MyWay Wealth Weekly Update (Issue #35): DHFL has defaulted & RBI has cut rates: Is your portfolio safe?

DHFL is the gift that keeps giving – worries around delayed & defaulted payments. It has been months since DHFL has maintained its reputation as an NBFC that can keep lenders on the edge for quite some time. While the DHFL default on interest payment turned the street glum, RBI gifted debt investors a well-appreciated Eidi in the form of a rate cut and change of stance to accommodative.

Game of Loans: Winter is Almost Here!

Earlier this week, CRISIL downgraded DHFL’s commercial papers to ‘D’ (default) as it defaulted on an interest payment due for almost INR 900 crore worth of bonds on 4th June 2019. Per the latest communication received, DHFL has paid out almost INR 350 Cr. of its dues on 7th June 2019. While DHFL seeks to mobilize cash to service its obligations in full during the seven-day grace period, the liquidity situation seems tight. Many mutual funds, along with other investors, have suddenly found themselves in hot water – but we’ve got you covered; read on to know how.

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A Penny Saved is a Penny Earned.

Save every penny

“Do not take yearly results too seriously. Instead, focus on four or five-year averages.”

-Warren Buffett.

We worry about the investment the way we worry about our weight. Instead of dieting or investing being a habit, we only think of them as remedial measures when our weight or our bank balance goes too high or too low

Regarding the Indian Banking System:

India is in the middle of a digital transformation. Today you can open a bank account in less than a minute, with e-KYC (electronic KYC). Today, that’s a total of three minutes, versus three trips to the bank earlier. You need an OTP (One Time Password) instead of three sets of addresses and Id proofs, along with some thirty signatures.

Moreover, you can access all of these bank accounts from one app using UPI (Unified Payment Interface). No need to worry about updating your passbooks every month. The app you choose doesn’t even have to be your own bank’s app, you can choose the one that suits you the best.

Connecting With Mutual Funds:

Mutual funds, once thought to be the investment instrument of the elite only, are now available, starting in sachets less than Rs. 500 a month! You can start investing in a completely paperless, presence-less and cashless manner. You accumulate your cash, and then some sharpshooter comes along and offers this fantastic deal and gets your money. The core principle behind investing is to choose the right Mutual Fund that is based on your investment appetite and financial goal. Having made the right decision, you can be assured that your investments are safe, will fetch you the right returns and definitely better returns than Fixed Deposits.

How to Invest in Mutual Funds?

You can invest in a mutual fund, where you can increase cash or value from three sources:
Capital gain
Income earned
The increase in share prices

1.Capital gain:

When a fund sells a security that has gone up in price, that is a capital gain. And when a fund sells a security that has gone down in price, that is a capital loss.

2. Income earned:

Wherein an individual can earn from dividends on stocks and interest on bonds. A mutual fund pays all of the net income (in the form of distribution).

3. The increase in share prices:

This eventually happens when there is an increase in the price of the share. One can sell the fund and can earn a profit.

MyWay
To get access to top recommended mutual funds, MyWay Wealth is a one-stop destination. Where you can invest your funds and can secure your future. MyWay Wealth offers you direct plans for investment. Equity where you can create long-term wealth creation, Debt is where one who is looking for short term investment, and Hybrid is where you can invest your funds in equity and debt. You need is a few minutes to complete your KYC process and put in your monthly contribution.

Think about investment. Think MyWay Wealth.

Invest Before It’s Too Late

term Insurance

“The best we can do is size up the chances, calculate the risks involved, estimate our ability to deal with them, and then make our plans with confidence.”
Henry Ford.

Why you need a life cover?

Not to save taxes, not for a secure retirement, not because the advertisement agency put together images of happy families doing cool things together. Not because you are arm-twisted into buying a policy by a family member, a friend, a neighbor, your bank or just a ‘wont-take-a-no-for-an-answer’ agent.
You need a life insurance cover for only one reason: To protect your family’s financial health if you die an untimely death.

It’s you who has to figure out how much the family will need to live without you bringing in the monthly income and how much money is required for the further of your kid’s education and marriage.

Now let’s look at some of the plans that help you to get a cover.

1. What is typically an endowment plan?

An endowment plan offers a life cover as well as a saving option. Your nominee gets the money in case of your unfortunate demise if you outlive the policy period.

  • Price: On the other hand, the endowment plan provides a maturity benefit, along with the additional features such as maturity benefit, rider benefit, terminal bonus, reversionary bonus, of this policy makes it so expensive.
  • Sum assured: The sum assured is not high in the endowment plan as compared to the term insurance plan. This is because the endowment plan fills the aim of savings. You need a lover sum assured but also a maturity benefit.
  • Aim of cover: The endowment plan helps you to save for your future goals. It gives you guaranteed returns and caters to future savings.
  • Payment options: In an endowment plan, the payment is lump sum either at the death of the policyholder during the policy term or as a maturity benefit on the completion of the policy term.

 Disadvantages of endowment plan:

  • Its low yield policy.
  • The surrender value is lower than the premium value.
  • The premium is higher than the term plan.

Example:
Mr. Bond is the policyholder. His age is 25 years. The plan for what he has opted is a term plan. Sum assured is 20 lakhs. The duration of the plan is 25 years. And yearly premium he has to pay is 6443.

2. What is the term plan?

The term insurance plan offers you a life cover. It is a simple life insurance plan that promises to pay a sum assured if the policyholder dies during the policy period. If he outlives the term there is no maturity benefit.

  • Price: Since a term plan doesn’t offer any return and only provides risk cover it is less expensive.
  • Sum assured: The sum assured in the term plan is high. That is possible because it covers the risk, by fulfilling the need for protection.
  • Aim of cover: In term insurance, the nominee receives the sum assured in a lump sum, or in equal installments or a contribution in case of the death of the person during the policy period.
  • Payment: The policyholder has the option to customize the payment option based on the family needs.iIt can be a lump sum, monthly or combination of both.

Advantages of term plan:

  • Term insurance is the simplest form of life insurance to understand.
  • Term insurance is a sensible choice for people who are building a family.
  • Lower initial cost when compared to an endowment plan.

Example:
Mr. Bond is the policyholder. His age is 25 years. The plan for what he has opted is an endowment plan. Sum assured is 20 lakhs. The duration of the plan is 25 years. But here in an endowment plan, he has to pay 86616 yearly.

In short:

PlanDescription
Term Plan1. Life cover
2. Fixed term
3. No maturity benefits
4. Death benefits
Endowment Plan1. Life cover
2. Maturity benefits = Sum Assured + Bonus + Additional bonus
3. Death benefit = Sum Assured + Accrued Bonus + Additional Bonus (If Any)

Here are the features of Term and Endowment Plan

BenefitsTerm PlanEndowment Plan
Maturity BenefitNoYes
Death BenefitYesYes
Premium AccountLowHigh
LiquidityNo
Yes
Investment SavingsNoYes
Tax BenefitsYesYes

Let’s look at some of the pointers before you take a cover:

  • How much cover do I need?
    You need to buy insurance for all the debt. Each time you take a large loan – usually a home loan, sometimes on a personal loan – buy a term cover for the full amount for the loan that you take.
  • When it is a good time to buy?
    Buy as soon as you have dependents or the possibility of getting dependants. Touching thirty is usually a good time to buy the cover. You are old enough to have a good income flow and not that old for covers to be too expensive. The cost of life cover rises exponentially as you age.
  • Which policy to buy and how much to buy it?
    Term insurance is a pure vanilla product. You pay a premium if you die the company gives you the cheque to your spouse. Since its the long term plan, so remember you are getting your cover till your retirement.

Now that we know the Term Plan is the best option, Why Delay? Start investing in Term Plan through MyWay Wealth. The app has a user-friendly interface, completely paperless process and charges no fees or commission.

Term Insurance - MyWay Wealth

All you need is a few minutes on your smartphone and you will be able to provide a cover of 1 crore to your family, with the same amount with which you get a Netflix monthly subscription. So Make Your Investments Today.

Protect Your Family with MyWay Wealth!

MyWay Wealth Weekly Update (Issue #34): Nifty at an all-time high; will your portfolio tie? & More

News outlets are abuzz with headlines about Nifty & Sensex being at all-time highs, the street is euphoric, everyone seems to be making money. Meanwhile, are you simply wondering why hasn’t your portfolio reached “all-time highs”?

This edition is to help you decode the mystery behind zooming indices and not-so-zooming portfolios.

Back to Basics

Nifty & Sensex are bellwether indices that reflect the indicative state of capital markets. But, it is important to understand that Nifty is simply a basket of shares of the largest 50 listed companies in India.

To put things in perspective, Indian capital markets have ~4,900 listed stocks and Nifty 50 reflects only 1% of the total universe (and sensex even lower at 30 companies) – that too only shares of the most blue-chip companies in India. So essentially when people say that the indices have sky-rocketed, it is implied that the share prices of only the top 1% of the listed space have increased.

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