Benefiting the clients through differential pricing - Arbitrage Mutual Fund

There was a person named Vikrant. He owned a garment shop in a small city. He used to make his bulk purchase from Mumbai at lower costs and resell it in his city at relatively higher cost. For example, if a regular T-shirt would cost him Rs. 300/- then, he would sell it at a rate not less than Rs. 600/-. Hence making a double profit. This is called arbitrage opportunity. Taking the advantage of the difference in the prices of two markets is the strategy followed by many business firms. However, it lasts for a short-term.

Arbitrage Mutual Fund is a unique scheme of the mutual fund industry. Unique because the investment and disinvestment take place simultaneously. In simple terms, the Arbitrage Mutual Fund deals in two different markets viz, the stock market and derivative market. In the stock market, the dealings are done in cash. The derivative market also called as futures market is a place where the dealings are done on the contractual basis, and no cash is involved. Hence, you buy in cash, but your sell is not in cash.

Initially, for some time, Vikrant got a huge success and was able to earn profits that kept on rising. But, as people knew the secret of his business it became difficult for him to continue with the same strategy. He had to either bring down his profit margin or had to lose its customers to the competitors. Thus, zeroing the scope of further profits.

In the same way, the profits from arbitrage fund are also short-lived, and as more and more investors start investing, the gain narrows down. Hence, it is suitable only for short term investing. People tend to believe that Arbitrage MF performs ably in the bullish and bearish market. But, they are mistaken here. When the market is bullish, then it is a clear fact that the price of shares in the futures market will be more. And in contrast to this, when the market follows a bearish trend then the price of shares in the stock market will be more than that of the derivative market. Hence, the clients can make a profit only when the markets follow an upward trend.

There is another variant of Arbitrage Mutual Fund known as the Arbitrage Plus Fund. Practically there is a thin line separating both the funds. In Arbitrage Plus Fund there is a portion of shares that are not sold in the derivative market. Both funds are embedded in one single scheme because of the minute difference in their working.

Attributes of Arbitrage Mutual Fund

From the viewpoint of a client the Arbitrage Mutual Fund is the best fund due to the following reasons:

• It is a risk averse scheme because the buying and selling of the stock are done simultaneously. Thus, the risk of market fluctuations is negligible. For example, the share of a company is priced at Rs. 50 on the stock exchange and Rs. 52 in the derivative market. If the fund manager buys from the stock market and sells in the futures market at this moment making a profit of Rs. 2 on each stock. 
• Also, to capital gains clients are able to get a scheme which is tax-efficient. In other equity-oriented schemes, the capital gains are taxable according to the tax slab of the client. But, the profit from Arbitrage fund is taxed at the rate of 15%. 
• A notable return percentage of 9% is obtained by the clients. Hence, making it more suitable than debt funds. At the same time, it is less risky than other equity-oriented funds. 
• The Arbitrage mutual fund can make a profit only when there is a price differential in the market. As soon as the market at equipoise, the arbitrage opportunities die out. But, practically it is not possible for the stock and futures market to strike equilibrium. 

Therefore, Arbitrage Fund gives an OK signal to the clients who aspire for capital appreciation through equity investment that too for short-term. The clients will undoubtedly earn higher profits with much lower risks involved. 

Inside out of the ELSS mutual fund

Are you interested in saving through investing? Then, here is the perfect scheme suiting to your needs. ELSS (Equity Linked Saving Scheme) facilitates to save your taxes via investment. ELSS is a scheme which provides tax-rebate up to INR 1,50,000. The scheme falls under the Section 80C of the Income Tax Act. According to the budget declared for FY 2016-17, Mr. Arun Jaitley, the Finance Minister has not altered the income tax slab, which means that the individuals having an income above INR 2,50,000 are the ones who can opt for ELSS.

The income tax saving is a crucial part of the revenue-expenditure cycle. When you invest your revenue in addition to becoming eligible for a tax rebate, you will get growth of your money also. There is capital appreciation in ELSS fund because it is a type of diversified equity. Another factor that shows a green signal to ELSS scheme is the non-taxation policy on the long-term gains from the plan. Owing to its short lock-in period, ELSS mutual fund has gained popularity like no other tax-saving scheme.

There are many restrictions on the lock-in period as well as the maximum investment limit annually in other tax-free schemes. But, in ELSS scheme, there is restriction only in the lock-in period and that too for a short period. The targeted beneficiaries of the scheme are the investors with towering income. The investors having income above INR 2,50,000 are always on a quest for the schemes which can perform extraordinarily. The search for the investors will now end on one single name ELSS mutual fund.

Options under ELSS Scheme

ELSS scheme invests around 65% of the total fund in the equity instruments which are tax-free. Hence, there is a little risk factor involved in it. But, the capital gains are tax-free under the scheme which is the highlighting feature of the plan. The client has the twin option of growth and dividend. Under the growth function, the client will receive a lump sum amount after the lock-in period of three years. On the contrary to it, the dividend option allows the investor to enjoy a payback during three years whenever the dividend is declared.

Why ELSS?

ELSS fund wins over the other tax saving instruments because of the following reason:

• The lock-in period for the close competitor of ELSS, i.e., PPF (Private Provident Fund) is 15 years. Though the partial withdrawal can be made after 6 years, the full amount can be withdrawn after 3 years in ELSS.
• Where the maximum investment in PPF is INR 10,00,000, there is no limit on the maximum investment under ELSS mutual fund.
• The returns are in the form of rate of interest in PPF, which fluctuates around 8.5%. In contrast, to this, the returns from ELSS termed as equity gains or dividends hovers around 12-15%. 
• In addition, to the lump sum withdrawal ELSS mutual fund provides the option of dividend earnings which are absent in PPF.
• As an equity-linked scheme, it provides an edge of capital gain to the investment which marks a prolific growth in the money.

Who should invest in ELSS?

ELSS is not a good choice for the risk averse investors. The investors who want to go in for capital appreciation, as well as tax saving, should go in for ELSS scheme. The dividend and growth options serve the basis for selection. The investors who can not afford to invest their money in the long-term schemes can choose ELSS fund. All in all ELSS mutual fund is the right choice for the investors who want tax-benefit with capital appreciation and have a short-term perspective.

ELSS mutual fund is a beneficial scheme providing a growth rate of 12-15%. The fund offers to invest in diversified equity. This will serve the benefit of growth as well as tax-saving in one go. Therefore, reducing the tautness of investing in two different schemes viz, one for capital gains and other for tax-saving. These all benefits can not be seen in any other tax saving scheme.

Tata Mutual Funds : Dispensing certitude amongst investors

Tata Group is a synonym for excellence since 1868. The foundations of the Tata Group was laid by Late Mr. J.R.D. Tata. Initially established as a steel company, later on, it diversified into various other branches viz, Information Technology, Consumer Products, Financial Services, etc. The Tata Asset Management Company was branched with a perspective of providing harmonious investment strategies. The Tata Mutual Fund is all geared up for providing an outspread range of the schemes coinciding with the wants of the business community to working professionals. The company does not target a particular segment of the society. Abiding by the foresightedness of the founder Late Mr. J.R.D. Tata, the Tata Mutual Fund is centered around connecting with the common masses. The environment and the strategies of the organization should send a positive vibe to the investors and magnetize them first to trust and then invest in the company.

At Tata Mutual Fund, it is strongly believe that confidence and the money which clients invest in the company should be reciprocated copiously. It is a trait which is illiberally adopted from the parent company. Tata Mutual Fund holds the view that the investors along with their money sow the seeds of trust in the enterprise. When the seeds of faith are not adequately nurtured;  then it will create an adverse effect on the goodwill endured for so many decades. The client is the most important asset for any business. Thus, the comfort of the clients is of utmost importance.

The lineage of Tata Mutual Fund is vehement. The foundation of the AMC holds years of expertise and profound knowledge. The business ethics are truly followed by Tata Mutual Fund to procure a lofty position. On the horizon of the mutual fund industry, Tata Mutual Fund has marked its presence as one of the leading mutual fund companies. It has become a globally renowned company which is acting as a role model for the upcoming businesses in the industry. Therefore, Tata Mutual Fund is not only a brand name, but it has genuinely plowed the much-required efforts to be able to hit the crest.

Ethics making Tata Mutual Fund stand unequivocally from the clan are stated below:

• Outlandish schemes for the investors: The clients have diverse expectations from the investment. On one hand, where a businessman may focus on capital appreciation, on the other hand, a person having a moderate income may concentrate on investing for the purpose of accumulating funds for the education of his children. Hence, if the needs are varying so should be the schemes. One single plan cannot serve as a solution to all the requirements. For instance, equity-oriented funds like Tata Equity Opportunities Fund (G), acts as an instrument of capital appreciation. In the same way, for secure investment and generating fixed income debt fund like Tata Income Fund-Regular Plan (G), can be useful. There is no stone left unturned regarding the planning of the schemes. 
• There is always a scope for improvement: The most cardinal point which is included in the strategy of Tata MF is believing in the fact that the learning process is never-ending. Hence, there is always room for improvement. The employees are taught that the need for improvement should not be taken as a shortcoming but, an opportunity for growing through learning. No individual is perfect and doesn’t need improvement. Therefore, the policies of Tata Mutual Fund motivates the employees to have a learning perspective of growth. Wisdom is not only the result of learning new concepts; it can also be achieved by embracing the mistakes. It is conceptualized at Tata Mutual Fund. The employees are careful while carrying out their duties. Hence, the chances of error are zeroed. But, then too any mistakes appear then the employees are happy to correct it and at the same time learn from it.
• Believe in yourself: When one believes that he/she can do the allotted work, half of it gets completed at that very moment. At Tata Mutual Fund, the staff take up the most challenging jobs and complete them flawlessly. This is possible only with optimism. The professionals are of Tata Mutual Fund are trained so well that every difficulty appears to be an opportunity for them to learn and grow. Hence, taking up the challenge with a positive attitude is the first step towards solving the problem. 

Therefore, Tata Mutual Fund is a rock strong company providing an environment which is suitable for the client and making it easy for the customer to converse and put forward any queries or opinion quickly.

Systematic Investment Plan is bringing about a revolutionary change

It is rightly said, “ Each revolution begins with an Idea”. No change can be made in a single day. It takes a long duration to conceptualize any idea. Identical is the case with the investing industry. The emergence of Systematic Investment Plan (SIP) on the horizon of the mutual fund industry is a revolutionary concept. Making it tough for its rivals like RD (Recurring Deposit), SIP is fast emerging as a fertile source of planned monthly investment. The SIP has been the prime focus of the investors who want to invest consistently over an extended period of time. Just like its name Systematic Investment Plan, actualizes itself in the application also. SIP is nothing but a regular installment that an investor pays for a prolonged period to enjoy a good corpus.

But, SIP should not be confused as an investment itself. Technically, SIP is just a method of investing in the online mutual funds; it is not an investment. Many times people start believing that Systematic Investment Plan is the scheme in which they are depositing their money. Such is not the case. SIP is a facility extended by the mutual fund industry to those investors who are not comfortable with lump sum investment.

Comprehending the concept of NAV in SIP

SIP is nothing but a regular investment in the capital market through a more secure network (Mutual Funds). The installment that a client pays on a daily, monthly or quarterly basis is pooled up with all the other investors money and finally put in the capital market. For each installment the client deposits as SIP, he/she gets some units of a scheme. These units are similar to the shares that one gets on investment in stocks. The units are allotted on the basis of NAV (Net Asset Value). NAV is the price per unit of any particular scheme prevailing on a certain day. In simple words NAV is the cost of buying one unit of a scheme under the mutual fund. It alters as the market fluctuates. The closing NAV for a certain day is taken as the NAV for that particular day.

Focusing points for investors :

The investors need to focus on some of the points so that they do not error while investing. They are the following:

• Don’t invest and forget: Timely monitor the performance of your Systematic Investment Plan. It is your money, and no one can take care of it like you. When you examine SIP on regular intervals, then the chances of loss become negligible. At the same time, you need not be too conscious.
• Diversify your investment: Never take up identical plans for all your investments. For example, in one scheme you can take a monthly SIP, for another you can opt for a quarterly. If you have all identical SIPs, then it will pressurize you. You will have to pay a lump sum but in a disguised form. Warren Buffet indeed said, “Don’t put all your eggs in a single basket”.
• Never take star rating as the benchmark: The star rating is no benchmark for investing in the SIP. The score keeps varying on the monthly basis. You need to understand that the choice of schemes should center on the requirements of investment and not on the rating it earns, as it keeps varying.

Bearing in mind, the simple steps of investing you can attain copious profits. A smart investor can make more progress than a hard-worker. Now is the world where we need to manage our wealth wisely and smartly. Therefore, don’t just focus on earning money, invest to multiply it fast. 

Organize your investments in savings for better future!

The D-day has come, and you got that paycheck you have been dreaming of always! So, what are you going to do it? Even before I complete this question, a series of plans would already have rolled out in your mind - parties, shopping, making gifts, ahem! Though I don’t want to spoil this fairy tale, but why not think of starting an SIP plan too?

‘SIP plan, what is it?’ - Well, if I give you a forensic analysis of this term, it is an investment program run by asset management companies through which they invest the money into a variety of assets such as securities, debt instruments, etc. Feeling bowled over? Then read this. You give a fixed amount every month to a scheme of a fund management company. The fund manager invests that money on a variety of projects and gives the money back to you with returns earned on it. Isn’t it simple?

‘Why not should I keep the money in my bank account?’ - another query, just as expected from a beginner. I would suggest, why not make a mix of some money put in bank and other in mutual funds and other investment avenues? While banks give you only a fixed annualized return, mutual funds are known to deliver better returns.

If you go by my experience, the investors have earned 15-20% more returns as compared to what offered by instruments like fixed deposits and savings bank accounts. There is a lot of literature available with every asset management company that gives transparent view of how they had fared over a period of time. Comparing maturity value of fixed deposit and mutual fund scheme for the same time period can help you find what the fate of your money will be.

‘Is there any way by which I can plan my investment in mutual fund with more cognitive approach?’-  Certainly yes! Looking at the growing curiosity of investors towards the mutual funds, the intelligent brains have developed SIP calculators that give fair idea of the future value of the investment. Some common variables required to develop an SIP calculator are:

1. Amount you can invest per month
2. Rate of return you want to achieve (try being a bit realistic here)
3. Number of years 

SIP calculators are very handy and all the work at the back-end is done by the experts who apply the rules of compounding and exponential growth that worked behind the scene while your investment grew up to bring that grin on your face. He who laughs the last, laughs the longest - when various financial troubles keep on jostling your boat, the small disciplined investment made in SIP gives you all the peace that you deserve after bidding your work-life adieu.

Thus, use SIP calculator and organize your investment. Investing in SIP is possible online too. Growing security of cyber world and ease of usage has driven people towards online tools where they provide all the help for which you need to approach an advisor. So, next time when you book a fixed deposit online, try to deviate some portion of it to SIP and see how the structure of your savings transformed into a profit-making deal.

Important tips to stay organized while saving for the future

1. Put a rough idea of all the fixed monthly overheads on a piece of paper. The wider there is a gap between income and expenditure, the more there is scope for saving.
2. Adopt a disciplined approach towards savings. Set aside a fixed amount for making savings every month and pledge to continue it. The longer you stick to the savings plan, bigger will be the size of corpus at the end.
3. Try to put cap on the expenditures: Not everything needs to be bought in a single month; it is better to understand the fact. Rome was not built in a Day; so give some time to your dreams too.
4. Make a portfolio of investments: It is advisable to have a good mixture of investments having payback as well as growth feature. If you have some investment options that pay you back at regular intervals, you can meet important objectives without taking bitter and bigger decisions like selling off the house, etc.

Transacting SIP online is much easier than you think!

After buying clothing, home grooming solutions, foods and umpteen other products online, it is time to give Systematic Investment Plans a chance! And believe it or not, the process is nothing more than a walk in the garden. Internet users are reported to be about 40% of the whole global population (www.internetlivestats.com), and the numbers are increasing every year. Given the bouquet of services offered to the buyers of SIP plans online, there is an element of convenience attached with this new concept of making and tracking investments.

Buying online SIP is just as easy as opening an account for online shopping and using it. Only difference lies in the fact that as a first time user, you need to get your KYC (Know Your Customer) verified. So, if you have a valid ID proof, address proof and a bank account with NEFT/RTGS facility, you will never require making umpteen calls to your broker for getting menial tasks done.

This is how you can transact online SIP
Just like any other biller such as electricity or phone service provider, you can add your fund house as biller and pay instalments for making investment in SIP online. Alternatively, you can open an online account with the fund house of your choice. Following this, you are supposed to fill a bank mandate form and send it to the fund house with a cancelled cheque. This is the only offline activity that you require to do to get the process rolling. Once all the documentation processes are completed, the path onwards becomes super easy.

You can enjoy the flexibility associated with SIPs in true sense by going online. A broker may not always be available to you to provide you the needed guidance. Moreover, he may not be dealing with all the funds. But, online fund houses list as high as 200 primary funds to provide umpteen choices to the investor.

Functions available with SIP online

You can do each and every transaction possible through online way of dealing in systematic investment plans. Once your documentation is complete and KYC is verified, you can start buying SIP plan of your choice. Also, there is added flexibility to switch to any fund of your preference at any point of time. Moreover, you can withdraw funds simply by clicking the redeem button. So, online is the new ‘in’ among SIP investors who are sick and tired of listening to the busy tone of helpline numbers of their brokerage firm.

Safety redefined

Online SIP account is as safe as your bank account. Though you need to practice caution against phishing e-mails and other related stuffs, it does provide you password-protected environment and aegis of security related certificates to ensure that your money remains safe and well-protected.

So, find more about how to apply for systematic investment plans online and go for one. You are surely going to become more active in investing and saving for the future, such is the level of convenience!