Investment Solutions - Bardoli

01/05/2025

What are balanced advantage funds and its benefits?

Balanced Advantage Funds are hybrid funds blending investments in both equity (stocks) and debt (bonds). They may also allocate to other asset classes such as real estate or gold, albeit in smaller proportions. Unlike conventional hybrid funds that maintain a fixed ratio of equity and debt, BAFs adopt a dynamic strategy. Fund managers actively modify the allocation between equity and debt according to their evaluation of prevailing market conditions.

The Securities and Exchange Board of India (SEBI), India's securities regulator, grants BAFs flexibility in their investment approach. These funds can allocate anywhere between 0% to 100% of their portfolio in equity and debt, enabling fund managers to adopt a more tactical investment strategy.

Typically, BAFs target a moderate equity allocation (approximately 60-70%) to balance growth potential with reduced risk compared to pure equity funds. The remainder of the fund, after allocating to equity, is invested in debt instruments. This debt allocation aims to provide stability and generate income, particularly during periods of volatility in equity markets.

07/11/2022

07/11/2022

Tips to select the right tax saver option

Tax payers can claim deduction of up to Rs 150,000 from their taxable income by investing in certain eligible schemes specified under Section 80C of Income tax Act. There are several investment options under Section 80C for different needs and risk appetites. Unfortunately many investors look at tax planning, purely from the perspective of tax savings without considering other objectives of investments. This often leads to making sub-optimal decisions. In this regard, we discuss six factors that you must consider when choosing the right tax saver option for you.

What are these six factors?
While tax saving (which all 80C schemes are eligible for) is the primary consideration, you must consider the following factors:-

Investment Objective – Capital preservation or wealth creation

Investment tenure – How long you want to stay invested? This should be linked to your financial goals

Potential returns – Returns of 80C schemes can be non-market linked or market linked

Risk appetite – Low to high. Your risk appetite will depend on your stage of life and financial situation. You should consult with your financial advisor, if you need help in understanding your risk appetite

Liquidity – How quickly can you turn your investments into cash if required? All 80C investments require you to remain invested for a minimum period in order to claim tax benefits, but different schemes have different liquidity profiles

Taxation of maturity or redemption proceeds – How will the maturity or redemption proceeds of you 80C investments be taxed?

What are different types of 80C schemes?
There are broadly two types of schemes eligible under Section 80C:-

Non-market linked schemes: Employee Provident Fund (EPF), Voluntary Provident Fund (VPF), Public Provident Fund (PPF), National Savings Certificates (NSC), 5 year tax saver bank FDs and traditional life insurance plans (e.g. endowment plans, money back plans) are the non market linked schemes u/s 80C. Most of the non-market linked schemes assure a fixed rate of interest over a certain period of time. The interest rates of the small savings schemes are subject to quarterly revision by the Government. Traditional life insurance plans also have fixed income type features such as, payment of sum assured on maturity or money back from time to time, and guaranteed additions depending on the policy term. Non-market linked schemes provide high degree of capital safety and fixed income returns.

Market linked schemes: Mutual fund Equity Linked Savings Schemes (ELSS) and Unit Linked Insurance Plans (ULIPs) are the market linked schemes u/s 80C. These schemes invest in financial market securities e.g. stocks. Their returns are linked to market returns and they are subject to market risks. There is no guarantee of capital safety in these investments.

Jay Bhavsar (Mob: +91 94292 65140)
AMFI - Registered Mutual Fund Distributor (ARN-206626)
LIC Insurance Advisor
Bardoli

13/10/2022

Jay Bhavsar
AMFI - Registered Mutual Fund Distributor
(ARN-206626)
Mob: +91 94292 65140

Equity Fund Investors Must Choose The SIP Route: Here's Why

Mutual fund investments have garnered a lot of popularity off lately. These are market linked schemes that invest in a diversified portfolio of securities to generate capital appreciation over the long run. According to AMFI (Association Mutual Funds India), Assets Under Management of mutual funds have grown from Rs 6.75 trillion as of February 29, 2012, to Rs37.56 trillion as of February 28, 2022. That’s a whopping 5 times plus growth in just one decade.

Equity mutual funds are one of the most sought-after investment avenues among other mutual fund investments. The reason equity mutual funds are so popular is because they offer the features of the equity markets and risk management in one single investment. Equity mutual funds invest the majority of their investible corpus in equity and equity related instruments of publicly listed companies. This makes them a stock market linked investment scheme. However, since equity schemes are managed by a team of professional fund managers, investors who seek active risk management consider them over direct stock market investment.

What is SIP?

As perceived by many, SIP is not an investment instrument in itself but a mere tool to invest in equity mutual funds. This mode of investing adapts a systematic investment approach that may inculcate disciplined investing in young and novice investors.

Understanding how SIP works

Through the option of the Systematic Investment Plan, retail investors can break down their overall investible corpus in small monthly installments. The SIPs come in weekly, monthly, quarterly and annual formats. However, most salaried professionals consider the monthly SIP option as it allows them to save and invest a fixed sum from their regular income.

Here’s a simple example explaining how the whole idea of SIP works –

Assume that you want to invest Rs 1.2 Lac in an equity mutual fund scheme. However, you do not have enough savings to invest this amount all at once. Here, what you can do is that you can start a monthly SIP of Rs 10000. As soon as you make your first month’s investment you will be allotted units and every month as you continue your SIP investments , you will receive units depending on the scheme’s existing NAV (net asset value). At the end of the 12 months, you would have accumulated the sum of Rs 1.2 Lac in the equity scheme. Also, depending on the scheme’s performance over the course of the past 12 months, you may even accrue some interest over the invested sum.

What are the benefits of SIP investing?

The primary advantage of considering SIP investments over lump-sum is that the investor is able to invest small, fixed sums at periodic intervals in equity funds. This makes investing affordable and makes it possible for investors from all walks of life to invest and give themselves a chance to create long term wealth.

It is possible to automate your SIP transactions so that you do not have to make manual investments. Once you instruct your bank to allow auto-debit, every month on the predetermined date, the fixed SIP sum will be deducted from your savings account and transferred to the mutual fund account. As mentioned earlier, you will be allotted units in quantum with the SIP sum and depending on the current NAV of the scheme. This is a convenient and seamless investing method and saves the investor from the hassles of manual investing.

Making your SIP transactions automatic saves the investor from the hassles of in-person investing and automatically instills investment discipline, something that is a must for long term wealth creation.

Every year as the individual receives increment, he or she may even choose to top-up their monthly SIP installment. This will not only increase their savings but may also help investors achieve their financial goals faster.

Flexibility does not end with modifying your SIP sum or automating the transactions. Investors can even decide to pause their SIP investments for time being or even decide to completely stop investing if they feel that the scheme is not performing as per their expectations. There are no cancellation charges applicable with SIP investments. Also, the investor can start a fresh SIP in another equity scheme at any given time.

SIP and Rupee Cost Averaging

Another benefit of starting a SIP in equity funds is that investors can take advantage of the rupee cost averaging method. Here is how it works –

Whenever you make an investment in an equity fund via SIP, you purchase a certain amount of units. If the NAV of the equity fund is high during your month’s SIP installment, you will purchase fewer units. Similarly, when the NAV is low, you can purchase more units. For example, assume that you invest Rs 5000 on the 5th of every month in a large cap fund. When the SIP is credited, the NAV stands at 20 which allows you to buy 250 units. In the following month, the NAV stands at 10 during the SIP installment day. This allows you to buy 500 units. In the month after that, the NAV goes up to 25 and now you purchase 200 units. Similarly, depending on various factors the NAV of the equity scheme may rise or fall down. Since your SIP sum remains stagnant, you are able to buy more units when the NAV is low and fewer units when the NAV is on the higher side. This is referred to as rupee cost averaging as you average out cost per unit in the long run.

Benefit from the Power of Compounding

Mutual funds are often considered to be long term investments. Especially if you are investing in equity mutual funds, you are expected to remain invested for at least five to seven years. Also, if you continue investing in mutual funds via SIP, you might even benefit from compounding. But compounding will only show its true potential if you keep investing even in volatile market conditions. So, it is better that you do not stop your investments and continue investing in mutual funds via SIP if you want to gain from compounding

Investing in equity funds through the Systematic Investment Plan can be a good choice as one does not have to expose their entire investment sum to market vagaries right from the beginning of the investment cycle. Investors only expose a portion of their sizeable corpus every month, thus mitigating the overall investment risk.

Investors can even use the online SIP calculator to compute the total assumed returns that their investments might fetch over a fixed duration. The SIP calculator is an easy-to-use tool that computes complex calculations in a jiffy and hence is termed a time-saving tool.

It works in two different ways –
• You can compute the future assumed returns from your existing SIP investments
• It can tell you how much you need to invest regularly in order to achieve your financial goal

Investing in equity funds has its own risks. Since these funds predominantly invest in stocks, the investment risk is very high. Investors are requested to consult their financial manager before investing.

12/10/2022

Jay Bhavsar (Mob: 9429265140)
AMFI - Registered Mutual Fund Distributor
(ARN-206626)
Wealth Creation vs Savings

We often tend to use “saving” and “investing” interchangeably, confusing both these terms as the same thing. However, there is a world of difference between the two. Savings refer to the amount that is left with you after accounting for your expenses from your income. It is essentially money that is kept aside to be used in the future.

Thus, Savings = Income – Expenditure

On the other hand, investing, which aims for wealth creation, refers to using money to make more money by generating returns on it.

The amount that you save may either lie with you as cash or in a bank account generating nominal returns. Investing can be seen as a next step after savings. It is a disciplined approach to park the savings in various financial assets that generate comparatively higher returns so that your savings can compound into a larger corpus over time.

Money invested in assets such as equities, gold, and bonds has the potential to create wealth over the long term. However, it must be noted that investments in these asset classes comes with risk and volatility and therefore, it is advisable to consult a financial advisor or expert before you start your investments. (Contact: 9429265140)

The need for wealth creation

It is important to save money for the future but investing that money in financial instruments to build wealth over a period of time is even more important. Savings can help you meet short-term needs and serve as a cash cushion when all four tyres go flat. But leaving your savings untouched can be like watching a plant wither away because it was not watered. This is because idle money erodes in value over time due to inflation. When you invest, your money compounds and grows over a long period of time and it can also protect your money against rising inflation.

A good financial plan is the core for wealth creation and building a secure financial future. Dividing your financial needs into short, medium and long-term and diversifying your investments across asset classes are two important aspects for a good financial plan. Diversifying and investing across asset classes helps to reduce the overall risk, which would otherwise be higher if you were to invest in a single asset class. This is because each asset class over a period of time tends to behave differently. These investment decisions, however, must be based on your risk-taking capacity in order to multiply your savings and eventually create wealth over the long term.

How mutual funds can help unlock wealth creation

Wealth creation is a process of building a corpus over a period of time so as to be able to fulfil your aspirations and also to be able to manage your daily expenses, long after you have stopped working. It is not a point-to-point journey but a constantly evolving process. It involves planning for specific financial goals, identifying a target corpus, choosing your investment products and then constant review and monitoring of the performance of these funds.

Mutual funds are financial instruments that can help you in your wealth creation journey. Mutual funds have schemes that span across asset classes, investor risk profiles and time horizons. You can also opt to invest in some of the schemes that are specific to certain financial goals such are retirement or children’s benefit funds.

Investors can choose to invest in schemes having single-asset class such as equity or debt or opt for hybrid funds which give access to a mix of asset classes in a single fund. Either way it is important for you as an investor to diversify your portfolio to minimize risk. Further, mutual funds are managed by experienced professionals who have the expertise to analyze the markets trends and invest accordingly with the aim to optimize your returns.

The secret to financial independence is consistent savings, well-invested over time to create wealth. What better way to achieve this other than mutual funds!

11/10/2022

Jay Bhavsar (Mob: +91 94292 65140
AMFI - Registered mutual fund distributor
(ARN-206626)

Your investment objectives change throughout your life. When you are young, your focus will be on growth or capital appreciation. As you approach your golden years, it may change towards safeguarding your investments as well as ensuring a steady income stream. Whatever your investment objectives, the key to achieving them is the knowledge of various investment options available, to be able to choose the right ones.

Let us understand and evaluate the various investment options or vehicles or instruments as they are often called, available today.

Bank Fixed Deposits or FDs:
This is one of the traditional ways of investing money. They provide a fixed rate of interest to the investor on the invested amount at the end of a specified period.

Corporate or Company Fixed Deposits:
These are like FDs used by companies to borrow money from investors. Company FDs are a bit riskier than bank FDs. Hence, returns offered by them are a bit higher.

Equity Shares:
These are shares in the ownership and performance of a company. They are high in risk and liquidity and are traded on stock exchanges. An investor gets his return through dividends declared by the company or appreciation in the value of the shares or stock price over time, depending on the company's performance.

Mutual Funds:
Mutual funds work on the principle of pooled money invested and managed by experts. When you invest in a mutual fund, your money, along with that of other similar investors is used to buy stocks, bonds, gold or other permissible instruments by a fund manager.

Bonds and Debentures:
This is another way of raising capital for companies. Often used for large investments or to get some capital gain tax rebate, they have a fixed term to maturity and fixed interest rates over a long term period like 10 years.

Money Market Funds:
These are specialised mutual funds that invest in very short term money market instruments. They work on the principle of preserving the capital and then maximizing returns.

Public Provident Fund or PPF:
PPF is one of the most popular low risk investments for investors. It gives a fixed rate of interest which is given by the government and is compounded annually over the long term.

Post Office Saving Schemes:
These are saving schemes provided by the Post Office like the National Saving Scheme (NSS), Kisan Vikas Patra, National Saving Certificate (NSC), Monthly Income Scheme or recurring deposits. They carry low risk and give returns that are slightly higher than bank FDs.

National Pension Scheme:
This is a systematic contribution-based pension scheme launched by the Government of India.

Life Insurance:
This is often used to provide life risk cover and/or investment. It is not advisable to consider life insurance as an investment avenue.

Gold:
Gold is the most traditional form of investment. In addition to physical gold, it can be now bought via Exchange Traded Funds (ETFs) and Mutual Funds in electronic format.

Real Estate:
Real estate is a popular investment option in India. Whether residential or commercial, it has given good returns over a long term period but is not a liquid investment option.

08/10/2022

Jay Bhavsar Mob: +91 94292 65140
AMFI - Registered Mutual fund distributor
(ARN - 206626)

What Makes ELSS A Better Tax Saving Tool?

Generally, investors find it difficult to ascertain which tax saving tools to invest in. Tax planning must be an integral part of one’s financial plan and is something that an individual must consider well in advance. The biggest mistake most individuals make is that they come to a realization only when they have to submit investment proof to their respective employers. During such moments, one may end up making an impulsive decision and invest in a tax saving instrument that might not be ideal for their investment needs.

One way to ensure that you not only seek tax benefits but also earn long term capital appreciation is by investing in Equity Linked Savings Scheme. Young investors prefer investing in ELSS as it not only brings down their gross taxable income but also gives them exposure to a diversified portfolio of stocks.

Let us find out what makes ELSS an ideal tax saving tool?

Saving Tax With Equity Linked Savings Scheme

Also referred to as ELSS, an Equity Linked Savings Scheme is a mutual fund that comes with dual benefits of a tax rebate and long term capital appreciation. An individual can invest up to Rs. 1.5 Lac every fiscal year in ELSS funds and claim for a tax deduction on the amount invested. ELSS funds has the shortest lock-in period among other tax saving instruments under section 80C of the Indian Income Tax Act 1961.

Features of ELSS

ELSS is a tax saving tool that predominantly invests in equity and equity related instruments of publicly listed companies. According to the capital market regulator SEBI, all ELSS funds must invest a minimum of 80% of their total assets in equity and equity related instruments. The fund may also invest the remaining of its assets in fixed income securities. ELSS has maximum exposure to the stock market making it a highly volatile investment scheme. However, it might be able to generate inflation adjusted returns in the long run.

ELSS has a lock-in period of three years. This is the shortest among other tax saving tools under Section 80C that have lock-ins ranging from 5 years to 15 years. Investors can redeem their investments as soon as the three year lock-in is over. However, there are no facilities for ELSS investors to redeem any sum during the lock-in period. Other tax saving instruments offer partial withdrawal facilities, but ELSS does not have any such facility.

One can make an investment in an ELSS scheme either through a one-time lump-sum investment or through the Systematic Investment Plan (SIP) option. A lump-sum investment is favored by those who have irregular income or by businessmen whose revenue is not determined and is seasonal. On the other hand, SIP is the easiest way to invest in ELSS funds and almost anyone can invest in this tax saver fund via SIP. That’s because you need not have a large surplus to commence your SIP investment journey. These days, the minimum monthly SIP investment criteria for ELSS is low enough for almost any individual to afford an investment in this tax saving scheme.

Since ELSS is a mutual fund that invests majority of its investible corpus in the equity market, one can even consider this fund for achieving their life’s long term financial goals. For example, if you have not planned for your retirement yet, you can continue to invest in ELSS till you retire and then use the accumulated corpus to enjoy retirement with financial freedom. One can also consider ELSS for long term wealth creation or any similar long term financial goal that needs systematic and long term investing.

20/08/2022

Jay Bhavsar
AMFI - Registered Mutual fund Distributor (ARN-206626)
Mob: +91 94292 65140

Understand Risk in Debt Mutual Funds

You’ve lent 5 lakhs to your friend who owns a start-up @8% interest (higher than current bank rate of 7%). Even though you’ve known him for years, you still run the risk that he may not return your money on time or may fail to pay back. Also, the bank rate may rise to 8.5% while you are stuck with 8%.

Likewise, Debt Funds invests your money in an interest-bearing securities like bonds and money market instruments. These securities promise to make regular interest payments to these funds. Hence Debt Funds are prone to three major risks like you when you lend money to friends.

Firstly, since these funds invest in interest-bearing securities, their NAVs fluctuate with changing interest rates (interest rate risk). Prices of these funds fall when interest rates rise and vice-versa.
Secondly, these funds are subject to credit risk i.e. the risk of not receiving the regular payments from the underlying securities (e.g. bonds) they have invested in.
In the worst-case scenario, these funds can face default risk where the bond issuer fails to make the promised payment. When a bond in the underlying portfolio of a Debt Funds defaults in its payments, this impacts the interest income component of the fund thereby adversely affecting your total return from the fund.

19/08/2022

Jay Bhavsar
Registered Mutual fund Distributor (ARN-206626)
Mob: +91 94292 65140

What Is a Mutual Fund?

A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund. Mutual funds invest in a vast number of securities, and performance is usually tracked as the change in the total market cap of the fund—derived by the aggregating performance of the underlying investments.

Most mutual funds are part of larger investment companies. A mutual fund has a fund manager, sometimes called its investment adviser, who is legally obligated to work in the best interest of mutual fund investors.

09/08/2022

Mutual Fund Taxation for NRIs: 4 Things You Should Know

In the last few years, mutual funds have become one of the most popular investment options in India. With all the different types of schemes to choose from and low initial investment amount, mutual funds match the investment objective of most investors.

Apart from residents, Indian mutual funds are also attracting the fancy of NRIs across the world. But if you are an NRI planning to invest in mutual funds in India, taxation is something that deserves your attention.

1. CAPITAL GAINS TAX
Your gains from mutual fund investment will be taxed like resident Indians. Gains of above Rs. 1 lakh from equity funds attract LTCG (Long-Term Capital Gains) tax at 10% without indexation benefit if the investment is redeemed after a year. STCG (Short-Term Capital Gains) tax at 20% is applicable for redemption within 1 year.

LTCG tax is applicable at 20% with indexation benefit if the investment is redeemed after three years for debt and other types of funds. Short-term capital gains are taxable as per your income tax bracket and redeem the investment before three years.

2. DOUBLE TAXATION
India has DTAA (Double Taxation Avoidance Agreement) with more than 90 countries across the world. If you currently reside in a country with which India has a DTAA, you can protect yourself from double-taxation. In other words, if you’ve already paid taxes on your mutual fund investment in India, you will not be required to pay taxes on the same again or pay taxes at a lower rate in the country where you are currently residing.

3. TAX DEDUCTIONS
Unlike resident investors, mutual fund investments made by NRIs are subject to TDS deductions in India. If you’ve invested in equity funds, TDS will be deducted from your LTCG at 10%. The same for debt and other non-equity funds is 20%.

Note that TDS is deducted, assuming that you belong to the highest income tax bracket. In case if your tax liabilities are lower, you can claim a tax refund by filing yearly returns.

4. SETTING-OFF GAINS WITH CAPITAL LOSSES
Another vital aspect of NRI mutual fund taxation is setting-off capital gains with losses. NRIs are allowed to set-off their capital gains made in a financial year with the losses made in the year. For instance, you can use gains from equity funds for setting-off losses from debt funds and vice-versa.

DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only.

JAY BHAVSAR (ARN-206626)
AMFI-Registered Mutual Fund Distributor
Mob: +91 94292 65140