So now Zerodha is allowing most of the securities to be pledge which is approved by NSE.
Now one can have choice to invest in securities with better returns other then liquid funds.
Now Money Market funds ,Gilt Funds and Govt. Secuties are included.
Past 5 years avg returns are far better than liquid funds like liquidbees.
Please suggest best Securities for Cash Components with higher returns. This became important as now many of the scripts are allowed under cash components.
I think you should spread the risk by investing in different types of schemes.
Right now I have spread it between Liquid funds (Axis/Franklin) and Gilt funds (ICICI/Nippon). Will re-balance if required after 6 months (Mar - 21).
Continuing on the previous response. I also plan to purchase SGB (which is surprisingly cash component) when the prices cool down a bit. This will create a portfolio hedge and small yearly income of 2.5%.
in case of margin shortfall or loss ; the broker has to liquidate the pledged security , to the extent the shortfall amount .
But , if your pledged security is SGB ; it has to be liquidated in full lot size and not to the extent of your margin shortfall !
another , matter of concern is that there is hardly any volume liquidity in it . So , i wonder how the broker would liquidated the pledged SGB security !!
Good point. That is why I mentioned in the initial post that we need to spread the risk. Your SGB portion should not be more than 20-25% of your overall cash pledge.
Gold provides two types of hedge: stock market crash and currency crash.
Some of the Securities that may be good for cash component.
Category : GILT funds (Avg 10-11% returns)
ICICI Prudential Gilt Fund - Direct Plan - Growth
HDFC Gilt Fund - Direct Plan - Growth
Nippon India Gilt Securities Fund - Direct Plan - Growth
Categeory : Money Market ( Avg returns 7.10 -8%)
L&T Money Market Fund - Direct Plan - Growth
in case of margin shortfall or loss ; the broker has to liquidate the pledged security , to the extent the shortfall amount .
But , if your pledged security is MFs ; it has to be liquidated in full lot size and not to the extent of your margin shortfall !
another , matter of concern is that there is no trading in the secondary market for all the MFs and thos MFs trade have hardly any volume liquidity in it . So , i wonder how the broker would liquidated the pledged MFs security !!
Some good questions raised here w.r.t liquidating pledged securities… do you liquidate fully or partially incase of shortfall… is there a difference if the pledged security is a Mutual Fund and not a Stock?
Based on shortfall, same for mf or stock.
Could you clarify clearly and putting question in terms of numbers for better understanding
suppose a person has 1 lakh worth of liquid bees pledged and there is shortfall of 10k .
How much would of pledged liquidbees will be sold. ?
Sometimes we may cut position, sometimes we may let to carry forward position as it depends at the discretion of our RMS, final point is if there is debit of 10k in account, we will sell worth of 10k only so that it will make good of debit.It is client responsibility to take care of his positions.
How about LIC MF G-Sec Long Term Exchange Traded Fund and SBI ETF 10 Year Gilt
For gilt funds - its subject to interest rate risk …so because currently interest rates are low …do you think they are the right choice for investment at the moment? @TradeB2B @Vij
@curiousvi glit funds are long duration fund
already interest are bottom out , from now the interest rate will increase from here
if interest rate is decrease Glit fund NAV will increase
if interest rate will go to increase Glit fund NAV will decrease drastically
Not a good idea to invest now in Glit funds , Now is the best option to invest is FLOATING RATE FUND
Please give couple of names.
birla floating and icici floating
These funds are part of non cash component.
Yep …they are part of non-cash component.
Money Market are safe and good returns.
Addition to above there are 3 more securities with good returns and considers cash component.
Aditya Birla Sun Life Government Securities Fund