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.

The power of compounding

Why is power of compounding powerful? Simply because this strategy allows the interest earned to also earn interest leading to a growth in the value of investment. Using this strategy, the investments works hard for you. Therefore, it is a powerful tool used in the world of investments, which helps achieve your future goals.

Now it’s not uncommon to have questions in your mind regarding where should you invest? How do you start? How much should you invest? The answer is simple, start your investments in mutual funds.

With each succeeding year, the returns will get added to the principal. Power of compounding is nothing but exponential growth for your corpus. Example for the Power of compounding : if you had invested Rs 1 lakh in 2010 investment growing at an assumed rate of 10% annually compounded, after 11 years in 2021, the investment corpus was Rs 19.28 lakhs( Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR).The above example is to explain the concept of power of compounding and is given for illustration and explanatory purposes only

Make the best use of this tool – the power of compounding in three 3 easy ways

Start early – Longer the investment horizon, the better as mentioned earlier, your investment and corpus size keeps growing with the help of power of compounding. SIP mutual funds are a convenient way to use this power of compounding. The key is to start investing early and stay invested for a longer tenure to leverage the power of compounding. This will help you to gather a retirement corpus.
Choose wisely – Seek optimum return on investment Ensure to choose your mutual funds wisely before making an investment. You can also use the power of compounding calculator to understand your desired objectives. If you invest in any Equity or debt mutual fund schemes, you can benefit from the power of compounding. Mutual fund schemes and objectives have various categories and goals. Accordingly corroborate the target and required corpus.
Invest judiciously and regularly It is evident that if you invest a higher amount, you potentially to have a larger sum of investments at the end of your time horizon subject to market risk. However, the sentiments are different because investments are sometimes random and unplanned. So, the investment size does not grow. This can be changed by investing timely and regularly. Therefore, the Power of compounding can be utilized and optimized with the factor of regular and disciplined investing. Thus, it is essential to invest in mutual funds systematically.
In a nutshell, long-term investment strategy is best utilized with the power of compounding in SIP. The Power of compounding is a useful and powerful tool that is also subject to market risk and conditions. Investors may seek the help of an investment advisor and gather maximum knowledge before investing.

VIRTUAL SOLUTIONS by AVPS

Lift Your Business by Accepting Online Payments by means of E-Check

There are three different ways that checks take care of their work of taking money from your account and offering it to someone. The customary route started with a piece of paper that you gave to a vendor, who sent it to their bank, who sent it to your bank, and your bank sent the money to their bank. It was moderate and expensive for merchants to use.

Along came electronic check readers – scanners that read the code from your paper check and sent it to your bank, then your money was credited to the vendor immediately. This was faster, less expensive, and offered greater security, with a major improvement over the cumbersome paper checks.

Time passed and technology evolved, and now verification processors offer software that takes the key data electronically to your bank, gets the money, and places it in the vendor’s bank. It was with this process that the true electronic check (called e-Check) was created. It enjoys every one of the benefits of the scanned check yet should be possible entirely online.

For credit card leery consumers, electronic checks offer a quick and safe method for online payments.

American Verification Process Solutions offers this service: e-Check Processing.

Expand your payment choices to include ACH Processing for your current and new customers.

No outsider integration needed
Combined Reporting with all your other payments
Eliminate the expenses and inconvenience of paper checks
Lower Fees – ordinarily lower than credit cards and PayPal
Reliable, Secure, PCI-consistent
24/7 Online Reporting

How do Gateways help?

We’ve partnered with payment gateways to bring security, ease of use, and low prices to keep you straightforward, help your primary concern, and process safety. Gateways integrate with the vast majority of the mainstream shopping baskets and e-commerce stages just as provide features, for example, ACH processing, recurring charging, etc.

Check out some of the features provided by Gateways for reliable and secure processing:

Credit card, debit card, and ACH payments
Accept a versatile number of payment choices to keep you developing

Reduce Expenses with our Low Rates
Improve your main concern with more choices of gateways

Scalable with User-Friendly Interface
Easy to develop into an easy to use so you will not need to relearn anything

No extra hardware needed
Use your internet-connected Macintosh or PC with no added purchases

Dedicated Merchant Account
Get your money faster compared to utilizing other payment services

PCI-agreeable Security – Fraud Prevention
Fraud management apparatuses keep your business and customer information safe

Mobile-ready: IOS and Android Compatible
Synced to your virtual terminal to keep you processing anywhere

Quick Bunch Processing
Mass processing will save you time so you can concentrate on others

Customer Management
Construct a secure customer database to better serve and connect to them

Seamless Shopping basket Integration
Compatible with most e-commerce stages for quick, secure exchanges

Recurring Charging – Set. Bill. Bill once more.
Speedy and easy setup to begin charging your customers regularly

Business Reporting and Bits of knowledge
Manage your business more efficiently with advanced reporting features

AVP Solutions offers a new business owner or an experienced one with best-in-class customized payment processing solutions that gives you an edge.

With the promise of causing your business to get better with the presentation of new online technologies and software for the online presence of your business.

Set up your virtual gateways, merchant accounts, mobile terminals, and countertop terminals for your online business with affordable solutions by American Verification Processing Solutions.

CONTACT US

Get in touch with us for a free consultation by connecting with us on our Contact Page or reaching out to us through the below information –

What Are Debt Funds & How do they Work?

Debt Funds or Debt Mutual Funds primarily invest the money in fixed-income securities like government securities, debentures, corporate bonds and other money-market instruments. These funds lower their risk by investing in such avenues. They have relatively low volatility and generate risk adjusted returns over time.

How do Debt Funds Work?

These funds invest in instruments such as Bonds and fixed income securities to generate returns for the investors. These funds buy these instruments and earn interest on the money. The yield that the investors receive is based on this.

The portfolio of debt funds needs to have specific maturity ranges. For example, a liquid fund can buy only securities which have maturities of upto 91 days. They do not offer assured or fixed returns, unlike FDs. Their returns can fluctuate. A rise in interest rate positively impacts on the interest income but negative impact on the bond or instrument price. And it’s the other way round when the interest rates fall.

What are different types of debt funds?

Liquid Funds:
This category of funds are considered the least risky among the mutual funds. As the name suggests, they are highly liquid. The portfolio of this fund comprises instruments that have a maturity period of not more than 91 days.

Dynamic Bond Funds
In this fund, the fund manager changes the maturity of the portfolio depending upon the forecast of the interest rates. If the forecast indicates a rising interest rate, then the maturity will be longer. If the forecast is indicating a falling interest rate, then the maturity will be a shorter duration.

Short / Medium / Long Term funds
Short term Funds come with a maturity period of 1 to 3 years. The portfolio in these funds are structured such that their prices are not much impacted by the change in interest rate movements.

Medium Term debt funds have a maturity period of upto 3 to 5 years, and long-term debt funds have maturity beyond 5 years. These are riskier than short-term as their tenure is longer; hence more significant is the impact of the interest rate on the portfolio, which is also known as interest rate risk or duration risk.

Fixed Maturity Plans
These schemes are closed-ended schemes. But can be traded on stock exchange where they are listed.

Debt funds are ideal for investors seeking moderate risk as the risk of investing in debt mutual funds is generally lower than in equity mutual funds. Debt funds can be the right choice for anyone having a lower appetite for risk. You can invest in a debt fund if you have a surplus fund or want to diversify your investment portfolio, or think of making an emergency fund. Debt funds can also diversify the overall portfolio risk if your allocation towards the equities are on a higher side.

How to Begin Your Systematic Investment Plan (SIP) Journey

A common misconception among new investors is that a SIP is a type of mutual fund. However, SIP is actually a method of investing in mutual funds. It allows investors to contribute small, regular amounts—starting from as little as Rs. 500—towards a mutual fund of their choice, which could be equity, debt, or a hybrid. This disciplined investment approach helps in mitigating the risk of market timing and leverages the potential of compounding over time.

The Benefits of SIPs
Rupee Cost Averaging: This benefit allows investors to purchase more units when prices are low and fewer units when prices are high, which can potentially lower the average cost per unit over time.
Financial Discipline: Regular investments ensure disciplined savings, helping investors build substantial wealth over the long term.
Flexibility: Investors can choose the frequency of their investment—monthly, quarterly, or even daily.
Step-by-Step Guide to Starting Your SIP
Step 1: Assess Your Risk Appetite
Before you invest, it’s crucial to understand your risk tolerance, which varies depending on age, income, financial responsibilities, and personal comfort with market fluctuations. Young investors typically have a higher risk tolerance, which allows them to invest in equity-oriented funds for potentially higher returns. In contrast, those nearing retirement may prefer debt funds for stability and regular income.

Step 2: Define Your Investment Goals
Clear financial objectives are essential for choosing the right SIP. Whether you’re saving for retirement, a child’s education, or a home, your goals will dictate the type of mutual fund suitable for your SIP. For instance, equity funds may be appropriate for long-term growth, while debt funds might be better for short-term objectives.

Step 3: Select the Right Mutual Fund
Choosing the right fund can be daunting given the plethora of options available. Consider factors such as the fund’s performance history, the fund manager’s track record, and the fund house’s reputation. Tools like CRISIL ratings and Morningstar reports can be helpful in assessing these factors. It’s also wise to consult with a financial advisor to ensure the fund aligns with your risk profile and goals.

Step 4: Set Up Your SIP
Most fund houses offer an online SIP setup through their websites or mobile apps, making the process convenient and paperless. You’ll need to complete the Know Your Customer (KYC) process, which involves verifying your identity and address. Once KYC is done, you can set up your SIP by choosing the amount, frequency, and specific dates for the investment.

How to Invest in SIP Online
Complete the KYC process.
Submit necessary ID proofs.
Register for an online account with the mutual fund.
Choose your preferred mutual fund scheme.
Decide on the SIP amount and frequency.
Set the start date for the SIP.
Interesting Statistics and Insights
According to a report by the Association of Mutual Funds in India (AMFI), SIP contributions have seen a significant rise, with monthly contributions increasing from Rs. 8,123 crores in March 2020 to over Rs. 11,000 crores in March 2023. This growth highlights the increasing popularity of SIPs as a preferred investment choice among Indians.

Conclusion
Starting a SIP is a wise decision for anyone looking to build wealth systematically and with financial discipline. By understanding your risk profile, setting clear goals, choosing the right mutual fund, and setting up your SIP correctly, you can optimize your investments and achieve your financial objectives effectively.

Remember, mutual fund investments are subject to market risks, so it’s important to read all scheme-related documents carefully. For more detailed information on SIPs and mutual funds, visit AMFI’s official website or consult a financial advisor.

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