Month: March 2024

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Tips to Start Investing for Mutual Fund Beginners 

March 28, 2024

When you are planning a journey to an unknown destination, one thing you would surely do is hire a guide. The same applies when you invest for the first time in mutual funds. Some mutual funds investment strategies can help you to achieve your financial goals.

So, in this blog, we’ll explore some mutual funds investment strategies and also some tips for mutual funds for beginners.

How can new investors start their journey?

New investors can begin their mutual fund investing journey online or offline. Online mutual fund investing is quite easy and has two options. On the official AMC website or mobile application, you can register for an account. You can buy or sell units, see account statements, and invest in mutual funds via the app.

The following are 4 easy steps to investing in mutual funds:

  • You should be aware of your ability and risk tolerance before making a mutual fund investment.
  • Investing your money in several asset classes is known as asset allocation. A combination of debt and equity instruments should be used in the asset allocation to balance out the risk concerns.
  • You need to determine which funds are invested in which asset class and compare them using historical results or the desired investment outcome.
  • It is vital to diversify your portfolio and conduct frequent follow-ups.

Wondering how to balance your portfolio? Your search ends here, read our blog and know the art of balancing your portfolio. Click here.

What should be your investment strategy?

As you invest, you must abide by mutual fund investment strategies that can mitigate your risk and bring you closer to your financial goals. Here are some tips that can help you to build an investment strategy while you invest in mutual funds.

  1. Know your risk-tolerance: Every investor has different financial goals and this same goes for his risk appetite. Understand your risk appetite first. If investing in a fund doesn’t suit your risk appetite then you may end up losing your invested amount.
  2. Consider your age: Your investment plan for mutual funds also heavily depends on your age. Younger people can take more risks because they have more time to recover from losses, if any, and because they have fewer financial responsibilities. For those in their 20s and 30s, equity funds are a great option, but those over 40 should allocate the majority of their money to considerably safer options like debt funds.
  3. Understand your goals for investing: Having a clear understanding of your investment objectives is one of the most crucial mutual fund investing strategies. For example, someone seeking to save taxes can invest in Equity-Linked Savings Scheme (ELSS) funds; someone planning for retirement or other long-term goals can explore equity funds.
  4. Allocate your funds: Maintain a diverse portfolio with at least a few different sorts of mutual funds rather than depending solely on one kind of fund.

Conclusion

Every investor is different and there is no one-size-fits-all approach to investment. However, by following these above-mentioned steps you can start your investment journey. However, you need to give certain attention to a few things, like your investment horizon, your risk appetite, and your reason to invest. Try to find answers to these questions before you dive into the universe of mutual funds. It is recommended to take advice from experts while you begin to invest.

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NPS Tax Benefits – Optimum Choice for an Investor 

March 21, 2024

Financial year is about to end and people who pay taxes invest in different schemes to save their taxes. But individuals also invest in NPS for tax saving purposes. In the recent past, NPS or National Pension System have gained popularity among investors due to its features and tax saving benefits.

But can you save tax through NPS? What are the Income tax sections that are associated with NPS?  Can salaried employees save tax under NPS? How NPS save tax in particular sections and how much a salaried employee can gain from it?

If one of these questions comes into your mind then this blog is for you.

NPS Tax Deduction

There are three sections, Sections 80CCD (1), 80CCD 1(B), and 80CCD (2) of the Income-tax Act, 1961 that allows you to claim tax benefit for NPS investment. Let’s have a look at each of them.

NPS Tax Benefits under Section 80CCD (1):

Contributions to the NPS may be deducted from your gross total income under Section 80CCD (1) of the Income-tax Act, 1961. Taxpayers who are self-employed or who are salaried may deduct their NPS investments under section 80CCD (1). 

With a cap of ₹1.5 lakh per financial year, the maximum deduction allowed under this section is 10% of your salary (Basic + DA) for those who are salaried or 20% of your gross total income if you are self-employed. 

But here, you need to remember that this limit falls within Section 80 CCE’s overall ₹1.5 lakh ceiling. Sections 80C, 80CCC, and 80CCD allow for a combined total of deductions that cannot exceed ₹1.5 lakh.

NPS Tax Saving Benefits under Section 80CCD (1B):

Contributions to NPS are eligible for an additional deduction of up to ₹50,000 under Section 80CCD (1B). This offers potential tax savings for both salaried and self-employed taxpayers, as it exceeds the ₹1.5 lakh limit allowed under Section 80CCD (1B).

NPS Tax Saving Benefits under Section 80CCD (2):

The employer’s contribution to an employee’s NPS account is covered by Section 80CCD (2). Therefore, it is only accessible to taxpayers who are working on a salary basis. However, the amount of deduction cannot exceed 14% of the salary when it comes to Central Government employees and 10% for any other employees.

Whereas in the private sector, many employees have the option to arrange their salary in such a way that their employer deducts it from their total cost-to-company (CTC) package, while contributing to NPS.

Conclusion

The National Pension System is one of the best options available to save tax for individuals. Although, other than saving tax, NPS stands out as one of the best retirement saving schemes for many Indians as it is regulated by PFRDA, an government entity. NPS invests in equity, government securities, corporate bonds, and alternative investments. It has the potential to provide you higher returns rather than traditional saving schemes, such as PPF or Fixed Deposits. So, if you are planning for retirement and looking for a credible option then NPS can be your first choice. 

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Invest Outside the Box: Get Started with Alternative Investment Funds (AIFs)

March 20, 2024

Diversification is the name of the game in investments, and Alternative Investment Funds (AIFs) can give you precisely that. If you are looking to diversify your portfolio beyond traditional investment options, AIFs might be just what you need. They offer unique opportunities for diversification and potentially higher returns. 

In this blog, let’s walk through the different types of AIF (Alternative Investment Funds), their benefits, and associated risks. We will also explore how to invest in AIF when compared to traditional funds.

Types of Alternative Investment Funds

AIFs come in various forms which offer investors access to unique asset classes. However, SEBI has categorized AIFs into 3 categories which include the types of AIF as follows:

CATEGORY 1

  • Venture Capital Fund (VCF)
  • Angel Funds
  • Infrastructure Funds
  • Social Venture Funds

CATEGORY 2

  • Private Equity Funds
  • Debt Funds
  • Fund of Funds

CATEGORY 3

  • Private Investment in Public Equity Fund (PIPE)
  • Hedge Funds

Benefits of AIF

AIFs offer several advantages that make them attractive to investors aiming to diversify their portfolios. Let’s check out the benefits of AIF below:

  • Provides exposure to non-traditional asset classes, reducing overall portfolio risk
  • Have higher return potential compared to traditional investments
  • Access to unique investment opportunities that may not be available in traditional markets

Risks of AIF

Remember that potentially higher returns come with increased risks. Let’s check out the risks of AIF below:

  • Invests in illiquid assets, making it challenging to sell them quickly
  • Subjected to higher levels of market volatility due to alternative assets
  • Changes in regulations can impact AIF operations and performances
  • The success of AIFs often depends on the expertise of fund managers, introducing managerial risk

AIF vs Traditional Funds

When it comes to AIF vs traditional funds, it’s important to know the difference between them. While traditional funds involve publicly traded securities like stocks and bonds, AIFs have a broader range of asset classes as discussed above. AIFs also tend to have higher fees and may offer less liquidity compared to traditional funds.

As a result, investing in AIFs usually needs a different approach than investing in traditional funds. Wondering how to invest in AIF? AIFs are accessible to individual investors, but it’s usually preferred by HNIs. If you are interested in AIFs, you should conduct thorough research, consider your risk tolerance and investment objectives, and seek advice from financial professionals.

Conclusion

AIFs can be a valuable addition to your investment portfolio, offering diversification, potential for higher returns, and exposure to unique asset classes. However, you need to be careful when considering AIFs as an investment opportunity before diving in.

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