Zebu blog

Tag: portfolio diversification

  • Equity Market vs Commodity Market – Part 1

    If a smart investor makes the right investment in the right financial market, they could make a lot of money, especially now, when the internet makes trading in almost every market easier and more accessible than ever. So, we’ll compare the stock market and the commodities market, two very popular markets, to see if it makes a difference.


    What is a stock market, anyway?

    A stock is a type of security that shows that someone owns part of a company that is traded on the stock market. The amount of company shares a person owns, which he or she can then sell or buy from other stockholders, shows how much of the company that person owns. The group of markets where this buying and selling of stocks takes place is called the “stock market.”

    A person can invest in the stock market by opening a trading and demat account with a brokerage firm. The brokerage firm could then set up accounts for you at the right stock exchanges and make trades for you.

    What is the commodity market?

    A commodity is a useful resource or item that can be traded for another of the same kind. There are two types of commodities: soft commodities, like food and livestock, and hard commodities, like gold or oil.

    A commodity market is a place where traders can buy and sell different goods, either in person or online. There are many ways to trade and invest in commodities. These include both direct investments in commodities and investments in futures contracts on commodities.

    Differences between the stock market and commodity market

    After we’ve talked about the difference between stocks and commodities, let’s look at how each market is different. Here are the most important things that set the stock market apart from the commodities market:

    Effects of inflation: Inflation often means that expected costs go up, which could mean that businesses lose money and the value of their shares goes down. This is bad news for the stock market. But inflation is sometimes good for the commodities market because it lets people who own the items sell them for more than they thought they would. But both situations give experienced players chances to make money. In the same way, a drop in the price of oil or other commodities could help stock market indexes.

    Ownership: When an investor buys stocks on the stock market, they get a piece of a company. Most people trade on the stock market by holding on to a stock they already own until the market turns in their favour. But futures contracts are the most common way to trade on the commodity markets. When you use futures contracts, there is no change of ownership. Instead, these agreements cover upcoming supplies of goods that are often traded but rarely owned.

    Volatility: Compared to other asset classes and financial markets, the commodity and commodity markets tend to have the most volatility. The patterns in the commodity market will be much more unpredictable than those on the stock market. This is because the commodities market has a reputation for having less liquidity and is affected by factors like supply and demand and geopolitics that change all the time.

    We’ll discuss more about the differences between the commodity and equity market in the follow up article as well.

  • What Impacts The Performance Of A Mutual Fund?

    There are many different mutual fund investments that people can choose from. There are some good reasons to invest in mutual funds, like getting help from a qualified asset manager.

    Investors trust fund managers to choose investments that will be good for their money. If you’re an investor, it’s best to know how fund managers do their jobs.

    Here are a few factors that impact the returns from a mutual fund.

    1. The cost of running a fund

    The expense ratio, which is also called the fund management fee, is a typical fee that the fund house charges investors to cover costs like operating costs, wages, compliance costs, administrative fees, etc. It usually shows how much of the investor’s mutual fund holdings it is. Most hedge fund companies use the 2/20 model, which lets them take 2% of the fund’s AUM as a cost ratio and 20% of the fund’s profits as performance fees.

    2. Window dressing illusion

    Mutual funds sometimes use “window dressing” to hide the fact that they aren’t doing well by making it look like they are. They don’t have to explain what happened to make them perform badly. Before putting money into a fund, a potential investor should carefully look at how the fund has done in the past and how it invests overall.

    3. Indexing as a way to lower risk

    Investors prize fund managers’ stock-picking skills. But now, a lot of mutual funds invest in a portfolio that is like an index. It lets them get similar returns and lowers their risk. But if they charge you a management fee, this may not be the best way to invest.

    4. Giving short-term growth more importance than long-term growth

    Fund managers may put more emphasis on the fund’s short-term growth to make it look more appealing to individual investors. This lack of long-term thinking could force the fund manager to ignore the bigger picture and focus only on how the next quarter will go. The short-term goals of a fund may affect how you do as an investor and what your financial goals are.

    5. Incentives

    Mutual fund companies need to increase AUM to grow their market share and profits. They often use advertising and marketing methods to get people to invest. It leaves the manager of the fund with little time to run the fund. But none of these things improve how well the fund works. By investing in index funds that are passively managed, small investors can avoid being affected by the fund manager’s goals.

    How to figure out how well a mutual fund did

    Set goals for your investments

    Before you make an investment, you should know what you want to get out of it. Finding the answer to the question is the first step in choosing the best mutual funds.

    Choosing between mutual funds

    The best way to find the best mutual funds is to compare the returns of several similar funds.

    Check out how things worked in the past

    Even though a fund’s past performance doesn’t tell you how it will do in the future, it might be helpful to know how it has done in different market conditions.

    How they did compare to the index

    Even if the fund didn’t do well, management fees still have to be paid. So, before you put money into a fund, compare the fees. Most of the time, better funds will cost you more.

    Risk-adjusted returns

    Mutual funds have to take your capital risk into account. When a fund makes more money than its overall risk, this is called “risk-adjusted returns.”

    Conclusion
    As an investor, you should know how standard fund management works so you can have more control over your money. Start investing in mutual funds with Zebu right away by opening a demat account.

  • Everything You Need To Know About Diversified Equity Mutual Fund

    A well-diversified equity fund, which is usually just called a “diversified equity fund,” invests in companies of all sizes, no matter how big or small they are.

    Diversified Equity Mutual Fund: What is it?
    A diversified equity fund puts its money into companies of all sizes and in all industries. It spreads investments across the stock market so that investors can make the most money possible while minimising risk. Unit-linked insurance plans (ULIPs), mutual funds, and other investment firms all offer them.

    There are many different types and sizes of companies on the stock exchange.

    1)large caps
    2)mid caps,
    3)small caps.

    How does a fund with a wide range of stocks work?

    A diversified equity fund also invests in companies from different sectors and industries. So, it can take part in the growth of the whole economy and isn’t tied to any one sector or industry.

    They can choose to put their money into businesses from –
    Pharmaceuticals
    Technology
    Engineering
    Automobiles
    Power/Services
    Services for banking and finance
    Gas and oil

    Simply put, a diversified equity fund invests in companies from different sectors, industries, and sizes of the market.

    Diversified equity funds, which include both ULIPs and mutual funds, are created so that investors can profit from the financial growth of companies of all sizes and in all industries and sectors. The rules for investing in ULIPs and mutual funds are different, and investors are told this in product literature and on company websites.

    Who does it work best for?
    Diversified equity funds can be helpful for investors who like stocks and have long-term goals like planning for retirement or saving for a child’s education or wedding. They can be used on their own or as part of a portfolio with other investments.

  • Are You In Your 20s or 30s? Consider These High-Risk Investments

    As the name suggests, high-risk investment plans are best for people who want their money to grow over the long term. Most high-risk investment plans, on the other hand, tend to have big risks, but they also offer chances to make big returns in the long run. Plans like these are examples of high-risk investments:

    High-risk investment opportunities require a good online trading platform and at Zebu, that’s what we offer. As a highly experienced share broker company, we try to support our customers with the lowest brokerage on everyday transactions.

    1. Direct equities

    Investors who are willing to take risks can use stocks to reach their financial goals. Even though every asset is important in its own way, stocks have a better track record than other assets over the long term. So, in an equity investment, you can buy a piece of a company’s ownership, which gives you a say in the business’s profits and losses.

    2. Unit-linked insurance plans

    Most people in India think that ULIPs, or unit-linked insurance plans, are one of the best ways to invest because they offer both life insurance and investment returns. Not only that, but you can also move your money between high-risk, medium-risk, and low-risk investments. This is because it lets you put your money in a variety of different funds. Part of your money is put into different funds based on your investment goals and risk tolerance, and the rest is used to give you the much-needed insurance coverage.

    Overall, ULIPs are basically life insurance plans that let you invest your money in different money-market linked assets based on your goals. So, ULIPs are another way to invest in a portfolio of stocks or bonds that is managed by a professional. The benefit of investing in a bond fund through a ULIP is that, according to the current tax laws, you may be able to get a tax break under section 80C if you meet certain conditions.

    ULIPs make it easy to see where you stand in terms of risk, so you can choose a higher-risk fund for your long-term goals. As your investment nears its end, you can gradually switch to investments with less risk.

    3. Mutual Funds

    A mutual fund is made up of money from different investors that is put into the stocks or bonds of a company. Most of the time, thousands of investors share a mutual fund, and a fund manager works to get the best returns possible. A professional fund manager is in charge of running the mutual fund.

    Mutual funds offer a way to invest in multiple asset classes with a smaller amount of money. For example, you can invest in a fund that only buys stocks, a fund that only buys bonds, or a fund that buys both stocks and bonds.

    Mutual funds might have different types of risky funds based on the stocks or bonds they invest in. Index funds are thought to be the safest type of equity fund, while Gilt funds are thought to be the safest type of debt fund.

    Medium-Risk Investment

    Medium or moderate risk investments are, as the name suggests, plans for investments that are diversified or well-balanced. Plans for investments with a moderate risk profile offer the chance for growth and the ability to deal with a certain amount of market volatility. Most medium-risk investment plans help you diversify your portfolio by including both equity and debt instruments. This way, you can get stable returns without taking huge risks.

    As mentioned earlier high-risk investment opportunities require a good online trading platform. And being a highly experienced share broker company, we try to support our customers with the lowest brokerage on everyday transactions.

  • Types Of Stocks In The Indian Share Market – Part 2

    In the previous blog, we discussed a few important types of stocks. Now, let’s look at the other major categories.

    5. Value Stocks

    These are stocks that are trading below their worth or intrinsic value. What exactly is intrinsic value?

    It is the true worth of the company based on estimates rather than the market price of the company’s stocks.

    Consider the following example:

    Assume you come across a firm called Sheetal Communications, which has a current share price of Rs. 500. However, based on your calculations, the company’s intrinsic value is Rs. 600 per share. The stock market will eventually recognise the company’s true worth, and the stock will grow correspondingly.

    Value stocks are inexpensive and have the potential to generate high returns over time.

    However, both value companies and terrible stocks are available at a low valuation.

    So how do you tell the difference between the two?

    Remember that value stocks are quality businesses that have been momentarily trading at lower prices and have the ability to resurge and prosper in the future. Some possible reasons for a temporary decline include results falling short of expectations for a quarter, a brief piece of bad news riding strong sentiment but with a smaller financial impact, or simply poor market mood. Weak stocks, on the other hand, have limited liquidity, inconsistent earnings history, or poor metrics on conventional financial parameters.

    6. Growth Stocks

    You might have guessed how stocks in this category work. These are companies whose earnings are expanding faster than those of their peer group.

    However, because of their stronger growth rate, these stocks require a higher investment than their rivals. They require additional capital to expand due to their rapid growth. As a result, these stocks will pay no or very little dividends and will reinvest earnings largely in the firm.

    However, the difficulty with these stocks is that a company’s rapid growth rate does not usually last long. This means that when the company’s growth rate returns to normal, the stock price may decline with it.

    7. GARP Stocks

    GARP, or Growth at Reasonable Price, is a hybrid of growth and value investment. GARP investing identifies growth stocks that are accessible at a reasonable valuation.

    The goal is to find growth firms that consistently exhibit above-average earnings growth while trading at a low value. These equities have an average P/E ratio and a greater rate of earnings growth, resulting in a PEG ratio of one or less than one.

    However, there is a distinction between GARP and value investing.

    Value investors seek out stocks that are inexpensive, but the chance of losing money with GARP is negligible.

    8. Momentum Stocks

    Momentum stocks are based on the idea that if a stock is rising, it will continue to rise for some time. This means that investors would buy rising stocks and sell them when they appear to have peaked.

    It is usual for investors to buy up-trend momentum equities at greater prices with the hope of selling at even higher prices. Early riders on the momentum rally benefit the most.

    However, momentum can be a trap for new investors if they enter the stock too late, especially if the up-move is about to end.

    When a stock begins to rise in price, investors become concerned that they will miss the next major move and begin to buy. This causes the stock to rise even higher, and so on.

    Momentum investing is based on technical information rather than fundamentals. And, while momentum investing may not be a good option for inexperienced investors, when done correctly, it can result in remarkable profits.

    9. Income stocks

    These investors want a steady income with the possibility of capital appreciation. Income stocks are less risky than other equities in the market. Companies in the income stock category receive extra income in the form of dividends that the company pays per share.

  • Types Of Stocks In The Indian Share Market – Part 1

    When it comes to investing in the stock market, you have so many options to choose from! You can choose from over 5000 companies based on your risk-taking abilities and market conditions. However, these stocks can be classified broadly into a few types that will make investing easy for you.

    Let’s look at the many types of stocks and how to choose them.

    1. Blue-chip stocks

    Blue-chip stocks are top-rated stocks that you might be very familiar with. For example, Reliance, TCS, Nestle, and Asian Paints are a few blue-chip companies.

    But do you know what these businesses all have in common?
    They’ve been in business for a long time.
    They are well-known with a long track record of performance.
    Show consistency in performance
    Are pioneers in their respective sectors
    Have strong financials
    These companies’ stocks are good buys.

    Since these companies are the best in their respective industries, they can provide consistent returns. More importantly, because they are at the top of their game, you may not notice a significant decline.
    Are very liquid since there are always investors wanting to acquire these equities.

    Before we proceed, let’s discuss an important market term – beta.
    Who doesn’t like the attractive combination of predictable returns and low volatility? But how does one evaluate both of these combinations in a single stock? There are numerous methods for evaluating a firm, but one efficient method is to examine its Beta.

    What exactly is a Beta?
    Beta is a measure of stock volatility in relation to stock indices such as the Nifty, which has a beta of one.

    A stock is regarded as more volatile than the index if its beta is greater than one. It is typically favoured by aggressive investors with a high-risk tolerance. A stock with a beta of less than one, on the other hand, is considered low volatile and is chosen by conservative investors with a low-risk appetite. Beta can also be referred to as market risk or systematic risk.

    2. High-beta stocks

    Stocks with a beta greater than one are considered high beta. Because of their high beta, these companies are volatile and are preferred by aggressive investors. They also have the potential to outperform the benchmark index in terms of returns. Stocks in financial services, infrastructure, metals, and other industries are considered high beta.

    So, what are stocks with a low beta value called?

    That brings us to our next stock kind.

    3. Defensive stocks

    In layman’s terms, defensive stocks are equities issued by corporations that are not affected by economic cycles. Companies in this area include healthcare, utilities, and food & drinks, among others.

    Regardless of the state of the economy, you will require food, healthcare, and electricity. So, these are not affected by economic events.

    These stocks often have a beta of less than one and are considered low volatile. Despite a market slump, these equities are unlikely to decline significantly in comparison to other stocks. As a result, they are often favoured by investors who do not wish to take on a significant level of risk with their equity portfolios.

    But what kind of equities are genuinely affected by the economic cycle?

    4. Cyclical securities


    Cyclical equities, on the other hand, are corporations whose performance is affected by economic cycles.

    When the economy is in a boom, there is a strong demand for these companies’ products, which leads to better profitability and rising stock values. When the economy is in a slump, however, demand for these industries’ products falls, resulting in fewer earnings and a drop in stock price. Steel, cement, infrastructure, vehicle manufacturers, and real estate firms are examples of companies that belong within this category.

    You may have guessed why by now.

    Because budget cuts make it less probable to buy a new automobile or a new house while the economy is struggling.

    In the next blog post, let’s discuss more types of stocks.

  • Alternate Investment Funds – A Haven For HNIs

    Venture capital, private equity, hedge funds, and managed futures, are some of the investments that can be made in an alternative investment fund. To put it another way, an AIF is a type of investment that does not fall under the traditional categories of equities, debt securities, and so on.

    In contrast to Mutual Funds, which require a lower investment amount, Alternative Investment Funds tend to attract high-net-worth individuals and institutions.


    Before getting into understanding Investment Funds, if you are keen on investing or trading you should always have the right tools that can support your investment journey. At Zebu, as a reputed share broker we have the best lonline trading platform and offer lowest brokerage for intraday trading.

    Alternate Investment Funds Types
    According to the SEBI, AIFs fall into one of three basic categories.

    Category 1:

    Small and medium-sized firms (SMEs) and other startups with strong development potential that are also considered to be socially and economically viable fall under the purview of Category I investment funds. They have a multiplier effect in terms of growth and job generation and are encouraged by the government to invest. Those funds have been a lifeline for firms that were already flourishing but lacking in funding.

    The following funds are included in Category I:

    Venture Capital Funds
    Funding for start-ups with great growth potential but a lack of capital to start or develop their firm is provided through Venture Capital Funds (VCF). For new enterprises and entrepreneurs, Venture Capital Funds are the preferred method of raising financial because it is difficult to raise funds through the capital markets.

    Venture capital funds (VCFs) bring together money from investors who wish to invest in start-ups. According to their business profiles and assets, they invest in a variety of startups at various stages of development. A venture capital fund focuses on early-stage investments, unlike mutual funds or hedge funds. Depending on the amount of money spent, each investor receives a piece of the company.

    VCFs are favoured by HNIs looking for high-risk, high-return investment opportunities. Foreign HNIs can now invest in VCFs and help the economy flourish as a result of the AIF inclusion of VCFs.

    The Infrastructure Fund (IF)

    The fund makes investments to improve public infrastructure, including as roads, railways, airports, and other means of communication. The infrastructure industry has a high barrier to entry and relatively low competition, making it a good investment opportunity for those who believe in the sector’s future growth.

    It is possible to earn both capital gains and dividends from an Infrastructure Fund investment. Government tax incentives could be available to Infrastructure Funds that invest in socially desirable/viable projects.

    Angel Fund

    Fund managers combine money from a number of “angel” investors and invest in young firms for their development in this form of Venture Capital fund. Investors receive dividends when the new enterprises start making money.

    As with Angel Funds, units are distributed to the investors. In the startup world, a “angel investor” is a person who wishes to invest in an angel fund and who also has company management experience to offer. These investors choose to invest in businesses that aren’t often supported by mainstream venture capital funds because of their uncertain growth.

    The Social Venture Fund

    The rise of the Social Venture Fund (SVF) as a vehicle for investing in companies with a strong social conscience and a desire to effect genuine change in society can be attributed to socially responsible investing.

    These companies aim to make money while simultaneously addressing environmental and social challenges. A return on investment is still possible because the companies involved are still expected to make a profit.

    The Social Venture Fund prefers to invest in projects in developing nations because of their potential for both growth and social transformation. A win-win situation for all stakeholders is created when the finest techniques, technology and significant expertise are brought to the table by the investors, businesses and society.

    In the following blogs, we will cover the investments that come under Category 2 of the Alternate Investment Funds.

    As we mentioned before, with the right tools your investment journey can be very smooth. At Zebu, as a reputed share broker we have the best lonline trading platform and offer lowest brokerage for intraday trading.

  • Why You Should Invest In US-based Stocks

    We Indians use apps like Google, Amazon, and Instagram on a daily basis in today’s digital environment. A Dell or MacBook laptop is likely to be used by you or someone you know. Many of the world’s largest corporations, including these, are headquartered in the United States but have a global presence. Have you thought about investing in such high-growth businesses but are hesitant due to their location? Let’s have a look at some of the benefits of investing in US stocks as an Indian.

    For when you consider investing or trading in the share market, we at Zebu, a share trading company offer the lowest brokerage for intraday trading and are one of top brokers in share market.


    1. Access to multinational corporations

    All of the major technology businesses, such as Google and Apple, as well as well-known brands like Nike and Starbucks, are based in the United States. Another thing that all of these US businesses have in common is that they are all global. These businesses are well-known all across the world. The US equities market has a market value of $47.32 trillion due to its global prominence, while the Indian equity market has a market capitalization of $3.21 trillion. As a result, investing in these businesses can help you broaden your horizons.

    2. Fractional Shares

    The current price of an Apple stock is 173 dollars or nearly 12,500 Rupees. Similarly, an Amazon stock currently costs 3321 dollars or over 2.3 lakh rupees. One could argue that US stocks are overvalued and not a long-term investment. However, one fantastic feature of the US stock market is the ability to buy fractional shares. Let’s say you only have Rs. 20,000. You can put Rs 5,000 into each of your four favorite American companies, and so on. This characteristic of fractional shares allows investors to spread their money across a number of companies. You need not own an entire share.

    3. Expanding your horizons

    Political unrest, elections, budget cuts, and natural calamities can have a significant impact on a country’s stock market. Diversifying your holdings is a fantastic way to protect your investments from a sudden drop. While gold and bonds can help you diversify your portfolio, investing in US equities can help you diversify your portfolio while also setting you up for potentially good profits.

    4. The monetary value

    When you buy equities in the United States, you are doing so in dollars. Today’s dollar-to-rupee exchange rate is 76.33. Half a decade ago, it was much less. When compared to the rupee, the US dollar has gained by more than 18% in the last five years. When you invest in US equities, you’re not just betting on the stock’s worth, but also on the value of the dollar. If the value of the dollar rises against the rupee, so does the value of your investment.

    5. Global Reach

    We live in a world that needs technology to emerge every year. The United States is endowed with resources and draws talented minds from throughout the globe. Companies in the United States are always inventing to offer revolutionary solutions to the market. Companies like Tesla, Meta, and Amazon have been working on disruptive solutions in numerous fields in recent years. You can join this wave of innovation by investing in such US enterprises.

    Conclusion
    Portfolio diversification is critical for any investor. For an Indian investor looking to invest in global companies and innovative solutions, US stocks are a good choice. And with Zebu, you can do that with ease.

    We at Zebu, a share trading company make it easier for you to invest in the share market by offering the lowest brokerage for intraday trading and are one of top brokers in share market.

  • Do You Have What It Takes To Invest In Small-Cap Funds?

    Many small-cap mutual fund investors saw 100% gains in the previous year. It’s no surprise that we receive several inquiries each day from people who want to know if they can still make great returns by investing in small-cap funds. Some investors are also concerned about whether they should sell small-cap funds because the stocks have already appreciated significantly. So, what should your plan of action be?

    Is it possible to invest in small-cap mutual funds in a secure manner? What aspects should you consider before selecting mutual funds? Is it feasible to avoid losses in small-cap mutual funds by playing it safe?

    Investing in small-cap funds comes with its associated risk. However, if you do it with Zebu, one of India’s leading share market brokers, we will give you the best online trading platform and investment platform to perform a comprehensive analysis. With us, you will have access to the to trade and invest in small-cap stocks.

    Before you invest in small-cap mutual funds, keep the following tips in mind.

    Before you go any farther, you should clarify one point. If you invest in equities mutual funds, especially small-cap mutual funds, you simply cannot avoid risk and volatility. Small-cap funds, as you may know, invest in very small companies with a promising future. However, the majority of these businesses have governance flaws and fail to deliver on their promises. If these companies falter even slightly, the stock market will punish them harshly. In a short period of time, the share prices could be reduced to zero. When you invest in small-cap schemes, you are incurring this risk.

    What are your options for dealing with this threat? You can’t completely prevent it, but you can soften the blow with a few safeguards. To begin with, you should only invest in small size funds if you have a very long investment horizon, meaning, you can hold the fund for several years. If you don’t have at least seven to ten years, don’t invest in small-cap plans. This will allow you to recuperate your losses over time.

    Two, small-cap funds should never be the mainstay of your portfolio. Small-cap schemes are notorious for going through extreme swings in prices. As a result, they will not provide you with consistent returns. So, it is better to limit your exposure to them to a fraction of your portfolio.

    Three, choose fund houses and managers who are well-known for their expertise in managing small-cap funds. Always keep in mind that investing in small-cap schemes is really difficult; it requires recognising potential firms, taking significant interests in them ahead of time, and patiently holding on to them in order to profit. Only a few fund managers have been able to consistently give superior performances over time.

    Four, make sure that the fund isn’t too big. In the small-cap space, finding investment opportunities is quite challenging. It becomes exceedingly difficult when you have a vast corpus. This is why many fund houses are forced to stop their subscription programmes after a specific period of time. As a result, select a scheme with a limited corpus.

    Last but not least, do not begin investing in small-cap schemes when you see tremendous gains and then abandon them at the first hint of a downturn. This is a certain way to lose money. If you get concerned about your assets during a market downturn, it is apparent that you lack the essential risk appetite to participate in small-cap schemes. Invest in small-cap schemes frequently over a long period of time, regardless of market conditions, if you have the proper risk profile and a long-term investment plan.

    Finally, small-cap investments are only for the most daring investors. If every market slump gives you the jitters, it’s best to stay away from them.

    As we have mentioned before, small-cap stocks come with an immense amount of risk. But for those brave hearts who back up their investments with authentic research, we at Zebu have the best trading account for you. As one of the fastest-growing share market brokers in the country, we are proud to offer the best online trading platform for our clients. To know more about them and how you can invest in small-cap funds with us, please get in touch with us now.

  • Multiple Asset Classes That Can Form Your Financial Goals

    Since March 2020, when the stock markets plummeted, asset values have rebounded at a similar rate. What develops is a type of agreement that, regardless of short-term blips, equities do well in the long run. While the volatility persisted into 2021, it also demonstrated that the stock market is not just a home for the bulls and that prices do fall.

    So what moves up the prices of stocks? Corporate earnings and growth prospects in the years ahead are what ultimately drive equities asset prices. Current valuations appear to be on the high side, and many companies’ input costs are under pressure. However, truly valuable companies come with good promoters and a sound business fundamental and are always good investments in the long run.

    Here is how you can diversify your investment across multiple asset classes to build over wealth over a long period of time.

    Before we start…

    Before investing a lump sum in your portfolio, make sure to have an emergency fund that covers the basic health and life risks for your family. This way, your family can stay financially secure in any emergency. It is also important to apply and obtain enough health insurance for every member of your family. You can also choose a term insurance plan that covers at least 15 times your annual income and reassess it every five years or if new financial obligations arise.

    Another thing to keep in mind is to choose the right investment partner for your financial objectives. Zebu is one of the leading share market brokers for online share trading. Get started in a few minutes with us to own one of the best trading accounts in India.

    Fixed Incomes

    The fixed income asset class, which is the most popular among Indians, is one of the most trusted and oldest types of investments. Two examples are fixed deposits and public provident funds (PPF). Is this, however, a sound investment? You’re simply allowing the bank to borrow money from you under the terms of capital protection, pre-agreed returns, and liquidity.

    You will not lose money if you invest in fixed income asset types because they have no risks. Furthermore, you receive consistent profits as promised at the time of investment. Fixed income plans may offer yields of 7% to 8%, but they are hardly inflation-beating rates. Fixed income plans only provide security and are subject to STCG or LTCG depending on the term.

    SIPs

    Start SIPs (systematic investment plans) in a few equities mutual funds with a good mix of large, mid, and small-cap schemes. When you have a large sum of money to invest, put it into your current folios. Also, take advantage of market dips to add extra shares to your roster. Importantly, diversify among stock, debt, and gold to maintain asset allocation and avoid switching from one asset or scheme to another based on short-term performance.

    You can put funds in a liquid fund and migrate them to equity schemes at periodic intervals using the STP (systematic transfer plan) technique. These strategies assist in taking a managed approach and regularly subjecting your funds to the prospects of the equity market for a better risk-adjusted return. Depending on your risk profile and the general economic climate, a portion of your portfolio can also be invested in sector-specific funds such as pharma and IT funds.

    Mutual funds

    A mutual fund is managed by an analyst or fund manager who handles the money from multiple investors and invests it in stocks, bonds, and short-term debt. The mutual fund comprises stocks from various market segments that the fund manager deems well-performing. And shares of the mutual funds are purchased by investors. With every share you own, it is a representation of the fund’s ownership and revenue. Mutual funds are seen as a relatively risk-free tool for investors to diversify their portfolios.

    Debt funds

    Debt funds are mutual fund schemes that are focused on fixed income instruments such as government and corporate bonds. In these finds, your capital is relatively safe and you also earn a small interest on it. Debt funds now include floating rate bond funds. These are debt instruments whose interest rates vary with the value of the underlying instruments. These can be chosen by investors for goals that are at least three years away.

    Gold

    Over the last year, gold has remained nearly unchanged. However, in light of growing inflation, one can consider a 5-10% exposure in their portfolio. You could invest in gold using sovereign gold bonds rather than physical gold.

    Depending on your risk appetite and capital, you can tap into a sea of investment options that are right for you. At Zebu, we complement your financial goals with the best trading account we can give you. We are one of the leading share market brokers in the country and come with a wide range of products and services to help you make the right financial and trading decisions.

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