Month: May 2021

‘Managing wealth is managing yourself’, says Ashish Shanker of MOPWM

Personal Finance

[ad_1]

Read More/Less


A veteran in financial services industry, Ashish Shanker as managing director and chief executive of Motilal Oswal Private Wealth Management (MOPWM) leads a team that advises top corporates/institutions and over 3,000 HNI families. He has played a key role in building the investment, research and advisory platform and creating the proprietary ‘4C fund manager’ framework at the firm. As a captain of ship that advises client assets worth ₹25,000 crore, here is a sneak-peek of how the much sought-after wealth manager tends to his own personal finances.

What does money mean to you?

Money is a means to fulfill needs and desires for self, family and parents. It is a means to an end. You should have enough of it but then the greed for it also can end up destroying us.

What are your top financial goals as an individual?

For any parent, the kid comes first. Providing for my kid is at the top of my mind, so that he has a decent education and he has a decent lifestyle. Then, of course, providing for a high-quality retirement where I don’t have to compromise on lifestyle once I retire. I’m a little bit of a gourmet connoisseur, I like to have my malt as well. There are intermittent goals, such as travel and, at some point, may be housing. I do own a house, but it’s in my hometown (Pune). At some point, if price and wallet permit, buying a house in a Mumbai suburb of my choice is also a goal.

What does your portfolio look like?

Close to 85-90% of my money is invested in equities. All my incremental money also goes in equities. I do not count my PF (provident fund) in this.

My first job was as an equity analyst with a local brokerage firm. Even before that, I fell in love with equities in probably 12th standard. I used to interact with people in my family who were related to stock markets. I’ve been in private wealth firms now for 16 years. Hence, from day one, it’s been equities. Equity investments for me are a combination of stocks and mutual funds. I also hold a lot of my portfolio in ESOPs.

What was your most successful investment? What are the mistakes you’ve made?

All the investments that I made in the late 90s, and mind you I have not sold a single share, have been the most successful in terms of IRR (internal rate of return ). I bought Nestle, ITC etc., but on a very small capital.

I also do remember that I bought a lot of the dot-com stocks which went to zero. My experience has shown that if you buy 20-30 stocks and hold them, the better quality companies more than make up for the duds. So, the lesson I’ve learned is that in equities, patience and longevity beats everything else. It is 90 per cent temperament and 10 per cent skill.

How much emergency funds do you have and where do you keep it?

I’ve always had this principle that you should have at least six months of your expenses as emergency funds. You may call it very inefficient to keep that amount of money idle, but I always have that amount lying in my savings account. Now, there are even savings banks accounts, which give you 6-7 per cent. I tell people that maybe you should have one year’s worth money but six months is good enough for me.

What kind of amount would you require for your retirement?

Ten years back, if you’d asked me, I could have put a number of ₹5 crore. But today, that number doesn’t excite me because my lifestyle has gone up. I have figured it’s a moving target. Today, the target I am looking at is 200-250 times my monthly expenses.

As a private wealth veteran, what is the most important message to people on managing wealth?

As philosophical as it may sound, managing wealth, I believe, is predominantly about managing yourself. If you know your own temperament, you will be a better investor. Also, keeping it simple, and thinking long term is the crux of what I’ve learned in 24 odd years of my career. Ultimately, you are your biggest cash-generating machine. So, invest in yourself as in your career or your training, picking up skills.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , , , , , , ,

How to choose riders in a guaranteed insurance plan

Personal Finance

[ad_1]

Read More/Less


With increased awareness about insurance products and prevailing low bank deposits rates, many insurers have launched assured return products to catch the attention of investors. These types of plans offer guaranteed regular income i.e. a pre-defined percentage of sum assured (SA) is paid out as per a schedule.

In addition to offering life cover (up to policy term) and savings, such policies offer multiple riders i.e. additional benefits to the policyholder for an extra cost, to enhance the benefits of the policyholders. While all the riders at first glance appear to benefit you, it is important you choose the ones that fit your requirements.

Options galore

Almost all guaranteed return insurance policies, including those of Bajaj Allianz Life, Aditya Birla Sun Life, HDFC Life and Future Generali Life, come with rider options. Life insurance riders are contingent additional benefits over a primary/base policy. They come into play in case of a specific eventuality. Riders offer financial cover (rider SA) over and above basic sum assured in the life insurance policy.

Some of the common riders include accidental death benefit, where the policy (rider as well as base policy) pays rider/maturity benefit to the nominee. There is accidental permanent total/partial disability benefit where policyholder receives a lump sum payment (from the rider policy) in case of any specified disability.

Some insurers offer critical illness benefit rider where if the policyholder is diagnosed with any of the listed critical illnesses, the rider policy will pay the benefit and terminate. Even with the occurrence of the said event, the life cover remains intact which means you remain eligible for the death benefit on the life insurance plan.

In case of a waiver of premium rider, all future premiums for the term cover are waived if the policyholder is unable to pay because of permanent disability due to an accident or on being diagnosed with a critical/terminal illness.

A few insurers offer other riders as well. For instance, Bajaj Allianz Life offers family income benefit rider where 1 per cent of SA is paid monthly to the nominee/policyholder upon death or permanent disability or the first occurrence of one of the listed critical illnesses. Similarly, Aditya Birla Sun Life insurance offers, among other riders, surgical care benefit and hospital care benefit riders as well.

Factors to keep in mind

Do note the savings plans offered by life insurers generally cost more than a pure protection plan. Also, you may have to shell out more in terms of premium if you opt for riders. Consider Bajaj Allianz’s Flexi Income Goal plan which provides guaranteed income. For a 30-year old opting for an SA of ₹5.04 lakh and a guaranteed monthly income of ₹3,500 over a policy term of 17 years (premium payment term is 5 years), the total outgo works out to ₹1,23,892 (excluding tax). Now if a rider is added to this, say, a critical illness benefit rider, then the total premium cost works to ₹1,25,585 (excluding tax and discounts).

Before signing up for any rider, keep in mind two crucial things.

First, check whether the rider you want is available with that particular policy. For instance, in case of Future Generali Lifetime Partner Plan, there are no riders available but its Triple Plan Advantage plan comes with accidental benefit rider. Similarly, HDFC Life’s Sanchay Par Advantage offers two riders accidental disability rider and critical illness plus rider.

Second, assess whether you really need rider(s) with a savings product. According to Bikash Choudhary, Appointed Actuary & Chief Risk Officer, Future Generali India Life, “While all the riders play an important role in enhancing protection for the policyholders, the selection of riders depends on the need of the individual in terms of finance, lifestyle etc. For example, waiver of premium rider comes in handy in case of an insurance plan bought for a child. If the parents are not around, the rider helps in continuation of the policy until maturity to get full benefits, thereby protecting the child’s future financially.”

It is generally recommended to keep insurance and savings separate, instead of combining the two. This is because you may neither get sufficient life cover nor good returns from the product when you mix them. But certain investors such as high networth individuals, who have very low risk appetite, can consider such products. While these products do offer multiple riders or options, it may not make sense to sign for all of the riders available. So, make an intelligent choice to save on premium.

Check whether the rider is available with particular policy

Find out if you really need rider with a savings product

Savings plans cost more than term plans

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , , , , , , , , , , , , , , , , ,

Why betting on stocks based on big-picture themes doesn’t work

Personal Finance

[ad_1]

Read More/Less


No one can resist the onward march of an idea whose time has come, Victor Hugo said. In bull markets, there are many who apply this to stock investing as well. While conventional investors run screeners, scan company filings and analyse quarterly numbers to identify buys, idea investors believe that to find multi-baggers, all they need to do is latch on to a powerful idea.

So, the moment the Centre announces an Atmanirbhar Bharat push, they’re buying chemical or pharma intermediate companies. In a Digital India push, they’re buying fibre-optic cable makers. When it announces higher FDI in insurance or defense, they’re buying up listed insurers or PSU defense equipment makers. If e-commerce is taking off, they buy logistics stocks and if States are ramping up Covid testing, they bet on diagnostic labs.

But exciting as it may seem, selecting stocks based on such big-picture themes seldom adds durable wealth to one’s portfolio. If you’re itching to try it out, watch out for these pitfalls.

Skipped homework

Most long-term winners in one’s stock portfolio come from understanding a company’s business better than others in the market, spotting a sector trend early or buying a business when the market is under-estimating its potential. But when you’re chasing hot new ideas, there’s often no room for deep study of a company or a sector. Being in a hurry to ride a wave before it fizzles out, can force you to skip necessary homework, leading you to buy lemons.

A recent and somewhat extreme example of an idea stock that proved to be full of hot air is Bombay Oxygen Investments. As the media filled with reports of oxygen shortages during the second wave of Covid, thematic investors scrambled for companies that would gain from this theme. Bombay Oxygen Investments, thanks to the keyword in its name, shot up by 140 per cent between end-March and mid-April from ₹10,000 to over ₹24,000. But after little digging revealed that the ‘oxygen’ in the company’s name was a legacy of the past, the stock crashed 40 per cent.

The company, earlier in the business of manufacturing industrial gases, had discontinued this activity in August 2019 to secure a NBFC license from RBI. Since December 2019, it has been engaged in investment operations that have nothing to do with oxygen.

Shifting focus

While Bombay Oxygen may not have set out to deliberately mislead investors, there are many companies in the Indian market that are ever willing to oblige fickle markets by entering any business that seems to be the current flavour of the season. Scores of obscure firms attached ‘cyber’ to their names during the dotcom boom, construction companies transformed into ‘infra’ firms in the 2007-08 bull market and several new ‘logistics’ companies cropped up in the e-commerce boom. Owning such companies can be quite a roller-coaster, because you may find that instead of sticking to and scaling up in the business you bet on, they are constantly shifting shape to cater to market preferences.

Investors in Vakrangee Software have seen it morph from a company focussed on last-mile financial inclusion, to a play on e-governance and Digital India, to a retailer for Bharat in a short five-year span. Originally a franchisee for the Aadhar UID project in 2010, Vakrangee pivoted to being an e-governance firm that helped folks in tier-3 towns and villages perform internet-related tasks through an extensive network of over 40,000 Vakrangee Kendras in 2016-17. It then made unrelated forays, through subsidiaries into providing logistics for e-commerce giants and retailing gold. Even as the company’s revenues have taken a sharp tumble, it is readying yet another pivot, from e-governance to setting up a pan-India ATM network. While the stock has crashed over 90 per cent from its peak of ₹500, the company has run into governance issues as well after scotching a ₹1000 crore buyback plan, abrupt resignation of its auditor and penalties from SEBI for fraudulent trading in the stock.

To avoid betting on such wrong horses, run a check on the company’s annual reports and management commentary over the years. Frequent business pivots are a sign that the management is more focused on managing its stock price than on building a scalable business.

Execution woes

Idea investors focus a lot on big-picture trends that will play out in future. In the process, they may forget to check if the company they’re betting on has the execution capability to translate its larger-than-life vision into reality.

A good example of a great-sounding idea turning out to be a pipe dream is Educomp Solutions, a favourite stock with idea investors between 2008 and 2010. Listed in 2006, the company’s management successfully marketed the idea that Indian schools mostly using old-world methods of chalk-and-board teaching, were ripe for digital transformation pan-India. The hardware company, engaged in the computerization of schools pan-India, showcased itself as a high-growth play on ed-tech solutions for K-12 education. Within three years of listing, it was reporting 100 per cent revenue growth with operating profit margins of 48 per cent. Having installed its Smartclass solutions in about 2500 schools, it set itself a target of expanding to 15,000 schools and a ₹1000 crore revenue. It later transpired that in its aggressive bid to sign on more schools, Educomp didn’t pay attention to whether these school tie-ups actually translated into revenues. After many delayed or skipped payments, the company faced mounting receivables and debt, defaulted on bank loans and turned an NPA in 2016. It was later subject to CBI raids. The stock which hit dizzying heights of over ₹1000 in its heydays is currently at ₹3.

Educomp’s story is a lesson that captivating big-picture ideas need not translate into profits on the ground. It pays to be particularly wary of managements who set order-of-magnitude targets and sell you big dreams.

Not all idea-based stocks turn out to be lemons on the scale of a Bombay Oxygen or an Educomp or a Vakrangee. Investors in the stocks of diagnostic chains or pharma API companies have for instance, made significant gains in the last one year. But this is more because such companies already had established business models that had evolved over many years and had operating metrics, even before the Covid opportunity came by. Even in such cases, long-term investors may need to ask two questions – whether the big pop in earnings from the opportunity will sustain and whether stock valuations already factor in a best-case scenario.

Overall, even if idea-based investing excites you, it may be best allocate only a fixed portion of your portfolio to such opportunistic bets.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , ,

Pradhan Mantri Jeevan Jyoti Bima Yojana: How Nominees Can Claim The Sum Assured?

Personal Finance

[ad_1]

Read More/Less


Premium amount

The yearly premium for the policy is Rs 330 if you enroll between June and August, which is auto-debited in one instalment from the policyholder’s bank account on or before the 31st May of each yearly coverage term under the policy. If a person enrols between September and November, the premium is Rs 258; between December and February, it is Rs 172; and between March and May, it is Rs 86. As per the ICICI Bank’s website, the current year’s premium will be Rs 330, and the bank will auto-debit it between May 25 and May 31. For those who open a savings account on or after June 1, the coverage will begin on the date of the account holder’s application and terminate on May 31 of the succeeding year. The cover terminates when the person reaches the age of 55, the account is terminated with the bank if there is an insufficient balance to pay the premium, and the cover is limited to Rs 2 lakh if the individual obtains insurance from other banks.

How to raise a claim?

How to raise a claim?

The nominee must first get a death certificate from the Municipal Corporation before beginning the process of making a claim under the PMJJY scheme. Following the receiving of the death certificate, the nominee must submit a properly completed claim form to the bank branch where the policyholder was registered in the scheme. The nominee must also submit to the bank a signed ‘Discharge Receipt.’ Both ‘Discharge Receipt’ and ‘Claim Form’ can be downloaded from here. A bank or another recognised source, such as an insurance company branches, hospitals, PHCs, BCs, insurance agents etc, can also provide the claim form and discharge receipt. The nominee must then submit a properly completed Claim Form, Discharge Receipt, death certificate, and a photocopy of the cancelled cheque of his or her bank account (if available) or bank account details to the bank where the policyholder had the “Savings Bank Account” through which he or she was covered under PMJJBY.

Steps to taken by the bank

Steps to taken by the bank

The bank shall investigate if the cover for the stated individual was in force on the day of his death, i.e. if the premium for the said cover was deducted and remitted to the Insurance Company involved on the Annual Renewal Date, i.e. June 1st, prior to the policyholder’s death. The bank will then check the Claim Form and nominee details against their records and fill up the necessary fields of the Claim Form.

The bank must then submit the following documents to the Insurance Company’s authorised office:

  • Claim Form duly completed
  • Death certificate
  • Discharge Receipt
  • Photocopy of cancelled cheque of the Nominee (if available).

The bank requires thirty days from the day the claim is lodged to forward the duly filled claim form to the Insurance Company.

Steps to be taken at the designated office of the Insurance Company

Steps to be taken at the designated office of the Insurance Company

  • The Insurance Company’s authorised office verifies that the Claim form is duly filled and that all necessary documents have been attached.
  • If the claim is legitimate, the insurer’s authorised office will verify that the member’s coverage is active and that no death claim payment has been made for the policyholder through any other account. In the event that a claim is settled, the nominee will be notified, along with a copy of the bank.
  • Payment will be sent to the nominee’s bank account and a notification will be issued to the nominee with a copy sent to the bank if the coverage was in effect and no claim had been settled for the mentioned member.
  • The Insurance Company has thirty days from the receipt of the claim from the bank to authorise the claim and release the funds.
  • If the claimant submits the claim form directly to any office of the insurer, the insurer’s office will promptly forward it to the concerned bank of the deceased account holder to initiate the necessary verification from the bank.
  • The Claim Form will be forwarded by the respective bank branch to the authorised office of the Insurance Company for settlement.



[ad_2]

CLICK HERE TO APPLY

Leave a comment

Why Indian banks are banking on the rich

Personal Finance

[ad_1]

Read More/Less


Picture a lazy Saturday morning. You get a call from a soft-spoken representative of one of the well-known private sector banks, telling you how they have customised a neat deal encompassing services, offerings and add-ons just for you.

Surprised? Don’t be! As the number of rich individuals grows in the country, banks are developing services for the well-to-do so that these customers bank with them. Most of these promised goodies will cost you virtually nothing. Banking services for the rich carry names that contains words such as wealth, privilege, preferred, class, priority, league and premier etc., and this itself is a great ego boost for customers. But remember that beneath the super-slick glib, the grandeur and the goodies, there is always a profit motive. While this is not wrong, you will do well to know what’s at stake before you sign up for such services.

A good hook

Broadly speaking, banks generate money from three areas: interest income, capital markets income and fee-based income. With intensifying cost pressures and rising competition, banks are trying to find clients who can generate a good amount of revenue individually. A high-income professional customer, a highly paid salaried customer or a businessman customer can help a bank bring in more income compared to scores of savings account holders who merelyhold small deposits at a bank.

Customers are segmented based on the total relationship value (TRV). This is an aggregate of the value of the savings balance, fixed deposits, investments, etc. Depending on this total value, banks will offer you various levels of service. Common offerings across banks aimed at rich customers are personalised banking services via a dedicated relationship manager (RM), priority servicing, discounts on many products including lockers and demat accounts, relationship pricing and waivers on a variety of products, including loans, and services. The higher the TRV, the bigger is the range of services and products offered – a client relationship manager, a wealth manager/investment counsellor, invitation-only credit cards, access to exclusive events, etc. All these goodies have a direct relationship with the core revenue areas for the bank.

Measured bet

It may be easy for the bank with which you have an existing relationship to know the details of your ‘relationship value’. But for other banks to attract you, your details need to be dug out. Business intelligence teams, with the use of big data, map prospective customers based on your transactions such as credit/debit card payments, shopping pattern, etc.

It’s an attractive proposition for a bank to become primary bank for a rich customer. Once onboarded, there are ways to ensure that such a customer stays with the bank. One way is by offering loans. Even the rich and high-income people need loans, obviously for different purposes than the hoi polloi. Second, is by selling various investments and insurance products which will result in a sticky relationship. Not only do the investments facilitated by the banks provide fee income, once people have a bank account linked with income tax, mutual funds, stocks or insurance, they hardly change the bank. Third, in case of business or self-employed rich customer, offering a current account gives additional float (money) and keeps the transaction volume up. If employee salaries or vendor payments are paid, then cash management services come into play.

Do your homework

From a customer point of view, getting top-quality banking services is a feel-good experience. But it is important to not let down your guard. Customers who are NRIs, those who play a passive role in terms of decision-making and the elderly are often at the receiving end. While your networth could have attracted banks, you need to shield the same by doing your homework and not making wrong money choices.

Fresh graduates or MBAs are recruited to become RMs and are often given sky-high sales targets and may often sell financial products without fully understanding them. Since customers, even the rich ones, lack proper financial knowledge, the chances of mis-selling are high. The YES Bank case where perpetual bonds were sold to HNI customers is a classic example. Your RM must advise keeping your best interests in mind. On your part, spend time to understand the product well and weigh every investment decision carefully.

Be it taxation, investment, financial planning or even succession planning, it is important to choose a professional whose interests are aligned with yours. In an atmosphere of surplus liquidity and low interest rates, banks may no longer be excited with your deposits alone. They may want to lend to get interest income, see you trade or invest regularly to get a sustainable flow of non-interest income. You can also hire a SEBI-registered investment advisor to guide you.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , , , , , ,

BoB slips into loss in Q4 on account of one-time tax charge

Banking & Finance

[ad_1]

Read More/Less


Bank of Baroda (BoB) has slipped into the red, reporting a standalone net loss of Rs 1,046.50 crore in the fourth quarter ended March 31, 2021 against a net profit of Rs 507 crore in the year-ago quarter.

The loss is mainly on account of a one-time tax charge of Rs 3,837 crore on account of the public sector bank exercising the option of moving to a lower tax rate. The management does not foresee any further implications of this option being exercised by it.

Operating profit before provisions and contingencies were, however, up 27 per cent year-on-year (yoy) at Rs 6,266 crore (Rs 4,922 crore in the year-ago quarter).

Net interest income (difference between interest earned and interest expended) was up 4.50 per cent yoy at Rs 7,107 crore (Rs 6,798 crore).

Other income, including income from non-fund based activities such as brokerage, commission, fees, income from foreign exchange fluctuation, profit/ loss on sale of investments, recovery from written-off accounts and income from sale of priority sector lending certificates, etc., jumped 71 per cent to Rs 4,848 crore (Rs 2,835 crore).

Gross non-performing assets (GNPAs) during the reporting quarter increased by 3,489 crore.

GNPAs increased to 8.87 per cent of gross advances as at March-end 2021, against 8.48 per cent as at December-end 2020.

Net NPAs rose to 3.09 per cent of net advances as at March-end 2021, against 2.39 per cent as at December-end 2020.

Provisions (other than tax) and contingencies were down 46 per cent yoy to Rs 3,586 crore (Rs 6,645 crore).

Deposits increased by 2.22 per cent yoy to stand at Rs 9,66,997 crore as at March-end 2021. Advances were up 2.34 per cent to Rs 7,06,301 crore.

Meanwhile, BoB’s board on Saturday approved raising of additional capital up to Rs 5,000 crore.

This comprises Rs 2,000 crore of Common Equity Capital by various modes, including QIP, in suitable stages and Rs 3,000 crore by way of Additional Tier I capital/ Tier II capital instruments with an interchangeability option, issued in India/ overseas in suitable tranches up to March-end 2022.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Covid-19: Depositors’ body seeks suspension of penalty on premature FD withdrawal

Banking & Finance

[ad_1]

Read More/Less


The All India Bank Depositors’ Association (AIBDA) wants the Reserve Bank of India (RBI) to direct banks to suspend penalty charges on premature withdrawal of Fixed Deposits (FDs) in view of the Covid-19 pandemic.

In its “Addendum to Memorandum to the Reserve Bank of India,” the AIBDA observed that many depositors are under compulsion to prematurely withdrawal their savings to defray the excessive medical bills for treatment of Covid virus and many have lost their jobs.

Hence, the association requested the RBI for a moratorium on penalty charges for premature deposit withdrawal up to ₹5 lakh.

AIBDA underscored that this request is in light of the accommodation given (with respect to moratorium on loan repayments and resolution framework) to small borrowers, MSME loans up to a given limit.

Depositors need relief

“When borrowers are accommodated then why is there no relief for bank depositors – it is unfair and iniquitous.

“This has become of paramount importance in the current pandemic scenario with unemployment, economic uncertainties, health concerns and unexpected expenses,” said DG Kale, President, and Amitha Sehgal, Honorary Secretary, AIBDA.

The association’s office bearers emphasised that many sections of the society depend on FD interest income as a primary source of income.

“It is only in case of extreme necessity/ emergency that a depositor may withdraw the FD prematurely. It is unfortunate that if they need to break the FD receipt, they also have to forego a part of their income as ‘penalty’,” said Kale and Sehgal.

From the long-term perspective, AIBDA urged the RBI to nudge banks to have a more reasonable penalty structure, that is responsive to the current predicament faced by depositors.

The association said while FD rates are currently hovering at around 4 to 5 per cent per annum, the premature withdrawal penalty can be nearly 0.50 to 1 per cent per annum.

Earlier the FD rates used to hover around 7-8.50 per cent. According to AIBDA’s calculation, the penalty of 1 per cent was reducing the return by approximately by 12 per cent (1 per cent divided by 8 per cent).

Currently, FD rates are hovering around 4 to 5 per cent. The penalty of 1 per cent will bring the return down by 20 per cent (1 per cent divided by 5 per cent).

Unfair to depositors

“This is unfair to depositors. In the best interests of retail/ small depositors and in the light of the current falling interest rate scenario, the existing policy related to penalty on premature withdrawal needs a review,” said the AIBDA office bearers.

AIBDA reiterated its concern that retail depositors are likely to be lured by riskier financial assets to improve on the rate of return on their savings.

Against the backdrop of the impending turbulence and uncertainty in the financial market and a likelihood of stress in the banking/ NBFC/ corporate sector, it is important to take care of this risk, it added.

The association emphasised on the need for some calibration in penalty, linking it to absolute percentage return so that retail depositors are able to meet their objective of generating suitable return from this banking product.

It suggested that the penalty may be linked with the value of the FD, with small value FDs having nil or lower penalty structure.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

UTI Corporate Bond Fund: A Better Opportunity Than Bank Deposits

Personal Finance

[ad_1]

Read More/Less


Investment

oi-Sunil Fernandes

|

With returns from bank deposits around that 4 to 5.5% range, it’s unlikely that you are going to generate returns. In fact, if you are in the highest tax bracket you might end-up with returns of 2 to 3.5%. It’s time to look at mutual fund schemes that are into corporate bonds and can offer better returns.

Reasons to invest in debt instruments like Corporate Bond Funds

It is expected that RBI is likely to continue to announce Open Market Operations, Operation Twist in addition to G-SAP which would help boost market sentiment. Further, the government likely to continue to borrow massive amounts, yields would remain at reasonably good levels. This presents a good opportunity for a conservative investor to look at UTI Corporate Bond Fund for an investment horizon of more than 12 months.

Returns from the UTI Bond Fund are decent

This corporate bond fund was launched in Aug 2018 and going by the current NAV of Rs 12.84, the returns are to the tune of 9.35%. The 1-year returns are close to 7%, which is pretty decent.

Most of the corpus is invested in debt instruments of government owned entities like National Highways Authority of India, NABARD, SIDBI, Rural Electrification, Power Finance etc. The portfolio is rather strong.

UTI Corporate Bond Fund: A Better Opportunity Than Bank Deposits

The fund predominantly invests in high quality corporate bonds such that minimum 80% of portfolio is invested in AAA and AA+ rated corporate bond and equivalent instruments with an aim to provide reasonable income through accrual strategy. This fund follows conservative approach in security selection and has currently invested 100% of the portfolio in AAA rated securities issued by Public Sector Undertakings, Public Financial Institutions and Corporates with strong parentage & proven track record with various maturities. The fund’s average maturity generally ranges from 3.5 to 4.5 years.

Conclusion

The returns are likely to remain pretty decent at that 6% mark is what we believe. This is still better than what banks are offering currently. If you are looking at diversification and away from bank deposits, UTI Bond Fund could be a good bet.

Story first published: Saturday, May 29, 2021, 14:29 [IST]



[ad_2]

CLICK HERE TO APPLY

Leave a comment

National Pension System: Check Current Withdrawal, Exit & Account Opening Rules

Personal Finance

[ad_1]

Read More/Less


Investment

oi-Vipul Das

|

Subscribers of the National Pension System (NPS) may soon be able to withdraw their whole contributions. According to sources, the Pension Fund Regulatory and Development Authority (PFRDA) aims to establish a new alternative for retirees that would allow them to take their whole investment at once if their corpus is up to Rs 5 lakh. During the current phase of the coronavirus pandemic, the raised threshold of Rs 5 lakh will provide improved liquidity to a particular subset of subscribers. Beneficiaries can withdraw up to Rs 2 lakh from their NPS account presently whereas pensioners can withdraw 60% of their contributions after this limit has been exceeded. According to sources, the regulatory body would allow subscribers to maintain a portion of their pension funds for investment in annuities or by pension fund managers directly. As per the existing guidelines of NPS, check current withdrawal, exit, partial withdrawal and account opening rules below.

National Pension System: Check Current Withdrawal, Exit & Account Opening Rules

NPS current withdrawal rules

If the entire accumulated corpus is less than or equal to Rs. 2 lakh at the time of Superannuation/at the age of 60 years, a subscriber can claim a 100 per cent withdrawal. In the event of an early exit, if the total accrued corpus is less than or equal to Rs. 1 lakh, the subscriber has the option of withdrawing the whole amount. However, one can only exit the NPS once ten years have passed. In the event of a partial withdrawal, the subscriber must have been a member of the NPS for at least three years and the withdrawal amount should not exceed 25% of the contributions made. A maximum of three withdrawals is permitted throughout the subscription period. Investors can withdraw funds in part for their children’s higher education, marriage, the purchase/construction of a residential home (under certain conditions), and the treatment of serious diseases. Subscribers can make a partial withdrawal request online. Subscribers can also submit a physical partial withdrawal form (601-PW) along with supporting documents to POP, which will allow a POP to launch an online application, on the other hand, POP must ‘Authorize’ the withdrawal application in the CRA system. Subscribers can also request an Online Withdrawal by logging into their NPS account. This request must be confirmed and approved by the concerned POP. If a Subscriber is unable to make an online Withdrawal request, he or she must submit a physical Withdrawal form to the POP, with the requisite documents. POP will proceed with the withdrawal request on behalf of the subscriber depending on the subscriber’s preference.

NPS Current Exit Rules

An exit is regarded as the closing of a subscriber’s pension account under the National Pension System. According to the PFRDA (Exits and Withdrawals under NPS) Regulations 2015, subscribers can exit NPS in the following circumstances:

Upon Superannuation: When a subscriber hits Superannuation/60 years of age, he or she must utilise at least 40% of the accrued pension fund to buy an annuity that will give a regular monthly income. The outstanding funds can be withdrawn out in one go. Subscribers can choose for a 100 per cent lump-sum withdrawal if their entire accrued pension corpus is less than or equal to Rs. 2 lakh.

Premature Exit – In the event of a premature withdrawal (before reaching the age of superannuation/60 years of age) from NPS, at least 80% of the Subscriber’s accumulated pension corpus must be used to purchase an Annuity that would deliver a regular monthly annuity. The outstanding money can be withdrawn in one go. However, after ten years, one can exit from NPS. Subscribers who have a total corpus of less than or equal to Rs. 1 lakh can choose for a 100 per cent lump sum withdrawal.

Upon Death of Subscriber: The entire accrued pension corpus (100%) would be given to the subscriber’s nominee/legal heir.

Options for exit from NPS

Subscribers have the option of staying invested in NPS for up to 70 years or exiting NPS. Subscribers of NPS have the following options to opt according to npscra.nsdl.co.in:

Continuation of NPS account: Subscribers can keep contributing to their NPS account once they reach the age of 60/superannuation until they reach the age of 70. This contribution made beyond the age of 60 is also eligible for tax deductions under NPS.

Deferment (Annuity as well as Lump sum amount): Subscribers can delay withdrawals and remain invested in NPS until they reach the age of 70. Subscribers can choose to delay only lump-sum withdrawals, only Annuity, or both lump sum and Annuity.

Start your Pension: Subscribers can exit NPS if they do not want to continue/defer their account. He or she can submit an exit request online and start earning pension according to NPS exit guidelines.

Note: If the Subscriber meets the age and corpus requirements for purchasing an annuity, the pension starts immediately, based on the annuity scheme chosen by the respective Annuity Service Provider (ASP).

NPS new account opening rule

The pension regulator has approved the seamless digital onboarding of new subscribers via Points of Presence (POPs) and Central Record Keeping Agencies (CRAs). CRAs will continue to create soft copies of NPS subscribers’ applications for accounts created digitally in CRA platforms, including eNPS. According to the revised guidelines, NPS subscribers will no longer be required to submit a physical application form to their respective CRAs. Before the activation of a Permanent Retirement Account Number (PRAN), subscribers will have the alternative of e-Sign or OTP authentication. This regulation will apply to NPS accounts registered through POPs as well.

Story first published: Saturday, May 29, 2021, 13:31 [IST]



[ad_2]

CLICK HERE TO APPLY

Leave a comment
1 … 5 6 7 8 9 … 100