Fresher

FMCG Funds

2018-11-16T08:50:00.000+05:30

The consistent performance of FMCG mutual fund schemes over various time-frames have revived an old debate: Should regular investors opt for them? FMCG fund category has been consistently performing in one-, three-, five- and 10-year time periods. A recent report by Crisil said that the FMCG sector is likely to report 11-12 per cent rise in revenues in fiscal 2019, up 300-400 basis points from 8 per cent in fiscal 2018.

However, despite its consistent performance, most mutual fund advisors are not in favour of retail investors betting big on the sector. "FMCG funds are consistent but they are essentially sector schemes and fundamentally retail investors shouldn't have more than 10 per cent in their portfolio,

The FMCG sector has great prospects with rural consumption growing in India but investors need not bet on specific funds. FMCG sector is going to remain strong in India but the funds are meant to be a topping in your portfolio. During the low phase, they will give you consistent returns but in a bull run, you will miss the rally

The FMCG fund category has returned 21.78 per cent in the last one year, 16.73 per cent in three years, 16.61 per cent in five years and 19.46 per cent in the 10 year time frame. The Nifty FMCG Index has returned 12.83 per cent in the last one year, 12.16 per cent in three years and 10.57 per cent in five years. There are only two schemes investing in the FMCG sector in India: SBI Consumption Opportunities Fund (Erstwhile SBI FMCG Fund) and ICICI Prudential FMCG Fund. Both these schemes have been consistent performers in the long term.

Fast-moving consumer goods (FMCG) falls under the defensive sector category like pharma. Products that people use in their everyday lives come under FMCG sector. Coca-cola, ITC, HUL are some examples of FMCG companies. The FMCG sector is an important contributor to India's GDP growth, with a whopping size of around Rs 500 billion.

Mutual fund advisors believe that FMCG is a strong story in the coming time but why bet on specific sector funds when your fund manager can do that for you. "For small investors, adding more schemes doesn't make sense. If you are investing in a diversified fund, your fund manager is already adding the best sectors to your scheme portfolio. In a diversified fund your fund manager can change the allocation if a certain sector goes down.

You don't have that freedom in the sector scheme

However, you may opt for FMCG if you have deep pockets, say mutual fund advisors. If you have a huge corpus and you have already invested across market caps to meet you goals, you can add an FMCG scheme for consistent returns over years, they say. But if you are a small investor, you should opt for a diversified fund. Those who are betting on these schemes for diversification should get in with a horizon of minimum five years

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

What is an NFO?

2018-11-15T17:27:00.001+05:30

What is an NFO?

NFOs are first-time subscription offers for a new scheme. Many funds launch NFOs to complete their product basket. For example, if an AMC does not have a hybrid fund or multi-cap fund, it could launch an NFO to offer that product to investors. NFOs can be for both open as well as closed-end funds. In a closed-end NFO, you can invest only during the offer period. On the other hand, open-end funds reopen for subscription again and investors have the option to subscribe on any working day at the prevailing net asset value.

Should investors put money in a new fund offer?

Financial planners say investors should invest in an NFO if there is a need for that product in their portfolio, or there is a theme, which can be played only through the new fund. Many investors invest in an NFO because it is priced at ₹10, compared with other existing schemes with higher NAVs. It is a wrong strategy, say financial planners. Investors to stick to open-end schemes, which have a track record. They believe that in an existing scheme, the portfolio and fund manager's style of investing is well known. In comparison, in an NFO one does not know what the portfolio will look like or how much assets the fund will gather.

What is the difference between an equity IPO and a mutual fund NFO?

Equity IPOs are issued by companies seeking capital to expand or to become publicly traded. On the other hand, an NFO from a fund house just pools in money from investors and invests in a set of securities (stocks or bonds or government securities), based on a stated strategy. Rarely are IPOs done at the face value today, as most of them are done at a premium to the face value. On the other hand, an NFO is always available at ₹10.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Reinvestment Risk in Bank FDs

2018-11-15T08:45:00.001+05:30

Banks keep varying their FD rates and that poses a risk to your investment. A rate of 9% is not only the highest rate offered five years ago, but also one of the highest interest rate levels over the past decade. But what if prevailing rates are on the lower levels at, say, 6.25% – 7%? If the rates go up in future, you will not be able to take advantage of it.

Also, if you had opted for a three-year FD or a one-year FD and gone for renewal, the entire scenario would have been different. You would have had to renew at prevailing rates, which were much lower than your original rate.

Volatility exists in FDs as well, though not as explicitly as in debt funds. Returns may be fixed with FDs. But what looks attractive now may not look good five years down the line when rate (and inflation) scenarios are entirely different.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Should SIPs be Continued When Returns are Negative?

2018-11-14T18:36:00.000+05:30

Many investors who started investing in equity mutual funds using SIPs in the past year are seeing negative returns due to the correction in the markets. Find out what they should do in that case:

1. I started SIPs in three equity mutual funds in January, of which two are giving negative returns? What should I do?

Investors should not start evaluating SIP returns in less than a year's time, as they could see disproportionate returns in the near term. For example, in 2017, we saw one-year SIPs in midcap funds delivering as high as 40% return, but right now, some mutual funds are showing negative returns. They should continue with the SIPs with a long-term time frame of 5 to 10 years. During this long cycle, the equity markets will go through a number of ups and down, and in some of these times, they are bound to see negative returns. In the long term, equity market returns follow the nominal GDP growth rates. Hence, investors should continue their SIPs irrespective of the ones giving negative returns.

2. I will continue with my SIP, but does it make sense to change the mutual fund scheme if the existing SIP returns are negative?

Typically, six months is too short a period to judge a scheme and its returns. Ideally, investors should give the fund manager three to five years to perform. If the fund underperforms its benchmark even over a three-year period, then investors could take a closer look at it and shift to another fund. Alternatively, if the mandate of the scheme has changed, or the fund manager has changed, they should discuss this with an advisor before arriving at a decision.

3. How long can you run an SIP for?

Most fund houses stipulate a minimum time frame of 6 months for the SIP.

Investors can choose any tenure they wish, which could be 3, 5 or even 10 years, or link it to their long-term goals.

Investors also have the choice to opt for the perpetual option, which means the SIP will continue till the investor gives an instruction to the fund house to close it. Financial planners suggest investors link each SIP they do to a particular goal and continue with the SIP till the goal is reached.

4. I have money to spare every month post my annual salary hike. Should I increase the allocation?

Do not get disturbed by the volatility in the markets. Use this opportunity of a salary raise to increase your SIP amount proportionately by using the top-up facility provided by the fund house. It is important that as your income grows, so should your investment amount.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Investment Strategy of ICICI Pru Bluechip Fund

2018-11-14T15:06:00.000+05:30

Classified under large cap funds, ICICI Prudential Bluechip Fund is now mandated to invest predominantly in stocks of top 100 companies by full market capitalization. The fund will maintain a minimum exposure of 80% to Large Cap stocks.

ICICI Pru Bluechip Fund follows process based investment strategy to identify quality large cap stocks forming a part of top 100 companies by market capitalization. While the fund is expected to majorly have a growth oriented approach, it has shown some flair towards value as well. Probably, it is because both the fund managers managing the scheme have different skill set and investment style, which results in blend style of investment. The fund is process driven and depends predominantly on bottom up approach to pick quality stocks for its portfolio. While picking stocks the fund managers look for scalability of the company they are considering to buy and give high weightage to management track record and scope of improving profitability. The fund typically follows buy and hold strategy, looking for long term holding period and keep churning under check.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Invet in Short Term Debt Funds

2018-11-14T08:46:00.000+05:30

Following a hike in the repo rate by the Reserve Bank of India (RBI) and expectations of a few more increases in the current financial year, fund managers insist that investors should stick to short-term debt funds. Apart from short-term debt funds, fixed maturity plans (FMPs) and debt-oriented hybrid funds can be opted by investors in current scenario.

The RBI, in its second bi-monthly policy of 2018-19, has raised the key repo rate by 25 basis points to 6.25%. In the past three years, RBI has cut repo rate down by 200 basis points (100 basis points=1%).

The policy was in line with expectations and three key reasons led to increase in rate hike. First is turbulence in emerging markets, then rise in oil prices and finally pick-up in the core inflation last month. These were some of the key reasons for rate hike. Investors should look at short-term products with average maturity of two-three years if they have investment horizon of 18-20 months.

Short-term bond funds invest in debt securities that mature in about a year to three years. They can invest in a mix of short-term instruments like commercial paper and certificates of deposits. In the last one year, short-term debt funds like Franklin India Low Duration Fund, Baroda Pioneer Short Term Bond Fund and Franklin India Short Term Income Plan have given returns in the range of 6.5% to 7.75%

On an average, returns on short-term debt funds were around 5.25% in the past one year, while returns of longer duration funds like income and gild-medium and long-term funds have given average returns of 3.2% and 0.44% respectively. On Wednesday, the 10-year benchmark government securities (G-Sec) closed at 7.92%. Its very unlikely that RBI will stop with just one rate hike. We might see few more in this financial year. So we would suggest investors to stay away from longer duration funds and stay in short-term or money market securities

Market participants also added that, 10- year yield will continue to remain in the range of 7.75-8% in the next two-three months. The prices of fixed income securities are governed by interest rates prevailing in the markets. Interest rates and price of fixed income securities are inversely proportional. When interest rates decline, the prices of fixed income securities increase. Similarly, when there is hike in interest rates, the prices of fixed income securities come down.

Some industry players also think that, fixed maturity plans (FMPs) and hybrid funds are best bet during the current times. "Investors can lock-in money at the higher yields in FMPs at this point of time. Even hybrid funds which have equity exposure of 10-15% can be attractive at this point of time. Such hybrid funds invest in both debt and equity, but around 70-80% of the corpus is invested in debt instruments while remaining in equity.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How to Make Money Work Efficiently

2018-11-13T17:26:00.000+05:30

Some people are better investors and financially more secure because they know how to extract more from every rupee. The consequences of right and wrong financial decisions.

Investing for retirement
The simple act of starting to save early can be the difference between a comfortable and constrained life. Mr Right harnesses the power of compounding and after investing Rs 36 lakh in 30 years, he gets a corpus of Rs 3.05 crore. Mr Wrong puts in Rs 45 lakh in 25 years and still gets a lower corpus of Rs 2.5 crore.

Mr Right
Decision: Started investing at 30 years
Calculation:
Amount invested as SIP in an equity fund earning 12% return Rs 10,000 a month
Period of investment: 30 years
Total amount invested: Rs 36 lakh
Corpus amassed: Rs 3.05 crore

Mr Wrong
Decision: Started investing at 35 years
Calculation:
Amount invested as SIP in an equity fund earning 12% return Rs 15,000 a month
Period of investment: 25 years
Total amount invested: Rs 45 lakh
Corpus amassed: Rs 2.52 crore

Investing for child's goal
Most people confuse investment with insurance, buying traditional insurance plans to fund kids' goals. An endowment plan does not make your money work hard, since you pay a higher premium but get a lower corpus due to low returns of 6-7%, while an equity fund offers over 12% returns over the long term.

Mr Right
Decision: Investing in equity mutual funds
Calculation:
SIP amount: Rs 8,000 a month
Term: 20 years
Assumed return: 12%
Corpus amassed: Rs 72.9 lakh

Mr Wrong
Decision: Buying a traditional insurance (endowment) plan
Calculation:
Monthly premium: Rs 8,000
Sum assured: Rs 9.6 lakh
Total premium: Rs 19.2 lakh
Policy term: 20 years
Assumed return: 6%
Corpus amassed: Rs 28.8 lakh

Tax-efficient investments
Make your money work harder by not allowing tax to eat into investment returns. If you pick fixed deposit, the interest is considered as income and subjected to tax as per your tax slab. However, debt fund returns are capital gains, which invite a lower tax of 20% after indexation, if held for over three years.

Mr Right
Decision: Investing in debt funds
Calculation:
Amount invested in debt funds Rs 2 lakh
Amount after 3 years Rs 2.52 lakh @ 8% return
Capital gain after indexation Rs 31,470
Taxed at 20% after indexation
Total tax: Rs 6,293

Mr Wrong
Decision: Investing in fixed deposit
Calculation:
Amount invested in fixed deposit Rs 2 lakh
Amount after 3 years Rs 2.49 lakh @ 7.5% (compounded quarterly)
Avg interest each year Rs 16,648
Taxed in 30% bracket Rs 4,994 per year
Total tax: Rs 14,983

Taking a home loan
The term of a home loan depends on the EMI one can furnish, which is why some home buyers opt for an extended tenure. They will, however, end up repaying a bigger loan because the longer the term, the higher the interest. So, Mr Wrong will end up buying the same house for a higher price, compared with Mr Right.

Mr Right
Decision: Taking a home loan for 20 years
Calculation:
Loan amount: Rs 30 lakh
Interest rate: 9%
Term: 20 years
EMI: Rs 26,992

Total amount repaid: Rs 64.78 lakh
Total interest paid: Rs 34.78 lakh

Mr Wrong
Decision: Taking a home loan for 25 years
Calculation:
Loan amount: Rs 30 lakh
Interest rate: 9%
Term: 25 years
EMI: Rs 25,176

Total amount repaid: Rs 75.53 lakh
Total interest paid: Rs 45.53 lakh

Dealing with volatility
In a fluctuating market, maintain your asset allocation by rebalancing the portfolio because a skewed allocation is bound to affect your returns. So while Mr Right may seem to work against his own interests by paring down his equity holding after a bull run, he will not suffer as serious a loss were the market to take a tumble.

Mr Right
Decision: Rebalancing the portfolio
Calculation:
Worth of portfolio (80% equity, 20% debt) Rs 1 lakh
Rebalancing when market rises 50% equity, 50% debt
Worth of portfolio @13.6% growth (15% equity, 8% debt) Rs 1.13 lakh
Return during market fall (-5% equity, 8% debt) 1.5%
Portfolio value: Rs 1.01 lakh

Mr Wrong
Decision: Not rebalancing the portfolio
Calculation:
Worth of portfolio (80% equity, 20% debt) Rs 1 lakh
When market rises, no rebalancing done
Worth of portfolio @13.6% growth (15% equity, 8% debt) Rs 1.13 lakh
Return during market fall (-5% equity, 8% debt) -2.4%
Portfolio value: Rs 97,600

Buying life cover
The purpose of buying pure life insurance, or term plan, is to secure the finances of your dependants if you were to die. It is not an investment vehicle to get returns. This is why Mr Right secures a Rs 70 lakh term plan at an annual cost of Rs 7,000, while Mr Wrong is paying a high premium of Rs 96,000 to get an inadequate cover of Rs 9.6 lakh.

Mr Right
Decision: Buying a term plan
Calculation:
For a 30-year-old non-smoker earning Rs 7 lakh a year with three dependants.
Sum assured: Rs 70 lakh
Annual premium: Rs 7,000
Term: 30 years
Total premium paid: Rs 2.1 lakh
Benefits: Lump sum to dependants on death of insured

Mr Wrong
Decision: Buying a traditional (endowment) plan
Calculation:
For a 30-year-old non-smoker earning Rs 7 lakh a year with three dependants.
Sum assured: Rs 9.6 lakh
Annual premium: Rs 96,000
Term: 20 years
Total premium paid: Rs 19.2 lakh
Maturity amount: Rs 28.8 lakh

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Single Premium ULIP plans vs Regular Premium ULIP plans

2018-11-13T15:44:00.000+05:30

Individuals who are disciplined for regular investing and looking for a good long term investment option backed with life cover and do not mind the 5-year lock in period should be investing in regular premium ULIPs.

There has been a recent spike in the sale of single premium ULIP plans as compared to regular premiums. In the single premium plan, an insurer gets coverage for full term by paying premium amount in a lumpsum. Whereas, in regular premium ULIP plan, an insurer needs to pay premiums in intervals such as monthly, quarterly, half-yearly or annually for the policy.

The private sector insurers registered a hike in the growth of 54.75% in the single premium segment in April-June 2018 at the same time the regular premium grew just 3.84% during the same period.

Investors have taken into account the Long Term Capital Gains (LTCG) tax on equity mutual funds, post the announcement in the Union Budget and hence there was an overall growth in ULIP sales. New plans have lower charges and are more transparent so it's gaining investors' confidence. Let's understand key differences between single premium and regular premium ULIP plans for investors to take informed decisions before opting for one.

Why investors are opting for single premium ULIP plans?

While buying a single premium ULIP plan, a buyer of the policy needs to have a lumpsum amount to invest in existing or new schemes getting launched. Lumpsum investors have always been a key chunk of the market. This is mainly because a good proportion of the customers have a good amount of investible surplus right now, but they shy away from the commitment of recurring investments in regular premium ULIP plans.

We see a spike in sales as many companies are launching single premium insurance plans where product offering and pricing is better than the existing plans."

Who should be investing in single premium or regular premium ULIP plans?

Single premium ULIPs should be bought by individuals who can afford its expensive premium. Even individual with uneven cash flows can invest in such a mode as their future premiums might be uncertain.

Investors who have unexpected windfall gains like bonuses, profits, huge income from property sale, etc. also investing their gains in these single premium plans.

Lastly, individuals who want to avoid the hassle of regular payment of premium should be investing in the single premium plan.

Individuals who are disciplined enough for regular investing and looking for a good long term investment option backed with life cover and who do not mind the lock in period of 5 years should be investing in regular premium ULIPs

The positives and drawbacks of single and regular premium ULIP plans

Illustration of fund value comparison in single premium vs regular premium ULIP plans

In ULIP products, the premiums remain same since you choose how much you want to invest. It is the output, the maturity amount that differs, basis the cost of the product, which is a net of all the charges it deducts and the additional allocations it gives. Also, you cannot simply compare the maturity fund values for regular and single premium, since the former has repeated investment inflow, while the latter just grows on the initial investment amount.

Tax benefits

In single premium ULIP plans, if the premium paid in a year is more than 10% of the sum assured of the plan, then the total premium is not eligible for tax exemption.

Example:

If the annual premium of a plan is Rs 35,000 and cover amount is Rs 1,75,000, therefore, only Rs 17,500 which is 10% of sum assured (Rs 35,000) will be tax-free and not the entire amount of Rs 35,000 will be exempted from tax.

Be careful while investing in single premium investment plans and check if the annual premium is less than 10% of the sum assured as this criteria is very often not met in such plans. The premiums are not fully tax exempted under Section 80C, also the maturity amount is also fully taxable.

On the other hand, regular premium ULIP policy will provide you tax deduction benefit continuously i.e. over the tenure of the policy under section 80C.

You can also avail tax benefits of up to Rs 1.5 lakh over a period of 15 years (tenure of the policy).

Hence, a single premium ULIP plan can be a shortcoming when compared with the regular premium ULIP plan.

Regular premium ULIP plans are value for money in uncertain demise of policy holder

When it comes to value for money, regular premium ULIP plans are more value for money. Suppose the policyholder meets an untimely death prior to the end of the policy term, the nominee need not pay the pending premiums once the sum assured is received. While in case of single premiums wherein you pay the entire premium in one go, if the policyholder dies during the term they would have unnecessarily paid for the future premiums

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

High Rating Does not means high Mutual Fund Returns

2018-11-13T08:44:00.000+05:30

Mutual fund schemes need to be tracked with respect to their benchmark and the ability of the management to show its true ability during volatile and choppy periods to evaluate their performance

A mutual fund that is rated highly today may not necessarily maintain its rating a year later. While a highly rated fund is a good first step to short list a scheme to invest in, it does not guarantee better returns. There are more crucial parameters to be evaluated before investing.

Schemes need to be tracked with respect to their benchmark and the ability of the management to show its true ability during volatile and choppy periods to evaluate their performance. Past performance in the short term does not matter.

Also, every rating agency ranks a mutual fund scheme according to its own standards. Do your due diligence before selecting a scheme.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Can you stop Mutual Fund SIPs?

2018-11-12T17:12:00.001+05:30

Can you stop your SIP?

Yes, that is simple. Just fill in an SIP stoppage form or write a letter and you can stop your SIPs. On the other hand, if your bank account doesn't have enough funds and your SIP is still on, then the fund house may just stop after 3-5 months' default. If you start an SIP, it's always better to ensure that there are enough funds in your account to prevent unnecessary premature stoppages.

As far as possible, do not pause your SIPs. It's a bad habit. It's always better to build an emergency corpus to meet sudden expenses, so that your SIPs continue and your expenses don't harm your investment commitments.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Cyber Insurance Cover

2018-11-12T12:43:00.000+05:30

A few years ago, our biggest risk was the cash in the wallet. Having being pick pocketed or protecting gold kept in the home were our main concerns. However, today we are living in a digital world with perpetual fear that our banking details and data stored online could get stolen, hacked, damaged or erased. The biggest nightmare that an individual can wake up to is to see an unauthorised debit in their bank account and realise that they are a victim of an online fraud.

In today's digital world, the amount of personal data being generated, transmitted, and stored on to various digital devices is growing. The critical nature of this data and the complexity of the systems that support its transmission and use have created a gamut of cyber risks. Therefore, the major worry for everyone today is not if their physical wallet is pickpocketed, but whether the latest download on their Smartphone or laptop is a bait for a digital hacker who may secure access to their hard-earned money which they may lose in a matter of minutes

This insurance cover will provide customers with a comprehensive protection against various cyber risks. Here are some of them:

Online Banking frauds

Apart from large corporates, individuals too face a lot of cyber risks such as cybercrime, including loss of funds to online fraud, identity theft, cyberstalking, phishing, cyber extortion and malware attack. A majority of banking transactions today are conducted online with a lot of personal information also being available online and on social media websites which can be used by hackers. While taking into account all the risk factors that individuals currently face in their everyday lives, a comprehensive cyber insurance cover that can provide protection against these risks is the need of the hour.

Phishing mailers

Phishing has increasingly become a popular way for cybercriminals, wherein a scammer uses an authentic-looking page or email from trusted companies, such as online payment firms, to trick users into giving out their personal information, such as log-in credentials, credit card and bank account details, personal identification ID details, and other important personal information. Therefore, if the customer who falls victim to a phishing scam has a cyber-insurance cover, it will not only pay for the loss of fund but also incur the cost of filing a criminal complaint against the culprit once found. Also in cases of cyber extortion, the insurance company will pay all the costs of hiring a specialised consultant to mitigate and minimise the loss.

Adidamu said spear phishing or the act of sending a malicious file or link through a seemingly innocuous message, via social media accounts is quite common today. There have also been increasing cases of 'identity theft' and hacking of individuals' social media accounts to post malicious information defaming the individual which can cause immense reputational damage. "This data can be misused to transfer the funds from your account or your personal photographs, emails, texts etc. A cyber insurance cover will pay the cost of filing a criminal complaint against the culprit," he said.

IT Theft Loss

The recent worldwide 'WannaCry' ransomware attack has a served as a wakeup call for all of us on the new age risks that enterprises and individuals face in the modern digital era. From government institutions to temple trusts, hospitals and large enterprises, the ransomware threatened each one of us.

Adidamu said WannaCry's virulent attack managed to cripple over 2 lakh computers in over 150 countries. The attack clearly showed that Asia is particularly vulnerable to such attacks. Moscow-based Kaspersky Labs found India to be among the worst hit by the malware, and Indian IT security firm QuickHeal also revealed that over 48,000 systems in the country were found infected

Malware attacks

In cases of malware disruption which damages access to the computer, cyber insurance will pay the cost of restoration of the computer system, software and data. The insurance company will also pay the policyholder the legal fees to defend the policyholder in the court of law if any third party files a suit against the policyholder for their loss of data

Cyber extortion loss

A comprehensive cyber insurance plan will also provide coverage for expenses incurred on Counselling Services treatment, claim for Damages Against Third Party for Privacy Breach and Data Breach, Cyber Extortion Loss and transportation for attending Court summons.

While the internet has made our life easier, it has also made everything a lot more risky for individuals. In this day and age insurance covers against pickpockets do not help when the bigger risk is of cybercrime.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

What are the Debt Funds Risks

2018-11-12T08:46:00.000+05:30

Debt Funds Risks

Interest rate risks on longer maturity: Bond prices are affected by the interest rate cycles and policy stance of central banks. Higher the average maturity, the more volatile and risky is a fund considered.

Credit risks: Credit risk is about the fund's ability to pay back money at the time of maturity. The lower the rating profile of a fund's investment, the more risky is it considered.

Longer maturity risk is normally due to fluctuation in bond prices and is considered recoverable over long periods. Credit risk is typically binary in nature, where if the investee company defaults in repayments on due date, the subsequent recovery is generally unlikely

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

GST on Mutual Fund Investors

2018-11-11T15:58:00.000+05:30

If you were stumped to read that you will now be paying goods and services tax (GST) on your mutual fund exit load, you are not alone. The frequently asked questions (FAQs) issued by the Central Board of Indirect Taxes and Customs (CBIC) reveals the impact of GST on some financial services.

The FAQs explain tax implication on various charges, penalty and fees such as "exit loads" charged by mutual fund companies at the time of redemption, additional interest charged for default in payment of loan instalments and charges for late payment of dues on credit card outstanding. Here is how GST will impact your investments and financial transactions.

GST Impact on mutual fund investors

In case of mutual funds, expenses incurred by asset management companies (AMCs) are factored in the net asset value (NAV) of the scheme on a daily basis. However, exit loads are not included in the total expense ratio (TER) and charged at the time of redemption based on the scheme you have invested in and the tenure of your investment.

Typically, exit loads are nil or charged at a nominal rate in case of debt-oriented mutual fund schemes, if the redemption is made within a short period, say, 7 to 30 days from the date of purchase. However, in case of equity-based schemes, fund houses typically charge exit load of 1% of the NAV if the investor redeems from schemes within 365 days from the date of allotment.

In the recent FAQ, it has been clarified that the exit load will attract GST. However, the load will not increase for the investor as GST is included in the existing load levy. The scheme on the other hand will lose out as the exit load amount credited back to the scheme will be net of 18% GST

He said the fund houses made a representation to the GST authorities and the service tax authority about this. In that they requested the tax to be withdrawn, and clarified that this is not a service provided to the investor, it is in fact, a levy to deter investors from exiting too soon. Their request hasn't been accepted and thus fund houses are going to pay GST on exit load, but the tax will be included in the load itself.

All fund houses do not have clarity on this yet. Another fund house that Mint contacted was unclear about this issue and its treatment.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

What is Portfolio Turnover in MFs

2018-11-11T08:14:00.000+05:30

Does your fund changes its stock holdings frequently? Does it sell a lot to book profits or buy more on dips? Portfolio turnover reveals these things. It is a number that is disclosed at the end of the month in fund factsheets. Portfolio turnover is calculated by taking either the total amount of new securities purchased or the amount of securities sold, whichever is less over a particular period, divided by the total net asset value (NAV) of the fund. This is the method used globally.

A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. In fact, it represents the percentage of the portfolio's holdings that have changed over the past year. A low turnover figure indicates a buy-and-hold strategy, while a high turnover would indicate considerable buying and selling of securities.

If the portfolio is churned many times during a year, the fund will incur higher transaction costs. Aggressively managed funds generally have higher portfolio turnover rates than conservative funds. When you use portfolio turnover, do not forget to compare it with peer category schemes.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How to open bank accounts for children

2018-11-10T18:15:00.001+05:30

Children's bank accounts help parents create a corpus for their children and teach them basics of money management.

Such accounts are called "minor" accounts. A minor is a person who has not attained 18 years of age.

Who can open?
i. A natural guardian on behalf of the minor.
ii. A natural guardian, jointly with the minor.
iii. A legal guardian in the name of the minor.
iv) A minor of age 10 and above in his/her name to be operated by the minor.

Form
The usual account opening form can be filled up to open a minor account. Details like the minor's name, address, guardian details and signature must be furnished.

Documents
Following documents need to be furnished:
• Proof of minor's date of birth
• KYC documents of the guardian. Aadhaar card of the minor.
• Specimen signature of guardian. Minor's specimen signature in case he/she is 10 years old.

Operation of account
For accounts of minors below 10 years of age, the guardian must operate the account. However, minors over 10 years of age can operate the account on their own.

Upon turning 18 years
Once the minor turns 18, the account has to be designated as a regular savings account. Thereafter, the guardian cannot operate the account on the account holder's behalf. An application form along with KYC of minor turned major needs to be furnished.

Banks prescribe daily transaction limits and allow parents to have additional transaction limits on accounts of minors to enable them to keep a check on the transactions of their children

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Intraday Trading and Short Selling

2018-11-10T16:08:00.000+05:30

In Intraday Trading, you have to open and close your positions on the very same day. It is essential that you buy and sell the shares on the same day. Intraday has to take place within the trading hours as fixed by stock exchanges like NSE and BSE.

Things to know on Intraday Trading:

1. Choose two to three highly liquid large-cap shares. Large-cap shares have high trading volume and hence, you will not have to hold these for a long-time. Mid-size or small-cap shares may have to be held for a longer time, as these shares have low trading volumes.

2. Intraday trading is very risky. It is wise to be cautious. Start by deciding your entry level and target price. Try to stick to the target price. Do not sell off the shares, if you see just a nominal increase in share prices.

3. Choose the stop-loss strategy. Stop-loss is a level beyond which, if share prices fall, your shares are automatically sold. This is used to minimize your loss to the greatest possible extent.

4. Never panic in intraday trading. Do not be greedy and hold back the shares. It is not only important to cut losses, booking profits once the target price is reached, is also important. Adjust the stop-loss trigger as and when needed.

5. There is a fine line between investing and Intraday trading, although, the strategies are not very different. There may be instances when retaining the shares is wise. But, do not hold back the shares beyond the trading hours.

6. Research before you place your order. It is best to create a wish list and study these shares closely. Learn about the Companies like mergers, bonus dates, dividend payments and so on.

7. Stock markets are very volatile. Even experts fail to predict market movements. Therefore, do not test the market if it moves against your expectations. You might do better by exiting and squaring off your positions to avoid losses.

8. There is this golden rule: 'Invest only what you can lose.' Intraday Trading is outright risky; therefore, avoid investing living expenses in the stock market.

With Intraday Trading, you can make profits, when the market is bullish and even if it is bearish. Let's say the market is bullish and you buy 100 shares of XYZ Ltd. at a lower price. Sell all the 100 shares when prices go up to make a profit.

What is Short-Selling:

You can even make money when stocks fall through Intraday Trading. This can be done through short-selling. Let's understand this with a simple example. You can sell shares of a company, say ABC Ltd. without actually owning them, with the hope that its price will go down.

You borrow 100 shares of ABC Ltd. from your stock broker. You sell these 100 shares in the open market at Rs 500 per share and get Rs 50,000. If the price of ABC Ltd. goes down to Rs 450 a share, you buy 100 shares at Rs 45,000. You then replace the shares that you borrowed from the broker. The difference (Rs 50,000 - Rs 45,000 = Rs 5,000) which is your profit.

Note: If the price goes up, you suffer a loss.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How mutual fund investors can benefit from rising interest rates

2018-11-10T14:42:00.001+05:30

The fall in interest rates which we have witnessed since April 2014 seems to have taken a pause. And, thanks to rising oil prices and rising inflation, interest rates are on its way up. The 10-year G-Sec yield has already moved from 6.46% to 7.82% over the last one year and is all set to cross the 8%-mark anytime soon. Sensing the inflationary conditions, RBI, in its latest June policy monetary meeting had increased the repo rate by 0.25% after a gap of almost four years and is expected to increase it further in this calendar year itself.

Taking advantage of rising rates

Inspite of rising cost of funds for the banks which would hurt the borrowers, debt investors may position themselves in a way to take advantage of the situation. This is creating an opportunity for investors looking to generate competitive returns from debt investments. Such investors need to capitalise from such a rising interest rate scenario. Investing in debt mutual funds provide a better alternative during the rising interest rate scenario. However, investors need to be careful with the choice of debt mutual funds as not all of them may generate decent returns. Recently, Sebi had reclassified funds including debt funds into 16 categories based on the duration of the underlying securities.

When interest rates are looking to go up, choose funds with shorter maturity profile like the short-term funds or ultra short term funds. When the interest rate rises, the price of existing bonds fall as there is expectation of higher rates on newer bonds. As prices fall, so do the NAV of the debt mutual funds. The impact, however, is more pronounced in debt funds with underlying securities which have longer maturity profile than on the shorter term funds. Such funds, therefore, provide stable and steady returns in rising interest rate scenario.

In addition to these funds, the conservative investors may consider liquid funds and fixed maturity plans. Importantly, avoid long-term funds as they may even result in the loss of capital when rates show rising trend. Till the rates are on the upward swing, stay invested in shorter duration funds.

Bank deposits

While interest rates of certain bank fixed deposits have increased, the post-tax return and the real return post-inflation may still be low compared to other alternative investments. Conservative investors looking for fixed return may alternatively consider fixed deposits of reputed companies with decent ratings. Their return overshadows bank deposits yet provide safety to the principal invested.

When interest rates rise, the tendency of investors is to park funds in fixed income investments. But, during these times, when interest rate shows a rising trend, the investors needs to be re-looking at the risk-return equation. As the G-Sec yield rises, so do the risk-free return and therefore the risk should be given importance over returns. As and when the interest rate cycle turns, investment in companies offering higher rate may face default risk.

Remember, debt funds are best suited for generating better tax-efficient returns when one's goals are short to medium term in nature. They, anyhow, are not meant for wealth creation over the long term. While retired and senior citizen investors may consider them as a part of their debt portfolio to meet their regular income needs, others may consider debt funds as a de-risking strategy when nearing their goals.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How are NULIPs different from ULIPs?

2018-11-10T08:36:00.000+05:30

When stock markets do well, investors want to hitch a ride through various investment products. Everybody wants to get a piece of the action. There was a time, not long ago, when United Linked Insurance Plans or ULIPs were considered as bad investment products due to high charges and fees. Plus, there was a lot of misselling by insurance firms and their agents as well, which drove customers away. Then insurance regulator IRDAI stepped in with reforms in 2010. Market linked products are also dependent on market movement. Though ULIPs were reformed, they lacked the bang and appeal. Also, investors who were once bitten became twice-shy. This is also a time when mutual funds witnessed a rise in popularity. Over the last 12-18 months, a new sub-category of ULIPs have emerged. Call them, new ULIPs or NULIPs. Are these any different or just a marketing gimmick? Let's find out.

On paper, NULIPs seem much different. Life insurance companies claim that NULIPs are extremely cost effective and are comparable to mutual funds. You might not hear a lot about them on TV, newspapers/ magazines or see big hoardings. Many of these NULIPs are sold online. That is a reason why they are better as well. Selling a product through offline channels means higher cost of customer acquisition. So, customers/investors buying these NULIPs online get a much better deal. In some cases, NULIPs also return the insurance cost to the investor, making the insurance practically free. Plus, there are a whole lot of other goodies which can potentially enhance investors' returns if they remain invested for the long-term.

One must understand why people buy ULIPs. Unit linked insurance plans combine the insurance aspect with investment. You may invest Rs 1 lakh a year in an investment, but if you die at the end of 5 years, all your returns will be limited to the Rs 5 lakh invested. On the other hand, if you buy a pure term insurance policy, you will have to die to realize the benefit! This is why combination products try to merge the best of both worlds. ULIPs were designed to replicate this. They give you reasonable insurance so that if you die in the interim, your financial goal is met with the sum assured. In case you live through, the investments done by the ULIP will ensure you get a neat corpus on maturity.

But ULIPs got it wrong somewhere down the line. Huge commissions were being paid to ULIP agents. This was recovered from investors in the name of exorbitant fees. Thankfully, the NULIPs have done away with most such charges. Do remember that unlike Systematic Investment Plans in tax saving mutual funds, ULIP investors can redeem the entire amount at the end of five years even if the premium has been paid in installments. In tax-saving MFs, only units that have completed the three-year lock-in can be redeemed.

Now let us check out some interesting features across NULIPs.

Loyalty additions or bonuses

These are like the extra money given to policyholders in endowment policies. NULIPs give loyalty additions for any person who is paying a hefty premium, say like annual premium of Rs 5 lakh, and who pay premium for long periods, say 10 years. These additions can be usually paid after the 6th policy year.

Return of mortality charges

This is akin to giving free insurance cover. Mortality charges are the cost of insurance cover. Do remember this cost will be added back by the insurance company to your NULIP fund-value after the end of the policy premium. So, expect your fund value to rise by that extend on policy maturity. But not everyone offers this feature.

Fund/wealth/premium booster

On the maturity date, these fund or wealth boosters will be added to the regular premium fund value, provided all due regular premiums have been paid up to the date. The fund booster is given as a percentage of one annualised premium. This booster is payable only for policies where the policy term is 10 years and above in most cases. Some plans have premium boosters that start from 6th year, like loyalty additions.

Additional allocation

EdelweissTokio Life - Wealth Plus has something called an 'additional allocation'. This plan provides additional allocation every year starting from the 1st policy year till the end of the premium paying term. These allocations are as a percentage of the premium. During the first 5 policy years, extra allocation will be added to the fund(s) along with each premium paid by you within the grace period.

No premium allocation charge

Earlier ULIPs charged hefty premium allocation charge of up to 90-100 per cent of first year premium. With most NULIPs, this is not the case. There is no such charge, which means right from the word go most of your money is invested. There is a fund management charge. For example, Bajaj Life Goal Assure product levies up to a maximum of 1.35 per cent per annum of the NAV for all the funds. There can be a policy administration charge per year. Also, there could be miscellaneous charges levied on per transaction basis. Some plans like the HDFC Life Click2Invest ULIP - Online Unit Linked Insurance Plan has no premium allocation or policy administration charge, but has fund management charge and mortality charges.

Settlement options

NULIPs also provide flexible settlement options. Under this option, you need to choose from settlement term (option of 1, 2, 3, 4 or 5 years etc.); and frequency of pay-out (yearly, half-yearly, quarterly or monthly instalments). This allows you to take a regular stream of payment, instead of lump sum. Lump sum amounts can be wasted on unnecessary spends.

Once you have chosen the settlement term and the frequency, the amount paid out in each instalment will be the outstanding fund value as on that instalment date divided by the number of outstanding instalments. Do note that the investment risk during the settlement period will be borne by you. If the markets fall, your fund value will reduce. Also, no risk cover will be available during the period of the settlement option. Fund management charge can be deducted by insurance company during the period of the settlement option. Alternatively, you will have an option to withdraw the fund value completely, at any time during the period of settlement option

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

When to Sell a Mutual Fund?

2018-11-09T17:11:00.000+05:30

Compared to buying a mutual fund, investors often make worst decisions when it comes to selling them

The fact that there are so many mutual funds in India and choosing a suitable one is difficult is now understood by every saver. Everyone has a way around it, whether it's advisors or websites or just asking around. However, there's actually an even more difficult choice that investors face--which funds to sell off and when. Curiously, more knowledgeable and more involved investors face this problem a lot more than others. The reason is those of us who are active and involved investors always have an urge to do something. Such investors generally do well because because they learn, analyse and act more than others. Therefore, they start equating being good investors with doing something, often anything. Unfortunately, along with everything else, in practice, this also translates into being all too ready to sell off their investments.

There are many reasons for selling funds but not all of them are good ones. There can be exceptions but the good reasons tend to be about the investor's own finances and the wrong reasons tend to be about the fund. Let me explain.

Overactive investors give three reasons for wanting to sell off a fund investment. One, they've made profits; two, they've made losses and three, they've made neither profits nor losses. That sounds like a joke but isn't. Someone will say, 'Now that my investments have gone up, shouldn't I book profits?' Alternatively, 'This fund has lost a bit of money recently, shouldn't I get out of it?' And finally, 'The fund has neither gained nor lost, shouldn't I sell it.' Basically, what I'm saying is that investors who have a bias for continuous action can create a logic for taking action out of any kind of situation.

And which is the right reason for selling a fund? Obviously, none of the ones above. By themselves, they are not legitimate reasons for selling a fund. The first comes from the spurious 'booking profits' concept that advisors have promoted. Booking profits doesn't make sense for stocks, and it makes even less sense for mutual funds. In both, this attitude makes investors sell their winners and hang on to their losers. In mutual funds, the whole point is that there is a fund manager who is deciding for you which stocks to sell and which to buy. If the fund manager is doing this job well, then the fund is making good returns. Therefore, selling a fund that has made good returns is the exact reverse of what investors should be doing.

Let's come to the second reason now. While selling underperformers is a legitimate idea, you need to evaluate the timeframe and the degree of underperformance. Investors try to sell funds that have generally excellent performance but may have underperformed other funds by small margins. Someone will say that over the last year, my fund has generated 25% but five other funds have generated 30% so I will switch to those. This switching based on short-term past performance is counterproductive and does nothing to improve your future returns. Only if a fund underperforms consistently for two or more years.

So when should investors actually sell their funds? The right answer is that they should be guided by their own financial goals. You should sell a fund and get your money out when you need it. Let's say you have invested for five or ten or fifteen years, continued your SIPs, and now the money has grown to what you need. You may need to make a down payment for a house, or pay for your child's education, or whatever else. If you're getting close to that time, you should sell and redeem, irrespective of the state of the market. In fact, unless it's an expense that can be postponed, you should start acting one or two years before time. Withdraw the money from the equity fund and start parking it in a liquid fund. You can use an automated STP (Systematic Transfer Plan) for this which will be convenient.

In a manner of speaking, the primary goal of investing is not to invest but to sell because that's when you achieve your goal. Be guided by that.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

How to get Forgotten Investments

2018-11-09T08:26:00.000+05:30

Forgotten investments are a big issue. A massive amount of money lies in banks, insurance companies and housing finance companies. It is more common amongst the older folks where they speak about the old share and deposit certificates they lost and forgot about them completely. This is the reason that the money lies unclaimed with financial institutions. The concerned companies and financial institutions, too, fail to locate investors or policyholders as contact details changes are not updated with the company. Also, once the original document is lost, it becomes difficult to claim the amount that is due to them.

You can reclaim your money even after 10 years, after following these steps:-

1) If an account has not been operated for 10 years, or any amount remains unclaimed for more than 10 years, it is transferred to the Reserve Bank of India's Depositor Education and Awareness Fund Scheme

2) An investor can claim the money, or operate his account, even after such a long gap by approaching his bank

3) The bank will claim the money back from the fund

4) If no claim has been made for 10 years after maturity of a traditional insurance policy, the money gets transferred to the Senior Citizen Welfare Fund (SCWF)

5) This money can be claimed within the next 25 years by providing KYC details and providing authenticity.

Sometimes, even after an asset in the form of investments is passed on by grandparents and parents, the nominees and legal heirs fail to claim them as they are not aware of the existence of those assets. It happens in the absence of a Will. As a countermeasure, the RBI has mandated that banks should publish details on their websites of accounts that have remained inoperative and inactive. It has directed the insurance companies also to update details of unclaimed funds on their websites.

In cases where your parents leave you a fortune but don't assign you the nominee of any of the shares, the problems can increase. It can be an arduous task to obtain a succession certificate from a district court. One can take help from the asset recovery companies. The process broadly involves filing legal claims, tracing the investments, and approaching the concerned companies. Generally, in a situation where your parents passed away without appointing you the nominee of the bank account, then you will have to submit a succession certificate or legal heir certificate. The legal heir will have to produce other documents like KYC details and NOC from other legal heirs.

In a situation where, as an investor, you have lost your share certificate and do not even remember the folio numbers of the holdings, then you should get in touch with the company directly. You will require to write down mentioning your personal details and provide the KYC documents. The company shall authenticate the applicant and then provide information about the holdings after going through the shareholding list.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Income Tax benefits from Life Insurance

2018-11-07T16:00:00.000+05:30

Thanks to Section 80C of the Income Tax Act, you don't have to pay tax on ₹1.5 lakh of your salary—you can deduct this amount from your taxable income. But this deduction is allowed only for certain expenses and investments.

Premiums that you pay for a life insurance policy is one such expense, but did you know that the life insurance cover needs to be at least 10 times the annual premium that you pay to be eligible for tax benefits?

Income tax rules

Under Section 80C, premiums that you pay towards a life insurance policy qualifies for a deduction up to ₹1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium.

But if the sum assured is less than 10 times the premium—for instance you pay ₹1 lakh as premium for a sum assured of ₹5 lakh—you will get a deduction on the premium up to 10% of the sum assured. In the example, your deduction will be ₹50,000 and not ₹1 lakh (₹50,000 is 10% of ₹5 lakh).

Also, in case of death, the sum assured that's paid to the nominee continues to be tax-free. But, on maturity, since the policy doesn't meet the qualifying criterion for tax benefit, the income will be taxed at the marginal tax rate.

In fact, in order to ensure compliance, if the maturity proceeds exceed ₹1 lakh, then a tax deduction at source (TDS) will apply and the insurer will deduct 1% as TDS if the PAN of the policyholder is available.

Why does it matter?

If you are buying a term plan, then maybe you don't have to delve into the nitty-gritty because the sum assured in a term plan is several times the premium that you pay.

However, for insurance-cum-investment plans like unit-linked insurance plans or endowment and money-back insurance plans and single premium policies, looking at the insurance limit becomes important.

This is because, for policy holders below 45 years of age, insurance plans now offer a minimum sum assured of 10 times the annual premium, but those above 45 years may get a sum assured that is seven times the annual premium. Even in case of single-premium plans, the sum assured may be less than 10 times the premium.

But such policies will not qualify for tax benefits, so make sure you go through your insurance policy carefully.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Motilal Oswal Focused 25

2018-11-07T08:27:00.000+05:30

Motilal Oswal Focused 25

1/3 year return: 9.54 /9.91%

Top 10 holdings (%): 62

Top 3 holdings: HDFC Bank, Maruti, kotak Mahindra Bank

THE FUND manager aims to own compact portfolios of quality stocks with secular long-term growth prospects, with low portfolio churn. The fund prefers to restrict its holdings to no more than 25 companies.The fund manager follows a bottom up approach to stock picking and is index agnostic and does not hesitate in taking large concentrated bets in its portfolio. Stocks like HDFC bank, Kotak Bank have helped it outperform.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Contra Funds vs Multicap Funds

2018-11-06T17:27:00.000+05:30

You should have a time horizon of at least 5 to 6 years. All these categories are good. They invest in equity but have a different strategy. Most multi-cap funds will be growth-oriented. They'll be investing in companies which are likely to go up in value because the companies are growing. It may not be cheap.

Value funds target to invest in those companies which are out of favour and are available at discount. So, it's completely about buying cheap. In contra strategy, the companies may not be cheaper, but there could be special situation companies which are out of favour for some reason and the market is unwilling. It could be a turnaround situation.

So, these fund managers follow a different style of investing. I would say that they all fit into a portfolio. I would say that invest a third of your money in a value fund and invest 2/3 of your money in one multicap fund. That will do the job. If you are investing a large sum of money, maybe two multicap funds and one value fund will do the job. A third of money in value fund will work because different segments of the market do well at different points of time. This is another level of diversification which investors should be aware of.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Investing in Bond Funds

2018-11-06T08:35:00.001+05:30

Bond funds make a lot of sense for investors who are looking for slow but steady growth. They are tax-efficient too compared to the good old fixed deposits for individuals in higher income tax bracket. But contrary to popular perception of being risk-free, they are fraught with risks. Here are five factors you should be aware of before committing your money.

Credit risk

The portfolio of bond funds comprise investments in instruments such as treasury bills, commercial papers, government securities, certificate of deposits and bonds. Each of these differ from each other in terms of credit risk. Simply put, credit risk is the chance of default by the issuer of the instrument. Credit risk impacts investments in two ways. First, a default may lead to permanent loss of capital. In case of rated instruments, papers with AAA rating are seen as the safest bet. Not a single AAA rated long term instrument rated CRISIL AAA has ever defaulted, says CRISIL default study 2017.

A change in rating issued by rating agency also impacts bond prices. A rating upgrade pushes up bond prices and a downgrade pulls down prices. As per CRISIL default study 2017, during 2007-2017 around 95.3 percent of CRISIL AA ratings remained in that category at the end of one year; 1.2 percent were upgraded to CRISIL AAA and 3.5 percent were downgraded to CRISIL A category or lower. The numbers mentioned above are just for understanding purpose and are expected to change over a period of time.

Always check the portfolio of the schemes. If the fund manager is taking undue risks to boost the returns, avoid such funds. Liquid funds are marketed as safe investment bets. However, many of them invest in commercial papers issued by corporates which carry credit risk. Ideally, liquid funds should have a sizeable chunk of their money in treasury bills and government securities maturing in three months

If you are comfortable taking extra credit risk for extra returns, do consider credit risk funds. As the name suggest, these funds invest in bonds that carry high credit risk. These schemes are expected to reward you with extra returns for the extra risk you took.

Interest rate risk

Existing investors in bond funds have learnt it hard way over the past couple of years. For the uninitiated, when interest rates go up, bond prices fall and vice-versa. The 10 year benchmark yield has moved closer to 8 percent now as compared to 6.18 percent recorded on December 7, 2016. The rate of interest changes is seen the most in long dated bonds. If you have been holding long dated papers, you have pocketed moderate returns. Government securities funds investing in long term government bonds lost 0.6 percent over the last one year on an average.

If you are not too comfortable with interest rate risk, stick to short duration bond funds, which earned 4.5 percent over the past one year.

Expenses and exit loads

Double-digit returns potential in equity funds make many Indian mutual fund investors ignore the expense ratio of mutual fund schemes. In bond funds, you have to be very careful. Keep a track of expenses. Any uptick in expense ratio pulls down returns payable to investors

There are many short duration funds and corporate bond funds that invest in high quality papers and charge very low expenses. On the other hand, there are credit risk funds that charge high expenses and invest in low rated high risk bonds to earn extra returns.

"Investor returns - arrived at by deducting expense ratio from portfolio yield-to-maturity - must be compared by investors before taking investment decision

For example, a short duration fund investing in high quality papers may have portfolio YTM of 8.3 percent and have expense ratio of 40 basis points. Here investors are expected to pocket 7.9 percent returns, other things remaining the same. Now compare this with a credit risk fund that comes with YTM of 9.1 percent and expense ratio of 1.6 percent, which nets an investor 7.5 percent. If investors are not getting adequately compensated for the extra risk they are taking, then there is no point taking that extra risk.

Do check the exit loads at the time of investing. If you have to sell before the stipulated time, the fund house deducts exit load, eating into your returns.

Fund manager risk

There are many celebrity fund managers in the equity space. However, not many are bothered about knowing more about the fund manager when they are investing in bond funds. A fund manager's role is critical in dynamic bond funds and credit risk funds as the fund manager takes interest rate calls and credit risk decisions.

Changes in AUM of the scheme

Large changes in assets under management may change the expense ratio of the fund. A sudden dip in the assets may push up the expense ratio leading to lower returns.

One should also understand that a few strategies work the best with limited money. Sudden large investments in credit risk funds may force the fund manager to settle for sub-optimal investments in already illiquid corporate bond market. However, this is not a risk in government bond funds, given the ample liquidity.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Know About Your EPF

2018-11-05T15:37:00.000+05:30

An Employees' Provident Fund (EPF) is managed by the Employees' Provident Fund Organisation (EPFO) under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

Every establishment with 20 or more employed individuals or sometimes less than 20 in certain conditions come under this scheme. The employee and employer make equal contributions to the scheme and the employee receives the contribution with interest after retirement.

This is the permanent account number allotted by EPFO. When you change your job, a new member ID will be provided to you from the local PF office, which is your PF number. All the PF numbers will fall under one umbrella of UAN. You can find this number in your payslip, along with your PF number from the current employer.

Your Contribution Paid

Contribution made towards the EPF is:

Government sector: 12% of your basic pay plus your dearness allowance plus retaining allowance
Private sector: 12% of basic pay
Establishment with less than 20 employees: 10% of the basic pay

Share of Contribution

All the contribution made towards EPF does not remain under EPF, some of it goes towards Employees' Pension Scheme (EPS). From the employer's contribution, 8.33% goes to EPS while the rest goes to EPF. However, for those with Rs 15,000 or more basic salary, the EPS contribution is limited to 8.33% of Rs 15,000 that is Rs 1,250.

Voluntary Provident Fund

You can choose to contribute higher than 12% of your basic pay towards EPF by applying for the Voluntary Provident Fund (VPF). Here the employer does not require to match the contribution and your contribution is tax-free.

Withdrawal of EPF

You can withdraw your full PF balance:

If you have retired from your employment after attaining 55 years of age.
If you are out of employment for 60 straight days or more.

However, those over 54 years of age, nearing retirement can withdraw upto 90% of the balance with interest.

Interest

EPF interest is calculated on monthly running balance. If you do not contribute to your account for three years, it becomes inactive and you will not earn any interest.

Withdrawal after 5 years of employment

If you have worked for 5 continuous years, you can withdraw your PF balance without any tax implications if you have quit the job and are unemployed for over 60 days. The five years of service does not have to be with the same employer provided, you have transferred your EPF to the new employer instead of withdrawal.

Withdrawing before 5 years of employment

Employer's contribution along with interest is taxable in the year of withdrawal. Deduction claimed under section 80C on your contribution will be added to income for the year. Interest earned on your contribution is also taxable.

Tax is deducted at source (TDS) for premature withdrawals of EPF. Advances

Advances

You need not wait till your retirement to withdraw the EPF amount. You can make withdrawals after a minimum of 5 years of service.

It can be withdrawn for purchasing a house or residential plot, repaying loan from a government organisation or nationalised bank, for child's marriage or education, medical treatment of a family member hospitalised for more than a month, etc. Please note that the employee should have completed 7 years of service for child's marriage/education advance.

The amount withdrawn is limited to conditions laid by the EPFO. You need not pay any interest on this withdraw and choose not to repay the balance.

House Loans and EMIs

The EPFO allows members to use upto 90% of their accumulated contribution to make down payments in purchase of the house or to pay EMIs of home loans.

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

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com