Invest in Stocks, MF, Debt funds and Gold
Each asset has unique benefits and challenges but together can deliver inflation beating returns, limit portfolio volatility.
this enables you to stay invested and enjoy the benefits of compounding.
Navigate successfully through economic cycles and market volatility using dynamic asset allocation
Be convinced - then act
Everything required to take smart investment decisions with conviction and with ease made available transparently online, real-time
Investment Counselor assigned to you
To help and nudge you to take right actions. And in times of deep uncertainty give you good counsel to avoid mistakes that cause permanent loss of capital or wipe out your gains
Asset allocation is the most important investment decision. Simply put it the answer to the question, "how much of my saving do I put in different asset classes so that I meet my goals without taking risks that can give me sleepless nights?".
Traditionally asset allocation is done by first understanding your willingness and ability to handle risk. You will fit into one of the three categories- conservative, moderate or aggressive. The allocation to equity-debt is typically (in %) 40-60, 50-50 and 60-40 respectively. This is held constant and portfolios rebalanced to maintains this mix. This ensures the right emphasis is put on earning returns and the security needs of an investor.
Omega starts with a core allocation but does not hold it constant for all levels of the market. Using Moneyworks4me's market level assessment Omega makes smart asset allocation changes. Omega decrease the allocation to equity when the market has clearly moved into higher levels thereby reducing portfolio risk/draw-downs when the market corrects. Similarly Omega increases allocation to equity when the markets become attractive. This ensures you are able to take advantage of lower equity prices.
This is required when you have an existing portfolio that you wish to now manage using Omega. Omega is designed to deliver a consistent compounded growth in the future without giving you sleepless nights. Thus as the name suggests your current portfolio needs to be aligned to Omega's investment strategy.
This requires two things:
As explained, Omega does Smart Asset Allocation. When market movements alter the asset mix significantly it needs to be rebalanced to the desired equity-debt mix depending on your risk profile and the market level. This requires reshuffling i.e some assets are sold while others bought. Similarly you need to reshuffle the portfolio when the market makes some assets very expensive and/or throws up some new opportunities which you should act on. So how does Omega reshuffle your portfolio?
Omega has access to all the data and expertise available within MoneyWorks4me. Omega compares risk-adjusted returns across assets and recommends the best at every stage. In case you wish to make some changes eg not act on a certain buy or sell recommendation, you can do this. Omega will take this into account and make a suitable recommendation (read Risk Management)
We are transferring more and more of our collective intelligence to Omega and onto our site so that you get more online. We also intend to build more features to help you get answers to your queries. However, you may have a number of queries especially in the beginning till you get accustomed to how Omega works and how to use it effectively. Our team of Investment Counselors are available to help you. Please call us during office hours or schedule a call.
Customer with portfolio larger than 25 lacs have the facility to discuss their portfolio with our Equity Analyst twice a year. Customers with 50+lacs portfolio can talk to our analyst once every quarter. This ensures together we manage your portfolio and make your money work hard for you.
Onboarding & Portfolio Building
Omega goes live
Smart Asset Allocation
Rebalancing & reshuffling
Agreement, Subscribe & Risk Profiling
Onboarding & Portfolio Building
Omega goes live
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An investment advisor offers you advice regarding investing your money and helps you manage it to meet your financial goals. Investment advisors are fiduciary i.e. always act in your best interest. They cannot earn any commissions, brokerage, etc, from your investments but can charge you fees. This ensures they do not have any conflict of interest.
Investment advisors understand your financial needs and risk-taking ability to recommend how much you should invest in different asset classes like equity, debt, gold etc-asset allocation. Depending on their expertise, they guide you to make specific investments e.g. stocks, mutual funds, debt funds, etc. They also handhold you through the ups and downs of the market to ensure you stay invested in the right assets and meet your financial goals.
Everyone needs some investment advice. However, investment advisory services come at a cost and hence are recommended for investors who have a sizable investment amount (say >20 lacs) and want to grow it at a rate higher than FD/inflation. This requires them to make investments in asset classes like equity which can earn substantially higher returns but comes with higher risks.
Such investors can benefit from the services of an investment advisor who can help minimise mistakes and avail of opportunities to earn higher returns by managing risks at a level that ensures you stay invested.
The risk profile of an individual indicates their ability and willingness to take risks. The purpose of risk profiling is to ensure a suitable asset allocation that helps the investor stay invested by managing the risk at a level that does not cause them to panic and exit in the event of a market correction.
An investor's ability to take risk depends on his/her income, expenses, age, responsibilities, total net worth, etc. Their willingness to take risks is determined by their temperament, how much risk or loss they are able to handle beyond which they are likely to take irrational decisions out of fear or inability to handle the pain and discomfort.
You can find out your risk profile here.
Asset allocation refers to the process whereby you divide your investable surplus among various types of investments such as stocks, mutual funds, debt funds, gold etc., in specific proportions that are in line with your risk profile, future financial goals, and current financial situation. Ideally, asset allocation should be done in a way that helps you meet your goals with a good balance between earning high returns while managing risks at an acceptable level as indicated by your risk profile.
Retail investors should ideally invest across multiple assets to meet their requirements of returns while keeping risk at a manageable level. Some of the assets that retail investors should invest in are:
There are three asset allocations recommended based on your risk profile:
The following table outlines the recommended splits between equity and debt for each category
Once an asset allocation is done, the proportion changes because of asset prices and interest earned. Conventional asset allocation rebalances i.e. resets the mix back to the recommended allocation usually once a year. Smart and Dynamic asset allocation rebalances your assets based on the movements of the market. So, when the market falls and quality stocks are available at a good share price, the asset allocation will change to increase the proportion of equity. When the market picks up again and is close to fair value smart asset allocation moves some money around in order to restore your previous asset allocation proportion. If the market goes substantially over the fair value, then allocation to equity is reduced proportionately. By doing this, you will essentially increase your chances of making lucrative profits from the market movements. That said, keep in mind that this should ideally be done after consulting an expert.
Equity Fund: Equity funds invest a majority of their corpus in stocks of companies across various sectors. Active funds are managed by fund managers who invest in different stocks based on their investment style and outlook on those companies’ future. Index Funds invest in a portfolio that mimics a particular benchmark index eg Nifty 50 Index funds allocated as per Nifty 50. Equity funds are suited for investors with a long-term horizon (> 5 years).
Debt Fund: These are the category of mutual funds that invest mainly in debt instruments like bonds, securities, etc where the returns are not dependent on any specific company or sector's performance like equity funds. However, since they essentially provide loans to different entities, they do run the risk of defaults and interest rates fluctuations.
Having both equity and debt asset classes in an investment portfolio is the best way to earn returns and lower risk.
Imagine a scenario where an investor is 100% invested in equity-based assets and there is a major market downturn. Since equity is directly related to market performance, such a portfolio will drop sharply along with the market and investor are likely to panic, have sleepless nights and sell all their shares at a loss.
In such cases, having 50% of investments tied to debt asset classes would significantly reduce the loss, giving the investor peace of mind, and most importantly keep them committed to staying invested.
Hence it is important to allocate investments to both equity and debt asset classes.
Having a diversified portfolio of quality stocks and investing in reputed mutual funds both have their advantages.
Building your own stock portfolio with necessary diversification lets you be in control of where your money is invested and is not affected by actions of other investors as a mutual fund is but requires a higher understanding and experience of investing in the market.
Mutual funds also involve maintaining a diverse portfolio of stocks managed by a Fund Manager who charges you a fee in return.
A good investment approach is to not look at individual stocks or funds, rather look at the entire investment portfolio as a whole. A well-constructed portfolio should give you the benefits of both. This can be achieved by choosing a direct stock investing style or process that suits you and complementing it by choosing mutual funds with different investing styles. For example, Moneyworks4me recommends Quality-at-Reasonable-Price way of investing in direct stocks and other styles like momentum, small-cap etc through appropriate mutual funds.
Read all about investing in equity the right way here.
We choose an actively managed mutual fund, despite its higher cost when we expect it will deliver higher returns than the benchmark index. Thus it makes little sense to choose a fund that is similar to the index as it is unlikely to beat it. Another important reason to select an actively managed mutual fund is that its style or process of investing diversifies your portfolio in a meaningful way eg adds momentum or small-caps stocks which we cannot easily add through other means.
An index fund provides diversification at a low cost. Since its portfolio is known and does not change frequently, it brings some predictability to a portion of your portfolio. This allows you to choose other funds or stocks to complement and build your portfolio. Also, some index funds or a combination can be an acceptable substitute for a particular style of investing.
In the hustle to stand out amidst competition in terms of returns, a fund might hold comparatively riskier stocks. Alternatively, a fund manager may ‘mimic’ the benchmark index, i.e., the portfolio will be very similar to the Index and hence you cannot expect higher than index returns. Hence it is advisable to assess the quality of the portfolio that a fund holds.
Check out this video on how MoneyWorks4Me can help you choose the right mutual fund:
In addition, you would prefer funds that deliver consistent returns immaterial of when one invests in it. This is ascertained from its rolling returns of the period of your investment eg 3-year. Finally selecting more than one fund that has a similar style or process of building its portfolio may not add to diversifying your portfolio - an important consideration for choosing to invest in mutual funds. Finally, you also need to consider your risk appetite and financial goals while selecting a mutual fund. Small-cap funds could generate comparatively higher returns over the long term but are high risk. Large-cap funds offer less risk but yield a significantly smaller return.
Read more here.
During times of economic or political distress, there is a chance that investors could lose confidence in the market and this may also reflect in the fall of the local currency. This usually leads to a sharp and rapid fall in stock prices and fixed income securities. In a situation of hyperinflation, the local currency may fall drastically.
In such situations, the value of gold acts as your insurance; your currency with value. This fact holds true globally. Given the global acceptance and value of gold, it’s imperative to make an allocation to gold as well.
Keep in mind that there is really no exact formula that dictates how much you should invest. However, it’s advisable to invest at least 5 to 10 % of your entire net-worth in gold. This can be increased in times of high uncertainty based on the recommendations of your advisor.
Gold mutual funds are open-ended funds that allow you to invest without a Demat account, whereas gold ETFs require a Demat account as it is traded on the exchange.
Investing in gold mutual funds is more expensive when compared to gold ETFs.
Gold fund units are determined by NAV (Net Asset Value) at the end of trading hours, while gold ETFs are listed on the stock exchange, and one can get real-time updates on their pricing.
Gold funds are SIP-based whereas gold ETF is not SIP-based.
Gold funds invest in gold and other liquid funds which is not the case with gold ETF. Unlike gold funds, gold ETFs offer better liquidity, and also don’t have any exit loads which means investors can buy or sell the units at any time during trading hours.
Typically for corpus of less than 5 Crore, Equities, Debt and Gold are three broad asset classes suitable for investments. Your self-occupied house is not counted as an investment since it does not earn any returns. When your assets increase beyond 5 crore, you can consider Real Estate that you can rent and or sell to earn a return, as an additional asset to diversify your wealth.
If you are investing in Fixed /Recurring Deposit for about 5 years and more, then this is a reasonably good duration to invest in Equity. Investing in Equity will help you to beat inflation and grow your corpus for meeting your long term goals. MoneyWorks4me will help you build your portfolio with quality assets, diversify it and occasionally rotate assets based on upside and downside risk
The MoneyWorks4me Way of Investing is to designed to ensure an investor reaches his financial goals by staying invested for long and earning a healthy risk-adjusted return.
We are anchored in estimating as best as possible the long term fair value of stocks based on fundamentals and using this knowledge intelligently to get in or move out of equity. This ensures an investor captures reasonable upside as well as protects downside; overall ensuring he doesn’t get out of equity at wrong times. In the end what matters is time spent in the market to compound the capital rather than chasing returns.
We have developed a unique measure Nifty@MRP and Sensex@MRP, which is a hypothetical value of the Nifty/Sensex if all the 50/30 stocks were fairly valued. We have analysed the actual movement of the market vis-à-vis Nifty@MRP and Sensex@MRP for more than 5 years (real time) and back-tested our hypothesis over more than a decade. This has enabled us to confidently assess whether the market is over-valued or under-valued at any point of time.
Based on opportunity we would recommend investing in:
Liquid Fund is a category of mutual fund which primarily invests our funds in money market instruments like certificate of deposits, treasury bills, commercial papers and term deposits. Since all the above instruments are very liquid and short term assets, Liquid fund can be redeemed easily. It typically earn close to after-tax Fixed Deposit returns but more tax efficient if held for more than 3 years. Besides, it can redeemed without any penalty/pre-mature closure fee.
An index fund is a type of mutual fund with a portfolio of 50-80 stocks constructed to match or track the market index, such as Nifty 50 or MSCI 80. An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. This product can be used for tactical allocation if not many stocks are available at decent prices, thereby holding a diversified equity. Two popular index funds are listed on exchange R*Shares Nifty BEES & Junior BEES