Looking to get into the stock market, but don’t know where to begin? We simplify things for you a bit.
1. Link investments to goal
If you are a first-time investor and have a plan in your mind before you start investing. How much will you invest per month, and towards which goals is something you should be clear about. The amount that you wish to save should be inflation-adjusted to avoid under-investing.
You may start saving separately towards your goals that could be home buying in 3-5 years, children education in 15-18 years or even your retirement almost 30 years away.
2. Portfolio construction
As a beginner in mutual funds, make your first investment in Index Funds because they track the underlying Index and are less volatile than any other equity fund. Choose 2-3 schemes forming the core of the Mutual Funds (MF) portfolio. Add mid-cap and small-cap depending on your risk profile and goal horizon. Avoid thematic or sector funds unless you can track them especially in terms of government policies impacting them.
Go for consistently performing MF schemes that have generated benchmark-beating returns over the long term. Do not merely look at the fund’s especially sectoral fund’s short-term performance to decide.
Understand the scheme’s objective, have a close look at least at the scheme’s ‘Fact Sheet’ to see the portfolio structure – in terms of market cap, allocation to top 5 industries and top 5 stocks, as returns are largely going to flow from these factors. This approach will also help you diversify your MF portfolio.
3. Systematic Investment Plans (SIP)
A better approach could be through Systematic Investment Plans (SIP) where a fixed amount gets debited from your bank account towards the MF scheme each month. Further, you may deploy any lump sum preferably into the same MF folio as and when a surplus is there. Staggering one’s investment through SIP helps one to stay disciplined, avoid temptations to book profits or delay making investments based on market conditions.
Till the goals are at least three years away, keep funds in equity-oriented schemes. Thereafter, start shifting funds from equities to less volatile debt funds to preserve the corpus to meet the goal.
4. Review regularly
Other than the Index fund, which is a passive fund, you may have to review the performance of the MF schemes in your portfolio. The active funds where the performance depends on the acumen of the fund manager, among other factors, need a regular review. Check their performance against peers, benchmark and category returns, and take appropriate action.
5. Regular plans or direct plans
Every MF scheme will have two options – A regular plan and a Direct plan. The difference is in terms of lower cost (expense ratio) for Direct plans as they are to be invested directly without the help of any MF distributor. Over a longer horizon, a Direct plan helps to save a sizable chunk of money. However, the selection of an MF scheme is the key to maximize the benefit of the Direct plan and thus may not suit all new investors.
For a new investor in the market, it is important to give time to your investments. Some of the active funds may outperform the market while others may not. Stay with consistent performers only while selecting the funds and do not merely look at their short-term performance. There could be a significant dip in your fund value as we all saw in March 2020. Those investors who opted to stay and not exit benefited in the long term. Finally, remember to make use of the fall in the market and invest more during such corrections. It takes time for the results to show as equities tend to drift upwards in the long term.
Paytm celebrates SEBIs nod for India’s largest IPO
It’s raining IPOs across India, and one of the biggest fintech players has now joined the party. Fintech company Paytm recently received the nod from the Securities and Exchange Board of India (SEBI) for its upcoming Rs. 16,600 crore IPO.
The company is expected to list on the Indian bourses ahead of Diwali. Reports suggest that the company could list by the end of October, as it plans to skip the pre-IPO share sale rounds to fast-track listing.
Ant Group, SoftBank’s Vision Fund, and Berkshire Hathaway are among the company’s supporters. Its operational loss reduced to Rs. 16.55 billion ($221.00 million) in the fiscal year that ended in March 2021, from Rs. 24.68 billion a year earlier. In July, a source told Reuters that Paytm would likely break even in 18 months.
Paytm is aiming for a valuation of Rs 1.47-1.78 lakh crore in its upcoming IPO. Previously, Aswath Damodaran, a US-based valuation specialist who is also a finance professor at New York University’s Stern School of Business, valued the firm’s unlisted shares at Rs 2,950 each.
Several first-generation Indian businesses are planning to list on local stock exchanges, following in the footsteps of food delivery company Zomato, which made a successful stock market debut in July and is backed by China’s Ant Group.
Launched a decade ago as a platform for mobile recharging, Paytm grew quickly after ride-hailing firm Uber listed it as a quick payment option. Its use swelled further in 2016 when a ban on high-value currency banknotes boosted digital payments.
Paytm has since branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances.
After Zomato, six more companies eye IPO
As many as six companies—Nykaa, Adani Wilmar and Star Health & Allied Insurance, Penna Cement Industries, Latent View Analytics and Sigachi Industries—have received clearance from the Securities and Exchange Board of India (SEBI) to launch Initial Public Offerings (IPOs).
According to a Monday update from the capital markets regulator, these six companies submitted preliminary IPO papers with SEBI between May and August and received its “observations” or approval to float the IPOs between October 11 and October 14.
FSN E-Commerce Ventures Ltd’s IPO, which runs Nykaa, includes a fresh issue of equity shares worth Rs. 525 crore and an Offer For Sale (OFS) of 43,111,670 equity shares by a promoter and existing shareholders.
The promoter and promoter group Safecrop Investments India LLP, Konark Trust, MMPL Trust, and existing investors Apis Growth 6 Ltd, Mio IV Star, University of Notre Dame Du Lac, Mio Star, ROC Capital Pty Ltd, Venkatasamy Jagannathan, Sai Satish, and Berjis Minoo Desai are among those selling shares through the offer for sale.
Star Health, the country’s largest private health insurance, is owned by a group of investors led by Westbridge Capital and Rakesh Jhunjhunwala.
According to the Draft Red Herring Prospectus (DRHP), Penna Cement’s IPO will include a fresh offering of equity shares totaling Rs. 1,300 crore and a promoter offer for sale of up to Rs. 250 crore. The IPO of Latent View Analytics also includes a new issue of equity shares at Rs. 474 crore. It also has a promoter and current owners offering to sell equity shares for Rs. 126 crore.
Adugudi Viswanathan Venkatraman, the company’s promoter, will sell shares worth Rs. 60.14 crore, Ramesh Hariharan, a shareholder, will sell shares worth Rs. 35 crore, and Gopinath Koteeswaran, a shareholder, will shelve off shares worth Rs. 23.52 crore, among others.
Sigachi Industries, a cellulose-based excipient company, will see its IPO sell up to 76.95 lakh equity shares.
Cryptocurrency: increasingly the currency of choice for new India
Cryptocurrencies took the world by storm when they first emerged in 2009. With no government backing these digital currencies, and no single user having complete authority over them, Crypto has seen a decent rise in the number of its owners. From Elon Musk to Bill Gates, all have spoken about the ‘future’ of currency.
Recently, BrokerChoose, a broker discovery and comparison website stated in its annual proliferation index that India has the biggest number of cryptocurrency users in the world, with 10.07 crore users. The United States is next, with 2.74 million crypto owners, followed by Russia (1.74 million), and Nigeria (1.30 million).
The increasing trade volumes and valuations of Crypto exchanges in India is another testimonial to the exponential rise of this virtual currency in the country. The report by Mint states that the Crypto exchange platform CoinSwitch Kuber has 11 million users, whereas WazirX stands at 8.3 million. Within one year of its incorporation in June 2020, CoinSwitch Kuber entered the unicorn club with a valuation of $1.9 billion. Prior to this, just two months earlier, crypto exchange platform CoinDCX became the first crypto unicorn in India with a valuation of $1.1 billion.
Despite the country’s uncertain future, the cryptocurrency fever continues to grow among the public. The Reserve Bank of India banned cryptocurrency trading in 2018, but the prohibition was eventually overturned by the Supreme Court. In February of this year, the Indian government proposed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which would prohibit the use of private cryptocurrencies in the country. However, the bill has yet to be introduced in Parliament.
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