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A lot of people confuse savings with investment. To illustrate the difference, let’s take example of cricket. When it comes to savings, it’s like a batsman defending himself from getting out. When a batsman plays defensively to save his/her wicket, he is not making any runs. Investing is playing judiciously to dodge a few balls, hitting the ball at the right opportunity by taking calculated risks to make runs.

So, in general, savings is like idle money- you will never grow your wealth whereas investing means making your money work for generating more wealth to fulfill your financial goals.

Anyone can start investing in mutual funds from as little as INR 500/- per month.

You can redeem general mutual fund units as and when you require, adhering to the mutual fund terms that you have invested in. If you have invested in a mutual fund without any lock-in period, you can choose to withdraw anytime. Some AMCs charge penalty if you withdraw within 1 year from date of investment while others do not.

You can easily withdraw the funds by signing a redemption form. After successful submission of redemption application, your money will directly be credited to bank account within 5-6 working days.

There are various types of mutual funds based on their investment horizon, goal, type of instrument invested, etc. In India, debt mutual funds, liquid mutual funds, equity mutual funds and hybrid funds are the most popular. You can consult us for more information about these funds.

Yes, you can safely invest in a mutual fund without any worries. However, based on the type of fund you chose, the risk to reward ratio changes.

We do not deny the safety quotient of bank FDs however they provide very little TAXABLE returns in terms of meager rates of interest. Such a reward is not enough to help you meet your future financial goals. Also, it is a known fact that Bank FD interest rates are reducing day by day. Compared to fixed deposits, mutual funds are a lucrative option with lower tax implication. The mutual funds domain also has an option that offers safety similar to bank FD and provides higher rate of return

Inflation is increasing every day (10%, at present) The more the inflation, the more expensive things become in the future. So, what you can buy with an amount today, you will not be able to buy tomorrow. This is how inflation erodes the real value of savings.

NEED is something that you require for daily survival whereas WANTS are luxury expenses like eating out in restaurant, buying/replacing expensive gadgets every few years. In order to achieve financial goals, it is important to strictly control his/her WANTS.

Real estate investments are very illiquid. Also, investing in real estate does not give huge returns like the past. In the last two years, real-estate inventories are piling up with many flats being lying unsold. Real estate investors have suffered immensely due to slow value growth and reduced liquidity. Also, the growth of real estate sector is slow, at present. Also, taxability factor associated with real estate investments make them highly unattractive.

For example, the cost of one BHK flat in Mumbai (Borivali) was INR 15 lakh in 1998. The market value of the same flat grew up to INR 100 Lakh in 2018. This means that the real estate investment grew approximately 7 times in the last 20 years. Everyone knows that the same flat will not grow up to INR 7 crore in the next 10 years.

When we compare this investment to growth in equity investment, we will realize that a decent, acceptable rate of return @ 12% will grow INR 1 crore to INR 9.5 crore in next 20 years.

If we compare rental earnings with the value of real estate, one doesn’t get more than 3-4% gross return per annum. On top of it, the investor will have to pay annual maintenance charges, property tax and a host of expenses that bring the returns much lower than 3% per annum. Instead of investing in real estate, if someone invests in mutual funds, he/she is expected to get higher returns with lower taxability and high liquidity.

Debt Mutual Funds

In debt mutual funds, the corpus is generally invested in safer instruments like Govt. Bonds, T-bills, Corporate FDs, Money Markets, Non-Convertible Debentures, etc. Debt mutual funds possess the following attributes:

           • Risk: Low
           • Returns: Moderate
          • Taxability: In the short term (less than 3 years), the profit realized is added to the income of individual and taxed as per the tax slab. In long term, when the funds are held for more than 3 years, the profit is considered as long-term capital gain and taxed at 20{7e93f7da8768b7623d1f97a07edcc121cf09482a17f6244afd1168a7ad9a2d16} post indexation.

Equity Mutual Funds

Equity mutual funds create a portfolio of shares and invest the corpus in the shares of companies stated in its portfolio. Equity Mutual Funds possess the following attributes:

           • Risk: High
           • Returns: Higher than Debt MF
           • Taxability: If held for more than 12 months, then 10% tax is levied on profit of more than Rs. 1L per annum. If held for less than 12 months, than 15% tax on profit.

An investment gives the maximum return when started early. The earlier one starts, the higher returns can be anticipated in the long term.

As per a Chinese proverb, “The best time to invest in a tree was 20 years ago. The second-best time is TODAY!” Let’s illustrate the importance of age in investing with an example:

A person wants to accumulate INR 1 Crore on retirement (58 years). If he starts investing at the age of 25 years, he would need an amount of INR 2250 per month that would grow to INR 1 crore at a moderate rate of 12% per annum. But if he starts at the age of 45, he would need to invest INR 28000/- per month to accumulate the same amount.

To find out if you are adequately insured, calculate the inflation adjusted corpus required to fulfill daily requirements. Add your future financial goals + obligations/liabilities to the amount. Contact our expert advisors for accurate analysis of your insurance requirement and suggest appropriate sum assured.

If you are thinking of investing in equity segment, then you should go for long term. However, one should always invest according to the personal financial goal.

One should never mix insurance with investment. Insurance protects your family from financial burdens if the earning member passes away prematurely. Insurance should never be bought considering the maturity value in mind. The premium of a term plan is low compared to an insurance policy, leaving you with enough funds to invest judiciously to earn higher returns. If you want to restructure the outflow of insurance premiums, contact VIBGYOR for detailed assessment of the value you derive from existing policies and compare that to that of term plan.

The biggest risk associated with investment is ‘NOT starting at all’. Even in life, a person tackles risk to achieve his/her wishes. There is even a risk in crossing the road. The key to mitigating risk is to take calculated risks and consult an expert advisor like VIBGYOR to evaluate your risk profile and suggest something that syncs to your risk appetite.

Section 80C helps you save tax up to INR 1,50,000 in a financial year by investing in various instruments. Insurance policy premiums, ULIP premium, contributions to PPF, repayment of principal property loan amount, investments in NSCs, NPS, tax saving bonds, PO term deposits, ELSS Mutual Funds, SCSS, Sukanya Samriddhi Scheme are subject to a collective tax benefit of INR 1.5 Lakh per annum.

If you want to save tax and at the same time get good returns, you can think of investing in ELSS plans.

A Unit Linked Insurance Plan is an amalgamation of investment as well as insurance while mutual fund is a pure investment. Though, both the options offer market-linked returns, ULIPs are known to provide lesser returns than mutual funds.

ULIPsMutual Funds
Entry LoadHigh (5-40%)No Entry Load
TransparencyLowCompletely Transparent about Operations & Portfolio
Maturity5-20 YearsMaturity
Lock InMinimum 5 YearsNo Lock-ins

One of the basic rules of investment says that one should never club investment with insurance.

Why many distributors and advisors keep on recommending ULIPs, then? Because commissions on ULIP plans are generally higher than mutual funds.

However, the problem with ULIPs is that there are variety of charges like Premium Allocation Charges, Mortality Charges, Fund Management Charges, Policy Administration Charges, which are adjusted from insurance holder’s premium, making it a non-lucrative investment option.

As large number of charges tend to reduce your overall returns, it is recommended to keep insurance and investment separate and never think of ULIP plans as an investment option.

Mutual fund companies offer direct plans for investors that can be bought directly from their website without any assistance from a mutual fund distributor. If you choose the direct route, you get a chance to receive higher returns as MF companies need not pay commissions to distributors in this case. However, if you invest via the direct route, you do not get any expert advice on choosing the right fund according to your risk profile and financial goals. Distributors suggest mutual funds that closely suit your personal goals. Thus, you need to be very diligent in research and depend on your own when you choose to go direct which is not possible due to lack of experience, time and research.

Let’s illustrate the power of compounding through the following example:
If someone invests INR 5000/- per month for 10 years at 12%  returns, the corpus would turn out to be INR 11 Lakh at the end of the period. If the same amount is invested for a period of 15 years, the final corpus would be INR 24 Lakh.

As the tenure of investment increases, the corpus will grow enormously. The same INR 5000/- per month will grow to INR 45 lakh in 20 years at the same rate of return.

The phenomenal difference in terms of corpus is the power of compounding.

National Pension Scheme is a government scheme that promises regular pension after retirement. Being a voluntary scheme, one can contribute during his working years to accumulate a corpus that will be used for payments in the form of pension after retirement.

The accumulated corpus gets invested in Govt. securities, corporate securities, stock market as per the preferred asset allocation of the investor.

In addition to tax benefits under Sec 80C, a person contributing to NPS can also claim tax benefit under Sec. 80 CC D/B of up to INR 50,000 per annum. Surely, NPS is a useful scheme for the long run but one must contact a professional financial expert before investing in NPS for maximum benefits.

In such a case, an investor can think of investing in debt mutual funds, liquid mutual funds and bank FDs by nationalized banks.

Yes, any investments made in the name of spouse or children are eligible for tax saving. You may need to consult a professional tax planner to plan and understand the implications.

Should one start buying insurance at a young age?

Definitely yes. When one is young, it is easier to get an insurance policy at a lower premium. One should buy a pure term plan as soon as one starts the job. As the age increases, policy premium gets expensive. To illustrate, here is an example:

  • Mr. A, aged 25, can easily get a term plan with INR 1 Crore sum assured for 50 years at just INR 500 per month.
  • Mr. B, aged 40, will have to shell out INR 2300 per month for 1 Crore cover for 45 years.

So, the difference is huge. It’s better to start as early as possible.

One can think of buying non-life insurance policies for inclusive cover to protect immovable property from losses due to the above-mentioned contingencies.

Just like no two persons can be the same, the financial goals, status and ambitions cannot be the same for two persons. So, it is quite hard to create an ideal asset mix based on age. As financial goals change with time, it is important to consult an expert financial planner for setting a financial goal and financial planning. If you are looking for goal based financial planning, please consult VIBGYOR.

Being confused about investing directly in stocks or buying mutual funds is completely understandable. As you cannot keep daily track of market and cannot perform research on your own, it is safer to invest via mutual funds. Mutual funds are managed by professional fund managers who have the skills, qualifications and research teams to analyze, choose and buy lucrative stocks.

As one cannot just pick up stocks through tips or newspaper articles in the long run, it is better to go the professional route and choose to invest in mutual funds.

What is meant by long-term and short-term investment tenure?

Investment horizon is generally categorized as short-term, long-term or mid-term. These horizon terms mean that the investment is kept invested for the following time periods:

  • Long Term: More than 5 Years
  • Mid Term: 3-5 Years
  • Short Term: Less Than 3 Years

There are a number of mutual funds scheme available for investors to choose from. One must carefully align the mutual fund investments to his/her financial goals and investment horizon.

If one is looking to invest for short-term, debt/liquid schemes are ideal. When one thinks of mid-term, one can choose a balanced or hybrid mutual fund scheme. If one’s investment horizon is greater than 5 years, one can think of investing in mid cap, small cap or multi-cap funds.

Retirement planning is an important financial goal that many choose to ignore. To ideally plan for retirement, one must have a fair idea of his/her monthly household expenses. Retirement planning should start from the first day of employment in life as the early you start, the lesser you need to invest for larger retirement corpus.

For example, Mr. A, aged 28, with monthly household expenses of INR 50,000 is looking to retire at an age of 58. If life expectancy is considered to be 80 years , he would need approx. INR 9 CR at 58 years age. He can achieve the same if he invest INR 16,000 per month if invested with approx.. @ 15%  CAGR

For the same case Mr. B, aged 38 will need INR 4.6CR and have to invest approx. INR 35,000 per month

Mr. C, aged 48 will need INR 2.35CR and have to invest INR 89,000 per month. To understand and find out your retirement corpus requirement, please contact VIBGYOR.

In the modern world with high inflation, it is important to set specific financial goals as the timeline of investment and inflation-adjusted corpus required at the time of goal fulfillment will be different for every goal. Goals should be divided into short, mid and long-term and an investment plan should be chartered out accordingly to achieve your financial goals.

I had a really bad experience with mutual funds because of UTI in the past. Since then, I am quite apprehensive about investing in mutual funds. In the current scenario, how safe are mutual fund investments?

Unlike the past, mutual fund industry is now highly-regulated and well-structured. All mutual funds are closely monitored and controlled by Securities & Exchange Board of India (SEBI) which has set out detailed guidelines about functioning of a mutual fund.

According to SEBI MF Regulations, 1996, Mutual Funds must operate under a three-tier management structure, including:

  • Sponsor: Generally, the promoter of a company which appoints a trustee with approval from SEBI and sets up an AMC.
  • Trustee: Trustees protect the interests of mutual fund unit holders by monitoring the performance of key personnel in the AMC and reviewing and reporting all transactions on a quarterly basis to SEBI.
  • Asset Management Company: The investment manager that works on behalf of the sponsor under the aegis of trustees.

Apart from the above, custodians, registrar and transfer agents, auditors, fund accountants play an important role in management and operations of mutual funds and ensuring safety of investor wealth.

A Portfolio Management Service (PMS) is a privately-managed mutual fund that is specifically targeted and structured for HNI investors. The minimum investment required for starting a PMS as per SEBI is INR 25 Lakh. This is specifically kept on

Comparing PMS with Mutual Funds, one can start investing in mutual funds from as low as INR 500. Also, the charges are much lower in mutual funds. PMS investments should not be more than 20% of anyone’s portfolio, irrespective of its size. For more information about asset allocation and PMS, please contact VIBGYOR.

Contingent events like the situation with IL&FS, DHFL & specific NBFC cases have brought a setback for debt market investors. The uncertainty regarding debt funds has panicked many retail investors. However, SEBI took various steps at the right time to amend rules concerning control of NBFCs and there has been strict monitoring of MFs with larger exposure to NBFCs than prescribed limits. So, the situation will improve in the coming years. It is advised to stay invested for better returns.

Mutual fund selection must be carefully assigned to personal financial goals. One must review every investment every six months for any mid-term goal and annually for a long-term goal. To choose the right mutual fund and for periodic review, consult a CERTIFIED FINANCIAL PLANNER like VIBGYOR

Sum assured should always be linked to one’s expenses, liabilities and financial goals. Also, to make your life insurance cover fruitful, always keep insurance and investment separate. There are two methods to calculate life insurance cover- Expense Replacement or Income Replacement. Contact VIBGYOR to calculate your insurance requirement in detail.

As stated earlier, insurance and investment should be kept separate. So, endowment policies which have an element of investment and returns should be avoided because the returns are quite less in such a policy for meeting financial goals.

Everyone needs a financial planner just like everyone has a family doctor. Similar to a doctor who knows your past health history and conditions, a financial doctor serves as a wealth doctor to help you create ideal financial plans for the future. Just keep in mind that a financial planner is different from an investment advisor.

CERTIFIED FINANCIAL PLANNER can be deemed as super specialty doctors while investor advisors are like general physician. A CFP undergoes rigorous training and learns the intricacies related to all aspects of financial planning like retirement planning, estate planning, insurance planning, tax planning, etc.

A CFP certification is one of the most prestigious financial certificates around the globe. In India, till date only approx. 4000 CFPs are available. CFPs strictly follow detailed Code of Ethics as defined by the CFP Board and provides CFP provides a reliable, honest and trustworthy financial advice for the benefit of his/her clients. To reap maximum benefits out of his/her investment portfolio, one must only consult a CERTIFIED FINANCIAL PLANNER for financial advice.

CFPs link investment to goal-based financial planning. Generally, a CFP would advise someone to invest in mutual fund but at the same time can include stocks as a part of financial portfolio. CFPs may advise client to invest in stocks based on fundamentals and deep research.

Generally, a CFP charges a one-time fee of INR 5,000.00 to INR 30,000.00 for making the financial plan. Also, a CFP may also charge an annual fee- approx. 1% of the portfolio for a regular review (Quarterly) in line with the original financial plan.

A CERTIFIED FINANCIAL PLANNER spends a large amount of time with the client to identify the financial goals, devise an investment strategy based on personal needs and review the financial plan, periodically. A CFP works with the client to understand their financial circumstances and how to achieve their financial objectives.

So, definitely a financial advisor should charge for his/her advice. As CFPs are specialists just like a specialist doctor, it is foolish to think of providing free advice.