Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

It not only allows you to invest at regular intervals but also enhances returns as the cash is invested in liquid funds, which generally offers better returns than savings bank account. As a mutual fund investor, what do you do when you have large sum in bank account and equity markets become attractive day by day, a scenario that we are going through for almost last three months? Some of you may want to write a cheque immediately. The wiser lot will opt for a systematic investment plan (SIP) to benefit from ongoing volatility but the bit smarter lot opt for systematic transfer plan (STP).  STP allows an investor to invest lump sum amount in a scheme and periodically transfer a fixed or variable sum into another scheme . It is quite similar to SIP which is more widely known and popular of the two among the mutual fund investors. While in a SIP you invest a specified amount in a scheme at pre-specified intervals and the investment amount for every SIP tranche comes directly from you

All of us must have some debt investments .  Some of us would like to know answer to the below questions.   “I live frugally, and save all the money that I can in Fixed Deposits, Public/Employee Provident Fund, and National Savings Certificates. When do you think will I get rich?"  the answer to this is: 1. Debt instruments preserve your money:  Yes, and they preserve it exactly as it was! Your money does not grow in a debt instrument. 2. The ‘interest’ that you get in a debt instrument is equal to, or less than inflation:  Over a long period of time, the interest is equal to inflation, that is all. That means the money is preserved, if at all. 3. The interest that you receive, howsoever meagre, is taxed at regular rates:  So, if you are a tax payer, a small part of the interest received is lost to taxation. In fact the bank may deduct about 10 per cent tax, and the balance tax will have to be paid by you as an advance tax. 4. The impact of the taxation is so bad that comp

§   Buy life cover of 6-8 times your annual income §   Buy health cover of at least Rs 5 lakh for full family §   Save at least 10% of your income for retirement §   Keep contingency fund to sustain 3-6 months' expenses §   Start saving for kids' education when they are born §   Take personal accident, disability cover of at least Rs 25 lakh §   Your EMIs should not exceed 40% of your take home income §   Insure home and other assets against damage and theft §   Earmark savings for specific financial goals §   Increase savings in line with rise in income §   Establish a diversified portfolio and asset allocation §   Rebalance your portfolio at least once a year §   Don't go after extraordinary returns §   Match investment horizon with asset class §   Differentiate your wants from your needs §   Ensure timely and regular repayment of loans   §   Avoid investments that offer extraordinary returns §   Understand features of insurance polici

I am happy to share my answers on investments are published in Nanayam Vikatan's 2nd Aug'15 edition.