Do ratings for initial public offerings (IPOs) help? How does one use these grades to make investment decisions?
These grades are indicative and reflect the business fundamentals of the company coming out with an IPO. However, they do not reflect on the price of the issue. This means a fundamentally sound company may get a good grading, but may not be an attractive investment bet, if the IPO is overpriced. Therefore, these grades have a limited benefit in helping make investment decisions.
Given the volatility in the markets, should one shift from monthly Systematic Investment Plans (SIPs) to a daily one? Are there any advantages?
A daily SIP could help an investor get a better average price for their investments than a monthly one, since the investments would factor in the day-end price for every trading session.
A monthly SIP could be more volatile in terms of returns, since investments may happen on days when the markets are higher or lower than the average daily trading values for the month. Therefore, it could be more advisable to have a daily SIP.
However, investors may have to invest a higher amount, since there may be a minimum investment amount for the daily SIP, higher than what is required for the monthly SIP.
I am 55 years of age and have Rs 15 lakh invested in equity mutual funds and stocks. I want to shift this amount to debt instruments. For this, I was advised floating rate funds in the current interest rate scenario. Is this right? Would fixed deposits not be a better option? Please suggest. Also, should I transfer the entire amount in one go?
A floating rate fund will give you returns based on the prevailing interest rates, while you would be able to lock in interest rates in a fixed deposit.
Given the current high interest rate scenario, I agree fixed deposits may be a better option. For transferring the investment amount, you may do so at one go or systematically through a SWP (systematic withdrawal plan) for your mutual fund investments, depending on your requirements.
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I recently read that as the markets are going nowhere, structured products are attracting investors. It is said these products protect from downside and provide unlimited upside. What are these products? How do they work and how can one invest in them?
Structured products are very complex products meant for sophisticated investors. They are usually a mix of an underlying asset class like maybe a bond, along with exotic options, which may provide capital protection and a limited upside, depending on the terms of the product.
The writer is director, Touchstone Wealth. The views expressed are personal. You can send your queries to yourmoney@bsmail.in