Mutual Fund Investment for the First Time Investor

 For a beginner, investing in mutual funds can seem a difficult task. Understanding the meaning of mutual funds and how mutual funds work is the first step in the investment journey...

For a beginner, investing in mutual funds can seem a difficult task. Understanding the meaning of mutual funds and how mutual funds work is the first step in the investment journey.

A mutual fund means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the pubic under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, real estate assets and such other assets

Depending on the schemes objective, the money collected from investors is invested in various categories such as stocks, gold, bonds and other securities. A fund manager whose main aim is to follow scheme objective and try to generate alpha on the fund’s investments manages each fund.

If you are a first time investor you should consider your financial goals, your investor profile viz, are you looking for short term investments or are you aiming at building your wealth over long term? You should also look towards diversifying your portfolio by investing in different mutual funds.

Beginners can begin their investing via systematic investment plans (SIP) especially if they are investing in equity instruments for the first time. A lump sum investment can be risky if the stock market is at its peak.

SIP allows you to spread your mutual fund investments over time and invest across market levels.

A mutual fund calculator is a financial mechanism that enables investors to calculate the estimated returns on their mutual fund investments.

A mutual fund calculator guides you in your future planning based on estimated returns.

An SIP calculator is a financial device that enables investors to calculate the expected returns on their SIP investments. With the help of this tool, you can calculate how much of mutual fund investment is needed to achieve the target corpus.

Investments in mutual funds can be made online or offline. However, bear in mind that you should be KYC compliant to invest in a mutual fund. This means, you need a PAN card and valid address proof. 

One can invest in mutual funds through RIA or directly with the asset management company (AMC) in the direct plan. You must complete your KYC formalities online. You will also have to complete the IPV (In-Person Verification) by SEBI-approved agencies.

Mutual fund investments can be made through a mutual fund distributor by opting for a regular plan. The mutual fund house pays a commission to the mutual fund distributor or the intermediary.

You can also invest in direct plans of mutual funds online through the website of a fund house. You need to complete your KYC (Know Your Customer) compliance and then invest in the mutual fund scheme of your choice.

Mutual funds are one of the effortless way of investments.  It helps to potentially grow your corpus in the long term. For this, plan your goals, through mutual fund comparison select the appropriate funds and start investing.

 

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Speculating And Hedging: The Strategies Used By Professional Investors

 In this article, we take a closer look at how professionals manage risk through hedging and how they increase output with leverage. This is a beginner guide.

The stock market is not always a safe place. Sure, it’s seemingly safe on the outside, but it is quickly becoming a dangerous realm where you risk losing everything if you make the wrong decision. You could end up buying stocks that plummet in value as we all saw happen with J.C Penney’s stock. 

The best way to get around this is by trading on the long side of an entity and sometimes using leverage to amplify profits when a favorable opportunity arises. Learn how to do this and what other leverage strategies work best in our latest blog article!

The Difference Between Speculating and Hedging

There are two main types of trading: hedging and speculating. Speculating is when you trade with the intention of making a profit from price movements. Hedging is when you trade to protect yourself from price movements.

Most traders are speculators. They take positions in the market with the hope that prices will move in their favor so they can make a profit. However, hedgers are not interested in making a profit from price movements. Instead, they trade to protect themselves from price movements.

The best way to think about hedging is like insurance. You pay a premium to insure yourself against an adverse event. If the event happens, you receive compensation that covers your losses. If the event doesn’t happen, you lose the premium you paid for the insurance.

Hedging, on the other hand, is similar, but it's a very defensive approach to investing. You take a position in the market that offsets your exposure to an adverse price movement in order to prevent loss. If prices move against you, your hedged position will offset some or all of your losses. If prices don’t move against you, you will still incur a small loss from the hedge itself.

The key difference between hedging and speculating is that hedgers are not trying to profit from price movements. The best time to hedge your portfolio is when you are heavily long in stocks and equities and you don't want to close your positions while the volatility increases.

Trading Stocks, Indices, and Commodities

When it comes to trading, there are a variety of strategies that can be employed in order to generate profits. One such strategy is leveraged trading, which involves using a small amount of capital to control a large sum of capital. This can be an effective way to make money, but it also carries with it a high degree of risk. In order to be successful with this strategy, it is important to have a solid understanding of the markets and the underlying assets that are being traded. Additionally, it is important to have a system in place to manage risk and protect profits.

Strategies for Traders to Watch for

When it comes to speculating with leverage, there are a few strategies that traders should keep an eye out for. These include:

1) Breakout strategy. This is where traders look for stocks that are about to break out of a tight trading range. Once the stock breaks out, they will enter into a trade and ride the momentum.

2) Trend following strategy. This is where traders will enter into trades with the trend. They will look for stocks that are in an uptrend or downtrend and then ride that trend.

3) Contrarian strategy. This is where traders will do the opposite of what everyone else is doing. So, if everyone is buying, they will sell. If everyone is selling, they will buy. Short-selling is a good approach if your outlook is contrary to what everyone else sees.

4) Scalping strategy. This is where traders will look for small movements in the market and try to make a quick profit off of them.

5) Day trading strategy. This is where traders will hold their positions for a short period of time and then exit before the end of the day.

Risk Factors

Most readers probably think that leverage trading is all about making quick and profitable trades. However, there is another side to this coin – the risk factor.

Just as leverage can magnify your profits, it can also amplify your losses. This is why it’s important to have a solid risk management strategy in place before you start speculating with leverage.

The main factor that contributes to losses is the overall position size. When you use leverage you are able to trade much larger sizes with only a fraction of your own margin capital. This tends to overwhelm new traders and overleveraging is very common.

When you add volatility to the mix it can become very difficult to control your position, especially if you don't use protective stops or proper risk management tools such as negative balance protection and isolated margin accounts.

Things to keep in mind when speculating with leverage

1. Use stop-loss orders: A stop-loss order is an order to sell a security when it reaches a certain price, and is used to limit losses on a position. For example, if you buy a stock at $100 and place a stop-loss order at $95, you will sell the stock automatically if it falls to $95 or below.

2. Calculate your leverage: It’s crucial that you calculate the leverage before you enter any kind of setup to be fully aware of how much you are risking per trade and how big of a position you can afford to open. Use a leverage calculator to perfectly select the ratio that best fits your setup. 

3. Manage your position size: Position size is the number of shares or contracts you take on in a single trade. When trading with leverage, it’s important to keep your position size small relative to the size of your account. This will help you avoid getting margin calls (a demand from your broker for more collateral) and protect your capital if the trade goes against

Final words

The financial markets have always been a mystery to beginner investors and it might seem like a daunting task to take on high volatility stocks and commodities. While this is true, there are a couple of basic principles that you should know about before you start that will help you to amplify your profits and secure your downside. In this article, we take a closer look at some speculative approaches and hedging.