Author: VNN Wealth

Why does Systematic Transfer Plan works best for Gig Economy? Let’s find out!

Finances are a bit tricky for Freelancers/Self-employed individuals. 

Fun! But tricky.

Some months you get paid really well. Some months are not that great. And the best months are those when a big lumpsum payment comes through. Drum Roll!

Getting paid for your skills and creativity via gigs is pretty cool. Congratulations, you are running a profitable business. 

But that’s only the half battle won. The other half is managing that money.

With income coming from different streams at a variable frequency, investing each month is not reliable. SIPs are almost out of the picture. Though, investing a lumpsum amount in a single scheme is also risky. 

What if…you get SIP-like features by investing a lumpsum amount? 

Sounds interesting? Alright, we gotta talk about this. Read along!

What is a Systematic Transfer Plan?

STP allows you to move money from one scheme to another in installments at preferable intervals. You get to enjoy the returns on both schemes.

Investors prefer STP when they have a lump sum amount to invest. 

STP is somewhat similar to SIP. While SIP deducts money from your savings account, STP deducts the amount from the source mutual fund. 

You may like to know the benefits of SIP.

How Does STP Work?

In STP, your lumpsum amount gets invested in a mutual fund of your choice, called a source fund. You can set a specific amount and the frequency at which your money will be transferred to one or more target mutual funds of your choice. 

Note- Both source and target schemes must be from the same fund house. 

At regular intervals set by you, your money will go from the source scheme to the target scheme in installments.

We would recommend liquid debt funds as your source scheme and equity mutual funds as a target scheme. Debt funds are often less volatile than equity funds. You will earn decent returns, which are higher than any saving account. And equity funds, even though slightly riskier, can deliver higher returns long-term. 

Benefits of Systematic Transfer Plan

1. Possibility of Higher Returns

You get the best of both source and target schemes with STP. 

Liquid debt funds invest in debt instruments with short-term maturity and decent returns. While your savings account will give you a 4% interest rate, debt funds may offer 6-7%. 

With a slight risk, equity funds may deliver superior returns than debt funds. Collectively, you have the possibility to earn superior returns on your lumpsum amount. 

2. Balanced Risk and Returns

Market volatility is an inevitable part of investments. Of course, there will be some risk involved.

The good news is, STPs can balance that risk and returns by shifting your money into safer investment avenues. 

When the market is not in your favor, you can shift your installments into safer equity funds such as large-cap. Or money market schemes. 

3. Rupee Cost Averaging

Similar to SIP, STPs also have rupee cost averaging. Fund managers will buy more units when the NAV is low and fewer units when NAV is high. 

When the unit prices increase even further, selling units would be more profitable. 

Tax Implications

Each transfer from a source scheme is considered a withdrawal. Investors have to pay a certain tax per transfer.

• If the source fund is an equity scheme: You will have to pay a 20% tax for short-term capital gains (funds redeemed within a year). Long-term capital gains (funds redeemed after 1 year) will be taxed at 12.5% above 1.25 lakhs. 
• If the source funds are debt funds: Both short and long term capital gains are taxed as per the investor’s tax slab.

Things to Consider Before Starting a Systematic Transfer Plan

1. Source and Target Scheme

You can choose any type of debt or equity scheme as your source and target scheme(s). Fund houses have various mutual fund schemes for you to explore.

Equity scheme targets are suitable for investors with moderate to high-risk appetites. Otherwise, you can go with safer instruments. 

Don’t forget to align your investment goals and portfolio with the schemes that you select. 

Get a complimentary portfolio analysis with us. Our advisors will help you select the right schemes.

2. The Frequency and Amount of the Transfer

Fund houses often have weekly, monthly, quarterly, and even yearly STPs. Make sure you understand all possible options before setting the frequency and the amount of transfer.

NOTE: Once you invest a lumpsum amount in the source fund, you can start STP even after 6 months or a year. The transfers can start/stop/change later on.

3. Investment Horizon

Sabr ka fal meetha hota hai!

Returns on mutual fund investment take time. We would recommend holding your investment for a longer duration. Preferably 3-5 years or more.

4. Expected Returns

Returns on mutual funds vary with market trends, fund performance, taxation, exit load, expense ratio, and more. Knowing the above parameters will help you understand the expected returns. 

Conclusion: Why Should Freelancers Invest In a Systematic Transfer Plan?

Freelancers have a wide spectrum of payment structures. Month-end salaries are not a part of the gig economy. 

Managing payments, filing taxes, and planning investments can get complex when payments vary. 

STPs make the investment part quite easier as it allows lumpsum investment followed by installments. The definition of a lumpsum amount can be different for everyone. Please know that you don’t have to have lakhs to start STP. 

Many fund houses have a lower threshold on source fund investment. You can take benefit of liquid funds as well as equity funds.

If you are still confused, feel free to reach out to our advisors. Our experts will help you plan a suitable STP with the amount that you are comfortable with. 

The earlier you invest, the better returns you will earn! 

Get more Personal Finance Tips and Mutual Fund Tips with VNN Wealth. 
 

Are you stuck with a bad financial advisor? Maybe it is time to part ways!

Nobody enjoys breaking up with someone. Unless it’s your financial advisor who’s no longer being helpful.

In that case, you should immediately break up with your financial advisor. You are working hard to earn money and build wealth. And if the advisor is not on the same page as you are, then it’s time to call quits.

Below are a few reasons you may want to fire your financial advisor.

Top Reasons to Break Up With Your Financial Advisor

1. Lack Of Communication 

Communication is the base of any relationship. Without it, misunderstandings will only grow. 

Financial advisors should maintain frequent communication with you. It’s their job to understand your financial goals and lay wealth management options in front of you.

It’s a red flag if your advisor won’t answer your calls or emails, or simply doesn’t keep you informed.

You need someone who keeps you posted about your investments and market trends. If you don’t get that from your advisor, get a new one. 

2. The Advisor is Making Unrealistic Promises

We said it before and we’ll say it again- Nobody can guarantee market performance. Sure, sometimes predictions do come true with analysis. 

But you cannot rely on promises that seem too good to be true. The stock market is uncertain. Advisors can enlighten you with some insights. However, they cannot guarantee how much returns you’ll earn. That depends on so many external factors affecting the market. 

Don’t fall for fake promises. Instead, look for an advisor who can show you a realistic scenario. 

3. The Advisor is Not Aware of Market Trends 

Understanding the market and aligning your investment is literally the whole job of an advisor. 

The market study is a crucial part of a financial advisor’s job. If your advisor is not passionate about the market and finances, they can’t help you.

You are trusting them with your money. And you, essentially, want to save the hassle of keeping up with the market trends. 

If your advisor is not able to answer your questions or doesn’t know where to plan your next investment, there’s no point in keeping them.

4. The Advisor is Not Paying Attention to Your Financial Goals 

Every individual is different and so are their financial goals. Financial advisors must understand your financial goals before sharing any insights. 

The advisor should make your financial goals their priority. Even better if they can help you get beyond your goals, which is possible with the right advice. 

There shouldn’t be even the slightest conflict of interest. At the end of the day, it’s your money and your wealth goals. And if you don’t see that happening with your advisor, you have all the right to break up with them.

5. The Advisor Doesn’t have the proper licenses

This is a major red flag. Immediately break up with your financial advisor if they don’t have a proper license. 

Taking financial advice from a non-licensed individual is as good as asking your friend where to invest. Your friend doesn’t understand your financial situation and neither would an advisor without a proper license.

God forbid, if something goes wrong, these advisors won’t be able to help you. 

A simple way to find out if an advisor is smart enough is, ask them what trends are going on in the market. If there’s no glint of shine in their eyes as they talk about the market, they aren’t made for it. 

Now that we’ve discussed enough reasons to break up with your financial advisor, let’s look at it from a different angle.

How to know if the Financial Advisor is Good for you?

You probably know the answer to the question from the above points. 

The right financial advisor:

1. Has a thorough knowledge of industry trends and market performance. 
2. Will only make realistic promises that include a long-term investment plan rather than quick money-making schemes.
3. Prioritize your wealth goals and knows where to invest your money.
4. Keeps you informed about the cash flow in your portfolio. 
5. Has the proper licenses for the financial instruments they are selling.

Read more about how to find a good financial advisor.

Conclusion: Do You Even Need a Financial Advisor?

Yes. Absolutely!

You might be aware of mutual funds and the stock market, crypto even. But you cannot optimize your investment portfolio with a simple Google search or reading Twitter threads. 

Finance is more complex than it seems. You will get tired of keeping up with all your investments.

Instead, a financial advisor can take over your portfolio and make smart decisions for you. Of course, your say in it is above the advisor’s say. 

Having a dedicated financial advisor will save you a lot of time. And, it’ll also improve your chances of achieving your financial goals. 

The cost of home ownership goes beyond the price of the flat or the cost of the land and construction. From stamp duty to parking space, you may have to write a check everywhere.  

It can get intimidating to think about those extra expenses. Having a general idea of the overall cost beforehand can make the process a lot easier.

So, are you planning to buy your dream home? You must have a Pinterest board full of ideas.

That’s great. Have you calculated how much you’ll spend on a home?

In this blog, we’ll walk you through a list of things to consider before purchasing the house. 

Top 8 Things to Know Before Buying a Home: Actual Cost of Home Ownership

1. Down Payment and Home Loan

The first thing you’ll need to buy a house is a home loan and a down payment. The down payment is the percentage of the property’s total value that you pay to secure the deal. It ranges from 10% to 30% of the total value.

You can take a home loan for the remaining amount. Home loan interest rate varies depending on the lender. Consider getting a loan from a trusted bank. 

2. Brokerage 

Most properties in India are sold via a broker. Brokers help you find your dream home, ease the entire process, and take a lot of hassle away from you.

For this, they may charge 1-2% of the total value as a fee from both buyer and seller. 

The brokerage could be saved if you make a direct deal with the seller/builder or opt for no-brokerage platforms. 

3. Preferential Location Charges

Apartments with gardens attached, or houses facing the view cost more than any other basic apartments in the same society.

These charges depend on the locality and the developers.

Many societies offer gardens, gyms, pools, and more amenities. Of course, the flat will cost more and the maintenance charges will also be high.

We’d recommend evaluating the preferential location charges before finalizing the house. 

4. Parking Space 

Parking spaces are limited considering every family has more than one vehicle. If you are buying a flat in a city, you may have to buy/rent the parking space. 

One parking spot may not be enough if you have multiple vehicles. So you’ll have to consider the total charges for a comparatively larger parking spot.

The charges vary from city to city and locality to locality. To give you a rough estimate, it could be between INR. 1 lakh to 15 lakhs. Or, approx. 10k/month as rent. 

5. Stamp Duty and Registration Fee

Home buyers need to pay a certain amount to the government in the form of stamp duty and registration. 

These charges can put a massive dent in your home budget. In India, stamp duty varies between 4% to 7% of the total property value along with 1% registration fees.

Each state and city in India have different stamp duty and registration charges. Don’t forget to check it beforehand to add it to your house budget. 

6. Maintenance Charges

Living in a society, you’ll have to pay maintenance charges each year. These charges cover the maintenance cost of all the amenities like a swimming pool, gym, garden, running elevators, security, cleaning, and more.

These charges vary across states, cities, and localities. Confirm the range of charges with the society to ensure it fits your budget. 

7. House Inspection

If you buy a flat in a brand new society, the safety measures would already be in place. But, if you are purchasing a flat for resale, you may want to consider the inspection.

Older houses tend to need frequent repairs and maintenance. It could cost you a huge deal later on. Better to be thorough than panic when a problem arises. 

In fact, you can hire a professional to inspect both new and old properties. It’ll help quicken your decision-making process. 

8. Setting up The House

Here comes the opportunity to design your home the way you always wanted. Getting the right furniture, appliances, and decor is an additional cost.

Fortunately, you have the option to control this expense. You can seek a good deal on furniture in both online and offline stores. Even appliances and decor would be affordable if you set your eyes on the right products.

Set a budget for the home decor to effectively shop for what you need. 

Final Thoughts

Owning a home is not a one-time cost. It can come with a lot of hidden and unexpected costs. Apart from the points mentioned above, there’s also the cost of plumbing, roofing, and repairs. 

We encourage you to jot down all possible expenses to stay aware of the total cost of home ownership. Divide the home loan and down payment as per your comfort. Don’t forget to consider EMI and tenure.

To make your dream home a reality, we’d also recommend creating a dedicated investment portfolio. Our advisors will help you curate investments so you don’t have to compromise on your dream home. 

Get in touch with us and we’d love to hear your ideas for the home. Take advantage of our complimentary portfolio analysis to receive personalized investment recommendations from our advisors. 

You May Also Like to Read
7 Quick Financial Fixes 

5 Money Mistakes to Avoid

Get Personal Finance Tips

Financial mistakes can happen even when you have a wealth plan. 

Money management can be complex. In the roller coaster of building wealth, many people get trapped in the biggest financial mistakes.

Don’t worry. We are only humans. Any mistake can be solved with the right knowledge and tools.

Let’s shed light on some of the common financial pitfalls and how to avoid them.

Get a cup of tea. We have some important decisions to make. 

Common Financial Mistakes And How to Avoid Them

1. Don’t Blindly Follow the Crowd

Doing what others are doing is human nature. You try out a new restaurant because your friends like it. Or you watch a Netflix show because an Instagram influencer recommended it.

Taking recommendations is fine as long as they are benefiting you. 

But you may wanna be careful with your money. 

Your money goals are different from someone else’s money goals. It could be tempting to invest in something your friend benefited from. But the chances of you gaining the same returns as your friend are very low.

Seek opinions from the experts instead of your friends or relatives who may not have your best interest at heart. 

Create a wealth goal for you and your family. Sit with a financial advisor to plan your investment portfolio

2. Stay Away From Get-Rich-Quick Schemes

Have you watched Hera Pheri? Then you must have seen the mess Akshay Kumar creates with ‘25 din me paisa double.’

If it was that easy, everyone would be rich. 

In the world of the internet, scammers are on the lookout at every corner. Even educated people fall for quick-rich schemes and end up losing money. And the reason is, these schemes know how to pitch the idea.

But don’t let them get to you. If a scheme promises unrealistic outcomes, it is probably shady.

Focus on building long-term wealth. Outline a retirement plan. Invest in mutual funds for a long tenure. Build a diverse portfolio by exploring various investment avenues. 

Be patient while your money brings more money.

3. Don’t Keep Your Money Lying in Savings Account

A lot of people don’t want to invest and lock in their money. The primary reason they keep the money in their savings account is- What if I need this money tomorrow for an emergency?

Fair enough. But the drawbacks are: 

• You don’t earn enough returns. 
• You may end up spending more just because you have money in your account.

If you are worried about long tenure, liquid funds, or short-duration debt funds allow quick redemption with minimal exit load. 

Create a separate emergency fund. Make your money work for you by investing it in instruments that better suit your risk appetite and money goals.

4. Trading is Not Investing

You’d think the quickest way to earn money is trading. But it is also the quickest way to lose money.

You will have to be accurate both while buying and selling to earn maximum returns. And the probability of winning won’t be in your favor all the time.  

Nobody can predict market movements accurately. Rather, create a long-term sustainable plan. Evaluate your expenses against your investments. Build a portfolio to support the kind of lifestyle you want to achieve. 

5. Fix Bad Spending Habits

What was the last thing you purchased? Was it value for money? 

Poor spending habits are one of the primary causes of losing wealth. You buy things just because you can. 

Do you really need that extra pair of branded shoes? Or that designer handbag that doesn’t even have enough space?

Separate your wants and needs. Purchase items that you are really going to use. You don’t want to live an extravagant lifestyle that can empty your pockets quicker than you imagine.

Instead, create SIP and set an auto-debit for the first week of the month. Put money in a PPF account or in mutual funds.

Corporate FDs are also a great way to lock your money and earn decent returns. 

Dos of Building Wealth

After discussing the don’t of building wealth, let’s quickly explore the Dos.

1. Set a financial goal that includes your personal expenses, wedding, house, car, education, and retirement. 
2. Start investing early. Benefit from the investment avenues that expand your wealth over the years.
3. Understand how taxation works and invest in tax-saving instruments.
4. Diversify your portfolio to balance the risk and returns.
5. Hire a financial advisor to take the money management load off your shoulders. 

Final Words

Are you taking the right actions to build wealth for yourself and your family?

We hope the above Dos and Don’ts of wealth building will guide you in the right direction. Analyze your finances to find the money mistakes you are making with or without your knowledge.

Financial mistakes are easy to make and difficult to fix. Better to set things right before it’s too late. 

If you need any further assistance, our team would be delighted to help you. Write to us with your concerns, get your portfolio reviewed for free, and plan your next move. 

Explore more personal finance tips.

Time to improve your financial situation with quick financial fixes.

People often procrastinate on exercise, chores, and finances. Things could go out of control before you know it.

We are here to save you from the trouble of being financially devastated. 

When you seek quick financial fixes, you’ll probably come across generic options. Keep track of your expenses, pay credit card bills on time, shut down unnecessary subscriptions, and save more.

While these options are useful, we are going to discuss more effective solutions. 

Buckle up! Let’s set your financial goals straight. 

7 Quick Ways to Fix Your Finances

1. Create a Public Provident Fund (PPF) Account

You can create a PPF account in any bank or post office using net banking. The account activation shouldn’t take more than one working day.

PPF scheme is a long-term wealth-building and tax-saving scheme. It allows you to invest anything between INR 500 to 1.5 lakhs per financial year. The interest rate on PPF can be higher than the savings account and the FDs.

The lock-in period for the PPF account is 15 years. Though you can make a partial withdrawal after 5 years. Or you can get a loan against the PPF account whenever needed.

If you invest 1.5 lakhs in a financial year, you get tax exemption under section 80C of an IT act. 

Put money in PPF before the 5th of April to earn interest on the whole amount throughout the year. 

Read more about the benefits of PPF. 

2. Invest in ETF instead of Physical Gold/Silver

Investing in physical precious metals is very common in Indian households. 

Three primary problems with that are- 1. The making charges. 2. Buying and selling are not quick. 3. Sentimental values attached to it.

Simplify the whole process by investing in Gold and Silver ETFs. Not only is it easy to buy or sell, but you may end up earning more returns. There are no making charges. And you don’t have to worry about keeping them safe or shedding a tear or two when you sell them.

3. Add 10-15 Extra Years to Your Retirement Plan

People often create a retirement plan for 70-80 years of life span. But what if you are blessed with a longer life span? Would your retirement plan cover those additional years?

At the age of 75+, your expenses could be more than what they are when you are 60. 

It’s better to have a longer retirement plan, especially for women. Studies show that women live longer than men. 

Add at least 10-15 extra years into your retirement plan.

4. Get a Health Insurance

Health insurance should be your top priority while fixing finances. Medical emergencies can occur at any time with anyone and can create a huge dent in your savings. 

Without health insurance, you are looking at massive bills. You may or may not have such a huge emergency fund. 

To avoid breaking your funds, get health insurance. Better if you get it in your 20s or early 30s. 

Note- Health Insurance also offers tax exemption on 1.5 lakhs under section 80C of an IT act.

Find our more tax-saving instruments. 

5. Close Multiple Bank Accounts

We have a client who and his wife had ten different bank accounts. Some of them were their savings accounts and the majority were salary accounts.

They realized they weren’t able to keep track of so many accounts. And collectively, they had a lot of money lying around in accounts that they could invest.

Eventually, we asked them to shut the majority of the accounts and keep only two to three. Now they are able to manage their money quite easily. They expanded and diversified their investment portfolio as well.

If you have multiple bank accounts, shut them off. Don’t keep the money in a savings account. Invest it in mutual funds, put some in PPF, or create FDs if that’s what you prefer.

6. Don’t Spend Extravagant

Are you an aggressive spender?

Unhealthy financial habits are the primary reasons behind bad financial health. 

You see money in your account and don’t think twice before spending it. Spending habits can go out of control. And by the time you realize it, you have no money to invest.

To save yourself from poor spending habits- Create SIP and your first transaction after you get a salary should be towards SIP. 

If you have multiple credit cards, enable auto-pay to pay the full amount. Instead of buying unnecessary things, put your money to better use. 

Check out the top 5 financial mistakes to avoid.  

7. Get a Financial Advisor

A professional and experienced financial advisor can help you meet your financial goals and suggest options to fix your finances. 

Having a financial advisor by your side will save you a lot of hassle in managing your money. Building wealth is not as easy. You most certainly would need someone’s help. 

However, be aware of advisors who do not have the appropriate licenses or market experience. Here are a few tips for choosing the right financial advisor. 

Don’t hesitate to dump your financial advisor if they are not on the same page as you. 

Final Thoughts

Building wealth takes years of hard work and consistency. One could ruin it in a blink of an eye if not careful. 

Then it’ll take years to get back on track.

Follow the above easy and quick financial fixes. Most of them can be done in a day or two. Have a clear vision of your money goals and keep following them.

Interested in knowing your risk appetite? Get complimentary portfolio analysis with us and our advisors can recommend investment opportunities to achieve your financial goals. 

March is the month to sort out your personal finance if you haven’t already. The FY 2023-24 is about to end and we have things to do before 31st march. 

We Indians love to keep things for the 11th hour. Ha bhai kar lenge is our mantra. 

But…now we have a few days left to complete financial year-end planning. 

So, keep your laptop handy, we are going to do it right now!

Top 5 Things To Do Before 31st March

1. Link Your PAN to your Aadhaar

First thing first, link your PAN to your Aadhaar if you haven’t done it yet. Failing to do so will make your PAN inoperable in the next financial year.

The easiest way to link the two documents together is via the Incometax Portal.

On the portal, Locate the ‘Link Aadhaar Status’ under quick links on the menu. Enter your PAN and Aadhaar and Click on View Link Aadhaar Status. If it is linked…Congratulations. 

If not, the portal will redirect you to the page to link your documents. You may have to pay a 1000 Rs. late fee. 

Note-> The deadline has been extended till June 30, 2023. 

2. Add Nominee Details for Your Mutual Funds Investments

Adding nominees to your Mutual Funds will only take a couple of minutes. 

Complete the task before 31st March to avoid freezing your investment. You may not be able to transact without the nominee declaration.

Steps to Add/Update Nominee:

• Go to the CAMS Portal
• Enter Your PAN number and Click Next
• It’ll show you the mutual fund investments linked to your PAN.
• Select the one (or all) where you want to Add/update the nominee
• Proceed with OTP verification
• You will come across a form to add one or more nominee details.

The change will get reflected within a few hours. 

Note-> The deadline has been extended till September 30, 2023. 

3. 80C TAX-Saving Investments

Taxation is probably the most tiring task. But you gotta do it to save the tax.

Invest in Tax saving instruments before 31st March to get tax exemption. Our advisors have curated a list of tax-saving investments under section 80C of an IT act. 

Note- If you already have a PPF account, don’t forget to make one installment for the current FY, anything between INR 500 to 1.5L. 

4. File an Updated ITR for FY-2019-20 (ITR-U)

The last date to correct/update the ITR for FY-2019-20 is 31st March 2023. 

If you want to make any changes to your ITR for FY-2019-20, the ITR-U form is for you. You can make the relevant changes and re-submit the form. Though you may come across some late fees during the process.

5. Book Long Term Capital Gains

Long-term capital gains up to Rs. 1,00,000 are eligible for tax exemption. Gains (long-term) over and above INR. 1,00,000 are taxed at 10%.

Here’s how you can lower the tax amount with a strategic withdrawal when close to 31st Mar: Instead of withdrawing all your mutual fund gains at once, make a partial withdrawal – break it into 2 parts. Before 31 st Mar and after 31st March.

For example, let’s say you have invested 10 lakhs and have earned 3 lakhs gain. Out of 3 lakhs, 1 lakh will be tax-free. But you’ll have to pay 10% on the remaining INR. 2,00,000, which is INR. 20,000 if you withdraw all of it before 31st Mar. 

Instead, you can redeem half this financial year i.e. INR. 1,50,000 (in the above example) and pay tax on only INR. 50,000, which is INR. 5,000. Repeat the same at the start of the next financial year. 

By withdrawing the investment in two halves, you only paid INR. 10,000 tax instead of INR. 20,000. 

If you are planning to book profits anytime soon or redeem your investments, make use of this since the financial year is about to end, you can redeem partial investment before 31st march. And the remaining can be done on 1st of April when the new financial year starts.
 

See? That wasn’t so difficult, was it? Enter the new financial year with zero headaches, well-planned personal finance, and new money goals.

Be sure to analyze your investment portfolio to understand tax liabilities. If you have any queries regarding Mutual fund investments, taxation, and better wealth management, give us a call. 

Our advisors will outline an investment plan matching your goals for the upcoming financial years. The earlier you invest, the better outcomes you achieve.

Check out more blogs on personal finance to plan your investments accordingly.