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Your Money: Steps to reach your retirement corpus milestone

Retirement planning is all about gaining an understanding of the “future you” based on your current aims, desires, and desires. Estimating your post-retirement activities can give your retirement plan more meaning. For example, you could desire to travel more, get active in humanitarian activities, or set up money for emergencies.

Your Money: Steps to reach your retirement corpus milestone

It is better if you are motivated by your post-retirement objectives. Quantify the expenditure to an approximate amount based on current value, and inflate the expenses to your retirement age.

Someone who needs Rs 2 lakh per month in present value may need to plan for Rs 5.3 lakh per month after 20 years at a 5% inflation rate. With a life expectancy of 35 years, the required corpus would be Rs 13.7 crore; with a real rate of return on the post-retirement corpus of 3% (investment return – inflation). Without the right foundation for your retirement goals aim, it may be difficult to continue your present lifestyle after retirement.

Efficient retirement plan

To build an effective retirement plan, you must have an optimal pre and post-retirement portfolio composition in order to get closer to your retirement corpus milestone and efficiently monetize withdrawals afterward. Someone with more years till retirement may afford to assume a significantly greater risk asset exposure than someone retiring in a few years. Consider leaving everything to risk assets for the “long term” without portfolio rebalancing. Additionally account for the market falls by 30% in the year of retirement.

This depletes about one-third of your portfolio during the time in which you were to begin withdrawals from the corpus. Following an asset allocation strategy comprising diversely connected funds and rebalancing at regular intervals helps to mitigate such risks. Equity mutual funds have historically shown to be particularly efficient compounders of your investment.


Plan for contingencies

Being prepared for emergencies is essential in any financial plan, especially one for retirement. An unexpected medical bill is the one item that may chew a significant hole in your nest egg. It is critical to ensure that your medical insurance covers you throughout retirement to preserve your retirement corpus from rapid depletion. Mutual funds may be helpful in covering unexpected bills.

Investment portfolios aim to meet several objectives throughout the course of a person’s life. One must manage risk and returns effectively to ensure enough finances are accessible for each objective while still saving enough for retirement. Efficient portfolios are those that can cater to numerous lifecycle goals while maintaining a constant flow of capital in and out of them.

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How to make the most of your Systematic Withdrawal Plan (SWP)

SWP, or Systematic Withdrawal Plan, is a mutual fund investing feature that allows investors to withdraw from their current assets in the form of preset sums at regular intervals. One can withdraw on a monthly, quarterly, semi-annual, or annual basis, as determined by the investors. It guarantees a consistent cash flow for your income requirements.

How to make the most of your Systematic Withdrawal Plan (SWP)

SWP is the opposite of the Systematic Investment Plan (SIP). In SIP, a fixed sum is sent from your bank account to the mutual fund on a regular basis, whereas for SWP the transaction flow reverses. SWP is a useful tool for investors who want consistent cash flows to cover their costs.

How does SWP work?

An SWP allows you to take a set amount from your mutual fund assets on a regular basis. When an investor chooses an SWP, he obtains his own money from the ongoing investment in a methodical manner. The money is received back by redeeming certain mutual fund units.

Simply put, a portion of your mutual fund units will be sold on a regular basis to honor the dividend you have set. If no time frame is specified for the SWP, payments will continue as long as you have units in your holding.

Suppose you began an SWP for Rs 1000 on a lump sum investment of Rs 1 lakh in an equity mutual fund plan for 5 years. Assume the projected rate of return is 10%. Over the course of 5 years (60 months), you will receive a total dividend of Rs 60,000; while the value of the remainder of your investment will be Rs 84,490. So, in essence, investors continue to get their normal monthly cash flow by redeeming units. While the remaining units appreciate in line with the market price.

 Systematic Withdrawal Plan (SWP)

How to make the best use of SWP?

SWP assures consistent cash flow. If an investor has a large lump sum to deposit for immediate recurring withdrawal, choose SWP right after making the investment. However, experts recommend that investors initiate an SWP in their equity scheme at least one year after investing to avoid paying the 15% short-term capital gains tax.

One should implement SWP features after a couple of years, say 5-7 years if one is better financially organized. Since this time period improves capital appreciation. It is advantageous to have a bigger volume of consistent cash flows.

Furthermore, investments made in the SIP mode can further receive help with the SWP option at any time. If you have been saving through a SIP until retirement and do not wish to invest anymore, you should consider terminating the SIP but not completely redeeming it. Rather, SWP is the greatest method to realize the benefits of the sizable corpus. This approach, a regular monthly flow will be more like a pension for you and will be able to meet your demands for a much longer period of time because the remainder of the corpus will remain invested and continue to increase.

It’s worth noting that, despite the SWP, you may redeem more whenever you want.

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Equity Mutual Fund: Should you go for a concentrated investment portfolio?

Concentrated portfolios are typically recommended above extensively diversified portfolios. This is due to the fact that the asset allocation method of diversification has a long track record. However, if the focused investment accounts for a modest percentage of your entire portfolio, it makes sense and may be worth exploring. A concentrated section of a portfolio functions as a satellite investment surrounding your core portfolio, adding value to your wealth-building process.

Equity Mutual Fund: Should you go for a investment portfolio?

One of the finest and easiest methods to build long-term wealth from stock markets is to invest in equity mutual funds using a systematic investment plan (SIP). One should invest in Equity funds according to one’s risk appetite and investment horizon. There are several types of funds, some of which may not be suited for all investors. Hence, investors should carefully choose any investment funds and/or investment plans.

Several fund institutions provide equity plans with a concentrated portfolio, believing that too much diversity will cut into the potential profits. Such an investment opportunity may out to be more than profitable at times, but the contrary is also conceivable.

What Is A Concentrated Portfolio?

A concentrated portfolio is an equity plan featuring a small number of high-conviction equities in its portfolio. At any given time, the number of firms in which the program would invest may be as low as 20. Furthermore, because they have a limited investment scope, an equity plan focusing on only one industry or topic is classified as a fund managing a concentrated portfolio. Typically, such scams are incredibly dangerous, but they may also be quite lucrative. Schemes with titles like focused, select, or sectoral and thematic funds manage a concentrated portfolio.

Equity Mutual Fund

Who Should Opt For Such Schemes?

Because concentrated portfolio equity schemes have a relatively limited investment universe, they do not provide investors with the needed diversification. However, this does not negate the fact that it is an investment worth making. Schemes that limit the amount of space available to build portfolios may not be suitable for all investors. Investors with a long-term investment perspective and a high-risk appetite might select concentrated portfolio plans.

Concentrated portfolios should account for no more than 15-20 percent of the whole portfolio. Moreover, in such types of funds experts recommend SIP investments. However, if the value of your portfolio drops by 5-10%, you should search for further acquisitions to take advantage of the drop, as this investing approach averages out your investment costs.

There are benefits and drawbacks to equity mutual fund schemes with concentrated portfolios. If you have a high-risk tolerance, there is no harm in investing in such funds. Investors with a high or low-risk appetite, on the other hand, should limit their investments in these types of funds to no more than 20% on the upper end. Seasoned investors who have weathered many market cycles should feel at ease with schemes that have concentrated portfolios.

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Your Money in 2022: Smart money moves for a healthier financial life

The year 2021 has come to an end, and we have entered the year 2022, yet the epidemic continues to rage over the world. It has, however, taught us the value of developing a strong financial plan, saving more money, and having enough insurance coverage, among other things, in order to assure greater financial health.

 Smart money moves for a healthier financial life

Here are some New Year’s resolutions to help you improve your life.

Identify your financial goals

Identifying one’s financial objectives is the first and most important step toward a healthy financial life. Financial objectives, in reality, are the monetary value of one’s life goals, such as building a nest egg for post-retirement, funding a child’s education, or making a down payment on a property. “Use online SIP calculators to figure out how much money you’ll need to save each month to reach your financial goals.” According to Gaurav Aggarwal, Senior Director of Paisabazaar.com, “this will provide a clear roadmap on how much to save each month and where to minimize spending.”

Then, depending on your risk appetite, utilize the SIP mode to invest in equities, debt, or hybrid funds. The SIP mode eliminates the trouble of investing at the right time, maintains financial discipline, and aids in cost averaging over time.

Start saving more

The epidemic has taught us the value of increasing our savings. You should begin putting money aside each month for this purpose. It may not seem like much, but if you stick to this behavior, you’ll quickly amass quite a sum of money. You may use the money to pay off expenses or start investing after you’ve saved enough.

a healthier financial life

“Spending less, or not buying goods that aren’t truly required, is one of the easiest methods to save money. However, it is easier said than done! However, you might begin by taking tiny measures. Remember that financial independence comes from a combination of saving and investing money. “You should always attempt to save at least 10% of your total income,” says Abhinav Angirish, founder of Investonline.in.

Start investing

One of the most effective strategies to expand your money over time is to invest. Investing entails placing your money into something that will provide you with a future income or profit. The greatest approach to investing is to purchase company shares, but this does not have to be the only option. You can invest in mutual funds if you don’t understand stocks or find them too daunting. There are several sorts of investments available, so do your homework before making any judgments.

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Fixed income: Tips to choose the right debt mutual fund

The present equities market is turbulent, with major indices already down over 10% from their recent peak. For example, the Nifty 50 is presently trading below 17,000, compared to its previous high of 18,600. Thus making it wise to allocate a portion of your money to fixed income funds or debt mutual funds.

fixed income: tips to choose right debt mutual fund

Knowing and comprehending such asset class and their associated risks may assist investors in capitalization and selection of the best fund for their portfolio.

What is a debt mutual fund?

A debt mutual fund, also known as a fixed-income fund, is a type of mutual fund that invests in fixed-income assets. For example: as government securities, treasury bills, commercial papers, debentures, highly rated corporate bonds, and other money-market instruments. All of these instruments have a set maturity date and a fixed interest rate that the buyer can earn at maturity. As a result, they are referred to as fixed-income securities. Debt mutual funds are considered low-risk investment alternatives since their returns are often unaffected by market volatility.

Every debt instrument has a credit rating, which represents the likelihood of the debt issuer defaulting on interest and principal payments. Debt mutual fund managers, in general, employ these ratings and other considerations to identify high-quality debt securities. However, depending on the circumstances, fund managers may choose low-quality debt instruments that provide the chance to generate greater returns; in which case the fund manager takes a calculated risk.

Debt mutual funds are classified into several types.

mutual funds

On the basis of maturity time, Debt Funds are classified into different types. Liquid funds are ones that solely invest in money market products with maturities of no more than 91 days. Dynamic bond funds engage in debt securities with changing maturities dependent on the interest rate environment in place. In contrast to the foregoing, corporate bond funds invest at least 80% of their entire assets in corporate bonds with the best credit ratings. These funds are suitable for individuals who want to invest in high-quality corporate bonds but have a low-risk tolerance. Similarly, there are theme funds such as banking and PSU funds, gilt funds, and other types of funds such as credit risk funds, floater funds, etc.

Tips to consider:

Before investing in a debt fund, consider your investment goals. For example, you may want to park your money until the equities market’s volatility subsides, or you may want to put up an emergency fund, etc. So, after you’ve determined your investing goal, the process of picking the correct fund becomes much easier.

Another consideration is the investment holding term since each investment goal has a time restriction. Liquid funds are better if you have a short-term investing goal of three months to one year. You can use short-term loan funds if the duration is between one and three years. However, if you have a three to five-year time horizon, dynamic bond funds are appropriate.

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Know the role of alpha & beta in MF returns

In the investment world, the terms alpha and beta are frequently used. However, these words may be unfamiliar to inexperienced retail investors. In this article, we will explain what alpha and beta are and how they are useful to evaluate funds.

know the role of alpha and beta in MF returns

Alpha and beta are two statistical measurements that are commonly used to assess the performance of individual stocks, mutual funds, and investment portfolios. Thus alpha and beta are great tools to create greater returns, as a result.

What is alpha?

Alpha is a critical metric in mutual funds. Understanding alpha aids in determining the soundness of a scheme’s investments. In most cases, the measurement of a scheme’s composition is against an index. A benchmark index for a large-cap scheme, for example, may be the BSE 100. Consider the following two scenarios. One in which the scheme returns 15% while the benchmark BSE 100 returns 10% in a year. In the second example, the identical scheme returns 10% while its benchmark index, the BSE 100, returns 15%. In the first scenario, the plan generated 5% higher returns than the benchmark. The alpha it has been able to create is this excess return.

The fund managers’ investment competence is responsible for this alpha. In the second scenario, the strategy has been unable to keep up with the benchmark’s returns, indicating a number of possibilities. It’s possible that the fund manager missed out on catching interesting ideas that might have enhanced the returns. As a result, alpha refers to the extra returns a scheme provides over and above the returns generated by its benchmark index.

stock exchanges

What is beta?

Investors must keep the concept of volatility in mind when calculating returns. The plan is in connection to one component of volatility. It refers to how volatile the scheme’s portfolio is in comparison to the average. The other component of volatility is related to the markets, specifically its benchmark index. The term “beta” refers to this feature of volatility. This is often referred to as market correlation.

The market benchmark index is always connected with stock or portfolio. If the benchmark index changes, the stock or portfolio’s value will fluctuate as well. The number one is the starting point for a beta. This means that portfolio prices fluctuate in lockstep with market movements. A beta of less than one indicates that portfolio prices have changed less than the market, whereas a beta greater than one indicates that portfolio prices have changed more than the market.

When the market is rising, fund managers prefer a high beta value so that their portfolio can outperform the benchmark index, and when the market is dropping, they prefer a lower beta value so that their portfolio falls less than the market.

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High-value transactions that can get you an income tax notice

If a person engages in high-value cash transactions, he or she is likely to receive a notification from the Internal Revenue Service. If the value of a transaction exceeds a certain threshold limit, it must always be notified to the Income Tax Department.

internal revenue service

The Internal Revenue Service works with a number of government agencies to access the financial information of people who engage in high-value transactions but fail to mention them on their tax returns.

Here are some examples of transactions for which you may receive a notification from the IRS:

Making high-value deposits in bank FDs

The maximum amount for a cash deposit in a bank FD is Rs 10 lakh. Thus, a bank depositor making a cash deposit in a bank FD account be cautious if exceeding the Rs 10 lakh limit. The Central Board of Direct Taxes (CBDT) has announced that banks must disclose whether individual deposits in one or more fixed deposits exceed the permissible maximum.

Making deposits in savings bank accounts

A bank account’s cash deposit limit is Rs 10 lakh. The Income Tax Department may issue an income tax notice to a savings account holder who deposits and withdraws more than Rs 10 lakh in a financial year.

Income tax notice

Paying credit card bills

According to CBDT, one must disclose any payments of Rs 1 lakh or higher in cash against credit card debts. For any payment of Rs 10 lakh or more to settle credit card obligations in a financial year; one must reveal it to the tax authorities.

Purchase or sale of an immovable property

Property registrar reports every investment or sale of immovable property of Rs 30 lakh or more to the tax authorities. Your Form No. 26AS should be used to report the property purchase or sale. If you buy or sell a property for more than Rs 30 lakh. Then you are also on the radar of the Income Tax Department. The IRS may investigate whether the buyer declared the money on his or her tax return.

Shares, mutual funds, debentures, and bonds related cash transactions

Investors in mutual funds, equities, bonds, and debentures must limit their cash transactions in these investments to Rs 10 lakh. The Internal Revenue Service (IRS) has developed an Annual Information Return (AIR) account of financial transactions to track high-value transactions.

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Mutual funds: ELSS lose shine; spotlight on sectoral funds

The popularity of the equity-linked savings scheme (ELSS), a popular tax-saving investing option, is rapidly fading. According to data from the Association of Mutual Funds in India, this category has shown net outflow every month since January this year; with the exception of March, when it showed an inflow of Rs 1,552 crore.

MUTUAL funds : spotlight on sectoral funds

Investors choose to invest in sectoral/thematic funds. Many profiting on the current market rise, resulting in a net outflow of Rs 3,986 crore from January to October 2021.

Due to the low performance of most ELSS funds when compared to large and mid-cap funds, investors are avoiding them. ELSS inflows typically peak in the last three months of the fiscal year, dubbed “tax-saving season. However, many taxpayers are opting for the new flat rate without any exemptions under the new personal tax regime. Hence, they are not investing in tax-saving instruments such as ELSS and unit-linked insurance plans.

Should you put your money into an ELSS?

According to experts, investors should not invest in ELSS solely to save taxes. Look for quality funds in the multi-cap, large-and mid-cap, and theme funds categories for a better investment strategy. Because equity-oriented investments provide higher long-term returns. ELSS, on the other hand, is a good option if you don’t want to invest actively in equity-related products and only want to save money on taxes.

Mutual funds

Under Section 80C of the Income Tax Act, an investment in an ELSS up to Rs 1.5 lakh is eligible for a tax rebate. However, it is important to understand your expectations before investing in ELSS. The shortest lock-in duration for ELSS is of three years as compared to other tax-saving vehicles; such as Public Provident Fund, National Savings Certificate, and five-year bank fixed deposits.

Although, you can make a one-time investment or invest monthly through a SIP. In fact, when markets are falling, SIPs function best since you can acquire more units. However, there is no guarantee on returns and it might fluctuate according to the stock market and the mutual fund manager’s stock selection.

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Mutual Funds: Why Flexi-cap funds are right for every season

Flexi-cap funds invest across market cap segments and provide investors with both growth and value. While also balancing risk and volatility in a single portfolio. In this article, we will discuss, why Flexi-cap funds are right for every season?

flexi cap funds

Flexi-cap funds are mutual funds that invest in firms’ equity and equity-rated securities in a variety of market capitalizations; including small-cap, mid-cap, and large-cap. These open-ended, dynamic equity funds invest at least 65 percent of their total assets in equities and equity-related securities. Investors can possibly limit their risks and lower volatility by investing in such funds.

Flexi-cap funds can invest in any company regardless of its market capitalization, whereas mid-cap and small-cap funds have to stay within their respective categories. This category recently come into existence to distinguish itself from multi-cap funds. Multi-cap funds, like small-cap, mid-cap, and large-cap funds, invest equally in small, mid, and large-cap equities. Flexi-cap fund managers, on the other hand, have the freedom to assess the growth potential of various firms without considering their size. They have the power to invest money in a variety of market segments and companies.

flexi cap funds

Furthermore, these funds invest in the best-performing companies that are industry leaders in their respective fields, have proven business plans, excellent balance sheets, and so on. As a result, these funds have a better chance of generating significantly higher risk-adjusted returns.

Is it good to invest in Flexi Cap Funds?

These funds provide investors with a well-diversified portfolio by balancing risk and reward. These funds provide consistent returns, even when the market is volatile and bearish. Furthermore, if the fund management notices that a certain market sector in which he had invested has proven to be unattractive over time, the fund manager can re-allocate to a more profitable and alternative area.

Flexi Cap Funds are suitable for whom?

Flexi-cap funds are best for investors who want to put their money in for a five-year or longer length of time to achieve a long-term financial goal. Returns that outperform inflation and outperform fixed income options are to be expected. It caught investors’ attention due to its flexibility, and it became the second-largest equity mutual fund category after large-cap funds.

For more such updates, keep watching this space!

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Mutual Funds: Five reasons to invest in a global fund

Global funds invest in high-growth companies and help to mitigate risk and volatility specific to a geographic region. Thanks to globalization, we are all consumers of global items in our daily lives.

mutual funds

Whether it’s through our smartphones, social networking apps, or e-commerce platforms, multinational businesses have built a large and loyal client base in India across all segments. We acknowledge the quality and scale that these brands bring in as consumers. However, as investors, we tend to give preference for investment in domestic securities over foreign securities.

Here’s why it’s not the ideal option for your investment portfolio. India has a market capitalization of barely 3% of that of the rest of the globe. Payments, eCommerce, and revolutionary technologies are just a few of the early-stage industries where investors might make money. These, however, are not available on Indian stock exchanges.

indian stock exchanges

As a result, Indian investors are missing out on the rewards of global economic expansion. Consider allocating a portion of your portfolio to a global fund if you want to participate in global growth stories. It’s a form of mutual fund that looks for investment possibilities in domestic and foreign markets and invests in equity stocks.

Typically, Indian mutual fund houses collaborate with an overseas fund that manages global investments. As a result, they’re known as fund-of-funds. Such adaptable funds allow you to easily navigate global market cycles while protecting your portfolio from a single market downturn.

Five reasons to invest in a global fund:


Strength in diversity

Because it is not tied to a single region, a global fund can help to mitigate risk and volatility specific to a geographical region.

Efficient risk-reward

A developed market like the US is home to some of the most disruptive and fastest-growing companies. While, emerging markets like Indonesia, Malaysia, and Thailand give you an opportunity to earn good returns in the long term. Investing in a global fund gives you the opportunity to diversify your investment and helps in earning good returns in both the short and long term.

Hedge against inflation

Investing in economies with lower inflation than India will provide you with better medium to long-term returns.

Currency exchange

In addition to equity appreciation returns, a worldwide fund benefits from the likely difference in the currency exchange rate. Hence, if you invest in a country with a stronger currency than India's, such as the United States, you can earn more rupees for every dollar you put in.

Experienced team

Though investing in foreign markets can be beneficial, finding the correct investment opportunities requires extensive research. On this front, the fund management team's domestic and offshore knowledge comes in handy. Thus, an experienced team will be monitoring your investment for you.

For more such updates, keep watching this space!