What is a Systematic Transfer Plan (STP) and how to use one?


Posted By : Kushal Kothari
Tags :  Switch STP

One of the biggest worries we have while investing is a lack of assurance as to whether or not we are 'timing-it-right'. And that's the thing about investing in markets - One never knows what the right time is. This is the exact reason why people are more comfortable investing in mutual funds through SIPs rather than making a lump sum purchase. With SIPs, since a specific amount is invested at regular intervals, one does not have to worry much about timing the market as the purchase value of your investment gets averaged through the ups and downs of market movements.

 

But what happens when you get those mid-year or year-end bonus payouts? Investing this amount, which can be typically 10-30% of your annual CTC in one single transaction would definitely make you hesitant, won't it? Or what if you want to switch a significant chunk from debt to equity funds or the other way around? This is where a systematic transfer plan (STP) works fabulously to periodically...

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The pre-tax saving season begins! Things you need to know about 80C investments!


Posted By : Kushal Kothari
Tags :  ELSS Tax

If you are an employee of a public/private sector company, you probably have received emails from your HR to submit your investment proofs. And thus a mini-tax saving seasons has kickstarted as we try to make hurried investments in order to avoid seeing a cut in the paycheck for the months of Jan-Mar next year. Here is a short list of some of the common mistakes and misconceptions to avoid while making your 80 investments -

 

1. First things first - The deadline for submitting your investment proofs is just that. A deadline. Even if you miss it, you can make your investments any time until the end of March and still save tax. The deducted tax will either be adjusted in following month's payslips or can be easily reclaimed while filing your tax returns. These days, the IT department is known to settle tax refund within a few days, along with interest due to the user. Kindly don't misunderstand us. We are not recommending to delay your investments, but all we suggest is...

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How to link your Aadhaar with Mutual Funds?


Posted By : Kushal Kothari
Tags :  General

Our generation has probably not seen the government push any agenda as hard as that of linking Aadhaar to every single transaction and account we hold. While the debate continues as to whether it constitutes a Big Brotherly move or not, the common man is pretty much expected to follow the directive while the government awaits a verdict from the Supreme Court. I'm sure, you probably have received WhatsApp messages regarding all the deadlines already.

 

The deadline to link Mutual Fund folios with Aadhar number is 31st December 2017 31st March 2018. Failing which, you may not be able to access your holdings. In all likelihood, this deadline will be extended. Yet, it is prudent to get started to link every account you hold to your singular identity - The Aadhaar. Unfortunately, we at Expowealth cannot update your Aadhar details across all the fund houses, yet. It is something you'll have to do with the respective RTA (Registrar and Transfer Agents) of Fund...

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New fund classification and scheme merger as directed by SEBI - What it means for you


Posted By : Kushal Kothari

Late last week, something important happened. A lot of the discussion so far between the fund houses and regulators have been around capping of commissions, splitting transaction and advisory roles etc. A whole lot of efforts taken up by SEBI have been to solve conflicts of interest and making investment fees reasonable. Simultaneously, fund houses (along with intermediaries) have been putting forth a case for protecting their distribution channels and protecting their margins, a fairly genuine concern for them. But the directive that SEBI came out with last week, finally, is on the structural reforms for changing the way mutual funds are launched and managed. 

 

The Problem: Fund houses have long adopted the strategy of launch and grow, furiously launching mutual fund schemes with NFOs starting with a NAV of 10 and pitching the retail client to get in early at cheaper NAVs. We've already explained why this strategy, while great for marketing, is just...

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The Risk-Return hierarchy of mutual funds


Posted By : Kushal Kothari
Tags :  debt equity Funds

8th November 2016 was a very important date for India. A surprise decision by Mr Modi rocked the life of 1.2 billion Indians across the nation. Much about that has already been discussed in every medium possible, India and abroad. Interestingly, there was one particular outcome of the monetary shock - it peaked the interest of Indian investors in debt mutual funds of all kinds. For a variery of reasons, deposit rates, which were already in a declining pattern, suddenly spiked down causing an alarming sense of uneasiness among the fixed deposit investors to look for better avenues outside their safe and secure bank deposits.

 

This is when a lot on money started flowing into GILT (Government bonds) funds and dynamic bond funds. Pitching the idea of investing in government backed safe securities that gave astounding returns in the few weeks post demonetization, a whole of lot of advisors and fund houses pulled the attention of investors to GILT and Dynamic bond...

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Mutual Funds vs Index Funds vs ETFs vs PMS


Posted By : Kushal Kothari

Investing would not be hard, if only there weren't multiple options thrown at the retail investor. When it comes to investing in the markets, there are 4 prominent investment vehicles that users often come across. Surprisingly, it is very difficult to find resources to help understand the difference between them. We write this post in order to explain the key characteristics and differences between them and hope our users have a better understanding about the right investment vehicle for them.


1. Mutual Funds 

Hopefully, with our periodic weekly emails, you are already familiar with this category of investment vehicles. With Mutual Funds, several thousands of retail investors hand over their savings, starting as low as Rs.500, to a team of professional managers. The fund managers collectively manage a few thousand crores rupees which they invest in various stocks, bonds, commodities, etc. as per the mandate of the scheme with the help of their internal research...

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Funds Intro #4: Arbitrage Funds - The tax free alternative to liquid funds, though not quite the same


Posted By : Kushal Kothari

Liquid funds are great. They are safe, secure and provide liquidity to the portfolio. However, they get taxed as debt schemes. This makes the post tax-return low for investors, especially for those in the 30% tax bracket. That's one of the reasons for the popularity of arbitrage funds that give returns similar returns to Liquid schemes but are completely tax-free after the one-year holding period. 

 

Arbitrage Funds

What are they? These are funds that invest in equities and take offsetting positions through derivatives like futures. As such, there is no exposure to market movements and investments are relatively safe. 

 

USP? Get returns similar to liquid funds with the tax benefit of equity funds (tax-free after one year).

 

Where do they invest? These funds invest in cash market (stocks) and hedge them using derivatives (futures etc.) The returns they make are the difference in the pricing between the cash market and futures market....

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How to pick the best mutual funds?


Posted By : Kushal Kothari
Tags :  Funds

As investors, isn't that something we are always trying to figure out? Partly because we want the best bang for our buck (who doesn't?). But also because we want a methodical process for figuring out the same. A process, that not only makes sure that the selection is logical, but also ensures the results so obtained will be replicable. After all, we are not looking for one-hit wonders, rather solutions that we can follow repetitively to build our investment portfolio. 

 

The truth, however, is that there is no single secret answer to finding the best mutual fund. The problem lies in the definition of "best mutual funds". Many investors, still think the best fund is the one that gives the most returns. Some others think it's the one that has the most star ratings. The investment advisory community the world over is grappling to clear many pre-conceived notions that investors have about mutual funds. Part of the problem is that there are so many...

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The fundamental problem with ULIPs


Posted By : Kushal Kothari

There's a good chance you already own a Unit Linked insurance plan (ULIP). Chances are that either your parents bought one in your name or the friendly bank manager showed up in the month of March to sell this policy for tax purposes. Only later you started to hear a lot of clamour about not mixing insurance and investments. You started to get a cringing feeling of having been ripped off. You try to understand the policy but you cant. Whose help do you take? And would you really want to admit to others of having made a bad investment decision? Besides you probably have paid 2 of the 5 instalments. You'd rather pay the rest than face surrender charges. What's done is done.

 

Sadly, that's the story of a vast majority of investors, including yours truly. Advisers much experienced and wiser than us have already written about the pros and cons of choosing a ULIP, the product. Though to understand the problem with the product, it's much more essential to...

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Risks associated with Mutual Funds


Posted By : Kushal Kothari
Tags :  Risks

Mutual Fund investments are subject to market risks - We all know this universal disclaimer that follows each radio ad, newspaper ad and is mentioned in all policy documentation of mutual funds, right? We are so repetitively exposed to these words that we start taking them for granted every time we hear them. It sort of ends up beating the purpose.

The problem is, that the product distributors have to sound off their customers about risks involved in investments without scaring them away. And the customers are all too busy to read and understand the fine print when the main thing that matters is the expected returns from their investments. We've tried to summarize in brief what exactly are the risks involved in mutual funds and which ones you should care about in your portfolio.

 

There are broadly 5 risks that you need to know about with regards to your investments. We've explained them in their decreasing order of importance (in our opinion) - 

 

Market...

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