All about Initial Public Offering – IPO

Now that a few basics of MF has been done..now we could move on to other terms in the finance world…

So what is IPO??

What is Systematic Investment Plan (SIP)?

It is popularly knows as SIP, it is a simple method used all over the globe. It is very close to recurring deposits. It involves investing a fixed amount on a regular basis for a fixed period in any scheme. A SIP can be started even by investing ` 500 p.m. (in most of the schemes)

Advantages?

Power of Compounding.....

 Hope this post helps one and all in understand how important it is to save consistently and regularly. One has no idea of the Power of Compounding.

I would narrate the same with an example which we share with all our clients:

Early systematic investment paves the way for a stress free retirement.

Let’s say there are 2 people Mr. A (age 25) and Mr. B (age 25). Both have been worried about their future financially with the rise in inflation etc for the next 35 years. Both of them plan to retire at the age of 60.

Mr. A starts investing `10,000 pm on a regular systematic way from the age of 25 and would continue till the age of 35 (assuming the basic 10%p.a. compounded monthly).   After the age of 35 he stopped investing further amount and did let his investment appreciate till he would retire i.e. when he would be 60 years. Hence total amount invested till age of 35 is ` 12 lacs.

Mr. B started investing the same amount a bit late from the age of 35 and went on investing till he was 60 years (retirement age). His total investment was of ` 30 lacs.      

Now because of the power of compounding lets look at their investment value at the 60^th year.

What is Mutual Funds and Why Mutual Funds?

Continuing with the previous post..

-     Money Market / Liquid Fund / Income Funds: Main objective of this fund is to provide easy liquidity, moderate income and capital preservation. They generally invest in commercial paper, treasury bills, government securities etc. Returns in these fluctuate very less.

-    Equity Linked saving schemes (ELSS):  They are the open-ended growth schemes with 3 year lock in. This is the most popular scheme in today’s generation. It offers the benefit of Section 80 ( C ) of IT Act, up to a maximum of ` 100,000.

-     Index Funds: They replicate any index that is Sensex or Nifty. These schemes invest in index securities in same weightage of an index. NAV will fluctuate as the index would. 

-     Sectoral specific Funds: Main objective of this fund is to invest in equities of a specific sector. For eg. FMCG sectoral fund would invest in companies like Hindustan Lever, Nestle etc…

What is Mutual Funds and Why Mutual Funds?

While I have been writing this blog…Sensex has been roaring, crossing up 20k levels and trying to reach 21k no sooner.

Via this blog, I would be sharing views on Equity, MFs, little bit of Insurance. Though Equity being my forte, I would start with MF as equity being a vast area where MF is not that much.

Starting with MF then, the first question on everyone’s mind would be What is and Why Mutual Funds?

The answer to this is very simple.. A MF acts like a trust wherein they pool in savings of a huge number of investors (who are called unit holders) with a common financial goal. Once the money is collected they are then invested in various products like capital markets / debt markets by qualified professionals. The capital appreciation is then distributed to the unit holders in proportion to the units hold by them.

These hectic days we all have, wherein we hardly have time for ourselves then how would be monitor our finances on a daily basis, where by we are struggling for a good savings / investments and worried about our future financially. Mutual funds have qualified professionals who do all this for you. This is the reason why, the world over, they have become the most popular means of investing.

Some advantages:

Saving vs Investing….

There is not much difference between saving and investing…it’s just the thin line. But yet we can’t say it’s the same.

Saving is for our own security where as investing is for our growth financially. Saving is more of storing money safely for our immediate and upcoming expenses. For e.g. keeping money in banks, FDs, products where there are fixed rate of returns and where even the returns guaranteed. So we always have savings in interest – bearing accounts that are safe.

Savings work like an insurance against emergency requirements. It makes you feel secured. While we save we even prevent it from any loss though the growth would be less but its more secured and works as a backbone to the family. Savings would be where we might earn low or at a fixed rate and where in we can withdraw it easily.

Basic Rules While Investing...

We all know why one should invest at a regular interval.. it should be like a compulsion investments which could help us in future. No investment mode is bad..right from old timers FD, PPF, RDs, Insurance etc to the new genx modes of Stocks, Mutual funds etc..

The most important thing for anyone is to know how much he has to invest and how he would divide the amount set aside wisely. It’s always better to break up the amount and split them in to various modes, keeping in mind the Tax saving too.

Safe investments are FDs, PPF, RDs, Debt funds etc where in we know for sure the principal amount would always be intact…while entering in to Stocks and MFs etc one can never be assured returns. Of course this is very debatable as both the modes have their own pros and cons. Like the earlier ones might give you less returns but guaranty principal amount protection where as the later one could give very good returns  but one cant be too sure about the same.

In the investment world the race between the hare and the tortoise is often won by the tortoise.

Offline vs Online Trading….

Online trading is quite popular lately as its more affordable, fast and its everything one would want when on a move..

Especially for all the working professionals, for all the investors who travel a lot.. trading from almost anywhere, transferring funds for trading from anywhere is an ease.

Now even trading via mobile platforms have come up which is again anything a professional would want when on a move or in a meeting etc.

Ofcourse it has its own advantages and disadvantages when compared to Offline trading.

Basics of Online trading:

-Trade from almost anywhere.

-Transfer funds online from anywhere.

-Shares are transferred to and fro online. (as compulsory one has to open a demat account with the same broker he wants to trade online with)

-Can trade only to the extent of credit in the trading account.

-Absolutely Real time stock quotes.

-Real time confirmation of trades.

-View trades, accounts, balances, portfolio etc online.

-Less brokerage/commission costs

Basics of Offline trading:

Just the Basics…..

Finance in a term is quite a huge term. It would be very difficult to explain in just a few lines or paras…

There are various verticals in the term Finance…

It consists of Investments, Loans, Corporate finance, Debt markets and so much more…

My blog would talk about the fields I have learned thru the years.…and that is  Investments (via Equity, Debt, Mutual fund, Insurance mode)

Hope it would help one and all for their investment needs. You are even free to ask me any sort of questions at anytime..

Lets start with Investing in Stock Markets…

Financial Jungle...

I had been working since I was in my 2^nd year of graduation. Have been in Debt markets that time and was just a part time job to earn some experience and some pocket money and same time I cleared my 3 years GNNIT from NIIT.

Just after my graduation I had no idea as in what I would be doing ahead in my life….had many plans…but life wont take in the same direction as you plan… for me I wanted to do something on the IT side…mostly towards animation or something closer.

Also at same time I wanted to do my MBA, but wanted to earn 1^st and then pursue the same. Dad being from the Finance / Investments field.. I knew I had a soft corner for that field always. But I never thought that as a career and move forward. Still undecided for 2-3 months..one day dad came to me and told me why don’t I join his friends firm which is a Broking firm and in to Arbitrage. At that time though dad was a master in this field of broking; I had no much clue as in what each and every term meant.