My 15 lakhs FD matured. How do I use the money?

As per a recent survey by SEBI, more than 95% of Indians prefer parking their money in Fixed Deposits (FD). Well, if that is true by any measure, then it is only likely that a good number of those FD(s) are maturing every single day. And the looming question is – Should I start another FD?

Before we answer this question, let us look at the various options we have in hand.

Retain it as cash – Unless you have a spending need within the next 7 days, there is ABSOLUTELY no reason to consider this. Liquid funds work best for any spending needs in near future. Idle cash at home is like a bucket of still water. The level only depletes with time gradually.

Start another fixed deposit – Fixed deposit returns have been falling and the extent of our expenses is increasing. Healthcare costs increase by approximately 15% every year. Are the fixed deposit returns still attractive? We would say a big NO to that. Low returns coupled with taxation of returns renders them to be an unattractive investment destination. With easy access to better information, a lot of Indians are now realizing this. Have you awaken yet?

Invest in debt funds – Debt funds are a type of mutual fund which invest in debt related instruments like Government bonds, corporate bonds, commercial paper (CP) etc. The reason a lot of people are now shifting to debt funds is because of better returns and lower taxation possibilities. With the tax net getting stringent, it only makes sense to explore all possible avenues of reducing tax liability. Read more about how debt funds fare better over FDs here

Invest monthly in equity funds – Equity mutual funds are the latest talk of the town. Useful or in-vogue, whatever you call them, they are amongst the very few wealth creating asset classes available to Indians today. A pre decided monthly investment in equity mutual funds can result in double digit returns over the long term. But only and mostly over the long term. And by long term we mean that your money should stay invested for more than 5 years. For example, an investment of INR 80,000 over 18 months (INR 14.4 lakhs) can lead to a corpus size of INR 41 lakhs after 10 years (Assuming annual return of 12%). And that too tax free.

Therefore in conclusion, the best investible options available are debt and equity mutual funds. You can choose either of them or a mix of them depending on your risk profile, return expectations and time horizon.

How do we help?

At CAGRfunds, we assess your complete profile in terms of risk, return and time horizon and accordingly make customized suggestions to you. We ensure that your money gets invested in the right avenues and meets your expectations.

Is your fixed deposit making you wealthier?

Last week, I met a lawyer on my flight to Delhi. Since I had nothing better to do, I broke the ice and soon, we started discussing about my favorite topic – how do we get wealthier over the long run.

So I asked my new found lawyer friend, what does he do with his surplus funds? Immediate response – “Fixed Deposits!” So I then asked him why? And with a very perplexing look, he said – “My money grows at 6.5%. Do I need another reason?”

That is when I realized the lack of awareness that is prevalent even amongst the learned breeds of lawyers. I therefore introduced him to the concept of Debt Funds.

Debt Funds are those mutual funds which invest in debt instruments like bonds, debentures and money market instruments. But why are we comparing debt funds to fixed deposits?

Fact 1: Debt funds on an average give an annual return of 7.0% – 8.5%. SBI 1 Year Fixed Deposit yields 6.9% interest annually, and a 3 Year Fixed Deposit yields 6.50% annually.

Fact 2: If money stays invested in a debt fund for more than 3 years, then you end up paying considerably lower tax on the returns from such debt funds. This is because of the indexation benefit. Indexation implies to inflating purchase cost to account for inflation. As a result, returns which are subject to taxation is reduced. Also, such reduced returns are taxed @20%. However, in case investments are held for less than 3 years, the gains are added to the income of the investor and taxed as per the income tax slab rate applicable.

Fixed deposits are taxable as per the applicable slab rate of the investor, irrespective of the holding period of investment. That doesn’t sound good at all!

Let us understand by examples:

Consider an investor with income of INR 15lacs. He is willing to invest INR 1lac. The tax slab for this investor is 30% as per the income tax slab.

Case 1: Comparison of FD vs Debt Fund, assuming different rate of returns (as per Fact 1 above)


The net gain from investing in Debt funds exceeds in both the holding periods, so the investor is better off by investing in debt funds after taxes.

Due to indexation benefit, the purchase price has been inflated from ₹100,000 to ₹119,808, thereby reducing the tax liability from ₹6,238 in FD to ₹539 in debt funds. This benefit is available when the holding period is 3 years or more.

Case 2: Let us consider a scenario where returns from debt fund are the same as that of FD

An investor is better off by ₹6,051 even if the returns are same, in case holding period exceeds 3 years. Hence, debt funds are more tax efficient than fixed deposits in every scenario.

Time you think about the funds lying in your bank account?

Read More: Will Debt Funds help your create wealth?

9 financial mistakes I wish I had not made!!

“I do not regret the things I have done, but those I did not do” – Rory Cochrane

I cannot agree more to the statement above. Through a large part of my working 20s I believed that we earn a living to live an enjoyable life in the present. Makes perfect sense. But it was only until recently that I started to think differently. It took a medical emergency in my family to make me realize the importance of financial planning. As I reflect on my past, I realize I made several mistakes, all of which could have been avoided had I thought about the uncertainty that future holds.

Mistake 1: Reckless Expenditure

I never made a budget for my expenses. Spending on anything and everything I ever wanted was my road to happiness. But now I have learnt that it is important to differentiate between what I need and what I want. A careful thought before every purchase we make will uncover the extent of our wasteful spends.

Mistake 2: Inconsistent savings

I never thought about savings. I spent first and then whatever was left at month end amounted to my savings. A recent consultation with a financial advisor coaxed me to take a reverse approach. I now decide the percentage of my salary I want to save and then plan my expenses.

Mistake 3: Saved but not invested

I never looked at money beyond my bank account. Whatever I saved, sat idle in my account, growing only by a meagre 4% every year. As per NSSO data, between 2004 and 2014, the average medical expenditure per hospitalisation for urban patients increased by about 176%. Ever wondered how your bank balance will cater to your future needs? Channelizing our savings into return generating assets is inevitable now.

Mistake 4: No emergency fund

A year back someone asked me if I had an emergency fund. I thought it was a crazy idea to plan for an emergency. But if only such situations came knocking at the door. It is advisable to park at least 6 months of expenses as an emergency fund so that any untoward incidents can be accounted for.

Mistake 5: Excessive use of credit card

My credit card enabled me to defer my payments. So, I seldom had control over how much I was spending. Not to mention, the innumerable defaults I made in repaying my credit card bills. Sometimes, I did not have sufficient money to pay it back and sometimes I just forgot. I now keep just one credit card with a very tight credit limit.

Mistake 6: Got greedy about making quick money in the stock market

My friends used to regularly tell me about how stock market offers opportunities to make quick profits. I saw someone make 30% profit in 8 months and I felt like I am missing out on the rocket to richness. So I immediately invested all my savings in a “tip” I received from one such friend. I had no idea what business that company was in, who managed the company and how did they make money. All I was interested in was my 30% profits. Well, after 3 years, I made a loss of 35%. Anything that is too good to be true, is perhaps not true. Lesson learnt the hard way.

Mistake 7: Got excited about “instant” personal loans

I once got a message that I was eligible for an instant personal loan. I was royally ecstatic. No questions, no checks. I grabbed the opportunity with both hands. Little did I read the footnotes about exorbitant interest rate. Thanks to my financial advisor, I now know the difference between good loans and bad loans.

Mistake 8: Trusted my Provident Fund to be sufficient for my retirement

I had been living under this solemn belief that my PF balance will be more than sufficient for my retirement. No, I did not make any calculations. I was simply assuming that the Government had us covered. But as alarming as it might sound, my PF balance might not cater to even 10% of my needs when I retire. Again, channelizing our savings into return generating assets is inevitable now.

How do we help?

At CAGRfunds, we help you NOT commit any of the above blunders. With a careful analysis of your cash flow and future goals, we tell you how much you need to start saving every month to ensure a comfortable and peaceful future. We also be with you throughout your financial journey to help you manage your financial commitments and make course corrections if required.

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5 things about investing that we learn from Mahabharata

We all derive values from the great stories of our past! Turns out, we can learn a little something about investing from them too!

Don’t gamble with your money: Take palatable risks

The root of all problems in Mahabharata arises from the eldest Pandava gambling away the kingdom. This caused the Pandavas a lot of suffering. And thirteen years in exile. All this could have been prevented only if Yudhishthira had not taken such a pricey bet!

Investing fundamentals: Don’t bite what you can’t chew. Your ability to take risk is partially defined by how much can you afford to lose in the worst case scenario. Consult a financial advisor to identify your risk profile and invest according to what suits your profile.

Diversify, but not too much! Quality over quantity

There were five Pandavas and a hundred Kauravas. Both sides had brave warriors with different skills, with Kauravas clearly outnumbering the Pandavas. In the end, what mattered weren’t the numbers but rather the quality.

Investing fundamentals: Making a few good investments always scores over making innumerable investments that you can’t follow. Diversification is important to minimize risk, but over-diversification can lead to suboptimal results. Click here to know how many mutual funds should you ideally own in your portfolio.

Do what you understand: Build your financial knowledge

Abhimanyu, the son of Arjun & Subhadra had entered the Chakravyuh with partial knowledge of breaking it. Before Abhimanyu’s birth, when Arjun was narrating how to break the Chakravyuh to Subhadra, half way through the story, she fell asleep. Abhimanyu thus could not learn the full technique yet entered the Chakravyuh. Since he could not exit the chakravyuh, he got killed.

Investing fundamentals: Always understand the products you are investing in. Since it is your money, it is imperative you understand the important aspects of the same. Consulting a good financial advisor is recommended to get clarity on various products. Subscribe to our blog to keep learning!!

Don’t get caught in the rumor trap: Beat the noise!

Drona, who was supposed to be undefeatable when armed, took charge of the Kaurava army. By the thirteenth day, Pandavas were on the losing side of the battle. That is when they devised a clever strategy. They killed an elephant called Ashwatthama (which incidentally was Drona’s son’s name) and spread the news that Ashwatthama is dead. On hearing this news, Drona let his guard down and was summarily killed.

Investing fundamentals: We often feel tempted with the “quick rich” ideas that our friends and acquaintances present to us. Anything which is too good to be true, is perhaps not true. Investing is a science which works best when you are patient. If you are not falling prey to rumors and “getting rich tips”, you are probably on the right road to richness!

Take sound advice

The battle of Kurukshetra couldn’t have been won by the Pandavas had it not been for Krishna. Though he didn’t take up arms himself, it was his information and guidance that paved the path to victory.

Investing fundamentals: It is always good to take advice when it comes to important things, especially when it’s money. The right advisor will help you with the right information and guidance.

How do we help you?

At CAGRfunds, we help you define a stable investment plan for yourself. We ensure this by interacting with you, understanding your objectives and risk profile. The investment plan is then prepared keeping YOU in mind, so that all your objectives can be met in a disciplined way. Not only that – we help you stay away from suboptimal products, develop good investing habits and introspect your own investing behavior & priorities.

Whatsapp us on +91 9769356440 to know more about how we travel with you throughout your investment journey!

Is tax eating away a major chunk of your salary?

A few years back, a text message popped up: “Dear Customer, salary of Rs. ABCDE for the month of May 2017 has been credited to your account XXXXXXXXXXXXX”.

Happiness?? Not for me. Not when I was expecting a six figure salary but ended up with a five figure one, all thanks to the tax that I had been paying so diligently.

The emotional impact was of a nature that I felt compelled to consult a tax consultant. And to my absolute horror, I discovered that I was solely responsible for the reduction of a digit in my monthly pay package. Before I could get into any further depression, my consultant served me with the much needed ray of hope – several ways of saving tax to increase my income in hand.

1. If you live in a rented accommodation, you can save some tax

A salaried employee living on rent can save some tax by presenting the rent bills to his organization. Such expenses can be claimed under the House Rent Allowance (HRA) offered by the company.

2. Did you know you can reduce taxes by holidaying??

Leave Travel Allowance (LTA) can be claimed twice in a block of every four years. You can get your actual travel bills reimbursed for any travel that you might have done. However, every company has policies relating to what qualifies for LTA. If unclaimed against travel, LTA becomes fully taxable.

3. Check if your salary includes medical allowance

More often than not, medical allowance is part of the CTC. Medical expenses to the extent of Rs. 15000 are exempted from tax in any financial year. However, one usually needs to submit actual medical bills to one’s company to get the same reimbursed. So now you can worry a little less about the rising medical costs!!

4. Save tax as you invest your money under section 80C

Under section 80C, we can make investments into several instruments and the amount of investment made is deductible from our taxable income. However, the upper cap of such benefit is Rs. 1,50,000. Public Provision Fund (PPF), Employee Provident Fund (EPF which is part of your salary) and Tax Saving mutual funds are a few such instruments which fall under this category.

5. Planning for retirement can help reduce tax further

While section 80C gives benefits of up to Rs. 1,50,000, section 80CCD(1B) gives a further benefit of up to Rs. 50,000. This benefit accrues by way of investing in the National Pension Scheme or NPS. Also, investing in NPS helps generate better returns as compared to bank deposits as they have a diversified exposure across asset classes. But, the only consideration with NPS is that you cannot withdraw your  money till you attain the age of 60.

 How do we help?

At CAGRfunds, we help you plan your tax outgo by making you aware of expenses that you can claim as deduction. We also apprise you of various investment avenues which either help reduce tax or earn tax free returns. For example, after studying one’s profile, we recommend the best tax saving (Under section 80C) mutual funds. We also help plan tax by educating our investors about benefits of equity and debt mutual funds vis-à-vis other products.

Wedding on the cards? Here are 6 financial planning tips for the newly – weds!

It is the wedding season and some of you who have recently gotten married or are about to tie the knot in the next few weeks must be aware of the enormous scale of wedding expenses. While it could be difficult to limit these expenses, post your wedding some cognitive steps should be taken for financial planning together with your partner. In order to preempt the chances of encountering incompatibility in financial matters, couples should opt for a plan that is fully acceptable to both partners and promises security for the future.

So before you fly up and away for your coveted honeymoon, here are 6 financial planning tips for you to be aware of.

1. Share and pool ideas to formulate an effective plan

It is very important that newly-wed couples engage in honest conversation that will serve to build a healthy climate of understanding and trust between them. Whereas the couple’s individual financial planning mechanism may have been flawless and effective before marriage, the need for absolute clarity on the way forward is critical to a future that is free of conflict and financial hassles.

2. Decide on a joint or a separate account

In a marriage, the importance of trust cannot be minimized and the couple’s financial standing, as individuals, occupies a space that revolves around the pivot of trust. The couple should not shy away from fundamental decisions such as whether to opt for a joint bank account, where the cash flow can be viewed and managed by either, or separate accounts, especially if both partners are earning members. In either case, it is best not to compromise on the aspect of mutual trust.

3. Build a fund for emergency situations

While the individual partners may have been inclined to spend money lavishly or feed off parents’ income before marriage, it is time for discipline and a sense of responsibility, once the equation changes with the newly wedded status. Adversities, especially those that arise due to financial pressures, should be anticipated and planned for.  Such challenges can take the form of an unexpected illness, a loan repayment schedule interruption or even a failed job. Ideally, this fund should amount to the sum of the expenses of a few months.

4. Save prudently

Saving is a habit which like any other, grows on people. The couple should earmark a fixed amount that will go into their savings. This amount should be determined after accounting for regular and incidental expenses that will be necessary for both sustenance and for lifestyle choices. The ground rule should be that finances are planned to allow for a reasonable and consistent remittance towards savings.

5. Invest smartly

Savings by itself is not sufficient to cater to all our future goals. Income declines or ceases altogether, as life advances and states such as retirement become a reality. It is at such junctures in life that we need a hefty corpus to sustain our lifestyle. It is therefore inevitable to continuously invest your savings in instruments that suit your profile. Inflation and the galloping cost of living can strain the best of financial plans. As such, it may be a wise decision to make the money in a savings account generate enhanced monetary benefits through judicious investment.

6. Get an Investment Plan

It is possible that prior to marriage, the couple had adequate allocation to different asset classes on an individual basis. However, post marriage, one should always look at the combined portfolio. This leads to a need for redesigning your investment plan. The help of a financial expert can be a practical and productive consideration, in this regard.

Everything that you wanted to know about an SIP

SIP or Systematic Investment Plan – A term which has off late been doing the rounds in the world of investing. Every financial advisor you meet will recommend a few SIPs to you. Do you often feel bogged down by the what(s), why(s) and how(s) of these SIPs? Read on to find out everything you need to know about SIPs before you move on to start one.

  1. Mode of investment and not a fund: SIPs are a mode of investment and not the fund or the instrument where you invest. Therefore SIPs don’t represent any asset class. They are a way of investing in any of the asset classes. In other words, they are more of an approach to investing.
  2. Defined periodic instalments: As the term indicates, SIPs are defined instalments which get invested on a pre decided date every month or quarter. For example, you can decide that Rs. 10,000 should get invested on the 10th of every month.
  3. ECS / Deducted directly from bank: Every SIP application is accompanied by a NACH mandate also known as an ECS mandate. By signing the mandate you authorize your bank to debit the pre decided amount on the specified date. This means that you do not need to put a separate transaction every month to make your investment. For example, when you sign the mandate, your bank automatically debits Rs. 10,000 on the 10th of every month and this gets invested without any action on your part. At CAGRfunds, we have introduced the concept of 1 mandate, which means you do not need to sign separate mandates for separate SIPs. One mandate for any number of SIPs across any number of mutual funds.
  1. Pre decided funds: When you make an application for registering a SIP, you also decide the funds where the investment shall happen every month or quarter. O every month, Rs. 10,000 gets automatically deducted from your bank account and gets invested in the fund you had selected.
  2. Start date and end date: You can choose the start date and end date of your SIP. Most funds have a criteria for minimum number of instalments (wither 6 or 12). However, having a perpetual SIP is beneficial for those who want to create wealth in the long run and want to follow a disciplined approach for the same.
  3. Any number of SIPs: You can have any number of SIPs. Each SIP is for a particular fund that you decide and hence you can have as many SIPs as the number of funds you decide to invest in.
  4. ELSS SIP: Taxation is a necessary evil and none of us should leave an opportunity to save our taxes. Section 80c of the IT Act gives us a benefit of Rs. 1,50,000 which we can deduct from our taxable income. Some of us who are more aware and believe in the potential of wealth creation through equity investment, choose to invest in ELSS funds (Tax saving mutual funds). However, very few of us choose the SIP route. ELSS investments if made through SIPs, helps reduce the risk arising out of market volatility to some extent. For example, you need to invest Rs. 60,000 to cover your 80C investments and you choose to invest in ELSS funds. You should invest Rs. 5,000 every month over a period of 12 months rather than invest Rs. 60,000 as a lump sum investment at one go.

How do we help?

At CAGRfunds, we help you with all your financial queries. Whether it is about a SIP or otherwise, we promise to give an answer to each one of them. For any query, post a comment to this article. Or whatsapp us on +91 9769356440