futures Arbitrage.
  9. Benchmark will be 50% CNX Nifty + 50% Crisil Composite Bond Fund Index.
  10. The full detail of the NFO will be available HERE.
Now let us review the fund from investors point of view-

# Why to invest in NFO when there are so many old funds which have a track record to judge?
# This is the typical equity mutual fund. But used the name as Children’s Gift Fund. However, for your kid’s education or marriage, you can invest in existing and consistent performed fund.
# Never be emotional with the products which claim to be meant for your kid’s planning.
# This fund will have heavy exit loads if you planned to withdraw within 3 years. So if the fund is not performing well, you have to wait for at least 3 years to be out of it.
# I don’t think it is necessary to provide two facilities like lock-in and no lock-in.
# This fund is treated as equity mutual fund. However, this fund not answers about how one must invest in debt category to manage debt:equity. Investing in equity fund alone is not a right strategy of investment. One must have debt category too.
# The only new point of what I saw is, this fund uses the arbitrage opportunity available in market to the extent of 5% to 15% of your portfolio.
# Notice the benchmark. It is 50% CNX Nifty and another 50% Crisil Composite Bond Fund Index. Therefore, if the fund claim to beating the benchmark, then it does not mean that it is beating NIFTY. Because, only 50% of the benchmark returns are linked to NIFTY.
# When the fund is meant for long term goal of kid’s education, then why it is providing dividend payout option?
# In my view, it is nothing but a gimmick to utilize the emotions of parents for investment towards kid’s education. Nothing new to offer
We will be happy to help you to select your mutual fund plan. Get more details here: Mcx Tips, Derivative-Free Trial, Stock tips Call on:9977499927


Capitalstars is a SEBI registered investment advisor. Schedule a call with Capitalstars investment consultant or drop a mail at backoffice@capiltalstars.in and we will get in touch with you. You may also call us on 9977499927



Investment trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647

For more details call on 9977499927 or visit our website www.capitalstars.com
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Direct Mutual Fund Investors and Dunning–Kruger effect

hybrid mutual funds , managed mutual funds
Direct Mutual Fund Investors and Dunning–Kruger effect

Yesterday I received a mail from one of a blog reader requesting me to review his equity portfolio. He started investing from February 2016. All his investments are in DIRECT Funds. This motivated me to write the post.

Before proceeding further, I want to make sure that I am not against DIRECT MUTUAL FUNDS or DIY (Do It Yourself) theory.
I want to link few of these direct mutual fund investors or DIY theory followers to Dunning-Kruger effect. Because these few investors are exactly doing of what it is said Dunning-Kruger effect. Let us know what this effect is.
Dunning-Kruger effect is a cognitive bias theory where unskilled persons suffer from illusory superiority. They try to mistake in assessing their ability. This is one part of this effect. This I purely relate to a DIRECT Mutual Fund Investor.
Further, this theory suggests that highly skilled individuals may underestimate the relative competence and may wrongly assume that the tasks, which are easy for them, are also easy for OTHERS. This I purely relate to a few who are EXPERT but assuming others can also do it easily by investing in DIRECT mutual funds.
The miscalibration of an investor about his ability is an error about SELF. However, the miscalibration of an expert is about others. Investors’ miscalibration is natural, he looks for an expert advice, and he simply follows. However, the danger is when an expert advice so easily that others can also be followed by what he is following. It sometimes leads to a disaster.
This Dunning-Kruger effect was inspired by a study, which is explained in Wikipedia as “McArthur Wheeler, a man who robbed two banks after covering his face with lemon juice in the mistaken belief that, because lemon juice is usable as invisible ink, it would prevent his face from being recorded on surveillance cameras.”
Dunning and Kruger proposed that, for a given skill, incompetent people will do as follows-
  • Fail to recognize their own lack of skills-This means you don’t have the skill of understanding how mutual fund investments work or how to identify the right funds. However, you act like an expert and invest in DIRECT Mutual Funds.
  • Fail to recognize their extent of inadequacy- They don’t know what they are doing. They don’t the repercussions of such blind act. However, they ACT.
  • Fail to recognize genuine skill in others-Investors just follow few experts who preach DIRECT funds or promoter of DIY theory. However, fail to understand that they suite to it or not.
  • Recognize their own lack of skill after exposing-They realize their lack of knowledge only after the act turned to be a disaster.
Why I linked this theory to this above-mentioned new investor?Dunning-Kruger Effect
Because I felt and I firmly believe that the above reader of whom I mentioned above  decided to invest in mutual funds on his own. Saving penny of a commission was in his mind. However, he don’t know of what he is doing and where he is heading. Suddenly, after the investments, he felt uneasy due to negative returns in his portfolio.
Within a month of equity investments, he is turning to be so over-reacting means how can he be long-term investor. Choosing online platform is the best for all gadget savvy investors. I completely support that. However, failing to know of what they are doing or acting with overconfidence leads to danger.
Mr.A may be experts in managing his own money. He may preach to all. However, investors must think about whether they are capable like Mr.A to act, monitor, be patience or adjusted for volatility. I feel it a herd mentality. If one preaches direct funds or DIY theory and he is expert means following blindly of him. If he is investing in XYZ fund means I too invest. If he possesses negative view about ABC fund means I too must have same view. I may say madness at its peak.
At the same time, I am not at all against Direct Mutual Funds or DIY theory. I always suggest my clients or readers to take control of their money today or tomorrow. This is the only solution in this financial world. Because at the end of the day it is your money, you know the risk, you know your goals, you know how much important each rupee is. But not the expert or your fellow friend who is investing in direct funds or following DIY theory.
First, understand your limitations. If you are capable of handling your portfolio, then I will suggest of going for DIRECT or follow DIY theory. Otherwise, simply take an advice of adviser whom you believe can handhold you in long run. Remember the point here that finding a right adviser is also the toughest task on this earth. Be cautious, test his each suggestion, cross-question each recommendation, and finally invest after better understanding. This is the only solution to invest and learn your money properly.
We don’t know when we need money. We don’t know our financial goals. But eager to invest in Mutual Funds. I often face the questions like “I am interested to invest in mutual fund for the period of 5-10 years. Hence, recommend me some BEST funds”. Sadly, they don’t know that 5-10 years is a big gap of 5 years. Investing for 5 years has been different than investing for 10 years. Understand yourself first is a first step of investment. Rest of the calculation, choosing products monitoring will come into picture at a later stage.

We will be happy to help you to select your mutual fund plan.

Get more details here: 
 
Call on:9977499927

Capitalstars is a SEBI registered investment advisor. Schedule a call with Capitalstars investment consultant or drop a mail at backoffice@capiltalstars.in and we will get in touch with you. You may also call us on 9977499927.


Investment  trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647
For more details call on 9977499927 or visit our website www.capitalstars.com
 


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What can we learn from 80 Yrs old Mutual Fund?

hybrid mutual funds , managed mutual funds
What can we learn from 80 Yrs old Mutual Fund?

Do you know a Mutual Fund which is almost 80 years old? You may get surprised. But there is an equity mutual fund on this earth which is almost 80 Yrs old Mutual Fund. What can we learn from this fund?
Many of use listen to the advice from GENUINE Financial Planners or Advisers that you must stay invested for long term. However, the definition of the long-term varies from person to person. For few enthusiastic investors, the long term may be 2-3 yrs. For few, it may be 10 Yrs and for few, it may be 20-30 yrs.
Hence, we assume the meaning of LONG TERM as per our comfort and start investing. But I found many that they neither do asset allocation (may be many times because of not knowing the meaning of it) or stay invested for long term.

How to become Crorepati easily??

Yes, EASILY you can become Crorepati. You no need to work hard. Here are some number and products using them you can easily become a crorepati.

Source: basunivesh.com
Become Crorepati Easily
Notice the difference between years of becoming Crorepati by keeping money in the savings account to investing in debt products. It is almost 49 years early by merely investing more than 3% return. Same way if we consider equity investment, then the difference is almost 3 times lesser.
By showing above numbers, I am not saying you that you take a risk and invest all your investable surplus in equity asset class. But here my point is that, debt products alone not sufficient to create wealth.
Therefore, by investing in any asset class you can become a crorepati. But what matters is WHEN.

What can we learn from 80 Yrs old Mutual Fund?

Investment is lazy exercise. Means you no need to act on news based or event based actions for investing. Every now and then we hear in media or from financial experts that we must either BUY or SELL. They never suggest you to hold if forever.
Because the experts who appear in media are almost brokers or sellers. They never feel happy with your laziness. They need some action of either BUY or SELL. If you buy or sell then they earn otherwise NO.
However, wealth can be created by investing for LONG TERM. The proof is the USA’s 80 Yrs old Mutual Fund. You may surprise with listing to this that how this 80 Yrs old Mutual Fund survived for so long. But if you check their strategy then you also feel of zealous.
The Fund Name-Voya Corporate Leaders Trust
Inception Date-18/11/1935
Now let us see the fund performance since it’s inception.
80 Yrs Old Mutual Fund Performance
You notice that since inception I mean since 1935 to date, the fund has generated 10.12% returns. It may not be a great number to those who running behind star ratings or chasing fund returns.
However, this 10% to 12% are great numbers who are investing for their long-term goals.

Few facts about Voya Corp Leaders Trust Fund

# It is almost 82 Yrs old Fund.
# The fund is holding the same stocks which it started in the year of 1935. It invested in 30 leading US companies equally in 1935.
# It invested in 30 leading US companies equally in 1935. After that, it has not made any changes to portfolio except for automatic corporate actions like a merger, spinoffs, bankruptcy etc. So it sells stocks when company go bankrupt or if the dividend is suspended.
# Currently the fund is holding 22 companies.
# If you invested Rs.10,000 as lump sum investment in this fund in 1935, then that will be now worth of Rs.2.71 Cr. (It is USA Fund but for simplification, I assumed rupee as an investment value).
# The fund has outperformed the market in 40 years without adding or deleting the new stocks.
# The fund buys same company stocks when an investor invests and sell same stock when investor request for withdrawal. But portfolio remained same forever.
# Few stocks which the fund holding since 82 years are DuPont, General Electric, Procter & Gamble, and Union Pacific.
# It also has positions that came through mergers and/or spinoffs. For example, it owns Berkshire Hathaway via an original position in the Atchison Topeka and Santa Fe Railway. It has CBS via a stake in Westinghouse Electric. It owns Honeywell through a stake in Allied Chemical.
# It is a low-cost fund with expense as 0.52%. Its expenses are less. Because of no frequent trading. Holding the same set of stocks for long.
# The formula fund following as per the product brochure is “The founders of the Trust bought equal shares of 30 leading companies in 1935 and decreed they could never be sold. The only exception was companies that went bankrupt, merged or spun off”.
These are the few facts which I learned about funds. This is just a SLAP to all those who churn their portfolio frequently. This is the SLAP to all those who feel EQUITY is not a worthy investment.
This is all about the story of USA based 80 Yrs old Mutual Fund. How can we assume the same with Indian market? Because there are few sets of experts who believe that we must not follow what it happened in the USA. For those, here are few funds which were started in 90’s era and their performance are as below.
1) HDFC Top 200 Fund
Inception date-03/09/1996
Returns of 3 Yrs-16.43%
Returns of 5 Yrs-15.24%
Returns of 10 Yrs-14.44%
2) Franklin India Bluechip Fund
Inception date-01/12/1993
Returns of 3 Yrs-16.11%
Returns of 5 Yrs-14.27%
Returns of 10 Yrs-12.82%
3) SBI Magnum Equity Fund
Inception date-01/01/1991
Returns of 3 Yrs-16.72%
Returns of 5 Yrs-15.33%
Returns of 10 Yrs-12.51%
4) UTI Equity Fund
Inception date-18/05/1992
Returns of 3 Yrs-16.84%
Returns of 5 Yrs-16.45%
Returns of 10 Yrs-14.19%
5) Reliance Growth Fund
Inception date-08/10/1995
Returns of 3 Yrs-23.54%
Returns of 5 Yrs-17.73%
Returns of 10 Yrs-14.09%
6) Franklin India Prima Fund
Inception date-01/12/1993
Returns of 3 Yrs-29.47%
Returns of 5 Yrs-26.20%
Returns of 10 Yrs-16.44%
These are the few among many funds which are since 90’s era and still giving us decent around 10% to 12% returns. There is no specific attachment to these Indian funds. However, I randomly selected.
Notice one thing, all funds 10 yrs returns are over and above 12%. I just IGNORED the star ratings of these funds. I am not saying that these are the BEST funds. However, my point here is investing for the long term without bothering about ups and down of market is actually what the secret of wealth creation.

Source: Basunivesh.com


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Investors can directly buy mutual funds on stock exchange

Capitalstars investment advisor Till now investors looking to buy directly had to go to a fund house website or independent websites. ...