SIPs can be done in any kind of MF scheme. Also, as many SIPs as you want can be done (any number of them for any amount). Invest through SIPs in liquid/ ultra short or short term funds for your short term goals (between 0 to 2 years)
Invest through SIPs in bond funds for your medium term goals (between 2 to 7 years)
and invest across diversified equity MFs for your long term needs (goals after at least 7 years).
All these goals (short, medium and long) can have multiple SIPs for the purpose of diversification (within an asset class)
You can different SIPs in the same as well as different asset classes
Yes, you can have more than SIP. Also, you can diversify across asset classes like Equity, Debt, Gold etc.
Equity investments are suited for long term investing (at least in excess of 7 years) for the goals which would require money after at least 7 years. Also, equity investments are meant for people who understand the volatility involved with this asset class.
Given that you have just started investing, you should first build an emergency fund (equal to 6-8 months of your monthly expenses) by investing the procceds in an ultra short/liquid fund. In addition, if you have any credit card outstanding, it's advisable that you square it off before starting to invest. After these 2 are done (retiring credit card outstanding and building an emergency fund), you should create a medium term fund (for goals occuring in 2 to 7 years) by investing ib corporate bond funds
This is depending on your financial goal. If your goal falls within 2 years you should not be investing in Equity. Rather Debt is a preferable option. In Debt category you may look for a Liquid fund or Short-Term Fund.
If the goal fall between 3 years to 6 years then go for Hybrid category. In case it is beyond 7 years then only go for Equity fund.
You may start with saving in bank in form of Fixed Deposit (FD) and Recurring Deposit (RD). Whatever amount to decide to save in FD & RD, 10% of it you can start investing in Liquid Mutual Fund and Balanced Mutual Fund. Once you are comfortable with the market volatility, you may increase your investment gradually. For better clarity on your risk-taking appetite and financial goals, contact your Financial Advisor/Planner.
To begin with, categorise your goals/needs as per short (0 to 2 years), medium (between 2 to 7 years) and long term (in excess of 7 years). Then prioritize them
And then invest the current and future cashflows and current savings available as per the impending needs.
For your short term goals invest in short term MF products like ultra short and short term funds. For medium term goals you can invest in bond funds or banking and PSU debt funds and for your long term goals invest across diversified equity MFs. While investing in equity funds it is suggested that you invest in a staggered fashion. if you have monthly surplus, you can initiate a SIP (Systematic Investment Plan) across diversified equity MFs, if you have lumpsum money available, you can start investing in the equity funds by initially putting up the amount available in the respective liquid/ultra short fund and then start a STP (Systematic Transfer Plan) to the equity fund over 6 or 12 installments
DIY (Do IT Yourself): you will have to make a note of your own behaviour and sentiment when markets go up or down. And then do analysis come to the conclusion.
Professional: You should contact your Financial Advisor/Planner so that no blind spots are there.
Note: Risk profiling depends on number of factors like demographic, financial goals, what is your relationship with money when you were child, teenager & adult, your current nature income etc.
To me, risk (what you undertake on your money) is defined by the need, by your future goals. If majority of your goals are short (occuring between 0 to 2 years) and medium term (arising between 2 to 7 years) then for these goals you should invest in liquid/ ultra short term funds (for short term goals) and for long term goals (due after an excess of 7 years) invest in diversified equity mutual funds.
Based on your investments, if your majority investments (depending on your future needs/goals) are in the short and medium term category, you are a conservative investor. And, if your majority investments are in long term assets you are an aggressive investor.
In order to ascertain your risk appetite, you should consider various situations and your reponse to those situations. e.g. if you are considering an investment where there are chances of losing your principal amount partially and at the same time there is also a likelihood of gaining substantial returns , your comfort of taking this risk defines your risk appetite. Risk appetite is also associated with your income levels, occupation and several other behavioral factors. However, more important is that the investor should clearly know the risks associated before making investment decisions because most investment accidents happen due to limited knowledge of risk return profile of an instrument.
Without providing any basic details about you like your age, risk profile, retirement age, etc it will not be possible for me to answer your query
Investment is subject to market risk, please read the document carefully before investing
|Returns of monthly investment done||12%||12%||12%||12%|
The chart above details 4 scenarios
PV (Present Value) means the amount needed if you were retiring today
After refers to the number of years you are retiring after
FV (Future Value) means the amount (extrapolated for those years at an inflation rate of 7%)
Monthly investment required in computed at a compounded returns of 12% per annum. These long term investments should stay invested for at least 7 years
Alternatively, if you require Rs. 4 cr.after certain years ( as mentioned below), the mobthly investment required to be made for that is as under
|Returns of monthly investment done||12%||12%||12%||12%|
We would require more information from you before advising on the quantum of investment required to reach a retirement corpus of 4 crores. However, you will get a clue when I say that if you do an SIP of 25000/- for 27 years then assuming a return of 10%, you might reach this target. However, depending on your expenses, years to retirement and other family obligations you can decide on your SIP amount.
Active investing means there is a Fund Manager & a Fund Management Team that will research the companies and identify the stocks to buy / sell.
In case of passive investing, there is no role played by a fund manager or the team to identify the stocks to buy/sell. Eg. NIFTY Index Fund - where the stocks are bought in such proportion that the portfolio mirrors the NIFTY.
Passively managed funds have lower cost as compared to Actively managed funds. However, this does not necessarily mean that Passively managed funds yield a better return than Actively managed funds. Over a fairly long period - 5 years or more - many actively managed funds have outperformed the Passively managed funds.
Major difference in active and passive investing is in style of investment and cost of fund management. Active investing involves portfolio creation based on fund manager's style of investing which includes growth or value biases, fundmental analysis of various sectors and stock selection approach. In case of passive investing , stock selection and allocation weightage mirrors the underlying index or benchmark. Active investing involves lot more fund maanger involvement while passive investing involves limited role to be played by fund manager . Therefore, cost of active investing is almost always higher than passive investing.
In nutshell, Active Fund manager endeavours to beat the benchmark in order to create alpha and thereby justify higher expenses.
Active Investing means Fund Manager or Portfolio Manager actively takes decision with the portfolio on Regular Basis to generate the Returns Over and Above the Benchmark to Generate Alpha Returns.
Passive Investing means no active Roles in Portfolio like investing for long term in Index Fund or ETF Etc. Returns Matches with the Benchmark Returns.
Active investing requires adequate and in depth knowledge of markets, instruments and most importantly, the ability to withstand losses and setbacks.
Mutual fund schemes gives you the cheapest cost option of investing in the market as a passive investor as you get access to very highly qualified, experienced and well paid fund managers to do the active management of your funds while you remain passive. This option allows you not to take the risk of uncertainty off success, gives you time and piece of mind to focus on your core strength, your profession / trade. I would advise passive strategy through investment into MF schemes with proper asset allocation.
Active investing allows the fund manager to choose stocks and their proportion while building a portfolio in line with the objectives and directives of that scheme. Also, the changes happen keeping in mind the fundamental attributes of a stock and fund manager's views on the underlying businesses/industries
Passive management needs the fund manager to follow an index (based on the specific product in question)
Owing to the fact that the former (active management) requires research and due diligence on the securities at hand the expenses are higher than passive management
Active management strategy seems to work better in economies of developing nations where the market information is far from perfect. This leaves room for many opportunities and sweet spots in securities purchase increasing the possibility of superior returns (vs the benchmark/index)
Equity Mutual Funds invest in the shares of the universe mentioned in the offer document (in could be as per market caps- large, mid and/or small; as per investment style- growth, value or blend; as per sectors- diversified or specific sectors like, banking, infrastructure, pharma etc.
ULIPs (unit linked insurance plans) are primarily a two in one. They combine investments and insurance. They provide a risk cover to the extent of the current value of the investments made.
Mostly the expenses of ULIP are multiple times those of equity MFs. This often makes the Equity MFs superior in performance to ULIPs
Option 1: Supoose if the Present Cost of a house is Rs 30,00,000/- and inflation is @8% Future Cost of the house is @ Rs 44,07,984/- one should invest Rs 60,000/- per month with 8% Return on investment.
Option 2 : if the Present Cost of a house is Rs 30,00,000/- and inflation is @8% Future Cost of the house is @ Rs 44,07,984/-. Assuming to go for a bank loanf with Down Payment of Rs 4,07,984/- and taking Loan for Rs 40,00,000/- with Interest rate @8% for Next 20 Years EMI Would be Rs 33458/-.
A debt fund would be most suitable for such a tenure. Invest in a well managed corporate bond fund and Banking and PSU debt Fund
Over a 15 year time horizon, Equity tends to yield a better return than non-equity instruments. However, equity also is highly volatile!!
Therefore, the ideal way to meet this goal is to start a monthly Systematic Plan in an Equity fund or an Equity Hybrid fund. More important is for you to be willing to tolerate high fluctuations and to accept long periods of low returns during the 15-year journey.
The goal is 15 years hence, therefore, one should look at investing in riskier asset classes viz, equity or aggessive baalanced funds. At the same time, one should have sufficient term insurance cover on the earning member to take care of college education and other family requirements in case of any eventuality in the intervening period.
15 years is a very good time in the current situation in India to invest for a particular goal. You can choose to do systematic investment (SIP) monthly into equity funds (one large cap fund and one mid cap fund). If you do not disturb the same for 15 years and continue the SIP for 180 months, you will have more than desired amount for her education. You can then withdraw the necessary amount for education as and when needed and continue the SIP and hold on t othe remaining amount in the investment.
Alternatively, if you want to invest a lumpsum amount then, please put the investment into a short term debt fund and put a 12 month Systematic Transfer Plan from this short term fund into 2 equity funds, one large cap and one mid cap. You will get average NAVs of coming 12 months for entry into equity funds and then hold it without disturbing for 14 years. The desired result will be achieved.
You are better off investing money for her her higher education across well managed diversified mutual funds. Be a long term investor (at least 7 years plus). Invest across large caps (around 75-80%), mid caps (10-15%) and the balance across mid cap Mutual Funds
Also, across each market caps diversify through 2-3 MF schemes.
The best way to invest this corpus is through monthly investing by doing a SIP (Systematic Investment Plan) . Even if you have a lumpsum amount you are better off investing it in a liquid fund and transferring a fixed amount every month in the respective equity Mutual fund across 12 months through a STP (systematic transfer plan)
Technically, Mutual Funds are non transferable and therefore, gifting of MF units is not possible. If one wishes to do so, one should sell his/her MF units, transfer funds as gift to sister and she may purchase same MF units in her name. However, if sister is a minor ,then only gurdian can purchase the MF units on behalf of minor.
Unlike shares, mutual fund units cannot be simply transferred from one person to another, except on demise of the unit-holder.
The ideal way to do it is to open a minor bank account in your sister's name. You can be the guardian for her.
Also, investments have to be done in your sister's name with you as a guardian.
When she turns into an adult, she will have to apply for a status change (from minor to major) for those investments and they will eventually be in her name.
Choose a MF based on it's past long-term data (for more than at least 7 to10 years). Go for a fund which has minimised risk and maximised returns among its peers. We want to identify optimum risk adjusted returns of a fund.
Check whether the investment universe of the fund is as stated in its' objectives, that the processes are in place (and being adhered to) for stock selection and buidling up of the portfolio, and that it is not individual driven.
Also, accord weightage to a fund house in terms of its operational ease and access to information needed.
1. Set Your Financial Goals Before Investment
2.Define your Risk and Reward Ratios
3.Check the Fund History and Track Record of the Funds and Fund Manager track record
4. Expense Ratio and Loads
5. Select a Fund which is appropriate for your Time Horizon
6. Take the help of an Advisor
Review the risk data and performance numbers (vs index and its peers) of the scheme for the last 7-10 years. If you find inconsistencies in the abovemnetioned data for at least 4-5 quarters, you may want to evaluate exiting the fund. While executing the exit be mindful of the tax implications and exit loads. Be clear that you are not judging in a hurry and remember that the preformance most often is in line with the equity markets benchmark.
However, it could also be a debt fund during an interest rate hardening cycle or a debt fund having poor credit quality securities which could be losing the money. If its the fomer you could hold it longer till the cycle starts turning or till the accrual returns make good the loss. If latter is the case, please consult your advisor for actionable.
There is no single 'Best' way to invest in a Mutual Fund.
SIP in an equity mutual fund is a convenient way to keep investing small amounts making use of the Averaging concept - Buying more units at lower price and lesser units at higher price. For some individuals, SIP may be the only way to invest because they cannot accumulate a Lump Sum to invest.
Lumpsum may be a suitable method to invest for individuals whose income is earned in spurts and who do not have a regular monthly source of income.
The decision to invest through SIP or Lumpsum is largely dependent of an individulas unique circumstances. There is no 'Best' way to invest.
In equity mutual funds the best way to invest is through instalments, i.e. SIP (systematic investments plans) or STPs (systematic transfter plans). STP means investing in a liquid fund and from there transferring money every week/month/quarter to the desired equity Mutual Fund.
For medium term and short term debt funds, one can use the lumpsum or the SIP way.
There is no specific 'Right' time to invest in Mutual Funds. Anytime is the Right Time. The choice of the type of Mutual Fund will depend on your financial goal, the stock market indicator ratios, previling interest rate and expectations of Interest rate movements in the future.
Therefore, an individuals own goals, risk profile, tenure of investment and economic indicators are the factors to be considered for choosing the right type of Mutual Fund. There is nothing like 'Right' Time to invest in a Mutual Fund.
The best time to invest is when one has surplus investible surplus. The need/purpose for which this money will be required in future will decide the class of Mutual Funds to invest in. One needs to classify one's goals as short term (0 to 2 years), medium term (2 to 7 years) or long term (7 years plus). Accordingly the money should be deployed in short term debt Mutual Funds, medium term debt Mutual Funds or long term equity Mutual Funds respectively.
It;s always a good time to invest. The critical factor to mind is which asset class to invest in. The asset class to invest in gets driven by one's goals.
When you are investing for a short period of three years, your priority should be to protect the capital. Investors Should Look at Debt Fund for this time horizon. It is always better to Stagger the investment in Equity MF.Anyday is better day for any long term investment.
It is the amount of profit investor has earned in a particular year. For example if investor has invested Rs 1 lakh in 1 Jan 2020 and the final value of his investment is Rs 1.2 lakh in 31 Dec 2020. Then he earned an annualized return of 20% in year 2020.
In simple terms if an investment has made a total return of 18% over 18 months (one and half year) then the annualised return for this investment will be calculated as 12% (not getting into compounding rate).
An annualized total return is the geometric average amount of money earned by an investment each year over a given time period. The annualized return formula is calculated as a geometric average to show what an investor would earn over a period of time if the annual return was compounded. An annualized total return provides only a snapshot of an investment's performance and does not give investors any indication of its volatility or price fluctuations.
Time Taken to double money
14 years 2 months
9 years 0 months
7 years 3 months
6 years 1 months
4 years 11 months
3 years 9 months
3 years 1 month
Yes Taxes are applicable as mentioned below.
Dividend Income on equity investment taxable at appropriate tax bracket of Individual/HUF/NRI/Corporate.
Capital Gain Tax :
Long Term Capital Gains units held for more than 12 months.
Equity Oriented Schemes Individual/HUF/NRI/Corporate is at 10.4%(including Cess).
Other than Equity oriented schemes units held for more than 36 months. Individual/HUF/Corporate is at 20.8% (including Cess).
NRI In case of Listed is at 20.8% and 10.4% in case of unlisted.
Whether it is investing in Mutual Funds or in any other instrument, the primary objective is to allow your money to work for you so that it can help you achieve your Financial Goals.
Mutual funds offer a full spectrum of options for immediate term or for short term and for long term investments. In addition, Mutual Funds are sometimes more tax efficient. Most importantly, mutual funds offer the benefits of diversification even for small size investments.
It is always advisable to first have clear goals and then shortlist the instruments to evaluate the suitability of each instrument to meet your goals.
Mutual fund schemes are by far, the cheapest vehicle for retail investors to participate in corporate growth in India, as one gets access to a very qualified and highly paid, experienced fund management team to assist in the process of decision making. It becomes even more lucrative, if one is looking at investing in growth through equity mutual fund schemes.
Although in the current inflation is moderate, we can’t overlook India’s history of high inflation rates. Equity Mutual funds are among the few asset classes that can provide good real rate of return i..e return over and above inflation rate. Real rate of return has been poor in fixed income products like Fixed Deposits etc, thereby significantly impacting the purchasing power of investors.
In short, you should invest in Equity Mutual funds to retire with a significantly better corpus, although the investment outlook must be long term.
The income tax law allows an employee to claim a tax free reimbursement of expenses incurred. An employee can claim reimbursement of the actual bill amount paid or amount provided in the salary package, whichever is lower.
For ex.Employees incur expenses on books, newspapers, periodicals, journals and so on. The income tax law allows an employee to claim a tax free reimbursement of the expenses incurred.
An employer may provide you with meal coupons such as sodexo. Such food coupons are taxable as perquisite in the hands of the employee. However, such meal coupons are tax exempt up to Rs 50 per meal. A calculation based on 22 working days and 2 meals a day.
In case of individuals, only certain specified expenses like Premium paid on Life Insurance or Tuition Fee for school going children are allowed for tax exemption u/s 80C upto a combined limit of Rs. 1.50 lakhs per year. Apart from this, premiums paid on health insurance for self and dependent parents also qualify for tax exemption upto specified limits.
Other expenses like general living expenses on food, utilities, entertainment, travel, etc. are not allowed for income tax exemption in case of individuals
Timing the equity market seems simple in theory but tough in practice, esp for Mutual Funds because, for the day you choose to invest, the NAV gets decided by the closing price of the stocks (as part of MF schemes holdings) at 3.30 pm and the cut-off time to submit once purchase in equity MFs is 3 pm. Changes on markets levels can happen in the last half an hour also.
Furthermore, our emotions pose a huge obstacle to our buying decision. The best way to invest in equity markets when you have lumpsum money is by putting in the respective liquid/low duration debt mutual fund and setting up a STP (Systematic Transfer Plan) for 12 months towards the desired equity Fund. This way the money eventally gets invested in equity MFs over an year providing rupee cost averaging. And, the lumpsum money invested in liquid/low duration funds also generates returns on the depleting (since the money keeps getting moved to equity fundsin 12 instalments) balance
You can invest either Lumpsum or via SIP in a mutual fund. SIP ensures discipline in investment since you invest a certain amount each month on a fixed date. It helps to average out the cost of investment and brings discipline in the investment process. Since we cannot time the market, SIP ensures we invest a small fixed amount over a period of time.
This however does not mean that we should not do a lumpsum investment. Incase we receive a lumpsum amount like a bonus or an inheritance etc, then we can invest it as a lumpsum as well depending on the market conditions or incase we do not want to time the market, we can invest the lumpsum in a liquid fund and from there we can do an STP into an equity fund over a period of say 3-6 months.
Tax-planning is a part of financial planning. Align your tax-saver investments with your goals and overall strategy.
Tax planning should be part of your overall investment strategy. You will make these investments every year, over your entire working life. So, you must manage it in such a way that it helps build in building a large corpus over the long term.Starting early will help you achieve this.
ELSS is a good choice, especially for the young and millennials just starting out on their investment journey. But if you already have a well-established portfolio, then an ELSS may not be necessary.
I would suggest keeping investments simple so that you understand the same as well as persist with the strategy over long periods of time for wealth build-up. This strategy could use some elements stated below, though there needs to be specific customisation to your unique needs / aspirations and goals.
I would always encourage housewives to save and invest. There are some investments which additionally gives tax savings of upto Rs. 150,000 (under Section 80C of the Income Tax Act, 1961) making it doubly sweet and ELSS (Equity Linked Savings Scheme) is one of them. These are equity oriented mutual funds and anyone can invest in ELSS. An added advantage of ELSS is that these have a lock in period of only 3 years (much lower as compared to other tax savings schemes such as PPF etc.). However, this also necessitates that you only invest that portion which you don’t intend to withdraw over the next 3+ years from the date of investment.
There is no right age to start investing for a child. However, the earlier one starts investing, the more you give the investments the chance to compound (the essence of investing) and become a meaningful value in the later stages of a child’s life.
We all aspire to give the best possible life to our children. There are life stages which are inevitable for a child – education (school), college (graduation and possibly post-graduation), marriage, starting professional life etc. and each of these stages cost money. So, if we start saving early towards these goals or any other unique goals which the child / parent may have, the chances of us accumulating enough towards fulfilling these goals comfortably increases proportionately. So, then one can spend time on planning how to meet the goal rather than getting distracted by how to fund the same in addition to the core question of how to meet the goal.
Out of "Gold ETF or Physical Gold", ETF option is many times better if the objective is for investing. It provides the following benefits over the Physical Gold:
1) The Custody worries as ETFs are only reflected in the Electronic form
2) The Liquidity at full prevailing Prices without any other Taxes or levies - in comparisons with Physical Gold
3) Ease in Liquidity.
4) LTCG: If you sell after holding for 36 months, you generate long-term capital gains. These gains are taxed at 20% (plus any cess) with indexation
Gold provides a good diversification to the regular asset classes (such as Equity / Debt etc.) and is often uncorrelated to them. So, the question is how does one invest in the same.
Physical Gold provides the diversification above and you have full control as well as physical possession of the same. However, you run with some unique risks – is the Gold which you are holding pure or does it have adulteration ? Where do you store it securely as there is risk of theft = and you possibly would need a locker ? How do you access the Gold if you are traveling to some other city etc. and therefore can become illiquid from time to time.
Gold ETF tries to provide the same diversification into Gold with convenience through financialization of Physical Gold. Physical Gold (of defined purity) is held centrally by an Asset Management Company and against the same units are issued which are traded on the Exchange. So without holding the physical gold, one can buy units of Gold (so no purity risk / security risk / need for locker etc.) and these are exchange traded (so no liquidity risk and accessible from anywhere).
So one can choose physical Gold or Gold ETF depending on what convenience once is looking for. For a retail investor, a Gold ETF would be superior for the convenience it offers.
A mutual fund is a pool of resources invested and managed by experts. Thus an investor gets access to a host of different companies by investing in a mutual fund.
An intial public offering of a company is the first time a company gives investors an option to invest in their business.
Investing in a mutual fund and an Initial Public Offer (IPO) are very different. Mutual funds could be equity or debt and in the case of equity mutual funds the only similarity is that the underlying is an equity product.
In the case of an equity mutual fund, the underlying portfolio is a basket of equity shares and possibly some cash (to manage liquidity) as per the mandate of the mutual fund. So, the risks are diversified across many companies. Even in the case of a New Fund Offer (NFO) of a mutual fund, the underlying portfolio consists of a basket of shares of companies (existing) aligned to the NFO strategy (only thing which is new).
In the case of a IPO, it corresponds to the first public offer for a new company , so in that sense it is concentrated to just 1 company and that too which has no track record of the public offer. This is not to say that investing in an IPO is a good strategy or not for that would depend on the potential and the offer price of the IPO.
In short the risk/ return profile of an IPO is very distinct and different from an NFO of an equity mutual fund. And the difference only grows if you consider a regular running existing mutual fund as the question alludes to.
As you are mentioning you are just starting to invest, mostly you should first be looking at building your emergency fund corpus and insurance planning (Term Life Insurance, Personal Accident Insurance and Health Insurance). If you’ve already taken care of those and are ready to start investing towards other goals, specifically this goal of providing for marriage expenses (which is 4 years from now), you may consider investing in schemes under Conservative Hybrid and Balanced Advantage Categories. These schemes provide superior risk adjusted returns over medium term horizon.
Financial Planning is all about goal based investments. It is very heartening to note that you have started planning for your marriage expenses as soon as you have started earning. This gives you the best chance for meeting this goal (and future goals) in a planned manner.
Equity gives the highest long term compounded growth rate and therefore on a generic basis would recommend investing regularly into the same at this stage of your life journey and especially so as your goal is 4 year away (reasonable time horizon to let equities compound). You could use Systematic Investment Plans (SIPs) to add to your investment kitty month on month. Within equity, you may wish to diversify your portfolio across Large Cap & Mid Cap as you start learning about the world of investments and fine tune the same based on your preferences as you understand them better. You could take help of a financial advisor whom you trust because aligning your investments to your risk profile is crucial for long term success.
They key towards a smother experience of using the funds when you need, as you reach closer to your goal date (4 years from now), you would need to continue to book profits from equity and put in less volatile asset classes – so that you are not dependent on market movement on the day you need the funds.
Considering that you have a short to medium time horizon for saving for this goal, you should look at a mix of short term debt funds and dynamic asset allocation funds.
The short term debt funds with a good AAA portfolio would help to generate steady returns with low volatility. While choosing debt funds, due attention should be given to the quality of portfolio in order to avoid facing difficult situations on account of low quality credit issuers.
Dynamic asset allocation funds change allocation between equity and debt based on equity index levels. As the equity indices rise, these funds reduce the equity allocation and vice-versa. Therefore, the dynamic asset allocation funds would help lower volatility in the capital invested and at the same time generate better returns than pure short term debt funds. The main mandate of these funds is to rebalance asset allocation on a monthly basis so that investors can benefit even in the situation of volatile equity market movement. Therefore, while choosing funds in this category one should try to see if the fund manager has displayed the ability to actively rebalance the asset allocation in different market environments
As per the new rules of NAV applicability, units will be allotted on all purchase transactions, including SIPs, as per the NAV of the date when money is available in fund's bank account for utilization (before cut-off time). So, in case you miss a SIP instalment, you'll not get units for the said instalment, as the amount wouldn't reach Fund/ Scheme's Bank Account. MF/AMC won't levy any penalty whatsoever for the missed SIP Instalment. However, if SIP debit in the bank account was missed due to insufficient balance in the account, then your bank may levy penal charges for ECS/ACH return / bounce.
If you miss your SIP installments twice in a row and third time also if it does not go through, then your SIP gets cancelled and you will have to again register the SIP.
This might invite bank penalties too. So it is better to pause the SIP in case of inadequate funds and restart once the funds are there.
SIP (or Systematic Investment Plan) is a method of investing in a regular manner. However, all such systems are meant for supporting investments and not becoming a burden. However, our recommendation is to continue the SIP unless absolutely necessary as the regular investments are often an integral part of financial plans.
For exceptional circumstances, when one is not in a position to make the regular investments, the SIP can be stopped. There are some instances where this is for a short period, in which case a facility of SIP Pause offered by many AMCs can be used. SIPs can then simply be resumed when the period is over.
In the worst case scenario where you miss a SIP instalment in an unplanned manner, then also there is nothing to worry (other than the investment plan taking a hit). Most AMCs allow up to 3 misses for the SIP to stop. So, just missing one instalment may mean that you need to do nothing and the SIP would automatically try again and go through the next instalment if funds are available in the linked savings account. However, if because of repeated SIP misses, the SIP stops then one would need to re-register the SIP for it to start again.
In India, if an investor misses one SIP instalment, then it is not an issue. If three consecutive SIP instalments are missed then the SIP is automatically cancelled. However, if the instalment is missed on account of insufficient balance, the banks have now started levying bank charges for such transactions.
Based on the information you provided, it seems you have a teen ager daughter. Assuming you don’t have any other financial goals, your daughter’s graduation, marriage and your retirement income seem to be the goals due to be achieved. Due to lack of clear information about the exact age of your daughter, her career aspirations and the kind of marriage you have in mind for her, it is not possible to do exact estimations (calculations) with regards to those goals. However, setting aside 50 Lakhs for those goals from your 2 Crore Corpus may be sufficient. Remaining 1.5 Cr. may be considered to be available for your retirement income goal. The value of the present own house, which is self-occupied (?) may not be considered towards any goal. Further, you haven’t specified how much more you’ll be able to save & invest monthly, towards your retirement goal from now, until you retire.
Assuming the life expectancy till age 85 and you wish to get retirement income equal to your present annual expenses i.e., 1L per month, and you will be able to save Rs.1 L per month for retirement goal from now till retirement, and some other sets of assumption about inflation and rates of return on investment you may be able to retire at age 54. You may build your retirement corpus using Equity and Equity Oriented Hybrid Mutual Funds and arrange retirement income cashflow using Systematic Withdrawal Plans from Debt and Conservative Hybrid Funds.
A Google Spreadsheet calculator for you is made available at http://bit.ly/calc2retire which you can download as .xlsx and get to know what is optimum retirement age by changing different variables. Further, as can be seen in the above answer, there are many things that require your inputs. And assumptions have to be fine tuned by experts in a way that suits your situation (for example rate of return on investment). As this is a critical decision of your life, please consult an expert before you decide and also to put in place an investment and withdrawal plan.
I really appreciate your diversified Asset Allocation in your Portfolio and also the strong valuations as on today.,
Retiring early is the dream of almost everyone in this world. I always feel that just an adequate Retirement Corpus may not be the factor to decide the retirement date - but the most important factor to practically think on "What is going to be my Post Retirement Life".
I am sure when we pass through our career with our busy routine, there are many things that we like to do in our life but some how can't do those due to scarcity of time and we store that in our bucket list (To be done at your free time). Many times this bucket list becomes so big that some times we start thinking that, let me retire early so that I can start doing all the stored asssignments of my bucket list - based on my own priorities. Many "Such to do things" authomatically get disappered over the perid of time. But this is one important view Point to think on early retirement.
Infact in my career of almost 4 decads - I have seen the early retirees or even the retirees at 60 get bored/confused with the sudden change of Post Retiremnent life! I appreciate the fact in your case of adequate Nest-Egg developed over a period of time and also you do not have much responssibility except may be of your daughter's marraige etc. Therefore my suggestion would be to use the following startegy to retire early:
With the existing Portfolio Equity segment gradually Move to Mutual Funds atleast with those equities that you think are at stretched valuations.
If you are heavyly into Gold and Liquid Assets - just analyse the "any time requirement" size and if you are at Physical Gold - Move to Soverign Gold Bonds instead of physical one, for many reasons. Liquid Assets are important but not more than... say above your 6 to 7 months requirement at the most 11 months. Try to initiate in deferred annuity plans..with guaranteed Fixed rate payouts with long term basis. Every time you also need to check on Tax Efficiency...And with all this you start thinking or actually persuiting other favoriate things one by one, by taking out some free time from your daily schedule so that gradually you will get the idea about the new lifestyle and think whether you are eager to do that rather than the existing routine. So with all this I think you will be happy to retire at your age 55 or with more confidence at 53 but certainly not before that.. This is my frank opinion Sir!
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