Blog – Page 4 – Pradeept Agarwal

NRI Investment in Mutual Funds – Process, Do’s & Dont’s

Can NRIs Invest in Mutual Funds?

Absolutely, non-resident Indians (NRIs) have the opportunity to invest in Mutual Funds in India. The Indian government, in conjunction with the Securities and Exchange Board of India (SEBI), has put in place specific guidelines and protocols. These ensure that the investment process is smooth and transparent for NRIs. This initiative aims to encourage overseas Indians to participate in India’s financial growth through the Mutual Fund sector.

How Can NRIs Invest in Mutual Funds in India – Detailed Process

Starting with KYC Compliance

Every NRI desiring to invest in Indian Mutual Funds must first clear the Know Your Customer (KYC) process. This process involves several documents. These documents primarily are proof of identity, address proof, a recent photograph, and, importantly, a PAN card copy.

Institutions offering Mutual Funds often have set processes for KYC, which could sometimes involve added documentation or even direct meetings. Therefore, it’s a good practice for NRIs to familiarise themselves with the chosen institution’s specific KYC requirements.

Setting up an NRE/NRO Account

To proceed with investments, NRIs need to hold an NRE (Non-Residential External) or NRO (Non-Residential Ordinary) bank account in any Indian bank. These specially designed accounts allow NRIs to maintain and manage their funds in Indian Rupees, which further eases the investment and returns process.

An added piece of information: NRE accounts come tax-free and have provisions for repatriation, while NRO accounts have certain taxation aspects and come with limited repatriation options.

FEMA Declaration – A Mandatory Step

When making foreign transactions, especially in the Indian context, it’s essential to abide by the country’s regulations.

As a requisite, NRIs must provide a declaration consistent with the guidelines of the Foreign Exchange Management Act (FEMA). This is to certify that the investment funds comply with all Indian regulations.

Making the Right Fund Choice

India’s Mutual Fund market offers a vast range of funds. These cater to different financial goals, ranging from short-term gains to long-term security.

Before selecting the best mutual fund, NRIs might want to either research or consult financial experts to ensure the selected fund aligns well with their future financial plans.

The Utility of Power of Attorney (PoA)

If an NRI finds it challenging to manage the Mutual Fund investment due to distance or any other reason, they have the option to assign a Power of Attorney (PoA) to someone trusted in India.

The trusted individual, backed by the PoA, can then oversee transactions and manage the investment. It’s always safe and practical to define the boundaries of this power in the PoA document.

Understanding Tax Implications

Taxation is a significant part of investments. When NRIs invest in India, they might face tax implications here and in their residing country.

Understanding the Double Tax Avoidance Agreement (DTAA) that India shares with several countries is beneficial. Being aware can help in possibly avoiding dual taxation on the same income.

Steps for Redemption

Be it the maturity of the Mutual Fund or a voluntary exit, the redemption amount is typically credited directly to the NRI’s NRE/NRO account. Knowing about the process in advance and understanding any costs linked to redemption is beneficial.

While appearing comprehensive, the steps to invest in Mutual Funds in India for an NRI are designed for clarity and ease. With a good grasp of the process, an NRI can navigate the Mutual Fund landscape in India without any hurdles.

Things to Consider Before NRI Investment in Mutual Funds

Taxation Concerns

It’s crucial for NRIs to be well-informed about tax liabilities not just in India but also in the country where they reside. Different countries have diverse taxation norms, and being aware can prevent any unwanted surprises.

Selecting the Right Fund Type

The financial market boasts a wide variety of funds. To maximise benefits, it’s essential to research thoroughly and opt for a fund that perfectly matches your financial aspirations and future plans.

Determination of Investment Duration

NRIs should be clear about their investment horizon. Whether they’re looking at short-term gains, medium-term benefits, or long-term growth, this clarity will guide their choices.

Understanding Risk Appetite

Every investor has a unique risk threshold. Some might be adventurous and go to gamble for higher returns, while others prefer the safety of steady, assured growth. Recognising one’s risk tolerance will help select the most appropriate funds.

Impact of Currency Fluctuations

The global financial market is dynamic, and currency values can oscillate frequently. Being aware of these fluctuations is vital, as changes in exchange rates can influence the actual returns on Mutual Fund investments for NRIs.

Conclusion

For NRIs, the opportunity to invest in Mutual Funds in India is both lucrative and feasible. By understanding the process and staying informed about regulations, NRIs can make the most of their investments, securing their financial future.

Source- Religareonline

Best Financial Planning Tips For This Diwali

Diwali is the biggest festival celebrated in India and this festival brings us various lessons about financial planning which can be implemented in day-to-day life. While many of us plan well ahead of time for Diwali, there are various things that we need to take care to ensure best financial planning for the coming festive season

Most of us work for long hours so that we can make ends meet but we fail to take out the time needed to manage the personal finances. We not only need to earn but we also need to take the time needed to manage the hard-earned money and create that change in our mindset. Diwali is the best time to bring ahead that change and to take care of the financial well being of your family.

Let us now have a look at some of the tips that can help you with financial planning this Diwali !!

1. Start by improving your financial knowledge

Most of us suffer from low returns on our investments, debt traps, being under insured and having insufficient funds for retirement and so on. One of the major causes of such issues is the fact that we were never taught about managing personal finance. You need to have the right knowledge about managing your finance and this is the first step that you will be taking for the financial well being of your family.

2. Create a savings plan for every financial goal

Planning is important in every aspect of life. This is quite essential when it comes to money. One can set their financial goals based on the three kinds, the short, medium and the long-term goals. Such planning will certainly help in your financial well being.

3. Have proper budgeting

People can gain control over unwanted expenses by proper budgeting. By knowing how much you are earning and what is being spent, it gets easy to control finances. Budgeting will also help people to identify the area of high expense and will also help you to evaluate on how unnecessary expenses can be curtailed.

4. Reduce the burden of loans

One also needs to review the existing loans on timely basis to make sure that we only have loans that will help in increasing our net worth in the future. One example for such loans is educational loan. Bad debts are to be paid immediately. A proper evaluation of debts will help us save on the interest.

5. Plan your taxes

Most of us get into a last minute tax planning at the end of the year. You need to do your tax planning by considering your needs, goals and the risk appetite you have. People can talk to financial experts and take help for choosing the best ELSS funds for Tax Planning this Diwali.

6. Take Insurance cover

Insurance is a must now days and is the most crucial thing to remember while financial planning. Most of us do take the insurance cover but it is not adequate. While buying the life insurance policy do consider the important factors like living expenses of the present and future and how much does your family need in case a tragedy occurs. Accidental insurance and property insurance too are to be the part of everyone’s insurance portfolio.

7. Always have an emergency fund

While many of us do plan for the same, not all of us implement it. Our life is full of uncertainty and hence it is necessary to have an emergency fund. This not only helps us with the financial need during emergencies but also saves us from the stress that arises due to financial crisis.

8. Write Your Will

If you haven’t yet created the will, this is the right time to do so. Most of us do not write a will as we think that we do have such assets and also that we have placed a nomination already. Though nomination is a great help, but it is also advised that one needs to make a will to avoid any family feuds and complications in future.

The above-mentioned strategies will certainly help anyone in preserving their wealth, not only for one Diwali, but for many more to come.

Source- Motilaloswal

What your spending reveals about you

A colleague is a coffee aficionado. He set his heart on a home espresso machine, and after tremendous narrowed down on the gold standard. The two Italian models were Lelit Bianca 2.21 and La Marzocco Linea Micra. The first would set him back by Rs 2.21 lakh, and the other was going for Rs 3.41 lakh.

My friend is passionate about baking and coffee. I suspect that he surreptitiously nurtures the dream of running his own café, or a coffee bar.

So what was holding him that he kept wavering on this decision for the past year? Well, the tug of war between his heart and mind was because he could not justify the cost to himself. Somewhere in his mind, he believed that it was not right to spend so much on a “want”.

This black-and-white classification of need and want is where he erred.

I answered him based on the tremendous research and brilliant insights of author and behavioural finance expert Meir Statman, the Glenn Klimek Professor of Finance at Santa Clara University. Statman suggests that we need to view our preferences, wants and errors though the prism of benefits. And this helps individuals choose wisely.

What do people want? They want three benefits: Utilitarian, Expressive, Emotional.

Utilitarian
Q) What does it do for me?

A watch has the utilitarian benefit of informing you what the time is. The utilitarian benefits of a car are in ferrying us from one place to another. The utilitarian benefit of a restaurant is in feeding us when we are hungry or have not cooked sufficiently to feed our guests. The utilitarian benefits of investments are to create wealth so that one day we don’t have to work.

Expressive
Q) What does it say about me?

What is the image I want to create for myself? What is this saying about me to others? These expressive benefits convey to us and to others our values, tastes, and status.

So it is not just about eating out, but the restaurants you frequent. Where do you want people to see you? Which locations will tempt you to post a picture on social media?

Along the similar lines, it is not just any car. A TATA Nexon EV Prime will tell the world that I am conscious about the environment and I take responsibility for my consumption. On the other hand, the Jaguar I-Pace conveys the same while simultaneously screaming status.

Emotional
Q) How does it make me feel?

An insurance policy will make me feel secure. A huge corpus will make me feel safe. A lottery gives me hope. Investing in a Portfolio Management Scheme (PMS) makes me proud. An electric vehicle makes me feel virtuous and responsible. A Jaguar gives me confidence like no other.

All your decisions will rest on the confluence of the above.

Humans are designed in a such a way that we aspire for much more than just meeting our basic needs for survival. People express themselves in the houses they own, the cars they drive, the clothes they wear, the restaurants they frequent, the accessories they buy, the gadgets they own, where they holiday, and so on and so forth. We can argue about how money is being spent and which is the “right way”, and which is a “good” investment or bad. But these are futile discussions because it never stops at utility.

We want to make a statement. To ourselves and to the world. What we buy and own has expressive and emotional benefits too. And they must never be ignored.

Why do we save and invest and grow our wealth? Yes, because don’t want to work in our old age or be dependent on anyone. But it is more than that. It is because we fear poverty and detest the social stigma it carries. We want to experience the freedom and liberty to walk away, that only a monetary safety net can provide. We want to express gratitude to our parents by offering them a lifestyle that they could never envisage. We want our parents to feel proud of us.

All these utilitarian, expressive and emotional benefits go way beyond the need vs. want categorization. It speaks of our values, our identify, our insecurities, our desire for social status, of playing games and winning, and more.

I love how Statman says it; We are neither computer-like rational, nor bumbling irrational. We are all normal: having wants such as not to be poor and to be rich, and making our way towards them. And yes, because we are human, we will make mistakes along the way.

Owning a house is different from renting a house, even though in both cases you’ll have shelter. Some seek the emotional and expressive benefit in ownership – pride. “Yeah, I own the place. I might have a mortgage on it, but I own the place. I’m a homeowner.” That status is dear to many. On the other hand, some may be most comfortable living in a lovely neighbourhood where they cannot afford to buy a home. But living there and paying the rent satisfies them in a way that can’t be accounted for in an excel sheet.

Statman even talks about financial investments within this paradigm.

Ask someone why they invest in hedge funds, and they will tell you about the potential for high returns and strategies not available to lesser mortals. They probably believe that even if evidence suggests otherwise.

But it is also the case that in a gathering, it is socially unacceptable to introduce yourself as a rich man if you cannot state that you are invested in a hedge fund. That, of course, will indicate that you are a reasonably rich man, because not everyone is eligible to be a qualified investor who is allowed to buy those hedge funds. That is the expressive benefit – you can hint that you are a rich man without saying that. In India, the equivalent would be a PMS where the entry point is minimum Rs 50 lakh.

A young person investing bulk of her money in fixed deposits (FD) will satisfy her want of tranquillity. The volatile stock market won’t affect her. She can break the FD when she wants. And she is smug knowing that her money is not getting “wasted” in a savings account. But eventually she will have to reconsider its utility if she wants the chance to have a reasonable amount of money that will sustain her in retirement.

Another example is a target-date fund. There is an emotional benefit because this approach boasts simplicity. The individual investing doesn’t have to worry about adjusting the asset allocation. With a target-date fund they gain utilitarian benefits and at the same time, they have a sense of calm and comfort that they are doing the right thing and on their way to achieving their goal.

Similarly, investing in index funds says that I’m going to get higher utilitarian benefits and higher returns because very few can beat the market. And I am too smart to think I can do otherwise.

This is important!

Human beings are not robots. Everything is not about a number or spreadsheets or chart. It is much more than a listing of Do’s and Don’ts, Needs and Wants.

We have desires, hopes, fears, insecurities and obligations. And how they play out is shaped by our circumstances, life experiences, gender, age, personalities, and cultures.

Don’t judge another’s decision. Walk in your lane.

So what has he decided?

It doesn’t matter. Based on the decision matrix that I presented him with, he will do what he believes is best for him.

Source- Morningstar

Seven rules of money management

In a world where the relentless pursuit of money often feels like a never-ending marathon, it’s easy to forget that finances should be a means to an end, not an end in themselves. Money, the universal lubricant of life’s machinery, can both power our dreams and ignite our nightmares. It can take us to the heights of joy or plunge us into despair. But navigating this vast, complex terrain need not be a heart-pounding rollercoaster ride.

Enter the world of financial rules – simple, elegant guidelines that can transform your financial journey.

But before we dive in, let’s clarify: these rules aren’t rigid commandments. Generally, we hesitate to offer one-size-fits-all solutions. In fact, we often discourage them. The future, with its tantalising uncertainty, refuses to be tamed. Financial rules are more like stars in the night sky, guiding you through the darkness but allowing you to chart your own course.

6x rule

The first rule is the “6x rule,” a beacon that illuminates the path to financial security. It’s like building a sturdy shelter before you explore the wilderness. Imagine this: before you start investing your hard-earned cash in the stock market’s turbulent waters, you should have a lifeboat ready. This lifeboat is your emergency fund, and the 6x rule is your guide.

Picture this: you’re a regular Jatin, and your monthly expenses clock in at a cool Rs 50,000. The 6x rule tells you to put aside at least six months’ worth of those expenses. So, you multiply your monthly expenses by six – Rs 50,000 x 6 – and you get Rs 3 lakh. That’s the sum you need to stash in your emergency fund. It’s your financial safety net, there to catch you if life throws a curveball.

20x term insurance rule

Now, let’s talk about the “20x term insurance rule.” Life insurance isn’t something we like to dwell on, but it’s a crucial part of a solid financial strategy. Imagine you’re the breadwinner in your family, earning Rs 5 lakh a year. According to the 20x rule, you should consider a life insurance policy that pays out Rs 1 crore if the unthinkable happens. Why Rs 1 crore? It’s simple math: Rs 5 lakh x 20.

Rule of 70

Now, onto the “rule of 70,” a secret weapon against the silent assassin of your wealth – inflation. Inflation is like a sneaky thief that slowly steals the value of your money.

So, how can you estimate when your cash will lose half its purchasing power? The rule of 70 is your answer. If inflation is running at 6 per cent, you divide 70 by six to find out that it will take roughly 11.6 years for your money’s buying power to halve. Armed with this knowledge, you can make smart investment choices to beat inflation at its own game.

Rule of 72

Speaking of investment, let’s meet the “rule of 72.” This rule is your crystal ball for foreseeing when your investments will double in value.

Imagine you’ve parked Rs 10,000 in an investment that earns you 12 per cent annually. Just divide 72 by that 12, and you’ll see that your money will double in about six years. That initial Rs 10,000 will become a magical Rs 20,000.

100-age rule

Now, let’s shift gears and meet the “100-age rule.” It’s a bit like picking the right ingredients for a recipe. In this case, your assets are the ingredients, and the recipe is your financial future.

The rule is straightforward – subtract your age from 100, and that’s the percentage of your savings you should invest in riskier assets like equities. So, if you’re an energetic 32-year-old, the rule says you should invest about 68 per cent of your savings in the stock market, and the remaining 32 per cent in safer assets, like debt mutual funds or FDs.

25x rule

Retirement can be a complex maze, but this rule is your trusty compass. It whispers that you might be ready to kick back and enjoy the fruits of your labour when your savings hit 25 times your annual expenses. If you spend Rs 10 lakh a year, you’ll want to aim for a retirement nest egg of Rs 2.5 crore. That’s Rs 10 lakh x 25. This isn’t a strict deadline but more like a milestone to guide your journey.

4 per cent withdrawal rule

After years of diligent saving, you’ll reach the golden shores of retirement. But how do you make sure your savings last a lifetime? Here’s where this rule steps in.

Imagine you need Rs 10 lakh annually to live your dream retirement. If you’ve saved up Rs 2.5 crore, you can safely withdraw 4 per cent of that every year, which is Rs 10 lakh. The rest of your money keeps growing, like a fine wine getting better with age.

The final word

Now, you might be thinking, “What if my situation is unique? Can these rules apply to me?” Well, the beauty of these rules is that they’re adaptable. They’re like a Swiss Army knife in your financial toolkit – versatile and handy. Your financial journey is unique, and these rules are your trusty companions, offering direction but allowing you to carve your path.

So, the next time you’re faced with a financial crossroads, remember these rules. They’re your North Star, your guiding light in the maze of money. With them, you can turn the chaos of finances into an exciting adventure, a journey to financial well-being, and ultimately, the freedom to chase your dreams.

Source- Valueresearchonline

Howard Marks’ art of risk management

Howard Marks is a name that needs no introduction. His brilliance and insights are the fundamental drivers behind the success of his investment firm Oaktree Capital, reflected in his memos. In his latest memo, ‘Fewer Losers, or More Winners?’, Marks highlights the importance of steering clear of the losers to reduce downside risks.

The Oaktree Capital philosophy

“If we avoid the losers, the winners will take care of themselves” is a line that perfectly captures Marks’ thought process, which later became the motto of Oaktree Capital. Along with risk reduction by avoiding losers, Marks stresses the importance of finding winners.

“If we invest in a diversified portfolio of bonds and can avoid the ones that default, some of the non-defaulters we buy will benefit from positive events, such as upgrades and takeovers. The winners will materialise without our having explicitly sought them out…”

Marks consistently emphasises risk control and evaluating risk rather than just focusing on returns. He continues, “We want the concept of risk control to always be at the top of the mind for our investment professionals. When they review security, we want them to ask not only, “How much money can I make if things go well? but also “What will happen if events don’t go as planned? How much could I lose if things got bad? And how bad would things have to get?” “

Risk control vs risk avoidance

Marks insists that risk control should not be confused with risk avoidance. All investments carry a certain degree of risk. Investing is a forward-looking activity consisting of uncertainty while pursuing attractive returns. Putting money into riskless assets will only lead to risk and return avoidance.

“You can avoid risk by buying Treasury bills or putting your money into government-insured deposits, but there’s a reason why the returns on these are generally the lowest available in the investment world. Why should you be well paid for parting with your money for a while if you’re sure to get it back?”

According to him, risk control is declining to take risks that a) exceed the magnitude of risk you want and b) the reward for bearing the risk is low.

Not all investments are good investments

Marks states that while investing, making a few wrong decisions is unavoidable. Investors can only claim to make the right decisions sometimes. Hence, the selection of a few losers is inevitable. The question isn’t whether you will have losers, but rather how many and how poor relative to your winners.

He says, “Warren Buffett – arguably the investor with the best long-term record (and certainly the longest long-term record) – is widely described as having had only twelve great winners in his career. His partner Charlie Munger told me the vast majority of his wealth came not from twelve winners but only four. I believe the ingredients of Warren’s and Charlie’s great performance are simple: (a) a lot of investments in which they did decently, (b) a relatively small number of big winners that they invested in heavily and held for decades, and (c) relatively few big losers. No one should expect to have – or expect their money managers to have – all big winners and no losers.”

Is it possible to beat the market?

Marks firmly believes there are times when the markets are either overpriced or underpriced. The efficient market hypothesis does not always prevail because of shifting market sentiments. He argues that the potential skills to generate alpha over the market exist in some markets and with a few investors.

He expresses that investors can produce alpha by reducing the risk while giving up less or increasing potential return by taking moderate additional risk. According to Marks, “The choice between these approaches depends on the type of alpha an investor possesses: Is it the ability to produce stunning returns with tolerable risk, or the ability to produce good returns with minimal risk? Almost no investors possess both forms of alpha, and most possess neither.”

Summing up

Risk is unavoidable when it comes to investing. However, Marks, with his years of experience and wisdom, shares how an investor can navigate risks by avoiding losses and, as a result, construct a winning portfolio.

Source- Valueresearchonline

ICC World Cup 2023: How will home advantage impact businesses amid festive season?

India is set to host the 13th edition of the ICC Cricket World Cup after 12 years on home soil starting from October 5. The mega sporting event will see 48 matches spread over the next 45 days. As cricket is the most popular sport in India with a significant viewer base, consumption and media activity will be at its peak, which is already evident in flight/hotel rates, advisory firm Jefferies said in a note.

While the country is rooting for a win in the home venue, investors and brands are also expecting a strong December quarter riding on the sporting fever that is coinciding with the festive season.

This year marks the 13th edition of cricket World Cup and will see 10 teams playing 48 matches over 45 days. The last edition (2019) saw 750 million unique viewers and 14 billion hours of total viewing time. Nearly 12 lakh visitors attended the World Cup matches in person in the stadium in 2011 when India last hosted the event with an average attendance of 25,000 viewers per match.

Jefferies said that while overall consumption should see an upside, there will be winners and losers. Of the 16 weekend days in the next two months, nearly half will see an India match or semi-final/finals. On India match days, there should be a negative impact on footfalls for movie theatres, theme parks, and offline brick-and-mortar retailers. On the other hand, the event should provide a boost to food delivery, quick commerce, alcobev, soft drinks, media, online gaming etc. We expect companies to run world-cup-specific promotions on match days to tap this consumption boost, it said in the note.

World Cup has been a key marketing platform for brands across categories. The first World Cup hosted by India in 1987 was co-branded as ‘Reliance Cup’, while the 1996 version was called ‘Wills World Cup’ due to sponsorships by Reliance and ITC, respectively. Several brands have announced World Cup tie-ups this time too and we expect a surge in media activity in coming weeks, Jefferies said.

India is Cricket and Cricket is India

Cricket’s popularity is evident from the fact that four out of the top 10 most-followed sportspersons globally on Instagram are Indian cricketers, with Virat Kohli leading the pack. The sports industry in India attracts sizeable sponsorship and media spending, totalling $1.8 billion per year, which has grown at 14 percent CAGR in the past decade, the Jefferies release said. Cricket alone accounts for 85 percent of these spends, while all other sports combined account for only 15 percent. Cricketing events attract $900 million annually in media spending, which is 8 percent of the overall advertising spend in the country. It also sees $550 million spending per year in team/on-the-ground sponsorships, according to the release.

Cricket’s growth in India has accelerated rapidly in the last decade, led by the IPL. In fact, the controlling body for cricket in India, BCCI, has seen its revenue grow 10x in the last 16 years, reaching $800 million in FY23. India’s dominance in the sport is also reflected in BCCI’s revenue, which is almost equal to the combined revenue of all other full member countries and 2x of ICC itself. BCCI has also seen the fastest growth over the past decade, the advisory firm added.

Gain for some, loss for others

The World Cup is likely to impact consumption trends over the next two months, which also marks the important festive season in India. Overall consumption may see an upside due to the World Cup, albeit there will be categories that benefit while some others may be adversely impacted, according to Jefferies.

Interestingly, India will play 9 group stage matches over the coming 45 days, of which 6 are being held on weekends, which see high consumption. Further, of the 16 weekend days in the next two months, nearly half will see an India match or the World Cup semi-final/finals.

On India match days, there could be a negative impact on movie theatres, theme parks, and offline brick-and-mortar retailers. On the other hand, it would be a tailwind for bars & restaurants, beverages (alcoholic & non-alcoholic), food delivery, quick commerce and e-commerce platforms, who would also organise their festival events, it said.

Flight and hotel rates surge

Jefferies India hotels and airlines analyst, Prateek Kumar, notes that on India match days, fares have shot up on average by 150 c/80 percent for selective hotels/flights compared to the week prior to match day, with some rates up to the extent of 13x/5x.

While major cities are seeing significant increases in hotel rates, hotels in smaller venues like Dharamsala are completely sold out for multiple days. The rooms are booked for players, support staff, cricket board officials, media etc. apart from booking from spectators. Checks with reservation desks of many hotels in bigger cities also indicate that occupancies for match days are already running high which has resulted in rates rising sharply and rates are likely to mostly increase further closer to match dates.

The World Cup event also coincides with the seasonally strong Q3 for the hospitality industry and the same is likely to benefit both hotels/airlines industry in Q3. Further, airlines are reportedly eyeing cap adds to target the traffic rush.

World Cup impact on consumption across categories

The advisory firm has categorised the impact of the mega sporting event of firms across sectors According to the recommendations: In the food delivery segment: Zomato (positive); in the QSR/restaurants segment: Jubilant Food, Westlife, Devyani, Sapphire, Restaurant Brands Asia, Barbeque Nation (Slightly Positive); alcoholic beverages segment: United Spirits, United Breweries, Radico Khaitan, Sula Vineyards (Positive), in the movie/theatres segment: PVR-Inox (Negative); in theme parks: Wonderla, Imagicaaworld (Negative); in the hotels segment: Indian Hotels, Lemon Tree (Positive); in the airlines segment: Interglobe Aviation (Positive); in the apparel retail/brands segment: Shoppers Stop, Trent, Aditya Birla Fashion, Page Industries, Reliance Retail (Slight Negative); in jewellery segment: Titan, Kalyan Jewellers, Senco Gold (Slight Negative); in e-commerce segment: Nykaa (Slightly Positive); in media arena: Zee Entertainment, HT Media, DB Corp (Positive) and in gaming segment: Nazara (Positive).

Source- Moneycontrol

Navratri 2023: 9 financial lessons that you can learn this festive season

Financial freedom embodies the ability to lead life according to one’s preferences, liberated from financial restrictions. It denotes a state of financial well-being where you possess the means and flexibility to chase your dreams, sustain a chosen lifestyle, and realise long-term financial objectives without depending solely on conventional norms. While there is no one-size-fits-all approach to achieving financial freedom, there are certain financial mantras that can help guide investors who want to attain financial freedom. In this article, we will explore nine financial lessons that can pave the way to your financial freedom.

Live below your means

One of the fundamental principles of achieving financial freedom is to live below your means. This means spending less than you earn. It’s essential to create a budget, track your expenses, and prioritise saving and investing over unnecessary expenditures.

A fundamental principle where one can spend less money than one earns, practise prudent expense management, and prioritise saving and investing for the future. This approach encourages a lifestyle that emphasises financial security in pursuit of long-term goals over excessive spending. It involves budgeting, careful spending, and making informed financial decisions to ensure that expenditures remain lower than income, enabling you to save and invest for a more stable and comfortable future.

Save first spend later

Precedence should be given to one’s savings and investments before allocating funds for discretionary spending. This involves setting aside a portion of the income for saving or investing immediately upon receiving money and treating it as an essential aid in planning for retirement, emergencies, or other financial goals. This fosters financial discipline and gradual accumulation of wealth by making savings a primary objective.

Diversify income streams

Generating revenue from multiple sources rather than relying solely on a single income stream aims to mitigate concentration risk, enhance financial stability, and potentially increase overall income. Individuals can explore part-time jobs, freelance work, rental income, or passive income streams like dividends that will provide financial resilience and flexibility, reducing vulnerability to economic fluctuations or job insecurity.

Invest wisely and early

It emphasises the importance of making well-informed investment decisions and starting as early as possible. By investing intelligently and commencing your investment journey at an early stage, individuals may take advantage of compound interest and have the potential to achieve long-term financial goals more effectively.

Compound interest is a powerful concept that can significantly impact an individual’s long-term financial goals. It refers to the process of earning returns on an initial investment and then reinvesting those earnings to generate additional earnings in subsequent periods. Put simply, it’s the snowball effect of your money growing over time. The longer you leave your money to compound, the more substantial the growth potential.

Debt management is the key

Managing debt is indeed a critical aspect of personal financial well-being and stability. High-interest debts can be a significant obstacle to financial freedom. Individuals should prioritise paying off high-interest debts, such as credit card balances, as quickly as possible and avoid accumulating new debt unless essential. Responsible debt management, which includes making on-time payments and reducing outstanding balances, can positively impact your credit score. A good credit score is essential for accessing favourable lending terms in the future, such as lower interest rates on essential loans.

Set clear financial goals

Financial freedom requires a clear roadmap and financial goals will provide an individual with a sense of direction and purpose for making decisions. Set specific, measurable, achievable, relevant, and time-bound (SMART) financial goals that will keep one on track and make necessary financial adjustments.

Stay informed and educate yourself

In a rapidly changing world, staying informed allows you to adapt to new situations, technologies, and opportunities. It helps you stay relevant and competitive. Financial success often hinges on financial literacy. Educating yourself about personal finance, investing, budgeting, and other financial matters can lead to better money management and wealth-building strategies.

Be patient and persistent

Achieving financial freedom takes time and discipline. Patience allows you to endure delays and setbacks gracefully, while persistence empowers you to keep moving forward, adapt to obstacles, and ultimately reach your desired outcomes. Together, these qualities are key to long-term success and resilience in the face of adversity.

Review and adjust your plan regularly

Financial freedom is not a static objective. As circumstances evolve rapidly plans need to be revised so reviewing budget, investments, and goals regularly will ensure it is relevant and align with one’s aspirations.

In conclusion, financial freedom is not an elusive dream but an achievable goal. By making well-informed financial decisions, living within their means, prioritising financial goals, and staying disciplined, individuals can progressively work towards financial freedom.

Source- Livemint

Investments and goals: Why you need the guidance of a financial adviser

There is a lot of narrative around how managing your own money is quite simple, but that’s not the case really. Financial planning is not only investment planning. It includes liability management, risk management, goal-based planning, estate planning, tax planning, etc. How many of us can confidently say that they have adequate life insurance and health cover? Most would be under-insured and worst; not insured at all.

How do you know if you have selected the right investment management product? You won’t know till you actually face adversity; till then, the cheaper plan will look good. Does the family know how to settle any obligations or property claims after your death? While the number of insured in India is just 5%, only 0.5% in the country actually has a will.

Most of India is under-invested because they have no idea of how much should they invest for their goals. In the rush to generate better returns, people make investing mistakes and can’t achieve simple possible goals.

The investing puzzle

How many of us understand the right asset allocation to have in accordance with our risk profiles, time to the goal, liquidity needs and return expectations?

India has more than 1,500 mutual fund schemes, over 400 portfolio management services (PMS) providers, 200-plus alternative investment funds (AIFs), more than 500 non-convertible debentures (NCDs) and bonds, over 100 fixed deposit options and thousands of other investment products. How does one decide which ones to invest in and which ones to avoid?

The problem does not stop at deciding the right asset class or product category, but also zeroing in on specific funds, asset management companies and fund managers.

For example, in the last three years, the worst-performing small cap fund gave 27.5% annualized return, but the best gave 47.7% annualized returns. The difference is of a staggering 20 percentage points. So, you can see anywhere between 27.5% and 47.7% returns, depending on your ability to pick the right fund.

Forget about the 20-percentage-point difference, even if the difference is three percentage points, the outcome is hugely different. For example, ₹50,000 monthly SIP (systematic investment plan in mutual funds) for 25 years, at 12% annualized returns, will become ₹8.5 crore. The same ₹50,000 SIP for 25 years at 15% will become ₹13.7 crore, a difference of a whopping ₹5.2 crore.

You will now say, okay I will invest in Index! That still does not solve your problem, unless you can get the right asset allocation. There are hundreds of index and exchange traded funds (ETFs). Most don’t even know that ETFs are mutual funds, that’s unfortunately the level of financial literacy among Indian investors today.

Behavioural issues

Let’s say you know it all, but remember wealth management is less of investment management and more of behavioural management.Will you hold your investments for 25 years? I keep hearing stories around how had I bought ₹10,000 of this stock, it would be worth ₹100 crore now, but how many of us have really held on for so long?

Investing is not as simple as it looks.

Managing risks

Risk management is a crucial element of financial planning that most investors tend to ignore. Having adequate life insurance cover can ensure that your family’s needs and goals are taken care after your death. An adequate health cover can ensure that you don’t have to take a significant hit on your savings and investments in case of a medical emergency.

These risk-mitigating instruments are what can set the foundations of your entire financial journey. However, you need a financial adviser to tell you how much insurance cover you need to take care of your family’s current and future goals. Also, what health cover you need to ensure that your medical costs are covered even after accounting for medical inflation.

So, you often need a friend, philosopher and a guide to help you through the journey. Here is where a Sebi-registered investment adviser and a competent financial planner can play an important role in your investment journey.

Source- Livemint

Wealth creation is not a magic, make sure it happens by method

As we celebrate the World Financial Planning Day on 4^th October this year, let’s chat about something we all know but often overlook—financial planning. Financial planning isn’t just for the elite or the well-versed as often misunderstood, it’s for every Indian who aspires to secure their future.

Why Financial Planning Is a Big Deal

Picture this: You decide to go on a road trip without any idea of your destination, no map, no GPS. Fun at first, but you’ll soon find yourself lost, frustrated, and maybe even running low on fuel or battery as applies to you. That’s what life can feel like without financial planning. Here’s why financial planning is a must-do.

1. Your Goals Are Your Roadmap: Just like you’d set a destination for your trip, financial planning helps you set and prioritise life goals. Whether it’s buying that dream home, sending your kids to college, or retiring comfortably, a plan gets you there better and generally with less stress.

2. Unexpected Potholes: Life’s full of surprises—some good, some not so much. A well-thought-out financial plan is like having a spare tyre for those unexpected flat tyres in life.

3. Money Multiplier: You know how your smartphone battery drains when you use too many apps? Well, your money does the same if you don’t manage it wisely. Financial planning helps you keep your money working for you, not against you.

4. Zen Mode: Imagine having adequate money set aside for emergencies and life’s little luxuries. Financial security brings peace of mind, and that’s worth its weight in gold.

Financial Planning in India – The Reality Check

So where does the Indian scenario stack up on all this? We’ve got a lot going for us, but we’ve still got some ground to cover when it comes to financial planning.

1. Financial Literacy Gaps: Many of us never learned the ABCs of finance. It’s like trying to play cricket without knowing the rules. We need better financial education, starting from schools to workplaces.

2. Insurance Missteps: A lot of us are underinsured or don’t have insurance at all. It’s like riding a racing bike without a helmet. Comprehensive insurance should be a no-brainer.

3. Stashing Cash: We’re known for saving, but sometimes we just hoard cash or park it in low-yield investments. Imagine having a supercar and only driving it at 20 km/hr. It’s time to rev things up and explore better investment options.

4. Retirement Myopia: Retirement planning is still a new concept for many. It’s like ignoring the scoreboard in a cricket match and hoping to win. Start planning for retirement early; your future self will thank you.

Benefits of Getting Your Financial Act Together

Now let’s talk about the good stuff—how getting your financial ducks in a row can make your life better.

1. Freedom to Dream: Ever dreamed of quitting your job to travel the world or start your own business? Well, financial planning can make those dreams a reality.

2. Stress Buster: Financial worries can give you sleepless nights. But with a solid financial plan, you can relax, knowing you’re prepared for life’s curveballs.

3. Money Magic: Smart planning can make your money grow faster than a magic beanstalk. It’s not about making more money; it’s about making the most of what you have.

4. Legacy Building: Wouldn’t it be amazing to leave a legacy for your kids and maybe grandkids? Financial planning helps ensure your wealth sticks around for generations to come.

World Financial Planning Day: What’s the Big Deal?

Now, why should you care about World Financial Planning Day? Here’s the lowdown:

1. Wake-Up Call: It’s a reminder that financial planning isn’t just for the rich and famous; it’s for all of us. Time to roll up our sleeves and take control of our financial future.

2. Community Vibes: This day brings together financial experts, everyday folks like you and me, and everyone in between. It’s like a big financial planning picnic, where we share tips and stories.

3. Think Global: Money matters are universal. On this day, we realise that the same rules apply whether you’re in India, the US, Europe or anywhere else. Financial planning is a worldwide team effort.

4. Be Empowered: World Financial Planning Day is your chance to get the scoop on how to make smart financial moves. It’s like having a personal financial coach on speed dial.

So, as we celebrate World Financial Planning Day, remember this: Financial planning isn’t rocket science; it’s life science. It’s about making your life easier, more enjoyable, and full of possibilities.

Take a step today, set some goals, protect your dreams, invest smartly, and plan for your golden years. It’s your journey, and with a little financial planning, it’s bound to be a lot smoother and more rewarding. Here’s to your brighter financial future!

Cheers to World Financial Planning Day!

Source- Economictimes

Know the different types of NRI Accounts in India

A Non-Resident Indian (NRI) or Person of Indian Origin (PIO) can open different types of bank accounts in India, depending upon their liquidity and investment requirements. Further, the type of bank account being opted for may also depend upon the repatriation requirements of the account holder. One can make an informed decision in this respect, only after knowing about different options available.

Here are different categories of accounts an NRI/PIO can open in India:

1.Non-Resident External (NRE) Account (Savings Account/Fixed Deposit)

NRE Accounts are rupee-denominated accounts, wherein the NRIs/PIOs can deposit their money in foreign currency and park such amount in Indian account. An NRI/PIO can open such an account in his/her name solely, or open a joint account with another NRI/PIO. In such accounts, one can deposit the funds in foreign currency which is converted into the Indian currency upon deposit at prevalent foreign exchange rates and credited to the account. Thereafter, the account holder can freely withdraw the money in domestic currency. However, no rupee credits are allowed in such accounts, as such accounts accept only the foreign currency credits. To further add to the utility of NRE Accounts, the account holder is free to repatriate the account balance outside the country without any limit. This means that you can freely transfer the principal amount deposited and also the interest earned on such deposit. Further, the interest earned by the NRIs on NRE Savings and Fixed Deposit Accounts is tax-free in the hands of the account holder.

2.Non-Resident Ordinary (NRO) Account (Savings Account/Fixed Deposit)

NRO Accounts are rupee-denominated accounts, wherein the NRIs/PIOs can deposit their Indian as well as foreign incomes. Such incomes can include interest income, rental income, dividend, pension, etc. An NRI/PIO can open such an account with ‘Single’ operations or operate a joint account with an NRI/PIO or even a resident. The account holders can credit the account with Indian currency as well as the foreign currency. In case of foreign currency credits, the funds are converted into the Indian currency at the prevalent foreign exchange rates. The account holder can freely withdraw the money in domestic currency. However, in terms of repatriability of the account balance, the account holder can repatriate the interest earned but is restrained from transferring the principal balance beyond the limits specified under the Foreign Exchange Management Act. The interest earned by the NRIs on NRO Savings and Fixed Deposit Accounts is also taxable in the hands of the account holder as per the Income Tax laws.

3. Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

NRIs/PIOs can also invest in FCNR Fixed Deposit Accounts, wherein the funds invested continue to be maintained in foreign currency, unlike the rupee-denominated NRE/NRO Accounts stated above. Accordingly, such accounts mitigate the foreign exchange risk for the account holders. However, such accounts can only be opened for a fixed tenure like normal Fixed Deposits. Both, the principal and the interest amount in FCNR (Bank) accounts can be freely transferred to foreign country. As per the prevalent Income Tax laws, the non-residents do not have to pay any tax on interest income through such accounts.

With different types of bank accounts and deposit options available, NRIs can opt for the account type best suiting their operations and investment needs.

Source- IciciBank