Corporate bonds – Welcome Echizenshi http://welcome-echizenshi.com/ Sat, 08 Jan 2022 14:00:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://welcome-echizenshi.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Corporate bonds – Welcome Echizenshi http://welcome-echizenshi.com/ 32 32 You receive $ 1 million in cash. What do you do with it in 2022? https://welcome-echizenshi.com/you-receive-1-million-in-cash-what-do-you-do-with-it-in-2022/ Sat, 08 Jan 2022 14:00:00 +0000 https://welcome-echizenshi.com/you-receive-1-million-in-cash-what-do-you-do-with-it-in-2022/ sweetandsour / E + via Getty Images We have all at least once wondered what we would do if we win the lottery. Well, today is the day. Let’s imagine that it really won. After tax, you will receive exactly $ 1 million. What are you doing with it? It’s a surprisingly difficult question to […]]]>

sweetandsour / E + via Getty Images

We have all at least once wondered what we would do if we win the lottery.

Well, today is the day. Let’s imagine that it really won.

After tax, you will receive exactly $ 1 million.

What are you doing with it?

It’s a surprisingly difficult question to answer in 2022.

Treasury bills (IEF) and corporate bonds (VCLT) have a negative yield after you deduct taxes and inflation.

Shares (SPY) are also quoted at a valuation multiple twice as high as usual.

Homes (HOMZ) have enjoyed significant appreciation over the past 2 years and the most sought after properties are now selling for substantial premiums over the asking price.

Cryptocurrencies like Bitcoin (BTC-USD) have seen a huge rise over the past year and reached levels never seen before.

Finally, if you thought that holding cash was the answer, you have to remember that inflation is currently hitting close to 7%.

Graphic

Most of the time, $ 1,000,000 would be a lot of money, but since everything has gotten so expensive, the million won’t go that far in 2022.

But don’t give up hope.

T-bills, bonds, stocks, houses and cryptocurrencies may have become crowded and expensive, but the universe of investment options is actually much larger than that, and the opportunities remain abundant. in some neglected areas of the market.

Below I outline what I would do with the million dollars. Please keep in mind that this relates to my personal situation and therefore what I am doing may not be suitable for you.

I am still quite young, I have a long term horizon, a high tolerance for risk, and most importantly, I have a strong affinity for real estate investing because it is what I know best as a former real estate investor in private equity.

Let’s start:

Undervalued real estate through listed REITs: $ 400,000

Real estate is expensive, and rightly so.

We live in a world of ultra low interest rates and high inflation, and this combination is particularly beneficial for real estate investors. On the one hand, your property is gaining substantial value, and on the other hand, your cheap mortgage is slowly inflated.

To give you a real life example, at the end of 2020 I bought a property for ~ $ 500,000, put ~ $ 100,000 down, and since then the property’s value has increased by almost $ 100,000. , thus doubling my net worth, and because inflation is running close to 7%, the value of my mortgage, which is fixed, has lost its real value. Later this year, I plan to refinance the mortgage to take some of that equity out of the deal and reinvest elsewhere.

Unfortunately, these insane returns are now well known to investors, and the competition for the purchase of private property has become so intense that deals typically close with large premiums over asking prices.

But there is still a hidden opportunity in the real estate market:

Enter the REITs (VNQ).

REITs are publicly traded companies that invest only in income producing real estate. Considering the current environment, you would expect these companies to be very popular and trading at high valuations, but contrary to all logic many of them are sold at high discounts due to temporary fears of the pandemic.

As a result, it is not uncommon to find REITs that trade at large discounts compared to the underlying value of their properties.

Just to give you a quick example: Clipper Real Estate (CLPR) has an extensive portfolio of apartment communities primarily located in Brooklyn and Manhattan. It is well managed, has a good balance sheet, its rents are increasing and despite all this, equities are now valued at an estimated discount of 30% compared to the value of the properties.

The source

There are many similar opportunities. Macerich (MAC) has the highest quality shopping malls in the United States and is estimated to be priced at 50% off.

Why are REITs so cheap?

They collapsed at the start of the pandemic due to the false perception that most of them invest in low-end offices, hotels and malls. In fact, 90% of REITs invest in more defensive types of properties like apartment communities, cell phone towers, farmland, warehouses, etc.

Since REITs are hybrids of stocks and real estate, they often end up being badly priced because most equity investors have little understanding of real estate and most real estate investors have little understanding of the stock market.

Sometimes they become overvalued (before 2008) and at other times they become undervalued (after 2020). I think buying REITs below NAV is very appealing because you are basically getting real estate at pennies on the dollar that is professionally managed, diversified, and liquid. You don’t need to deal with any of the tenants, you don’t have to sign any of the loans, and your liability is limited. This results in an exceptionally high risk / reward ratio and for this reason I would allocate a large portion of my lottery winnings to discounted REITs.

Of course, as a real estate investor myself, I feel comfortable investing in what I know best. You might want to be more diverse.

High Conviction Concentrated Equity Positions: $ 400,000

As stated before, I have a long term horizon and a high tolerance for risk.

This is reflected in the way I invest in common stocks.

Instead of building a well-diversified portfolio, which is probably best for most people, I look to make concentrated investments in my best ideas.

In my opinion, a great equity investment is one that:

  • i can really understand
  • Has a strong ditch
  • An ability to reinvest capital at high rates of return
  • User-friendly management for shareholders
  • And an updated valuation with a potential for repricing

In other words, it’s a business that has a predictable trajectory toward above-market rates of return over the long term. Finding these opportunities is extremely difficult because for one I can only understand a limited number of companies, and for two most of the market today is quite expensive.

A good example of such a concentrated investment is my biggest stake, RCI Hotels (RICK), owner and operator of a strip club. I am very optimistic about the company because, as we explain in a recent report, it has a clear path to over 20% annual growth in free cash flow per share, but today it is only priced at around 12 times free cash flow, providing exceptional value for a fast growing, high quality business.

Gallery |  DFW'S Hottest Parties & Strippers

Source: RCI Hospitality

As its valuation multiple increases and meets our growth expectations, we expect it to generate 20-25% annual total returns over the next 5-10 years.

These superior returns are of course accompanied by high volatility. But since I have a long-term horizon, that’s fine with me, and because my investments are concentrated, I also know them very well and have the courage to buy more when prices fall.

If I won the lottery, a lot of the proceeds would go into those concentrated equity investments. This is the riskiest part, but also the most rewarding part of my portfolio.

Deposit for real estate investment: $ 200,000

Earlier I mentioned that it is getting harder and harder to buy private properties in today’s market. Competition is intense and prices are rising sharply.

But that doesn’t mean you should ignore real estate altogether. It just means that you have to become more creative and selective in the way you invest.

The real estate market is large and versatile. While one location or type of property can be expensive, others are still emerging and at a reduced price.

An example in which I invest in Estonia. I believe that the country’s capital, Tallinn, offers exceptional real estate opportunities for people who have an investment horizon of decades. This is because today they are still a small emerging country, but over the next few decades I expect them to become one of the richest and most expensive countries on the planet. .

Source: Tallinna Sadam (OTCPK: TSMTF)

Why is that?

I have covered this topic at length with members of High Yield Landlord, but in short Estonia is fast becoming the “Silicon Valley of Northern Europe” where ambitious young entrepreneurs move to profit from the company. the most user-friendly and the most digitally advanced. of the EU and the euro area.

At the same time, it also became the “Switzerland or Luxembourg of Northern Europe”, where wealthy and retired business leaders settled to reduce their taxes and improve their quality of life.

Today Estonia already has the most start-ups per capita in the EU and the most unicorns per capita (tech start-ups valued at over $ 1 billion) worldwide. Massive companies like Wise (OTCPK: WPLCF), Bolt, Pipedrive and Skype are emerging from this small country of 1.3 million people and these successes are leading to rapid economic growth and real estate appreciation.

The source

Today, Tallinn’s highest quality properties are still almost 3 times cheaper than in Helsinki, just 30 miles north, but over time we expect Tallinn to become more expensive, resulting in substantial price appreciation.

Essentially, Estonia is another small country positioned to replicate the past successes of Luxembourg, Switzerland, Monaco and Lichtenstein. All of these small European countries have one thing in common: They are great for business, attract talent and capital, and have notoriously expensive real estate.

It is still a good time to buy quality assets in Estonia and that is why I would put part of the proceeds as a down payment to buy another property. With $ 200,000, I would probably target a property worth around $ 600,000-800,000, adding cheap leverage to my lottery wins and diversification of the entire portfolio.

Final result

As you can see, my heavy real estate investment plan is quite unique and probably wouldn’t be right for you.

This is why this question is so interesting. Tell us in the comments section below what you would do if you won $ 1,000,000 in the lottery. Thanks for reading!


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Sales of corporate bonds fell nearly 13% on the month in December https://welcome-echizenshi.com/sales-of-corporate-bonds-fell-nearly-13-on-the-month-in-december/ Tue, 04 Jan 2022 21:45:00 +0000 https://welcome-echizenshi.com/sales-of-corporate-bonds-fell-nearly-13-on-the-month-in-december/ Among issuers, ICICI Bank, Canara Bank, State Bank of India, LIC Housing Finance, Axis Bank and Housing Development Finance Corporation remained the top issuers, raising more than 40% of the total amount raised in December. By Manish M. Suvarna Fundraising via corporate bonds through mandates and ratings fell nearly 13% on the month in December, […]]]>

Among issuers, ICICI Bank, Canara Bank, State Bank of India, LIC Housing Finance, Axis Bank and Housing Development Finance Corporation remained the top issuers, raising more than 40% of the total amount raised in December.

By Manish M. Suvarna

Fundraising via corporate bonds through mandates and ratings fell nearly 13% on the month in December, with most issuers sitting on the sidelines due to higher yields on these papers. . According to data compiled by the Prime database, businesses and banks raised Rs 48,852 crore in December, up from Rs 56,096 crore in November.

Among issuers, ICICI Bank, Canara Bank, State Bank of India, LIC Housing Finance, Axis Bank and Housing Development Finance Corporation remained the top issuers, raising more than 40% of the total amount raised in December.

“The upward trend in yields in line with fear of inflation and the likelihood of rising rates has kept investors at bay and their reluctant behavior has resulted in a lower than normal issuance trend,” Ajay Manglunia said. , Managing Director and Head of Institutional Fixed Income at JM Financial.

Corporate bond yields across maturities rose nearly 10 to 20 basis points in December after yields on government securities, particularly benchmark bonds, rose over fears of a rise in the price. inflation and concerns about the rapid spread of the Omicron variant of Covid-19. The benchmark 10-year bond yield 6.10% -2031 increased by almost 10 to 12 basis points in December, mainly after monetary policy.

“CPI inflation has trended upward, leading to higher inflation expectations. G-Sec’s trade is on the expected inflationary path and as a result volatility is on the rise, ”said Sandeep Bagla, Managing Director of Trust Mutual Fund.

Additionally, the Reserve Bank of India (RBI) and other central banks around the world are seeking to normalize monetary policy, and as a result, bond yields have become volatile in anticipation of rate hikes.

Market participants have said that a rise in corporate bond yields is likely to continue over fears of a central bank rate hike and an acceleration of the RBI’s withdrawal of liquidity from the banking system.

“This trend could continue for a while as the fear of a rate hike persists and ahead of the budget which cuts next year’s budget deficit and borrowing in the market must keep investors very cautious,” added Manglunia.

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You may be subject to tax on your previously exempt investment income as of January 2, 2022 https://welcome-echizenshi.com/you-may-be-subject-to-tax-on-your-previously-exempt-investment-income-as-of-january-2-2022/ Sun, 02 Jan 2022 18:57:12 +0000 https://welcome-echizenshi.com/you-may-be-subject-to-tax-on-your-previously-exempt-investment-income-as-of-january-2-2022/ Sunday 02 January 2022 / 6:50 p.m. / by PwC / Header image credit: PwC There are various tax changes affecting government securities, corporate bonds, and equity investments that you should be aware of. On January 2, 2012, the federal government issued the Corporate Income Tax (Exemption from Short-Term Government Bonds and Securities) Ordinance, 2011. […]]]>

Sunday 02 January 2022 / 6:50 p.m. / by PwC / Header image credit: PwC

There are various tax changes affecting government securities, corporate bonds, and equity investments that you should be aware of.

  • On January 2, 2012, the federal government issued the Corporate Income Tax (Exemption from Short-Term Government Bonds and Securities) Ordinance, 2011. The ordinance granted exemption from corporate income tax. corporate income on all bonds and debt securities issued by all levels of government and legal persons. from January 2, 2012 for a period of 10 years. Due to the sunset clause, the exemption is no longer applicable as of today.
  • The Capital Gains Tax Act (CGT) provides an exemption from capital gains tax on the disposal of Nigerian government securities, including federal, state and federal government bonds, stocks and stocks. and local. However, an amendment via the 2021 finance law aims to impose the CGT on the sale of shares subject to a specified threshold and other refinancing conditions.
  • The capital gains exemption does not cover gains that are considered income or trading profits depending on the frequency, period of holding and nature of the investor’s transactions, among others (generally referred to as principles business principles).
  • Personal Income Tax Law (Amendment)
    [PITA] 2011, which was published in the Official Gazette on June 24, 2011 with an effective date of June 14, 2011, grants tax exemption to taxable persons under PITA for income from bonds and short-term securities issued by federal, state and local governments and their agencies; companies and supranationals. The exemption clause does not have a sunset clause. Therefore, the exemption remains.
  • The 2011 Ordinance on Value Added Tax (Exemption of the Proceeds from the Disposal of Public Securities and Companies) of January 9, 2012 was published with an entry into force date of January 2, 2012 valid for 10 years in order to to exempt from VAT the disposal of public securities and companies. However, under the 2019 finance law, the VAT law was amended to specifically define property as excluding securities. It should be noted that commissions on stock market transactions were previously exempt from VAT via the 2014 Ordinance on value added tax (Exemption from commissions on stock market transactions) published in the Official Journal of July 30, 2014 with an entry date in force on July 25, 2014 for a period of 5 years. which expired on July 24, 2019.

Consequences :

1. Private investors are now subject to income tax on their income from corporate bonds and government securities. This means that the 10% WHT will be applicable as a down payment on the 30% CIT in addition to the 2% school tax for resident companies, while the 10% or 7.5% WHT will be the final tax. for non-resident investors. This will increase the cost of borrowing for issuers.

2. Based on the Local Loans (Shares and Registered Securities) Act 1946 (as amended), the Minister of Finance may issue registered shares, government promissory notes or bearer bonds specifying, among other things, exemption from all or part of the taxes payable under any other law in force in Nigeria. The exemption under the Local Loans Act has not historically been used to cover treasury bills and government bonds.

3. Individuals will continue to benefit from tax exemptions on income from government securities and companies. This means that WHT will not apply either.

4. Capital gains tax will not apply to government securities while corporate bonds will be subject to capital gains tax (if applicable). Capital gains on shares provided for by the 2021 finance law will also be subject to the CGT.

5. VAT will not apply to the proceeds from the sale of public securities and companies. However, VAT will apply on fees and commissions on these transactions.

Although it is not clear whether the time-out of the exemption should only affect securities issued after the expiration date or all income accrued after the expiration, regardless of the date of issue of the instrument , the latter will be the case.

What to do

You need to be aware in order to take the necessary steps to ensure tax compliance and optimization. You may need to track income from various securities and separate taxable income from income exempt for tax purposes. Any expense incurred to generate taxable income will be tax deductible.

Credit:

The post office You may be subject to tax on your previously exempt investment income today first appeared in PwcNigeria.com January 02, 2022.


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How to navigate expensive markets where all asset classes are at their peak? https://welcome-echizenshi.com/how-to-navigate-expensive-markets-where-all-asset-classes-are-at-their-peak/ Sat, 01 Jan 2022 04:14:19 +0000 https://welcome-echizenshi.com/how-to-navigate-expensive-markets-where-all-asset-classes-are-at-their-peak/ With most of the major asset classes nearing their peak, investors around the world are confused about their investment choices. Image credit: AFP Global stocks hit several new all-time highs during 2021, with the global benchmark stock index nearly doubling from its pandemic March 2020 lows. Despite bond yields rising this year, government bond yields […]]]>

With most of the major asset classes nearing their peak, investors around the world are confused about their investment choices.
Image credit: AFP

Global stocks hit several new all-time highs during 2021, with the global benchmark stock index nearly doubling from its pandemic March 2020 lows. Despite bond yields rising this year, government bond yields and corporate are still trading for nearly a decade. low, which implies high ten-year bond prices. With most of the major asset classes near peak and seemingly expensive, how should an investor consider investing in such a market?

The six-step guideline below could be a starting point for investors looking to navigate expensive markets:

Rebalance your portfolio

In the midst of a strong bull market, it is important for an investor to constantly review their existing asset allocation and analyze whether it has deviated significantly from long term goals and risk tolerance. For example, a simple 50% equities and 50% bond balanced portfolio starting in March 2020 would be significantly overweight equities today, simply because of the strong gains in the equity market over the past two years. . Any significant deviation in an investor’s risk profile increases their potential for loss. Thus, a prudent approach would consist in reducing exposures as close as possible to the target asset allocation.

Reset future expectations lower

Investors tend to extrapolate recent returns into the future. We believe equity markets are likely to move towards a more sustainable rate of return over the next several years, albeit with higher volatility, due to three factors. First, compared to previous cycles, stock valuations are now at a much higher starting point. Second, history suggests that stock market returns normalize to high single- or double-digit returns after the initial strong recovery from a receding market bottom. Third, the limited scope for lower interest rates and bond yields suggests modest stock returns over the medium term.

Be aware of the macro environment

Asset markets follow cycles strongly influenced by the macroeconomic context. However, many investors tend to overlook the importance of macroeconomic variables on investments. Being aware of the macroeconomic environment helps investors not only to grasp various sources of growth, but also to mitigate significant downside risks. For example: (i) the largest corrections (index declines of 20% or more) are usually triggered by concerns about impending recessions, (ii) business cycles and political environments have a different impact on various business sectors and investment trends and (iii) macroeconomic analysis can help identify multi-year and 10-year structural themes.

Avoid FOMO

Bull markets are typically characterized by surges that are difficult to explain in different market segments or themes. Investors are missing the hottest theme of the month, creating a feeling of FOMO (Fear Of Missing Out), forcing them to continue this trend with potentially disastrous results. Amos Tversky and Daniel Kahneman partially demonstrated FOMO through loss aversion theory, where people have a strong tendency to avoid loss – psychologically, losses are thought to have twice the impact on people. as the gains. With this in mind, it is almost impossible not to get carried away by the “lost opportunity” by standing on the sidelines during a raging bull market. However, having an investment strategy based on your goals, liquidity, and risk appetite could go a long way in squeezing FOMO.

Diversify across assets and markets

Diversification is a key tool for investors to overcome expensive markets. Diversification can be achieved in three general ways – (i) Diversify the allocation between different asset classes, such as stocks, bonds, commodities, cash, real estate and alternatives, depending on the ‘asset allocation, (ii) Invest in international markets to avoid a single market bias and (iii) Diversify within an asset class, for example, by investing in different market segments, sectors and styles within equities and by allocating bond exposures according to duration, credit quality and sensitivity to interest rates. The basic principle of diversification is to have assets that have a low correlation with each other, so that any weakness in one particular asset class can be offset by gains in others.

Average cost in dollars

The dollar cost averaging is a strategy in which an investor spreads out his asset purchases over time to reduce the impact of market volatility, to ensure that the asset is not bought near. of a peak. Taking a phased approach to investing in bull markets is very important as buying a lump sum and holding long term is easier said than done. Long-term studies of investor behavior show that it is generally difficult for anyone to time the market. Additionally, the average investor tends to panic when the market goes down and often sells after the market has gone down significantly (and then stays out of the market). From a behavioral standpoint, averaging cost in dollars eliminates the emotion of investing because it reduces the risk of panic selling during times of significant market weakness – typically the main cause of long-term performance.

– The writer is Chief Investment Strategist at Standard Chartered Wealth, India.


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CDOs are group loans that can sometimes be a mess https://welcome-echizenshi.com/cdos-are-group-loans-that-can-sometimes-be-a-mess/ Thu, 30 Dec 2021 13:02:30 +0000 https://welcome-echizenshi.com/cdos-are-group-loans-that-can-sometimes-be-a-mess/ Breadcrumb Links MoneyWise Canada To borrow money Secured debt securities nearly crippled the global economy in 2008 Author of the article: Shutterstock / MoneyWise Content of the article Secured Debt Securities (CDOs) are a financial tool used by banks to repackage individual loans and resell them to investors in the secondary market. Advertising This ad […]]]>

Secured debt securities nearly crippled the global economy in 2008

Content of the article

Secured Debt Securities (CDOs) are a financial tool used by banks to repackage individual loans and resell them to investors in the secondary market.

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This type of tool is known as a “derivative” because its value derives from the underlying assets, which can range from auto loans to credit cards and from business debt to mortgages.

Their popularity south of the border means that while not as common in Canada, the Canadian economy still felt their impact, especially during the 2008 financial crisis that CDOs helped create.

How these investments work

Secured debt securities are a collection of secured debts, this is where the “secured” part comes in. With secured debts, borrowers are required to put up an asset as collateral. If they are lacking, this asset can be seized.

They are generally supported by institutional investors such as pension funds, insurance companies, banks, investment managers and other financial institutions.

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Different types of CDOs may be known by different names, depending on the type of loans put up in the CDO. For example, a mortgage CDO is known as a “mortgage backed security” (MBS), while other debt collections like credit cards, student loans, and business debts are called “Asset backed securities”.

The advantage of CDOs is that when the economy is strong, these high risk investments can generate better returns than other fixed income products in their portfolio. For institutional investors like pension funds, insurance companies and hedge funds, this translates into higher profits.

Since CDOs are not tangible assets, their value is determined by a computer model. As these have become more complex, so has the risk assessment.

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To mitigate this for slightly more conservative investors, CDOs are divided into risk levels, or tranches. CDOs are placed in these tranches by credit rating agencies, which assign a credit rating to it.

If a loan were to default, the senior tranches (with the highest credit ratings) would be repaid in priority over the subordinated tranches. But they also receive a lower coupon rate compared to junior tranches with lower credit ratings.

Where you might know CDOs

CDOs are a riskier investment than your standard portfolio of stocks and bonds because there is always the possibility that some borrowers will default on their loans – and when they do, the results can be dramatic.

The collapse of mortgage-backed securities in the United States, caused by overly optimistic ratings of MBSs by rating agencies, led to the financial crisis of 2008. This brought CDOs out of favor.

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American banks were selling houses to people who realistically could not afford them. So when house prices fell from 2006, many of these people defaulted on their loans.

For banks and institutional investors who held mortgage-backed securities, this was a huge problem. The situation only started to improve in the United States when the Federal Reserve stepped in and bought these CDOs.

Yes, Canada has its own mortgage-backed securities, but they are very different from the ones that brought the US real estate market to its knees. The Canadian TH program is administered by the Canada Mortgage and Housing Corporation and did not collapse during the financial crisis.

Canada avoided the worst

As the initial crisis began in the United States, its implications were felt around the world.

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Content of the article

from Canada Bank Act prevented Canadian banks from making the same risky investments as lenders in the United States, but that did not prevent the effects of the American recession from being felt north of the 49th parallel.

In part because CDOs were less common in this country, no Canadian financial institution went bankrupt, and the country’s recession was relatively mild compared to other downturns decades before.

Although they offer the possibility of great rewards, the history of CDOs shows that you need to be careful when risking large sums of money in the debt markets.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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REITs invest more money in Indian bonds than in stocks https://welcome-echizenshi.com/reits-invest-more-money-in-indian-bonds-than-in-stocks/ Tue, 28 Dec 2021 18:06:30 +0000 https://welcome-echizenshi.com/reits-invest-more-money-in-indian-bonds-than-in-stocks/ This year marked the ‘coming of age’ for the normal Indian saver, with Nifty’s move beyond Mount 18K dominating the waves and segment inches. Yet what hardly has been seen is that foreign funds, which hold the bulk of Indian stock resources, have quietly bought a larger amount of local debt than stocks over the […]]]>

This year marked the ‘coming of age’ for the normal Indian saver, with Nifty’s move beyond Mount 18K dominating the waves and segment inches. Yet what hardly has been seen is that foreign funds, which hold the bulk of Indian stock resources, have quietly bought a larger amount of local debt than stocks over the course of a year. year that broke all records – of IPOs, unicorn valuations or SIPs. Foreign funds bought bonds worth around $ 4.5 billion under the Voluntary Retention Route (VRR). Conversely, their net stock purchases amounted to $ 3.9 billion this year, according to NSDL data.

“The wait for India to be included in the global bond index has aroused the interest of global investors, as such an event will have a ripple effect of increasing demand for Indian papers,” A Balasubramaniam said, CEO of Aditya Birla Mutual Fund. “The relative strength of the rupee has also helped. Any appreciation of the rupee helps to increase earnings for global investors. “

Indian bond yields have been stable. Globally, bonds would have generated negative returns of 5% in 2021.

Although the rupee is one of the worst performing Asian currencies this year, the local unit gained against the dollar in certain months, notably in June, July and August, where it rose 1.5 to 2.75% against the dollar.

“Stable money gets to local bonds if global investors go the VRR route,” said Ajay Manglunia, managing director of debt capital markets at JM Financial. “International investors can invest freely under this window, which offers greater flexibility than the normal debt REIT investment route.”

The VRR is intended to enable foreign portfolio investors (REITs) to invest in the debt markets in India. Investments through this route will be exempt from macroprudential and other regulatory requirements applicable to investments by REITs in debt markets, provided the REITs voluntarily undertake to maintain a required minimum percentage of their investments in India.
Indian sovereign bonds are expected to be included in the global bond index in early 2022. The move will help significantly increase appetite for investment. It adds to the liquidity of the papers.

“Some liquid papers offer fairly attractive returns for investors,” he said.

Some frequently traded corporate bonds include SBI Perpetual bearing a 7.72% coupon, Piramal Housing 6.75%, Shriram Transport Finance 10.25%, Mahindra and Mahindra 7.45%, India Grid Trust 8.20%. Papers rated triple A, AA + and AA have a yield of between 7.40 and 10.65%. As bond prices rise, yields fall.

“With the stock market peaking and the uncertainty looming over the path of interest rates, we can expect international investors to come and explore Indian debt securities,” said Suvajit Ray, vice president. Executive of IIFL Securities. “Indian papers still offer relatively higher returns to global investors hungry for safe returns.” True, foreign portfolio investors sold a net amount of $ 1.3 billion through normal debt investment channels during the year.

In addition to sovereign securities, some of the public sector corporate bonds that have been purchased are Power Finance Corp, National Highway Authority of India, Rural Electrification, and Indian Railways Fin Corp. The minimum retention period will be three years in VRR investments, or as decided by RBI for each auction.

VRR was included as an investment category in REIT debt last year (2020) only, when REITs bought $ 3.4 billion net.

Summary of the news:

  • REITs invest more money in Indian bonds than in stocks
  • Check out all the news and articles for the latest business news updates.
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Fixed income: tips for choosing the right debt UCITS https://welcome-echizenshi.com/fixed-income-tips-for-choosing-the-right-debt-ucits/ Sun, 26 Dec 2021 20:30:00 +0000 https://welcome-echizenshi.com/fixed-income-tips-for-choosing-the-right-debt-ucits/ Debt mutual funds offer predictable returns and high liquidity, making them one of the preferred investment vehicles for investors with low risk appetites. The current stock market looks volatile and the major indices are already down almost 10% from the recent high. For example, Nifty 50 is currently trading below 17,000 from its recent high […]]]>

Debt mutual funds offer predictable returns and high liquidity, making them one of the preferred investment vehicles for investors with low risk appetites.

The current stock market looks volatile and the major indices are already down almost 10% from the recent high. For example, Nifty 50 is currently trading below 17,000 from its recent high of 18,600. In such a scenario, it is a good idea to park some portion of your investments in fixed income funds or debt mutual funds. Knowing and understanding these funds and the associated risks could help investors reap the benefits of this asset class and also help choose the right fund for their portfolio.

What is a Debt Mutual Fund?
A debt mutual fund is also known as a fixed income fund which invests in fixed income securities such as government securities, treasury bills, commercial papers, debentures, corporate bonds. highly rated and other money market instruments. All of these instruments have a predetermined maturity date and a fixed interest rate that the buyer can earn at maturity. They are therefore called fixed income securities. As returns are generally unaffected by market fluctuations, debt mutual funds are considered low risk investment options.

Mechanics of the mutual fund
Each debt instrument has a credit rating that indicates the possibility of default by the debt issuer in the payment of interest and principal. Typically, debt mutual fund managers use these ratings and other factors to select good quality debt instruments. But depending on the scenario, sometimes fund managers may choose low quality debt securities that offer an opportunity to generate higher returns and the fund manager takes a calculated risk.

Types of Debt Mutual Funds
Depending on the maturity period, debt funds can be classified into different types. Liquid funds are funds that invest only in money market instruments with a maximum maturity of 91 days. Dynamic bond funds invest in debt securities of varying maturities depending on the interest rate regime in effect. Contrary to the above, corporate bond funds invest at least 80% of their total assets in corporate bonds that have the highest credit ratings. These funds are suitable for investors with a lower tolerance for risk and looking to invest in high quality corporate bonds. Likewise, we have thematic funds like bank and PSU funds, golden funds and other types of funds like credit risk funds, floating funds, etc.

Consider the following
Before investing in a debt fund, assess your investment objective. For example, you may wish to park your money until the volatility of the stock market subsides or create an emergency fund, etc. So, once you have identified your investment objective, the process of selecting the right fund becomes easier.

Another factor is the holding period of the investment, as each investment objective has a specific time limit. If you have a short-term investment goal of around three months to a year, liquid funds are best. If the term is between one and three years, you can go for short term debt funds. But if you have an intermediate time horizon of three to five years, dynamic bond funds are ideal.

To conclude, debt UCITS are not risk free because they are exposed to interest rate risk, which is the effect of changes in interest rates on the value of the securities in the scheme. However, debt mutual funds generally offer predictable returns, high liquidity and thus make them one of the preferred investment vehicles for investors with a low appetite for risk.

Writing is Professor of Finance and Accounting, IIM Tiruchirappalli

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How is an equity fund different from a debt fund? Which one should you invest https://welcome-echizenshi.com/how-is-an-equity-fund-different-from-a-debt-fund-which-one-should-you-invest/ Fri, 24 Dec 2021 13:53:40 +0000 https://welcome-echizenshi.com/how-is-an-equity-fund-different-from-a-debt-fund-which-one-should-you-invest/ Equity funds A mutual fund that invests primarily in stocks / shares of companies is known as an equity fund. Growth funds are another name for them. You have two choices when it comes to investing in stocks. One option is to buy and sell stocks directly, while the other is to invest in stock […]]]>

Equity funds

A mutual fund that invests primarily in stocks / shares of companies is known as an equity fund. Growth funds are another name for them. You have two choices when it comes to investing in stocks. One option is to buy and sell stocks directly, while the other is to invest in stock mutual funds.

Equity funds are either active or passive.

Active Fund – A fund manager scours the stock market, researches the company, analyzes performance, and looks for the best stocks to invest in.

Passive Fund – The fund manager builds a portfolio that closely resembles a well-known market index, such as the Sensex or the Nifty Fifty.

Also, market capitalization, or the capital market value for all of a company’s shares, can be used to divide equity funds. Funds can be classified into large caps, mid caps, small caps or micro caps.

An equity fund invests primarily in shares of companies and aims to offer ordinary investors the benefit of professional management and diversification.

Advantages of equity funds

  • Diversification
  • Risk mitigation
  • Convenience
  • Professional fund management

Debt Fund

Debt Fund

A debt fund is also a mutual fund system, but it is quite different from a stock fund. Debt funds invest in fixed income instruments that provide capital appreciation, such as corporate debt securities, corporate and government bonds, and money market instruments. Fixed income funds or bond funds are other names for debt funds. In the eyes of the investor, the nature of the investment makes it a heritage protection fund.

Benefits of debt funds

  • Low cost structure
  • Stable returns
  • High liquidity
  • Security

Loan funds are great for investors who want regular income but don’t want to take the risks of investing in equity funds. However, debt funds also come with risk, but it is less risky compared to equity funds.

Debt mutual funds would be a good alternative for saving investments such as bank deposits. If you’ve invested in traditional fixed income products and are looking for another investment destination with a steady return and low volatility, debt funds might be a good choice.

Debt funds help you achieve your financial goals in a more tax-efficient way and therefore achieve better returns.

Debt funds work the same as other mutual fund plans in terms of how they work. However, they outperform stock mutual funds in terms of safety of capital.

Final result

Final result

Long term goals are best served by equity funds, while short and medium term goals are best served by debt funds. Your risk appetite should also be taken into account, but if you are young, equity funds are the best option.

To keep up with inflation, retirees and seniors also need exposure to equity funds, albeit at a lower level than younger people. There are several things to consider when deciding which class of mutual fund to invest in.


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Small Equity Strategy Fuels Top Performing U.S. Equity Funds https://welcome-echizenshi.com/small-equity-strategy-fuels-top-performing-u-s-equity-funds/ Thu, 23 Dec 2021 06:07:00 +0000 https://welcome-echizenshi.com/small-equity-strategy-fuels-top-performing-u-s-equity-funds/ A US dollar bank note is seen in this illustration taken November 23, 2021. REUTERS / Murad Sezer / Illustration / File Photo Register now for FREE and unlimited access to Reuters.com Register NEW YORK, Dec.23 (Reuters) – The top-performing actively managed US equity funds of 2021 were primarily focused on small caps as a […]]]>

A US dollar bank note is seen in this illustration taken November 23, 2021. REUTERS / Murad Sezer / Illustration / File Photo

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NEW YORK, Dec.23 (Reuters) – The top-performing actively managed US equity funds of 2021 were primarily focused on small caps as a strategy, according to Morningstar data.

The top performing actively managed U.S. equity fund of the year was Bridgeway Small-Cap Value, which returned 61.5%, according to Morningstar data through December 15, while eight of the Top 10 funds also had small caps as a strategy. .

Some small-cap funds outperformed on a bet on cyclical stocks which surged as the US economy continued to recover from the coronavirus pandemic.

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“In our opinion, cyclical and consumer stocks are currently some of the cheapest stocks we see in the market,” said Ken Farsalas of the Oberweis Micro-Cap fund, which returned 41.3% for the year, according to Morningstar data, and was ranked # 2. 6. Farsalas said, “There are consumer companies that trade as if the economy is going into recession.

This strong performance came as concerns over sustained high inflation and supply chain bottlenecks weighed on small business stocks overall. The Russell 2000 benchmark of small companies has gained 12.5% ​​for the year to date, half of the 25% gain of the S&P 500 Large Cap Index on December 21.

Farsalas pinned the underperformance of small-cap stocks following the Federal Reserve’s withdrawal from its emergency support to the economy, weighing on the type of high-growth speculative stocks that rallied early in the decade. pandemic in 2020.

Among the winners of his fund was retailer Boot Barn Holdings Inc (BOOT.N), which is up nearly 152% since early January.

Bridgeway was not immediately available to comment on its strategy.

Overall, the best performing equity fund of the year according to Morningstar data was ETN MicroSectors US Big Oil 3X Leveraged, which gained 151.1%, followed by a Direxion fund (NAIL .P) who made a leveraged bet three times on home builders. and suppliers and reported 139.4% for the year.

Among fixed income funds, AlphaCentric Income Opportunities led the area with a 14.5% return due to its focus on non-agency residential mortgage-backed securities. This was followed by the 11.5% gain in RiverPark Strategic Income Institutional, which focuses its portfolio on high yield corporate bonds.

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Reporting by David Randall; Editing by Cynthia Osterman

Our Standards: Thomson Reuters Trust Principles.


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Buckle up and hang in there: a bumpy ride is the only sure thing in the New Year. https://welcome-echizenshi.com/buckle-up-and-hang-in-there-a-bumpy-ride-is-the-only-sure-thing-in-the-new-year/ Tue, 21 Dec 2021 19:48:00 +0000 https://welcome-echizenshi.com/buckle-up-and-hang-in-there-a-bumpy-ride-is-the-only-sure-thing-in-the-new-year/ Text size Nerves of steel are a big plus on Wall Street these days. Michael Nagle / Bloomberg One thing about the stock market next year is becoming clear: Chances are better than good that the ride will be bumpy. We’ve had a front row seat last week – top to bottom on Omicron, the […]]]>

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