Year: 2019

How Can You Get Rid Of Poor Finance with Car Title Loans?

Every person faces a time in his life in which quick cash is needed to handle the financial problem. Instant money for the financial crisis can be required at any time and usually not under the best circumstances that may also be beyond our control. This may include medical emergencies, house repairs, and overdue bills or maybe even job loss or some other reason. However, there are cases in life when things are simply out of your control and you want to manage. In such cases, you will require some quick extra cash help. There is a way to gain access to quick money with a secured loan best known as “Car Title Loans” that will help you out until you are able to get back on your feet again. If you own a car, you can easily pawn your car and get the money you need. You can get these loans with competitive interest rates and convenient payment options.

But now you don’t have to worry about all these problems. You can get rid of all these problems by getting a loan against your car and which will give you the money on the same day. These loans are called “car title loans”

What is a car title loan?

A Car Title Loan is a type of a secured loan where the borrower can use their vehicle title as collateral to borrow funds. To get these quick cash loans, you must submit documents of your vehicle. The value of your loan amount will depend on your vehicle’s equity. Once your loan is paid back, the lien is removed and the car title is returned. If the borrower fails on their payments then the lender has the right to sell the vehicle to get their money back. You can easily borrow money based on the market value and condition of your vehicle. Our loan terms are long and flexible which allow you to pay off your loan over time.

How do Car Title Loans work?

To borrow a loan against your vehicle, you need to have enough equity in your car to fund a loan. The amount you can borrow is based on the value of your car or the equity you have in the car. The value of your vehicle will measure your loan amount.

Get Rid of Poor Finance

Car Title Loans are loans that can be taken against your vehicle. If you do, and you make all payments, it will reflect positively on your credit score by making on-time payments on these loans. You can also improve your poor finances because these loans usually have low monthly payments and the lowest interest rates as compared to other loans.

The benefits associated with availing car title loans:

  • No Credit Checks or Job Requirements

You do not require good credit or employment history. If you do not have perfect credit, you can still apply for a loan.

  • Low Monthly Payments

Car title loans offer low monthly payment plans for collateral loans that are affordable and manageable.

  • Reasonable Interest Rates

Get the reasonable interest rates in the industry with the zero penalties for paying off your loan ahead of schedule.

  • Flexible Repayment plans

You can choose a convenient monthly repayment plan. You may deposit payments at any time in varying amounts because of the flexible repayment plan

  • Quick and Easy process

The loan procedure is easy and fast. For a car title loan, all you require is a fully owned vehicle.

  • Cash on the same day

After getting approval, get your cash on the same day and drive off with your vehicle.

Requirements to get a car title loan:

  • You must own a vehicle not older than 10 years.
  • Your vehicle must be lien-free.
  • You should have vehicle registration and insurance of your vehicle in your name.
  • A valid Canadian driver’s license.
  • Proof of permanent residency.
  • Duplicate keys to your car.

Below listed are some of the best companies which provide car title loans and offer the best deal on it:

  1. GetLoanApproved.com
  2. InstantLoansCanada
  3. SnapCarCash

You can choose any one of the above according to your needs and requirements.

Set your EGO aside while Investing!!

Time flies by and from a market which was booming at large since past few years, suddenly one starts feeling the nerve and the market breakdown seems nearby. We are humans, and we tend to react to emotions. The extremes of greed and fear will undoubtedly prevail, and one will have to deal with it. There will be extremism and still investors will be coming in hoards and when the chips go down.
I met retired defense personnel who seems to be quite of an optimist way back in 2016-17 and why not the market was moving in leaps and bounds, and his overall portfolio valuations were in double digits, and he was quite ecstatic about it. On an evening when we were discussing the markets and how will the tide turn in the next couple of years, I was quick to respond go slow on your overall small-cap and mid-cap exposures if you are looking to redeem in the next 24 months. To this, he reacted with quite an optimism. He said buddy the next 36 months the market would grow at the rate of 15 to 20 percent p.a. I won’t blame him for the utter optimism that a bullish market creates on our senses.
Most of the times, we forget about the very basics of investing. The period for which we would want to stay invested in the market. The second one – what do we want to do with that money? You would say what kind of question is that? I would say do you have some goals in hindsight like in his case – a corpus for your grandchildren, a vacation in a few years, etc. etc.
Why don’t we get mean when it comes to our money? Why not what’s wrong in that? In a bullish market, we start chasing the best and only to find ourselves gasping for breath, we get ecstatic with the double-digit returns and start pumping in more money into the market only to feel sorry when the market turns its ugly head. Same was the case here, after around two years the same person had been calling me frantically and asking for suggestions as to what should he do with his mid-cap and small-cap investments which are at minus 30 percent? Desperate times call for extreme measures but will that help him now when he is in urgent need of this money.
I am not here to provide solutions to anyone in this write-up, but then the idea that I am trying to draw is for every other investor to understand few basic things before putting in your hard-earned money in the market. Set your emotions aside, stay away from your EGO as it will lead you to a road of Nowhere. Till then Happy investing.

Cafe Coffee Day – A Few Thoughts

I saw some people write Cafe Coffee Day in the same sentence with DHFL, Jet, KF, and ILFS. Some even went to the extent of claiming how govt change (and cleaner govt now) forced Cafe Coffee Day owner to jump off the bridge. Even 5forty3 is busy maligning his profile.

So hold your horses guy. First of all, none of the names mentioned above was a fraud. They were businesses, and they made a mistake. And then they died (or May die). That is how businesses work. Most of them fail, some survive.

Now CCD is not a failed company (yet). Cafe Coffee Day was a revolution. For the first time for millions and millions of Indian, there was a clean, safe, and exceptionally well-managed coffee shop.

CCD introduced Indians to Cappuccino, Mochas, Ice coffee, Devil’s own, Cheese Chilly Toast, and many more iconic flavors. CCD was the place where couples met without the fear of being caught by the neighbor wali aunty. CCD was the place where you met your friends and planned your startups. CCD was the place where you searched for a clean washroom. CCD was the place where you could ask to play summer of 69 and Bob Marley, the person behind the counter will play it without making a face. CCD was when Indians met quality in food retail for the first time. CCD ensured a lot happened over a cup coffee.

I know a lot of married couples who met for the first time at a CCD. I am sure everyone has a story about their time at a CCD. Mine started with wondering what the fuck is this menu at XIMB CCD and continued to places like Miramar Beach, Airports, Highways, and so many places in between. The first time my wife and I decided to move to Canada was in a CCD – I asked them a tissue paper, and the whole plan was drawn on that tissue paper!

The business was not a fraud. Siddhartha must have made mistakes – Got wrong PE partners, took too much debt, got involved in shady deals, sponsored politicians, but he was not a fraud. A lot many men are worshipped in this country, and they have way more shady business dealing.

The Cafe Coffee Day brand will struggle to survive now. The stock is hitting 20% lower circuits, and banks will freeze funding. Franchise owners may not get the supplies, and some will default on an annual contract. Maybe Starbucks or someone will acquire the brand.

No matter what happens to the brand now, an iconic chapter in Indian corporate history is over. Siddhartha had dared to dream, and he made millions to dream with him. He created 30K jobs and made the ‘devil’ our own. I hope his legacy gets appropriately recorded!

Run Your Financial Life Like a Business: Me, Inc.

I was listening to the Dave Ramsey show during work one afternoon as I always did, and he offered a caller a peculiar piece of advice that stuck with me. The caller had all sorts of debt and had nothing to show for himself, and Dave asked the caller “If you were hired to handle money for a business called You, Inc. could you do it?” The caller responded that he could. Dave then asked the caller if he had been running a business’s finances in the manner that he ran his personal life, would he get fired? Most probably, yes.

Here are the facts. Most people do not do smart things with money because they make emotional decisions with their money. When it is someone else’s money, they do not make emotional decisions because it’s not their money. It’s much easier to be smart with someone else’s money than our own. To be successful with money, you have to break the tie between your emotions and your purchasing habits. The only way to do this is to run your financial life as if you were running a business called Me, Inc.

If you were to run a business, would you do it with just a checkbook and make a financial decision if it sounded like a pretty good idea? Of course not, you would want to maximize your return on investment and keep a close eye on your expenses. You have to be able to track where your money is going, not just for one month, do it for every month. Use a QuickBooks, Microsoft Money, or a fancy Excel Spreadsheet.

You would never run a business without a financial plan and an annual budget for the business, and you should never run your personal life without those things either. You need to have a list of financial goals that you want to achieve. You can’t just say that “I want to save for retirement.” You have to specify how much you want to save for retirement, where that money is coming from, where it’s going to be invested, and when it’s going to be invested. Use specific goals. Doing a budget every single month is also a must. If you’ve never done a budget before, there are plenty of great free budget forms online.

Most people fail to do research and planning with money, and in the end, it just slips away from them. You have to be intentional about your finances. Research as to what you should be doing with your money, have a specific financial plan, do a budget, and don’t let your emotions get the best of you when it comes to making purchases!

How To Create a Budget on an Irregular Income

To be successful financially, having a budget, and sticking to it is a must! A budget will tell you where all your money is going, and allow you to show your money where you want it to go rather than just allowing it to slip away from you! It will help you make priorities and reach your financial goals. This works great if you know what your income will be every month, however not all of us quite know what our income will be every month because part or all of our income is based on commission and other factors which cause our salary to change from month to month, so it can be quite difficult to budget an unknown amount of money, but it can be done, and here’s how you do it!

The first thing that you need to do when budgeting on an irregular income, is to list all of the things that you would like to do with the money in a month. This will include everything, paying for groceries, buying gasoline, paying the mortgage, your insurance bill, putting money away for retirement, and you name it. This can even include outlandish things that you know you’ll never get to, such as buying a new car.

The second thing you need to do is prioritize. Write a one besides the most important thing, which is buying groceries. Write a two next to the second most important thing, which is paying utilities. Write a three next to the third most important thing, which is paying rent. Four is groceries, and five is some necessary clothing. After those items, keep numbering down from most important to least important. Now when you get money, you can start by spending money for the items on the top and go from the most important to least necessary. That way, all of the important stuff will happen first, and the less essential items are secondary.

If you have a very irregular income, such as if you work in real estate solely based on commissions, you can do something else, you could make nothing one month, $20,000 the next month, and then nothing for the next two months! It’s not an option to quit eating and driving for a month, so we have to do something different here. Figure out what your average income a month is, and when you make any more than that a month, put it in a separate checking account, and keep it for when you don’t make as much money in another month. When you have a month which is under your average, take the difference from the average in your other checking account. This is your “hills and valleys” fund, which helps flatten out your income so that you can more predictably spend money every month.

Budgeting on an irregular income can be more complicated than on a fixed income, but it can be done, and it is worth it!

4 Reasons Why You Should Not Worry About Market Declines

The stock and bond markets always change in value. If you are invested in the markets, you are going to experience the financial effects of fluctuation. Should you worry or not? Here are four reasons why you should not worry, and two reasons why you should.

You should not worry about downward moves in the market for these reasons:

1. If you primarily invest for dividends, the dividend income is your focus, not the value of the shares. Dividend investing has some similarity to the real estate owner who rents his or her property. The monthly rent helps determine the return on investment. The market value of the property is not of great concern since the owner does not intend to sell. The current purpose of ownership is the receipt of income. If you are content with the dividend income from your mutual fund or stocks, the market value is a secondary concern.

2. If you are purchasing shares regularly, a downward move in the market is not a problem–it is an opportunity to accumulate more shares at a lower price. The downturn can be a welcome event. The renowned investor, Warren Buffet, seems to find good values during periods of market declines. A lowering of prices does not necessarily mean a scarcity of good value. Sometimes prices are lower because the demand for ownership has fallen–and not because a business or a property suddenly has less value. If you believe that a decline will not be permanent and that demand for ownership will increase in the future, the current market price is not that important.

3. If you are a long-term investor, current prices should not cause worry. A long term maybe five years or more. The question is, what will prices be in five years? The answer should be based on the investment’s prospects. As an example, the cost of real estate may be calculated by using rental income return as a determining factor for investment value. This return on investment reasoning can apply to dividend-paying stocks as well. If rents will go up in the future, or if business profits will increase in the future, so will the price that someone has to pay to assume ownership of the asset. As a bonus, you have had the benefit of the dividends, or return on your investment, throughout the entire term of your ownership.

4. If you understand that there is a relationship between risk and reward, you should not be upset as the investment process unfolds. Informed risk-taking uses information and reason in an effort to offset risk. Risk is never eliminated. For you to claim the fruits of excellent investment results, you must also be willing to bear the negative possibilities that accompany risk-taking.

Here are two reasons why you should worry about downward market moves:

1. You are an equity investor. You do not invest for income. The market price of your assets must move higher from the price you paid for you to make a profit. When you are not looking for income to provide a return on investment, you have no other choice than to rely on the increase in market price. Why does market price go higher? Because there is a demand to own the asset or because there is a belief that the asset’s value will increase. An income investor has a real indication of an asset’s productive value, the anticipated dividend, while an equity investor relies on less concrete indicators. Therefore, a downward price movement is of more significant consequence.

2. You plan to sell your investment soon. You want the highest price you can get. Will the rate go higher or lower from where it now sits? The need for cash and a pessimistic view of near-term market direction are both strongly tied to the current price.

Whether your interest is in participating in dividend-paying stocks or in buying low and selling higher, your temperament and tolerance for various levels of risk are factors to consider when choosing your investment strategies.

Howard Feigenbaum is Registered Principal and Owner of Sharemaster, a Broker-Dealer firm that specializes in monthly dividend income funds.

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” – John D. Rockefeller

This article is a general discussion of the subject and is not intended as a solicitation or specific investment advice.

12 Personal Finance Mistakes I Made!

I have shared (in past) several lists of things to do for a successful personal finance setup — most of the items in those lists were my learnings over past 15-16yrs.

Today I was talking to someone to get their personal finance in order and remembered all the mistakes I have done and so thought putting them here for others to use:

1. The lure of passive income

A lot of people aim for financial freedom and passive income. Well, it is almost impossible to achieve it unless you are fortunate or have an inheritance or have underestimated your expenses. When I started “investing” back in the early 2000s, one crore corpus was a good standard of retirement. Today it is not even a safe corpus.

Lesson: So, instead of focusing on passive income, the focus should be on active income. Work hard till you are 50 and ensure you hit the point where 80C is taken care by EPF only. The moment you hit this mark, a lot of things will fall into your place.

2. Multiple credit cards and bank accounts

I love credit cards and believe it is the best product in the world if used correctly. However, IF YOU CANNOT MEASURE IT, YOU CANNOT MANAGE IT!

Lesson: Keep the number of bank account, Demat accounts, credit cards, MF schemes, stocks in the portfolio to an ideal number. There is hardly any sense in having more than two bank accounts and 2-3 credit cards.

3. Multiple Demat accounts/ Learning macro and microeconomics

Contrary to point 2, have multiple Demat accounts, however, operate only one Demat account. The rationale for various accounts is to get equity research reports on multiple names.

Lesson: You May be a SIP only person; however, it is critical to understand the economy and sectors. The best place to do it is reading reports. There will be people who will say Indian Equity space sucks and the report quality poor – Don’t listen to them. It takes time to learn and understand economics, and most of the cynical people are the ones who don’t understand these reports

4. Always talk to the shopkeeper/Maids/Cook

There is a multibagger right in front of your eyes. The next Asian Paints, Eicher Motors, HDFC, Havells, Finolex, Page Industries, are in the aisles when you shop.

Lesson: Talk to the small shopkeepers and gauge the mood of the buyers. Also, look into the carts of the people standing in front of you. You will be able to get the next TTK and Asian Paints. It is not tough to spot them. Not for a moment, think all the multi-baggers are gone.

5. Follow a broad set of stocks

While it is essential to own a fewer number of shares and MFs scheme, it is necessary to track a broader set of stocks and MFs. In the long run, it helps to know a sector or a stock well while churning the portfolio

6. You will never miss the bus

I can’t fathom why people crib on missing buying a stock when it was X (today price is 5x). This is the stock market; the end is not near.

Lesson: There is one big “correction” once every decade. This decade had one when Southern European countries were on the verge of collapse and Greece bonds’ yield was 60%. You will always get a chance to enter – whether you are brave to enter during such a time is another matter.
I thought the world was ending in Sep 2008 and then in 2012. But now I have more grey hairs, a fatter waistline, and slightly more relaxed mind although I get scared even now 🤦🏻‍♂️

7. Spend money on yourself and your loved ones

Back in the mid-2000s, I chased the shit out of RPL and RNRL (few people will remember these stocks), and I made a fortune out of them. I paid up the majority of my education loan using these two stocks, and I reached a point where I started cutting serious corners to save money for extra leverage on day trading. I was stupid. I should have enjoyed more and should have spent that money on a few luxuries (like the trip to Sikkim that I skipped and bought Suzlon at 390 a share 😂)

Lesson: My engineering days are long gone, and that carefree day will not come back. While some of my friends have great memories of those time, I have memories of watching a black screen with quotes of two stocks that don’t exist anymore. Spend money on things that make you happy.

8. Buy a term plan

OMG! Every time I meet someone who doesn’t have a term plan, I pinch myself to stop me from punching him. Yes, it is outrageous not to buy a term plan. Buy one today if you don’t have one. Top it up to meet your current lifestyle if you already have one.

Lesson: Indian insurance sector is one of the most stable and well regulated in the world. Also one of the cheapest. Freeze the rate as early as possible to the maximum amount you can. AND PLEASE DONT EXCEPT for ANY RETURN FROM A TERM PLAN – term plan is for your loved ones and not for you to benefit!

9. Subdued returns? The brochure said Sensex gives 15% return

So your portfolio has a CAGR of only 9% while someone else has a CAGR of 12%. This is the end of the world – let me churn my portfolio. Don’t be this person. 9% over the long term is an excellent return; the days of 15% returns are behind us. Live with this fact.

Lesson: Don’t churn your portfolio at the drop of a hat. There is a whole line of finance that deals with portfolio management, and most of the well-performing portfolios/funds have a low churn rate. Buy quality and stick with them.

10. Dividends

The dividend yield is only 1.8%, why to bother about it. Dividends are more than just the money you get annually. A dividend paying company confirms several things which are critical for long term growth:

a) The company knows how to reward long term shareholders
b) The company is making enough cash to sustain its growth and hence can share profit
c) The company is making real cash and hence is able to share it. The profit is not just accounting magic.
d) The mgmt knows how to navigate short term financing

Lesson: Always give a premium to dividend paying stocks.

11. Buy gold

I know it is not in fashion to buy gold but keep 5% portfolio in gold. This is my personal opinion. Gold has a habit of sleeping for decades and then jumping suddenly in 2-3yrs to sleep again for decades. This is mostly because politicians world over has a habit of screwing the currency once in a while and gold is a hedge against the weaker currency.

Lesson: Buy gold on Diwali every year. Not only does it keep the spouse/parents happy, it will stabilize your net worth. How you wish to buy is up to you. I buy physical gold because I love the feel of it 🙂

12. Damn! He bought HDFC when it was 200 bucks. He is a genius

No, he is not. He is lucky. In personal finance, you can follow all the tips and rules, but in the end, it all boils down to luck. If your years of earning match the year of economy expansion, you will make money. It is as simple as that. Rest all is just garbage.
Yes being knowledgeable and having a plan will be useful and will give you an edge but luck plays a big role. As they say – The more you practice, the luckier you get.

Lesson: Don’t envy people who say he got X stock at 5% of today’s price. I have 3 Suzlon, Welspun, Jai Corp for every TTK and Page. I rarely mention Suzlon and Jai Corp and almost always mention TTK and Page. It is the case with everyone (including Rakesh Jhunjhunwala and other biggies). Just listen, smile and walk away. Some people have luck, you should have a plan. Eventually (after 40yrs), both of you will meet at the same point.

Phew! That’s all for today.

10 Lessons for Investors in the Indian Stock Markets

1. One should trade cyclical stocks only when one understands the start and end of cycles. Cyclical stocks peak in their prices not when their earnings peak out when expectations of earnings peak out.

2. MNC consumption commands a premium and should be looked at as a safe zone when markets are in an uncertain phase.

3. The financial mess can be more profound and trickier than manufacturing or product based company’s mess. In a finance company, troubles are unknown, leveraged and also have a ripple effect on other good assets.

4. Quality, the reputation of management, and quality of earnings provide a better margin of safety than cheaper valuations.

5. The market is smarter than all of us put together. If a stock trades at 30-40 PE, 50-60 PE, there are reasons for it. Predictability, longevity and quality with high growth command premium and price anchoring.

6. If the approach is not well defined, and strategy is not rolled out clearly, then random bets are bound to suffer.

7. Stock becoming cheaper and cheaper is not the right criteria to buy it, single-digit price is not at all a compelling reason to buy. If you ask me if it has assets, not so bad earnings and it’s in 10s or 20s of price, how much it can fall then answer is Zero. Sentiments and happenings to conduct in the future, perception towards them plays a significant role in price movements.

8. Turnarounds do not often turn. Stocks that have fallen from a ratio of 5 to 1 will not change their longer-term direction bouncing to 1.3 or 1.4 from 1. many stocks make such rallies in between but not able to sustain them when have fallen from very high.

9. no situation lasts. At one point people were picking mid-cap and small caps, now finding large cap as the holy grail. This won’t last all the time too. Time changes so do the momentums. Ability to hold good stocks for long, buying them on correction, digesting their falls only will produce substantial, durable returns. No shares or portfolio in the world has been invincible. Most revered veteran investors had witnessed 40-50% drawdowns in their holding value in their stock market investment career. Conviction and stomach will only make sizable investment and returns.

10. By merely avoiding what you don’t understand, stocks having pledges, low margins or cyclical margins, low promoter holdings, and investing in better roce, better visibility companies, one can do very well passively.

Lessons have a long way to go. The market is the best teacher.

Never Invest in a Mutual Fund Product You Don’t Understand!

A couple of days ago, I was having a discussion with my father about the recent DHFL default in debt Mutual fund space. He reads the newspapers regularly and  had read about ILFS, Essel group crisis and now DHFL. So he got concerned about the liquid mutual funds.

The first thing my father said was that he sees an ad daily on the television, “Mutual fund Sahi hai“. If Mutual fund sahi hai, then what do all these instances of default mean. I had explained many times earlier about the risks involved, but he was disappointed to learn that the sales team hide information about risks and just focus on one point to prove that mutual funds are always right.

My parents don’t know much about financial products, so I manage their portfolio and risk. My father retired four years ago and gets an indexed pension which is sufficient to meet their day to day and medical expenses. After checking the retirement calculator, I always knew that they wouldn’t have a sufficient corpus as most of their savings were spent on my and my sister’s education.

Thanks to an indexed pension, they get active income throughout their life so we didn’t have to think about buying an annuity. Also, funds get stuck in annuity and what if you need large corpus to fulfill any emergency. I also remember the day when we went to bank to deposit his retirement cheque. The manager tried to sell a ULIP. Since I was there I clearly told them no.

Later when we visited another bank to get KYC done for Mutual fund investments, they tried to sell regular plans. It’s like wherever you go for an investment product, the salespeople will be ready with a pitch to complete their target and sell a junk product to you.

After reading about the bucket strategy, we decided to keep 60% portfolio in FD, MOD, etc. and some part in Senior Citizens Savings Scheme (SCSS). The plan was to protect the corpus and let it grow matching with inflation as senior citizens get higher rates. Also, in case of emergency they can withdraw it anytime without much hassle.

15-20% was invested in liquid mutual fund due to its taxation benefits over FD and remaining in equity (as it should not be required for at least 10 to 15 years and I am always there to fund any emergency through my corpus). I don’t trust anyone to manage the risk for my parents as most people out there like distributors, bankers, etc will try to take customers for a ride.

The reason for this post is I have managed risk properly for the last four years for their equity portfolio, but I never thought that one by one there can be crisis in debt part. It’s like you focus on improving your middle order problems as the top order is sorted out then suddenly one or 2 of your top order gets injured and can’t recover for months.

Now you are staring at a fragile top order which was not there in your contingency plan.

Fortunately neither me and my father suffered a lost a single penny in debt portfolio due to recent events but this has been a very good lesson for everyone who invests in debt MF. They are more complex than any equity MF. Choosing an equity MF is more easy compared to debt MF. Losses in equity can recover with market (only with long term investment) but its almost impossible to recover it in debt MF.

Finally, for my father’s portfolio we decided to max out SCSS as it has some scope left and rest debt will be kept in good old FD only. I can’t imagine a situation for them where they would have lost their hard earned money due to such events. I would not have been able to sleep properly if something like that had happened.

Also, those who manage their parents portfolio due to their limited knowledge on financial products, please never invest in any product which you don’t understand clearly and younger generation and senior citizens have different risk appetite so quantify that before taking any decision. Sorry for a long post but I thought to share my experience as it might be helpful to others

A Quick Analysis of Overnight Funds

Why am I talking about Overnight Funds now?

I Got hit finally after years of escaping debt fund mayhem! UTI PSU And banking fund is bleeding… Banking and PSU funds are created just for this purpose as they eliminate interest risk compared to Gilt. They are supposed to invest only in Govt backed holdings as per their SID. This case also the SPV has a deal with NHPC, NHPC pays the money to SPV. But since SPV was created by IL&FS, they have stopped payments to adhere to supreme court order of stay. There should not be any credit risk in these family of funds unless the state or central or municipal govt refuses to honor the contract. This SPV was supposed to be the Govt backed deal but this time it failed. This is the only time it failed BTW. Got to know lot about the structure of SPV as I researched. This is an interesting case. Many lawsuits will be filed now saying this SPV is sovereign as payments are from NHPC and this is not linked to parent group IL&FS

Even though it’s a tiny amount as I have invested in many debt funds but this made me lose confidence in debt funds. I am done with them… Already from the past many years, I am building my own NCD, GOI bonds, Treasury list, etc. and accumulating it slowly.

Anyone who has a substantial corpus in debt funds beware.  Liquid funds are also risky. Even the most popular Reliance liquid which gives instant money holds many risky instruments! Its AAA just for namesake. Majority of the fund managers are god damn stupid/fraud and change the portfolio like they change their dress. They should be fired and sent to jail literally!

My only rescue funds are overnight and arbitrage fund. But guess what the arbitrage funds are becoming greedy and making the same goddamn mistake of storing junk in debt folio. Overnight fund I am not sure when CBLO guarantee turns out to be fraud.

What is an overnight fund?

An overnight fund has the mandate to invest in overnight securities that have a maturity of as low as one day. They are typically money market instruments viz — Treasury bill (T-Bills).

In contrast, Liquid funds invest in papers up to 91 days of maturity. More than 60% of the Liquid funds AUM is invested in Corporate paper (mostly unsecured) which makes liquid fund riskier than an Overnight fund. Hence Liquid funds could show a drop in NAV just like the other short duration, and credit risk and corporate bond funds did.

The Pros and cons of Overnight Funds

Overnight funds are the lowest in the spectrum of risk returns, i.e., Low risk and Low return. The returns match or slightly exceed the RBI Repo Rate. The RBI repo rate was incidentally was reduced to 5.75 by the recent RBI MPC.

A look at the offering of Overnight funds shows that many funds are less than one year and returns are around 6% … this is likely to fall as the repo rate has been reduced and hence more likely to be below 6% going forward.

These are good for a very short duration instead of Savings Bank.

Only two funds seem to have decent corpus (HDFC and SBI fund offering), and the total corpus across all funds is less than 17000 crores which is a very small compared to what gets invested in Liquid funds.