Investment Advisory Services
Long Term Investment Options:-
MUTUAL FUNDS/ULIP/NPS/PPF/SUKANYA SAMRIDHI SCHEME
1. Mutual Funds: - Brief Overview:- A Mutual Fund is a pool of funds collected from certain individual and non-individual investors. This pool of money is then invested by experienced fund managers in various market linked securities like shares, bonds, debentures or even govt securities etc. Who are the Fund Managers? Mutual Fund Managers are the persons who actively manages the money of investors. They are the ones who takes the decision about when to invest in a certain security and when to sell it off. The Inflation Impact on your Money: - Investment in Mutual Funds is a must to negate the impact of Inflation on your money since mutual funds can easily provide returns more than the rate of inflation, provided we stay invested in mutual funds for long term (say 7-10 years minimum). In simple terms Inflation reduces the value of money. And only a good investment providing returns superior than the rate of inflation can counter this negative impact on money. Various Modes of Investment in Mutual Funds: - One can either Invest in mutual funds either via lumpsum or through an SIP mode. Lumpsum: - Lumpsum investment simply means investing your entire available amount in one go. This type of investment is better suited for persons who have high risk taking capacity and who have received a large amount of money either through a property sale or an unexpected large bonus or money received on retirement etc. SIP (Systematic Investment Plan): - It simply means investing your money at a fixed regular interval like monthly or quarterly basis. Investing through SIP mode is less risky as compared to lumpsum investment and it also provides the benefit of averaging out the cost of purchase of the units of mutual funds since an investor under this mode invests his/her money on a fixed date every month. So, the money gets invested in both rising and falling markets. Risks associated with Investment in Mutual Funds:- Investment in mutual funds are always subject to some market risks. Although, the risk of capital erosion due to steep falls in share market gets reduced to a great extent since the money gets invested in falling markets as well as when the markets are on the rise. Further, the risk gets reduced, if one stays invested in mutual funds for longer durations (say 10 years or more). How do I choose mutual fund schemes for Investment:- There are as many as 44 AMFI (Association of Mutual Funds in India) registered fund houses in India which all together offers more than 2500 mutual fund schemes. These schemes are further categorized under Debt, Equity, Hybrid, Large Cap, Mid Cap, Small Cap etc. So selection of a good mutual fund scheme becomes very important. And it is very hard for a new investor to select the best suited mutual fund scheme himself. This is where RIFTCS as investment advisors come in to the picture. We are AMFI registered Mutual Fund Distributor vide ARN Code-233350.There are certain things to be kept in mind before finalizing the schemes for investment. An analysis needs to be done in respect of every individual investor regarding the specific needs and goals. Based on the requirements of the investor, our expert team at RIFTCS finds out the schemes best suited for you.
ELSS Vs Non Tax Saving Schemes & Lock In Period:- ELSS means Equity Linked Saving Schemes. ELSS funds are the ones that invests at least 65% or more of the money in Equity. ELSS also provides the benefit of tax saving up to Rs 1.5 Lakhs under section 80C of the Income Tax Act, 1961. There is a Lock in period of 3 years if one invests in ELSS. It is the time during which the investor cannot sell/redeem his/her mutual fund units. Non tax saving schemes doesn’t provide any tax benefits but on the other hand they don’t have any lock in period either. So, one can withdraw his/her funds at any point of time. The funds gets credited in the account within 2-3 working days from the date of sale/redemption of mutual fund units.
Direct Vs Indirect Investments in Mutual Funds:- Direct Mode:- One can invest directly by visiting and registering themselves on the website of various mutual fund houses. Direct Investment under mutual funds is for those persons who have prior conceptual knowledge about mutual funds. Direct Investments can also help you save on the extra cost in the form of commissions which are paid if invested through intermediaries (i.e. indirect mode). Indirect Mode:- For people who doesn’t possess the prior knowledge of mutual funds, its always advisable to hire a professional to guide you through various steps involved in the investment process like creation of your mutual fund account, linking of your bank account for direct debit under SIP, KYC for Mutual Funds needs to be done, selecting the best suited and top performing mutual fund schemes and last but not the least, the professional advisor will also keep you updated about the performance of your mutual fund investments from time to time and in case any scheme is underperforming then he will also help you change the schemes. He will also guide you in withdrawing your funds in case of any urgent need. All this comes at a cost of less than 1% per annum of your mutual fund value.
2. ULIP: - ULIP stands for Unit Linked Insurance Plan. The characteristics of a ULIP are very much similar to that of Mutual Funds except for some additional features. ULIP’s provides the benefits of insurance cover along with the market linked returns. ULIP’s comes with a lock in period of 5 years as compared to 3 years under mutual funds. Although a ULIP provides the dual benefits of insurance cover and market linked returns but a ULIP also attracts various additional charges like Policy administration charges, Premium allocation charges, fund management charges and mortality charges etc., which ultimately reduces the net amount invested in markets and that results in lower returns when compared with returns under mutual funds schemes. Similar to Mutual Funds, ULIP’s also provides the tax benefits under section 80C upto a maximum of Rs 1.5 Lakhs.
3. NPS (National Pension Scheme) NPS is a government scheme to provide financial security after retirement to all the citizens of India. Anyone between the age of 18-60 years can invest in this scheme. Account opening under NPS is very simple, PRAN (Permanent Retirement Account Number) is provided to the person opening an NPS Account. Investment under NPS is done via Tier-I account and Tier-II account. Amount invested under Tier-I account is non withdrawable until the age of retirement. However, investments done under Tier-II account is withdrawable as per the needs of the subscriber whenever it is required. NPS Account can be opened either with any of the nationalized banks or even via online mode through the eNPS portal. Further additional contributions under NPS can also be made by online transfers from your savings accounts. Tax Benefits under NPS:- Investment under NPS provides tax benefits to the extent of Rs 50,000 per annum under section 80CCD over and above the deductions available under section 80C amounting to Rs 1.5 Lakhs.
4. PPF/Sukanya Samriddhi Yojna PPF (Public Provident Fund) is a very old scheme from govt which provides fixed investment returns at a rate specified by the govt itself. It also provides tax benefits under section 80C up to a maximum of Rs 1.5 Lakhs. Even the Interest earned on PPF account is tax exempt under section 10(12). Investments done under PPF account are locked in for a period of 15 years. However, one can make partial withdrawls from PPF account after the completion of 5 years subject to certain conditions. Minimum and maximum investments under PPF is Rs 500 and Rs 1.5 Lakhs respectively. Sukanya Samriddhi Yojna was launched in the year 2015 for securing the future of a girl child. This account can be opened by the parents of the girl child below 10 years of age. Investments under this scheme provides fixed returns just like under PPF. It also provides tax benefits under section 80C up to Rs 1.5 Lakhs. Minimum and maximum amounts to be invested under this scheme is Rs 250 and Rs 1.5 Lakhs per annum. This account can be opened for a maximum of two girl child.
Investment in Gold ETF Buying gold has been a very old and traditional method of investment. But buying and storing physical gold was always a cumbersome process. It even had the security risks associated with it as there was always a risk of theft. However, investing in gold through the ETF mode is not only cheaper but less risky as compared to physical gold. Gold ETF can be bought and sold in open market through stock exchanges at any point of time hence providing the required liquidity. It can be purchased through online mode and be stored in the Demat Account of the investor. The most important feature of buying Gold ETF is that you don’t need to spend huge chunk of money to buy gold. You can decide the exact quantity to wish to buy Gold ETF.
Real Estate Investment Real Estate Investments are generally for persons who have a good amount of starting capital available with them. Since investing in real estate normally requires a large lumpsum amount to start with. Real Estate Investment can be a good source of passive income. One can invest in residential or commercial properties to earn regular rental income along with capital appreciation of the property in the long run. Location of the property can be the deciding factor as to how much rentals you can earn from a property. Sometimes it can be a good strategic decision to buy property from tax saving point of view also. Since interest on housing loan taken for purchase or construction is allowed as deduction under the Income Tax Act, 1961 up to a maximum of Rs 2 Lakhs per annum. Major disadvantage of investing in Real Estate is the liquidity problem, as you may not be able to sell your property in time of need, if the market conditions are not favourable and Even if u r able to crack a good deal to sell the property, you may not get the complete credit of funds immediately since it normally takes around 1-3 months’ time for the whole selling process to complete. Sale of Property whether residential or commercial also attracts capital gain tax (Short term or Long term depending up on the holding period). There is also TDS on sale of property @ 1% if the value of sales consideration exceeds Rs 50 Lakhs.