Month: October 2022

Leaders are trusted for their judgment and respected for their expertise, integrity etc and hence followed and not because they hold a certain position. For e.g. M.K. Gandhi for most part did not hold any official position to lead the Indian freedom struggle.

It is also important to understand that a formal authority and power emerging from it, might not always be able to influence people in the desired manner as; in times of crisis and difficulties people view it as coercion. On the other hand leadership tends to create followers out of free will and choice without forcing them to accept anything thrown their way.

Authority rarely provides a scope for feedback, constructive criticism or opinions of the people on whom it is exercised however leaders provide ample platform to their followers to voice their thoughts and feedback.

When dealing with adults, the sole use of authority to direct and discipline them hardly works, leadership provides a better approach of sharing and involving thus building rapports with followers and creating long term relationships. Authority can hardly make people change their attitudes and behaviors with lasting effects and results however a leader inspires followers through self modeled ways and hence leadership displays greater effectiveness in addressing attitudes and behaviors of people.

Exercising authority sometimes limits the approaches to arrive at solutions for issues and problems while leadership encourages people to look beyond the obvious and think innovatively and sometimes emerge with radical solutions.

Apart from it, the biggest difference between the two as cited by Stephen R Covey is the moral authority held by leaders over the followers which is absent in the case of power from authority.

Within the organizational setup when leaders also have moral authority on their subordinates by establishing a synchrony in their words and actions; the rest of the structure and processes of the organization also get aligned to it, thus creating a robust and transparent culture.

Authoritative way of working also encourages individuals to work in silos while in the organizations of today; the leaders need to have a complete picture and coordinate with other functions and departments as and when required. It is indeed difficult for mangers and leaders to move out of their circle of authority and coordinate and interact with external people. However the need of the hour and the more effective approach to leadership and management is when leaders come out of their comfort zone and move from exercising authority on a small group to leading the entire organization.

Individuals, who do not rely on authority but lead people, are the ones who enjoy the privilege of their ideologies and thoughts practiced by later generations long after they are gone. Even with individuals who held positions of responsibilities, the ones who actually led their people are the ones remembered and followed.

Leadership is a Choice

All executives have positional authority that can be leveraged to achieve results, but they can choose to use their leadership skills instead of authority to achieve results. You don’t need any positional authority to be a successful leader.

Leadership is exponentially more powerful than authority because it involves choice. When your team members choose to follow you, they are doing so because they either feel positively connected to your vision or because they simply feel connected to you. With this connection, your team members will start consciously succeeding for you.

This shift from their minds to their hearts means that your team members will begin intentionally incorporating the things they believe will ensure your success with their approach to ensuring their success. This will result in closer alignment between their actions, your vision, and the direction you hope their efforts will take the company.

Leader

A leader is an individual who leads a group such as a team, department or business in what they believe is the right direction. The leader tries to make decisions that benefit the entire group and address problems at the organizational level, allowing the group to advance toward its overall goals. Leaders also assign tasks to group members based on individuals’ strengths.

Effective leaders often motivate their juniors to improve by offering encouragement, recognizing work well done, rewarding successes and offering feedback. They may also promote a sense of camaraderie so individual group members desire to benefit the group.

Mentor

A mentor is an experienced and knowledgeable person in a field who undertakes an instructive and advisory role of a mentee, who has less experience. The mentor can guide the mentee toward growth by offering advice, helping to identify problems and being an encouraging figure. In business settings, mentors may also train and develop employees, and it’s not uncommon for mentors to advise leaders or be leaders themselves.

The mentor-mentee relationship is often long-lasting, similar to a friendship or parent-child dynamic. The mentor’s function is to be a source of support while letting the mentee ultimately make their own decisions about the directions they take.

Mentorship Inspires Individuals to Advance

Mentorship, hands down, is something that people need at any company, this will bring magnificent results as one needs to focus on the individual goals of their team members and inspire them to move to the next level on their own terms.

Leadership Is Crucial for Accountability

Leadership is more important because a leader must be willing to roll up his/her sleeves and do the actual work. This is more important as it will keep the leader accountable for everything they command, and show his/her employees how it gets done.

Mentorship is More Holistically Beneficial

Quite often, by definition, leadership is directional but it’s not as holistically beneficial as strong mentorship. Inspiring confidence, autonomy and the capacity to develop professionally are vitally important to a workforce with major societal challenges ahead.

Leaders Steer While Mentors Cultivate Culture

It is important to have both leaders and mentors within a business. At the very top level, there needs to be a leader who steers the direction of the company, and at the managerial level, it is essential to have mentors to learn from on how to cultivate a culture of learning.

Mentorship is Part of Effective Leadership

To be an effective leader, mentorship is part of the package. It is through this approach that people are able to mentor the next generation of marketing powerhouses through effective leadership.

Mentors Help Businesses Grow Future Leaders

Both mentorship and leadership have their own roles, but mentorship is the key to the success of any business. Mentors not only help team members evolve into making tough decisions for the business but also help them become future leaders.

Leaders and Mentors are Dependent on One Another

Mentorship and leadership are two sides of the same coin that are dependent on one another. From a behavioural science perspective, no one can motivate another person. Leaders can make it easy to accomplish what’s wanted or needed, whilst mentorship provides a form of guidance.

A Coaching Leadership Style is Akin to Mentorship

There are two primary types of leaders: dictators and coaches. The best leader is more like a coach or a mentor. Leaders and Mentors perform at their best when they are influencing and helping those they lead improve through encouragement and challenge.

Mentors Can Be Found in A Wide Range of Relationships

The mentorship role can encompass a wide range of relationships, from someone whom you occasionally meet for coffee or you can actually email for advice because having mentors to support and guide you is a key aspect of professional growth. But it’s important for leaders and mentors to be approachable, provide well-rounded advice and make people feel safe when reaching out to them.

Younger Workers Want Leadership and Mentorship

Leadership demonstrates positive movement forward and a confidence that inspires those just coming into the workplace, whilst mentorship provides a roadmap that allows someone to build their own skillset, knowing that they are, indeed, moving in the right direction, that’s why the new generation in the workforce wants both leadership and mentorship.

Leaders Must Listen and Dialogue as Mentors

Leaders must dance between inspiring and recognizing that their motivations, measures of fulfilment and relationship with “work” have shifted. Mentors, just listen. Some of the best decisions come from hearing feedback, involving the team and not being afraid to evolve.

Mentorship Shapes Employees to Lead in Their Own Areas

Mentorship shapes employees to become leaders in their own areas. That means they, too, get to bear the company’s goals and objectives so that they can carry out their tasks with minimal supervision.

Power is the ability to impose your will on others, whereas influence is the ability to deeply affect behaviors and beliefs.

As a leader, you’ll need to use your power once in a while to steer the ship. But when you use influence to lead, you’ll slowly build deeper trust and loyalty with your team.

When you lose a position of power, you lose the power that came with it, but not the influence you generated.

Build your leadership skills with personalized coaching using BetterUp and become an inspiring, daring leader for your team

Power leadership

Power leadership uses sources of power instead of influence to motivate others to act.

With power leadership, you can influence how others act, but it won’t necessarily change what people believe and how committed they are.

Power leadership also tends to centralize power and decision-making to one person.

Instead of working to develop trust in your team and get your team to trust you, you focus on finding external ways to drive performance.

If you rely solely on power leadership, you don’t necessarily try to get feedback from your team. Although, it doesn’t mean you aren’t willing to listen when it comes your way.

Power relies heavily on forcing team members to do something through the use of threats, whether they’re implied or explicit. Intimidation is achieved by creating the belief that if an employee does not comply, they will face punishment whether that means being fired, losing out on a promotion or being berated in a public space. This kind of negative leadership can create the feeling amongst team members that they have no choice but to do things a certain way.

Power remains in the hands of one person, or a small group. This independent approach to leadership means that the team is not consulted during the decision-making process, and are often micromanaged to ensure that the leader’s methods are upheld. This undemocratic response to leadership removes a sense of responsibility from the team, decreasing morale.

Influence leadership

Influence leadership is having an impact on the beliefs and actions of the people you are leading.

You notice how the people you lead become motivated and committed, and you use what you know to generate positive results.

Influence leadership in management is based on two-way trust with the people you lead. 59% of leaders consider employee feedback a high priority, and building this trust can help make way for this feedback.

As an influential leader, this means you are not only open to receiving constructive feedback, but actively encourage it. You understand that feedback is necessary to improve the wellness of the entire team and help you improve as a leader.

Influence understands that teamwork is a dependent process: the team is dependent on their leader for guidance and the leader is dependent on employees to produce excellent work. As a result, there is a shift from autocratic decision-making to an emphasis on transparency and getting the team involved at various stages of a project’s inception. This approach means that team members feel valued, and as a result, produce work that reflects that.

Influence leads to an entirely voluntary approach to completing work. Through the use of positive affirmations and encouragement, influence results in the team feeling that they have a choice in both the work they’re required to complete as well as the means they take to get it done. Threats are traded in for persuasion and negotiation to allow employees more control over the work they’re doing.

Regulation of FDI and foreign exchange

The Reserve Bank of India (RBI) controls all foreign exchange inflows and outflows, directly or through the banking system. Foreign direct investment (FDI) in India was historically heavily regulated, it is now more liberalised. However there are detailed compliance requirements for remittance of capital into India and for repatriation of profits to a parent outside India. Remitting money into or out of India through banking channels also requires a substantial amount of paperwork. Similarly, taking a loan from an overseas parent company falls under the External Commercial Borrowing (ECB) guidelines which restrict certain sectors from borrowing and place limits on amounts, interest rates, agreements, etc.

Complex taxation systems

India has both direct and indirect taxation in the form of income tax (IT) and goods and services tax (GST). The latter replaces many taxes, including service tax, value added tax, central sales tax and others. Both IT and GST systems are moving towards greater online reporting, however both require in-depth analysis and interpretation of tax law. There are also several monthly, quarterly and annual tax compliances for companies of all sizes. In addition to this, tax scrutiny/assessment or tax audit can often be a lengthy, time-consuming process, with extraneous factors influencing outcomes at times.

Complex legal systems and slow-moving judiciary

A relic of the British era, India’s legal system is complicated and often archaic. There are several legacy laws that continue to apply to companies and individuals. All businesses require multiple registrations and certificates and manufacturing entities face the highest compliance burden. Labour laws are strict, however most small to medium sized companies do not have strong unions. Delays in court cases can stretch to decades and it is quite ordinary for all directors of a company to received personal notices in litigations against the company.

Differences in market

In size and scope, India is an extremely complex marketplace. For consumer brands in particular, it can be overwhelming to formulate a strategy. This is because of the multitude of regional languages, the varied income ranges of consumers, the difficulty of setting up a distribution network and so on. Local competition usually exists and has the first mover advantage. There is also a thriving and fragmented unorganised sector which cannot be analysed and competed with.

Wealth Management Services Used

• Independent financial advisers are more widely being used than firms that position themselves as wealth managers.
• Younger potential clients use a wealth management service as a one-stop shop.
• Poor service and poor communication are the key reasons for dissatisfaction with a wealth manager.

Investment Preferences

• Potential clients in both age groups favour an advisory portfolio management approach where every investment transaction is first approved by the client. So discretionary mandates are declining and Clients are increasingly becoming more active in the investment decision making process.
• Overall, clients want to focus on core asset classes such as equities and bonds, with less interest in non-core instruments. Younger clients show marginally more interest in specialist areas such as emerging markets.
• Clients are increasingly going for a customized portfolio creation than just investing in model portfolios.

Client-led not sales-led proposition: wealth managers need to show how they differ from other intermediaries. Primarily this requires a business structure that enables the Wealth Management Organizations to focus on quality of client advice, not volume of product sales.

STP

STP is a useful tool in mutual funds to average your investment over a specific period. To decide on whether one should do an STP or lump sum depends on three factors an investor’s current allocation to equities, the risk profile of the investor and finally, the market view. For instance, to invest Rs.1 lakh in an equity fund using STP, you may first select either an ultra-short-term fund or a liquid fund.

Features of a Systematic Transfer Plan

Entry & Exit load

To apply for an STP, you need to do at least six capital transfers from one mutual fund to another. While you are free from entry load, SEBI allows fund houses to charge exit load. However, the exit load cannot exceed 2%.

Minimum Investment

There is no standard minimum investment amount to invest in the source fund. However, some AMCs insist on a minimum amount of Rs.12,000 in their systematic transfer plans.

Taxation on STPs

While an STP is a good strategy, you should be aware of the tax implications and exit loads on the transfer. Every transfer from one fund to another is considered as redemption and new investment. The redemption is usually taxable. The money transferred within the first three years from a debt fund is subject to short-term capital gains tax (STCG). But even with this tax aspect, the returns earned would be higher than those in a bank account.

Disciplined & Lucrative

Systematic Transfer Plan (STP) enables a disciplined and planned transfer of funds between two mutual fund schemes. In most cases, investors initiate an STP from a debt fund to an equity fund.

Investment steps of STP:

First Step: As soon as the lump-sum amount gets credited into bank account, go to websites like moneycontrol or valuereserachonline and pick a good debt based & equity based mutual fund. The units purchased of a debt based fund is the beginning of the process.

Second Step: In the second step you will decide an amount which you would like to withdraw (SWP) each month from the debt fund for onward investing (SIP). This amount can be fixed or variable. We will know more about this in types of STP.

Third Step: The amount decided in 2nd step gets automatically invested (like SIP) to buy units of a pre-decided equity-based fund. In an STP, there is a limitation on number of transfers from a debt fund to equity fund. Example: Minimum of 6 transfers from a debt fund to equity. Read more about other limitations.

Systematic Withdrawal Plan

A Systematic Withdrawal Plan or SWP allows an investor to withdraw from his/her mutual fund scheme every month on predefined dates. This withdrawal could be a fixed or a variable amount. It could be made on an annual, semi-annual, quarterly, or even monthly basis.

Advantages of systematic withdrawal plan

A steady source of income

SWP’s can help your finances by ensuring a steady and regular flow of income as per your chosen period. It can be of great help, especially if you have attained retirement or when you need an extra cash flow to meet expenses like your child’s educational expenses.

Investment with discipline

With SWP, an investor can automatically redeem some mutual fund units every month to meet monthly expenses, irrespective of market levels. Thus, it protects against withdrawing large amounts from panic/fear during volatile market situations. It allows withdrawals even when markets are experiencing new highs and therefore, protects investors from impulsive investment during boom periods.

Tax Benefit

Since tax is usually payable only on the income component and not the capital component, SWP can be a great way to benefit from tax efficiency. Withdrawals on the SWP are treated as a combination of Capital and Income. SWPs also enjoy tax exemption for up to Rs. 1 lakh on long-term capital gains. The investor needs to pay tax only on earnings in excess of Rs. 1 lakh. In the case of equity funds, tax is to be paid on the gains from equity at 15% on the withdrawn sum if the holding period is less than a year. In the case of debt funds, if it is withdrawn within 3 years, the returns are treated as a part of income and taxed on the basis of the relevant slab rates. On the other hand, if it is withdrawn after 3 years of investment, then the gains from equity mutual funds are taxable at a rate of 20% after indexation, which is, of course, more profitable.

Meeting financial goals

If planned on time, SWPs can be a great asset for you and help you meet your financial goals easily. A second income, besides the salary, is always an added benefit. It can help meet your goals from being delayed due to the unavailability of cash or cash crunch. If set for redemption at a time when you need the most, SWP is a great value addition.

Portfolio Management Strategies refer to the approaches that are applied for the efficient portfolio management in order to generate the highest possible returns at lowest possible risks. There are two basic approaches for portfolio management including Active Portfolio Management Strategy and Passive Portfolio Management Strategy.

Portfolio management strategy essentially involves the following elements.

• Monitoring their performance to ensure that they meet your financial objectives.
• Picking the right investment options for your individual investor profile.

Characteristics and Advantages of active portfolio management strategy

• It gives you the ability to employ various sub-strategies and techniques.
• It provides you with an opportunity to outperform the market.
• Since investments are bought and sold regularly, this strategy has a high portfolio turnover.

Active Portfolio Management Strategy

The Active portfolio management relies on the fact that particular style of analysis or management can generate returns that can beat the market. It involves higher than average costs and it stresses on taking advantage of market inefficiencies. It is implemented by the advices of analysts and managers who analyze and evaluate market for the presence of inefficiencies.

Top-down Approach: In this approach, managers observe the market as a whole and decide about the industries and sectors that are expected to perform well in the ongoing economic cycle. After the decision is made on the sectors, the specific stocks are selected on the basis of companies that are expected to perform well in that particular sector.

Bottom-up: In this approach, the market conditions and expected trends are ignored and the evaluations of the companies are based on the strength of their product pipeline, financial statements, or any other criteria. It stresses the fact that strong companies perform well irrespective of the prevailing market or economic conditions.

Passive Portfolio Management Strategy

Passive asset management relies on the fact that markets are efficient and it is not possible to beat the market returns regularly over time and best returns are obtained from the low cost investments kept for the long term.

The passive management approach of the portfolio management involves the following styles of the stock selection.

Efficient market theory: This theory relies on the fact that the information that affects the markets is immediately available and processed by all investors. Thus, such information is always considered in evaluation of the market prices. The portfolio managers who follows this theory, firmly believes that market aveages cannot be beaten consistently.

Indexing: According to this theory, the index funds are used for taking the advantages of efficient market theory and for creating a portfolio that impersonate a specific index. The index funds can offer benefits over the actively managed funds because they have lower than average expense ratios and transaction costs.

Apart from Active and Passive Portfolio Management Strategies, there are three more kinds of portfolios including Patient Portfolio, Aggressive Portfolio and Conservative Portfolio.

Patient Portfolio: This type of portfolio involves making investments in well-known stocks. The investors buy and hold stocks for longer periods. In this portfolio, the majority of the stocks represent companies that have classic growth and those expected to generate higher earnings on a regular basis irrespective of financial conditions.

Aggressive Portfolio: This type of portfolio involves making investments in “expensive stocks” that provide good returns and big rewards along with carrying big risks. This portfolio is a collection of stocks of companies of different sizes that are rapidly growing and expected to generate rapid annual earnings growth over the next few years.

Conservative Portfolio: This type of portfolio involves the collection of stocks after carefully observing the market returns, earnings growth and consistent dividend history.

Value and growth are two commodities, and the investment methods are based on their distinctions. Growth vs. value stocks and investment approaches, as well as investment approaches, are sometimes set against one other as an either-or proposition. On the other hand, portfolios, on the other hand, have a place for these, and finding the correct mix of value and growth companies may lead to enhanced diversity.

Growth stocks are firms that can outperform the general market throughout time due to their future prospects. Value stocks are firms that are now selling below their actual value and will consequently deliver a greater return.

The primary distinction between growth investing vs value investing is that equities are firms’ traders believe are overvalued by the marketplace. In contrast, growth stocks are corporations traders believe will provide above-average returns. Also available are development and value investment products, which invest in value vs. growth investing.

Before you choose a growth or value stock or fund manager, here’s everything you need must know about every school of thinking, beginning with a review of the significant distinctions.

Growth

Growth stocks represent companies that have demonstrated better-than-average gains in earnings in recent years and that are expected to continue delivering high levels of profit growth, although there are no guarantees. “Emerging” growth companies are those that have the potential to achieve high earnings growth, but have not established a history of strong earnings growth.

The key characteristics of growth funds are as follows:

• Higher priced than broader market. Investors are willing to pay high price-to-earnings multiples with the expectation of selling them at even higher prices as the companies continue to grow.
• High earnings growth records. While the earnings of some companies may be depressed during periods of slower economic improvement, growth companies may potentially continue to achieve high earnings growth regardless of economic conditions.
• More volatile than broader market. The risk in buying a given growth stock is that its lofty price could fall sharply on any negative news about the company, particularly if earnings disappoint Investor or traders.

Value

Value stocks are often more extensive, established corporations selling at a discount to what experts believe the company is worth, given the financial ratio or baseline to which it has been referenced.

Characteristics of value funds

Priced below similar companies in industry. Many value investors believe that a majority of value stocks are created due to investors’ overreacting to recent company problems, such as disappointing earnings, negative publicity or legal problems, all of which may raise doubts about the company’s long-term prospects.

Lower priced than broader market. The idea behind value investing is that stocks of good companies will bounce back in time if and when the true value is recognized by other investors.

Carry somewhat less risk than broader market. However, as they take time to turn around, value stocks may be more suited to longer term investors and may carry more risk of price fluctuation than growth stocks.

Tactical, Fixed & Flexible

Tactical investment solutions are our product ideas to help you express your shorter-term views of the markets and take advantage of current sentiment.

Tactical asset allocation is an active management portfolio strategy that shifts the percentage of assets held in various categories to take advantage of market pricing anomalies or strong market sectors. This strategy allows portfolio managers to create extra value by taking advantage of certain situations in the marketplace. It is a moderately active strategy since managers return to the portfolio’s original asset mix once reaching the desired short-term profits.

Tactical investment solutions are typically used for exposure to more specialised asset classes and markets, such as European equities or small & mid cap stocks, or select sectors, such as technology, healthcare or clean energy.

While investing remains a long term process, the added flexibility to take tactical positions based on shorter to medium term market expectations could provide ways to boost your portfolio’s return.

Fixed investment

Fixed income is an investment approach focused on preservation of capital and income. It typically includes investments like government and corporate bonds, CDs and money market funds. Fixed income can offer a steady stream of income with less risk than stocks.

Benefits:

Capital preservation:

Capital preservation means protecting the absolute value of your investment via assets that have a stated objective of return of principal. Investors who are closer to retirement may rely on their investments to provide income. Because fixed income typically carries less risk, these assets can be a good choice for investors who have less time to recoup losses. However, you should be mindful of inflation risk, which can cause your investments to lose value over time.

Diversification from stock market risk:

Fixed income is broadly understood to carry lower risk than stocks. This is because fixed income assets are generally less sensitive to macroeconomic risks, such as economic downturns and geopolitical events.

If you’re seeking to grow your wealth investments over time to save for retirement or other long-term goals, you probably hold a significant amount of stocks in your portfolio. But by allocating a portion of your portfolio to fixed income investments, you can potentially help offset losses when stock markets swing.

Income generation:

Fixed income investments can help you generate a steady source of income. Investors receive a fixed amount of income at regular intervals in the form of coupon payments on their bond holdings. In the case of many, municipal bonds, the income is exempt from taxes.

Total return:

Some fixed income assets offer the potential to generate attractive returns. Investors can seek higher returns by assuming more credit risk or interest rate risk.

Flexible investment

A flexible fund is a mutual fund or other pooled investment that has broad flexibility for making investment decisions and allocations. Flexible funds can be SEBI regulated or offshore funds.

These funds give the portfolio manager broad latitude for making portfolio investments. As a result, they are highly susceptible to style drift and may employ macro strategies such as sector rotation or macro hedging.

Investors in these funds will often invest based on the expertise of high-profile managers rather than specific market segment allocations.

A flexible fund usually does not have fundamental investing criteria or requirements that the portfolio manager must follow. This gives the portfolio manager the opportunity to choose from a broad universe of investments. Managers can also more actively allocate investments according to market opportunities and conditions rather than specific investing requirements.

Flexible funds usually target some universe of securities; however, they may also have the flexibility to invest across all types of assets. Similar to other market strategies, the fund will be required to disclose details on its investment intentions in a prospectus.

The prospectus will only provide details on the broad universe where the fund plans to invest, noting that its strategy has broad flexibility for investments. One of the key benefits of a flexible fund strategy is that its investments and allocations can change over time.