fbpx
Search for:

What happens to my ‘regular’ plan units when switching to a ‘direct’ plan?

 

What will happen to my units with the ‘regular’ plan after I switch to the ‘direct’ plan? Will all units be converted to the direct plan as per the NAV on the switch date or as per the previous SIP dates? – Gajanan G. Khandkar

 

Switching from a ‘regular’ plan to a ‘direct’ plan in mutual funds is similar to moving your investment from one fund to another. While the money doesn’t move through your bank account, it is treated as selling your units in the regular plan and buying new ones in the direct plan. This means you will have to pay capital gains tax and perhaps an exit load.

 

But do remember that when switching funds, while the investment value stays the same, the number of units might change due to the different NAVs of the ‘regular’ and ‘direct’ plans. Let’s simplify this by giving you an example: Say the NAV of the ‘regular’ plan is Rs 10, and you hold 10,000 units. Your total investment in the ‘regular’ plan would be Rs 1 lakh (10,000 x Rs 10).

 

Now, let’s assume that on the date of switching, the NAV of the ‘direct’ plan is Rs 11. In this case, while the investment amount of Rs 1 lakh remains the same, the number of units allotted to you will be slightly different. It will be 8,333.33 units (Rs 1 lakh divided by Rs 11).

 

Source- Valueresearchonline

India’s retail inflation to remain above 5% till May: SBI Research report

 

India’s retail inflation gauged by the Consumer Price Index (CPI) is expected to remain slightly above 5 per cent till May before declining towards 3 per cent in July, according to SBI Research. The retail inflation print is expected to stay below 5 per cent beginning November till the end of the financial year 2024-25.

 

Retail inflation in India eased a tad in February to 5.09 per cent from 5.10 per cent the prior month, due to the deceleration of prices in all categories except food.

 

Within food inflation, protein items (meat, egg) inflation increased exorbitantly (in the range of 400-500 basis points) in February month as compared to January.

 

Vegetable prices also increased month-on-month by 300 basis points to 30.2 per cent. Core CPI declined to 3.37% – a 52-month low and reached the level of Oct-19.

 

The retail inflation was at a four-month high of 5.69 per cent in December.

 

The retail inflation in India though is in RBI’s 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

 

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

 

At the latest monetary policy meeting, the RBI pegged India’s retail inflation projections for 2024-25 at 4.5 per cent, with Q1 at 5.0 per cent, Q2 at 4.0 per cent, Q3 at 4.6 per cent, and Q4 at 4.7 per cent, with risks evenly balanced.

 

SBI Research said spatial heatmap shows that the largest weighted contribution to the current reading of retail inflation came from Maharashtra and Uttar Pradesh.

 

“With moderate fuel prices, inflation is currently being driven by food price dynamics. Looking ahead evolving food prices will determine domestic inflation,” said SBI Research said in its Ecowrap report.

 

The report suggested Department of Consumer Affairs publish a detailed list of vegetable prices other than only TOP (tomato, onion, potato).

 

“This will make it easier to fathom the direction of vegetable price impact on CPI (retail inflation,” it said.

 

In recent months, vegetable prices in CPI have been driven mostly by prices of other vegetables in the basket apart from TOP, the Ecowrap report noted.

 

“Based on all the scenarios, the current repo rate at 6.5 per cent, looks ideal. We can expect the first rate cut only in Q2FY25,” it added.

 

Source- Economictimes

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:

 

 

  • 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

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:

 

  1. 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.
  2. 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

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

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

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

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

About Us

Deeva Ventures, originally established in 2008 as Deeva Agencies, is a top-notch financial company offering a wide range of financial products and delivering tailor made financial services. At Deeva, we believe developing a plan with a professional advisor is one of the most powerful steps you can take in life. Read More…

Useful Links

Quick Links

Quick Contact

Registered Office

AMFI – Registered Mutual Fund Distributor : 109820 | EUIN: E176669 | CIN  No: U70102UP2015PTC073452

© Copyright 2023 www.deevaventures.com. All Rights Reserved.
Disclaimer | Disclosure | Privacy Policy | T & C | Sitemap  | DVPL Go