Plan your Retirement with Mutual fund

Mutual fund companies are coming up with Retirement plans in recent past , insurance companies have already flooded the market place with plethora of products which say they are made for your retirement planning. Do you really need all these or you need just simple mutual funds which can solve your purpose ? By the end of this article you will get the answer.

A decade ago it would have been unimaginable that a person in his 20s talk about retirement planning.  Well that’s not the case any more things have changed now.

 Now people have started to look for retirement solutions from staring year of their earning cycles. Gone are the days when Government use to give pension to employees after their retirement.  Life expectancy has also increased with better medical facilities available so in turn you require a larger nest egg to take care of your sunset lives.

So how do you start planning for it. Well the answer is SSIP (Small Systematic Investment Plan) in Equity mutual fund. A small sum invested regularly over a long period of time will create wealth for you and in turn your retirement corpus. Equity Mutual funds provide inflation-beating better post tax returns over a long period.

Return offered by Various Equity Mutual funds over 10 Year:  Large Cap category offered around  15% ; Multicap Category gave 18% and Mid and small caps gave 20% during this period.

Investment can be made after considering your risk profile and time horizon. For a conservative investor Large cap category offer better risk reward. For an Moderate Investor Multi Cap category will be rewarding  and for an aggressive investor a portion of portfolio in small and mid cap will also do wonders.

Choose your scheme wisely which suits your goal and risk profile category and start SSIP  for long term and sit back and relax.

Now coming to funds which are specifically created for retirement savings , these funds have typically lock-in period of 5 years. So if you think that in future you can face the urge to redeem your investments before reaching the retirement age , that you should definitely choose these retirement mutual funds to achieve your goals as they will not allow you to redeem before the lock-in or reaching your retirement age. Otherwise open ended mutual fund are equally good for you.

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Interim Budget FY19-20

The Interim budget has been a pragmatic and well balanced one, benefiting various sections comprising of farmers, middle class, the unorganized sector etc.

A farm package, the Pradhan Mantri Kisan Samman Nidhi, was announced with direct income support of Rs. 6,000 per year for those farmers owning up to 2 hectares of land. The budget outlay for this package is Rs. 75,000 crore in FY20 and interest subvention benefit was also announced on loans for both the farming and animal husbandry sectors.

Numerous benefits have also been announced for the middle class. On the personal taxation front, individual tax payers having taxable income up to Rs. 5 lakhs, would receive full tax rebate (compared to Rs. 2.5 lakhs exemption before). For individuals above Rs. 5 lakhs income, this rebate does not apply, and the earlier income tax rates/slabs are applicable. Also, standard deduction has been increased from current Rs. 40,000 per year to Rs. 50,000 per year. Besides that, TDS limits have been raised on various savings instruments. Individuals and the real estate sector is also expected to benefit from various tax advantages being provided to the sector. Overall, this tax saving will increase the disposable income in the hand of individuals, and provide a boost to consumption. This is a positive for GDP growth too, with consumption growth slowing down a bit lately. We expect especially the consumer sectors to benefit, and the stock markets are already indicating that, with the Auto & FMCG indices closing with healthy gains.

On the social security front, the government also announced a Mega Pension Scheme (namely Pradhan Mantri Shram Yogi Maandhan) for the unorganized sector, under which individuals having monthly income up to Rs. 15,000 per month, will be provided a pension of Rs. 3,000 per month, post retirement. This could turn out to be one of the largest pension schemes in the world in the coming years, and follows the Ayushman Bharat Yojana (one of the world’s largest health insurance schemes) announced in the last budget.

On the fiscal front, there been some slippage, as expected. The revised fiscal deficit for FY19 stands at a revised 3.4% of GDP (vs 3.3% earlier), and for FY20 has been budgeted at 3.4% too (vs 3.1% earlier). As a result, the gross market borrowing for FY20 has come in slightly higher at Rs. 7.1 lakh crore, compared to the market expectation of ~Rs. 6.5 lakh crore, and the net market borrowing for FY20 is Rs. 4.73 lakh crore. This will put some moderate upward pressure on bond yields (as been seen already). In the fixed income segment, we continue to prefer the shorter end of the yield curve.

We feel that the markets will soon digest the budget, and move on to more fundamental factors and global events. Investors should continue to invest systematically in equities to benefit from India’s long term growth story and recovery in corporate earnings.

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Season’s Greetings

We have all worked very hard throughout yet another year, and for what? For the love of our jobs, for the love of our ambitions, for the love of our near and dear ones, to fulfil our dreams to travel the world and the list goes on. However, don’t you think it may be also wise to just pause and check if we have done all the necessary provisions and arrangements to take care of our future and the future of our loved ones…..Financially!

Here are some Cardinal Rules for a Happy Financial Life which you may find handy!

Nomination! As morbid as it sounds, it is one of the wisest little things that one can do to make things simple and hassle free for our loved ones in our absence. Ensure that you have a nominee mentioned for all investments – be it in the bank, FDs, Post Office, PPF, MF, Life Insurance, Locker, Health Insurance, etc. Any place including any government agency related (electricity), society where you stay.
Have a large Term Insurance Policy with CI (Critical Illness)riders. Policy should at minimum be equal to your liabilities plus should sustain the lifestyle for your near and dear ones.
Have a good Family Cover Health Care Insurance even if you have some cover from your employer. Get it when you are younger as you save on the premium amount instead doing this when you are close to you retirement.
Invest for your short, medium and long term goals through Mutual Fund. Invest across asset classes Liquid Funds for emergency money needs (3-6 months), Fixed Income Funds for 1-3 years, Hybrid Funds (3-5 years), Equity Funds (5year plus).
We often pay a lot of attention in building a corpus for our car buying, home buying, child’s education when we are young. Save regularly for your Retirement Corpus also as seriously as you are doing the rest.
Purchase Gold etc through the ETF route which is far cheaper than buying physical gold
Ensure that Bank Accounts are linked with all investments and a schedule is kept for when the payments (premium payment or SIP payment) is to be done. Also check if you have any unnecessary and unused bank accounts and demat accounts and close them
Ensure you take a Home Insurance against fire & theft.
Keep an updated Will.
As we come close to the end of 2018, we often say “Ring out the Old and Ring in the New!!” Well, it may also make sense to say in the same breath …” take good care of whatever you already have “! All of the above rules are what makes you financially happy, secure and help you lead a contended life.

Season’s Greetings from Fortunext Investment Advisors to you!

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Top Stock Ideas for Long Term

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Change Your Perspective: Think and Grow Rich

Think and Grow Rich was written in 1937 by Napoleon Hill, promoted as a personal development and self-improvement book. Hill writes that he was inspired by a suggestion from business magnate and later-philanthropist Andrew Carnegie.

While the book’s title and much of the text concerns increasing income, the author insists that his philosophy can help people succeed in any line of work, to do and be anything they can imagine.

The book asserts that desire, faith, and persistence can propel one to great heights if one can suppress negative thoughts and focus on long-term goals.

The 13 “steps” listed in the book are:

  1. Desire
  2. Faith
  3. Autosuggestion
  4. Specialized Knowledge
  5. Imagination
  6. Organized Planning
  7. Decision
  8. Persistence
  9. Power of the Master Mind
  10. The Mystery of Sex Transmutation
  11. The Subconscious Mind
  12. The Brain
  13. The Sixth Sense

For those who can’t find the time out to read this little gem here is a documentary to dive in the knowledge of the book….. Go ahead and spare some time for it

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5 investing insights from Jim O’ Shaughnessy

Jim O’Shaughnessy is the Chairman and Chief Investment Officer of O’Shaughnessy Asset Management (OSAM). A pioneer in quantitative equity research, his interviews, tweets and writings are rich in wisdom. Here are a few insights gleaned from them that will help any investor, be it an amateur or a professional.

1. Design your own strategy. If you want to succeed as an investor, don’t imitate anyone. The “Warren Buffett” of 2038 will have gotten there via a much different road. Read as much as you can. Learn all that you can. Then synthesize all that knowledge into a strategy uniquely your own, so that your investment plan reflects ‘you’. When you create and own your investment strategy, you have many things in your favour. You… Make it easier to stick with it. Avoid playing the victim by blaming others or events. Commit yourself and put skin in the game. Have the leeway to continue to study/learn and adapt as you do so.

2. No one particular ratio has an advantage over a composite of ratios. A lot of people, when they think about value, they think about the P/E or the P/B ratio. Investors should go with a multiple-pronged approach to value which covers the balance sheet from top to bottom and offers a much better assessment. Move from a single ratio to many in a composite. A decade ago, the Citibank stock looked extremely appealing because it had one of the lowest P/Es and a super high dividend yield. But on the overall value composite, it had problems and bad financial strength. This could only be revealed by examining the stock on a variety of variables: price-to-sales, EBITDA to enterprise value, price to earnings, free cash flow to enterprise value, and shareholder yield (dividend yield + buyback yield). By considering all the various composites, one gets a much better sense for the overall attractiveness of the stock than by looking at any one specific variable. That’s because there is no single factor or fundamental piece of data that is the answer or solution to the complicated question of how to pick stocks that outperform. For example, shareholder yield is a good indicator, but performs much better when selected from a group of stocks that are very cheap; have good earnings quality and have a high conviction in their buybacks, as evidenced by percentage of outstanding shares they are buying.

3. Remember that you are prone to the Recency Bias. This simply means that we recall much more easily that fact that we recently came across. This bias in behavioral finance indicates that humans put way too much emphasis on the most recent and available information, which results in us being overly pessimistic or optimistic. And as we pay the greatest attention to what has happened recently, we forecast it into the future. This translates into being drawn towards stocks where we have just read or heard something really positive and away from those where the information was negative. At O’Shaughnessy Capital Management, a game used to be played with a 50-stock portfolio. The analysts would pick the 10 stocks that they think are going to do the best, and the 10 worst. Most often than not, the ones picked as the worst performers ended up being the best; the best potential performers performed poorly. This is human nature; your chances of going with your gut on a stock that has great numbers could backfire.

4. Investors attempting to actively manage their portfolios need the emotional and personality traits necessary for success. Successful investing is hard, but not impossible, if you have the right traits. It is simple, but not easy. The most difficult thing about applying your strategy is having the emotional discipline not to override it, especially when it is underperforming. Stay in your strategy and let it do its work. That is truly the hardest thing to do. Investors (passive or active) face one real point of failure: reacting emotionally to a market selloff and liquidating their holdings, often near a market bottom. Active investors have to watch out for another factor; selling out of an active strategy that is doing worse than its benchmark, often over periods as little as three years. Most importantly, do not fool yourself. If you lack the emotional fortitude to stick with it through thick and thin, you’re probably better off not trying to do it on your own.

5. Arbitrage human nature. Markets change minute-by-minute. Human nature barely changes millennium-by-millennium. Therein lies your edge. The price of a stock is still determined by people. As long as people let fear, greed, hope and ignorance cloud their judgment, they will continue to misprice stocks and provide opportunities to those who rigorously use simple, time-tested strategies to pick stocks. Names change. Industries change. Styles come in and out of fashion, but the underlying characteristics that identify a good or bad investment remain the same. Each era has its own group of stocks that people flock to, usually those with the most intoxicating story: “new era” industries such as radio and movie companies (1921-1929); new technologies (1950s); the dot.coms (late 1990s); and now Bitcoin. Far from being an anomaly, these are predictable ends to long bull markets. A long view of returns is essential because only the fullness of time uncovers basic relationships that short-term gyrations conceal. History never repeats exactly, but the same types of events continue to occur. Investors who had taken this essential message to heart in the last speculative bubble were the ones least hurt in the aftermath. They understand that today’s events and news are mostly noise, and that only longer periods of time deliver the much more accurate signal. The same is true after devastating bear markets. Investors behave as irrationally after protracted bear markets as they do after market manias, leaving the equity markets in droves, usually at or near the market’s bottom. By the time they gather enough courage to venture back into equities, a good portion of the recovery has often already happened. We are always trying to second guess the market, but the facts are clear—there are no market timers on the Forbes 500 list of the richest people, whereas there are many, many investors.

Credit – Content created by Morningstar

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