Why debt mutual funds will always score over traditional safe avenues like FDs?

Every one of us understands Bank FDs and maybe even Corporate FDs. But most of us have no idea about Debt Mutual Funds (MFs) which also operate in the safe investing space while giving you a host of advantages which any FD can never hope to give.

Flexibility of Investing. In FDs, you have to commit a certain amount of money for a certain period of time, with any premature withdrawal attracting penalty, and in case your requirement has got pushed further due to any reason, you have to do another FD taking a call again on how much period of FD to be done.

Debt MFs are ‘unfixed’ FDs – you can start with any amount more than Rs 5000, add in any amount on a regular or irregular basis, take out any amount of your money any time in as many installments as you want which will not attract any penalty (except for a small initial period) or continue your investment for as long as you wish.

Continuously Adjusted Returns. The returns of the Debt MFs continuously adjust as per the interest rates. Eg, if you take a FD for 5 years now, you are stuck with today’s low interest rates for 5 years. In case of Debt MFs, the returns keep adjusting as the interest rates keep rising, if you have chosen the correct Debt MF category.

Huge Tax Advantage + No TDS. If you hold on to your Debt MFs for more than just 3 years, your taxation rate comes down to just about 1/5th or even lesser, if you had the same money in a FD. Another sweetener – as long as you do not take out any money, there is Zero tax, unlike the FDs where tax will have to be paid every year compulsorily whether your FD matures or not. Also, there is no concept of TDS (Tax Deduction at Source) in Debt MFs for Indian citizens.

Transparency. In Debt MF portfolio, you can easily know where your money is invested with just a few mouse clicks. In FDs, you will never ever come to know that.

Debt MFs are great source for a tax-efficient Pension. Using the Systematic Withdrawal Plan (SWP), you can get an additional pension in debt MFs whenever you want of an amount of your choosing, frequency of your choosing, starting time of your choosing and for the duration that you want. And while doing this, it saves you a huge amount of tax compared to ANY other avenue which gives you pension.
(Contributed by Vishakha Rohilla, Financial Planner, Team Prithvi of Hum Fauji Initiatives)

International Investing – Should You Look Beyond India?

If you’re one of those people who like to examine every bit of merchandise across a dozen retail stores before putting your money on a single shirt, then the ‘wider canvas’ argument on international investing will apply to you.

India has a listed universe of 5000-odd stocks, but its market capitalisation (value of shares transacted in stock markets) of $2.1 trillion accounts for barely 3% of the total capitalisation of global stock markets. This suggests that there’s 97% of the equity canvas waiting for you, if you look beyond India. Many globally large companies do not have a representation in the Indian listed universe either. Think of Coca Cola, Starbucks, Apple, Boeing, electronics giants like Samsung and Sony, ecommerce like Amazon and Alibaba, and many more.

There are no parallels of such companies in India. So, if your investment philosophy is all about owning the best-in-class firms in a sector, international investing will make sense for you. Also remember that there’s a bull market on in some part of the world all the time – prudent international investing will make those opportunities available to you.

Global diversification may allow you to hunt for better value among global stocks, when Indian markets are in super-heated mode or specific sectors have been bid up to fancy valuations.

However, please do not forget that ultimately, even in international equity investing, you are investing in stock markets somewhere. And stock markets, especially of foreign lands, whose metrics we understand lesser then the Indian markets, are always subject to those markets’ risks.
(Contributed by Lakshay Gupta, Financial Planner, Team Prithvi of Hum Fauji Initiatives)

Reviving the noble Indian Culture of दान

We had posted this in our Cocktail Samosas last week too but did not find too many people responding on this or asking us many questions. So, repeating it since we feel this is the aspect which does the most ‘wealth creation’ for us.

India and Indians have an old tradition of helping others – the needy, the under-privileged, the destitute – in whatever small or big way that each could. Before the English word ‘Charity’ became more popular, which somehow conveys a feeling of the giver doing a favour to the receiver, the Indian system of ‘Daan’ (दान) implied that the giving is for enriching ownself – purifying the soul, body and the universe.

Unfortunately, with the passage of time, this tradition got forgotten somewhere, deteriorating the noble financial planning culture that our ancestors used to follow.

COVID-19 has flooded the media with countless stories of common people like each one of us reviving this tradition. It has also been a wakeup call for financial planners like us too who were somehow just focused on helping the investors achieve their material goals (education, marriage of children, making a house, vacations, post-retirement life etc) only, forgetting the larger being that a human is supposed to be.

Being your holistic financial planner, we now recommend you to introduce at least ONE additional SIP (5% – 10% of monthly savings) as the Humanity SIP in your portfolio to convert your wealth creation journey into a Soul-enriching journey too. Annual accumulation through this Humanity SIP can be withdrawn and donated to an NGO, Charitable Trust or social cause of your choosing. Alternatively, you can continue your Humanity SIP along with other SIPs for longer periods and take it out to donate when you wish to or plan its proper utilization later, even including it in your Will.  When donated, it can also provide you a tax deduction under Income Tax section 80G too.

Looking forward to your positive response on this aspect so that the Soul journey can also be started along with wealth creation journey…

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