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...
If you've been following our previous two series on Funds Intro, perhaps you will have noticed that we prefer investing in Debt through Mutual Funds than directly investing in FDs or bonds. There are a couple of reasons for the same:
1. Access - While access to equity stocks is fairly easy, access to debt securities is not. Most of these debt instruments only trade between large banks, corporates and the only viable way for retail investors to invest in them is via Debt funds
2. Liquidity - Even if you directly invest in bonds, you are stuck with them till maturity with no way to sell them off midway. Debt Funds manage their liquidity to facilitate redemptions any day for the investor
3. Management - Debt funds may actually be more tricky to manage than equities. Unlike popular perception, debt also has many risks associated with it - Credit risk and interest rate risk being the major ones. A professional manager to look after them is a...
You have decided to start investing in mutual funds, and you are researching the best-rated funds at all the various sites. Kudos to you, but that’s just the part of the whole process. Tax planning is an integral step in your entire allocation strategy and can make a whole lot of difference to your returns. Tax planning makes sure that money actually stays in your bank account, and is not paid as tax to the government (We are not saying paying taxes is bad, but let’s try not to pay more than what we owe to the government)
Let me start by introducing you to few basic terminologies –
Capital Gain Tax – Any returns from your investment, be it Fixed Deposits, Stocks, Mutual Funds etc., are all subject to tax laws. The returns you make from these investments are termed as capital gains. You are liable to pay your marginal tax rate (your highest tax bracket based on your total income) on these returns as well. This tax, for obvious reasons, is...
Bank rates are at an all-time low. Yes, that makes your home loan really affordable, but investors looking for a safe and secure investment vehicle are left hungry for better alternatives. We want to take this opportunity to tell you briefly about liquid/money market funds and why you should know about them
Liquid/money market schemes
What are they? Highly liquid investments in high rated fixed income securities
USP? Get money back in your account anytime within 1 day without any penalty, earn annualised interest rate roughly equal to 1 year FDs. Favourable tax treatment as compared to FDs
Where do they invest? A portfolio of corporate deposits, FDs, government debt etc. that mature in less than 91 days. Usually, these schemes have the highest credit ratings among all debt schemes.
Why should you invest? These are great instruments to park money that you can recall anytime you want with no exit charges and very low...
Thanks to the immense amount of marketing, advertisement and the performance of the category over the last 2 decades, mutual funds aren’t an alien concept even to a young 20-year-old something, just graduating out of college. India is one of the youngest demographics in the world, and mutual funds as a category are only beginning to etch their presence in the savings and investment landscape.
However, for a majority of individuals, Mutual funds somehow are synonymous with Equity Mutual funds, which is like saying Chocolate bars are the same as Cadbury (which was pretty much the case until two decades ago).
Mutual Funds only refer to the ecosystem of individuals handing over their small savings to professionals who in turn manage crores of rupees to generate better returns for their clients, given the objective of Investment.
Once the objective is established (high growth, capital protection, etc), one moves to picking the specific category of funds (Diversified Equity,...