@sdadwal Hi, I heard recently some rules have changed and now EPF can be withdrawn online only. Is it really true? I mean, won't we be able to withdraw our EPF amount through physical form? Are there any conditions for the ones who can get EPF money online or not? If anyone can guide here.
@balogh03 Yes, the earlier one starts financial planning, the more amount we can accumulate. DIY approach is fine but getting professional help is also a good idea especially if you are a new investor. People are realising the importance of financial planning these days. It's great you consulted a financial expert. How was your experience and what guidance you got? A brief idea, if you can give.
Unit Linked Insurance Plans, better known as ULIPs, are a product offering from insurance companies that provide a ‘Combo’ of investment and insurance. The underlying investment funds offered by ULIPs are similar to that of mutual funds.
ULIPs are a combination of investments and insurance. Every ULIP policy has a minimum premium amount and a premium payment term. The sum assured is a multiple of the premium amount.
You may choose to make a Single Payment or Regular Payment over the policy term. The policy term ranges from a minimum period of 5 years to as much as 20 years.
Every premium you pay, part of it is deducted towards the insurance cover, which is the mortality cost.
Apart from this, other charges in the form of Administration Charges and Premium Allocation Charges are deducted. The resultant premium is then invested in the funds selected. Therefore, ULIP has its of underlying funds that have a predefined investment strategy. You may invest in a single fund or divide your investment across multiple funds based on your risk profile.
Discussion about investment in mutual funds in India
A SIP allows you to invest a pre-decided amount in a set of stocks or mutual funds/exchange-traded funds at regular intervals and beat market volatility by averaging out the costs. Prabhudas Lilladher offers you all the SIP instruments via its offices across the country.
You can set up a SIP via your trading account or via a bank account, and buy a fixed number of shares/units for a defined number of periods. The shares/units are bought at the prevailing market rate at the time of SIP each period and keep adding to your account. You can choose to invest at any frequency-daily, weekly, fortnightly or monthly in the stock or mutual fund of your choice.
Best funds to invest in for SIPs and often end up preferring the less volatile ones. While in fact, one should look at starting SIPs into more volatile ones. Or even in stocks for that matter. Therefore, one should go for SIPs in classy Midcap or Multicap funds depending on one’s horizon and risk appetite.
@pranali-yadav said in Child Plans: How to plan for your Child's Education:
Most of the people think insurance as the investment plan. But, it is risk coverage. It will be totally wrong to mix both of them.
Very right! It is better to start investing rather than thinking. Insurance & investment are two different things. Both of these need to be done keeping in mind different objectives.
Planning for your child's education well in advance through proper investment strategy ca really prove helpful. So, we need to work out the best options to get good returns from our investments.
I am an active investor and a trader as well. Something I wanted to discuss from long was a difference between different investing instruments. So, here I'll highlight Mutual Funds v/s Stocks v/s Bonds in specific.
Financial Instruments: Types
In the multi facade market, we trade in all kind of commodity and financial instruments. So a few commonly traded financial instrument are stocks, bonds, debentures, currency, etc.
Here I'll discuss the major difference between 3 popular investment alternatives: Mutual Fund v/s Stocks v/s Bonds.
Before jumping into the difference analysis, let's first understand the meaning and features of these three.
What are Stocks?
Stocks or more commonly called "shares" or “equity" are nothing but part of the company. Buying shares or stocks entitles its buyer with a right to part ownership of the company depending on the number and quantum of shares.
What are Mutual Funds?
Mutual fund is a basket of different combination of financial instruments i.e. equity and debt. So, investing in mutual funds simply means building an investment portfolio which comprises of equity and debts depending on once financial need and risk capacity.
The higher the risk an individual can take the more equity portion the person buys. The lower the risk the individual can take then the portfolio comprises of debt.
What are Bonds?
A bond is an instrument of indebtedness. In other terms, a bond is a financial instrument that is fixed income investment which represents characteristics similar to a loan taken by an investor to a borrower.
So, when you are buying a bond then simply means the company has taken loan from you.
Now that, we are clear about the meaning and basic features of all these, let's deep dive into the important differences.
Mutual Fund vs Stocks vs Bonds: Difference
In the case of Equity investment, the company is sharing part of ownership with the investor.
In case of bonds, the company is being indebted to the investors. While in case of mutual funds, the investor can be both be the owner as well as lender to the company depending on the investment plans and decisions.
Equity, bonds and mutual funds are all financial instruments which are subject to market risk.
As equity is a more volatile instrument, therefore more risk is attached to it. Whereas Bonds are only debts for the company, thus the risk factor tones down in there.
Further, Mutual fund is a bundle of equity and debt. Thus, the risk of the complete portfolio depends on the percentage of investment you make under which bucket.
3. Income Returns:
The income return on all financial instruments depends on market fluctuations and status. The income of bonds are more fixed and guaranteed than that of equity. Whereas mutual funds here provide a balance to their owner. If you can create a balanced portfolio of equity and bonds, then it may provide the investor with balance yield on the amount invested.
So to sum up, I can say that equity and bonds are opposite poles to each other in the market place environment. Whereas we can call mutual funds are our equator. So, in this spinning market, we have the three biggest financial players which you and I can choose for our personal gains and benefits.
Where do you prefer putting in your money? Do you actively trade in the stock market hours or you are a stay away from it? Mutual funds vs Stocks vs Bonds, who is the winner for you? Or there's yet another investment alternative that you'll like to add here? Feel free to share your views.
@Sandra Although PL India is quite old platform. But, with new and emerging brokers offering low cost models, the competition is tough. The investors and traders get more inclined towards discount brokers also as compared to full service brokers in India these days. Isn't it true? What do you say?
Fixed Deposit Double Scheme is meant to double your investment over a specific period of time. It is the interest earned that eventually doubles your money.
Fixed Deposit Double Scheme:
We all want to earn more money in a short period of time. There are many popular methods wherein; individual can invest in the share market or mutual funds or gold. But, the same is attached with high level risk.
So, everyone doesn’t have the ability and willingness to take the risk involved with these earning methods.
Let me take you through some conventional and low risk method with over the average return like: Fixed Deposit Double Scheme.
What is Fixed Deposit Double Scheme?
A Fixed Deposit Double Scheme is a scheme which is mainly launched by banks, wherein an individual investor needs to deposit fixed amount of money for pre-determined tenure of time.
The interest earned on this sum is eventually re-invested in the scheme and the complete amount is paid along with complete interest after the maturity. This scheme is also known as cumulative fixed deposit scheme.
Now-a-days many of the commercial, private and government banks and financial institution provide the benefit of this scheme to their account holders.
This scheme is very similar to regular fixed deposit scheme except for below points.
Fixed deposit Double Scheme vs Normal FD:
The features of the schemes are as follows:
The differentiating feature of the scheme is double earning. This means the interest earned on the scheme is re-invested in the scheme. Thus the total yield rate of interest is higher than regular risk free scheme. Thus the rate of return on investment (ROI) is higher than normal and regular fixed deposit schemes.
This investment scheme cannot be opened for shorter period like in days or a month. The tenure is comparatively longer than normal FDs.
There is no intermediate or regular payout. That simply means that the complete payment of investment along with interest would be made at the maturity date.
The terms decided at the beginning of the scheme i.e. rate of interest and period of investment cannot be modified during the tenure of the investment.
Benefits of FD Double Scheme:
Let's now discuss the exclusive Benefits of FD Double Scheme:
So, the overall advantages of this fixed deposit double scheme as below:
Easy to open: Any Individuals or companies or joint account holders can open this FD with banks following simple online or offline procedures. The interested investor after providing AADHAAR card details and other information like of tenure, amount and scheme holder name and address, can open the account.
Flexible: Every Individual investor is free to choose according to their financial position and market condition; the sum of amount the person is willing to invest for the tenure of such a deposit.
Collateral security: The scheme document can provide collateral security in case of loans. Many of the banks now-a-days offer loans against these fixed deposit schemes.
Easy Nomination: The investor can nominate the secondary account holder on their behalf of them by easily following either online or offline procedure.
Rate of Interest: The rate of interest under this scheme is higher than other related fixed deposit.
No doubt, the said scheme has its own pros (higher ROI) and cons (fixed tenure and no modification of terms).
At the end of the day, we need to make financial decisions based on our future prospects and current capability. Thus, every investor must analyze the same and take up their decision accordingly to satisfy their investment requirements.
And as far as I see it “Fixed Deposit Double scheme” is a very viable and risk free option to ensure above average return. What do you feel?
Fixed deposits are very popular fixed return-low risk investment schemes wherein an investor fixes an amount for a said period of time. No doubt, Fixed deposit or FD has been a highly preferred choice amongst people of India. And, this trend is being followed since decades. Do you agree to it?
Each one of us or our parents or grandparents might be having an FD for sure. Since this has been regarded as a safe investing option giving fixed returns over the years.
Now, depending on the bank policy, a fixed deposit can be opened as:
Cumulative Fixed Deposit (Paid at maturity)
Non-Cumulative Fixed Deposit (interest paid on regular intervals)
Interest rate for fixed deposits depends on RBI policy and bank notification. It usually ranges from 6-8% p.a. (pre-tax return). This may be slightly higher for senior citizens.
Tax Saving Fixed deposit: In case the investment under this scheme for a period of 5 years and more, then the individual can claim tax exemption benefit under Section 80C up to Rs.1.5 Lac of Income Tax Act.
Recurring deposits are again fixed return-low risk investment schemes wherein an investor agrees to deposit decided sum of money on a monthly basis. This is very popular scheme in India wherein Indian families save some amount on monthly basis.
@Ishu I always get this question: when should I start investing? And I always answer the same as Warren Buffet says "Start investing as early as possible to start reaping the benefits at the right time”.
The decision to create your investment portfolio is based on permutation and combination in between risk and returns. There is always a set of mixed options to choose to create your own investment portfolio.
And, the one that fulfils your goals is the "best investment" for you.
@surendranathm Liquid funds is a good option for short term investment in India. Just that, you need to put money in the right kind of mutual funds so as to get good returns. Liquid funds are easily converted to cash whenever required. But, not to forget, these carry some amount of risk. So, be very careful while investing.
@Harleen Definitely SIP wins provided if one invests in good mutual funds. PPF is safe but doesn’t give high returns. SIP in mutual funds gives you a chance to earn more as compared to other investments.
Getting 15% annual return seems a bit unrealistic that too in a very short period. I think stock market may give that much return but that's very very risky. And, there's no guarantee to earn profits only in stocks unless you are a stock market expert.
"Mutual funds" might be a better way, but that too may not given you the desired return of 15% p.a in a short span of time.
@Tarun Hey, You just summed up my post in few words "Don't put all eggs in one basket" as per a common saying. So, it will definitely turn to be more fruitful if one invests at different places rather than in one type of investment only. The best idea to follow is to invest as per our own:
Financial goals: Short term and long term
Risk tolerance: analyse how much risk taking capacity one has. No risk, low or moderate risk or high risk. You'll get the choice of investments options there itself.
Surplus funds: How much money one is willing to invest?
Period of investment: For how long you wish to invest, very short, moderate or longer time period.
Once we ask ourselves answers to the above 4 important queries, choosing the right investment becomes much easier. Right! Anything you wish to add upon, feel free to do so.
@Punkeirang well said! Deciding our goals is really important. If we have clear objective in front of us we can move ahead to achieve that. I feel we should get rich through our good work.
Adding a side income does help to get rich in terms of money. But, one should grow rich in good deeds.
@Harleen Nice collection of stock trading apps in India. But, we can't have all of them. It really gets difficult to manage too many apps on our mobile. I would like to go with Moneycontrol app. I have heard a lot about this app and its features.
@Girish Khanna @Punkeirang I think FD is a good option for Senior citizens since they get a good interest rate plus some extra tax saving benefit also. But, for others the interest rate you are saying 7-8% is not the actual rate. This is before tax rate. And, more interest is offered for long term FDs.
Also, the real rate of return is much lesser after taxes. So, you basically get lesser in hand amount.
@Anmol Why are you asking to open 2 demat accounts at first? I mean is there any specific reason to do so. It's possible to manage our investment and trading activity at one place. So, why to get into the hassle of 2 accounts.
@GURUMOORTHI-G I feel active mode of investing is much better these days. There are so many platforms out there to help. Even the regulators are strict and favour investors. So, I personally like investing directly rather that the ETF or index funds route. What do you think? Am I right to some extent.
@harleen Nice and useful investing tips. What's this power of compounding? Can you give a brief idea about it? I mean, can you explain that in a simple language. I am not good in finance field. So, please clarify a bit.
Hey nice details, very useful tips for beginners.
Personal finance is a subject that is of utmost importance but is not taught in our schools. We need to be more aware of it to be successful financially in our lives.
ETF or Exchange traded funds have evolved as a popular and low-cost way to invest worldwide for investors. Particularly for investors who do not want to track individual stocks but are interested in taking exposure to stock market.
What is an Exchange Traded Fund?
Exchange traded fund is a freely marketable security which tracks a particular index, commodity, bonds or combination of assets. ETFs are traded on the exchange. Hence, their price changes dynamically unlike Mutual funds which have a NAV at the end of the day.
Why Exchange traded funds(ETF) are not popular in India?
Unlike United states and other developed countries, Exchange traded funds haven't really taken off in India.
There are multiple reasons for the same.
Relative Under performance: ETFs have tended to under perform actively managed Mutual funds in India. Which is not the case in markets like US where ETF performance is not very far off from mutual fund performance.
Lack of choices/Diversification: Investors in India do not have too many choices when it comes to investing in ETFs. Currently, there are limited ETFs linked to the index and apart from gold not many commodity ETFs are available in the market. It's like a typical supply-demand problem, not much quality supply and hence not much demand.
Lack of Institutional interest: Few institutions have ETFs on the approved list of investment options. Hence, there are few institutions investing in Exchange traded funds.
Costs are low but not enough: ETFs globally have a low-cost structure while in India the cost is little higher. If you add brokerage costs the costs go up further.
Lack of Awareness: Because of low margins, not enough has been done to make ETFs popular amongst investors in India. With distributors not getting any margins, they are not promoting them much.
No additional tax incentives: In US ETFs are more tax efficient than mutual funds. This is not as such in India.This is primarily because mutual funds and ETFs are treated similarly as far as tax incentives are concerned in India.
Not enough liquidity: Lack of popularity of ETFs amongst investors results in reduced liquidity as they are traded in the market. This results in less efficient price discovery and higher spreads for investors. This is not the ideal thing to have in a traded asset class.
What do you think about ETFs in India? Will they gain more popularity? Feel free to share your viewpoint on the same.
You must have heard about Public Provident Fund having 15 years of maturity. But, you probably have no idea about its withdrawal rules and policies. That's why you have landed here!
Hoping you already know about PPF scheme, we are moving directly to the main crux.
Closure Of PPF Account:
The maturity tenure for PPF account is 15 financial years. It means, if you have opened the account in August 2015, you can close it on 31st March 2031. Once maturity period is completed, you can withdraw entire amount compounded in the account over 15 years.
PPF authorities have strict restrictions regarding withdrawal. You are not allowed to make a premature withdrawal unless money is needed for medical urgency or higher education. In such cases, the government has provided the relaxation. But still, your account has to be 5 years older for premature withdrawal.
Coming to the main point, you have three closure options once maturity period is finished.
How to close PPF account? Options available
At maturity, you have the following three choices:
Withdraw total PPF balance
Extension of PPF accounts without any further contribution
Extension of PPF accounts with further contribution
Let's discuss this one by one:
1. Withdraw Total PPF Balance:
After the completion of 15 years maturity, you have freedom to make the withdrawal. You can get entire PF balance along with the compounded interest. You won't face any problem for this step. Just take your passbook to the respective bank or post office and request for withdrawal. You need to submit a Form C with essential details and documents for withdrawal.
2. Extension Of PPF Account Without Any Further Contribution:
Sometimes, people don't need to withdraw PPF balance. The reason can be anything. In this situation, you can extend the PPF account that does not require any further contribution. For this option, you don't need to fill any form. Just sit there when maturity period is finished.
If you don't make a move to withdrawal, your account will go in this mode by default. By mode, I meant PPF account will act as the savings account. You can withdraw money when needed.
An extended PPF account will have following characteristics:
You can make the withdrawal anytime you want.
The withdrawal is allowed only for once in a year.
The amount left in the account will earn the interest.
To close the account, you need to make a complete withdrawal.
You cannot make any further deposits.
The account will have no privileges under section 80C.
3. Extension Of PPF Account With Further Contribution:
This is the most outstanding feature of PPF account. If you can maintain good cash flow movement, you should extend the PPF account with further deposits. For this, you have to make intimation within one year of maturity. Otherwise, you cannot avail this opportunity.
After maturity, you can extend the PPF account for further 5 years. The Form H is mandatory for the extension request. Once 5 years are done, you may make another extension request again with the Form H!
Talking about features, it pretty much acts like normal PPF account:
A minimum deposit of Rs. 500 per year is compulsory.
The account still claims the tax deduction.
Before 5 years, you cannot ask for closure.
For once in a year, you can make withdrawal as per need.
You cannot make withdrawal more than 60% of total PPF balance.
All three withdrawal options can prove beneficial as per your requirements.
For instance, you may use the first option if you need money right after the retirement.
The second option is great if you are financially strong and don't want entire PPF balance. In this way, you can earn interest and make a withdrawal when you need it.
The third option is an ideal situation for people with financial stability. As, this option comes with interest, tax benefits, and withdrawal relaxation.
Hopefully, you get the answer you were looking for! In case you have something valuable to share, please pen down your valuable thoughts.
Disclaimer: Any views/recommendations expressed in the forum, of the individuals are their own only. Fintrakk doesn't endorse or recommend any financial product or views by the users of the forum. The information/comments on the forum should not be considered as a financial advise. Please do your own due diligence before investing. Fintrakk is not responsible for any financial loss to any of its visitor/user.