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By Balwant Jain
Return on fairness investing relies on quite a lot of elements. This contains each macro and micro elements. So far as macros are involved, market individuals would search for particulars like current and potential financial progress, inflation, rate of interest and many others. to gauge its impression on the financial system and consequently the market. Aside from this, micro elements that are firm particular in nature additionally come into play.
What’s
Momentum primarily based investing is a mode of investing whereby buyers reap advantages by using an current worth development. The selections made on this type of investing is basically primarily based on technical indicators associated to the worth motion of the inventory of an organization. The target right here is to learn from inventory worth volatility within the brief time period. It’s akin to browsing on the ocean waves. Right here, an investor is crusing up the crest of a wave, solely to leap on to the subsequent wave earlier than the primary one crashes down.
Using the momentum wave
Previous efficiency of the index
The previous efficiency of the index has been very encouraging. Rs. 1 lakh invested within the index throughout June 2005 could be price Rs. 20.51 lakhs as of June 2022.The same funding in Nifty 50 or Nifty 200 at this time could be price Rs. 9.46 lakhs and Rs. 9.77 lakhs respectively. From a 10-year perspective, the index has delivered an annualized return of 19.88% whereas Nifty 50 and Nifty 200 have respectively given an annualized return of 12.94% and 13.44 %.
The Nifty 200 Momentum 30 index enjoys a dividend yield of two% as towards 1.5% and 1.4% for Nifty 50 and Nifty 200 respectively. When it comes to price-to-earnings ratio, the momentum index is sort of at par with Nifty 50 TRI and is decrease than Nifty 200 TRI. In relation to price-to-book, the index fares higher than Nifty 50 TRI and Nifty 200 TRI. (Information as on June 2022).
Spend money on momentum corporations with ease
For a lay investor shopping for into every of the businesses within the index individually and rebalancing them when required is a time consuming and tedious course of. So, the simplest solution to go about is to spend money on an Trade Traded Fund (ETF) or an index fund which is predicated on the Nifty 200 Momentum 30 Index. Each the ETF and index funds are devices that are designed to duplicate an underlying index and provide investor the return just like that of the index minus monitoring error and bills.
Taxation facet
Since each index fund and ETF qualifies as fairness oriented schemes, any funding in these funds shall be thought of as long run if held for 12 months or extra and earnings on such items shall be taxed at a flat fee of 10% after excluding the preliminary Rs. 1 lakh of long run capital good points accounted for all listed shares and fairness schemes taken collectively. If bought earlier than completion of 12 months, the earnings shall be handled as brief time period capital good points which get taxed at a flat fee of 15%.
To conclude, if you’re an investor with a long run funding orientation and is trying to capitalize from momentum investing, then these choices be it an index fund or an ETF primarily based on the Nifty200 Momentum 30 index shall be an attention-grabbing funding choice.
(Balwant Jain is a tax and funding skilled and may be reached on [email protected] and @jainbalwant on Twitter.)
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