Different types of Debt Mutual Funds

         Different types of Debt Mutual Funds

A Primer on the Different types of Debt Mutual Funds

Are you scared of investing in mutual funds because it invests in the equity markets? Most of us assume that investing in mutual funds is akin to investing in the stock market. However, that is not the case. There are mutual funds that do not invest in equities. A debt mutual fund is a category of mutual fund that invests in the debt securities issued by the government and various companies.

Debt is an asset class that is less volatile than equities. Government bonds, state development loans, treasury bills, and corporate bonds are some of the types of debt instruments. These debt instruments come with different maturities and risks.

Debt mutual funds invest in these securities according to the scheme’s investment objectives. Based on the underlying securities, debt funds can be segregated into a few categories. Depending on the time horizon, investors can choose the debt funds based on the maturity periods of the papers held by these funds. Different debt funds are meant for different investors.

Here are some of the main types of debt funds:

Liquid Fund:- 

Liquid Fund carries the lowest risk among the different mutual fund categories. It has the lowest risk as it invests in high-quality debt papers that mature within 91 days. The main objective of liquid funds is to provide liquidity. It helps investors to park surplus cash for a certain period and receive better returns than savings accounts. Unlike fixed deposits, liquid funds do not have any maturity period. You can also redeem money from liquid funds.

Currently, investors can redeem up to Rs.50,000 or 90% of the total amount,whichever islower, instantly.

Also, given the series of downgrades and defaults, the market regulator has laid down stricter norms for liquid funds. According to the new guidelines, liquid funds have to invest at least 20% of their portfolio in liquid assets such as cash, government securities, treasury bills, and repo instruments. Moreover, liquid funds can now invest only up to 20% in a single sector and not more than 10 percent in housing finance companies.

Liquid Funds are good investment options for your short-term goals such as planning for a vacation or saving money for a new laptop.

Overnight  Fund:- 

As the name suggests, these debt funds will invest in overnight securities that mature in one day. It can be a good investment option for individuals who want to park their money for a day or two.

Money Market Funds: 

Money Market funds will invest in money market instruments with a maturity period of within 1 year. Money market instruments include.

Duration Funds: 

These debt funds invest in debt securities with a maturity period. Ultra-short-duration funds, low-duration funds, short-duration funds, medium-duration funds, medium to long-duration funds, and long-duration funds are the different categories of duration funds. Ultra-short-duration funds will invest in debt securities with a maturity between three months to six months.  Low-duration funds, short-duration funds, medium-duration funds, medium to long-duration funds, and long-duration funds will invest in papers maturing six to12 months, one year to three years, three years to four years, four to seven years, and greater than seven years respectively.

Duration funds will help you to invest in a fund based on your time horizon. E.g., if you are planning for a vacation in the next six to 12 months, you can invest in a low-duration fund.

Dynamic Bond Funds

While duration funds invest in papers with a fixed maturity period, dynamic bond funds can invest in papers maturing at different periods. The average maturity of the papers of these funds will depend on the interest rate scenarios. If the fund manager believes that the interest rate is likely to inch lower, they will increase the allocation of long-term bonds such as government bonds, and vice versa.

Corporate Bond Funds

Corporate bond funds primarily invest in high-rated corporate bonds. Corporate bonds are issued by various companies. According to the recent SEBI guidelines, corporate bond funds have to invest nearly 80% of their portfolio in AAA-rated corporate bond funds. Corporate bond funds carry a higher risk than ultra-short and short-term funds and hence it is suitable for investors who can take higher risk.

Credit Risk Funds

Credit Risk Funds mainly invest in debt securities that are rated AA by various agencies. Fund managers invest in lower-rated papers that are likely to be upgraded in the future, which increases the value of the paper. As it invests in lower than AAA-rated papers, credit-risk funds also have the potential to give higher returns than other debt funds. However, it also comes with higher risk as well. 

Gilt funds    

Gilt funds only invest in government securities of different maturities. Gilt funds perform well when the interest rate is moving south. Investors who want to invest for the long run can invest in these funds. It also comes with higher risk than short-term debt funds.

Conclusion:  

If you are looking for a tax-efficient investment option that carries a lower risk, debt funds can be a good investment option. However, as discussed above, different categories of debt funds carry different risks. So, research is highly recommended before investing in debt funds. In case of further queries, you can always reach out to your financial advisor. 

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जोखिम को समझना

                        टैक्स बचाने के लिए आपको क्या चुनना चाहिए?

                 

     

                           

 

ईएलएसएस बनाम पीपीएफ: कौन सा टैक्स सेविंग इंस्ट्रूमेंट बेहतर है

 

"... लेकिन इस दुनिया में मृत्यु और करों को छोड़कर कुछ भी निश्चित नहीं कहा जा सकता है।"

 

बेंजामिन फ्रैंकलिन

जबकि हम मौत के साथ चतुर नहीं हो सकते हैं, हम करों के साथ होशियार हो सकते हैं और अपनी मेहनत की कमाई को बचा सकते हैं। इक्विटी लिंक्ड सेविंग्स स्कीम (ईएलएसएस), पब्लिक प्रोविडेंट फंड (पीपीएफ) और नेशनल पेंशन सिस्टम (एनपीएस) और टैक्स सेविंग फिक्स्ड डिपॉजिट आदि जैसे विभिन्न उपकरणों में निवेश करके टैक्स बचा सकते हैं।

इन टैक्स सेविंग विकल्पों में से ईएलएसएस और पीपीएफ सबसे लोकप्रिय हैं। इन दो विकल्पों में से एक वित्तीय वर्ष में 1.5 लाख रुपये तक का निवेश आयकर अधिनियम 1961 की धारा 80 सी के तहत कर कटौती के लिए योग्य है।

क्या आपने पीपीएफ या ईएलएसएस में निवेश किया है? इस लेख में, हम इन दो टैक्स सेविंग इंस्ट्रूमेंट्स की तुलना करेंगे जो आपको आपके लिए सही एक का पता लगाने में मदद करेंगे।

 

 

लॉक-इन अवधि: लॉक-इन अवधि: ईएलएसएस और पीपीएफ दोनों ही लॉक-इन अवधि के साथ आते हैं। ईएलएसएस फंड में तीन साल की लॉक-इन अवधि होती है जबकि पीपीएफ में 15 साल की लॉक-इन अवधि होती है। हालांकि, पीपीएफ में आप सातवें साल के बाद आंशिक निकासी कर सकते हैं। इसलिए, हम देखते हैं कि ईएलएसएस में पीपीएफ की तुलना में कम लॉक-इन अवधि होती है। इसका मतलब है कि आप तीन साल के बाद ईएलएसएस फंड की इकाइयों को भुना सकते हैं। हालांकि, यह सुझाव दिया जाता है कि आप इसे रिडीम न करें, क्योंकि निवेश किए जाने से आपकी पूंजी समय के साथ बढ़ेगी।

रिटर्न: रिटर्न पीपीएफ और ईएलएसएस को अलग करने वाले प्रमुख कारकों में से एक है। भारत  सरकार हर तिमाही पीपीएफ की ब्याज दर तय करती है। दूसरी ओर, ईएलएसएस में रिटर्न सुनिश्चित  नहीं है और यह इक्विटी मार्केट से जुड़ा हुआ है। अगर हम दोनों विकल्पों के ऐतिहासिक प्रदर्शन को देखें, तो पिछले दस वर्षों में ईएलएसएस फंड ने 13.55%* का रिटर्न दिया है, जबकि पीपीएफ में  ब्याज दरें 7.6% से 8.8% के बीच रही हैं।

शोध के अनुसार (https://www.valueresearchonline.com/story/h2_storyview.asp? str=26860&utm_source=2019-07-09-insight&utm_content=Tue-

1200&utm_medium=email&utm_campaign=insight) by Value Research, an investment of Rs.1.5 पिछले 20 वर्षों में हर साल लाख, पीपीएफ में बढ़कर 79.39 लाख रुपये हो गया है।जबकि इसी समयावधि में ईएलएसएस में निवेश बढ़कर 2.28 करोड़ हो गया है।इसलिए रिटर्न के मामले में ईएलएसएस ने पीपीएफ से बेहतर प्रदर्शन किया है| 

 निवेश राशि: पीपीएफ के मामले में, आप एक वित्तीय वर्ष में केवल 1.5 लाख रुपये तक ही निवेश कर सकते हैं। हालांकि, ईएलएसएस के मामले में ऐसा कोई प्रतिबंध नहीं है। जबकि कर लाभ 1.5 लाख रुपये पर लागू होगा, आप अधिक निवेश कर सकते हैं और पूरी निवेश राशि पर रिटर्न अर्जित कर सकते हैं। नतीजतन, लंबी अवधि के लक्ष्यों की योजना बनाने के लिए ईएलएसएस भी एक लोकप्रिय विकल्प है। 

कराधान: ईएलएसएस फंड से होने वाले लाभ पर इक्विटी फंड के अनुसार कर लगाया जाता है और यह अल्पकालिक और दीर्घकालिक पूंजीगत लाभ के अधीन होता है। यदि इकाइयां 1 वर्ष से पहले बेची जाती हैं तो अल्पकालिक पूंजीगत लाभ लागू होते हैं। इस परिदृश्य में, 15% का कर लागू होगा। यदि इकाइयों को एक वर्ष से अधिक समय तक रखा जाता है, तो एक वित्तीय वर्ष में 1 लाख रुपये तक के लाभ पर छूट दी जाती है। यदि लाभ 10 लाख रुपये से अधिक है, तो ईएलएसएस फंडों पर दीर्घकालिक पूंजीगत लाभ लागू किया जाएगा।

 दूसरी ओर, पीपीएफ ईईई (छूट, छूट, छूट) श्रेणी के अंतर्गत आता है। इसका मतलब है कि पीपीएफ में निवेश से अर्जित ब्याज और मूल राशि पर कराधान से छूट है।

निष्कर्ष 

अब तक आप पीपीएफ और ईएलएसएस के बीच के अंतर से परिचित हो चुके होंगे। पीपीएफ भारतीय जनता का प्रिय है, लेकिन इसका दीर्घकालिक प्रदर्शन आकर्षक नहीं है जबकि ईएलएसएस फंडों ने आकर्षक रिटर्न दिया है। साथ ही, ब्याज दर 8% से घटकर 7.9% (जुलाई-सितंबर 2019) होने के साथ, यह संभावना नहीं है कि पीपीएफ बेहतर रिटर्न देगा।

ईएलएसएस न केवल एक कर बचत साधन है; यह आपको सेवानिवृत्ति जैसे अपने दीर्घकालिक वित्तीय लक्ष्यों को प्राप्त करने में भी मदद कर सकता है। ऐसा इसलिए है क्योंकि आप 1.5 लाख रुपये से अधिक का निवेश कर सकते हैं और फिर भी पूरे कोष पर रिटर्न अर्जित कर सकते हैं।

अगर आपने अभी काम करना शुरू किया है या इक्विटी मार्केट में कोई एक्सपोजर नहीं है, तो आप ईएलएसएस फंड में निवेश कर सकते हैं। एक बार जब आप ईएलएसएस फंड के साथ सहज हो जाते हैं, तो आप अपने वित्तीय लक्ष्यों को प्राप्त करने के लिए अन्य इक्विटी फंडों में निवेश करना शुरू कर सकते हैं।

किसी भी प्रश्न के मामले में, कृपया एक वित्तीय सलाहकार से संपर्क करें। वह आपको सर्वश्रेष्ठ ईएलएसएस फंड के साथ मदद करने में सक्षम होगा।

                                             

                                        AMFI Registered Mutual Fund Distributor 

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UNDERSTANDING RISKS

                                 What should you choose to save tax?

     

ELSS vs PPF: Which Tax Saving Instrument Is Better                        

 “...but in this world, nothing can be said to be certain, except death and taxes.”

Benjamin Franklin

 While we can’t get clever with death, we can be smart with taxes and save our hard-earned money. One can save tax by investing in various instruments such as Equity Linked Savings Scheme (ELSS), Public Provident Fund(PPF), and National Pension System(NPS) and tax saving fixed deposits, etc.    

Out of these tax-saving options, ELSS and PPF are the most popular. Investments of up to Rs.1.5 lakh in a financial year in these two options among others qualify for tax deductions under Section 80C of the Income Tax Act 1961.   

Have you invested in PPF or ELSS? In this article, we will compare these two tax-saving instruments which will help you to figure out the right one for you.

Lock-in Period: Both ELSS and PPF come with a lock-in period. ELSS funds have a lock-in period of three years while PPF comes with a 15-year lock-in period. However, in PPF, you can make partial withdrawals after the seventh year. Hence, we see that ELSS has a shorter lock-in period than PPF. This means that you can redeem the ELSS fund’s units after three years. However, it is suggested that you do not redeem it, as by being invested your capital will appreciate over time.

Returns: Returns are one of the key factors that distinguish PPF and ELSS. The government of India fixes the interest rate of PPF every quarter. On the other hand, the returns in ELSS are not assured and are linked to the equity market. If we see the historical performance of both the two returns options, ELSS funds, in the last ten years have given returns of 13.55%* while the interest rates in PPF have ranged from 7.6% to 8.8%.

According to research (https://www.valueresearchonline.com/story/h2_storyview.asp? str=26860&utm_source=2019-07-09-insight&utm_content=Tue-

1200&utm_medium=email&utm_campaign=insight) by Value Research, an investment of Rs.1.5 lakh every year over the last 20 years, has grown to Rs.79.39 lakh in PPF. While in the same time frame, investment in ELSS has increased to 2.28 crore. Hence, in terms of returns, ELSS has outperformed PPF. 

Investment amount: In the case of PPF, you can only invest up to Rs.1.5 lakh in a financial year. However, there is no such restriction in the case of ELSS. While the tax benefit will apply to Rs.1.5 lakh, you can invest more and earn returns on the entire investment amount. As a result, ELSS is also a popular option to plan for long-term goals.  

Taxation: Gains from ELSS funds are taxed as per the equity funds and are subject to short-term and long-term capital gains. Short-term capital gains are applicable if the units are sold before the 1st year. In this scenario, a tax of 15% will be applicable. If the units are held for more than a year, gains up to Rs.1 lakh in a financial year are exempted. If the gains are higher than Rs.10 lakh, long-term capital gains will be applied to ELSS funds.

On the other hand, PPF falls under the EEE(Exempt, Exempt, Exempt) category. This means that the interest earned by investing in PPF and the principal amount is exempted from taxation.

 Conclusion

By now, you may have become familiar with the differences between PPF and ELSS. PPF is the darling of the Indian masses, but its long-term performance is not attractive while ELSS funds have given attractive returns. Also, with the interest rate trending down from 8% to 7.9% (July-Sep 2019), it is unlikely that PPF will give a better return.

ELSS is not only a tax saving instrument; it can also help you to achieve your long-term financial goals such as retirement. It is because you can invest over and above the Rs.1.5 lakh mark and still earn returns on the entire corpus.

If you have just started working or have no exposure to the equity market, you can invest in ELSS funds. Once you are comfortable with ELSS funds, you can start investing in other equity funds to achieve your financial goals.

In case of any queries, please get in touch with a financial advisor. He or she will be able to help you out with the best ELSS funds.

  

                                                        AMFI Registered Mutual Fund Distributor 

                                                                      6306522855  

                                                            Burlington, Lucknow, 226001     

                                                 customercare@vsix.co.in || www.vsix.co.in

                                         

                                                          

   

                                          

BEST Fund vs Right Fund

                                                          BEST Fund vs Right Fund 

The Right Fund vs Best Mutual Fund

The Right Fund vs Best Mutual Fund

Every one of us wants the best things in the world. The best clothes, shoes, cars and the list goes on. Seeking the best things is fine in all the other areas but not when it comes to selecting a  mutual fund to invest.

It is easy to get swayed by the best mutual fund that is giving eyeball-popping returns in the last six months. But is it a good option to go for this best mutual fund? The answer is, it depends.

IT DEPENDS on whether this best fund is also the right fund for you. The right fund will vary from individual to individual. There are several factors that need to be considered to arrive at the right fund. By the right fund, we mean the most appropriate fund for a particular investor. The appropriate fund for someone who wants to stay invested for 10 years will vary from a person who wants to stay invested for just 10 months.

The investment horizon, risk-taking capacity, age, and urgency of the goal are some of the factors that will help to decide whether the fund is right for you or not.

So, let’s understand what will be the right fund for you based on these factors:

Investment horizon: The investment horizon is the time that you would want to remain invested. Also, your investment horizon for your different goals will be different. You may want to stay invested for 10 years to buy a house, which may not be the same for a short-term goal. If your investment horizon is short, then you can invest in a mutual fund that carries a low risk. Liquid fund to short-term debt funds is ideal investment options if your investment horizon is less than three years.

Risk-taking capacity: Not everyone can take the same level of risk. A young professional who has recently started working may not be willing to take a higher risk as the person may have no prior experience in investing in equities. On the other hand, a person who has been investing in equities will have a higher risk-taking capacity as he/she understands the risk associated with investing in equities. The person will be better emotionally prepared to handle the volatility in the stock market,than someone who hasn't invested in equities. 

Age: Age is also a crucial factor that helps to decide on the right fund. The financial needs of individuals belonging to different age groups will be different. A person in their 20s has a goal of buying a bike or traveling the world, while a person in their late 50s may want to create a sustainable monthly source of income. Hence, the routes taken by the two individuals will be different. For the person in their 20s, equity funds may be the best option to fulfill their long-term financial goals. On the other hand, the person who is going to be retired, setting up a Systematic Withdrawal Plan from a debt fund with extremely low risk will help him to take care of his needs after retirement.

The urgency of the goal: We may have a lot of financial goals but there are a few goals that we can’t compromise. These goals are most likely to be short-term goals. Planning for these goals will be different than the goals that are not very urgent. A higher allocation of the investment corpus may go towards fulfilling the urgent goals. Also, to make sure that you earn higher returns with moderate risk, you may have to invest in two or more mutual fund schemes. Depending on the time horizon of your goals, it may be a mix of equity and debt funds. Your financial advisor will be able to help you out with the detailed planning. 

Conclusion: The factors such as time horizon, risk-taking capacity, age, and urgency of the goal should not be considered in silos. These factors are dependent on each other. It is always prudent to seat and discusses all these criteria with your FINANCIAL COACH, who considering all these can help you to choose the right scheme for you.

                                                                            Bal Sachin Gupta

                                                        AMFI Registered Mutual Fund Distributor

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