17th June 2017 | VOL 11 | ISSUE 12 Fortnightly Issue        
Special Story

Savings Account vs. Liquid Funds

Let’s understand Savings Account vs. Liquid Funds
In this article, we will be comparing savings bank account with liquid funds. Our grandparents and earlier generations use to invest regularly in traditional savings instruments such as bank FDs, traditional life insurance plans, gold, and real estate.

Expert's View

How to organize your financial goals?

Did you ever measure your dreams using a measuring tape before you actually started dreaming? The answer most certainly is no.That’s the best part. Be it of any size, you don’t and shouldn’t stop dreaming. Let’s take the example of this young guy from Mumbai who wanted to invest in an igloo in the Arctic region. Now, isn’t that a unique dream? That said, the main issue for him was not the bizarre nature of his dream. The fact that he didn’t think strategically about his dream couldn’t make it happen. The two main problems were that he thought it was a far-fetched idea and financially non-viable given his current financial situation. Reality check suggested that he just didn’t know how much his dream would cost. He simply assumed that building an igloo was an unachievable dream and thus, let it die.

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Financial Planning

The First Step

Deena Mehta
Mrs. Deena Mehta
Managing Director, ACMIIL

Lot of investors wish to participate in the equity markets but do not know where to start.

Equity SIP Model Portfolio
Conceptually, an Investment Advisory is a service that provides investment advice and designs a strategy to manage a certain sum of funds.
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Disclaimer: This InvestorFirst Magazine of Asit C. Mehta Investment Interrmediates Limited is meant to educate its recipients only. The news and views herein do not constitute investment advice or an offer to sell, or a solicitation of an offer to purchase or subscribe for any investment. The information herein is derived from sources believed to be reliable and is subject to change without notice.

Savings Account vs. Liquid Funds




Let’s understand Savings Account vs. Liquid Funds
In this article, we will be comparing savings bank account with liquid funds. Our grandparents and earlier generations use to invest regularly in traditional savings instruments such as bank FDs, traditional life insurance plans, gold, and real estate.

 Traditional Savings Instruments Vs. Contemporary Savings Instruments

The investment avenues have broadened largely in the past three decades in India. Today, you can spread your money across many asset classes such as Debt funds, ULIPs, Equity Funds, Gold ETFs. These have become highly fruitful investment options for investors from a long-term perspective. Moreover, these options help investors adopt an effective diversification strategy for optimizing their hard-earned savings.

In this article, we will focus on Debt Funds as an effective option by comparing it with the traditional savings account. A savings account is a deposit account offered by banks, financial institutions, and post office. A savings account provides you with security of the principal amount while paying you quarterly and annual interest. Some banks require you to maintain a minimum balance in your savings account. Liquid funds are a type of Debt Mutual Funds, which invest in instruments such as commercial paper, treasury bills, and certificate of deposit. The maturity date of these instruments is a small period, which is generally 1-90 days. These funds are available to investors in two options – growth and dividend.

Risks
The risk in case of savings account is minimal since the principal is secured. The risk is minimal in case of liquid funds as well. The kind of instruments that these funds invest in have a very short maturity periods. Thus, they are not traded on the markets and are not affected as much by market fluctuations or interest rate changes. These investments are held by the fund houses until maturity. Moreover, Debt Funds generally invest in instruments with high credit rating from top ratings companies such as Crisil and ICRA. Thus, these investments are highly safe. A good question that you might get in your mind is if the debt instruments in which debt funds invest are not traded on the market, how does the NAV change? The NAV changes based on the interest accrued on the instruments that the debt funds have invested in.

Returns
Savings account normally offer around 4% annual interest. Some banks may offer slightly higher rates but may ask you to deposit higher amounts. However, Debt Funds have provided investors with annual returns of around 8% in the past few years with the good performing funds providing much higher returns. In case the interest earned by a savings account is more than Rs. 10,000/-, the amount is added directly to your gross total income (GTI) and taxed according to the respective tax slab. Thus, if your account earns you 4% interest p.a and you fall in the 10% tax bracket, you would ultimately earn net returns of 3.6%. If you are in the 20% tax bracket, net returns would be 3.2%, with the net returns dropping further to 2.8% if you fall in the 30% tax bracket.

In case of liquid funds, if you redeem your investments within 36 months, the amount would be added directly to your GTI and taxed as per your tax slab. Since the average returns provided by Debt Funds have been 8%, the post tax returns are also higher. If you fall in the 10%, 20%, or 30% slab your net returns would be 7.2%, 6.4%, and 5.6% respectively. This is much higher than the storing your money in a traditional savings account. Liquid funds are generally used for making short-term investments. However, if you hold on to your investments for more than 36 months, your investment will be taxed at a flat rate of 20% irrespective of your tax slab but after indexation. In case you have invested in Dividend Funds, the fund pays a dividend distribution tax on the amount that is given to the investor, which is the dividend amount. The dividend is tax-free in your hands.

Utility
Savings account should always be used as a reserve for your monthly expenses that include online funds transfer, shopping, and bill payments. That said, when there is a hefty sum lying idle in your savings account, you must invest that into Liquid Funds/Debt Funds. You could use debt funds for parking your emergency funds while gaining reasonably good interest. Moreover, in case you have sudden inflows and you have not yet decided on where you want to invest it, the best thing you can do is to park that into Debt Funds until you make up your mind on that inflow. This will allow the money to grow better and bigger.

Therefore, based on the nature of product, risks, post-tax returns, and utility, Liquid/Debt Funds become much more lucrative investment options than savings bank account for investors owing to higher and secure returns.

How to organize your financial goals?



Did you ever measure your dreams using a measuring tape before you actually started dreaming? The answer most certainly is no.That’s the best part. Be it of any size, you don’t and shouldn’t stop dreaming. Let’s take the example of this young guy from Mumbai who wanted to invest in an igloo in the Arctic region. Now, isn’t that a unique dream? That said, the main issue for him was not the bizarre nature of his dream. The fact that he didn’t think strategically about his dream couldn’t make ithappen. The two main problems were that he thought it was a far-fetched idea and financially non-viable given his current financial situation. Reality check suggested that he just didn’t know how much his dream would cost. He simply assumed that building an igloo was an unachievable dream and thus, let it die. What we need to understand here is that nobody needs to give up his/her dreams even without reviewing its prospects. Be it of any nature, the only way you can achieve your dreams is by converting them into achievable goals. A dream can become a goal only if you put a price tag and a time frame on it. You can decide on a figure, for instance, Rs. 2 crore, that you need to spend to achieve you dream within 15 years. This would be a good starting point.

It is very crucial for you to note that it becomes much easier for you to achieve your goals when you create a good financial plan.This plan would act as a road map to help you monitor the progress of your goals. Modern financial planning is all about adopting a goal-based approach to managing your financial resources effectively. However, you must remember that the goals you set must be SMART – Specific, Measurable, Achievable, Realistic, Timebound, for you to achieve them.

Going back to the example of the young lad from Mumbai, let’s now see whether his dream of buying an igloo is an achievable one or not. Let’s assume that the lad’s post-tax income is Rs. 30 lakhs, and that he has saved~ Rs. 60 lakhs as of today owing to good savings culture. Now, on conducting a Google search, heestablished the fact that an igloo in the Arctic region would cost him around Rs. 45-50 lakhs, which maynot be as expensive an investment proposition as envisaged earlier. Let’s assume he gives himself a time horizonof around 5 years to buy the igloo, which means the pricecould increaseto around Rs.65-70 lakhs. Once he would purchase the igloo, he has planned to rent it to a timeshare company. Therefore, his dream to buy an igloo was not as unrealistic as he felt at first, once he followed a SMART goal-based approach towards investment.

No matter how big your dream is, a goal-based approach towards investing would help you geta clear target to aim with stronger precision. Once you combine well-defined goalswith a financial plan, you would have most certainly found the key to unlock all your major dreamsin this life successfully. Please note that you may have the financial resources, it is just that you need to plan the way you use them optimally.

Happy investing!

The First Step

Deena Mehta
 
Mrs. Deena Mehta
Managing Director, ACMIIL
 


Lots of investors wish to participate in equity markets but do not know where to start from. Some have partial knowledge about the markets and there are others who are completely ignorant. There are others who take great pride in saying I do not invest in stock market. As I have written in the first & second issues of market wisdom, the Indian saver cannot ignore equity investments; falling interest rates and withdrawal of tax concessions on income generated out of government and bank savings coupled with rising inflation has necessitated participation in equity markets. Equity investments have a potential of generating highest revenue compared to other financial investment options. Knowledge of course is the first requisite.

There are several ways of getting introduced to the stock market, I would recommend the way which is the safest

To begin with reading about the markets is the first requirement. Start reading the share market page in the newspapers. There is a summary on the stock prices' page of what happened during the day that gives you a fair idea of the market activity. Business channels on the television also make you familiar about the markets. If you are working during the day, then watch the market report, which is broadcast by most channels in the evening. There are also websites like www.moneycontrol.com specifically dedicated to markets providing regular updates. Initially it may sound very boring. It can be made interesting if you focus on 2-3 stocks only. Just pick names that are familiar to you such as Reliance, Infosys, etc. You may also be working for a company or bank or supplying to any company, then select such names. Housewives identify the stocks by reading the labels displaying the manufacturing company name on the packaged product they buy. Students can look at the company stocks that they have done research projects in. In short there are enough company names available around us. Maintain a journal or a diary and write down these company names. To make it more interesting, predict the stock price for the next day, whether it will go up or down and why. Spend 15 minutes daily and write down whether your predictions were right or wrong and why.

If you do this for 6 months on a continuous basis then you would have sufficient knowledge to experiment with the market. Do not commit any money at this stage. Assume that you have Rs.1 lac and note it in your diary as capital. Make buy decisions with this money in the 2-3 stocks that you have been studying. Make a note of it in the diary by looking at the closing prices take buy-sell decisions. Each time you make or lose money, write down why it happened. Several analysis of leading company stocks is available on business channels, web sites and business news papers. Plus you will also read news items. Another important source of information is website www.bseindia.com. It is the official web site of Bombay Stock Exchange - BSE Ltd. which captures results and news about companies. During this period there has to be intensive self-learning. Try to analyze why your decision was correct or otherwise. In a rising market you will be very successful often, that does not mean you are a great stock picker. Learning will happen only if you analyze the reasons for rise or fall in prices. Doing this on a regular basis for 3 months equips you to start committing money.

In order to start trading on the exchange, three accounts are necessary - a Trading account with a broker, a Beneficial Owner account with a Depository Participant and Bank account. Most of you would have a bank account. However, for online trading, a Bank with either online banking or core banking facilities is necessary for hassle-free trading. Hence if your bank does not offer such services then a new account would be essential. Most online brokers have tie-ups with Banks for online transfers, once you select a broker then look up for the banks which have links with the broking site, open account with such a bank. I have already written about Broker selection in Market Wisdom-Issue No.11, which should be referred to in order to select the right broker.

The account opening form of the broker has four components - The Know-Your-Client (KYC) form, separate agreements for trading on BSE and NSE, Risk Disclosure Document and certain Power of Attorneys. Ensure that you read the Power of Attorney carefully and give authority only for delivering shares to exchange on your behalf against your sale trades and not for any thing else. The KYC form captures your contact details and your financial worth. This Form is also accompanied with Proof of your identity, proof of your residence and Permanent Account Number (PAN) card. Proof of identity can be given by submitting a copy of your Passport, Voters card etc. You need to get your photograph attested by your banker. Proof of address is ration card, latest electricity bill etc. All documents should be produced in original for verification.

The next document is a set of agreements between the broker and the client. This agreement has to be separately signed for BSE and NSE. Both agreements are identical and formats prescribed by SEBI. There is also a separate agreement for Depository operation between the Depository Participant and the Beneficial owner. If you are working through a sub-broker then there is a tripartite agreement between the broker, sub-broker and client. This agreement allows you to do only cash market trades. All these agreements have to be stamped. Confusing?????? Sorry these are in your interest, though there is scope for simplification. You have a choice of opening your depository account with an entity who specializes only in rendering depository services or with the broker with whom you are about to register. This choice may not be available and invariably you will be asked to open depository account with the broker if you opt for online (internet based) transaction facility. It is easy to maintain, simpler and hassle free if the depository account is with the broker as broker will provide additional services of delivering shares to the exchange on your behalf.

Make sure you read the risk disclosure document before signing and submitting to the broker. This document will explain the different risk involved with your transaction for which you will be responsible. There is an inherent risk of price variation (volatility) of the securities you have dealt in, risk due to low liquidity in a particular company, risk due to more than normal difference between a person wanting to buy and another wanting to sell. The document also explains certain risk mitigation measures that can be used by you.

On submitting the completed set of document, the broker will scrutinize and if found everything in order will allot a code normally referred to as client code to you. You may need to furnish this code every time you want to transact. Having got your client code you can start transacting in the stock market. However you need to ensure that you have paid the requisite margin money as stipulated by your broker to place any transaction. Initially you start with placing orders in small quantity between 1 to 10 shares. Once you have understood the system in full you may gradually increase the size of your transaction.

Happy Investing!!!


Equity SIP Model Portfolio

Conceptually, an Investment Advisory is a service that provides investment advice and designs a strategy to manage a certain sum of funds. Here, we have provided an investment strategy in the form of Equity SIP model portfolios. With the basic understanding that investors can be broadly classified as high, medium and low risk takers, we designed Aggressive, Moderate and Defensive Portfolios respectively, as on January 2013. Each portfolio basket requires an investment of aproximately Rs.10,000 per month and is a good way of accumulating fundamentally sound stocks for a long term horizon. These portfolios will be reviewed half yearly and any changes will be communicated accordingly.


Benchmark Return From





Nifty 26.80% 41274

NIFTY 100  29.50% 41274
Aggressive Portfolio
Sr. No. Scrip Name Sector Weight Acc. Qty Price as on 31 May. 2017 Total Value Return
% Return Wt. Return
1 Tata Motors Ltd Automobile 10.57% 116 476.15 952.3 4% 0.78%
2 ICICI Bank Banking 9.12% 183 326.45 979.35 31% 7.18%
3 LIC Housing Finance Ltd NBFC 6.23% 86 734.1 1468.2 102% 10.94%
4 VEDL Diversified 2.74% 82 238.65 954.6 43% 1.45%
5 State Bank of India Banking 1.73% 36 288.3 864.9 20% 2.10%
6 ONGC Ltd Oil & Gas 4.71% 85 177 531 -36% -2.21%
7 Aditya Birla Nuvo Ltd Diversified 12.58% 70 1684 3368 87% 10.96%
8 Adani Ports Port & Logistics 3.12% 59 339 1017 28% 0.90%
9 BHEL Capital Goods 2.12% 69 138.2 552.8 -10% -0.19%
10 Tata Steel Ltd Metals & Mining 5.76% 81 504.7 1009.4 42% 4.33%
11 Sun Pharmaceuticals Inds. Ltd Pharmaceuticals 9.35% 70 501.6 501.6 -25% -3.11%
EXIT Return from Exited Stocks 18.91%
Total 1 12199.15 53.53%



Benchmark Return From

NIFTY 200 31.20% 41624
Moderate Portfolio
Sr. No. Scrip Name Sector Weight Acc. Qty Price as on 31 May, 2017 Total Value Return
% Return Wt. Return
1 HDFC Bank Banking 10.42% 58 1636.2 1636.2 76% 6.64%
2 M&M Financial Services Ltd NBFC 4.70% 89 358.9 717.8 31% 1.79%
3 VEDL Diversified 2.88% 86 238.65 1193.25 37% 2.09%
4 Ambuja Cement Ltd Cement 3.94% 109 241.25 723.75 29% 1.13%
5 ITC Ltd FMCG 6.40% 106 311.8 623.6 -1% -0.03%
6 Infosys Ltd IT services 2.45% 12 977.05 977.05 -8% -0.16%
7 Zee Entertainment Ent. Ltd Media 6.55% 98 514.85 1029.7 49% 3.28%
8 Hindalco Inds. Ltd Metals & Mining 3.14% 129 200.7 602.1 59% 2.91%
9 Reliance Inds. Ltd Oil & Gas 9.53% 53 1340.7 1340.7 44% 3.78%
10 Biocon Ltd Pharmaceuticals 9.83% 98 948.65 1897.3 82% 6.04%
11 Bharti Airtel Ltd Telecom 7.86% 123 371.55 743.1 12% 0.75%
EXIT Return from Exited Stocks 22.08%
Total 100.00% 11484.55 51.78%


Benchmark Return From

NIFTY 200 31.20% 41624
Defensive Portfolio
Sr. No. Scrip Name Sector Weight Acc. Qty Price as on 31 May, 2017 Total Value Return
% Return Wt. Return
1 Glenmark Pharma Pharmaceuticals 3.68% 24 636.65 636.65 -29% -0.97%
2 HDFC Bank Banking 9.28% 58 1636.2 1636.2 76% 5.92%
3 Cummins India Ltd Capital Goods 6.65% 53 941.4 941.4 29% 1.56%
4 Dabur India Ltd FMCG 5.84% 154 279.95 559.9 27% 1.18%
5 Tech Mahindra IT services 2.47% 27 390 390 -27% -0.65%
6 TCS Ltd IT services 20.56% 53 2546.6 2546.6 13% 2.18%
7 Hind. Unilever FMCG 3.52% 24 1067 1067 25% 0.66%
8 Coal India Mining 1.28% 24 262.55 525.1 -16% -0.17%
9 Lupin Ltd Pharmaceuticals 12.13% 53 1161 1161 -13% -1.35%
10 Pidilite Ind Specialty Chemicals 1.39% 12 770.15 770.15 14% 0.16%
EXIT Return from Exited Stocks 28.48%
Total 100.00% 10234 38.51%





Benchmark Return From

NIFTY Midcap 34.40% 41624
Mid Cap Portfolio
Sr. No. Scrip Name Sector Weight Acc. Qty Price as on 31 May, 2017 Total Value Return
% Return Wt. Return
1 Motherson Sumi Systems Ltd Auto Ancillaries 8.15% 185 450.55 1351.65 153% 19.67%
2 Kalpataru Power Power Transmission 4.33% 72 354.75 1064.25 46% 1.73%
3 Va Tech Wabag Ltd Capital Goods 16.96% 143 653.5 1307 36% 4.46%
4 PFS NBFC 2.89% 295 44.1 661.5 11% 0.36%
5 Gateway Distriparks Logistic 4.68% 62 248 496 -19% -0.68%
6 Aia Engineering Ltd Capital Goods 9.53% 36 1472.05 1472.05 37% 1.00%
7 Apollo Tyre Auto Ancillaries 3.65% 83 228.6 914.4 29% 1.21%
8 Camlin Fine Chemical 1.80% 72 76.1 456.6 -25% -0.44%
9 JK Cement Ltd Cement 6.73% 51 1109.8 1109.8 108% 7.33%
10 DHFL NBFC 5.39% 90 416.65 1666.6 72% 6.91%
11 Majesco Ltd* IT 5.15% 52 318 636 -21% -1.80%
12 Return from Exited Stocks 14.85%
Total 100.00% 11135.85 56.09%

 

 

About Us

Company History & Background
Established in the year 1986, Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL) is one of the most trusted and reputed brokerage houses known for providing investment related services in the capital market, money market and depository services in India. The company has been jointly promoted by noted stock market professionals, Mr. Asit C. Mehta and Mrs. Deena A. Mehta and is a part of Mumbai-based Nucleus Group of Companies. The other group companies are engaged in commodity, derivatives, development of databases, back-office applications for banks, corporate document management solutions and Geographical Information Systems (GIS).
Corporate Purpose
Envisioned to be a "Trusted Financial Intermediary", the group has etched out a very specific corporate purpose - "To reach appropriate financial products, services and solutions to every Indian entity."
Our Beliefs

  • That every household can, should and will need to participate in the financial markets directly or indirectly to protect their financial interests.
  • That regulatory/legal compliance ensures economic sustainability.
  • That transparency and fairness are the cornerstones of all dealings.
  • That knowledge rather than capital is the key driver of this business.
  • That product, process and technology led innovations are necessary preconditions for continuously adding value to all our constituents.
  • That given the environment every person will realize her/ his potential.
  • That people are driven by causes.
The FIRSTS to our Credit
  • One of the First limited liability Companies to acquire membership on Bombay Stock Exchange (BSE).
  • One of the First multiple seat holders and multiple exchange members.
  • One of the First private VSAT network users.
  • First to utilize the franchisee business model for Associates.
  • First to achieve the ISO quality certification for business processes from SGS. Currently we are a "ISO 9001:2008" certified company.
  • Company Managing Director Mrs. Deena A. Mehta was the first woman to be elected to the governing board of the BSE and the first and only woman to be the President of BSE (post corporatization).

Contact Us

Asit C Mehta Investment Interrmediates Ltd.
Nucleus House, Saki-Vihar Road,
Andheri (E), Mumbai 400 072.
Maharashtra. India.
Telephone : 91-22-28583333,66798315,28577898
Fax : 91-22-28577647
Email : helpdesk@acm.co.in
For corporate level general communication, you need to email at acmiil@acm.co.in
Toll Free Number