Debt

The Debt Story

Parents always warn us not to be in Debt. “Better to go Hungry to bed than to wake up in Debt” is what our dads would say in a stern tone. But why?
It has a simple reason! The word Debt is often referred to as borrowings such as a car loan, home loan or credit card loans. It reminds of the hunting calls from the credit card companies.
But, these are conventional thoughts.

As for the newer ideology… DEBT means products with “ RETURNS”.

The usual feeling that comes with “Investing” is “Fear”. They are normally two sides of the same coin, to most investors. But like Warren Buffett says
“Risk comes from not knowing what you’re doing.”
Knowledge is what you require to make your first move in investing in Debt Instruments. The finance part, you will eventually figure it out once you are familiar with Debt and stop fearing it.

Here are few Debt Instruments and also a set of alternatives that will help you in your course of investing:

1.Savings Bank Account: Savings account is a necessity, not an instrument anymore. They encourage savings, are highly safe with their moderate interest rates and are flexible when it comes to withdrawing your money when you need it.

2. Bank Fixed Deposit: These are the most trusted funds because they give moderate yet periodic returns with Average interest rate of 4%-7 %. You get your principal amount back once your term is over. All this with zero risks. This fund is essentially useful when you want to park your money aside for an Emergency. One of the easiest ways to invest is to opt for smaller Fixed Deposits so that you don’t lose the entire interest on your deposit when you have to break it for an Emergency.

3.Provident Funds: If you are employed then Provident fund is your pie. Provident fund is the accumulated amount one gets on retiring from his/her job. The accumulated amount is the contributions one makes during the employment period.

Public Provident Fund: This instrument is provided by the Central Government to employees who are self-employed and those at the unorganized sector. These are long term savings scheme that provides income security at your old age. This investment is famous for guaranteed returns, tax benefits, withdrawals after lock-in periods and is voluntary. Both Provident Funds and Public Provident Funds are definite items in your investment list as they secure your life after retirement.

4.Recurring Deposit: When you hear Recurring Deposit, remember SAVINGS. Recurring Deposit is quite similar to fixed Deposits. The difference is that in the recurring deposit you deposit a fixed sum every month in a recurring deposit account for a fixed tenure and you earn interest on these deposits, thereby you practice the habit of saving.

Warning Bell: The usual jazz that brokers give when they sell schemes is “Higher Returns”. Ever wondered how, say, for example, Real Estate manages to provide high-interest rate. The trick is, Higher Returns is a sugar coating for the Hidden Risks. An easy thumb rule is to keep the Interest on Bank FD as your benchmark. Any scheme providing an Interest rate higher than that a Bank FD, will have the factor of higher Risk. However, there is a way to earn higher returns with Debt too with the help of Debt Mutual Funds.

Equity Mutual Funds

Equities! A Smart Way to Invest

People normally don’t find it safe to invest in Equity. They consider it a gamble. Why? Because your shares are traded in the stock market which is subjected to market fluctuations. Then why does Monika Halan, consulting Editor for Mint, state “I Love equity funds”  in her book “Let’s Talk Money”.

Let’s look at this picture:

Invest in Equities

 

Surprising! The most trusted instruments such as Fixed Deposit multiplies wealth only by 20 times whereas investments in Equity multiplies it by 260 times.

Equities are stocks, meaning shares of a company. When you invest in equities it means you own the shares of a company and are partial owners of the company

But the hitch is how do you know which company’s stock performs well? How are your shares trending in the market? When to sell or buy?

This arises the need to understand the difference between investors and traders. The work of a trader is to track the market minute to minute and closely monitor the fluctuations in the stock. But as an investor, you must ascertain your investment horizon and financial need, invest in Equities and to stay invested until investment purpose is achieved. Remember, “time in the market” is important not timing the market.

The best option to invest in Equities is through Mutual Funds. Even Monika Halan says that she doesn’t buy shares directly but rather invests in Equity through Mutual Funds. Because when you do so, the decision of picking the right stock is vested with Professional Fund Managers who track the movement of shares closely and rebalance the investment portfolio regularly. They have a tab on the performance of companies, markets, political events, interest rates, and past data that help them to forecast the future of a stock. With Mutual Funds, there is a scheme for every person depending on your risk and investment goal. Say if you are a conservative investor but are willing to take a little bit of risk then, with Mutual funds you can always have your investments primarily in Bonds (Debt) with a little exposure to Stock (Equity).

As an investor one should remember that Equity Investing is no gamble. In a growing economy like India, good investments should outperform in the long run, irrespective of the macroeconomic factors. The Table below will give a clear idea:

Time Period 1 year 3 years 5 years
Amount Invested (INR) 12000 36000 60000
L&T India Value Fund-Direct Plan Growth Option 10,948.02 37,485.68 76,658.66
ICICI Prudential Bluechip Fund-Direct Plan Growth 11,596.35 40,193.66 75,470.58
SBI Bluechip Fund Direct Growth 11,322.36 37,843.27 72,645.74

These are the Top Rated Funds on MyWay Wealth. The Table clearly shows that when Rs 1000 a month invested through SIP in these funds, say L&T India Value Fund-Direct Plan Growth Option for a period of 1 year gives a fund value of Rs. 10,948 which is lesser than the invested amount of Rs. 12000. But when the same process is carried out for a process of 5 years, the fund value is Rs. 76,658.66, which is 27% more than the invested amount Rs. 60000. The same pattern is seen in the other two funds as well.

India is expected to add the fourth-highest number of High Net Worth Individuals in the next five years, only behind the star economies of U.S., China, and Japan yet ahead of the European powerhouse – Germany.

Here’s what the High Net Worth Indians are doing right with their money-

HNI Indians: Source of Wealth

To make life simpler, here’s the inference you should care about – The wealthy have become wealthy through smart investing and by having a very good understanding of equities as an asset class.

Investing & Equity – bring these together and you will discover the secret sauce to wealth creation.

To sum it up, Equities may be volatile in the short run, but over the longer period, volatility will decrease and the returns will increase, thus reducing the risk.

So, Remember!

The thumb rule in Equity is to stay patient and remain invested for a long period to reap its benefits.

Investment Planning in case of job loss

Are you worrying about your Job Loss? Here is what you can do!

The thought of losing a job is very scary, isn’t it? With the evolving technologies around and automation happening in every industry, it is but natural to be worried. Any of us can lose our job at any time and the worst part is we can’t do anything about it.

What you usually do to get out of this fear is you start talking to your peers, your friends, spending more time with your loved ones or you may watch a motivational movie etc which can motivate you. Each of them will motivate you but you would end up getting the perfect answer for what if I lose my job?
So here are some best ways to prepare for and tackle the job-loss situation:

Create your emergency fund:

Build your emergency fund out of your income. Transfer around 30% of your saving income into Liquid funds or ultra-short-term funds where risk is minimal, and your money will start growing on a daily basis. An ideal emergency fund should be equal to six months’ future expenses or if you are having any EMI’s going on, it should at least equal future six months EMI.
Another option would be to reduce the EMI amount & increase the tenure of the loan temporarily till the time things get normal. This is not at all beneficial for you in the long term so better have an emergency fund in place.

Fun Fact: There are certain mutual funds like Reliance Liquid Fund which provide instant redemption facility whereby you can get your money in just 5-10 min in your bank account 24*7. These funds can give you returns ranging from 6.5% – 8%.

Understand the employee benefits:

You should be aware of all the details of your salary, your unused leaves and their compensation, insurance etc. It will help you in estimating the future income.

Utilize your open-ended/Withdrawable Investments:

You should always have an investment which can be easily liquidated. In such critical times, your real estate, Public Provident Fund (PPF), National Savings Certificate (NSC) etc investments will not help as you can’t liquidate them but your investment in mutual funds safeguard you in such cases.

Use loan protection plans if you have any:

To safeguard investors from any uncertain events, banks do provide loan protection before taking any loan. This plan covers other critical events like illness or job loss. If you have this policy, redeem the plan’s benefit at times of job loss.

Make sure about your personal Mediclaim Policy:

You should always make sure that you are having your own Mediclaim policy other than the one which gets provided by the employer. Medical emergencies can arise at any time and will impact you majorly in your crucial times.

Look ahead for the opportunities:

While it is obvious to get frustrated by job loss but at the same time, you should also think about the skill set, the knowledge set required to qualify for the best opportunities in the market. Because, the above measures will help you in tackling the temporary emergencies, knowledge and skill set will give you permanent solutions.

Losing a job is a stressful activity, however proper planning & a balanced approach can help you in coming out of such cases.

Direct vs Regular

How Do Direct Plans Help you Earn More?

Usually, when we place orders online, we come across two products: those that don’t charge for delivery and the others that charge for the same. We usually opt or like the ones that provide “Free Delivery.” Right? The simple reason being we do not incur additional charges for our purchase, and that reduces the burden of our expenses.
Even Direct Plans and Regular Plans of Mutual Funds work on a similar concept. Let’s take a closer look.

Regular and Direct Plans: An Introduction

Regular Plans are mutual funds that you buy through an intermediary such as an advisor, distributor, agent, or broker. These agents charge commission, trail, or distribution fee for the service they provide, thus increasing the expenditure for your investment. And not always do brokers or intermediaries intent to sell plans that suit your financial needs, their primary objective would be to push the scheme and earn their share of profit.

Now let’s look at funds that are like the delivery of free online products.
SEBI made new regulations with regards to Mutual Funds, which was made effective on January 1, 2013, i.e. Introduction of Direct Plans. Direct Plans are those mutual funds in which investors can directly invest with Asset Management Companies (AMC) who do not involve intermediaries and do not charge any agent or broker fees.

How Are Direct Plans More Beneficial?

We are aware now what the difference between Regular and Direct plans. But what makes Direct plans more convenient for investments. Let’s find out:

  • Direct Plans do not involve intermediaries, and hence, Fund Managers can generate better returns by reducing their expense ratio.
  • The Net Asset Value (NAV – per share market value of a fund) is more when compared to Regular Plans implying that the returns that you can make are higher by approximately 0.5% for equity funds and 0.2% for debt funds.
  • Investors can earn 1-1.5% more returns with Direct Plans. Additionally, a difference of 1% can be a huge gap with the compounding effect in the long-term.

Let’s look at a simple example:

An investment of 2 lakhs in each Direct, as well as Regular plans for 20 years, yield different returns.

 

Direct Vs Regular

Direct Plans offer 42.2 lakhs, which means the investor is entitled to 16.5% returns, whereas Regular plans help you earn 32.7 lakhs, which are approximately 15% returns. This is a clear example that the Direct Plan is more beneficial and hassle-free than Regular Plans.

 Direct Plans = Higher Returns

However, each investor’s risk appetite is different, and so is their knowledge or expertise about Mutual Funds. So if you are a newbie to investing and have no prior knowledge of mutual funds, then you can opt for Regular Plans, initially. However, once you have gathered enough experience and expertise, it’s highly recommended that you quickly switch to Direct Plans for the above-mentioned reasons.

Think Smart! Think Investments!

term insurance

Do women need Term Insurance?

 

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

-Warren Buffett

This phrase is so true when we speak about our Mothers. Mothers play such a significant role in our lives. The lessons they teach structure our lives beautifully. A woman has so many responsibilities to fulfill at various stages of her life, be it the role of a daughter, a sister, a wife, a mother and if you’re a working woman, then you’re even the bread earner of the family. As women, we know every nook and corner of our house and understand the needs of every family member; their favorite food, their outing spot, the gadgets they like and even their financial needs. We always want to protect our families from every trouble.

But what if we are not around our family? What happens when we cannot cater to their needs? What if we face an untimely death? Still, as mothers, we want our families to have a peaceful life after we have left them. For this, we need to prepare our families both mentally and financially. This arises the need for Women especially to have

“Term Insurance”

Term Insurance is the purest form of Life insurance, wherein you need to pay a fixed amount as a premium to a certain amount known as Sum Assured. And in case of your unfortunate death during the policy term, your family receives the amount.

Why should working women opt for Term Insurance?

  • The conventional thought is that men are the bread earners of the family, even though women work. Let’s imagine your income stops for a while. Can anything substitute that income? No, right? So a women’s salary is also a major source of income for the family. Also, Term insurance is provided based on the total income of the family. Hence your salary matters.
  • Since you’re a working woman you would help your partner in taking care of the expenses of your family. A term cover is essential because, in the absence of your income, it would help your partner to handle the expenses all by himself. Let’s say, for example, school fees of the children, EMI, loan, rent, etc.

What is the use of a term plan for a homemaker?

  • Even if you don’t make monetary contributions, your absence would still leave a huge void in your family.
  • Your partner or your siblings would have to carry forward your responsibilities.
  • With the help of term insurance, your partner or siblings can cut down on their work hours or part-time jobs and dedicate their time in fulfilling your responsibilities. (Planning of your child’s marriage /education or taking care of your parent’s medical needs). They would receive a fixed amount of income, that would cater to their financial necessities and goals.

Women receive certain special benefits with term insurance such as:

  • Special premium rates especially for women.
  • If you don’t smoke, then you receive attractive premium rate benefits.
  • Comprehensive protection with the option to choose Critical illnesses rider and other added riders as well with your term plan

How do I get Term Insurance done?

Working women normally have a busy schedule, an easier way to handle finances would be to use digital platforms. MyWay Wealth – India’s most trusted app for Direct Mutual Funds, is one such digital platform that offers Term Insurance. 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.

You may delay but life will not, and lost time is never found again. Hence plan your Term Insurance on MyWay Wealth app today and be rest assured regarding your families well-being. 

Tax saving

Top Tax-Saving Funds

Tax season is as certain as sunrise.
You’ll be better off having a hat at all times!

“Request for submission of proof of investments”: This is the email subject I woke up to this morning. I realized that many, just like me, are just so engrossed in the frenzy of daily tasks that we sometimes forget our essentials – like saving tax through 80C deductible investments.

It would be too redundant to list out a comparative table enlisting tax-saving options with their pros/cons and prove how ELSS mutual fund is the best tax-saving avenue in terms of the lowest lock-in period and highest return expectation.

However today, let’s cut to the chase and let me present our top ELSS mutual fund picks for the year 2019 which will not just help you save on taxes, but also help build you some decent wealth.

Fund NameFund Type3Y Returns5Y Returns
IDFC Tax AdvantageAggressive13.9%16.4%
L&T Tax AdvantageAggressive14.5%16.3%
Aditya Birla SL Tax Relief 96Low-Aggressive14.0%19.2%
ICICI Pru LT EquityModerate12.0%16.1%
DSP Tax SaverModerate13.7%17.6%

While these are our top picks for the year, you may choose to invest in the fund that matches your risk-appetite. Remember, the risk reduces as you move from small cap to midcap to large-cap allocations.(Source: Morningstar; data as on 17 Jan 2018; returns are annualized)

While ELSS is the only tax-saving investment option with a lock-in period as low as three years, the equity component has been the largest wealth creator when it comes to asset classes.

While equities work like a gold mine which takes years to mine, but at the end delivers a fortune, it only helps to see what has been moving this mine in the past week.

Nifty Data

Now that you know the necessity of ELSS go ahead and invest through MyWay Wealth.

mutual funds

Aren’t Mutual Funds Risky?

Although Mutual funds are regulated by the Securities and Exchange Board (SEBI) of India,  people are skeptical of investing their money in Mutual Funds. The reason for this phenomenon is “Safety of your investments”. Since Mutual Funds are linked to the market, investors doubt the safety of their funds and the guarantee of their returns. This article addresses the concern and lists out reasons to prove that investments in Mutual Funds are safe even though they are risky:

Regulated

As stated before, SEBI regulates Mutual Funds with the intention to protect the interests of the investors. SEBI sets guidelines that help investors in comparing various funds and also have categorized Mutual Funds into – Equity, Debt, Hybrid, Solution Oriented, and Others. This makes the entire system simplified and uniform.

Diversification

Mutual funds have definitely capitalized on the quote “Don’t put all your eggs in the same basket”. Mutual funds wisely invest your funds in various instruments such as stocks, bonds, company shares, etc. Thus reducing the risk that could arise from investing in a single stock.

Reduces Risk

Mutual Funds are managed by Professional Fund Managers. They make decisions regarding the buying and selling of funds based on research and abide by the standards set by SEBI. They constantly evaluate the investments and address risk by diversifying asset portfolios.

Inflation-beating returns.

Mutual Funds account for inflation. The inflation rate in India has been between 4% – 7% and with Mutual Funds, investors have the potential to earn more than 15% in returns, which easily beats inflation. Thus the real interest rate (i.e. nominal interest rate – inflation i.e. 15% – 7%) is more in Mutual Funds when compared to FDs.

Flexibility   

Emergencies such as accidents or health issues are uninvited guests in anyone’s life. One way to face them is to be able to access your money easily. With Mutual Funds, you can withdraw your funds anytime and the amount gets credited to your bank account. Also with MyWay Wealth, you can invest for a specific goal (retirement, child’s education/ marriage, vacation) or just park your money aside with 3-year investments.

A fund for every investor.

Investment decisions have to be made based on the investor’s risk appetite & investment horizon and with Mutual Funds that is possible. Mutual Funds provide tailor-made funds that suit your financial needs. Right from short term funds to long term funds, Equity Funds (High risk, high returns) to Debt Funds (low or moderate risk and returns), you can find them all under one roof of Mutual Funds.

“Everything you want is on the other side of fear” Jack Canfield

Now that we know Mutual Funds are not as risky as they seem to be, let’s overcome the fear. Don’t Delay – Invest Today!

invest in gold

Make wiser investments in Gold

“Gold has two significant shortcomings, being neither of much use nor procreative”

-Warren Buffett

One of the most prominent investors of our time, Warren Buffett is known for his advice on investments is telling people to trade in anything but “gold”. However, we Indians love gold and just cannot let it go. It would be hard to find a person who has not invested in gold in one form or another. There are those who buy gold jewelry for different occasions like weddings, festivals, etc., while others look to make a profit.
“Gold is not an investment at all!” said the Vanguard founder and former CEO, John Bogle in an interview with CNN. “Gold is speculation. It has absolutely no underlying intrinsic value,” said the American investor, who is known for promoting Mutual Funds. An investment that only recently became popular among the average investor for its low-cost and high earning schemes.
Did you know that you can invest in gold through Mutual Funds? This investment vehicle collects the money and invests in physical gold without the hassles of storage and low yield. There are two ways you can go about it. One is to invest Gold Exchange Traded Fund (ETF) and the other is to simply invest in Gold Funds. Let’s see how they differ from each other :

 

Gold ETF

Gold Fund

  • Investor trades in the physical gold through an exchange.
  • A Mutual Fund scheme which invests on the Gold ETF and other related assets.
  • Can be purchased from the stock exchange and requires a Demat account.
  • Can be purchased in Mutual Funds without a Demat account.
  • Gold ETFs are priced transparently based on international gold prices.
  • Gold Funds invest in Gold ETFs and other related assets, their NAVs are dependent on gold prices as well as prices of other assets that funds hold.
  • Gold ETFs typically require a minimum investment amount of 1gm gold which is close to Rs 3,000 at current prices.
  • Gold Funds allow a minimum investment of Rs 1,000 (as monthly SIP).

 

If you were determined to purchase gold, do so with the better investment vehicle. Since Gold Funds are professionally managed, they are preferred over physical gold, even though it holds less liquidity. Using the MyWay Wealth App, any person can trade in these funds with his specific appetite of risk. Explore More on Top Rated Gold Funds

So go for the real gain, not just for the gold!
Think MyWay Wealth!

Mutual Funds

Basics of Mutual Funds

Investments and returns are two sides of the same coin. The primary goal of your investments is to earn substantial returns and one such instrument that helps you with that is Mutual Funds. A Mutual Fund invests money in various financial instruments such as stocks, bonds, company shares, etc, by pooling in money from several investors. The money collected is managed by an Asset Management Company (AMC) and the person who drives this investment vehicle is a Fund Manager.

Mutual Funds comes with two plans – Direct and Regular plans. The major difference between these two plans is that with Direct Plans an investor buys Mutual Funds directly from an Asset Management Company (AMC) and with Regular Plans an investor does the same through an intermediary (broker, advisor or distributor). Now, the question is why do you buy Regular plans when the same can be bought directly? With Direct Plans you get to earn 0.5% – 1.5% more returns than Regular Plans because:

  • Expense Ratio – The Expense involved in a Direct Plan is lower. Unlike Regular plans, Direct Plans do not involve commissions that are to be paid to intermediaries.
  • Returns – Since they have a lower expense ratio, Direct Plans provide higher returns.

So why miss out on Higher Returns? If you have invested in Regular Plans, it’s highly recommended that you quickly switch to Direct plans.

Speaking of returns, Mutual Funds are risky because they are linked to market conditions, but due to high risk, they also provide higher returns (returns more than traditional instruments such as FDs, RDs or PPF). The current interest rate for Fixed Deposits is anywhere between 4% – 8.5% but with Mutual Funds, an investor has the potential to earn returns of 15% or more.

Inflation is yet another important factor to be considered when it comes to investment and Mutual Funds account for it. The inflation rate in India for the past 10 years has been between 4% – 7%, which means that the returns earned minus inflation are higher when it comes to Mutual Funds when compared to FDs.

Now that we know Mutual Funds are the best option for investment, the often debated question is whether to invest in small amounts (SIPs) or lump sum in Mutual Funds. Systematic Investment Plans (SIPs) are a way of investing a fixed amount in a monthly/quarterly basis, whereas lump sum is a one-time investment in Mutual Funds. However, SIPs are more beneficial than a lump sum, let’s find out why?

  • Systematic – SIPs inculcate the habit of savings by investing a fixed amount at regular intervals.
  • Less Risky – With SIPs the money is spread over various intervals of time. This reduces your risk and protects your investment during times of market volatility.
  • Rupee Cost Averaging – With SIPs you get the opportunity to hold more units. With SIPs the money is distributed during different phases in the market which means when the market is low, you get to buy more units. This gives the opportunity to sell high when the market is favorable.

“Risk comes from not knowing what you are doing.Warren Buffett

Now that you know everything about Mutual Funds, then what are you waiting for? Start investing with MyWay Wealth! You can start a SIP with just Rs. 500 in Direct Plan Mutual Funds today.