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Unlock Your Financial Potential: Explore the Top 6 Hybrid Funds Now
Hybrid mutual funds are the type of mutual fund scheme that invests in two or more asset classes, i.e., equity, debt, and other asset class, depending upon the fund’s objective.
This helps the fund manager to diversify the portfolio not only among the sectors but also among different asset classes.
Hybrid funds are subdivided into different categories, i.e., based on equity-debt allocation, based on solutions, and others.
- Aggressive Allocation: The fund has the flexibility to invest 65-80% in equity & equity-related instruments and 20-35% in debt instruments.
- Balanced Hybrid: The fund has the flexibility to invest 40-60% in equity and equity-related instruments and 40-60% in debt instruments.
- Conservative Allocation: The fund can invest 10-25% in equity & equity-related instruments and 75-90% in debt instruments
Types of Hybrid Funds
Hybrid funds come in various types based on their asset allocation:
- Equity-oriented Hybrid Funds: These allocate 65% or more to equity and the rest to debt and money market instruments.
- Debt-oriented Hybrid Funds: They invest at least 60% in fixed-income securities and the remainder in equity.
- Balanced Funds: With a minimum of 65% in equity and the rest in debt, they offer tax benefits on long-term capital gains.
- Monthly Income Plans: These primarily invest in fixed income, with a small portion in equity, providing regular income to investors.
- Arbitrage Funds: These seek arbitrage opportunities by buying low and selling high, switching to debt when opportunities are scarce. They have a tax treatment similar to equity funds.
Each type serves different investment goals, offering a range of risk and return profiles.
Benefits of hybrid funds
Hybrid funds offer several advantages:
- Simplified Diversification: They provide access to multiple asset categories within a single fund, reducing the need for multiple investments.
- Active Risk Management: Hybrid funds actively manage risk through diversification and asset allocation, investing in non-correlated assets like equity and debt.
- Enhanced Diversification: They diversify across various asset classes and sub-classes, such as different stock types and growth/value stocks, boosting portfolio diversification.
- Risk Catering: Hybrid funds cater to various risk profiles, accommodating conservative, moderate, and aggressive investors.
- Multi-Asset Class Exposure: Hybrid funds provide multi-asset allocation to the portfolio by investing in equity, debt, and other asset classes.
- Actively Managed: All the hybrid funds are actively managed by professional fund managers. So, as per the market condition, the fund manager has the flexibility to change the fund’s allocation.
Top 6 hybrid funds
| S.No. | Fund Name | 3-Yr Annualized Performance |
| 1 | Quant Absolute Fund Growth Option Direct Plan | 28.29 % |
| 2 | Bank of India Mid & Small Cap Equity & Debt Fund Direct-Growth | 25.71 % |
| 3 | Edelweiss Balanced Advantage Fund Direct Plan-Growth | 16.37 % |
| 4 | Baroda BNP Paribas Balanced Advantage Fund Direct-Growth | 16.05 % |
| 5 | Bank of India Conservative Hybrid Fund Direct-Growth | 14.74 % |
| 6 | Kotak Debt Hybrid Direct Growth | 12.17 % |
Source: Morningstar
1. Quant Mutual Fund
Fund analysis:
The fund has the flexibility to invest 65-80% in equity & equity-related instruments and 20-35% in debt instruments. The risk grade is above average, and the returns grade is high.
The fund has given consistent performance over different trailing period returns. The fund has outperformed the category average over the period. It has invested in equity and debt securities.
| Pros | Cons |
| Fund has outperformed the category average with good margins. Attractive risk-to-reward ratio. | Low Assets Under Management. |
2. Bank of India Mutual Fund
Fund analysis:
The fund’s objective is to provide capital appreciation and income distribution to investors from a portfolio constituting mid and small-cap equity and equity-related securities as well as fixed-income securities.
The fund holds major holdings in mid-cap companies and the cyclical sector holds 62.84% weightage followed by sensitive 20.52% and defensive 16.64%. The risk grade is high, and the returns grade is also high.
| Pros | Cons |
| High growth potential. Invested in AAA quality bonds. | High expense ratio. |
3. Edelweiss Mutual Fund
Fund analysis:
The fund’s objective is to generate capital appreciation with relatively lower volatility over a longer tenure of time. The Scheme will accordingly invest in equities, arbitrage opportunities, derivative strategies on the one hand, and debt and money market.
instruments on the other. The Scheme may also invest in Infrastructure Investment Trusts and Real Estate Investment Trusts. The fund has outperformed the category average over the long-term period.
The fund has a well-diversified portfolio of 113 equity holdings and 14 bond holdings. The risk grade is average and the returns grade is high. The fund has the flexibility to invest 0-100% in equity instruments and 0-100% in debt instruments.
| Pros | Cons |
| Fund has outperformed the category average with good margins. Fund has invested in both value & growth stocks along with AAA-rated bonds in the debt category. | Fund has underperformed the category average over 3-Months & 6-Months trailing returns. |
4. Baroda BNP Paribas Mutual Fund
Fund analysis:
The fund has the flexibility to invest 0-100% in equity instruments and 0-100% in debt instruments. The risk grade is average, and the returns grade is high.
The fund has a well-diversified portfolio of value & growth stocks and has invested across sectors. In the debt market, the fund has invested majorly in aaa-rated bonds and money market instruments.
| Pros | Cons |
| 5-star rated by Morningstar. The risk grade is average, and the returns grade is high. | Fund has underperformed the category average over 3-Months & 6-Months trailing returns. |
5. Bank of India Mutual Fund
Fund analysis:
The fund can invest 10-25% in equity & equity-related instruments and 75-90% in debt instruments. The risk grade is high, and the returns grade is also high.
The fund has a blended style of investing, indicating both value & growth stocks. The fund has invested across sectors and AAA-rated bonds.
The fund has 23.99% in equity, 50.20% in bonds, and 25.81% in cash & money market instruments.
| Pros | Cons |
| Fund has outperformed the category average over different trailing period returns. The fund has captured the market well when it was falling & rising, better than the category average. | High expense ratio. |
6. Kotak Mutual Fund
Fund analysis:
The fund’s focus is to provide regular income by investing in debt instruments, along with some exposure to equity & equity-related instruments to enhance returns.
The fund may also invest in derivatives to hedge the position. The risk grade is average and the returns grade is high.
The has given a consistent performance over the period and has also outperformed the category average by good margins. The fund has invested 24.88% in equity, 66.94% in bonds, and 8.18% in cash & money market instruments.
| Pros | Cons |
| Consistent performance. The fund captured the market well when it was falling & rising, better than the category average. | Fund has underperformed the category average over 6-Months trailing returns. |
How do hybrid funds work?
Hybrid funds invest in both equity and debt. While equity has the potential to generate high returns, it comes with high risk. On the other hand, debt is a fixed-income instrument with low risk and returns.
So, in hybrid, you can see a fund with moderate risk and return due to the availability of both asset classes. A hybrid fund gives you both asset classes in a single product.
Equity provides long-term gain, whereas debt provides short-term stability or regular income.
Boost Your Financial Liquidity: Dive into the Top 6 Liquid Mutual Funds
Who should invest in hybrid funds?
A hybrid fund is perfect for:
- First-time investors – Investors are looking for stability like fixed deposits and fear the risk of volatility over the short term. Hybrid funds give a good entry point to the equity market.
- Investors with a 3-5 years horizon – For any medium-term goal like buying a car, school fees, etc., hybrid funds can be a good option as returns generated are relatively less volatile.
- Retired Investors: Investors who have retired can look to generate regular income with the help of hybrid funds and their unique asset allocation.
- Short-term investors – Arbitrage funds provide a good option for investors looking to park money in volatile market conditions.
Taxation
1. Equity-Oriented Schemes – A fund with a minimum of 65% in equity or equity-related instruments is treated as equity funds for taxation. Arbitrage funds are also classified as equity funds for tax purposes. For equity, the taxation is as below -.
- Long-Term Capital Gains: If held for more than a year, it is known as long-term capital gains and comes with a 10% tax over Rs 1 Lakh gains which is tax-free.
- Short-Term Capital Gains: If held for less than a year, it is known as short-term capital gains and comes with a 15% tax
2. Other Schemes:
- Long-Term Capital Gains: If held for more than three years, it is known as long-term capital gains and comes with a 20% tax with an indexation benefit.
- Short-Term Capital Gains: If held for less than three years, it is known as short-term capital gains. Gains will be added to the investor’s income and taxed as per their tax slab.
Conclusion:
Investors should consider hybrid funds as part of their portfolios. As they can provide you attractive risk-to-reward ratio along with low volatility.
FAQs
Is it good to invest in hybrid funds?
Hybrid mutual funds are the type of mutual fund scheme that invests in two or more asset classes, i.e., equity, debt, and other asset class, depending upon the fund’s objective.
This helps the fund manager to diversify the portfolio not only among the sectors but also among different asset classes.
What is a hybrid fund example?
Some hybrid fund examples are:
Quant Absolute Fund Growth Option Direct Plan
Bank of India Mid & Small Cap Equity & Debt Fund Direct-Growth
Edelweiss Balanced Advantage Fund Direct Plan-Growth
Is a hybrid fund better than equity?
Hybrid funds are the best of both worlds – equity and debt funds! Investors who are willing to take moderate risks and gain high returns can consider this type of fund after consulting an investment advisor.
Are hybrid mutual funds safe?
Hybrid funds are safer than equity funds and less risky.
Disclaimer:
This is not recommendation advice, use it for educational purposes only. Mutual Fund investments are subject to market risks, read all scheme-related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes
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4 essential tips on investing in your child's education
Life becomes easier and more manageable with planning. A very important part of a happy and balanced life is managing your finances well. This responsibility becomes manifold if you have a family to provide for. Prioritizing the prior planning of your child’s college education can make your retirement life effortless and stress-free. Put away savings to preserve wealth. Invest money to generate more wealth. At the end of the day, gaining that fine balance between your savings, investments, and spending habits is what will secure a beautiful future for you as well as your family. Here are some pro tips on how to invest and save for your children’s college education. 1. When to start? Timing is everything. The logic is simple - the earlier you start, the more wealth you can generate and accumulate. You may begin as early as the family planning stage itself. Even if you do not have a clear sight of the stream of academics your child might pursue later in life, it does not hurt to put away money. As your child grows up, they might decide upon what line of academics they want depending on their career goals. Your savings will come in handy in reassuring your child that you are perfectly prepared to back them in realizing their dreams as there will already be a considerable amount of funds they can count on. 2. Compartmentalise your savings The habit of saving money regularly is one of the healthiest habits one can inculcate. But mastering the art of saving requires self-regulation and a sense of organization. Putting away a bulk of money indiscriminately is not the most effective way of saving. Keep track of your expenses and your income; device upon an amount you can afford to put away as savings. Make a list of all the things you need to save for - emergencies, education, health, housing, and so on. Divide your savings accordingly. The act of compartmentalizing savings can also be effective in regulating your spending habits. You can also inculcate this healthy habit in your child from an early age by encouraging them to save money from their monthly allowances. 3. Consider different investment options Investing is always an improvement upon saving because investments can generate new wealth. Thus, it is not enough to just put away money as savings; you also need to allocate funds to certain investments that suit your monetary goals. There are different kinds of investment channels you can opt for. Some of us prefer fixed or recurring deposits while others want to generate more returns and go for mutual funds. Mutual funds can be of different types depending on the factors like the amount of risk, duration, return rates, etc. The mode of payment can also vary. For example, you can go for a one-time investment or you can choose monthly SIPs. Be well aware of all kinds of investment plans available so that you can choose the best one for yourself. 4. Invest in a global education Your savings and money made from investments will be especially useful when you send your child abroad to pursue a college education. Even if you are not sure about the possibility of global education in the future, it is always advisable to remain prepared for the same. Simply saving money is not enough. Investing is a better idea and in the case of global education, it can be beneficial to invest in foreign stocks. This is because the value of the Indian currency is forecasted to fall in comparison to other stable currencies in the world. This means that the cost of living and studying abroad will be way higher than the cost of living and studying in a new city within India. Once you set your financial goals, find out about investment schemes with international equity funds from countries like the US, so that you can make money in a more stable currency. Conclusion There can be several investment goals relating to different parts of your life like yourself, your spouse, relatives, housing and accommodation, health, gadgets, and emergencies. Mixing these up will only cause chaos and distress. Hence, it is important to think separately about saving for your children’s college education and indulge in smart investments. Consult an expert advisor to get the right plan TALK TO AN EXPERT
4 W’s of Balanced Advantage Funds
What is a Balanced Advantage Fund? A balanced advantage fund is a fund that can invest 0-100% in the equity market or 0-100% in the debt market dynamically as per the prevailing market condition. For example - If a fund manager finds that the price of the equity market has gone up, he will tilt the portfolio more toward the debt market. Likewise, if the equity market trades at a discount, then the fund manager can tilt/shift the portfolio toward the equity market. The valuation is the internal process of the fund. Based on valuation, the fund manager can take the call. This way, the fund manager can take the opportunity and change the asset allocation. The fund manager can go aggressive in the equity market or can also decide to play conservatively to reduce the portfolio's volatility. The aim is to minimize the portfolio's downside risk and maximize the returns. Who should invest? Investors who are looking for long-term wealth creation. Investors who are not comfortable with the market volatility. Investors who do not want to face high volatility and looking for equity-like returns. Investors who are unsure which type of fund they should invest in, whether in the equity or debt-oriented fund. Risk-averse equity investors with an investment horizon of more than three years. Additional read: Financial mistakes to avoid Why should you invest? A balanced advantage fund is a dynamically rebalancing fund between two asset classes, i.e. equity and debt. It has the complete flexibility of rebalancing from 0-100% in both asset classes. It provides you with better risk-adjusted returns. It manages the equity market volatility and provides stability in the portfolio by diversifying the portfolio into the debt market. It offers you equity-like returns, which help your portfolio to grow at a much faster rate than debt funds and also helps you to beat inflation. Minimizes the downside risk and provides scope for growth by investing in the equity market. When should you invest? When the volatility in the equity market increases you do not want to have such high exposure to the prevailing volatility. When you want equity-like returns but do not want to face high liquidity. First-time mutual fund investor looking for long-term wealth creation. Conclusion Try to allocate some portion of your portfolio towards a balanced advantage fund if you want to reduce the portfolio's volatility. A balanced advantage fund is like a season fund. FAQs What is a Balanced Advantage Fund? A Balanced Advantage Fund can dynamically invest 0-100% in either the equity or debt market, depending on market conditions. Who should consider investing in Balanced Advantage Funds? Investors seeking long-term wealth creation, those uncomfortable with market volatility, and those unsure about equity or debt-oriented funds can benefit. Why invest in Balanced Advantage Funds? These funds offer flexible asset allocation, better risk-adjusted returns, and stability by diversifying into the debt market. They provide equity-like returns, growth potential, and risk mitigation. When is the ideal time to invest in Balanced Advantage Funds? Consider these funds when equity market volatility increases, and you want equity-like returns without excessive risk. What is the aim of Balanced Advantage Funds? The aim is to minimize portfolio downside risk, maximize returns, and adapt to market conditions, providing both stability and growth.
5 financial things to consider before child planning.
Both life and wallet will never be the same once you decide to have a baby. No event in your life will signify financial change quite the way this one does, from the first prenatal appointment to the day of college graduation (and beyond). 5 financial things to consider before child planning 1. Create a budget Before you start child planning, you need to have a budget in place. You and your partner may need to create a realistic budget based on your expenses and your streams of income. Once you know how much you can afford to spend, you will be able to tackle the costs easily. A new child is a new family member that needs space! So if you need extra space once the baby is born, figure out what kind of home you can afford, whether it's a slightly larger apartment, a warm cottage, or a pricey house. Will you want the latest baby things or your sister’s passed-on ones? Think about what sort of child care would you require and get candid with your expenses before you start making any purchases. Money Management Tips for Homemakers Read More 2. Costs associated with birth As new parents, you need prenatal vitamins, alternative therapies, labor and delivery alternatives, and screening tests. Give yourself enough time to change or upgrade insurance plans should you need more comprehensive coverage. Good health insurance is vital in this economy. Hospital bills, medical fees, and maternity costs can be high. According to estimates from the industry, a straightforward delivery could cost between Rs 50,000 and Rs 70,000, but a private specialty hospital could charge up to Rs 2-3 lakh. A cesarean delivery could result in a cost rise of up to Rs 4-5 lakh. Before having a kid, you should make financial arrangements for the costs associated with the delivery and child care. 3. Consider maternity leave The vast majority of Indian employees are not entitled to paid family leave. If the mother is employed, you might need to think about taking a lengthier (unpaid) maternity leave or a sabbatical for a year or two. This can be a huge financial loss for families that rely on both streams of income. Paid parental leave is not always an option. Find out if your workplace offers paid leave for new parents and if there are any policies in your favor that you can utilize. Determine the number of weeks covered and the proportion of your salary that is used. Do you have to use your sick and vacation days first? If you don't have access to paid time off or you're going to take more unpaid time off, you might want to cut costs or rely on your savings. 4. Purchase life and health insurance You'll want your child to be stable financially if something were to happen to you or your partner. A life insurance policy can assist in paying for things like child care, housekeeping, cooking, and more. Purchasing maternity insurance is the first action you can take to cover maternity costs. When purchasing health insurance, (even for a couple), it is important to confirm that the policy includes coverage for maternity costs and, if applicable, any applicable waiting periods. Additionally, by paying a larger rate, you might add pregnancy coverage to a current insurance policy. Buying health insurance is most important when considering having a child. Get your health covered in your plan so that you are not financially burdened in case of a health emergency. 5. Plan for the child’s education Just like the prices of lemons and oranges are growing, the cost of education is skyrocketing. Saving for your child’s college is a necessity. When it comes to saving money for college, time and compound interest are your best friends. Even while inflation is an unavoidable fact, keep in mind that education inflation is far higher. Utilizing the force of compounding is one approach to combat this, but it will only be effective if you have a long-term strategy in place. You indeed have no idea what career path your child will take, but you still need to put aside a portion of capital that can be utilized when the time comes. Right now, you need to think about the type of education you would like to offer because the practical costs of studying engineering in India vs. the US would be very different. From giving birth to seeing them off to college, watching your child grow and thrive is every parent’s dream! So give those dreams wings by planning ahead and investing for their bright future! TALK TO AN EXPERT
5 investment plans every parent should have
As parents, we have a profound responsibility to ensure a bright and secure future for our children. While providing love, care, and education are crucial aspects, financial planning plays a pivotal role in setting the stage for their success. Investing wisely is key to securing their future aspirations and safeguarding against unforeseen circumstances. Let's explore five essential investment plans that every parent should consider, ranging from mutual funds and US ETFs to US stocks and insurance. So, we will dive in and discover the strategies that can pave the way for your child's financial well-being. Education Fund: The Power of Mutual Funds One of the most crucial investments you can make as a parent is in your children's education. Start by setting up an education fund that specifically caters to their academic pursuits. Consider tax-efficient options like a 529 plan, which allows you to invest in a variety of mutual funds, ensuring growth potential while enjoying tax benefits. Platforms like EduFund (www.edufund.in) offer valuable guidance and tools to help you plan and manage your child's education fund effectively. investment plans US ETFs: Diversification Made Easy 1. Exchange Traded Funds Exchange-Traded Funds (ETFs) have gained significant popularity in recent years due to their flexibility and global exposure. Just like mutual funds, ETFs represent a basket of securities, including stocks, bonds, commodities, or a combination thereof. However, unlike mutual funds, ETFs are traded on stock exchanges throughout the trading day at market prices. ETFs offer several benefits, including transparency, liquidity, and cost-effectiveness. Parents can buy and sell ETFs at any time during market hours, allowing for more flexibility in managing their investments. Additionally, ETFs disclose their holdings daily, ensuring transparency in the investment portfolio. With generally lower expense ratios compared to mutual funds, ETFs offer a cost-effective investment option for parents. 2. USA Stocks For parents who are comfortable with taking on more active roles in their investment journey, investing in individual stocks can be an exciting avenue. Owning shares of well-established companies can offer substantial returns over time. While investing in individual stocks requires careful research and monitoring, it can provide the potential for higher growth compared to mutual funds or ETFs. EduFund's resources can assist you in understanding stock investing basics and identifying companies with strong fundamentals. To mitigate risk, parents can consider diversifying their stock portfolios across different sectors and industries. This diversification helps reduce the impact of a single stock's performance on the overall portfolio. In addition, parents should adopt a long-term investment mindset and focus on the fundamentals of the companies they invest in rather than short-term market fluctuations. Investment Tips for Dad's in India Read More Insurance - Protecting Your Family's Future Insurance is a pivotal component of any comprehensive financial plan, especially for parents. Life insurance provides financial protection to your family in the event of your untimely demise. It ensures that your children's education, living expenses, and future aspirations are secure, even in your absence. Term life insurance offers coverage for a specified period, providing a higher coverage amount at an affordable premium. Additionally, health insurance safeguards against unexpected medical expenses, offering peace of mind during uncertain times. By securing adequate insurance coverage, parents can safeguard their family's financial well-being and ensure a secure future. Investment Tips for Mom's in India Read More Mutual Funds - Diversify and Grow Your Wealth Mutual funds are an excellent choice for parents seeking diversification in their investment portfolios. These funds pool money from several investors to invest in a variety of asset classes, including stocks, bonds, and money market instruments. Managed by professional fund managers, mutual funds allow parents to benefit from their expertise and experience in making investment decisions. By spreading investments across different sectors and markets, mutual funds help reduce the risk associated with investing in individual stocks. Parents can choose from many types of mutual funds on the basis of their risk appetite and financial goals. For those seeking stability, bond funds can offer a regular income with lower volatility. On the other hand, equity funds offer an opportunity for capital appreciation through investments in stocks. Balanced funds offer a blend of both equity and bond investments, providing a balanced risk-return profile. By investing in mutual funds, parents can access professional investment management and enjoy the benefits of diversification. You can lay a strong foundation for your family's future by incorporating these investment plans into your financial strategy. Remember that investment decisions should align with your risk tolerance, financial goals, and time horizon. It's always suggested as advice to seek guidance from financial advisors who can provide personalized advice based on your specific circumstances. Conclusion Investing wisely is an integral part of parental responsibility. By incorporating these five investment plans into your financial strategy, you can take proactive steps toward securing your child's future while also protecting your own financial well-being. Remember to conduct thorough research, seek professional advice, and regularly review your investment portfolio to adapt to changing circumstances. By combining long-term vision with disciplined investment practices, you can build a strong financial foundation for your children, allowing them to chase their dreams with confidence. Start planning today and pave the way for a prosperous future for your family. Consult an Expert Advisor
5 reasons why SIP is the best investment choice?
A systematic investment plan or SIP is the best plan that helps you invest in mutual funds on a regular basis. You can choose to invest weekly, monthly or even quarterly – the most popular choice being monthly. There are multiple reasons why SIPs are the best way to grow your money especially when you have a goal to plan – e.g. your child’s education. SIPs can be bought easily and you can start with a very low amount - Rs. 500 per month. In this blog, we will talk about the ‘Big 5 advantages’ that SIPs offer to you as a parent. But before that, let's understand what a SIP is What is SIP? A SIP or systematic investment plan is an investment mode through which an investor can create a regular mechanism of investment for themselves. Let's take the example of investor X. Investor X wishes to invest Rs. 10,000 every month in a mutual fund. In this case, investor X can create a SIP for a fund they want to invest in and the money will be deducted every month automatically (the deduction can be weekly, monthly, or even quarterly, depending on the investor's choice). Think of it as a recurring deposit, with better returns. Now that we know what a SIP is, let's get to know why investing via SIP is the best choice you can make to enlarge your corpus. CALCULATE MONTHLY SIP 5 Reasons SIP is the best These are the 5 main reasons why you should invest via a systematic investment plan to reach your financial goals 1. Suitable for Long-Term Investment Any financial advisor will tell you that if you want to invest long-term, SIP is the way to go. The reason is simple, regular investing and automatic deductions keep investors motivated to stay invested and reach their investment goals quicker. During the 2008 financial recession, many people withdrew money from mutual funds. However, the ones that remained invested via SIP, attained a huge profit once the markets rose. Long-term investing makes sure that even if the market is down at the moment, once the markets rise, the investor will make profits. 2. Goal-planning SIPs are good tools to plan for a future goal – to buy a 4-wheeler or to pay for college tuition fees maybe 10-15 years from now. When you determine the amount required to achieve your goal, you will know how much you should invest and how long it will take to reach your goal. This will help in planning effectively. Having financial goals is very important to creating a financially secure future. One must have a defined idea about what financial goal one wants to reach by the age of 30, 40, 50, and so on. 3. Effect of Compounding Compounding is one of the biggest advantages of a SIP. Over time your investments grow because you start earning returns not on your principal amount, but on the interest that keeps getting added to it. Let's take an example. Suppose you invest Rs.1,000 in a mutual fund that gives you a yearly return of 10% p.a. Your amount becomes 1,100. at the end of the first year. At the end of the second year, the rate of return is 11%, this time the returns will be calculated on Rs. 1,100 and not the principal amount, which is, Rs. 1,000. This ensures the growth of your corpus and is one of the reasons why experts advise you to not withdraw your investments when the market is down. 4. Curated by Experts With the increasing number of fund types like equity, debt, mixed, gold-based, etc. there is a wide variety to choose from based on your risk appetite and preferred investment duration. This has led to customized offerings based on individual needs, supervised by experts in the SIP domain. All you need is to specify your goal and timeline and you are provided with the best possible funds that can meet your future goals. SIPs have become popular over the past few years, because of the ease of investing and the flexibility provided in terms of the amount of money that can be invested. You can stay invested as long as you want, although average returns have been higher when invested in the long term. Research also shows that the returns offered by SIPs are more than recurring deposits in banks, in the long term. 5. Automates Your Investment Experience SIPs automate your investment experience, which makes you a regular investor. It is easy and convenient and because of the online surge, today, it is super easy to invest via SIP. If you choose the lump sum method, you will have to manually invest an amount and there may be times when you can miss an installment. With automated installments and a streamlined process, investing via SIP has now become an extremely popular method, to reach long-term goals like saving up for your child's education. FAQs Why is SIP investment good? By investing through SIPs, you will do away with the burden of timing the market as you could then avail the benefit of Rupee Cost Averaging. By investing through SIP, you will tend to invest in the up and down markets. This helps you shy away from the volatility of the market. Additionally, you will benefit from the power of compounding, which fundamentally generates returns not only on capital but also on returns. Is SIP good for students? Investing in SIP can be a huge benefit for students. It cultivates a healthy investment habit, and they can invest a small amount to start their journey. SIP is best for beginners and a comparatively safe investment vehicle. What are the features of SIP? A SIP offers the following features: It is best for long-term investment, brings financial discipline, allows small investment amounts, benefits from the power of compounding, and is a comparatively safer investment tool. Why do people prefer SIP? A systematic investment plan helps bring discipline to an individual’s investment habits. A SIP will automatically deduct a pre-decided amount periodically. Investors also do not need to worry about timing the market while investing via SIP. It is one of the best investment vehicles for beginners. Consult an expert advisor to get the right plan TALK TO AN EXPERT
5 tips to know before investing in US stocks
If you want to invest in the US stock market to benefit from US stocks, you may start by opening an international trading account in India. But before investing in US equities, here are the 5 important things to know before investing in US stocks. 1. Regulatory framework One of the oldest, most effective, transparent, and well-regulated stock markets in the world is the one in the United States. On US stock markets are listed some of the largest businesses in terms of market capitalization, sales, and profitability. The worldwide exposure and flavor that US markets offer are crucial since many of these listed firms have a significant global presence, scale, and operational structure. The regulatory body that monitors the operation of the US stock markets is the Securities and Exchange Commission (SEC), which was founded in 1934. It guarantees the strict application of laws and rules that establish the highest standards of openness and integrity—essential for stock markets as well as for the safety and trust of investors. 2. Impact of Foreign Exchange The volatility in the value of the US and other currencies should be taken into account while investing in US equities. This is because before any gain (or loss) for an Indian investment is realized, it would be converted using the appropriate exchange rate in the Indian rupee. The gains (or losses) will fluctuate in lockstep with changes in the exchange rate. An Indian investor must be aware that the exchange rate can be unpredictable and is influenced by a wide range of political, economic, and supply and demand variables. 3. Liberalized Remittance Scheme According to the Reserve Bank of India's Liberalized Remittance Scheme, an individual may invest up to $ 250000 per year in US equities from India (LRS). The cap covers any money sent abroad for purchases, travel, education, or other international transactions during the year. The investor's brokerage account has to be filled before making any investments in US equities. Investors must complete Form A-2, which is available from RBI-authorized dealers. Any sum over the $250000 cap requires RBI approval. Additional read: US stocks for investing in child education 4. Taxation To make your efforts worthwhile, it is crucial to take into account the tax consequences of your international assets. Due to the Double Tax Avoidance Agreement (DTAA) between the US and India, the same income cannot be taxed twice on investments made in the US stock market. 5. Dividend tax The dividends from US stocks are taxed at a fixed rate of 30% for overseas investors. However, as a result of the tax agreement between the US and India, citizens of India pay a 25% tax rate (deducted before distribution). However, because of the double tax avoidance agreement between the US and India, the tax paid in the US may be claimed as a foreign tax credit in your domestic filing. 6. Capital gains tax Your assets in the US are not subject to capital gains tax. However, India requires you to pay tax on your overseas capital gains. This may be divided into two groups.: Long-term capital gain (LTCG)If you keep the equities for more than 24 months before realizing capital gains, you will be subject to indexation advantages and a 20% tax rate in addition to any relevant fees and other surcharges. Short-term capital gain (STCG)Standard income-tax regulations apply to any gains from assets held for less than 24 months, and they are added to your ordinary taxable income. You must also take into account the recently implemented Tax Credited at Source or TCS. Under the new regulations, a 5% TCS will be applied to all international transfers over INR 7 Lakhs in a fiscal year. It is not an additional expenditure to deduct this advance tax when submitting your taxes each year. Charges on US stock-broking account Using an Indian stock brokerage account to invest in the US stock market is prohibited. You would need to create one with a US stock brokerage company instead. To provide this service, the majority of Indian stock brokers who allow you to invest in US equities typically collaborate with a US stockbroker. You would also be required to pay certain fees for a US stock broking account, just like you would for an Indian trading account. This is something you should also take into consideration when you buy US stocks because these fees can reduce your earnings. These fees include Annual Maintenance Costs, brokerage charges, bank charges, transaction charges, and more. Invest in the US stocks with EduFund Download the EduFund app and create an account to start investing in US stocks. With zero charges and no hassle account opening process from the comfort of your home, you can start investing in FAANG stocks in your portfolio to geographically diversify your portfolio!! Thus, investing in US firms and equities may give investors access to the worldwide market, credibility, and an opportunity to increase their wealth. Consult an expert advisor to get the right plan TALK TO AN EXPERT
5 top investments for risk-averse investors
All investments are associated with risks. Yet, the risk is not uniform, and it's essential to be aware of the different levels of risks linked with all types of investment instruments. This is why the first thing to consider before investing is how much of a risk appetite has – how much risk one is willing to take. Want to know the best investment options for risk-averse investors but still generate good returns? Continue reading this article to know more! What is risk averse? Risk-averse refers to an investor who chooses to preserve the capital over and above its potential to generate returns that are higher than the average. Risk can refer to many factors – volatility, currency, market, credit rating, etc. Risk-averse can also refer to a conservative investor. Low risk symbolizes stability in investments. A low-risk investment generates guaranteed reasonable returns, if not outstanding, above benchmark returns. But chances are near zero that the principal investment amount will be lost. Whereas a high-risk investment option may gain or lose money over time. Risk-averse investors are unwilling to accept market volatility. They prefer their investments to be highly liquid - readily available to be withdrawn. Such investors usually include old investors or retired individuals who depend on their savings for their daily expenses. Start Investing in Mutual Funds Is FD a good option for risk-averse investors? One should constantly adjust their returns against the current inflation rate. The current Fixed Deposit interest rates are 5-7% p.a. on average. But the current inflation rates are around 6-8% p.a. Give these figures a thought. The price you pay for your everyday goods and services is rising at 6-8%, whereas your FD investments are growing at only 5-7%. FDs do not increase the value of your money over time. In fact, you actually lose money or its purchasing power over time. Do you think FDs are the safest investment option? Banks defaulting on payments is rare but definitely possible. The Deposit Insurance and Credit Guarantee Corporation (DICGC) guarantees Rs. 5 lakhs per person per bank if the bank defaults. Let's not forget the liquidity part of this instrument. Fixed deposits can have a lock-in ranging from 3-5 years. Banks penalize the investors for withdrawing money before the lock-in is over. This penalty is in the form of a reduction of interest rate by a certain percentage. Download App and Start Saving for Child Education What are the best investment options for risk-averse investors? The market is filled with many investment options for investors with varying risk appetites. Let's look at some of the best investment options for risk-averse investors: 1. Short-term bond fund The best alternative for investors who do not want exposure to FDs or volatile instruments. Short-term bond funds – bond funds with low maturity and a high potential to offer better returns. Debt Funds with longer maturity are subjected to interest rate risk. But short-term bonds have a lower interest rate risk as their maturity period is much lower. 2. Municipal and Corporate Bonds State and local governments and companies usually raise money by issuing bonds to the public. Bonds offer lower risk than stocks. When a company is winding up, the bondholders are given first preference in the payment and settlement order. 3. Other debt funds Other debt funds include banking and PSU Funds, ultra-short duration funds, Dynamic Bonds, etc. You could always invest a lump sum in these debt-based mutual funds and opt for a Systematic Withdrawal Plan (SWP). This would ensure that along with the returns being generated on your investments, you would also get a monthly income from these investments. This investment option is one of the best options for older people who want a monthly income. 4. Liquid funds Invest in top-rated liquid funds to avoid loss of capital with a higher degree of safety for your primary investment. Also, when the market moves up, your investment performs better and generates higher returns in line with the market. 5. Dividend growth stocks Stocks are not as safe as cash, savings, or other debt-based instruments. But they are safer than options and futures. Dividend-paying stocks are considered safer than high-growth ones as they minimize volatility, if not eliminate it. You don't depend on the value of the stock as you get a dividend as a regular income on your investment. Apart from debt-based investments, you could also apply a staggered investment approach in equity-based mutual funds for a long-time horizon. A periodically rebalanced portfolio helps you minimize your portfolio volatility and ensures efficient capture of up-market and down-market movements even with equity exposure. Take the help of an Investment Advisor who will guide you through goal-based planning and help you choose the investments that are most suitable to your goals and objectives and your risk appetite. FAQsWhat type of investments do risk-averse investors prefer? Risk-averse investors typically prefer conservative investments with lower volatility and more predictable returns. These may include government bonds, high-quality corporate bonds, certificates of deposit (CDs), and stable dividend-paying stocks. These options aim to preserve capital while providing modest growth, aligning with the risk tolerance of such investors. What are 3 high-risk investments? Three high-risk investments include investing in individual stocks of volatile and speculative companies, trading in cryptocurrencies known for their price volatility, and investing in startups or early-stage ventures that have higher failure rates. These investments offer the potential for significant returns but also carry a substantial risk of loss. Which investment is the riskiest for investors? Investing in highly speculative and unproven assets like cryptocurrencies, especially in lesser-known or new coins, can be among the riskiest options for investors. The volatile nature of these assets can lead to substantial financial losses due to sudden price fluctuations and lack of regulation. Which investment has the highest return without risk? No investment offers guaranteed high returns without any risk. Investments with potentially higher returns often come with varying degrees of risk. While some low-risk options like government bonds or savings accounts provide stability, they usually offer lower returns. Diversification and a clear understanding of risk are important for any investment strategy. TALK TO AN EXPERT
Investing in mutual funds for your child’s education is always advisable. First of all, it is a less stressful option than investing in direct equity stocks because that requires you to have in-depth knowledge of market trends and fluctuations. Secondly, with mutual funds, there are a variety of schemes you can opt for depending on a range of factors. These factors could include the time period for which you can invest before liquidating, the amount of money you can invest, the amount you require to secure the education fund, the level of risk you can take, and so on. When it comes to building an education fund, here are the top 5 types of mutual funds you can choose from. 1. Large-cap mutual funds The defining characteristic of large-cap equity funds is the fact that these funds invest in the top 100 Indian companies that have the highest market value. Large-cap mutual funds can bring in impressive returns if you remain invested for a long period. If you are a person who wants to avoid taking very high risks with your investments and has decided to invest early for your child’s education, this is the way to go. The average returns rate has historically beaten that of Fixed Deposits and similar investment alternatives. SIP Mutual Fund Investment Read More 2. Mid-cap mutual funds Mid-cap funds invest in Indian companies that come in the next best 250 in terms of market value. These funds are for you if you are ready to take on a higher level of risk. Justifiably, the return rates also tend to get higher. One way to satiate the risk appetite of mid-cap equity funds is to let them season for at least 7-10 years. If your child is in primary or middle school, investing in such a scheme will generate a wholesome amount of wealth by the time they are ready to pursue a college education. How to track Mutual Funds? Read More 3. Equity-linked saving schemes Among the various perks of investing in mutual funds is the tax deduction benefit. Equity Linked Saving Schemes are devoted to enabling investors to save taxes, as the name also indicates. The only catch here is that it has a compulsory lock-in period of at least 3 years. The aim here is to keep you invested longer to counter the risk level. If you can spare that amount of time, then ELSS is definitely a go-to. An added benefit is the historically high level of returns. Mutual Funds to invest in Child Education Read More 4. Low-risk options There is this whole myth surrounding mutual funds that they only come with a high-risk factor. On the contrary, a debt fund is also a kind of mutual fund that comes with low risk, so much so that it remains undisturbed by market fluctuations. Debt funds are still a better option than Fixed Deposits because they can generate a higher percentage of returns. So, if you are not in favor of taking high risks, debt funds are a go-to. 5. Hybrid mutual funds If you are confused about your investment options or even hesitant about risking too much, the answer to your problems is a hybrid mutual fund. This kind of fund is a mixture of equity as well as debt. Hybrid mutual funds bring in the best of both worlds. They tend to generate good returns at low risk. FAQs What are the different types of mutual funds? Large-cap mutual funds Mid-cap mutual funds Equity-linked saving schemes Low-risk options Hybrid mutual funds Which type of MF is best? The best type of mutual fund is the Hybrid mutual fund. Which MF gives the highest return? Equity-linked mutual funds are considered the mutual funds with the highest returns. Conclusion There will be miscellaneous financial goals you will be required to set if you are a family person. One among these might be to straighten up the roadmap to your child’s academic and career aspirations. The first step is calculating your expected expenses with the help of an education cost calculator. The calculator will help you draw your investment map to fulfill your child's aspirations. The earlier you invest, the more prepared you will be to make critical decisions as the moment arrives. DisclaimerMutual funds are subject to market risks. The previous performance of a fund is no guarantee of future success. Please reach out to an expert to know more about the schemes before investing.
5 ways you can save up for your child’s education
In this blog, we will explore the best ways to save for your child's education! Education in India is viewed as a stepping stone to a good future. The race to get children into the best colleges is so keenly fought that every Indian parent can qualify for a role of an expert counselor. The “padhai karo, nahi tho achchi Naukri kaise lagegi” line is so often heard that it could very well replace the “so jao, varna gabbar aa jayega” line. The belief that a good education will provide for a good life, is entrenched in the way we think. Indian parents are willing to go to lengths to provide their children with the best education and are ready to spend as much as it takes. Many parents start saving when their child is very young, to prepare for future college-related expenses. In this blog, we will look at 5 avenues where Indian parents can consider investing their hard-earned money. 5 Best ways to save for your child's education Your child's education does not deserve to be compromised and here are some ways in which you can plan ahead and start taking small steps toward your child's college fund. Let's get started. 1. Investing in Mutual Funds We're sure you have heard of the phrase 'mutual funds' Sahi hai! And when it comes to saving up for long-term investments, mutual funds definitely Sahi hai! Investing in mutual funds as a way to build a corpus fund for a particular goal has gained a lot of interest in the past decade or so. Building a retirement fund or a home purchase fund is very common and a small percentage of investors are also parents keen on saving up for their child’s education. Investing in mutual funds is viewed as a potentially high-return investment with the risk involved since the returns on mutual funds are market-related. Markets have been extremely volatile in the recent past, but mutual funds should still form a large part of an education fund, considering the longer time horizon involved. It is possible to invest as per your risk preference and redemption is far easier when you need the money. With Systematic Investment Plans (SIPs) that give you the option of investing monthly, there is a possibility of better returns compared to one-time/lumpsum investment mutual funds, especially over longer investment periods. INVEST IN MUTUAL FUNDS 2. Exchange Traded Funds (ETFs) For those of you who are unfamiliar with the concept of ETF, it is basically a basket of securities that is traded on an exchange. They are similar to mutual funds. Investing in ETFs can prove to be a successful investment option when saving up for your child's education. The reason is, that you will be investing your money in dollars, therefore, if your child aspires to pursue his/ her education abroad, the dollar holds more value than many other currencies. INVEST IN ETFs 3. Buying Insurance Plans Buying an insurance plan to provide income security to your child is also an option. Many of these so-called child plans provide insurance cover and also market-linked returns after a fixed tenure. However, returns on these plans have been volatile and impacted by frequent regulatory changes. Also, child insurance policies may not be the best investment option, because they are bound by various terms and conditions. 4. Buying Real-Estate Yes, this holds true for parents trying to save up for their children even today. Real Estate is considered by many, to be a good long-term investment. Since the time horizon that parents should consider is 15-20 years, real estate investments are good to maintain a diversified portfolio. But, real estate has lost its sheen as an attractive investment option over the past decade or so, due to excess inventory and regulatory impacts. There are a number of hassles when investing in real estate. Other than the declining returns – unreliable deals, possible legal tangles, and a high wait time when one wants to sell are some of the factors to consider if this is an investment option for you. 5. Investing in PPF In India, the Public Provident Fund, or PPF is the go-to option for many parents when investing in their child’s future. It is a low-risk option that is exempt from tax on the withdrawal. The returns are lower but predictable. However, there is a limit to the amount of money one can invest through this route – the upper limit is Rs. 1,50,000, annually. PPFs are also less suited when an investor is ready to take more risk and willing to invest in market-linked funds. FAQs How can we save for children's education? Ans. Investing in mutual funds, exchange-traded funds, buying insurance plans, buying real estate, investing in PPF. What is a good educational plan? A solid educational plan will give your family and you a road map for your future educational and professional objectives. Although parents and kids are free to start as early as they'd like, planning for college and technical training at the middle school level is not too early. What is the best savings plan for a child? Ans. Sukanya Samriddhi Scheme, Make Investments in Gold, Invest in Equity Mutual Funds, Investments via Recurring Deposits. Why save for your child's education? Ans. You can avoid taking on significant debt to pay for your child's higher education by starting a savings plan early, even before they enter kindergarten. What is the right time to start saving for your child's education? The right to start saving for your child's education is as early as possible. The earlier you begin, the better it will be for your investments, as you'll be able to take advantage of the power of compounding. Conclusion We hope now you have a decent idea of what investment options you could consider, as well as the pros and cons of each. In our next post, we will look at why we think mutual funds - through SIP mode - are a good way to build a corpus fund with the goal of educating your child. With this kind of education fund, you can stop worrying about the finances that are required to send your child to the college of her dreams. Your investment today will gift your child a good life, tomorrow. Consult an expert advisor to get the right plan TALK TO AN EXPERT
