Skip to main content

Diversify portfolio to reduce risk

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

Diversify portfolio to reduce risk

 





Most of us use the term saving and in vesting interchangeably. However if you want your money to work for you, it is important to understand the difference between the two. Saving is a passive decision, investing is active. So, if you ear n Rs 1,000 and spend Rs 800, you save Rs 200.


This Rs 200 accumulates in your savings account by default, or you may route it into a recurring deposit, fixed deposit or a money market fund. People who save do not want to take any risk with their money. They certainly do not want Rs 200 to drop to Rs 190. They expect capital to be secure, even if returns are low.

Investing is a different ball game. When you invest, you expect to take some risk and hence be compensated for the additional risks. You want to generate returns that are higher than inflation, so you can plan for your long term goals such as children's higher education or retirement. Clearly savings will not help you meet long term goals, since the post-tax returns from such investments barely beat inflation. Savings are meant to meet short term goals or expenses. You do not want to hold on to too much savings because the opportunity for this money to grow is limited.

It is important to have the right mix of products in your portfolio so that they beat inflation and enable you to get wealthy over time. Your age is a good indicator or the amount of safe investments you need in your portfolio. If you are 40, then have 40% bonds or other risk-free instruments in your portfolio.


The remaining 60% can be invested in riskier investments which have the potential to deliver higher returns over time. These could be stocks, equity mutual funds, exchange traded funds and maybe some real estate. Such investments must align with your goals, time horizon and risk appetite. This is important since investing is usually for the long term. Investing for the short term may cause liquidity issues or force you to exit an investment at a loss.

With inflation hovering between 8% and 10%, we need to make our money stretch more than inflation so that we can move forward toward our goals and not run on a treadmill where we're trying hard to remain in the same place.


So, say, you are a 30-year old and your current expenses are about Rs 3.6 lakh a year. Assuming your expense patterns don't change throughout your life, you will be spending Rs 36 lakh for the same set of expenses when you are 60, assuming inflation is at 8%, and when you are 90 you would be spending Rs 3.6 crore.

Many of us are risk averse and are comfortable investing in traditional risk-free investments such as savings deposits, FDs and bonds like NSC, Kisan Vikas Patra etc. Even though some of these instruments offer around 8 1 0 % i n t e re s t , the interest is taxable.


Post tax, the yield can come down to as low as 6-6.5%.


With inflation in the 8-10% range, these instruments deliver negative real returns.
Sometimes the biggest risk to financial independence is not taking a risk at all.

There are several instruments that offer returns that beat inflation. Good equity funds can earn you annualized returns of between 14%18%, thereby comfortably beating inflation. Capital gains are also tax-free after a year. Earning an income through systematic withdrawal plans of mutual funds can be a much more tax efficient way of generating income. These plans are flexible, so you can stop them when you want. You can also increase the withdrawals each month if inflation catches up with you.

To bring safety to your portfolio, you can invest in good debt funds. Contrary to popular opinion, there is more money invested in debt funds than in equity funds. This is mostly due to the tax break you get in mutual funds, compared to bank accounts and fixed deposits. If the investments are held for more than a year, fixed maturity plans or other debt mutual funds are a more tax efficient way of generating better returns than fixed deposits. Liquid funds offer the ability to plan for an emergency, vacation or any short term goal by generating far superior returns compared to a savings account.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now