Invest Savings from FDs to Debt Funds

No matter what savers are hoping for, interest rates are going to stay low for years to come. It is time to study the investment alternatives.

A few hiccups along the way notwithstanding, it's more than likely that India is heading for lower interest rates for years to come, if not for decades. In fact, if one steps out of the ivory tower of economists and into the real life of savers, a huge amount of damage has already been done. A measly 2.5 - 3.5% on savings bank deposits and 5-7% on other deposits are going to be the normal from now on.

Most Indian savers, including retirees who need income, are heavily invested in bank fixed deposits. Their earnings have fallen by 25% or more in the past three years. So is there a solution? As it happens, there is. There are mutual fund products that fit the bill perfectly. They not only give you higher returns than the banking products, but are also liable for a lower tax outgo, making the effective return very attractive. In fact, their liquidity and convenience are also superior compared to fixed deposits, especially if you deal through the special apps that many funds have released for the purpose.

Sebi's recent reorganisation of fund categories has somewhat changed the lie of the land, so the types of mutual funds that work well as substitutes for bank accounts are liquid funds and ultra-short duration funds. These funds give predictable and stable returns with negligible volatility. The precise definitions that Sebi has now enforced have made them even more stable. Over the past year, liquid fund returns have been an average of 6.85%, while that of ultra-short duration funds have been around 6.47%.

While these compare well with the deposit products they can replace, the real kickers are convenience and tax factors. Liquid funds can be invested in and redeemed through a smartphone-based app for many fund companies. Through these apps, you can invest instantly by transferring money from your bank accounts. More to the point, you can redeem the investments and the money gets transferred to your savings account in five to 10 minutes. So you are able to earn interest that is 1.5 times that of a savings account and, yet, have a liquidity compromise of only a few minutes.

The benefits of funds over fixed deposits go much beyond a simple comparison of returns. The different taxation structure means there's a bigger difference in post tax returns. The tax difference arises from the fact that returns from fixed deposits are classified as interest income, while mutual fund returns are classified as capital gains. For interest income, you have to pay tax every year for what you have earned that year. If your total interest income from a bank (all accounts and deposits together) exceeds ₹10,000, then the bank also deducts TDS at 10%. In fact, if the bank does not know your PAN, it will deduct 20%. This means that a part of your return is not available for compounding because it is taken out and paid as tax every year.

There is a further advantage to the mutual fund option if you stay invested for more than three years. If you redeem after three years, then the gains are classified as long-term capital gains and are taxed after indexation. Essentially, you get taxed only on inflation-adjusted returns. Again, this does not happen with FDs. Applying all these factors, a three-ear investment in a short-term fund will leave you with almost twice the returns as an FD over the same period, and with excellent liquidity.

Earlier, this kind of fine-tuning could be expected only from a handful of knowledgeable and involved investors. However, with low interest rates, the payoff is huge, and a lot of us could benefit substantially from shifting away from deposit-type products and towards mutual funds.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Calculate RETIREMENT Amount

An ideal retirement corpus should take care of all your expenses after you stop working. But can you calculate the amount required? It involves taking into account life expectancy, interest rates, inflation and the time value of money...and can be a bit tricky. Here we explain how to use MS Excel to calculate the amount easily. But first, let's understand some basics.

The concept of time value of money states that the worth of a rupee received today is more than a rupee received at a later date because of its earning potential. The concept of time value has two elements: Compounding and discounting. Compounding helps to estimate future values whereas discounting helps to estimate present values. For calculating your retirement corpus, it is the present value that matters.

For example, an investment product promises ₹8 lakh in 10 years if you invest ₹4 lakh today. Given interest or term deposit rates of 8% per annum, will this investment product be profitable? You will have to find out the present value of ₹8 lakh at 8% discount rate to arrive at the right answer. Present value is calculated by dividing ₹8 lakh by (1+r) ^n, where 'r' is the discount rate (or interest rate) and 'n' is the tenure of investment. The present value of ₹8 lakh works out to be ₹3.7 lakh.

Since the present value of the amount that the product promises to pay (fund inflow) is less than the amount invested (fund outflow), the product is not profitable. In other words, the net present value of the investment product is negative. Net present value is the difference between the present value of cash inflows and present value of cash outflows.

If the same ₹4 lakh is invested in an FD for 10 years, offering 8% annual interest, the maturity proceeds work out to be ₹8.63 lakh (assuming no tax)—₹63,000 higher than the aforementioned investment product.

Calculating the present value of an amount gets complicated, if the investment generates a series of payments over a period of time. To calculate the current worth of such an investment, the present value of each payment in the entire series of payments needs to be derived. Technically, one needs to find out the present value of an annuity.

Estimating one's retirement corpus involves calculating the present value of an annuity. This is because, one expects to generate a stream of payments—monthly, quarterly or annually—from one's retirement corpus for a given number of years at a certain rate. Such stream of payments seek to take care of one's post-retirement expenses—based on one's current expenses and assumed inflation rate.

A 38-year-old with current annual expense of ₹6 lakh can calculate his annual expenditure requirements when she retires at the age of 60, based on an assumed annual inflation rate over 22 years (the period after which she will retire).

For instance, at 5% assumed inflation she will need ₹17.5 lakh—₹6 lakh x (1+5%)^22. The ideal retirement corpus must generate a stream of ₹17.5 lakh annually for 25 years after retirement, assuming life expectancy of 85 years. Such a corpus can be arrived at by adding the present value of each stream of ₹17.5 lakh discounted at an appropriate rate. The appropriate rate is generally the average long-term (10-year) yield on government securities. Additionally, the post-retirement inflation also needs to be taken into account.

Although the methodology appears complex, MS Excel's NPV function can help you do the calculations easily. NPV requires you to input the discount (or interest) rate and the series of expected inflows or estimated expenses.

At 7% discount rate and assuming no inflation, the present value of the annuity works out to be ₹2.04 crore. So, in our example, the working professional will have to accumulate ₹2.04 crore for his retirement. However, if we assume post-retirement inflation of 4.5% per annum, he will have to accumulate ₹3.12 crore. One can play with the numbers to see how changes in inflation, discount or interest rates changes the desired corpus.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Invest [at] SaveTaxGetRich [dot] Com

PPF vs ELSS Tax Saving Mutual Funds

The Public Provident Fund (PPF) and equity-linked saving schemes (ELSS) are popular investment options that both qualify for income tax deductions. A deduction reduces your overall tax liability. Contributions up to Rs 1.5 lakh a year qualify for tax deduction under Section 80C. Financial planners say that when it comes to investments in the PPF and ELSS mutual funds, investors should look at these investments not just from a tax-saving perspective but one that will help achieve their financial goals. ELSS mutual funds invest in equity shares of companies across sectors and market capitalization and have a three-year lock-in.

An ELSS mutual fund is quite the same as a diversified equity fund, other than tax deduction benefits and the three-year lock-in. ELSS investments come with a lock-in period of three years, which is lowest among Section 80C investments. Investors should understand ELSS mutual funds are equity market-linked products.

1) The PPF is a 15-year government-backed savings option offered through banks and post offices. Thereafter, it can extended further in batches of five years.

2) The interest rate on the PPF is revised every quarter and is benchmarked to yields on government securities. Currently, the PPF fetches an interest rate of 7.6%.

3) In the PPF, you can maximise your returns by investing early in the financial year so that your deposits can earn interest for the entire year.

4) The minimum amount that must be deposited in a PPF account in a financial year is Rs 500 and the maximum allowed is Rs 1.5 lakh.

5) From the seventh year, you can make partial withdrawals from your PPF account. Apart from income tax benefits, the PPF is suitable for conservative investors who are looking at long-term financial goals like a child's education or retirement, say financial planners. The interest and maturity proceeds are exempted from tax.

6) Premature closure of a PPF account is allowed only under specific conditions such as expenditure towards medical treatment. For this, a PPF account must have completed at least five financial years.

7) ELSS or tax-saving mutual schemes have a three-year lock-in period. You can partially or fully redeem your ELSS or tax saving mutual fund investments after three years.

8) Financial planners suggest investors to opt for systematic investment plans (SIPs) in tax saving mutual funds to help spread their spread their investments throughout the year.

9) The lock-in of three years also applies to SIPs. In other words, every SIP instalment in a ELSS fund is subject to a three-year lock-in.

10) Long term capital gains from equity mutual funds, including ELSS funds, above Rs 1 lakh will be taxed at 10%. ELSS funds come with both growth and dividend options. Mutual fund houses have to pay a dividend distribution tax or DDT of 10% on dividends declared under equity schemes, including ELSS funds. This effectively reduces the return from dividends from equity funds.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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You can write to us at

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Focused Funds

They are bit more Risky. The risk comes in two forms.

One is the likelihood of a fund manager losing money in a certain stock. I think if a fund manager goes wrong, the possibility of significant loss in a focused fund is far higher. Because in a focused fund a position in a stock can well be in the region of 5 to 10 percent.

The other is that focused funds can be far more volatile because you have fewer stocks. Nowadays, we are seeing a volatile market. So, the days on which the market goes down you see the concentrated fund falling much more than the market, compared to a more diversified fund.

I would say volatility is not as much of a risk on a 5 to 7 year basis. Because volatility, if you stay invested, is not a risk. But the risk of the fund manager going wrong is reasonably high.

So, yes, focus funds do come with high risk of volatility as well as the penalty for a fund manager going wrong with his selection is very high. And if he goes wrong with a couple of things, it could be a disaster.

But, I guess, that is where evaluation of a fund manager for a focused fund comes in handy. As a fund performs well and gets more money, it tends to become more diverse. So, I think 30 also gets you reasonable diversification.

So, check two things. You should look at the experience of the fund manager, of what he has set out to do and what are the quality filters. That apart, make sure even if it is a focused fund, it has at least 20 to 25 stocks, which is reasonable diversification for an investor. If you are comfortable with the volatility some of the focus funds look very promising.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Impact of rising interest rates on Equity Mutual Fund Investors

Rising interest rates in all eventuality can apply the brakes on a rising stock market. Of late, returns from market indices, especially mid- and small-cap indices have dwindled. "Interest rates act like gravity on valuations; higher the interest rates in a country, lower are the equity valuations. It is an inverse correlation

Reasons such as rise in oil prices, faltering health of public sector banks, increasing inflation among others may lead to the equity market finding new lows in the near future. The offset is that corporate earnings have been robust this quarter (top and bottom lines) for a substantial portion of the market. The question is what level will crude become an impediment to earnings, and we think we are already at levels that will result in a dampening of consumer willingness to spend.

That has repercussions for equities and continued rise in crude is likely to impact markets negatively

What to do: These macro economic factors should not deter a long term investor in equities and equity mutual funds. We would point out though, that the macro conditions can change quickly, so investors need to work within an asset allocation framework and stick to a plan that takes advantages of moves in the market, rather than letting these moves shake them out of a long term investment plan

 

After the recent reclassification of mutual funds, tracking the performance by investors may become easier. Going forward, investors will benefit by focusing on their fund's relative performance against its benchmark as well as the peer group during different timeframes

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Not Filing IT Returns May Land You In Prison

As citizens of India, our responsibility towards the country does not end with paying taxes. We have to file income tax returns (ITR) every year for which the government allows us four months from April 1 to July 31. To crackdown on stragglers, the government has introduced penalties on late and failure to file ITR. Let's discuss in details.

Penalties: Sec. 276CC

Wilful failure to furnish ITR during the prescribed time resulting in tax evasion exceeding Rs 1 lakh attracts a fine and imprisonment that can be from 6 months to 7 years. In other cases, it could be a fine and imprisonment of 3 months to 3 years.

However, a penalty cannot be levied unless there is substantial evidence of wilful failure. As the provisions of the Income Tax Act are amended frequently, it is impossible even for tax experts to know all the provisions at any given point of time. Hence, ignorance of law is often cited as an excuse to escape the penalty.

From April 1, 2018, the government introduced a fine of Rs 10,000 for those who fail to file the ITR by July 31. If you file ITR after the due date but before December 31, the penalty will be Rs 5,000. Small taxpayers with income not more than Rs 5 lakh per annum will not be penalised more than Rs 1,000.

Scrutiny Assessment

As a relief to senior citizens, the department has decided not to scrutinise any returns filed by those above the age of 60 years and those whose gross total income is less than Rs 10 lakh.

Annual Information Report

Various authorities (not individuals) are required to send annual information report to the department of all persons, including NRIs, undertaking any one of the following transactions:

1. Banks — (a) Cash payment of Rs 10 lakh for purchase of DDs / POs, RBI Bonds, etc. (b) Cash deposit / withdrawal of Rs 50 lakh from current account. (c) Cash deposit of Rs 10 lakh in any one or more accounts, other than current account and time deposits. (d) Time deposits, (other than those through renewal of another time deposit) of Rs 10 lakh (e) Payment in cash of Rs 1 lakh or Rs 10 lakh by any other mode, against credit card.
2. Company — Receipt of Rs 10 lakh for acquiring bonds, debentures or shares, including share application money.
3. Listed Company — Buyback of shares of Rs 10 lakh.
4. MFs — Receipt of Rs 10 lakh for acquiring units.
5. Forex dealer — Receipt of Rs 10 lakh for sale of forex, including against forex card or expenditure in such currency against debit/credit card or issue of traveller cheque or draft.
6. IG registration or registrar/sub-registrar of property — Purchase or sale of immovable property for Rs  30 lakh or as valued by the stamp valuation authority, whichever is higher.
7. Any person liable to audit u/s 44AB — Receipt of cash payment of Rs 2 lakh by any person for sale of goods and services, other than those specified above.

The aggregation rule is applicable for all transactions except for purchase or sale of immovable property and cash payment for GST.

Take care to remain out of being a reportable person, as much as you can.

Taxpayers can view their consolidated annual tax credits in Form 26AS enabling them to resolve any discrepancies arising due to incorrect quoted PAN, non-filing of TDS returns, non-deposit, lower deposit of TDS by the deductor, etc.

Refunds are made directly to the taxpayers' bank accounts, with intimation through SMS or e-mail.

Tax and PAN related grievances can be redressed online through e-Nirvan, a paperless facility launched by CBDT. Alternatively, one can visit the Aaykar Seva Kendra. However, suggestions or matters related to the Court, RTI, religion, services of government employees or foreign governments cannot be redressed through this mechanism. 

Filing income tax returns is not just an act of responsibility, but it also helps in getting loans, credit cards and gaining benefits of adjustments against losses. Hence, file income tax returns on time

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

SWP or Dividends

Mutual Fund SWPs are better option

When your clients are looking to generate regular cash flow from mutual funds, they often find it difficult to decide whether or not they should redeem their investments. Currently, mutual fund investors have two options to generate regular cash flow, systematic withdrawal plan (SWP) or dividends. Let us understand what is best suited for your clients.

Dividends in mutual funds

Choosing the dividend option for a mutual fund scheme entitles an investor to receive dividends declared by the fund scheme periodically. Dividends are tax-free for investors. The fund house though has to pay Dividend Distribution Tax (DDT) on such dividends on behalf of investors. This means investors indirectly bear the tax burden on dividend income.

However, in case of close-ended schemes or schemes with a lock-in period like ELSS, the dividend option is preferable. This is because your clients will receive part of the profits throughout the investment tenure. Even though the investment is locked in, they would still benefit from some liquidity from time to time. 

Systematic Withdrawal Plan (SWP)

Just as systematic investment plans (SIPs) allow investors to make investments in mutual funds periodically, SWPs redeem your investments periodically. SWPs give investors the flexibility to choose the periodicity and amount of redemption.

Why SWPs score over dividends

Here are three reasons why an SWP is a better option than dividends

Consistent cash flow: The dividend option does not guarantee regular cash flow since AMCs declare dividends after realising profits, if any. However, with SWPs, your clients can choose to have regular cash flow by redeeming their investments. There is no ambiguity on cash flow with SWPs.
Control over quantum of cash flow: With SWPs, your clients can decide the amount and timing of cash flow depending on requirement. Simply put, your clients cannot rely on the dividend option to meet regular requirements.
Tax efficient: The government levies DDT on dividends arising out of mutual fund investments. Since the NAV of the fund is reduced to the extent of dividend, investors end up paying the tax from their MF investments. SWPs, on the other hand, are treated as redemption from mutual funds. The tax treatment of such redemption is just like growth options in mutual funds.

Hence, SWP scores over the dividend option. However, if the periodic payouts are considerably higher than the returns generated by the mutual fund, you should consider recommending the dividend option as the investment amount might get exhausted. There is no such fear with the dividend option, as any dividend has to be declared only out of profits realised.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

SBI Focused Equity Fund

Top SIP Funds Online 

SBI Focused Equity Fund

How has the SBI Focused Equity Fund performed?
With a 10-year return of 17.82%, the fund has outperformed both the index (12.43%) and the category average (14.31%) by a good margin.
The fund has comfortably beaten the multi-cap category over the past decade.

SBI Focused Equity Fund performance (%)

The fund has outperformed across time periods.

Yearly performance (%)
The fund has mostly delivered healthy outperformance in recent years.

Where does the SBI Focused Equity Fund invest?
The fund has hiked presence in large-caps in recent years.

Top 5 sectors in portfolio (%)

The fund is significantly overweight in auto, engineering and metals.

SBI Focused Equity Fund Top 5 stocks in portfolio (%)
The fund takes outsized positions in its top bets.

How risky is it?

Should you buy SBI Focused Equity Fund?
This fund has been rechristened as a focused fund, but even in its earlier avatar as SBI Emerging Businesses, it maintained a concentrated portfolio. While the fund remains market-cap neutral, it has hiked its presence in large-caps in recent times. But it retains its mid- and small-cap tilt, where its exposure remains higher relative to many peers. The degree of concentration is also comparatively higher with the fund taking outsized positions in

high-conviction bets and several small positions at the tail-end of the portfolio.

It has favoured financials with nearly 40% exposure to this segment. Its performance has been consistent in recent years, delivering healthy alpha relative to peers, making it a worthy bet for those seeking an aggressive, focused strategy.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Critical Illness Plan

Apart from a health insurance policy that pays for hospitalization, critical illness insurance plans are also very popular in the health insurance segment. A critical illness policy compliments a plain vanilla health plan, so ensure you don't substitute your health policy with a critical illness plan.

What are critical illness plan?

There are two types of health plans: indemnity and defined benefit plans. A basic health insurance is an indemnity product that covers hospitalisation expenses, pre- and post-hospitalisation expenses and listed day-care procedures.

Defined benefit policies pay a stipulated sum on an insured event. A critical illness policy is a defined benefit plan that pays the total sum assured on diagnosis of an insured critical illness; it doesn't matter what the hospital bill is. Also, most of the plans terminate after the first claim; few plans cover multiple critical illnesses but mostly cap the number of illnesses they can cover.

A critical illness policy helps cover incidental expenses and supplements your income in case you are unable to work: a plausible fallout of a critical illness.

The caveats

You need to keep in mind some caveats, the most important being the waiting period.

Most health plans come with an initial waiting period. A critical illness plan has that and another specific one: the survival clause.

This kicks in if a policyholder is diagnosed with a critical illness. Most insurance companies have a survival period of 30 days and it's only after the policyholder has survived this period that the claim is settled.

Some plans may waive off this clause.

What you need to do

The most challenging aspect of buying a critical illness policy is understanding what is insured. It's not just looking at the number of critical illnesses covered and going for the one with the maximum number of illnesses covered, but also about understanding the exact definition of the illnesses to avoid unpleasant surprises at the time of making a claim. For instance, a critical illness plan covering cancer may not cover the early stages of cancer.

The second thing to understand and think about is how you buy a critical illness plan. These policies can be bought as a rider—on a base policy like a life insurance policy—or as a standalone policy. But as a rider, the policy exists only till the time the base policy exists. Surrender the policy and you end up forgoing the benefits of a critical illness policy.

Unlike a health insurance policy, a critical illness policy requires minimal paperwork because the insurer concerns itself with the diagnosis of the ailment.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

What are FMPs?

What are FMPs?

As Fixed maturity plans or FMPs are closed-end debt mutual fund schemes, they come with a specific tenure. So investors can invest only at the time of a new fund offering (NFO). Similarly, you cannot withdraw before maturity, but you can sell such schemes on the stock exchange. The corpus of FMPs is invested in fixed-income securities that mature just before the scheme itself. For example, if the FMP is for three years, the fund manager will invest in instruments with a maturity of three years or less. This helps FMPs to protect against interest rate risk.

In the current interest rate regime, FMPs offer a good investment opportunity as investors can lock in their money at attractive yield

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

L&T India Value Fund

Investors are increasing finding it difficult to pick up quality stocks because of their high valuations. In such a situation, it makes sense to be with mutual fund schemes that follow value theme and have high focus on large-sized companies. One such scheme is L&T India Value Fund.

The scheme invests 40-55% of its portfolio in large-sized companies, 35-40% in mid-sized companies and rest in small-sized companies. In comparison with its peers, the scheme has higher exposure to large-sized companies. Due to this, the scheme has performed well even in weak markets. In the past three- and fiveyear periods, the scheme has generated returns of 16.4% and 26%, respectively. During the same period, its category of schemes have given 12% and 19%, respectively.

In the past six months, the scheme's fund managers Venugopal Manghat and Karan Desai have invested in diversified themes by selecting companies which not only have lean balance sheet, but are also placed well in terms of earnings' growth in the coming quarters. A few prominent names are Bharat Electronics, KNR Constructions and Sun TV Networks.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How to Exit out Insurance Policy

Why go for term plan-MF combo
The term plan-mutual funds combination is financially the most efficient. Ulips levy a number of other charges besides the fund management charge (that a mutual fund also charges) and mortality charge (that a term plan charges). They levy a premium allocation charge (PAC), an administrative charge, and so on. The cost structure of Ulips is also complicated. While charges levied under endowment plans and money back policies are unknown, charges under linked policies are clearly mentioned in policy brochures and policy document available on company website. Investors are either unaware or they do not take pain to go through the policy details before making a final purchase. Insurance companies, agents and advisors take advantage of the ignorance of investors and sell policies which are not really helpful.

Therefore, in the first place, the mutual fund-term plan combination scores by having a lower and more transparent cost structure.

Another problem with Ulips is that an insurance company offers only a limited number of fund options. If the funds offered by the insurance company underperforms, the investor does not have the option to exit his current fund and invest in a high-return fund from another company (until the lock-in period is over). On the other hand, if he invests in mutual funds, he can easily exit his current underperforming fund (most mutual funds do not have an exit load after one year), and choose to invest in any one of the hundreds of funds available in the market.

Traditional products such as endowment plans and moneyback plans too have drawbacks. The biggest is that they offer simple interest, whereas if you invest in a mutual fund or even in a PPF, your investments grow through compounding. As we well know, the effect of compounding is powerful, especially over the long term. The second disadvantage of traditional products is that they have a high allocation to debt products. This, too, affects their returns: over the long term, as we know, returns from equities trounce those from debt.

Another disadvantage of insurance-cum-investment products belonging to insurance companies is that despite paying a hefty sum of money as premium, the family could still be under-insured. Since term plans are inexpensive, one can buy adequate amount of cover through them.

What should you do
Exit and bear the losses upfront: If a person has invested in a Ulip or in traditional products, and especially if he has paid the premium only for two or three years, the ideal solution would be for him to exit these policies right away. In the older Ulips, there was a lock-in period of three years, which has now been extended to five in the new Ulips. If an investor exits from an old Ulip after paying two premiums, he will lose out on his premiums completely. If he exits an old Ulip after three years, all he is likely to get is the third-year premium; the myriad charges in Ulips would eat up the rest. According to Pune-based financial planner Veer Sardesai, 'Over a 20 to 25 year span the investor is better off exiting these policies, even if it means entirely forfeiting his premium, and going with the term plan-mutual funds combination.' However, only investors who are financially savvy would perhaps agree to pursue this course of action.

Stay put: At the other end of the spectrum, you would have investors who are not at all financially savvy. They would have little knowledge of term plans (because agents do not push them) and mutual funds (especially in smaller towns, there tends to be greater awareness about insurance products than about mutual funds). Such investors would be wary of these options.

These investors would prefer being in a Ulip rather than in a term plan-mutual fund combination because a Ulip, being a product from an insurance company, would offer them a greater sense of security (especially if it is from the public-sector behemoth). Such investors could stay put in the Ulip. Even if the Ulip is not a financially-efficient product, it would still benefit these investors by offering them equity exposure, which would boost their returns over the long term.

The middle path: Next, you have investors who are financially savvy and who understand the logic behind promptly exiting a Ulip or a traditional product. Despite this, they might shy away from the option of writing off their premiums in the Ulip entirely. Very often the premiums they have paid are as high as Rs1 lakh or more per year, so bearing the loss upfront becomes difficult.

For such investors, Sardesai suggests the middle path of making the policy 'paid up'. Enquire from the insurance company the minimum period for which premiums must be paid. Pay till then and then stop. Thereafter, the policy will continue to exist. The insurance company will deduct its annual charges from the corpus that has accumulated within the policy and keep it alive. The paid-up policy would offer a lower sum assured, but the investor would at least be saved from throwing good money after bad. The advantage of this course of action is that the investor feels he has not lost his money entirely, though if one were to do the mathematical calculations, the first rather than this third option would be optimal.

As you can see, once you have entered these high-cost insurance-cum-investment policies, there can be no painless exit. Taking your losses upfront, especially if you have not been in these policies for long, would be the best course of action if you are keen to get your financial portfolio back on track.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Impact of rising interest rates on Debt Mutual Fund Investors

Rising rates is bad news for debt fund investors. When the interest rate starts to move up, the price of existing bonds falls which in turn pushes down the net asset value (NAV) of debt funds, translating into lower returns for the investor. As far as debt mutual funds holders are concerned, the impact of rising interest rates is more on the schemes that hold long-term securities compared to those holding bonds which are maturing early.

What to do: While investing in any of the 16 debt fund categories as classified by Sebi recently, look at the ones with a shorter maturity profile. Investors should be allocating to ultra-short term funds and corporate credit funds. These funds are likely to deliver the best returns in the current rate environment and can substantially protect investors from a rise in interest rates

Debt funds with underlying securities with longer holding period may be avoided. Avoid long-term bond funds as they depreciate in a rising interest rate scenario resulting in a potential capital loss

This is what debt fund investors with moderate risk appetite and those who are risk-averse should do:

* Risk-averse investors should consider investing in liquid funds, arbitrage funds, ultra-short term funds and fixed maturity plans at this point based on the current market conditions.

* Investors who can withstand some amount of risk and with a medium-term investment horizon should consider investing in high quality fixed-income funds with duration range between 1 year and 3 years via systematic investment plans (SIPs). They should spread their investments over 3 to 4 instalments for six months or so. This may help the investor take advantage of the upward trend in bond yields and help mitigate downside risks.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Single or Multi trip Travel Insurance Policy

Indians love travelling. The thought of exploring new places, learning new cultures and tasting local cuisines is both exciting and enthralling. But in that excitement, many of us generally forget to secure oneself from any unexpected events one can face during their travel. These can range from loss of baggage, flight cancellation, accidents, etc. Conclusion: One needs to have a forceful travel insurance policy in place before they board their flight, regardless the kind of trip they are taking.

So, the next steps involve doing a thorough research on the various policies available in the market vis-à-vis one that meets your requirements to the closest. Broadly, there are two types of travel insurance policy available in the market for travellers travelling abroad: single and multi-trip travel insurance policy. But first let's understand the basic difference between the two:

Single trip travel insurance

As the name suggests a single trip travel insurance policy provides coverage for one domestic or international trip. Even if one is on a single trip, they can visit multiple destinations or multiple countries, and that is still considered a single trip while you are away from your home. The policy will last until one returns home from the trip.

The policy cover starts from the time one flies from the home country to the foreign destination and remains in force till the date of the return/ end of policy (whichever is earlier). The insurance policy comes with an extendable facility and quick claim resolving option. Single trip insurance can be bought as soon as one plans to leave. Such policies generally cover hospitalisation expenses, emergency dental treatment costs, loss of checked-in luggage, among others.

Those who travel occasionally and for a long duration, single trip travel insurance is an appropriate choice. It is also cost-effective as one needs to pay only for the exact length of the trip.

All insurance companies have a cap on the number of days that are to be counted as a single trip. Normally, a single trip plan provides cover for a period of around 180 days.

Multi-trip travel insurance

Multi-trip travel insurance plans are generally purchased on an annual basis. The policy term, which will be in force for a period of 12 months, begins from the date on which it is bought. All trips one makes during the year will be covered under the same policy. Multi-trip travel insurance policies generally cover loss of passport, emergency medical expenses, trip cancellation among others.

The cover is basically set for 365 days, wherein a person can fly abroad as many times as he wants under the same insurance policy. If one goes on multiple official trips in a year or believes in exploring the world, then this is the best option for you. That said, some multi-trip plans do have a limit on the duration of travel which may vary from 30-70 days per trip. Hence, reading the fine print is always advisable.

To be eligible for a multi-trip travel insurance one should hold a domestic health insurance policy in the country of their origin.

The differentiator

Single trip insurance policies are designed for people who only take one or two holidays a year, whether that is a short trip to Singapore or a three-week jaunt in Europe. Multi-trip policies, on the other hand, are for those lucky enough to enjoy more than two journeys a year. These policies are often better value for money than buying single trip cover for each separate holiday. Multi-trip policies allows one to make unlimited journeys in a year. Moreover, most policies will limit the length of each trip (usually between 31 and 45 days), but double-check for any restrictions before you buy.

Things to keep in mind

Whatever policy one decides to opt for, there are certain things one must cross-check. Key ones being destination, duration of stay, possible medical expenses, (including sports/activity-related injuries in case your focus is thrill or adventure travel), the cash and valuables you will be carrying, trip cancellations in case of multi-trips and policy limits and exclusions.

Destination is crucial as most insurance companies have separate cover for Europe and the rest of the world. Some worldwide policies even exclude the US, Canada and the Caribbean. The level of cover and feature varies from country-to-country and plan-to-plan.

Though every policy offers basic medical cover for unexpected or new injuries and illnesses, one must ensure that they are covered for all medical emergencies. All existing medical conditions must be declared before the purchase of the policy, otherwise there are chances of denial.

The cancellation cover must be enough to encompass the pre-paid cost of the trip(s). The cost of emergency items of clothing should also be accounted for in case the luggage is misplaced and damaged by the airline.

In nutshell

Both plans have different uses and advantages. The choosing criteria is solely based on one's requirements and policy options. A single or multi-trip travel insurance policy makes your journey worthwhile and provides you complete peace of mind in a foreign territory.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com