11 Apr 2023

Let’s Start the Financial New Year 2023 by Doing Things Right…

Getting ready for the new financial year 2023-24 (FY24) means understanding common financial mistakes that can cost you a lot. There are many pitfalls to avoid, including overspending via credit cards, not investing enough to handle emergencies, not reviewing your credit report, and procrastinating tax planning.

A term insurance policy is critical to protect your loved ones in the event of your untimely death. “Life insurance can provide financial support to your beneficiaries and help cover expenses such as future financial goals, outstanding debts and living expenses,” says our CEO Colonel Sanjeev Govila (retd).

You can read his interview published at Money Control to find out how you can avoid some seemingly simple financial mistakes that can negatively affect your life and finances.


Begin your New Financial Year Journey with Hum Fauji Initiatives. Contact Us

There may have been a New debt MF taxation rule they still can give better returns!

Debt funds have long been a favourite for tax-effective fixed-income investments. However, the new taxation rule that will come into effect from April 1, 2023, may take away this advantage from most debt funds. But industry experts still believe that despite the loss of taxation advantage debt funds have several advantages over fixed deposits. Here’s what our CEO Sanjeev Govila has to say.

Better return opportunity with debt MF: Corporate Debt funds will always give better returns than bank FDs. Pick up good quality corporate debt funds and you will always do better. Banking & PSU Debt funds too are doing better now.

Helps in managing interest rate risk: The powerful advantage of M2M (Mark to Market) available now and for say next 3 years or so would increase returns in Debt funds as interest rates go down. On the contrary, when rates go down, bank FDs will give lower returns.

Allowed to set off the capital gain: income from debt funds shall still be classified as capital gains which shall be available to be set off against any other capital loss.

Read what he has to say here:


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US Stock Market: Is it the right time to enter now?

In the first quarter of 2023, all major US indices, including the Dow 30, S&P 500, and Nasdaq 100, posted positive returns, making it a strong start to the year for stocks. But the most important question here is whether to fall for the good numbers and enter the market or not. Answers our CEO, Colonel Sanjeev Govila (retd) in his recent interview in Financial Express.

“The answer is Yes and No, depending on what are our risk-taking capacity and the time frame that we’re looking at for investments. The main risks of the past – inflation, the Russia- Ukraine war, lag in the Chinese economy, and supply chain issues – are still not under control. In fact, inflation is proving more stubborn than ever before with the jobs data refusing to come down, indicating an overheated economy. The Fed Reserve seems to have run out of options and the fact that any actions by it will only work on the US economy with a considerable lag indicates that the pain has a long way to go. That forms the case for waiting it out and buying time before entering the markets,” says Col. Govila (Retd).


28 Mar 2023

Debt Mutual Funds – Are They Still Relevant to Col AK Karmakar Retiring Shortly?

Col Arun Kumar Karmakar is retiring next month and had approached Hum Fauji Initiatives to take him ahead with his retirement planning, tax planning and investment of his retirement portfolio to his and his family’s best advantage. 

The goal-based retirement plan made for him by Hum Fauji was under the process of discussion with his Relationship Manager (RM) and Asst Manager (AM) in the company when news came about the amendment done in budget proposals wherein Long Term Capital Gains (LTCG) status and indexation provisions of debt mutual funds were removed. He got confused about whether the debt MFs included in the plan made for him by Hum Fauji still remained relevant to him.

The conversation between him (AKK) and his RM took place as follows:-

AKK: With no LTCG benefits available, I think the debt mutual funds should be removed from the portfolio prepared by you and we should stock up on bank FDs, corporate FDs, Senior Citizens Savings Scheme (SCSS), Govt Bonds etc recommended by you.

RM: Sir, LTCG and indexation benefits are just one of the benefits offered by Debt MFs. There are so many other benefits that debt MFs give you over traditional investment avenues that we recommend you to continue with them in your retirement plan.

AKK: Tax saved is money earned. If I don’t save tax, then why should I invest in them.

RM: Sure Sir, we should surely try to save tax wherever possible and if you see the plan made by us, we have already done that at every step. But any plan based entirely on tax concessions is bound to trouble later since tax laws can be changed any time by the Govt, as in the current instance.

AKK: All this is very fine but I fail to see how debt MFs give me any edge over other avenues now.

RM: Sure Sir, I would like to tabulate it for you so that the two types of instruments can be compared

Aspect Bank FDs Debt MFs
Safety Very safe. As safe as you want – wide choice and flexibility available. For max safety, take MFs investing only in bank FDs and Govt Bonds and still get better returns and benefits
Mark to Market (M2M) No such facility available which actually would disadvantage as rate go down from here Huge advantage. Current interest rates are at their peak. As they go down, long term debt MFs will gain in value while FDs will give you lower interest rates
Systematic Withdrawal Plan (SWP) Anything earned from bank FDs is fully taxed This is the best way to take additional income or pension since it can save up to 80% of the tax that you would comparatively pay on your pension, bank interest, SCSS interest and other similar instruments.
TDS Tax Deducted at Source irrespective of FD being cumulative or non-cumulative No concept of TDS for resident Indians
When taxed Taxed every year on interest earned – actual or notional – irrespective of the tenure of the FD Taxation only when redeem MFs. Big advantage if your taxation is going to be lower later, say after retirement or getting disability pension. Could also invest in minor children’s name now or if major children not likely to earn or be in a high tax bracket for a long time to save tax.
Tax Saving on gains No set off of FDs’ tax on interest against any other loss Short Term Capital Gains (STCG) of MFs can be set-off against short-term capital losses (STCL) of other instruments like equity, equity MFs and others.
Tenure Have to decide beforehand and would face issues of penalty if money requirement occurs before or after FD maturity No tenure laid down – absolutely flexible. Withdraw when you wish or may not withdraw the whole life even though invested for a different tenure in mind initially
Liquidity Any time but penalty imposed on premature withdrawal Full or partial liquidity within 1-4 working days. Exit load may or may not be there depending on the fund chosen by you. Typically, no exit load beyond One year
Choice No choice – a FD is a FD and nothing else Huge menu available. Choose as per your requirement and returns desired
Anything else Bank FDs much older product, hence occupy Indians’ mind space. Best only for creating Emergency Fund Latest products with huge innovations; active investing as per interest rate scenario; and flexibility of investing and withdrawal

Sir, I hope I’ve been able to convey to you that, with the recent tax change, only one aspect of debt MFs has changed while all other advantages remain.

AKK: OK, convinced about the bank FDs Vs debt MFs comparison. But aren’t SCSS and corporate FDs now better than debt MFs after this taxation thing?

RM: Sir, corporate FDs surely give you better interest than bank FDs. You should have them in your portfolio for diversification and better returns. The corporate FDs suggested by us are top-of-the-class combination of safety and returns. But SCSS, even though giving a good 8% interest and have high safety, suffer from four main disadvantages:-

  1. Interest is fully taxable. So, you will actually get 5.6% in hand after tax.
  2. Even if you do not want the interest, it is compulsorily given to you and you have no choice.
  3. Since you have already taken out the interest, there is no compounding in SCSS which is a big disadvantage since you anyway do not need the monthly additional income that is compulsorily given to you.
  4. Bank or Post Office clerk will tell you to put this quarterly interest of SCSS in a Recurring Deposit (RD) and you will get ‘9-12% total interest’. This is a wrong calculation. You get an average of the interest rate of SCSS and RD and get taxed twice on the interest at SCSS as also RD.

So, we recommend only a limited amount to be invested in SCSS. 

AKK: OK. Let us not delay the discussions any further and go ahead with the plan as prepared by you!

RM: Sure Sir.

Also Read: Will You Miss Out This Tremendous Safe Investment Opportunity?

20 Feb 2023

Will you miss out this Tremendous Safe investment Opportunity?

We had launched our limited-period Debt Opportunity Portfolio (DOP) 10 days back, accessible at the link below: (https://bit.ly/TremendousOpportunity).

The aim of DOP is to take maximum advantage of the current high rates of interest in the market which give us all a great opportunity to:-

  1. Lock in the current high rates of interest in high-quality and safe investments like Govt bonds, bank FD equivalents and corporate FDs.
  2. Be unaffected by the interest rate cuts which are likely to start approximately 6-10 months from now.

And and added Bonanza : there’s an even more powerful deal clincher called the ‘Mark-To-Market’ (MTM) advantage in DOP!  

This ‘deal clincher’ is peculiar to debt mutual funds and not available elsewhere due to the manner in which debt MFs work! Let’s see how…

What is this Mark-To-Market (MTM) phenomenon?

DOP will have various categories of bonds in the portfolio held through the ‘envelope’ of carefully-selected debt MFs.

Let us now say that the interest rates fall down from the current ballpark figure of 7% to 6% after about One year from now. The newly issued bonds available in the market at that time would therefore be offering a 6% interest rate (called the Coupon Rate in case of bonds).

The 7% interest bonds issued earlier (which would be part of our portfolio) and available in the market for sale-purchase, will then start commanding a premium due to giving 16.66% more rate of interest (7% Vs 6%) than the new bonds being issued giving 6% rate of interest then. The price of these earlier-issued bonds then increases in the market and our Debt MFs holding these bonds will see their NAV (Net Asset Value) rise, thus giving even more rate of return to the holders of those debt MFs while not compromising anywhere on the safety part at all.

Can we calculate the likely price of such bonds if the interest rates fall down from 7% to 6%?
For sure.

There’s an (obnoxious-looking 🙄 ) formula, called the Bond Pricing formula, that can calculate it:

Bond Price = [(Coupon Payment / Yield) x (1 – 1/(1 + Yield)^n)] + [Face Value / (1 + Yield)^n]

We’ll not bore you with the calculations but suffice it to say that a 10-year bond giving 7% interest today with a face value of Rs 1000 will be selling in the market at about Rs 1121.96 if interest rates fall down to 6%. This is equivalent to adding about 2% per year of more returns to the already high rates which can be currently locked in.

If interest rates fall down further, more bonanza.

Thus, DOP will not only lock in current rates, give you high safety, high-quality investments but also keep giving you better and better returns as interest rates fall down later due to the Mark-To-Market (MTM) phenomenon, compared to traditional safe avenues like bank FDs, Corporate FDs, Senior Citizens Savings Scheme (SCSS), Post Office Monthly Income Scheme (PO MIS) and the likes.

This is the B-I-G safe opportunity available in the market today

Check out the video Our CEO, Col Sanjeev Govila (retd), explains about the safe investment opportunity available in financial market here

So how do you go ahead?
Please feel free to reach out to your financial planner in the company if you are an existing investor, or contact us at office@humfauji.in or give us a call at 9999 838 923 during working hours if you are yet not invested through us.

Please note that the minimum investment in this opportunity will be Rs 5 Lakhs and further in multiples of Rs 1 Lakh.