DV-Mint – Page 8

October 21, 2023

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

October 18, 2023

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

October 14, 2023

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

October 11, 2023

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

October 7, 2023

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

October 3, 2023

Real volatility, false risk

Nowadays, tomato prices are volatile, but the stock market is not. At least, that’s what the headlines say. Are they correct? What is the meaning of the word volatility? The word appears to have three related but distinct meanings. Unfortunately, the one that is most commonly used is the wrong one.

Outside the financial markets, volatility means, as a dictionary puts it, undergoing frequent, rapid, and significant change. For example, the weather can be volatile. In the financial markets, technically, it means the amount of variation in a series of traded prices of anything over time. You can get even more technical and talk about the dispersion of returns for a security or an index. High volatility means that the price may change dramatically over a short time period in either direction. Low volatility means that it will not fluctuate dramatically but change at a steadier pace. Note that there is no direction of movement implied in either of these definitions, either the financial or the non-financial ones.

The third definition of volatility is the common and wrong one: Volatility means that the price of something is moving in a bad direction. In the media and social media, volatility means that bad things are happening to the price of something. It’s a ridiculous definition, but it’s the most common one. Technically, when the price of a stock increases sharply, it increases the volatility. However, I doubt whether anyone has ever used the word volatility to describe a sharp increase in a stock price. The word is only used for bad things. Funnily enough, in some contexts, that can mean a price rise. In the current tomato headlines, volatility means a rise in prices!

But let’s talk about genuine volatility. A lot of savers will always choose the lowest possible volatility in the asset class they choose for their savings. The massive preference for fixed-income assets like bank FDs, PPF, and other sovereign deposits that we see are all strong evidence of this. Even within market-linked volatile asset classes, lower volatility is a characteristic many investors chase. Within equity mutual funds, people will choose hybrid funds or only conservative large-cap funds and so on. All this is fine–I’m not criticising this. In fact, I keep a tight check on the volatility of most of my investments.

However, and this is something that few investors appreciate, lower volatility is not free. It has a cost. Perhaps that sounds self-contradictory to you. After all, we have been conditioned to believe that volatility means losses and lower volatility is good. That’s not true. Choosing the right kind of volatility can always boost your returns. To see the truth of that statement, compare equity mutual funds with bank fixed deposits. When you choose lower volatility, you reduce your returns. You are paying the price for stability — volatility in good quality investments means that your investment fluctuates but, on the whole, rises faster.

However, do you actually need the lower volatility? That question is important because volatility is transient. For a quality investment, prices fall but then rise again. The fall in value means that it will soon rise even faster. For investments that have to be held for a long time, paying the price for lower volatility makes little sense. If you can withstand temporary volatility, you should happily and enthusiastically embrace volatility — that’s the road to high returns.

Many years ago, Warren Buffett said, “Charlie and I would much rather earn a lumpy 15 per cent over time than a smooth 12 per cent.” So should you and I. One doesn’t have to be as rich as Buffett and Munger to prefer a lumpy but higher return. One just has to be as sensible and have a long-term view.

Source- Valueresearchonline

September 28, 2023

Five SIP facts you may not be aware of

This story is fitting for a new as well as an intermediate SIP investor. And with SIPs to the tune of Rs 14,000 crore being pumped into the market, we thought the timing was right to know more about SIPs too. So, let’s get started.

1. The best time to start SIP is now

If you have heard this before, skip to Point two. But those who haven’t or are currently in the start-now or start-later confusion, here’s why you should not delay your SIP further: the markets are in constant flux; something or the other keeps happening. If you keep procrastinating, nothing good will come out of it.

On the other hand, SIPs, by design, are meant to help you navigate the ups and downs of the market, thanks to rupee cost averaging.

Rupee cost averaging? Here, your SIPs buy more stocks when they are available at a lower price and buy less when stock prices become expensive. That’s what all investors want, right?

Sure, you will go through a rollercoaster of emotions, as seen in the table above, but you will come out the other side better than you were before, as seen in the above Sensex chart.

Hence, start your journey now.

2. Never pause or stop your SIPs at a market high

Stopping or pausing your SIPs should be for valid reasons and not because you wish to be clever with your money.

Let’s assume both Mr A and Mr B have been investing in HDFC Flexi Cap Fund with a monthly SIP of ₹10,000 for the last 15 years. Mr A keeps investing irrespective of how the market is performing, whereas Mr B pauses his SIPs for three months whenever the Sensex hits an all-time high. Care to guess who is cleverer? Let’s find out.

Too clever for your own good?
Pausing SIPs at market high may yield marginally higher returns, but at the expense of a smaller corpus

Monthly SIP: Rs 10,000 for last 15 years
Mr A never stops SIP
Mr B pauses SIP for three months during Sensex highs

Mr B earned a mere 0.13 per cent higher returns for being clever. Worse, he invested Rs 4.5 lakh less and ended up with a lower corpus by 11.46 lakh.

Therefore, you win no points for trying to be clever with your SIPs. Just keep at it; stay consistent.

Plus, Mr B will always have to correctly guess the market’s future movement. What if he, like all of us, gets it wrong most of the time? The final returns would be even lower!

3. Don’t try to be tactical with your SIP amount

Let’s say you keep doing an SIP of Rs 10,000 for 10 years. It will not make any meaningful difference whether you increase your SIP to Rs 15,000 when the market crashes or decrease it to Rs 5,000 when the markets rally.

That’s because your SIP amount gets increasingly insignificant compared to the corpus you have accumulated in the long run. See the table below, and you’d observe how the weight of an SIP instalment reduces over time.

4. Be patient with your SIPs. Time in the market is important

The most important factor with your SIPs is time. The more time you invest, the bigger your corpus will get. Let’s see how much wealth you can create by 60 if you start a Rs 10,000 monthly SIP at the age of 25 years, 30 years and 35 years.

The power of time in the market
Start early and witness the magic of compounding in your later years

The numbers in the above box tell you everything. The younger you start, the better it is.

5. It matters when you need the money

Timing matters for SIP investors.

Say, you kept doing your SIPs religiously, and when it was time to withdraw, the market crashed. Your overall returns would be hit too.

But if the markets rally, so would your overall wealth, as seen in the table below.

Climax gone wrong
It can all go wrong if you plan to withdraw when markets crash

SIP: Rs 10,000 per month in HDFC Flexi Cap Fund (Regular)
Duration: 10 years

Fortunately, there’s a solution to ensure your hard-earned investment is not wrecked at the last minute because of the market: Systematic withdrawal plan (SWP) and proper asset allocation .

Source- Valueresearchonline

September 24, 2023

Know about Section 195 – Income Tax for NRIs in India

The law says that if you earn income, you must pay income tax. But if you do not fall in the tax bracket or have paid excess tax, the Government will refund you, but that will come later; after you have paid income tax.

One mechanism that the Government has in place to ensure tax payment and curb evasion is TDS or Tax Deducted at Source. It is a basic form of income-tax collection; you may have seen such deductions reflected in your salary slip. TDS is also applicable on a range of income types, including interests earned and commissions received.

The Income-Tax Act, 1961 has specific sections to address the issue of TDS for different types of earnings – Salary (Section 192), Securities (Section 193), Dividends (Section 194), interest other than interest on Securities (Section 194A), lottery wins (Section 194B) and even prize money on horse racing (Section 194BB).

And then there is Section 195.

The NRI Tax

Section 195 spells out the tax rates and deductions on payments made to Non-Resident Indians (NRIs), who are required to file tax returns in India for income received or accruing or arising in India or deemed to accrue or arise in India. But this can be a tricky area. For example, TDS does not come into play when a Mutual Debt Fund pays up the proceeds of redemption to a Resident Indian, but it does not mean an NRI is exempted. This is where Section 195 comes into play – it identifies the key areas pertaining to tax for NRIs.

As is done with Resident Indians, the deduction is to be made at the time of crediting or making a payment, whichever event occurs earlier; this includes crediting in Suspense Accounts or any other account where the payment is credited.

While, Section 195 does not prescribe any threshold limit, and the TDS amount has to be computed on the entire amount payable. The onus of making the deduction falls on the payer – i.e. anyone making the payment to an NRI, irrespective of whether the entity is an individual or a company/organisation.

TDS Rates

What this means is that the payer needs to be aware of TDS rates under Section 195:

Income from investments: 20%
Long-term capital gains in Section 115E: 10%
Income by way of long-term capital gains: 10%
Short-term capital gains (as per Section 111A): 15%
Any other income by way of long-term capital gains: 20%
Interest payable on money borrowed in foreign currency: 20%
Royalty from Government/Indian concern: 10%
Other royalties received: 10%
Fees for technical services from Government/Indian concern: 10%
Any other income (e.g. rent on property owned): 30%

Surcharge and education cess, which must be statutorily added at the prescribed rate, can be ignored if payment is made as per the Double Tax Avoidance Agreement (DTAA).

NRI Exemptions

As stated earlier, computing TDS for NRIs can be tricky; for instance, Section 195 does not mention salary paid to an NRI in India; this is instead covered under Section 192. Sometimes, an NRI may have to be reimbursed by cheque payment for out-of-pocket expenses; this is not covered under Section 195 as there is no income element in the process.

Also, under Section195 (3) and Rule 29B, an NRI can apply for a nil-deduction certificate, provided the following conditions are fulfilled:

The NRI concerned is up-to-date on tax payments and tax returns
He/She has not defaulted in payment of tax, interest or penalties
He/She has been carrying on business in India for at least five years without a break, and the value of his/her fixed assets in India exceeds Rs 50 lakh.

Such certificates are valid until their expiry or cancellation by the assessment officer.
Also, if as an NRI, you are looking for tax breaks, you could look at the account categories that ensure that. Let us say you have an NRE Account with ICICI Bank; funds lying in such accounts will not attract any tax.

However, if you have an NRO Account, the interest earned on it would be taxable at the rate of 30%, in addition to the applicable cess and surcharge.

TDS Procedure: To deduct TDS under Section 195, the payer should first obtain Tax Deduction Account Number (TAN) under Section 203A, by filling Form 49B, available online.

PAN is a must for both the payer and the NRI concerned, who must be told of the deduction and the TDS rate. Also, the deducted amount has to be deposited by the 7th of the following month through authorised banks or the income-tax department.
Following this, TDS return can be filed electronically by submitting Form 27Q; this has to be done on specific dates: on Jul 31 (for the first quarter; Oct 31 (for the second quarter); Jan 31 (for the third) and May 31 (for the fourth).
The TDS certificate in a specified format i.e. Form 16A (Certificate of Deduction of Tax) can be issued to the NRI within 15 days of due date of filing TDS Returns, as given above.

Source- ICICIBANK

September 21, 2023

How to retire at 45

Gokul, a dynamic 32-year-old project manager at a prestigious IT firm, has charted a clear course for his future: early retirement at 45. His vision extends beyond the confines of his corporate career, and wants to start his own blog.

At the heart of his plans is his family – his wife, who manages the household and their five-year-old son. As the sole breadwinner, Gokul brings home a monthly salary of Rs 1.2 lakh, which comfortably covers their monthly expenses of around Rs 80,000 and leaves enough room for life’s little luxuries. But given his circumstances, can he afford to retire early? Let’s find out.

His son’s higher education

Parents want to provide their children with the best education they can. And Gokul is no different. He wants to allocate Rs 15 lakh for his son’s higher education. However, given the average inflation rate of 6 per cent in India, the same Rs 15 lakh course will likely balloon to around Rs 32 lakh in 13 years.

Fortunately, Gokul has the means to cover this cost, as he has accumulated Rs 7.5 lakh in a few tax-saving mutual fund schemes . This amount will grow to the desired amount by the time his son gets out of school, assuming his investment increases 12 per cent each year.

Calculating retirement corpus

Since Gokul has a monthly expense of Rs 80,000 and wants to retire by 45, he’ll need to save a little more than Rs 5 crore. We arrived at this figure based on three assumptions:

That he and his wife live until 85.

The average inflation rate in their post-retirement years is 6 per cent.

That they ensure their nest egg (roughly Rs 5 crore) grows at 9 per cent during their retirement years.

A Rs 5 crore retirement kitty is a formidable sum to accumulate in the next 13 years, but we dived head-long to see if this can be achieved. When we pored over Gokul’s current investments, we found he has a provident fund of Rs 7 lakh, and a monthly EPF contribution of Rs 7,200 – an amount matched by his employer.

Assuming EPF grows 8 per cent each year and Gokul’s monthly contribution rises 10 per cent, he would amass Rs 60 lakh by age 45. In addition, he should put his savings to work for him. Since he’s saving Rs 40,000 each month, it would be ideal if the money is invested in one or two flexi-cap funds, which are diversified equity mutual funds .

That’s not it. (The ambition of retiring early comes with a price attached, after all). Gokul will have to step up his investment by 10 per cent each year. If he can successfully do this and the flexi-caps annually grow at 12 per cent, he’d build a Rs 2.19 crore corpus. But even then, Rs 5 crore seems like a long shot.

Our suggestion

If Gokul and his wife can put the squeeze on their monthly expenses by just Rs 10,000 each month, it will work wonders on two fronts:

His retirement corpus will reduce to Rs 4.38 crore.

He can start investing the additional money he saves in flexi-cap funds . Meaning, he can start investing a total of Rs 50,000 every month.

Do this, and he retires by the age of 45! Combining the EPF and flexi-cap money will help Gokul achieve his retirement target.

The magic of equity

Gokul should invest in flexi-cap funds stems from the time-tested theory of equity being a true wealth generator in the long run. Contrary to popular belief, the risk quotient of equity flattens over the long term. ‘Long term’ is the key here.

On the other hand, if Gokul invests in debt-oriented funds, it would be an uphill task – a polite term for impossible – to scale his retirement peak.

Parting shot

Once Gokul retires, it is important to transfer a certain portion of his money from flexi-cap funds to the more conservative debt-oriented fund. Because, during retirement, capital preservation is of utmost importance.

Having said that, he shouldn’t go overboard with debt-oriented funds. He still needs to keep 35-50 per cent of his money in an equity fund. Flexi-cap remains a good option even at this point in time. This will ensure his retirement nest egg doesn’t exhaust during his lifetime.

Last but not least, Gokul should watch his withdrawal rate. Limiting annual withdrawals to 4-6 per cent of the retirement corpus will eliminate risks in future.

Keep in mind

Gokul should have life insurance and medical insurance. Consider critical illness riders.

He should have an emergency fund that covers six months of expenses. For this, use a combination of a liquid fund and a sweep-in deposit.

Source- Valueresearchonline

September 17, 2023

Investing for women

The world is changing. So is India.

We’re in an era of growth. And never before in the history of finance and economics have women been more instrumental. While women are increasingly taking charge of their finances, they are still far behind where they can be.

So, let’s see how our women can invest and grow their money better.

Myths around women and money

One of the common reasons why many women shy away from investing is the number of myths surrounding women and finance.

The biggest of them is that women do not understand finance or do not have the mathematical abilities needed to make the right decisions. Another myth is that women are not good at managing money and they are risk-averse.

On top of everything else, the belief that women love to splurge is one thing that makes many people believe that women do not make good investors.

What’s the truth

A lot of these myths, in reality, are simple gender biases. One doesn’t need a lot of background in Maths and Statistics to make wise financial decisions.

Although there is no research available in India, some reports from the developed economies suggest that women end up spending more on essential family needs like food, clothing, medical expenses etc. This leads to lower surplus investable income with them, hence the myth that they spend more.

And yet, despite the conservative household budgets, our women, through generations, have been managing to save money. All that needs to change for women to generate wealth is to put this money in suitable instruments.

Financial decisions are not rocket science. Common sense is as instrumental to finance as any other decision-making process, and women have it in plenty and then some. As far as the more technical aspects of investing are concerned, there’s always expert advice available, just like it is for men.

How is the scenario changing

For women to be in charge of their wealth, the game has to change on multiple levels. Change has already begun and is visible to an extent.

For instance, at the national level, India’s recent economic growth has been nothing short of a perfect winning-against-all-odds script. Organisations like the IMF and the World Bank are raving about India’s resilience even in the currently chaotic world.

This means more opportunities for women to invest.

On the other hand, the push behind women’s entrepreneurship, STEM education, diversity and inclusion at workplaces, and women’s safety, has enabled them to earn more.

The latest AMFI data indicates that the number of women between 18 and 24 who invest in mutual funds has grown more than four times (62 per cent annualised growth) from December 2019 to December 2022.

Similarly, the number of women investors in the 25-35 age bracket has doubled (grew at 33 per cent) over a similar period. In contrast, the older age groups have grown relatively slowly, at 11 per cent annualised growth.

How to start your investment journey

If you still haven’t started investing, our first advice is to begin. There is no better time to invest than now. So, just start.

Also, do not hesitate to seek expert advice or professional support when choosing the right investment instruments, specially in the early stages of your journey.

Remember, the basic principles of investing and the larger economic framework of the country remain the same for men and women. So, any piece of advice on investment remains as valid for your investment journey as it is for your male counterparts.

However, here are some simple steps summarised to start your journey.

Start investing with discipline. You can start an SIP with as less as Rs 500, and do your KYC and payments online.

Stay regular. Don’t lose tempo, get bored, or forget to keep investing.

The next step in investment is to plan your goals. Your goals can be either short-term or long-term. For instance, retirement is a long-term goal, while buying a car can be a short-term goal. In a long-term horizon, you invest regularly for five years or more. A short-term investment horizon is one to three years.

Choose the right fund. This critical step may look complicated, but this is no rocket science.

A debt fund is a good choice if you’re investing for a short-term goal. For any long-term goal, an equity fund is the best option. It balances your risk and returns well.

If you’re a first-time investor in an equity fund, you will initially benefit from an aggressive-hybrid fund. It reduces your risk and lets you witness the value of systematic investing over two to three years.

Once you get a hang of the market, you can quickly move to pure equity funds, say a flexi-cap fund, for good returns.

Increase your SIP gradually. If you’re a working woman, keep increasing your SIP as your earnings increase. If you’re a homemaker, you can still invest an extra amount whenever you get cash gifts, inheritance etc.

Remember, your key to success is the consistency of investment so that you can create an emergency corpus or a nest egg for your old age.

The message is simple.

The fundamentals are not gendered. So, your journey doesn’t have to be stereotyped, either. Women can manage finances; they do manage finance. And successfully so.

The other key principle to note is that there’s saving, and there’s investment. And, if you want to grow your wealth, you must begin investing now.

India is on the cusp of something great. The next 25 years are expected to make the country reap the magical benefits of the last 75 years of effort. And there’s no reason why women should not benefit from this golden period!

Source- Valueresearchonline

India is Cricket and Cricket is India

Gain for some, loss for others

Flight and hotel rates surge

World Cup impact on consumption across categories

Live below your means

Save first spend later

Diversify income streams

Invest wisely and early

Debt management is the key

Set clear financial goals

Stay informed and educate yourself

Be patient and persistent

Review and adjust your plan regularly

The investing puzzle

Behavioural issues

Managing risks

Why Financial Planning Is a Big Deal

Financial Planning in India – The Reality Check

Benefits of Getting Your Financial Act Together

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

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

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

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

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

1. The best time to start SIP is now

2. Never pause or stop your SIPs at a market high

3. Don’t try to be tactical with your SIP amount

4. Be patient with your SIPs. Time in the market is important

5. It matters when you need the money

The NRI Tax

TDS Rates

NRI Exemptions

His son’s higher education

Calculating retirement corpus

Our suggestion

The magic of equity

Parting shot

Keep in mind

Myths around women and money

What’s the truth

How is the scenario changing

How to start your investment journey

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