ETF VS Stocks: How do I select?

Stocks & ETFs both trade on exchange, but they are two different investment vehicles. When you purchase a stock, you are buying equity of the company, which means you become a shareholder. When you are investing in ETFs you are investing in a fund which is mirroring an index. First let’s understand how each of them works in piecemeal.

Stocks & their Benefits:

Stocks represent ownership in companies. They trade on regulated markets & over-the-counter markets. Stocks give you more degrees of control over your investments and let you invest in and potentially have a say in the management of particular companies. In contrast, ETFs let you track a more extensive market index

When you invest in stocks, you have more control over where to invest. You have the liberty to invest in the business you understand. You can research the company, their business model, their earning history, and their quarterly forecast and then make a sound decision.

The same would be difficult in an ETF because they replicate the fractional shares of index with a lot of companies. Hence that is beyond your control.

ETF & its Benefits:

Exchange-traded funds are investment vehicles that invest in multiple securities. You can buy and trade them on the markets just like stocks. They are not available over-the-counter. ETF’s seek to replicate the stocks of a particular index.

ETFs are managed passively

Salient Features of Stocks & ETFs:

When you are buying individual stocks, you are owning a particular company but when you buy ETFs, ETFs let you track a broad area of the market because they are replica of respective index. ETF’s are more diversified than individual stock, but they carry expense fees, which a stock does not.

When you are buying individual stocks, you have the flexibility to pick and choose the stocks that fit your financial objectives. You have the liberty to create a portfolio for yourself, including stocks of foreign companies.

Investing in more than one ETF could lead to duplication or over diversification. An ETF that tracks NIFTY 50 and an ETF that tracks technology or IT companies may have many overlaps as they will have several stocks in common.

Costs:

To invest in a stock, you will pay a brokerage charge, for ETF you will be paying management fees in the form of expense ratio of the scheme.

Risk:

When you invest in stocks, you limit yourself to that company’s performance, subjecting your portfolio to a higher degree of risk. By investing in ETFs you allow yourself to keep your investment spread over equities of different companies, thus diluting your risk significantly.

You can’t fully predict the difference between an ETF and a stock in terms of returns since nobody can fully predict the market, but you can choose which is suitable for your investment needs.

5 Mistakes to Avoid in Retirement Planning

Retirement- 16 times, Goal – 5 times, SIP- 5 Times, Asset Allocation – 4 times, inflation: 1 time,

Saving & investing for your retirement is essential while you are in that nascent stage of your career. However, people end up making small mistakes that later amplify their losses or their realized gains.

Most of the time, people don’t realize the importance of saving & investing. They push it back and worry about their retirement kitty for later. However, the sorry news is that this is, quite honestly, not the right approach. Here are 5 mistakes one should avoid while saving up for their golden years.

Mistake 1: Improper Plan/Calculations for Your Retirement Dream You must start estimating your retirement corpus requirement with a Retirement Calculator. Start by sharing your future plans with your spouse by asking each other how much of the present income is required to maintain a comfortable life during retirement? Are there any plans to see the world? Figure out your costs. Calculate your current expenses and find out the future value of your expenses by the time you retire, assuming a realistic rate of inflation. Once you know your answer, use the Retirement Calculator to serve a rough guide as to what this figure can be.

Mistake 2: Not Increasing Your Investments through SIPs A Systematic Investment Plan (SIP) could be your first step to happy retirement life. SIP is one of the preferred ways of investing in a mutual fund. In an SIP, you can invest every month with a minimum amount of Rs. 500. An SIP makes you a disciplined investor. It also helps you achieve your goal of retirement planning. Let’s say you save 5% of your income, for instance, Rs. 2,083/- a month on a yearly income of Rs. 5,00,000 Gradually increase that amount to 10-12% every year. The additional increase will substantially add to the future value of your corpus.

Mistake 3: Starting late & losing on Compounding

The tool that you need to grow your investment over time is the power of compounding. In simpler words, it is earning returns which gets reinvested – a snowball effect that could effectively increase your savings much more over time. Thus, the sooner you start saving, you get more time on your hands, thereby letting compounding work for you in the long run.

Thus achieve your financial goal of saving up for retirement by investing as soon as possible. consult your financial advisor before making any investment-related decisions.

Mistake 4: Improper Asset Allocation

Asset allocation is based on the premise that the different asset classes have varying performance cycles.,.

A good asset allocation plan develops an investment portfolio that will help you reach your financial objectives with minimal amount of risk. However, if you are young and not investing in equity, you are missing out on gains that equities have to offer. A portfolio heavily tilted towards debt at a young age might keep your principal at lesser risk, but it will fail to generate more significant returns. Similarly, if one ends up investing heavily into equities when they are reaching a senior age, they are risking their capital. – a move that could prove disastrous.

So a prudent asset allocation is always advised based on one’s risk-taking capacities.

Mistake 5: Not having a Plan at all

It may sound funny, but if we open our eyes, we will notice that saving habits among youngsters are at an all-time low. Many fancy that they will end up running some successful business that will generate enough cash flow to meet their needs. But pandemic has taught us that some of the most reliable ideas have miserably failed and have bought people to poverty. So it’s not just wise but equally important to have a retirement plan for ourselves no matter how we are faring in our lives.

Best Share Market Tips for Beginners

If you want to get into the stock market, there are various ways to do it and make money, not lose money. One of the simplest ways is to get a broker whom you can belief and hand over your money to him. Regrettably, it takes out the fun and enthusiasm of the willing. This will make you complex to broker decisions, and it can cost you money and take you some time to study and master the basics of stock trading.

Before you even start investing in the stock market and Commodity Market, it is vital for beginners to understand the market well and be as fruitful as possible. The following stock market tips and Commodity Tips like MCX and NCDEX Tips can guide you in the exact direction.

Educate Yourself

The first step to becoming a successful investor is to teach yourself. Take some lessons in accounting; Read as several books on investing as possible, and research online about many aspects of the market and how you can make it work.

Talking to a certified stockbroker or financial advisor is another tip that can help you become a successful investor. A trustworthy advisor will be able to give you direct, personal information that you will not find in books or articles, and can even sit with you one by one and answer all your questions.

Understand Stock Market Software

An alternative great tip would be to consider software to help you with a selection of tasks. It is suggested to invest in personal finance software, which can help you accomplish your funds as well as track profits and losses. Other software to consider would be a program that helps you manage your stock collection, as well as tracking when to buy or sell; analyzing the potential benefits vs. risks of a particular stock, and tracking stock prices.

Never invest in unknown penny stocks

Even if you are buying everybody, you cannot resist the enticement of buying, do not invest unidentified money in stocks. Try not to follow the secret, insider’s warm proposals that your acquaintance’s well-informed friend murmurs in your ears.

The penny stock may have tripled during the last fortnight, but previously that, your friend’s friend started purchasing the stock. The organizers of the firm are likely to have ongoing a shopping spree for the said stock and flashed rumors about the option of some foreign investors taking over the company.

Future growth vs past performance

When you try to analyze the worth of a stock before buying it, you should consider its future development forecasts rather than relying on its past performance.

The past performance of any stock, even its promoters, warn investors in their ads, there is no assurance of its future performance. You can claim yourself into buying a stock because it has doubled in the last year. Instead of relying on its double growth, you should try to analyze the details for that ‘great’ performance.

Could it have been a deficiency of serious competition? Could it have been the supply of raw resources at a lower cost because raw material suppliers had recently come to the market and wanted to spread their product?

If you are satisfied with the reasons, then go ahead and buy the stock of that company.

Keep Practicing

One of the top investment advice, exclusively for learners, is to keep practicing until you have a strong grasp of the market and its ideas. If you do not follow any other stock market tip, it should certainly be a priority no matter what.

There are numerous stock simulation programs that can help you take a risk and get a feel for the real thing without actually investing. Some of these programs are more accurate than others, but all of them will help you appreciate the concept of stock buying and trading.

There are numerous stock trading tips out there, particularly for beginners, but only through information and knowledge can you imagine making the most investment. The stock market tips outlined here are designed to help beginners learn about the market and make the best decisions to succeed.