Every investor while investing wishes to maximise his returns while minimising his risk. Asset Allocation and Superior scheme selection are time tested proven ways for doing the same. But time and again it has been proven that for an investor to manage his asset allocation and select superior schemes is extremely tough and difficult to execute due to operational and behavioural reasons.
MARS (Mutual Fund Automated Portfolio Rebalancing System) tries to overcome these issues for investors whereby they can manage their asset allocation and invest in better performing schemes by the click of a mouse and maximise their returns. As the process is system driven and operationally smooth, it also helps weed out behavioural biases. MARS gives a wide array of portfolios to choose from to the investor based on his risk appetite and periodically triggers portfolio rebalancing based on deviations from the asset allocation of the model portfolio resulting in superior returns to the investor over a period of time.
- Asset Allocations
- Mars Portfolio
SALIENT FEATURES OF MARS
- It gives clients access to a range of well diversified portfolios to choose from.
- There are 2 broad sets of asset allocation portfolios:
- Dynamic Asset Allocation: the asset allocation between equity and debt would vary depending on the risk in the equity markets; higher the risk, lower will be the allocation into equities and vice versa.
- Fixed Asset Allocation: the asset allocation between equity and debt will be kept fixed.
- The underlying MF schemes will be selected by the NJ Research Team.
- The asset allocation re-balancing would be done yearly for Fixed Asset Allocation and quarterly for Dynamic Asset Allocation.
- The MARS portfolios are only available to clients holding Trading and Demat Accounts with NJ.
BENEFITS OF MARS
- Client can select a model portfolio depending on his requirements and investment needs.
- Helps the client to invest in well researched mutual fund schemes in his portfolio.
- Simple execution tools for portfolio rebalancing.
- Enhanced returns resulting from disciplined asset allocation.
HOW DOES MARS WORK
- Portfolios designed by the NJ Research team will be made available on the MARS platform.
- Client has an option to select any of the available portfolios with the help of his NJ partner.
- The client can buy into MARS by transferring his existing MF portfolio.
- The client can also buy into MARS through cheque / net banking / debit card / auto debit mandate
- The client will be required to authorize all the purchase transactions either online through a single click or signing the TIS provided by NJ Partner.
- Rebalancing of the portfolio is triggered as per schedule of various portfolios. The client needs to authorise the same to realign the portfolio with his target asset allocation.
WHAT IS ASSET ALLOCATION
Asset Allocation, simply means, investing money across asset classes, namely equities, bonds and cash. It is the key ingredient for any investor wanting to create wealth in the long term. Asset allocation is also important because diverse asset classes, due to their inherent nature, behave differently. Equity, which represents ownership in a business or enterprise, is volatile in nature and tends to go up and down in the short term. On the other hand, bond, which represents lending money to a business or enterprise, is relatively more stable and provides regular income in the form of interest. Diversifying the client's investments across different asset classes will result in diversifying the investment risk and create a well balanced portfolio that can offset the impact of investments that are currently not doing well and take advantage of investments that are currently growing and performing well.
Values of individual asset classes can go up and down in line with the underlying market movements. While this is no reason for the client to panic, it is important for the client to review his initial asset allocation with the current asset allocation and make course correction through portfolio rebalancing.
HOW TO DETERMINE THE BEST ASSET ALLOCATION
Asset classes vary on the basis of their average returns and volatility. Equities have the potential to give higher returns but the volatility of the returns is also high. Bonds are relatively more stable and pay fixed interest at defined frequencies.
The best approach to asset allocation is to find out the risk appetite of each client. The greater the appetite for risk, the larger the share of the portfolio that can be allocated to equities.
Risk appetite may differ from individual to individual based on his investment horizon, ability to bear loss, current financial status, current job status, social background etc. These are some of the factors affecting risk appetite for any person. The advisor should determine the right asset allocation for the client based on his understanding of all these factors.
FIXED ASSET ALLOCATION PORTFOLIOS
Apart from the DAA Portfolios, MARS also oers Fixed Asset Allocation portfolios. There are multiple portfolios which offer the option to invest in FAA ranging from 10% Equity upto 100% Equity exposure. The rebalancing in these portfolios will happen on a yearly basis. The details of these portfolios are mentioned as under:
What is MARS?
MARS stands for Mutual Funds Automated Portfolio Rebalancing System. It is an asset allocation and scheme selection tool that is being offered to NJ Partners and their clients. Depending on the risk appetite and goals of the client, the partner and client can choose from a wide range of portfolios available in MARS. The tool will provide regular reminders to the partner and client for maintaining the asset allocation and change underlying schemes periodically based on research done by NJ team. The client will need to authorise the transactions for the relevant changes to take effect.
What are dierent portfolio strategies oered under MARS?
MARS offers the following 2 portfolio categories
- Dynamic Asset Allocation Portfolios
- Fixed Asset Allocation Portfolios
Under Dynamic Asset Allocation, the following portfolios are being oered to partners:
Under Fixed Asset Allocation, Portfolios are available from 10% Equity Allocation to 100% Equity Allocation.
What is the minimum amount for opening MARS account ? What is the minimum top up amount?
Minimum amount for opening a MARS A/c is Rs. 1 Lac. The minimum investment for top up is Rs. 10,000.
Does a client need to open a new TADA account for MARS?
No, a client does not need to open a separate TADA account for MARS. He can avail the facility from his existing TADA account only.
Can a client avail the MARS facility without opening a TADA account
No, having a TADA account is compulsory as all the transactions will be routed through the stock exchange platform
MODES OF INVESTING
What are modes for investing into MARS?
The client can invest through cheque, net-banking, debit card, auto debit mandate or by transferring his existing MF portfolio into MARS. Client cannot transfer his stock portfolio into MARS.
Which schemes are restricted for transfer to MARS a/c?
FMPs, closed ended equity funds, ELSS schemes (units under lock-in) and schemes having pledge units will not be transferred to the MARS a/c.
Which schemes will get automatically transferred to MARS account?
All the schemes in your existing portfolio which are also part of MARS portfolio, will automatically get transferred to your MARS.
For e.g. A Client wishes to transfer some of his existing investments to MARS portfolio. He has investments in HDFC Equity Fund, Reliance Growth Fund and Birla Top 100 Fund. Assuming MARS portfolio also has Birla Top 100 Fund, his total holding in Birla Top 100 will automatically get transferred to MARS portfolio. Of the remaining funds, the client may choose to select any, all or none of the funds to be transferred to MARS.
Is there any lock-in in MARS?
MARS is an asset allocation and scheme selection tool. All the schemes in MARS are open-ended, hence there is no lock-in for the client. The client can buy / sell any scheme in his MARS portfolios subject to the exit load charged by the scheme.
What is the subscription fees for MARS?
As an introductory offer, the MARS a/c is currently free of cost to the client. However, nominal fees may be introduced later for the client. The only charge to the client is the transaction charge on the exchange platform, which is decided between the partner and the client at the time of TADA a/c opening. These charges are any way applicable to the client with or without MARS. There are no other charges in MARS.
Can a client open multiple TADA a/cs for dierent MARS portfolios?
No, the client cannot open multiple TADA accounts with the same holding pattern.
Can the partner select or change schemes in the MARS portfolio?
The MARS portfolio schemes are short-listed by the NJ research team. The partner cannot change the underlying schemes in the MARS portfolios.
Can the client switch from one MARS portfolio to the other ?
Yes, the client can switch from one portfolio to another. However, only one switch can be done in a calendar year.
Will there be any charges on the switch from one portfolio to another?
There are no charges for the portfolio switch currently. Normal transaction charges on exchange platform will apply as per agreement between client and partner.
When will the Portfolio Rebalancing happen ?
The Asset Allocation rebalancing for Dynamic Portfolios will happen on a quarterly basis and for Fixed AA portfolios will happen on a yearly basis in January of every calendar year. The portfolio change will happen every alternate year according to investment series. For e.g. - For all investments made in 2014, the scheme change will happen in Jan 2016 and for investments made in 2015, the scheme rebalancing will happen in Jan 2017.
What are modes available to the client for authorising portfolio rebalancing?
The client can avail of the following modes:
- Online authorisation via TADA a/c
- Partner can download TIS from the Partner Desk, get client's signature and submit it to nearest NJ PSC.
- Call and Transact (will be launched shortly)
How will the client and partner come to know about the schedule of rebalancing or asset allocation change?
The partner and client will be sent an SMS and email on the first day of the rebalancing schedule. The authorisation window will be open for the client for 15 days. During this period, client will get regular reminders till the time he authorises the transactions.
The client has forgotten to authorise the rebalancing transaction during the prescribed time. What should he do now?
In case the client has failed to authorise the rebalancing transactions, he will have to wait for the next rebalancing cycle for the auto change in his portfolio. However, the client always has the option of changing his portfolio himself by selling / purchasing / switching the schemes. None of the underlying schemes in MARS have any lock-in.
Can a partner authorise the transactions on behalf of the client?
No, a partner can not authorise on behalf of the client.
Client wants to discontinue his MARS account. What does he need to do ?
In case the client wants to discontinue the MARS service, he needs to intimate the partner for the same. The partner can then unmap the client from MARS service through Partner desk. The Client will stop getting any future alerts for rebalancing on his portfolio.
If a client redeems his entire MARS portfolio, does he automatically get unmapped from MARS?
No, the client is not unmapped from the MARS platform. He continues to a part of MARS. If he wishes to invest more money, the minimum investment amount will be Rs. 1 lac.
Can a client do partial redemption in MARS?
Yes, the client can do a partial redemption in MARS. The redemption amount will be proportionately redeem from all the schemes as per their asset allocation.
Can a client do a SIP in MARS?
SIP option in MARS will be launched shortly
Will the client have to bear additional tax burden due to investment in MARS ?
The scheme rebalancing in MARS will happen once in 2 years, so any scheme changes on the Equity side will not attract any tax as the same will fall in LTCG. The Asset Allocation rebalancing may attract minuscule tax on account of STCG in Equity and Debt based on market fluctuations. However, the cost of such tax will be minimal and should get largely offset by the overall additional returns generated through AA rebalancing.
Can an NRI invest through MARS?
No, NRI cannot invest through MARS