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Aadhaar-based e-KYC is the alternative to the current paper-based KYC process, providing a seamless, hassle-free way for customers to verify their identity and address through their Aadhaar card.

In India, proof of identity and proof of address are two key requirements for accessing financial products like bank accounts, Demat accounts, mutual fund investments, and even SIM cards.

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Trading Products explained for seamless trading opportunities with reliancesmartmoney.com

Market Order: A market order is an order to buy or sell a stock at the current market price. It signals your broker to execute the order at the best price currently available. However, as market prices keep changing, a market order cannot guarantee a specific price.

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Strengthen your bond with financial security this RakshaBandhan

Raksha Bandhan is a celebration of the spirit of love and responsibility between brothers and sisters. While she shows her love for you by tying the Rakhi, you can gift her a start for her secured financial future. This festive season, make a fresh start towards a mutual goal of financial security with an unconventional yet thoughtful initiative for the future of your sibling.

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Goals, whether short-term such as buying a car or long-term goal such as building wealth, mutual fund is your friend. It is a one-stop shop product when it comes to financial goal planning. It can help you come closer to your dreams, you once thought unachievable. Look to mutual funds for an economical, transparent and convenient way to achieve your goals. This independence season, take a step closer towards financial independence with mutual funds.

Having sufficient money to realize your dreams makes you financially independent. Set up your goals and take a step towards making financial independence a reality.

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What are Blue Chip Stocks? The definition of blue-chip stocks varies, but generally, the well-established companies which have large market capitalizations and demonstrated its financial performance in giving consistent dividends in both upward and downward trends are blue-chip companies.

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Your guide to know more about equity share. Understanding and Investing in Stocks with reliancesmartmoney.com

What is equity share?

The capital of a company is divided into shares. Each share forms a unit of ownership of a company and is offered for sale to raise capital for the company.

How to raise capital in primary market?

Public Issue (Also Known as IPO) - A company to raise money sells a share of ownership in the form of shares to the public. By issuing stock publicly, this allows the public to own a part of the company, though not be a controlling factor.

Rights Issue- A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. More specifically, this type of issue gives existing shareholders securities called "rights", which give the shareholders the right to purchase new shares at a discount to the market price on a stated future date. The company is offering shareholders a chance to increase their exposure to the stock at a discount price.

Private Placements- Private placements are the sale of stocks, bonds, or securities directly to an individual investor, rather than as part of a public offering. Usually, large banks, mutual funds, insurance companies and pension funds are the investors involved.

Preferential Allotment- For raising funds, it is not always preferable or feasible for a company to issue securities to the public at large as it is time-consuming as well as an expensive option. In such situations, the securities can be offered to a comparatively smaller group of individuals, such as the directors or the existing shareholders. This entire process is known as the preferential allotment.

How can I buy stocks?

To buy stocks, you need to open a demat and trading account with us, by submitting you KYC documents like PAN card, Photograph, Address proof, Cancelled bank cheque, Bank statement.

Once you open an account, you need to transfer funds via Online or through a cheque to buy shares.

Now that you have funds in your trading account you can buy share through our trading platforms. These shares will be credited to your Demat account on T+2 days. For example, if you buy stocks on 18th Mar 2017, they will get credited to your account on 20th Mar 2017.

What are Preference Shares?

The preference share is a share that enables an investor to claim a stake at the issuing company with the condition that whenever the company liquefies or decides to pay a dividend, the preference shareholder will be the first to be getting paid after clearing their debt.

What is short sell in equity trading?

In equity trading, the technique of profiting from a falling stock price by borrowing shares of the stock, and selling them at the market price, and then repurchasing them at a lower price to return them to the original lender is referred as a short sell. If you put in a simple word "buy low, sell high".

What is capital loss?

The negative difference between the buying price of the stock and selling price is referred as a capital loss.

What is a "bull" market?

A bull market is a period of rising market prices.

What is a bear market?

A bear market is a period of declining market prices.

What is the dividend?

The profit share of the company after tax, which is distributed to its shareholders according to their class and the total number of shares held by them is referred as a dividend.

To calculate ROE

ROE stands for Return on Equity; it is a measure of profitability that calculates how much profit a company generates with each shareholders equity.

To calculate ROE ROE = Net Income/ Shareholder Equity

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A key skill in building up an enviable and successful stock portfolio is getting in, and out of a stock at the appropriate time.

Key takeaways

Let every buy be a part of a larger financial objective

Enter the trade with a pre-conceived idea of how long you plan to hold

Same goes for the outer-limit of loss you’re willing to bear on sale

Be flexible to allow for economic and corporate upheavals, rebalance/sell holdings accordingly

Why have an exit strategy in Stocks Trading?

A key skill in building up an enviable and successful stock portfolio is getting in, and out of a stock at the appropriate time. Getting out of a stock and cutting losses early is one of the prime strategies followed by successful investors. There is nothing wrong with losing money on a stock, that’s the nature of the market. Recognising and weeding out dud stocks from your portfolio at the right time (as opposed to panic-selling solid stocks during a downturn) is an important instinct to cultivate.

Let’s look at some of the ways to fine-tune your knack with exiting early…

Most investors know that ‘get rich quick’ is a flash in the pan occurrence. Players of the long game have a set objective in mind, appreciating their invested wealth by x%, supplementing their other investments by a certain amount and certain time. Stay on course till your requirement is met before making your exit.

Every objective is linked also to a time frame, stick to it. It’ll be tempting to cash in and run for shelter during bear phases and cyclic downturns. But more often than not, staying the course and riding out a downturn allows you to reap the recovery gains as the market swings back around. So, if your holding period was 4 years in order to meet a certain level of returns, fight the urge to sell just because everyone else is and stick around for the recovery.

Just as you have a holding period in mind, you also need to know the outer limit for your risk-tolerance. Know upfront how much money you are willing to lose on the trade should you decide to sell the stock. And should the price hit that low, then sell. Don’t let pride, and market sentiment override the risk-tolerance limit you had set yourself at the start of the trade.

Your investment strategy needs to be rooted in the economic outlook, the fundamentals of the financial markets and your objectives. While selling on an impulse, or only to go with the flow is not recommended, you should periodically review your investments and rebalance or sell your holdings based on their performance and valuations. This will reduce your exposure to volatility and help you fine-tune your market-reading radar.

By now you’re probably wondering ‘But how early should ‘early’ be?’, and it’s a fair ask. Each investor’s threshold varies greatly in relation to one another, and from one share to the next. Several factors will come in play when deciding your exit point, key among them being

Your own risk appetite

The fundamentals of the company, and its performance after previous downturns

Either way, it helps to set for you a smaller tolerance margin on short-term trades, and a larger one for long-term trades. The only one who can decide those margins is you.

Knowing when to exit your trades is critical to generating, and maintaining a high-performing portfolio. The world of trading may be complex, but some of the skills to successful investing are mostly common-sense. Good research, a keen ear to the ground, and discipline are your main tools – enter the market well-armed with them, but have a structured plan ready for exits – one based on your experiences, gut instincts and risk appetite.

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Exotic Stocks by reliancesmartmoney.com comprise of stocks of Blue Chip Companies, Buzzing Stocks, Sector wise top 3 stocks. The description for these is available here.

Here are some Exotic Stocks for you to buy

The weight of 37.5% to sales, 37.5% to net profit and 25% to market cap is assigned to arrive at a score for each stock.

Top 3 companies based on above final score are considered under the particular product group.

Companies that are cumulatively generating net loss at least for last two financial years (8 quarters).

Started showing cumulative net profit consistently at least for last two quarters.

Companies are from the Nifty 50 index.

Net Debt to Equity ratio is less than 1

Last five years' average Return on Equity is minimum 15%.

Updated on a weekly basis based on following criteria.

Average volume (in value term) of the stock should be at least 150% of last four weeks' average volume.

Market cap should be equal to or greater than Rs10bn.

Market cap should be more than Rs10bn.

Net D/E should be less than 1

Last five year’s average profit growth should be more than 15%

Average Return on Equity of last five years should be more than 15%

Dividend payout should be more than 15% for last five year

No Pledge of shares

Promoter’s holding should be more than 40%

Cumulative free cash flow of last ten years should be more than Zero

PEG ratio should ideally be less than 1

A stock should be currently traded

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Initial Public Offering (IPO) gives the opportunity to the privately-owned companies to raise capital or funds to further expand their businesses and the retail investors to buy shares in the primary market

What is IPO?

When a privately-owned company first time offers its securities generally ‘common stock’ for sale to the general public is referred to as initial public offering (IPO). In doing so, it undergoes various rules and regulations which are governed by the market regulator Securities & Exchange Board of India (SEBI). By going public, a company benefits from raising capital in the primary market and reach out to a large number of institutional and individual investors while at the same time the retail individual investors also benefit from investing in such IPOs.

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What is Income Tax return (ITR)? An income tax return (ITR) is the form that an individual or company files to the Income Tax Department as proof of its income, expenses, and other tax information in that financial year. The ITR filed contains the proof of your income and amount paid as tax in that financial year. While filing the income tax return (ITR), an assessee must ensure to enclose the proof of every source of income earned in that financial year including the exempted income thereon to Income Tax Department.

Know well about ITR forms

Who can file Income Tax Returns?

Individuals, HUFs, AOPs, BOIs, firms and companies are mandated to file the income tax return (ITR) if the income earned is taxable. Each of these taxpayers is taxed differently under the Income Tax laws of India wherein the domestic companies and firm have fixed a 22 per cent tax rate but the individuals are taxed as per the tax slabs.

Advantages of filing income tax returns (ITRS)

It has often seen that many individuals believe that if their salaries fall below the taxable bracket then they don’t need to file an income tax return (ITR). However, that is not true! Even if your earned income is not taxable, you should file ITR as it will benefit you in different ways. Listed out the following advantages of filing income tax returns:

Avoid Penalties:

Easy Loan Approval:

Address Proof:

Compensate for Losses in the next Financial Year:

Hassle-free Visa Processing:

Filing ITR timely can help you avoid penalties imposed by the Income Tax Department for belated return that could cost you extra interest.

In India, ITR is one of the important documents asked by banks in sanctioning a loan to an individual. Many banks and NBFCs ask for ITR receipts of the latest 3 years when applying for the loan such as home loan, car loan etc. Such lenders consider ITR as the most authentic document of verifying an individual’s income. Hence, an individual who is filing ITR on time can benefit from hassle-free loan approval.

Income Tax Return (ITR) receipts can serve as a residential proof as it is sent directly to your registered address.

If you are eligible to file ITR but didn’t then you would not be able to carry forward the losses of the current financial year to the next financial year. Hence, it is vital to file the ITR to claim the losses in the future years.

At the time of applying for Visa, the embassies generally ask for past ITR receipts to process the Visa application of an individual. So, filing ITR before the due date can help you in quick Visa processing at the time of Visa application.

Things to remember before filing an Income Tax Return

Income tax return filing is very important and if you have not filed your return yet, it’s a good idea to get going and try to do it as early as possible. Tax filing involves a lot of paperwork, confusion and queries. To ensure a seamless process, give yourself enough lead-time for a smooth and timely return filing. Unfortunately, there are penalties to be paid, if the deadlines are missed. These fines range between Rs. 5,000 to 10,000, depending on the delay.

You can get help from professionals to file your tax return who can advise you on how to save tax, the available deductions and exemptions under 80C and assist you with investment planning. But, if you are planning to file returns yourself, here are a few important things you could keep in mind.

First of all, make sure to collect all the required documents that you will need to file your ITR Form such as Form 16, Form 26AS, investment documents, premium payments, loan statements, salary slips, bank statements, and proof of capital gains (if any) that will help you in providing the details of tax deducted at source (TDS) and to compute the gross taxable income of yours in that financial year.

Similar to this, if you have redeemed mutual fund units within that year, you can reach out to your mutual fund house to provide you with the transaction statements and capital gain statements. Remember, if the gains exceed Rs. 1 lakh, you will be required to pay tax on LTCG. Once you finished computing your total income, the next thing is to calculate your tax liability by applying the tax rates as per your income slab.

Important Things To Remember While Filing Income Tax Returns

Know Your ITR Forms Well

The Central Board of Direct Taxes (CBDT) has made few amendments in the ITR forms to ease the process of filing Income Tax returns. The number of forms to be used by taxpayers has been reduced from 9 to 7. For individuals with annual taxable income (from salary, interest, one house property) of up to Rs. 50 lakh, ITR 1 is required to be filed. Whereas, for individuals with annual taxable income of more than Rs. 50 lakh, ITR 2 is required to be filed.

Mandatory Disclosure

Following up on the Central Government's efforts on demonetisation, the Income Tax department has made it mandatory to disclose cash deposits of Rs. 2 lakh and more in bank accounts. This was first initiated during the demonetisation period and continues to this day. The Income Tax department requires a declaration in a separate column giving details of money deposited along with bank details in the income tax returns. To prevent being taxed at 60% plus surcharge and cess, tax payers need to explain all sources or forms of income or investment.

Carefully Select the Assessment Year and Financial Year

Assessment Year and Financial Year are not the same and you need to be familiar with them in order to correctly file your taxes. Financial Year is the period or year within which you earn the income, whereas Assessment Year is the period or year that follows Financial Year and it is in this year that you file your tax return. Every Financial Year and Assessment Year begins on the 1st of April and ends on 31st of March. Assessment Year always comes after Financial Year.

Since your income is taxed in the Assessment Year, you have to select Assessment Year while filing your income tax return.

Check For Deductions Under 80C

Section 80C entitles you to certain deductions from the gross total income, up to a maximum limit of Rs. 1.5 lakh. It is the most widely used option to save income tax. The investments and expenditures that qualify for deduction under section 80C are investments in National Savings Certificates (NSC), Kisan Vikas Patra (KVP), notified Equity Linked Saving Scheme (ELSS) of a mutual fund, five-year post office term deposits, five-year bank fixed deposits, contribution to Employee Provident Fund (EPF), Public Provident Fund (PPF), Superannuation Funds and premiums paid for life insurance, annuity plan and Unit-Linked Insurance Plans (ULIP), etc.

These investments can not only be claimed as deduction while calculating your total taxable income but can also generate good returns. Moreover, investment in PPF, superannuation funds, etc. also help in accumulating funds for retirement planning.

Check TDS on Form 26A

Form 26A is an important document for tax filing. It provides details of the income paid to you, the tax deducted on that income and the amount of TDS deposited by the payer with the Government. The form also contains details of any refund applicable to you. To check your tax deduction on Form 26A, you have to go to https://incometaxindiaefiling.gov.in and login to your account. Next, you have to go to ‘My Account’ and click on ‘View Form 26AS’ in the drop down.

Conclusion

While filing your income tax return, ensure that you know the relevant ITR forms well, make the necessary disclosures, select appropriate assessment year, take advantage of 80C deductions and verify your TDS from Form 26A. This will ensure a smooth and hassle-free tax filing process.

For reference: http://www.incometaxindiaefiling.gov.in/main/ListOfITRsAndOtherForms

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As we are in the final week of lockdown, it is highly likely that lockdown will be extended with curbs to go. Slowly but the life will return to normalcy and so do economic activities which were halted due to the coronavirus crisis. Undoubtedly, it is a good opportunity for investors to make investments in stocks during the lockdown period to benefit from the lower prices.

Top Stocks to Invest in During Lockdown

India’s coronavirus reported cases tally has just now crossed the grim milestone of 70,000. As India’s enters the last week of nationwide lockdown, the PM Narendra Modi asked the chief ministers to take decisions and decide the road ahead. It is highly likely that lockdown will be extended with more curbs and relaxations to go. Now that millions of people are staying at home, the whole economy is in the disruption.  It is one of the times when the economy falls into recession and you get the chance to buy some high-quality stocks at lower costs. While some may suggest you stay away from the current market, many experts and market pundits believe that it is the right time to invest in the stock market and generate high returns over the long haul, say 5 to 10 years, or more.

Below we’ve mentioned selected stocks to invest in during lockdown that can benefit you in foreseeable future:

Hero Motocorp Ltd.

Hero Motocorp Ltd., formerly known as Hero Honda is the largest two-wheeler manufacturer in India, and also in the world holds the market share of about 46 per cent in the two-wheeler category. The ongoing coronavirus is unlikely to affect the demand for two-wheeler motorcycles. When the demand starts to pick up in auto sector post coronavirus, it will begin from the two-wheelers then move to 4-wheelers. Besides, the coronavirus has taught us to keep social distancing which will further encourage people to avoid cabs like OLA & UBER, public transports etc., and prefer to use private vehicles for a safer mode of transport.

Hero Motocorp is a zero debt company with the ROE – 26% and ROCE 39% - which is the indication of the better financial performance of the company and potential in stock for the foreseeable future.

HDFC Life Insurance Company Ltd.

If we compare the life insurance market of India to the global then it is highly under-penetrated. This offer great growth opportunities to private sector players like HDFC Life which has a long proven track record of consistent performance which good promoter group. The stock that was at Rs. 640 at the beginning of the year is now available at a very lower price of Rs. 480. The population is growing at a higher rate in India and the way coronavirus has gripped the country, it is very likely to see the high demand in the life insurance sector. People are now more cautious and will seek insurance services to ensure the safety of their families.

HDFC Life is a zero debt company with promoter pledging of 63% - which is good. The ROE and ROCE of the company are at 25% and 30% respectively, making it a reliable stock to look forward.

ITC Ltd.

ITC Ltd is another zero debt company with quite an attractive price to earnings ratio of 13 however the HUL and Nestle have P/E Ratio of 68 and 77 respectively – which makes ITC very attractive in its peers to buy at the current valuation and benefit from the capital appreciation and dividend income. It is probably one of the most diversified and fundamentally strong companies listed on Indian exchanges which can withstand the high-volatility – making it an excellent choice to add to your portfolio. It should not be long before the stock will break from its range once the things start to settle after the COVID-19 crisis.

The ITC too have attractive ROE & ROCE values of 23% and 35% respectively.

Amber Enterprises India Ltd.

The heat waves in summer have been forcing the Indian public to opt for air conditioning (AC) systems to keep the temperature under control. Now AC is not at all a luxury but a need for all group of people. It will lead to the robust AC sales in upcoming years giving the population is rising rapidly.

Amber Enterprises is in Air Conditioning & OEM business connected with big brands like LG, Blue Star, Hitachi, SML ISUZU, Carrier, and Godrej etc.  Amber Enterprises is a small-cap listed company with 0.34 debt-to-equity ratio with average CAGR (last 3 years) of 28 per cent. It is a small-cap stock with high growth potential available at 48 per cent discount from its 52-week high.

Disclaimer: This is for the sole purpose to provide information to the readers and not to interpret as investment advice. It is also not to consider as an offer or solicitation for the purchase and sale of any financial instrument. Any action taken based on given information contained herein is your responsibility alone.

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Coronavirus continues to spread rapidly around the world leaving countries under the state of lockdown. India too has experienced a significant increase in the number of reported cases since the beginning of April and extended the lockdown as a responsive strategy. The nationwide lockdown has brought high stress upon employees as well as businesses and with the lockdown is not looking to end soon, the employees are feeling anxious and worried about their jobs and future. The economic sluggishness caused by the coronavirus outbreak has resulted in a halt of companies’ business operations which led to job losses, steep pay cuts, and delayed appraisals. With the upstanding bills, EMIs, and SIP instalments, the immediate reaction of many investors is to pause their SIPs for some time to compensate with their irregular cashflows.

Should you pause your SIP during Lockdown?

The extension in lockdown has started to take a toll on businesses with as many as companies unable to compensate their employees due to general weakness in consumption across all sectors.  With the restriction in movement of people, shutting down factories, and cancellation in flights & trains, many companies faced a massive loss in revenue as the economy is going through a slowdown leaving only a handful of companies to continue its operations while working from home.

Badly hit by Coronavirus-forced lockdown, the employees are fearing possible job loss, steep cut in their salary and delayed appraisals. Many have already seen pay cuts and delayed appraisals which directly impact the regular cash flows of many. And as the lockdown is not looking to end anytime soon, many employees are under stress as it is affecting their regular payments such as EMIs, Systematic investment plans (SIPs) and utility bills. As a result, people are having second thoughts on - whether they should stop their SIPs in the current situation or not.

Who should pause their SIPs during Lockdown?

Well, SIP stands for a systematic investment plan. So, the first the foremost is to have an investable capital to invest period. So, people who find difficult to have a regular cash flow in this pandemic situation having second thoughts about to stop their SIPs until the situation does not start to settles. However, there is a more viable option rather than stopping their SIPs and that’s to opt for SIP pause. In stopping SIP, you’ll get back to square one as the monthly contribution will be stopped permanently. But, when you opt to pause SIP, the instalments will not only get deducted from your account for the months you pause it, but the deductions will resume after the period automatically. It is the only practical solution to not jeopardize your long-term investment plans with short-term irregular cashflows.

AMCs allow investors to pause their SIPs but not all fund houses offer this facility. So, it would be wise to clear it with your fund house first. You can either write to AMC or fill the form to opt for a pause or stop facility. It would take some time to process the application.

Who should keep their SIPs running…& Why?

Some investors irrespective of cashflow are tempted to stop or pause their SIPs due to the stock market meltdown which led them to heavy losses.  It is obvious for such investors who contribute to their SIP investment in a month and find that it’s lower value in the following month. But, the investors should know that the volatility will always remain in the market. That is the whole nature of this asset class. So, investors who have the surplus to invest during the lockdown should benefit from the rupee cost averaging especially now when the markets are at low levels. The current market is favourable for long-term investors who can buy more at a lower cost to achieve their financial goals.

Take any chapter from the history of the financial crisis, the market always finds it’s way to recovery. The first few years is the most crucial period when the market recovers most. So, investors with the surplus should continue to walk down that path and keep their SIPs running.

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The current economic crisis made investors reassess their risk tolerance to determine how much risk they are willing to take with the ongoing pandemic situation. The immense volatility in the equity market forced them to switch to the debt market and debt-related instruments to ensure optimal returns and minimal risk.

What are Gilt Funds?

Gilt funds are types of mutual funds that invest in varying government securities (G-sec) – medium to long-term issued by the Reserve Bank of India (RBI) on behalf of Government of India. As these investment schemes are made to the government and invest only in high-quality debt instruments, this makes them usually a safe and ideal option for risk-averse investors who just want to play safe.

In contrast to bond funds, the gilt funds invest solely in high-quality, low-risk government securities (G-sec) which are generally considered to be as safe as AAA grade investments. However, the returns are moderate might be lower than other asset-classes but the high asset quality ensures investors’ money is well protected from capital risk.

How do Gilt Funds Work?

Whenever the Government of India require funds, they approach the Reserve Bank of India (RBI) which lends money to the government after accumulating from other entities such as banks and insurance companies. In exchange of loan, the RBI issues Government Securities with fixed tenure, to which the fund manager of a gilt fund subscribes. Upon maturity, the gild funds restore the government securities and receive money consequently.

The gilt funds are backed by the government so the credit risk is almost zero making it an ideal investment scheme for investors in receiving moderate returns at low risk. However, there is an inverse relationship between interest rates and prices of government securities. So, movement in interest rates highly impacts the performance of gilt funds.

Who should invest in Gilt Funds?

Investors who are seeking safety within their investments rather than high returns can opt for gilt funds as these investment schemes have almost no credit risk and ensure capital preservation. In a comparison of equity funds and bond funds, gilt funds offer better asset quality while delivering moderate returns. Any investor who is hesitant to invest in volatile equity funds can park their capital in gilt funds.

However, the best time to invest in gilt funds would be in times of falling interest rates since the interest rates and bond prices have an inverse correlation. In the falling market when the equity funds are not performing well, the gilt funds are effective. The movement in interest rates can help generate better returns from investing in gilt funds but it also exposes the funds to risk.

Factors to Consider Before Investing in Gilt Funds

It would be recommendable to consider a few factors before investing in any gilt fund scheme:

Risk Gilt funds carry no credit risks has they invest in varying government securities (G-sec) making the default risk almost to nil. But, there is interest rate risk that affects the performance of these investment schemes. In rising interest rates, the net asset value (NAV) of a gilt fund falls sharply.

ReturnsGilt funds have a history of generating relatively higher returns and in falling interest rate regime, it can generate up to 12% returns. But, the returns from gilt funds are not assured and can vary with the movement in interest rates. Thus, it would be wise to invest in the gilt funds at the time when the interest rates are falling or economy facing a slump.

Expense RatioSimilar to other mutual funds, the gilt funds also charge a fee for fund management and other expenses known as the expense ratio. It is the percentage of average asset under management (AUM). The Securities & Exchange Board of India (SEBI) has capped the upper limit of expense ratio at 2.25% for debt mutual funds but the operating cost is fund specific and highly depends on the fund manager’s investment strategy. It would be wise to compare gilt fund based on their expense ratio and performance and seek one with the low expense ratio to protect the interests and maximize returns.

Investment HorizonAs you know the gilt funds invest in government securities (G-sec) of varying maturity – medium to long term. So, the average maturity of a gilt fund lies between 3 to 5 years. So, if you have an investment horizon of 3 to 5 years then the gilt fund is an ideal option to generate moderate returns in medium tenure with low risk. Ensure your investment horizon align with a maturity period of the particular gilt fund.

Financial GoalsInvestors who have the financial goal of accumulating stable returns with no credit risk then gilt funds can help you generate moderately safe returns to achieve your medium to long-term financial goals. But, if you have long-term goals like a retirement plan or accumulating wealth over 20-30 years then be wary of your selection as over long period, the gilt funds would be riskier and more sensitive to interest rate changes.

TaxThe taxation of gilt funds is similar to debt mutual funds. Means, the capital gains would be taxed based on the duration. If the capital gains redeemed before three years, the STCG would be applied as per the individual’s income tax slab. On the other hand, if redeemed after three years the LTCG would be taxed at flat 20% with indexation.

Now if you are an investor who wants to invest money where you can have safety and moderate returns, the gilt fund may be for you. You can start your search for gilt funds with reliancesmartmoney.com to select the fund scheme that aligns with your financial goals and time horizon. Most of all, help you generate reasonable returns with safety.

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If you are planning to benefit from both rising and falling interest rate cycles then the ‘dynamic’ approach of dynamic bond funds can help you generate higher returns from altering portfolio allocations between short-term and long-term bonds. Dynamic bond funds will give you steady returns regardless of the interest rates movement. Dynamic bond funds are well-recognized for their ‘dynamic’ maturity as well as composition.

What are Dynamic Bond Funds?

The dynamic bond fund is a class of open-ended debt schemes that follows a dynamic approach in terms of maturity for investing across duration. These schemes enable investors for generating potential returns by shifting maturities of securities in the portfolio based on market scenarios. As the bond funds are impacted by interest rates, the dynamic bond funds give the flexibility to alter the allocations between short-term and long-term bonds to tide over the volatility in the bond market.

The objective of this particular bond funds is to provide investors with attractive returns through investing in high-quality debt securities of varying maturities. However, there is no guarantee that the scheme’s objective will be achieved as it all depends upon the fund manager’s view of interest rate that could lead investors to make or lose money.

How do Dynamic Bond Funds work?

The distinctive feature of dynamic bond funds that separates it with other debt funds it its dynamic approach that it switches between short-term and long-term maturities. So, if the fund manager feels the drop in the interest rates, he can switch the fund’s maturity to long-term. On the other hand, if he feels like the interest rates have reached its lowest peak and will only rise from here on, he can switch the maturity to short-term. This can help out the investors to tide over the abrupt changes in the interest rates.

Who should invest in Dynamic Bond Funds?

Dynamic bond funds are meant for investors who are seeking regular income for medium to long-term (3 to 5 years). Investors who do not know about making right calls whatsoever can opt for dynamic bond fund with a systematic investment plan (SIP) approach to combat the volatility and make returns from interest rate movements. However, before investing, one must go through a key information memorandum (KIM) which sets forth the information on the investment scheme.

Factors to Consider before Investing in Dynamic Bond Funds

Role of Fund Manager:As we mentioned earlier, the role of the fund manager in these schemes is quite crucial. The manager’s view of interest rate decides everything. It is the manager’s call that can lead to good returns, but if anything goes wrong, investors can lose including the possible loss of principal.

Interest Rate Movement:Dynamic bond funds allocate fund corpus across debt securities including government securities, foreign securities, and money-market instruments so the schemes are subjected to interest rate movements. That is one factor that affects the dynamic bond funds as the trend in interest rates is not always visible. Sometimes, the rates move in the opposite direction of the expectation which results in the funds hit badly. Change in interest rate can affect the prices of bonds. However, a well-diversified portfolio may help to mitigate some risk.

Liquidity:As the dynamic bond funds allocated in debt & money market instruments, the liquidity of the fund schemes restricted by settlement periods, transfer procedures and trading volumes. But, an investor can partly mitigate such risks by diversification and staggering of maturities in events of a large number of redemption requests.

Macroeconomic Factors:The returns come from investing in dynamic bond funds highly impacted by factors like changed in government policies, oil & gas prices, fiscal deficit. To tide over such macroeconomic factors, one can benefit from the fund's dynamic approach to switch the maturities duration from short-term to long-term and vice-versa.

Additional Tips:

Every investor must look out for dynamic bond funds’ performance over the last 5 years and check out the companies for background, fundamentals, management, and financials to mitigate the credit risks associated with investing in dynamic bond funds. While at it, it would be recommendable to avoid New Fund Offers (NFO) in dynamic bonds. Investors must not consider dynamic bond funds if the investment horizon is below 3 years and stick to short-duration funds.

Dynamic bond funds tend to be riskier even by the debt fund standards. But, when it comes to generating high returns from investing in debt securities, the dynamic bond funds can deliver it to you.

You can begin your research to find the most suitable dynamic bond funds with reliancesmartmoney to compare, evaluate the fund schemes to invest in dynamic funds via SIP or lumpsum.

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Volatility and risks are characteristically attributes of investing – and also the major reason why many investors afraid to invest in equity markets. But, if one could benefit from such immense volatility and turn it into an investment opportunity while hedging the risk simultaneously? – Arbitrage funds

What are Arbitrage Funds?

Arbitrage funds are kind of mutual funds that leverage the price differential in the cash and derivatives markets to generate returns. These funds are hybrid in nature and capitalize on the mispricing of equity shares in the spot market and futures market. Usually, a fund manager buy shares and sell them in higher later hoping that would help in generating profitable returns. Instead, an arbitrage fund manager simultaneously buys stocks in the cash market and sells them in the futures or derivatives market. The differential in the buying and selling prices are your returns.

How do Arbitrage Funds work?

As mentioned, the arbitrage funds work on differential prices in the cash market and derivatives market. The cash market (or spot market) is often seen as the stock market. For example, the shares of Company ABC are trading in the stock market at the price of Rs. 5,000. You purchase that share and get ownership in the company. But, the futures market doesn’t work that way. The futures (or derivatives) market anticipated futures price of underlying stocks. Similar to this, the transactions in the futures market do not carry out the same way in the spot market. Stocks purchased in the futures market deliver on the maturity date of the futures contract. On maturity, the transaction carries out on the pre-decided price as specified in the futures contract.

Suppose the shares of Company ABC trading in the spot market at the price of Rs. 5,000. The arbitrage fund manager decided to buy 100 shares of ABC Company at the beginning of May month which cost Rs. 5,00,000 and sell the 100 units of ABC Company at Rs. 5,500 per share in a Futures contract. Towards, the end of the month, if the prices coincide, the fund manager will sell the shares in the futures market and generate a profit of Rs. 50,000 (5,500-5,000 x 100).

If the fund manager believes the prices to go down in future, he can buy the lowered-priced futures contracts and sell shares in the cash market.

Since the differences in the stock prices and futures contracts are quite small. Arbitrage fund managers must execute a large number of traders to generate substantial gains. Arbitrage funds usually perform well during the volatile market as it creates the differences in the spot and futures contract prices of shares.

Who should invest in Arbitrage Funds?

Risk-averse investors who are looking to have equity exposure but at the same time not prepared for the risk associated with them can benefit from the volatile markets without taking too much risk. Even though the risk is relatively low, the returns can be unpredictable due to volatility. However, volatility is a necessity to make greater profits in investing in arbitrage funds. Greater the uncertainty and volatility in the market, the higher the possibility to generate returns.

So, the cautious investors with short to medium-term financial goals can apt for arbitrage funds to park their surplus and benefit from market volatility without taking too much risk. While you’re at it, don’t forget to check for the expense ratio – a percentage of the fund’s overall assets. Due to frequent trading, the arbitrage fund incurs substantial transaction costs, high turn over ratio, and fund manager’s fee may lead to high expense ratio which could affect your take-home returns.

Advantages & Disadvantages: Arbitrage Funds

Like every other asset class, the arbitrage fund has its own advantages and disadvantages which are as follow:

Advantages of Investing in Arbitrage Funds

Low Risk: One of the primary benefits of investing in arbitrage funds is that even with the volatility they carry low risk. It is because each security simultaneously bought and sold. Also, the arbitrage fund managers invest part of the capital in highly stable debt securities so that if the fund is less profitable, the debt securities cover for that and provide with the returns what investor expected for. On top of that, the fund performs well in a highly volatile market. It is the characteristic of arbitrage fund that makes it an ideal choice for risk-averse investors to benefit from the market volatility.

Taxed as Equity Funds: Although these are categorized as hybrid funds because arbitrage funds invest primarily in equities, they are taxed as equity funds. If one is holding shares in an arbitrage fund which treated as equity funds for more than a year then the returns received will be taxed as capital gains rate which is pretty much lower than the income tax rate.

Disadvantages of Investing in Arbitrage Funds

Unpredictable Returns: Arbitrage funds are recognized for their moderate returns from simultaneous buying and selling in spot and futures market. As you know, the arbitrage funds tend to perform well in the volatile market due to high price differential but it turns out, the arbitrage funds are not very profitable in stable markets. During stable markets, the fund manager park more capital in debt instruments which made arbitrage fund a bond fund, temporarily. In such situations, the actively managed equity funds tend to outperform the arbitrage funds due to excess time in bonds which reduce the fund’s returns drastically.

High Expense Ratios: As noted above, the arbitrage funds have high expense ratio due to frequent transactions and manager’s fee which lead to substantial expenses. The high expense ratio could reduce your take-home returns.

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What are Gold Funds? All About Gold Funds in India

What are Gold Funds? – All about Gold Funds

What are Gold Funds?

As the name suggests, the gold funds are funds that invest in various forms of gold directly or indirectly. So, it can be in physical gold, stock of gold mining companies or gold producing syndicates. So, there are Gold Mining Funds, Gold ETFs, and here is another type of gold funds also known as Gold Fund of Fund (FoF) which invest in the units of the Gold Exchange Traded Funds (ETFs) and often considered as Gold Mutual Funds.

Investors who are looking for exposure in gold commodity but avoid investing in physical form, generally give preference to gold mutual funds as a tool to hedge against economic shocks and diversify their investment portfolio to minimize the risk of investment.

Difference between Gold Funds and Gold ETFs

Gold mutual funds and Gold ETFs are amongst the most simplified gold investment options that provide better liquidity and simplified gold buying process. But, often investors get confused in distinguishing one from another.

Things to Consider Before Investing in Gold Funds

Gold funds are regulated by the Securities & Exchange Board of India (SEBI), which lowers the risk of investing in these open-ended schemes. It is an ideal investment choice for investors who are looking to diversify their investment portfolio and minimize the overall risk of investment. After all, one can simply invest in these highly-liquid funds with as low as Rs. 1000 via SIP and benefit from safer returns.

Despite all, even gold mutual fund has its risks so it would be wise to consider a few things you begin. Following are the things that you should consider before investing in gold funds:

Lower Returns

Gold funds do not offer as much as returns as equities. Generally, the investors invest in gold mutual funds at the times of uncertainty and move back to riskier options once the things start to settle down.

Seasonal Behavior

It is one of the factors that made many investors believed that the gold fund is not an investment option but a tool to hedge against market fluctuation and economic shocks. It is because the gold performance is based on seasonal patterns. During adverse situations or market crisis, it offers higher returns, sometimes higher than any other asset-class; otherwise, it’s lagging in normal market conditions.

Diversification

A gold mutual fund is one excellent investment option to diversify an investment portfolio. But it only works as long as an investor have a large-sized portfolio otherwise, gold is not an ideal asset-class due to its low optimal return generating capacity compared to other asset classes.            

Dynamic Portfolio Allocation

Gold funds can be used for spreading investments across different assets to minimize investment risk. Investing in gold funds at the time of crisis. No doubt, it investing during such time can lead to higher returns. Similarly, when the market recovers, it is important to switch to different asset-classes to earn higher returns.

Hope, this would help you in understanding the few factors that can be considered while at the time of investing in gold funds. While you’re at it, don’t forget to analyze the different funds to come up with the right one that can help fulfill your financial goals.

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Quick Tour on How to Invest in Indian Stock Markets

The lockdown in 2020 saw a huge surge in the number of new trading accounts that were opened. According to data from the Central Depository Services (India) Ltd., 1.2 million new accounts were opened with them during March and April 2020 itself. If you are not in that number, or want some tips on how to invest in the stock market in India online, this article is sure to help.

Primarily, people invest their surplus funds in the share market, as a means for supplementing their income, or creating a retirement fund. However, there are also people who have replaced their primary source of income with trading in stocks.

How to invest in share market online?

1.    Choose your Intermediary/ Broker

As a beginner, you should know that trading is now done online electronically in India, and the paper system has been completely abolished. You can invest in the Indian share market, through two institutions:

A)   Bombay Stock Exchange (BSE)

B)   National Stock Exchange (NSE)

The stocks listed on these exchanges have to be bought and sold through Depository Participants (DP) or brokerage firms. Once you’ve selected your broker, they will provide you with an interface through which you can interact with the market. This includes a Trading Account which enables you to make transactions like buy and sell shares, and a Demat Account which maintains a record of the securities you are currently holding. This enables you to trade online from anywhere.

2.    Keep your documents at hand

Your broker will require you to submit certain documents to complete the set-up of your Trading and Demat account. These may include a permanent address proof, identity proof, PAN Card copy, and proof of income in certain cases. Keep this at reach to fasten the process of starting to invest in the share market online.

3.    Set your budget beforehand

It is easy to get carried away with the tide, once you start investing and trading money in the share market online. Hence, you need to be cautious as a beginner, and set yourself a budget clearly defining the amount you are willing to invest at each step. Make sure that it is your surplus income you are investing, and not that which you will need to meet your basic necessities.

4.    Know your risk appetite

As a beginner, you need to know the difference between ‘trading’ and ‘investing’. Trading requires you to keep a close watch over price fluctuation of shares, allowing you to make profits from short-term price changes. Investing, on the other hand mainly focuses on studying the performance of different companies over a longer term and choosing shares based on several financial parameters.

As a beginner, you should focus on ‘investing’ initially, by studying the market and its functioning as it involves relatively less risk. Once you are familiar with the same, you can consider ‘intra-day trading’ if it appeals to your risk-taking ability.

5.    Don’t put all your eggs into one basket

This is an advice worth taking, if you are a beginner to investing in the share market in India. It is important to diversify your investments in order to protect your funds from adverse market fluctuations. For this, you may invest a certain percentage in mutual funds, equity, ETF’s, etc. Similarly, do not invest all funds in one company or within a single industry. Having a diverse portfolio ensures that you do not lose all your securities if the markets crash.

6.    Research about the company

Spending time at the beginning in doing some research about the company you are going to invest in, will save you money in the long-run. Research about the company’s management, their BOD, revenue over the past periods, income-generating capability, present debt and liabilities, legal proceedings against them if any, etc. Using ratios like RoCE and RoE to measure their performance will help assess their credibility and trustworthiness with your funds.

7.    Select companies you understand

While deciding how to select a company share, the easiest way would be to check how closely you relate with the business of that company. Get an understanding of how the business operates to generate a profit, what products or services they sell, would you purchase what they have to offer? etc. Answering such questions will give you a clear picture of the category of shares you should select.

  There is no minimum amount required to be invested in the stock market in India, making it a very affordable and flexible investment option for people with limited means. However, you are required to pay taxes mandated by the Government and brokerage charges (which vary depending on the broker) on each transaction you make in the share market. Remember that there is no right time to start investing. The key is to be patient, and go slow!