Rating : 2 star Fund size : 7332.91 cr Expense ratio : 1.72% , seems a bit higher Trailing Returns Based on the past returns we see that it has been giving good returns Rolling Returns Rolling returns show that for around 77% of times the fund has given returns more than 12 % and around 50% of times returns more than 15 % for a rolling period of 5 years. Which is a normal result. It is to be observed that the fund has never given negative returns in 5 years period. The average returns is also decent for the fund at 14% Benchmark return : The fund is benchmarked against S&P BSE 500 TRI. The fund started with weak performance but had recovered since then. And has been above the benchmark for all these years. Vs Other ELSS fund : When we see the performance compared with other funds we see that the fund is not performing as compared Ratios The fund has std. deviation of 12.46 which shows the returns are stable, the beta is high of 0.91 but the fund has not been able to deliver any alpha, which is negative. The Sortino ratio which shows how much the downside the fund can protect is not good. Fund manager : The fund had a lot of changes in fund manager till 2020 , which may have caused a lot of trouble for the fund. The new fund manager seems to be loaded with a lot of funds to manage . Only Vishal Mishra even though new is trying to manage the fund. But his fund performance is still below the benchmarks. Fund strategy and fund style : Fund is growth oriented fund with fair orientation to large caps , limited allocation to id cap and very small allocation to small. So it may be one reason that it has underperformed the other ELSS funds in the market. This is the reason for the fund to be much more stable. The sector allocation of the fund is aligned with the benchmark to financial , technology and Automobiles. Conclusion The fund has some stable results and can be part of portfolio if you do not want to take much risk in your portfolio. But still better ELSS fund are available in the market.
Ben Graham the inventor of the phrase “margin of safety” defined investment as “ An investment operation is one which, upon thorough analysis, promises safety of principle and satisfactory returns. Operations Not meet these requirements are speculative” Investing can be an exciting journey that allows you to grow your wealth and achieve your financial goals. But before you dive in, it’s essential to equip yourself with a solid understanding of core investment principles. These fundamental concepts provide a roadmap for navigating the financial markets, making informed decisions, and building a successful investment portfolio. Whether you’re a seasoned investor or just starting out, a grasp of these core principles empowers you to take control of your financial future and make smart choices with your hard-earned money The fundamentals are very easy to grasp and may work as a guiding principle for anybody investing. They do not change for your Mutual fund investing too. Assigning goals: Every investment you make should be tied to a specific financial goal. This goal could be as simple as growing your money by a certain percentage over time, or it could be something more substantial like buying a house, funding your children’s education, or securing a comfortable retirement. Risk : Understanding your risk tolerance is crucial before investing. Mismatching your risk profile with an investment’s risk level can lead to a negative experience. Imagine a conservative investor placed in a small-cap fund, like the Nippon Small Cap Fund, which experienced a significant downturn of -36.19%. This could cause them considerable anxiety and potentially derail their investment plans. Conversely, an aggressive investor stuck in an equity-saving fund during a strong market might feel frustrated watching others earn higher returns . Horizon : Time horizon in investing refers to the amount of time you plan to hold onto an investment before you need to access the money. It’s a crucial factor in determining your investment strategy and risk tolerance Common Time Horizons: Short-Term (0-3 years): Focuses on preserving capital with minimal risk. Examples include savings accounts, money market funds, and short-term bonds. Medium-Term (3-10 years): Aims for a balance between growth and stability. Examples include balanced funds, index funds, and some corporate bonds. Long-Term (10+ years): Prioritizes long-term growth with the ability to handle volatility. Examples include growth stock funds, small-cap funds, and real estate investments. Current asset allocation: Having your asset allocation analyzed is a critical step in successful investing. This process helps you understand the current makeup of your portfolio and how different assets within it have historically behaved. By analyzing your asset allocation, you can identify any areas where you might be overweight or underweight in certain asset classes. This knowledge empowers you to make informed decisions and potentially adjust your portfolio to better align with your risk tolerance and financial goals( i have written about the concept in my blog https://wealthinn.in/asset-allocation-guideline-for-investment/ Diversification : Diversification in investing is a fundamental strategy that involves spreading your investments across various asset classes, industries, and even geographical locations. The core principle is to avoid putting all your eggs in one basket. By diversifying, you aim to reduce the overall risk of your portfolio without sacrificing potential returns. Asset allocation tends to take care of your diversification needs Emergency planning : Building an emergency fund is a crucial principle of sound financial planning. It’s a safety net that can cover unexpected expenses, such as job loss, medical bills, or car repairs. Aim to save 6-12 months of your living expenses in this fund. This amount can be adjusted based on your circumstances. For example, if you have a steady job and good health insurance, you might target 6 months. Conversely, if you’re self-employed or have high healthcare costs, consider saving closer to 12 months. You can store your emergency fund in a highly liquid account like a Fixed deposit account or a money market fund. Remember to regularly review and adjust your emergency fund as your income and expenses change. Insurance planning : Insurance planning is the process of strategically choosing insurance policies to financially protect yourself, your loved ones, and your assets in case of unforeseen events. It’s about identifying potential risks and finding insurance plans that can mitigate the financial burden they might cause. You should at least run one term plan and one health insurance policy apart from your corporate policy if you are salaried . These profiles prepare you and arm you with necessary steps to investment, i always say that products are last to be selected. Once the profile is clear things are done we can move to look into the products and select the products as per the guidelines given below Past performance : Past performance is a tricky concept in investing. While it can provide some insights, it’s not a guaranteed predictor of future results. But we do need to check how the funds are performing as compared to other funds in the category. Rolling returns : Rolling returns are a valuable tool for investors looking to understand the historical performance of an investment over various holding periods. Unlike traditional point-to-point returns, which show the change in price from one specific date to another, rolling returns provide a more nuanced picture. Benefits of Rolling Returns: Provides a Smoother Picture: Rolling returns smooth out short-term fluctuations, offering a better understanding of how an investment performs over different holding periods. Helps Analyze Risk: By analyzing rolling returns across various holding periods, you can gain insights into the investment’s potential volatility and risk profile. Informs Investment Decisions: Understanding how an investment has performed for different holding periods can help you make informed decisions about your own investment horizon and risk tolerance. Ratios : Mutual fund ratios are like little keyholes that give you a glimpse into the inner workings of a fund. They offer valuable insights into a fund’s performance, cost structure, and risk profile. Here are some key ratios to understand: Expense Ratio: This is the annual fee a fund charges investors to cover
What are flexi cap Lets start with the definition, Flexi Cap mutual funds offer several advantages for investors, making them a compelling option for many. Here’s a breakdown of their key benefits and how they compare to other mutual fund schemes: Advantages of Flexi Cap Funds: Diversification and Risk Management: Flexi caps invest across companies of all market capitalisation (Large, Mid, and Small). This spreads your investment across different segments, mitigating risk compared to focusing on a single cap size. If a particular market segment (like small caps) underperforms, the fund’s exposure to other segments can help balance the portfolio. Growth Potential: Flexi caps allow you to tap into the potential of high-growth mid and small-cap companies alongside the stability of large caps. This combination can offer the potential for better returns compared to pure large-cap funds. Flexibility for Fund Managers: Unlike multi-cap funds that have mandated allocations across market caps, Flexi caps offer more flexibility. Fund managers can dynamically adjust the portfolio based on their assessment of different companies and sectors. This allows them to capitalize on opportunities across the market spectrum. Comparison with Other Schemes: Large Cap Funds: Provide stability and consistent returns but may limit growth potential. Mid Cap Funds: Offer higher growth prospects than large caps but come with increased volatility. Small Cap Funds: Even higher growth potential but with significant volatility and risk. Fund Name Year Of inception Fund rating ( Crisil rated ) Portfolio Size ( In Cr ) Expense ratio PE ratios JM flexi cap fund 2008 5 star 3,855 1.83% 21.32 HDFC Flexi cap 1995 4 star 61,572 1.45% 20.85 Franklin India flexi cap fund 1994 4 star 16,677 1.72% 17.40 Motilal Oswal Flexi Cap fund 2014 4 Star 11,466 1.74% 45.70 Parag Parikh flexi cap fund 2013 3 Star 75,956 1.33% 16.55 Kotak Flexi Cap 2009 3 star 53,783 1.44% 22.14 DSP Flexi Cap 2007 3 Star 11,879 1.72% 21.70 ABSL Flexi Cap fund 1998 2 Star 22,792 1.66% 24.95 PGIM India flexi cap fund 2015 1 star 6,418 1.77% 29.94 Quant Flexi cap fund 2008 – 7,436 1.76% 22.21 Invesco India Flexi Cap 2022 – 1,985 2.03% 28.29 JM flexi cap fund The fund was launched in the year 2008, Currently CRISIL rated 5 , The fund has an expense ratio of 1.83% as the current fund size is very low. The PE of the fund is 21.32 HDFC Flexi cap This is one of the oldest funds in the category launched in 1995, So a long history for the fund. Currently CRISIL is rated 4 Star. The fund enjoy’s one of the highest portfolio size of 61,572 cr , with a low expense ratio of 1.44%. The current PE of the fund is 20.85. Franklin India flexi cap fund This is the oldest fund in the category launched in 1994, Crisil rated 4 star. Due lack of distribution and loss of reputation during the debt crisis the fund size is low 16,677 cr , expense ratio is 1.72%. With a very good PE of 17.40. Motilal Oswal Flexi Cap fund The fund was launched in 2014, it is rated by Crisil as 4 star. The fund has a fund size of 11,466 cr with expense ratio of 1.74%. The current PE is 45.70 Parag Parikh flexi cap fund The fund was launched in 2013, Currently CRISIL rated as 3 star, has the highest AUM in the category of 75,956 cr, the lowest expense ratio of 1.33%. THE current PE of the fund is 16.55. Kotak Flexi Cap The fund was launched in the year 2009, currently CRISIL rated as 3 star. It has AUM of 53,783 Cr, 3rd largest AUM in the category. Low expense ratio of 1.44% . The current PE is 22.14 DSP Flexi Cap The fund was launched in the year 2007, Currently CRISIL rated 3 star. The current AUM is 11,879 Cr, with expense ratio of 1.72%. Current PE is 21.70 ABSL Flexi Cap fund Another fund with a long history launched in 1998, Currently rated 2 star. The portfolio size of 22,792 cr, expense ratio is 1.66% . The Current PE is 24.95. PGIM India flexi cap fund The fund was launched in 2015, currently rated as 1 star. The fund has a small fund size of 6,418 cr. Expense ratio of 1.77%. PE of the fund is 29.94 Quant Flexi cap fund The fund was launched in 2008 , currently not rated by CRISIL. The fund has AUM Of 7,436 Cr. Expense ratio of 1.76%. PE of the fund is 22.21 Invesco India Flexi Cap The fund is a recent addition to the category, launched in the year 2022. Currently not rated by CRISIL . The fund size is small of 1,985 cr. The PE of the fund is 28.29. Trailing Returns : Scheme 1 month 3 months 6 months 1 year 3 years 5 years 7 years 10 years 15 years 20 years Aditya Birla SL Flexi Cap Fund Reg (G) 1.45 11.61 17.85 39.16 17.24 20.98 14.36 15.46 15.01 DSP Flexi Cap Fund Reg (G) 1.59 11.62 21.74 37.53 16.94 21.92 16.4 15.51 15.23 Franklin India Flexi Cap Fund (G) 1.59 11.05 18.44 44.68 23.46 24.9 16.83 16.44 16.38 19.1 HDFC Flexi Cap Fund Reg (G) 0.55 9.06 17.06 43.12 27.8 24.62 17.94 15.69 16.36 19.79 Invesco India Flexi Cap Fund Reg (G) 2.99 12.72 21.91 52.08 JM Flexi Cap Fund (G) 0.23 12.28 23.93 62.01 30.85 27.98 19.71 19 14.82 Kotak Flexi Cap Fund Reg (G) -0.44 6.42 18.06 36.84 17.99 19.48 14.73 15.82 15.13 Motilal Oswal Flexi Cap Fund Reg (G) 2.24 12.58 24.14 58.07 18.68 18.62 12.4 16.82 Parag Parikh Flexi Cap Fund Reg (G) 2.03 8.46 14.14 39.97 19.45 26.47 20.66 18.61 PGIM India Flexi Cap Fund (G) 2.45 11.66 15.28 29.91 12.48 23.42 15.9 Quant Flexi Cap Fund (G) -0.58 7.56 14.81 57.42 27.08 37.05 22.85 21.42 13.81 1 year trailing 1st quartile : >54, The first was JM flexi cap fund, Motlia
Fund Name Year Of inception Fund rating ( Crisil rated ) Portfolio Size ( In Cr ) Expense ratio Exit Load Quant small cap fund 1996 3 26,645 cr 1.59 1% for redemption within 365 days Bandhan Small cap fund 2020 4 7,534 cr 1.74 1% for redemption within 365 days Hdfc Small cap fund 2008 3 33,894 cr 1.57 1% for redemption within 365 days Nippon India small cap fund 2010 4 62,260 cr 1.42 1% for redemption within 365 days Axis Small cap fund 2013 2 24,766 cr 1.61 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days HSBC Small Cap fund 2014 4 17,306 cr 1.68 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days SBI small cap fund 2009 3 34,217 cr 1.56 1% for redemption within 365 days DSP small Cap fund 2007 1 16,705 cr 1.7 1% for redemption within 364 days Kotak Small cap Fund 2005 3 18,287 cr 1.64 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days Mahindra Manulife Small Cap Fund Reg (G) 2022 – 5,478 cr 1.79 1% for redemption within 3 months ITI Small Cap Fund Reg (G) 2020 5 2,415 cr 1.93 1% for redemption within 365 days Quant small cap fund : One of the oldest performing funds in the category, enjoying 3 star rating, but of course it was not launched by quant but had been taken over by quant, with a decent portfolio size of 26,645 cr , expense ratio of 1.59. Bandhan Small cap fund : Launched in 2020 , bandhan small cap enjoys 4 star rating , Portfolio size is small at 7,534 cr, high expense ratio of 1.74. Hdfc Small cap fund: Launched in 2008 , the fund enjoys a 3 star rating . It has a decent fund size of 33,894 cr, and seems like a lot of people liked it . The expense ratio is very low 1.57. Nippon India small cap fund : Launched in 2010, the category leader enjoys a 4 star rating. Highest fund size of 62,260 cr, managed by sunil singhania before exit. Lowest expense ratio of 1.42% . Axis Small cap fund : Launched in 2013 , the fund enjoys a 2 star rating. Even with this rating the fund has a decent portfolio size of 24,766 cr , as it was favorite at some point in time. 1.61% expense ratio is very decent. HSBC Small Cap fund : Launched in 2014, the fund was very much in demand in its earlier times. It enjoyed a rating of 4. Portfolio size of 17,306 cr . Expense ratio is a bit high 1.68%. SBI small cap fund : Launched in 2009, with the distribution power of SBI bank , the fund is the 3rd highest fund size of 34,217 Cr. Fund is 3 star rated. Low expense ratio of 1.56%. DSP small Cap fund : Launched in 2007, the fund is 1 star rated. Fund size is 16,705 cr. High expense ratio of 1.64%. Kotak Small cap Fund : The fund was launched in 2005. Currently rated as 3 star. Has garnered a decent fund size of 18,287 cr. Decent expense ratio of 1.64% . Mahindra Manulife Small Cap: The fund launched in 2022, so the fund is not rated till now. Very Small fund size of 5,478 cr. High expense ratio of 1.79%. 7 ITI Small Cap Fund Reg (G): The fund was launched in 2020, is highest rated as of now at 5. The fund size is not too big 2,415 cr. The expense ratio is 1.93 . Trailing Returns : Scheme 1 Year 3 Year 5 Year 7 Year 10 Year 15 Year Bandhan Small Cap Fund Reg (G) 59.88 26.44 0 0 0 0 Kotak Small cap Fund (G) 36.99 19.06 31.17 20.07 19.97 18.93 HSBC Small Cap Fund Reg (G) 36.45 25.81 30.69 18.71 21.04 14.36 Axis Small Cap Fund Reg (G) 32.9 20.96 27.3 21.5 19.86 0 Mahindra Manulife Small Cap Fund Reg (G) 45.25 0 0 0 0 0 Nippon India Small Cap Fund (G) 39.97 28.75 35.78 22.63 22.85 0 DSP Small cap Fund Reg (G) 32.45 21.83 30.55 17.54 19.76 20.97 ITI Small Cap Fund Reg (G) 46.97 20.36 0 0 0 0 SBI Small Cap Fund Reg (G) 32.25 20.38 27.97 19.42 22.53 21.16 Quant Small Cap Fund (G) 43.97 25.67 45.81 26.28 20.84 17.94 HDFC Small Cap Fund (G) 27.17 22.48 28.22 18.88 19.25 17.52 Even though in the market the past returns are no guarantee of future returns but let us understand how in this rising market these funds have performed. Well we do have trailing returns history for last 24 years since only one fund was present at that moment we would consider the following 13 years trailing ,we see that looking at 1year/ 3 years / 5 years /7 years /10/15 years returns 1 year trailing 1st quartile : 51.25 – 60% – Bandhan Small Cap Fund Reg (G), 2rd quartile : 42.5 – 51.25 % – Mahindra Manulife Small Cap Fund Reg (G), ITI Small Cap Fund Reg (G), Quant Small Cap Fund (G) 3rth quartile : 33.75 – 42.5 % – Nippon India Small Cap Fund (G), Kotak Small cap Fund (G), HSBC Small Cap Fund Reg (G), 4th quartile : 25 – 33.75 % – Axis Small Cap Fund Reg, DSP Small cap Fund Reg (G), SBI Small Cap Fund Reg (G), HDFC Small Cap Fund (G) 3 years trailing return 1st quartile : 25 – 29%: Bandhan Small Cap Fund Reg (G), HSBC Small Cap Fund Reg (G), Nippon India Small Cap Fund (G), Quant Small Cap Fund (G) 2nd quartile: 21- 25%: DSP Small cap Fund Reg (G), HDFC Small Cap Fund (G) 3rd quartile : 17 – 21% : Kotak Small cap Fund (G), ITI Small Cap
Financial Planning : Child Education During my interactions with many parents, the main topic of discussion was their desire to learn how to plan and finance their children’s education. Even a few had done some self-directed planning; however, it lacked basic concepts such as goal setting for the required amount, factoring in inflation, and considering risk contingencies. A lot of parents have been misguided by their so-called advisor into buying products which were not in line with results. Recognizing how deeply parents care about their children’s education, health, growth, and personal aspirations, I’ve aimed to develop a framework for constructive discussion. This framework doesn’t prescribe “correct” answers, but rather fosters informed decisions and positive choices that align with each child’s unique path and evolving needs. Lets See the Framework : Start Early: The earlier you begin, the more time your money has to grow through compound interest. Even small contributions made consistently can add up significantly over time. Set SMART Goals: Define specific, measurable, achievable, relevant, and time-bound goals for your child’s education. Consider factors like desired type of institution, estimated costs, and potential scholarships or grants. Inflation in Education: A measurable number so as to understand the future cost of the education. Explore Investment Options: Research various investment options suitable for your risk tolerance and time horizon. Consider age-appropriate mutual funds, savings bonds, or guaranteed education plans (depending on local regulations). Prioritize Diversification: Don’t put all your eggs in one basket! Spread your investments across different asset classes (stocks, bonds, real estate) to mitigate risk and maximize potential returns. Budget Conservatively: Factor in not just tuition fees but also living expenses, books, and other associated costs. Create a realistic budget and stick to it, leaving room for unexpected expenses. Utilize Government Benefits: Research and take advantage of any government grants, scholarships, or tax breaks available for education expenses. These can significantly reduce your financial burden. Seek Professional Guidance: Consider consulting a financial advisor for personalized advice based on your specific circumstances and risk tolerance. A professional can help you develop a tailored financial plan and navigate complex investment options.( This is were people ignore ) Communicate with your Child: Discuss your financial plan with your child in an age-appropriate way. This fosters transparency, teaches them the value of saving, and encourages responsible financial habits. Let’s see how the framework works in practice using the example of Mr. and Mrs. Sharma, both MBAs who met during their studies and married around the age of 28. They became parents at 30 and both have good-paying jobs. An article about rising education costs by 10% for higher education caught their attention. This fueled their concerns, as their own MBAs cost around Rs. 11 lakhs each back then, and they already pay Rs. 2,50,000 annually for their child’s education. Seeking guidance, they consulted professionals and found solutions using the framework. Seek Professional Guidance: First great step they took was to seek help from professionals, rather than planning on their own. As you will see the benefits and pitfall explained to them. SMART GOALS As both engineers with MBAs, Mr. and Mrs. Sharma searched for engineering programs at top institutions. They found that the four-year degree course at IIT cost around Rs. 9,00,000, while VITS/Bits Pilani charged around Rs. 15,00,000. This further worried them, as the current cost of an MBA at IIMs stood at Rs. 24,00,000 lakhs. Inflation in Education : After researching historical inflation data, we found a CAGR of 5% over the past decade, rather than the 10% mentioned in the article. We will use this as the base inflation rate for our calculations. At age 18, the cost of their child’s engineering education will be Rs. 32,74,311.To pursue their MBA at age 24, the estimated cost will be Rs. 70,20,625. These expenses will require a total of Rs. 1,02,94,937 from their savings. Explore Investment Options: Government Scheme : Sukanya Samriddhi Yojana: A Government Scheme for Girl Child Savings Launched in 2015 by the Government of India, Sukanya Samriddhi Yojana is a tax-saving scheme designed to encourage parents to save for their daughter’s education and marriage. Here are the key features: Eligibility: The account can be opened for a girl child between the age of 0 and 10 years. Account Opening: Parents or guardians of the girl child can open the account. Deposits: The minimum monthly deposit is ₹250, with a maximum annual deposit of ₹5 lakh. Interest: The scheme offers a fixed interest rate of 8% compounded annually. Tax Benefits: The interest earned is exempt from income tax under Section 80C of the Income Tax Act. Maturity: The account matures after 21 years from the date of opening. Returns: This scheme can potentially help you accumulate up to Rs 67,34,534 for your daughter’s future needs. Investment Considerations for Mrs. and Mr. Sharma Since Mrs. and Mr. Sharma have a son, the Sukanya Samriddhi Yojana is not applicable. However, here are some alternative options to consider: Insurance Planning: It’s crucial to protect your investment plan. The unexpected loss of an income earner can disrupt family finances. Adequate term life insurance coverage, at least Rs 1 crore for both earning parents combined, can help secure your commitments like education expenses for your son. For our case example, they should have cover of at least Rs 1 Cr term cover between both the earning parents. Guaranteed plans : Till date , guaranteed plans were market favorites. However, to ensure you make informed decisions, I want to analyze their effectiveness in beating inflation and achieving your goals. Taking three top private plans as examples (without naming companies), let’s assume parents invest Rs. 3,00,000 annually to build a corpus. These plans offer the following benefits: Tax-free premiums under Section 80C Insurance cover, as discussed earlier Tax-free returns, provided the insurance premium is less than Rs. 2,50,000 per year The next step is to assess these plans further. Can they truly keep pace with inflation and fulfill your specific needs? Stay tuned for a thorough analysis! Plan 1 ( Endowment plan 1)
Preparing for Retirement: Don’t Delay, Plan Today! If we ask people if they have planned for retirement? They will say yes, they already are saving for retirement. On further inquiry, do they know the amount they would require at retirement? Few had even put a thought to it. Even further, those who had put thought are either just saving through the traditional way or, even if they are using multiple channels, they have yet to plan any asset allocation. Why do we need retirement planning? While interacting with many HNI’s Salaried or Businessmen in the NCR region, I wondered why we need to plan when we already have many assets. They were blank when we discussed how much you think is required at retirement. The pace of life has increased, and most of us don’t even have time to ponder things that should matter to us financially. We are occupied with earning. We need to plan. The primary asset allocation structure. Which would help you to build your plan. The life expectancy in our country has increased to 70.8 currently. If we say a person retires, At, say, 58, he has to take care of his expenses for at least 12 years. During this time, he had no pension support in the developed world. Also, the inflation would eat into most of the savings he has made so far. The person’s expenses at that stage are kept as he has a living standard to maintain. Medical expenses must be taken care of, and Indian tradition wants the elders to give to their children at this age. So you are not earning but only have expenses to take care of for at least a further 12 years. With the nuclear family system, parents, after retiring, do not receive support from their children. The inflation-adjusted cost of everything would be very high. So, there is a need to have a retirement corpus in place, and it can be achieved through asset allocation. Missing Social Security In India: As the rest of the Western world or the more developed world has systems to care for its aging population, India still needs a strategy. A person must depend on retirement investments to create a corpus. Another challenge people say is they are already spending so much that they need more money to spare for the future. People take such a myopic view of life that they start to think and plan when the future is very near, which would have been done years ago. They do not because of sheer laziness or lack of trust in the end. How to plan for retirement? Once we understand the reason to plan retirement, we need to consider the factors to make a plan for the best possible pension we can give to ourselves. You worked hard all through life, and now you need to enjoy your golden years. Emergency planning: Any plan has to have emergency planning in case you lose your job or your business has a downturn. It would help if you were prepared with the amount required for at least one year of household expenditure. Insurance: Take sufficient cover to protect yourself from the unplanned incidences of life. Health and term should cover you and your spouse to help you with lifelong processes. Budget: So, how to budget is the big question you need to answer. So, the first step is to take your current monthly expenditure. This is the lifestyle expenditure. Add the cost of trips or any other activity you do to this. Take the number of years of retirement. Check the price of inflation as of today. Check the life expectancy the number of years you could be alive. Now, you have to consider the pre-retirement and post-retirement rates of interest. This would give a rough amount you would need after retirement. Asset allocation: Another important concept is asset allocation, which would help you to achieve your goals according to your risk. I have already discussed the same great length in my other post. (https://wealthinn.in/annuity-plan-retirement-planning/) Review and rebalancing: Review your portfolio and rebalance as and when required. This fundamental step should always be noticed. Estate Planning Consider creating a will, trust, or estate plan to ensure your assets are distributed according to your wishes. An estate plan can also help reduce estate taxes and simplify the transfer of assets to your heirs. What instruments are available FD: The most commonly used and relied-on instruments for planning. Which most people say is the best suited for them. But it should not be considered an investment option but a saving option. There are two cases where this would be used Emergency fund parking After retirement, some amount of money should go into it. PPF/ELSS: Another fundamental instrument that can be used if you are very risk averse is PPF, and if you can take risks is ELSS for long-term planning. PPF would give tax-free returns and per-defined interest rates provided by the government. ELSS would be taxable at redemption, but you can earn higher equity-related returns. You can balance out both PPF and ELSS as investment options. NPS: Another great government instrument is to invest in NPS. It helps you to create a corpus for a pension when you retire. The only mechanism which the government planned for retirement benefits in our country. EPF: if you are salaried, you can use this instrument to create a corpus. But now, the government has made a limit beyond which you would not get taxation benefits. Equity/MF/PMS- Equity or equity-linked instruments are one the best agents that help in long-term planning like retirement. You can invest via SIP or LumpSum. Also, you can use debt to balance the portfolio in market distress. Equity-linked instruments have been giving returns upward of 12 %, which other traditional devices are not. This helps you increase the risk and reward for your portfolio. Annuity: An annuity is another important instrument to use for your retirement planning. The annuities are simple instruments that give you a
Annuity Plan: Retirement Planning An annuity is a contract between an individual (the annuitant) and an insurance company. The annuitant makes a lump-sum payment or series of payments to the insurance company. In return, the insurance company agrees to pay the annuitant a fixed sum of money at regular intervals for a set period of time, or for the remainder of the annuitant’s life. These payments can begin immediately or after a specified deferral period. Does Annuity make sense? An annuity is a contract which assures a person a fixed amount paid for the rest of life. Most people compare Annuities with prevailing FD rates in the market and find low rates offered. But they forget that FD rates are not constant throughout life. As a country grows, the rate of interest provided on the FD goes down. So, a one-on-one comparison does not make sense. People should look at the rate of interest charts, which ten years ago offered a 12% rate, and then compare it with today, which is close to 7.5% Guaranteed Income in Retirement: Fixed Rate: An annuity offers a guaranteed rate of return, locked in at the time of purchase. This ensures a predictable income stream throughout your retirement years. Retirement Security: Annuity payments guarantee a reliable source of income within your retirement corpus.This fixed income helps cover your living expenses in your golden years, fostering financial independence. You can make your partner part of the Annuity; they would get the same sum when they are alive. The money you use to buy an annuity can provide your progeny with a legacy in the form of guaranteed income payments after you’re gone. It makes sense to invest in annuities and park some funds. What are the different times of Annuity? Immediate Annuity We do not have any accumulation phase in this, but the person directly starts benefiting from the Annuity. These are the most popular plans. Deferred Annuity Another popular plan is deferring the Annuity by a few years compared to the immediate Annuity; the rates offered are higher at the time of postponement. Options available Single Life Annuity with Return of Premium: You receive a guaranteed fixed income stream each year. Upon your passing, the sum of money you originally invested is paid to your designated beneficiary. Single Life Annuity without Return of Premium: You receive a higher fixed income payout compared to the return of premium option. However, there is no death benefit paid to your beneficiary after you pass away. Joint Life Annuity with Return of Premium: Both you and your spouse receive a guaranteed fixed income stream for as long as either of you are alive. After both you and your spouse pass away, the original premium amount is returned to your designated beneficiary. Joint Life Annuity without Return of Premium: Both you and your spouse receive a guaranteed fixed income stream for as long as either of you are alive. There is no death benefit paid to your beneficiary after both you and your spouse pass away. Annuities for Retirement Planning: Carefully consider your needs and retirement timeline when choosing an annuity. They can be a valuable tool for securing your financial future. We Can Help You Find the Right Annuity: Only a limited number of insurance companies offer annuity products. We can assist you in finding the solution that best suits your needs. Contact us through our website or mobile number for more information.
Most firms have set up a war room to triage their immediate response to the crisis. But the lack of visibility around future demand complicates efforts to restart stalled portfolio companies…