n this episode of Money With Monika, personal finance expert Monika Halan talks about the benefits of choosing a mutual fund over direct stock investments. Investing in mutual funds is far safer than putting all your money in one stock, she says, as the chances of failure of an entire basket of stocks are next to none. In short, hedge your bets for maximum returns at minimal risk. Monika Halan is consulting editor of Mint and author of ‘Let’s Talk Money’.
The year 2018 was when we all learnt some hard money lessons. We learnt that stock prices that go up very fast can zoom down too. We learnt that debt funds are not fixed deposits and returns are not assured. We learnt that real estate revivals can take years and years, and 2018 was not that year. We learnt that governments can change the rules of the game around taxation making it better or worse for you. 2018 was the year in which we learnt the meaning of risk.
There were four kinds of risks that we took home this year. First, the risk of chasing high returns. Many of you may be holding a portfolio that has mostly small- and mid-cap funds. That’s because you saw the 40% plus one year returns in 2017 and went all out to harvest that return. I can remember plenty of conversations with first-time mutual fund investors who had jumped right into the deep end with all their money in the risky part of the market. Warnings would fall on deaf years as the return chasers thought the SIP was their safety belt. 2018 saw a bloodbath in both the mid- and small-cap categories. Investors are staring at an average loss of 12% in mid-caps and around 18% in small-caps. The worst small-cap funds have lost almost a third of the invested value—or ₹1 lakh has become ₹70,000. If you had your entire money in small- and mid-caps, your portfolio is bleeding. But if you had a mix of large-cap, multi-cap and ELSS funds, the red will be less stark. Just buying last year’s winner is not a good strategy for mutual fund investors. 2018 told us that. Understand what a ‘diversified portfolio’ means and implement it in your money box.
Why mutual funds? That’s the question personal finance expert Monika Halan, consulting editor of Mint and author of ‘Let’s Talk Money’, answers in this episode of ‘Money with Monika’.Mutual fund investments do come with risks, she says, but it’s a gamble worth making for a diverse, and more lucrative, investment portfolio—be it for a seasoned investor or a beginner taking her first steps in financial planning. See mutual funds as a buffet, Monika Halan says, and invest as per your taste.For more videos from Money With Monika series, click here >>
The amount spent on the wedding of the daughter of India’s richest man, how much the bride’s clothes cost, what the invitation boxes contained have been the subject of almost every conversation for the last few weeks. This is a carry-over from the same talk about the two big Bollywood 70mm weddings just a few days earlier. Why they are spending so much, how vulgar such spending is and how this money could have been better spent elsewhere is the one thread that runs through most of these social media forwards, office café talks, metro gossip and drawing room debates. The gasp of middle India horror at this vulgarity is loud and clear.
How much should the very rich spend on themselves? This seems to be the issue at stake. Let’s stay with first principals. Media reports say that India’s richest man Mukesh Ambani spent on his daughter’s wedding anything between ₹100 crore and ₹700 crore. Mukesh Ambani’s net worth, according to Forbes, is $47.3 billion, or ₹3.4 trillion at current exchange rates. This makes his spend between 0.03% to 0.21% of his net worth. The 2018 combined earning of the two movie stars, Deepika Padukone and Ranveer Singh, who got married to each other, according to Forbes is almost ₹200 crore. Though estimates vary, a conservative number of ₹4 crore spent on their wedding is about 2% of their annual earning. Or they just had to work for slightly over a week to pay for the wedding.
The average drawing room conversation on the government encroaching on the independence of the RBI tut-tuts over the good guys at the Reserve Bank of India (RBI) getting stamped on by a bully government. Now, the resignation of Urjit Patel has added fuel to the views fire. But I wonder if the conversation would change if the same groups realized what this ‘independence’ or its obverse, the lack of accountability, means to their money. Last week, the RBI announced that new floating rate home loans from banks would be benchmarked to a rate not controlled by banks from April 1 2019. Anybody who has taken a floating rate loan in India knows that as the interest rate cycle goes up, loan rates mostly go up very quickly, but the opposite does not happen. This is not a new problem. I remember flagging the issue more than 15 years ago. It is not as if the RBI has not been aware of the problem of benchmark fixing by banks to cheat retail home loan borrowers. RBI has changed the way the rate is calculated four times in the past 24 years to make it difficult for banks to fix the rate—starting with the Prime Lending Rate (PLR) in 1994 to the Marginal Cost of Funds lending Rate (MCLR) in 2016. But in each case the power to calculate and fix the rate remained with the banks. A power they have mis-used freely at your expense. An internal RBI committee found that banks fixed rates at will.