2018 – Page 2 – My Money Streets

September 16, 2018

What is CAGR and What does it mean for your long term investment?

Hi, this is especially for existing mutual funds investors and the aspiring investors. The two things which come into our mind when we talk about equity or equity mutual fund investments are disciplined long-term investment and high-return over the long term. To promote the mutual fund schemes, AMCs showcase the past performance by CAGR. We often dont know what is CAGR return or how to verify the company claims. It is a simple calculation with help of square root calculator, you may check the square root of numbers with help of online calculators as well.

Let us look at an example to simplify the word ‘CAGR’

The below-mentioned chart shows a comparative study of CAGR return.

But we need not always depend on charts to calculate the year on year return.

#CAGR or #Compound Annual Growth Rate is the average rate at which an investment grows over time assuming that it was compounded (re-invested) annually (periodically). CAGR has nothing to do with the value of an investment in the intermediate years as it depends only upon the value in the first year and the last year of the investment tenure.

(Source – cagrcalculator.net)

CAGR = [{(Final NAV/ Initial NAV) to the power 1/n (n = no. of years)} – 1]*100

Let us consider 3 years back we bought a mutual fund scheme at NAV 100, and now the NAV now is at 200, then the CAGR would be –

CAGR = [{(200100)}to the power 1/3 – 1]*100

= [Cube root of 2 – 1]*100

= [1.2599 – 1]*100

= (0.2599)*100

= 25.99/100 or 25.99%

3 years CAGR return is 25.99%

Hope, next time you will calculate the CAGR return on your own.

August 27, 2018

Planning to rent a house? 10 things you should keep in mind

Planning to buy a car? Consider this too

Home is a place we grew up from a child to an adult. Home is a place where we build a family and raise children. The home is a feeling of belonging which begins at finding a house, creating our comfort corner.

Lucky are those people who are privileged to stay at Parent’s or has earned enough to buy on their own. For those who are yet to find a own house, this post is to help you get the next best option – ‘Renting a house – and make it a home’. Renting a house is not an easy task, a dream home is not easy or may not be pocket friendly or commute friendly. It takes amount of research, negotiations and hard work. 🙂 Here I am listing the critical points which will help you find the best home. I am taking Mumbai as a case for this, as I call the city my home.

1. Broker or no-broker?

Mumbai is a huge metro city, finding a rental home without a professional help is difficult. You may consider taking brokers list from neighbourhoods. The online help at JustDial listings or even property websites like 99 acres, Magic Bricks, housing.com etc is also a great help as they also provide the sample pictures of the property along with the broker coordinates. Brokers generally take down the criteria from you as in budget, location and property and help you with options. Incase you dislike third-party involvement, there are websites like nobrokers.com, purely listed by owners can get you property with no brokerage. However, in these cases, assistance in registration, background of the owners etc is difficult.

2. Location and neighbourhood – the list of a preferred location can be long with neighborhood, market, hospital, railway station, bus stand – A big city comes with a few advantages as well as disadvantages. According to me, commute time to workplace should be the first criteria while searching a house, a smart planning will help save you cost as well as time.

3. Rental amount – Rent of a house will depend on multiple factors like age of the property, locality, society, proximity to local facilities like hospitals, schools, multiplexes, shopping malls etc. You need to decide a rent budget basis your net income, saving goals and other liabiities (like ongoing personal loans, car loans etc.) Ideally a home expenses like rental, and bills (electricity, water, telephone bills) should not exceed one-third of net monthly income. If you can keep it lower than that, would be better for you. Also, pre-decide the hike in rental with home-owner if you are planning to make multi-year contract.

4. Home owner – The house you are planning to make your home is somebody else’s property, the legal contract of the house will be between renter so knowing the owner in person would be a good idea. Have a conversation with your requirement to agree upon a mutually convenient contract.

5. Documentation requirement – As rental document is a legal contract, it follows procedure such as police varification, you would need to provide copy of Adhaar card, Pan Card, Passport size photograph, cancelled cheque leaf etc. Ensure the documents are attested with date and purpose (mention – for rental agreement).

6. Brokerage – In mumbai, the brokerage is generally a month’s rent, don’t agree for more even if you doing multi-year agreement. Broker’s primary job is to list down your various criteria and take you for online and physical visit to the properties. The broker should be able to provide you with registration assistance and helping with a conversation with the owner. You are not liable to pay any fee untill the broker is able to complete the deal. Many a times if a broker doesnot find a suitable option in his designated geography, he/she may reach out to other brokers who may have properties which meets your demand, in these cases they often ask and negotiate for bigger brokerage, you shouldnt agree to this unreasonable demand.

7. Rental Agreement – This is the legal document for you and your home-owner. You need to check the document carefully to ensure your interest is protected. Often times there is a clause of minimum lock-in period, which means incase either party wants to end the contract may have to shell out a pre-decided amount to the other party. Check the document, clarify with the owner, broker as well as the registration official on any doubts. Keep a copy of the agreement safely. It will be needed for many official use including dealing legally with the owner if need be.

8. Amenities – There are some basic and important requirements of every individual in a home. Figure out if you would like to use pre-owned amenities or you would like to rent a house which has some basic fixtures. Basic amenities would include Gyesers, exhaust fans, ceiling fans, electricity connection, water connection, cooking gas connection etc. You should keep these factors in mind while chosing the house and negotiating the rental.

9. Furniture – This is the second most aspect of a home after the basic ameninites. If you pre-own furniture, you can be sorted with a un-furnished house, but depending on requirement and your current possessions you may look for semi-furnished or fully furnished hones. The semi-furnished home may come with a bed, modular kitchen. A fully furnished house may include a sofa, dinning set, TV cabinets etc.

For furnitures, you also have many options – buying brand new or second hand from platform like OLX, Quikr. You have additional option of renting your furniture from websites like Fabrento, Rentomojo, Pepperfry etc., they also provide packages for bed room, dining room, living room etc. The renting and owning is a personal choice, may be will write another post on that!

10. Maintainance – The rented flat/ apartment should be properly registered with the building/housing society. Society maintenance cost is home-owner’s responsibility. But you need to ensure you get a spik n span house with colour, window mesh, pest control and furnitures and other amenities repaired and you will be expected to return the house key in the same manner when you leave the house.

Make checklist as per your requirement to help you make the shifting a smooth affair.

Advantage of renting a home – my passion is calculation. With a basic reseach I found the concept of renting is much convinient on pocket than buying a new property. Renting is a super cool option unless you have deep pocket and have the capacity to buy a house with existing savings without going for an EMI. Rent saves money, you have a option of staying in the house as long as contract permits, stay in the locality you want in about 1/4th of a owned house (EMI+maintanance). India is obsessed with owning house, wouldnt want to debate too much here. But do some google and sone excelsheet, you will understand my viewpoint. Hope this article will be useful fir renting a home in mumbai. See you soon with my next article!

Happy saving, Happy Investing and Happy Renting!

May 17, 2018

Seven Money Lessons for your kids this summer vacation!

Indian summer is here in its brightest best. Its mid-May, most of the schools have declared Summer holidys, and rest will declare in coming few days. The vacation which lasts for 1-1.5 months for the kids, also means double activities for the parents. Addressing unending-demand list of kids become a daunting task for parents. The schedule for travel, signing up for summer camps, short hobby classes visiting grand-parents and relatives tops the list in this country. While my childhood summer holidays memory is all about relatives and grand parents, things have changed a long in last two-decades in India. Besides spending time with family, a trip abroad or a trip to hill station in India has become a must.

The vacation has taken a new meaning all together for children as well as for the olders. It’s a festivity. When fun-frolic stay at its best, it also can be utilised by the parents for inculcating some good habits in the children which go a long way, no less than their life time to be honest. Habits learnt in childhood stays long life. The small but important training may not always ensure the best results, but it definitely sows a seed of discipline.

Though the topics could vary individual to individual, my post would talk about the lessons of financial discipline we can impart on our kids this summer vacation. We may chart out a activity calendar secretely and follow it slowly to achieve our goal. Financial discipline cant be taught in a crash course, but introducing during a holiday season will ensure it gets enough mindspace of your child, which can be practiced over the year. I have penned down 7 points you may consider doing, even achieveing 3 would be a good start.

1. Take your child to bank branch

On your next visit, consider taking your little one to the bank branch. Show him around. Show the deposit slip and introduce basic terms used in banking like demand draft, fixed deposit etc. Make him write your cheque book if you need to withdraw money. If your child is little older like 10 years, you can also show how bank statement looks like. What is a credit and debit.

2. Show them a mutual fund return calculator – This is easily available in mutual funds and personal finance website. You can show them the benefit of compounding, how a small sum each month could make a big amount in few years.

3. Make them pay electricity bill/gas bills – This mundane task will ensure that he /she is aware of household responsibility. A teenage kid can be introduced to this, be it manual submission or through online payments. It will give them an early introduction to their responsibilities

4. Fill up your health insurance form with your child by your side

If your child is older than 10 years please consider this. You can make your child sit through this process, you already have a winner. In this process, you can introduce them to the importance of insurance, kind of insurance, what you should not hide don the insurance company.

5. Help them set financial goals – your kid may have various demands time to time. Buying a new cycle, guitar, games, travel etc. You may introduce him to the concept of “saving to buy”. You may give him a piggy bank to save from their pocket money to sponsor their object of desire. It may or may not fully sponsor, but idea of ‘saving first’ will be sown in the young mind.

6. Reward them on reaching goals – keep your promise and reward them with some goodies, a small treat to encourage their efforts however, don’t overspend on the reward. Remember the idea is to teach them financial discipline

7. Teach them the small joys of life

This is an important aspect to be taught to the kids early in their life. The life priorities should be aligned with the financial habits. Being frugal, disciplined, organised has its own benefits.

To introduce this aspect, you may give them live examples of recycling clothes, plastics. Cooking at home together is as much fun as dining out. Life is all about balancing. Teach the kids to enjoy the small joys of life.

Remember – they will follow your action more than words

Teaching kids good manners is a priority for parents. But, kids follow your action more than your words. They take up from visual cues more than verbal instructions. Overshopping, unplanned expenditures in household will be observed and absorbed by the young ones faster than you think!

Money management is fun thing. It’s a learning process and we can take it up anytime, may be this summer while teaching the kids, we end up learning some good habits and enjoy it too!

April 16, 2018

The good side of the endowment plans which can be used smartly

I would like to call myself a rational person who likes to be without bias and greed. Well with a bit too much of rationalistic approach, I found myself actually biased towards ‘being rational.’ I can call myself rationally biased towards my investment choices, aggressive allocation of equity on portfolio and staying away from debt heavy instrumemts, especially the fixed deposits for short term amd endowment plans for long term to be specific. Well, that fits well with my current age, but that is not the only way to look at long term investing. Endowment plans fits perfectly for a set of investors based on their risk profiles, investment objective, personal choice and priorities. Endowment plans stand out in long term debt investments.

Though I like aggressive equity allocation for long term, with all humility I will accept that endowment as on today stands equal with the other long term debt products in various ways. Endowment plans have always have been a popular insurance cum savings product in India, credit goes to the hefty commission the insurance agents receives from the insurance companies for decades. My personal opinion have been rationally biased against it because of its lack of transparency on asset allocation, high agents commission, low coverage and low returns. The fact which bothered me the most is the “miss-selling”. You may think, if I have so many rational points against the endowment plans, why I am even writing this post and what is my agenda? You will come to know.

source – Wikipedia

With my first job, I joined the bandwagon of mutual fund investing, as the mutual funds investments were just picking up at fast pace, SIP was gradually getting introduced as a disciplined way of investing, superior tax-free return over long term was very attractive. And I hated the Endowment plans. I do have a active policy, I bought this one before I signed my first joining letter. Every time I paid the premium, I felt irritated about what a waste of my hard earned money until… until the ‘D’ day 2018-19 union budget struck hard on my equity dreams. Levying 10% tax on my artistically built equity portfolio on long term capital gains hit hard on my mind. It wasn’t that the few other factors were not coaxing me to have a rational look at endowment plans and completely reject it, but the budget day nailed it. Budget not only introduced tax on long term capital gains, it also introduced 10% tax on dividends of equity and mutual funds. The equity dreams came crashing momentarily for many of us.

I recalled my father’s advice, my boss’s suggestion, inflation numbers and newly introduced Long-term-capital-gain-tax. In a whole it did push me to give a thought about taking a rational look at the cost and return analysis.

While my view of equity being the best investment for long-term capital growth remains the same, endowment plans have made a special space for itself. Here is the list of things you get as benefits of endowment plans.

1. Life cover, as per IRDA regulations, insurance companies have to give a minimum 10 times life cover of annual premium, so at given point during the policy term you have a life cover, which is upto 20 times incase of endowment plans. For a 10 thousand yearly premium, you will be covered for about Rs. 2 lakh. The maturity value will be the accumulation of premium and interest earned from various instruments as the insurance company deplys the same to generate return.

2. Income Tax benefit under section 80c. This product gives you tax benefit under income tax, the yearly premium can be calulated to reduce the income tax burden.

2. Loan against insurance at a minimum interest rate – This is an interesting benefit which mutual funds, ULIPs or term insurance plan can’t provide you. This instrument can be used as a collateral for an emergency loan if required, the loan amount and eligibility will depend on how long are you invested in the policy. Few people in my circle were immensely benefitted during medical and business emergencies.

3. At the current interest rates, the return of 4-4.5% tax free is equivalent to the post tax fixed deposit returns. Also,there are no long term fixed deposit schemes over 10 years tenure in India. Over the years, India is moving towards low tax regime, which means in coming years the interest rate could go well below 5%. Endowment plans could give equivalent returns.

4. Tax-free return of accumulated corpus. This is a bonus. Given the recently launched LTCG, very few instrument like PPF and Life insurance.

This option is ideal for individuals above 45 years of age, as financial planners suggest reducing the equity exposure gradually and look for fixed income options. This option is also applicable for people in the highest tax bracket, as the post tax return on Fixed deposits are equivalent to the maturity value of a long-term endowment plans.

This is a viable option for somebody who dont like equity investments, above 45 and looking at saving a corpus for retirement. Individuals with 30% tax bracket bracket can also consider the same as a long term FD with a provision of getting loan and tax exemption at maturity with life cover. However, One should keep a low exposure given its low return. For savvy investors, Term insurance and ULIP are good product which has a low cost structure and puts your money to good use maximising your profits.

To maximise the benefits, you should ask your insurance agent to pass on some cash benefit to you by paying first two premiums. This is a negotiable deal you can broke with the agent.

Kindly note that endowment plan should be bought only for long term like 20 years and above. Endowment plans attract heavy penalty on missing due dates for premium, surrender pre-mature and may close the policy if policy-holders consecutively misses premium payments. Also, it is an illiquid inveatment as one cannot withdraw the investments before its maturity or policy-holder’s death. If one doesnt continue paying premium upto atleast 3 years, the investors will not get any return on the investments. Also, this may give very low or no inflation adjusted return given India’s average inflation rate is about 5%.

THIS POST IS FOR EDUCATIONAL PURPOSE, AND NO WAY I AM PROMOTING ENDOWMENT PLANS AS TOP CHOICES FOR INVESTMENT FOR EVERYBODY, THIS IS APPLICABLE TO SELECT SET OF INDIVIDUALS, THIS ARTICLE IS JUST A RATIONAL LOOK AT ENDOWMWENT PLANS. TAKE A CALL ANALYSING YOUR FINANCIAL POSITION

April 3, 2018

How to invest in IPOs online

While fixed deposits, mutual funds, ULIPs remain top investment options for Indian Investors, if you have an understanding in direct stock investing, Equity IPO is an option too.

Investing in IPOs are getting increasingly popular amongst the retail investors in India. IPO market in India has given big returns in the year 2016-17, IPOs like Avenue Supermart, CDSL, BSE, Salasar etc has helped investors get a listing gains above 50%. The websites like Chittorgarh and IPO central tracks IPO market very closely, listing of IPOs – current IPO, Upcoming IPO, IPO allotment dates, etc. They also provide reviews on IPO shares. For a new investor, it will be a good idea to check these websites to get an idea of the upcoming IPOs and look for IPO reviews as one of the parameters to decide to buy new IPO. One must check few IPO reviews, read the company details carefully before investing.

What is an Equity IPO?

Many retail investors in India who have exposure in equity investments and mutual funds are unaware about IPO investments.

An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded.- Wikipedia

IPO (Initial Public Offering) helps the equity shares to be listed on stock exchanges BSE and NSE. Once listed, investors can buy from any trading platform freely.

How IPO works for retail investors?

For the new IPO, Companies in consultation with book running lead managers come up with price band for the issue. The issue is then divided into lots. Investors can get the information on current IPOs and Upcoming IPOs in newspapers and business channels. The crucial details like price band, IPO opening date, closing date and lot size are key factors to look at. For example IPO issue of company A is opening on 15th April, 2018 with a price band of Rs. 95 – 100 and lot size of 150. An investor will be able to bid for a minimim quantity of 150 shares and multiples. Generally in normal IPO the minimum investment quota is Rs. 15,000 and the upper limit for application for individial investor in any IPO is Rs. 2 lakh.

How to invest in IPO online?

To invest through online method, one has to have an internet banking enabled Banking account. Trading account with a registered equity broker/platform and demat account with CDSL/NSDL which comes by default with a trading account.

Online IPO follows a process called ASBA, ASBA (Applications Supported by Blocked Amount) is a process developed by the India’s Stock Market Regulator SEBI for applying to IPO. In ASBA, an IPO applicant’s account doesn’t get debited until shares are allotted to them. (Source – Wikipedia)

For test case, lets take Axis Bank online banking.

Step by step guide to buy IPO online –

1. Login to your internet banking

2. click on Investments, go to the Online IPO section

3. One clicking the Online IPO Tab, (it will take you to a registration page, which will ask for Client Id (trading account) and depository ID. On submitting them, Bank will generate an OTP to complete online IPO registration) it will confirm the demat details and you can click on equity and debt IPO.

4. This post is dedicated to Equity IPO. Hence, click the Equity IPO tab. It opens up the next page with list of equity IPO. Once the IPO name is chosen it moves on to the next page where you have to choose the bank account and investor type, for Indian individuals, you may chose the highlighted option and go to the next page which lists the details of the IPO including IPO lot size, price range etc.

5. Submit the bid – chose the lot size and multiples you would like to apply for and confirm your bid. The Bank will generate OTP to conclude the transaction.

Following the procedure, bank will send a confirmation message. After closing date, you will have to wait for the allotment date. Depending on the application no.s, electronically allotment takes place, the bank will deduct the money only if you are allotted the shares.

The following day, the company gets listed on the stock exchange, and many retail investors likes taking advantage of high listing price and sale it for listing gains.

#IPO #current IPO #Upcoming IPO #personal finance

April 3, 2018

Grandfather clause in equity investments to protect you from some tax liabilities on LTCG

The famous budget speech by Arun Jaitley left the investors dissapointed with the re-introduction of Long-term capital gains tax. LTCG which was abolished sometime in 2004, by introducing STT was re-introduced for the equity investors with a 10% tax on capital gains over and above rupees 1 lakh for the financial year for the investments made above one year.

The shocker was too much for the investors, leading to a short-term fall in the market. The finance minister tried to tame the anger by keeping a grand-father clause applicable till 31st Jan 2018. Now the point is what is this grand-fathering clause and how is it going to make any difference to the investors?

Step by step guide to buy ULIPs

As the LTCG was introduced, it simply meant April 1, 2018 onwards one has to pay tax on income on equity sales over 1 lakh. However, this is not exactly the case. Grand-father clause give you some respite. According to.this clause, investor need not pay tax on the notional profit accumulated till 31st of January. The returns generated over and above on the closing price of the equity as on 31st January will attract LTCG of the return is over 1 lakh. However, the return will be grand-fathered upto 31st July, 2018, post which investors will have to pay 10% tax on LTCG.

Let me give you an example with a real equity test case example. Lets take ESCORTS as a test case. Assume I purchased ESCORTS share on August 9, 2016 at a price of Rs. 260 per share. It reached a peak of Rs. 811 per share on Jan 31, 2018. So, according to grand-father clause, If I sale the shares at or below 811, I dont have to pay any tax on the same (before 31st July, 2018). Assume I sale it on 3rd April, 2018 at the price of 884 per share, my tax liability will be based on 884 – 811, 73 Rs. i.e. my tax liability would be 10% of Rs. 73 (Upto 1 Lakh tax free inclome still applies here)
Step by step guide to buy ULIPs

The Grandfather clause is applicable to domestic investors for equity and mutual funds investments on LTCG.

grand-father-clause-in-equity-LTCG, Long term capital gain

April 1, 2018

Dont be a financial fool – a suggestion on April Fool’s day!

Step by step guide to buy ULIPs
Few days back I came across a news report on Rahul Dravid being conned by an entity on investments. A firm promised him more than 40% return on investments and duped him of crores. While I don’t feel surprised when I hear my housemaid or my neighbor aunty are miss-sold a chitfund or endowment plan, Rahul Dravid, the ace cricketer known for his perfect calculation on field being conned, came as a big shocker to me. Shocked to know that a person who is a millionaire or even a billionaire on his own right who can afford a personal Charterd accountant or even a team to take care of his finances can fall in this trap. The point to note here is anybody can fall into this trap. These frauds in the name of ponzi, misselling wrong products and false promises has been existing since long. It is likely to continue in some form or the other. The point we should focus here is to catch it before it traps us. These wrong investments have a patern to it. If we learn the pattern and ask few questions, we can save ourselves from being cheated and a lot of mental agony along with it. Let me give you some points to ponder over.

It should strike if someone guarantees you high referral bonus, guarantee high returns, or kickbacks on your investments etc. The best way to identify and handle these, is stick to wellknown finanicial products, well known financial advisors and brokers and well known financial institution. Though there are numerous online frauds available, these fraudster may knock your door and call on your cell-phone, to give you a more genuine feel to it. Financial fraud is not limited to running away with money, it inculdes misselling as well. Be clear about investment objective and expected return. Do little bit of calculation and follow few steps to safeguard yourself.

These are the traps, however, there is no harm in double checking and being assured of you are not duped. Whoever is the seller few points you definitely need to check before you say “yes”

So, take few steps and varify –

1. Google it – if it is a genuine company, or even false, it will have a website or some online listing. If it doesn’t have no internet presence, don’t even bother looking at it.

2. Do a little search – if you find the company name, check for the results its throwing up. Check for reviews. Reviews will guide you a bit.

3. Ask for the business model – no, you are not getting personal. If you are asked to invest 1 lakh rupee and assured of a 50% return in one year, you must know the source of the return. Any fixed deposit in India will not give 10% return if bank rates are hovering around 7%. Equity related investments have a potential of giving higher return.

4. Dont be emotional fool – last week my young cousin had a query that if I would like to buy an insurance product from her, a specific product which is her target. She was told by her bosses that it was the best seller product. Mind you, I am talking about a very very reputed company. I felt helpless. I was astonished to see it was a high cost endowment plan. I really wanted to help my little sis. And she wasnt working with the insurance company, but the retail broking wing. So, I offered to buy some mutual funds worth 4 times her target, incase it helped her. But to my surprise, the company refused to consider it. If I were not aware of the product features, I would have simply bought the insurance to make my sister happy, which is nothing but highest level of misselling. My sister is matured and understanding 🙂 but dont comit this mistake.

5. Call on that toll-free no. – It takes few minutes. Whichever financial product you are buying, in the brochure you will find a customer care no. Call up and verify the commitment s your broker made it you. Tally the benefits. If it suits you and if it completely match, you are quite safe.

Read, google, compare and ask experts on forums like Quora etc to make an informed decision. This financial year has brought in many changes, look forward to sharing updates and insights on them. Stay invested Stay happy.

March 29, 2018

Your nominee may not be your legal heir

Know the difference between nominee and legal heir

How to invest in ULIPs

While filling in the request for a online fixed deposit, the site popped an request to file in nomiation details for the fixed deposit. How strange is that? I was just blocking a small amount of money as a fixed deposit for a period of two years. It just stuck on my mind for a while and I assumed that it means incase of my death, the nominee would receive the money as a beneficiary. But my inquisitive mind doesn’t stop that easily as I have been reading too much on the latest stories on e-will, importance of making a Will. I decided to do a brief study on the same, While doing an online research I came across numerous queries and news piece on the conflicts on this topic.

The confusion over legal heir and nominee may even create fights and create chaos amongst family and close relatives. The question arise here is if nominee is requested for all large investments, why Will is required, isn’t it natural that after demise of the individual, nominee is naturally handed over all the possession,? the answer I found here is different. While it is acceptable to nominate any family member for the assets, nominee only refers that he/she is eligible to take the handover of the possession incase of demise of the investor as a custodian or trustee. And the actual beneficiary of the assets will be the legal heir.

The assets and properties include – assets like house, jewelery, art work, land, valuables, mutual fund, Insurance policies (Endowmwent, ULIPs, Term plans), Bank fixed deposits, company fixed deposits, bonds, PPF, NSCs etc.

Who can be a nominee and what is nominee’s role?

Nominee can be any member of family – mother, father, brother, sister, husband, mother-in-law, sister-in-law, son, daughter etc, but they have to be a relative of the individual. Incase of no immediate family, one can make nominee outside family, however, incase he/she acquires family the previous nomination will be cancelled and a fresh nomination needs to be filed. Nominee is nothing but a trustee who is authorised to receive the assets/ funds post demise of the individual. It doesn’t give the individual the right on the assets of the deceased.

Who is legal heir of your assets?

Legal heir simply means the person who is legally inherit your assets and properties according to your Will, if will is not in place, it will follow the ‘provision of succession law’. As per succession law of Hindu, heirs are divided in two classes, Class I and class II.

Class I heir has the first right on the assets and properties of deceased. It includes Sons, daughters, mother, widow, sons of predeceased son, widow of predeceased son. However, incase if the widow of the deceased son is remarried, she wont be legal heir anymore.

ClassII heir – Incase of absence of class I heir, Class II heirs have the right on the assets of the deceased. The class II heir includes Father, Brother, sister, niece and nephews.

Registering a will is important and saves lot of hassles for the closed ones of the deceased, especially if you are clear about whom you want to passon your properties. So, to stay away from conflicts, make informed decision. The nominee and legal heirs are two different things, you should keep in mind and educate your family members and near and dear ones for making informed decision.

#HappyInvesting #moneystreets #legalheir #nominee

Know the difference between nominee and legal heir

March 21, 2018

Plan your Life Goals with ULIP. Chapter 2 – How to invest

how to buy ULIP, Invest in ULIP, Save tax with ULIP, Bajaj Allianz G

Test Case – Bajaj Allianz Goal Assure, Step-by-step guide to invest in ULIP

Hi Friends, I have taken it up as my resolution for this year to guide or help you with step by step process of various investment options. To name a few would be how to make fixed deposits, how to buy life insurance, how to buy mutual funds etc. On this blog post, I would like to focus on the emerging life insurance cum investment products, which in recent times have gone through many upgrades, to promise superior return on investments for long term (10 years and above).

ULIPs are not only a convenient investment solution; they also offer tax benefits under 80c.

For a test case, I am choosing the newly launched BajajAllianz Goals Assure. Three reasons I have chosen this investment solution:it’s the latest ULIP plan which boasts of minimum cost structure of the policy, secondly the funds this ULIP invests in have proven track record and last but the most important part, this plan focuses on your goal, which gives many flexible options to switch investment within the plan, withdrawal options, free-switches and flexible maturity benefits.

This ULIP Policy address an important need of goal based financial planning. Often our financial plans are not aligned with the life goals,which proves to be inadequate in the times of need. Hence, more and more financial planners and experts are suggesting to move to goal-based planning to make the maximum out of the investment and lead a stress free happy life. This policy comes handy as you will have to sit once, read through, choose your preferences and relax.

About Bajaj Allianz Goals Assure – Find the brochure

A life goal based investment plan (ULIP) that gives you the opportunity to plan once in a lifetime experiences with one investment. It offers choice of eight funds which can be invested through four investment strategies. The highlight of the plan is return of life cover charge on policy maturity, tax free returns on your investment and life cover. Investor also have an option of receiving the maturity benefit in instalments and receive the benefit of Return Enhancer, which is an addition of 0.5% of each due instalment. Funds continue to be invested during this time.

Important features of Bajaj Allianz Life Goal Assure–

Option to take maturity in installments
Return Enhancer benefit
Return of life cover charges at maturity
Choice of 4 investment portfolio strategies to meet your financial goals
Unlimited free switches between funds, choice of eight (8) funds to achieve your financial goals
Tax benefits under section 80C

Step by Step process to invest in this PLAN – with some screenshots to make your investment decision smooth.

To begin, Please Open

Step 1

Click Invest now.

Fill up the personal details like name, age, mobile, email and other mandatory fields.

It also gives you an option to choose your life goal – buying a house, child’s education, earn your first crore to name a few, you may also choose a different option by choosing ‘others’ as an option.

Step 3. Choose yearly premium

On filling up and submitting the details, you reach the next page which asks about how much you wish to invest.

Step 4. Choose your plan

I chose planning for child’s higher education hence to me the goal is 20 years away. I choose the payment term of 20 years and monthly premium of Rs. 5000. The payment term can vary between 15- 20 years basis your comfort, and the premium also can be chosen as per your wish and goal. You have an option here namely ‘multiplier’ it gives you a flexibility to choose the life cover on the premium you pay annually. In this the minimum life cover you are assured is 10 times of your annual premium. You can also increase it up to 20.

In the same page you will be given an option to choose your investment style. You may consider wheel of Life or Trigger based portfolio if you want to just enjoy the returns without much of involvement.

If you are a savvy investor, you have options of choosing your funds actively. You will have range of funds to choose from, bonds to be the safest ones but lowest on returns. Depending on your age, risk appetite you may choose this. If you have a horizon below 10 years you may consider having an exposure to bond funds, more no. of years you have on your side you may choose to have higher exposure in equity. If you have invested in markets before and like the long term growth story of equity markets, you may have higher allocation in the Pure Stock fund II and Accelerator MidCap funds. If you see the window, you can choose multiple funds upto 6 funds. However, personally I want to have a complete equity exposure in 3 of its funds in equal proportion as I have 20 long years in hand, and I have an option to switch freely later.

how to buy ULIP, Invest in ULIP, Save tax with ULIP, Bajaj Allianz G

Step 5. Verify details

You check and verify the details you filled up so far.

Step 6.

Enter the payment mode

how to buy ULIP, Invest in ULIP, Save tax with ULIP, Bajaj Allianz G

Step 7.

Make the payment with Net banking or credit card or online wallet.

Documents required

1. Your PAN Card

2. Adhaar Card

3. Demat account (Optional)

4. Address proof

5. Bank account details

This is a simple process to invest in ULIP which is emerging as one of the best option for long term investment like buying house, child’s education, earning your first crore or funding your start-up. etc.

The website also features and Return calculator to help you get a sense of return you may get in your investments. Though the illustration shows a return on 4% and 8%, in real term with equity funds, the returns can go above 10% easily over 15-20% making it a substantial gain in compared to the traditional saving products.

I will come back to you with similar investment step-by-step guide for other investment products. Keep saving, Keep investing and do spend on yourself.

Live a stress free life with goal based investing.

how to buy ULIP, Invest in ULIP, Save tax with ULIP, Bajaj Allianz Goal Assure

February 10, 2018

Systematic Withdrawal Plan will be the instrument to fight Long Term Capital Gain Tax

Its been about a week that our finance minister read out the budget to the nation, but I still cant get out of the angst of levying 10% tax on #long term capital gain on equity and mutual funds investments.

Though the markets have reacted in the expected lines by shading about 500 points on Nifty, I expect it to settle at some point in about few months depending on the course of action decided by the large institutional investors. The sudden shock of introducing #LTCG after 14 years on Equity will be hardest on the small investors, who have been told continuously over the years that equity is the best investment option and investing through #SIP in Mutual Funds is the best option.

What is long term capital gain tax on equity – When an investor buys and keep his equity investment over a year and withdraws, the profit generated on the investment is subject to taxation if it is above Rs. 1 lakh. This is applicable to all investors including individual, HUF, FPI. Mutual Funds have been exempted for this, as this is taxable in the hands of Investors.

Also, Mutual Funds will levy 10% dividend distribution tax on dividend options under various equity schemes.

(Short term tax on equity and equity based mutual funds stand at 15%)

#SWP Calculator

Things were different until 5 days back, when capital gain tax was zero over 1 year, but now we have to learn and adjust to the new normal. What we understand basis the announcement is if we make profit over 1 lakh in a financial year on equity or equity based mutual funds, we have to pay tax on the money over 1 lakh on the long term capital gain (over 1 year). Refering to the chart below on illustration, the tax is applicable to the profit generated over and above 1 lakh. Also, as the budget will only come into effect from April 1, returns above 1 lakh wont be taxed.

Long term capital gain calculation sheet

Investment	Investment amount	Entry date	Exit date	Gain = Amount – Investment (Hypothetical)	Tax applicable	Net Profit
Stocks	1,00,000	1^st Jan 12	1^st Mar 18	3,00,000	None	3 lakh
Stocks	1,00,000	1^st Jan 12	1^st Mar 22	6,00,000	10% of 5 lakh = 50 thousand	5.5 lakh
Equity MF	1,00,000	1^st Jan 12	1^st Mar 18	2,50,000	None	2.5 lakh
Equity MF	1,00,000	1^st Jan 12	1^st Mar 22	5,00,000	10% of 4 lakh = 40,000	4.6 lakh

Incase of #SWP, profit will be spread per unit basis. Spreading out the withdrawal over a period will be beneficial for tax saving.

What is SWP?

SWP Is a disciplined approach towards investments withdrawal. From a mutual fund scheme investor can chose to withdraw a fixed sum of money or pre-decided number of units of units every month. (This is not dividend scheme). This is nothing but selling investments, booking profit but just in staggered manner.

Recommend highly as post-retirement earning or for people on sabbatical. It also work out well for second income generation. To illustrate the benefits on a table, I have taken a hypothetical investment of Rs. 5 lakh in 2013, in an equity scheme.

I have made an illustration on SWP for better understanding on the same. The table is drawn with an assumption that the fund value has grown to Rs. 10 lakh. The sum of Rs. 15 thousand to be withdrawn from the period of April 2018 to March 2019.

In the above case, the investor have to pay any tax on 10% Tax on three thousand eighty three that is Rs. Three hundred and eight only on his withdrawal.

By no mean I am portraying tgat you can escape LTCG Tax completely by following this method. It can be used as a method if you dont require the money at one go. It can work like a pension and can be withdrawn to be tax efficient. One may also consider having other pension options which are tax efficient in nature.

The benefits of SIP have been spoken about a lot. It is about time that we start taking a view on SWP as a tool for withdrawal to make most of the mutual funds investments. SWP Mutual Funds reminds us time and again about discipline. It can beautifully work as a pension or work like extended salary in time of need. It is not required to be a market specialist to invest in it. Choose an equity fund and keep investing for the long term.

This is only applicable to open ended equity and equity based hybrid mutual funds.

systematic withdrawal plan, SWP Calculator,

Keep investing!!

Tweet me at debashree_ad for any clarification.