Wednesday 29 December 2021

12 Features of ELSS Funds

                                             


Equity Linked Savings Scheme is a type of equity mutual funds that offers tax saving and wealth creation. Here are a few unique characteristics of ELSS that make it an ideal investment option.

1. What are Equity Linked Savings Scheme Funds? 

Equity Linked Savings Scheme Funds (ELSS) also known as tax saving funds is an equity mutual fund that invests predominantly in equity stocks. ELSS funds offer tax exemption on a maximum investment amount of up to Rs. 1.50 lakh from your annual taxable income under Section 80C of the Income Tax Act, 1961.


2. Where do ELSS funds invest? 

ELSS funds invest in equity instruments such as stocks of listed companies. These funds allocate its investments across large, medium and small-sized companies.


3. Get the power of equities

 Historically, equity investments have outperformed other asset classes in the long-term. Investment in equity funds have the potential to help you fulfil your long term financial goals.


4. Avail the dual advantage of wealth creation and save on tax 

With ELSS, you can avail the dual advantage of wealth creation and save on taxes. As ELSS funds invest in equities, it has the potential to earn higher returns in the long term. Moreover, your returns from ELSS are deductible from the total income under Section 80C of the Income Tax Act, 1961. Hence, you get tax benefits with attractive returns through your investment in ELSS.


5. No limit on investment

There is no maximum investment limit on ELSS. You can earn market-linked returns on the entire investment amount. However, tax benefits on the investment are available up to Rs. 1.5 lakhs.


6. Achieve your financial goals

 As ELSS funds invest in equities with no cap on investment, it can help you achieve your long term financial goals such buying a house, planning for higher education and preparing for retirement.


7. Invest through SIP or onetime lump sum investment

Lump sum and Systematic Investment Plan (SIP) are two popular ways to invest in ELSS funds. You can opt for a mix of both these investment options to gain the maximum advantage of investing in ELSS. In the SIP mode of investment, you need to invest a small amount of money over a period. Whereas, in case of lump sum investment, you invest in one go


8. Systematic Investment Plan (SIP)

Facility If you want to invest in ELSS through SIP, you don’t have to invest a large sum at one time or wait for the last moment. It is because you can plan your tax saving investment at the start of the financial year and invest in ELSS funds through SIP over the financial year. Although monthly SIP is a popular SIP frequency for salaried individuals, investors can opt for weekly, quarterly and half-yearly SIP frequencies as well.


9. Low minimum investment amount

 Investment in ELSS is affordable, as the minimum investment amount in ELSS fund through SIP is Rs.500. So, you do not worry about amassing a large corpus for investment. The low minimum amount makes it easy for different investors to invest in ELSS with no issue


10. Lowest lock-in period 

The tax saving funds have the lowest lock-in period of 3 years. You can redeem your investments after three years without paying any penalty or exit load or continue to stay invested after the end of lock-in period.


11. No mandatory exit period 

There is no mandatory exit period of ELSS. You need not redeem your investments after the lock-in period of 3 years is over. You can stay invested in ELSS beyond this lock-in period until you are ready to redeem your investments.


12. Tax on capital gains

 Long Term Capital Gains on equity funds applies on ELSS funds as it has a lock-in period of three years. The capital gains from ELSS funds below Rs.1 lakh in a financial year is tax-free. The long-term capital gains above Rs.1 lakh in a financial year is taxed at the rate of 10%.


Make a smart financial move by investing in ELSS.


This blog is purely for educational purpose and not to be treated as an personal advice. Mutual fund investments are subject to market risks, Read all scheme related documents carefully.

Wednesday 15 December 2021

4 reasons why you need a Financial Advisor?





 

Before we understand the importance of financial advisor, answer this one simple question.



Did you take the help of a CA or a tax consultant to file your ITR returns this year? While it can be done for free by the income tax department, we still consult our tax consultant so that we don't go wrong anywhere.

However, when it comes to managing money, most people do not want to take any help from financial planners or advisors. There are many reasons for this attitude. Some think it is a waste of money, while others believe that they can handle their money.

Financial advisors can provide immense value to any individual’s portfolio.

Here’s why you need a financial advisor:


Assess your financial health:

An advisor examines an individual’s financial situation and health. He may pinpoint weak points that need strengthening. For example, the advisor may alert you about wasteful expenditures. Hemay identify investments that are not giving optimal returns and accordingly suggest the right way forward.


Teach you the basics of investing:

There are many resources on Google through which you can learn the basics of investing and personal finance. However, there is a high probability that you get lost in this maze. Some articles will suggest plan A, while others will tell you to follow plan B. This can increase the confusion. Andas a result, you may postpone starting your investment at a later date. When you have a financial advisor, he or she will make sure that you understand the basics of investing. The world of finance is vast. Hence, it is always better to know and understand the parts that are important to you.

Choosing the right products to invest and aligning your investments with your goals:

Even if you know the basics of investing, choosing the right products to invest may be uphill for many. It is because there are different types of products in a particular category. Also, the companies keep on coming up with products, some of which are too complicated to understand. financial advisor will suggest the right financial products for you and ignore the noise. Financial Advisors regularly meet the investment teams of the financial products to understand their investment rationale. For example, in the case of mutual funds, financial advisors use a lot of ratiosand parameters that help them to collate the list of top funds under the different categories. In Addition, they regularly compare the various financial products with their peers to suggest you the right product. Selecting the investment product will not mean much if it is not aligned with your financial goals.Not just your financial goals, the investment product should also go with your risk-taking capacity and time horizon. E.g., the best small-cap fund may not be the right choice if your investment horizon is just three years.


Help you to stay focused on your goals

While we may like to believe that personal finance and investing is all about numbers and selecting the product that has given the highest returns in the recent past, it is mostly about habits. It hasmore to do with behaviour and discipline than returns. In this journey, many investors tend to make avoidable mistakes.

Investors are likely to be carried away by discussions with their colleagues and friends. Theybecome tempted to follow the footsteps of their friends, even without knowing if that will be the right approach for them or not.

In this scenario, the financial advisor will handhold you and suggest you the right steps and make you stay on the course to reach your financial goals. Also, financial advisors carry out portfolio review at regular intervals to make sure that you are on the right track to achieve your financial goals.



These were the four main reasons why having a financial advisor is the best that you can do for your financial health.



Wednesday 8 December 2021

PLANNING FOR YOUR CHILD'S FUTURE








 Steps to Plan for your Child’s Future

Financial planning for the child’s future has become an indispensable part of financial planning. Earlier, public education took care of the educational needs. Times have changed and getting quality education requires a lot of money. Starting from kindergarten to postgraduate degree, getting the right education is a costly affair and it is going to increase in the future. So, instead of making ad-hoc financial investments, have a financial plan in place for your child’s future.

Financial planning for children is not just limited for people with kids but it will also help couples and singles who want to have children in the future.

Planning for children’s future as early as possible will help you to plan for their education and marriage easily and reap the benefits of the power of compounding.

To carry out financial planning for your kid’s future, it is important to note the different stages that require financial planning.

Before the kid enters formal education: Expenses related to a kid starts before the kid joins the formal education system. The medical expenses such as hospital bills and vaccination are some of the costs that parents have to incur.

School admissions: School admissions are no longer the same. Admission in a reputed international school requires a lot of money in the form of donations, school fees, tuition fees, books, co-curricular activities etc.

Higher education: The cost of quality higher education is rising at a faster pace. Education inflation is higher than overall inflation in the economy. Financial planning for college education is not limited to tuition fees. The cost of living in a different city including hostel fees, rent, food and transportation cost also needs to be considered.

Child Marriage: Your child’s marriage is another area that requires financial planning.

Now, that you are aware of the ‘whys’, let's shift our focus to the ‘hows’.

The first step is to find out the current cost of the course at the institution

Second, add the rate of inflation to the present cost. Rather than taking the inflation rate of the economy or education inflation, it will help to figure out the rate of inflation in the field of their choice. You can use a future value calculator available online to arrive at the future cost of your goal.

The overall education inflation is considered to be around 10-12%. E.g., if the current cost of a course is Rs. 15 lakhs, the course may cost approximately Rs.1 crore after 20 years with 10% rate of inflation.

The third step is to consider the time horizon i.e. knowing when you will need the money. For e.g., if you recently became a parent, your kid’s school admission may be a short term goal and their marriage plan is most likely to be a long-term goal.

The fourth step is to invest according to the time horizon of these goals. Different saving and investing options can help to fulfil your goals. Mutual funds are one such financial instrument can help you to plan for your children’s future goals.

For short-term goals with a time horizon of one year to three years, parents can invest in short term debt mutual funds. These funds invest in debt instruments that aim to protect your capital and give higher returns than traditional instruments such as fixed deposits. Hybrid funds can help to plan for your medium-term goals with a time horizon of around five years. Equity funds such as large cap funds make the best option for long-term goals.

Systematic Investment Plan (SIP) is a facility through which you can invest a certain sum of money every month in a mutual fund of our choice. Investors can also increase their SIP amount and make one time or lump sum investments that will aid in reaching their goals faster.

To gain clarity or to know how to plane for your child’s future, you can take help from a financial advisor.

Conclusion: With the rising cost, planning for a child’s future has become an important part of financial planning. Money should not come in between your child’s goals and proper planning will ensure that they have the luxury to opt for the college and course of their choice. So, give your child the opportunity to spread their wings and fly. A financial advisor can help to make it a reality. Get in touch with your financial advisor today.


6 Money lessons you must teach your child.

 





There is no denying to the fact that parents want the best for their children and help them in every possible way to make them better individuals. While children receive formal education from educational institutes, the traditional education system teaches them almost nothing about money. 

Hence, the need to teach money lessons or help children form good money habits fall on the parents. 

On this Children’s day, we show you some of the easy ways that help your kids to inculcate good money habits.

 

1. Explain to them the difference between Needs and Wants:

It is normal for kids to demand things from their parents. Many things will catch their attention. However, is it required to buy whatever your kid wants? Absolutely not!

Whenever your kid wants a particular thing, ask them why they want it. You can follow up with several other questions such as asking them about other alternatives that they already own. You can explain the concept the need and wants. This may help them to cultivate good spending habits in their later life. 

2. Give them a budget

Instead of heading to their whims and fancies, give them a specific sum of money on a weekly or a monthly basis. The allowance may vary from time to time. 

Also, let them know that they may get over and above their allowances if they help around the house such as getting groceries or doing other household chores. This will help them to understand the value of money.  

The value of money is one of the most important money lessons that are going to stay with them for their entire life. The key is to make children realise that everything comes with a cost and they need to plan and work for it. 

3. Help them to cultivate saving habits

In this age of instant gratification, cultivating savings habits has become the need of the hour. Typically, parents give piggy banks to their kids to help them save their pocket money or the money that they have received as gifts from various relatives.

Gift them a clear glass piggy bank found on various shopping sites. As the amount of money is visible through a glass piggy bank, it may encourage your child to save more and help them to prioritise their financial goals over other things.

If they have multiple financial goals, you can give them piggy banks as per their goals. You can also buy some mason jars and ask them to label it with their goals.  

4. Tracking their savings and spendings 

Helping your child to track their savings and spending will result in good money habits as an adult. Before they begin their savings journey, tell them to keep a note of the amount that they are saving in a diary. Once they achieve the required amount, they can open or break their piggy bank. 

Also, motivate them to keep a tab on their spending. This will help your kid to keep a track of their pocket money or save more if they wish to. 

5. Include your child in money conversations

Many parents make the mistake of leaving out their children from some of the critical money conversations. Include your children when you are drafting the monthly budget, or planning to invest as it will also make them familiar with the different aspects of money managing. 

Also, try to bring your children when you meet your financial advisor. While they may not understand most of the things, kids quickly absorb and it helps them to build a perspective. 

6. Be the financial role model 

Kids learn a lot by observing elders. Hence, it is important to become the financial role model that your kids might follow. While parents must make their children understand the value of money, parents should be mindful of the way they are spending money, where they are spending money, and how much are they saving or investing per month. 

Conclusion: Habits cultivated at a tender age has a long-lasting impact. Money habits are no different. With the lack of financial education, parents and elders need to help their children form good money habits.  


Save tax and Plan retirement with Mutual Funds





For most Indians, retirement is the most ignored financial goal. From the beginning of our career, we start chasing short-term goals which give us short-term gratification like buying a car, buying a New smartphone, vacation, etc. Most of our savings are channelized in achieving our Retirement Goal.

However, we all have a desire to save taxes. We can channelize this desire to achieve two goals,

  1. Saving Tax
  2. Creating Retirement Corpus

Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C. This deduction is allowed to an Individual or a HUF.

To save tax, we normally invest in PPF and other instruments which have a long lock-in period. When you are ready to invest for such a long period, investing in equity is a better idea, as equity is less risky and more rewarding in long term. You may choose to invest in Equity Linked Savings Schemes (ELSS) of mutual funds to save tax under section 80 ( C ).

What is ELSS?

An Equity Linked Savings Scheme (ELSS) is an open-ended Equity Mutual Fund that doesn't just help you save tax, but also gives you an opportunity to grow your money. It qualifies for tax exemptions under section (u/s) 80C of the Indian Income Tax Act.

Along with the tax deductions, an ELSS offers you the opportunity to grow your money by investing in the equity market. ELSS carries a lock-in period of 3 years. Furthermore, you can also choose to invest through a Systematic Investment Plan and bring discipline to your tax planning.

Here's how it will work. Say, one invests Rs 12,500 monthly in ELSS (Rs 1.5 lakh annually) for 25 years of one's working life towards retirement. Assuming a growth rate of 12 percent a year, the corpus could be nearly Rs 2.12 crores, which could be part of one's retirement portfolio in addition to other investments earmarked for retirement. 

SCHEME NAME1 Year2 Year3 Year5 Year7 Year10 Year12 Year15 Year
Capital Invested
Rs 1 LacRs 2 LacsRs 3 LacsRs 5 LacsRs 7 LacsRs 10 LacsRs 12 LacsRs 15 Lacs
Retruns Generated from Various Schemes
Maximum ELSS Return₹ 1,21,559₹ 2,75,071₹ 4,41,203₹ 8,98,110₹ 16,13,266₹ 26,14,434₹ 35,18,416₹ 82,92,953
Minimum ELSS Return₹ 1,00,030₹ 2,29,534₹ 3,50,048₹ 7,25,657₹ 12,12,686₹ 19,86,361₹ 25,83,101₹ 48,77,739
Average ELSS Return₹ 1,10,884₹ 2,51,585₹ 3,89,498₹ 8,08,623₹ 13,58,294₹ 23,01,979₹ 30,64,690₹ 69,33,800
S & P BSE Sensex₹ 1,13,410₹ 2,45,862₹ 3,72,791₹ 6,97,401₹ 11,06,090₹ 17,71,240₹ 23,53,781₹ 47,32,426
PPF Calculated @ Actual Rates₹ 1,07,829₹ 2,24,307₹ 3,50,839₹ 6,37,886₹ 9,76,743₹ 15,94,563₹ 20,93,314₹ 30,01,347


Past Performance may or may not sustain in the future. The above table shows the value of Rs. 1 Lac invested in PPF, Sensex, and various ELSS Schemes as of 31ˢᵗ May of every year. (Valuation Date: 31ˢᵗ May 2018) Note: Amount assumed Rs. 1 Lac in PPF & ELSS. However, deduction u/s 80C has been increased from Rs. 1 Lac to Rs. 1.5 Lacs w.e.f 22ⁿᵈ August 2014.

Disclaimer: The information contained in this report has been obtained from various sources. While utmost care has been taken for the preparation of this report, we do not guarantee its validity or completeness. Neither any information nor any opinions expressed constitute an offer, or an invitation to make an offer to buy or sell any fund. Investors should take financial advice with respect to the suitability of investing their monies in any fund discussed in this report. Mutual fund investments are subject to market risk. Please read the Scheme Information Document and Statement of Additional Information carefully before investing. 


 

Why you shouldn’t depend only on EPF for your retirement?






 

When most people think of retirement, they think of employer benefits like Employee Provident Fund (EPF). While this is a great option, but it is not the only one. You can supplement with other investment options such as mutual funds. This blog will highlight the importance of investing in mutual funds for your retirement.

EPF is a tax-efficient investment instrument and has the backing of the government.

Mutual funds and EPF can help boost your retirement savings and ensure that you don’t run out of your retirement savings.    

Here are some reasons you shouldn’t rely entirely on your employer for your retirement benefits:

EPF is primarily a debt-based product:  

EPF is primarily a debt-based product. It is essential that you understand that EPFO can invest up to 15% of its incremental flow in equities. 

Equity-based instruments have the potential to make real returns on your money. Real return is the return given by the investment option after subtracting the effect of inflation.

You can build a retirement corpus if you invest in options that beat inflation, especially if you start early. You can invest in equity-oriented mutual funds, which involve higher risks than most other investment instruments but offer impressive returns over time.

Minimal investment amount:

In EPF, employees and employers both contribute 12% monthly to EPF. They can contribute up to 12% of Rs.15,000, or Rs.1800. However, if your income exceeds Rs.15,000, the company is not required to contribute 12%. So, regardless of your income, the employer’s contribution may be smaller.

Basically, the overall amount that gets credited to your EPF account may not be sufficient to fund your retirement goals.

You can invest more in your EPF account. This option is called Voluntary Pension Fund (VPF), and it is an extension of EPF.

Previously, VPF investments were tax-free. However, according to Budget 2021, if your EPF and VPF contributions exceed Rs. 2.5 lakh in a financial year, they tax the interest that you earn on such contributions.

Cap on maximum investment amount:

As an employee, you can make tax-free contributions of up to 12% of your basic to EPF. If you want to invest more towards your retirement plan, you can invest in mutual funds. You may choose from a variety of mutual funds depending on your investment objectives and time horizon.

If you invest in mutual funds, there is no cap on the maximum investment amount. Moreover, taxes apply on redemption.

Availability of different investment options:

Mutual funds offer different investment options such as lumpsum and Systematic Investment Plans. It means that you can make investments at any time of the day from anywhere.

A systematic Investment Plan (SIP) is a regular investment plan through which you can invest a predetermined amount at regular intervals. You can also increase or decrease your SIP per your financial conditions. So, mutual funds offer investment flexibility that EPF does not provide.

Conclusion:

The importance of retirement preparation cannot be overstated. It’s possible that relying on EPF isn’t the greatest option. Inflation might deplete your savings faster than you expect, so your retirement fund may not be sufficient to pay your daily expenses. You might use a Systematic Investment Plan (SIP) to invest in mutual funds for retirement income. SIP allows you to invest a set amount at regular intervals. It’s completely optional, and you may increase, decrease, or stop your SIP investments at any time. As a result, you may develop a retirement plan and invest to meet your retirement objectives.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

6 Reasons Why Health Insurance is Important

 




Do you have health insurance? Do you think the health insurance provided by your employer is adequate?

There is a popular saying that 'health is wealth'. In the modern context, deteriorating health has the potential to wipe out all your wealth in a fraction of a second.

In the current scenario, health insurance has become the need of the hour. An adequate health insurance plan is essential as it insures the health of you and your family members.

In this article, we will explain health insurance and its importance.

Meaning of Health Insurance

When you take a health insurance, the insurance companies take the financial responsibility of your and your family member's health. So, if you are hospitalised, the insurance companies will take care of the hospitalisation and other fees.

There are two key ways to claim your insurance proceeds. If you are hospitalised in the non-network hospitals, you can provide the receipts to get your claims. Here, you pay for the hospital bills upfront.

However, if you seek treatment in a network hospital, you can enjoy cashless hospitalisation. This means you don't have to pay any money. A good deal of insurance companies have tie-ups with hospitals and treatment facilities.

Health insurance is a must for everyone. Individuals under 45 years of age can take insurance policies undergoing no health check-up. The premium that needs to be paid increases with age.

Importance of Health Insurance

It takes care of your medical expenses

Healthcare costs are expensive and it is likely to skyrocket in the near future. Government's inflation data have shown that health care inflation is almost double the rate of overall inflation. The average retail healthcare inflation in India was 7.14% in the financial year 2018-19.

With the ever-increasing cost of health care, without insurance, a single day in the hospital may wipe out several months savings. In this urgent scenario, with no health insurance, you may have to withdraw money from other investment options such as equity mutual funds. As a result, there may be a delay in reaching your financial goals.

Health insurance makes sure that your savings and financial goals remain intact. Insurance takes care of hospitalisation expenses and medicine costs. Few insurance plans also cover the cost of pre-hospitalisation and post-hospitalisation expenses such as ambulance costs, check-up fees and medicine costs.

Avail Cashless Health Insurance

As mentioned above, many insurers have tie-ups with hospitals to offer cashless treatment to their customers. Hence, customers can avail the treatment paying no cash. This means you don't have to pay any money for the treatment and focus on the well-being of your loved ones.

Entire family protection

Health insurance should cover all your family members under health insurance. However, taking individual health cover for all your family members can be expensive. Family floater plan that covers the health-related costs of the entire family is an affordable option.

Covers lifestyle-related diseases

There is no denying the fact that several lifestyle-related diseases have sprung up because of your sedentary lifestyle. Diabetes, high blood pressure and cardiac problems are some lifestyle-related diseases. It can lead to other severe health problems.

Health insurance plans cover these lifestyles-related diseases. While it is necessary to be physically active to keep these diseases at bay, with health insurance you don't have to worry about the costs raising due to these issues.

Avail Tax benefits

Besides helping to cover the healthcare-related costs, you can also save tax on the premium paid on health insurance. You can save tax up to Rs.25,000 under section 80D of the Income Tax Act in a financial year. The premium paid for you and your spouse and dependent children is considered for tax exemptions.

Conclusion:

Whether you want to protect yourself from the costs arising from coronavirus or lifestyle diseases treatment, health insurance policies cover a lot of such diseases. Cashless hospitalisation makes it easy for customers to avail cashless treatment.

Health insurance policies come with a lot of terms and conditions. Hence, it is advisable to sit with your financial advisor to figure out the best health insurance plan for you.

Wednesday 1 December 2021

Why & How To Diversify Your Portfolio?






Diversification is investing in investment options to limit the exposure to any particular asset class  or investment. This practice helps to reduce the risk associated with your portfolio. Simply put, diversification helps you to yield higher returns as well as reduce the risk in  your  portfolio.  Balancing your comfort level with risk against your time horizon is one of the keys to a long successful investing journey. For e.g., keeping pace with inflation may not be easy if you start investing in conservative investment options from a young age. On the other hand, taking a large exposure in high-risk instruments near retirement could erode the value of your portfolio. Hence, it   is important to balance the risk and reward in your portfolio so that you don’t lose sleep on market ups and downs.



What are the components of a diversified portfolio?

The major components of a diversified portfolio are equity, debt and money market instruments.

 

Equity investments carry the highest risk in your portfolio and it has the potential to give higher returns over the long run. But with higher return comes greater risk especially in the short run. Equities tend to be volatile than other asset classes. Investing in equity mutual would be the best way to take exposure in equities. Equity mutual funds are diversified funds  as  fund  managers invest in different stocks and across sectors (except sectoral funds) which optimises the risk in   your portfolio.


Another important component of a diversified portfolio is debt securities. While equities have the potential to grow your wealth, debt investments provide stability and act as a cushion through the market cycles. Debt instruments include debt mutual funds, fixed deposits, bonds etc . The  main  objective of debt instruments is not to provide high returns like  equities  but  capital  protection along with inflation-beating returns. Debt investments can also be a source of income.

While equity investments give higher returns and debt instruments protect the capital to help us   fulfil our financial goals, a part of the portfolio should be in liquid and money market instruments such as liquid mutual funds or a separate savings account. It provides easy access to money    during emergencies such as job loss or accident.


Why is diversification  important?

Diversification helps to minimise the risks associated with your portfolio. Let us assume that two years ago, you had invested your entire savings in a particular airline stock. Now, the airline is near bankruptcy and the stock price went down 60% in one month. Would you be comfortable in that   kind of scenario? Most people wouldn’t. You  would have less stressed out if you had diversified  your portfolio and invested in a few other companies rather than taking 100% exposure in one particular stock.

Diversification is important because different investment options react differently to the same development or move in a different pattern. For example, real estate  and  gold  tend  to underperform when equity markets are soaring. A cut in the interest rate may benefit the bond market but may not be good news for individuals with fixed deposits.


How to diversify your   portfolio?

Diversifying your portfolio is as healthy as consuming green leafy vegetables, fruits, exercising and meditating on a regular basis. However, eating just one kind of fruit may not be very effective.  Hence, it is important to diversify. Investment is no different. Here are some of the ways through which you can diversify your portfolio:


                                            

Spread your investments among different asset classes:A diversified portfolio should include equities, debt and cash. Exposure to international market and commodities such as gold can help you in further diversifying your portfolio. It is because different investments come with different    risk and returns. Higher the returns, higher will be the risk and vice versa.

Diversify within individual types of investments: Diversification is also necessary within an asset class. For e.g. in case of equity mutual funds do not concentrate on one category. It is  recommended that you have mutual funds across market capitalisation such as large cap funds,  mid cap funds and different investment strategies. Different funds and stocks come with varying risks thus minimises the risks.

Rebalance your portfolio regularly:Diversification is not an one-off exercise. Rebalancing your portfolio depends on two important things which are the number of years until you expect to need money(time horizon) and risk-taking capacity(risk tolerance).


To summarise, diversification is important for every investor whether it is across asset classes or within an asset class. The nature of diversification depends on financial goals, time horizon and  risk tolerance. It is also important that the diversification of the portfolio is updated on a regular basis.




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आपके जीवन के 3 सबसे महत्वपूर्ण पहलू हमें बचपन से ही सिखाया जाता है कि पैसे बर्बाद न करें और हमेशा सबसे सस्ते विकल्प का चुनाव करें। लेकिन महं...