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Finance

7 Best Tips You Should Consider Before Investing In Mutual Funds

7 Best Tips You Should Consider Before Investing In Mutual Funds
7 Best Tips You Should Consider Before Investing In Mutual Funds

Summary: Mutual Funds are one of the most popular tools of investment in India. A collection of bonds, stocks, assets, and money market instruments come with many benefits.

Warren Buffett once said, “Risk comes from not knowing what you are doing.” And when it comes to investment his words stand true. When you know how the market works, what kind of risk it involves, and know the essential tips and tricks of the same, you can become a good investor.

For beginners, Mutual Funds are the safest option to start investing in the market. Mutual Funds enable an investor with limited capital to make investments in various schemes like SIPs with as little as Rs. 100 or Rs. 500 to generate better earnings.

A mutual fund is an investment scheme made up of a pool of money collected from many investors to invest in various securities. The fund manager then uses these funds by investing them to purchase various securities including gold, stocks, bonds, etc. Each mutual fund will have a certain objective and different returns.

Before you decide to invest in mutual funds, follow these 7 tips that will help you to make a better decision in investing your money:

1. Read About Mutual Funds & Its Benefits

The new age investors believe in making passive income by making their idle money work for them. However, very few understand its true meaning and how to make the most of it. Many individuals are aware of the benefits that come along with investing in the stock market. But very few know that routing such investments through mutual funds would prove to be more effective.

Hence, you need to read as much as it is possible about Mutual Funds and how they work. What are the benefits and how you can reduce the risk that comes along with investments in just one asset category?

You can also take help from a wealth creator. He or she can help you in making investment decisions, just like a business coach helps you in taking critical decisions related to your business.

2. Learn about types of Mutual Funds

Mutual funds are segregated into distinct categories by asset class. They are divided into stocks, bonds, and cash, and then furthermore based on their style, objective, or strategy. There are three types of Mutual Funds in India:

a). Equity: High on both risk and potential returns, these investment schemes are the favorite of seasoned traders. However, beginners and investors with a low appetite for risk are cautioned before investing in any equity-oriented Mutual Funds.

b). Debt Mutual Funds: If you are risk-averse but want great returns on your investment, debt mutual funds are suitable for you. These fund schemes mostly invest in debt instruments like government bonds, corporate bonds, etc.

c). Balanced Mutual Funds: Also known as hybrid funds, this type of investment put money both in stocks and bonds. Its diversified nature provides balance and a perfect blend of both risk and rewards in terms of investments.

3. Find Your Objective

Before you decide to invest in mutual funds, you must know your objective. For instance, you can invest in equity funds, if you have long-term financial goals, but if you have short-term or medium-term financial goals, you can invest in debt funds.

Hence, your first step should be to decide on a goal. The time frame you are looking for and the returns that you are expecting will help you choose a fund that is best suited to your objective.

4. Learn About the Risk Involved

When thinking about investing, it is essential to know that the risk factor remains constant no matter which investment scheme you pick. However, there are numerous options available to help investors find one scheme that matches their risk appetite and return on investments.

5. Check the Expense Ratio

For the proper management of your funds, a commission is charged which is known as the expense ratio. As an investor, you need to figure out how much expense ratio a particular fund is charging, as it is calculated across the investor`s total portfolio and will have a significant impact. Hence, always pick a mutual fund that comes with a lower expense ratio.

6. Check Taxable Income on Your Investment

How much income from a fund will be taxable is something every beginner must consider. The returns from equity mutual funds are taxed based on the holding period and the applicable tax rate. Mutual funds are often efficient in terms of post-tax returns. For instance, long-term capital gains are taxed at 10% over and above the exemption limit of INR 1 lakh while short-term capital gains are taxed at a rate of 15%.

7. Track Past Performance of the Mutual Fund

It is crucial to check the track record of a particular Mutual Fund scheme before investing. From the duration to ‘Assets Under Management (AUM), you must learn everything related to the investment scheme you are planning to put your money in. Also, check the investment style of the fund manager and opt for a fund where the manager shows consistency irrespective of the market cycle.

Mutual funds are subject to market risk, which is why doing a fundamental analysis of a particular investment scheme becomes paramount. But, do know that no matter how good a fund has performed in the past, it won’t guarantee that the mutual fund will do well in the future. Keep these tips in mind before investing your money in a mutual fund.

LFP Plus by Dr Vivek Bindra

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Finance

4 Ways To Reduce Risks & Make Good Financial Investment In The Market

4 Ways To Reduce Risks & Make Good Financial Investment In The Market
4 Ways To Reduce Risks & Make Good Financial Investment In The Market

Summary: Making investments in stocks and mutual funds is a great way of achieving your financial goals. But how to reduce risks when you are a beginner? Find it out.

The ongoing war between Russia and Ukraine has impacted the Bombay Stock Exchange and National Stock Exchange. Such volatility of the market may cause beginners to panic and slip away from the equity markets, vowing never to come back again.

Any investment big or small is subject to market risks. The thumb rule is to protect your principal amount. While the stock market involves risks and can`t be entirely predicted or avoided, one can protect the portfolio by being mindful, careful, and observant of market changes to minimize the investment risks. There are many online business courses for entrepreneurs to offer in-depth information on financial investment.

So apart from creating a diversified portfolio with quality stocks, you may also listen to the experts like Meghana V Malkan and Vishal B Malkan from April 1st to April 3rd, 2022 to learn how to make a mindful investment.

Here are four ways that will help you to reduce the risk while investing:

1. Keep Your Portfolio Diversified

What you do to your portfolio matters and when it comes to diversifying it, it can help in more than one way. Investing in more than one asset class will minimize the risk. Diversification means to spread out investments in different types of funds across various sectors and not stick to a particular theme or an idea.

While over-diversification means low-risk and low returns, a concentrated portfolio are a high risk-high return concept advisable to only those who are experts in the field. An investor`s job is to find the middle ground between over-diversification and concentration.

2. Buy Value & Buy Cheap

Would you invest in a property which is quite expensive or would you want to invest in a real estate property that is available at a cheaper price and have the chances of gaining momentum in the future?

The best thing about value investing is that it offers maximum margin safety. But the downside is that it offers limited growth, unlike the sectors that offer unlimited growth with high uncertainties. To find themes that are available at cheaper prices and experiencing temporary downturns but are expected to do well in the future. If you are just a beginner, you can take online courses for entrepreneurs to gain basic knowledge related to stock market.

3. Invest in SIPs

Systematic Investment Planning which is also known as SIP is a great investment plan for everyone. Hence, it is advisable to maintain a disciplined approach towards mutual fund SIPs no matter where the world is going as it can help in averaging out the NAVs at various levels.

4. Avoid Adding Stocks With the help of Margins

Avoid taking leverage and adding stocks with the help of margins. Pure cash investing is a slow and steady process to win the race.

Investing in stocks can be overwhelming especially for beginners. However, with the above-mentioned strategies, you can begin on a positive note. These strategies will help you to minimize risk while investing. To ensure that you make some good investments, you can either consult a financial advisor or you can take our problem solving courses that are aimed to offer extensive knowledge.

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Finance

5 Key Factors Beginners Must Consider Before Choosing A Mutual Fund

5 Key Factors Beginners Must Consider Before Choosing A Mutual Fund
5 Key Factors Beginners Must Consider Before Choosing A Mutual Fund

Whether you are a novice, an experienced investor, or a trader, mutual funds are among the most popular investment options. All one needs to know is the basics and zeal to build their knowledge base to make smart, informed choices.

But what exactly are mutual funds?

A mutual fund is an investment scheme made up of a pool of money collected from many investors to invest in various securities. The fund manager then uses these funds by investing them to purchase various securities including gold, stocks, bonds, etc. Each mutual fund will have a certain objective and different returns.

So, when is the best time to invest in mutual funds- when the market is up or down?

It is both. Many people often get confused about the best time of investing in mutual funds. But investing in mutual funds needs in-depth analysis, discipline, and practice. Irrespective of the market fluctuation, these funds tend to provide decent growth over some time.

However, before you decide to invest in mutual funds, you need to be aware of a few things that will ensure you get better results and a rewarding experience.

Here are 5 things you must know before investing in Mutual Funds:

1. Mutual Funds have Different Risk Levels

Every mutual fund category is different and hence, they possess a different level of risk. However, there is no common platform based on which you can determine if a particular mutual fund category has a high risk or low risk.

For instance, direct equity has a higher risk when compared to equity mutual funds. However, it offers higher returns than other funds. So, the risk associated with every mutual fund category is different. Hence, before investing in any Mutual Fund, you should check how many risk factors it contains because every scheme has a risk assigned to it, and how much you are willing to take.

2. Find Your Objective

Before you decide to invest in mutual funds, you must know your objective. For instance, you can invest in equity funds, if you have long-term financial goals, but if you have short-term or medium-term financial goals, you can invest in debt funds.

So, before choosing a mutual fund, the first step is to decide the goal. The time frame you are looking for, and the returns that you are expecting will help you choose a fund that is best suited to your objective.

3. Check the Expense Ratio

For the proper management of your funds, a commission is charged which is known as the expense ratio. As an investor, you need to figure out how much expense ratio a particular fund is charging, as it is calculated across the investor`s total portfolio and will have a significant impact. Hence, always pick a mutual fund that comes with a lower expense ratio. The higher the AUM, the lower the expense ratio.

4. Consider the Taxes Your Investment Attracts

How much income from a fund will be taxable is something every beginner must consider. The returns from equity mutual funds are taxed based upon the holding period and the applicable tax rate. Mutual funds are often efficient in terms of post-tax returns. For instance, long-term capital gains are taxed at 10% over and above the exemption limit of INR 1 lakh while short-term capital gains are taxed at a rate of 15%.

5. Don`t forget to check the Track Record of the Mutual Fund

From checking the investment time to AUM, it is crucial to check the track record of a particular Mutual Fund scheme before investing. As an investor, you should opt for a mutual fund house with a larger AUM. i.e. Assets Under Management.  It not only withstands the sudden redemption pressure from major investors but also offers a lower expense ratio.

Also, check the investment style of the fund manager before putting money in a mutual fund. Opt for a mutual fund where the fund manager shows consistency irrespective of the market cycle.

Mutual funds are subject to market risk, which is why doing a fundamental analysis of a particular investment scheme becomes paramount. But, do know that no matter how good a fund performed in the past, it won`t guarantee that the mutual fund would do well in the future.

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Startup

4 Big Common Legal Mistakes Startups Make

4 Big Common Legal Mistakes Startups Make
4 Big Common Legal Mistakes Startups Make

Starting a new business is no less than a marriage. Initially, everything is rosy and smooth, but as soon as the honeymoon period fades away, the real hustle begins. This is the reason startups need to have a clear legal agreement in place.

A startup business can face significant legal challenges due to plenty of mistakes made by its founders. These mistakes are generally made at the initial formation of the business, at the early stages of growth, and when dealing with staff. You can also hire the best business coach to get the right guidance.

If you are an entrepreneur and planning to start your dream venture, here is a list of common and legal mistakes you must avoid at all costs:

Mistake #1: Not Making an Agreement with Co-Founders

If you are starting your business with a co-founder, then you should have all the agreements in place at the initial stage of your business relationship. Not doing it can lead to various legal challenges down the road. A founder`s agreement is just like a “prenuptial agreement.” Here are the key legal terms your founder agreement must involve:

  • What are the roles and responsibilities of the founders?
  • How will the equity be split among the founders?
  • What is the overall goal and vision for the business?
  • What salaries are the founders entitled to? Factors that will lead to change salaries?
  • Is each founder’s percentage ownership in the company subject to vesting?
  • If one founder leaves, does the company or the remaining founders have the right to buy back the departing founder’s shares? If so, at what price?
  • How will a sale of the business be decided?
  • What time commitment to the business is expected of each founder? What constraints will be imposed on outside commitments?
  • How will key decisions and day-to-day decisions of the business be made? (by majority vote, a unanimous vote, or are certain decisions solely in the hands of the CEO?)
  • Under what circumstances can a founder be removed as an employee of the business?
  • What assets or cash does each founder contribute or invest into the business?
  • What happens if one founder isn’t living up to expectations under the founder agreement?

Mistake #2- Not Deciding the Structure of the Company

Because founders often start businesses without consulting lawyers, they do not decide the structure of their businesses. One of the very first decisions that any entrepreneur should make is in what legal form to operate the business. Due to the incorrect structure of the company, startups often incur higher taxes and become subject to significant liabilities that could be avoided by structuring their startup business as a corporation or a Limited Liability Company (LLC). You can also take help from the best business coach who can help you navigate with legal formalities.

Mistake #3- Choosing a Disputed Business Name

It is very important to do research when picking a company name as it helps to avoid trademark infringement or domain name problems. It also ensures that the name you select is available to use. Here are some steps that you can do to avoid naming issues:

  • Conduct a Google search on the name to check if it is already in use.
  • Before picking a domain name, search GoDaddy.com or other domain name registrars to see if the domain name you want is available.
  • Ensure the name is distinctive and memorable.
  • You can shortlist 5 names and test market them with prospective employees, investors, partners, and customers.
  • Avoid unusual spellings of the name as it can cause confusion and problems down the road.

Mistake #4- Not Adhering with Securities Laws When Issuing Stocks

If founders form a corporation, LLC, Limited Partnerships, or any other structure the sale of stocks, limited partnership interests, or LLC interests to the investors will be subject to state securities laws. Most laws require that such sales comply with certain disclosure, filing, and various other form requirements unless the sales are exempt. If any business fails to comply with these laws, it can result in significant financial penalties for the entrepreneurs and the company.

Founding a company is not much different from getting married. Everything looks promising in the beginning, but as the business evolves, complexity and stress become a part of everyday operations. So, with all of the things that go into launching a startup, one must get the Founders agreement, right!

The idea of managing a business is easier said than done and we completely agree with you. This is why to help you move forward with your business goals, we at Bada Business offer exclusive problem solving courses that come with Foundation courses, specialized courses, and value-added courses. To know more, visit www.badabusiness.com

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HR & People Management

3 Facts about ESOPs everyone should Know!

esops

ESOPs, the Employee Stock Ownership Plans is the current term that has created a lot of buzz in the business world. ESOPs is the term that offers employees a chance to have ownership in the firm. It recognizes the best performing employees and rewards them with an equity stake or cash based on an equity stake.

The definition of ESOP was originally introduced in the Companies Act, 1956, which underwent a complete change in the Companies Act, 2013.

An Employee Stock Ownership Plans aids to retain high-performing employees and provides cost-effective company benefits. There are two types of ESOPs- selective plans and all-employee plans. While the selective plan is only for the senior executives, all employee plans provide the same facility to all employees of the company.
However, various myths and facts are revolving around ESOPs that need to be addressed. Here are 3 facts every employer and employee must know about ESOPs:

1. ESOPs are for everyone

ESOPs are for every organization that is generating profit to support the annual costs of maintaining the ESOP. The profitability of the company is more important than a company`s size. In a profitable ESOP organization, the tax savings alone can be enough to offset the annual costs.

2. Company`s Operations Remain Unaffected

Many company owners feel that after establishing an ESOP, they will have to consult their employees on regular basis regarding the company`s operations. However, the matter of fact is that the management remains in control of the company. Even when the ESOP owns a majority, there is no loss of control of the company.

3. No detailed financial information is to be disclosed

An ESOP is a qualified retirement plan. Hence, the participants must be provided with the annual statement demonstrating the number of shares and the value for their benefits. No other financial disclosures are required by the organization to its employees who are a share-holder.
The companies offer ESOPs to attract more qualified employees. They do it in a phased manner and provide stocks at the end of the financial year to reward their impressive performance.
Many companies startups and companies that can`t provide high packages, offer ESOPs to their employees. We hope we have shed some light on the current trending term- ESOPs. For more information, visit www.badabusiness.com

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