Doing Nothing is also a Great Strategy

Let’s take a Scenario from the world of professional football where a goalkeeper is about to face a penalty kick. Should he anticipate and dive to the left or to the right just before the ball is struck, or should he stand still in the hope that either the penalty-taker aims towards the middle of the goal or that he will have sufficient time to take this decision when the Striker hits the ball?
Statistically, it is seen that only 6% of the time does the goalkeeper stay in the centre; otherwise, most of them dive to the left or the right.

Why do goalkeepers make such a choice?

The answer is largely behavioural. If the goalkeeper dives to the left or right and still a goal is scored, he can say he did his best since he took ‘some’ action. If he doesn’t move and a goal is scored, it seems like he didn’t do anything to stop the goal!

There is a ‘bias for action’, a bias that can affect people in many different domains – including in the world of investment. Some call it ‘itchy fingers’ too!

In portfolio management, when the markets are volatile or low or high, people itch to do something rather than continue on the course which had been carefully selected for long-term investing. But history and statistics have proved time and again that just sitting put on your long-term investments, not gambling to try to time the bottom, and not panicking, will serve the portfolio better than actively guessing which way the market is going to go next.

While the stock market implodes all around, sometimes let’s sit back and do what is right for your portfolio — sip your tea.

(Contributed by Kritika Saini, Relationship Manager, Team Arjun, Hum Fauji Initiatives)

Should you rent or buy a house?

Calculations show that rented accommodation is always a better preposition in India than buying your own home. But, owning a home is always the dream of every individual.

Home is more about emotions and, as per behavioural scientists, this urge to have ‘own home’ dates back to the pre-historic times of homo-sapiens wanting their own cave for safety, security and keeping their own herd together!

There is a unique sense of privacy, safety and freedom associated with one’s own home which can never be replaced by a rented accommodation. A home also creates memories like entering a new phase of life, marriage, parenthood, celebrating functions, festivals etc that gives people happiness. अपना घर तो अपना ही होता है…!!

Owning a home is definitely an expensive option, maybe the most expensive spend of one’s life, which requires good prior research as the decision cannot be reversed easily. But once you are sure about owning your home, even if you do not have the full requisite money, the banks can provide you loans so that your dream home becomes affordable to you.

Tax deductions up to Rs 1.5 lacs under Section 80C is available against the annual principal repayment and up to Rs 2 lacs against the annual interest repayment under 24(b) in the home loan EMI option after you get the possession of the house.

If the loan is taken jointly, each loan holder can claim above deductions individually which can actually double the tax benefits too within the family. Please be sure that this tax benefit is a by-product of loan and NEVER the main objective of taking a loan. We have seen people getting into a debt trap with such a false notion of saving tax. To claim this deduction, they should be co-owners of the property taken on loan.

When does rented accommodation becomes logical?
1) If your job demands frequent change of locations, then it’s better to look out for rented accommodation only.
2) If Loan EMI disturbs your monthly budget, then it’s better to stick to rental option.

(Contributed by Shaheen Akhtar, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Exploring Silver ETFs and Funds

On 24th Nov 2021, SEBI allowed mutual fund companies (AMCs) to offer Silver ETFs and Mutual Funds to the investors. Since then, the AMCs seem to have suddenly developed a ‘new found’ love for Silver, and Silver ETFs and Funds have flooded the market.

Should you also jump on to this bandwagon? Silver is a good conductor of electricity – will it conduct good returns to you? Let’s see.

What’s a Silver ETF and Fund?
Like Gold ETFs (Exchange Traded Fund) available in the market for years, Silver ETF invests in physical silver and offers it in convenient small packages (called ‘Units’) to the investors where they can own some silver indirectly with money as small as Rs 5000. With the money collected from investors, the fund houses buy physical silver. These ETFs are traded on the stock market like any other stock. In case you do not wish to go through the stock markets and use the Mutual Fund route including doing a SIP in it, Silver FoF (Fund of Fund) offers it to you like a regular mutual fund.

Is Silver a good investment?
Right now, it is a fad – SEBI allowed it, so AMCs launched it!
Silver has traditionally been used as an ornamental metal in the lower income families of India and China for centuries. Also, unlike gold, silver has a good industrial usage. But the latter also makes silver prices a lot more sensitive to the world’s economic cycles. When the economy sees an uptick, the silver demand tends to grow, and vice versa, affecting the prices widely. Lately, apart from the traditional industrial uses, new uses like for renewable energy and electronics have also increased silver usage.

Should you invest?

We feel that commodity cycles are very difficult to follow and predict for retail investors. Over decades, Gold has established itself as a hedge to inflation and stock market uncertainties. But that cannot be said about silver as it is linked to industrial performances.

We therefore advice you not to go in for silver investments, directly or through ETFs / mutual funds, unless you understand and can track commodity cycles well.

(Contributed by Devanshu Anand, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)

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