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Recurring Deposit Vs Systematic Investment Plan – Be Wise in Selecting

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Recurring Deposit is a kind of term deposit offered by banks; wherein an investor invests a fixed amount every month for a given term/duration. Systematic Investment Plan, popularly known by the term SIP in mutual funds is equivalent to Bank Recurring Deposit in concept. Recurring Deposit vs SIP Key Characteristic Recurring Deposit Equity SIP Long Term Potential Return 7% 15% Tax efficient No Yes Liquidity No Yes Flexibility No Yes Wealth Creation: RD Vs SIP An Rs 10,000 Monthly investment into RD over 30 years would be worth Rs 1.22 Crores; while the same investment into an Equity SIP would be worth 6.92 Cr. The incremental gain would be Rs 5.7 Cr by selecting right investment option. Conclusion: A Rs 10,000 SIP over 30 years can add Rs 5.7 Cr more than an Bank RD. Apart from wealth creation an SIP offers investment flexibility (no penalty if a monthly payment ...
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Bank FD vs Bond Mutual Fund: Taxation

Bank FD & Bond Fund both are fixed income securities. The most ignored part while investing in fixed income securities is the effect of taxation. This blog highlights the differences Tax Effect on Bank FD Taxes are paid on accrued interest and payable as per the individual tax brackets. Ex Mr X invest Rs 10 Lac in a bank FD yielding an interest rate of 6% ; Mr X is in a 30% tax bracket; then Mr X has to pay an average tax of Rs 18,000/Annum. The effect of tax over 5 year is as shown below Year 1 Year 2 Year 3 Year 4 Year 5 Total Interest Income 60,000 60,000 60,000 60,000 60,000 3,00,000 Tax Effect Income Income Income Income Income Tax Payable rate 30% 30% 30% 30% 30% Tax Payable (18,000) (18,000) (18,000) ...
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Investors Investment Behavior are riskier than the Markets

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Indian Equity markets have witnessed a roll coaster ride in FY 2018. Nifty is down by 5.37% (till date for FY 2018); Nifty started positively with a gain of +4.72% for the month of Jan 2018, since then the index is down more than 9% over last two months on the back of TDP exit, banking scams, fed rate rise and increased global trade fears. • Are you a long term investor? Equity Investments are suitable for long term investor. Assume you are investing for retirement; kids educational needs which might have an investment horizon of 5-20 years. Should you be really concerned about short term fall. The below chart depicts nifty performance over short and longer time frame.      Investor behavior tends to change based on the market movement. Investor are comfortable holding on to long term perspective when markets are trending up; however, as markets trend downwards, panic sets in. Please note if your retirement is 15 years away, its still 15 years...
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Mutual Funds: offers Investment Solution for all kind of investors

Mutual funds are becoming very popular investment vehicle in India. India MF asset under management (“AUM”) has increased from  Rs 3.26 lakh crore as of Dec 2007 to Rs 21.27 lakh crore of Dec 2017. MF AUM has grown 6.5 times or at a CAGR of 20.6% over the last ten years . Indian MF consists of 41 Mutual fund house and have in total of  1,904 schemes as of Dec 2017 . Mutual fund classification helps us to understand the suitability. Mutual fund classification 1.         Based on asset class a.         Equity Funds —Equity funds invests in Equity securities. Equity funds can be further classified into large cap funds, Mid cap funds, small cap funds, Multicap funds, sector funds, thematic funds.  Equity funds have potential to generate a long-term return of 12-20% (depending on the nature of the fund) , however these funds are more volatile and hence suitable for  aggressive investor as we...
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Systematic Investment Plan (“SIP”) : Solution for all market condition

Mutual fund’s Systematic Investment plan (“ SIP ”) enables you to build a portfolio over longer time horizon with small investments at regular intervals reducing the risk of market volatility. An individual should save around 30% of the monthly income to secure financial future. This 30% should be used to pay towards debt repayment (if any) and towards  SIP .  SIP  is Similar to that of Bank’s recurring deposit, However offer more flexibility and potentially higher return. Key Benefits of  SIP 1.         Timing the market is not necessary – Sensex returned 27.9% for CY 2017 and up +2.5% (YTD for the first 15 days of CY 2018). Indian Equity markets of late have been on a roll. Many investors have been skeptical about Government reforms initiative be it GST, demonetization, Bank recapitalization and Others have been  skeptical on valuation and are waiting for a correction.  Indian Broad markets (Nifty & Sensex)...
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