Mutual Fund stops 28.08.20

Stops in Pharma Funds are getting tight, need to cautious on those investments. On the other hand, as the broad market is getting into further bullish strength, all other funds are doing good, adding more profits as well locking them too.

With the breadth in the markets moving into many sectors along with Pharma, IT, Auto, Metals. Now Power and Finance sectors have turned bullish. This broad strength in the markets is likely to take the indices to their new high’s. It is good time to be invested in Equities. More exposure to Mid and Small caps would be a good option as these segments are likely to give higher returns.

MF Trailing Stops 21-08-2020

As the whole market is moving up now, all the trailing stops in Mutual Fund schemes have been moving up and locking profits. Stop losses for the funds tracked and discussed in our You Tube Channel are published on weekly basis in this blog.

The use of stop losses in Mutual Funds is for conservative investors. Investors, those who have clear defined objectives on their investments.

If you want to increase the returns on your investments with defined risk like say, you are ok to take a 5% risk on your capital and the rest you want to be protected. In such conditions, out of your total investments, find the 5% amount.

Using the risks given for each scheme, calculate how much you can invest and set aside only that much of capital for the fund. As long as the fund is going up, hold the investment. Stop loss will be trailed as the NAV climbs up.

When the fund performance turns and hits the stop, move out & book profit.

Using this strategy, you will be able to manage your investments more prudently.

Let’s take an example. If an investor wanted to take 5% risk & in April he had invested in SBI Pharma fund, which carried a 5% risk. Today, in 3 months from the time we took the position, this fund has locked 17.40% gains.

By taking a 5% risk on the capital, this investor has made 17.40%. This strategy helps investors to maximize gains with conservative approach. In case the investment had turned sour, he would have only lost 5%. The balance capital is safe.

In this process, investments should be taken only when opportunities are available. When there is no opportunity, park the funds in debt funds to have returns that are above bank FD’s.

MF Stops 14-08-2020

MF Stop losses for 14th Aug 2020. As the market is going up, all the funds are locking profits on the go.

Our Pharma Funds stops have made tremendous gains. For example, SBI Pharma which we had been tracking since recommendation has locked 16.70% gains so far. This pharma fund is presently carrying 4.42% risk on its NAV.

Something different is happening in the markets today. Risks on Mutual Funds which used to be at 5% have now got down to below 4.50%. What this means?

Volatility is dropping in the markets. This is advantage is the trend continues in a smooth manner. On the other hand, if the tide changing direction. We will have exits coming on all funds soon.

Invest with caution.

Mutual Fund Stops – 07-08-2020

Stop loss values for Mutual Funds tracked and recommended by us.

Pharma funds have reached 15% lock in profits. Trend is likely to continue for few more weeks. Value funds are leading with good returns now due to the big drop that facilitated them to pick best bargains. When value funds perform, they give very big returns.

Use stop losses for all your positions, it helps protect your profits as well as your capital.

Reliance – costliest Oil company

With the run up in price of Reliance stock, which nearly doubled in three months, post the pandemic lockdowns. Reliance has become the costliest Oil company on the planet.

Market cap of Reliance has moved past 12 lakh crores, where the stock PE is at 40. On the business side, both sales and profits are down substantially when compared to last year.

This is not a COVID impact, Reliance business on Oil could have taken a hit as consumption dropped in the lockdown period. Even this for the March 2020 quarter, should not have declined as the lockdown was only for 10 days in the month of March.

Once market became jittery about the debt that Reliance carried, promoters got into fear mode and began selling rampantly. Now, the whole world has a share in the company. Google, Facebook & Microsoft kind of ownership. Also with ARAMCO, now the promoters hands are tied on future dreams.

They will not be allowed to blow money and kill competition. One very good blessing in disguise for the competitors.

With so much cash in their kitty, it cannot be kept idle. After clearing debts the future profits of Reliance, the parent of the telecom venture will get moved to some other activities, not into Oil business for sure.

They are now planning to sell stake in Retail too, looks like, apart from the stakes they will hold in the Oil, Tech & Retail, this company will become a bigger financial services firm which will invest into new technologies through the start-up ecosystem.

The next big challenge is for the PE & Venture capital firms globally, as Reliance will compete in bidding to acquire stakes globally into new businesses.

How good their dictatorship mindset will play in the totally competitive space that they are venturing will get known in a couple of years.

Reliance stock is not a favourite among institutions. All the holdings that Mutual Funds hold in the company are process based. Very few fund managers have a liking to this stock because of all kinds of clueless decisions that the management makes.

All of these views expressed are our beliefs, which can differ largely against others.

5 Myths & facts of Mutual funds

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.

Here are some myths & facts about Mutual Funds which are useful, when investing in this asset class.

  1. Myth – Mutual Funds are meant for long term investors.

Fact – Mutual Funds can be a short term investment but, It is meant to be a long term asset, to receive  high returns. Mutual Fund when invested for period of 5 years may give a return of an average of 12 – 15%. ₹1 lakh invested for 5 years will be 1.75 lakhs in 5 years. At 15%, money will double in every 5 years.

  1. Myth – Funds will get locked and cannot be used.

Fact – There is no lock-in period for Mutual Fund Investments, apart from ELSS schemes which are done to save taxes. Even these schemes are one of the lowest lock-in available in the tax saving products universe. Other products like, PPF, Tax saving FD’s, ULIP’s etc are locked for more than 5 to 15 years.

All other mutual fund investments are available for redemption at time after the investment. Only that withdrawals made before 1 year from the date of investment will have 1% exit load and above 1 year, it is free to withdraw.

  1. Myth – Mutual Funds always give positive returns

Fact – Investments into mutual funds are market related and will go through the up’s and downs of the market. If invested for short durations, there is possibility of having negative returns on the other hand, if the investment horizon is more than 5 years chances of negative returns becomes zero.

  1. Myth – Mutual Funds is very risky

Fact – It becomes risk only when we do something without the knowledge of what we are doing and don’t know the outcome. In mutual funds, experienced fund managers manage the investments and they are well equipped with research teams to identify good investment opportunities.

  1. Myth – Big Funds will give big returns and small risk

Fact – Wealth creation is about time and not size. Just investing into a big fund will not give big returns, while staying with the fund for a longer period will for sure give big returns.

 

FM’s thoughts on Oil & Loan Waiver

Jaitley’s talk at the ET awards, “Users should pay for oil… else fiscal deficit will rise and add to the current account deficit. It will push up inflation, weaken rupee. Tax on fuel prices should come down not by creating fiscal deficit, but through an increase in the non-oil tax to GDP ratio, which is on the rise since last few years. We must create a sense of maturity among people” Very nice thought, if we contribute by way of higher compliance, it will help in getting other benefits.

It felt like, we have only been asking without contributing. When we talk about this to people, they get agitated about paying taxes. It is because, for generations we have been on the receiving end.

Want farm loan waiver, how can that happen? Vice president Venkaiah Naidu said, “Loan waiver can happen only if there is a deposit waiver’. We did not want FRDI to come because we stated poor man’s money in the banks should not get used for the bank’s non-competence. All the deposit holders should be given highest safety on their investments. At the same time banks should waive off loans. This can happen only from the profits that banks make.

And unfortunately our banks don’t have that edge too, because of people running the banks who don’t have big vision.

Happened to hear a banker say that, “De-Mon was good and GST was good, while it was wrongly timed and not executed well. Government should have planned well to avoid the problems that it came across in implementing both these great reforms.”

We are the world’s biggest democracy having diversity of Africa to Europe in our mindset. When it comes to paying taxes we are like Africa, the most corrupt. There could not have been an opportunity to learn from some others mistake before bringing these two reforms. We should only learn from our own experiences. That is how it can be…..

There is an urgent need to move out of the comfort zone of protectionist mindset to accept reality & face the world as it is. It will strengthen us as a country and prepare us to have more luxuries.