Category: Tax Planning

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.

“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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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!

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.