Risk averse investors may switch to short term debt funds The Economic Times

Distressed debt investors are in business to buy debt at significant discounts, often from forced or highly motivated sellers. They are bargain hunters whose ardor rises as prices fall…not the reverse like so many other investors. He admits to the tendency of returning to a few topics time and again. But that is simply because of the frequency with which themes tend to recur in the investing world.

A highlighting feature that differentiates liquid funds from other debt funds is the way the Net Asset Value is calculated. The NAV of liquid funds is calculated for 365 days while for others, only business days are considered. Because it is not asset quality that determines investment risk. Most of the risk in investing comes not from the companies, institutions or securities involved. From the risk perspective, the effect of “house money” is considered to be opposite to the “snakebite”.

International/ Foreign Funds

Although we found this story heartwarming, as economists, we can also explain this result as the outcome of rational behaviour in one’s self- interest. To understand this, we need to first account for how economists view risk. On 1 August 2021, an incredible event took place at the Tokyo Olympics—Mutaz Essa Barshim of Qatar and Gianmarco Tamberi of Italy shared the gold medal for men’s high jump. Both Barshim and Tamberi had cleared 2.37 metres and were unable to clear the 2.39-metres bar even after three attempts.

It is observed that investors tend to repurchase those stocks which resulted in a gain for them but they avoid those which resulted in losses earlier. They do it because they do not want the repetition of an experience of pain but want to have the repetition of experiences of pleasure. These gain and pain experiences are evident in their subsequent behaviour. As a result, they generally avoid all the earlier losing stocks when they take a decision of repeat buying. Invest in top-rated liquid funds to avoid loss of capital with a higher degree of safety for your primary investment. Also, when the market moves up, your investment performs better and generates higher returns in line with the market.

Such negative real yields (nominal yields less inflation of 5.6% currently) have driven many retail investors to the stock markets. Central banks liquidity in trillions of Dollars in the US and in lakhs of crores in India have resulted in today’s bull markets. Fearing the impact on the financial markets, central banks globally have been wary of doing this and in the process exhibiting a “slavish” attitude to the markets. Already there are dissenting voices among monetary policy makers, though now in a minority, on central banks keeping the markets on steroids through liquidity, and risking inflation in the process.

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risk averse opposites are not as safe as cash, savings, or other debt-based instruments. Dividend-paying stocks are considered safer than high-growth ones as they minimize volatility, if not eliminate it. It requires investors to look past the news, and instead focus on the fundamentals of a company when deciding where to put their money. If a stock is trading for less than its intrinsic worth, a value investor would buy it and hold onto it until the price caught up, regardless of fluctuations along the way. The RBI is also keeping an eye on the 2-year restructuring window provided by it to banks for restructuring loans of corporate and retail borrowers.

• Going against the herd may sound savvy but requires tremendous courage.
• The supply chain disruption on account of subsequent waves of the Corona virus and excess liquidity in the system has resulted in a spike in commodity prices and consequent inflation.
• This is the rationale behind the Financial Risk Manager FRM Exam gaining large recognition amongst financial consultants across the globe.
• They are least volatile and they fare relatively better in a bad market.
• This is to inform that, many instances were reported by general public where fraudsters are cheating general public by misusing our brand name Motilal Oswal.
• A primary research study had been initiated to examine if these two contradictory effects are existing on Indian investors.

But RBI has to come back to the market to meet the Government’s borrowing requirement. To curb rising yield expectations in the markets, the RBI has been buying G-secs from the markets through the G-SAP program. However, the size of the G-SAP is not commensurate with the Rs 12 lakh crore borrowing requirement, nor is it intended to be.

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Pay 20% upfront margin of the transaction value to trade in cash market segment. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. The newly inducted chief of Cognizant Ravi Kumar S has a clear brief. The 48-year-old has been tasked with reviving the fortunes of the US-based software exporter that has grown slower than peers and seen an exodus of senior leaders.

And it’s done more than just save him a few dollars here and there – it’s helped him amass billions. Value investing is essentially the opposite of speculative investments, such as bitcoin. The concept involves taking a short position on NIFTY by calculating a value called portfolio beta which is slightly complex. We initially assumed that we bought the stock for Rs 100 in the cash market. Is quite excited in particular about touring Durham Castle and Cathedral.

Investors who believed that the pendulum would move in one direction forever — or, having reached an extreme, would stay there — are inevitably disappointed. Wonderful to read, but print option is not working, also would be great if there is view in single page format too. Accepting the broad concept of contrarianism is one thing; putting it into practice is another.

It means there is a strong agreement in favour of Hypothesis-1 irrespective of their degree of involvement in investment. The group having income range of INR 12,00,001-15,00,000 shows just a little bit less than the strong agreement with a mean score of 0.99. Other three groups exhibit almost identical strong agreement with respective mean scores 1.06, 1.06 and 1.05. In case of individual questions, INR 9,00,001-12,00,000 exhibits highest level of agreement in two cases and rest three groups have highest mean score one each. However, all the income groups show clear agreement in favour of Hypothesis-1.

If you totally avoid risks, you may choose very safe investments. The valuation of securities may increase or decrease depending on the factors affecting the securities market. Shaktikanta Das said the banks should look for opportunities in sunrise sectors. “There are opportunities in the rural sector, start up, renewables, logistics, value chain etc,” said Das. The banks have turned risk-averse in last few years as slowdown in the economy impacted asset quality adversely.

Investors get crazily bullish and imagine no limits on prosperity, growth and appreciation. At other times, they get despondent and conclude that the “worst case” scenario they prepared for isn’t negative enough. Contrarianism isn’t an approach that will make you money all of the time.

The Net Asset Value is the market price of all the securities that a mutual fund scheme currently holds. Relying solely on savings to get through your golden years is not recommended as savings get used up. EPF is an example, but there are many lucrative schemes offered by banks, insurance firms etc. Neither is it enough to bet against the crowd for the sake of it. The potentially profitable recognition of divergences from consensus thinking must be based on reason and analysis.

Risk administration happens anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment. In the insurance instance above, the insurance firm is danger-neutral, while patrons of insurance coverage are risk-averse. Notably, the businesses tasked with rating those bonds should have assigned them scores that reflected the risks of the investments.

Since derivative instruments are considered aggressive investments, they subject inverse ETFs to additional risks, including correlation, credit, and liquidity. Compounding returns result in SH’s returns being -1X those of the S&P 500 Index. Through derivatives such as futures contracts, inverse ETFs enable investors to wager on the market decline. If the market declines, the inverse ETF increases by nearly the same proportion, with fewer brokerage costs and charges. Unfortunately, bond market investors think otherwise, in India. This has resulted in some of these bids from investors being rejected.

Concentration and diversification are two seemingly opposite investment strategies. While concentration strategy includes increasing potential gains by sticking to a few asset classes or securities, diversification strategy believes in spreading risk across various securities. When the investors are optimistic about a particular asset class, sector, theme, or few stocks, they may go for a concentrated portfolio. Aside from the same lexical meaning, global funds are quite different from International Funds. While a global fund chiefly invests in markets worldwide, it also includes investment in your home country. Debt funds invest primarily in fixed-income securities such as bonds, securities and treasury bills.

Similarly, risk, along with earnings, is an important aspect in investment. Almost all investment products are risky in some way; the extent of the risk varies. As a consequence, it’s vital to understand your risk tolerance level before blindly hawking financial products.

Let us say you are long on a particular stock “X” in the spot market whose price is Rs 300/- and you are holding 5000 shares of the same. After the position has been initiated, let’s assume there is a sudden fear gripping the global markets about a new deadly virus variant. One way in which you can hedge your position is by simply taking a counter position in the futures market.

In debt, the return is capped by the coupon rate and market price, while the risk is theoretically infinite . So, for retail investors, the most important thing, and possibly the only factor to look for in a debt fund, is the rating of the instruments. Switch to direct mutual funds in 3 simple steps, earn 30% more return on your investments. Which is better among concentration vs diversification strategies depends on your investment goals. If you are willing to take a higher risk to gain potentially higher returns, a concentration strategy may help.