Financial literacy among children

Education of a child begins at home and in India, I have not seen many parents talking about “money” and “finances” to children from a very tender age. The conversation is limited to what we can buy for them and vice versa. Conversations around savings, rising cost of living, goals is largely missing. As children, we did save a portion of our pocket money in our “Gullak” (a box where children lock away their savings). But we were not really taught about growing that money.

In my view, financial literacy is incomplete without connecting the dots. Asking the child to save his pocket money is just one part of the whole game. It probably only inculcates a habit of putting away a part of what he owns for future consumption. That is indeed a good start. However, explaining the concept of inflation and the fact that inflation will continue to be a reality is not there. Basic understanding of investment products is something children don’t understand even till they start working. And this lack of awareness throughout our early years – at home, school and college is the reason why financial savings penetration in India is miniscule.

We have started discussing a lot about making children aware of a lot of things. However, implementation is very low. Specially, till we do not see this being implemented as a subject in schools. Anything which is incorporated in schools is automatically taught at home too. A simple subject on “money” will prepare the next generation for financial planning in the right way.

Life lessons that stuck to me

Happy Teacher's Day

Life and failure are the biggest teachers, as they say. Every day in life is a learning of a different kind and some of the lessons learned stick with us forever. And of course, teachers come in different forms – a friend, a colleague, a family member, a mentor or simply even a book or a blog these days.

I’m happy to share that a lot of my thought process is influenced by three people – my dad, Charlie Munger and Warren Buffet. Financial planning being the core of my work, here are some of the most memorable life lessons that I go by which I’ve learned from them.

  • You should be ready to try things. Even if you fail, it is fine. People who succeed are the ones who tried.

I’ve felt encouraged to start a business with this very belief and voila, with the right resources, support and most importantly by trusting my instincts, today we have CAGRfunds.

  • Focus on the work in hand and live in the present.

Time spent regretting about mistakes made in the past can instead be well invested in trying to learn from the same and develop yourself to become better. The analogy is the same as focusing on your goals and working towards them today so that the future is secure.

  • Discharge your duties faithfully and well. There is no alternative to hard work.

No pain, no gain. A simple learning which we all know of. We, at CAGRfunds ensure that we advise our clients earnestly, by thoroughly understanding their needs and ensuring that their investments are made wisely. Having seen the results of working hard is a reassurance of this lesson.

  • Never cheat someone to make money. It comes back in the form of Karma.

Money is precious to everyone. Being in the business of finance has given me enough reasons to understand that, educate people about it and most importantly, to handle it well for other people who trust us with it. Everything connects to everything else – just like karma. You save enough now, you have a lot taken care of in the future. You ignore managing your money now and your money won’t help you much in the future.

  • Avoid envy and resentment. These two are subtle emotions but have serious and bad consequences.

Negative emotions can make you take wrong steps causing losses of various kinds. They can make one act thoughtlessly or hastily – both not advisable in financial planning or even otherwise generally in life. A valuable lesson that applies in business as well as in my personal life.

Happy Teacher’s Day!

5 Lessons of Financial Prosperity Inspired by Lord Ganesha

Lord Ganesha, also known as Ganpati is believed to be the God of wisdom, a symbol of happiness, prosperity, knowledge and remover of obstacles. Adored by his devotees, there is a lot of inspiration that we can take about financial planning from the Lord himself.

Here are 5 lessons of financial prosperity from Ganpati Bappa.

Listen out and loud 

The Lord’s big elephant ears signify how it’s important to have your ears wide open at all times, pay attention to all the information coming your way, absorb all the knowledge and filter out what’s not necessary. Lord Ganesha is also known to be worshiped for beginning new ventures. Therefore, by taking a cue from there, you can start saving and investing money early, ideally as soon as you begin to generate income. As investors, there can be an overload of knowledge and information that comes your way. However, making the right decisions at the right time with the help of sound knowledge and guidance of financial advisors, by listening to them carefully can be a big step forward in your financial planning journey.


Think big to achieve bigger

The Lord’s huge elephant head signifies that one should always think big. From a financial planning perspective, it’s important to identify goals and categorize your investments accordingly. Thinking big about your future is a way to secure it better, by knowing what you want to invest for and thereby identifying your short, medium and long term goals. Goals can be met when they are prioritized well. In order to do this, it’s also important to keep your thirst for financial knowledge alive. Lord Ganesha symbolizes wisdom and intellect, which gives us the inspiration to be financially literate and understand the various investment options that can be suitable for our goals and give us good returns in the short or long term, as planned by us. While thinking big, it’s also important to realize the magic of compounding which is earning interest over interest and generating more wealth over a longer period of time. Secure yourself by taking advantage of this and working towards the bigger picture.


Concentrate and stay focused

Although bestowed with a big head, the Lord has very small eyes which signify that in all the big plans that we take on, it’s very important to concentrate and be detail oriented. With attention to the minutest of details, this feature of the Lord inspires us to understand the nitty-gritty of our planned investments, the pros and cons involved in each of them and therefore, be mindful of how we plot this journey for ourselves. Even after making that commitment, it reminds us to stay focused and be consistent with it to ensure that we don’t deviate from our plans and disturb the financial planning process for ourselves. Not to forget, the focus also enables us to be protected and prepare ourselves for monetary turbulences, which should be paid just as much heed as we do to any of our other investments.


Trunk-like patience to adapt in all conditions

The Lord’s trunk symbolizes the virtue of patience that we must all possess as it’s unlikely that things always go as planned. Having a foresight towards this and ensuring that we can adapt to new circumstances as per the changes or new developments, is an inspiration for us to take. The long trunk also signifies that the Lord can sniff out danger or negativity, which is why he’s referred to as the remover of obstacles. This teaches us the lesson to be vigilant towards our investments and not be lured towards lucrative offers and those that promise anything big in a short span of time. To sense the unrealistic and frivolous nature of any such investments and steer away from it, being aware of market conditions and the risk involved in the investments that we choose to make, is an important lesson to bear in mind.



Strong tusk power to fork out bad investments

The Lord’s strong tusks are a reminder to us to have the strength to take the right decisions and eliminate any negative influences that there might be. Building your perceptions after critical analysis is a way to attain that sense and strength to fork out poorly performing investments that hold back the potential of the portfolio.


The lessons above lead to financial security in the future, well represented by the laddoo in the Lord’s hand which signifies that the fruit to patience, focus, perseverance and good thinking always results in something sweet. On this Ganesh Chaturthi, let us acknowledge Bappa’s lessons that we can follow for life and work towards a safer and wiser path of savings and investments. Best wishes from CAGRfunds to everyone on this auspicious occasion. Ganapati Bappa Morya.





A head for numbers and a heart for words.

Sonia Gandhi Limaye is the founder of Kalamwali and Rightwords Publications Pvt. Ltd. in Pune. Born and raised in a business family, she knew that she always wanted to be a business owner. But that said, she was also clear about establishing and running an organisation that would let her have a good work-life balance, for herself and for people working with her. Being very clear in her mind about not having to choose work over family, children, hobbies and social responsibilities, Sonia took the right steps towards founding her start-up.

Kalamwali was conceived as an idea in 2014 and relaunched in 2016. It is a platform for writers and an online publishing website that allows all kinds of writers to publish their work in the form of stories, experiences, poems, recipes, tips and much more. It’s a constantly growing community of readers and writers. Apart from an online existence, Kalamwali also conducts an array of literature related activities like storytelling and creative writing sessions for both kids and adults.

In 2016, Sonia released a self-published anthology called “The Best of Kalamwali” with the 50 best write ups on the company’s website. The book was a huge success and both the readers and the writers coveted its copies. This year she and her team are working towards publishing the second edition of the anthology.

Since writing is her passion, she started Rightwords Publications Pvt. Ltd. in 2017. A small and intimate set-up, they are a humble enterprise with a strength of four. With a focus on content related work such as content strategy for websites, brochures, Social Media pages, they are currently working with four very well-known clients based out of Pune.

Sonia’s passion to translate ideas into possibilities was her main inspiration to become an entrepreneur. Besides, she did not see herself in a 9 to 5 job especially feeling averse to the monotony that she thought would be attached to it. However, she like many other entrepreneurs had her set of fears while starting out on her own. “Failure of not being able to explain my idea through my work. Fear of realising that work is boring for my employees and they hate their job. To face an unhappy client at the end of a job work.”, she states were some of them.

Sonia’s entrepreneurial journey has been slow and steady. She funded her business from her savings when she started off and now it’s almost self-sufficient. She explains that had her capital investment been high, she would have considered options to raise money. But that would have come with a lot of pressure to pay off. She shares from her experience what all should one be cautious of while starting off on their own, “Have a clear idea of what you want to do and what you want to achieve with that. Don’t get carried away into something that may look very lucrative or easy. There is no such thing as an ‘easy business’ or fast money or quick success. Let your dream take its own course of time. Don’t trust anyone blindly with your finances. Do as much research as you can on your own about the various options to manage your finances. Consult a financial planning advisor once you’ve done enough research on your own. Take things in your hands. As soon as you accumulate an amount, however small, reinvest it in your business or invest it in something that will grow. Do not depend fully on someone you have hired to do something for you. Make sure you know how to do it even if it’s a basic version.”

Sonia maintains a straightforward approach to manage her personal finances and those of her business. She pays herself a salary to keep that distinction. In case of accumulation of funds or receiving monetary gifts, she invests them immediately. She does not give or take loans, which she shares is a very recent improvement in her and that she has learnt to save before splurging.

With years of experience of setting up an enterprise and running it successfully, Sonia generously shares her tips for budding women entrepreneurs. She says, “Have a clear idea about your scope of work. And a tentative goal. Neither short term, nor too long term. Like a three-year goal which is not difficult to speculate or set. Write and rewrite the business plan at least 3 times for better clarity in scope of work. FAILURE in the initial stage is important so as to never become complaisant. Face it bravely. Have sleepless nights, anxiety, endless brainstorming sessions with different people who will ask you the questions you fear. Have immense belief in your idea and love your business like your child. Don’t let anyone tell you it’s not your cup of tea. Start taking your finances in your own hands and learn from scratch. Until 2015, I had never personally stepped into the bank for any bank work. I didn’t know how to write cheques or file returns. But I learnt from scratch and now even though I am not a master of it, I can do it by myself. Last but not the least, enjoy your work, and the wealth you’ll generate from it.”








FIRE: Financial Independence, Retire Early

As much as this may seem like another millenial term invented in the world of finance, Financial Independence, Retire Early; more commonly known as FIRE has existed for more than a decade. Although the term for it wasn’t coined back then, the concept has been around for longer than you would imagine. FIRE is a movement wherein one takes a path towards extreme savings (almost 70% of the income) to quit their job and retire much earlier than the standard way of retiring at 60. The objective is to save enough to be able to live off the savings by withdrawing small amounts (typically 3-4% yearly) from the portfolio. And the motivation for it generally stems from the idea of having the freedom to do what you want to do. For example, traveling, blogging, authoring a book or anything as such which is more to do with pleasure, not necessarily generating income out of it. This frugality movement has been gaining awareness and spreading into the mainstream since the last decade.

People opting for FIRE are usually regular employees in corporate jobs with a definite timeline in mind. Their aim is to build a massive corpus for early retirement through extreme savings and once achieved, to quit their jobs/any form of employment. However, it’s important to note that with this decision there has to be extreme levels of discipline to be followed with regards to expenses and overall lifestyle choices. Almost 70% of your income contributed towards savings is a huge amount and hence, comes into picture the frugality aspect of the movement. Expenses have to be monitored diligently and the focus on continued maintenance and reallocation of the money is also just as crucial.

There are various approaches that people opt for while adopting the FIRE movement. The main goal is the same – extreme saving but there can be differences in the way they abide by this. Let us understand each of the types with the help of examples.

Fat FIRE – Rahul is a single, 33 year old software engineer who aims to retire at 45. He was introduced to the FIRE movement a few years ago when he gave it a serious thought and planned his life towards an early retirement. Three years ago, he dedicatedly started investing 70% of his income on a yearly basis towards his new financial goal. He has been very conscious about his expenses and has chosen to lead a simple life where there’s enough for his basic needs and some for an emergency. His brother who is 35 years old has opted for the traditional route of retiring at 60. Therefore, his saving towards his goal is 10% of his yearly income, and there’s no compromising on the lifestyle choices as there’s a budget allocated for that too. In short, saving more than the average retirement investor by adopting a very traditional and simple lifestyle is considered Fat FIRE.

Lean FIRE – Meenakshi is a college professor aged 35 years and her husband, Jay an insurance agent, is 38. Nearly five years ago, after gaining enough knowledge about FIRE through various sources and consultation with their financial planning experts, they decided to adopt a very stringent method of minimalist living to achieve their goal of extreme savings and mandating a far more restricted lifestyle. With the aim of retiring by the time they reach 50 years respectively, they have taken certain measures to meet their goal. They ensure that they eat only home cooked meals, they don’t subscribe to cable or Netflix/Amazon Prime but view only content that is aired free, they always opt for second hand goods when it comes to buying something for their house or their 7 year old son, they shop for necessities only when absolutely needed and they take buses and trains instead of cabs and have decided not to own a car. A lean lifestyle is how they look at it that brings them closer to their goal.

Barista FIRE – Rohan and Jharna are a millenial couple both aged 36 years. Rohan was in advertising for over a decade and Jharna, a journalist for the same amount of time. They aimed to retire at 50 years when they were both 25 and hence, hatched a plan for it. 10 years from then, they quit their corporate jobs and took over Rohan’s beach house. They renovated it and put it up on AirBnB, making an arrangement to cover their current expenses without eroding their retirement fund. Their aim to do so was not only to be financially independent and retire early but also to do some kind of part time work on their own terms. Their motivation for this financial goal was to bring an end to the stress of the corporate jobs or any form of employment where one doesn’t necessarily have the luxury or flexibility to do things as they please. With enough saved up over a decade for their early retirement, they still have work that keeps them busy and let’s them have the privilege of doing it on their terms while easily covering their current expenses through their new venture.

Coast FIRE – Mayuri is a 37 year old banker turned social media influencer. She is a single mother to her 5 year old daughter. With a finance background, Mayuri always had the tools to her disposal to understand the do’s and don’t’s with money management. Planning way ahead in her 20s, she knew she wanted to retire at the age of 35 and travel the world while she was still in her 30s. Her motivation to do so was to never work again for money and have enough to cover for her current expenses too. She worked seriously towards her goal through extreme savings and managed to achieve it just as planned. However, after being in a corporate job for close to 15 years it was actually not as simple as she thought – to not do anything at all. Besides, with a daughter in tow, needless to say that there are several expenses to keep up with. While money wasn’t an issue at all, Mayuri was drawn to social media marketing and became an influencer. While this helps her to still make money on her own terms, whether she does it part time or full time, her nature of work still involves all the privileges she dreamed of post the early retirement. And all of this while actually having enough in her retirement fund to cover for the current expenses too.

The FIRE movement has started spreading gradually as we see more people opting for it. Achieving financial independence to fund an early retirement is most definitely an act of severe discipline and stringent means that one ought to stick to. However, one should also be cautious while practicing extreme diligence that when stock markets fall and/or interest rate environments are low, the FIRE plan may fall short. The discipline too needs to continue post the early retirement to ensure that the corpus is not used up recklessly or too soon. They are after all fruits of all the hard work and compromises made for years to have a cushion much earlier in life. FIRE is certainly a redefined way of retirement and to make informed and sound decisions, it’s highly advisable to connect with financial planning advisors or companies who can guide you towards your goal in the right manner.

There’s a new Spice Girl on the block

This one is not to be confused with the famous girl band from the 90s. Singapore-based Namita Moolani Mehra is a mom of two and is the founder of Indian Spicebox. Her brand is about enabling families to eat more wholesome home-cooked meals, including healthier versions of restaurant favourites. Simple recipes are packaged with wonderful organic spices that provide not just amazing flavour, but great health benefits as well. The best part is that for each Spicebox Kit she sells, 10 street children in India are fed a hot meal. Namita states, “We have funded over 60,000 hot meals and our goal is to provide 1 million meals by 2025.”

Namita is also a writer and has published two cookbooks out of which one is a children’s book published by Scholastic. She also writes for several online publications including Sassy Mama. She founded Indian Spicebox a few years ago after spending 15 years in the corporate world, primarily working as a digital strategist at ad agencies in New York after which she spent five years at Facebook in both New York and Singapore. Indian Spicebox was born as an idea in 2004 when she was living in New York and surrounded by friends asking her for recipes and information about spices. It wasn’t till a decade later that she quit the corporate world and founded it as a business.

Namita’s drive to make a difference was her main inspiration to become an entrepreneur. She wanted to give back and do something with meaning and purpose. Therefore, by creating something of her own that would be purpose-driven and make her feel excited about getting out of bed, she wanted to put her strengths in service of something meaningful. After working at one of the world’s best companies (Facebook) with the most incredibly talented people, and supported by tremendous resources, she was afraid of going off on her own. She was worried about not having the teams and resources to keep her motivated and productive.

A year before starting her own business, Namita worked for a VC (Venture Capital) firm which was an eye-opening experience for her to a great experience. It gave her a good understanding of the start-up world and financing better. “Frankly, I had no clue about funding businesses and there are a lot of different routes and options out there for founders and small business owners. It is really important to know your options, network with other business owners and founders, attend start-up conferences/events, read the blogs, soak up as much information as you can and also consult financial planning advisors to get a clear understanding of that part too.” says Namita. She invested her own savings from her previous jobs and advocates engaging financial advisors and companies who can help to manage money and investments for you on the personal front and for the business.

There are several things one should be aware of while starting on their own. Namita shares a few from her experience, right from being prepared to feel alone, to being constantly in battle mode to ensuring that you hire and delegate early-on. Hire interns and invest in a good
website developer and designer. She also emphasizes to take the time to create and build a solid brand right at the onset (as all touchpoints matter) and most importantly, investing in quality.

Amongst other things, Namita also highlights that it’s important to surround yourself with people you trust. She states, “If you find good partners, vendors, interns, freelancers—hold on to them and keep investing in good people. Also, build a solid brand upfront. Invest in good designers, brand building experts and digital experts who know how to present your brand and offering via critical touchpoints. Have several mentors or your own personal board of advisors – the people you can trust and use as soundboards. Work with a professional coach. I’ve been working with a coach for over five years now and she anchors me tremendously behind the scenes. As I’ve mentioned earlier, engaging financial advisors to keep you on track with your money management is also crucial. Remember, you can’t succeed alone. So, the people you surround yourself with, are the ones who will ultimately determine your success.”






Cancer Health Plans may be useful to consider!

Cancer Health plans

A slew of niche healthcare plans have been launched recently. These plans cater to specific diseases only. Cancer Plans are one such category.

Key features which are common across various Cancer Plans are as follows:

  • Objective is to cover the expenses that arise out of diagnosis of any type of Cancer
  • Benefits are generally payable in parts basis the different stages of Cancer

Why should you buy these plans?

Well, there is no good answer to this. As we know, occurrence of Cancer is random and anyone could be a victim of the same. Some of the facts are worth being aware of:

  • India is the world’s largest contributor to Cancer deaths
  • 22 lakh Cancer deaths are reported every year
  • 71% of the Cancer deaths occur in the age group of 30 – 69 years
  • 15% of Cancer patients are children and young adults (as compared to the global average of 0.5%)

The geographic spread of Cancer in India is largely driven by the environmental practices prevailing in respective regions:

States Common types of Cancer Reasons
UP, Bihar, WB Gall Bladder, Neck and Head Polluted water, diet rich in animal protein or fish
MP, Bihar, Gujarat, Rajasthan Oral High Tobacco and Pan Masala consumption
Punjab, Haryana, Delhi All Cancers are higher than average, especially, kidney, lungs, urinary, breast Pollution, pesticide, toxins in food
Goa Colon Cancer Red Meat, Alcohol, Tobacco
WB Lung, Urinary Bladder Air and Water Pollution
North East Highest Cancer Rate, especially of Oesophagus Tobacco, Household burning of Firewood
South & Coastal India Stomach Diet rich in spice, salt

Is Cancer not covered in regular Health Insurance Plans?

Regular health plans do cover hospitalization for Cancer. However, Cancer treatment costs often cost anywhere between 10 – 25 lacs and only go upwards for advanced treatments. Health Plans with such high sum insured can turn out to be very expensive.

Moreover, Cancer treatments tend to continue for years and the costs have only been rising.

What about Critical Illness covers?

Cancer is also covered under Critical Illness Plans, but only at advanced stages where a lump sum is payable. Generally, most Cancer specific plans tend to pay lumpsum at multiple stages of diagnosis, thereby protecting the continuous flow of expenses.

What is the alternative?

A decent size of Base Insured Plan + A large Top Up Plan + Critical Illness may be a good alternative. However, for those who have had a first – hand experience of Cancer treatments among friends and family, might want to insure themselves against the deadly possibility. The decision depends on affordability of every individual.

Read more on Top Up Plans here

To know more about the best Cancer Plans, write to us on


This Independence Day, check if you are financially independent

Independence Day and Financial independence

A few months ago, I was out taking an evening walk when I happened to run across my old school friend, Gaurav. We both were elated to see each other after more than a decade and decided to grab some coffee and dinner. We walked into a nearby café and started marvelling over how the past 10 years seem to have flown by.

After graduation, Gaurav got his pilot’s license and started working for a well-reputed airline. He was making a comfortable 30 lacs p.a. with no dependents. I was pretty impressed with how well his career had panned out so far.

We both finished our meal and decided to leave. He offered to pay the bill with his credit card and drop me home in his car. I obliged.

While on our way to my house, I saw him being very callous about his spending. He had unnecessary add-ons in his car, designer seats, expensive smartphones, etc. He was also too generous with his tipping to the Barista and the Petrol Pump Attendant. I asked him how he could afford all of this. He replied with a grin, ‘EMIs’.

I was shocked. On further enquiry, I found out he had EMIs for everything – Cars, Mobile, Laptops, and even his clothes! I asked him if he saved anything at the end of the month and he simply replied with a small ‘No’.

Worried, I asked him if he was investing any money in assets.

He replied, ‘Of course! Look at this expensive phone, my car, my house, these are all my assets!’

I frowned as I went on to explain to him how assets are those that generate income or appreciate in monetary value.

Being a finance graduate myself, I decided to help my friend organize his finances. We met over the weekend and decided to plan his journey towards financial independence.

Step 1. Budget and Analyze

We listed down some of his EMIs:

Expense Loan Amount Interest Tenure Monthly Cost
Home Loan INR 10 lacs 9.00% 20 years INR   90,000
Car Loan INR   8 lacs 10.00% 10 years INR   10,572
Laptop INR   70K 12.00% 3 years INR     2,325
Phones INR 65K 12.00% 3 years INR     2,159
Designer Suits INR 50K 12.00% 3 years INR     1,661
Home Renovation INR 2 lacs 14.00% 5 years INR     4,654

And his other monthly expenses:

Expense Monthly Cost
Restaurants  INR 35K
Movies  INR 4.2K
Electricity  INR 2K
Water  INR 600
Fuel  INR 4K
Mobile Bill  INR 1.5K
Maintenance  INR 5K
Misc.  INR 15K

His total monthly expenses came to INR 178,671. His income being around INR 180,000.

We now decided to split his expenses into three categories:

A: Important and Unavoidable expenses. (Example: Rent, EMIs, Insurance, Investments)

B: Expenses that can be postponed. (Example: New clothes, new furniture)

C: Unnecessary expenses. (Example: Luxury Items, High-end dining)

I asked him to only spend money in categories A and B for a month and indulge in minimal wants (category C).

Gaurav managed to save INR 20,000 in just this one month!

Step 2. Emergency Fund

Many of us often end up taking personal loans to cover for unexpected expenses such as medical emergencies, car repair, home repair, etc. These increase our monthly expenses and leave us with lesser money to grow our assets. This problem can be solved by having an emergency fund. This money can be used during times of such unexpected emergencies and will not cost you any additional interest. Therefore, we decided to keep INR 5000 per month, in a Liquid Debt Scheme as an emergency fund.

Step 3. Insurance

With the rising costs of health care and other expenses, buying insurance is unavoidable. Gaurav had no insurance since he stopped being covered under his parents’ insurance. Insurances, although are being unwanted goods, are necessary for everyone to save you on rainy days. I asked him to get health insurance and car insurance that can help him out in times of crisis. It cost him INR 10,000 for both.

Step 4. Investing

The final part of handling personal finances is investing. Money saved will depreciate in value over time. Money invested, will grow and earn for you forever (thanks to the magic of compounding). We decided to start a small SIP of INR 2,000 and build from there. The leftover money was deposited in his Savings Account.

Soon, he started understanding the unnecessary expenses and callous attitude that was costing him all his money. He gradually increased his investments and savings to pay off his massive EMIs.

As of today, his investments have already reached INR 30,000 and continue to grow. Just the past few months, gave him enough incentive to save for his future, thus becoming completely financially independent in the coming 15 years.

Is SIP in tax saving funds useful?

sip vs lumpsum

At CAGRfunds, January to March quarter is perhaps the busiest for us. No special reason why it should be so, but it is. Why? Because, many of our investors wake up to the need for tax saving investments just then. And then they end up investing a lumpsum amount in tax saving funds (ELSS).

What is wrong with that?

Well, nothing. Except that a lumpsum investment in any equity oriented fund forces us to lock a single price. What most investors miss are the problems they would face when they invest lumpsum instead of SIP.

Let us see an example of a SIP and a Lumpsum investment in an ELSS fund. We have two comparisons:

  1. SIP of 12,500 every month since 15th Dec 2008 until 15th July 2018, and
  2. Lumpsum of 1,50,000 every year on 15th December

Scenario 1: ABSL Tax Relief’96 (since 2008)

Scenario 2: Axis Long Term Equity Fund (since 2010)

Scenario 3: Franklin India Tax Shield (since 2006)

As we can see, an annual lumpsum investment in any of the above ELSS funds would have given significantly lower returns than SIP over the same period. This is because SIP enables the investor to invest every month at different prices. SIP thus averages out the cost of purchase. On the other hand, with a lumpsum investment, money gets locked in at one price and that can give lower returns if the pricing, unfortunately, is at a high level. This happened with a lot of our investors who had to compulsorily invest a lumpsum amount in ELSS in January 2018 since they were restricted by the last date of submitting tax proofs.

So if you have not yet planned your taxes and are still waiting for the last date to knock your doors, you need to think again. Feel free to post a comment if you have any questions!

Should you go for the NPS (National Pension Scheme)?

National Pension Scheme

If a genie popped in front of me today and granted me three wishes, the child inside me would probably want to get an endless supply of money, a surreal supply of cake and to live forever to enjoy all of those things. But everything in life has an expiry date, including our wealth and us.

Therefore, the adult in me would wish for enough money to enable me to have a comfortable working life & a delightful retirement, a healthy & fit life and maybe a large cup of Cappuccino.

The fear of not having enough money to sustain ourselves post-retirement is real and that’s why the government launched the National Pension Scheme, so that we could garner enough to continue with our current lifestyle, even after our primary source of income is gone.

We, at CAGRfunds, have recently started enabling our clients to subscribe to NPS. Let’s try and understand what NPS can do for you!

National Pension Scheme or NPS, is a defined voluntary contribution pension system. It was initially started for Government Employees in 2004 but was later expanded to all citizens of India in 2009.

Investors can invest in both equity and debt which enables them to make good returns on equity while having the safe assurance of debt!

To understand better how and when to invest in NPS, let us have a look at Ramesh, Suresh and Mukesh and how their choices could affect them at the age of retirement.

Ramesh started investing in NPS at the age of 20 while Suresh and Mukesh started investing at the age of 30 and 40 respectively. Let us see how their investments will perform when they reach the age of 60 (Retirement Age).

Ramesh has done very well with his corpus standing at an astonishing 46 lakhs. At the same time, even though Suresh and Mukesh have invested 2.4 lakhs more than him, their investments are only 36 lakhs and 20 lakhs. This difference has arisen because of the power of compounding! You can read our article on the miracles of compounding here!

To help you out further, here is a small description of the types of NPS accounts:

Tier 1 (Investment Account)

It is an investment account wherein you can deposit money via SIP or Lumpsum. Investors can invest from the age of 18 years up until 65 years of age. Money once deposited in this account, can only be removed before maturity in a few circumstances. This often sends people away but we feel that its focused approach towards retirement prevents the customers from making mistakes during market volatility.


  1. You can withdraw up to 25% of your initial investment amount after three years of investing.
  2. Investors can withdraw 20% of corpus as lumpsum after ten years of investing.

There are two stages of investing. The first is the Accumulation Phase wherein you invest your money at regular intervals into NPS. The second is the Distribution Phase wherein the money comes back to you. Once you reach the age of 60, you have an option of withdrawing 60% of your corpus as lump-sum and you can buy a pension scheme (annuity) with the remaining 40%.

Note: It is compulsory to invest a minimum of 40% in annuity.

Government employees can mostly invest in corporate or government bonds. However, other investors can choose from various ‘Pension Fund Managers’ ranging from SBI and LIC to HDFC and ICICI. Investors can invest in two ways:

Active Choice

Investor gets to choose their investments. However, they have the following limits:

  1. Equity: Max 50%
  2. Bonds: No limit
  3. Alternative Funds: Max 5%

Auto Choice

In this option, investments are automatically adjusted based on the individual choice of plan. The exposure to equity will gradually reduce after the age of 35 in all three plans.

  1. Conservative Plan: Max 25% Equity
  2. Moderate Plan: Max 50% Equity
  3. Aggressive Plan: Max 75% Equity

Note: Investors can change their investment options twice a year and their PFMs once a year.

Tier 2 (Savings Account)

Tier 2 is a savings account. You can put and remove money as and when you wish as there is no exit load in this account. You can choose to invest in a Tier 2 account only if you have a Tier 1 account. It is possible to go back from a Tier 2 account to a Tier 1 account but once changed, you cannot change your account to Tier 2 again. In our view, one should only consider investing in Tier 1 account.

Tax Deductions


Investments in Tier 1 are tax exempt up to 1.5 lakhs every year under section 80C of the Income Tax Act. An additional 50,000 is also tax-exempt under section 80CCD (1b).

Investments in Tier 2 are not tax exempt and will be charged at slab rates (and hence, we feel that only Tier 1 is the relevant part in NPS).


Withdrawals in Tier 1 have the following taxation:

  1. Premature withdrawal of up to 25% is tax exempt
  2. Withdrawal of 40% of investment at maturity is tax exempt. If you withdraw more than 40% (upper cap of 60%), then differential is chargeable at slab rate
  3. Returns earned on the part of corpus that is used to buy annuity (minimum 40%) are also tax-exempt
  4. Income from annuity will be charged at slab rate

Withdrawals from Tier 2 are not tax exempt.

In conclusion, as scary as the idea of growing old and having to let go of your lifestyle on your way to retirement seems, by investing in NPS now, you will save much more than enough to continue living your life the way you like it.

For further advise on investing in NPS, feel free to contact us at or call / Whatsapp us on +91 9769356440.

Everything about tax saving mutual funds

Benefits of ELSS Funds

Tax Saving Mutual Funds or ELSS (Equity Linked Savings Scheme) funds are a type of mutual funds which give you tax benefits under section 80C and also enable growth in your investment. Like all other equity mutual funds, they too invest in the equity market. So what makes them unique and desirable?

  • Potential of generating high returns (historically, the good funds have generated an average annual return of more than 15% )
  • Least lock-in period of 3 years compared to other tax-saving options
  • Deduction of ₹1.5 Lacs every year from taxable income, thus a saving of up to INR 45000 in tax
  • More equity exposure (linked with higher returns) than any other tax saving options
  • Available to HUFs also (Unlike individuals, HUFs have limited alternatives to save tax)

So, basically an individual or HUF (Hindu Undivided Family) can avail an exemption of ₹1.5 Lacs from their total taxable income in every financial year by investing in ELSS Mutual Funds under Sec 80C of Income Tax Act, 1961. In addition to this, a capital gain of ₹1 Lac is tax-free. Gains above ₹1 Lac are taxable @10% under Growth plans. Dividend plans will have a 10% tax levied from April, 2018.

How is ELSS better than other investment options (ULIP, FD, NPS, PPF, and NSC)?

Comparison of different tax saving optionsELSS will therefore be appealing to an investor who has a higher risk appetite as ELSS funds have the potential to outperform and generate better returns than FDs, NSCs, and PPF/EPF.

Final Thoughts:

There’s a widespread misconception that equity is too risky for older investors or for retirees and therefore they should not use ELSS. The truth being that every investor, who has a high risk appetite and wishes to invest in equity, has ELSS as a great investment option. It benefits your finances by saving on tax and generating better returns than traditional investment options.

The main issue that we, as Indians, face is inflation (6-7%). Fixed deposits and similar investments take a big hit because of inflation and the falling rupee rate. The returns are simply not rewarding and barely help to keep the value of the principal investment. For an investor saving for his children’s education, FD may not suffice as education inflation grows by 15% while for a retired person, prices for goods and services from healthcare grow by 20% due to inflation. Such long term investments maybe very underwhelming.

Of course, like all equity investments, the best way of investing in ELSS funds is through monthly SIPs throughout the year. Equity investment is a higher risk instrument over the short term. However over a span over 3 to 5 years, the market fluctuations are averaged out and the returns are usually healthy.

Investors can choose to invest lump sum too. Although, it is riskier than SIP as your returns can vary with the market highs and low. During a market high, it seems attractive to invest and during lows investors rush to stop investments. This is where they make lose on an opportunity. High markets fetch lower units and hence lower returns. Low markets fetch higher units and hence higher returns. Although, timing the market is never certain and it’s advisable to invest through SIPs as market highs and lows will produce a healthy average return in the long run.

Budget 2018: What should investors be doing?

The much awaited Union Budget 2018 was presented and views as usual are multi-fold and diverse. Here is a short summary of the key questions that must be on your mind as an investor. Please feel free to post any further questions as comments or reach out to us on You can also Whatsapp us your queries on +91 9769356440.

Which are the sectors which are under Government focus?

The focus of the NDA Government is on strengthening the ground level infrastructure and thus the focus has truly been on the lower pyramid of the society. Most of the budgetary support has been rolled out to sectors which therefore impact the rural economy. Key sectors that are under focus are:

Agriculture & Rural – Focus on agriculture was an expected move this year.
  • MSPs to be 1.5 times the cost of input to the farmer. This should benefit all agri input companies (Seeds, Fertilizers, Pesticides)
  • Focus on improving access to maximum MSPs – Historically, farmers have not received the MSPs that they have deserved. While the Government claims to be committed to improving access, we need to wait and watch the success of the same.
  • Promotion of Organic farming – Will be useful for seed companies, not so good for fertilizers and pesticide companies. But given the small scale of organic farming in India, the impact is not expected to be material
  • Cold Storage – They are likely to be positively impacted if Operation Green is implemented well. A good part of potato production in India gets wasted and hence this is a welcome move
  • Overall, several initiatives have been rolled out for improving the rural livelihood. Actual benefits will depend on implementation
Health – Several initiatives have been rolled out for the Heathcare sectorHealthcare sector.
  • Flagship National Health Programme to cover 50cr people. Poor families to have better health insurance coverage
  • Focus on medical research
  • Use of generic drugs likely to increase

Should you then start investing in the thematic funds related to the above sectors?

Every year the budget rolls out some enhanced and some new policies for the key sectors. Short term sops lead to short term gains while structural reforms have a very long term play. From a broader picture perspective, sectors which are over exposed and dependant on Government policies should be avoided as any change in the Government itself or their priorities can have a very significant impact on particular sectors.

We therefore suggest that taking concentrated exposures in particular sectors should be avoided. In mutual funds, diversified exposures are always safer.

What is the tax implication on Equity?

Implication of Budget 2018 on Equity

What is grandfathering of returns?

If your investment in Mutual Funds and Equity is there for more than 1 year there would be a tax of 10% on the profit earned which was 0% as of now. For this they have considered Base Year as 31/01/2018 and profit calculation will be based on the higher of the two values – actual purchase price and the price on 31st January 2018.

For Example, consider that you have invested INR 100 on 1st September 2016 and you redeemed on 2nd April 2018.

Price on 2nd April 2018: INR 180

Price on 31st January 2018: INR 150

Long Term Capital Gains:  INR 180 – 150 (since this is higher than the actual purchase price of INR 100) = INR 30

Tax to be paid: 10% of INR 30.

Short Term Capital Gain remain unchanged at 15%.

With long term capital gains tax on equity being levied, are equity mutual funds still an attractive investment avenue?

Equity as an asset class is still attractive when we compare the returns with other asset classes. The benefit of compounding your money at a higher rate is immense when you are planning for your long term financial goal. Further, this taxation does take away some of your gains in the form of taxes, but even after the tax implication the post-tax returns are far more lucrative than other asset classes.

What does it mean for the debt mutual funds?

Debt funds still remain an attractive investment vehicle for people in the 20-30% tax bracket. In the present budget there has been no change in the tax structure for debt mutual funds so it remains an attractive investment avenue to gain from the benefit of indexation in the long run. Read more about how and when are Debt funds useful here.

What does it mean for you if you are a senior citizen?

The budget gives a big relief to senior citizen. Any interest a senior citizen earns either from fixed deposit or savings bank account is exempt to an extent of Rs. 50000.

So if you are a senior citizen and want to park an amount up to Rs. 700,000 for 1-5 years, then a fixed deposit now makes better financial sense for you.

What does it mean for you as a retail equity investor?

If you want to invest for the purpose of wealth creation with a time horizon of more than 5 years

For retail investors on a relative basis equity mutual funds still remain an attractive asset class. On a risk adjusted basis it will still outscore other asset classes. As a retail investor you will gain financial independence by saving more and maintaining your asset allocation as per your risk appetite. Also, it is recommended that choose “Growth” schemes as dividends are now taxable at 10%.

If you want to invest for 3 – 5 years (but more than 1 year) to generate better returns

For people who were using dividend option for such measures will have to re-look as dividends now will be taxed at 10%. However, a hybrid product such as a balanced fund may still outperform other possible asset classes for this objective. Therefore it is suggested that you take exposure in “Growth” options of balanced equity funds through the SIP or STP route. Lump sum (one time) investments in equity or equity mutual funds for such time frame should be avoided.

If you want to park your money for use between 1 – 3 years

Ultra – Short Term and Short Term debt funds where there is no change in taxation still remain an attractive investment avenue.

If you want to park your money for use within 1 year

Arbitrage funds as a category will become relatively less attractive as you will have to pay 10% taxes on dividends received. However, if you are in the 30% tax bracket, this is still a more lucrative option than other alternatives available (since Ultra Short term debt funds are also giving lower than average returns). On the debt side there is no change

If your existing holdings are in below types of funds, then what actions should you be taking?

Arbitrage funds – Stay invested till March 2018 since all changes take effect from April 2018.

  • If you are in 20 -30% tax bracket and withdrawal is planned within 1 year: Continue to stay invested in Arbitrage Funds even after March 2018
  • If you are in 20 – 30% tax bracket and withdrawal is planned after 1 year: Split exposure between Arbitrage Funds and Short Term Debt Funds
  • If you are in 10% tax bracket: Shift to Ultra Short Term and Short Term Debt Funds

Ultra Short Term Debt / Liquid Funds – Continue to stay invested. If funds are not required to be deployed in next 3 years, you can consider taking small exposures in equity on market corrections (if they happen over the next few weeks)

Dynamic Bond Funds – We are not recommending dynamic bond funds in the present scenario seeing the volatile debt markets to retail investors.

Short Term Funds – Short Term funds have had small hits because of the debt market volatility.

  • Investors should not look into the category for less than 1 year. For less than 1 year stick to ultra-short term funds
  • Some of you would have seen less returns in the short term funds in the last 3 months because of a sudden spike. We would like to emphasize that during our discussion with you we had suggested these funds for a horizon of more than 1 year. So please hold on the investments as the returns are likely to improve in the next 3-6 months

Duration Funds – We still hold our previous view of sticking to short term bond funds and accrual funds seeing the interest rate scenario.

Equity funds – As long as your time horizon is more than 5 years, stay invested. However, periodic look at the portfolio for re-allocation and re-balancing is inevitable. At CAGRfunds, we are committed to your wealth creation. While we are planning to start are annual re-allocation and re-balancing exercise after 15th February, 2018, do reach out to us if you want to discuss your portfolio prior to that.

Overall take: We feel that as retail investors we will benefit far more by focusing on the basics (which is our hand) which is consistent increase in our savings. Ensuring regular investments over a long period of time will help us reap the true benefit of compounding and create wealth over the long run. We therefore highly encourage starting / moving to the SIP mode of investment. While short term trading / speculation in direct stocks was never recommended for retail investors, it becomes all the more unattractive now. Also, the objective of investment at the first place is not to save tax. It is to build wealth. Equity mutual funds and a diversified portfolio continue to keep the objective intact and hence no major changes are required in the face of tax implication.

The only way to secure your future is to build it!

Disclaimer : This update is as per the information available as on 1st February 2018 from the budget document