Mutual Fund Basics - Part II (Types of Mutual Funds)

In the First Part, I explained about what is mutual funds and their advantages and disadvantages. In this part I am going to explain the basic types of mutual funds. Mutual funds can be categories according to Maturity Period or Investment Objective.

Mutual Funds according to Maturity Period

Based on the maturity period mutual fund schemes can be categories into two types

 1. Open Ended Mutual Funds         

An open ended mutual fund is one that is available to purchase and repurchase continuously. Liquidity is the main feature of open ended mutual funds. There is no maturity date for open ended mutual funds. Investors can buy or sell unit at any time based on NAV which is declared on a daily basis.

Mutual Fund Basics - Part I

A mutual fund is a professionally managed investment scheme that pool money from many investors and invest in market securities. The companies which manage the funds are called AMC (Asset Management Company).

Profits and losses are shared by the investors by the proportion of their investment. AMC allocates units to the investors as per their investment. The value of unit varies daily basis based on the market.

Public Provident Fund Basics

Public Provident Fund is a good saving investment which provides tax benefit and also gives good returns. Many people don’t know about PPF or have very little information. If someone asked me in 2009 about PPF I could not have any answer that time because I also didn’t had any information about PPF.

Public Provident Fund started by government for salaried and self-employed people to encourage the saving habit and by investing in PPF, people can build good corpus for their retirement. In this post I will list down some basic and important points about PPF.

Health Insurance - Points To Understand Before Purchase

Some people thinks that since they are young and living a healthy life they don’t required any health insurance and purchasing health insurance is totally waste of money. But what they do not understand that medical emergency can arise anytime and we should be well prepared for that because medical treatments are getting costlier day by day and it can make a big hole in your savings which could affect your future goals.

One of the best ways to prepare for such situation is to get health insurance for the future medical expenses. Now the question is which health insurance to choose, what the common terms are and how much should be the sum assured. To get these answers let’s try to understand the types of health insurance and there features.

11 Points To Achieve Financial Freedom - Part II

Being independent is wonderful feeling. We got our independence from British after long struggle. Same is applicable to financial freedom. Let’s understand what financial freedom is:

 “Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities”

In part one of this post I have listed 5 points, do read it "11 Points To Achieve Financial Freedom - Part I".
Here I am listing remaining 6 points.

6. Purchase adequate life cover

The main purpose of term insurance is to provide the financial security to your loved ones in case of you died so that after you, your family will not be in any debt.

11 Points To Achieve Financial Freedom - Part I

Being independent is wonderful feeling. We got our independence from British after long struggle. Same is applicable to financial freedom. Let’s understand what financial freedom is:

 “Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities”

Things which prevent people from being financial independent are debts, no savings only spending, no plan for future goals, choosing wrong investment products etc.

Term Insurance - Points To Remember Before Purchasing

Term Insurance is the best way to provide the cover for one’s life. Currently there are lot of term insurance plans available in the market and the premium is getting cheaper, thanks for the competition.

Before purchasing term insurance please read below points:

1. Understanding the main purpose of term insurance

The main purpose of term insurance is to provide the financial security to your loved ones in case of you died. It is also needs to understand that there is no maturity benefit in term insurance. So use term insurance as the life cover provider not the money making tool. 

9 Best Tax Saving Instruments

One should plan their tax saving investments at the beginning of the financial year. Do not wait for end of the financial year which can lead to wrong choice of instrument. I am listing here 9 tax saving instruments one can consider while doing tax planning.

1. Term Insurance Policy

Everyone who is having some liabilities or having dependent people should purchase a pure term insurance policy. I have used word purchase because it is a expense (and should be a mandatory expense) which provides cover to life. Life cover may differ from person to person depending on liabilities or dependent people. One can avail tax benefit under section 80C.

Please read "Term Insurance - Points To Remember Before Purchasing" blog post before purchasing the term Insuranse.

Understanding The Tax Benefit on Home Loan Interest

Most of us took home loan for purchasing our dream house and it is a very good tax saving instrument. There is a lot of confusion about the tax benefit on interest on home loan among people and in companies also.

I have experience in my previous and current company (with old payroll vendor) that they allow tax benefit only on one home loan and up to 1.5 lacks. So if you have more amount for tax benefit (i.e. Interest on a second home loan etc.) you have to file return to get back the paid tax.

5 ways to payoff home loan early

It is every ones dream to own a house and taking home loan to fulfill this dream is the most preferred way for most of them. But till you doesn't pay off your home loan house is not yours. So it’s also important to pay off the home loan early to get the full ownership of the house.

Let’s see how we can payoff the home loan early.

1. Opt for lesser tenure

Now these days some home loan lenders giving loan for 25 yrs tenure. Mostly people Opts for long tenure since long tenure reduces the EMI amount. Doesn't fall into this trap. You should understand that irrespective of tenure or EMI amount, the interest part EMI remains same. So if your interest rate is 11% that means you have to pay 11% interest annually irrespective of tenure, what it mean is the more is tenure the more interest you are paying.

You should opt for the minimum tenure you could afford. This will reduce the total interest paid.

8 Reasons Why People Don't Do Any Investment – Part 2

In my last blog, I have written about the difference between investment and non-investment. You can read it here.

 

Today I am going to write about the reasons why people don’t do any investment.

I have observed lot of reasons for not doing any investment. In first part I have written about 4 reasons, you can read that here.

Here I am listing remaining reasons.

8 Reasons Why People Don't Do Any Investment – Part 1

In my last blog, I have written about the difference between investment and non-investment. You can read it here.

Today I am going to write about the reasons why people don’t do any investment.

I have observed lot of reasons for not doing any investment. Here I am listing some common reasons.

What is Investment and What is Not

"Investment is putting money into an asset with the expectation of capital appreciation, usually over the long-term future"

Lets see what some people says about investment.

Case 1: I didn't think much and put all my money in saving account it gives me 4% interest.

Is this investment? No. You are earning 4% interest but inflation is 6%-8%, that means you money's value getting reduced by 2%-4% every year. Who is actually earning here? banks. Same money they are giving you as loan with interest rate 11%-17%.

How to Download Form 26AS (Tax Credit)

Verification of TDS data with Form 26AS is very important step before filing your return. For error free return filing make sure you verify TDS details in Form 16 or Form 16a with Form 26AS.

Form 26as is available in TRACES website. Please follow the below steps to download your Form 26as.

3 Mistakes of My Financial Life

Normally we do mistakes and also learn from our mistakes. But sometimes it take a lot of time to realize our mistake due to our own ignorance or ego. At times we thinks that we know everything and because of this we didn't listen to correct advise sometimes. 

Sometime we do mistakes due to laziness (i.e. purchase useless insurance  plan or ULIP without understanding them), sometime we do mistake because we trust some person and got wrong advise (mostly happens in sales).

Making mistakes is not a crime but not learning from the your own and others mistakes is definitely. I also did lot of mistakes in my financial life but here I am writing about the major ones.

Step by Step Guide for E-Filing Income Tax Return

Deadline for filing IT return is fast approaching and still many salaried people didn't filed their return's yet. Since e-filing is mandatory if your total taxable is more than 5 lacks. There are some third party sites available for filing return online but majority of them charges fee. 

Majority of salaried person opts for this saying that fee is very small but if you know the whole procedure of e-filing than you will come to know even this small fee is unnecessary and you can file your return by own self easily. 

In this blog I am going to explain how to e-file your return step by step.