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Finance

Understanding Sharpe ratio and its importance while taking investment decisions

Developed by Nobel laureate William Sharpe, the Sharpe ratio is used to understand the returns earned on an investment compared to its risk. Risks and returns have a direct relation – the higher the potential return, the greater the risk. Calculating Sharpe ratio is one of the easiest methods to measure the investment returns given the level of risk taken.

What is Sharpe ratio and why is it important?

Sharpe ratio in mutual funds helps investors to know about returns on their investments as against the risks taken to earn those returns. The ratio is useful to compare the risk-adjusted returns of different investments such as mutual funds, stock market, deposits, bonds, and other investment avenues. This ratio comprises three variables – expected return, standard deviation, and the risk-free rate of return.

Sharpe ratio is calculated with the below formula:

Sharpe ratio = (Rate of return on investment – Risk-free return) / Standard deviation of returns

For example, a fund named ABC gave a return of 15%, risk-free return was 5% and the risk factor (standard deviation) was 30%. Based on the formula above,

= (15%-5%) / 30%

= 10%/ 30%

= 0.33

Fund ABC generated 0.33 units of return for the risk undertaken.

Benefits of Sharpe ratio in the investment sector

Investors can use this equation to evaluate risks against returns and make smart investment choices. When it comes to mutual funds investment, a fund without any risk has a 0 Sharpe ratio. Similarly, if the ratio is higher, the returns will also be greater.

What is a good Sharpe ratio for a mutual fund?

Any Sharpe ratio of 3.0 or more is considered excellent by investors. A ratio above 2.0 is termed good, and a ratio greater than 1.0 is near to acceptable. A Sharpe ratio of less than 1 is said to be poor. 

Sharpe ratio and its importance for investors 

Along with any other ways to evaluate if the investment instrument of choice is good for your investment or not, you should also look at Sharpe ratio for the chosen instruments. Sharpe ratio is a popular risk measuring method that you could use to make smarter investment choices. If calculating Sharpe ratio, assessing the performance of securities seem a bit too complicated or time-consuming for you, you could also explore your investment options with a financial advisor to create a diverse portfolio based on your risk appetite and financial goals.

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Finance

What are the different types of debt funds?

Mutual funds are broadly categorized as equity and debt funds. Equity funds are those mutual fund schemes which predominantly invest in equity and equity related instruments to generate wealth. They invest majority of their investible corpus in stocks of publicly listed companies and try to generate capital appreciation through active risk management.

A lot of people do not wish to invest in equity funds because of their high volatile nature. It is natural that people do not want to face losses by investing in a mutual fund scheme that carries a very high risk profile. In India, a majority of people depend on conventional investment avenues for their income goals. A sharp fall in interest rates over the years has left investors complaining about how these investment avenues no longer tend to their income needs. Such investors may consider shifting to debt mutual funds.

What is a debt mutual funds?

While equity schemes invest majority of their investible corpus in company stocks and other equity related instruments, a debt fund aims to generate capital appreciation by investing in debt securities and money market instruments. A debt fund may invest in bonds, corporate securities, debentures, derivatives, commercial papers, treasury bills, certificate of deposits and other debt securities.

Types of debt funds?

Market regulator SEBI (Securities and Exchange Board of India) has further categorized debt funds to allow retail investors to be able to take an informed investment decision. If you are planning on investing in debt funds to add diversification to your investment portfolio, you should know the different types of debt funds available.

Here are all the debt schemes currently offered to Indian investors –

Liquid funds – Liquid funds are open ended debt schemes which invest in debt securities that mature within 3 months.

Dynamic bond – A dynamic bond fund manager can switch between long-term to mid-term to short-term securities depending on the fund’s market performance.

Corporate bond fund – A corporate bond scheme predominantly invests in highest rated corporate bonds.

Ultra short duration fund – Ultra low duration funds invests in securities having the Macaulay duration between 3 months and 6 months.

Low duration fund – Low duration fund invests in debt securities such that the average maturity duration of the portfolio is between 6 months to 12 months.

Overnight fund – An overnight debt fund invests in debt securities that mature in just 24 hours.

Money market fund – A money market fund is an open ended debt scheme that invests in money market instruments such as high credit rating debt-based securities, commercial paper, treasury bills, etc.

Short duration fund – Short duration fund is an open ended short term debt scheme which invests in marketable securities with Macaulay duration between 1 year and 3 years.

Medium duration fund – Medium duration funds invests in debt and debt related instruments such that the average maturity of the portfolio is between 3 years and 4 years

Medium to long duration fund – A medium duration fund is an open ended debt scheme which invests in debt securities such that their Macaulay duration between 3 years and 4 years.

Long duration fund – A long duration fund is an open ended debt scheme whose investment portfolio has an average maturity of 7 to 10 years.

Gilt fund – A gilt fund is an open ended debt scheme that invests majority of its investible corpus in government backed securities.

Floater fund – A floater debt fund must invest a minimum of 65 per cent of its investible corpus in floating rate debt instruments.

Credit risk fund – A credit risk fund is an open ended debt scheme that invests a minimum of 65 per cent in corporate bonds of the total assets.

Banking and PSU fund – Of its total assets, a banking and PSU funds at least 80 percent in debt instruments of banks, public sector undertakings, and public financial institutions.

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Finance

Which mutual funds are best for short term?

Mutual funds offer active risk management by investing in a diversified portfolio of securities. Fund managers are responsible for actively trading with the underlying securities of the mutual fund to ensure that the scheme is able to achieve its investment objective. Mutual funds hold the potential to offer capital appreciation over the long term. SEBI, the regulator of commodities and securities in India has further categorized mutual funds to allow retail investors to take an informed investment decision. Depending on their risk appetite, investment horizon and investment objective retail investors can decide which mutual fund scheme to invest in.

If you have an investment horizon of 6 to 12 months, you can consider investing in a short term fund or a liquid fund.

What is a short term fund?

A short term fund is an open ended debt scheme whose average portfolio maturity is anywhere between 1 to 3 years. This means that the underlying securities of a short term fund may mature any where between 1 to 3 years making it an ideal investment option for those with a short term investment horizon. Short term funds only invest in debt instruments of those companies who have a proven track record of repaying their loans. A short term fund manager invests in debt instruments of those companies that have a regular cash flow which justifies the companies’ ability to repay the borrowed sum.

What is a liquid fund?

If you wish to park your surplus money for a very short term and earn some interest rather than letting it sit ideal you can consider investing in a liquid fund. A liquid fund is an open ended debt which invests in debt instruments that have an average maturity period of 3 months. Liquid funds may be considered for building an emergency fund or a medical fund as one can instantly redeem their liquid fund units.

Benefits of short term funds

Short term funds may not offer returns as high as equity funds, but their main aim to provide stable returns with minimum investment risk. These funds try to offer capital protection to their investors are ideal for someone who wants to park their money for 12 to 18 months. Short term funds have delivered better returns than bank fixed deposits while ensuring that the investment risk is kept to minimum.

Benefits of liquid funds

Liquid funds can be used to park your surplus cash that is sitting ideal in the savings account. Why let your money sit idle when you can earn some interest on it by parking it in a liquid fund? As mentioned earlier, a liquid fund can also be utilized to build a medical fund. Thanks to its instant redemption facility, an investor can almost immediately receive money in their savings account after selling their liquid fund units. Liquid funds do not come with a lock-in period which make them ideal for those wanting to add liquidity to their investment portfolio.

If you have decided which mutual fund scheme to invest in to address your investment goals, you can consider starting a SIP in that fund. Systematic Investment Plan (SIP) is an investment process that allows retail investors to save and invest a fixed sum at regular intervals in a mutual fund scheme of their choice. Although most investors use SIP to automate their equity fund transactions, anyone can start a SIP to inculcate the discipline of regular investing. Investors can also refer to SIP calculator, a free online tool accessible to all investors.

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FinanceLoan

How to Get a Home Loan with Minimal Documentation?

The enormous price hike in the real estate market has prompted many homebuyers to avail a home loan for purchasing a property. With reputed lenders, it’s possible to avail a housing loan through a hassle-free online application process. Simple eligibility criteria, minimal and paperless documentation have further encouraged a great number of homebuyers to apply for a housing loan.

If you too are looking for a housing loan, you must keep all the necessary documents handy. This will reduce the processing time, and help you avail the loan amount within a short span.

Some of the important documents required for a home loan are mentioned below:

Documents Required for Home Loan

  • Passport size photograph
  • Identity proofs- PAN Card/ Aadhaar Card/ Voter ID
  • Residence proof – Passport/ Voter ID/ Driving Licence/ Aadhar Card/ Electricity Bill

In addition to the above-mentioned documents, you will also have to furnish the income proof as follows:

For salaried applicants

  • Salary slips for the last three months
  • Form 16 and Income tax returns for the last two years
  • Original six months bank statements
  • Original six months bank statement of any other bank account
  • Details of any existing loan availed along with its track record.
  • Property documents
  • Sanction letter

For self-employed applicants

  • Bank statement/passbook for at least past 1 year
  • Bank statement of last 1 year of any other bank account. The bank details must contain the account holder’s name, account number, bank name, and branch.
  • Last 3 years profit and loss account and balance sheet certified by a Chartered Accountant.
  • Degree certificate
  • Last 3 years Income Tax Returns, including your Business’s IT returns.
  • In case you have a partnership firm, you will have to provide registered partnership deed.

Make sure to keep these documents handy before starting your loan application process. Apart from verifying these documents, the lender may also evaluate various aspects such as your credit score, monthly income, job profile, employment history, etc. while determining your home loan eligibility. You can boost the approval chances of your loan application by minimizing your debt-to-income ratio and improving your credit score before beginning the process.

Once your home loan is approved and the loan amount is disbursed, it should be your prime responsibility to make timely loan repayment. Make sure that you do not delay or default on your EMI payments. You can make use of an online home loan EMI calculator to get an estimate of your monthly instalments. It’s advisable to settle for an affordable EMI, as it will help you repay the loan without straining your finances.  If you have a high repayment capacity, you must consider opting for a higher EMI outgo. This will allow you to close your loan sooner and save on the total interest pay-out. In case of any query while applying for a home loan, you can seek the help of a financial advisor for making a well-informed decision.

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Finance

Calculate your interest from Post Office FD

Fixed deposits have traditionally been among the safest investment options for investors looking for guaranteed returns. Conservative investors have a range of FD options to choose from. If you’re interested in opening an FD account too, you can choose from alternatives such as bank FDs, FDs offered by non-banking finance companies, or even post office FDs.

What are post office FDs?

Post office fixed deposits, also known as post office term deposits, are simply FDs offered by the Indian Postal Services department. Being government backed investments, they are generally considered to be among the safest investment instruments available. This is because they come with the sovereign guarantee, that is, the guarantee of the government of India.

Other than this, post office FDs work much like regular FDs. They also offer you interest on your deposit. And you can make use of a post office fixed deposit calculator to calculate your interest and see how much your investment will grow over time.

What is the interest rate offered for post office FDs?

The interest rate on post office FDs is decided by the government of India. And it is generally revised every quarter. This is done as per the government’s Small Savings Scheme, and the rates vary based on the tenure of the deposit. Check out the latest interest rates in the table below.

Period of deposit Interest rate
1 year 5.5%
2 years 5.5%
3 years 5.5%
5 years 6.7%

Here are some other key things to note about the post office fixed deposit scheme.

  • The interest is payable annually but calculated quarterly.
  • You need to deposit a minimum of Rs. 1,000.
  • Thereafter, you can increase your deposit in multiples of Rs. 100.
  • There is no maximum limit on investment.

How to calculate interest from post office FDs?

If you’re wondering how you can calculate the interest on your post office FD, a post office time deposit calculator can help you. This online tool calculates the interest that you will earn and the total maturity amount of your mind mapping tool investment. It’s simple and easy to use, and it saves you a lot of time. Using a post office FD calculator is fairly straightforward too.

You simply need to enter a few key details, and the post office fixed deposit calculator will compute the interest and/or the maturity amount for you. Here are the details you need to submit when you are using a post office time deposit calculator.

  • The amount of investment
  • The tenure of investment
  • The rate of interest

When you submit these details, the online tool shows you how much interest you will earn over that tenure, and how your investment will grow over the years. It takes just a few minutes to use, and the best part is that you can make use of a post office FD calculator absolutely free of charge.

Conclusion

So, if you’re looking for a safe investment option, a post office FD is something you can consider. You can also use the FD calculator on Finserv MARKETS to check the interest you will earn from your investment.

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Finance

YOUNG PROFESSIONALS ARE SEEKING FINANCIAL ADVISORS TO HELP THEM INVEST AND DEVELOP FINANCIAL GOALS

You might have been earning for a few years now. But are you really financially independent? Being financially independent means that you are not dependent on anyone for any of your current or future financial needs. Beginning your journey towards financial independence can be intimidating and overwhelming. You can start by creating a financial plan. This article aims to offer advice to young professionals who are seeking financial advisors to help them with their investment decisions.

Start saving to create a retirement corpus

While retirement might seem like a far-fetched plan to you right now, it’s never too early to prepare and invest for your future. Saving for retirement is an important financial goal and one must not delay it. Remember, the earlier you start investing for your retirement, the less pressure you’d feel when nearing your retirement. Your retirement corpus must be enough to not only maintain your current standard of living, but it should be enough to cater to your medical bills, unforeseen emergencies, hobbies that you may wish to take upon, inheritance, etc. There are different types of investment options that cater to retirement planning objectives such as National Certificate Savings Scheme (NCSS), Post Office Monthly Income Scheme (POMIS), mutual funds, etc.Your retirement is as important as any other financial goal such as saving for your child’s higher education or marriage.

Banking apart from investing

In addition to investing in mutual funds, you must also have a separate fund that solely caters to emergencies. This fund is known as an emergency fund. It is very important to have an emergency fund in place. An emergency fund can help you deal with unexpected and unforeseen contingencies such as home repair, the demise of a loved one, loss of job, accident, etc. As a thumb rule of investing, you must allocate at least three to six months of your living expenses towards the emergency corpus. You can invest this amount in a high-interest savings account or money market instruments that provide exceptional security and liquidity. Examples include savings schemes, liquid funds, etc.

Investing can result in long-term wealth creation

Now that you have saved and invested for any unforeseen circumstance and your retirement, you can focus on other financial goals that can help you to accumulate wealth. Different types of investments offervarying levels of risk. Remember, the higher the level of risk, the greater is the potential for exceptional returns. Understand your risk appetite, investment horizon, and financial goals and choose the right investment vehicle to achieve these goals. Equities are a great option to generate wealth in the long run. If you are a risk-averse investor and are unsure about the volatility associated with investments in stocks, you might consider investing in relatively safer investment options such as equity mutual funds. If you wish to simply preserve your wealth, then you might opt for more safer options such as debt funds, money market instruments, savings schemes, etc.

The earlier you start saving and investing for your future, the greater would be the power of compounding, and thus higher returns. So, what are you waiting for? Do not waste another moment and invest to secure your future. Happy investing!

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Finance

7 Valid Reasons to Avail Instant Personal Loans on a Mobile Banking App

Mobile applications play a major role in the banking sector because most banks have started providing their customers mobile banking facilities. A mobile net banking app allows the users to have better control over their accounts, making it much easier to access their accounts, check balance and even apply for personal loans. Rather than going to the bank and waiting for hours, without knowing whether your papers are approved, can be tedious. This page therefore speaks about various advantages of using an online loan application feature.

Advantages of Applying Personal Loans Online

As time is everything in the world, one may not find time to go to the bank often. This once made applying for a loan difficult as it involved going to the bank multiple times. Hence, most banks today allow their users to apply for instant loans through a banking app. Given below are a few advantages of using this feature:

  1. Apply for Personal Loans from Anyplace: A mobile banking application allows you to access its features anytime and apply for an instant personal loan is easy by following a few steps.
  2. Quick Cash for Emergencies: Life is full of uncertainties, and you will never know when you need some extra cash. During such emergencies, you rely on the online banking app to avail instant personal loans with just three steps. When it offers convenience, it also relieves you from stress.
  3. Instant Cash in Your App: It is not just the loan application process that is fast. As soon as you apply for a loan, the approval process commences, and the cash is transferred to your account immediately, and is accessible from your mobile banking app.
  4. Keep Track of All the Loans and their Due Dates: Applying for a loan and getting it is one thing, but keeping track of it is another thing. The banking app has the feature to track all the loans and interest you have to pay, along with their due dates. With this feature, you need not worry about missing out on payments.
  5. Security: One of the major concerns that users have is the security of their account and with good reason. As long as you keep your personal fleet maintenance software details safe, you do not have to worry about stealing money from your account because there are enough security checks in place to avoid that from happening.
  6. Easy to Use: The major highlight of the app is that it is easy to use. The user interface is very intuitive and makes navigating within the app much easy. Everything you need to know are provided in the ‘Help’ section.
  7. 24/7 Customer Service: Customer service is something which improves customer satisfaction. There is customer support section in the app, which has all the queries listed. If the problem you are facing is not available on the list, you can contact the customer support and file a query.

These are some of the few benefits that come along with using a mobile net banking app to apply for a personal loan.

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Finance

Must know this about Bexar property tax

Property taxes in Bexar County, Texas are comparable to those in other Texas counties. Calculating property taxes, on the other hand, can be difficult. It’s also crucial to be aware of the dates for filing for exemptions or challenging property value increases.

Bexar County Property Taxes: Things Investors and Homeowners Should Know

  • How is Property Tax Determined?
  • Tax Rates in Bexar County
  • When Do Property Taxes Have to Be Paid?
  • Paying Property Taxes
  • Techniques for Reducing Tax Liability

  1. How is Property Tax Determined?

Property taxes in Texas are calculated in a similar manner throughout counties. There is no property tax in the state of Texas. Local agencies are in charge of determining the value of property in their jurisdictions. To varying degrees, this might cover both real estate and personal possessions.

  1. Tax Rates in Bexar County

Each taxing authority in Bexar County sets its own annual budget. The tax rates of a particular taxing unit may be affected as the county grows and new demands emerge. As a result, demand for public services, community upkeep, schools, and tax rates will surely rise. Texas has had fast expansion in several areas, necessitating higher government investment.

  1. When Do Property Taxes Have to Be Paid?

The fiscal year for property taxes begins on January 1st. The Bexar County Appraisal District appraises property throughout the county and applies any applicable exemptions or credits. To take advantage of exemptions or credits for their home or other property, taxpayers must submit the necessary documentation to the County Appraisal District.

  1. Paying Property Taxes

Bexar property taxcan be paid in a variety of ways. You could pay at a local tax office, but paying online with a credit card or using eCheck to pay directly from a bank account is significantly easier.

  1. Techniques for Reducing Tax Liability

In Bexar County, there are numerous options for you or your spouse to reduce your property tax liability. The first step is to apply for any exclusions or credits to which you may be entitled. Depending on the type of property and how it is used, you may be eligible for additional tax breaks in your district.

Can I save money on my taxes if I pay in advance?

Tax payment discounts for Bexar County, Flood Control Fund, and all 55 taxing jurisdictions that we are contractually committed to collect have been suspended by the official order of the Bexar County Commissioners Court dated September 9, 2003.

Other payment choices, such as the 10-Month Payment Plan for individuals 65 and over, Disabled Citizens and Disabled Veterans, or the quarterly payment option, should be considered.

What Are the Differences Between Bexar County and Other Cities in Texas and the United States?

Bexar County, with a market value of $156 billion in taxable property, is nearly half the size of Dallas County, which has a market value of $292 billion. With a market value of $574 billion, Harris County is nearly double the size of Dallas County.

Conclusion 

Those who have already been assessed property tax but are experiencing difficulty making payments should be aware that payment arrangements are available. You can also seek the advice of a qualified tax attorney who may be able to assist you in reducing your overall tax bills.

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Finance

Stay protected on the road with comprehensive bike insurance

 There are mainly two types of bike insurance policies available in the market today, third-party bike insurance and comprehensive bike insurance. While a third-party insurance policy is the most basic and budget-friendly way to legally drive your bike, a comprehensive bike insurance policy provides wider insurance coverage in case of an accident.

 The comprehensive insurance policy is highly recommended for people who use their bikes regularly or own a high-end two-wheeler. If you are also a regular rider and are wondering what exactly can comprehensive bike insurance cover, here’s the list –

  • Vehicle damage due to natural disasters – Disastrous natural calamities like tsunamis, tornadoes or earthquakes are unpredictable and can prove to be financially and mentally disturbing events. While third-party insurance would not cover the vehicle damages in such events, a comprehensive cover would provide you with complete financial relief when it comes to fixing the vehicular damages that were caused by the natural calamity.
  • Own bike damages in an accident – Paying to fix your own vehicle damages after an accident can turn out to be quite an expensive affair. Nonetheless, with a comprehensive bike insurance policy, you can conveniently hand over such a financial burden to the insurer and get your bike fixed without taking a hit on your pocket. It is important to keep in mind that this benefit cannot be availed in third-party insurance and can only be claimed by comprehensive insurance policyholders.
  • Man-made disasters – If you happen to be a victim of a theft or robbery, a two-wheeler insurance company would cover your losses if you have bought a comprehensive insurance policy from them. You are also covered for other such man-caused disasters like a mishap in vehicle transportation, collisions and even against any malicious acts like riots that cause damage to your vehicle.
  • Injuries to the rider – There is a high possibility of serious injuries when you get into an accident on a two-wheeler. Some insurance companies provide comprehensive insurance policies that have an in-built cover for the rider’s medical expenses and also provide compensation in the unfortunate event of permanent disabilities or death. Many insurance companies even provide separate insurance cover for the pillion rider. Nonetheless, even if personal accident coverage is not included in your insurance plan, you can conveniently get it added to your coverage by contacting the insurer or by going to their provided website.
  • Third-party damages – With comprehensive insurance, you not only get covered for the damages of your own vehicle but even save yourself from the financial burden of having to pay for any damages that are incurred to the third party. Comprehensive insurance is the combination of third-party cover and an own damage cover.

You can conveniently get a comprehensive insurance cover when you opt to do your bike insurance renewal online or offline and avail of various add-ons that an insurance company provides. This would slightly increase your premium but it would also help you extend the policy’s coverage.

We hope this article clears all the doubts and questions that you might have with regards to a comprehensive bike insurance policy and that you are now fully equipped with the right information to make the correct decision. All the best!

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Finance

Why Choose Moneylender Singapore Financing For Your Company

Compared to investors, a moneylender Singapore company is never ever going to interfere with just how your organization is managed. If you find a capitalist, you will need to function along with them. And unless they’re a silent affiliate, they will anticipate to have a say in how their cash is invested by the organization. Meanwhile, moneylenders don’t care what you do with the money provided that you’re going to be able to settle the balance with extra interest. What takes place in between now and then is entirely approximately you. So, if you intend to maintain complete management over your organization and just how it grows and beefs up, a company loan is normally the best choice.

A financing tool for development

Probably the most evident factor to think about a small organization loan is to purchase a growth possibility for your business. When organization is flourishing, continuing to grow your company can help make sure that your earnings don’t stagnate or shrivel.

Obviously, additional development has lots of expenses, such as advertising, brand-new real estate, building improvements, and boosting team sizes, and it’s unlikely you’ll have the money on hand to cover everything unless you take it from the funds that maintain your business operational.

Loans can help you cover the costs of growing your organization without devouring your operational funds, to ensure that you can continue to impress clients while growing your organization.

Advantages

  • Smaller sized loan quantities– If you need only a small quantity, such as ₤ 15,000, then an unsecured loan makes good sense especially if you’ve real estate and don’t want to expose it to the threat of foreclosure.
  • Adaptable repayment periods– unsecured loans can have any repayment period, up to around 5 years. The lengthier the loan period, the lesser the interest rate you’ll be billed on the loan.
  • Good for those currently trading– as the loan is unsecured, the loan provider will examine it against your organization’s trading position. They will also perform background inspections such as your credit history, cash flow position, annual report, money reserves and might request a personal assurance versus the loan.
  • Faster to obtain– unsecured loans for modest amounts are speedier to get approved, with fewer procedures and legal headaches.
  • Lower property direct exposure– no requirement to set up real estate as security and couple of admin expenses.

Downsides

  • Can be harder to access– if you do not have a strong trading position, it can be hard to get a big unsecured loan.
  • Bad for huge amounts– loan providers typically will not lend more than around $25,000 as an unsecured loan even to a strong company, and loans higher than $40,000 are really uncommon.

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