Introduce savings into your routine
Health and wealth are interrelated in more than one way. While making exercise a part of your routine can improve your health, saving and investing regularly can build your wealth.
Here are two easy things you can do today to start your journey to financial well-being.
Put aside a fixed amount: People who struggle with their finances often complain that they can never seem to save anything to invest in the first place. This is because they have always been waiting for money to be left over after they have made their expenditures. It is a common mistake that a lot of us make. A good idea can be to simply set up an automatic bank transfer to an investment just after you receive your salary or income. You can use your bank’s net banking service to do it yourself or you can go to your bank’s branch and leave instructions with them. This would ensure that as soon as you get paid, your investments are made... even before you have a chance to spend that money.
Where to invest: If you are uncomfortable with complicated financial investments and do not really understand how a lot of them work, you should consider a Systematic Investment Plan (SIP) in a suitable mutual fund. There are mutual fund schemes that suit all sorts of investors with different risk profiles.
Why choose a mutual fund?
Mutual funds are managed investments. This means that qualified and professional fund managers oversee the funds that you invest. If you were to manage your funds yourself, you would need a substantial knowledge of the equity and debt markets to make the right decisions. If you are a complete novice, you should always opt for managed financial products. Mutual funds invest across a wide range of asset classes. You can use your favorite mutual fund to invest in stocks, bonds, commodities or even other mutual funds!
What are the advantages of a mutual fund SIP?
Mutual fund SIPs allow you to invest as little as Rs. 1,000 per month automatically into mutual funds. If you have just begun to save and you are not sure how much you can spare for savings each month, just start with one SIP and keep adding SIPs as you grow comfortable. Just like splitting your exercise into smaller manageable bits, you can do the same for your investments as well. SIPs also allow you to build a corpus over a long-term investment and take advantage of Rupee-cost averaging. This means when the markets are down you get more mutual fund units and when the markets are on the higher side you get better returns. Over a long period of time if you keep investing little amounts of money through a SIP, you will average out and beat stock market ups and downs.
Is there something I need to do before I invest?
You may need to read a bit about these funds in analysts’ reports on various mutual fund schemes in different categories. These reports are easily obtainable online. If you have trouble going through these reports, you can take the assistance of a financial advisor. Financial advisors are professionals who help investors manage their money and invest better.
How can I start a SIP?
Starting a SIP is easy. To do so, you will need to choose the mutual fund scheme, the frequency of deduction for SIP installment, the SIP tenure and the SIP installment amount. Before you start SIP in a scheme, you will need to make an initial investment in the scheme. To do this, you need to fill a mutual fund application form along with the SIP enrollment form. You will also need to furnish a Know Your Customer acknowledgment. Your SIP enrollment form has details such as the SIP start date, frequency of the SIP, investment period, etc. You have the option to issue post-dated cheques for your SIP or opt for a direct debit mandate from your bank account. If you opt for the direct debit option, your SIP will be deducted from your bank account at the chosen frequency automatically. Keep in mind that it can take up to 15 to 21 days for a new SIP request to be processed. Conclusion: After you have set up your SIPs, you can be worry-free that at least some of the money that was being spent before is now being accumulated to build your wealth. This is a big step. You are also now learning more about how to put something aside and let it grow with time. Soon it will be time to start enjoying the turnaround in your financial health.
Source:smartomorrows.in
Health and wealth are interrelated in more than one way. While making exercise a part of your routine can improve your health, saving and investing regularly can build your wealth.
Here are two easy things you can do today to start your journey to financial well-being.
Put aside a fixed amount: People who struggle with their finances often complain that they can never seem to save anything to invest in the first place. This is because they have always been waiting for money to be left over after they have made their expenditures. It is a common mistake that a lot of us make. A good idea can be to simply set up an automatic bank transfer to an investment just after you receive your salary or income. You can use your bank’s net banking service to do it yourself or you can go to your bank’s branch and leave instructions with them. This would ensure that as soon as you get paid, your investments are made... even before you have a chance to spend that money.
Where to invest: If you are uncomfortable with complicated financial investments and do not really understand how a lot of them work, you should consider a Systematic Investment Plan (SIP) in a suitable mutual fund. There are mutual fund schemes that suit all sorts of investors with different risk profiles.
Why choose a mutual fund?
Mutual funds are managed investments. This means that qualified and professional fund managers oversee the funds that you invest. If you were to manage your funds yourself, you would need a substantial knowledge of the equity and debt markets to make the right decisions. If you are a complete novice, you should always opt for managed financial products. Mutual funds invest across a wide range of asset classes. You can use your favorite mutual fund to invest in stocks, bonds, commodities or even other mutual funds!
What are the advantages of a mutual fund SIP?
Mutual fund SIPs allow you to invest as little as Rs. 1,000 per month automatically into mutual funds. If you have just begun to save and you are not sure how much you can spare for savings each month, just start with one SIP and keep adding SIPs as you grow comfortable. Just like splitting your exercise into smaller manageable bits, you can do the same for your investments as well. SIPs also allow you to build a corpus over a long-term investment and take advantage of Rupee-cost averaging. This means when the markets are down you get more mutual fund units and when the markets are on the higher side you get better returns. Over a long period of time if you keep investing little amounts of money through a SIP, you will average out and beat stock market ups and downs.
Is there something I need to do before I invest?
You may need to read a bit about these funds in analysts’ reports on various mutual fund schemes in different categories. These reports are easily obtainable online. If you have trouble going through these reports, you can take the assistance of a financial advisor. Financial advisors are professionals who help investors manage their money and invest better.
How can I start a SIP?
Starting a SIP is easy. To do so, you will need to choose the mutual fund scheme, the frequency of deduction for SIP installment, the SIP tenure and the SIP installment amount. Before you start SIP in a scheme, you will need to make an initial investment in the scheme. To do this, you need to fill a mutual fund application form along with the SIP enrollment form. You will also need to furnish a Know Your Customer acknowledgment. Your SIP enrollment form has details such as the SIP start date, frequency of the SIP, investment period, etc. You have the option to issue post-dated cheques for your SIP or opt for a direct debit mandate from your bank account. If you opt for the direct debit option, your SIP will be deducted from your bank account at the chosen frequency automatically. Keep in mind that it can take up to 15 to 21 days for a new SIP request to be processed. Conclusion: After you have set up your SIPs, you can be worry-free that at least some of the money that was being spent before is now being accumulated to build your wealth. This is a big step. You are also now learning more about how to put something aside and let it grow with time. Soon it will be time to start enjoying the turnaround in your financial health.
Source:smartomorrows.in
Investing in liquid or accrual funds could be a source of generating extra income for investor
Most earner, salaried or businessmen, work hard to earn money for the family and the self. However, not all these people, after they have earned money, also make their money work hard to generate some extra income. There are quite a few options which people could use to earn some extra income. Two of those routes are putting a small part of your hard earned money into Liquid Funds and/or accrual funds. Investing in these funds could also help retired people to earn some extra income. And if they are already getting pension, earnings from these funds could work as a source for a second income for them.
WHAT ARE Liquid Funds AND ACCRUAL FUNDS?
Liquid Funds are those mutual fund schemes which are ideal for putting money for a very short period of time, preferably not more than three months. Since these funds invest in extremely short term Debt papers, they come with very low volatility and risks. Accrual funds are those funds which invest in Debt papers of short and medium tenures to generate interest income. These funds usually do not take any interest rate/credit risk but stick to earning interest.
INVESTING IN ACCRUAL FUNDS
According to financial planners and advisors, retired people could invest in Debt accrual funds for higher post-tax income. These funds are more useful to those retired people who are in the higher income tax bracket (20% and 30%). For those who are in the 10% tax bracket, and also those who do not have to pay any taxes, bank fixed deposits are equally good, they say.
This is how the people who are in the 20% and 30% tax bracket can generate another stream of income by investing in accrual funds: The investor will invest in the fund and subsequently should also set up a systematic withdrawal plan (SWP) for the same scheme. The SWP will be set up in such a way that only the gains from the fund are transferred to the investor's bank account, at regular intervals, while the principal remains untouched. So, in effect the investor enjoys a steady flow of regular income, but pays lower tax compared to if he had invested in bank fixed deposits. This is because as per tax rules, only the gains are taxed. While investing in accrual funds, the investment option should be growth and not dividend, financial planner and investors say.
INVESTING IN Liquid Funds
Investing in Liquid Funds could generate annual returns of nearly 7%. With banks cutting interest in savings account, Liquid Funds, which are almost a perfectly substitute product for SB accounts, could turn more attractive in terms of return.
At 6% annual rate of interest, even if the fund house has to pay a dividend distribution tax of about 28.3%, the post-tax return works out to about 4.3%. In case the fund manager can generate a bit higher return in the fund, the returns to the investors in the fund could also be proportionately higher.
Source:http://utiswatantra.utimf.com
Most earner, salaried or businessmen, work hard to earn money for the family and the self. However, not all these people, after they have earned money, also make their money work hard to generate some extra income. There are quite a few options which people could use to earn some extra income. Two of those routes are putting a small part of your hard earned money into Liquid Funds and/or accrual funds. Investing in these funds could also help retired people to earn some extra income. And if they are already getting pension, earnings from these funds could work as a source for a second income for them.
WHAT ARE Liquid Funds AND ACCRUAL FUNDS?
Liquid Funds are those mutual fund schemes which are ideal for putting money for a very short period of time, preferably not more than three months. Since these funds invest in extremely short term Debt papers, they come with very low volatility and risks. Accrual funds are those funds which invest in Debt papers of short and medium tenures to generate interest income. These funds usually do not take any interest rate/credit risk but stick to earning interest.
INVESTING IN ACCRUAL FUNDS
According to financial planners and advisors, retired people could invest in Debt accrual funds for higher post-tax income. These funds are more useful to those retired people who are in the higher income tax bracket (20% and 30%). For those who are in the 10% tax bracket, and also those who do not have to pay any taxes, bank fixed deposits are equally good, they say.
This is how the people who are in the 20% and 30% tax bracket can generate another stream of income by investing in accrual funds: The investor will invest in the fund and subsequently should also set up a systematic withdrawal plan (SWP) for the same scheme. The SWP will be set up in such a way that only the gains from the fund are transferred to the investor's bank account, at regular intervals, while the principal remains untouched. So, in effect the investor enjoys a steady flow of regular income, but pays lower tax compared to if he had invested in bank fixed deposits. This is because as per tax rules, only the gains are taxed. While investing in accrual funds, the investment option should be growth and not dividend, financial planner and investors say.
INVESTING IN Liquid Funds
Investing in Liquid Funds could generate annual returns of nearly 7%. With banks cutting interest in savings account, Liquid Funds, which are almost a perfectly substitute product for SB accounts, could turn more attractive in terms of return.
At 6% annual rate of interest, even if the fund house has to pay a dividend distribution tax of about 28.3%, the post-tax return works out to about 4.3%. In case the fund manager can generate a bit higher return in the fund, the returns to the investors in the fund could also be proportionately higher.
Source:http://utiswatantra.utimf.com
Every investor has a reason to invest depending upon their various needs and financial goals. There is no one solution to all. In order to cater to a wide range of investor requirements, various types of mutual funds categories are designed to allow investors to choose a scheme based on the risk they are willing to take, the investable amount, their goals, the investment term, etc.
For example, a young investor may take more risks and opt for an equity-based mutual fund, whereas a retired investor might do well by channelizing his funds towards a debt-based mutual fund with only a small or zero exposure to equity.
Similarly, while a long-term investor might take the Systematic Investments route and reap the benefits of staying invested, an institutional investor might just park excess funds in a liquid fund for just a few days and earn handsome returns.
Mutual funds allow investors to spread their investments across various asset classes based on risk profile, investment needs, and horizon. Based on their structure and objective, mutual funds can be classified into:
Categorization by structure:
1. Open-Ended Schemes: These funds buy and sell units on a continuous basis around the year and, hence, allow investors to enter and exit as per their convenience. The key feature of open-ended schemes is high liquidity.
2. Closed-Ended Schemes: The unit capital of closed-ended funds is fixed, and they sell a specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-ended fund after its NFO period is over. This means that new investors cannot enter, nor can existing investors exit till the term of the scheme ends.
3. Interval Schemes: With characteristics of both open ended and close-ended schemes, they allow investors to trade units at pre-determined intervals.
Categorization by investment objective:
1. Growth/Equity Schemes: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options later. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period.
2. Income/Debt Schemes: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
3. Balanced funds: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60 per cent in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
4. Money Market/Liquid Schemes: These funds are also income funds and their aim are to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities; etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors to park their surplus funds for short periods.
Source: timesofindia.indiatimes.com/business
For example, a young investor may take more risks and opt for an equity-based mutual fund, whereas a retired investor might do well by channelizing his funds towards a debt-based mutual fund with only a small or zero exposure to equity.
Similarly, while a long-term investor might take the Systematic Investments route and reap the benefits of staying invested, an institutional investor might just park excess funds in a liquid fund for just a few days and earn handsome returns.
Mutual funds allow investors to spread their investments across various asset classes based on risk profile, investment needs, and horizon. Based on their structure and objective, mutual funds can be classified into:
Categorization by structure:
1. Open-Ended Schemes: These funds buy and sell units on a continuous basis around the year and, hence, allow investors to enter and exit as per their convenience. The key feature of open-ended schemes is high liquidity.
2. Closed-Ended Schemes: The unit capital of closed-ended funds is fixed, and they sell a specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-ended fund after its NFO period is over. This means that new investors cannot enter, nor can existing investors exit till the term of the scheme ends.
3. Interval Schemes: With characteristics of both open ended and close-ended schemes, they allow investors to trade units at pre-determined intervals.
Categorization by investment objective:
1. Growth/Equity Schemes: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options later. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period.
2. Income/Debt Schemes: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
3. Balanced funds: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60 per cent in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
4. Money Market/Liquid Schemes: These funds are also income funds and their aim are to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities; etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors to park their surplus funds for short periods.
Source: timesofindia.indiatimes.com/business
There are certain myths associated with investing in mutual funds. In this article, we would like to clarify five of the most common myths associated with investing in mutual funds.
Myth 1: You need a large sum to invest in mutual funds.
This is an erroneous perception. You need not have a lot of money to start investing in funds. You can start with a sum as low as Rs 500 when investing in equity linked saving schemes (ELSS) or Rs 1,000 every month when investing in a mutual fund through systematic investment plans (SIPs).
Myth 2: Buying a top-rated MF scheme ensures better returns.
Mutual fund ratings are dynamic and based on performance of the fund over time. So, a 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 eternally. Investments in mutual funds need to be tracked with respect to its benchmark to evaluate its performance to stay invested or exit.
Myth 3: Investing in mutual funds is the same as investing in stock market.
Not all mutual funds invest only in stocks. In fact, even the most diversified equity funds have a mix of equity and debt. Also, the sheer variety of mutual funds means that there is a fund for every type of investor, spanning a risk spectrum of low to high and spreading investments that are significantly high in equities to those which have no exposure to equities.
Myth 4: A fund with lower NAV is better.
This is a popular misconception. A mutual fund's NAV represents the market value of all its investments. Any capital appreciation will depend on the price movement of its underlying securities. Say, you invest Rs 10,000 each in fund A (whose NAV is Rs 20) and fund, B (whose NAV is Rs 100). You will get 500 units of fund A and 100 units of fund B. Let's assume both schemes have invested their entire corpus in exactly same stocks in same proportions. If these stocks collectively appreciate by 10%, the NAV of the two schemes should also rise by 10%, to Rs 22 and Rs 110, respectively. In both cases, the value of your investment increases to Rs 11,000.
Therefore, always remember that existing NAV of a fund does not have any impact on the returns.
Myth 5: You need a Demat account to invest in mutual funds.
You do not need a demat account when investing in mutual funds. You may just fill up an application form, attach a cheque of the desired amount and submit the form at the mutual fund office or to your financial adviser.
Now that you have more clarity on investing in mutual funds, we are sure you will make prudent investment decisions while panning your financial portfolio.
Source: www.timesofindia.indiatimes.com
Myth 1: You need a large sum to invest in mutual funds.
This is an erroneous perception. You need not have a lot of money to start investing in funds. You can start with a sum as low as Rs 500 when investing in equity linked saving schemes (ELSS) or Rs 1,000 every month when investing in a mutual fund through systematic investment plans (SIPs).
Myth 2: Buying a top-rated MF scheme ensures better returns.
Mutual fund ratings are dynamic and based on performance of the fund over time. So, a 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 eternally. Investments in mutual funds need to be tracked with respect to its benchmark to evaluate its performance to stay invested or exit.
Myth 3: Investing in mutual funds is the same as investing in stock market.
Not all mutual funds invest only in stocks. In fact, even the most diversified equity funds have a mix of equity and debt. Also, the sheer variety of mutual funds means that there is a fund for every type of investor, spanning a risk spectrum of low to high and spreading investments that are significantly high in equities to those which have no exposure to equities.
Myth 4: A fund with lower NAV is better.
This is a popular misconception. A mutual fund's NAV represents the market value of all its investments. Any capital appreciation will depend on the price movement of its underlying securities. Say, you invest Rs 10,000 each in fund A (whose NAV is Rs 20) and fund, B (whose NAV is Rs 100). You will get 500 units of fund A and 100 units of fund B. Let's assume both schemes have invested their entire corpus in exactly same stocks in same proportions. If these stocks collectively appreciate by 10%, the NAV of the two schemes should also rise by 10%, to Rs 22 and Rs 110, respectively. In both cases, the value of your investment increases to Rs 11,000.
Therefore, always remember that existing NAV of a fund does not have any impact on the returns.
Myth 5: You need a Demat account to invest in mutual funds.
You do not need a demat account when investing in mutual funds. You may just fill up an application form, attach a cheque of the desired amount and submit the form at the mutual fund office or to your financial adviser.
Now that you have more clarity on investing in mutual funds, we are sure you will make prudent investment decisions while panning your financial portfolio.
Source: www.timesofindia.indiatimes.com