How to invest this 1 crore to get maximum trading margin from pledging?

[travi]

where can we get the list of acceptable liquid collaterals those which gives periodic returns with near to zero price fluctuation ....

In zerodha, use the link shared by trendtrade.

Look for g-secs. They have 0 price fluctuation and semi-annual interest payout.
Return of gsec is fixed when bond is purchased.
One can buy from secondary MKT, or bid in auction from Z coin or even use rbi portal.
Check with broker as to what they accept too.

If bond is acquired through coin, it may take some weeks before they are accepted for pledging.

 

[trendtrade]

Thank you so much @travi bhai, for your knowledge sharing. Very helpful.

All your points make sense. Thanks for shortlisting the names for us, now we both will simply choose the funds from these companies - HDFC, SBI, Kotak, Nippon, ICICI as all of them are reliable names. And when the capital protection and safety is priority, then why to take unnecessary risks for extra 0.5% returns.

And just to further shortlist the candidates, I have noticed that mostly these 4 type of Debt Funds are being accepted for Cash Equivalent from the excel sheet of zerodha -

Overnight Fund
Liquid Fund
Money Market Fund
Gilt Fund

So we have to look further within for these 4 Fund Types only.






Regarding buying the G-sec etc. through zerodha coin app etc. I found that the overall process looks a bit complicated and the difference in returns, compared with the Debt Funds, would not be a too big, therefor it looks much easier to simply buy the Debt Funds and pledge them for margin. Although there is no doubt that the G-sec are the safest bet.

Best Regards.

 

[trendtrade]

The point is that you are realising all of this today
It is as old as the instruments and IT rules themselves.

Just a note i missed in previous post.
Also margin collateral and margin funding are two very different things.

In collateral margin, there is no interest bcos broker is not providing additional funds whereas margin funding has interest applicable.

Margin funding primarily targets funding CNC trades, or some form of cash component fund or MTM shortfall etc.

Yes bhai, this could be very confusing for many traders.

Some more information in this regards could be found from this link -

https://www.angelone.in/knowledge-c...w-the-difference-mtf-pledge-v-s-margin-pledge

 

[travi]

Thank you so much @travi bhai, for your knowledge sharing. Very helpful.

All your points make sense. Thanks for shortlisting the names for us, now we both will simply choose the funds from these companies - HDFC, SBI, Kotak, Nippon, ICICI as all of them are reliable names. And when the capital protection and safety is priority, then why to take unnecessary risks for extra 0.5% returns.

And just to further shortlist the candidates, I have noticed that mostly these 4 type of Debt Funds are being accepted for Cash Equivalent from the excel sheet of zerodha -

Overnight Fund
Liquid Fund
Money Market Fund
Gilt Fund

So we have to look further within for these 4 Fund Types only.






Regarding buying the G-sec etc. through zerodha coin app etc. I found that the overall process looks a bit complicated and the difference in returns, compared with the Debt Funds, would not be a too big, therefor it looks much easier to simply buy the Debt Funds and pledge them for margin. Although there is no doubt that the G-sec are the safest bet.

Best Regards.

Reliable AMC is primary. in MF, Sarkari AMC wont behave like some of the sarkari customer service that has earned bad rep. There is almost 0 interaction. You buy units get NAV and redeem, thats all.

regarding which funds,
GILT - only if view is super LT. Like 5-6yrs+. Best to get in near rate peaks like right-now upto next quarter. Even 1 yr from now isn't big problem. ( so this is sorted )

If you want super-safety for some paranoid reason, use over-night otherwise i don't see any point.
some rainy day funds are best kept in FD.

Liquid and MMF have some % difference due to risk but one can split this in some ratio.
What we have to understand is that all AMC dont put all money in one underlying so there is already huge diversification.
Thinking overnight and liquid are better than MMF in theory looks ok but not really practical for even 20% to default at one go.

Safety measures mostly came in place after scams. Therefore, after we/or some of us are robbed in the next scam, only then will we know what mistake we made.

Regarding G-Sec, all is rosy except liquidating in an emergency. Prices on the secondary mkt are really bad. and as i said before, this periodic payout doesnt suit many bcos of tax implications.

In growth option, margin will increase on its own as NAV rises. Who will take periodic payout and again re-invest?
If you want periodic payout, then also one can redeem units as and when funds are required.

 

[TracerBullet]

If you want super-safety for some paranoid reason, use over-night otherwise i don't see any point.

Overnight funds hold gsec as collateral in treps. So basically no default risk. To me, that half perc or lower extra with liquid funds is not worth it for trading capital. So overnight + some gilt looks like a good enough option.
Yeah default in liquid is super rare, but can happen and if there is some inside info leak then because these are open ended, large groups can withdraw at favorable price ( that has happened - multiple times, i think even for liquid funds with ILFS issue) and suddenly that 5% bad holding can become 15+%. Probably not going to happen to liquid funds, but does not seem worth it to me. Trading gives enough

Gsec Directly - makes no sense i think due to taxation impact if you are in 30% bracket. Best to invest in them via Mutual funds. Gilt index funds seem safe enough with not that much duration risk, and you can hold till maturity. Ofc, rates get locked.

Edit - HDFC overnight portfolio yield is 6.46%. Expense is 0.1%. HDFC liquid yield is 6.64% Expense is 0.2%. Probably this is lower than normal right now.

 

[trendtrade]

Thank you so much to both of you @travi and @TracerBullet for sharing this valuable information. This has been of great help.

So far, this seems to be case for the 4 Categories of Debt Funds, which have been shortlisted -

Overnight Fund - around 4.8 % past 1 year returns, expense ratio of around 0.1 %
Liquid Fund - around 5 % past 1 year returns, expense ratio of around 0.15 %
Money Market Fund - around 5 % past 1 year returns, expense ratio of around 0.22 %
Gilt Fund - around 6-7 % past 1 year returns,

Obviously the GILT Funds are giving the best returns over the past 1 year, as seen here -
https://www.etmoney.com/mutual-funds/debt/gilt/66

The problem is that I really do not understand the CYCLES that these Debt Funds go through, as what we are getting this year, we might not get in the next year, specially for the longer duration options of GILT and Money Market Funds. So I am taking so much of time before punching in the buy orders for the same. Otherwise it is so easy to just simply buy the Overnight Funds for the complete amount and pledge it and forget about it.

I have stayed invested into the " HDFC Liquid Fund - Direct Plan - Growth" for more then 3 years and 8 months now and it has given me a CARG of 4.5 % for the same. I invested 12,00,000 in April 2019 and its value has become Rs 14,16,928 as of 1 Jan 2023. I was expecting that it will give me 6 % atleast.

 

[travi]

Thank you so much to both of you @travi and @TracerBullet for sharing this valuable information. This has been of great help.

So far, this seems to be case for the 4 Categories of Debt Funds, which have been shortlisted -

Overnight Fund - around 4.8 % past 1 year returns, expense ratio of around 0.1 %
Liquid Fund - around 5 % past 1 year returns, expense ratio of around 0.15 %
Money Market Fund - around 5 % past 1 year returns, expense ratio of around 0.22 %
Gilt Fund - around 6-7 % past 1 year returns,

Obviously the GILT Funds are giving the best returns over the past 1 year, as seen here -
https://www.etmoney.com/mutual-funds/debt/gilt/66

The problem is that I really do not understand the CYCLES that these Debt Funds go through, as what we are getting this year, we might not get in the next year, specially for the longer duration options of GILT and Money Market Funds. So I am taking so much of time before punching in the buy orders for the same. Otherwise it is so easy to just simply buy the Overnight Funds for the complete amount and pledge it and forget about it.

I have stayed invested into the " HDFC Liquid Fund - Direct Plan - Growth" for more then 3 years and 8 months now and it has given me a CARG of 4.5 % for the same. I invested 12,00,000 in April 2019 and its value has become Rs 14,16,928 as of 1 Jan 2023. I was expecting that it will give me 6 % atleast.


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back then interest rates were lower.
I had some liquid bees which gave me 2% p.a

we just have to believe that in LT the returns will avg out but they wont 100% beat inflation. Even FD doesnt.
So what we are doing is to pledge and use collateral to generate more returns and just selling far OTM can give decent returns.

 

[trendtrade]

back then interest rates were lower.
I had some liquid bees which gave me 2% p.a

we just have to believe that in LT the returns will avg out but they wont 100% beat inflation. Even FD doesnt.
So what we are doing is to pledge and use collateral to generate more returns and just selling far OTM can give decent returns.

Yes bhai, you are right. Eventually we need to generate good returns from our Trading Margin in order to beat the inflation.

I am a bit confused between your counter views to @TracerBullet regarding the Overnight Funds, as he seems to be fine with that, whereas they look like an overkill for you, from the safety point of view. Or maybe I have misunderstood something here.

If I simply divide the amount into 25 lac each for these 4 funds -

Overnight Fund
Liquid Fund
Money Market Fund
Gilt Fund

will that be a wise decision ? Otherwise on what basis should I decide to finalize the portfolio allocation for these different funds? Confused.

 

[TracerBullet]

Yes bhai, you are right. Eventually we need to generate good returns from our Trading Margin in order to beat the inflation.

I am a bit confused between your counter views to @TracerBullet regarding the Overnight Funds, as he seems to be fine with that, whereas they look like an overkill for you, from the safety point of view. Or maybe I have misunderstood something here.

If I simply divide the amount into 25 lac each for these 4 funds -

Overnight Fund
Liquid Fund
Money Market Fund
Gilt Fund

will that be a wise decision ? Otherwise on what basis should I decide to finalize the portfolio allocation for these different funds? Confused.

You are thinking too much man. 1st three are very similar with different holding periods. 1st one holds collateral too for part of portfolio (treps) and rest i think is govt stuff so default risk is managed and in exchange we lose some returns. Liquid funds have extra SEBI restrictions today in terms of quality, that could be reason for spread getting smaller vs overnight. In turn it will be safer too (vs past liquid funds portfolio) . But they are all very similar in terms of safety.

Gilt depends on holding period. Very long term will be more volatile. If rates goes down then they do well and vv. Index gilt funds have a target maturity. For ex, this one - https://www.valueresearchonline.com...l-2028-index-fund-direct-plan/#fund-portfolio - has about 7.35% minus expenses. If you are happy with that, you can just invest in that to lock in rates and hold it till 2028. Duration risk should not be terribly high in it so hopefully it wont be too volatile.

I can tell you what i do. Right now most of my funds are in overnight. Some funds i keep out of Z but belong to trading capital ( i do not use full margin). Say 15%. 10% is in ICICI all seasons fund which is a dynamic bond fund and 5% is in HDFC money market fund. I will also add pledged IDFC gilt index in future now once i make more money as i have enough overnight for now. Probably something like 60-70% in overnight rest in gilt looks fine too me. I dont want my trading capital to be too volatile outside trading. Instead of overnight, you can use liquid/money market too understanding the tradeoff. I have held liquid funds for more than a decade too and i did not have any issue. Got lucky with ILFS. Understand that risk is part of returns, esp in case of short term funds. If a fund is giving much more return vs competition then it might be taking extra credit risk to manage that.

 

[travi]

Yes bhai, you are right. Eventually we need to generate good returns from our Trading Margin in order to beat the inflation.

I am a bit confused between your counter views to @TracerBullet regarding the Overnight Funds, as he seems to be fine with that, whereas they look like an overkill for you, from the safety point of view. Or maybe I have misunderstood something here.

If I simply divide the amount into 25 lac each for these 4 funds -

Overnight Fund
Liquid Fund
Money Market Fund
Gilt Fund

will that be a wise decision ? Otherwise on what basis should I decide to finalize the portfolio allocation for these different funds? Confused.

the problem you are facing is you want to inki pink ponki

TB bhai or my holdings might be more than 6-7 yrs old.
Overtime different instruments are being added.

Even now i have some LBees, overnight, liquid fund, MMF and Gilt. Somewhere above i wrote, we dont need stock selection criteria here. AMC reliability is more.
We wont know your risk profile so create some ratio and buy everything