DIY (Do It Yourself) - Starting Direct Investment in Mutual Funds

Everything whatever we do first time look difficult and tedious and same is with mutual fund investment.

When I started investment in mutual fund I don’t know how to invest directly with AMC. So initially I started investment with distributor and after sometime I started direct investment.

This post is intended to people who has not done any mutual fund investment and want to invest directly through AMC.

Personal Tax Benefits After Union Budget 2014-15

New government presented the budget for the financial year 2014-15. There is some benefit has been given to individual tax payers. Basic exemption limit has been increased by Rs 50000, Investment limit under section 80 C has been revised from Rs 1 lac to Rs 1.5 lac, home loan interest tax benefit for self occupied house also increased from 1.5 lac to 2 lac.

In this post we will try to see how much tax benefit individual tax payer will be getting from these changes.   

Exemption limit

Basic Exemption limit raised from Rs. 2 lacs to Rs. 2.50 lacs for general category of individuals and from Rs. 2.5 lacs to 3 lacs for senior citizen. So in total Rs 50000 has been added to exempted limit. 

2008 Market Crash and People's Reaction

Currently Indian market is in bull phase and the new investors are happy by seeing the growth of their investments. They are hoping that the bull phase will continue forever. 

The idea of this post originated from the discussion about the actions people has taken during the 2008 market crash on Facebook Group “Asan Ideas for Wealth”. 

In 2008 market crash almost all fund’s NAV dropped significantly. People who are sitting on huge profits suddenly found that now they are sitting on losses. After seeing the market crashed some people stopped investment, some people redeemed their funds and some people continued with further investment.

Why Early Retirement Planning is Important

Now a days one video has gone viral where one person at the age of 75 year sells toys for making living. He travels daily 150 KM to and from Delhi to sell the toys. He was the manager at one big American company before retirement. You can see it here. 

After seeing the video I was wondering how many people after seeing this video will take charge of their own financial life and plan for retirement and start investing for the same. 

5 Reasons why ULIPs are BAD

ULIP is unit link insurance plan, which provide insurance as well as capital appreciation of the premium paid. ULIP provides the combination of two products in the premium of one. So what are the problems with ULIPS? 

1. Un-sufficient Insurance 

Before purchasing insurance plan we should know how much cover we required. ULIP provides very less life cover with high premium. For most of the ULIPs premium paid is tax exempted under section 80(c) subject to premium is not more than 10% of sum assured hence most of ULIPs life cover is 10 times of premium paid. Suppose I want 20L life cover then I have to purchase a ULIP with the premium of 2L. Is this cover is justified with this premium? 

Endowment Policy Vs. Combination of Term Insurance and PPF

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.

I talk to people and ask them whether they have term insurance or not and in reply I got different-different answers. Some say they do have term insurance (very few), some say they have endowment policy and ULIP and some say they do not have but they are planning to purchase.

A Conversation with Insurance Agent

Long-time back I got call from XYZ Insurance agent and the conversion was like this.

Agent :- Sir we have very good Insurance plan with guaranteed return.

Me :- How much? 

Agent :- 5.5% + life cover worth of 20 times of Premium.

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.

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.

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.

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%.

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.