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2020 has finally come to a close, a year that will always bring one word to mind: Covid! A majority of us spent this year entirely at home, and this unexpectedly gave us the opportunity to reflect on the key elements of our lives: work, relationships and hobbies.
Among other things, 2020 has also taught us, as investors, that regularly reviewing our investment portfolios will be monumentally important going into 2021. Read along to find out why.
What is an investment portfolio review?
It refers to the act of analysing one’s investment portfolio in detail, to determine its adequacy, in line with one’s preferences and objectives.
Why will it be so important in 2021?
There are numerous reasons why reviewing your investment portfolio will be key in 2021:
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How and when to conduct an investment portfolio review?
You can perform an investment portfolio review either yourself, if you have the financial know-how, or by hiring the services of a professional financial advisor or wealth manager.
Ideally, there should be a periodic rhythm built-in: typically quarterly, half-yearly or annually. For highly volatile assets, you could review them even more frequently, if required.
How can MProfit help?
Having provided portfolio reporting solutions for over 11 years, we at MProfit understand the true importance of a portfolio review for investors.
While conducting a detailed analysis can be a daunting task, MProfit is a smart, technology-enabled tool available in the market, that helps you keep track of your investment portfolios across different asset classes.
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We have created solutions to suit investors, traders, family offices and high net worth individuals. We also have solutions catering specifically to financial advisors and brokers.
Our uniquely automated products offer a host of benefits that make investment portfolio management systematic, efficient and highly insightful.
From all of us here at MProfit, here’s wishing you a successful investing journey in 2021!
The Mutual Fund Factsheet houses crucial details about the scheme, encompassing its objectives, portfolio, risks, returns, & more. In this blog, we delve into the key indicators in the MF Factsheet that shed insights on equity and related MF schemes. The Mutual Fund Factsheet includes quantitative parameters that provide statistical insights into a mutual fund’s […]
\n","slug":"decoding-the-mutual-fund-factsheet","content":"\nThe Mutual Fund Factsheet houses crucial details about the scheme, encompassing its objectives, portfolio, risks, returns, & more.
In this blog, we delve into the key indicators in the MF Factsheet that shed insights on equity and related MF schemes.
The Mutual Fund Factsheet includes quantitative parameters that provide statistical insights into a mutual fund’s performance, composition, and structure.
Here are a few important metrics to look out for while making investment decisions:
Beta is the volatility of the Mutual Fund with respect to its benchmark indices like Nifty or Sensex.
Beta > 1 indicates that the MF is more volatile than the benchmark.
Beta < 1 indicates that the MF is less volatile than the benchmark.
SD indicates how much the fund’s returns deviate from its average return over a specific period.
A higher SD suggests that the fund’s returns have fluctuated widely from the average, indicating higher volatility or risk.
In simple words, the Sharpe Ratio is the return delivered by the mutual fund per unit of risk taken.
A higher Sharpe Ratio suggests a better risk-adjusted return because the fund is generating more return per unit of risk taken.
In simple terms, it means the number of times the mutual fund has bought/sold equity and related instruments.
Lower Portfolio Turnover means the fund is not buying/selling too many stocks in a year.
TE refers to the divergence between the fund’s performance and its benchmark index.
A lower TE suggests that the fund closely mirrors the benchmark’s returns.
It is one of the most important metrics when choosing index funds.
The MF Factsheet also tells you some important facts about the scheme like:
In actively managed schemes, a fund manager plays a crucial role as he manages the money pooled in by investors.
Any change in the fund manager is updated in the factsheet.
It is the total money managed by the scheme on behalf of the investors.
AUM is a significant metric used to assess the size and scale of an Asset Management Company (AMC) and its ability to manage assets for its clients.
This is a percentage that denotes the fee paid to the AMC to manage your investments.
i.e. the per-unit expense of operating and managing the mutual fund.
Expense Ratios vary from 1 – 2 % depending on the mutual fund scheme.
Portfolio holdings refer to the stocks, bonds, cash equivalents, or other financial instruments that the fund owns.
Understanding portfolio holdings helps investors comprehend the fund’s diversification, risk exposure, and investment strategy.
It is the fee charged by the fund house at the time of buying or selling the MF units.
These loads are subtracted from the invested amount or the redemption proceeds, reducing the returns for investors.
The factsheet contains the scheme returns since inception and returns wrt to the benchmark for a specific period.
It is crucial to note that a fund’s past performance does not guarantee future returns.
The riskometer scale represents the risk associated with the scheme as per SEBI product labelling guidelines.
Each scheme is assigned a specific position on the scale based on its risk profile, & factors such as volatility, market risk, liquidity, etc.
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The Mutual Fund Factsheet is an excellent tool which the AMC publishes for every scheme each month.
One must always read the factsheet before investing and make informed decisions based on your financial goals and risk-return profile.
In the world of investing, there has been a massive shift in recent years towards passive mutual fund strategies, specifically index funds. With the growth of the internet and ease of access to financial education, more investors are becoming aware of the advantages of low-cost, diversified investing. Active vs. Passive Funds First, let’s differentiate between […]
\n","slug":"active-vs-passive-funds-explained","content":"\nIn the world of investing, there has been a massive shift in recent years towards passive mutual fund strategies, specifically index funds.
With the growth of the internet and ease of access to financial education, more investors are becoming aware of the advantages of low-cost, diversified investing.
First, let’s differentiate between the two primary investment strategies: active and passive.
Active investing involves a hands-on approach with a portfolio manager striving to outperform the market’s average return.
Passive investing, on the other hand, involves taking a non-active approach by investing in a diversified portfolio with low costs and a long-term horizon, aiming to match the market’s average return.
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One type of passive investment strategy that has gained significant popularity is index funds. Index funds invest in stocks that mimic a stock market index, such as Nifty or Sensex. These funds are passively managed, meaning the fund manager invests in the same securities present in the underlying index, in the same proportion.
Recent reports suggest that passive assets under management (AUM) could grow to ₹ 25 trillion by 2025, potentially representing 37% of overall assets in the MF industry. This significant growth highlights the appeal and advantages of index funds for investors.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/04/passive-investing-in-India.png\")
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/04/active-fund-performance.png\")
While index funds provide numerous advantages, it is crucial to keep in mind certain factors when investing in them.
Firstly, tracking error (TE) measures the difference between the return of the index fund and the benchmark index it is tracking. Secondly, there is little or no room for alpha in index funds.
By investing in an index fund, the investor is accepting returns that are in line with the index the fund is tracking.
In conclusion, investors should consider a mix of both active and passive funds in their portfolios.
Index funds are an attractive strategy for low-cost, passive equity mutual funds that decrease the likelihood of underperforming the benchmark. Index funds provide an effective and straightforward approach to capture broad market returns with minimal cost and risk.
As per the new Finance Bill, it seems that Taxation rules for Mutual Funds might be changing in the near future. It seems that starting 1st April 2023, gains on Debt Mutual Funds might no longer receive a long term benefit with indexation, and they’ll be taxe as per one’s income tax slab rate. If […]
\n","slug":"understanding-the-basics-of-capital-gain-reporting-in-mprofit","content":"\nAs per the new Finance Bill, it seems that Taxation rules for Mutual Funds might be changing in the near future. It seems that starting 1st April 2023, gains on Debt Mutual Funds might no longer receive a long term benefit with indexation, and they’ll be taxe as per one’s income tax slab rate.
If this change is indeed confirmed, be rest assured that we will accordingly update our Capital Gain reporting in MProfit!
And while we are on the topic, why not a quick refresher on Capital Gains and how MProfit can help you automate this?
If you are short on time, kindly note the following 4 points to automate your Capital Gains:
Now, if you have the time to learn more about Capital Gains, please read ahead.
\n\n\n\nKey points to keep in mind:
\n\n\n\nCurrent taxation structure for FY 2022-2023:
\n\n\n\nThe guidelines below are for FY 2022-23. We will update you separately about changes for the next FY.
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Simple enough so far? Here’s some more detail
You must compute Capital Gains using the First-In-First-Out method. Simply put, this means that when you sell your shares, you sell your oldest shares first and compute Capital Gains accordingly.
Second, you must account for any applicable corporate actions (like Bonus, Split, Merger or Demerger) while computing Capital Gains for stocks.
MProfit provides an awesome feature that auto-applies corporate actions for your Stocks. While computing your capital gains, we also properly handle each corporate action.
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Everyone’s talking about Indexation. But what is it?
Indexation simply put is a means to adjust the cost price of an investment to reflect the impact of inflation on it. This is done to pass on a benefit to investors by considering the effect of inflation on investment returns!
For FY 2022-23, you can get an indexation benefit on your Capital Gains for Debt Mutual Funds and Gold Bonds, as per India’s Cost Inflation Index (CII). Capital Gains in MProfit currently adjust for Indexation where applicable, by using the latest CII data.
And if debt mutual fund taxation guidelines are changing in the near future, we will update our capital gain reporting accordingly. Be rest assured!
MProfit provides Capital Gain reporting for your Stocks, Mutual Funds, Traded Bonds, REITs and InvITs!
Here’s what a sample Capital Gain report in MProfit looks like:
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Income Tax guidelines are dynamic and investors must adapt!
Last week exemplifies the fact that taxation will always be an evolving topic and that investors must adapt, in order to comply with the latest guidelines.
If you’re an MProfit user, you don’t need to worry! We take care of the details.
Regardless of whether you file your return directly or via a CA, MProfit makes the computation of Capital Gains seamless & automated, as per the latest IT guidelines.
To learn more on the proposed changes to Mutual Fund taxation, read this detailed article.