You got Rs. 10 lacs with you. You know you would need the money or at least some portion of it within 3 years. Where would you invest that money? A Bank Fixed Deposit or a Debt Mutual Fund? Let's assume debt mutual funds have as low risk as FDs and FDs are as flexible as debt MFs. The only difference is in tax treatment. And that both return 8%. After 1 year, you … [Read more...] about Need money within 3 years: Bank FD or a Debt Mutual Fund?
If you are an investor in debt mutual funds, do keep an eye on the size of your fund scheme. It is a red flag if the size of your debt fund scheme has gone down sharply. If your fund scheme has experienced sharp outflows, you need to investigate. What is the problem if the size of my debt fund scheme has gone down sharply? If your fund scheme is experiencing fund … [Read more...] about A Sharp Decline in Debt Mutual Fund Size is a Red Flag
I regularly write against mixing investments and insurance. I highlight issues in the cost structures of various investment and insurance combo products. Regular readers would know that I like mutual funds for investments. However, I must concede that the mutual fund companies do not really smell of roses. I have written about many issues with their intent and communication to … [Read more...] about Mutual Funds: The Expense Ratio Trick
The Finance Minister presented the final budget for FY2019-2020 on July 5, 2019. Here are the key highlights of the budget. Income Tax slabs unchanged; Surcharge increased for the rich There has been no change in the income tax slabs. There is a sharp increase in surcharge for those earning more than Rs 2 crores. We must understand the impact of the surcharge … [Read more...] about Final Budget 2019: Taxes for the Rich, Benefits for Buyers of Homes, Electric Vehicles
SEBI, in June 2019, made a few changes to investment guidelines and valuation of securities in debt mutual funds. These changes enhance credit and liquidity profile of the liquid funds. At the same time, these changes can make liquid funds a bit volatile. Let’s try to understand the new SEBI rules. #1 Liquid funds are now required to hold 20% in liquid … [Read more...] about Liquid Funds to have exit load and will now be a bit volatile
Debt mutual funds are again in the news. On June 4, 2019, DHFL could not make the interest payment on one of its bonds. It says that it will pay in another week. Does not matter. Even the slightest delay is considered a default. As per extant rules, even if a default happens in one security by DHFL (not the one held by the fund scheme), the value of the all the bonds from … [Read more...] about The DHFL Mess: Learnings and What should you do?
When we plan for a goal, we assume a rate of return on investments for the goal and plan investments accordingly. Picking up the long-term average return is a rational choice. Long term averages are fine (even though long term averages can also change). However, the sequence of returns matters too. For the same level of long-term return, the actual output can be very … [Read more...] about How the Sequence of returns risk affects your Financial Planning?
You start with a certain asset allocation mix. At regular intervals, you bring your portfolio to original asset allocation mix. Let’s say you have Rs 20 lacs to invest. You have two asset classes Equity and Debt. You invest Rs 10 lacs in Equity and Rs 10 lacs in Debt. Asset allocation of 50:50. During the next 1 year, Equity gives 20% returns while Debt gives 5% … [Read more...] about What is Portfolio Rebalancing? How it helps?
As investors, we like to compare different investment products while making an investment choice. Most of us compare different products on their returns. We look at 3-year, 5-year, 10-year returns. We look at rolling returns for various horizons. That is good. However, we must also look at the way the performance is reported. You may not get what is reported. In this post, … [Read more...] about Mutual Funds, ULIPs, NPS, PMS: How is return performance reported?
Investors have different levels of risk tolerance. Some don’t bat an eyelid even if their portfolio nosedives by 25-30% while others worry even if their portfolio is down just half a percent. The first set of investors is likely made up of experienced investors while the second category of investors has a low level of risk tolerance. How should such investors with low risk … [Read more...] about How to invest if you have a low risk appetite?