Inflation Vs Growth

Inflation Vs Growth

What should be the focus at the moment? Inflation or Growth? With the current inflation numbers being printed,the concerns rise again on the stance of RBI and the direction ahead. What really impacts the inflation,to my mind are two constituents:

International Oil Prices

Cost of Grains

The Oil price as a factor is totally out of our control & as India consumes 5% of the Global Oil Production per day,any Dollar change in the price of Oil has a deep impact on the domestic pricing. Also with the weakening of INR to Dollar, we tend to import further more inflation. 

For years and years we have been dependent on Monsoon for our Kharif and Rabi produce. Each year the Food Inflation that accounts around 35% weight in the CPI basket fluctuates our Inflationary expectations. 

Further with a huge borrowing programme,we have been keeping the yields artificially low. Even though GSAPs have been announced, the fresh GSEC auction results have been in front of us. 

So should we be worried for Inflation, Interest rates or Growth.

Targeting a higher Double Digit Nominal GDP Growth rate of around 15% with Inflation targeted around 6/7% will lead us to a Real GDP Growth rate of around 9% for a few ahead years. 

Liquidity is not the issue today, the issue remains to part funds with credible borrowers and their ability to multiply and payback. Employment generation is the Key at the moment for a higher Consumption capacity and savings as well,as they are interrelated.

Gradually as the interest moves up,the small saving schemes will provide better returns and the money supply will get balanced between a suitable consumption & savings. 

As a developing market,Growth is what will attract the FPI inflows and the Retail Equity Inflows into the markets,hence providing a superior alpha in that space as the Corporate Earnings improve. 

The need is to inculcate the long term savings pattern which should be 20 years plus,while the short term interest rates need be low for the Consumption cycle to kick in across the spectrum.

Equity SIPs are always what we talk about,ever considered SIP in Debt Funds for a Long Term Savings as well as the reinvestment rates move up? 

The Views are Personal.

How to Select Shares to Buy?

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” -Warren Buffett

Here are the eight essential steps that you need to follow for picking winning stocks to invest in the Indian stock market.

1. Does the company has Good Fundamentals?

2. Do You Understand the Products/Services offered by the Company?

3. Will people still be Using this Product/Service in 15-20 years from now?

4. Does the Company Have a MOAT (or Low-Cost Durable Competitive Advantage)?

5. What is the Company Doing that Its Competitors are not?

6. Does the Company has a Big Debt?

7. Is the Company’s Management Efficient and Qualified?

 8. Is the Company Constantly in the News and Overly Popular?

1. Does the company has Good Fundamentals?

To find the answer to this question, there is a 2-minute drill to find a fundamentally strong company. Using this drill, you can filter the financially healthy companies so that you can proceed to investigate further. If the company is not fundamentally strong, there is no need to learn more about its products/services, competitors, future prospects, etc.

You can move to the next steps only once you confirm that the company has given good past performance and is worth investing in. For this 2-minute drill, you need to look into the financials of the company. Here are 8 financial ratios and their trend that should be carefully noted in this step:

1. Earnings Per Share (EPS) – Increasing for the last 5 years

2. Price to Earnings Ratio (PE) – Lower compared to competitors and industry average

3. Price to Book Ratio (PBV) – Lower compared to competitors and industry average

4. Debt to Equity Ratio – Should be less than 1 (Preferably debt<0.5 or Zero)

5. Return on Equity (ROE) – Should be greater than 15% (Last 3 Yrs Avg)

6. Price to Sales Ratio (P/S) – Smaller value is preferred

7. Current Ratio – Should be greater than 1

8.  Dividend– Increasing for the last 5 years

To begin your 2-min drill. Once you are confident that the company fulfills most of the criteria mentioned above, you can start researching the company further.

These financial ratios, however, tells us about past performance. You cannot decide whether the company will perform the same or better in the future based on just past trends. Therefore, you need to consider other important factors too while evaluating a stock to buy in the Indian stock market. These factors are discussed in the next steps.

2. Do You Understand the Products/Services offered by the Company?

 You might ask why is it so important to understand the company. Let’s comprehend this with the help of an example. Assume that you have to choose a classmate for whom you’ll be paying for 36 months of expenses. In return for this, he/she will give you a quarter of his/her earnings thereafter for the rest of their lives. Whom will you choose?

While choosing, you must be thinking to select the one who is most likely to have a great income in the future. Further, will you choose a guy/girl randomly, whom you know nothing about? As you don’t know that person, there is no way that you can predict how much he/she will earn in the future. The same goes for stocks. If you can understand the stock, you can easily make an informed decision whether to buy, hold or sell the stock at any time. Hence, always invest in the companies that you understand.

There are a number of companies that everyone knows and understands. From toothpaste, soaps, towels, t-shirts, jeans, shoes to bikes, cars, airlines, banks; there is a company behind every product. Invest in such companies. Do not buy the stock of ‘ABC Chemicals’ without knowing what products it produces.

3. Will people still be Using this Product/Service in 15-20 years from now?

 The next step is to ask about the future of the company. Always look for a company with a long life. Such companies have huge growth potential and the power of compounding applies to such companies. Avoid investing in companies having a life of just a few years.

For example, do you think people will be using soaps 20 years from now? The answer is ‘Yes’. It’s been there for over 100 years and will surely continue in the future. Maybe the fragrance will change, but the soap will be there. Now, take another example. What do you think about pen drives? Do you think that people, 20 years from now, will still use pen drives? The answer might be no. Overall, select only a stock to invest in the Indian stock market that will last for the next 15-20 years.

4. Does the Company Have a MOAT (or Low-Cost Durable Competitive Advantage)?

“I like businesses I can understand. We’ll start with that. That narrows it down about 90% …There’s all kinds of things I don’t understand, but fortunately there’s enough I do understand. You got this big, wide world out there. Almost every company is publicly owned…You got all American business, practically, available to you. Now, to start with, it doesn’t make sense to go with things you think you can[‘t] understand. But you can understand some things. I can understand this. I mean you can understand this. Anybody can understand this. I mean this is a product that basically hasn’t been changed much…since 1886…and it’s a simple business. It’s not an easy business. I don’t want a business that’s easy for competitors. And I want a business with a moat around it. I want a very valuable castle in the middle. And then I want…the Duke who’s in charge of that castle to be honest and hard working and able. And then I want a big moat around the castle, and that moat can be various things.”

Warren Buffet (Source: Warren Buffett On Economic Moats)

 Invest in companies with ‘MOAT’

This concept of ‘MOAT’ was popularized by Mr. Warren Buffet. A moat is a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack. Some stocks have a similar moat around them. That’s why it’s really tough for its competitors to defeat them in its sector.

For example, Maggi (NESTLE)! It has become such a common name in Indian homes that Maggi is considered as a synonym to Noodles. Another example is Colgate– the toothpaste producing company. This company is dominating its industry and the people simply want to buy Colgate toothpaste. Similarly, Maruti Suzuki has got a moat in the passenger car sector. Maruti Suzuki has been in dominating in the Indian car sector with over 50% market share for the last few decades.

In addition, while selecting an ‘unbreathable moat’ look for such companies in which the switching cost is high. For example, Banks or IT companies. How rarely people change their bank accounts just because the competitor is giving 0.1% more interest rate. Coal India, ITC, IRCTC, etc are a few of the other Indian companies with big moats.

5. What is the Company Doing that Its Competitors are not?

Find the unique selling point of the company. Learn what this company is doing which its competitors are not doing.

To understand better, let us analyze the Indian automobile sector. There are a number of automobile companies in India. However, when we consider the passenger vehicles (Cars and SUVs), Maruti Suzuki is the leading company in India. There are a number of Indian and global competitors against Maruti in this sector like Tata Motors, Hyundai, Honda, Ford, etc. However, they have not been able to break the Maruti’s moat.

Maruti Suzuki is dominating because of its cost advantage and the easily available service centers that it provides. Most competitors of Maruti are not able to compete on its selling price. Further, Maruti’s service center can be found on every corner of the streets. It’s really simple and easy to get a Maruti car serviced even in small cities and that too at a little price. On the other hand, try to get your ‘FORD’ car serviced. You will rarely find any authentic ford service center around you. That’s why people prefer buying Maruti cars in India. And hence, Maruti Suzuki is able to increase its sales consistently and give good returns to its shareholders.

Overall, investigate first what the company is doing that its competitors are not before you select a stock to invest in Indian stock market. Whether you’re investing in a banking stock or Tyres, there will be many companies and competitors. Find out the USP of the company in which you’re interested to invest.

 

6. Does the Company has a Big Debt?

Big debts in a company are the same as the big hole in the boat. If the hole in the boat is not filled soon, then it won’t be able to cross the long sea and will definitely sink in between.

Before you select a stock to invest in Indian stock market, read its balance sheet to find out the debts on the liabilities side. Avoid investing in companies with big debts. Further, while investing the companies in the banking sector, look for its Non-performing assets (NPA). Avoid companies in the banking sector with huge NPA’s.

 7. Is the Company’s Management Efficient and Qualified?

This is one of the most crucial questions to ask before you select a stock to invest in Indian stock market. The management is the soul of the company. Good management can prosper the company to new heights. On the other hand, bad management can lead to the downfall of the company.

It is really important to research carefully about the management of the company that you plan to invest in the Indian stock market. First, do some research, and find out who is running the company. Among other things, you should know who its CEO, CFO, MD, and CIO are along with their qualifications and past experience. Next, here are a few points to check the efficiency of the company:

— Strategy and goals

Go through the Vision, Mission, and Value statement of the company. Together, mission and vision guide strategy development, help communicate the company’s purpose to shareholders and inform the goals and objectives set to determine whether the strategy is on track. These defined future statements for the company can help an investor to decide whether to select a stock to invest in the Indian stock market or not.

— Length of tenure of Management

This can help to judge the stability in the management of the company. A long length of tenure of the top management with the steady growth of the company is a good sign. However, sometimes, a change in management is considered an adept signal when the last management was not performing well enough. Nevertheless, the long tenure of good management in a consistently growing company is a sign of a healthy company.

— Promoter’s buying and share buybacks

The promoters of the company have the best knowledge about the company’s performance. The management and the top officials can understand the future aspects of the company and if they believe that the company will outperform in the future, they are mostly correct. Therefore, promoter’s buying and share buybacks are signals that the owners trust in the future of the company and it’s a good company to select a stock to invest in Indian stock market.

In addition, the other scenario, where the promoters or CEO is selling the stocks, is an independent activity and cannot be treated as a bad signal. We cannot judge the company’s future is in the dark just because the promoters are selling a small portion of their stocks once in a while. Maybe, the promoters need money to start another venture, buy a new house or enjoy a vacation. Everyone has the right to sell stocks when they need them the most, and so do the founders.

In short, the promoter’s buying and share buybacks are signals of a good company. However, we cannot judge the company’s future based on just the promoter’s selling little stock. Please note, if the promoters are selling a lot of stocks continuously without explaining the reason, then it’s a matter to investigate further.

— Perks and Compensations to Staff and Workers

If the company is giving good perks to its staff and employees, then again it’s a sign of good management. The results of a company depend a lot on the performance of its staff and employees. Happy employees will give their best performance.

However, if there is continuous strikes or increasing worker union demands, then it means that the management is not able to fulfill the needs of its workers and employees. Such cases are a bad sign for investors in the company.

— Financial ratios ROE and ROCE

The management’s efficiency can also be judged using a few financial ratios. Return on Equity (ROE) and Return on Capital Employed (ROCE) are the best tools to judge the management’s performance and the resulting potential for future growth in value.

ROE is the percentage expression of a company’s net income as it is returned as a value to shareholders. This formula allows investors and analysts an alternative measure of the company’s profitability and calculates the efficiency with which a company generates a profit using the funds that shareholders have invested.

ROCE is the primary measure of how efficiently a company utilizes all available capital to generate additional profits.

A high and steady ROE and ROCE for the last few couples of years is considered a sign of good management. As a thumb rule, invest only in companies with the ROE and ROCE of above 15% continuously for the last 5 years.

— Transparency

This is the last, but one of the most important factors while judging the management. The integrity of the management is the key to the growth of the company. It’s the management’s duty to be ‘fair’ and announce the quarterly & annual results to its shareholders honestly without any manipulations.

Just as the management takes the credit to announce the good results of the company; in the same way, the management should come forward in times of bad results to explain the reasons for its poor performance to its shareholders. Good management always maintains the transparency of its organization. 

8. Is the Company Constantly in the News and Overly Popular?

The stock market is based on the sentiments of the people. Overly popular stocks that are consistently in news affect the expectations and decisions of the public. These stocks can be inflated by the hype of the media. As people expect greater results from such companies, even after giving good returns the stock prices of such companies may fall.

That’s why try to avoid buying stocks of such companies for easy returns. The hot stocks are more subjected to market volatility and the boring stocks are the one, which gives the best returns.

Quick Tips: Apart from the above eight stock-picking tips on how to selfec t shares to buy in India, here are a few additional tips to select a stock to invest in the Indian stock market:

"Cheap isn’t always good, and expensive isn’t always bad"

While investing in growth stocks, sometimes it’s okay to invest the stocks with a high PE ratio. Some growth stocks have huge future potentials and can give multiple times returns. Moreover, while selecting an undervalued stock, you should investigate further why the stock is undervalued. Many companies sell cheaply because they do not have much growth opportunity in the future.

 Invest in Mid-cap companies for Higher Returns

 The mid-cap companies can give the best returns. These companies have the potential to become a large-cap company in the long term frame. They have a high growth rate compared to the large caps that have already reached saturation and the chances of giving multiple-time returns are highly unlikely.

In addition, Mid-cap companies have good capital to stay out of debt and live a long life. Overall, a good growth mid-cap stock can easily become a multi-bagger, i.e. a stock which gives multiple times returns.

Past results do not guarantee future performance

 Do not rely totally on the financial reports to select a stock to invest in the Indian stock market. These reports show the past performance of the companies. However, future growth depends on various aspects of management, competitors, industry, economy, etc. Always look at both the quantitative and qualitative aspects of the company before investing.

Summary: 

These are the key points to consider while choosing a stock to invest in. Now, let us summarize the 8 questions to answer on how to select shares to Buy in India for consistent returns:

Does the company have good fundamentals? 2-minute drill to filter companies using financials.

1. Do you understand the products or services offered by the company?

2. Will people still be using this product or service in 15-20 years from now?

3.Does the company have a low-cost durable competitive advantage?

4. What the company is doing that its competitors are not?

5.Does the company has a low debt?

6. Is the company’s management efficient and qualified?

7. Is the company constantly in News and overly popular?

8. Is the company’s and overly popular?.

That’s all for this post on How to Select Shares to Buy. I hope you have understood all the steps and questions to be answered before you select a stock to invest in the Indian stock market.

By

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

 

Why is market going up in Covid scenario ?

Why is market going up in Covid scenario ?

In general, people are thinking all businesses are affected due to covid and all companies will be facing loss.But in reality, what is happening ? Will go by sectorwise.

Pharma 💉💊

After covid, Pharma sector got huge benefit, that need not to be explained. Everyone can understand by themselves

IT sector 💿🖥💻

IT sector are doing very good because of very less expense due to work from home. All the projects are getting completed without any issue. Companies started making huge profits.

FMCG 🍔🍟🍕🥪🍜

All FMCG products are countinued to sell in big volume especially during lockdown period. This sector is not affected by covid at all. Infact, more sales in santizing products.

Metal ⛓⚒🛠🔧

Gold & Silver: You know what happened. Any crisis, gold price will shoot up. All companies which dealing with gold got benefited.

Steel, copper and alloy:

Immediately after lockdown, every where sudden demand in raw metal requirements which leads to price increase. Now most of the metals and minerals are trading in life time high.

Auto sector 🚗🛵🏍

After lockdown, people realised that the travelling in public may lead to virus spread. People who can afford where buying car, bike, etc. Automobile got sudden spike in demand. All industries related to automobile got benefited.

Oil and Gas 🗯🆖

During lockdown, crude price crashed and all oil and gas companies stored as much as possible. But we have not seen any petroleum products price cheaper. Eg. Petrol, diesol etc. Infact, we are paying more than precovid price. 

Financial 💰💶💵💷💴

Financial companies are got effected only because of increasing NPA. But once the companies started recovering the initial loss and making profit, things will be settled down.

Telecom 📱📞☎️

After covid, all school, office activities are happening using mobile, internet etc. Which leads telecom to perform better.

Power and engineering ⚙🔩

During lockdown, especially engineering sectors got affected and now things are getting better.

Amusement and entertainment 🎳🎯🎬Most affected sector is amusement parks and theatres. It will be affected till improvement in covid scenario. 

Conclusion:Most corporate companies are doing well even after covid. Infact, lot of companies got benefited. Most affected - common people, MSMEs, street vendors and daily wages.Now you may be convinced why Nifty is trading near all time high.

Hybrid Funds is it good to invest?

 Introduction to Best Hybrid Funds

Hybrid funds, as the name suggests, invest across both equity and debt securities to constitute a diversified portfolio. Investing in these funds is a better way of diversifying your portfolio rather than separately investing in several individual securities.

Hybrid funds are further classified into equity-oriented hybrid and debt-oriented hybrid funds depending on their equity exposure. If equity exposure is more than 65%, then it is said to an equity-oriented hybrid fund. If not, it is a debt-oriented fund.

Who Should Invest in Hybrid Funds?

Investing in hybrid funds is suitable for those who are willing to take some risk in exchange for the potential to earn much higher returns than debt funds. Anybody looking to diversify their portfolio should consider investing in these funds.

If you are not willing to assume higher levels of risk and are looking to gain exposure to a portfolio dominated by debt securities, then you may invest in debt-oriented hybrid funds. The exposure of these funds towards equity is on the lower side, generally less than 35%. These funds are relatively stable than equity funds and may provide higher returns than debt funds.

If you are looking to gain exposure to an equity-oriented portfolio having some exposure toward debt securities, then you may consider investing in hybrid funds. The debt exposure of these funds is restricted to under 35%. This gives you the benefit of diversification and the presence of debt securities mitigates market volatility to some extent.

Risks Associated With Hybrid Funds

Generally, hybrid funds are regarded as a higher level of risk as compared to a debt fund but lower as compared to an equity fund. The fund manager strives to balance the risk-reward ratio by modifying the composition of the fund’s portfolio by following the prevailing market trend.

Hybrid funds carry all the risks that come associated with both equity and debt securities. These funds carry credit risk, interest rate risk, market risk, liquidity risk, concentration risk and volatility risk. All hybrid fund investors automatically assume all these risks on gaining exposure to a hybrid fund.

Things to Consider Before Investing in a Hybrid Fund

You have to consider the following points before investing in a hybrid fund:

Risk profile You need to assess your risk profile and choose to invest in that hybrid fund whose risk levels are matching yours. Investment horizon If your investment horizon is shorter than five years, then you may consider investing in a debt-oriented hybrid fund. If it is longer than five years, then you may choose to invest in an equity-oriented hybrid fund. Equity-oriented portfolios require longer tenures to mitigate market volatility to a greater extent. The type of hybrid fund Since the rate of taxation of capital gains offered by hybrid funds depends on their type, you should essentially be aware of the type of hybrid fund you are choosing to invest in. This helps in planning your taxes better.

Advantages of Investing in Hybrid Funds

The following are some of the advantages of investing in hybrid funds:

• As these funds invest across both equity and debt securities, it naturally gives you the benefit of diversification.
• The fund manager modified the composition of the portfolio depending on the market conditions. He tries to reap the best out of both equity and debt segments.
• These funds are known to provide higher returns than a debt fund while carrying lower levels of risk.
• First-time equity investors may consider getting started by investing in a hybrid fund. This gives them a controlled exposure to equities.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

What is BITCOIN? A simple explanation.

 Let me try to explain using an example of prison currency.

Prisoners need a proxy for currency as they are not allowed to possess cash. So how do they “pay” for laundry service, hygiene products, protection, a haircut, a book, chocolate or even alcohol? The medium of exchange must be durable, uniform and have a wide acceptance. That is how Ramen noodles and canned fish became prison currency. But cigarettes are top of the pecking order.

Notebooks are kept. Prisoner X will note down how many cigarettes he owes Prisoner Y, and Prisoner Y will make note of what Prisoner X owes him. That book documents all the transactions. The ledgers are draw in an identical fashion. So all books have the same template. To prevent fake entries, a third individual is selected as a witness. He signs the entry made in the books of Prisoner X and Prisoner Y.

Cigarettes / instant noodles / canned fish are bitcoin.
Notebooks are ledgers.
The similar format in the notebooks is blockchain.

Is bitcoin money?

There are 3 functions of money:

1. Money is a store of value. It can be used as a means of saving and allocating capital. It holds its value over time, despite inflation slowly eroding the purchasing power of money.
2. Money is a unit of account. It can measure value in transactions. It can be used to record debts and make calculations. It is divisible and countable. It can account for profits, losses, income, expenses, debt and wealth.
3. Money is a medium of exchange. It is accepted as a method of payment. When you go to the store, you can be confident that the cashier will accept your money, and not demand your shoes as a barter exchange.

Though increasing in popularity, bitcoin is not universally accepted as a unit of account and a means of payment. Far from it. Countries can even ban it. As billionaire Mark Cuban said: Bitcoin would have to be so easy to use it’s a no-brainer. It would have to be completely friction-free and understandable by everybody first. So easy, in fact, that grandma could do it”.

Is bitcoin like gold?

Gold and bitcoin are both speculative; their prices are not determined by cash flow, revenue, earnings, interest payments or dividends. Though bitcoin is sometimes referred to as “new gold”, the similarity ends there. Since gold exists in the physical realm it has to be stored someplace. It is universally acknowledged and humanity has a long history with it. While gold is classified as a commodity, cryptocurrency has eluded categorisation.

What is bitcoin?

• Bitcoin is a cryptocurrency. There are thousands of cryptocurrencies, the most popular being bitcoin.
• A cryptocurrency is created and held electronically. Call it digital currency or virtual money. It can be used to buy goods and services online.
• Cryptocurrencies are powered by blockchain --- a decentralized technology that manages and records transactions spread across many computers. Each "block" contains many transactions. Blocks are "chained" together linearly. Blocks are like a page in a physical ledger signed with maths (cryptography).
• Cryptocurrency uses an online ledger with strong cryptography to secure online transactions.
• Bitcoin was introduced to the world via a whitepaper authored under the pseudonym Satoshi Nakamoto. The creator’s gender, race, nationality, or whether it is an individual or a group, remains a tantalizing mystery.

It is NOT dependent on central banks that control money supply.
It does NOT flow through the traditional banking system.
It is NOT controlled by a monetary agency, institution or country.
It is NOT paper money like the rupee, dollar, euro or yen.
It is NOT backed by gold or central banks or monetary authorities or countries; it is backed by code.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

What is the difference between a large cap equity fund and an equity focused fund? Which one is a better option for investment?

What is the difference between a large cap equity fund and an equity focused fund? Which one is a better option for investment? 

Large-cap Funds:

These are equity funds that invest a minimum of 80% in large-cap companies.

These funds invest primarily in larger & more established companies.

These are in the lowest-risk category amongst equity funds as larger companies tend to have less volatile earnings and stock price volatility than smaller companies.

Large-cap equity funds are suitable for Conservative Investors who wish to invest in equity but are not comfortable with the higher stock price volatility associated with smaller companies.

Equity Focused Funds:

Focused funds take more concentrated exposures in stocks, as compared to the diversified approach more common to mutual funds. Focused funds typically follow a multi-cap approach.

These funds offer higher risk-return than diversified funds.

This fund category essentially includes the top ideas of the fund management team and can outperform or underperform more diversified funds based on how well the investment teams call pans out in the markets.

Focused funds are suitable for Aggressive Investors seeking higher returns on their portfolios, who are comfortable with the potential higher volatility of more concentrated portfolios.

The best investment option depends on your investment profile and financial goals. One must evaluate their risk appetite before investing. The return that an investor can expect from his investments is therefore typically dependent on the level of risk that the investor is willing to assume and the investment horizon.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

How to Build Your Emergency Fund

Experts say's one should having three to six months’ worth of expenses available for emergencies. That’s a pretty wide range; knowing which end of the range to target depends on several factors. 

Saving three to four months’ worth of expenses might be enough if:

• You’re relatively healthy
• You don’t have much debt
• You live in a low cost-of-living area
• You rent and your car (if you have one) is reliable
• You could easily find a job if you lose your current one
• You don’t have kids or dependents (including furry ones) relying on your income
• Your job is very stable
• You have a partner or other family you can rely on for financial assistance

Saving closer to six months’ worth of expenses is recommended if:

• You live in a high cost-of-living area
• It’d be hard for you to find a job if you lose your current one
• You own your own home (especially if you have an older home)
• Your job isn’t very stable (you’re a seasonal worker, gig worker, or an artist)
• You have children, a stay-at-home spouse, pets, and/or other dependents you support
• You have a medical condition, or do high-risk activities (like rock climbing or BASE jumping)
• You lack a financial support network

 Saving a year’s worth of living expenses is ideal if:

• You have a high income
• You have a niche position or specialized job that might require relocation or take extra time to replace
• You are the sole provider to multiple dependents
• You are retired or are nearing retirement

A lot of people will be a blend of these. But if you see more potential for risks in your life, consider saving more versus less.

How to Build Your Emergency Fund

Calculate how much your emergency fund should have and take steps to fund it.

1. Set a savings goal: Determine how many months of expenses to save, between three and six months, based on your personal circumstances and risk factors. 
2. Calculate one month’s worth of expenses: When calculating expenses, only tally up things you’d still pay for in an emergency, like rent, groceries, and bills. Leave out optional expenditures like travel and dinners out.
3. Calculate the amount of your savings goal: Multiply your monthly expenses by the number of months you want to save. For example, if you want to save four months’ expenses and one month’s expenses are 20000 your target is an 80000 emergency fund (20000 x 4). 
4. Automate your savings: If you automate your savings, you’re more likely to succeed. Decide how much you can afford to save each month, then set up automatic deposits into your savings account from your checking account after you get paid.
5. Capitalize on savings opportunities: If you come across other money, such as a tax refund, side hustle income deposit it in your emergency fund to reach your goal sooner.

Don’t get flustered if your goal seems difficult to reach. Just remember that you don’t need it all immediately, or even next year. It’s better to think of your emergency savings fund as an ongoing process, like your retirement savings account. Then, once you do reach it, you’ll have extra money each month to put toward other goals.

 

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