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Retirement Planning with NPS? Remember these 5 key points

April 24, 2024

Have you ever considered retirement planning? If so, you must have come across the word ‘NPS’ or ‘National Pension System’. Many people hope that their retirement will bring them happiness and peace in their retirement years. To achieve this, you must plan for retirement and have good financial support. Retirement planning is the process to plan how you manage post-retirement years.

There are numerous benefits associated with the NPS. From flexibility, to low investment, to tax benefits, and in this blog we’ll explore what are things you should remember while investing in NPS. 

5 things to remember while planning NPS for retirement planning:

  1. There are two categories which come under NPS, Tier-I and Tier-II. Tier-I is the primary and compulsory account. It is intended mainly for retirement funds. In comparison to the Tier-I, the voluntary savings account known as the Tier-II account offers greater flexibility when it comes to withdrawals. If you have an active Tier-I account only then you are eligible to open this optional account. To know the difference between Tier 1 and Tier 2 accounts, click here. 
  1. NPS is a long-term retirement savings scheme. A long-term commitment is required to reap the benefits of compounding. Your money has the potential to grow more the longer it is invested. And when a subscriber turns 60, they are allowed to take out up to 60% of their cumulative corpus under NPS Tier-I account. Moreover, you have the option to keep this amount invested until you turn 75 and withdraw it gradually using the systematic lump sum withdrawal (SLW) option. The remaining 40% can be used to purchase annuities to get pension on a regular basis. It is noteworthy that the primary purpose of NPS is to serve as a long-term retirement savings vehicle and it may have some implications on the final corpus if you withdraw the amount before the prescribed retirement age.
  2. The National Pension System (NPS) gives you the option to select between government securities, corporate bonds, alternative investments, and equities. Your risk tolerance should be in line with your financial goals. It is crucial to regularly monitor your asset allocation with changing conditions. Additionally, there are options, ‘auto’ and ‘active’ choice, where a person can leave the asset allocation to an algorithm based on their age or choose their own decisions based on their risk tolerance.
  1. NPS also comes with various tax benefits. Section 80 CCD (1) of the Income Tax Act allows for a deduction of up to ₹1.5 lakhs. Moreover, an additional deduction for NPS investments under section 80 CCD (1B) of the Income Tax Act of up to ₹50,000.
  2. The National Pension System is managed by expert fund managers that are authorized and appointed by the Pension Fund Regulatory and Development Authority (PFRDA).

Conclusion

While investing in the National Pension System, you need to consider the above mentioned pointers. Retirement planning is essential for many individuals who look to invest and create a corpus for their golden years. But it is also advisable to contact a professional financial expert before you start your NPS journey. 

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The Landscape of Alternative Investments Funds In India

April 23, 2024

What are Alternative Investment Funds?

AIFs, or alternative investment funds, are privately pooled investment vehicles that make bets on derivatives, real estate, commodities, hedge funds, private equity, and other alternative asset classes. Due to the significantly larger investment amount in AIFs, HNIs (high net-worth individuals) and institutions typically make these kinds of investments.

The Securities and Exchange Board of India (SEBI) oversees AIF regulation. An alternative investment fund (AIF) may be established as a trust, company, limited liability partnership, or corporate body by the SEBI (Alternative Investment Funds) Regulations, 2012. Nonetheless, a large number of AIFs that have been registered with SEBI take the shape of trusts.

So, what are things you need to consider before investing in AIFs?

Considerations Before Investing in AIFs

Before investing in Alternative Investment Funds (AIF) in India, there are a few more things to think about. Here’s a list of a few of them:

  • Investment Goals: Investors should assess the Alternate Investment Fund India’s investment goal to make sure it fits with their risk tolerance and investment objectives.
  • Track Record: Investors should assess the AIF’s track record by looking at how it has performed over time. Using this information, investors can assess the fund’s risk-adjusted returns and consistency of returns.
  • Management Team: Choosing investments and overseeing fund assets fall under the purview of the AIF’s management team. Before investing, investors should consider the management team’s background and performance.
  • Fees and Expenses: Performance and management fees are commonly assessed by AIFs. Investors ought to consider the AIF’s fees and how they affect returns.
  • Liquidity: Because AIFs are often illiquid investments, investors might not be able to sell their holdings right away. Before investing, investors should assess the AIF’s liquidity and take their investment horizon into account.
  • Assess the risk: AIFs generally entail greater risk in comparison to conventional investments. Before investing, investors should consider the risk profile of the AIF and their own risk tolerance.
  • Regulatory Structure: Before investing in an alternative investment fund, investors should assess the regulatory structure that oversees it and make sure the fund complies with all relevant laws.
  • Options for Exit: Investors should assess their options for leaving and take the Alternate Investment Fund’s lock-in period into account.

Now, let’s have a look at the advantages of AIFs.

The following are a few advantages of purchasing AIFs:

  • High Potential Return: Compared to other investment options, AIFs typically offer a higher potential return. Fund managers have ample space to devise adaptable strategies to optimize returns thanks to the substantial amount pooled.
  • Diversification: These funds give an investment portfolio much-needed diversification. They ​have the potential to​ provide​ stability during periods of economic downturn or fluctuations in the market.
  • Volatility: Unlike equity or mutual fund investments, which are more volatile due to their relationship to the stock market, AIFs are not affected by stock market fluctuations.

Conclusion

AIFs (Alternative Investing Funds) are complex products that only experienced investors should consider for diversification. These funds provide exclusive investing techniques and help diversify portfolios. However, investing in AIFs requires a significant amount of money, making it unsuitable for small investors who wish to make regular small investments. Typically, AIFs are more appropriate for large investors, such as HNIs (high-net-worth individuals), who are willing to take on greater risks and can invest a sizable amount of money at once.

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Exploring Best Mutual Fund Software: A Guide for Distributors

April 22, 2024

Mutual funds have emerged as one of the popular investment tools among individuals and businesses. However, for mutual fund distributors, it becomes essential to choose the best mutual fund software to navigate in complexities of managing mutual fund portfolios effectively.

In this blog, whether you are an experienced distributor or just starting in the industry, we’ll explore how you would select a top mutual fund software in India.

Things to consider while choosing the best Mutual Fund Software

While selecting the best mutual fund software, it is important to look for the key factors, such as ease of use, customer support, managing and tracking reports, scalability of the software, and a few others. Here are some important features of mutual fund software:

  1. Easy to use: The program should have an easy-to-use interface that makes it simple to move between its many features and functionalities. It should have an easy-to-understand user interface so that you and your team can adapt to it easily.
  2. Characteristics: Look for software with extensive features tailored to mutual fund distributors’ particular requirements. For example, portfolio management, transaction processing, reporting and analytics, incentive management, and compliance features.
  3. Scalability: Select mutual fund software that can grow along with your company. It must be able to manage a sizable client base, a high volume of transactions, and assets under management (AUM) without sacrificing efficiency or speed.
  4. Seamless integration: Take into account how well the software integrates with the other systems you use in your company, including portfolio management tools, accounting software, and CRM (customer relationship management) software. Your workflows can be streamlined and data consistency across platforms can be guaranteed with seamless integration.
  5. Customer Service: Find out how good the software provider’s customer service is. To handle any problems or questions that may come up during the software’s implementation, it is critical to have dependable and attentive customer support.
  6. Security: It should be the priority for mutual fund software since it handles sensitive client and financial data. Choose software with robust data encryption, user access controls, and regular security audits to ensure the security and privacy of your data.

Want to level up your mutual fund services? Read here.

Conclusion

Mutual funds software for distributors can be very helpful in today’s fast-paced financial services sector in terms of improving client management, guaranteeing compliance, boosting productivity, and obtaining business insights. It is crucial to thoroughly assess various software alternatives according to their features, usability, scalability, integration potential, customer service, and security to select the most appropriate one for your company’s requirements. By using mutual fund software, you can streamline your mutual fund distribution operation, save time and effort, and concentrate on expanding your clientele and business.

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NPS Scheme Benefits: Everything is good about it!

April 18, 2024

To start anything in life is one of the hardest decisions. Whether you need to start a new job or a new business venture. Although, planning for your retirement and investing in NPS is not a difficult task to start.

The National Pension System widely known as the National Pension Scheme or NPS has many scheme benefits. From low contributions to flexibility to invest to tax benefits, NPS has almost every feature for an investor to look for to plan his retirement. And not to miss, National Pension Scheme returns are potentially on the higher side. So, how can it benefit you?

In this blog, we’ll explore the benefits of the National Pension Scheme and give you reasons to invest in it.

NPS Benefits

Potential of High Returns: The National Pension Scheme returns are linked with the market and it has more potential than traditional investment or saving schemes such as FD and PPF. NPS invests in equities, alternative investments, corporate bonds, and government securities that provide diversity to your investment.

Investment Approach:  An investor can invest using the ‘active’ or ‘auto’ method. NPS gives you the flexibility to choose your investment process. In active choice, you can allocate your assets and decide how much to invest in various categories.  It also allows you to select the fund manager. Active choice lets you decide your approach, whether you want to invest aggressively, moderately, or conservatively.  If you don’t want to manage your financial portfolio then you can choose auto mode. It allocates your asset dynamically as per market conditions.

How can you calculate your NPS corpus? Click here to find out. 

EEE Tax Category: Contribution to NPS comes under the exempt-exempt-exempt (EEE) mode of taxation wherein the amount contributed to NPS, the income generated, and the amount of maturity are all tax-exempt. Additionally, you will get tax benefits of up to ₹1.5 lakhs under section 80 CCD (1) of the Income Tax Act. Furthermore, there is an additional deduction of ₹50,00 under section 80 CCD (1B) of the Income Tax Act over and above the ceiling of ₹1.5 lakh.

NPS Categories: An investor can start investing in NPS through Tier 1 and Tier accounts. However, it is mandatory to have Tier 1 before you open a Tier 2 account. If you are planning for retirement, a Tier 1 account can be your best option, however a Tier 2 account offers better flexibility in terms of withdrawals.

NPS Withdrawals: Contributions in NPS are not only tax-exempt but also withdrawals. You can take up to 60% of your corpus upon maturity and there will be no tax on it. Moreover, 40% of the remaining corpus can be used to buy an annuity so that you can receive it in the form of a monthly pension amount.

Low-Cost Investment: This is one of the attractive features of NPS. You can contribute to NPS with ₹500/- per month or ₹1000/- annually. This makes NPS one of the popular retirement plans in India.

To start investing in NPS, click here.

Conclusion

NPS gives the freedom to benefit from the nation’s economic growth until you retire. From the potential of high returns to tax benefits to flexibility to invest, NPS has become one of the lucrative retirement planning schemes for individuals. You can start investing in NPS without worrying about your future, you only need to plan for your retirement. 

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Unraveling Mutual Funds: Basics, Types, and Advantages

April 9, 2024

It can seem difficult to start equity investing, especially if you are new to it. There are so many numbers, graphs, and insights to remember. But there is a simple solution: mutual funds. They are more like a shared piggy bank, which is managed by an expert called a fund manager. The manager invests the money, which many people contribute, in stocks and bonds. And whatever the profit is, they distribute it among themselves. It is more like investing in pairs.

In this blog, we’ll unravel the basics of mutual funds, their types, and their advantages. First, let’s understand the basics of mutual funds.

What is a mutual fund?

A mutual fund is an investment vehicle in which multiple investors pool their funds to purchase a variety of assets, including bonds, equities, and money market instruments. Professional investment managers oversee the assets with the goal of making money for the investors. The Securities and Exchange Board of India (SEBI) oversees mutual funds.

Now that you have an idea about mutual funds, let’s explore the types of mutual funds.

Mutual Fund Types

  • Open-ended Mutual Funds: Those mutual fund schemes that are accessible for subscription and redemption on a daily basis throughout the year are termed open-ended mutual funds. They are similar to savings bank accounts, where deposits and withdrawals can be made at any time of the day. An open-ended mutual fund doesn’t have a maturity date.
  • Close-ended Mutual Funds: Similar to a fixed-term deposit, a close-ended fund has a defined tenor and fixed maturity date and is only available for subscription during the first offer period. Close-ended fund units may only be redeemed at maturity, and early redemption is not allowed. Therefore, following the new fund offer, the units of a closed-ended fund are required to be listed on the stock exchange and traded similarly to other equities. This allows investors who wish to exit the scheme prior to its maturity to sell their units on the exchange.
  • Active funds: An actively managed fund is a mutual fund scheme where the fund manager uses analytical research to support his or her professional judgment in making decisions about which stocks to buy, sell, or hold. This involves “actively” managing the fund’s portfolio and regularly monitoring it. The goal of an active fund manager is to outperform the scheme’s benchmark and provide maximum returns.
  • Passive funds: In contrast, a passively managed fund replicates or tracks the scheme’s benchmark index in exactly the same proportion as a market index. In other words, the fund manager in a passive fund remains inactive or passive because they do not use their judgment or discretion to choose which stocks to buy, sell, or hold. The goal of passive fund management is not to outperform the scheme’s benchmark index, but rather to duplicate the scheme’s benchmark index and produce returns that are equal to or greater than the index.

Have you ever heard of debt funds and equity funds? Are you curious to know what makes them different? Read here.

Advantages of Mutual Funds

  1. Liquidity: Investors can easily access their money invested in mutual funds by buying or selling units at the current net asset value (NAV).
  2. Diversification: It provides portfolio diversification that minimizes the risk. If one fund performs poorly, then it will be balanced by others, fostering stability.
  3. Low-investment: You can start investing in mutual funds with a minimum investment.
  4. Professional Management: Mutual funds are managed by fund managers, and with skill, expertise, and experience, they make informed decisions.
  5. Variety of offerings: Mutual funds offer a wide selection of investment options to meet varying risk tolerances and financial objectives, so each investor can find a solution that works for them.

Conclusion

Investing in mutual funds is not a heavy task. You can start investing as soon as you are prepared. Do a thorough research and get advice from a professional financial manager. 

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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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