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Which plan to choose – Growth or Dividend

From investment point of view, it becomes very imperative to understand the implication of which option you are choosing. Selecting the right option is as important as selecting the fund itself

The option you pick should depend on the

Cash requirement & investment time horizon
Tax efficiency
In case of Equity Funds

Equity funds are meant for long term investments. Those who want to create wealth or achieve long term financial goals should choose growth option. It will help you to stay invested rather than cashing out from your long term funds.

Exceptions to Growth option

- In case of thematic or sector funds, it would be wise to choose dividend payout option as you will able to book profits when that particular theme or sector is in uptrend. Returns from these categories are highly volatile and it will be difficult to predict the time of exit from these funds

- Those looking for regular income such as retirees, monthly dividend option in Hybrid funds like Balance funds, Equity Savings Fund or MIP will be a good option to select.

In case of Debt funds

Debt funds are meant for short term as well as for long term investments depending on the needs of the investors. Those looking for regular income should select dividend option.

Less than 3 years:

- If you fall in the 10 percent or 20 percent tax bracket, it would be wise to opt for growth option.

- For those in 30 percent tax bracket should select dividend option as DDT paid by the AMC in case of debt funds is around 28.32% in case of Individual/HUF/NRI.

- Companies/corporates should select growth option as they fall in 30% tax bracket and DDT paid by the AMC is also 30%. So for them it will make no difference whether they choose dividend option or growth option.

More than 3 years:

- For all investors including corporates, it would be wise to choose growth option as they can take the benefit of indexation which will provide them higher post tax return.

Happy Investing!!!
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Understanding Dividend and Growth Option in Mutual Funds
#MutualFundOnline #Dividend #OnlineInvestment #FundzBazar

Are you confused whether to go for Growth or Dividend option while investing in mutual funds.

From investment point of view, it becomes very imperative to understand the implication of which option you are choosing. So, one should understand what growth and dividend options mean, in order to invest wisely!

Growth Option:

In growth option all profits earned by the fund are invested back into the scheme. So, investor will not receive any intermediate payments in the form of Dividend or Bonus. The return from the scheme gets compounded over time, resulting in higher proceeds at the time of maturity. The only option to realize the profit in the growth option is to sell or redeem your investments. Growth option is best suited to those who are willing to invest for long term.

Dividend Payout option

It implies that part of the profits earned by the fund from time to time is distributed to the unit holders in the form of dividend. Dividend is distributed from the NAV itself, so the NAV of the fund gets reduced by the same amount of dividend declared. The amount and frequency of dividends is never guaranteed. Dividends are declared only when the scheme makes a profit and it is at the discretion of the fund manager.

Dividend Reinvestment option

In this option dividends declared by the fund are not paid to the unit holders but instead reinvested back in unit holder’s account at the prevailing NAV. Dividend Reinvestment option is as good as growth option. However, one should note that dividend reinvested is treated as new investment and accordingly it may attract exit load & lock in period from the reinvested date.

Few points to note

- Different options doesn’t imply that they are 2 different schemes

- It invests in same set of stocks/bonds; just the nature of distribution of profits is different

- All other things like Investment objective, Fund manager, exit load, etc will remain the same

- NAV of Growth and dividend option are different

- NAV of dividend option will always be lower than growth option (NAV of growth & dividend option will be the same where the fund has never declared dividend under its dividend option)
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9 Investing rules to be kept in mind
#Investing #MutualFundInvestment #OnlineInvestment #FundzBazar

Investing should not be made complicated. Putting your hard-earned money to work is all about helping you get what you want while making sure you can sleep easily at night. There are handful of rules for investors to keep in their mind for successful investing. Below given is the list of the nine considerations that we feel are most useful before you make investment decisions.

Rule 1: Know yourself

Quantify the risk which you are willing to take
Consider the time horizon for your investments
Set various Financial goals
Rule 2: Devote enough time to make savings work for you

We work really hard to earn money & save. Our investments should also work hard for us. Saving is a good habit, but investing it in a wise manner will always help us create wealth.

Give enough time to make investment decisions, otherwise money will lie idle in bank accounts or get invested in products pushed by sellers.

Rule 3: Select the right asset class

Identifying the right asset class helps you achieve various financial goals. Different goals require investment to be made in different asset classes. Selection should be based on the time left to achieve the goal, potential to deliver returns and the risk associated with it.

Rule 4: Don’t forget to consider the impact of Inflation

Inflation reduces the purchasing power of money. It lets us know the expected return required to maintain the same standard of living. So it is prudent to invest your savings in that asset class which generates higher inflation adjusted returns.

Rule 5: Consider the impact of taxation

While identifying the right asset class, looking at the returns generated by a particular asset class will not suffice. It is equally important to look at the taxation aspect of that asset class to know the tax adjusted return. It is wise to compare different asset class on tax adjusted returns before taking investment decisions

Rule 6: Herd mentality

Most of us tend to do what others are doing. Financial markets are most reflective of the same. Do not get influenced by market behavior, don’t jump on the investment bandwagon when everyone is buying and don’t press the panic button when everyone sells into the market.

Rule 7: Don’t put all eggs in one basket.

Minimize risk by diversifying your portfolio across various asset classes. If we put all investments in the same asset class – and that asset class falls, then you are at a greater risk. But if your investments are well diversified across various asset classes than loss from one asset class can well be set off from the gain of other asset class.

Rule 8: Give enough time for your money to grow

You will be able to create wealth over long term only when you give enough time to the asset class to perform. “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein. The best way to take advantage of compounding is to start early and have a higher time horizon

Rule 9: Review periodically

You should review the portfolio periodically and its progress towards achieving various financial goals. Review and maintain your desired asset allocation.

Happy Investing!
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When is the best time to start an SIP?
#MutualFundInvestment #SystematicInvestmentPlan #FundzBazar

The most common question investors ask is - Is this the right time to start SIP? We believe - Any time is a good time to start SIP.

Many investors also have the misconception that SIP should not be started when markets are trading at higher levels.

It is almost impossible to predict the market movement for short term. Markets may get overvalued, but still continue to move up due to higher liquidity or positive sentiments. Or there may be times when markets get undervalued & still they fall further.

Time spent in the market is more important, then timing the markets. Corrections are inevitable in stock market & they are bound to come. They spread panic in the short term but never last long in an ongoing bull market.

That’s why, it’s better to start investing as early as possible rather than wait for the correct time to invest.

Investing via SIP with higher time horizon helps in

Reducing the volatility arising on account of stock market movements
Averaging out the cost of purchase
Benefiting from the Power of Compounding
One should always remember that SIPs shield the investor from market fluctuations with its systematic approach.

Below given is an analysis of SIP returns in Absolute terms under 2 different scenarios:

Started SIP on 8th Jan 2008 when Sensex closed at 20873
Started SIP on 9th Mar 2009 when Sensex nosedived to the levels of 8160

The above analysis shows that Starting an SIP in any market conditions will lead to substantial gains over long term
Starting an SIP when markets were at peaks has helped investors to take the benefit of correction by accumulating more units when markets nosedived to the levels of 8160 on 9th March 2009.
To Conclude:

Investor shouldn't place their SIP investment decisions solely on the basis of market levels.
Investor should start & align their SIPs in equity funds to meet their long-term goals.
SIP for a long period will help them to average out the purchase cost and enhance their returns.
Start SIP for a minimum period of 5-6 years to take the benefit of the market volatility.
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#MutualFundInvestment #OnlineInvestmentPlan #Investing #TopPerformingMutualFund #BestMutualFundScheme #FundzBazar

This is the 2nd part and in this part we tried to measure the POWER of MF industry. To measure the power of MF Industry, we have considered 2 criteria - % CAGR Returns and how many times the schemes have multiplied the investor’s wealth. After looking at the schemes and the returns generated by them, an important message emerges out and that message is – Long Term Investing pays off. And the POWER which works in favour of Long Term Investing is the POWER OF COMPOUNDING. This is the power which multiplies wealth many times.

Wealth Creation is not a rocket science. The simple formula which works in wealth creation is –

Start Investing Early + Invest Regularly + Invest Long Term = WEALTH CREATION

Have a look at the powerful mutual fund schemes which have created wealth multifold for their investors in last 2 decades or since inception.

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When is the right time for tax planning

#TaxSavingInvestment #MutualFunds #OnlineInvestment #Finance #FundzBazar

Congratulations on making it through to another tax season! Have you ever thought why most people tend to wake up in the month of March to save tax? This is, because they consider tax planning as one-time ritual that will help them from paying taxes. All they want is to get the maximum possible income tax benefits.

Tax planning is not something you should wait till the end of the financial year; it’s something you should start early and build on it.

Tax planning should always be considered as a part of your overall financial plan. While tax saving is important, investments made for this purpose will also help you move closer to your financial goals.

If you start your tax planning early, you can…

Avoid the risk of locking your funds in an unsuitable product
Have lesser burden at the end of the financial year as investments get spread over 12 months
Achieve your financial goals
Follow the below given Steps for optimizing your Tax Planning:

Determine your Tax Liability – Calculate the amount of tax liability and the amount of deduction you want to claim based on the estimates of your income for the financial year
Determine the amount of Fresh investments you need to make – Evaluate whether your current investment towards tax planning will be sufficient enough to meet the amount of deduction you require.
Choose the right Instrument
If you don’t have sufficient life cover buy a term life insurance
Adequate Health insurance cover is equally important as it takes care of your physical and financial health during a medical contingency.
Important things to be kept in mind while selecting tax saving instrument for investments:
- Goals

- Risk appetite

- Lock in period

- Inflation

- Taxability of Income

- Your personal Tax slab

Tax planning should ideally begin at the start of every financial year. Remember, the risks of planning tax-saving in a hurry later are manifold.

So, start early and plan for your taxes for FY18.
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Key points to be kept in mind while selecting debt funds
#DebtFund #MutualFund #OnlineInvestmentPlan #Investing #FundzBazar

Debt fund enhances the overall value of the portfolio, if chosen properly. Debt funds offer variety of products that are based on different time horizon to meet individual investment needs.

Selecting a debt fund is a tougher task then selecting an equity scheme. Below given are some of the important points that are to be kept in mind before making the selection.

Investment time horizon

Investors should first be aware of their future cash flow requirement before making the fund selection. Investors should define the period for which they want to invest.

Short maturity funds include Liquid, Ultra short term & short term funds.
Medium maturity funds include corporate bond and credit opportunities fund.
Long maturity funds consist of Income, Gilt & dynamic bond funds.
Portfolio Indicators

Yield to Maturity (YTM) is the expected yield that the portfolio will generate from the coupon payments if the securities are held till maturity.

Average Maturity is the weighted average maturity of all the securities held in the portfolio. Higher the average maturity, more sensitive is the portfolio to the interest rate movement.

Modified Duration is a measure of sensitivity of the price of a bond to change in interest rates. If modified duration of the portfolio is 3 years and interest rates goes down by 1%, then Net Asset Value (NAV) of the fund will go up by 3 per cent. Higher the modified duration, higher will be the sensitivity of the price for a given change in interest rate.

Allocation to Credit rating

Credit rating indicates the credit risk that the fund assumes. Debt funds tend to invest in securities having varied credit ratings. Portfolio consisting of sovereign & higher rated papers implies lower default risk. Higher the credit rating of the securities in the portfolio, safer will be the investments.

Allocation to different asset classes

Debt funds invests in the various instruments like government bonds, state government bonds, corporate bonds, PSU bonds, treasury bills, cash etc. issued by different entities.

Government bonds are more sensitive to movement in interest rates compared to corporate & PSU bonds. Cash and current asset in the portfolio ensures availability of funds to meet day to day redemption's from the fund.

Market Scenario

See to it where the interest rates are expected to move in the overall economy – upwards or downwards for near term as well as few years down the line.

When interest rate cycle is in an uptrend, it makes sense to invest in short term debt funds, while in a falling interest rate scenario invest in longer duration debt funds.

Other than above, one should also look at the investment objective of the scheme, performance track record over a period of time vis-a vis its benchmark & other fund features like corpus and exit load.
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The crux of Asset allocation lies in minimal risk. Lesser risk needs not necessarily lead to lesser return but assuming a realistic return from the portfolio is a very important step while planning investments. strike a balance and you will achieve your goal comfortably.
#InvestmentOnline #MutualFunds
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The first step to creating wealth is to invest in gaining knowledge.
Be Aware of 10 common Myths about Mutual Fund Investments.
‪#‎MutualFund‬ ‪#‎OnlineInvestment‬ ‪#‎SystematicInvestmentPlan‬
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