DV-Mint – Page 4

March 21, 2024

Update your nominee or get frozen out

Securities and Exchange Board of India’s (SEBI) recent consultation paper on nominations has revealed some shocking facts. A startling 73 per cent of individually-held demat accounts either lack a nominee or have consciously opted out from choosing one. Though not as bad, 14 per cent of individually-held mutual fund investments also lack a designated nominee. In the case of jointly-held investments, this number stands at 34 per cent for mutual funds and 37 per cent for demat accounts.

Why you must have a nominee

Having a designated nominee enables passing the investments to loved ones in case of your absence. Because if you don’t, its absence can throw the beneficiaries in a vortex of legal formalities before they can claim the money. Even worse, the money may remain unclaimed in some cases.

Considering its importance, the SEBI in July 2021 published a circular asking demat or trading account holders to either nominate a beneficiary or opt out of it by filling up a declaration form. A similar circular was released for mutual fund investors in June 2022.

While the initial deadline was set at March 31, 2022 for demat accounts and March 31, 2023 for mutual funds, it has been extended multiple times. Currently, it is June 30, 2024. Failing which, your investment folios and demat accounts will be frozen. This will prevent you from making withdrawals or fresh investments until the necessary details are provided.

The data above also underlines a significant disparity in nomination rates between joint and single holders of mutual fund folios, with 34 per cent of joint holders opting out or having no nomination compared to 14 per cent of individually-held mutual fund folios. While the surviving joint holder gains rights to the account or units in the event of one holder’s death, it’s prudent to nominate a beneficiary for an ease in transition of assets in cases where both holders pass away simultaneously.

73 per cent of demat accounts don’t have a nominee!

So, we recommend you to choose a nominee before starting or continuing with your investment journey. To add or update your nominee(s) as an existing investor, follow the steps outlined below.

Steps to add or update a nominee (Mutual fund investments)

There are multiple ways to add or update a nominee. One way is that you can directly contact your fund house. But, instead of visiting multiple mutual fund sites, you can visit the MFCentral platform to add or make changes to your nominations in one go. To learn how to add or update a nominee in MFCentral, click here.

Steps to add or update a nominee (Demat account)

There are two methods to add or update nominees in your demat account. The first option is to access your demat account through your broker’s platform. Once logged in, you can easily locate the option to manage your nominee details. Alternatively, you can directly visit either the CDSL or NSDL portal, depending on the depository participant associated with your broker. To update your nominee in CDSL, you’ll require the Beneficial Owner Identification Number (BO ID), while for NSDL, you’ll need the DP (depository participant) ID and client ID.

Apart from this, the procedure for both of them is broadly similar. Here’s how:

Go to the NSDL or CDSL portal

On the NSDL homepage, locate the ‘Nominate Online’ option. For CDSL, you can access the nomination feature by selecting it from the dropdown menu under ‘Quick Links’.

Enter the DP ID and Client ID in case of NSDL or BO ID in case of CDSL. You can find them in the profile section of your demat accounts. After that, enter your PAN (Permanent Account Number). You will receive an OTP (one-time password) on the mobile number registered with your demat account.

After logging in, you’ll find two options: ‘I wish to Nominate’ and ‘I do not wish to nominate’

Opt for ‘I wish to nominate’ and add or update your nominee(s).

E-sign using Aadhaar. You will receive the OTP on your mobile number registered with Aadhaar.

That’s pretty much it. Follow these steps and ensure your demat account isn’t frozen. More importantly, it will be easier for your beneficiaries to get access to your investments in your absence.

Source- Valeresearchonline

March 18, 2024

A four-step guide to bringing women closer to financial empowerment

When it comes to investing, women show more prowess than men. In fact, Warren Buffett stated once that he invests ‘like a woman.’ This hints at the fact that women have a temperament better suited to this discipline.

The numbers back this theory, too. According to Fidelity Investments, women investors tend to achieve 40 basis points (0.4 per cent) higher returns based on the study of the annual performance of 5.2 million accounts. A separate study by Berkeley University found a difference of nearly 1 per cent in investments made by women.

That’s because women aren’t as concerned by the constant market fluctuations, and they do not look to outsmart the market by tinkering with their investments. In short, they keep investing simple.

Yet, some women take a backseat.

A primary reason can be the social prejudices that continue to hold them back. Statements such as ‘women are not good with numbers’ or ‘men are better at math’ often discourage them from making financial decisions. Men are at the helm of household finances, too, leaving women (even highly educated ones) out of key decisions.

So, how can more women start making financial decisions on their own? One way would be to break the biases that exist. For this, you need to start learning about personal finance to build up their confidence. To start off, here is a four-step action plan to help achieve your goal.

#1 Seek adequate insurance

With medical costs rising, it is a genuine concern that a health issue may wipe out your savings. To protect yourself from such an eventuality, you should get medical insurance.

If you have dependents that you need to care for, then we suggest going for term life insurance as well. Ideally, it should pay out 10-12 times your annual income when you pass away. This will ensure your loved ones are financially secure in your absence.

#2 Control your expenses and plan your savings

By tracking expenses and budget planning, you can avoid impulse purchases.

Take the help of online calculators to determine your savings goals. Only after you have computed how much to set aside for savings and expenses should you make discretionary purchases.

Then, keep track of the amount allocated to your monthly savings, essential expenses and occasional spending. This will help you identify any leaks like outstanding credit balances and loans.

#3 Build an emergency fund

Suppose an unforeseen event pushes you towards the brink of poverty. While it is an unpleasant reality, an emergency fund can help tide over tough times. It should cover at least six to eight months of expenses. This will help relieve stress and soften the blow of a sudden financial setback.

#4 Plunge into the world of investing

While you save for a rainy day, you invest to create wealth. That’s the difference between saving and investing.

So, where do you begin? The process is quite simple. Start off by investing small amounts of money, and remember these two ground rules:

If you have an investment horizon of four to five years, go for fixed deposits or debt mutual funds. While they may offer lower returns as compared to equity funds, they carry much lower risk.
For investments you plan to keep for the longer term (five years or more) to meet your major financial goals (home, retirement, child’s education, etc.), choose equity mutual funds . Compared to many investment avenues, they have the potential to offer attractive returns.

Here’s a pro tip for first-time investors: Begin by investing in an index fund that tracks the Nifty 50 Index. If you want to play it even safer, opt for an aggressive hybrid fund. They invest in a mixture of equity and debt. A small allocation to debt cushions the downfall during sharp market declines.

Follow this roadmap to become financially independent in the long run. You might make mistakes on the way but don’t get disheartened. It is more important to start investing today. It will be your stairway to financial heaven.

Source- Valueresearchonline

March 14, 2024

Which life insurance policy should you buy?

When it comes to life insurance, there are so many products available in the market. Moneyback, Unit-linked Insurance Plan (ULIP), Pension Plan and so on. Which one should a common man buy? – Jitendra

Buying a life insurance policy is a smart move, Jitendra. Any person with a financial dependent should get one. That policy would take care of them if the family’s breadwinner had an unfortunate demise.

Moneyback, ULIP, pension plans = Not good

Regarding the question, we’d like to highlight that Moneyback, ULIP and pension plans are hybrid products. They offer a combination of life insurance and investments.

Sounds good in theory but not in reality.

That’s because these policies a) provide inadequate life cover, b) are costly to buy and c) their investment component generally gives below-par returns.

Therefore, it’s better to keep insurance and investment separate.

For investments, look at equity and equity-oriented funds.

For life insurance, only consider pure term plans.

For one, they are very affordable compared to hybrid plans. A 35-year-old healthy male can get a Rs 1 crore cover at an annual premium of around Rs 15,000.

Don’t get missold

Many customers buy a life insurance policy through an agent or a broker, who may push-sell hybrid plans to you because these products help them earn higher commissions.

But don’t get swayed. Ensure that you want to buy a pure term plan.

The easiest way to identify a pure term plan is to check the life insurance’s survival benefit. If it’s a pure term plan, the policy will have ‘zero’ survival benefit. This means that your loved ones would get the sum assured (life cover) only if you pass away.

But don’t hybrid policies give you back your premiums anyway? They do, but hybrid policies usually charge high premiums and deliver low returns.

Source- Valueresearchonline

March 11, 2024

Mutual funds that still enjoy indexation benefit

Ever since debt funds, international funds and gold funds lost indexation benefits – an inflation-adjusting feature that lowers tax liability – investors, especially conservative ones, have been in the dark about what to do now.

Krishnan V, one of our subscribers, is among them. He contacted us, asking if there’s a mutual fund with a 40-60 equity-debt split that also offers indexation benefits.

We hope the below table answers the question.

As you can see, balanced hybrid, multi-asset and dynamic asset allocation funds still retain indexation benefits. Let’s look at them at a glance.

Balanced hybrid funds

The equity allocation in these funds usually fluctuates between 40 and 60 per cent, activating indexation perks.

That said, there are no balanced hybrid funds currently in the market. Instead, what you have are a few solution-oriented funds. A few examples of these funds are UTI’s children’s career savings funds and retirement benefit pension funds.

Multi-asset funds

These funds invest in at least three asset classes, with a minimum allocation of 10 per cent in each.

The asset classes include equities, debt, real estate, international securities and commodities like gold and silver.

However, the equity allocation in these funds can vary widely, and the indexation benefit depends on this equity allocation. The fund receives indexation benefits only if the equity allocation lies within the 35 per cent to 65 per cent range.

So, keep a close eye on the fund’s asset allocation to ensure it qualifies for the indexation benefit.

Moreover, these fund’s decision to invest in commodities and real estate do not sit well with us. We have, for long, believed that they are not great investments in the long run.

Dynamic asset allocation (AKA balanced advantage funds)

Technically speaking, these funds can choose to have a 35 to 65 per cent allocation in equities and the remaining in debt. That said, quite a few of them have a higher equity allocation, thereby limiting the choice of conservative investors and retirees.

What got us thinking now is whether it makes sense to do a 40-60 equity-debt allocation yourself.

There are two reasons why:

There are very few mutual funds in the 40-60 equity-debt space.
We also wanted to see if the do-it-yourself (DIY) method is tax efficient.

So, we pitted UTI Children’s Career Fund – Savings Plan with a DIY allocation, and here’s what we found:

Although the DIY asset allocation option has a marginally higher tax liability, its post-tax returns are considerably higher, as shown in the above table.

There are two reasons why:

The DIY investment (40 per cent in a flexi-cap fund and the remaining 60 per cent in a short-duration debt fund) generated 9.2 per cent as against the UTI fund’s 8.35 per cent
The DIY tax liability was not too high compared to the UTI fund because flexi-cap fund gains up to Rs 1 lakh are exempt from tax.

The last word

Clearly, the DIY route makes more sense for retirees or conservative investors looking at a 40 per cent exposure to equities.

However, don’t dive into it headlong. Opt for the DIY option only if you have the knowledge and time to monitor and adjust your portfolio.

Source- Valuresearchonline

March 7, 2024

Tax harvesting can help you save tax. Should you do it?

Did you know profit from equity investments over 12 months old are taxed at 10 per cent? However, gains up to Rs 1 lakh are exempt.

That means if you have a Rs 5 lakh investment and the gain is Rs 1 lakh or below, you can withdraw your investment without paying tax. This is only if your investment is at least a year old.

What is tax harvesting?

The above example is a type of tax harvesting.

Basically, if your investment gains are within the Rs 1 lakh limit, you can sell your investment, realise the gain, and reinvest without paying taxes. This strategy allows you to escape tax.

Is it worth it?

Not really. Because you are saving only a small amount in tax (Rs 10,000 on Rs 1 lakh gain) each year.

This hassle of selling and reinvesting each year may not be worth it, especially for long-term investors. In fact, for larger investors, the savings are even more minute.

We analysed the strategy in greater detail in one of our stories. During the number crunching, we found that an investor who followed tax harvesting each year earned just 0.29 per cent higher post-tax returns than an investor who didn’t.

Are there other issues?

It takes T+2 days (2 working days; not counting the day of the withdrawal request) for the investment money to be transferred to our bank account. But what if the NAV of the mutual fund sees a significant jump in that period? You’ll miss out on that opportunity.

To conclude, the result doesn’t justify the effort, especially for an investor with a bigger investment corpus.

Source- Valueresearchonline

March 4, 2024

These eight stocks have seen a surge in mutual fund investments

When big players such as mutual funds invest in stocks, it often acts as a safety net for investors. Fund houses typically have greater access to information regarding a company’s governance and financial health. This is something usually not available to ordinary investors. Hence, when fund managers place their bets on a stock, it can be a strong indicator that a company has the potential to deliver high returns in the long run.

So, which stocks have caught the fancy of fund managers? Of the 939 companies invested by actively managed funds between September 2023 and January 2024, there were eight stocks that generated robust double-digit returns in such a quick time, had at least 1 per cent weight in a fund’s portfolio and saw a significant rise in interest from fund managers during the period. IREDA was a standout; it delivered a staggering return of 254.1 per cent during this period.

The elite eight

These stocks have seen a sudden spike in interest from mutual funds

Was this surge driven by high returns?

If you check the table, you’d observe that these stocks did not just have a smart upswing but also caught the fancy of different mutual funds over a short span of four months.

That said, whether the increase in stock price and higher mutual fund participation is purely tactical or coincidental is something only time will tell.

Our take

While mutual funds going bullish on these stocks is a strong nudge for a retail investor, you shouldn’t base your investing decisions solely on what other fund managers are buying. Also, one doesn’t know the precise moment fund managers enter and exit a specific stock, making it risky for individual investors to mimic a fund’s portfolio.

So, do your due diligence by understanding a company’s business model and taking account of your long-term financial goals and risk appetite before deciding to invest. If you don’t have the skillset, time or the risk appetite, stick to equity funds.

Source- Valueresearchonline

February 28, 2024

Will I be taxed twice for protecting the money needed to reach my long-term goal?

Most of my money is in equities. Now, if three years before retirement, I move it to a debt fund, I believe I will have to pay capital gains tax as the gains are likely to be more than the basic exemption limit of Rs 1 lakh. But then later, will I be taxed again if I set up a Systematic Withdrawal Plan (SWP) from the liquid fund to my bank account? – Anonymous

Yes. The realised capital gains will be taxed in both instances.

However, paying capital gains tax in both instances does not mean paying twice the taxes. In fact, in each instance, only the gains for the relevant holding period are taxed.

In addition, it always makes sense to switch your money from equity to a fixed-income option two-three years before reaching your long-term goal. That’s because equity is capable of throwing nasty surprises over shorter periods.

Therefore, as you come closer to the goal, it is important to move your money to a less volatile asset class (fixed-income) in a systematic manner.

This is where an SWP (systematic withdrawal plan) can be useful. Diverting your money from equity funds to a fixed-income fund through SWP reduces the risk of exiting at a market low.

Source- Valueresearchonline

February 25, 2024

Should one consider investing in innovative SIPs?

Since the equity market is climbing a new high every other day, would you suggest investing through Smart SIP? – Anonymous

Smart SIPs are an innovative offshoot of a regular SIP.

They are smart because the amount of money that gets invested in equity each month depends on how the markets are faring.

They have an algorithm that decides whether the markets are expensive or cheap based on specific parameters. So, if the algorithm believes the market to be richly valued, only a part of your SIP amount is invested in equity. The rest of it is diverted to a liquid fund, which is a type of debt fund. And if company stocks are trading at a discounted price, more money is invested in equity and less in a liquid fund.

That is broadly how smart SIPs work.

In theory, it looks like a winning strategy. You invest less in equity when they are expensive and seek refuge in a debt fund, and vice versa. But in practice, there is an element of timing the market, which no-one can perfect on a consistent basis.

The power of simplicity

In fact, the plain-old SIP is actually a solution to the problem of timing the market. In this case, you keep investing in the market regardless of whether it is expensive or undervalued. While this may read like a high-risk option, SIPs benefit from rupee-cost averaging.

For the layperson, rupee-cost averaging means that you buy more mutual fund units when stock prices go down and fewer units when prices are high. So, this simple yet effective strategy negates the risk and stress of second-guessing and timing the market. Additionally, it helps you to be disciplined with your investments, a key ingredient to building wealth in the long run.

To summarise, we suggest you stick with regular SIPs and keep it simple.

Source- Valueresearchonline

February 21, 2024

The Demand For CFP Professionals On The Rise As More Indians Look For Professional Financial Advice

According to the Financial Planning Standards Board Ltd. (FPSB) press statement issued on February 15, the global count of Certified Financial Planner professionals (CFPS) has increased by 5.1 per cent compared to the prior year, as more than half of individuals who have never received financial planning guidance plan to seek it within the next three years.

Meanwhile, in India, The CFP professional community has reached a record high of 2,731, a surge of 8.5 per cent. The increase is attributed to the escalating demand for professional financial planning guidance in the country.

“The surge in the number of Certified CFPs in India reflects a growing awareness among individuals regarding the importance of professional financial planning. Factors such as increasing financial literacy, a complex financial landscape, changing demographics, and regulatory changes have contributed to this rise,” says Nita Menezes, Founder and CEO, Financially Smart & MoneyPrastha.

Hrishikesh Palve, director & deputy head, product, Anand Rathi Wealth, elaborates on the reasons why there is an increase in demand for professional finance advice and CFPs.

Rising Disposable Income:

“The number of ITRs filed by people earning between Rs 10 lakh and Rs 25 lakh has increased by 291 per cent. Further, in the range of gross total income up to Rs 5 lakh, 2.62 crore returns were filed in AY 2013–14 and 3.47 crore forms in AY 2021–22, representing a 32 per cent rise. The country’s growing economy and higher disposable incomes have empowered individuals to invest and seek guidance for effective wealth management,” says Palve.

Increased Financial Product Complexity: Complex financial products require expert guidance for informed decisions. There is a vast range of products to pick from for example in equity we have mutual funds, direct equity, portfolio management services (PMS), etc and under debt as a category, we have fixed deposit (FD), bonds, debt mutual funds, etc. Apart from these we also have asset classes such as real estate, gold, commodities, etc, and picking the right of these asset classes can get overwhelming for the investors.

Demographic Shift:

“With a young and aspirational population seeking financial security and early retirement planning, the demand for Certified Financial Planners (CFPs) has surged. The consistent increase in SIP numbers depicts how the investors are focusing on planning for the long term,” adds Palve.

Lack Of Financial Literacy: A significant portion of the population lacks sufficient financial knowledge and skills, leading them to seek professional assistance from CFPs.

Who Typically Seeks Financial Advice From CFPs?

Individuals with growing incomes and complex financial needs are one of the segments who seek financial planning advice. People approaching retirement who need investment and estate planning. Individuals facing major life events like inheritance or career changes, also feel the need for a financial planner. Finally, high-net-worth individuals seeking asset management and tax planning.

What To Look For When Selecting A Financial Planner

“While selecting a financial planner you should consider that he is comprehensive – not just talking about investment but also cover insurance, taxation, estate planning and also focus on your goals,” says Hemant Beniwal, certified financial planner and director at Ark Primary Advisors, a financial planning firm.

Further, the planner should be independent, having his own firm or working for a trusted small firm. “People who are working with banks or bigger institutions are sometimes forced to do things that are not in the best interest of clients. Finally, he should be competent – a CFP is a great validation of competency,” says Beniwal.

It is even more important to make the right decision when choosing a financial planner because nowadays there are a lot of finfluencers dishing out financial advice, something without being adequately qualified to do so.

A few days ago Securities and Exchange Board of India (Sebi) took action against Zee Business guest experts who were allegedly making gains by taking opposite positions in the market compared to their on-air recommendations, which shows that financial advice may not always be unbiased.

In the context of financial planners, CFPs must act as fiduciaries, which means that they must act in the best interest of the client.

“Information and content is available in plenty. Recognizing the true essence of unbiased, unfiltered financial literacy done in the right manner and then having media share the information in the right manner is crucial to investor decision-making, protection, and growth of the industry,” says Dilshad Billimoria, a Sebi-registered investment advisor (RIA) and Managing Director and principal officer, Dilzer Consultants, a financial planning firm.

Hence it is crucial to exercise caution when it comes to finfluencers.” While they may offer financial advice, they often lack the expertise and regulatory oversight that CFPs adhere to. It’s important to verify their credibility and seek personalized advice from qualified financial planners,” says Menezes.

Source- Outlookindia

February 18, 2024

How surety bonds can be made at par with bank guarantees— explained

In a bid to make the surety bond business more attractive, the government is looking at making relevant changes in the Insolvency and Bankruptcy Code (IBC), PTI news reported. While presenting the Union Budget 2022-23, Finance Minister Nirmala Sitharaman said that the use of surety bonds as a substitute for bank guarantees will be made acceptable in government procurement.

What are surety bonds?

Surety bonds are third-party guarantees issued by the insurance companies on behalf of the applicant (i.e. on behalf of whom the guarantee is to be provided)

“Surety Bonds are issued to Beneficiaries and Authorities (i.e. corporations that accept the guarantee). Fundamentally, it is similar to any Non-Fund limits provided by banks to provide Bank Guarantees and LCs,” said Sanjay Kedia, CEO and Country Head, Marsh India Insurance Brokers.

Last week, IRDAI Chairman, Debasish Pandaurged stakeholders in the infrastructure sector to take advantage of offered surety bonds, which complement bank guarantees needed for large-scale funding.

Why Irdai chief stress the need to make use of surety bonds to complement bank guarantees?

IRDAI Chairman, Debasish Panda had mentioned that India is planning to spend almost ₹100 lakh crore+ on infrastructure in the next 5 years, which will generate a need for bonds worth almost ₹90 lakh crore in the next five years.

As per Sanjay Kedia, the current banking setup would urgently need additional support from alternative financing mechanisms to support such a demand for capital of this scale.

The IRDAI issued the Surety guidelines in 2022 which present a significant opportunity for Indian general insurers to complement the bank guarantee mechanism used by banks by providing alternative options for funding, he added.

Purpose of surety bonds

The purpose is to provide corporates an alternative for Non-Fund limits, which are more likely than not, uncollateralized and free of margin money/cash margins

As per Head, Marsh India, in some scenarios, the surety company can also provide a conditional guarantee, where the beneficiary is the private corporation and the chances of the unfair calling of the guarantee are minimised.

Benefits of surety bonds

Sanjay Kedia, CEO and Country Head, Marsh India listed four benefits of surety bonds

1)Diversified source of non-fund based limits

2)Easing of liquidity pressures

3)The ability for companies to participate in more orders

4)Project owners enjoy participation from a larger bidding group which helps them get a fair value for the bid

Source- Livemint

Why you must have a nominee

73 per cent of demat accounts don’t have a nominee!

Steps to add or update a nominee (Mutual fund investments)

Steps to add or update a nominee (Demat account)

#1 Seek adequate insurance

#2 Control your expenses and plan your savings

#3 Build an emergency fund

#4 Plunge into the world of investing

Moneyback, ULIP, pension plans = Not good

Don’t get missold

Balanced hybrid funds

Multi-asset funds

Dynamic asset allocation (AKA balanced advantage funds)

The last word

What is tax harvesting?

Is it worth it?

Are there other issues?

The elite eight

Was this surge driven by high returns?

Our take

The power of simplicity

Rising Disposable Income:

Demographic Shift:

Who Typically Seeks Financial Advice From CFPs?

What To Look For When Selecting A Financial Planner

What are surety bonds?

Why Irdai chief stress the need to make use of surety bonds to complement bank guarantees?

Purpose of surety bonds

Benefits of surety bonds

Varanasi | Prayagraj | Raipur | Bhadohi | Siliguri

Customers buy a product but pay for the experience

Subscribe for Updates

Useful Links

Quick Links

Important Links

Contact Us

Customers buy a product but pay
for the experience