Category Archives: Finance

In the previous article, we discussed how to finance your child's education post-pandemic. In this article, we will discuss why you need to look beyond traditional investment options for your child’s education. Investment is an age-old concept. People have been investing for many years in various asset classes. Traditional investments like Fixed Deposits, government bonds, gold, silver, etc. continue to be cherished areas of investment. However, the world of finance is evolving rapidly.  People are becoming adaptable to diversity in their portfolios.  Today, personal finance is a valued concept amongst people of all age groups. The awareness about investing is increasing. The youth especially is very enthusiastic about the diversification in the world of finances. People are switching to Modern Investment options like Debt Funds, Equity Funds, Hedge Funds, etc.  But, the concept of personal finance changes dramatically if you are a parent. As a parent, your portfolio demands a strategic redesign, to accommodate your child’s requirements. To ensure that your child receives the best academic exposure, you need to plan your investment journey in advance. Both traditional and modern investments come with their own set of merits and demerits. The catch is to attain an ideal mix of both, that minimizes the risk and maximizes the return.  6 reasons to go beyond the traditional investments Wealth Generation When you are planning for your child’s education, you can not ignore education inflation. Traditional investments like fixed deposits offer a very low rate of return. They might keep your money safe, but they make little to no contribution to your wealth generation.  To meet your child’s education needs, you need to look beyond these investments. There is no dearth of investment opportunities in the market today. Based on your risk appetite, you can consider investing in equity funds, debt funds, bonds, etc. These investment options will allow you to grow your money substantially. Moreover,  playing long-term reaps the most out of compounding. Just remember, making money will not help you generate wealth, managing your money will. Diversifying your portfolio helps! Risk Mitigation Going beyond traditional investment can help you mitigate the risk of uncertainty. You can not anticipate what will happen with the economy tomorrow. Neither can you foresee its impact on your assets,  Can you?  But, you can always plan for the uncertainties and make room for damage control. Distributing your money into various asset classes instead of one would help mitigate the risk of uncertainty.  Inflation adjustment Inflation is a real threat to your investments, especially the traditional ones like fixed deposits. If you are someone hoping to see your money double over the period through fixed deposits, it is time for a reality check! Fixed deposits offer a very low rate of return somewhere between 7-8%. Whereas, the Inflation rate in India is recorded at 4-6% in recent years. Hence, the true inflation-adjusted return that you receive by the end can go as low as 1-2%. Now, just imagine the implications when inflation goes higher than the rate of return.  This is why it is important to have investments that can beat inflation. Modern investments like debt funds, equity funds, and hedge funds are potent to beat inflation.  Source: Pexels Diversification  If you stash all your money into one asset class, you are missing out on some wonderful opportunities. Investments come with a low-risk low-return rule. Investing only in risk-free traditional investments, unfortunately, can not suffice to fund your child’s education. Therefore, for a  higher return, you need to make room for some risk. Modern investments like Mutual Funds allow you earn good returns as per your risk appetite. Strategic diversification enables you to maximize the return of your portfolio. Professional Portfolio Management Equity is a risky but rewarding asset in the long run.  But, if you are a beginner not yet friendly with equity stocks, Mutual funds are the best way to begin. Here, you have a professional portfolio manager, who invests your money into stocks. They are skilled people well-versed with the knowledge of the stock market, taking care of your risk appetite throughout. This way, you avail the benefits of equity without risking your money in the dark spots.  Liquidity Traditional investment options like Fixed Deposits have a lock-in period. Also, the investments in these options call out a lump sum amount. So, when you put your money in an FD, you cannot withdraw your money except at a cost.  As far as your child’s education is concerned, you can not predict when and how the fund requirement arises. So, it is wiser to have some relatively liquid assets like Mutual funds in your portfolio.  Traditional Investments have been favored by Indian households for a reason. These investments offer security and assured returns With the soaring inflation, these assets are likely to fall short and force you to rely on education loans to fund your child’s education dreams. To ensure your savings are enough, looking beyond traditional investments and storing your wealth in different asset classes can help in the long run FAQs What are traditional investments in the Indian scenario? Traditional Investments are investments that offer security and assured returns. Some examples of this are land, property, fixed deposits, recurring deposits, gold, and other precious stones. What are some investment options to grow your wealth? In order to grow your wealth, you should explore equity-based investments like Mutual Funds, Stocks, and ETFs. These have the potential to beat inflation and preserve the value of your money in the long run. Why should Indians look beyond traditional investments? While traditional investments have worked in the past and are secure investments, they don't offer returns big enough to help you achieve goals like wealth creation or help you with financial goals like buying a house, sending your child abroad, and more. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Why invest early? - is a question that plagues most young adults. Many research and polls demonstrate that the sooner you invest, the better off you are. The best time to invest is during or after college when you are in your early 20s.   Investing early in life teaches you financial independence and discipline. Early investment explains the proper distinction between investing and saving.   Never consider your age to be a barrier to investing. You are never too young to do so. You will have more money in your pocket in the future if you invest a tiny bit of money from today onwards.   Investing early is advantageous because you can plan your investments and give them enough time to grow into a corpus that can meet your financial goals.   If you are a young investor looking for inspiration or wondering if it is a good idea to start investing early, here are some of the best reasons.   Reasons to start investing early 1. Save more Starting early, you will acquire the habit of saving more when you start investing at a young age. The more you invest now, the more you will receive in the future.   As a result of that cognitive process, you tend to save more by reducing unnecessary expenses on your part and investing the money you save.   2. More recovery time If you invest early, even if you lose money, you will have more time to recover your losses.   An investor who begins investing later in life, on the other hand, has less time to recuperate for his losses. As a result, if you invest earlier, money has more time to rise in value.   3. Time value of money Compounding gains arise from early investments. Money has a temporal value that increases with time. Regular savings started at a young age can pay off handsomely when it comes time to retire.   Furthermore, early investing allows you to enter the world of finance sooner. With time, your money will increase in value. You can buy items that others may not be able to afford at that age because of early investments - putting you ahead of those who would instead invest later in life.   Source: Pexels 4. Polished risk-taking ability Young investors are more capable of taking risks than older investors. Adult investors, on the whole, are conservative and desire stability.   Therefore, they reject high-risk investing opportunities. The more the risk, the greater the gain; as the old saying goes, with a tremendous risk-taking attitude, the likelihood of making substantial returns at an early age increases.   5. Not becoming a debtor Investments made young can be pretty beneficial. Whenever you need money, you will have it in surplus. You will never need to borrow money or become someone's debtor if you have enough money invested with you.   When you have money parked in the correct investment channels at the right age, you can lend it to others; that is, you can instead become a creditor.   6. Solid corpus for achieving the big dream Early-age investments enhance the probability of reaching financial stability at a very young age.   If you start your saving and investing journey at the age of 20, you will have a perfect corpus by the age of 40 to 50, and you will also have a better idea of how your investments worked out.   Post that, you will have a corpus big enough that you will be able to take care of that dream house of yours or have a good retirement life. With technology at a younger age, you invest in avenues that can give high returns.   Investment in self-research will give you confidence and help you make many bold decisions in life. So, the earlier you start, the easier it is to build wealth.  The example below shows how beneficial it is to embark on your investing journey early in life.  Example:   Ram invested Rs 2,000 per year in balanced mutual funds between the ages of 24 and 30; he earned a 12 percent after-tax return, and he continued to make 12 percent per year until he retired at age 65.   Shyam also invested Rs 2,000 per year and earned the same return, but he waited until he was 30 to start and continued to invest Rs 2,000 per year until he retired at age 65.   It is difficult to imagine at the end of the age of 65; both would end up having 10 Lakhs. But Ram had to invest only Rs 12,000 (i.e., Rs 2,000 for six years), while Shyam had to invest Rs 72,000 (Rs 2,000 for 36 years) or six times the amount that Ram invested to delay his investment by six years.   If you expect an annualized return of 18% on your investments, it means that after four years, your money will double, your investment will multiply four times in the next four years, and so on.   This shows how compounding has a significant positive impact in the later stages of the investing cycle. As a result, you must keep your money invested for longer so that the force of compounding can help you become wealthy.   There is a significant difference between investing from the age of 18 and starting to invest at the age of 28. The gap of 10 years between these two starting points will have a tremendous impact on the wealth corpus you will have at the end of your investment period.   The more you can compound interest on your investment, the faster investment will accumulate and the better off you will be when you retire and start enjoying your savings. So early investments in your career will help you build a secure future.  FAQs Why is it beneficial to start saving and investing early on in life? Save more More recovery time Time value of money Polished risk-taking ability Not becoming a debtor Solid corpus for achieving the big dream Why is it important to invest early on? It is important to invest early on because it is the best way to meet your financial goals on time. Investing early gives you benefits like the ability to stay invested for a long time, mitigate risk over a period of time, and even expand your investments as you grow old. Is 25 too old to start investing? No, it is not too old to start investing. You can start investing in different equities classes whenever you have the money and financial expertise to start. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

ETF investment strategy is new to India. In fact, the first successful ETF was introduced in 1993 in the United States to monitor the Standard & Poor's 500 Index (S&P 500), and it is still one of the most popular ETFs today. In India, the first ETF to track the Nifty 50 Index came to the market in 2001. ETFs are a low-cost, low-risk way to invest.  Since it tracks a specific index, such as the NIFTY 100 or S&P 500, and is passively managed. An exchange-traded fund (ETF) is similar to an index mutual fund.   However, today's market has a large number of actively managed ETFs. ETFs, unlike index funds, are marketable securities that may be bought, sold, and traded at an exchange throughout the day, just like any other corporate stock.  Benefits of investing in ETFs ETFs offer liquidity as they are tradable securities on the exchange;  ETFs are very cost-efficient compared to their mutual fund counterparts due to their structure and functioning; ETFs offer unparalleled flexibility due to traceability advantages;  ETFs offer diversification to the portfolio;  ETFs are single transaction securities; when an investor buys a mutual fund, he or she buys a basket of equities made up of small shares spread across various assets. When ETFs are bought in a single transaction, it is akin to owning a tiny portfolio it is beneficial to investors who are keeping track of their performance;  Unlike some mutual funds, ETFs do not have lock-in periods.  ETFs are tax-efficient  Passive management helps get transparent returns akin to the underlying index.   Source: Pixabay Four ETF investment methods 1. Cost-per-dollar Averaging  You acquire assets worth a specific amount of money regularly, regardless of how the asset's price changes. Even if it's a modest amount, if you're new to US investing, you should strive to save a regular amount in an ETF or a set of ETFs every month.   This aids in the development of saving discipline. The goal is to spend time in the market rather than trying to time it.  For instance, using DCA, a $200,000 investment in shares can be made over eight weeks by investing $25,000 each week in the same manner. The trades for lump-sum investing and the DCA approach are in the table below:   DCA @ $25000 per weekLumpsumWeekShare priceNo shares purchasedShare priceNo shares purchased185294852353286291  383301  481309  582305  678321  780313  882305  Total shares purchased 2437 2353Average share price82 85  The entire amount invested is $200,000, with 2,353 shares purchased as a lump-sum transaction. On the other hand, the DCA strategy purchases 2,437 shares, a differential of 84 shares worth $6,888 at the $82 average share price.   As a result, DCA can raise the number of shares purchased when the market is down and decrease the number of shares purchased when the market is up.  2. Asset Allocation  Simply put, you should not invest all your money in a single asset group. Instead, you spread it over various asset classes, such as equities, bonds, and commodities.   ETFs can assist a novice in putting together a basic portfolio allocation. The asset allocation you make should be based on your risk tolerance. When you're in your twenties, for example, stock ETFs may make up the bulk of your portfolio as you have more time on your hands.   You might choose to implement a less aggressive policy as you age and your goals change by increasing the proportion of your assets in bond ETFs.  3. Sector Strategy  ETFs are a great method to gain access to a sector that otherwise would be hard to enter. For example, the ARK Autonomous Technology & Robotics ETF can help you gain exposure to the technology and robotics sectors.   You can also invest in the ALPS Clean Energy ETF if you wish to invest in the clean energy sector. It also allows you to perform a sector rotation, in which you can earn gains from one ETF and switch to another based on economic cycles – this is especially useful in cyclical businesses.  4. Global Diversification  ETFs also allow you to diversify your portfolio regionally and in global markets other than the United States. The Invesco China Technology ETF, for example, tracks the performance of the FTSE China Incl Index.   Tencent Holdings Limited and Baidu Inc. are the firms represented in this 25% Technology Capped Index.   The iShares MSCI Japan ETF monitors the performance of an index of Japanese stocks, with Toyota Motor Corporation and Sony Group Corporation among its holdings. Investing in the United States and other countries allows you to build a global portfolio.  ETFs are a solid long-term investment alternative because they have a lesser expense ratio than active funds. Hence going with them makes the most sense. FAQs What are the benefits of investing in ETFs? Here are the benefits of investing in ETFs - ETFs offer liquidity as they are tradable securities on the exchange;  ETFs are very cost-efficient compared to their mutual fund counterparts due to their structure and functioning; ETFs offer unparalleled flexibility due to traceability advantages;  ETFs offer diversification to the portfolio; What is an ETF? An ETF stands for exchange-traded fund (ETF). One single ETF is a basket of securities that can be bought and sold like mutual funds through a brokerage firm. ETFs track a specific index such as S&P, sector, commodity, or other assets. Much like stocks, ETFs can be traded on the market. How can you invest in ETFs from India? You can invest in ETFs in India via the EduFund App. You can download the App and set up a US account to start investing. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, we discussed saving for your child's education abroad. In this article, we will discuss 3 financial goals for millennial parents. The vast majority of parents in today's society are millennials. As a result, they are influencing parenting in the future. Parents of the new generation are overcoming obstacles by viewing their wants and goals from a new perspective.   Most needs and goals must be transformed into financial goals to be funded. If the financial goals are met within the allotted time frame, these needs will be met.  Young parenthood is never simple. Our generation, the millennials, must navigate a world that is fundamentally different from the one our parents experienced.   Housing costs are out of reach, interest rates are high, and job security is nonexistent. So let's look at three financial objectives that every millennial parent should prioritize. Source: pixabay Financial Goals for Millennial Parents 1. Emergencies It is crucial to set up money for emergencies. Millennial parents should think about setting up money for unplanned expenses. For unforeseeable occurrences, parents need to set up an emergency fund.  Such circumstances make it difficult to manage one's money effectively. Unexpected events could include anything from an accident to a catastrophe. There may be several circumstances, particularly when a child is involved when parents will incur unanticipated costs.   The potential economic impact of such unexpected costs is uncertain and unpredictable. Because it provides a safety net for unforeseen financial events, a well-framed financial plan is shockproof.   An intentional and systematic approach is necessary for financial planning. Financial objectives need to be specified in terms of their time horizon for investments and the sum of money needed to achieve them.   2. Education The majority of parents believe that the biggest expense is the expense of the education of their children. You do not want to provide your child with the best education possible, but that comes at a cost.   The annual cost of college and university is rising at an unprecedented rate. You will understand how crucial it is to save when you take a short look at the cost of sending your child to study abroad.   When attempting to achieve a long-term objective like schooling - investing regularly, regardless of the amount, in securities that tend to outperform inflation is crucial.   If parents take a proactive stance and make systematic investments from a young age, they can protect their child's future. Therefore, financial planning is key to achieving a goal as important as paying for a child's education.   3. Retirement Financial freedom is the ultimate objective. The most fulfilling long-term objective for anyone is saving money for their retirement. When you are young, retirement seems far away, but you'd be shocked at how much money you'd need to put up to live comfortably once your children have flown the coop.   Saving for retirement is essential because most of us won't receive a pension as our parents did. Planning for your retirement wisely is the best gift you can give your family.  Most people think they would have to scale back on their pre-retirement lifestyle once they enter the retirement phase. However, the expenses can stay the same with the right savings plan and well-prepared retirement budget.   Although managing finances as a parent may initially appear difficult, things get simpler with time. Just be sure to prepare ahead and conduct thorough research. FAQs Can you name one of the top 3 financial goals for Millennials? The top 3 financial goals for every millennial parent are building an education fund for their children, having a robust retirement plan, and finally having an emergency fund for unfortunate times and emergencies. What do millennial parents value? Millennial parents value quality education for their children above all material things. Quality education is the gateway to better and bigger opportunities. The only way to secure these opportunities is to prepare for them in advance. For example, creating an education corpus for your child's college or encouraging your child to take the right steps towards their desired career path with extra classes or internships. Are education costs too high for millennial parents? Yes, the education costs are higher than ever before. Most millennial parents struggle to provide their children with academic opportunities due to high costs and high competition. To ensure no parent struggles with education costs, the best route is to start investing early on for your child's future. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, we discussed emerging market ETFs. In this article, we will talk about financial planning for contingencies A contingency is the possibility of future adverse events such as a recession, natural disaster, fraudulent conduct, terrorist attack, or an epidemic.   COVID-19 is the perfect example of a contingency. Businesses were devastated by the coronavirus pandemic in 2020. Some let go of employees, some required many employees to work from home while others struggled to cope with the changing economic sphere. To counter contingencies, businesses and investors must adopt some extra safety precautions. Although you can plan for the contingencies, the form and breadth of such unfavorable events are rarely known ahead of time.   Companies and investors prepare for various scenarios by analyzing risks and putting preventive measures in place.   A well-thought-out contingency plan reduces the amount of money you might lose because of an unexpected adverse event.  What is a contingency plan?   A contingency plan or a contingency fund covers your day-to-day expenses in the event of a financial emergency, such as a job loss, medical expense, or any other unpleasant condition or occurrence that results in a temporary financial loss.   Let us take an example of what a contingency fund should look like. Say X needs Rs 50,000 to meet his monthly expenses. His household expenses are Rs 15,000, his child’s tuition fee is Rs 5000, his loan EMI is Rs 20,000, and some personal expenses at Rs 5000, which add up to a total of ₹50,000.   In this scenario, X would be good to set aside some money as a contingency reserve for his necessary monthly expenses. He needs to invest that money in a reasonably liquid product because it is held for an emergency.   How can he figure out how much money he needs to set aside as a rainy-day fund? As a rule of thumb, it should be enough to cover at least six months of his necessary monthly needs. To be on the safer side, this can be done for a year.   To establish his contingency, fund X can save rupees 25,000 a month for a year. He can also invest this money in a Flexi deposit or a liquid mutual fund rather than leaving it in a savings account.   Liquid funds offer better returns than bank savings and have no entry or exit loads.    Knowing that you have a contingency fund will assure you that you can keep your investments and financial planning on track, even if your regular cash flow stops or decreases momentarily. Source: Pixabay How to make financial planning for contingencies?   The steps involved in formulating a contingency plan are to analyze what risks you might face in the future. It could be a job loss, a shift of a job, or anything of that sort.   And by that, you need to create a contingency fund. Then, creating a fund will require you to cut your expenses for a few months.   For example, if you want to save 3 Lac rupees as a contingency fund. You must cut some of your monthly expenses and transfer them to a different account as a part of the contingency fund.   These are the two basic steps that need to be considered to fulfill this requirement. FAQs What is an example of a financial contingency plan? A contingency is the possibility of future adverse events such as a recession, natural disaster, fraudulent conduct, terrorist attack, or an epidemic. COVID-19 is the perfect example of a contingency. Businesses were devastated by the coronavirus pandemic in 2020. Some let go of employees; some required many employees to work from home, while others struggled to cope with the changing economic sphere. How do you create a contingency budget? The steps involved in formulating a contingency plan are to analyze what risks you might face in the future. It could be a job loss, a shift of a job, or anything of that sort. And by that, you need to create a contingency fund. Then, creating a fund will require you to cut your expenses for a few months. For example, if you want to save 3 Lac rupees as a contingency fund. You must cut some of your monthly expenses and transfer them to a different account as a part of the contingency fund. These are the two basic steps that need to be considered to fulfill this requirement. What is the main purpose of a contingency plan? Contingency plans are essential to help individuals during difficult times. A case of job loss, pandemic, or economic recession can hurt you if you don’t have a contingency plan. What is contingency planning in financial planning? A contingency plan or a contingency fund covers your day-to-day expenses in the event of a financial emergency, such as a job loss, medical expense, or any other unpleasant condition or occurrence that results in a temporary financial loss. TALK TO AN EXPERT

Let us start from the very basics and understand what mutual funds are. After that, we'll discuss how to invest in them and discuss the advantages and disadvantages of investing in mutual funds.   What is a Mutual Fund?  A mutual fund is a financial trust that collects funds from investors and invests them into different instruments like stocks, bonds, and other money market instruments.   Fund managers manage mutual funds – they make investment decisions on behalf of the people who have trusted them with their money.   Mutual Funds are of different types, like equity mutual funds, debt mutual funds, and hybrid mutual funds depending upon the investment proportion in debt and equity.   These different types of mutual funds vary in their risk and return potential. Mutual Funds are one of the most popular investment options today.   Invest in Mutual Funds Advantages of Investing in Mutual Funds 1. Advanced portfolio management When you purchase a mutual fund, you must pay a small fee as a part of your expense ratio. That fee is used to engage professional portfolio managers to buy and sell stocks, bonds, and other securities on your behalf – it is a tiny fee for professional assistance in managing your investment portfolio, which goes a long way in creating market-beating turns.   2. Liquidity An advantage of investing in mutual funds is the ability to redeem the units when you require them. Mutual funds, unlike fixed deposits, allow for flexible withdrawals.   However, issues such as pre-exit penalty and exit load must be taken into account before deciding to exit your position in a mutual fund.   3. Convenience and fair pricing Mutual funds are simple to purchase and comprehend. They usually have modest minimum investment values and are only traded once a day at the closing net asset value thus removing day-to-day price fluctuations and different arbitrage opportunities used by day traders.   4. Diversification An investment's Maybe. The value may or may not decrease or increase in tandem. When one investment's value rises, another's value may fall. As a result, the risk that the portfolio's overall performance would be erratic is low.  Diversification lowers the risk of putting together a portfolio, lowering the risks for investors. As mutual funds consist of a variety of assets, the interests of investors are protected even if there is a downfall in the value of other securities so purchased.   How to track the performance of mutual funds? Read More 5. Accessibility A big reason for the popularity of mutual funds is the easy accessibility from anywhere in the world.   An Asset Management Company (AMC) offers the funds and distributes them through different channels like brokerage firms, registrars, the AMCs themselves, online mutual fund investment platforms, and agents and banks.   This factor allows mutual funds to be available and easily accessible universally. Also, mutual funds are easy to buy and track performance and one-click investments.   6. Low lock-in period Tax-saving mutual funds have the most down-locking periods of only three years, which is lower when compared to the maximum of five years for other tax-saving options like FDs, ULIPs, and PPFs. Also, you will have the opportunity to stay invested even after completing the lock-in period.   Fits every financial goal: The best aspect of a mutual fund is that you can invest with as little as ₹500, and there is no upper limit for an investor.  Before investing in mutual funds, examining their income, expenses, risk-taking abilities, and specific investment goals is essential.   As a result, anyone from any walk of life is free to invest in mutual funds regardless of income.   7. Good tax-saving options Mutual funds are one of the best ways to save on taxes. Under section 80C of the Income Tax Act, equity-linked saving scheme (ELSS) mutual funds are eligible for a tax exemption of up to 1.5 lacs per year.   In India, all other mutual funds are taxable according to the type of investment and the fund's duration. For example, equity mutual funds and debt mutual funds are taxable at different rates.   Tax-saving mutual funds have the potential to out for performing other tax-saving products such as PPF, NPS, and tax-saving FDs in terms of returns.  Disadvantages of investing in mutual fund Mutual funds do not promise set returns, so you should always be prepared for the unexpected such as a drop in the value of your mutual fund. In other words, mutual funds are subject to a wide range of price changes.   Fund managers oversee all forms of mutual funds. A team of analysts may assist the fund's management in various circumstances. As a result, you have no influence over your money as an investor.   Your fund manager makes all significant decisions regarding your fund on your behalf. However, you can look into certain vital factors, including disclosure requirements, corpus, and overall investment strategy.   Diversification is a significant advantage of mutual funds. However, the problem arises when there is over-diversification.   Over-diversification can raise funds' running costs necessitate increased due diligence, and dilute the relative benefits of diversification.   A mutual fund's value may fluctuate as market conditions change. In addition, there are fees associated with professional mutual fund management which are not present when purchasing stocks or securities directly from the market.   When buying a mutual fund, investors must pay an entry load. When investors wish to exit from a mutual fund, providers charge an exit fee.  The performance of a mutual fund does not give investors enough information about the degree of risk that the fund faces.  As a result, it is just one of the metrics used to assess the company's performance, but it is far from being comprehensive.  How to invest in a Mutual Fund via the Edufund App?  Step 1: Log in to the Edufund website or the Edufund app.   Step 2: Complete your KYC and move ahead to create your investment account.   Step 3: Choose the option of mutual fund investments.   Step 4: Analyse your risk profile on the app by answering your household income and expense, the number of dependents you have, the highest level of maturity you have in terms of investments, your period of investment, and similar questions.  Step 5: After answering the above questions, you will know what type of investor you are and the degree of risk you might be willing to take.   The Edufund website or the Edufund app will suggest some mutual funds you might want to invest in, with a recommended SIP value.  Step 6: Choose the fund and start investing. FAQs What is a Mutual Fund? A mutual fund is a financial trust that collects funds from investors and invests them into different instruments like stocks, bonds, and other money market instruments. How to invest in a Mutual Fund via the Edufund App? Step 1: Log in to the Edufund website or the Edufund app.   Step 2: Complete your KYC and move ahead to create your investment account.   Step 3: Choose the option of mutual fund investments.   Step 4: Analyse your risk profile on the app by answering your household income and expense, the number of dependents you have, the highest level of maturity you have in terms of investments, your period of investment, and similar questions.  Step 5: After answering the above questions, you will know what type of investor you are and the degree of risk you might be willing to take.   The Edufund website or the Edufund app will suggest some mutual funds you might want to invest in, with a recommended SIP value.  Step 6: Choose the fund and start investing. What are the different types of mutual funds? The different types of mutual funds are Debt, Equity, and Hybrid Funds. There are many more divisions within mutual funds that investors should check before investing their money. 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Before going to the types of asset classes, let's understand what is an asset class. A resource with economic value that an individual, business, or country holds or controls with the hope of future gain is an asset. An asset can produce cash flow, cut expenses, or increase sales in the future. Asset classes are groups of investments with comparable characteristics governed by the same laws and regulations.   As a result, asset classes consist of instruments that often act similarly in the marketplace. The significant types of asset classes are as follows  Types of an asset class 1. Equity Talking in brevity, equity also called a stock, is fractional ownership of a company. The ownership interest in a corporation represented by securities or stock is equity.   Common and preferred stock are two types of equity shares that an investor can possess in a company. The original business owner shares ownership with others, known as shareholders, in the form of equity ownership in the company.   The monetary value might represent the equity of each share that they could receive if they sold it. This value fluctuates as a result of market dynamics during the trading day.   By multiplying the equity value of a single share by the total number of shares an investor owns, they can calculate their entire equity interest in a company.  A person invests in equity to get ownership in a firm and get the right to vote on critical decisions. However, the core reason for investing in equities is that the investor will make money by selling away the equities at a premium compared to the buying price.  2. Fixed Income Fixed-income assets and securities offer investors a steady flow of cash, usually in the form of fixed interest or dividends.  Investors in many fixed-income instruments obtain the initial amount they invested and the interest earned at maturity. Fixed income is an investment type that emphasizes capital and income safeguarding.   Government bonds, corporate bonds, CDs, and money market funds are specific investments. Fixed income can provide a consistent stream of income with less risk.  Fixed-income investing is less volatile than equity investing because when an investor lends a loan to a firm, the corporation pledges to repay the entire debt at the end of the term (plus interest).   There is no such guarantee with stock investment, as it could lose all of its value. Fixed income is popular among investors because of its stability, capital preservation, and consistent income stream.  Source: Pexels 3. Commodities Raw resources or agricultural goods that can be bought and traded are commodities. They are one of the most important investing asset classes.   A futures market is where commodity trading is done. The people who make the goods and those who buy them haggle for payment in this market. These contracts also include a future delivery date for the products. Commodity pools are also available to individual investors.   It is a method of diversifying your holdings. These pools are much like mutual funds or exchange-traded products (ETPs). Traditional mutual funds and exchange-traded funds are not the same as these.   The assets themselves do not belong to the investor. Instead, the investor purchases the right to buy or sell an asset in the future for a certain period. This asset class can be precarious.   Commodities are appreciated as an asset class because of their low connection to stock and fixed-income markets, in other words, for their diversification benefits.  4. Alternatives  Alternative assets are investments that are not part of the standard asset classes that most investors are familiar with, such as stocks, bonds, or cash.   These investments may be less liquid than their traditional counterparts because of their alternative nature, and they may require a longer investment time before any substantial benefit is received.  Alternative investments are difficult to understand and are not well-regulated. As a result, institutional investors and high-net-worth individuals hold the majority of alternative asset assets.   In comparison to public markets, private markets are famously opaque due to their lack of oversight. Private corporations, for example, are not required to disclose earnings or financial information or to report to shareholders; therefore, information on these types of assets might be difficult to come by.  Some alternative asset classes are Private equities, venture capital, hedge funds, private debt, real estate, infrastructure, and natural resources.   5. Currency  A wager on the direction of a currency is known as currency investing. Investors can now make directional bets on currencies like the euro, Australian dollar, yen, US dollar, and even currencies from emerging markets like the Indian rupee or Chinese yuan in ETF format.   Currency investing is a rare recommendation as a long-term investment. On the other hand, professionals and short-term traders frequently use currency funds to hedge current currency risk.  A proper mix of the above asset classes based on investor goals and risk profiles can generate handsome returns for the investor.  FAQs What are asset classes? A resource with economic value that an individual, business, or country holds or controls with the hope of future gain is an asset. Asset classes are groups of investments with comparable characteristics governed by the same laws and regulations. Example such as equity, fixed income, commodities, etc. What is an asset? An asset can produce cash flow, cut expenses, or increase sales in the future. Asset classes are groups of investments with comparable characteristics governed by the same laws and regulations. What are the five major classes of assets? The most common asset classes are equities, fixed-income securities, cash, commodities and real estate and alternatives Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Investors frequently struggle with deciding whether to invest directly in stocks or through mutual funds for equity investments. Equity Mutual Funds are institutions that combine investors' money to invest it in publicly listed stocks. On the other hand, buying these equities through the stock market is also possible. Direct equity investments have historically been unpredictable; they have resulted in significant returns as well as massive losses for some investors.   This article will learn the distinction between direct equity investment vs investment in mutual funds.   What is Direct Equity Investment?  Direct stock investments have a significant risk of loss but also have the potential to be very lucrative. Before investing in equities, one must thoroughly understand the underlying business and the sector in which it works.   As a result, as an investor, you will need to research the company's track record, financial performance, managerial expertise, and even external issues like governmental regulations, currency exchange rates, and changes in local and global politics.   You can gain more if you strike the correct balance between risk and return.   What are Mutual Funds?   Companies that offer mutual funds pool money from a variety of investors and save through their offered mutual fund plans. The money gathered is subsequently invested by the fund firms in a variety of financial products to provide significant returns.   Experts administer mutual funds. In essence, you own the units representing the share of the fund you own as an investor. A unit holder is another term for the investment.   The distribution of the investment's increased value and other revenue is proportional to the number of units owned by the unitholders - provided after any necessary deductions.   What are mutual funds? Read More Source: Pixabay Direct Equity Investment vs. Investment in Mutual Funds While direct equity investment offers substantial returns, it is only practical for individuals who consistently understand how the equity markets operate.   Therefore, the mutual fund option is better for people who lack the time or expertise to track and understand equities markets. With regard to your investment in mutual funds, there are some advantages that you get.   From professional management of your money by mutual fund experts to low ticket sizes where you can start to invest with as low as Rs 500, there are many perks of investment via mutual funds.   Subject to exit loads, open-ended funds permit investors to withdraw their money at the current net asset value (NAV). This also aids in financial planning. When a person invests in shares, he is uncertain as to whether he will be able to sell the shares on the market for a reasonable price or not.   In risk management, an individual may go overboard on a particular share; however, a fund manager will have the risk management guidelines in place there are limits on how much a fund manager can invest in each stock and sector.   When you buy and sell shares before holding them for one year, you end up paying short-term capital gains of 15%. However, the fund manager may keep transacting shares at varying intervals if the investor remains invested for more than one year in an equity fund, his gains are tax-free since STT is already deducted.  Your final decision on whether to invest either in mutual funds or direct equity will depend upon how much you understand the markets and whether you have the time to trade in direct equity or not. If you lack the discipline to operate in the stock market, you should channel your money via the mutual fund route. FAQs What is the difference between investing in equity shares and mutual funds? While direct equity investment offers substantial returns, it is only practical for individuals who consistently understand how the equity markets operate.    Therefore, the mutual fund option is better for people who lack the time or expertise to track and understand equities markets.   Are mutual funds 100% safe? Mutual funds are generally looked at as safe investments, considering the diversity they offer to minimize the risk. However, any investment involves risk. Investors should consult experts and do their research before investing. Are mutual funds safer than equity? Direct stock investments have a significant risk of loss but also have the potential to be very lucrative. Before investing in equities, one must thoroughly understand the underlying business and the sector in which it works.    The mutual fund option is better for people who lack the time or expertise to track and understand equities markets. With regard to your investment in mutual funds, there are some advantages that you get. From professional management of your money by mutual fund experts to low ticket sizes where you can start to invest with as low as Rs 500, there are many perks of investment via mutual funds.   Is mutual fund and equity fund the same? An equity fund is a mutual fund that invests majorly in stocks. It can be actively or passively managed. Equity funds are also called stock mutual funds.  Consult an expert advisor to get the right plan for you  TALK TO AN EXPERT

Before proceeding to the comparison between Bond ETFs vs. Bond Mutual Funds, let's quickly brush up on our knowledge of bond ETFs and Mutual Funds.  Bond Mutual Funds For many years, mutual funds have been investing in bonds. Balanced funds, including stock and bond allocations, have been around since the late 1920s.  As a result, there are many bond funds available that provide a wide range of investment alternatives.   Passively managed funds, which strive to duplicate various benchmarks while not attempting to surpass those benchmarks, and actively managed funds that seek to outperform their benchmarks are the two types of bond mutual funds available in the market.  There are two types of bond mutual funds available  Open-ended funds can be purchasable directly from fund providers. The brokerage commission cost does not exist if the item is purchased directly.  Bond funds can be redeemed by resale to the fund house, making them liquid and easy to buy and sell.  Open-ended funds are valued and exchanged once a day. Furthermore, each fund's net asset value (NAV) is determined when the market closes.   The NAV is reflected in the trading price. Since open-ended funds do not trade at a markup or a discount, determining how much a fund's shares will yield if sold is simple and predictable.  Daily, bond mutual funds do not disclose their core holdings. They report their holdings semi-annually in most cases, with specific funds reporting every month.   Investors cannot ascertain the specific makeup of their portfolios at any given time due to a lack of transparency.  A closed-end fund is a form of mutual fund that raises cash for initial investments by selling a limited number of shares in a single initial public offering (IPO).   Its shares can then be purchased and sold on a stock exchange, but no new shares or money will flow into the fund.  Bond ETFs  Compared to mutual funds, bond ETFs are new to the market, with iShares establishing the first bond ETF in 2002.   Although a rising number of actively managed products are available, most of these offers strive to mirror various bond indices. Ceteris paribus, ETFs often have lower fees than their mutual fund counterparts, potentially making some investors the more attractive choice.  Trading of bond ETFs on a secondary market and the provider is not involved in the day-to-day transactions of the investors. ETFs are traded continuously throughout the day.   Share prices can change dramatically from one minute to the next and throughout a trading session. Shares can also be bought and sold at a premium or discount on their underlying net asset value.  Bond ETFs have no minimum holding time, so there are no penalties for selling soon after making a purchase. They can also be purchased on the margin and sold short, giving them far more trading flexibility than open-ended mutual funds.  Bond ETFs, unlike mutual funds, divulge their underlying holdings daily, providing complete transparency to investors. Bond ETFs provide several advantages over traditional bond mutual funds.   Bond ETFs are tradable to a considerable extent because of their listing on the stock exchange, and they can be quickly sold off without the involvement of the fund house, as in mutual funds.   Mutual fund trading is done only once a day after the market closes. Bond ETFs are highly transparent of their holdings due to regular holdings publishing regulations.  The ETF method reduces paperwork, record-keeping, and distribution costs, among other things. As a result, the overall expense ratio of an ETF is typically lower than a matching mutual fund.  However, not everything is rosy; Bond ETF investors need to shell out commissions to the broker for every trade carried out in the stock market, which can amount to a sizeable sum in the long run.   The ask spreads can become pretty broad in the bond market, thus eliminating potential returns coupled with the possibility of having the market price of the ETF available at a discount or premium from the NAV, making the ETF proposition less lucrative.  During extreme volatility in the market, bond mutual funds may be worse off as individual bond values are difficult to calculate. Certain bonds can go without trading for several weeks, making such holdings' value judgment challenging.   On the other hand, ETF prices are kept in check by the power of arbitrage held by the APS. The very organic process of creation and redemption of ETFs makes this a breeze and helps in maintaining the market price of the ETF near the NAV.   Whether to buy a bond fund or a bond ETF is usually based on the investor's investing goals. Bond mutual funds provide more options if the investor desires active management.   Bond ETFs are a smart alternative if the investor plans to trade regularly. Bond mutual funds and bond ETFs can suit the needs of long-term, buy-and-hold investors, but it's best to do some homework on the holdings in each fund.  If transparency is vital to the investor, bond ETFs are suitable. If the investor is worried about liquidity and trading volume, a bond fund can be a better option because one can sell the holdings back to the fund provider.  It's crucial to conduct due diligence and consult with a broker or financial advisor before making any investment decisions. FAQs Which is better - bond mutual funds vs. bond ETFs? Both are good investments. If you are looking for active management then go for bond mutual funds, if you achieve to sell and buy frequently then bond ETFs are ideal for you. What is the difference between bond mutual funds and bond ETFs? The main difference between the two lies in trading. Bond ETFs are cheaper, easily tradable, and transparent. bond mutual funds. What are bond mutual funds? Bond mutual funds are funds that collect money from investors to invest in bonds. The mutual funds can either be passive funds tracking indices or actively managed funds. TALK TO AN EXPERT

In the previous article, we discussed Mutual funds vs. FD to find out which is a better asset for your child's future. In this article, we will talk about Saving vs. Investing. Savings and investing involve different goals and functions in your financial strategy.   Saving money entails depositing money in secure, liquid accounts, whereas investing entails purchasing assets, such as stocks, to make a profit.   Before you start your journey to riches and financial independence, you must understand this fundamental difference.   Difference between Saving vs Investing   Saving money implies putting away money by depositing it in highly secure securities or accounts. The money is also liquid, which means it can be turned into cash quickly.   Above all, your cash reserves must be there when you need them. They must be ready for use to meet all your immediate needs and wants. Some examples are: keeping money in cash form, in a savings account, etc.  Investing money refers to utilizing your cash or capital to purchase an item you believe has a fair chance of creating an acceptable return over time.   Investing is to increase your wealth, even if it means going through significant volatility for months or even years. Actual investments have the backing of a margin of safety, usually in assets or earnings from the owner.  Stocks, bonds, and real estate are some of the best investment instruments.   Basis of Distinction Investing  Saving Definition The exercise involves investing the money saved so as to generate profits and capital appreciation The income or money left at hand after meeting all expenses Purpose The purpose of investing is capital appreciation and wealth creation. Investing in your alpha tool, which fights increasing inflation and helps you create wealth. The purpose of saving is to meet short-term and long-term requirements. And also, to tackle unforeseen events. Saving is the foundation of your investment portfolio. Returns The biggest advantage of investing in high returns is that it provides some exposure to market volatility as well. If you are a risk-averse investor or have a little risk appetite, you can choose to invest in debt funds. Saving is not done with the view to generating returns. Since there is negligible or little risk involved with the money, there is very little return - generally, a percentage or two on the instruments where you save your money. Risk Investing has its fair share of risks involved because of the market volatility, the risk and return depend on the mood of the market in general. Saving money has no volatility risk. The thing that can possibly happen with your money is that it can diminish in value owing to rising inflation. Liquidity Investments vary in liquidity depending upon the instruments.  Liquidity is the primary purpose of saving.  An important difference   The most significant distinction between saving and investing is the Risk Factor. When you place your money into a savings account, such as a money market account or a certificate of deposit, you are saving.  It has a very low danger of losing money but has very little chance of making money. When you save money, you have access to it as and when you need it.   When you invest money, you have the chance to make higher long-term profits or rewards. But you also have an opportunity to lose money. You can take on more risk for a higher return, but your potential loss is also more significant.   It is critical to assess your objectives to determine which alternative is ideal.    Making the wrong decision can cost you a lot of money in fees or even result in a loss of future investment revenue. Another distinction is interest or profit.   The primary purpose of investing is to make money, whereas the motive of saving is to keep money secure while earning relatively little.  Saving vs. Invest: Which comes first?   Almost often, saving money comes before investing money. Saving is the foundation upon which your financial dreams are based.  The logic is simple - unless you possess a certain sum of money, you will need to rely on your savings to fund your investments.   In rough times when you need money, you'll probably have to sell your investments at bad possible times, and that is not a prescription for financial success.  As a rule of thumb, your savings should be able to cover at least three to six months of your expenses - usually known as an emergency fund.   You can start investing until you have things in place, such as an emergency fund, health insurance, and life insurance.   You will benefit from significant tax cuts with the help of these instruments like insurance. You will also have a safety net to bear volatility even in your investments.   Which one is for you?   There is no particular answer to this question because saving is a means to your investment journey. If you have good savings and if you can generate a safety net around your wealth, you can start investing that day itself.   It all depends on your planning, your needs, and your future goals. Make your decision wisely and choose the instruments carefully. FAQs Which is better, investing or saving? Savings and investing involve different goals and functions in your financial strategy. There is no particular answer to this question because saving is a means to your investment journey. If you have good savings and if you can generate a safety net around your wealth, you can start investing that day itself. What are the benefits of investing? Investing money refers to utilizing your cash or capital to purchase an item you believe has a fair chance of creating an acceptable return over time. The returns an investment generates are the biggest advantage of investing, but investing involves some amount of risk. Which comes first, investing or saving? Almost often, saving money comes before investing money. Saving is the foundation upon which your financial dreams are based. The logic is simple – unless you possess a certain sum of money, you will need to rely on your savings to fund your investments. What is the difference between saving and investing? The most significant distinction between saving and investing is the Risk Factor. When you place your money into a savings account, such as a money market account or a certificate of deposit, you are saving. It has a very low danger of losing money but has very little chance of making money. When you save money, you have access to it as and when you need it. When you invest money, you have the chance to make higher long-term profits or rewards. But you also have an opportunity to lose money. You can take on more risk for a higher return, but your potential loss is also more significant. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Established in 1994, Aditya Birla Sun Life AMC Limited (ABSLAMC) is co-owned and backed by Aditya Birla Capital Limited and Sun Life (India) AMC Investments Inc.   ABSLAMC is one of the leading asset managers in India, servicing around 8.01 million investor folios with a pan India presence across 290 plus locations and a total AUM of over Rs. 2,930 billion for the quarter ending 31st December 2022 under its suite of a mutual fund (excluding our domestic FoFs), portfolio management services, offshore and real estate offerings.  https://youtu.be/i1guXHG0TAc ABSL Flexi Cap Fund  Investment Objective:The objective of the scheme is long-term growth of capital through investment in equity & equity-related instruments across market cap (large, mid & small) companies.  Investment Process:A diversified portfolio having disciplined large-cap bias is followed because the inclination towards large-cap ensures focus on quality companies with solid management & sound balance sheet. Also, the Top-Down approach is used for sector selection.  Portfolio Composition  The portfolio holds significant exposure in large-cap stocks at 52.97%, and significant sectoral exposure is to Banks, which account for 25.64% of the portfolio. The top 5 sectors hold more than 50% of the portfolio.  The fund has 98.02% investment in domestic equities, of which 52.97% is in Large Cap stocks, 22.89% is in Mid Cap stocks, and 5.5% is in Small Cap stocks. Note: Data as of 31st March 2023. Source: ABSL MF, Value Research Top 5 Holdings Name Weightage % ICICI Bank Limited 10.10 HDFC Bank Limited 7.42 Infosys Limited 6.11 Sun Pharmaceutical Industries Limited 4.30 HCL Technologies Limited 4.21 Note: Data as of 31st March 2023. Source: ABSL Performance since inception  If you had invested 10,000 at the time of the fund's inception, it would now be valued at Rs. 1088640, whereas the benchmark (Nifty 500 TRI) would have fetched you Rs. 347773.  The following table depicts the fund's performance vis-à-vis its benchmark (returns in %).  Particulars 1 Year 3 Years 5 Years Since Inception ABSL Flexi Cap Fund -4.15 26.46 9.58 21 Nifty 500 TRI -1.22 28.97 11.52 15.51 Nifty 50 TRI 0.59 27.80 12.72 14.42  Fund Managers  Mr. Anil Shah (Total Experience: 30 years)  Mr. Anil Shah is a Co-Head of Equity with Aditya Birla Sun Life AMC Limited (ABSLAMC). Anil brings nearly three decades of rich professional experience in Indian equity markets.As a Senior Fund Manager, Anil executes and regularly reviews the investment strategy for Equity portfolios. Before joining ABSL AMC in 2012, Anil was a part of RBS Equities (India) Limited (formerly known as ABN AMRO Asia Equities (India) Limited) for around 15 years. He is a CA and Cost Accountant by qualification.  Mr. Dhaval Joshi (Total Experience: 15 years)  Mr. Dhaval Joshi has an overall experience of 15 years in equity research and investments. Before joining Aditya Birla Sun Life AMC Limited, he was associated with Sundaram Mutual Fund (India) Ltd. for around five years. He has also worked as a research analyst with Emkay Global Financial Services and Asit C Mehta Investment Intermediates Ltd.  Who should invest?  An investor looking for an equity fund that would be a suitable investment proposition across market cycles and with at least three years investment horizon  Looking at a 3–5-year investment horizon perspective.  Why invest?  Investing in this fund exposes investors to all types of stocks such as large-cap, mid-cap, and small-cap. This type of fund can help create wealth over the long term.  Horizon  Ideal for investment with a time horizon of, preferably, five years or above   Investment through Systematic Investment Plan (SIP) may help in tackling the volatility of the broader equity market.  Conclusion  ABSL Flexi Cap fund has underperformed than its benchmarks over 1, 3, and 5 years. However, it has outperformed both benchmarks since its inception. Hence investors need to remain invested for the long term so that the alpha can be generated.  DisclaimerThis is not recommendation advice. All information in this blog is for educational purposes only. 

In the previous article, we discussed what are asset classes and their types. In this article, we will discuss the power of compounding. Compounding refers to earning interest on the already earned interest on your investment. The money earned from the returns is employed to increase the value of the investment.   If you have a long-term investment, compounding can be beneficial even if you invest a small amount of money consistently in any given form of investment.   The power of compounding allows you to receive considerable returns over a long period.   In simple terms, compound interest occurs when you earn interest on your principal amount, which is added to the original principal amount.  Raising the potential interest for the next cycle; that is, when interest is added to the principal amount, it increases the base for the subsequent interest to be generated.   The power of compounding, however, is not limited to compound interest. It also includes the concept of delayed gratification, in which you add what you earn to the initial amount. It is usually in the later stages that the magic works.  Comparison of an investment under the principles of simple interest and compound interest:   Say you have invested Rs 1,00,000 each in two investment instruments, A and B. Scheme A and B offer 10% simple and compound interest per annum, respectively.   The period of the investment is 20 years Scheme A: The principal amount is Rs 1,00,000 and the rate of interest is 10% p.a. The simple interest for each year is 10% of Rs 1,00,000, which equals Rs 10,000. So, at the end of 20 years, the total interest accumulated will be 10,000x20 = Rs 2,00,000. Thus, the final value of your investment will be Rs 1,00,000 + Rs 2,00,000 = Rs 3,00,000 after 20 years of the initial investment.  Scheme B: The principal amount is Rs 1,00,000, and the interest rate is 10% p.a.  In year 1, the compound interest will be 10% of Rs 1,00,000, which equals Rs 10,000. Thus, the new principal for year 2 becomes Rs 1,00,000 + Rs 10,000 = Rs 110,000.   Now the next lot of 10% interest will be calculated at Rs 110,000, which will be equal to Rs 11,000. Thus, the new principal amount becomes Rs 110,000 + Rs 11,000 = Rs 121,000.   Similarly, for year 3, the interest is 10% of Rs 121,000 = Rs 12,100. And this process continues. In this way, using the compound interest formula, at the end of 20 years, the value of your investment will stand at Rs 672,750.  (Note: the compound interest formula is A=P(1+(r/100)) ^n, where A= amount received at the end, P = initial principal, r= rate of interest, and n= number of periods).  The money invested in the scheme offering compound interest has become more than 6.5 times the initial principal. The investment is worth three times the initial principal in the simple interest scheme.   The difference is more than double. The difference will keep increasing as the period of investing is increased further. Compounding magic will work to blow up the size of your investment multifold.  Power of compounding in mutual funds  Due to the numerous benefits mutual funds provide, they have become a popular financial instrument in recent years. The power of compounding, an integral aspect of how mutual funds work and generate exponential returns over time, is one of the advantages.   The idea behind a systematic investment plan is to take advantage of the compounding effect by investing a small amount of money at regular periods over a lengthy period.   The amount invested grows enormously. For example, to create your retirement corpus, you may start a monthly SIP of ₹5000 and invest for 30 years at 15% projected returns. As you reinvest your money, it will rise enormously.   Using a SIP calculator, we find out that the final value of the corpus is Rs 3.64 crores, with a total investment of Rs 18 lacs over 30 years.   You can reach this whopping amount because of the magic of compounding or what we can call the “power of compounding.”   Key rules for investing Start early: The earlier you start, the more time you give your investments to grow. So, beginning early is an important step.   Be regular: In case of a SIP, be disciplined, and you will see your corpus grow. Be it only Rs 1000, but invest it regularly.   Be patient: Patience is the key. We know that compounding shows its magic in later years, so be patient with your investment. FAQs What is the power of compounding? Compounding refers to earning interest on the already earned interest on your investment. The money earned from the returns is employed to increase the value of the investment. If you have a long-term investment, compounding can be beneficial even if you invest a small amount of money consistently in any given form of investment. What are 3 ways to maximise the power of compounding? Start early: The earlier you start, the more time you give your investments to grow. So, beginning early is an important step. Be regular: In case of a SIP, be disciplined, and you will see your corpus grow. Be it only Rs 1000, but invest it regularly. Be patient: Patience is the key. We know that compounding shows its magic in later years, so be patient with your investment. What is the magic of compounding? The power of compounding, an integral aspect of how mutual funds work and generate exponential returns over time, is one of the advantages. The idea behind a systematic investment plan is to take advantage of the compounding effect by investing a small amount of money at regular periods over a lengthy period. The amount invested grows enormously. For example, to create your retirement corpus, you may start a monthly SIP of ₹5000 and invest for 30 years at 15% projected returns. As you reinvest your money, it will rise enormously. Using a SIP calculator, we find out that the final value of the corpus is Rs 3.64 crores, with a total investment of Rs 18 lacs over 30 years. What is an example of the power of compounding? Compound interest occurs when you earn interest on your principal amount, which is added to the original principal amount. Say you have invested Rs 1,00,000. The principal amount is Rs 1,00,000, and the rate of interest is 10% p.a. The simple interest for each year is 10% of Rs 1,00,000, which equals Rs 10,000. In year 1, the compound interest will be 10% of Rs 1,00,000, which equals Rs 10,000. Thus, the new principal for year 2 becomes Rs 1,00,000 + Rs 10,000 = Rs 110,000. Now the next lot of 10% interest will be calculated at Rs 110,000, which will be equal to Rs 11,000. Thus, the new principal amount becomes Rs 110,000 + Rs 11,000 = Rs 121,000. Similarly, for year 3, the interest is 10% of Rs 121,000 = Rs 12,100. And this process continues. In this way, using the compound interest formula, at the end of 20 years, the value of your investment will stand at Rs 672,750. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Leaving the child with the stress of debt is the last thing any parent would wish for. Yet there are various examples where the burden of financial stress is carried down through generations. Have you ever wondered why this happens?  This is because taking out a loan is simpler and a faster solution to a financial problem. But, what is often forgotten is the mental stress and task of paying back the loan that may fall on your child’s shoulders. While education loans can be effective and instrumental in securing a bright future, there are some ways to rise above and save your child from a student debt trap. Save your child from a student debt trap: 9 tips! 1. Save your money Obvious though it may sound, saving still is a habit many fail to inculcate. It is quite difficult to resist the desire of spending money when we have so many options available. Now here is the catch, spending your money can get you temporary pleasures, but it contributes nothing to your long-term goal.  Sticking to a budget, evaluating your needs, and saving your money in a high-interest offering saving account are some small steps you can take to harness this habit.  2. Invest your money In a country of 138 crore people, only 1.2 crore people are active investors according to a report by National Stock Exchange. By not investing, you are missing out on an opportunity to grow your money and give your child a debt-free life.  3. Stick to your budget Usually, there is a 50/30/20 rule whenever the question of planning a budget comes into the picture. It says that 50% of your earnings should go towards your needs, 30% to your wants, and 20% you save. By following this scale, you can keep a check on your money and control the uses you put it to. Very easy and rewarding technique, if implemented diligently! 4. Monitor your Credit Card Usage Your monthly earnings should always exceed the monthly bill that you pay for your credit cards, as simple as that! Having the option to spend, should not necessarily provoke you to spend. Always be in check of your credit limits and do not let the perks control you.  Source: Freepik 5. Create a College Fund The cost of higher education is skyrocketing and it is an unavoidable expense. The purpose is not just to protect your child from debt, but also to have enough to support them until they are independent. Make sure you have a sound investment plan in place today, to provide for your child’s higher education tomorrow! 6. Practice Self-Discipline Discipline is crucial to ensure the consistency of your efforts. For instance, a newly launched luxurious car may tempt you, but knowing your needs and checking your priorities is important. Especially when you have kids to afford reckless spending.  7. Portfolio Diversification  Investments are subjected to risk. The ROI from equity or mutual funds is highly dependent on the market conditions. Portfolio diversification, however, is one way to adjust the risk associated with your investments. You invest in multiple securities varying in terms of risk and return involved in such a way that the overall risk is adjusted.  8. Health Insurance Cover Have a proper insurance plan for your health in place. You can not anticipate medical emergencies, but you can plan for them wisely. Medical bills can hugely impact your financial planning and spending. Besides, insurance coverage concerning fire, vehicle, etc. can be helpful as well.   9. Mindful about procuring finances For individuals, bank loans continue to be the popular source of procuring finance. It is mostly a ready source to pay off big amounts. However, one should not neglect the cost associated with it. Loans from banks are secured against collaterals. Moreover, you are obliged to pay the interest at which the loan is offered along with the principle. Therefore, this source of financial procurement would call for consistent allocation of your earnings towards the repayment.  The catch is to be mindful of the quantum to ensure a debt-free future.  Financial planning, investing, saving, and budgeting can help make your life and your child’s life easy. By following the above-mentioned methods you will save your child from a student debt trap and give them the confidence to build a unique future.  FAQs What are some tips to save your child from a student debt trap? The first tip to saving your child from a student debt trap is to create an education fund for them. This can pay for their college in the long run and cover other expenses like books, accommodation, extra classes, and more miscellaneous expenses. Another benefit is that your child can focus on their studies and opt for internships in place of part-time jobs if they have enough funds to support themselves. When is the right time to save for your child's education? The right time to save and invest in your child's education is to start before they are born. This allows your investment to grow with your child and beat inflation as well. What is the most reliable way to fund your child's savings? The most reliable way to build an education fund for them. This helps your child in the long run and they do not have to depend on external, sources like loans or scholarships. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT