1. What is goal-based financial investing?

Every individual has several life goals - both long term and short term. Investing in a planned manner to achieve these goals is called goal-based investing. For example, if you want to plan a foreign holiday with your family in mid-2018, which is about 18 months away , it is a short-term goal. On the other hand, saving for the higher education of your child who is five now is a long-term goal.

2. How does one plan for goals?

The first step is identifying the goal for which you wish to in vest and assessing the time you have to reach it. Once that is done, it is important to find how much the goal costs today . Add a reasonable amount of inflation to that, and then you would know what the goal would cost you in the year you wish to accomplish it. The next step would be to understand how much you can save or invest for that goal. You could then use the systematic investment plan (SIP) or go for a lumpsum investment, or even a combination of both, to achieve that goal.

3. How can you use mutual funds to meet the goals?

First, identify funds based on your risk profile. For example, if you plan for a foreign holiday 18 months from now, which will cost you about `5 lakh, debt funds (ultra short-term or dynamic bond funds) will be ideal to reach that goal. Since it is a near-term goal and the time is less than three years, investment advisors suggest you should go for a combination of debt oriented funds, which could give you anything between 7% and 9%. Do your math and decide whether you wish to opt for a lump-sum investment or want to stagger it. Also keep the tax implications in mind, as debt investments for less than three years will attract short-term capital gains tax. Similarly , for your child's higher education, which would be more than 10 years away , you could invest in equity mutual funds. If you do an SIP of Rs 5,000 every month for 15 years, at a 12% return you could accumulate Rs 23.79 lakh.

4. What are the benefits of goalbased investing?

Goal based financial planning helps you invest in a systematic and disciplined manner to achieve your goals. It helps you remain focused and unaffected by the short term volatility in the equity markets.

Fund managers Sankaran Naren, Manish Banthia and Atul Patel manage the scheme. On the equity side, the scheme is known for its contrarian investment strategy. This is a key thing that distinguishes the scheme from other balanced funds. The fund managers are not interested in employing inconsistent stockselection strategy and show superior returns. The scheme has a good mix of large-sized established companies on the equity side. Prominent companies in sectors such as telecommunications, power and IT, which may seem out of favour at present, may see a turnaround in earnings cycle in the next two years are the ones which have attracted the attention of the fund managers. On the debt side, the scheme's portfolio consists of government securities and bonds with more than AA ratings, which provides reasonably good assurance to investors about the safety of their capital.

The scheme has been a top performer and has delivered 16-20% returns in the past threeand five-year periods, though its category of funds has given 14 and 16% returns during the same period.

1. What is open interest?

An outstanding buy or sell position on a stock or index futures or options contract.

A trader can gather cues from open interest (OI) to spot potential trends in a stock or in an index. Read along with price data it's a useful data for traders who can interpret whether a trend is bullish or bearish. But often it could mislead those wet behind the ears.

2. Why is it important?

Higher the OI, deeper the market. High volumes along with high OI indicates greater hedger and trader participation on a stock futures or options counter. Conversely , high volumes and low OI means more speculative interest in a counter. Because OI is high a trader can gauge whether short-term trend in a counter is bullish or bearish.

3. How's that?

Rising OI accompanied by rising price is indicative of bullish trend. If OI remains flat after substantial price rise OI it indicates that market is forming a top. Similarly , rising OI but falling price indicates bearish trend. When OI does not rise much after a sharp fall in prices it indicates formation of a bottom and trend reversal.

4. Why can it mislead, especially during result season?

Markets discount. If a company is expected to perform poorly prior to results the stock will fall and open interest rises. If one looks at the options chain to gauge, the person will see a huge sale of call options and a relatively lower sale of put options. Higher call OI than put OI will probably make the person inclined to buy a call, thinking that the stock will rise post result. But actually the seller had sold or written more calls knowing downside chances are greater or any possible upside will be capped. So, the buyer will probably be on the wrong side. Therefore, it is important to take an informed decision and trade with strict stop losses in place. When writers feel a stock will rise, they sell puts and partly finance their own purchase of calls with premia received from buyers.

5. What more can happen?

Sometimes the buyer might see many calls being written and so, interpret that as meaning stock will face downside pressure and buy a put. But post poor results, if company gives positive guidance for quarters ahead, the stock could surge despite posting poor results and cause a loss to the put buyer as call writers start covering their shorts. That is open interest of calls begin to fall as price rises.