ALPHA
Alpha is referred to as excess return in relation to a benchmark. Alpha is generally used in Financial Market as a measure of performance indicating when a strategy, trader or portfolio manager has managed to beat the market return or other benchmark over a period for a given amount of risk taken by the scheme.Alpha may be positive or negative and is the result of active investing.
BETA
Beta of a mutual fund scheme is the volatility of the scheme relative to its market benchmark. If Beta of a scheme is more than 1, then scheme is more volatile than its benchmark and if less than 1, then the scheme is less volatile.
BETA = (Fund Return – Risk Free Return) / (Benchmark Return – Risk free return)
** assuming risk free return is only 4%
Standard Deviation (SD)
A standard deviation is a number (expressed as a percentage) that can be used to show how much the returns of a mutual fund scheme are likely to deviate from its average annual returns. When applied to historical returns over a period the standard deviation can be used as a tool to measure the volatility of a fund.The higher the standard deviation the higher the volatility.
For example, if a mutual fund scheme has a standard deviation of 5 and average returns of 15% it means that the returns can deviate by 5% on the higher side (i.e. 20%) or 5% on the lower side (i.e. 10%).A fund with a low standard deviation over some time (3-5 years) can mean that the fund has given consistent returns over the long term.
Sharpe Ratio
The Sharpe ratio divides a portfolio’s excess returns by a measure of its volatility to assess risk-adjusted performance.
Sharpe Ratio=(Rp−Rf) / σp
where: Rp=return of portfolio, Rf=risk-free rate, σp=standard deviation of the portfolio’s excess return
Expense Ratio
Expense ratio is the annual maintenance charge levied by mutual funds to finance its expenses. It includes annual operating costs, including management fees, maintenance expenses, entry load, exit load, allocation charges, advertising costs, brokerage fees, etc. of the fund.
Dividend in Equity Market
Dividends means the percentage of company’s earning that is paid to the shareholders as
their share of profits.
It is
generally paid quarterly (but for few bond investing fund it might be monthly
dividends as well) and the total amount of dividend is being decided by the
board of directors based on company’s most recent earnings. Dividends are paid
either in form of cash or in the form of additional shares or in any other
form.
A dividend is a reward paid to the shareholders for their
investment in a company, and it usually is paid out of the company’s net
profits. Some companies continue to provide dividend payments even when their
profits are not justified. A steady track record of paying dividends makes the stock
more attractive to investors. But regular dividend payments should not be
considered as a stellar performance by the fund.
Dividends paid by funds are different from dividends paid by
companies. Funds takes the principle of Net Asset Value (NAV), which
reflects the valuation of their holdings or the price of the assets that a fund
has in its portfolio.
In India, an individual can receive dividend income
upto Rs. 5,000 in a financial year without being subject to tax on
it. A 10% TDS is payable on the dividend income amount over INR 5,000
during the fiscal year. After the abolishment of Dividend Distribution Tax
(DDT) and the introduction of the Finance Act, 2020, dividends are now
taxable at the applicable slab rates.For non-resident persons, TDS is required
to be deducted at the rate of 20%, subject to the DTAA (double taxation
avoidance agreement), if any.
SIP Man
Here comes your SIP Man………………, who will guide you to the basics of SIP in Indian equity market.
SIP means Systematic Investment Plan, the name itself signifies that it is a regular and disciplined way of deploying your money into an avenue or instrument for a better return in mutual funds or stocks to meet a particular and a pre-set strategized objective. It is a very popular and an additional method by mutual funds to enable investors to invest systematically in a particular scheme on regular intervals with a fixed amount.
It is a periodic investment for those who wants to save a pre-determined fixed amount at regular intervals, which also takes care of the market volatility.
SIP is very hassle-free way of investment as it gets automatically debited from your account through ECS / NACH facility.
SIP is ideally a long-term investment strategy, emphasizing on the importance of starting early with consistent contributions for optimal returns.
SIP can be invested in quarterly, monthly, weekly, and even daily mode.
SIPs are of 8 types, namely Regular SIP, Flexible SIP, Top-up SIP, Trigger SIP, Perpetual SIP, Step-up SIP, Value Averaging SIP, Multiple SIP.
Regular SIPs are having a fixed date and a fixed amount, Flexible SIP allows investors to change the amount monthly, Top-up SIP gives an option to increase the SIP instalment by a fixed amount at pre-defined intervals, Trigger SIP allows investors to initiate the SIP instalment based on pre-defined triggers, Perpetual SIP does not have an end date, Step-up SIP investment amount can be increased on regular intervals, Value Averaging SIP helps to invest in variable amount based on the current value of investment, Multiple SIP means the investor can invest in more than one scheme at the same time using a single SIP mandate.
There are 4 major types of SIPs available which are as follows:
Equity SIP,
Debt SIP,
Balanced / Hybrid / Multi Asset SIP,
Sectoral / Thematic SIP.
How does a SIP works………
Features:
1. Rupee Cost Averaging
2. Power of compounding
3. Cost efficiency
4. Consistent investment
5. Flexibility in investment amount
6. Professional Fund Managers
7. Short-term goals and Long-term wealth creation
8. Option to halt / pause investment
9. Diversification
10. Liquidity and transparency
Things to consider before starting a SIP:
1. Financial Goals
2. Risk appetite / tolerance
3. Investment Horizon / time duration
4. Fund selection depending on your objective
5. SIP amount depending on your short-term and long-term goal
6. Taxation while redemption
Disclaimer : Investing in Mutual Fund is subject to market risk, please read the offer documents before investing.
Difference between CAGR and XIRR
- appewealth.com
- August 20, 2024
- 11:02 am
CAGR
CAGR is Compound Annual Growth Rate is a metric to calculate investment returns.
CAGR calculates the gains which are periodic in nature and are reinvested at the end of each year simplifying the total return into an annualized growth rate between the start and end values.
CAGR is suitable for regular investments which are focused on long term growth, such as comparing the 5-year performance of different funds or stocks.
CAGR should preferably be used for single lumpsum investments without additional contributions or withdrawals
XIRR
XIRR is Extended Internal Rate of Return is also a method to calculate investment returns.
XIRR calculates the annualized return by considering the timing and amounts of actual cash flows, including additional investments, payouts in the form of dividends, redemptions, etc.
XIRR is appropriate for irregular investments with detailed cash flow data, example the SIP returns in mutual funds. It reflects the return on each instalment adapting to the investment’s inherent dynamism. It analyses the return of a portfolio with ongoing contributions or withdrawals.
XIRR provides more accurate and detailed calculations of returns which helps investors to assess the actual performance of any mutual fund investment and helps to take a more accurate investment decision.
The main difference between the two is that CAGR provides a simple annual growth rate, while XIRR offers a more complex return calculation. CAGR is a straight forward analysis while XIRR is a tailored made analysis.
Global-Market Insights
- appewealth.com
- August 20, 2024
- 11:02 am
Trade setup
-US markets near record highs
-Asian markets open in green
-Brent oil slips to $77
-Gold at record $2543
-US 10Y bond yield fell 1.7 bps to 3.88%
-The US markets continued rally eighth consecutive day, -S&P is now only around 1% below its 16-Jul record high
-Dow +237,
S&P500 +54,
Nasdaq +245,
Russell2K +26
-Investor confidence makes a swift return, just two weeks after spike in bearish fears
-Goldman Sachs strategists expect momentum, corporate buybacks to spark rally over next four weeks
-Latest survey shows Fed to deliver 0.75% rate cuts this year
-The two-day Jackson Hole symposium is scheduled to kick off Thursday, with Fed Chair J. Powell due to speak Friday
India Daybook
Stocks in News
Sequent Scientific: Company gets prequalification approval from WHO for Albendazole API (Positive)
Allcargo logistics: International supply chain monthly operational volume for the month of July stood at 818’000 cubic meters similar to its highest ever monthly volume which was recorded in AUG 2022 (Positive)
Zodiac Energy: Net profit at Rs 2.33 cr vs Rs 0.82 cr, Revenue at Rs. 79.59 cr vs Rs 32.54 cr (YoY) (Positive)
Quess Corp: Company gets BSE & NSE approval for demerger process. (Positive)
Hazoor Multi Projects: Company emerges as lowest bidder for Maharashtra State Infra Development Corp project worth Rs 274 crore (Positive)
Nucleus software: Board of Directors meeting is scheduled to be held on August 22 to consider the proposal for Buy Back of Equity Shares of the Company. (Positive)
Finkurve Financial: Company has entered into a co-lending arrangement with RBL bank, collaboration establishes a significant strategic partnership aimed for offering gold loan (Positive)
Tata Motors and Tata Motors DVR: Company sets September 1 as official record date for share capital reduction scheme. (Positive)
Suraj Estate: Board approves raising of funds via issue of 56 lakh shares on preferential basis. (Positive)
IndusInd Bank: Gets RBI nod to launch asset management subsidiary. (Positive)
DCM Shriram: Company successfully commissioned a new Hydrogen Peroxide (H₂O₂) plant (Positive)
Zomato: Antfin Singapore likely to sell 1.54% stake of Zomato via block deals at floor price of Rs 251.68/share (Neutral)
Vedanta: Shareholding in arm Hindustan Zinc falls to 63.42% after offer for sale (Neutral)
Vishnu chemicals: Company announced the 100% equity acquisition of jayansree pharma pvt ltd at an enterprise value of Rs 51.99 cr (Neutral)
Investment Trust of India: Company BSE returned demerger application of ‘non-lending business undertaking’ to company (Neutral)
Poly Medicure: Company launches QIP to raise ₹1,000 crore, offering shares at ₹1,850-₹1,880 each. (Neutral)
Bharti Airtel and Vodafone Idea: Companies struggle to comply with DoT’s demand for legacy network assessment. (Neutral)
Hi-Tech Pipes: Company to raise funds up to ₹600 crore via QIP or other modes (Neutral)
Sapphire Foods: KFC operator sets 5 September record date for upcoming stock split (Neutral)
Bank of Baroda: 10-year infrastructure bond issue likely to have base size of Rs 2,000 crore and green shoe option of Rs 3,000 crore. (Neutral)
Axis Bank: Delhi High Court directs SEBI and RBI to expedite investigation into allegations of fraudulent gains by Axis Bank and its affiliates. (Neutral)
Tata Consumer: Company announces completion of its Rs 3,000 crore rights issue. (Neutral)
ZOMATO: Antfin Singapore likely to sell 1.54% stake of Zomato via block deals at floor price of Rs 251.68/share (Neutral)