Let Your Money Work For You

Are you in need of more money but have no more time to work for it? 
Are you already putting in 80 hours of work a week, leaving little time for your family, or the things you enjoy?
 Stop working for your money and learn how to make your money work for you. Investments are no longer something that is only available for the rich.

Everyday people can put their money to work by investing. Many people are afraid of investments and have heard the awful stories about people who lost all their money on a single investment opportunity and now they are living in poverty. It is these tall tales which prevent people from reaching their financial potential.

A big part of fear is that most people do not understand how the stock market, investing, and financial planning works. Many individuals see investing as a form of gambling which is completely random and based on luck. Investments are not getting rich quick schemes and are not ways to make big money fast. These fantasy investments make for a great movie or story but do not exist in real life. Ten Rupees can never be turned into ₹10 million overnight and through a single investment.

Investments are the way in which you can make your money work for you. There are a number of investments which have almost no risk and require very little money to start. The best asset, the average investor has, is time.

₹1000 invested regularly, can grow to lakhs of Rupees over a long period of time. If you want to stop working those long hours at a job you can't stand and have time to spend with the family without worrying you should consider investing. The best place to begin is to find a stable business, or a mutual fund and invest your money in them.

Mutual funds are a very low risk and worry free place to invest your money. Companies that have a long history of success are also great places to invest. Companies like TCS, Hdfc Bank are corporates which have continued to be successful and not going to go out of business any time soon. They continue to show growth and success in the financial markets.

If you work hard for your money you know the value of putting in a long day's work. You can make your money work for you through investments. If you are interested in developing a financial plan contact a financial advisor who can help you begin your financial independence.

FMP(Fixed maturity Plans) vs FD(Fixed Deposit)

                                        FMP vs FD

                      In the Financial year 2018-2019, it would be best for you to revisit FD investments that you had invested a year ago, and choose to reinvest this year in an instrument, which provides better returns. As American financial specialist Peter Lynch has stated: "Realize what you claim, and know why you possess it.".  Fixed Deposits (FDs) are a well-known investment instrument on account of the guaranteed interest that they offer. Nonetheless, the Mutual Fund industry has created an efficient instrument that is Fixed Maturity Plans (FMPs).

What are FMPs? How would they contrast with FDs?

Fixed Maturity Plans (FMPs)  are closed-ended debt instruments. They have a fixed investment period, for three or more years. They are open for a predetermined period - that is the reason they are called closed-ended funds. These debt instruments invest in such as government securities, corporate bonds, commercial paper, certificates of deposits and treasury bills. Thus, we tentatively know the indicative returns of FMPs.

 Fixed Deposits enables an investor invests his or her funds with a bank for a specified period of time. FD interest rate and maturity amount are known to the investor since the beginning of the investment.  

Highlights of FMPs versus FDs

Fixed Deposit Interest Rates:

• FDs may guarantee you of fixed returns and thus offer greater security, however, FMPs offer higher returns than FDs.
• "In outright terms, FDs today give an interest of around 6.5%  to 7.5%  and in FMPs, it is from 8 -8.5%.
• "FMPs offer higher yields than Fixed Deposits. Bank FDs bring down returns contrasted with FMPs.  If you wish to buy a car three years from now, invest in a Fixed Maturity Plan with a maturity of three years.
• FMPs offer indexation benefit, which states that one can achieve higher returns through FMPs. The returns you get from FMPs are called capital gains and with indexation, it lowers tax outflow resulting in higher returns.

In FDs, the interest gets added to the income of the investor and taxed at applicable tax slab. In FMPs, 20 percent post-indexation benefit above three years, help investors with flat tax payout. To summarise, in FDs, after 30 percent tax, interest is around 4.30 percent to 5 percent against post-tax returns of FMPs - considering a 30 percent tax slab of investors - comes around 7.25 percent to 7.50 per cent.

FMPs give 3% more tax efficient returns than Fixed Deposits.

Gains on FMPs after 3 years are eligible for long-term capital gains (LTCG). Taxation in LTCG is at 20 percent with the indexation benefit. Indexation allows you to inflate the purchase price.

"For an  Indian resident, FMPs don't have any TDS. You have to pay taxes just in the time of maturity (on FMPs.  In FDs, the bank deducts Tax at Source (TDS) based on interest accrued, thus have to pay tax every year.

 If FMPs are less than three years old, then the taxation of FD and FMPs are the same. For FMPs with the maturity of over three years, capital gains indexation benefit makes FMPs far more tax efficient.

Liquidity on FMPs, FDs:

Assume you require cash earnestly. Clearly, you would need to fall back on your investments. FDs here prove to be useful in light of the fact that FDs offer an untimely withdrawal facility. FMPs are locked-in for the period of 3 years and in case you need funds, they cannot be withdrawn.

 Dangers on FMPs, FDs:

Since returns on FDs are known, they by and large influence an investor to feel more secure than FMPs.

"FMPs are presented to the danger of at least one of their fundamental papers defaulting (credit hazard), and this could possibly hamper their profits. They are additionally presented to a hazard known as 'reinvestment Risk' .”

Be that as it may, many people don't know about it yet even FDs are likewise guaranteed just up to a total of Rs. 1 lakh. Along these lines, an FD investor should know about the presence of such dangers.

So which is a superior alternative: FMPs or FDS?

"In the present market situation, the yields have risen, including the short end of the yield curve, making FMPs a powerful alternative to secure better returns.

The coupon rates of securities have climbed however FD rates have stayed low. In such a situation, locking into top notch (AAA-appraised) arrangement of FMPs can convey better returns than FDs.

Dhancreators Recommendation:

Be that as it may be picking amongst FDs and FMPs, as a financial specialist, we suggest investing in the one which suits him/ her the best. Based on your liquidity requirement, returns, and tax efficiency perspective,  a person can choose to invest either in FDs or FMPs.

Happy Investing !!!

Systematic Investment Plan

Want to invest but confused watching current Market Trend? Go for SIP( Systematic Investment Plan)

Tax Saving Mutual Funds - Best among the Rest Tax Saving Instruments

Tax Saving Mutual Funds 

There Is No Alternative (TINA) to Equities

                There is no Alternative To Equities

5 Reasons Why Your Company Health Insurance is Not Enough

Does your company cover you under their health insurance plan? However, in the wake of increasing medical inflation, frequent job switching, lay-offs and early retirements, it is important to have a good backup in the form of a suitable Individual Insurance Policy.

Let’s talk about the limitations of a corporate group policy.

When You Switch Companies or are out of Job

If you are depending on your company’s health insurance plan then if you are switch companies, you lose all the benefits earned on the previous policy. In a crisis situation wherein you lose your job then you will be without insurance.

When you Retire or Age

Once you retire, your company policy ends too. At a later age, it is difficult to get an insurance policy and the premiums are very high. Moreover, if you develop an ailment like diabetes, getting a policy of your choice will be nearly impossible. But, if you invest in a good policy earlier, you can enjoy the benefits of claim free years. Your sum insured will increase gradually and you can reap the benefits in your later years and post retirement.

Extended hospitalization

If you happen to be in a situation of an extended hospital stay, the major charges are the room rent and the medical bills. The limited sum insured of your company’s health policy, may not be adequate to cover these charges, leading to heavy financial investment from your end. Your individual policy benefits can be added to your corporate policy and save you from a major financial blow.

No Claim Bonus (NCB) not earned

With a corporate policy, you do not get any advantage for a claim free record. With your individual policy, you get a good history with the insurance companies and you get the No Claim Bonus reward. This is especially helpful, as the according to WHO, the current medical inflation in India is at 20% per year, whereas income increase is at 10%. Accruing a good NCB amount will keep you on top of your medical expenses. As the years go by, you will have a high sum Insured along with NCB with a gradual and affordable increase in premium.

Limited Flexibility

A group insurance policies are constructed according to the company’s policies and at the will of your employer with little or no flexibility to accommodate your health needs unlike an individual one.

The table summarizes the major differences between the two policies. You can get a fair sense of what you can expect from each of them.

	Individual	Corporate
Sum Insured	Flexible- at par with medical inflation	Totally at the discretion of the corporate
Extended hospitalization	A decent sum insured usually covers it	The sum insured will not be able to cover it
Pre-existing conditions	24-48 months waiting period	Covered from Day 1 onwards
Maternity Cover	2-4 years waiting period	Covered from Day 1 onwards
Retirement/Job Switching	Not affected	Ends with employment and had high conversion premiums
Flexibility	Completely flexible	None
Cover for Parents	Separate	May be included. But most companies are excluding it in current times
No Claim Bonus	Accumulates after every claim free year	Not Available

During claims, make sure you use your corporate policy and run a claim free individual policy for unforeseen and post retirement medical treatments.

The Right SIP Amount

As you keep investing it is natural for the question, “Am I saving enough?” to pop up once in a while. The last thing you would want is to have an acute shortage just before you need a corpus for the fulfillment of a financial goal; while all the years you had the opportunity to add more funds but you did not. Hence, you will not be able to reach the ‘right’ SIP amount. Despite continued investments, the failure to reach the right amount keeps gnawing at an investor.

Systematic Investment Plans or SIPs are mostly done by investors who are looking to fulfill a certain goal or goals with a stipulated amount. Investors invest with the mindset that they will get a certain elevated amount but whether the amount will be the right amount is the gnawing question. Hence, let us see a few ways which could help you to get the right SIP amount. As an investor you must keep in mind there are no sure shot way just options for possible trial and error investments to get the right amount.

Link SIPs to a Goal

You may not have a particular goal in mind while investing in SIPs. You could just be testing investment waters and making small investments. While there is no harm in doing that, not linking a certain investment with a particular goal often devoid the investor of personal motivation. Soon you might start to miss out on the monthly payments and small corpus that you had started to accumulate will dwindle. Suddenly you will require the corpus for a personal need and you might not have one to speak of. Linking the SIP to a goal does the simple task of ensuring that you do not lag behind the investment because that would imply lagging behind an important goal. Hence, to get the right amount you need the right goals.

The Future Value

The simplest way to get the right amount is to know the right amount, which is future value of the goal. A fatal investment mistake is not knowing the future value of your goals and investing to get a matured corpus of the present value. During investments the rising factor of inflation has to be considered which will affect the prices in the economy in the future. The Mutual Funds are known to give inflation adjusted returns. Hence, after estimating the future value along with the returns, you might be able to keep inflation at an arms distance.

Future Value Estimations Due to Inflation
Expense	Present Value	Future Value (10 Yrs)	Future Value (20 Yrs)
Household Expenses	100000	206103	424785
Private Schooling	300000	618309	1274355
Higher Studies	2500000	5152579	10619628
Foreign Holiday	300000	615000	1215000
Rate of Inflation assumed @ 7.5%. The Present values are estimates and could vary from individuals to individuals

Given above are some future value estimations. Hence, you can see that the future value is nowhere near the present value and it is time you started calculating the future value estimates for your investments. Once you reach a step closer to figuring out the right amount you will be a step closer to getting the right SIP amount

Investments are not a one time activity; it requires your constant vigilance. You may need to rebalance your portfolio or stop current investments and make fresh ones. To reach the right SIP amount you need to get your asset allocation done with the help of a financial adviser and keep rebalancing it as and when your needs change or your age progresses. Investors often fall prey to readymade asset allocation plans or tools and calculators that show asset allocation mix. While these might give you an idea about asset allocation they are a sure way to deter you from getting the right amount. Asset allocation has to be customized as every investor is different. Hence, to reach the right amount you need to start allocating assets based on your needs and goals and not a predetermined plan. Reaching the SIP amount is more than just making investments. It is also about making the right and informed choices.