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The ultimate guide to mutual fund investing

Mutual funds are a convenient investment option that helps you build wealth. They allow you to invest in a wide variety of stocks and other securities at a much lower cost than investing in them directly.

 

For individual investors who don’t have the time to study and research investments, mutual funds are the best option because there are professional fund managers who decide where and how to invest. Additionally, it is possible to start investing with as little as a few hundred rupees, even in the top-performing mutual funds. Unlike many other investments, mutual fund investments can be exited without any delay. So, let’s understand how mutual funds work by understanding them in greater detail.

 

Types of mutual funds
There are three broad types of mutual funds:

 

• Equity funds: These predominantly invest in stocks. Equity helps you earn high returns but it also fluctuates in the short-term, which is why people consider it risky. However, this volatility falls drastically if you plan to invest for a longer time horizon. So, if you plan to invest for five years or more, equity funds are the most suitable for creating wealth over the long-term.

 

• Debt funds: These funds invest in securities such as corporate bonds, government securities and other instruments that provide fixed income. Given their low-risk, low-return profile, they are better suited to meet short-term goals because preserving your money here is more important than the returns you make.

 

• Hybrid funds: This type of mutual fund is a combination of equity and debt funds. Their charm lies in being less volatile than pure equity schemes. These funds typically do well enough when markets go up and fall less sharply when markets drop due to the cushion provided by the debt component.

 

While there are hundreds of mutual fund schemes in India, we believe most investors should keep the fund selection process simple and look at only a handful of categories. For beginners, the choice is rather simple as we will see in the next section.

 

Where to invest?
If you are a beginner, the focus should be to make a decent return by taking low risk. Only after you get the taste of equity investing can you get into a more nuanced investment strategy. Here, we present the two best mutual funds for you:

 

Aggressive hybrid funds: This type of mutual fund invests about 65 per cent in equities and 35 per cent in debt. Their advantage is that the equity portion is high enough to give you decent returns and the debt component minimises the equity volatility. Softening the risk is necessary for new investors like you so that you are psychologically strong to stay the course and do not end up exiting the fund in panic when the markets fall.

 

Tax-saving funds: If you are looking to save tax, tax-saving funds – also known as equity-linked savings scheme (ELSS) – are a good option. They are pure equity funds where the majority of the funds’ assets are invested in large-cap stocks. However, these funds have a lock-in period of three years. But this is an advantage for new investors who can’t handle the market volatility and also helps one have a long-term view, which is the holy grail of equity investing.

 

Before you invest
You might have now got a fair idea of how mutual funds work and are ready to make your first purchase. But before you do, you need to have a bank account and be KYC compliant, which is a one-time procedure. Know how to get your KYC done . Nowadays, you can easily complete your KYC online. Once your verification is done, you are set to invest in mutual funds.

 

Points to remember
Every mutual fund scheme comes in two variants – a direct plan and a regular plan. There’s no difference between the two, except for the commission – also known as expense ratio – charged from the investors.

 

Regular plans have a higher expense ratio as it needs to pay a commission to the agent/distributor. These distributors help investors with mutual fund investing and take care of the investment process on the investors’ behalf. If you want to reduce these extra fees, you can go for a direct plan. But remember that you will have to do everything yourself.

 

Further, both regular and direct plans have two more options – Growth and IDCW. In the growth plan, the fund house reinvests all the gains you make, such as dividends received from stocks and realised gains from the underlying assets, back into the fund. Thus, the NAV of growth plans keeps growing with these reinvestments. In IDCW (Income Distribution cum Capital Withdrawal) plans, fund houses pay out some portion of the gains to investors. The quantum of payout and timing is as per the choice of the AMC.

 

So which one is better? We suggest you keep it simple and always opt for the growth option. It is more tax-efficient and gives you more control over when and how much you redeem.

 

Monitoring and managing your investments
Once you’ve made your investment, you must keep a track of how well they are performing. It’s not necessary to look at them every day because equity investments go up and down and constantly looking at them adds anxiety. So, review your investments once or twice a year.

 

Source: Valueresearchonline

From no savings to investing

Rich people stay rich by living like they are broke. Broke people stay broke by living like they are rich.

 

With convenient credit available, thanks to credit cards, EMIs and Buy Now Pay Later schemes, it is becoming increasingly easy to live like the rich and yet stay broke. Easy because it seems attractive to shop for shiny new things. Easy because we are living for today and not worrying about tomorrow.

 

But that’s dangerous. As Warren Buffett rightly said: “If you buy things you don’t need, soon you’ll have to sell things you need.” This is the mantra everyone must understand. One should reduce their spending and start investing for the future.

 

The importance of saving
So, how do you begin? Right off, you need to learn how to save. It is actually an art to keep aside money every month. This is how you can too: calculate your monthly fixed cost (your rent, travel cost, grocery, etc). Once you do that, check how much money is left with you and then decide to save aside a certain portion of the money.

 

But what if I end up using up that saved money too, you may ask? This is where investing comes in handy.

 

The importance of investing
Investing is a must if you want to a) protect the money you are saving and b) building your wealth. That’s right, investing can actually help you build wealth in the long run. Even if you are in the early stages of your career and the salary isn’t very high, investing can be a game changer for you.

 

And that’s because of the power of compounding. Compounding can grow your money manifolds even if the investment amount is small.

 

Therefore, developing this belief in saving and investing is important and it has nothing to do with the scale. There are a lot of people who earn well but they don’t invest, and there are a lot of people who don’t earn so well but are very disciplined about their savings and investments. So, it’s more a matter of attitude and habit and you should inculcate that habit as early as possible.

 

Where to invest
If you ask your parents, chances are they will nudge you to put money in bank fixed deposits. What you get out of fixed deposits is safe and guaranteed returns but this investment is not very desirable in terms of protecting you from inflation.

 

The best way to create wealth is to invest in equities. And historical data suggest that though equity may be risky over a short period of time, it is the fastest way to grow your money in the long run.

 

For starters, nothing beats the convenience of mutual funds if you want to invest in equity. Here, you can start investing with as low as Rs 500 per month. So, you don’t need a lot of money to start investing. With new technologies, getting started has become easier than ever. If you have a bank account and a mobile phone, you don’t even need to leave your house. Everything can be done online these days.

 

So, what are you waiting for? Just start, no matter how small it might look right now. This investing habit will help you gain experience and make you a wise investor over time. So, the next time you catch yourself splurging money, you should remember that it is better to be rich than broke.

 

 

Source: Valueresearchonline

Why Debt Funds are Better Than Fixed Deposits

Fixed Deposits (FDs) have been the go-to investment option in India for many generations. This popularity is mostly due to the guaranteed returns and the low risk associated with FD investments. So deep is the love for FDs that they are used for every goal – be it short-term or long-term. And while FDs can be a good option for short-term investments, there is a smarter way to invest in Debt for the long term. The solution is Debt Funds.

 

While Debt Funds might not offer guaranteed returns, they do outscore FDs on one of the most crucial factors – taxation.

 

In this blog, we will discuss how debt mutual funds are better than fixed deposits in terms of return, risk, liquidity, dividends, etc. And how FD interest earnings and Debt Fund returns are taxed.

 

Taxation Rules of Fixed Deposits Vs Debt Mutual Funds
Although Fixed Deposits and Debt Mutual Funds are debt instruments, there are quite a few differences in how they are taxed. The first and perhaps the most fundamental difference is when the returns are taxed.

 

In the case of Fixed Deposits, the entire interest earned is subject to tax for the applicable financial year. In fact, all the interest earned from FDs in a financial year has to be declared in your Income Tax Return under the head “Income from Other Sources”. On the other hand, Debt Fund returns are taxed only when they are realized, i.e., when the investments are redeemed. This is called deferred tax treatment.

 

Apart from this fundamental difference, for the holding periods of less than 3 years, there is no difference between how FD and Debt Fund taxation works. The returns are added to your income, and you are taxed as per your Income Tax Slab rate.

 

However, for the holding period of more than 3 years, while FD taxation remains the same, the Debt Funds taxation rules change. That is because Debt Fund gains are classified as Capital Gains and the rules for Capital Gains are different for different holding periods.

 

If you redeem your Debt Fund investments after holding them for at least 3 years, the gains made are classified as Long-Term Capital Gains or LTCG. As per current rules, LTCG are taxed at 20% after indexation.

 

There are two words here – 20% and indexation. And these two things along with deferred tax treatment make Debt Funds far more tax-efficient than FDs. While the 20% rate is fairly clear to understand, indexation is a bit complicated. However, it is perhaps the bigger reason for the tax efficiency of debt funds. So, let’s look at it a bit deeper.

 

Difference Between FD and Debt Mutual
Fixed deposit is an instrument wherein you invest an amount with financial institutions like banks and NBFCs for a fixed period. In return, you receive interest. You can invest in the fixed deposit for a minimum of 7 days and a maximum of up to 10 years.

 

Debt mutual funds are a type of mutual fund managed by an Asset Management Company (AMC). When you invest in debt funds, your money is invested in debt papers of private companies, PSUs, government bonds, etc. In the case of debt mutual funds, you are not promised a certain amount on maturity. In fact, for most debt funds, there are no maturity dates. You can enter and exit at any time. And well-managed debt funds have typically delivered better returns than FDs.

 

How Indexation Helps Reduce Tax Liability of Debt Funds
Indexation is the process using which you adjust the purchase price of an asset to account for the increase in inflation between the time you bought the asset and sold it. In case you are confused, don’t worry, we will try to simplify the concept with an example.

 

Suppose you bought a Spiderman comic book 5 years back for Rs. 500, but you had forgotten all about it. Recently you were going through some old things, and you found the old issue still in its original packaging which had never been opened. After a quick online search, you find that a new edition of the same comic would cost you Rs. 1500.

 

But since the comic book you have is older, and in mint condition, some collectors are willing to pay Rs. 2500 for your comic book. So, if you were to sell it, your profit will be = 2500 (your selling price) – 500 (your purchase price) = Rs. 2000.

 

But, due to inflation, the current market price of the comic book has increased to Rs. 1500. So, for the purpose of taxation, the government allows you to adjust the purchase price of your comic book to account for inflation. So, your taxable profit from the sale of your comic book will be = 2500 (your selling price) – 1500 (current purchase price) = Rs. 1000.

 

While indexation calculations of Debt Fund Investment returns are much more complicated than the simple example provided above, it gives you an idea.

 

Bottom Line
As a tool to preserve wealth, the fixed deposit makes perfect sense considering the key benefits of guaranteed returns and minimal risk.

 

However, if you are planning to book an FD for tenures exceeding 3 years, it might be a good idea to rethink your strategy and invest in Debt Mutual Funds instead. At the very least, such long-term Debt investments will significantly reduce your tax liability especially if you are in the highest 30% tax bracket. At best you will earn higher returns on your investment than what an FD can offer while still ensuring that you pay less tax on your investment returns.

 

 

Source: Etmoney

10 Best Tax-Saving Instruments and Their Returns

Tax saving is a prime tool for many investors, to prevent the erosion of the total income generated. There are various investments that provide this benefit, thereby, significantly increasing the effective investment portfolio in this country as all individuals want to avail this advantage. In this article, let us discuss the best tax-saving investments options that can reduce your tax outgo. Read on!

 

Equity Linked Savings Scheme (ELSS)
Equity-linked savings scheme is one of the most popular market investment tools among investors with the primary aim of tax saving. It is one of the best ways to save tax under section 80C, as well as earn substantial returns by gaining market advantage.

 

Tax saving ELSS funds invest at least 80% of the total portfolio on equity securities, thereby, yielding the highest return amongst any other similar instruments available in the market. This scheme comes with a mandatory lock-in period of three years on an investment amount. Under section 80C, the following provisions are made to ensure substantial tax reduction on funds related to the ELSS scheme.

 

• The total principal amount invested in ELSS is exempt from taxation, provided the amount is under Rs. 1.5 Lakh.

• Any capital gains less than Rs. 1 Lakh is not charged with long term capital gains tax.

Tax saving ELSS funds are relatively liquid instruments when compared to other securities available under the same umbrella.

 

Public Provident Funds (PPF)
Public provident fund is one of the best tax-saving instruments u/s 80C, sponsored by the Government of India. However, PPF comes with a mandatory lock-in period of 15 years. This might harm the liquidity requirements of an investor.

 

The PPF interest rate earned on this tax saving instrument is announced by the government every quarter and remains fixed for the given period. PPF forms a fixed return instrument, as it provides assured interest declared by the central government.

 

A maximum of Rs. 1.5 Lakh can be invested in a PPF account in one financial year, through a lump sum or monthly investments. The entire amount can be exempted from taxation, thereby, making it one of the best tax-saving investments under Section 80C. Any interest earned on an investment amount is also not considered for tax calculations.

 

Senior Citizen Savings Scheme (SCSS)
Senior Citizens Savings Scheme is also one of the best tax-saving investments u/s 80C, as it enables you to enjoy SCSS tax deduction of up to Rs. 1.5 Lakh on an investment amount. However, the eligibility criteria of this scheme are more rigid than other instruments. Only people satisfying the following criteria can avail of this investment tool:

 

• Individuals aged 60 years and above

• Individuals above the age of 55 years availing voluntary retirement

• Any individual above the age of 50 years employed in the defense sector of India

 

The total amount that can be invested in an SCSS policy is Rs. 15 Lakh. The interest rate payable on an investment amount is determined by the Central Government of India, and therefore, poses as a stable return on investment.

 

Sukanya Samriddhi Yojna (SSY)
Sukanya Samriddhi Yojna poses as one of the best ways to save tax under section 80C of the Income Tax Act. The SSY tax benefits amount up to Rs. 1.5 Lakh per annum. However, an account under the Suaknya Samriddhi Yojna can only be opened by a person having a daughter who is less than ten years old.

 

As a part of the ‘Beti Bachao Beti Padhao’ policy, the interest rate provided by the government on this amount is higher than other government-mandated instruments such as Public Provident Fund. Any investment which is higher than Rs. 1.5 Lakh in a year is not considered for SSY tax benefits.

 

Tax Saver Fixed Deposit (FD)
Fixed deposits with a lock-in maturity period of five years are eligible for tax exemptions under Section 80C. It is one of the popular investment tools among risk-averse individuals, as it assures guaranteed returns at a fixed interest rate.

 

However, it should be kept in mind that any premature withdrawals made nullify any tax benefit on such investments. Interest earned under this scheme is taxable.

 

National Pension Scheme (NPS)
National Pension Scheme is a systematic investment policy aiming to provide financial security to investors on retirement. It is one of the best tax-saving investments under Section 80C, with a claim deduction of up to Rs. 1.5 Lakh on the total principal amount. The national pension scheme accepts funds from both employers and employees in the case of salaried individuals.

 

Under Section 80CCD (1), a tax-free investment can be made by an employee up to 10% of his/her salary. For self-employed individuals, NPS tax benefits of an additional Rs. 50,000 can be claimed under Section 80CCD (1B).

 

Funds invested in an NPS account can be partially reinvested in equity schemes, subject to the discretion of an investor.

 

National Savings Certificates (NSC)
National savings certificate aim to provide secure investment to individuals wary of stock market fluctuations. The tax-saving benefits under this policy are immense, with exemptions of up to Rs. 1.5 Lakh on the principal amount and the reinvested interest amount. The maturity period on this investment remains fixed at five years and ten years and is up to an investor to choose between any of the two periods.

 

Unit Linked Insurance Plans (ULIP)
Unit-linked insurance plans are also one of the best tax-saving investments under Section 80C available in the market, with exemptions on both investment and premium amounts payable.

 

The portion of money dedicated towards the investment part under this scheme is entitled to tax redemption of Rs. 1.5 Lakh, along with 10% of the total premium (provided the value is less than Rs. 1.5 Lakh).

 

Life Insurance
Under section 80C, a premium paid on a life insurance policy is deductible under the income tax calculations. The total amount allocated towards premium payments should not exceed Rs. 1.5 Lakh to avail this tax exemption benefit

 

All these tools aim to provide tax exemptions to investors. However, the returns remain fixed under all instruments except the ELSS plan, as it is market-oriented. Tax saving ELSS funds offer the highest returns as its portfolio primarily comprises equity-oriented schemes. It comes in with a mandatory lock-in period of three years, giving it enough exposure to the stock market to realize substantial profits.

 

Conclusion
While there are multiple ways you can save tax, it is wise to select an option that offers you dual benefits of tax saving as well as wealth creation. Remember to plan your taxes in advance, seek the best way to optimize your taxes, and utilize the tax exemption limit completely.

 

Source: Groww

These tax resolutions will save you money and trouble in 2023

New Year’s resolutions are often made with good intentions, but many go unfulfilled. Tax-related promises, however, should not be neglected. The tax authorities are strict with deadlines and harsh with those who fail to pay their taxes. To ensure peace of mind and long-term financial stability, consider making the following tax-related resolutions.

 

Utilise All Available Deductions

■ Returns filed by taxpayers show many people don’t fully utilise the deduction limit under Sec 80. This leads to unnecessary outgo of tax on hard earned income.

Plan out investments so that you can claim the full benefit of tax-saving options to reduce your taxable income by up to Rs 5 lakh-6 lakh as follows: Section 80C (max Rs 1. 5 lakh), Section 80CCD(1b) (max Rs 50,000), Section 80D (max Rs 75,000-1,00,000) and Section 24 (max Rs 2 lakh).

 

Harvest Long-Term Gains By March 31

■ Stock markets have done very well after the Covid scare. If your stocks and equity funds have gained during the year, harvest up to Rs 1 lakh of long term capital gains to lower your future tax. Long-term capital gains up to Rs 1 lakh from stocks and equity-oriented funds are tax-free in a financial year, but you need to book profits before March 31 to pocket the tax-free returns. The same stocks and equity funds can be bought back again, but their price of acquisition for tax computation will get reset at a higher level. The same strategy can be used for equity funds. Ask your mutual fund house or CAMS or Karvy for a capital gains statement to know how much of capital gains needs to be harvested.

 

Pay Advance Tax

■ Many taxpayers don’t report their interest or dividend income because they are under the misconception that if TDS has been deducted, no more tax is due. But TDS is only 10%, while both interest and dividends are taxed at the normal rate applicable to you. If you have invested in bonds, NSCs or bank deposits, or have received dividends, make sure you pay the tax on these incomes by the due date. All these incomes will show up in your annual information statement (AIS), so there is just no way you can escape the liability. Also, keep in mind that unpaid tax attracts a penalty of 1% per month of delay.

 

Check AIS When Filing Returns

■ The annual information statement (AIS) has details of all your financial transactions during the financial year. It will have details of income (salary, profession, rent, interest and capital gains) as well as expenses(foreign exchange, purchase of gold above Rs 50,000 in cash and Rs 2 lakh by card) and investments (mutual funds, stocks, bonds). It also has details of the tax paid on your behalf by your employer and the TDS deducted by others. Be sure to check your AIS and verify that the details of your financial transactions are correct.
Verify TDS Details In Form 26AS

 

■ Form 26AS is your tax credit statement and has details of the TDS deducted on your behalf, and the tax collected at source (TCS) paid by you. Access your Form 26AS through the income tax department portal or your netbanking account and check if the TDS and TCS deductions are correctly mentioned in it. If some TDS or TCS has not been credited to you, you must contact the deductor immediately. A periodic check of Form 26AS will ensure you are not running around at the time of tax filing.

 

Don’t Ignore Foreign Assets, Earnings

■ Tax compliance becomes a little complicated if you have foreign assets. All foreign bank accounts, financial interests, immovable property, accounts in which an individual has signing authority, and any other capital asset held by the individual outside India, must be reported in the tax return, irrespective of the total income of the individual. Many taxpayers omit this, but this is not recommended. Not disclosing foreign assets can invite serious charges under the Black Money (Undisclosed Foreign Income And Assets) and Imposition of Tax Act, 2015. Even if a return for a previous year has been processed, cases can be opened up to 16 years later and penalties levied.

 

Source: TimesofIndia

Common sense about risk

Risk versus returns. Nothing ventured, nothing gained. The idea that the more returns you want, the more risk you must take is ingrained deeply into the way we think about investing. This is not just a concept or general rule of thumb anymore. There’s even a Nobel Prize that has been given out for work from which this risk-return concept can be mathematically derived.

 

Before someone gives you any investment advice, they are supposed to figure out your ‘risk tolerance’. In fact, in India as well as in most well-regulated parts of the world, this is a mandatory part of being a registered financial advisor. However, there is something fundamentally unsound about this idea. Not the idea of judging an investor’s risk tolerance, but the concept of a person having a single tolerable risk level. In reality, the same person almost always has different risk tolerances for different aspects of their financial life.

 

Conventionally, financial advisors treat all of an investor’s investments as a single portfolio and try and tune this to the investor’s self-perceived risk-tolerance. They try to fathom this risk-tolerance by asking some questions and/or by rules of thumb based on age, income stability and some other factors.

 

I have never believed that such an approach is useful. It may elicit something about an investor’s attitudes but it can’t be the basis for planning an investment portfolio. That’s because each saver, each family, has many different financial goals and each needs a separate portfolio. Think about it. A financial goal is defined by a particular purpose that the money will be used for, as well as a time-frame. Example goals could be ‘Child’s Higher Education’ which might be needed in eight years, or ‘House Purchase’ in about five years, or a ‘Holiday to Europe’ in about three to four years.

 

Some goals have a precise time-frame (like a child’s college education) while others, like an expensive holiday, would be nice to have but not crucial, so to speak. Again, some things can’t be postponed but others can be. There are also general goals like having enough emergency money on standby but that doesn’t need much of an investment strategy. As you’ll realise when you think about these examples, each goal has a different risk level. Moreover, this risk level itself varies not just with the nature of the goal but with how far into the future the targeted goal fulfilment is.

 

Therefore, the approach to portfolio-making that I have evolved at Value Research is based largely on the time-frame for which you are investing. For investments whose goals are far away, we can take more risks and get higher returns. The nearer a goal date is, the less risk you can take. For money that might be needed immediately, zero risk tolerance is needed. This approach means that the conventional idea of a person’s risk tolerance is meaningless.

 

One important implication of this approach is that eventually, the long-term becomes short-term and then becomes imminent. Your eight-year old daughter will start her higher education in 2032 and that’s a long-term goal. But by the time 2027 arrives, it’ll be a medium term goal and in 2031 it’ll be a short-term goal. Therefore, the way these investments are treated must change with time. The risk tolerance that the same goal needs keeps getting lower and lower as D-day approaches and thus the portfolio earmarked for fulfilling that goal must also change. None of these real-life nuances are captured in the conventional way of rating risk-tolerance.

 

At the end of the day, no conventional set of investment products and services will take all this into account. Savers have to learn the concept themselves and take care of their needs. However, as you can see, it’s all just simple common-sense – something that is not available as a service but which you yourself can provide.

 

Source: Valuesearchonline

If You Travel Abroad Frequently, A Global Health Cover Might Be Better Than Travel Insurance

If you frequently visit overseas for work or leisure, whether you are a student, a professional, or a businessman, you might seriously consider buying a global health cover.

 

This insurance would come in handy should you fall ill in a foreign land. You might panic, thinking you are in an alien land, and medical facilities and treatment would be super expensive. Though you must be having a health insurance policy back home in India, it won’t provide much coverage abroad. Also, your travel insurance may not be sufficient in some cases, as it has its own limitations.

 

This is exactly when a global health insurance policy would come to your help.

 

Says Bhaskar Nerurkar, head, health administration team, Bajaj Allianz General Insurance: “Global healthcare has been designed keeping in mind the needs of people who are looking for a seamless coverage, which would take care of treatment costs not only within India, but also across geographical boundaries for emergency as well as elective treatments.”

 

This product caters to the likes of the following people:

 

1. A parent residing in India who regularly visits his/her child who is settled abroad.

 

2. A senior executive of a multinational company (MNC) who resides in India and travels overseas frequently for business.

 

3. Ultra high-networth individuals (HNIs) residing in India who travel abroad frequently for leisure or business or both.

 

Adds Nerurkar: “Another unique attribute of the product is that due to its seamless nature, even if the actual treatment or surgery takes place outside India, the post-op rehabilitation can continue within India or vice versa if the insured so chooses.”

 

Global Health Cover Vs Travel Insurance

 

A travel insurance plan is typically meant for those travelling outside India for a short duration. The contingencies that are generally covered in most travel Insurance plans are flight cancellations, loss of personal belongings, and emergency medical treatment.

 

On the other hand, an international health insurance plan is designed to provide more comprehensive coverage for inpatient treatment outside India, and continuing treatment of chronic conditions.

 

Moreover, the aim of travel insurance is to get the person well enough to return home. Travel insurance rarely covers long-term medical treatment. Also, once the person returns to his/her home country, the coverage under travel insurance ceases.

 

Elsewhere, a global health plan coverage lasts for all 365 days, and the coverage continues even after the person returns to his/her home country.

 

Things To Keep In Mind When Opting For A Global Health Cover

 

Check whether the global health policy provides coverage across the globe for planned as well as elective treatment. This cover should be seamless, as well as facilitate the ongoing treatment in the insured’s home country if he/she chooses to do so.

 

One should also check that the global health policy covers not only in-patient, but also pre- and post-hospitalisation expenses.

 

Some global health plans in the market mandate that the diagnosis is made in India for taking treatment abroad. It is recommended that one goes for a plan without such condition and that the insured is allowed to take treatment irrespective of where the diagnosis is made.

 

Geographical coverage: Most global health plans in the market offer two types of geographical coverage i.e., including the USA or excluding the USA. One may opt for the appropriate plan with the required geographical coverage. Plans that exclude the USA have lower premiums than those that include the USA.

 

Most importantly, check the credibility of the insurance company that would cater to international claims and the ease of the process of registering a claim while one is hospitalised outside India.

 

Source: Outlook India

Missed Your SIP Payment? Here’s What You Can Do Now!

A systematic investment plan or SIP is one of the superior means to invest in mutual funds. SIPs require the investor to invest an amount they can afford into a mutual fund scheme of their choice. Moreover, they are required to link their bank account to their SIP. The SIP amount is then debited on a monthly basis on the due date of the SIP.

 

What If You Missed Your SIP Payment?
One of the common concerns for investors is that what if their account balance becomes low or they are not able to pay for their SIP due to any reason? Well, if you too have been in the same situation, you are not alone. Remember, missing a SIP payment is extremely common. Insufficient balance in the bank account is one of the prime reasons that many investors forget to pay for their instalments. However, missing a SIP instalment is something you should not worry about. Your investments will continue in a case like such. Moreover, the fund house will also not charge a penalty for missing the payment.

 

What To Expect?
A SIP is an investment that may seem to come with the only drawback of an insufficient corpus due to a missed instalment. What many people do not know is that even if they have missed a SIP payment, they can put money into their bank account as their payment would easily be done as and when the next SIP date arrives. What’s best is that their investment won’t suffer due to a missed SIP instalment.

 

Things to Look Out for
Missing one or two SIP payments will not have any adverse reaction to your corpus. However, there are two things that you must keep in mind regarding your missing SIP payments. They are:

• If an investor missed their 3 consecutive SIP payments, their SIP investment is terminated by the mutual fund house.

 

• The bank may charge the investor a penalty at the time when the bank account is low and the investor misses out on a SIP payment. This is referred to as dishonouring the payment. A charge is involved in cases like such.

 

How You Can Avoid Missing Your SIP Payments
If you do not want to end up missing your SIP payments, here is what you can do:

• Keep track of your bank balance account. In case, your bank balance becomes low and you find it insufficient as per your SIP payment, try increasing the balance before the SIP due date arrives by depositing some amount to the bank account.

 

• If you know for a fact that you will not be able to pay the SIP payment due to an unavoidable financial obligation, you can go ahead and stop your SIP. Once you feel that your financial crunch is over, you can simply restart the payment. During the same, your earlier SIPs would continue growing if you do not redeem them.

 

• Pausing your SIP investment is also one of the options you can go with. Especially, if you are expecting heavy expenses as well as liquidity issues. Remember, any mutual fund houses will grant you the freedom to pause your SIP instalments for up to a certain number of instalments. The mutual fund house can also allow you to pause SIP instalments for up to a certain period after which they begin automatically. Keep in mind to check if the AMC provides the same option and pause your SIPs for a few months when you encounter a financial crunch.

 

Final Words
There is no need for you to be concerned if you have missed a few SIP instalments due to unavoidable circumstances. But, make sure you understand that this would not mean that you can miss out on paying many SIP instalments as it would end up affecting your corpus in a massive way.

It is highly advised to avoid missing the SIP instalment. Furthermore, cover up for the loss by making additional purchases in the scheme if you cannot avoid not missing your SIP payment.

 

Source: Insurancedekho

Why Term Plan Should Be The First Step To Securing Your Future

Your parents keep urging you to start investing for your future needs. Then, there are regular newspaper, radio and television advertisements of companies asking you to opt for their investment products. Like many others, if you get motivated to start investing, remember to avoid a common oversight of ignoring adequate life insurance protection for family members before any investments. Just in case you are wondering why, you need to read on.

 

Why life insurance before investment A part of your regular pay is required to meet regular expenses such as groceries, rent or home loan EMIs, mobile services, children’s school fees and so on. What you save can typically be earmarked for imminent purchases like gadgets and future needs like children’s higher education and retirement. Now, imagine a situation where the regular income suddenly vanishes. This happens due to the sudden demise of the family’s major or only income earner. In such a situation, the only way to meet immediate needs is to dip into savings.

 

If the situation of low or no new source of regular family income continues, the family would need to liquidate investments for future needs. Since, the liquidation is typically done under duress this may have to be done at a loss. This is especially true for market-linked investments due to less-than-favourable market conditions or due to penal conditions for premature exits.

 

The most compelling argument in its favour of life insurance preceding any investment is that even the best performing investments typically can’t meet a family’s present and future needs on the demise of the major or only income earner. If a person, who expects to work till age 58, dies at age 28, the family needs adequate resources to replace the loss of income from 30 years of work life. Even the most outperforming investments can’t create that amount of financial resources. It is only a life insurance plan that provides adequate life insurance coverage that can help and fill the void. It is here that a term plan is ideal to have. If you are wondering why, here are some compelling reasons.

 

Term plan advantage Among life insurance plans, term plans typically provide the highest life insurance coverage at the most affordable premiums. This is useful in early work life where you need to both get a high level of protection and get started with investments, besides meeting regular expenses. Thanks to low premiums, that remain the same for the whole term that can stretch to 25-30 years, you have more savings at disposal for investments. This is especially so for investments providing high growth in the long term, especially equity and equity-oriented investments. This advantage continues to accrue to you even if you increase your life insurance coverage subsequently as your regular income and savings goes up.

 

When you have a term plan, in case of an unfortunate event, investments earmarked for long-term needs are secured. The protection from the term plan can be further enhanced by attaching riders for risks such as accident and critical illness for additional and affordable premiums.

 

Clearly, term plans not only protect your family in its hour of greatest need but also protect the investments that you diligently make over time for the future of your family members. They are like the car seatbelts. They protect the investments during your family’s financial journey. That’s why before you start your financial journey you need to belt up with a term plan.

 

Source: Ageasfederal

How to save more tax on your income

At the end of every fiscal year, you start looking for ways to reduce your taxable income. Instead of looking for quick ways to reduce your taxable income at the end of the financial year, it is prudent to begin tax-saving in advance, with proper knowledge about the best ways to save tax on your income.

 

The government allows various exemptions to allow citizens to save their taxes. There are various tax-saving instruments which can reduce your tax liability by decreasing your taxable income. You can save your taxes through these 4 basic components:

 

• Investing your savings
• Buying insurance
• Paying back your loans
• Donating to charitable institutions

Read on to understand how:

 

Tax benefits under section 80(C)
The most popular tax saving options are available under Section 80(C) of the IT Act. It includes various investments and expenses that can be used to reduce your taxable income. The government allows deductions up to Rs. 1.5 lakhs for investments made in the instruments as specified in this section and its sub-sections. Some of them are as follows, – Invest your savings in government schemes like Public Provident Fund (PPF) accounts, National Savings Certificate, Kisan – Vikas Patra

 

• Plant your savings in 5-year fixed deposits
• Invest in notified pension schemes like National Pension Scheme
• Pay life insurance premiums
• Invest in Unit Linked Insurance Plans (ULIPs) or Equity Linked Savings Scheme (ELSS)

 

Save tax on your health insurance
Your Health Insurance Package can turn out to be an efficient tax saving tool for you. You can claim tax deductions under Section 80(D) of the IT Act for paying premiums towards health insurance for yourself, spouse, children or parents. Amendments made in the Union Budget, 2018 have further extended tax benefits by raising the exemptions under this section.

 

• A maximum deduction of Rs.25,000 is allowed for paying health insurance premium for your family
• An additional deduction of Rs.30,000 is allowed for health insurance premium of your senior citizen parents
• Exemption of up to Rs.50,000 is allowed for Health insurance premium if the applicant is a senior citizen
• A maximum deduction of Rs.1,00,000 is allowed for senior citizens against critical Health insurance premium

 

Tax saving on home loans and education loans
You can also claim tax benefits by availing a Home loan or education loans under different sections of the IT Act. Tax planning for saving on income tax with a home loan is highly beneficial as you can claim deductions under three different sections.

 

• You are allowed to claim deduction U/S 80C for repaying the Principal amount of your Home Loan
• You can claim tax deduction up to Rs.2,00,000 for interest paid on your Home Loan U/S 24
• You can claim an additional exemption of Rs.50,000 U/S 80EE for your first house purchase
• You can claim tax deduction against Education Loan for you or your family U/S 80E

 

Remember, the best time to start your tax planning is the beginning of the fiscal year. Don’t procrastinate until the last quarter to avoid frantic investments to save taxes. With tax-saving tools like a health insurance plan or a home loan plan, you can also attain financial security and establish your long-term goals.

 

Source: Bajajfinserv