Category Archives: Investment Planning

Can SIPs in equity mutual funds help to avoid losses?

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Advertisements with the tag line ‘Mutual Funds Sahi Hai’ have become popular among retail investors. Such awareness programs are run by Association of Mutual Funds of India (AMFI) and individual fund houses to educate retail investors. Investors now know that one does not need a huge lumpsum amount to invest in the stock markets. Even small amounts as low as Rs.500 can be invested in mutual funds on a regular basis to create long term wealth through SIP (Systematic Investment Plan).

How do Direct plans in Mutual Funds make a difference to your long-term returns?

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The regulations in the mutual fund industry have evolved over time and in the best interest of investors. After the abolition of entry load in 2009, the SEBI introduced zero-commission, i.e., direct plans in 2013. This means that you as an investor can directly buy mutual funds from the fund house with no distributor/broker/agent in the picture. Thanks to the internet and the various digital platforms available today, it has become even more easier now to buy mutual funds directly online.

How you can create a separate Vacation Fund for frequent getaways

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There has been a marked change in the way Indians are holidaying in recent years. Instead of one big break, you will observe that many couples frequently undertake multiple short trips. This is unlike the earlier generation which waited till retirement to plan an international trip or travelled just once in a year. Be it an adventure trip or just relaxing in a resort, a weekend trip is a perfect way for the current generation to unwind. These short trips are undertaken 2-3 times in a year. Planned within a month, the cost of these short trips start from Rs.10,000-15,000, each. If one stays in a more than decent resort, the cost can go up to Rs.30,000-35,000 for a usual family of four. If planned further from the home city and in another state for 4-5 days, the cost can go up to Rs.60,000-70,000 or even more.

The one crucial thing that you should NOT ignore while selecting an Equity Mutual Fund:

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Investors lay a lot of emphasis on past returns and star ratings while selecting an equity mutual fund. Some do-it-yourself investors (DIYers) also consider investment objective, fund size, expense ratio, fund house, fund manager, etc. But there is one crucial factor that investors usually ignore in fund selection. In a scheme document or a fund advertisement, the one thing that is always mentioned is “Mutual funds are subject to market risk”. Yes, it is the RISK FACTOR that investors do not consider at all in selecting a fund. You must be knowing that higher the risk, higher the returns. What do you think is better & preferable – 18% returns with acceptable risk or 20% returns with very high risk? Do you know how much risk is your mutual fund taking in generating an X% of return for you?  How will it perform in a falling market?

The Snowball Effect: Compounding your Wealth to Riches

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In all my years of experience in the financial planning profession, I can surely tell that the science behind getting wealthy is very elementary. There is no secret to getting rich. Getting rich is not just confined to people who are earning high incomes or doing business or investing in properties or taking bets in stock markets, commodities, foreign currency, etc. Even an individual with average income can become rich. Let me show you how and prove with numbers.

Dividend or Growth option – which one is better in equity mutual funds?

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Many a times, I sense that people do not completely understand the financial products they are investing in. These can be easily gauged from the kind of questions they ask. For instance, amongst the many queries I receive on investments, the commonly asked are about suggesting a good SIP (systematic investment plan) mutual fund or dividend fund or a growth fund. There are no such funds actually. These are just methods of investing. The rationale behind buying mutual funds is inappropriate at times and such decisions are often influenced by agents. Their selling point – ‘Buy this mutual fund because this fund gives regular dividends or buy because dividends are tax free’.

Budget 2018 Impact – Understanding Long Term Capital Gains Tax on Equities

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At the time of writing this article today, the stock markets were in a bloodbath. Call it a knee-jerk reaction, plain confusion, disappointment, investors obviously have given a big thumbs down to the 10 per cent long term capital gains (LTCG) tax introduced by the Finance Minister on equities.  Here is a brief from his budget speech:

The 2 Pain-Points that prevent me from investing in NPS

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The tax saving season is here as the financial year draws to an end. I say tax saving season because usually people invest and submit the proofs to the HR in their office in the March quarter. I am not going to reiterate about how tax planning is incidental to investment planning and that it should be done at the beginning of a financial year. In this post, I am going to talk about the National Pension Scheme (NPS) in which people invest with the sole objective to save tax. What I find worrisome is that while investors fall for the tax saving bait, they fail to comprehend or do not give a serious thought to the other features of the scheme.

Herd Behaviour and how it can affect your Financial Decisions

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Nowadays, the most popular question I come across on personal finance forums is ‘How to buy Bitcoins, is it regulated in India’?  It is one of the top 5 most searched words in Google. Many investors do not know the head and tail of how cryptocurrencies like Bitcoin work. But they are lured by the mind-boggling returns Bitcoin has clocked (300 per cent in just the last quarter as per ET reports) or they know someone who has minted huge money out of it. They do not want to miss the bus too.

In this Digital Age, we humans get fast attracted to any event or news which is trending or ‘the next big thing’. In these times of too much reliance on social media, it is interesting to observe how rumours are created. For instance, people blindly forward news on WatsApp to others which someone else has forwarded to them without checking the veracity of it – be it a hoax on accidents, death of a celebrity, etc.

The Common Investor Dilemma – Should I Book Profits now?

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The stock markets are making new highs and your investment portfolio is doing really well. It has even beaten the broader market and the benchmark. Congrats! One thought must be frequently crossing your mind as the markets peak to new highs every day – ‘Should I book profits now?’
The reason this question pops up in the first place and very frequently in the minds of investors is because majority of them do not address the most important question before investing. The ‘WHY’ question – the starting point of investment. The ‘WHY’ is a very fundamental question which defines the purpose of anything we do. When you ask yourself, ‘why are you investing, you get a purpose, a goal in mind and the answer is easy to come by. It offers a perspective and also helps to prioritise depending upon the resources available.