Blog Archives - Hum Fauji Initiatives

20 Feb 2023

Blog Sanjeev Govila 0 comment

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:-

Lock in the current high rates of interest in high-quality and safe investments like Govt bonds, bank FD equivalents and corporate FDs.
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.

08 Feb 2023

Blog Sanjeev Govila 0 comment

How Can you Take Best Advantage of Current High-Interest Rates?

We all know that interest rates right now are at all-time highs and it is just a matter of time before they start moving downwards. Knowing this, what generally is then our response for that part of our money which we want to keep safe for the long term?

We go and invest in long-term bank FDs in our favourite bank for 3-5 years. You too might have done that or may be planning to do that shortly. Is this really the best solution to take advantage of high interest rates in the long term?

Do you know, and hold your breath for it, you may be consigning your money to assured low returns for a long time which would be ‘net-NEGATIVE’ to you for the complete period of those 3-5 years?

This could surprise you but let us see how it so happens if you were to invest Rs 10 Lakhs in State Bank of India’s fixed deposit for a period of 3-5 years even at the current high rate of interest of 6.25% when the rate of inflation is at least 5.5%:-

Why Will It Happen Like That When it seems that Current High FD Rates Are Good for You?

Rates are high but inflation too is high and is continuously eating into your returns without you even knowing it. How so?

As you know, inflation is the rate at which the cost of things that you buy increases year after year. Eg, if you earn 5.5% after-tax returns from your bank FD and the inflation is also 5.5%, then your money has just stood still for one year, earning nothing, adding nothing at all to your money value or its purchasing power. Only if you earn anything more than 5.5% after-tax in the year will your money’s purchasing power increase and you would feel that keeping that money in the bank FD was worth it.

If tax is causing all this loss to you, then why not invest in your spouse’s name who is not in a taxable bracket?

There is a income tax provision called the ‘Clubbing of Income’ (Income Tax Section 64) wherein you can give money to your wife (technically it is called ‘gifting’ to your spouse) but anything that this money earns forever is to be taxed in your own hands. Every year we see so many officers, who are not aware of this provision, invest a big amount, even a large part of their retirement corpus, in their wife’s name and then get Income Tax notices, finally ending up paying the tax anyway but with big penalties. Many years back this issue used to get brushed under the tax radar, but now, with close monitoring by the Income Tax Dept and sophisticated automation, infringements of Section 64 get detected very easily. And the tax notices follow…

Is there a way out where you take advantage of current high rates but also pay a minimal tax?

Absolutely yes, by investing in chosen safe debt mutual funds right now. And that is the big opportunity we bring to you now.

Let’s first compare the advantages of investing in debt mutual funds against fixed deposits for you.
Suppose you invest Rs 10 Lakhs each in SBI Fixed Deposits and good debt mutual funds for a period of 5 years.

As you can see above, investing in debt mutual funds reduced your tax liability by about 80%-!!
And thus provides an additional return of Rs 97,869 to you in your hands.

This exactly is the Opportunity that we wish to bring to your notice!

To take advantage of this opportunity available right now, we are launching an appropriately named ‘Debt Opportunity Portfolio’ (DOP) for you which aims to buy very safe Debt Mutual Funds now, akin to bank FDs, when their prices are currently very low – so you get high-interest rates at low prices. This is a limited-time offer and will close soon.

Shift your bank FDs to this opportunistic portfolio and see yourself gaining interest and saving hugely on taxes continuously over the next 4-5 years.

For our existing investors, it will be a separate portfolio called the ‘DOP’ and will not be merged with the existing portfolio. This will facilitate closing the portfolio at an opportune time when we find that the best interest has been extracted from the portfolio. Typically, we feel right now that DOP will run for the next 4-5 years from now.

Please note that the minimum investment in this opportunity will be Rs 5 Lakhs and further in multiples of Rs 1 Lakh. Also, no shifting from current portfolio of existing investors can be done for taking advantage of this DOP opportunity.

19 Jan 2023

Blog Sanjeev Govila 0 comment

How Many Financial Advisors Should You Have?

Multiple financial advisors may help you get diversified views, but unless they talk to one another, you may end up having duplicate investment products across multiple portfolios, doing similar things. Sometimes, specialists help.

Before the onset of Covid, most new customers walking through our doors would either not have been using any financial planning firm or may have been using one, at the most.

That has changed now. In many cases, we see people using more than one financial advisor. Why do people use multiple advisors?

The general reason is that “we don’t want to put all of our eggs in one basket.” That’s a reasoning more applicable in the context of asset allocation rather than advisor selection.

Having multiple financial advisors has both pros and cons.

Why multiple financial advisors work?

Here’s why multiple heads work better than one. You can get different viewpoints and perspectives on how to achieve your financial goals. Individual advisors can focus on different aspects of your financial plan, allowing you the benefit of specialized advice.

For instance, you could have one who excels in debt and fixed income, including tax-free bonds. Another advisor could be an expert in tracking international markets – a growing need among many investors in the past few years.

Different advisors may be able to offer access to a broader range of financial products to choose from.

When multiple financial advisors do not work

There could be some downsides too to advice coming to you from multiple directions.

None of the advisors would have visibility of your entire financial situation. If your advisors don’t see the whole picture, they may make recommendations that aren’t suitable to helping you achieve your goals. Without a central plan and monitoring, the overall picture could turn out to be haphazard.

It is ideal if all your advisors communicate with one another. At least in some measured way. Practically, this hardly happens as no advisor would want to share clients.

So it may be challenging for you to have a clear picture of your overall asset mix, fees and performance, especially if advisors aren’t communicating with each other. Investors may find themselves owning duplicate products or holdings that can skew the allocation of their portfolios.

This could lead to conflicts if your advisors have different takes on how to help you best reach your goals. You may become unsure of which advisor’s advice to follow. Applying multiple advisors’ strategies could prove to be counterproductive or even harmful.

You could also have problems on your tax management since none of the advisors would know what are your overall tax occurrences and what has already been catered for.

Possibility of the advisors to compete for all the assets and take undue risks on their part to outperform your other competing advisors is also very real, harming you in the long, or even short, run. In such cases, additional emphasis is then placed on short-term performance, undermining your long-term financial plan.

Have one advisor, but take on specialists

Your planning, execution, reviews and management is done at a single place. So, no conflicts of advice, differing perspectives causing dilemma to you, better tax management and a holistic view of your complete financial situation.

A single, good advisor will likely be able to maintain a better grasp of your entire financial picture, needs and goals in the short, medium as also the long term.

If you have large assets or a complicated financial or succession plan, one advisor may sometimes not be able to give the whole range of solutions, services and products that your situation demands.

Besides, some of the advisors have specialised practices, like insurance or real estate and may not offer a complete solution range. In such circumstances, you may have no alternative but to go to multiple advisors.

End note

It is better to have a single financial advisor or advisory firm provided the advisor you have chosen is ethical, has a good reputation, is responsive and is professionally competent.

A lot of research and due diligence should go into selecting the right financial advisor. Those pitching their services to you based on good returns they have got in the short term in some investors’ portfolios may not be the right way to choose an advisor – remember an advisor is much more than being a mere returns-getter in the long run.

A single, good advisor will be able to maintain a better grasp of your entire financial picture, needs and goals. Managing everything related to your finances, family and estate is challenging to do in a coordinated manner.

Adding another advisor can complicate things and often results in things falling through the cracks or duplication of roles or investments. Lastly, an investor generally will get much more out of the advisor when he or she also shows commitment to that advisor.

The original article can also be read at the following link on MoneyControl dated 11 Jan 2023

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