Investment on your Mind?

Investment is something that grabs your attention as soon as you start earning a decent living. Anxiety about the future and the desire to lead a comfortable and secure life, prod us to mull over the various options available for investment. From bank savings, stocks, bonds, mutual funds, and provident funds to post office savings schemes and insurance policies, there is a wide range of choices.

Fixed Deposits offer higher interest rates compared to Savings Account, whereas the stock market involves higher risk and return. Equity shares promise maximum returns in the long term if you are willing to take that kind of risk. While certain investment options have a high risk attached to them, some others are highly illiquid. In this scenario, it is crucial to critically analyze the options available and choose the right one depending on your risk appetite and investment goals.

Insurance is a very attractive investment option given that it enables the policyholder to mitigate risks while earning good returns on the funds. It protects policyholders against various risks to life and property, minimizing the damages and the impact. It helps to plan and prepare for life events like marriage, getting admission in your dream university, buying the perfect home and retirement. Loans are available against the accumulated cash value of the premiums paid. Dividends are paid out in the case of unit-linked plans like endowment policies.  Apart from this, insurance also offers tax benefits. Thus we find that the advantages of buying an insurance policy are manifold.

However, it is important to choose the most appropriate insurance policies to reap maximum benefits. Karvy Private Wealth offers high quality insurance planning services to guide you through the process. Experienced and qualified professionals analyze your risks based on age, health, income etc. and suggest the right plans for you.

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Secure your Sister’s Safety this Raksha Bandhan!

The festival of Raksha Bandhan celebrates the unique bond shared by brothers and sisters in India. As the name implies, it symbolizes the bondage of protective affection. When a girl ties her brother a Rakhi, he gives her a return gift as a promise to take care of her, come what may. Having a brother is one of the greatest blessings in a girl’s life because it gives her the security of knowing that she will never be left in lurch.

What better gift than health insurance to ensure the security of your beloved sister? Health Insurance provides protection in the wake of unforeseen events like accidents and health issues that can create chaos in your sister’s world. In today’s times where medical costs are rising and hospital bills are uncertain, it is important to prepare yourself financially for a health crisis.

Karvy Private Wealth offers very comprehensive health insurance plans such as mediclaim, family floater plans, senior citizens’ plans and critical illness plans. An individual health insurance plan (IHIP), or ‘mediclaim’, would cover your expenses if you are hospitalized for at least 24 hours. These plans are indemnity policies, that is, they reimburse the actual expenses incurred up to the amount of the cover that you buy. Some of the expenses that are covered are room rent, doctor’s fees, anaesthetist’s fees, cost of blood and oxygen and operation theatre charges. . Under a Family Floater (FF) health plan, the entire sum insured can be availed by any or all members and is not restricted to one individual as is the case in an individual health plan. A Critical Illness plan allows you to insure against the risk of a serious illness.

So choose your Rakhi gift wisely this season by picking something that would truly ensure her safety and protection. Happy Raksha Bandhan!

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Plan a Perfect Retirement!

Retirement is the time of the life when an individual should just bother of having the time to do nothing, worry about nothing and live a peaceful life with the monies saved and invested to get the rightful returns for a safer future.

There are various reasons why retirement planning has become imperative today: longer life span, increased medical costs, inflation etc.
Mentioned below are a few options which could be considered:

Equity: Traditionally discouraged as a retirement planning tool, it could give your investments a boost if you start early.

Insurance: This one is popularly used for retirement planning. Experts say it should only be used as a risk cover and not as an investment tool.

Provident Fund and Public Provident Fund: The all-time favourite option. Our grandfathers believed in these low-risk schemes implicitly.

Fixed deposits: Safe and secure, but may cower under inflation with their low returns.

Mutual funds: Preferable one, this. There are the professionals whose experience and expertise will come handy.

Property: Totally ever-appreciating asset in the long run, especially with the real estate boom. Small catch: the liquidity concern. Not everyone has money on hand to invest.
You can also invest in Debt products, bonds, debentures, National Savings Certificates etc.
So what are your options like?

Option 1. Pension plans

An ideal for retirement plans because they provide a cushion of debt in your portfolio and help you diversify. The advantages:

i. If you invest up to Rs 1 lakh in these plans, you are eligible for a deduction from your taxable income. What this means is, your taxable income comes down by Rs 1 lakh, and you stand to pay lesser tax.

ii.  After you retire, you can withdraw one-third of the fund balance as a lumpsum, tax free. The rest of your money will be invested in an annuity plan. You could choose to have a monthly or quarterly income from it. (Note: annuity is taxable.)

Option 2: Unit Linked Pension Plans

These are good if you don't mind a little risk and policy monitoring. Here are some ways you could go about them:

i. You could invest your funds in aggressive equity schemes.

ii. You could switch funds across schemes (from debt to equity and vice versa), as and when required. Switches are exempt from capital gains tax and transaction fees (some companies do charge though).

iii. Unlike mutual fund investments, you could stay away from entry loads when you re-enter equity funds in your ULIPs.

Here's a tip: a mix of these could give you the best returns.

Source: http://wealth.moneycontrol.com/
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Are you an over spender? Here's how you can save!

Do numbers make your head spin?  Were you a math hater in school? Or perhaps you are just too laid back to worry about planning and wisely remark...take each day as it comes, the rest will take care of itself. Actually that might be the truth, things happen seldom according to plan. However if you believe in the power of self-reliance, then you would probably sit up and take notice.

Planning your budget has nothing to do with conforming to set patterns. It merely makes you aware of your financial situation and helps you create a contingency fund to tap into, when in need. Now how would you assess that and how do you start preparing to put into money consistently into this contingency fund?

Fixed expenses vs. Flexible expenses

Step A: If you are someone used to hard cash and don't like the idea of  a credit or debit card, then you just need to calculate a week's regular expenses and multiply that into four, to get your monthly outflow. If you are someone who likes detail (that would be even better) then allocate expenses under different categories like food, transport to work, shopping, entertainment, etc. and you can further divide the categories into groceries, eating out, etc. The detailed break up will help you pin point exactly where you are overspending and take a conscious step to curb those expenses. You should divide these expenses under two broad categories namely Fixed Expenses and Flexible expenses.

Spending Forecast Plan

Step B: Chalk out a 'Spending forecast' plan. Evaluate what are the things you need to buy in all the five main areas: household, transport, food, entertainment, other needs; and set aside monies for that. Other needs may include emotional expenses like that snazzy electric guitar you always wanted to buy to cultivate an entertaining hobby, or a wardrobe upgrade, a professional course you were planning, etc.

Contingency Fund – I

Step C: Evaluate a scenario where you may  be out of a job, then you need to figure out how much you spend each month and then set aside that money x 6 months as something to fall back on, when fate hands you a raw deal like a lay off. This way you ensure that you can be self reliant and be prepared for unforeseen emergencies.

Contingency Fund - II

Step D: Set aside some money apart from a medical insurance for any sudden, short term medical expenses you are likely to incur. Keep this cash very accessible and yet be disciplined enough not to dip into it.

Once you have identified the fund boxes: Spending forecast, contingency fund for job loss and medical expenses, be dedicated and generate your money flow into these funds consistently. This could be once a quarter but it would be more manageable if its once a month. Before this final step of dividing the savings, you need to save every month! If you are like most of us, who notice the funds have run dry just a few days before the pay check is due to arrive, relax!

There is a way around it.

Create another account, which perhaps gives you a good return interest rate on your savings and enable an auto transfer of a percentage of your funds (which takes care of Steps C and D) based on your calculations, on a suitable date of every month to this alternate account. Keep this parked cash out of your reach and from here invest it in suitable financial instruments, which can be liquidated when the need arises or simply keep it here and let it accumulate interest.

Source: Rediff Business

Financial planning makes loan repayment comfortable

Buying a home is a major financial commitment for an individual. Usually, a homebuyer stretches financially to purchase a house, and in most cases, borrows the funds from a bank.

These loans are large amounts and in the light of the volatility in interest rates, it is advisable to spend a good amount of time on financial planning in order to avoid a debt trap in the future. The interest rates have been quite volatile since the last 10 years. There have already been a couple of cycles of soft and hard interest rates.

There are three types of home loan schemes - fixed rate scheme, floating rate scheme and mixed rate scheme (also called teaser rate scheme). Under the fixed rate scheme, the interest charged on the loan amount remains fixed for the entire loan tenure.

However, these days most banks have stopped offering the fixed interest rate scheme. A few banks offer a fixed rate at significantly higher than the prevailing rates and that too the agreement has a clause of variability based on time or under certain conditions.

In a floating rate scheme, the interest rate varies with time based on the market conditions. In the teaser rate scheme, the bank offers an attractive fixed interest rate for the initial few years and links the loan to a floating rate thereafter. There are many variants of such schemes available. They suit the needs of different borrowers. Therefore, it is very important to analyze such schemes based on your financial condition before getting into a particular scheme.

Usually, a home loan is a long-term financial commitment as the tenure goes for more than 10 years in most cases. Therefore, it is important to think about various personal milestones and plan for regular monthly outflows before taking a loan.

Regular payments of EMI is very important and an essential part of a home loan. The payment history of an individual goes a long way in deciding future loan disbursements. Therefore, it is important to keep in mind that one should be regular and prompt in paying EMIs. It is advisable to discuss with your bank in case of any difficulties in paying the EMIs and work out a solution. You can look at prepayment, part prepayment or foreclosure of the loan to reduce or stop the EMI dues.

Source :ET

Smart moves to ride rising interest rates

Fixed deposits rates are on the rise. Though the investors living on interest income are happy about it, they are finding it difficult to catch the peak.The biggest challenge an investor faces in a rising-rate scenario is to identify the peak and lock in the rates around that level.

A better way to deal with a rising interest-rate scenario is to invest in floating-rate bond funds that invest in short-term instruments whose interest rates float in sync with benchmark rates. The other option is to invest in liquid-plus funds. Smart investors can start by putting in a good chunk of money in liquid plus funds.

As the rates rise, they keep locking in money in fixed maturity plans (FMPs) at regular intervals. This ensures that the money is deployed at attractive yields and saves you from the risk of missing the peak.

If the rates on the long-term fixed income instruments, such as bonds having a 5-10 year maturity , rise, then the prices of these bonds fall. As prices dip, investors lose money.

Hence, it is better to avoid mutual fund schemes that invest in long-term instruments. Of course, if you are of the opinion that the rates have already peaked on long-term instruments, you may consider investing in long-term funds to earn good returns over the next couple of years.

Equity investors are also not spared by interest rate movements. Interest is the price of one key raw material – money. Hence, when the interest rates rise, the profitability of companies with debt on books goes down.

Investors should avoid interest-rate sensitive sectors such as real estate, automobiles and consumer durables as a large chunk of demand for these goods is satisfied using borrowed funds.

Source : ET

Make quick money with short term investments…

Have an appetite for risk and ready for some quick investments? With rising interest rates, investors with surplus money have a plethora of opportunities to invest for short periods. Here’s a look at some of them.

  

Debt Instruments

The return of capital is certain in debt instruments, making them a good option to invest in. Low risk investors can always avoid the volatility in the stock market and park money here. Currently, such schemes provide up to 10.5 percent returns before tax deduction.

Mutual Funds

 Generally, all the funds have an investment horizon of more than a year with few exceptions. Entry and exit loads act as barriers. Certain MFs which invest in securities have a maturity of one day to three months. Over the past financial year, these liquid MFs have given an annualized return of 8–10 percent.

Fixed Maturity Plans      

As compared to fixed deposits, only a dividend distribution tax is applicable on these. They are predominantly close-ended products (investment in debt instruments).

Fixed Deposits

This well known option of investment is offered by public and private sector banks with 9.5–10 percent rates (for senior citizens) on FDs with different tenures.

Equities/Derivatives/Commodities

High risk investors with some financial acumen will be able to earn handsome returns in a short time. Almost all the segments like blue chip, textile, and infrastructure have been doing well with a booming economy. Derivatives and commodity trading have also become features of short term investments as deals can be squared soon.

All the above options are on the table keeping in mind a short investment cycle (6 months–1 year). Do not forget that the majority of short-term investments like equities have short-term capital gains tax associated with them.

Source :ET

Higher rates can adversely impact your Fixed Deposits!

BANKS are quick to lower fixed deposit (FD) rates when the interest rates fall, but they take their own sweet time to raise rates when the interest rates rise. How many times have you heard this refrain from someone, especially a retired aunt or an uncle, in the recent past? With living expenses soaring each day, most investors, especially those who swear by FDs and other relatively safer avenues like company deposits and mutual fund (MF) schemes, are in a fix. The expenses may mount, but their interest income remains steady.

INTEREST RATE SCENARIO
The Reserve Bank of India (RBI) has started raising the policy rate since February in its effort to contain inflation. This means, interest rates — the key variable to watch out for a fixed income investor — is surely north-bound, at least, in the short term. What do you do in such a scenario? Consider this: you can’t lock the money in long tenure FDs because you can’t take advantage of rising interest rates.

SHORT-TERM INVESTMENTS
If you are looking to park your money for less than a fortnight, choose a liquid fund.
The liquid-plus option is more suitable for an investment horizon of more than a fortnight. These funds can give better tax-adjusted returns than saving bank accounts. However, don’t treat these funds as investment avenues. Before investing, take a look at exit loads charged by the schemes, if any, as exit loads erode returns.

MEDIUM-TERM NEEDS
You can consider company deposits and Fixed Maturity Plans for your medium term investment needs. Company deposits pay a little better than bank FDs, but they are more risky. Always look at the credit rating of the company and don’t invest more than 10% of your debt portfolio in a single company. Also, don’t invest in deposits over a year, say investment experts. Remember, the yield on an FMP is a function of the credit quality of the papers in the portfolio and the tenure. One can expect better post-tax yield on an FMP than a corporate FD of similar credit quality for equal tenure.

LONG-TERM INSTRUMENTS
In a rising interest rate scenario, the first thing most advisors will ask you is to stay away from long-term debt schemes. With inflation tapering off, long-term rates are likely to ease a bit. If you do not want to take credit risk, you can look at gilt funds that invest in government securities.

Source : ET

Ground Rules before you plan for Fixed Deposits!

Over the last few months many companies have observed that the demand of Fixed Deposits has considerably gone up after the inflation entered into double digit territory making the banks offer not a very great deal of return.

Here are a few things that you should consider before investing in any company:
Can you part with the money: Before investing in a company you should ask for yourself  whether you can actually part with the money for the term you have chosen for the deposits, this is because compared to MF’s or bank FD’s, corporate FD’s are not very liquid.

Does the name ring a Bell? : Before investing it is always advisable to check with your financial adviser about the credentials of the company. You can always check with the ratings in order to see where the company stands.

Know the Risk: Just like the stock market, the company deposit space is also inhabited by a variety of species, depending on which the interest rates could vary.

How much should you invest?: Remember one thumb rule ‘ Never put your eggs in one basket’, just because a company is offering better interest rate you need not rush in to put in your entire corpus. It always makes sense to diversify your investment.

Source: Economic Times