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.

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.

For Further Details Please free to call us on :

CHILD EDUCATION PLANNING (WHAT I LEARNT FROM TRAVEL ???)

 

HI!!!!!! 😊

You might be thinking how education planning is related to travel. As it so? Does travel has same similarity to child future planning? Let us see this as I move forward, so imagine you want to travel and imagine you don’t know your destination.

               OMG! WHERE I WILL GO!!! 😱😱

Definitely: You must be thinking how can I travel if I don’t have destination????

Similarly, If I don’t know what cost is require for my Child Education, Child Higher Education, International Education ,When he /she grow up how I can plan ?

                   

Yeah! It’s really sounds. There is same similarity .So now I know where to go Imagine from LUCKNOW TO MUMBAI 

           

So, I have 200 bucks so I need to take flight train or a car yeah !!!!  Again  CONFUSION?????😕

Likewise When I plan for my Child Future and I know target amount require for Higher Education which product to choose?????

       Yeah!!!!  

    It can be LIC  , OR  Other Insurance Policies 

                                                         

                                               It can be 'PPF'         

  

                                   

                      

             It can be 'Sukanya Samriddhi Yojna'

                             

                              It can be 'Mutual Funds  '

Now Let us review which the right resource for my journey but before that we must know How to Plan?      

The first devil of my child which will meet in the journey is

                                                   “INFLATION”

         

The Next Stage is to “PLAN” fighting with this “INFLATION”

So what are the Resources???? Viz as earlier discussed any of these can be above.

But Why mutual funds are ideal to fund your child's education

Picking an investment product for your child's education can seem like a daunting task. Your parents may have depended merely on bank fixed deposits, PPF and physical gold to meet your education needs. However, given the rising cost of education, you need to choose wisely in order to beat inflation and yield the expected returns.

Equity investments are considered to be ideal for creating wealth in the long term. However, they require specialized knowledge. Also, given their volatile nature, you'd rather invest in equities via the mutual funds route. The advantage of investing in mutual funds is that the underlying stocks/securities are well diversified and are managed by professional fund managers who have the expertise in selecting them.

Here's a look at the benefits that make mutual funds an ideal investment option to save for your child's education needs.

Diversified

A mutual fund invests the pool of money in a portfolio of different stocks/securities across various sectors. Mutual funds also invest in other assets, such as bonds, cash or commodities such as gold. This diversification not only reduces the risk of investing in one particular stock or sector, but also allows for higher potential returns by tendering a broader exposure to various stocks and asset classes.

For further queries please write or free to call on V6 ARTHGYAN LLP  

Property No.41/123, Flat No.404, 4 Th Floor, Humbra Apartment, Nawab Asgar Husain Roa D, Narhai Lucknow Lucknow Up 226001 

   Email id   customercare@vsix.co.in

                 Contact No :6306522855

 

MUTUAL FUNDS - A BRIEF INTRODUCTION

 

Mutual funds are one of the most popular investment options these days. 

The concept of mutual funds was invented in Europe in early 1770s. During a bleak economic situation, Adriaan Van Ketwich, a Dutch merchant created the world's first mutual fund in 1774. He pooled money from several individuals and created a diversified fund of bonds. 

The early mutual funds spread were of the closed-end variety, issuing a fixed number of shares. They spread from the Netherlands to England and France before heading to the U.S. in the 1890s. The first modern-day mutual fund, Massachusetts Investors Trust, was created on March 21, 1924.

 A mutual fund is an investment vehicle formed when an Assest Management Company (AMC) or fund house pools investments from several individuals and institutional investors with common investment objectives.

 A fund manager, who is a finance professional, manages the pooled investment. The fund manager purchases securities such as stocks and bonds that are in line with the investment mandate.Mutual funds are an excellent investment option for individual investors to get exposure to an expert managed portfolio. Also, you can diversify your portfolio by investing in mutual funds as the assest allocation would cover several instruments. Investors would be allocated with fund units based on the amount they invest. Each investor would hence experience profits or losses that are directly proportional to the amount they invest. The main intention of the fund manager is to provide optimum returns to investors by investing in securities that are in sync with the fund’s objectives. The performance of mutual funds is dependent on the underlying assets.

DISCLAMIER 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.