Why You Should Invest In Debt Mutual Fund

 

When you hear the word "investing," you might think of a stock market or bonds, but one particular type of investment has been steadily rising in popularity over recent years - debt mutual funds. These funds invest in bonds and other debt instruments, which can be used to generate income on a regular basis. 

What is a debt mutual fund? 

Debt mutual funds are a great way to invest your money. Debt mutual fund investments are typically made in bonds, which are long-term investments that provide stability and income. The fund generally invests in a variety of debt securities, including corporate, government, and municipal bonds. 

These funds are a great way to invest your money. Debt mutual fund investments are typically made in bonds, which are long-term investments that provide stability and income. The fund generally invests in a variety of debt securities, including corporate, government, and municipal bonds.  

Debt mutual funds can be a great way to diversify your portfolio and gain exposure to different types of debt products. They can also offer you the potential for above-average returns over time. They allow investors to purchase a pool of loans, which are then reinvested to help pay dividends and grow. Debt mutual funds are a great way for investors to diversify their portfolio and achieve higher returns while also taking on less risk.

Debt Mutual Funds - Benefits 

Investing in a debt mutual fund is one of the smartest things you can do for your financial future. Debt mutual funds are designed to provide stability and growth for their investors by investing primarily in high-quality debt securities. This allows debt mutual funds to provide a higher return than most other types of investments, while also providing the added benefit of stability. One of the biggest benefits of investing in a debt mutual fund is that it provides you with a way to diversify your portfolio. By investing in debt mutual funds, you are able to gain exposure to a variety of different types of investments while still keeping your overall risk level low. Additionally, debt mutual funds are typically very liquid, meaning that they can be easily sold or exchanged should you need to make a change in your investment strategy. Overall, investing in a debt mutual fund is an extremely smart move that can help you achieve long-term financial success. If you are interested in learning more about this option, be sure to consult with a qualified financial advisor. 

Choosing Debt Mutual Fund Over Regular Mutual Fund 

There are a few benefits to investing in a debt mutual fund over a regular mutual fund. Debt mutual funds are designed to invest in high-yield debt securities, which tend to offer higher returns than other types of securities. This means that debt mutual funds may provide a higher return on investment (ROI) than traditional mutual funds. Additionally, debt mutual funds typically have lower fees than traditional mutual funds, making them a more affordable option. 

Debt mutual fund is a type of mutual fund that invests in debt instruments. Debt mutual fund is different from other mutual funds because it invests in debt instruments, which are typically considered to be low risk investments. This is because debt instruments are backed by the issuer or creditor, which means that the issuer or creditor has agreed to pay the holder of the debt instrument back in full if the issuer or creditor cannot repay the debt instrument. Debt mutual fund also benefits from being diversified, which means that it will invest in a variety of different types of debt instruments. 

Why You Should Invest in Debt Mutual Funds 

It seems like there is an investment opportunity no matter what part of the world you are living in. That said, one sector that always offers a high degree of risk and potential for large gains is debt mutual funds. Why take the chance? Because even though debt mutual funds carry a high degree of risk, they offer investors the potential for significantly higher returns if things go their way. Debt mutual funds help individuals and businesses to access capital when it may not be available otherwise. They make equity investments in companies or governments with high credit ratings and then bet on those companies or government securities to pay off.

How to decide the right amount to invest in a SIP?

 

If there is one route to accumulating wealth, it is through savings and investments. However, several individuals shy away from this because they do not want to lock away their liquidity. If this is you, a SIP scheme could be the way forward. A SIP allows you to benefit from the price increase in stocks and bonds through a systematic investing regime. You get the freedom to put your money bit by bit as you earn. 

Investing in a SIP scheme is now as simple as clicking a few buttons from the comfort of your home. However, deciding the amount one wants to put away in a SIP is a dilemma that most investors face. 

Let us look at how you can decide the amount when you invest in a SIP.

Define Your Goals

Different individuals have different financial goals. Some have a short-term goal of buying a car, while others have a long-term view of planning their children's education. 

When your goals are defined, you will know exactly how much you want in the end. You can work back from there to calculate your SIP instalments.

For instance, suppose you want to buy a car worth Rs 10 lakhs after four years. To be on the safer side, you can consider the annualized rate of return at 11%. It will give you an idea of the amount you will need to put into your SIP scheme. 

Combining Financial Goals

If you have multiple goals, you would want to start saving for each of them. Now that you know what a SIP is and how it works, it will become easier to do the math. However, the total amount of monthly investments can seem exorbitant. More so if you have just started earning.

In this situation, take a step back and ask yourself if your salary will be the same in the next 5-6 years. No, right. As your salary increases, it will become easier to increase your SIP amount without impacting your monthly expenses. You can top up your SIP or increase the amount when you feel you have more disposable income.

The idea is to start early to benefit from the power of compounding. Moreover, it will help in averaging out the cost due to the cyclical nature of the stock market.

Retirement Planning

Have you planned for most of your financial goals? Even in that case, you will still need to plan your finances. Think about your post-retirement life. You would want to enjoy at least the same standard of lifestyle that you have right now. To be able to do so, it is advisable to chart out a suitable financial strategy.

Financial experts suggest that every individual must save at least 30% of their monthly income for wealth creation. If you do not have an emergency fund, first start with that. Ensure that you have at least six months of your monthly salary in this fund to manage health emergencies or job loss.

Once you have done that, you can invest in equity mutual funds through SIPs. If putting all your money into one instrument makes you uncomfortable, you can consider diversifying your investments.

How to Select the Best SIP?

Now that you have figured out how much is good enough for you, it is time to pick the SIP scheme. You can look at the past performance of the scheme and see how it has delivered in market ups and downs. Secondly, it is advisable to use a reliable AMC to safeguard your interests.

The Final Word

SIP schemes allow investors an easy way to save and grow their money through mutual funds. Depending upon your risk appetite and financial goals, you can select a scheme that best fits your needs. The information shared above will help you determine the amount you should set aside for your safe and secure future. You can also use a SIP calculator for this purpose.

How safe it is to buy term insurance online?

 

When you purchase life insurance, you’re probably not thinking about the fact that you’re doing it online. But, as you’re about to see, there’s a reason why so many people tend to shy away from buying life insurance online. There’s a lot of uncertainty involved with buying life insurance online, and that’s because it’s not always the most secure way of getting a policy. In this article, we’ll discuss whether it’s safe to purchase term insurance plan online and how secure life insurance is in general. Read on to learn more.

What Is Life Insurance?

Life insurance is a type of insurance that protects you in the event of your death or the death of a loved one. It’s typically purchased by people who are looking to protect their assets, provide for their loved ones, and plan for their future expenses after they die.

Why Purchase Life Insurance Online?

While it might seem more convenient to purchase life insurance online, there are reasons why so many people opt to purchase a policy in-person. For one thing, the policies are more secure when they’re purchased in person. The person will have to sign off on the papers right then and there, and the agent will usually ask for some form of ID as well. Another reason why you might not want to buy life insurance online is because of cost.  You’ll often find that policies via an agent or broker cost less than if you were to purchase them online. Agents will typically be able to help you find a policy that best fits your needs as well. If you decide not to buy life insurance through an agent or broker, know that you run the risk of fraud and scams. This is because without someone else verifying your information and identity, it’s easy for people to take your money and run. You should always do your research before purchasing anything online, no matter what it is. If you find that buying life insurance online doesn’t work for you, don't worry! There are plenty of other options out there!

Is Life Insurance Purchased Online Safe?

It’s common for people to buy life insurance online because it’s easy and convenient. However, it’s not as safe as buying from a local agent or broker. There are many concerns when you buy life insurance online that don’t exist when you buy offline. One of the main concerns is protecting your personal information. You have to enter your Social Security number and other sensitive information, which means there’s a chance it could be stolen or compromised. Another concern is the coverage factor. Some policies will only cover $50,000 while others offer $2 million in coverage, so finding out what the company offers upfront is important before you purchase anything on the site. Lastly, there are cases where customers have found that their policy is no longer valid due to errors made by the website or even those who bought “term insurance” but never had a policy come through because the company was fraudulent.

Limitations of Buying Life Insurance Online

The first thing to think about when you’re thinking about buying life insurance online is that you will be limited in the amount of coverage. It’s not so much that the maximum coverage limit is lower, it’s just that you won’t have access to as many options for how long the policy will last. Additionally, if you are a smoker or a heavy drinker and are looking to buy life insurance online, be aware that your application may be denied. You may also be denied if your medical records show that you have certain diseases or conditions like HIV/AIDS or diabetes. This is because these factors increase the risk of death. Moreover, when you buy life insurance online, there’s no one to talk to in person about your situation and needs – which means you might not get the best deal possible. Even if this seems like it could be an easy process at first glance, there are some drawbacks associated with buying life insurance online.

Conclusion

Term insurance is a simple and affordable way to protect your family and your loved ones. Buying term life insurance online has its benefits, but you want to make sure you are fully aware of the risks before you buy. But if you are looking for an affordable way to get the protection you need, life insurance can be purchased online. Term life insurance is a simple and affordable way to protect your family and your loved ones. Buying term life insurance online has its benefits, but you want to make sure you are fully aware of the risks before you buy.

Flexi-Cap Funds - A Beginner's Guide

 

Flexi-cap funds are mutual fund instruments that invest in equity associated and equity instruments across market caps like large, mid, and small. Flexi-cap funds are dynamic equity funds that balance the portfolio's risks and returns by shuffling between stocks with varying market capitalisations. For this reason, it provides both growth and value to the investors with greater investment diversification. 

Learn About Flexi Cap Funds

According to SEBI (Securities and Exchange Board of India) guidelines, flexi-cap funds must invest at least 65% of the total Asset Under Management (AUM) in equity and equity-related investment instruments. The best flexi-cap mutual funds offer diversification to investors since they invest in equity shares across market capitalisations. Hence, these funds can reduce portfolio risks significantly for investors who want capital market exposure.

The fund manager in flexi-cap funds estimates the growth of different companies regardless of the companies’ size. After getting an estimation, they invest money in the best stocks with better-than-average growth potential.  

Who Should Invest in the Best Flexi Cap Fund?

Investing in flexi-cap funds is no mean feat. One of the most critical points to keep in mind about flexi-cap fund investments is to find out what you can gain from them. Before investing in the best flexi-cap fund, you must identify your financial goals. Additionally, it would help to be mindful of the risks when choosing the fund scheme you think is right.

Reasons to Invest in Flexi Cap Funds

There are different reasons why you should invest in flexi-cap funds -

Mitigate Risks

Asset allocation flexibility lets these funds invest in mid, small and large stocks. The risk of the portfolio decreases due to diversification. The fund managers of flexi-cap funds keep the market conditions in mind. They sell or buy stocks of various market capitalisations and industries to maximise the wealth of the investors, which is why you should invest in the best flexi-cap mutual funds.

Allocation of Corpus

In a flexi-cap fund, fund managers can invest across large, small, and mid-cap companies' stocks. This allows investors to get stellar returns. You can get stability when the fund managers increase the weightage of large-cap stocks in your portfolio. They may also increase the small-cap stock exposure to generate higher returns when the market conditions are conducive.

Splendid Opportunities

Fund managers of flexi-cap mutual funds constantly look for opportunities to beat benchmarks and offer excellent returns. These managers are trained experts who can efficiently pick, analyse and invest in the best stocks and time-tested impactful decisions.

Should You Invest in Flexi-Cap Mutual Funds?

You should invest in flexi-cap mutual funds only if it is according to your investment objectives and if you are comfortable taking on such risks. Flexi cap funds can invest in small and mid-cap stocks. You can invest in these funds if you are an aggressive investor with an investment horizon of more than five years.

Considerations before Opting for Flexi Cap Funds

Here are the top things you must consider when investing in the best-flexi cap funds: 

Expense Ratio

The expense ratio is a fee that a mutual fund house levies on investors every year. Fund houses need this money to run the mutual fund scheme efficiently and pay staff salaries. It is better to check and compare multiple flexi-cap funds’ expense ratios before investing.

Fund Manager’s Experience

After complete research and analysis, flexi-cap fund managers make all purchase and sale decisions. The scheme's performance depends heavily on the fund manager's competence. Hence, checking the fund manager's track record before investing is important.

Past Returns

When looking at a flexi-cap fund's past returns, it will be easy to determine if the funds are consistent or not. You will also discover how they perform in different market cycle phases.

Conclusion

Finding the best flexi-cap fund is no more a challenge when PGIM Mutual Fund is by your side to assist you. Experience income stability with PGIM's profit-making mutual fund schemes and get unparalleled returns on your investments.

Various Types Of Insurance Plans - How To Choose The Right Plan

 

There are a plethora of insurance plans in the market, and choosing the right one needs careful study. Any insurance plan which you select must fulfil your goals. That is to say, your financial goals. If you wish to grow your money, a unit-linked insurance plan, or ULIP, may be suitable. However, if the idea is to just get a life cover and accept the amount the insurance company wants to payout at maturity, then a simple term insurance plan is enough. 

Term life insurance plans are generally a life cover in their basic form. This offers a life cover of a certain sum in exchange for a fixed premium payable annually. However, this type of plan has certain advantages. The premium for these is lower than for other plans. The maturity amount includes the premium paid as well as interest and bonus. 

Therefore, the insured knows that he will get a certain sum at a specific time in the future. Such plans are useful for planning financial goals, such as expenses for higher education for siblings or marriages. Then again, loans are available against such policies, so that sudden requirements of funds can be met by taking a loan against the policy. 

Term life insurance policies may also be modified to include a clause that ensures that double the sum assured is payable in the case of accidental death. This means a slightly higher premium but is certainly a useful clause to have.

However, if the idea is to increase the amount of premium that the insured is paying, then the best idea would be to invest in a unit-linked insurance plan. This is known as ULIP in short. The benefits of such a policy are dual. The first benefit is that there is a life cover, which is usually 10 times the premium. A higher sum assured can be negotiated with the insurance company. Therefore the basic function of life insurance is present in this policy. 

The other advantage of such a policy is that a portion of the premium can be deployed as an investment in market instruments. This means that the money being paid to the insurance company as a premium will grow. The maturity amount will obviously be higher. 

The type of investment and the portion to be invested ( from the premium amount) is for the insured to decide. He may apportion a larger amount or a smaller amount for this purpose, depending on what financial goals he has set himself to achieve. There are three ways in which this investment may be planned. The first is the steady income low, risk and low gain type of investment. Here while the gains are low, the risks are low. Then there is the high risk and high gain type of investment. If there is the capacity to take risks, then this type of investment can bring in a high rate of return. This policy offers income tax relief under Sec. 80C of the I.T. Act. Therefore savings, life cover and investment gains are all present in this policy. Young applicants should consider such a policy. However, it is necessary to plan a unit-linked insurance plan carefully. How much to invest and in what sort of market instruments. It is best to check out the plans being offered by various companies online. Also, check out sites which offer under one umbrella policies of different companies. Choose the one that suits your needs and offers the best returns.

How to Diversify Your Portfolio when Navigating the Mutual Fund Market?

 

When investing in market-linked instruments like mutual funds, diversification is an essential tool to manage your portfolio risk. In this blog, we learn more about a mutual fund, the concept of diversification and how you can diversify your portfolio when navigating the mutual fund market.

What is a Diversified Mutual Fund Portfolio?

A mutual fund is an investment medium that pools money from various investors, which a professional fund manager further invests into different stocks, securities, and other asset classes.

There are primarily two different ways in which portfolio diversification works. These are:

• Instant diversification

When investing in a particular mutual fund scheme, you buy units of a fund that invests in various securities, thus giving you the advantage of instant diversification by investing in one single scheme.

• Portfolio diversification

As a mutual fund investor, it is best to opt for portfolio diversification if you want to optimise your returns. Here, you purchase different types of mutual funds that invest in various asset classes/securities that are not correlated.

How to Diversify Your Portfolio When Navigating Mutual Fund Investments?

When looking to diversify your portfolio, mutual funds offer an excellent choice as you do not need to have a detailed understanding of each asset class to reach your portfolio diversification goals. All you need to do to diversify your portfolio is start investing in Indian mutual fund schemes that invest across asset classes to spread your risks and give you better returns.

The mutual funds you need to target to diversify your investments are-

• Equity-based mutual funds- As the name suggests, equity mutual funds invest primarily in equities and equity-related instruments. Based on factors such as risk tolerance, age, and financial goals, you can invest in various equity funds such as small-cap, mid-cap, large-cap and more. To diversify your portfolio, the key here is to analyse the schemes thoroughly and choose the ones that invest across varied industries and different asset classes.

• Debt-based mutual funds-: Debt mutual funds primarily invest in different debt instruments such as money market schemes, T-bills, corporate bonds, and more. The advantage of investing in debt funds is higher liquidity than other traditional debt instruments and better returns over a fixed period.
• Balanced mutual funds: - As the name suggests, a balanced fund refers to the hybrid mutual fund covering both equity and debt schemes. These funds are best suited for beginners with little or no risk appetite. 

Tips to Diversify Your Mutual Fund Portfolio

Here are some of the other tips to help you better understand what a mutual fund is and how to diversify your portfolio-

• Maintain a balance between various schemes 

The need for diversification varies based on factors such as age, risk appetite and expected returns over a period. For instance, while a person in their early 20s might require diversification of their mutual fund portfolio with more exposure to equity instruments, an investor in their 60s may require more exposure to debt schemes.

• Diversify based on the investment time horizon

Besides diversifying across different types of mutual funds, it is also important to consider a time horizon while diversifying your portfolio. The risk levels also vary depending on how long you are invested in a particular scheme. Investing in two different funds with different time horizons gives you the benefit of averaging out the risk.  

• Invest through different fund houses

Investing in mutual funds through various fund houses and leveraging the expertise of different fund managers allows you to beat the volatile market conditions and get better returns overall.

To Wrap

When diversifying your mutual fund portfolio, the key is to navigate the market carefully and spread your investment across different companies, various sectors, and multiple asset classes to get the maximum out of your invested funds and schemes.

If you are also looking to diversify your mutual fund portfolio, PGIM offers an excellent platform to invest across asset classes and accomplish your primary task, which is to grow your financial wealth over time while minimising risk by reducing volatility.

5 Reasons You Simply Cannot Avoid Unit Linked Insurance Plans

 

Unit linked insurance plans are a very good option and have become quite popular these days. The benefits are many, and it is perhaps a very important form of investment to think about. The first thing to understand is what exactly is an unit-linked insurance plan. Essentially when you invest in such a plan, the insurance company uses part of the premium in shares, bonds etc. The balance amount provides the insurance cover. Since insurance companies have on their payroll fund managers, the investor is spared the need of managing the investments. The experts within the company handle these for the investor. Depending on your instructions, the insurance company will deploy the funds. The great thing is that you can switch from ne form of investment to another if you so desire. However, keep in mind that the lock-in period is now 5 years. But in such investments, the benefits only accrue over a period of time.

Benefits of Unit Linked Insurance Plans.

The first benefit is that the plan offers a life cover. This is useful as the cover protects the investor in case of his untimely death. His family is protected financially. At the same time, the investment portion is working to generate money. 

The second benefit is Income Tax benefits. Under this plan, premiums paid are exempt from tax under Section 80C. In addition, the returns under the policy on maturity are also exempt from tax under Section 10 (10D) under the Income Tax act. There is thus a dual benefit. 

Financing long term goals is another advantage of this plan. If the goal is to buy a house after a certain time, this plan works to ensure that the funds are available and tax-free at that time. Therefore, investing in a unit-linked insurance plan is the best way forward. Considering the current interest rates being offered, investing in a fixed deposit with the bank does not bring good returns. The unit-linked insurance offers a larger return, although over a period of time. However, all investments generally yield results over a period of time. And the unit-linked insurance plan works in the same way. The planning for this needs to be a long term plan. It is possible to exit the plan after the lock-in period 5 years, but the gains are not as much as a longer time investment, say for 10 years minimum. 

Switching of investment instruments to be used by the insurance company is also a great benefit. Normally the insurance companies allow a number switches free of cost. You, as an investor, are free to ask the insurance company to switch the fund from equity to debt or vice versa. The company will act on your request. If you are someone who understands the market, this is extremely useful. However, insurance companies have god fund managers who handle such things. 

However, as for all investments, your personal goal is important. If your goal is wealth creation, then there is no better way than unit-linked insurance plans. The advantage is that it is possible to compare plans offered by different insurance companies and opt for the one which best suits you. Check the small print to see what sort of expenses are involved, premium payments, and the performance of this plan over the past. It is also necessary to investigate the kind of funds that the plan invests in and the kind of performance results these investments have given investors. This way, you can invest in the plan which you find suits your needs. The risk factor also needs to be examined before deciding to invest. 

Generally, unit-linked insurance funds are invested in the following manner - 

●      In Equity funds, the risk is higher, but returns are higher.

●      Balanced funds - in this case, the funds are divided between equity and debt markets to minimise the risk.

●      Debt funds - this investment carries a lower risk and is sometimes done at the request of the investor. Returns, however, are lower. 

However, there are 2 types of unit-linked insurance plans which must be understood. The first type pays the fund value upon the death of the investor, which is generally greater than the sum assured. The second type just pays the sum assured to the nominees. There is no added fund value. 

ULIP plan also have charges that must be considered when selecting the plan. There are Mortality Charges for the lif cover offered. And this charge depends on factors like age, sum assured etc. These charges are deducted on a monthly basis. Check to see what the size of the charge is.

 There is a fund management charge, which is essentially the charge that the company levies for management of the funds and is normally deducted before arriving at the NAV figure. 

Then there are the charges for switching the investment from debt to equity. Normally, some switching requests are free, but the company charges for each request after that.

 Partial withdrawals also attract charges. Therefore it is best to avoid such withdrawals if possible. 

The benefit of a unit-linked investment plan is that it offers a life cover and the advantage of growing your funds using the built-in investment system.

What are SIPs, and Do They Add Value to Your Portfolio?

 To build a new habit, you must find a way to include it in your daily routine. Whether it is about eating healthy, exercising, or saving, this is the golden rule that can take you closer to your goals. When it comes to investing, there is nothing better than SIPs. 

So, what is a SIP, and how can it help you build a strong portfolio? Let us find the answers to this in this article.

What is a SIP?

Many individuals confuse SIPs for mutual funds. A Systematic Investment Plan (SIP) is simply a tool to invest regularly in mutual funds. When you invest in the SIP of your choice, a pre-decided amount gets deducted from your bank every month. Typically, SIPs invest your money in equity funds.

Apart from helping you develop financial discipline; a SIP also helps you invest in your desired mutual funds in a staggered manner. It is ideal for salaried individuals looking for a convenient option to invest in mutual funds and build a portfolio.

How Do SIPs Work?

Mutual funds are investment instruments that invest your money in securities like equities, debt, or bonds. Asset Management Companies (AMC) manage mutual funds that are structured to offer the best returns to investors. 

When you invest in them, you buy units of the mutual fund that equals the value of your investment. When you take the SIP route, you buy units every month. You can use a sip calculator mutual fund for more accurate investment information.

How Can a SIP Help Build a Strong Portfolio?

Several individuals may want to invest in mutual funds and accumulate wealth in the long run. However, they may not have the required capital to do a lump sum. For such individuals, SIPs are convenient as you can invest little amounts regularly and increase the value of your portfolio. Moreover, if you want to invest in multiple funds and benefit from different AMCs, SIPs are a better option as they are easier on the pocket.

Another big advantage of SIPs is that you can benefit from both bullish and bearish stock markets. If you were to invest a lump sum, you would have to time it to benefit from a falling market. Considering the volatile nature of the stock market, you can never be sure when is an appropriate time to invest.

However, SIPs allow you to buy more units when the market is down. It helps in averaging out your investment to ensure that you get optimum returns on your investment. When the market is bullish, the value of your portfolio increases, thereby enhancing the returns. Apart from this, you can also enjoy the power of compounding, which can exacerbate the value of your portfolio by manifolds in the long run.

If you are looking for a tax-saving option, SIPs can help you with that as well. ELSS mutual funds are schemes that give you tax deductions as per Section 80C of the Income Tax Act. You can invest in ELSS taking the SIP route to save tax and invest that money for the future.

You also get the flexibility to change your SIP anytime you wish to. If you receive a windfall or get an increment at work, you can increase the amount of your SIP and enhance your portfolio.

Finally, if you do not want to lock your money, you get that option too. With SIPs, you can withdraw your investment anytime you need the money. 

To Sum up

SIP investment is a commitment. If you struggle to maintain and sustain a saving discipline, this is the way forward for you. The host of benefits it offers the investors can help you fulfil your objectives in the long run. For more information or to invest in a SIP today, you can visit PGIM Mutual Fund.

Do You Want Your Money To Grow? Then Invest In Guaranteed Income Plans

 

A worry-free retired life is something everyone dreams of. This becomes possible only with a stable source of revenue that does not fluctuate with the market. Banks and financial institutions offer numerous saving schemes and insurance plans. But they don’t often provide the security one experiences while earning on one’s own.

Getting a plan that matches all your requirements and offering you the security you need in retired life may appear confusing. You have to consider numerous factors like premium, returns, death benefits, etc. The smart choice here is to explore your options in guaranteed income plans.

Such plans ensure a guaranteed income for your family after your retirement or your untimely death.

What are guaranteed income plans?

Guaranteed income plans are a non-participating scheme that offers you a regular income. You pay a fixed amount every year as a premium for an agreed-upon number of years per the scheme. You can decide your age based on your financial strength and age. The insurer determines your premium accordingly. Upon maturity of the plan, you begin receiving a specified amount like a regular salary. The number of years and the amount will depend on the type of plan you chose, the premium you paid and the amount you agreed upon.

Explore your options among guaranteed income plans in India and enjoy the following benefits:

It reduces the risk of returns

People about to retire always have their own apprehensions towards making high-risk investments. They often receive recommendations to invest in the schemes like life insurance policies. These ensure a return for their families in the instance of their untimely death. If you invest in a guaranteed income plan, you don’t have to worry about this. The scheme minimizes the loss of your income when you retire.

The benefit upon the untimely death

In the instance of the unfortunate death of the policy-holder during the insurance tenure, the insured's nominee receives the basic amount promised in the contract. This is in addition to other bonuses the person may have saved. The payout is made, in general, for 15 years. In any other instance, it will continue as per the term mentioned in your insurance policy. If death happens after the end of the premium-paying tenure, the nominee receives the sum assured along with any other benefit as per the contract.

Tax benefits

Your investment here is eligible for tax exemption under Section 80(C) annually. Upon maturity of your policy, your returns are exempt as per Section 10(10D). Know that these exemptions are made available based on the terms and conditions described thereof.

Periodic payments after the first year of premium

You start receiving a fixed amount from the start of the second year of your insurance term. You can determine the interval. The payout remains same through the term of the policy. This provides you with a source of extra income. And you can take care of the small expenses that exceed your monthly budget.

Eligibility requirements

Guaranteed income plans are reserved for the salaried. The minimum age here is 18, and the maximum is 50. And when it comes to insurance tenure, the minimum is 34, and the maximum is 75.

Tips to maximize your returns

Do the following to maximize your returns from your guaranteed income investment scheme:

Repay all your debts: Availing a loan is a breeze for a salaried individual. But debts affect your savings. Repay your debts at the earliest to maximize your returns from your insurance policy.

Plan your retirement in advance: Calculate the expenses you expect during your retirement. Have a clear understanding of your health at the time. It will give you an idea of how much you should aim to save to lead a tension-free life when you grow old.

Prepare for an unexpected emergency: Anything can happen at any time. Having an emergency fund helps you handle it without having to worry about the loss of income it may cause. In a general scenario, it should be equal to the salary of five or six months.

Research and choose from among the numerous guaranteed insurance plans available. You will never regret your choice. See to it that you get it from a reputed insurer.

Everything You Need to Know about Small-Cap Funds

 

When categorized based on market capitalization, equity funds fall into one of the three types – large-cap, mid-cap, and small-cap.

Small-cap equity funds involve putting money in small-cap companies with a lot of room for growth. This means you can expect exceptional return potential but also be ready to face a higher level of risk.

In this guide to small-cap funds, we try to understand what they are, how they work, who should invest in them, and what benefits and features they offer. For a further deep-dive on the nuances of small-cap funds, please refer to this guide from PGIM.

What Are Small-Cap Funds?

As mentioned earlier, small-cap funds invest in stocks of publicly traded companies that have a market capitalization of Rs. 5000 crore or less.

On stock indices, small-cap companies often rank below 250 on the list by market cap. These are small and relatively new ventures focused mostly on aggressive expansion.

Small-cap funds try to leverage the growth potential of these companies by putting money in them when their capitalization is still small. These funds have a higher potential for returns as compared to mid and large-cap funds. However, such companies are more likely to incur losses during adverse market conditions.

This means, while small-cap funds offer outstanding return potential, they have a higher risk level than mid and large-cap funds. Most fund managers invest about 65%-90% of the portfolio in small-cap stocks.

Features of Small-Cap Funds

Here are the primary features of small-cap mutual funds.

Risk-reward ratio – Small-cap funds carry a higher risk than mid and large-cap funds. When the market does not perform well, these funds suffer a lot because they are not well-established and can move out of business.

However, these make an excellent option for those who can tolerate high risk and want to benefit from aggressive growth.

Returns – This small category has performed really well in the market in the past few years and has attracted a large number of investors.

Small-cap funds are known to generate substantial returns and outperform other funds over the long term.

Asset allocation – According to the rules of the SEC (Securities & Exchange Board of India), small-cap funds must allocate at least 65% of the investment portfolio to small-cap stocks.

Taxability – Short-term capital gains earned on holding these funds for less than a year are taxed at 15% regardless of the realized amount. A tax of 10% is applicable on gains over Rs. 1 lakh made from holding these funds for over a year.

Benefits of Small-Cap Funds

Here are some of the primary reasons investors prefer small-cap funds.

High Returns Potential – Small-cap companies generally have an aggressive growth and expansion strategy that can significantly increase their market cap over the long term. This means the potential for returns is quite high in small-cap funds.

Many small-cap funds have averaged a return of 60% in 2021, with a few providing returns in excess of 100% during the year.

Diversification – The best small-cap funds typically invest in companies with a huge potential to generate returns.

Managers consider researching the market to put money in companies across sectors, adding a lot of diversifications to your portfolio.

Outperforming Other Funds – If mid-cap and large-cap funds don’t deliver expected returns, small-cap funds are a great inclusion in the portfolio. As they tend to offer better gains, they balance your portfolio.

Who Should Invest in Small-Cap Funds?

Small-cap funds are more suitable for those with a long-term investment horizon. Such funds suffer a lot when the market dips.

So, to allow the funds to generate returns as per your expectations, you should stay invested for a longer term. Moreover, these funds are highly volatile and risky, so they are an ideal investment for those who have good risk tolerance.

Small-cap funds are good options for investors with long-term investment goals like retirement planning, children's education, or medium-term debt repayment. Investors can put money in small-cap funds in one of the two ways – lump sum and SIP (Systematic Investment Plan).

In the first route, you can invest the total amount in one go. SIP allows investors to allocate funds to a scheme on a monthly or quarterly basis.

Now that you know what small-cap funds are, how they work, their features and benefits, you can decide whether you should invest in them or not, depending on your goals and risk tolerance levels.