Money Market Instruments – Portfolio Management for Armed Forces Officers

The followings are the different asset classes available for investments


The aim of this Section is not to teach the mechanics of the stock market, or its virtues or otherwise. Suffice it to say that if played properly, stocks have the potential to give year-after-year returns much in excess of any other investment avenue. However, an undeniable fact remains that, apart from the beginner’s luck, the risk in stocks is probably the highest of any asset class. On the other hand, one would be lucky to come out unscathed if any stock investment is made without due diligence and the market turns volatile. Some people, out of plain ignorance, tend to equate the stock market to a gambling den – it can only be said that they are depriving themselves of a great investment class due to their lack of knowledge.

Fundamental Guidelines of ‘The Market’

While it is true that, in the stock market, there is no rule without an exception, there are some principles that are tough to dispute:-

Sell the losers and let the winners ride! Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined, in hopes of a rebound. Always bear in mind not to allow your apprehensions to curtail potential returns or amplify your losses. The following information might help:-

  • Riding a Winner –No one in the history of investing with the I’ll-sell-after-I-have-tripled-my-money” mentality has ever had a ten-bagger.
  • Selling a Loser –Don’t be afraid to swallow your pride and move on before your losses become even greater!
  • Don’t chase the “hot tip”.When you make an investment, it’s important you know the reasons for doing so: do your own research and analysis of any company before you even consider investing your hard earned money.
  • Don’t sweat the small stuff.Being a long-term investor, it’s imperative not to succumb to panic when your investments encounter short-term fluctuations.
  • Do not overemphasize the P/E ratio.Investors often place too much importance on the Price-to-Earnings ratio. To gain meaningful insights, the P/E ratio demands interpretation within a broader context, and its effectiveness is best realized when combined with other analytical methodologies.
  • Resist the lure of penny stocks.A common misconception is that there is less to lose in buying a low-priced stock. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it.
  • Focus on the future.It’s important to keep in mind that, even though we use past data as an indication of things to come, it’s what happens in the future that matters most.
  • Borrow Expertise and Knowledge to Win.As smaller retail investors, we are constrained by a large number of limitations on our knowledge. It is better to invest in the stock market using the expertise of good brokerage houses (or of Mutual Fund managers) so that our long and short-term goals are fulfilled through this powerful investment vehicle.

Riding a Winner

No one in the history of investing with a ” I’ll-sell-after-I-have-tripled-my-money” mentality has ever had a ten-bagger.

Selling a Loser

Don’t be afraid to swallow your pride and move on before your losses become even greater!

Common Pitfalls to be Avoided

  • Not being disciplined and failing to cut losses at 8% below the purchase price. But do not sell a winning stock just because it pulls back a little bit.
  • Do not purchase low-priced, low-quality stocks.
  • Do not let emotions or ego get in the way of a sound investing strategy.
  • Opt for long-term investments in equities rather than focusing on short-term gains.
  • Not keeping an eye on what the big players / mutual funds buy & sell is a pitfall and an opportunity lost to pick the right stocks
  • Patience is a virtue in investing. Do not panic about your existing stocks.
  • Remain proactive and well-informed about market happenings, delving beyond the surface of mainstream media’s top stories to seek comprehensive information.
  • Avoid concentrating all your funds on a single venture; instead, opt to diversify your portfolio across five distinct industries and allocate investments into a well-balanced selection of ten individual stocks.
  • Greed is dangerous. Once a reasonable profit is made, the investor should get out of the market quickly.


Put simply, a mutual fund is an investment vehicle that pools in the monies of several investors, and collectively invests this amount in either the equity market or the debt market, or both, depending upon the fund’s objective.

This is one investment vehicle that has truly come of age in India in the past decade and the growth data.

Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry for the month of April 2023 stood at ₹ 41,52,715 crore.

Over the past decade, the Assets Under Management (AUM) of the Indian Mutual Fund Industry has experienced remarkable growth, expanding from ₹8.26 trillion as of April 30, 2013, to a substantial ₹41.62 trillion as of April 30, 2023, surpassing a remarkable five-fold increase. increase in a span of 10 years.

The Indian Mutual Fund Industry achieved a significant milestone by surpassing ₹10 Trillion (₹10 Lakh Crore) in Assets Under Management (AUM) for the first time in May 2014. In a remarkably brief period of approximately three years, the industry witnessed an impressive growth trajectory, the AUM size had increased more than two folds and crossed ₹ 20 trillion (₹20 Lakh Crore) for the first time in August 2017. In a significant milestone, the Assets Under Management (AUM) of the Indian Mutual Fund Industry surpassed ₹30 trillion (₹30 Lakh Crore) for the first time in November 2020. As of April 30, 2023, the Industry’s AUM has continued its remarkable growth, reaching a substantial ₹41.62 Trillion (₹41.62 Lakh Crore).

During the month of May 2021, the mutual fund industry achieved a significant milestone by surpassing a remarkable count of 10 crore folios.

Mutual funds have emerged as a proxy for investing in avenues that are out of reach of most retail investors, particularly government securities and money market instruments.

Mutual funds: The Advantages…

Here are some compelling arguments for following the mutual fund route:-

Advantages of Mutual Funds in India:

  1. Diversification: Mutual funds offer instant diversification by investing in a variety of securities, reducing risk.
  2. Professional Management: Expert fund managers make investment decisions, leveraging their knowledge and experience.
  3. Accessibility and Affordability: Mutual funds have low entry barriers, making them accessible to investors with smaller amounts to invest.
  4. Liquidity: Investors can easily buy or sell mutual fund units, providing high liquidity.
  5. Systematic Investment Options: Options like SIPs enable disciplined and regular investing, mitigating the impact of market volatility.
  6. Variety of Investment Options: Mutual funds offer a wide range of choices to match different investment goals and risk profiles.
  7. Transparency and Regulation: Mutual funds operate under strict regulations, ensuring transparency and protecting investor interests, protecting the interest of Mutual fund holders is the utmost priority by SEBI
  8. Tax Benefits: Certain types of mutual funds provide tax benefits, reducing the tax liability for investors.

And disadvantages

Mutual funds carry risk and offer no assured returns or protection of capital. They do not offer assured returns, nor are insured or guaranteed by any government body.

Disadvantages of Mutual Funds in India:

  1. Lack of Control: Investors have limited control over individual security selection, however, it’s an advantage also for investors who are not well versed in equity research and stock selections
  2. Performance Variation: Not all mutual funds consistently outperform their benchmarks as Mutual funds are subject to market fluctuations and associated risks.

Types of Mutual Funds

Many people tend to wrongly equate mutual fund investing with equity investing only. In fact, equity is just one of the various asset classes mutual funds invest in. They also invest in debt instruments such as bonds, debentures, commercial paper, and government securities as also in Gold. Equity funds. The highest rung on the mutual fund risk ladder, such funds invest only in stocks.

At present, there are four types of equity funds available in the market. In the increasing order of risk, these are:-

Sure! Here’s a concise description of each category of equity mutual funds in India:

  1. Large-cap Funds: Invest in stable stocks of well-established companies.
  2. Mid-cap Funds: Focus on mid-sized companies with growth potential.
  3. Small-cap Funds: Invest in small-sized companies with high growth potential.
  4. Multi-cap Funds: Have the flexibility to invest in companies of different market caps.
  5.  Sector-specific Funds: Concentrate investments in specific sectors or industries.
  6. Dividend Yield Funds: Invest in companies with a history of regular dividend payments.
  7. Value Funds: Focus on undervalued stocks for potential price appreciation.
  8. Thematic Funds: Invest in companies aligned with specific themes or trends.
  9. Index Funds: Passively track a specific stock market index.
  10. Exchange-Traded Funds (ETFs): Similar to index funds, trade on stock exchanges.

Each category offers distinct investment opportunities and risk profiles, allowing investors to align their choices with their investment goals and preferences.

Debt Mutual Funds

Debt funds invest exclusively in fixed-income instruments securities like bonds, debentures, Government securities, and money market instruments such as certificates of deposit (CD), commercial paper (CP), and call money.

Here are the different types of debt funds in India:

  1. 1. Government Securities (G-Sec) Funds: Invest in government-issued securities such as treasury bills and bonds. These funds carry low credit risk but are sensitive to interest rate movements.
  2. Corporate Bond Funds: Primarily invest in corporate bonds issued by companies. The risk and returns vary based on the creditworthiness of the issuing companies.
  3. Money Market Funds: Invest in short-term debt instruments such as treasury bills, commercial papers, and certificates of deposit. These funds aim for capital preservation and provide high liquidity.
  4. Short-term Funds: Invest in fixed-income securities with a short maturity period, typically less than 1-3 years. These funds aim for stable returns with relatively low-interest rate risk.
  5. Medium-term Funds: Invest in fixed-income securities with a medium-term maturity period, typically 3-5 years. These funds offer a balance between income generation and interest rate risk.
  6. Long-term Funds: Invest in fixed-income securities with a longer maturity period, typically more than 5 years. These funds may have higher interest rate risk but potentially higher returns.
  7. Credit Opportunities Funds: Focus on investing in lower-rated debt instruments with the aim of generating higher yields. These funds carry higher credit risk and require careful credit analysis.
  8. Dynamic Bond Funds: Have the flexibility to invest across various durations and debt instruments based on changing market conditions and interest rate expectations. These funds aim to optimize returns by actively managing the portfolio.
  9. Fixed Maturity Plans (FMPs): Close-ended funds with a fixed investment horizon and a portfolio of debt instruments that align with the maturity of the scheme. These funds offer a predetermined return and maturity date.

Each type of debt fund has its own risk-return characteristics and investment objectives. Investors should consider their risk tolerance, investment horizon, and income requirements before selecting the most suitable type of debt fund.

Six Rules to Intelligent Investing in Mutual Funds

Know your risk profile: Ask yourself – Can you live with volatility? Or are you a low-risk investor? Would you be satisfied if your fund invests in fixed-income securities, and yields low but sure-shot returns?

Identify your investment horizon: Invest in an equity fund only if you are willing to stay on for at least two years. For income and gilt funds, have a one-year perspective at least. For anything less than one year, the only option among mutual funds is liquid funds.

Read the offer document carefully
Go through the fund fact sheet
Diversify across fund houses

Track your investments through websites like,, and, which are compiled on a quarterly basis.

And the caveat …

Mutual funds are not immune to risk: risk is inherent to their operation. Different plans have differing degrees of risk, depending upon the fund’s management style and its objective; it is important that you know the risk involved in your fund(s).

Connect with a planner.

Connect Now


As far as statistics are concerned, real estate/property investment is, and always has been, the most powerful type of investment for building wealth. It has been said that over 90% of the world’s millionaires got there by owning property. Investing in property offers two major benefits: capital growth and tax advantages.

In the early stages of property investment, rental incomes often don’t exceed your outgoings on a property – particularly the costs of servicing the loan. But as the property increases in value, rents tend to rise faster than costs and the property generates net income. However, it would not be correct to recommend the property to the exclusion of other investments. A strong portfolio is a diversified one, with investments spread across different asset classes.

Advantages of Investing in Property

  • No investment today offers the stability, and simplicity, offered by property investment.
  • While the Stock Market offers high returns, many investors have found it to be a volatile and dangerous place.
  • No other investment allows you to purchase with other peoples’ money (banks) and pay this back with other peoples’ money (rental income from tenants)!
  • Although there is no law stating that your property will increase in value each year, it is a well-documented fact that, on average, the value of a property doubles at least every seven years provided the property has been carefully selected.

How much can you afford?

What kind of property you can afford is basically a function of how much you can borrow. The monthly home loan installment has two distinct parts: the interest (calculated at the loan interest rate on the principal outstanding for that month) and the principal balance.

Tax advantages of taking a housing loan. A housing loan comes with two tax benefits which further reduces the cost of your borrowing. One is an exemption for interest paid on a housing loan, currently up to an interest paid of Rs 1.5 lakh per year on a self-occupied house and UNLIMITED on a rented-out house. The other is a tax break on principal repaid in the year under IT section 80C subject to the current maximum overall limit of Rs 1,00,000 under this section.

How does indexation work?

Let’s take an example. If you had bought an asset during the financial year 1981-82 for Rs 3 lakh, and sold it in 1993-94 for Rs 8 lakhs, your capital gains will be less than the apparent Rs 5 lakh, due to indexation as below:-

Cost in 1981-82 (base year, when cost inflation index is 100) Rs 3 lakhs

Cost inflation index in 1993-94 when the asset was sold. 244

Therefore, cost after factoring in the cost inflation index. (Rs 3 lakh x 244/100)Rs 7.32 lakhs

Net capital gain (8 lakhs ‘minus’ 7.32 lakh) Rs 68,000 Only

The benefit of the cost of inflation index is also available in the case of cost of improvement from the year in which the improvement is effected.


Gold has worked down from Alexander’s time. When something holds good for two thousand years, I do not believe it can be so because of prejudice or mistaken theory.

– Bernard Baruch (1870-1965), American millionaire

Over the ages, Gold has worked as an investment, especially during times of economic crisis, political strife, and wars. It has also been used to back currencies. In the year 2011, almost 980 tonnes of gold were bought in India, the world’s largest market for gold, a 40% jump over the corresponding period last year. Such is the demand for gold in India that prices have increased in the long term, even in the last decade, when many central banks sold their gold holdings. The compounded annual growth rate (CAGR) of gold prices over the last 10 years stands at 9-10 % CAGR,  The price of gold is expected to rise also because Central banks of several countries have been adding to their gold reserves and the cost of production is rising. Moreover, activities in many African mines have been reduced due to strife, adding to the low supply situation.

What kind of gold should you buy? If you see this purely as an investment, then SGBs issued by RBI are the best way to invest in Gold and you can also buy it in the form of physical gold bars, biscuits, or coins or even in a dematerialized form. The disadvantage of buying gold in the form of Jewellery is that its re-sale is not always a profitable proposition, one cannot be sure of the purity, and handling and storing remains an issue. Bars and biscuits are better as they can easily be exchanged for cash even though while purchasing these may be priced up to 8-20% above the market value of Gold.

The modern way to invest is buying dematerialized gold from a commodity exchange – it eliminates risks related to physical storage and theft, reducing paperwork and facilitating the easy transfer of holdings through the electronic mode. However, a very good option that has emerged now is buying Gold Exchange Traded Funds (Gold ETFs) on stock exchanges. These are typically in the denomination of single units, generally representing one gram of gold each. Many companies, like Reliance, Kotak, Quantum, Benchmark, and UTI, are offering the same on NSE (National Stock Exchange) and they are bought and sold exactly like stocks. In case you wish to buy in small quantities regularly so as to build up a good gold portfolio over a period of time, Gold Mutual Funds are the best option. Here you buy Gold units exactly like you buy any other units – in small nibbling through Systematic Investment Plans (SIP) and/or in bulk.

Where should you buy Physical gold from? Bullion experts recommend that it is best to buy gold from a reputed jeweler. Banks that sell gold bars charge a premium as high as 8-20% for providing you with a ‘certificate of purity’, but they are not allowed to buy it back and the jeweller that you sell it to has no use for that certificate. You end up paying a premium for no real value addition. If you buy from reputed jewelers, not only do they buy it back from you, but they also give you the prevailing market rate for it.

The paths taken to financial independence vary depending on the risk profile of the investors, the amount of capital they begin with, and the targeted capital that they wish to end up with. There is also a factor of luck and timing that many investment advisors do not like to acknowledge but is a fact of investing and planning. The most carefully laid out plans can be challenged by special, unforeseen circumstances. And conversely, sometimes those who did not have a plan end up reaching financial nirvana by sheer good luck and fortune. But though we respect the power of luck and timing, we still believe that most people who plan their financial future will have a better understanding of what they need to do to achieve their targets than those who rely only on luck. The suggested broad financial strategy below is only a guideline since the actual personal plan will be entirely individual-specific as per his requirements, risk profile, commitments, priorities, market conditions, state of the economy, and finally, what’s available in the market!!.

Connect with a planner.

Connect Now

order here