NFO and it's Advantages

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Anand (B.Tech, M.Tech, MBA Finance) 

Mob :- 9415283904

NFO (New Fund Offer) in Mutual Funds. and it's Advantages

A new fund offer (NFO) is a process through which mutual fund companies offer new mutual fund schemes to the public for the first time. It is a process by which a new mutual fund scheme is launched, and investors can subscribe to it during the subscription period. NFOs offer investors the opportunity to invest in a new mutual fund scheme at the initial offer price.

Advantages of New Fund Offer:

1.   Lower Initial Investment: One of the biggest advantages of investing in an NFO is that investors can buy the units of the fund at the initial offer price. This means that investors can invest in the mutual fund scheme at a lower price than the market value.

2.  Diversification: NFOs often offer a new theme, sector or investment strategy that may not be available in existing mutual fund schemes. By investing in an NFO, investors can diversify their portfolio with a new theme, sector or investment strategy.

3.   Potential for Higher Returns: Investing in an NFO can provide the potential for higher returns, as the fund manager has a clean slate to invest in stocks or bonds, unlike existing schemes that may already be fully invested.

4. Attractive Offers: Mutual fund companies often offer attractive offers and incentives to investors during the NFO period, such as a waiver of entry load or a discount on the initial offer price.

Example:

5.   Let's say a mutual fund company launches a new fund called "ABC Equity Fund" and offers investors the opportunity to invest in the NFO. The NFO has a subscription period of 15 days, during which investors can invest in the fund at the initial offer price of Rs. 10 per unit. After the subscription period, the fund will be listed on the stock exchange and the units can be bought or sold at the prevailing market price.

6.   Suppose an investor subscribes to the NFO and invests Rs. 10,000 in the ABC Equity Fund at the initial offer price of Rs. 10 per unit. The investor will get 1,000 units of the fund. After the subscription period, the market price of the units may go up or down depending on the demand and supply of the units. If the market price of the units goes up to Rs. 12 per unit, the value of the investor's investment will be Rs. 12,000, resulting in a profit of Rs. 2,000.

SWP: Earn Regular Monthly Income on your investment through SWP(Systematic Withdrawal Plan)

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Anand (B.Tech, M.Tech, MBA Finance) 

Mob :- 9415283904

SWP in mutual funds and How it works.

1.  SWP stands for Systematic Withdrawal Plan, which is a facility offered by mutual funds to investors that enables them to withdraw a fixed amount of money at fixed intervals from their investment. Essentially, an SWP is the reverse of Systematic Investment Plan (SIP), which allows investors to invest a fixed sum of money at regular intervals.

2.     With an SWP, investors can receive a regular stream of income from their mutual fund investment while still keeping the invested amount intact. It is a useful option for those who want to earn regular income from their mutual fund investments, such as retirees or those looking for a steady income stream to supplement their salary.

Here's an example of how an SWP works:

3.      Suppose an investor has invested Rs. 10 lakhs in a mutual fund, and they want to receive Rs. 5,000 every month as a regular income. They can opt for an SWP of Rs. 5,000 per month, and the mutual fund company will sell units worth Rs. 5,000 every month and transfer the money to the investor's bank account.

4. SWP is an excellent option for investors who want to generate a steady income stream while also keeping their investment intact. As per the performance track CAGR seen over a period of 25 years, Funds gives more than 10% returns per year in most cases, returning 5000 per months to investor amounts to returning 6% yearly to investor. Hence left 4% return adds on to the original corpus amount which ultimately grows at the rate of 4% despite giving 5000 to investor each month. 

5. For more info on the very safe SWP Scheme of mutual fund contact me on mobile number 9415283904 and seek professional advice before opting for it.

Basics of Mutual Fund and common Parameters.

Published by:-Anand(B.Tech, M.Tech, MBA Finance) 

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Mutual funds have different types of parameters, which can help investors evaluate and compare different funds.

Here are some common types of parameters in mutual funds:

1.   CAGR (Compound Annual Growth Rate):

 CAGR is a measure of the rate of return on an investment over a specific period of time, taking into account the effects of compounding. It is calculated by taking the ending value of an investment, dividing it by the beginning value, raising the result to the power of 1/n, where n is the number of years, and then subtracting 1.

CAGR = (Ending Value / Beginning Value) ^ (1/n) - 1

For example, if an investment had an initial value of 10,000 and grew to 15,000 over a 5-year period, the CAGR would be:

CAGR = (15,000 / 10,000) ^ (1/5) - 1 = 8.14%

2.   XIRR (Extended Internal Rate of Return): 

XIRR is a measure of the annualized return on an investment, taking into account the timing and amount of cash flows. It is used to calculate the rate of return when the cash flows are not evenly spaced over time. XIRR can be calculated using spreadsheet software or financial calculators.

For example, if an investment had an initial value of 10,000, received a cash inflow of 5,000 after 2 years, and another cash inflow of 7,000 after 4 years, the XIRR would be the rate at which the net present value of these cash flows is equal to zero.

3.   IRR (Internal Rate of Return): 

IRR is a measure of the profitability of an investment, taking into account the time value of money. It is the discount rate that makes the net present value (NPV) of the investment equal to zero. IRR can be calculated using spreadsheet software or financial calculators.

For example, if an investment had an initial value of 10,000 and generated cash flows of 2,000 per year for 5 years, the IRR would be the rate at which the net present value of these cash flows is equal to zero.

The IRR is often used as a tool to compare different investment opportunities or to evaluate the feasibility of a new project. Generally, the higher the IRR, the more attractive the investment or project is considered to be.

4.   Absolute return: 

It refers to the total return or profit that an investment generates over a certain period of time, regardless of market conditions. It is a measure of the actual gain or loss of an investment, rather than its performance relative to a benchmark or index. Absolute return strategies aim to generate positive returns regardless of whether the overall market is going up or down. These strategies typically involve using a range of investment techniques, such as short selling, leverage, and derivatives, to achieve their objectives. Absolute return is often used as a performance benchmark for hedge funds and other alternative investments.

5.  Net Asset Value (NAV) - 

The value of one unit of the mutual fund scheme.

6.   Dividend Payout Ratio - 

The percentage of profits that are distributed as dividends to the investors.

7.   Exit Load - 

The fee charged by the mutual fund company if an investor exits the fund before a certain period of time.

8.   Expense ratio: 

The expense ratio is the annual fee charged by a mutual fund to cover its expenses, such as management fees, operating costs, and administrative expenses. A lower expense ratio can be beneficial for investors as it can increase their net returns.

9.   Assets under management (AUM):

 AUM is the total value of all the investments in a mutual fund. Higher AUM may indicate that the fund is more popular and has more resources to invest in a wider range of securities.

10.   Minimum investment: 

Some mutual funds require a minimum investment amount, which can range from a few hundred to thousands of rupees. Investors should check the minimum investment requirement before investing in a mutual fund.

11.   Investment objective: 

The investment objective of a mutual fund specifies the type of securities the fund will invest in, such as stocks, bonds, or a combination of both. Investors should choose a mutual fund that aligns with their investment objectives and risk tolerance.

12.   Performance: 

Mutual fund performance is the return earned by the fund over a specified period, such as one year, three years, or five years. Investors should consider the fund's historical performance when evaluating its potential returns.

13.   Risk: 

Mutual funds can have different levels of risk, depending on their investment objectives and the types of securities they invest in. Investors should consider the risks associated with a mutual fund and determine if it aligns with their risk tolerance.

14.   Dividend policy: 

Some mutual funds may pay dividends to their investors, while others may reinvest the dividends called IDCW.

15.   Fund manager: 

The fund manager is responsible for managing the mutual fund's investments and making investment decisions. Investors should consider the fund manager's experience, track record, and investment philosophy when evaluating a mutual fund.

Old v/s New Tax Regimes, which one to opt.

Published by:-Anand(B.Tech, M.Tech, MBA Finance) 

Whatsapp 9415283904

Old vs new tax regimes.

The decision of whether to opt for the old tax regime or the new tax regime depends on various factors like income level, expenses, investments, and tax-saving goals. Let me explain the differences and benefits of both regimes.

Old Tax Regime:

Under the old tax regime, taxpayers can claim deductions and exemptions on various investments and expenses under Sections 80C, 80D, and 80G, among others. However, the tax slabs and rates are higher in the old regime, and the tax-saving options are limited.

New Tax Regime:

The new tax regime offers lower tax slabs and rates but does not allow taxpayers to claim deductions or exemptions on investments and expenses under Sections 80C, 80D, and 80G, among others.

To decide which regime is better, taxpayers need to calculate their tax liability under both regimes based on their income, expenses, and investments. If the deductions and exemptions claimed by taxpayers under the old regime are more than the tax savings under the new regime, then the old regime would be more beneficial. However, if the tax savings under the new regime outweigh the deductions and exemptions claimed under the old regime, then the new regime would be more beneficial.

Additionally, taxpayers need to consider their financial goals and priorities while choosing between the two regimes. If tax-saving is a primary goal, then the old regime could be more beneficial.

In conclusion, there is no one-size-fits-all answer to whether the old or new tax regime is better. Taxpayers need to analyze their financial situation and tax liability before deciding on which regime to opt for. It is advisable to consult with a financial advisor or tax expert to make an informed decision.

INFLATION & Calculating Indexation

Published by Anand(B.Tech, M.Tech, MBA Finance) Whatsapp 9415283904

Inflation and Inflation Index. 

How to calculate indexation.

1.   Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, the purchasing power of a currency is decreasing over time. In other words, inflation is the percentage increase in the price level of a basket of goods and services over a given period.

2.   An inflation index, also known as a price index, is a measure of the change in the general price level of goods and services in an economy over time. Inflation indices are used to track the inflation rate, which is a critical macroeconomic indicator.

3.   The most common inflation index used in India is the Consumer Price Index (CPI). It measures the change in the price level of a basket of goods and services consumed by households. The Reserve Bank of India (RBI) uses the CPI to calculate the inflation rate.

4.   Indexation is a technique used to adjust income or the value of an asset to account for inflation. It is a method of linking the value of an asset to an inflation index, such as the CPI, to maintain its real value over time. Indexation is commonly used in tax laws to adjust the cost of an asset for inflation.

5.   To calculate indexation, you need to follow the steps below:

(a)   Determine the base year: Choose the year when you purchased the asset, and you want to adjust its cost for inflation.

(b)   Calculate the cost inflation index: Use the following formula to calculate the cost inflation index for the current year:

(c)   Cost Inflation Index (CII) = (Current Year's CPI) / (Base Year's CPI) x 100

(d)   Calculate the indexed cost of the asset: Use the following formula to calculate the indexed cost of the asset:

(e)   Indexed Cost = (Actual Cost) x (Current Year's CII) / (Base Year's CII)

6.   By using indexation, you can calculate the real value of an asset by accounting for the effects of inflation, which helps to avoid paying taxes on inflationary gains.

NPS and TAX REBATE

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NPS account and how can we take tax rebate from it

1.   NPS stands for National Pension System, which is a Indian government-sponsored pension scheme launched in 2004. It is designed to provide a pension corpus to all citizens of India, especially to those who are not covered under any other pension scheme.

2.   To open an NPS account, you can approach any Point of Presence-Service Provider (POP-SP) authorized by the Pension Fund Regulatory and Development Authority (PFRDA) and submit the required documents. You can also open an NPS account online through the eNPS portal, bank or consult me.

3.   Contributions to an NPS account are eligible for tax benefits under Section 80C and Section 80CCD(1) of the Income Tax Act, 1961. As per the current tax laws, an individual can claim a tax deduction of up to Rs. 1.5 lakh under Section 80C and an additional deduction of up to Rs. 50,000 under Section 80CCD(1B) for contributions made to an NPS account.

4.   Apart from the tax benefits, the NPS also offers the option of withdrawing a certain portion of the accumulated corpus tax-free at the time of retirement. However, any premature withdrawals from the NPS account may attract a tax penalty.

5.   To claim tax benefits on your NPS contributions, you need to submit the details of your NPS contributions while filing your income tax return (ITR) using Form 10-BA. It is also important to note that the tax rebate is subject to the overall limit under Section 80C and 80CCD(1B).

Qualities of a Sound Investor

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Qualities of a Good and Sound Investor

There are several qualities that can make someone a good and sound investor. Here are some of them.

1.   Patience: A good investor has the patience to wait for the right investment opportunities to come along, and doesn't rush into making hasty decisions.

2.   Discipline: A sound investor has the discipline to stick to their investment strategy, even during times of market volatility or uncertainty.

3.   Knowledge: A good investor is knowledgeable about the investments they are making and the market in which they are investing. They stay up-to-date on the latest news and trends in the industry.

4.   Risk management: A sound investor has a good understanding of risk management and knows how to minimize the risk of their investments.

5.   Long-term perspective: A good investor has a long-term perspective and understands that investing is a marathon, not a sprint. They don't get discouraged by short-term fluctuations in the market.

6.   Diversification: A sound investor knows the importance of diversification and doesn't put all their eggs in one basket. They spread their investments across different sectors and asset classes to minimize risk.

7.   Emotional stability: A good investor has emotional stability and doesn't let their emotions dictate their investment decisions. They are able to remain calm and level-headed during times of market volatility.

8.   Patience to do research: A sound investor has the patience to conduct thorough research on potential investments before making any decisions. They don't rely solely on rumors or hearsay.

10.   Flexibility: A good investor is flexible and willing to adapt to changing market conditions. They are able to pivot their investment strategy if necessary.

11.   Focus on fundamentals: A sound investor focuses on the fundamentals of the investments they are making, rather than getting caught up in short-term trends or hype. They understand the underlying value of the investments they make.