Bonds

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There are various types of bonds such as zero-coupon bonds, tax-free bonds, taxable bonds, PSU bonds, 7.75% RBI Bonds. Features vary, therefore, before investing one must know the minimum investment amount, tenure, taxation on interest and maturity amount, and liquidity. You can buy the bonds for the first time whenever government or issuing company opens it for subscription or from the secondary market.

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

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

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Impact of rising interest rates on Debt Mutual Fund Investors

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

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

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

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

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

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

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

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

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Should SIPs be Continued When Returns are Negative?

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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.

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

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

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You can write to us at

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Investment Strategy of ICICI Pru Bluechip Fund

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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.

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

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

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You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Close Ended Mutual Funds Investing Tips

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Close-ended mutual funds do not have any track record and aren’t open to investors post their initial offer period

Ever since the Securities and Exchange Board of India (SEBI) announced re-categorisation of open-ended mutual funds in October 2017 into 36 schemes under equity, debt, hybrid etc, funds houses have been restricted from having more than one scheme under each category, subject to certain exceptions. As per a report by The Association of Mutual Funds in India (AMFI), fund houses have launched 12 new close-ended equity schemes in the January to March quarter, leading to growing eagerness among investors to invest in them.

But before you decide to invest in a close-ended mutual fund, here are some important points to keep in mind before arriving at any such investment decision:

Lack of past records and real time comparison

Close-ended mutual funds do not have any track record and aren’t open to investors after their initial offer period. Most agencies do not rank them in their rating exercises. Lack of a track record implies that past performance cannot be reviewed or scrutinised. Such schemes can neither be compared with their peer schemes and benchmarks, nor can their performance be tracked or compared real time. Moreover, sporadic disclosures also make analysis of close-ended funds difficult and lack of scrutiny often leads to complacency for close-ended fund managers.

Unlike open-ended schemes where the performance of the fund is traceable over different market cycles, investors may have to rely on the fund manager’s past performance and experience when it comes to investing in close-ended schemes.

Concentrated portfolio and high expense ratio

Close-ended mutual funds involve small sized portfolios. This leads to higher expense ratio for even the smallest of funds, which usually rises to 3 percent per annum. Majority of close-ended schemes have a relatively higher expense ratio than open-ended funds. Although SEBI has placed a limit on the maximum expense ratio chargeable from investors, the slab structure of close-ended fund allows them to charge the highest expense ratio from their smallest sized funds. As the fund size increases, this expense ratio decreases.

Levying high expense ratio on close-ended funds means fund houses can offer higher commissions to distributors and therefore maximize the income of both asset management companies and distributors.

Low liquidity

Close-ended schemes do not provide the option to exit funds in case of non-/underperformance of funds in the portfolio. Funds invested in these cannot be redeemed or sold when such a need arises. Due to lack of past records and absence of a facility to exit the fund, the working of close-ended schemes is sometimes referred to as black box as it lacks scrutiny.

Before maturity, the only mode to sell a close-ended scheme bought in demat form is on the stock exchange. On the latter, your fund units would be bought by another investor who is interested in purchasing units of that fund. Moreover, absence of portfolio rebalancing or an asset allocation option adds to the rigidity of close-ended schemes.

Absence of an SIP investment option

Many investors, especially the salaried class, usually prefer regular investments (in the form of systematic investment plans) over lump sum equity investments. This ultimately leads them to investing in open-ended schemes, since close-ended ones don’t offer the flexibility of regular investments. Even if a lump sum amount is invested in a close-ended scheme, the concept of rupee cost averaging isn’t present if the market trends lower. Performance of close-ended schemes and investor returns are therefore solely dependent on timing of the investment, i.e. the opening and closing dates.

Benefits of investing in close-ended mutual funds

Investors don’t sell in panic: Since close ended equity schemes have a specified term such as 36 months, 5 years etc, those aiming to build a corpus without worrying about day-to-day market fluctuation can invest in these schemes. Investors cannot exit whenever the market turns unfavourable. This provides a more stable asset base to fund managers to manage the fund throughout the term.

Moreover, only the opening and closing date of scheme affects returns which an investor would earn.

With a closed-ended fund, the fund manager has the advantage of managing the money pooled without any redemption pressure during the lock-in period. Although investors cannot redeem or sell their schemes, they can exchange them on stock exchange, by selling to a buyer who seems interested in the close-ended fund.

Invest in funds which offer differentiated income/objectives: Another benefit of investing in close-ended funds is that investors are able to invest in funds that offer differentiated objectives/income, which may not be offered in open-market funds or schemes. Close-ended funds can be unique and possess niche strategies which require a finite life and hence need to be properly timed. The strategy could be for a new or different idea meant only for select investors who are willing to look at a different risk profile and invest accordingly in such funds.

How much to invest in close-ended funds?

Ideally, investor should invest 5-10 percent of the desired corpus amount in each close-ended scheme, keeping in mind the risk of timing the investment properly for generating adequate returns on the closing date. Since close-ended funds require lump sum investment, investors should invest small sums in different schemes of close-ended funds, instead of putting the lump sum into a single scheme. But before investing in close-ended schemes, ensure that they offer something unique, when compared to the flexibility and benefits of open-ended funds.

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

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

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You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Section 80C Tax Saving Investments Comparison

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We have assessed 10 tax-saving instruments on eight key parameters—returns, safety, flexibility, liquidity, costs, transparency, ease of investment and taxability of income. Each parameter is given equal weightage and the composite scores of the various options determine their rank.

Insurance policies are definitely the worst way to save tax. They have consistently ranked lowest. However, though insurance plans give very low returns of 4-5%, they also inculcate a saving discipline that is so essential for building long-term wealth. Policyholders diligently pay the premium for 20-25 years to keep their policies in force and reap a huge corpus on maturity. It’s no surprise then that insurance policies have helped people build property, pay for their children’s education and marriage and live comfortably in retirement.

In contrast, ELSS funds have given terrific returns in recent years, but very few investors stay put for the long term. Amfi data shows that almost 35% of investments in equity funds by small investors are redeemed within a year. Another 17% are redeemed within two years, and only 48% are held for more than two years. So, while ELSS funds can give very good returns, they will not make wealth for you if you plan to exit after the three-year lock-in.

Equities had a terrific 2017, and the rally has continued into the new year. The average ELSS fund rose 36% during 2017, and even the long-term performance is fairly decent. The category has given 18% compounded returns in the past five years. Investors have seen their wealth double in a little over four years. What’s more, the returns are tax free because long-term capital gains from equity funds are exempt from tax.

ELSS are still better than Ulips despite LTCG tax

While ELSS funds look attractive, the elephant in the room is the all-time high level of the market. The Nifty is trading at a PE of almost 27 and many analysts have advised investors to be cautious. Others say that expectations of returns from equities need to be toned down. Given the high levels of the markets right now, don’t expect equity funds to repeat the performance of the past 1-2 years in 2018.

Some investors have stopped their SIPs in ELSS funds because markets are high. “I will restart SIPs when markets correct,” says Mumbai-based Abhishek Tewari. We believe stopping SIPs for a few months will not make a significant difference to his overall returns. Tewari should continue his SIPs regardless of market levels.

An aggressive investor should invest in ELSS funds to save tax. But invest through SIPs of Rs 5,000 per month.

Smart tip: Avoid investing large sums in ELSS at one go. Take the SIP route for best results.

At the same time, investors like Vinayak should avoid putting a large amount in ELSS at one go. He needs to invest Rs 1.16 lakh in taxsaving options this week and putting the entire sum in ELSS funds at one go can be risky. Ideally, he should stagger his investments over the next 2-3 months. But he does not have the luxury of time and should, therefore, opt for some other tax-saving option this year instead of ELSS. Here are a few other things that ELSS investors should keep in mind.

Though they offer the same tax benefits, not all ELSS funds are the same. Some are more adventurous and invest a larger portion of their corpus in small- and midcap stocks. This can be risky in the short and medium term but also rewarding in the long term. Others are relatively more conservative and line their portfolios with stable large-cap stocks. We have classified ELSS funds into three broad sub-categories (see tables). Choose the one that best suits your risk appetite.

The Best ELSS Funds


Don’t base your choice on a fund’s short term performance. The stability of returns is more important than the quantum of gain. Look at the 3-year and 5-year performance of the scheme before you make a choice. Small investors often treat ELSS funds as short-term investments and exit after the three-year lock in period. Look at ELSS funds as regular equity funds that should be held for the long term.

If you are investing for the long term, don’t go for the dividend option. Dividends are just another way of booking profits because the amount received gets deducted from the NAV. The dividend reinvestment option is even worse. Every time the fund gives out a dividend and reinvests the money into your account, the three-year lock in period starts all over again. In effect, you are locked in for perpetuity.

2. Public Provident Fund
Returns: 7.6% (For Jan-March 2018)

Small savings rates are linked to the government bond yields in the secondary market. PPF rates have progressively come down in the past two years, mirroring the decline in bond yields. The PPF rate was cut recently by 20 basis points and could fall further in the coming months. Despite the rate cut, advisers say the PPF remains a good bet because the interest is tax free. The tax-free status of the PPF gives it a distinct advantage over fixed deposits. The interest from fixed deposits is fully taxable, which brings down the returns to barely 5% in the highest bracket.

PPF rates have steadily come down in past few years

On the other hand, since consumer inflation is below 4%, the PPF offers a healthy real return of more than 3%. This is quite impressive for an option that offers assured returns. Investors should continue to take advantage of this long-term tax-free product

Besides the returns and taxability, the PPF scores high on safety, flexibility and ease of investment. An account can be opened in a Post Office branch or designated branches of PSU banks. Some private banks also offer the facility to invest in the PPF. Opt for a bank that allows online access to the PPF account. Deposits can be made throughout the year, but an investor must deposit at least Rs 500 in a year.

However, there is a better alternative available to salaried taxpayers covered by the Employees’ Provident Fund. Although an individual’s contribution to the EPF is linked to the salary, one can opt for the Voluntary Provident Fund (VPF). The VPF offers a higher rate (8.65% for 2016-17) compared to the PPF and contributions are eligible for the same tax benefits. But this option can be exercised only at the beginning of the financial year or in October.

Smart tip: Invest through a bank that allows online access and investment in the PPF account.

Your tax-saving guide for FY 17-18

3. Senior Citizens’ Saving Scheme
Returns: 8.3% (For Jan-March 2018)

Small savings rates have been cut, but the Senior Citizens’ Savings Scheme has been spared. At 8.3%, this is the best option for retirees looking for regular income in their golden years. The highest rate offered to senior citizens by banks is 7.7%. The tenure of the scheme is five years, which is extendable by another three years. However, there is a Rs 15 lakh overall investment limit per individual. Also, the scheme is open only to investors above 60. In some cases, where the investor has opted for voluntary retirement and has not taken up another job, the minimum age is relaxed to 58 years. There is also no age bar for defence personnel. There is also a clause allowing premature exits. If closed before two years, the investor has to pay 1.5% of the balance in the account. After two years, the penalty is lowered to 1% of the balance.

The Senior Citizens’ Saving Scheme is a good option for retirees looking for regular and assured income in their golden years.

Smart tip: Stagger investments across several financial years to create a ladder of deposits and optimise tax benefits.

4. Sukanya Samriddhi Yojana
Returns 8.1% (For Jan-March 2018)

For taxpayers with a daughter below 10 years, the Sukanya Samriddhi Yojana is a good way to save. Although the interest rate has been reduced to 8.1%, it is still higher than what the PPF offers. Just like the PPF, the interest earned is tax free and there is an annual cap of Rs 1.5 lakh on the investment. Accounts can be opened in any post office or designated banks with a minimum investment of Rs 1,000. A parent can open an account for a maximum of two daughters, but the combined investment in the two accounts cannot exceed Rs 1.5 lakh in a year.

Some experts argue that the debt-based Sukanya scheme is not the best way to save for a long-term goal. This is true, because equity-based options can deliver higher returns. This is why experts advise that the SSY should be used in combination with other investments, such as equity funds, for saving for a child’s future goals. The good part is that the girl child tag lends a sense of purpose to the investment. The maturity proceeds of other investments are often squandered. On the other hand, the Sukanya scheme helps a family save the daughter’s education and marriage.

The scheme offers higher returns than PPF.

Smart tip: Open a Sukanya account in a nationalised bank to make it easier to transfer to the child.

5. National Pension Scheme
Returns: 9.5% (Past three years)

The NPS can help save tax under three different sections. Firstly, contributions of up to Rs 1.5 lakh can be claimed as a deduction under the overall Sec 80C. Secondly, there is an additional deduction of up to Rs 50,000 under Sec 80CCD(1b). Thirdly, if the employer puts up to 10% of the basic salary of the individual in the NPS, that amount will not be taxable.

The trinity of tax benefits has attracted a lot of investors to the pension scheme. However, many are still put off by the fact that NPS is not completely tax free. Only 40% of the corpus is tax free on maturity. Also, on maturity, the NPS forces the investor to put 40% of the corpus in an annuity to earn a monthly pension. This pension is treated as income and is fully taxable.

For young investors like Vinayak, the long lock-in period is also a deal breaker. NPS investments cannot be withdrawn before retirement, except in some exceptional circumstances and for specific needs. However, experts say the long lock-in period is a blessing in disguise. “When the purpose is to save for old age, it is necessary to discourage early withdrawals,” says Kulin Patel, Head of Retirement, South Asia, Willis Towers Watson.

The twin rallies in equities and bonds have helped the NPS churn out good returns in the past few years. Aggressive investors who put the maximum 50% in equity funds have earned the highest returns. But this performance may not sustain in the coming months. NPS funds have lined their portfolios with long-term bonds which have not given good returns in recent months. And equity markets are looking overvalued. Even so, investors can expect better returns from NPS than pure debt products.

Rewarded by the markets

The stock market rally has boosted returns of aggressive investors who bet on equities

Smart tip: Don’t be too conservative when investing for the long term. A balanced exposure to all categories works best.

Your tax-saving guide for FY17-18

6. ULIPs
Returns: 9.9-11.9% (Past five years)

Despite attempts by distributors and insurance companies, the perception about Ulips has not changed much. Investors still consider them very costly and financial advisers continue to hold them in contempt. But it is time to bury the shady past of Ulips. New Ulips launched by insurance companies are low on costs, which translates into better returns for investors.

Morningstar data shows that aggressive Ulip plans earned over 20% in the past one year. That may not appear impressive compared to the 30-35% that equity mutual funds earned for investors. The 11.96% returns from Ulips in the past five years are not even a patch on what equity funds have earned since 2012. Besides, some of the charges of the Ulip are not deducted from the NAV so the actual returns for the investors may be even lower.

But Ulips have one distinct advantage over mutual funds. Switching from equity to debt or vice versa does not have any tax implications. Being insurance policies, the income and capital gains from these plans is tax free under Section 10(10D). This makes a Ulip a convenient rebalancing tool for investors who reset their portfolio’s asset allocation every year.

They will also be useful for investors wanting to put money in debt funds but are deterred by the taxation of short-term gains. The minimum period for long-term capital gains from debt and debt-oriented funds has been increased from one year to three years. If held for less than three years, the gains are added to your income and taxed at the normal rate. But there is no tax on short-term gains from Ulips.

You can also park short-term money in the liquid fund of your Ulip using the top-up facility.

How Ulips fared

Smart tip: If investing large sum, opt for liquid or debt fund of the Ulip and gradually shift the money to equity funds.

What to see in a Ulip

CHARGES: The most important consideration. Some charges are built into the NAV while others are levied by deducting units. Look up all charges mentioned in the brochure.

FUND OPTIONS: Look at the various fund options available. There are three basic funds: equity, debt and liquid, but some insurers offer hybrid funds and other options.

SWITCHING: Know how much the Ulip will charge for switching from one option to another. Normally 3-4 switches a year are free, though some offer up to 12 free switches.

WITHDRAWALS AND TOP UPS: Find out rules relating to top up investments and withdrawals from policy.

COVER: Be sure whether your Ulip will pay only the sum assured or also the fund value in case of a mishappening. Some Ulips pay only the sum assured, though their premium is also lower.

7. NSCs
Returns: 7.6% (For Jan-March 2018)

The interest rate of the NSCs has been reduced to 7.6%, but are still more than what bank fixed deposits offer. The NSCs also have a sovereign backing. NSCs fell out of favour when bank rates were higher at 9-9.5% a few years ago. But deposit rates have now fallen to 6.5-7%, though senior citizens get higher rates. This makes the NSCs more attractive than bank deposits.

What’s more, the interest earned on the NSC is also eligible for deduction under Section 80C in the following years. Here’s how this works. Suppose an investor buys Rs 50,000 worth of NSCs in January 2018. One year later, the investment would have earned an interest of about Rs 3,800. The investor can claim deduction for this Rs 3,800 for the year 2018-19. The next year, the investment would earn about Rs 4,100 in interest. This can be claimed as a deduction in 2019-20.

This is especially useful for investors in the 5% tax bracket who are not able to fully exhaust the Rs 1.5 lakh investment limit under Sec 80C. The tax deduction available on the interest effectively makes it tax free for such investors.

There have been some changes in the rules for non-resident Indians investing in small savings schemes lately. NRIs are no longer allowed to invest in these instruments. The PPF account of an individual will be deemed closed from the date he becomes an NRI and he would get only 4% interest from that date onwards. Similarly, NSCs will be deemed to be encashed by the holder on the day he becomes an NRI.

Smart tip: Create a ladder of NSCs so that after they mature the proceeds can be reinvested to earn benefits.

8. Pension Plans
Returns: 7-10% (For past one year)

The emergence of the NPS has pushed pension plans from insurance companies into oblivion. Unlike the new Ulips where charges have come down significantly, the pension plans from insurance companies continue to have high charges. Interestingly, these pension plans are more lenient than the NPS when it comes to deploying the maturity proceeds. NPS investors have to compulsorily put 40% of the corpus in an annuity. Some pension plans don’t have such restrictions, while some others require only 25% to be put in annuities. But on the other hand, only 33% of the corpus is tax free on maturity, compared with 40% in case of the NPS.

According to a recent RBI report, the population of Indians above 65 years old is expected to grow by 75%. The report also points out that only a small fraction of this age group has saved in private pension plans and a large segment of the total population has not actively taken steps to ensure adequate financial coverage during retirement.

Insurance companies believe that the tax treatment of annuities and pension income is one of the main reasons why people don’t invest in pension plans. There might be several reasons for people not saving for retirement but the taxability of pension plans is certainly one of them.

Right now, if an investor does not buy an annuity on maturity, 66% of the corpus of the pension plan is taxed. Even the pension from the annuity is treated as income and taxed accordingly. Both these tax rules should be relaxed as far as possible in the coming Budget which will give a boost to the entire pension space and encourage Indians to plan for a worry-free retirement

Smart tip: Rebalance pension plan portfolio periodically to restore original asset allocation, thus reducing risk.

9. Bank FDs
Returns: 7 to 7.7%

Their interest rates have fallen significantly and the income is fully taxable. Yet tax-saving bank fixed deposits are a good choice for the Rip Van Winkles who left their tax planning for the last minute and are now running around to beat the deadline. Vinayak has to show the proof of investment under Sec 80C by the end of this week or his company will deduct a very high tax from his January salary.

For such taxpayers, the Net banking facility is a godsend. Even if the bank branch has closed for the day, his tax planning can be done in a matter of minutes. All he has to do is open a tax-saving fixed deposit and show the proof of investment to your company.

We are suggesting bank fixed deposits for the simple reason that he cannot go wrong in these instruments. Sure, the income is taxable and the post-tax returns will be barely 5.5%. But at least Vinayak won’t end up buying a low-yield life insurance policy or an unsuitable pension plan.

These fixed deposits are also suitable for senior citizens who might already have hit the Rs 15 lakh ceiling in the Senior Citizens’ Saving Scheme and don’t want to lock in money for the long term in a PPF account. Though NSCs offer higher rates than most banks, they still require the investor to visit the post office. Bank deposits can be done online.

Keep in mind that the interest from such deposits has to be reported in the tax return next year. Many investors have the misconception that up to Rs 10,000 earned on bank deposits is tax free. The exemption under Sec 80TTA applies to savings bank interest only. Income from fixed deposits is fully taxable and should be mentioned in the income tax return of the individual.

The best tax-saving FDs

More than 50% of their corpus is in mid and small-cap stocks. Expect good growth.

Smart tip: Opt for the quarterly or yearly interest payout option if you don’t want to lock up your money for five years.

10. Insurance
Returns: 4.5-5%

It is no surprise that life insurance policies are at tenth place in our ranking of tax-saving options. Life insurance is the bulwark of a financial plan because it safeguards all the goals of the individual even if he is not around. But this purpose is best served by a pure protection term insurance plan rather than a costly traditional policy that gives back money at periodic intervals or provides a huge corpus on maturity.

Traditional policies yield barely 4-5% returns but investors are attracted to them because the agent quotes a very high maturity figure. Buyers don’t realize that there is a time value of money. If an insurance policy will give Rs 40 lakh in 20 years, even 6% inflation would pare down its value to less than Rs 12 lakh.

Manoj Srinivas is not able to save for other goals because he pays a very high insurance premium for a policy that covers him for less than his annual income. He should surrender this policy or turn it into a paid up plan. This will free up Rs 1 lakh a year, which can be put to good use elsewhere. A term cover of Rs 1 crore will cost him around Rs 10,000-14,000.

He pays Rs 1 lakh premium for a cover of Rs 5 lakh, though a term plan can cover him for Rs 1 crore at a cost of only Rs 12,000-14,000 a year. The high premium outgo prevents him from investing for other goals.

Smart tip: A pure protection term insurance plan can provide a large cover at a very low cost.

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

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

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

What Bond Yields tell Investor?

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What Bond Yields tell us?

The big difference between debt and equity market is that the former is less volatile. However, in the last one month, bond markets have been volatile in response to various announcements including the low government borrowing plan, high crude oil prices, lower than expected FPI (Foreign Portfolio Investment) limit and lower inflation forecast announced by the RBI in its latest Monetary Policy meeting. To name of few above all, the RBI has allowed banks to spread provisioning for mark-to-market (MTM) losses incurred during December 2017 and March 2018 equally over up to four quarters.

This news, collectively, has had an impact on the bond markets and pushed bond yields up and down significantly.

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

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

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Scheme Name Change after Recategorisation

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When investors sit to review their mutual fund schemes, they will notice some of the schemes that they held have merged or their names have changed.

1. Why have names of some mutual fund schemes changed?

Names of some equity and debt mutual fund schemes have changed as fund houses align them to comply with the directives of the Securities and Exchange Board of India (SEBI). As per the mandate, a fund house can offer 10 types of equity funds, 16 categories of bond schemes, and 6 categories of hybrid funds. In addition to this, they can also have index funds, fund of funds and other solution based schemes.

2. What is the outcome of this SEBI ruling?

Based on this mandate by the regulator, fund houses have completed the exercise of re-categorisation of their existing open-ended equity mutual fund schemes. Consequently investors will notice names of some schemes have changed, while some have merged.

3. What should investors do now?

This exercise by fund houses has come to an end. Investors will now have to see the impact of this on their portfolio and readjust them in line with their asset allocation. For example, if an investor holds a large-cap fund which post reclassification becomes a large and mid cap fund, could see his large cap allocation go down and mid-cap go up. Many mutual funds have just changed or altered the name to comply with the regulatory requirement. In such a case one could stay put in the scheme. Financial planners believe investors should not rush to make changes to their portfolios immediately. They should also keep in mind the taxation impact and exit load impact before rushing to make changes to their portfolio. As funds move to the defined categories, merge schemes, investors will have to see the overall impact on their equity and debt portfolios. They will have to recalculate their exposure to large-cap, mid-cap or multi-cap schemes and decide whether they need to make any changes to tune their portfolio in line with the new classification.

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

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

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What is an NFO?

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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

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

SWP or Dividends

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Mutual Fund SWPs are better option

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

Dividends in mutual funds

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

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

Systematic Withdrawal Plan (SWP)

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

Why SWPs score over dividends

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

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

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

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

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

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com