A simple guide to encouraging your sibling to take a step towards investing this Raksha Bandhan

Every Raksha Bandhan, sisters tie a rakhi around their brothers’ wrists a tiny thread carrying a rather big promise: I’ll always have your back.

Then comes the other, equally time-honoured tradition: the brother reaches for his wallet.

Over the years, the gifts have evolved. Sweets became chocolates, chocolates became gadgets, and cash envelopes became UPI transfers. But perhaps there’s another way to make the Rakhi gesture count not just today, but years from now.

This Raksha Bandhan, instead of just thinking only about what to give, why not think about what you can encourage your sibling to do for their future?

A SIP (Systematic Investment Plan) can be one such step. It is a simple, disciplined way of investing a fixed amount at regular intervals, helping build an investing habit over time. And unlike that smartwatch, it doesn’t need charging.

Can Rakha Bandhan Be a Nudge to Start Investing?

Mutual funds may not have a convenient “Gift this Investment” button just yet perhaps one for the wish list? but you can certainly encourage your sibling to begin their investment journey.

For an adult sibling, you can guide them towards starting a SIP in their own name, based on their financial goals, investment horizon and risk appetite. For a minor sibling, investments are subject to applicable rules and requirements, and the process may differ from that for an adult investor.

Since mutual fund investments are regulated by SEBI, the applicable KYC and other prescribed requirements need to be completed before an investment can be made. If your sibling is unsure about which fund or investment approach may be suitable, they can consider consulting a qualified mutual fund advisor.

So, the Rakhi gesture doesn't have to be about handing over an investment. Sometimes, it can simply be about giving someone the right nudge to start one.

Why a SIP Is a Meaningful Rakhi Gesture

A lump-sum gift says, “Here’s something for you” encouraging someone to start a SIP says, “I’m thinking about your future, too.”

That’s what makes the idea a natural fit for Raksha Bandhan.

A SIP is a recurring investment where a fixed amount is invested at regular intervals. Much like a Rakhi is a yearly reminder of a bond that lasts far beyond one day, a SIP is a small commitment that continues month after month.

And then there’s compounding.

A relatively small monthly investment, given enough time, has the potential to grow into a meaningful corpus as returns generated over time can themselves generate further potential returns. This is why starting early can matter the advantage isn't necessarily about making a big investment on day one; it’s about giving the investment more time to grow.

Of course, mutual fund investments are subject to market risks, and returns are neither guaranteed nor fixed. The value of the investment can move with market conditions and the scheme chosen.

SIPs can also be started with relatively small amounts, although minimum investment amounts vary across schemes and fund houses. So, whether the starting amount is a few hundred or a few thousand rupees a month, the bigger idea is the habit of investing consistently.

Step-by-Step: How to Start a SIP for Your Sibling

1. Complete KYC verification: Your sibling will need a PAN card, an Aadhaar-linked bank account, and to complete their KYC either online (via video KYC) or through a physical form, if they haven't already (check the AMC website)

2. Choose a fund category: Decide on an equity, debt, or hybrid fund based on your sibling's age, risk appetite, and investment horizon.

3. Decide the SIP amount and date: Pick a monthly amount that's comfortable to sustain and a debit date that aligns with their cash flow.

4. Set up auto-debit (mandate): Register an NACH or e-mandate so the SIP amount is deducted automatically from the bank account each month.

5. Confirm the first installment: Most platforms process the first SIP installment shortly after mandate registration, with subsequent installments following the chosen cycle.

Encourage your sibling to review the investment's progress every few months rather than daily, since SIPs are built for the long term.  You can also consult a financial advisor before investing.

What Kind of Fund Should You Choose?

This is where the Rakhi gesture needs a little more thought than simply picking a scheme because someone mentioned it in the family WhatsApp group.

There is no one-size-fits-all fund or one “best” fund for every sibling.

The right choice depends on factors such as the investment objective, time horizon, risk appetite, existing investments and financial commitments.

For eg. A sibling investing for a goal five years away may have very different needs from one investing for a goal 15 years away. Similarly, someone comfortable with market fluctuations may have a different risk profile from someone who prefers greater stability. You may consult a financial advisor before investing.

The point is simple: choose based on the person and the goal, not just the occasion.

This article is meant to be educational rather than prescriptive, the specific fund category and scheme should ideally be chosen after your sibling reviews the scheme information document and, where appropriate, consults a qualified financial advisor or mutual fund distributor.

Other Meaningful Financial Gestures Beyond SIPs

A SIP isn’t the only way to make your Rakhi gesture financially meaningful.

• Lump Sum: Investing a larger amount at one go, rather than spreading it across regular instalments.
• STP (Systematic Transfer Plan): Gradually transferring a predetermined amount from one mutual fund scheme to another at regular intervals.
• SWP (Systematic Withdrawal Plan): Withdrawing a predetermined amount from a mutual fund investment at regular intervals, which can be useful when the focus shifts from building wealth to generating cash flows.
• SIF (Specialised Investment Fund) offered by some fund houses: A newer mutual fund category designed for investors seeking differentiated strategies, subject to the applicable eligibility and investment requirement.

Each of these carries a different risk-return profile, so the right choice depends on what you're trying to achieve capital growth, stability, or simply building a saving habit. They can also consult a financial advisor before investing.

Sometimes, it’s about helping someone take the first step.  

Frequently Asked Questions

Can I gift a mutual fund folio to someone else in India?
You cannot transfer an existing mutual fund folio to another person as a "gift" in the way you might gift a physical item. Instead, you can help or guide your sibling or recommend him to a financial advisor, before investing in a new folio in their name (once their KYC is complete) or by transferring money for them to invest themselves.

Is there a minimum amount to recommend a SIP?
Minimum SIP amounts are set by individual fund houses and schemes, and are generally quite low, making it easy to start a SIP even with a modest monthly commitment.

Are mutual fund gifts taxable in India?
Money gifted between close relatives, including siblings, is generally exempt from gift tax under Indian tax law. However, any capital gains earned when the mutual fund units are eventually redeemed are taxable in the hands of the unit holder (your sibling), as per applicable capital gains tax rules. It's advisable to consult a tax professional for specifics relevant to your situation.

Can NRIs invest in mutual funds to siblings in India?
NRIs can invest in Indian mutual funds subject to FEMA regulations and fund-house-specific NRI KYC requirements. Rules can vary by country of residence, so NRIs should check fund house-specific NRI investment guidelines before proceeding.

What documents are needed to start a SIP in someone else's name?
The investor (your sibling, in this case) will typically need a PAN card, address proof, a bank account for the mandate, and to complete KYC formalities, since the folio and SIP must be registered in their own name, please check the amc website to know in detail.

A Promise That helps to Grow with Time

A Rakhi may be a thread, but the promise behind it lasts much longer.

This Raksha Bandhan, that promise doesn’t have to stop at “I’ll always have your back.” It can also be a little nudge towards thinking about the future and building a habit of investing.

No fancy wrapping paper. No batteries. No last-minute shopping spree. Just a small step that could keep growing with time.

So, this Raksha Bandhan, encourage your sibling to take that step—or perhaps take it yourself.

Some gifts are enjoyed today. Some gestures can grow into something meaningful tomorrow.

Mutual Fund investments are subject to market risks read all scheme related documents carefully.

Samco Mutual Fund | MF/077/21/03

Onam is Kerala's festival of homecoming, harvest, prosperity, and togetherness. It is a time when families come together, homes are prepared, pookalams bloom, and the traditional Onasadya brings everyone around the same table.

But at the heart of Onam is a simple idea: abundance takes time to create isn’t it?

A good harvest is not the result of one day's effort. It comes from preparation, patience, consistency, and care over an entire season. In many ways, we can thus infer that building wealth follows the same principles.

Good investing is not about chasing every market opportunity or finding the perfect time to invest. It is about having a plan, staying disciplined, diversifying thoughtfully, and giving your investments enough time to grow.

Here are five Onam traditions that offer valuable lessons for mutual fund investors.

1. Onasadya: The Power of Diversification

An Onasadya is never about one dish. Served on a banana leaf, it brings together a variety of flavours, textures, and ingredients. Each has its own role, but it is the combination that creates a complete and balanced meal.

A well-diversified investment portfolio works in much the same way.

Depending on your goals, risk appetite, and investment horizon, a portfolio may include different asset classes such as equity, debt, gold, or multi-asset strategies. The idea is not to invest in everything, but to aim to have the right mix so that your portfolio does not depend entirely on the performance of one investment or asset class.

Diversification cannot eliminate market risk, but it can help create a more balanced portfolio.

Investor takeaway: Like a good Onasadya, a good portfolio is about the right balance, not putting everything on one plate.

2. Pookalam: The Value of Consistency

A Pookalam takes time to be formed, with flower petals carefully arranged layer by layer to create a beautiful, intricate design. While the final arrangement may come together in a few hours, it is the collective effort, care, and attention to detail that brings the design to life.

This can be related to simple investing through a Systematic Investment Plan (SIP).

An SIP allows you to invest a fixed amount at regular intervals. Each contribution may seem small on its own, but over time, consistent investing can help build a meaningful corpus, depending on investment performance.

The same approach may be applied to different financial goals. You could invest systematically towards retirement, a child's education, buying a home, or another long-term objective.

The important thing is to aim to give every investment a purpose and every goal a plan.

Investor takeaway: Big financial goals can be built through small, consistent investments made with a clear purpose.

3. Vallamkali: The Importance of Staying in Rhythm

Vallamkali, Kerala's iconic boat race, is a striking example of discipline and coordination. Dozens of rowers move together, following the same rhythm and pulling towards a common destination.

Investing also requires this kind of alignment.

Your goals, risk appetite, time horizon, and investment strategy need to work together. And once a plan is in place, staying disciplined becomes particularly important when markets become volatile.

When markets fall, investors may feel tempted to stop investing. When markets rise sharply, there can be a temptation to chase recent performance.

But reacting to every market movement can take you away from your long-term plan.

Investor takeaway: Investing is less about reacting to every wave and more about staying in rhythm with your financial goals.

4. Onam Homecoming: A Reminder to Review Your Portfolio

Onam is a time for coming home, reconnecting, and taking a pause from everyday routines.

Investors can take inspiration from this idea of a pause.

Your financial goals and circumstances can change over time. Markets also move, which means your portfolio's asset allocation may gradually move away from what you originally intended.

A periodic portfolio review can help you ask:
• Are my investments still aligned with my goals?
• Does my portfolio match my current risk appetite?
• Has my investment horizon changed?
• Does my portfolio need rebalancing?

A review does not mean constantly changing your investments. Sometimes, the best outcome of a review is simply confirming that your original plan is still on track.

Investor takeaway: Use milestones as an opportunity to pause, review your portfolio, and realign it with the goals that matter.

5. Puthari: The Power of Compounding

Onam celebrates the harvest, the visible reward for months of work that happened quietly in the background.

Seeds were sown, crops were nurtured, and there was a period of waiting before the harvest arrived.

This is a useful way to understand compounding.

In the early years of investing, the growth of your investment may not seem significant. But when returns are reinvested, they can potentially generate further returns over time. The longer the investment remains invested, the more time compounding has to work.

Like a field that gradually moves from sowing to harvest, wealth creation can also happen quietly before the results become visible.

Investor takeaway: Compounding rewards patience. Give your investments time, and let time work in your favour.    

The Onam Lesson for Investors
Onam reminds us that abundance is built over a season, not in a day.

The Onasadya teaches us balance. The Pookalam shows us the value of consistency. Vallamkali demonstrates discipline and coordination. Homecoming reminds us to pause and review. And the harvest illustrates what patience and time can create.

These are also important principles of disciplined mutual fund investing.

Diversify, Invest consistently, Stay focused on your goals, Review when needed and give your investments time to grow.

Because just like a harvest, the wealth we see tomorrow is often the result of the small, disciplined decisions we make today.

This Onam, as we celebrate abundance and new beginnings, may we also remember to nurture our financial goals with the same patience, discipline, and care.

Happy Onam!

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

A note from Jimeet Modi  ·  April 2026

On 13 March 2025, the NIFTY 500 Momentum 50 closed 30.9% below its peak of 27 September 2024. As I write this in late April 2026, it has not yet recovered. By the data we have on Indian factor performance going back to April 2005, this is the deepest drawdown for Momentum 50 since the 2018 mid-cap crash — and the fourth-deepest of the 21-year record overall, exceeded only by the 70.2% drawdown of the 2008 Global Financial Crisis (GFC), the 38.1% drawdown of the 2018–2020 episode, and the 34.7% drawdown of 2006.

I want to write about it, plainly, while it is happening.

Most of what gets published about a fund's strategy is usually published when the strategy is winning. That is mostly the easier writing. What I owe our unitholders, our distributors, and anyone else who has been reading us for any length of time is the harder version: the one done while the strategy hurts.

Here is the central thing I want to argue, and I will return to it from several angles:

The premium that long-term momentum investors may eventually earn is being paid for, in real time, by the investors who hold through this drawdown. That is what drawdowns are. They are how the premium is funded.

Let me explain what I mean.

Two Premia, One Discipline

When someone moves money from a fixed deposit to an equity mutual fund, they are buying access to the equity risk premium — the additional return that equities have historically delivered, on average, over what FDs and government bonds pay. Across long horizons in Indian markets, that premium has compounded into a meaningful per-annum gap.

That premium is not free. It exists because equities can fall, sometimes a lot, and stay fallen for years. The 2008 Global Financial Crisis took the NIFTY 500 down 75.6% from peak to trough; it did not recover its January 2008 level until June 2014. That is six and a half years of below-water investing for anyone who bought near the crash. The equity risk premium is the price the market pays the patient minority for sitting through episodes like that.

Most investors, when they first buy equity, intend to be that patient minority. Most discover, in the first 25%-down episode of their investing life, that they are not. They usually convert their loss into a permanent loss by selling at the bottom. The equity premium passes them by.

Now consider what we do at SAMCO Mutual Fund. We do not just buy equities. We buy a particular kind of equity — the equities whose price is in a sustained uptrend, ranked and rebalanced by a system that does not consult anyone’s view. We are running a momentum strategy.

The momentum strategy carries its own additional premium above and beyond the equity premium. In our 21 years of Indian factor data, NIFTY 500 Momentum 50 has compounded at 21.2% per annum against NIFTY 500’s 15.0% — a 6.2-percentage-point spread, every year, sustained across two decades. ₹1,000 invested in the NIFTY 500 in April 2005 grew to ₹18,800 by March 2026. The same ₹1,000 invested in NIFTY 500 Momentum 50 grew to ₹56,600. Almost three times the wealth.

That is the momentum risk premium. And it is not free either. It exists because momentum, as a factor, has its own drawdowns — drawdowns that occur even when the equity premium itself is fine. There were 13 such drawdowns of 10% or more in our 21-year record. The median lasted 36 trading days from peak to trough and 85 trading days from trough back to recovery — about five and a half months in total. The deepest, in 2008, took 5.6 years to recover. The current one, at 30.9% peak-to-trough, has lasted 18 months from peak with no recovery yet.

So a momentum investor, properly understood, is buying two premia stacked on top of each other. The first compensates them for sitting through equity drawdowns of the kind FD-investors will not sit through. The second compensates them for sitting through momentum drawdowns of the kind broad-equity investors will not sit through.

Both premia are paid for the same behaviour, applied twice. The patient minority gets paid for being patient about equities. The doubly-patient minority — patient about equities, and also patient about momentum within equity — gets paid for both.

This is the only honest framing I know for what we are asking unitholders to do.

Where This Drawdown Sits on the Map

Without a historical map, every drawdown feels uniquely terrible. With the map, you can locate it and see what it actually is.

Here is the map for NIFTY 500 Momentum 50 over twenty-one years — every drawdown of 10% or more, ranked by depth.

Three observations stand out.

First, this drawdown is severe but not unprecedented. It ranks among the four deepest of the 21-year record, but to be unprecedented it would have to break the −70.2% of October 2008. We are 39 percentage points away from that benchmark.

Second, this drawdown is unusually long. The median momentum drawdown lasts roughly five and a half months from peak to recovery. We are at eighteen. Only two episodes in the data have lasted longer — the 2008–2014 GFC episode (5.6 years) and the 2018–2020 mid-cap-then-COVID episode (just over two and a half years).

Third — and this is the one that has surprised me most as I have lived through it — this is the first major drawdown in our record where Momentum is underperforming the broad market in the decline phase. In the four major bear markets in the data — 2008 GFC, 2018 mid-cap crash, 2022 inflation episode, and now 2024–26 — Momentum has previously either modestly outperformed Nifty 500 (2008: +4.9pp ahead through the decline) or substantially outperformed (2018: +23.9pp ahead, the largest cyclical cushion in the record). Right now, it is 5.9pp behind.

That is new. It does not invalidate the premium, but it is a fact I owe the reader on the same page as the long-run number.

The Numbers That Argue Both Sides

I want to give the strongest version of two arguments and let them stand next to each other.

The argument for staying in.

● 21.2% vs 15.0% CAGR over 21 years. That is the entire investible record of Indian momentum-factor data, and the spread is large enough to be unmistakable.

● In 93.1% of all rolling five-year windows in our data, NIFTY 500 Momentum 50 outperformed NIFTY 500. The median five-year cumulative outperformance is 59.9%.

● During the 2018 mid-cap crash — the single most painful Indian equity episode of the past decade for retail investors — Momentum 50 fell 35.9% against Nifty 500’s 59.8%. That is a 23.9-percentage-point cushion through the crash retail investors actually remember.

● The full 2018-to-2021 cycle — peak to recovery — produced +45.8% for Momentum against +0.6% for the NIFTY 500. A 45-point cycle outperformance.

The argument against — and I want to write the strongest version, the version a thoughtful sceptic would make.

The momentum recovery lag is real, and it is the strongest empirical attack on the strategy. After the 2008 GFC, when the NIFTY 500 returned 117.4% in calendar 2009, NIFTY 500 Momentum 50 returned 61.3% — 56 percentage points behind. By the time both indices recovered to pre-crisis peak in mid-2014, Momentum’s full-cycle return (Jan 2008 to June 2014) was 0.4 percentage points behind the broad market. In the worst cycle our data has produced, momentum did not just give up its premium — it paid one.

This pattern has a name in academic finance. Daniel & Moskowitz (2016) documented it for global momentum and called it “momentum crashes” — the phenomenon where, after a sharp market reversal, momentum’s still-stale exposures ride the wrong basket down for some time before re-selecting from the new leaders. We can see exactly the same pattern in the MSCI World Momentum Index. From March to December 2009, World Momentum returned 44.8% against MSCI World’s 66.9% — a 22-point lag.

So the honest case against momentum is not that it does not work. The honest case is that it works on average across cycles, but in the single worst cycle the data has produced, it produced no premium at all. We owe the reader that statistic, on the same page as the 21.2%, every time.

Why We Still Don’t Override

If the recovery lag is real, and if the current drawdown is one of the four deepest in our record, and if Momentum is — for the first time in twenty-one years — underperforming the broad market through a decline phase, why are we not adjusting?

I have asked myself this question more than once in recent months. Here is the honest answer.

The case for overriding is always: “This time, we have information the system does not have.” The case against is that we have asked that question many times, and the data says we are usually wrong about what the system is missing.

I do not run our momentum strategy with a discretionary toggle that I can pull when it hurts. There is no toggle. There are only the rules-based exception protocols we published last year — pre-coded responses to liquidity collapses, corporate actions, regulatory caps, concentration limits. Each of those has triggered cleanly through this drawdown, just as each was triggered through 2008 and 2018. None of them has been a discretionary intervention.

This is the part that has to be earned over multiple cycles before it sounds like anything other than a slogan: the Doctrine is not a slogan. It is the operational discipline of not having a toggle to pull, on the day when one would feel most useful to pull.

That feeling — “I should be doing something” — is one of the most reliably costly behaviours in active investing across decades and across markets. It is felt sincerely, every time. It is wrong on average, every time. We have made it our business not to feel it.

What This Means for Investors Today

I will keep this part short, because it is the part where most asset managers reach for promotion.

Three observations, no recommendations.

1. Pausing a SIP at the bottom of a momentum drawdown converts a drawdown into a potential missed recovery. This is the same arithmetic as pausing an equity SIP in 2008. The investors who held their NIFTY 500 SIP through 2008–09 saw it recover by 2010 and compound to several multiples of principal by today. The investors who paused in early 2009 did not.

2. Five years is the empirical patience threshold. Below that, momentum’s outperformance is probabilistic. At and above it, the data shows 93% of five-year windows favouring momentum. If the holding horizon is shorter than five years, momentum is the wrong product. If it is longer, this drawdown is exactly the kind of episode the long horizon was bought to absorb.

3. The behaviour gap is the only cost the long-term investor truly controls. Expense ratios are small. Tax drag is largely unavoidable. The behaviour gap — the difference between what an investor’s strategy returns and what the investor actually earns from it — has historically been a major drag on potential retail equity returns, and we have no reason to believe it is smaller for a more volatile factor like momentum.

My family and myself hold investments in our funds. I am, in real time, holding through the drawdown I am writing about. That should not move anyone’s investment decision — my doing this is one observation, not data — but it is the one piece of information I can offer that no spreadsheet can.

The equity premium is paid to investors who hold through drawdowns. The momentum premium is paid to those same investors, a second time, for holding through a second kind of drawdown. This is the moment when the second instalment falls due.
Follow Momentum. Trust the System. Never Override.

— Jimeet Modi

Founder & Group CEO, SAMCO Group  · Chair, Investment Committee, SAMCO Mutual Fund

The data cited in this note is drawn from SAMCO factor research covering NIFTY 500 Momentum 50, Quality 50, LowVol 50, Value 50 and NIFTY 500 daily levels from 1 April 2005 through 30 March 2026, supplemented by MSCI World Momentum Index and MSCI World Index daily data from 1 January 1997 through 27 April 2026. Index returns shown are gross of fund-level expenses, transaction costs, and taxes; live fund returns will sit below these figures by the relevant cost of implementation. Past performance is not indicative of future returns.

The information contained herein is intended to help you plan and invest for your financial goals based on your risk profile in a diversified and convenient manner. Investors are advised to consult their mutual fund distributors, financial advisors, and/or tax advisors before selecting any portfolio or making any investment decision. The investor(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice, and shall alone be fully responsible and liable for any decision taken on the basis of information contained herein.

Neither SAMCO AMC, SAMCO Mutual Fund, nor any person connected with them accepts any liability arising from the use of information herein.

For complete details on investment objective, investment strategy, asset allocation, scheme specific risk factors, and more, please read the Scheme Information Document (SID) and Key Information Memorandum (KIM) of the scheme, available at the Investor Service Centres of SAMCO AMC and on www.samcomf.com.

SAMCO Mutual Fund, its AMC, directors, officers, employees, key management personnel and their dependent family members may hold investments in the schemes recommended herein.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Our recent 𝗡𝗙𝗢 was covered by 𝗖𝗡𝗕𝗖 𝗧𝗩𝟭𝟴.

The article talks about the fund’s unique approach to investing in the mid-cap segment the momentum way.

https://s-mf.in/9Q

Generally momentum in physics is defined as ‘mass in motion’. As per the Newton’s first law of motion that says a body will remain in uniform motion in a straight line unless acted upon by an external force. But what exactly does “Momentum” means in the world of investing? In this article/blog we will discuss about the in’s and out’s of what is momentum and how it works as an investment strategy.

1) What exactly momentum means in terms of investing?

Momentum refers to the tendency of winning stocks to continue to perform well and losing stocks to perform poorly in the near future. In momentum strategy the stocks are also selected based on their performance in the past with the idea that they will continue to outperform. The investors are attracted to a company whose price is on an upward trajectory thus opening a new way of buying at high and selling higher, instead of the traditional idea of buying at low and selling high, generating higher alpha. Momentum strategies exploit this continuation in return patterns in order to make a profit.

2) How is momentum defined & identified?

Stocks in Momentum could be selected via Time Series Momentum or Relative Strength Momentum which are two distinct measures used to evaluate the performance of stocks.

Time series/relative momentum - Time-series momentum, also known as absolute momentum, assesses a stock's past performance by considering its own returns independently from the returns of other stocks.

Cross sectional momentum - On the other hand, cross-sectional momentum, measures a stock's performance in comparison to other stocks.

3) Why does this strategy works?

1) Behavioural bias

a) Disposition effect - A more behavioural explanation of momentum is based on the disposition-effect. The disposition effect refers to the investor’s willingness to sell “winners” too quickly and to hold “losers” stocks for too long. According to this explanation, investors who suffer from disposition-effect will tend to underreact to news.

b) Anchoring Bias - Alternatively, George & Hwang (2004) explain momentum with an anchoring bias, where investor’s decisions are influenced by or driven towards a certain reference point. The anchor in their study is a stock’s 52 week high price, which most newspapers reporting on the stock market publish. The authors propose that for stocks near their 52-week high, new positive information is at first only partially incorporated into prices because traders are reluctant to cross the anchoring point. Similarly, bad news does not to the extent that would be warranted——-drive down prices of stocks that are already far away from their 52-week high.

2) Information Diffusion

4) Global evidence of the momentum strategy

The existence of momentum is a well-established empirical fact. The return premium is evident in 215+ years (US equity data from 1801-2016), dating back to the Victorian age in UK equity data, in over 20 years of out of sample evidence from its original discovery, in 40 other countries, and in more than a dozen other asset classes. Some of this evidence predates academic research in financial economics, suggesting that the momentum premium has been part of markets since their very existence, well before researchers studied them as a science.

5) Let’s have a look what MSCI has to say about momentum strategy

“MSCI Research shows, on a historical basis, the momentum factor has been one of the strongest generators of excess returns.”

6) Does this strategy works in India?

Yes this strategy works in India as well! Nifty Index has its own Momentum Index which is based on the momentum factor where it churns their portfolio every 6 months according to the momentum characteristics of the stocks.

Nifty India mainly have 2 momentum indices named as:

• Nifty 200 momentum 30 Index
• Nifty Midcap 150 momentum 50 Index

Let’s have a look at the historical performances between Nifty Midcap 150 Momentum 50 Index vs Nifty Midcap 150.

7) There are mainly two forms of momentum investing. Let’s understand what’s the difference between them

• Passive - Passive management emphasises more on the relative method of choosing momentum bearing stocks where it compares the returns relative to its peers.
• Active - Active management uses the relative as well as absolute method of choosing momentum bearing stocks where it compares the relative performance of the stock as well as compares the past performance of its own price in order to analyse that the stock has actually risen in value as well

Let’s understand the advantages of active management over passive:

8) Introducing Samco Active Momentum Fund

India’s 1st active momentum fund that aims to invest in stocks that are showing momentum characteristics using a proprietary momentum-seeking algorithm to generate superior risk adjusted returns.

▶️ NFO Closes on 29th June 2023

🚨 Subscriptions in this scheme shall be accepted during NFO & be restricted post NFO until further notice.

9) How does Samco Mutual Fund defines and identify momentum?

Samco has developed a proprietary momentum-seeking algorithm called the Momentrix Framework which aims to identify momentum in stocks right at the beginning of the catching momentum. This framework is a combination of the momentum definition of index methodologies, well defined momentum characteristics and a distinct pattern identified by the promoter and CIO of the AMC over their investment career. The Momentrix framework is divided in three parts -

• Signal generating engine - Gives us buy, hold and sell signals
• Position Sizing and Risk management Engine - Gives us ideal position size of all buy signals with regards to the risk reward ratio
• Portfolio Management Engine - Give us the model portfolio using signals and their position size, which stock to buy, sell or switch. It also indicates the periods of anti-momentum

10) Data points used by Samco MF to identify momentum  characteristics

• Price
• Volume
• Shareholding pattern
• Bulk deals / block data
• Money flows
• Impact cost
• Free float market capitalisation
• F&O data including open interest
• Broader market levels including sectoral indices

11) Understanding the scheme strategy

12) Portfolio construction of this strategy

13) Asset Allocation Strategy according to Momentum & Anti-Momentum factors

14) Top 5 reasons to invest in Samco Active Momentum Fund

• India’s first Active momentum fund - Select stocks in form, drops stocks out of form
• Powerful momentum seeking algorithm - Use of technology & big data to mine deep data and generate insights to identify both absolute and relative momentum
• Captures momentum across wide universe - Aims to find hidden opportunities from a wide investible universe of 750 stocks allows identification of opportunities from the time companies including small or micro sized companies.
• Robust risk management - Negative filters to avoid outliers, Hedging during periods of anti-momentum
• Speed & Agility - Rebalancing in real time on loss of form & momentum

15) Scheme Features

Conclusion: As an investment opportunity, Momentum strategy has its own pros and cons. This strategy comes with the potential to generate a significant alpha but on the flip side it comes  with a high risk.

One needs to evaluate their risk profile and choose an investment portfolio according to their goals and risk bearing capacity. Thus it is best to do your own due diligence and decide whether Momentum strategy suits one’s style of investing.

Visit our Knowledge Center for more articles on Samco Mutual Funds. You can also find many valuable blogs in our Help and Support section.

We all invest in mutual funds by looking at the risk associated with it, and how much returns it gives. Do you know about the person who manages the large amount of investors? Yes, we are talking about fund managers. In this article, we will discuss about the fund manager, their role in the AMC, their duties, and how to evaluate them.

Fund Manager

A fund manager is an investment professional. A fund manager is in charge of carrying out a fund's investment strategy and monitoring its trading activities. They manage researchers, engage in research, and make important investment decisions for mutual funds.

A fund manager is responsible for managing the portfolio of schemes offered by the mutual fund. A fund manager manages the portfolio in an active or passive way.

Role of a fund manager

A fund manager is an investment professional who is appointed by an Asset Management Company(AMC) to manage one or more schemes offered by the fund house. The fund manager provides the best results to match the fund's goal. Later, they trade in securities that are appropriate and sell those that are not. Fund managers must dive deep into large financial data of traded companies. They conduct various research using a variety of tools and software platforms. The fund manager gathers the data, reads financial briefings, and stays up to date on current economic events.

The fund manager's role also involves meeting the industry experts and company personnel. They learn about the inner workings of the company whose stock they plan to invest in. They shortlist various companies that meet the investment objectives of the fund. After that, they trade on these stocks. In a multi-asset fund, there is a similar process for bonds, commodities, and other assets as well. A fund manager in a larger fund house may have a team of analysts. The analysts' research companies and a team of traders and dealers to execute buy and sell trades.

The fund managers prepare regular investor reports about the fund's portfolio composition. They also explain some of the major portfolio decisions that go with, and performance. A fund manager attends various events to explain their fund's strategy and represent their company in panel discussions. They aim to strengthen the brand appeal of the fund house and their managed funds in particular.

The key role of a fund manager is to manage the costs associated with administering and operating a fund. All portfolio composition decisions with an eye toward efficient cost management.

Fund managers are also responsible for liquidity and risk management. They must ensure that the fund has adequate liquidity. The assets in the fund's portfolio must be liquid enough to sell and without the loss in value, incase of redemption received from the investor.

Duties of a Fund Manager

1. Meeting the reporting requirements

The role of a fund manager is to design a fund portfolio keeping in mind the reporting standards. The fund must fulfil the objectives of the scheme, the strategies, risks, expenses, and various policies. The fund managers ensure that the investors are aware and abide by these details and rules. They also make sure that all the documents are furnished on time and follow the laws and regulations.

2. Complying with Regulatory Authorities

The operations of the funds must be in line with the rules set out by the Securities and Exchange Board of India.  Fund managers are answerable to legislators and investors in case of non-compliance. They play a critical role along with the compliance team.

3. The Protection of Wealth

The fund managers have to protect the wealth of investors. The funds are subject to some risks and generate returns. But they must not be subjected to reckless risk assumptions. The decision of the fund manager to buy or sell assets will be on research and due diligence.

The fund manager also investigates the company. Uses risk management techniques to protect the wealth of the investors. The fund managers ensure the diversification in asset portfolios to address the risk

How to evaluate a Fund Manager?

After understanding about the fund manager’s role in the mutual fund industry, it is critical to learn how to test them. The fund manager develops an investment strategy that supports the fund's investment goal. A sound investment goal can fail due to poor strategic planning and execution.

There are several factors that investors can consider when evaluating a fund manager. These factors can provide valuable insight about the right fund manager or are simply fulfilling his or her mandate.

1. Track Record: The fund manager states that past performance is not a predictor of future performance. The important factor is selecting a performing fund and a fund manager. Proving consistent performance depicts the experience and expertise of the fund manager. They navigate a fund portfolio through difficult times and also generate superior returns.
2. Investing Style: Different fund managers will approach the same fund portfolio in different ways. This difference is due to their different investment styles.

• One fund manager may choose to invest for the long term, whereas another may choose to take several short-term positions in stocks and bonds.
• One manager may align the portfolio with the underlying benchmark. Another may completely go off with the benchmark composition and create a portfolio based on their market views.
• One manager may remain invested in the market all the time. Another may decide to liquidate a part of the portfolio and invest it in cash until he finds a suitable investment opportunity. Investors can examine the changes in the portfolio over the course of a fund manager's management of the fund. They may also seek the advice of an advisor to better understand the investment styles of a fund manager.
• Is the manager a shareholder in his own managed fund? This may appear to be a minor point, but it is crucial. A fund manager charges a fee to manage other people's money, but do they invest their own money in the fund they manage? If they do, it demonstrates their belief in their own stock picks. If their stock-picking abilities are excellent to outperform the market and multiply investors' money. Why wouldn't they want to enjoy that as well?

3. Outperforming the Benchmark Index: Each fund has a benchmark index against which it aims to outperform. If a fund manager outperforms the benchmark index, it may be worthwhile to invest with them. But it is critical to consider a manager's performance during market downturns. Because when markets are rising, many managers may outperform their benchmarks. They make it difficult to identify whether the market performance is due to luck or skill. Investors should prefer a skilled manager to one who is lucky.

How do Fund Managers decide where to invest?

As mentioned earlier in the article, one must work for several years as an analyst to take the responsibility of fund management. This experience is key for a budding manager to shape his market insight. And choosing the right investment given the market condition.

A fund manager deep dives into company fundamentals by creating or managing a stock portfolio. They look at quantitative metrics to create a sector and industry-wide list of companies that can fit the investment mandate of the fund.

They combine the company-specific information with the broad market trend in terms: such as

• Market movement direction
• Sector and industry-specific trends,
• The direction of the economy and fiscal and monetary policies,
• Foreign investor interest and money movement, and other factors.

A fund manager prepares a final selection of stocks in the portfolio based on his study. His past expertise analyses equities after considering the above factors.

A fund manager takes the help of an analyst team, reports their findings to an investment committee. The committee chooses the best investment avenues for a fund based on internal brainstorming.

FAQs

Q. Does a fund manager change frequently?
A. No! The fund manager is the backbone of the strategy and philosophy of a scheme. A change in the fund manager may bring about a change in the investment methods and stock selection.

Q. Is A Fund Manager Answerable to Investors?

A. Yes. You can always reach out with your questions to the Investor Relations cell of the fund house. If you have query-specific questions reach out to the fund managers.

Visit our Knowledge Center for more articles on Mutual Funds. You can also find many valuable blogs in our Help and Support section regarding Samco Mutual Fund.

Nifty50 has had an eventful ride filled with structural changes and macro-economic cycles, right since 1995. In this period, the index has given a CAGR return of ~11% in ~27 years or an absolute return of 1700% as it has made its journey from 1000 to 17000+.

The NIFTY is in its 27^th year running and there are several vital lessons from its journey. In SAMCO Mutual Fund’s first edition of the “SAMCO MF Food for thought” series, we try to spell out some of the lessons we’ve learnt from the NIFTY’s journey. The source of our learnings is a detailed look at the NIFTY’s entries and exits since inception.

1. Strike Rate is Overrated – The NIFTY has a strike rate of only 55%

Most investors try to over optimize for win rates i.e. they anchor their investments to try and achieve a near 100% win rate on the trades/investments they make. Investors and even fund managers often want all their bets to end with a positive return. After all, who likes to be wrong?

Let us tell you a startling fact – The NIFTY has been right only 55% of the times and despite that delivered a handsome 11.31% CAGR

There have been an aggregate of 152 positions that the NIFTY has taken since inception of which only 85 have generated a win and the rest 67 have been losing positions. A complete list of all positions of the NIFTY is annexed.

Myth Busted – Generating a high return is possible even by being right just about half the times!

An obsession with win rate in investing and money management is ego driven and clearly the NIFTY has no Ego ;)

As long as investors are able to manage the overall risk-reward equation (some of which we’ve highlighted in our other learnings below), anything above a 50-60% win rate can deliver exceptional returns.

2. Let your winner’s run – NIFTY’s winners are 33 times bigger than its losers

Too often investors talk about “taking a profit” and waiting to “at least recover cost”. The fact is that if you have a profit on an investment it might be an indication that you own a share in a business which is worth holding on to. Conversely, we are all prone to run our losers, hoping they will get back to what we paid for them. This is commonly also known as the “Disposition Effect”.

Gardeners nurture flowers and pull up weeds, not the other way around.

Startling Fact # 2 – NIFTY’s average winning position is +1500% and average losing position is -45%

Because of the Nifty’s algorithmic, methodical and un-emotional investing process, the NIFTY is free from cognitive biases and let’s its winners run to infinity and beyond, literally! It doesn’t book profits on its winners.

Myth Busted – You need to book profits from time to time!

The math works for Nifty, if you make money on 55% of the trades with winners being at 1500%+ and losers only at -45%, you end up with a mathematical edge and can deliver exceptional returns.

However counterintuitive it may sound, it is true that no one ever went broke taking profits but serious wealth is made only by letting your winners run for years.

3. Not only ride, let your winner’s age – NIFTY holds its winners for 3x the time it holds its losers

“If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.” – Warren Buffett

The NIFTY has taken Mr. Buffett’s suggestion on holding period quite seriously. When the NIFTY initiates a position, it holds the patience of holding onto its stock for several years.

Startling Fact # 3 – NIFTY’s average winning position is held for an average of 12.5 years and the average losing position is held for about ~ 4 years

9 Stocks have been a part of the current NIFTY 50 since inception. The top contributors have been in the index for 23+ years. Losers in the NIFTY have been cut relatively faster with losers’ life in the NIFTY at ~4 years on an average since their entry i.e. 1/3^rd of the time that winners are held.

This is important since most investors often give their losers a lot more time to recover in hope and give very little time to winning positions. Winning stocks in a portfolio often age like fine wine.

The Stock(s)/ Issuer(s) referred in the article, should not be construed as an investment advice or a recommendation by Samco Mutual Fund.  Investors should consult their financial advisors before making any investment decision.

4. Don't need to be Hyper-active to make money – The NIFTY makes only about 4 trades a year

Buffett says, ‘The stock market is designed to transfer money from the active to the patient.’

In the urge to be busy and active, investors including fund managers engage in a lot of dealing activity. Brokers want investors to trade. Several investment advisers and mutual fund investors want their fund managers to be “active”. There are often people who ask, “Why pay a fund manager any fees. if he’s not constant churning the portfolio?.”

Startling Fact # 4 – NIFTY makes only about 4 trades a year!

As can be seen from NIFTY’s trades, In its long and continuing lifespan it has undergone only ~150 trades with an average of 4 stock rejigs in a year. Despite such a low churn, it has managed to deliver a 11%+ CAGR return.

Myth busted – You need to constantly churn your portfolio!

Results can be delivered even without frequent churning. In fact, as Mr. Buffett suggested, if you are patient, the market will transfer wealth back to you from the hyper active folks.

Also, another drawback of being hyper active with constant entries and exits in investing is the drag trading costs can cause to one’s portfolio.

5. For a stock to be a 100-bagger it needs to be a 10-bagger first – The NIFTY only picks proven winners

Most investors are constantly in the search of the next multi-bagger. The entire investment community believes investing is a prediction game where you can only win if you are able to predict the next set of winners.

Startling Fact # 5 – NIFTY only buys proven winners. It doesn’t predict winners but instead waits for actual winners to emerge and in many cases ends up buying after a stock would be up many-fold.

A stock has always entered Nifty50 after it has already been proven a winner. This is because only if its price increases, will its free-float market capitalization increase enough for it to be added in the index. So, a stock first needs to be a 10-bagger, then a 25-bagger, then eventually it could be a 100-bagger!

Myth Busted – You need to be early to identify a stock and only then can you make a decent return!

Unlike most participants, the NIFTY doesn’t predict winners. The NIFTY waits for winners to be proven by market forces and then buys the winners. Time and again, the NIFTY has bought stocks after serious run-ups and yet has managed to deliver a great 11%+ CAGR over its lifetime. In the process of betting winners, the NIFTY has saved itself from the prediction game!

To demonstrate what we are saying as an example, Asian Paints was only included in the index in April 2012, when it had already gone up by 10 times since 2002. However, since then, the stock price has gone up by almost 10 times again.

Out of the 135+ unique stocks which have entered the index since inception, 10 stocks managed to post a 25X return, out of which 6 have advanced to become 50-baggers and 3 have emerged as “100-baggers”.

Investors would be served much better if they ended up buying companies that were already multi baggers instead of predicting which companies could be future multi baggers.

6. All you need is just 3-5 ideas in a lifetime – More than half of NIFTY’s returns have come from just 3 stocks!

Billionaire investor Warren Buffett puts it quite succinctly: “You only have to be right on a very, very few things in your lifetime as long as you never make any big mistakes. An investor needs to do very few things right as long as he or she avoids big mistakes.”

Holding a large number of stocks in your portfolio doesn’t guarantee the highest returns.

Startling Fact # 6 – If you observe Nifty50’s history, out of the 135+ unique stocks that entered, exited or have stayed in the index ONLY 3 stocks have contributed to more than half of Nifty50’s absolute returns in 27 years. HDFC Bank, Infosys and Reliance Industries have collectively delivered a sum of ~66,800% absolute returns which is more than half the returns contributed by all other constituents in the index on an absolute basis.

Myth Busted – As investors we constantly need to search for new ideas and trends to profit!

One just needs to find the right 3-5 stocks in their lifetime rather than chasing hundreds of stocks that may be subject to current fads and fancies of the market for time to time. As you can see in the below chart, only few businesses have given outsized positive returns in absolute terms while the majority have given less than 500% returns.

7. You can cut losers even faster – The NIFTY waits too long sometimes to cut its losers

While there are many things that we love about the NIFTY, there are some things that an active investor could do much better than NIFTY’s mechanical approach.

Startling Fact #7 – Despite a clearly large losing position, the NIFTY waits for a stock to fall below to its lowest rank to exit.

Nifty50 follows a strategy wherein it holds the top 50 liquid stocks by free float. Now unless a stock’s free float market cap falls below the 50th stock or the 51st stock’s free float market cap rises above the 50th stock, there will not be any rejig in the index. That means even if the fundamentals of the stock deteriorates or if a company is on the verge of extinction/bankruptcy, until and unless the above conditions are fulfilled the stock is not removed from the index. More often than not, it is too late and exits usually happen after the stock has deteriorated significantly which would just add to Nifty50’s losses. Hence, it is better to cut your losses even faster and not let the pain prolong.

For example, Yes Bank fell 29% in a single day on 21st September 2018 when the hints of fraud at the bank came to light when RBI pointed out irregularities in the bank. The close price on that day was Rs. 226.5 while the exit from the index happened on 19th March 2020 when it’s close price was Rs. 53.85 i.e. it was 76% further down since 21st September 2018. As traders often say, the first loss is the best loss. As investors, we need not be subject to mechanical ranking based exits on free float and hence can actually exit the party as soon as we see the first set of people puking!

8. It’s better to buy high and sell higher than merely buying low and selling high – NIFTY makes most of its entries at All Time Highs without worrying about being late

As we have established earlier that Nifty50 only includes a business in its portfolio after it has become a proven winner. Nifty50 has a history of buying many stocks at their all-time highs. But despite that, the stocks have continued to perform well and have generated returns for investors. Hence, as counterintuitive as it may seem, it is never too late to enter a stock.

The goal is to make more on your winners than you lose on your losers and do it repeatedly. It's not about buying low and selling high, it's about buying lower than you sell. It's about making money!

9. Pick a style/method of investing and stick to it – NIFTY’s style is “Bhav Bhagwan Che”

No one can practically know EVERYTHING about a business or a company before investing in it. In fact, with proper rules and processes in place, you can still make money by investing even when you do not know anything about a company’s fundamentals, its industry or its promoter?

Wondering how is that even possible? Nify50 has done it! The criteria for a stock to enter or exit the Nifty50 “Portfolio” is the growth of its free float market capitalisation and fulfilling other criteria like impact cost, frequency of trading, etc.

It does not evaluate the financials of the business, does not meet its management, does not know what the business or industry the company operates. It doesn't track the day to day activities of the businesses but it still manages to makes money.

It is the discipline in its strategy which has enabled it to deliver a CAGR of 11% since 27 years. Because as per its discipline whichever stock experiences an increase in its free float market capitalisation to be among the top 50 band will make an entry into the index and vice versa with its exit.

Even Warren Buffett has widely quoted that ‘An idiot with a plan can beat a genius without a plan.’ Given that Nifty50 follows a process driven strategy and sticks to its process without any human interventions, it has been able to generate such returns in the long period.

List of NIFTY Entries and Exits

Important Notes:

1. Constituents' weightages have not been considered in calculating returns.
2. Dividends have not been considered in calculating returns.
3. Prices have been adjusted for corporate actions.

Disclosures

The Stock(s)/ Issuer(s) referred in the document, should not be construed as an investment advice or a recommendation by Samco Mutual Fund.

As of December 31, 2022, Samco Mutual Fund is having exposure in the following stocks in its scheme:

Samco Flexi Cap Fund

Samco ELSS Tax Saver Fund

Disclaimer

In the preparation of the material contained in this document, the AMC has used information that is publicly available, including information developed in-house. However, the AMC does not warrant the accuracy, reasonableness and/ or completeness of any information.

The information provided is not intended to be used by investors as the sole basis for investment decisions, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific investor.

Investors are advised to consult their own legal tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of Samco Mutual Fund. The information contained herein should not be construed as a forecast or promise nor should it be considered as an investment advice.

The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not be liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner.

There is a lot of confusion among the investors about what is a Systematic Investment Plan(SIP)? Most investors think SIP is a kind of mutual fund scheme, but it is only a method to invest in a mutual fund.

Have you heard the saying that little drops of water make the mighty ocean? It implies, metaphorically, that small thing have a huge impact. Small sums can lead to great things one day. This saying reflects how SIPs work.

In this article, you will learn:

• What is SIP?
• Benefits of SIP
• Who should Invest in SIP?
• Let's take an example to understand SIP

What is SIP(Systematic Investment Plan)?

In a SIP you can invest the same amount of money at regular intervals. It could be once a month, once a quarter, or even half-yearly.

SIP has made an investment in the mutual fund so easy that now investors can start investing as low as ₹100 so now investors prefer to do SIP instead of doing lumpsum. With the help of SIP, investors don’t need to worry about investing a large amount in the mutual fund at once anymore.

Benefits of SIP

1. Creates Investment Disciplines: SIP helps to create a disciplined investment habit. Once the investor sets up a SIP, a fixed amount gets debited every month. Investors must set aside the fixed amount every month in their bank account for investment through SIP.
2. Easily Affordable: It's not possible for all investors to invest a huge amount of money via lumpsum in mutual funds. So, SIP makes it easy for investors to invest in mutual funds by investing as little as ₹100.
3. No need to time the market: With SIP investment investors need not worry about timing their entries. It’s often seen that investors delay the investment in order to wait for the correction to take place, but it's difficult to predict the market. But with SIP investors do not need to worry about the market ups and downs. Your SIP will be continuously investing in the market.
4. Helps with Rupee Cost Average: The biggest benefit you will have from SIP is that it helps with the rupee cost average. You will buy more units when the market is down and you will earn fewer units when the market is up so, Rupee Cost Average means it lowers the overall cost by purchasing units at various rates.
5. Power of Compounding: Investing in SIP helps you to earn from the power of compounding. Compounding ensures that you earn returns not only from the principal amount but also earn from the gain on that investment amount. Not only your investment earns returns but your returns also earn returns with the help of compounding.
6. Power of investing early: SIP’s make it easier for anyone to start investing early even with a small corpus. Earlier investing through SIP’s can help one achieve his goals.
7. Convenience: Investing in Mutual Fund through SIP gives you the convenience to invest in a market as low as ₹100.
8. Additional Lumpsum Investment: You can do additional lumpsum investment anytime in the scheme in which you have your ongoing SIP.
   Flexible Investment: In SIP investor has the flexibility to invest in a mutual fund on a monthly, quarterly, or yearly basis. You can start or stop your investments through SIP’s at any point in time.

Who should Invest in SIP?

People with higher income groups are more likely to invest in mutual funds because they have the ability to take on more risk, whereas people with lower income groups are more likely to invest in fixed deposits, bonds, and the post office, while businessmen are more likely to invest in the stock market.

However, the introduction of SIP in mutual funds has made it possible for small investors to invest in mutual funds as well. Investors can contribute as little as ₹100 in a SIP, and there is no limit to the maximum SIP, as it is a viable alternative for investors of all income groups.

According to the research, investing in mutual funds through a systematic investment plan (SIP) is less risky than investing through lumpsum mode. As a result, younger investors are more attracted to SIPs than older investors.

In a similar team, you can also start investing in mutual funds through SIP.

Let's take an example to understand SIP:

There are 2 friends Seeta and Geeta and both want to retire at 60 years. Seeta started her ₹10,000 SIP at the age of 30. Whereas Geeta was a little behind and started investing ₹15,000 at the age of 35. To compensate for the lost time, she is investing ₹5,000 more than Seeta.

This is how their investment turns out to be when they retire:

What we learn from this table:

• At the time of retirement, Seeta has 68 lakhs more than Geeta.
• Even the investment made by Geeta is 9 lakhs more than Seeta.
• Geeta began investing only 5 years after Seeta, despite the fact that she had to bear the repercussions by investing 9 lakhs more than Seeta, and in the end, Geeta still makes less compared to Seeta.
• We learned from this example that investing at a young age can benefit investors at the time of redemption.

This clearly demonstrates that time and compounding power do not wait for anyone. This is why, in order to meet your financial goals, you should begin your SIP as soon as feasible. Like a single drop of water that eventually becomes an ocean, your monthly SIP has the ability to help you accomplish your retirement goals.

Visit our Knowledge Center for more articles on Mutual Funds. You can also find many valuable blogs in our Help and Support section regarding Samco Mutual Fund.

Mutual funds have been a trendy topic among all consumers, regardless of their interest in the financial markets. Mutual funds are one of the few financial instruments that provide inflation-beating returns to the investors. .

The functioning of a mutual fund is simple. Asset Management Companies (AMCs) receive money from lakhs of investors. This pooled money is subsequently invested in a variety of asset classes as per the fund’s investment objective.  A mutual fund can invest in stocks, bonds, government securities, and debentures etc.

Related Article: The Process of HexaShield Testing

Here are some reasons to invest in mutual funds.

1) Direct and Regular Plans: If you're considering investing in mutual funds, you should be aware of the differences between direct and regular plans. Direct plan enables you to purchase mutual fund schemes directly from the fund house. In this case, your expense ratio is less. If you prefer to invest in mutual funds through an agent or broker, you can choose the regular plan. However, the expense ratio of regular plans is higher than direct plan.

2)      Lumpsum and SIP: There are two ways to invest in mutual funds Lumpsum, which is a traditional method, and Systematic Investment Plan, or SIP. The lumpsum technique is appropriate for investors who have spare cash that they may not use, as it allows them to invest it all at once. SIPs allow investors to invest a little amount of money each month. The mutual fund's Net Asset Value (NAV) determines the buying and selling.

3)      Product Variety: Mutual fund houses offer a broad array of schemes. Mutual fund schemes are developed with the investor's objectives and risk tolerance in mind. Aside from the well-known equity fund, there are other options such as hybrid funds, debt funds, tax savings (ELSS), liquid funds, and so on. Different schemes are appropriate for different types of investors.

4)      Long term Goal: If you wish to save for retirement, pay for your children's education, or build a large fortune for yourself, investing in mutual funds, works like a charm. When you invest for the long term, mutual funds provide capital appreciation. Due to market volatility, investing in mutual funds for a short term horizon is not ideal.

5) Discipline Investment: Investment in mutual fund encourages investors to take a long-term approach to investing. Investors frequently fail to build wealth owing to a lack of discipline in their saving habits. But with the help of the SIP method in mutual funds, investor discipline has become easier. It has taken the emotion out of investing, so investors don't have to sit on the edge of their seats during bear and bull markets.

These are a few factors to think about when investing in mutual funds. However, before investing in any mutual fund scheme, you must first determine your objectives and risk tolerance, and then choose the appropriate scheme for you.

Visit our Knowledge Center for more articles on Samco Mutual Funds. You can also find many valuable blogs in our Help and Support section.

Related Article: Top 5 Reasons to Invest in Samco Flexi Cap Fund

Most people avoid investing in small cap funds because they have a reputation of being extremely high-risk. But what people don’t realise is that most large and mid-cap companies started out as small cap companies. No company becomes a large-cap company overnight. They all start at the small-cap stage. This article will help you get a better perspective on small cap funds before you start investing in them.

In this article you will learn:

- What are Small Cap Funds?

- Benefits of Small Cap Funds

- Risks related with Small Cap Funds

- Taxation on Small Cap Funds

- Why Small Cap Funds Outperform in the Long Term?

- Things to Keep in Mind

- Who should invest in Small Cap Funds?

What are Small Cap Funds?

Small cap funds are mutual funds that must invest a minimum of 65% of funds in stocks of small cap companies as per the Securities and Exchange Board of India (SEBI) regulations. Small cap companies are those companies that are ranked from 251^st in terms of market capitalization. Generally, these companies have a capitalization of less than Rs 5,000 crore.

Small cap companies are young and have huge potential to grow aggressively in the long term. But do note that small cap companies are more volatile and exposed to economic downturns. In small cap funds, investors must be invested for the long-term.

Benefits of Small Cap Funds

1. High potential for growth: Small cap funds invest in lesser-known start-up types of companies. These companies are still in the nascent stages. So, they have a huge potential for growth. It's often seen that most of the small cap funds have the ability to out-perform large cap companies.  The graph below shoes the performance of small cap funds against large cap and mid cap funds since 2014.

2. Returns are rewarding: Investing in a small cap fund enhances your portfolio’s overall returns. But only if you stay invested for the long-term.

3. Discounted rates: There is a possibility that small-cap stocks are undervalued as these companies are new and unknown. Thus, they may be available at a discount.

Risks Associated with Small Cap Funds

1. Small cap funds are inherently risky, resulting in sharp market ups and downs in the near term, making the portfolio highly volatile.
2. Small cap funds carry very high risk which makes them suitable for only aggressive high-risk investors with a long-term investment horizon.
3. Since all of the companies in small cap funds are growth stocks, they tend to hold on to all profits or reinvest them back into the business. As a result, small cap companies rarely pay dividends.
4. Small cap companies have limited liquidity. This affects the ease with which the fund manager can buy and sell underlying stocks.

Taxation on Small Cap Funds

In small cap funds there are two types of taxation applicable.

Capital Gain Tax: Capital gain tax is charged on the profit you make during the tenure of the investment. The rate of tax is charged on the basis of how long you have been invested in the fund. Capital gains tax is further divided into -

1. Short term capital gain is charged to investors who have a holding period of less than one year. The STCG on small cap funds is 15%.
2. Long term capital gain is applicable to investors who have held the small cap funds for more than one year period. The LTCG on small cap funds is Nil, if the total LTCG is less than Rs one Lakh. LTCG on small cap funds exceeding Rs one lakh in a financial year is taxed at 10% plus any applicable cess.

Why Small Cap Funds Outperform in the Long Term?

Historically, small cap stocks have outperformed large cap stocks in the long run. But why does this happen? The below chart will help us get a better understanding of the reason behind the success of small cap funds.

Here are the reasons why small cap funds show excellent results in long term:

1. Small cap companies are typically less capital intensive, allowing them to produce higher Return on Equity (ROEs). In the long run, small cap companies with greater ROEs result in providing better returns to investors.
2. Most of the small cap stocks are under-researched and fund managers identify those stocks and get them at discounted rates. These stocks are considered to be alpha stocks.
3. Small cap has a broader range of opportunities for the investors compared to the mid and large caps in the long term. Therefore you will find 250 small caps stocks in the Nifty 500 and only 150 mid cap stocks and 100 large cap stocks.
4. Small caps perform amazingly during the time of restoration. For example, the small cap stocks have rallied post Covid situation.

Things to Keep in Mind While Investing in Small Cap Stocks

1. Net Asset Value (NAV)

NAV of small cap funds is very sensitive to the underlying benchmark and when the market is not doing great, small cap funds suffer the most. This is considered to be the best time to invest if you have a long-term horizon and high risk appetite.

2. Low Expense Ratio

Expense ratio is charged for managing and operating a mutual fund. It is paid from the fund’s NAV irrespective of whether the unitholder has made a profit or a loss. SEBI has mandated that fund houses can charge a maximum expense ratio of 2.50%. As you know the expense is deducted from your fund NAV. This means you have to make sure that the expense ratio is low for whichever small cap fund you are going to invest your money in.

3. Risk Adjusted Return

Small cap funds are very volatile and have risks. But there are some small cap funds which are excellent in managing risks compared to its peers in the market. You can identify the funds with great risk-adjusted returns with the help of Sharpe ratio, Sorting ratio, etc.

4. Time Horizon

Investing in a small cap fund should be done with a long-term investment strategy in mind.  Your ideal time horizon should be seven to ten years.

5. Expertise of Fund Manager

Fund manager expertise, knowledge of the market, and research play an important role in the performance of your portfolio over time. While selecting a small cap fund you should look at the past performance of the fund manager, especially during market ups and downs.

Who should invest in Small Cap Funds?

Small cap funds have only one goal - To produce high long-term returns.  In comparison to mid cap and large cap funds, small cap funds have a high return-risk ratio and experiences high levels of volatility.

After learning about the benefits and risks associated with small cap funds, you can begin investing in these funds. But only if you have the risk taking capacity and can invest for the long term. This is everything that you must know about small cap funds before you start investing.  Make sure that you do proper homework from your end and then start your investment.

Visit our Knowledge Center for more articles on Mutual Funds. You can also find many valuable blogs in our Help and Support section regarding Samco Mutual Fund.

In the last few years,  there has been a huge interest among investors regarding Exchange Traded Funds, also popularly known as ETFs.

ETFs were  first introduced in 1989 by the American Stock Exchange and the Philadelphia Stock Exchange. But it took more  than a decade for ETFs to enter the Indian stock markets.

This article will help you to understand and make the best decision regarding ETFs.

In this article you will learn:

- What are Exchange Traded Funds?

- Types of Exchange Traded Funds

- Advantages of Exchange Traded Funds

- Disadvantages of Exchange Traded Funds

What are Exchange Traded Funds?

An Exchange Traded Funds is a  basket of securities that helps investors to track the performance of a select benchmark index. Some of the common  benchmark indices include the BSE Sensex, Nifty 50, S&P BSE Banks, etc.

ETFs  are not like your regular mutual funds. Unlike mutual funds, ETFs can be traded on the stock exchange in real-time. This means you can buy ETFs in the morning and sell them during trading hours to get the benefits of intraday trading.

With ETFs, you can enjoy the benefits of mutual funds and at the same time, you can enjoy it as a regular stock that can be easily traded in the stock market.

Let's understand it with an example:

You want to invest in BSE Sensex which consists of 30 stocks. Now normally you will have two options -

● Buy each stock that makes up the BSE Sensex index  separately. But this means you have to invest a huge amount.

● The other option is to invest in an index mutual fund. But you cannot trade units of index mutual funds.

The middle route for both of these options is to invest in an ETF. This way you save up on money and can trade ETFs like stocks.

An ETF pools money from various different investors just like mutual funds and investors are allotted units. In this case, units are listed in the stock market and the NAV of ETFs keeps on changing as per the market ups and downs. ETFs do not try to outperform the corresponding index. They just aim to mirror the performance of the index.

Types of Exchange Traded Funds

1. Equity ETFs: It is a basket of equity stocks. This is further subdivided as per the sector it monitors.

2. Debt ETFs: It is a basket containing fixed income instruments like government bonds, corporate bonds, treasury bills, etc. For example - Bharat Bond ETFs

3. Commodity ETFs: Commodity ETFs like gold ETFs allows you to participate in the price movements of gold without holding physical gold. The Securities and Exchange Board of India (SEBI) has also approved the establishment of silver exchange traded funds by mutual fund houses.

Related Article: 9 Lessons from the Nifty50’s journey

Advantages of Exchange Traded Funds

1. Low investment cost: Most of the ETFs are passively managed. This means investors do not have to pay fund manager fees. This leads to lower expense ratio and automatically increases the overall returns in the hands of the investor.

2. Diversification: ETFs give their investors a chance to diversify their portfolio across different industries, sectors, and styles. They also help you gain superior diversification as the losses in a few stocks are offset by gains in the other stocks.

3. Transparent: When it comes to ETFs, their transparency is remarkable. You will find the stocks in which the ETFs have been invested easily from any domain as it is mandated by SEBI. They disclose their holdings monthly and NAV is disclosed daily.

4. Liquidity: The best part of ETFs is that they can be traded in the stock market during market hours. In  mutual funds, the NAV is disclosed at the end of the day. But  in ETFs, you can actually buy and sell on real-time basis.

Disadvantages of Exchange Traded Funds

1. Misuse of investment period: Investment in a mutual fund is done with a long term aim. But with ETFs, traders can buy and sell their units throughout the day. This continuous buying and selling ruins the investors’ mind set and also hampers the power of compounding.

2. Brokerage commission: ETFs are just like buying shares from the market which results in investors having to pay brokerage and tax every time they buy and sell the shares. The more the buying and selling that takes place, the more the tax and brokerage investors have to pay.

3. Trading Volume: With the exception of a few well-known ETFs, most ETFs in India have very modest trading volumes.

These were all the important points you must know about Exchange Traded Funds before you start investing in one.

Hope this article was useful.

Visit our Knowledge Center for more articles on Mutual Funds. You can also find many valuable blogs in our Help and Support section regarding Samco Mutual Fund.

Related Article: Top 5 Reasons to Invest in Samco Flexi Cap Fund