In simple words, ETF or Exchange traded funds are index funds that trade on stock exchanges like shares. An ETF allows you to buy and sell an entire index like a stock. ETFs provide diversification with a single investment and limited amount of capital and at a small cost. Let’s say you want to take exposure to Nifty 100 benchmark. To be able to do that, you will have to … [Read more...] about PFP Primer: What are ETFs?
Debt mutual funds are not without risk. When a default or a rating downgrade of an underlying security, NAV of the fund takes a hit. Not just that, it poses an additional problem. In such cases, some of the more knowledgeable investors can benefit at the expense of less aware investors. SEBI has come out with a circular to address the issue. What is the issue if there is a … [Read more...] about What is Side Pocketing in Debt Mutual Funds? How it helps?
You invest Rs 10,000 on January 1 every year for 20 years. In the first case, you earn a constant 6% p.a. for the first 10 years and 12% for the last 10 years. In the second case, you earn a constant 12% p.a. for the first 10 years and 6% p.a. for the last 10 years. Will you end up with the same corpus in both the cases? After all, Compounded Annual Growth Rate (CAGR) is the … [Read more...] about How do you calculate your Mutual Fund Returns: CAGR, IRR or XIRR?
The topic of this post may seem odd, given what I regularly write about ULIPs. I advocate mutual funds over unit-linked insurance plans (ULIPs) and for good reasons. I do not deny bias though. I wrote a detailed post comparing mutual funds and ULIPs and showing why I prefer mutual funds over ULIPs, despite ULIPs enjoying far superior tax treatment as compared to mutual … [Read more...] about How to select the Best ULIP (Unit Linked Insurance Plan) for your portfolio?
SEBI has specified many categories of debt mutual funds. In this post, let’s talk about money market funds. I will address common questions about money market mutual funds in this post. Where do Money market funds invest? What are money market funds? Who should invest in money market funds? How much return you should expect? What you should keep in mind while selecting a … [Read more...] about What are Money Market Mutual Funds?
In an earlier post, I looked at how you can select a liquid fund. In this post, let’s look at how you can extend the same argument to selecting debt mutual funds for your portfolio. The pointers used in liquid funds can be extended to any debt fund. However, since we are looking at a much wider choice, there are a few additional aspects that must be considered. In the case of … [Read more...] about How to select a Debt Mutual Fund for your portfolio?
Over the past few years, we have seen debt mutual funds being promoted as a replacement for fixed deposits. I do not deny that there are a few clear benefits and debt mutual funds may provide better tax-efficient returns as compared to bank FDs. However, the return of principal is more important than return on principal. And the events of the past few years (ILFS default … [Read more...] about How to select a Liquid Fund?
In an earlier post, I discussed how NRIs can invest in mutual funds and the challenges they face while investing in India. In this post, let’s look at mutual fund taxation for NRIs (non-residents). NRI Mutual Fund Taxation: How is it different from residents? There are a few minor differences. #1 Long-Term Capital Gains Tax on Debt Funds For … [Read more...] about NRI Mutual Fund Taxation: How NRI Mutual Fund Investments are taxed?
One big advantage that ULIPs have over equity mutual funds is that the maturity proceeds from ULIPs are exempt from tax. On the other hand, the long-term capital gains on the sale of equity mutual funds are taxed at 10%. LTCG on sale of debt mutual funds is taxed at 20% after indexation. In an earlier post, I highlighted why I still prefer mutual funds over ULIPs. I don’t deny … [Read more...] about If you are old, avoid ULIPs
In one of my earlier posts, I discussed how you can avoid distribution costs by investing in direct plans of mutual fund schemes. I also established the quantum of long-term savings you stood to make by investing in direct plans of MF schemes. To find out more about direct plans, read my article in Business Standard about direct plans of mutual funds here. In this post, I will … [Read more...] about Why NAV of Direct Plans is higher than Regular Plans of MF schemes