How you can protect your savings from inflation?

What is a Balanced Advantage Fund? A balanced advantage fund is a fund that can invest 0-100% in the equity market or 0-100% in the debt market dynamically as per the prevailing market condition. For example - If a fund manager finds that the price of the equity market has gone up, he will tilt the portfolio more toward the debt market. Likewise, if the equity market trades at a discount, then the fund manager can tilt/shift the portfolio toward the equity market.  The valuation is the internal process of the fund. Based on valuation, the fund manager can take the call. This way, the fund manager can take the opportunity and change the asset allocation. The fund manager can go aggressive in the equity market or can also decide to play conservatively to reduce the portfolio's volatility. The aim is to minimize the portfolio's downside risk and maximize the returns.  Who should invest? Investors who are looking for long-term wealth creation. Investors who are not comfortable with the market volatility. Investors who do not want to face high volatility and looking for equity-like returns. Investors who are unsure which type of fund they should invest in, whether in the equity or debt-oriented fund. Risk-averse equity investors with an investment horizon of more than three years. Additional read: Financial mistakes to avoid Why should you invest? A balanced advantage fund is a dynamically rebalancing fund between two asset classes, i.e. equity and debt. It has the complete flexibility of rebalancing from 0-100% in both asset classes. It provides you with better risk-adjusted returns. It manages the equity market volatility and provides stability in the portfolio by diversifying the portfolio into the debt market. It offers you equity-like returns, which help your portfolio to grow at a much faster rate than debt funds and also helps you to beat inflation. Minimizes the downside risk and provides scope for growth by investing in the equity market. When should you invest? When the volatility in the equity market increases you do not want to have such high exposure to the prevailing volatility. When you want equity-like returns but do not want to face high liquidity. First-time mutual fund investor looking for long-term wealth creation. Conclusion Try to allocate some portion of your portfolio towards a balanced advantage fund if you want to reduce the portfolio's volatility. A balanced advantage fund is like a season fund. FAQs What is a Balanced Advantage Fund? A Balanced Advantage Fund can dynamically invest 0-100% in either the equity or debt market, depending on market conditions. Who should consider investing in Balanced Advantage Funds? Investors seeking long-term wealth creation, those uncomfortable with market volatility, and those unsure about equity or debt-oriented funds can benefit. Why invest in Balanced Advantage Funds? These funds offer flexible asset allocation, better risk-adjusted returns, and stability by diversifying into the debt market. They provide equity-like returns, growth potential, and risk mitigation. When is the ideal time to invest in Balanced Advantage Funds? Consider these funds when equity market volatility increases, and you want equity-like returns without excessive risk. What is the aim of Balanced Advantage Funds? The aim is to minimize portfolio downside risk, maximize returns, and adapt to market conditions, providing both stability and growth.

Both life and wallet will never be the same once you decide to have a baby. No event in your life will signify financial change quite the way this one does, from the first prenatal appointment to the day of college graduation (and beyond). 5 financial things to consider before child planning 1. Create a budget Before you start child planning, you need to have a budget in place. You and your partner may need to create a realistic budget based on your expenses and your streams of income. Once you know how much you can afford to spend, you will be able to tackle the costs easily. A new child is a new family member that needs space! So if you need extra space once the baby is born, figure out what kind of home you can afford, whether it's a slightly larger apartment, a warm cottage, or a pricey house. Will you want the latest baby things or your sister’s passed-on ones? Think about what sort of child care would you require and get candid with your expenses before you start making any purchases. Money Management Tips for Homemakers Read More 2. Costs associated with birth As new parents, you need prenatal vitamins, alternative therapies, labor and delivery alternatives, and screening tests. Give yourself enough time to change or upgrade insurance plans should you need more comprehensive coverage. Good health insurance is vital in this economy. Hospital bills, medical fees, and maternity costs can be high. According to estimates from the industry, a straightforward delivery could cost between Rs 50,000 and Rs 70,000, but a private specialty hospital could charge up to Rs 2-3 lakh. A cesarean delivery could result in a cost rise of up to Rs 4-5 lakh. Before having a kid, you should make financial arrangements for the costs associated with the delivery and child care. 3. Consider maternity leave The vast majority of Indian employees are not entitled to paid family leave. If the mother is employed, you might need to think about taking a lengthier (unpaid) maternity leave or a sabbatical for a year or two. This can be a huge financial loss for families that rely on both streams of income. Paid parental leave is not always an option. Find out if your workplace offers paid leave for new parents and if there are any policies in your favor that you can utilize. Determine the number of weeks covered and the proportion of your salary that is used. Do you have to use your sick and vacation days first? If you don't have access to paid time off or you're going to take more unpaid time off, you might want to cut costs or rely on your savings. 4. Purchase life and health insurance You'll want your child to be stable financially if something were to happen to you or your partner. A life insurance policy can assist in paying for things like child care, housekeeping, cooking, and more. Purchasing maternity insurance is the first action you can take to cover maternity costs. When purchasing health insurance, (even for a couple), it is important to confirm that the policy includes coverage for maternity costs and, if applicable, any applicable waiting periods. Additionally, by paying a larger rate, you might add pregnancy coverage to a current insurance policy. Buying health insurance is most important when considering having a child. Get your health covered in your plan so that you are not financially burdened in case of a health emergency. 5. Plan for the child’s education Just like the prices of lemons and oranges are growing, the cost of education is skyrocketing. Saving for your child’s college is a necessity. When it comes to saving money for college, time and compound interest are your best friends. Even while inflation is an unavoidable fact, keep in mind that education inflation is far higher. Utilizing the force of compounding is one approach to combat this, but it will only be effective if you have a long-term strategy in place. You indeed have no idea what career path your child will take, but you still need to put aside a portion of capital that can be utilized when the time comes. Right now, you need to think about the type of education you would like to offer because the practical costs of studying engineering in India vs. the US would be very different. From giving birth to seeing them off to college, watching your child grow and thrive is every parent’s dream! So give those dreams wings by planning ahead and investing for their bright future!  TALK TO AN EXPERT

As parents, we have a profound responsibility to ensure a bright and secure future for our children. While providing love, care, and education are crucial aspects, financial planning plays a pivotal role in setting the stage for their success. Investing wisely is key to securing their future aspirations and safeguarding against unforeseen circumstances. Let's explore five essential investment plans that every parent should consider, ranging from mutual funds and US ETFs to US stocks and insurance. So, we will dive in and discover the strategies that can pave the way for your child's financial well-being. Education Fund: The Power of Mutual Funds One of the most crucial investments you can make as a parent is in your children's education. Start by setting up an education fund that specifically caters to their academic pursuits. Consider tax-efficient options like a 529 plan, which allows you to invest in a variety of mutual funds, ensuring growth potential while enjoying tax benefits. Platforms like EduFund (www.edufund.in) offer valuable guidance and tools to help you plan and manage your child's education fund effectively. investment plans US ETFs: Diversification Made Easy 1. Exchange Traded Funds Exchange-Traded Funds (ETFs) have gained significant popularity in recent years due to their flexibility and global exposure. Just like mutual funds, ETFs represent a basket of securities, including stocks, bonds, commodities, or a combination thereof. However, unlike mutual funds, ETFs are traded on stock exchanges throughout the trading day at market prices. ETFs offer several benefits, including transparency, liquidity, and cost-effectiveness. Parents can buy and sell ETFs at any time during market hours, allowing for more flexibility in managing their investments. Additionally, ETFs disclose their holdings daily, ensuring transparency in the investment portfolio. With generally lower expense ratios compared to mutual funds, ETFs offer a cost-effective investment option for parents. 2. USA Stocks For parents who are comfortable with taking on more active roles in their investment journey, investing in individual stocks can be an exciting avenue. Owning shares of well-established companies can offer substantial returns over time. While investing in individual stocks requires careful research and monitoring, it can provide the potential for higher growth compared to mutual funds or ETFs. EduFund's resources can assist you in understanding stock investing basics and identifying companies with strong fundamentals. To mitigate risk, parents can consider diversifying their stock portfolios across different sectors and industries. This diversification helps reduce the impact of a single stock's performance on the overall portfolio. In addition, parents should adopt a long-term investment mindset and focus on the fundamentals of the companies they invest in rather than short-term market fluctuations. Investment Tips for Dad's in India Read More Insurance - Protecting Your Family's Future Insurance is a pivotal component of any comprehensive financial plan, especially for parents. Life insurance provides financial protection to your family in the event of your untimely demise. It ensures that your children's education, living expenses, and future aspirations are secure, even in your absence. Term life insurance offers coverage for a specified period, providing a higher coverage amount at an affordable premium. Additionally, health insurance safeguards against unexpected medical expenses, offering peace of mind during uncertain times. By securing adequate insurance coverage, parents can safeguard their family's financial well-being and ensure a secure future. Investment Tips for Mom's in India Read More Mutual Funds - Diversify and Grow Your Wealth Mutual funds are an excellent choice for parents seeking diversification in their investment portfolios. These funds pool money from several investors to invest in a variety of asset classes, including stocks, bonds, and money market instruments. Managed by professional fund managers, mutual funds allow parents to benefit from their expertise and experience in making investment decisions. By spreading investments across different sectors and markets, mutual funds help reduce the risk associated with investing in individual stocks. Parents can choose from many types of mutual funds on the basis of their risk appetite and financial goals. For those seeking stability, bond funds can offer a regular income with lower volatility. On the other hand, equity funds offer an opportunity for capital appreciation through investments in stocks. Balanced funds offer a blend of both equity and bond investments, providing a balanced risk-return profile. By investing in mutual funds, parents can access professional investment management and enjoy the benefits of diversification. You can lay a strong foundation for your family's future by incorporating these investment plans into your financial strategy. Remember that investment decisions should align with your risk tolerance, financial goals, and time horizon. It's always suggested as advice to seek guidance from financial advisors who can provide personalized advice based on your specific circumstances. Conclusion  Investing wisely is an integral part of parental responsibility. By incorporating these five investment plans into your financial strategy, you can take proactive steps toward securing your child's future while also protecting your own financial well-being. Remember to conduct thorough research, seek professional advice, and regularly review your investment portfolio to adapt to changing circumstances. By combining long-term vision with disciplined investment practices, you can build a strong financial foundation for your children, allowing them to chase their dreams with confidence. Start planning today and pave the way for a prosperous future for your family. Consult an Expert Advisor

A systematic investment plan or SIP is the best plan that helps you invest in mutual funds on a regular basis.  You can choose to invest weekly, monthly or even quarterly – the most popular choice being monthly. There are multiple reasons why SIPs are the best way to grow your money especially when you have a goal to plan – e.g. your child’s education. SIPs can be bought easily and you can start with a very low amount - Rs. 500 per month. In this blog, we will talk about the ‘Big 5 advantages’ that SIPs offer to you as a parent. But before that, let's understand what a SIP is What is SIP? A SIP or systematic investment plan is an investment mode through which an investor can create a regular mechanism of investment for themselves. Let's take the example of investor X. Investor X wishes to invest Rs. 10,000 every month in a mutual fund. In this case, investor X can create a SIP for a fund they want to invest in and the money will be deducted every month automatically (the deduction can be weekly, monthly, or even quarterly, depending on the investor's choice). Think of it as a recurring deposit, with better returns. Now that we know what a SIP is, let's get to know why investing via SIP is the best choice you can make to enlarge your corpus. CALCULATE MONTHLY SIP 5 Reasons SIP is the best These are the 5 main reasons why you should invest via a systematic investment plan to reach your financial goals 1. Suitable for Long-Term Investment Any financial advisor will tell you that if you want to invest long-term, SIP is the way to go. The reason is simple, regular investing and automatic deductions keep investors motivated to stay invested and reach their investment goals quicker. During the 2008 financial recession, many people withdrew money from mutual funds. However, the ones that remained invested via SIP, attained a huge profit once the markets rose. Long-term investing makes sure that even if the market is down at the moment, once the markets rise, the investor will make profits. 2. Goal-planning ‍SIPs are good tools to plan for a future goal – to buy a 4-wheeler or to pay for college tuition fees maybe 10-15 years from now. When you determine the amount required to achieve your goal, you will know how much you should invest and how long it will take to reach your goal. This will help in planning effectively. Having financial goals is very important to creating a financially secure future. One must have a defined idea about what financial goal one wants to reach by the age of 30, 40, 50, and so on. 3. Effect of Compounding Compounding is one of the biggest advantages of a SIP. Over time your investments grow because you start earning returns not on your principal amount, but on the interest that keeps getting added to it. Let's take an example. Suppose you invest Rs.1,000 in a mutual fund that gives you a yearly return of 10% p.a. Your amount becomes 1,100. at the end of the first year. At the end of the second year, the rate of return is 11%, this time the returns will be calculated on Rs. 1,100 and not the principal amount, which is, Rs. 1,000. ‍This ensures the growth of your corpus and is one of the reasons why experts advise you to not withdraw your investments when the market is down. 4. Curated by Experts With the increasing number of fund types like equity, debt, mixed, gold-based, etc. there is a wide variety to choose from based on your risk appetite and preferred investment duration. This has led to customized offerings based on individual needs, supervised by experts in the SIP domain. All you need is to specify your goal and timeline and you are provided with the best possible funds that can meet your future goals. ‍SIPs have become popular over the past few years, because of the ease of investing and the flexibility provided in terms of the amount of money that can be invested. You can stay invested as long as you want, although average returns have been higher when invested in the long term. Research also shows that the returns offered by SIPs are more than recurring deposits in banks, in the long term. 5. Automates Your Investment Experience SIPs automate your investment experience, which makes you a regular investor. It is easy and convenient and because of the online surge, today, it is super easy to invest via SIP. If you choose the lump sum method, you will have to manually invest an amount and there may be times when you can miss an installment. ‍With automated installments and a streamlined process, investing via SIP has now become an extremely popular method, to reach long-term goals like saving up for your child's education. FAQs Why is SIP investment good? By investing through SIPs, you will do away with the burden of timing the market as you could then avail the benefit of Rupee Cost Averaging. By investing through SIP, you will tend to invest in the up and down markets. This helps you shy away from the volatility of the market. Additionally, you will benefit from the power of compounding, which fundamentally generates returns not only on capital but also on returns. Is SIP good for students? Investing in SIP can be a huge benefit for students. It cultivates a healthy investment habit, and they can invest a small amount to start their journey. SIP is best for beginners and a comparatively safe investment vehicle. What are the features of SIP? A SIP offers the following features: It is best for long-term investment, brings financial discipline, allows small investment amounts, benefits from the power of compounding, and is a comparatively safer investment tool. Why do people prefer SIP? A systematic investment plan helps bring discipline to an individual’s investment habits. A SIP will automatically deduct a pre-decided amount periodically. Investors also do not need to worry about timing the market while investing via SIP. It is one of the best investment vehicles for beginners. Consult an expert advisor to get the right plan TALK TO AN EXPERT

Investing in mutual funds for your child’s education is always advisable. First of all, it is a less stressful option than investing in direct equity stocks because that requires you to have in-depth knowledge of market trends and fluctuations. Secondly, with mutual funds, there are a variety of schemes you can opt for depending on a range of factors. These factors could include the time period for which you can invest before liquidating, the amount of money you can invest, the amount you require to secure the education fund, the level of risk you can take, and so on.  When it comes to building an education fund, here are the top 5 types of mutual funds you can choose from. 1. Large-cap mutual funds The defining characteristic of large-cap equity funds is the fact that these funds invest in the top 100 Indian companies that have the highest market value. Large-cap mutual funds can bring in impressive returns if you remain invested for a long period. If you are a person who wants to avoid taking very high risks with your investments and has decided to invest early for your child’s education, this is the way to go. The average returns rate has historically beaten that of Fixed Deposits and similar investment alternatives. SIP Mutual Fund Investment Read More 2. Mid-cap mutual funds Mid-cap funds invest in Indian companies that come in the next best 250 in terms of market value. These funds are for you if you are ready to take on a higher level of risk. Justifiably, the return rates also tend to get higher. One way to satiate the risk appetite of mid-cap equity funds is to let them season for at least 7-10 years. If your child is in primary or middle school, investing in such a scheme will generate a wholesome amount of wealth by the time they are ready to pursue a college education.   How to track Mutual Funds? Read More 3. Equity-linked saving schemes  Among the various perks of investing in mutual funds is the tax deduction benefit. Equity Linked Saving Schemes are devoted to enabling investors to save taxes, as the name also indicates.  The only catch here is that it has a compulsory lock-in period of at least 3 years. The aim here is to keep you invested longer to counter the risk level. If you can spare that amount of time, then ELSS is definitely a go-to. An added benefit is the historically high level of returns.   Mutual Funds to invest in Child Education Read More 4. Low-risk options  There is this whole myth surrounding mutual funds that they only come with a high-risk factor. On the contrary, a debt fund is also a kind of mutual fund that comes with low risk, so much so that it remains undisturbed by market fluctuations.  Debt funds are still a better option than Fixed Deposits because they can generate a higher percentage of returns. So, if you are not in favor of taking high risks, debt funds are a go-to.  5. Hybrid mutual funds  If you are confused about your investment options or even hesitant about risking too much, the answer to your problems is a hybrid mutual fund. This kind of fund is a mixture of equity as well as debt.  Hybrid mutual funds bring in the best of both worlds. They tend to generate good returns at low risk. FAQs What are the different types of mutual funds? Large-cap mutual funds Mid-cap mutual funds Equity-linked saving schemes Low-risk options Hybrid mutual funds Which type of MF is best? The best type of mutual fund is the Hybrid mutual fund. Which MF gives the highest return? Equity-linked mutual funds are considered the mutual funds with the highest returns. Conclusion There will be miscellaneous financial goals you will be required to set if you are a family person. One among these might be to straighten up the roadmap to your child’s academic and career aspirations. The first step is calculating your expected expenses with the help of an education cost calculator. The calculator will help you draw your investment map to fulfill your child's aspirations. The earlier you invest, the more prepared you will be to make critical decisions as the moment arrives. DisclaimerMutual funds are subject to market risks. The previous performance of a fund is no guarantee of future success. Please reach out to an expert to know more about the schemes before investing.

In the previous article, we discussed taxation in mutual funds. In this article, we will discuss the types of risks associated with mutual funds. Mutual funds are excellent investment options for both novice and seasoned investors; they are currently a very popular investment option due to their capacity to provide inflation-beating returns.   Mutual funds combine money from a range of individuals and institutions and invest in various asset classes such as shares, debt, and other money market instruments after conducting thorough research to maximize capital appreciation or income generation.  The investors are subject to risks like volatility risk, management risk, liquidity risk, interest rate risk, and inflation risk. We shall now discuss all such risks that come up with an investment in mutual fund schemes; a sound knowledge of these is helpful to an investor in making the investments.  There are two types of mutual funds: equity mutual funds and debt mutual funds. Risks associated with mutual funds There are major two types of risks associated with mutual funds that the article will discuss such as risks associated with equity mutual funds and risks associated with debt funds. 1. Management risk A company's management refers to the group steering the organization on the right path.   Changes in the management team and their activities, such as pledging shares, decreasing or increasing promoter stakes, and so on, can impact the price of a company's stock.   While principles such as solid corporate governance and high transparency benefit a company's stock, mismanagement, team conflicts, and other factors depress the stock price and thereby affect your mutual fund investments as well if that particular stock is a part of your investment.  2. Liquidity risk When it comes to equity investments, long-term investing has the best possibility of securing investment profitability.   Thus, it is difficult for equity mutual funds to quickly buy or sell stock investments to profit or minimize a loss leading to a situation where the scheme's liquidity is insufficient to meet investors' redemption requests.   A liquidity crisis like this is most prevalent when investors make a high number of redemption requests due to prolonged bad market inequities.   Many equity funds invest a small amount of their capital in debt and money market instruments to mitigate this risk and ensure more substantial returns.  3. Volatility risk An equity mutual fund invests mainly in the stocks of publicly traded corporations.   As a result, an equity fund's value is in line with the performance of the companies in whose stocks it has invested. Current macroeconomic conditions have an impact on the company's performance.   Government, Sebi, and RBI policies, consumer preferences, the economic cycle, and other macroeconomic changes are all examples of factors that directly impact the price of company stock, either positively or negatively.   The value of an equity fund is affected by this movement. Large-cap corporations, on average, are less prone to such volatility than mid-cap and small-cap market enterprises.   Similarly, when compared to thematic or sectoral equity, funds are diversified. Equity funds are less likely to be influenced by such volatility. Risks associated with debt funds 1. Inflation risk Bonds and money market instruments are fixed-rate instruments because their coupon rates are fixed. As a result, rising inflation erodes the coupon rate-based revenues that the debt fund aims to receive.   As a result, rising inflation causes bonds to trade at a lower price on the bond markets, lowering their potential returns for the debt funds investors. On the other hand, lower inflation tends to push bond prices and debt fund investment values higher.  2. Credit risk Government securities, corporate bonds, certificates of deposits, commercial papers and other debt and money market instruments are among the items that debt funds invest in.   Credit ratings such as AAA, AA+, AA, AA- and so on are offered by credit rating agencies such as CRISIL, ICRA, and Fitch they evaluate the credit quality of these investments, which vary depending upon the issuer.   A specific risk is that the borrower fails; they do not pay the principal and/or interest on the loan.  3. Interest rate risk A risk linked with debt funds is interest rate risk. Bonds are exchanged in the same way as stocks, and their prices fluctuate.   The economies' interest rates mainly influence the movement in bond prices; the link between interest rates and bond prices is the opposite. As a result, as the economies' interest rate rises, the values of current bonds fall since they continue to offer the same interest rate.   Interest rate risk refers to price variation in bonds caused by changes in interest rates it is a market-wide element that influences bond prices and, as a result, the value of all debt mutual funds.   The degree of interest rate sensitivity varies by debt fund type and is shown by the adjusted duration of the debt fund.   In general, debt funds that invest in shorter-term assets are less vulnerable to interest rate risk than those that invest in longer-term products.  With regard to the above-mentioned risks, it is vital to note that while mutual fund performance is always subject to numerous risks, every fund house employs a variety of tactics to reduce, if not eliminate, these well-known dangers.   As a result, even if your investment gains are not guaranteed, your chances of developing your wealth are good if you invest with a well-known fund house, choose a fund with an established track record, and make the investment with a long-term horizon. FAQs What are the three main risks associated with mutual funds? The three main risks associated with mutual funds are: Management risk Liquidity risk Volatility risk Do mutual funds have high risk? All mutual funds are risky. Its terms and conditions specify that mutual funds are volatile in nature and are subject to market ups and downs. There are different levels of risk involved in mutual funds. What is the biggest risk for mutual funds? The biggest risk for mutual funds is inflation. Inflation affects different types of funds differently. Rising inflation causes bonds to trade at a lower price on the bond markets, lowering their potential returns for debt fund investors. On the other hand, lower inflation tends to push bond prices and debt fund investment values higher. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, the focus was on education inflation and its impact on our savings. This article will discuss how to break free from debt. Debt, this dreaded four-letter word, is a nightmare for most people. However, everyone has a debt of some kind, whether credit card debt, student debt, home mortgage, personal debt, or more.   Debt is an unavoidable part of life. Dealing with debt often leads to stress and anxiety and can impact your physical health. There are both good debts and bad debts. The debt that creates a valuable asset (tangible or intangible) for you is good debt.   Debt that keeps on exerting negative pressure to pay off is known as bad debt. You need to remove this bad debt to live a stress-free life. How do you break free from debt?  Here is a step-wise guide to help you break the vicious cycle: Assess your situation: To get out of the debt trap, you must know where you stand. Check all your accounts and add up your liabilities (all types) to know how much you owe and to whom. Calculate your net worth by subtracting your liabilities from your assets. This will help you know your worth on paper.   Know where you spent your money: It is important to categorize your expenses into housing, transport, food, travel, miscellaneous, and debt. An example of a bad monthly budget is where the debt is almost equivalent to income. You need to get your basics of spending right as your first step.   Improve your budget: When you don't follow the rule “Spend less than you earn” that's how your debt problem arises. Living below your means is a very important thing that one should take care of to avoid getting into a debt cycle or when trying to get out of it. Unless you manage to spend less than you earn, you will always be in debt and never be able to come out of it.   Pay off your high-interest debt in full every month: Your credit card bills keep on mounting because you do not pay them in full every month. It happens because you take on more interest-bearing debt than you can manage. Paying off your credit card bills and other debts very religiously every month will do good for your credit score and will be a good step to lighten your debt burden.   Source: Pexels Some effective ways to reduce your debt  Use the snowball effect: Start paying off your small debts and then tackle the bigger ones. Put as much money towards paying that one small debt, and once it is done with, the free money from that shall go to the next big one. As you proceed with wiping out debt, the amount going to the current payment will increase. Another way is to tackle the highest interest debts first (to save on interest payments) and proceed.   Pay more than the minimum amount: You pay both the principal and the interest when paying down debt. So, paying more than the minimum for a particular month means cutting the principal for the next month and thus, saving money on interest payments.   Increase your income: An increase in your income will solve half your debt problems if you know how to channel your money. An increased income from the same work or a new income from a different income source will leave more money in your hands to get out of that unwanted debt you are in. You have to help yourself in this regard. FAQs What are 3 ways to eliminate debt? The 3 ways to eliminate debt are: Budgeting, increasing your income, and paying your debt on time without accruing more interest. What are the 5 ways to get out of debt? The 5 simple ways to get out of debt are: Listing your debt obligations, creating a budget for repayment, increasing your income and paying your debt on time without accruing more interest and finally reducing your daily/miscellaneous expenses to create space for savings and investing. What are the 5 golden rules for managing debt? The golden rules for managing debt are: Budgeting your expenses and debt, actively generating more income and wealth, paying your debt on time without any delays or additional interest, reviewing your spending habits, and avoiding future debt traps. How do I clean up my debt? Stepwise guide to help you break the vicious cycle:   Assess your situation   Know where you spent your money   Improve your budget   Pay off your high-interest debt in full every month   What is the best solution for debt?   Start paying off your small debts and then tackle the bigger ones. Put as much money towards paying that one small debt, and once it is done with, the free money from that shall go to the next big one. As you proceed with wiping out debt, the amount going to the current payment will increase. Another way is to tackle the highest interest debts first (to save on interest payments) and proceed.   How to live a debt-free life? When you don’t follow the rule “Spend less than you earn”, that’s how your debt problem arises. Living below your means is a very important thing that one should take care of to avoid getting into a debt cycle or when trying to get out of it. Unless you manage to spend less than you earn, you will always be in debt and never be able to come out of it. How can I recover from debt fast? It is important to categorise your expenses into housing, transport, food, travel, miscellaneous, and debt. An example of a bad monthly budget is where the debt is almost equivalent to income. You need to get your basics of spending right as your first step.     Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

What is a mutual fund? Mutual funds are investment vehicles that pool money from multiple investors and invest them into equity, debt, other related instruments, and asset classes after thorough research and analysis. Each mutual fund portfolio is managed by a fund manager who has a great deal of experience in the industry. Their decisions are substantiated and are taken after following the thorough research done by the AMC's research analysts. As individual investors, we do not have enough time to perform such research to make a well-informed choice on “Where to invest to gain maximum returns?” or “Where to invest in the long-term?” We may also not have enough capital to make a diversified portfolio to sustain the blows of market fluctuations. Mutual funds provide a one-stop solution for both issues. Why should one invest in mutual funds? a) Money managed by experts The fund manager and his army of research analysts are experts in the field of investing. They make informed choices with respect to every penny and always aim to provide the promised objective to their pool of investors. b) Liquidity Redemption requests are handled with great ease in fund houses. The investor can also buy/sell his units in the secondary market (in an open-ended fund) for redemption (withdrawal) of the units. c) Diversification Despite having low ticket sizes for investment, an investor can receive returns that mimic or beat the market performance. He/she can own a portfolio that is diversified across market capitalization or across sectors or different companies to sustain the blows of volatility. d) Lower cost The funds charge a small % of the NAV or your gains from the fund as a management fee which is also known as the expense ratio. These are also regulated by SEBI and have an upper limit to ensure that the funds do not overcharge the investors. e) Fund switch options One can invest in a debt fund and have the plan to have a systematic transfer into equity or vice versa to match the risk appetite, financial goals, and other factors. f) Tax saving with equity linked savings scheme (ELSS) Mutual funds also allow you to save some part of your income and claim it for tax deduction under 80C. Rupee Cost Averaging: Investing in Mutual funds through SIPs averages the cost of purchase/unit. Regulation: Funds are highly regulated and are designed to ensure retail investor protection. Ways you can invest in mutual funds If you are a new investor, you will need to complete your Know Your Customer (KYC) compliances through distributors, online platforms, or mutual fund houses (KRA – KYC Registration Agencies) – SEBI registered intermediaries. This is a one-time mandated process by SEBI to prevent fraudulent transactions. 1. Through an agent An investor may contact an agent who would direct the investor to invest in different mutual funds based on risk appetite, investment horizon, goals, and other factors. There is no commission that is to be paid to the agent. The fee is paid by the fund house and is deducted from the expense ratio paid by the investor to the AMC. Login credentials are given by each fund house which enables the investor to receive real-time data on fund performance. 2. Asset Management Company (AMC) One can directly invest in the fund house through this route. However, the investor needs to perform some amount of research before choosing the fund and the fund house. He/she can walk into one of the fund houses for offline registration, post which, all the transactions can be performed online through their website. If an investor wants to invest in 5 different funds, each from a different fund house, he/she will have to visit 5 different offices. 3. Demat account The investor can directly invest in various funds of different AMCs, corporate bonds, government securities, ETFs, etc through one account. These can be managed from one single location – your Demat Account. However, one needs to pay an additional brokerage charge annually for maintaining the account in addition to the expense ratio (which is to be paid to the AMC). 4. Fintech investment platform These platforms are third-party mutual fund aggregators which aid the investor in investing the corpus after a detailed analysis of their risk profile, goals, investment horizons, and more and suggest the best funds to suit their requirements. They also offer the convenience of managing the investor’s portfolio through their user-friendly sites. Some of the popular firms are Groww, EduFund, Scripbox, FundsIndia, etc. 5. Stock exchanges One can invest through NSE or BSE, hence eliminating all the intermediaries/brokers. However, the investor needs to perform a thorough analysis before investing in any fund and ensure that the objectives of the fund match his/her financial goals, risk appetite, and other requirements. To go through this route, one needs to complete an online registration with NSE or BSE (a one-time process). 6. Registrar and Transfer Agents (RTAs) One needs to complete the application form and submit a bank draft or cheque at the branch office of the RTA post where one can visit any of the RTAs to start investing. Some of the popular RTAs are CAMS and Karvy. This route enables the investor to choose across multiple fund houses (instead of a single fund house – in the AMC route). 7. Mutual fund utilities It is a shared service platform that hosts all the fund houses (owned by several AMCs in the country) and is used for fund transactions. Investors can use this facility online or offline. 8. Investor service centers These are physical offices across the country belonging to RTAs or fund houses. They assist the investor with respect to all the steps in the investment journey – investment to redemption. FAQs What is a Mutual Fund? Mutual funds are investment vehicles that pool money from multiple investors and invest them into equity, debt, other related instruments, and asset classes after thorough research and analysis. Why Should One Invest In Mutual Funds? Mutual funds is the best way to enter the investment market. It helps you invest in multiple companies and the investment strategy is managed by experts. What are the ways to invest in mutual funds? There are many ways to invest in mutual funds: You can invest through an agent, directly with the AMC, through a Demat account, or through a third-party financial investment platform depending upon your goals and ambitions. Conclusion As an investor, you can use any of the above ways to invest in the mutual fund of your choice and enjoy the wealth generation that comes with compounding. You can start your investment journey by downloading the EduFund app and signing up. You can get started immediately and pay zero commissions.

In the early article, we discussed financial planning. In this article, we will try to under the taxation in the mutual fund system that applies to mutual fund investments.  Factors determining the taxation of Mutual funds  To know the taxation structure, first, you need to identify which type of mutual funds you have invested in and whether the fund you hold is an equity mutual fund or a debt-oriented mutual fund.   Along with this, the type of income that you are generating from the fund, whether a capital gain or dividend income - both these types of income are taxable in different ways.  Finally, your holding period is crucial in knowing the taxes applicable to your mutual funds' portfolio.  Earnings in mutual funds There are usually two ways in which money is earned in mutual funds: one through the selling of the mutual fund (capital gain) and the other through dividend income.   For example, if you are holding units of a mutual that you purchased at a NAV (Net Asset Value) of Rs. 100, and you sell it when its NAV of Rs. 150, you make a capital gain of Rs. 50; it is worth noting that capital gains tax accrues on the mutual funds' units only after redemption.   The tax will be payable when you file your income tax returns for the coming fiscal year.  The second way to earn from mutual funds is dividend income – the fund declares dividends for the holders based on the surplus that it has for distribution Dividends are taxable as soon as the dividend amount hits the bank accounts of the investors.   Source: Pexels Tax on capital gains  Here, there are again two parts to the story – whether the realized capital gains have come from equity mutual funds or debt mutual funds.   An equity mutual fund has an equity exposure of greater than 65%. For equity mutual funds, if the gains have been realized within 12 months of holding, then the applicable tax rate is flat at 15% on the gains (irrespective of your income tax bracket).   When the holding period exceeds 12 months, the capital gains of Rs. 1,00,000 are exempt from taxes. Any amount upwards of Rs. 1,00,000 is taxable at 10%, along with the provision of indexation benefits.  For debt mutual funds (funds with greater than 65% exposure to debt instruments) - the holding period is considered short-term if it is less than 36 months; anything more than that is long-term.  For the short term, the tax rate is in accordance with your income tax slab. On the other hand, for debt funds held for more than 36 months, the gains are taxable at a flat rate of 20% post-indexation (plus, some cess and surcharge are added).  A possible third case is hybrid funds (funds with a mix of debt and equity) it is simple, their tax treatment is supposed to be on the basis of the fund's exposure to debt and equity.  If the hybrid fund is equity-focused: LTCG is charged at 10% on capital gains exceeding Rs. 1 lakh (without indexation), and STCG is charged at 10%. If the hybrid fund is debt-focused: LTCG is charged at 20% with indexation benefits, and STCG is charged per income tax slab.  Tax on dividends  Now, when it comes to taxation of dividends paid out on mutual funds, it is done by adding the dividend to the investor's taxable income, and then the individual income tax slab rate is applicable; this is in accordance with the amendments made by the union budget of 2020.  Earlier, dividends were tax-free in the hands of investors since the companies paid the Dividend distribution tax (DDT) before sharing the profits with the investors.   Dividends (received from domestic companies) of up to Rs. 10,00,000 per year were tax-free in the hands of the investors during this period. Dividends above Rs. 10 lakhs were subject to a dividend distribution tax of 10%.  STT Aside from the dividends and capital gains taxes, there is also a securities transaction tax (STT).   When you acquire or sell mutual fund units of an equity or a hybrid mutual fund, the government charges an STT of 0.001%. It is important to note that selling units of debt funds are exempt from the STT.  Important points to note  There are tax-saving equity funds as well. Investments made under the ELSS (Equity-linked savings schemes) qualify for tax exemption under section 80C of the Income-tax Act (exemption up to Rs. 1,50,000).   Please note that ELSS schemes come with a lock-in period of 3 years – that is, investors cannot redeem the units before three years. LTCG (long-term capital gains tax) is not applicable for gains up to Rs. 1,00,000.   For LTCG more than Rs 1 lakhs, the applicable tax rate is 10% without indexation.  Taxation in the case of SIP (Systematic Investment plans)  Let us understand this with the help of an example  An investor invests Rs. 10,000 every month from April 2021, and another investor invests Rs. 60,000 lump sum at the same time.   When both of them redeem their funds simultaneously, Rs. 10,000 will qualify for tax exemption for the SIP investor because the investment made in 2021 would exceed one year as of May 2021. In contrast, the entire capital gain isn’t taxable for the lump sum. Investing in the long term can be more tax-efficient than holding the units for a short duration. FAQs How much amount is taxed in mutual funds? If the investor claims redemption in less than 1 year of investment, it would fall under the Short-term Capital Gains (STCG) category. The tax rate would be 15% on the gains earned by the investor. If the investor holds the investment for more than a year, (say April 2020 – May 2021), the gains would be taxed at long-term capital gains (LTCG) tax of 10% Is SIP in mutual funds taxable? Yes, SIP in the mutual fund is taxable. The tax amount differs based on the duration and returns generated Which mutual funds are tax-free? Profits from the sale of ELSS fund units are considered long-term capital gains and have tax exemption. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT