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What are family floater policies

Many people looking for a health insurance policy for their families wonder if they should take a family floater or individual policies for different family members. 


A family floater policy, as the name suggests, offers to provide health insurance to the entire family unit in a single policy. In some cases, this policy can also include family members beyond the nuclear family of parents and young children, like grandparents. A floater policy is like any health plan that comes with a list of benefits and exclusions, the only difference being that it considers the entire family as one unit. So if one member of the family makes a claim in a policy year, the cover reduces by that much on the entire unit or family for the remaining policy year.


The biggest benefit of a floater policy is that it is cost effective because it insures the entire family under one sum insured limit. The insurance premium on a family floater policy is determined by the age of the oldest member, so younger families with less age gaps benefit the most from family floater plans.


Keep in mind that you need to take adequate amount of cover under the floater plan because if one member of the family makes a claim, the sum insured could drop drastically. 







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

How SWPs are Taxed?

Mutual fund withdrawals are subject to tax depending on the category of the funds you own. Debt funds and equity funds are taxed differently. Systematic Withdrawal Plans (SWP) redemption is as per first in first out (FIFO) method wherein units first bought are assumed to be redeemed first. Hence your costs for the purpose of taxation will be considered as per FIFO method.


If you redeem/withdraw your investments in equity mutual funds after 12 months, your investments would qualify for long-term capital gains tax. Long-term capital gains in excess of Rs 1 lakh are taxed at 10 per cent currently. If you sell your equity mutual fund investments before 12 months, you will have to pay a short-term capital gains tax at a flat rate of 15 per cent.


Debt mutual funds qualify for long-term capital gains tax only if investments are held for three years. The long-term capital gains tax on debt funds is 20 per cent with the inflation indexation benefit on your original investments. If debt mutual fund investments are sold before three years, the short-term gains are taxed as per your applicable income tax slab.


Your SWPs will also be taxed as per the above rules. Based on your requirement and tax slab you can plan your SWP accordingly.



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

Step Up SIPs

Those lacking financial discipline often fail to increase their SIP amount in sync with their rising income.

Step-up SIP, also popularly known as top-up SIP, is an automated facility through which SIP contribution can be increased by a predetermined fixed amount, or a fixed percentage, at periodic intervals in line with your financial goals and level of income.

The investor has to opt for this facility - increasing amount/percentage and intervals - right at the time of enrolling for the SIP.

The periodic intervals can be quarterly, half-yearly, or annual.

Few AMCs still don't have an option of automatically increasing the SIP amount, so you have to manually make a transaction of increasing the SIP amount.

Difference between Conventional SIP and Step-up SIP

Conventional SIPs do not allow investors to increase their contribution during their SIP tenure. The only alternative is to start a fresh SIP or make lump-sum investments.

As a result, those lacking financial discipline often fail to increase their SIP contribution in sync with their rising income. That is where step-up SIPs come into the picture.

Step-up SIPs allows investors to automate their SIP contribution and increases in sync with their expected growth of income. With automated incremental investing, SIP investors can derive greater benefit from the power of compounding and thereby reach their financial goals sooner.

Illustration

An investor named Raman starts a conventional SIP of Rs 10,000 and another one named Mohan starts a step-up SIP with the same amount, increasing investment by 10 percent a year from the second year onward for 20 years.

At the end of an investment term, the total corpus built by Raman will be Rs 99.91 lakh, which is barely half of the Rs 1.98 crore accumulated by Mohan (refer to table).

Table 1_SIP

Who should opt for step-up SIPs?

Step-up SIP is especially beneficial for those who lack sufficient surplus to invest for their financial goals. With this option, they can start SIPs with lower contribution and then gradually increase their investments along with their increasing income

It is also beneficial for those who lack the financial discipline to increase their investments with growing income.

Benefit of step-up SIP: Built-up corpus takes care of rising inflation

An investor needs to step up any investment on the fact that the value of money is eroding with time due to rising inflation

In the last 20 years, the average rate of inflation has been 6.54 percent. The value of currency erodes with time.

If you invest Rs 3,000 a month, it would be the same as investing Rs 10,500 in 20 years. So, an investment target that seems worthwhile today, say Rs 1 crore by 2037, might actually become Rs 3.5 crore by the time you get there, assuming the same inflation rate of 6.54 percent per annum

So, stepping up your investment every year can help you create more wealth.

Challenges in step-up SIP:

  • Income should increase year-on-year
    The basis of a step-up SIP is the assumption that an investor's income would keep increasing in a linear fashion year-on-year. There can be instances where income may not increase as much in some particular years or expenses may increase too much, leaving little surplus. In such cases, continuing with step-up SIP will be stimulating task for an investor.

  • Changes in lifestyle and expenses
    Life and things around keep changing at a fanatic pace. So, arrival of a new born child or a job loss or any unfortunate circumstances in a family can make the whole cash flow go for a toss. If this happens after starting a step-up SIP, then it may be difficult to continue with rising investments. Keep in mind while stepping up your investment is to not overshoot and commit yourself to more than what you can afford to set aside

Illustration of step-up SIP with a mutual fund scheme

The illustration in the table below should persuade you to increase monthly SIP investments every year into mutual fund schemes you are holding, as per your goals and rise in income.

Table 2_SIP

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

Canara Robeco Bluechip Equity Fund

Canara Robeco Bluechip Equity

Fund Manager: Shridatta Bhandwaldar

As a fund house, Canara Robeco focuses that capture compounding stories which have visibility, sustainability, and longevity of earnings. In this, Bhanwaldar focussed largely on stories which fall under consumption theme. Due to this, the scheme's portfolio had companies which are well-established, have strong competitive advantages in their respective sectors and entry barriers in those sectors will be high. Selecting companies based on these parameters has paid off and upped the scheme's performance. Companies such as Maruti Suzuki, Bajaj Finance, Kotak Mahindra Bank, Britannia and L&T have enhance the scheme's performance. Also Bhanwaldar stayed away from sectors which were draw-downs. He stayed away from sectors such as metals, telecom and PSU banks.




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

Hybrid Fund Categories


Here's a list of the seven new hybrid MF categories.

Hybrid MF Schemes

CategoryScheme Characteristics
Conservative Hybrid FundInvestment in equity & equity related instruments- between 10% and 25% of total assets; Investment in Debt instruments- between 75% and 90% of total assets
Balanced Hybrid Fund*Equity & Equity related instruments- between 40% and 60% of total assets; Debt instruments- between 40% and 60% of total assets. No Arbitrage would be permitted in this scheme
Aggressive Hybrid Fund*Equity & Equity related instruments- between 65% and 80% of total assets; Debt instruments- between 20% 35% of total assets
Dynamic Asset Allocation or Balanced AdvantageInvestment in equity/ debt that is managed dynamically
Multi Asset Allocation#Invests in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes
Arbitrage FundScheme following arbitrage strategy. Minimum investment in equity & equity related instruments- 65% of total assets
Equity SavingsMinimum investment in equity & equity related instruments- 65% of total assets and minimum investment in debt- 10% of total assets. Minimum hedged & unhedged to be stated in the SID.
*Mutual Funds will be permitted to offer either an Aggressive Hybrid fund or Balanced fund.
#Foreign securities will not be treated as a separate asset class


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

Edelweiss Large cap Fund

Edelweiss Large cap


1/3 year return: 15.6 /10.14%


Top 10 holdings (%): 37


LOOKING FOR companies with secular growth stories coupled with sharp portfolio management relative to the benchmark has helped the fund manager deliver superior results over the last one year. The fund also scores by having the lowest expense ratio in the large cap fund category. Decent exposure to stocks like Reliance, HDFC Bank, HDFC, TCS, Infosys, which accounted for a chunk of the Niftys return in the last one year, has helped the has helped the fund beat its benchmark over the last one year.




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

Axis Focused 25 Fund

Axis Focused 25

3 year return: 16.58% Fund Manager: Jinesh Gopani

Top 10 holdings (%): 56.2 Top 3 holdings: Kotak Mahindra Bank, HDFC Bank, TCS

THREE FACTORS have worked in favour of Axis Focused 25. One, the scheme's fund manager Jinesh Gopani has focussed on core secular growth stories. In this, he focussed on companies which have high credit rating (AAA). These companies have been naturally blue-chip which to a large extent ensured high growth given their leadership position in respective sectors. Two, he generated alpha by focussing on Initial Public Offerings (IPOs) and some listed companies which have a unique story to tell in a given sector in comparison with their peers. Lastly, he focused on cyclical theme wherein companies embarked on capex cycle. Key companies which have enhanced the scheme's performance are Bajaj Finance, Endurance Technologies, Bandhan Bank, Gruh Finance and Kotak Mahindra Bank.



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

Debt Mutual Funds are not Risk Free

When it comes to debt investments there seems to be an acute aversion to any sort of volatility among investors. But that need not be the case. In the current market bond yields have seen movements of as much as 100 basis points within a month. There are chances that many investors may want to redeem their debt funds fearing fall in their returns. But what may happen is that investors may miss out on potentially improved returns at portfolio level due to lack of adequate planning.

Today mutual funds offer a number of different types of debt funds that cater to the investment requirement across the segment. As a thumb rule, the longer the investment horizon, the better is one's ability to withstand intermediate volatility and, thereby, enhance expected return.

Understanding price-yield movement

A basic fundamental of bond investing that yield and price are inversely related may not be commonly understood. Therefore it is important that investors take efforts to educate themselves to understand the product before taking the investment decision.

A simple way of understanding debt funds is to think of them simply as passing through the interest and capital gain income that they receive from the bonds they invest in, after deducting expenses and fees. There are a couple of further complexities to this.

One, unlike fixed deposits, mutual funds invest in bonds that are tradable. Two, in the debt market, prices of different bonds can rise or fall, just like they do on stock markets. Debt market focuses on various parameters such as global market development, interest rate cycles, inflation and credit pick-up. Bond prices are affected by the interest rate cycles and policy stance of central banks.

Don't panic if yields move up

Some investors withdraw untimely from debt funds because fear of loss is irrationally higher; the perception that the debt market does not witness volatility leads to panic when there is an upward movement in yields, adversely impacting returns during that period.

In current scenario no economy can sustain being standalone, therefore development in one part of the world is naturally going to affect the linked economy. Like in every other asset class, investors need to show patience in this asset also. An investor with long-term horizon should remain invested to benefit the most from the interest rate cycle.

Choose the right kind of fund

An investor should build his/her debt portfolio keeping in mind the time horizon and risk profile and invest in fund strategy matching their investment need.

Debt funds can broadly be categorised in the following three groups:

(1) For short-term investment-Liquid Fund/Low Duration Funds

(2) For medium term investment, defined as 18 months to three years – Short Term fund/Credit Risk Funds

(3) For long-term investment horizon of over three years – Bond Funds

Generally speaking, risk matrix in debt funds is measured on two major counts. Firstly, the average maturity of the fund's investments and secondly the average credit profile of the fund. Higher the average maturity, the more volatile and risky is a fund considered and similarly, the lower the rating profile of a fund's investment, the more risky is it considered.

Longer maturity risk is normally due to fluctuation in bond prices and is considered recoverable over long periods. Credit risk is typically binary in nature, where if the investee company defaults in repayments on due date, the subsequent recovery is generally unlikely.

Kinds of debt funds

Liquid Funds, typically invest in papers of maturity up to 91 days. Investors with very short- term horizon should consider such funds, especially for creating an emergency fund corpus (which should be ideally three to six months income).

Low-duration fund can have average Macaulay duration of six to 12 months. If investor has investment horizon matching the above, this category may suit them. Short-duration funds typically have maturity between one and three years. Credit risk funds generally invest in lower rated papers to capture higher carry yields. Such funds may suit medium term investors.

Bond funds typically can invest in long-term papers. Due to higher average maturity, typically, returns are very volatile and highly sensitive to change in interest rates. However, past experience suggests that over interest rate cycles, these funds in the long term have provided good returns. Hence, a long term investor should consider such funds.

Another way of managing the interest rate volatility is through Dynamic Bond Funds, which can increase or reduce their duration based on the interest rate outlook.

DEMYSTIFYING DEBT FUNDS

  • There are debt funds to match varying investment horizons  
  • Debt funds can also suffer losses like equity funds  
  • Key is to have patience and wait out the volatility


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 are International Funds

Ask any finance professional 'should investors diversify their investments?' The answer will be a resounding yes. Diversification is a key risk mitigation strategy. Generally, we view diversification as investing in unrelated asset classes. However, diversification also means spreading your risk across geographies.

Usually individuals invest all their savings in their home country. This exposes investors to country risk. That is any negative economic or political event in the country affects their investment returns. A way to shield your clients against country risk is to invest internationally. 

Investing directly in foreign markets   requires expertise and is subject to investment limits. However, investors planning to diversify internationally can do so via the mutual fund route.

Let us understand the pros and cons of investing in foreign funds.

Advantages:

  • Risk mitigation - Helps in providing portfolio diversification
  • Broader investment basket - Your clients can gain exposure to strong international businesses which are not listed in India
  • No limit – RBI has imposed certain restrictions on direct foreign investments. However, there are no such restrictions on investments made through foreign funds. As per RBI guidelines, the annual overseas investment ceiling for individuals is US $250,000 (approx. 1.7 crore).
  • Planning for foreign education – Children of many clients dream of studying in a foreign university. Being well aware of the foreign education costs many parents save for their children's education. However, these savings do not adequately reflect the impact of currency on investments. To elaborate assume the year is 2008, your clients calculate that they need to save 50 thousand dollars that is 21 lakhs for their son's education over a period of 10 years. USD/INR was around 42 in 2008. Come 2018 Rupee has depreciated to 68 that is a change of 61%. Now the same amount 50 thousand USD translates to 34 lakh Rupees. This huge increase will turn the client's financial calculations on its head. Instead if the client would have invested in a foreign fund investing in US markets then the currency movement would have no impact on the client's financial plan.    

Disadvantages:

  • Increased global risk - The client portfolio is exposed to country specific risks of all economies in which the international fund invests
  • Currency risk – This is the main risk while investing internationally. Any movement in Rupee compared to the currency of underlying investment influences scheme performance.  An appreciating Rupee negatively affects the returns while a depreciating Rupee boosts returns.
  • Tax inefficiency - For tax purposes, they are treated as debt funds. Earlier when long term capital gains tax (LTCG) for equities was nil foreign funds were at a significant disadvantage. However, this disparity has reduced post budget as the Government has reintroduced long-term capital gains (LTCG) tax on equity investments.

Now, profits (above one lakh) from equity investments where the holding period is more than a year are taxed at 10%. While, long-term investments in foreign funds (holding period greater than three years) are taxed at 20% with indexation benefit.





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

About Equity Mutual Funds

An equity mutual fund is a mutual fund that invests in stocks. They are a lucrative and interesting investment avenue present in the market today. Over the period of time, we have seen people moving from low-return instruments like NSC, Provident Fund and fixed deposits. Equity mutual funds not only help you get capital appreciation but also help save tax. There are options available under equity mutual funds which are specially designed to give you tax benefits. These funds may even provide you inflation-beaten returns in the future.

Here are the reasons why you should be investing in an equity mutual fund today:

1. They are aligned with your financial goal

Most of the funds are open-ended, which makes it easy to link the investments with any of your financial goals, like child marriage, child education, vacation, retirement planning, wealth creation etc. Investors can achieve their financial goals, as the schemes comfortably fit in the duration of any goal which they wish to get it fulfilled. However, make sure that the financial goal you are opting for should not be less than five years.

2. Diversification in stock investment

The amount invested through equity mutual funds are spread in substantial sectors and have holdings in various companies which allow mutual fund managers to spread the risk and reduce the future losses due to market volatility. Since the amount is invested through an expertise and a demonstrated performance, it is much safer compared to buying stocks directly.

3. Tax-saving element

Investors can avail tax benefits by investing in ELSS (Equity linked saving scheme) funds. These equity-linked tax saving investment schemes provide investors with total tax saving benefits of Rs 1.5 lakh under section 80C of the Income Tax Act, 1961.


4. They are Tax-free

Equity mutual funds, which are invested for more than one year of time horizon, are tax-free. Even dividend received till Rs 10 lakh from mutual funds is tax-free in the hands of investors.

5. Highly return-orientation

The scheme gets compounded returns which help in multiplying your money over a certain period of time. In a re-investment option, your earnings get reinvested and returns are calculated on every sum of the final earnings which includes return earnings of the previous years. The more you remain invested, the more you will be able to increase the potential of your inflation-beaten investment earnings.


6. Redemption is easy

Redemption of money from open-ended equity funds is relatively easy. You can invest through a direct plan using electronic clearing system (ECS) facility of your bank. Whenever you want to withdraw your free units, it can be done very smoothly through the redemption process. After signing the redemption form, it takes a maximum of three working days to get your money in the registered bank from where you have started your investments.


7. Offers versatility of investment

Investment in equity mutual funds can be done through a Systematic Investment Plan or in a lump sum. You have an option to stop or halt the instalments of your systematic investment plan. Investors also have the flexibility to go for the systematic withdrawal plan (SWP) which allows them the benefit of periodical withdrawal, at the same time retaining the fund.



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

Financial Planning for new Salary Earners

You have just got a job but you are clueless as to how to manage your money. You either spend your entire disposable income or let your savings sit on the credit side of your saving account. Either way, you are not doing the right thing.

Managing money can be an overwhelming process especially when you have just started earning. You are a millennial and still celebrating the fact that you are able to afford your rent, utilities and other expenses on your own. However, if terms like savings, investment, personal finance and money management are making you anxious, then try to understand these points:

1) Setting a monthly budget

Big organisations run on the simple principle of budgeting. The marketing department sets a campaign budget; the product department sets a research and development budget. Similarly, we set a budget before we think of making a big purchase. The same concept applies to our monthly expenditure as well. Write down your income and expenses. Try to limit the expenses by up to 60% of your income by budgeting the same. It can be done once you track, list, categorise and prioritise your expenses. Create your budget revolving around your lifestyle. Don't try to copy someone else's spending habit. Setting a budget in conformity with your expense can give you a lot of clarity and control. Also, the budget should not be so restrictive that living becomes a punishment.


2) Build a habit of consistent saving

The budget set shall help you to reach at a definite income-expense ratio after several attempts of trial and error. You may find yourself succumbing to temptations courtesy brilliantly curated advertisements. Don't worry. Keep aside a definite buffer sum for your crave-purchases. After adjusting various expenses for the first few months, slowly include savings into your budget. If you find savings difficult, then think long-term. Would you rather want a trip to Rome or fifty days of fine wine and dine? Learning to live within the means can be difficult in the present times but, your money-hygiene is just as important a discipline as your work-out regime. Financial planners suggest avoiding debt by keeping a check on credit card usage. Set short-term and long-term financial goals.


3) Leave room for some flexibility

At the start of your career, you may change jobs and cities. Make a flexible plan. Avoid committing to a long-term payment cycle like home loan if your work life and goals change frequently. Also, tying your savings into long-term products may not work if your goals change and you need funds immediately. Your investment plan shall also move like your savings plan. Park your investments in instruments which give you a lock-in which is similar to your financial goals. For example, if you are planning to get married in 3 years, then invest your money in an instrument with a 3-year lock-in.

4) Allocate towards an emergency fund

To hedge yourself against uncertainties, it is essential to build an emergency fund before assigning a chunk towards investment or savings. You have just started your career and you may get hit money-wise when you are exploring your options. Hence, an emergency fund can come to the rescue to give you some buffer time. Treat this fund as a cushion in order to remain debt free and review this fund from time to time.


5) Start investing your saved money

Investment is a term which is Mariana Trench deep. There are many products on the market you may not be aware of. Start simple. Focus on tax-efficient investment products like equity-linked saving scheme funds, provident funds and dividend incomes. Keep a certain amount aside dedicating to your retirement fund. Before splurging on couture think about getting a health and vehicle insurance. The investment options should be based on your financial situations. Putting all your money in equity in a stock exchange can prove to be financially fatal if you don't have enough margin of safety to fall back on. While you can postpone life insurance for a while but, you shall cover yourself with a health insurance if you are self-employed.

6) Maintain a sound credit history

Banks may decline your loan petition in future if you have demonstrated a bad behaviour in repaying debts. Pay your bills on time. A good credit profile is useful later in life when you wish to borrow funds. Just like your country, you are also rated on your financial credibility.




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

Debt Fund Categories

Here's a list of all the debt fund MF categories

Debt MF Schemes

CategoryScheme Characteristics
Overnight FundInvestment in overnight securities having maturity of 1 day
Liquid FundInvestment in Debt and money market securities with maturity of upto 91 days only
Ultra Short Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months - 6 months
Low Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 months
Money Market FundInvestment in Money Market instruments having maturity upto 1 year
Short Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year - 3 years
Medium Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 years - 4 years
Medium to Long Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 - 7 years
Long Duration FundInvestment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 years
Dynamic BondInvestment across duration
Corporate Bond FundMinimum investment in corporate bonds- 80% of total assets (only in highest rated instruments)
Credit Risk FundMinimum investment in corporate bonds- 65% of total assets (investment in below highest rated instruments)
Banking and PSU FundMinimum investment in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions- 80% of total assets
Gilt FundMinimum investment in Gsecs- 80% of total assets (across maturity)
Gilt Fund with 10 year constant durationMinimum investment in Gsecs- 80% of total assets such that the Macaulay duration of the portfolio is equal to 10 years
Floater FundMinimum investment in floating rate instruments- 65% of total assets



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

How to Invest in Debt Markets when Its volatile

Equity has fresh competition. In volatility that is. Gilts have turned pretty volatile the last few months so much so, that at times, they behave like small-cap stocks! Debt markets have been swaying based on the season's sentiment. Analysis of the movement post August last year shows the swings, thus reflecting the changing moods of the market. A year ago, it was all looking benign to the extent that some felt the RBI was behind the curve on cutting rates.

Broken sentiment

A series of events and news flows dented the confidence of the markets. From fears of the government breaching the borrowing target as a result of a tight fiscal deficit target to the nervousness post Gujarat elections, all the way to the Union Budget, we witnessed relentless pounding of long-end gilts. News bytes coming out of the RBI added to the already battered sentiment. Despite a bit of fire-fighting by the government, the back of the market was already broken.

The Union Budget threw up more questions and despite the government's pronouncements, newer fears capped any semblance of positive sentiment. In the space of 3-4 months, the 10-year has swung from 7.15% to 7.88%. If one were to track the 10-year gilt from March 2017, it has moved from about 6.69% all the way to about 7.88%. To put this in perspective, the current 10-year benchmark security, i.e., 7.17% GOI 2028 was issued on January 8, 2018 at Rs 100. This security was traded around Rs 95.33 on May 25, 2018. This meant an absolute loss of 4.67% in a matter of months! On an annualised basis this is -12.44%. Remember, we are talking debt returns and not equity movement.

Equity investors would be pardoned if they think the range was too small by their market standards. Only bond investors would understand the anxiety during swings such as these. From bleeding bank treasuries to retail investors licking the wounds through their debt MF investments, large parts of the participants saw valuations take a knock down.

What now?

Election year concerns along with PSU bank write-offs will continue to haunt markets. This time around even shorter-term bonds have lost value on the back of tightening liquidity. As cash in the public's hands has gone back to pre-demonetisation days, liquidity with banks have come down. With the currency weakening sharply, RBI has had to intervene to cool the runaway movement, thus sucking INR liquidity.

What should investors do?

After enjoying high returns for a couple of years, the last one-year returns on bond funds have started to weaken. While 2016 was a year of double-digit returns, the latter half of 2017 saw sentiment turn and returns have since trended down. The best bet is to retain existing investments so long as the time frame is 3 years and above. Importantly, return expectations need to be reset to around 7-7.50%, especially since inflation has also come off from the lofty levels that were seen until the RBI started targeting the Consumer Price Index.

Nervous investors who cannot weather volatility can switch to short-term funds. If a lock-in is something they can consider, Fixed Maturity Plans (FMP) offer a compelling alternative. With short- to medium-term yields elevated, these FMPs can deliver attractive returns without having to compromise on the credit quality.

Tax-free bond yields in the secondary markets have inched up over 6.25% and offer a safe bet. Non-tax or low tax bracket investors would have an opportunity to get higher returns on fresh fixed deposits and NCD investments. Here, we wish to caution investors that it is better to stick to well rated and better known entities, rather than go for lower credit instruments. After all, investors get into debt investments for safety over higher returns.

In summary, one needs to realise that every now and then bond markets suddenly wake up to remind the world of its existence. At times when rates soften, bond investors rejoice, whereas, when rates harden, the story takes a bad turn.




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