Category: Blogs

7 Quick Financial Fixes You Can Implement in a Day

Post author By VNN Wealth
Post date March 28, 2023
No Comments on 7 Quick Financial Fixes You Can Implement in a Day

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.

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.

Blogs Personal Finance

5 Things To Do Before 31st March: Personal Finance Checklist

Post author By VNN Wealth
Post date March 20, 2023
No Comments on 5 Things To Do Before 31st March: Personal Finance Checklist

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.

Blogs Mutual Funds

Short Duration Funds: Features, Benefits, Taxation, and More

Post author By VNN Wealth
Post date February 27, 2023

As the name suggests, Short Duration Funds are debt funds with a short-term maturity period. These funds primarily invest in debt or money market securities with 1-3 years of the investment horizon.

Fund houses allocate the majority of your assets into short-term instruments and the remaining into long-term instruments to balance returns and risk.

These funds have lower interest rate risk and varying credit risk depending on the scheme’s credit rating.

Here’s everything you need to know about these funds.

How Do Short Duration Funds Work?

Short-duration funds invest the majority of the assets in debt and money market securities with 1 to 3 years of Macaulay duration.

What is Macaulay Duration?

It is the weighted average number of years the present value of a fixed income instrument’s cash flows will take to match the amount paid for the instrument.

Confused? In simple words, Macaulay duration means the average time you will need to recover the initial investment through the instrument’s cash flow.

Please note that- in this case, duration does not mean tenure. Duration measures the value/sensitivity of the principal amount with respect to a change in interest rate. And tenure indicates maturity.

If the Macaulay duration is higher-> the instrument’s sensitivity to the changing interest rate is also higher.

Usually, fund houses create the investment regime to generate income via the accrual of bond yield over the investment tenure.

You will get both the interest earned and the principal amount by the end of the fund’s tenure. This eliminates the price volatility of the underlying instruments.

For example,

Let’s say the face value of the bond is INR 500 with a 7% annual coupon rate and 3 years maturity period.

Each year, you will get a 7% coupon rate on your principal amount.

The bond price may change with interest rate movements. But, it will have no impact on your investment if you hold it till maturity.

Top 3 Advantages of Investing in Short Duration Funds

1. Stable Returns Over The Investment Tenure

Fund managers prefer to hold bonds or money market instruments under the scheme till maturity. By doing so, fund houses accrue the coupons or the interest income that an investor is entitled to receive.

Debt funds are safer compared to equity funds and the returns are predictable. You can expect stable returns on debt funds.

We recommend you match your investment tenure with the fund duration to avoid interest rate risk. Staying invested for at least 3 years enables the tax benefit for you. You will only have to pay a 20% tax on the long-term capital gain post-indexation benefit.

2. Lower Risk

Debt funds have two types of risks- Interest rate risk and Credit risk.

Bond prices are inversely proportional to the interest rate. When the interest rate rises, bond prices go down, and vice versa.

To avoid interest rate risk, you can invest in funds based on the interest rate cycle. Short-duration funds perform well in rising interest rates. They can quickly mature and adapt to the new interest rate. During falling interest rates, long-duration funds perform better. The NAV of the funds goes up with each fall in the interest rate.

Choosing higher credit rating funds can avoid credit risk. Only invest in funds that have AAA or AA ratings. The risk factor increases as you go down on the credit rating chart.

3. Diverse Portfolio

Short duration funds are best suited for portfolio diversification. These funds invest in various fixed-income securities for a shorter duration.

If you are not ready to lock your investment for a longer duration, these funds are for you.

Things To Consider Before Investing in Short Duration Funds

1. Investment Horizon

Make sure you are certain about the investment horizon that you are looking for. Between 1 to 3 years, you can invest in funds that align with your portfolio.

3-year tenure is not much, so we would recommend keeping at least 3 years of investment horizon while choosing a fund.

2. Yield to Maturity vs Coupon Rate

The scheme will have a predefined annual coupon rate which remains the same throughout the tenure.

But, the interest rate keeps changing all the time. Yield to maturity is the annual rate of interest that you will earn from the funds. It could be higher or lower than the coupon rate.

3. Risk Tolerance

Even though short Duration funds are less riskier, you must analyze the risk tolerance of your portfolio.

Seek guidance from VNN Wealth advisors on how much risk your portfolio can manage. Choose your investments accordingly.

4. Track Record of The Fund and Fund Manager

We would recommend taking a moment to study the performance of the funds.

Though historical data is not the only way to judge a fund as anything can happen with the changing economy. But better to be aware of it.

Fund managers’ strategies and calculations are crucial for the fund’s performance. Check the track record of the fund house/manager along with the scheme itself before investing.

5. Expense Ratio

Fund houses charge you a small fee to handle your investments and to deliver desired outcomes. The fee is called the expense ratio which won’t be much for passive funds but could be higher for active funds.

Compare the expense ratio of various funds in a similar category to stay informed.

Note- Higher expense ratio is not always bad. Sometimes, funds with a higher expense ratio may deliver equally superior returns.

Tax Implications

Taxation on Debt funds has been revised since April 2023.

Now, both Short-term capital gains and Long-Term Capital Gains will be taxed as per the tax slab.

The indexation benefit on Long-Term Capital Gains is only applicable to hybrid funds with more than 35% exposure to equity funds.

Who Should Invest in Short Duration Funds?

Short-term funds are primarily suited for investors looking for a fixed income. These funds will generate stable returns with low to moderate risks in a short duration.

Investors who are looking for investments shorter than 5 years can go with these funds. You can get the indexation benefit after 3 years of investment tenure.

Conclusion

Short-term debt funds are a great way to generate income without a longer investment horizon. You can choose funds between 1 to 3 years of maturity at your convenience.

You may come across a moderate risk due to interest rate movements. But you can avoid it by holding your investment until maturity.

If you are looking for an option to balance equity funds risk, debt funds can help you. Debt funds have become as famous as FDs because of the lower risk and fixed coupon rates.
So if you are planning to invest in debt funds, don’t forget to explore various options. Get in touch with our advisors to see which funds can align with your portfolio.

You may also like

Dynamic Bond Funds

Banking and PSU Funds

Credit Risk Funds

Blogs Mutual Funds

Credit Risk Funds: Features, Benefits, & Taxation

Post author By VNN Wealth
Post date February 24, 2023

Credit risk funds are a type of debt fund that invest the majority of the assets in low-credit quality debt instruments.

Wondering why?

Debt securities with low-rating may carry a higher risk. But these funds may also generate a superior yield than safer debt funds.

Fund managers often invest in securities that they think have the potential of getting a credit boost. In the long run, these funds could bring higher returns than your expectations.

Interested to explore? Let’s find out more about Credit risk funds.

How Do Credit Risk Funds Work?

Debt funds come across two primary risks: Credit risk and Interest rate risk.

Credit risk is when the issuer may fail to repay your principal investment and returns. To avoid it, underlying bonds are given a rating based on factors such as: credit quality and the financial performance of a company.

Bonds below the rating AA are considered low-rating, high-risk bonds.

Safe investors often avoid such bonds to eliminate credit risk.

However, low-rated bonds are not always bad. These bonds have the potential to outperform and boost their credit ratings.

In credit risk funds, fund managers allocate at least 65% of total assets into securities with AA or lower ratings.

Though there is a risk, there is also a possibility of better returns.

These bonds may get a credit boost based on their performance, which also amplifies the NAV. In a longer investment horizon, you may end up getting a higher yield.

Top 3 Advantages of Investing In Credit Risk Funds

1. Potential Of Superior Returns

These funds tend to deliver superior returns because of the risk involved. Investors looking to generate income among debt securities can consider these funds.

2. Portfolio Diversification

Credit risk funds are a great way to diversify your portfolio. Swadanusar risk on your profile brings higher returns. Explore these funds if your portfolio has some space to take moderate risk.

3. Professional Management

These funds are not easy to manage on your own. Fund managers utilize their expertise to select the right debt funds to invest in. The underlying bonds may crawl up to the higher credit rating, rewarding you with more yield.

Things To Consider Before Investing In

1. Investment Goals

Do these funds fit in your investment goals for the next few years?

Don’t forget to recall your investment goals before you invest in any funds. If it fits, you have got yourself a nice opportunity to earn decent returns.

2. Risk Tolerance

These funds are riskier than other bond funds. Invest only if your portfolio has some space for inviting moderate risk.

Get a complimentary portfolio analysis with us to find out your risk tolerance before you invest.

3. Investment Horizon

Most funds perform better in a longer duration.

Credit risk funds tend to be highly volatile in the short term. Make sure you are fine with a longer investment horizon to avoid any losses.

4. Expense Ratio

The expense ratio is a fee that fund houses will charge you for managing your investments. It can be higher for actively managed funds.

Don’t forget to compare the fees and expenses of funds before investing. Often, investors prefer to pay a slightly higher fee if the fund has the potential to deliver higher returns.

5. Professional Advice

Credit risk funds could be tricky for new investors. If you are still willing to explore them, get professional advice to avoid confusion and possible losses.

Here are a few things to look for in a financial advisor.

Tax Implications

Taxation on credit risk funds is similar to all other debt funds.

Tax on Short Term Capital Gains (investment held for < 3 years) = Same as your tax slab.
Tax on Long Term Capital Gains (investment held for > 3 years) = 20% with indexation benefits.

Who Should Invest In Credit Risk Funds?

Credit risk funds can be volatile and carry high risk. There is a chance of credit rating further degrading instead of boosting.

These funds are not suitable for investors with low-risk appetites.

Invest only if your risk profile and investment goals align with these funds.

Conclusion

Credit risk funds can be a great addition to your portfolio to generate additional returns. Though you will come across a certain risk in the short-term horizon.

These funds are only suitable for investors with a high-risk appetite. We would recommend holding your investment for a longer duration to minimize volatility and losses.

If you are still confused, feel free to reach out to our advisors to plan your investments.

Also Read

Dynamic Bond Funds

Banking and PSU Funds

Blogs Mutual Funds

Banking and PSU Funds: Features, Advantages, Taxation & More

Post author By VNN Wealth
Post date February 20, 2023

Banking and PSU funds are open-ended debt funds.

According to SEBI guidelines, these funds invest at least 80% of the corpus in debt and money market instruments that banks or public sector undertakings issue.

Among all the other debt fund categories, Banking and PSU funds are known to have superior credit quality.

Investors wanting to explore debt funds with decent returns and lower credit risk can consider these funds.

But before you invest, here are some facts about these funds.

Top 3 Advantages of Investing in Banking and PSU Funds

1. Low Credit Risk

One of the biggest perks of investing in these funds is minimal credit risk. These funds strictly invest in Maharatna and Navaratna companies with AAA ratings on underlying instruments.

These companies have years of performance history and deliver consistent returns.

2. Risk

As mentioned above, these funds have underlying assets having AAA ratings. Investors do not have to worry about credit risk as most instruments are government-backed.

And as far as the interest rate risk is concerned, it’s just a temporary phase. The interest rate can fluctuate the NAV of the debt fund. But the loss you may face during the rising interest rate cycle can be recovered during the falling interest rate cycle. Make sure you hold your investment for a longer duration to surpass the interest rate cycles.

3. High Liquidity

Banking and PSU funds are often in demand among investors. Due to stable returns and safer investments, many are interested in buying these funds.

It enables higher liquidity for these funds. You can sell them off in case of emergencies.

Things To Consider Before Investing In Banking And PSU Funds

1. Returns on Investment

Debt funds may or may not deliver as much return as equity funds. But they generate superior returns than FD or savings accounts.

Banking and PSU funds ensure higher security but may not deliver higher returns.

Our advisors would recommend holding your investment for more than 3 to 5 years to earn decent returns.

2. Investment Portfolio

Banking and PSU funds would be a great addition to your portfolio to balance the risk.

If your portfolio is more inclined towards equity, debt funds can safeguard you from volatility. While equity funds deliver superior returns, Banking and PSU funds offer security.

3. Investment Tenure

Banking and PSU funds have underlying assets with 1-2 years of tenure. Investors who want to invest in a fund with short-term underlying assets and lower risk can invest in these funds.

Though, irrespective of the tenure of the papers held under these funds, you can hold the investment for a longer duration. Align the investment horizon with your financial goals. In fact, holding your investment for more than 3 years makes you entitled to tax benefits with indexation.

4. Expense Ratio

The expense ratio is the fee the fund house will charge you for managing your funds.

There is often a misconception that- a lower fee will leave you with higher returns. In reality, it doesn’t work like that.

Often, fund houses may charge a slightly higher fee but will deliver superior returns than other funds in the same category.

While investing in any mutual funds, don’t forget to compare the expense ratio.

Tax Implications

Tax implications on debt funds have changed since April 2023.

Similar to all pure debt funds, investors have to pay tax on both short and long-term capital gains as per their tax slab.

The indexation benefit on LTCG will only be applicable to hybrid debt funds with more than 35% exposure to equity.

Who Should Invest In Banking and PSU Funds?

Banking and PSU funds are suitable for investors looking for low-risk short-term investments. These funds are safer than Dynamic Bond Funds or Credit Risk funds.

These funds are also suitable for investors who are not fond of FD but would like similar security. Though these funds could be slightly riskier than FD, they may deliver superior returns too.

Conclusion

All the underlying assets in Banking and PSU funds are government-backed. These funds are also less volatile than equity funds, enabling maximum security.

You can explore various state-owned companies from various sectors via these funds to diversify your portfolio.

Investors looking for decent returns along with lower risk can go with Banking and PSU funds.

Get a complimentary portfolio analysis with VNN Wealth to see if these funds are suitable for your portfolio.

Dynamic Bond Funds: Features, Benefits, Taxation & More

Post author By VNN Wealth
Post date February 15, 2023

Dynamic Bond Funds are a type of debt mutual fund with a flexible average maturity period. These funds switch between long-term and short-term instruments depending on interest rate fluctuations.

DBF takes advantage of interest rate changes by dynamically altering the allocation to gain optimal returns.

Interested? Read along for more information.

How Do Dynamic Bond Funds Work?

Let’s get into some basics before exploring the DBFs.

Debt funds are a combination of various bonds, commercial papers, T Bills, etc. Each of these instruments has a different maturity period. Combined, the debt funds get the average maturity period of all these bonds.

Whenever interest rates fall, bond prices go up and vice versa. In a falling interest rate scenario, long-term funds perform better. Short-term funds tend to deliver superior returns in a rising interest rate scenario.

Dynamic Bond Funds are designed to deliver superior returns in any interest rate scenario. These funds do not have predefined maturity.

If the fund managers think the interest rates are falling and may fall further, they will switch the allocation to long-term bonds. Otherwise, they will switch the allocation to short-term bonds.

In both rising and falling interest rate scenarios, you get optimal returns.

Top 3 Benefits of Dynamic Bond Funds

1. No Debt Fund Mandate

Most debt funds have to follow an investment mandate. For example, short-term debt funds can only have short-term instruments as a base investment. Long-term debt funds only allocate assets among long-term instruments.

Dynamic Bond Funds do not have any restrictions. Fund managers can dynamically allocate assets among instruments with varying maturity periods.

2. Optimal Returns

Bond prices are inversely proportional to interest rates. There’s always a risk of losing profit when interest rates fluctuate.

Fortunately, Dynamic Bond Funds can shift allocations between different instruments to generate optimal returns.

3. Expert Fund Management

Investors do not have to worry about interest rate scenarios as fund managers take care of everything. Fund managers make the calculated decisions to switch the underlying instruments to deliver superior returns.

Things To Consider Before Investing In Dynamic Bond Funds

1. Fund Manager

As mentioned above, fund managers are responsible for dynamically altering the underlying assets.

Fund managers’ calculations and expertise are extremely important here. In any interest rate situation, the fund manager’s judgments are ultimately going to decide how much return you earn.

This brings us to the next point.

2. Risk

Returns on Dynamic Bond Funds are comparatively less affected by interest rates. By shifting the portfolio, fund managers can balance the risk to optimize the returns.

However, interest rates don’t always work in your favor. If the fund manager’s strategy fails to align with an interest rate, you may lose profit.

3. Economical and Political Matters

Changes in government policies, prices of oil and gas, and political matters can affect returns on dynamic bond funds. The returns might boost or fall, it could go either way.

It’s always better to be aware of such factors to plan your investment. Economical and Political matters often alter in the short term. You may save the loss by investing for a longer horizon.

4. Fund’s Track Record

It is advisable to examine the track record of the fund before investing in it. Be it equity or debt funds, check the fund performance across various interest rate cycles.

For dynamic bond funds, don’t invest via NFO. Instead, invest in funds that have a longer performance history to glance at.

Tax Implications

Post April 2023, tax rules on debt funds have been changed.

Both Long and Short term capital gains will be taxed as per the investor’s tax slab.

Long-term capital gains are applicable when you redeem your investment after 36 months. Otherwise, short-term capital gains will be applicable.

Who Should Invest In Dynamic Bond Funds?

Returns on Dynamic Bond Funds rely on ups/downs in interest rates. If you understand the interest rate movements, you can create your own portfolio of bonds. Otherwise, we would recommend investing in existing and well-performing funds.

DBF can be suitable for investors with moderate risk appetite. Beginners can consider DBF at a slightly later stage when the portfolio is stable. We would recommend an investment horizon of 3-5 years or more to gain superior returns.

Conclusion

Dynamic Bond Funds are one of the riskier debt fund schemes. Its performance depends greatly on the fund manager’s calculations and interest rate movements.

However, these funds can also deliver superior returns.

Dynamic Bond Funds are not suitable for everyone. But if you are curious about it, reach out to VNN Wealth. Our advisors will help you understand the fund alignment in the interest rate cycle.

Explore more funds and diversify your portfolio with us.

Understanding Your CTC And In-Hand Salary

Post author By VNN Wealth
Post date February 13, 2023

CTC and In-Hand salary is, by far, the most inevitable and annoying truth of the professional world. Right?
Many new professionals divide their CTC by 12 assuming that would be their salary.
Happiness goes over the moon but falls back down when the actual amount is way lesser than the sweet assumption.
In this article, we will discuss each component of your salary structure to understand CTC and In-hand salary.
It’s time for you to thoroughly explore your salary breakdown. That’s where all the knowledge of taxable and non-taxable amounts resides.

Let’s begin…

What is CTC or Cost To the Company?

As the name suggests, it is the amount that a company has to pay to hire an employee.
CTC is a combination of basic salary, provident fund, various insurances and allowances, gratuity, and sometimes, bonus. CTC also includes the Tax that will be deducted from your salary based on the tax slab.
Often companies offer individual or family health insurances that you can use. Allowances can be for food, internet, housing rent, cab services, petrol, or anything.
All these things vary from company to company and employee to employee.

What is Gross Salary?

Gross salary is what you get by adding the basic salary, HRA, and other allowances.
Again, this is not your net salary. A tax will be deducted from the gross salary to, finally, calculate your net/in-hand salary.

Let’s take a rough example of 6LPA as a CTC throughout this article.

Gross Salary Includes the following things-

1. Basic Salary

The basic salary is around 35-45% of your total salary. It could be higher in some cases.
This is the amount that you get paid for the job you are doing with your skillset. The basic Salary is a fixed amount, which differs from employee to employee.
Note that the Basic Salary is 100% taxable. That means you cannot claim tax over basic salary.
For the sake of example, let’s assume that your basic salary is 45% of your total salary. According to 6 LPA, it would become 22500/month or 270,000/year.

2. House Rent Allowance

Companies often offer HRA to cover your rental living arrangements.
HRA could be-

10% of the basic salary.
40% of the basic salary if you live in a non-metro city.
50% of the basic salary if you live in a metro city.

You can check your HRA from the salary slip to know which of the above three is applicable to you. HRA is a fully taxable amount under section 10(13A) of the income tax act unless you have proof to claim it.

You can use a rental agreement signed by your landlord as proof to claim HRA. Let’s consider your HRA is 50% of your basic salary. That would make it 11250 INR per month.

3. Medical Insurance

You will also get medical insurance in your gross salary. Most times, your parents, spouse, children, or all would be included in the insurance.
You can claim the insurance benefits by showing medical bills and reports.

Tip- Medical emergencies can occur anytime. Always understand the whole process of claiming your medical insurance beforehand. It will speed up the process in case you need it.

Let’s say your Medical allowance is 1300 Rs/month.

4. Special Allowances

This includes food, internet, cab services, or anything that the company has to offer additionally. The amount you get for each special allowance varies from company to company.

If you don’t end up using it, this amount is also taxable. If you use the partial allowance, the remaining amount will be taxable.

To save the tax, you can show proof that you, as a matter of fact, have been using these allowances.

Keep all the bills throughout the year to submit as proof.

For example, let’s assume your special allowance is 6000 Rs/month.

5. Gratuity

Gratuity is sort of a loyalty bonus. Employees receive it either on retirement or after completing certain years in the company.

Say your company will offer a certain amount after you complete 5 years in the company. You will only get that amount if and only if you work in the same company for 5 years.

6. Bonus

Some companies offer various kinds of bonuses such as performance bonuses and festive bonuses. This amount is also taxable.

7. Employee Provident Fund

The Employee Provident Fund is a long-term saving plan for your retirement. Both you and your employer contribute to your EPF account each year in agreement.

EPF contribution= Employee Contribution (10-12% of salary) + Employer Contribution (12% of salary)

You can withdraw money from EPF whenever you need it. But you may earn decent returns on it if you hold it for the long term. Let’s say you put 12% of your salary into EPF.

It would be around 4000 and will be deducted from the salary.

Earlier, EPF contributions and the interest earned used to be tax-free. Now the government has changed the rules.

According to new rules-

Employees have to pay tax on the interest earned on contributions above 2.5 Lakhs/year. This means interest earned on the contribution up to 2.5 lakhs will be tax-free. Please note that employers do not have to pay tax for their 12% contribution.
If an employee is the only one contributing to the EPF, the same rules apply but for the threshold of 5 lakhs.

Additionally, you will have to pay 10% TDS as per section 194A of the IT Act on taxable interest above the threshold.

8. Professional Tax

Professional Tax is an amount your employer directly deducts from your salary. It will depend on the tax slab you fall under.

The company can only deduct up to 2500/month as a professional tax. It varies from state to state in India.

For example,

Professional Tax Deduction In Maharashtra

Salary Per Month	Professional Tax
Salary up to 7500 (Men)	No Tax
Salary Upto 10000 (Women)	No Tax
Salary Between 7500 – 10000	175 Rs
10000+	200 Rs

Now let’s finally come to the In-hand Salary

What is In-Hand Salary?

Your In-Hand salary or the net salary is what you take home.

In-Hand Salary = Gross salary – all the deductions

From the above examples, your gross salary becomes = 45000 + Bonus (if any) + gratuity(if any)

Deductions include income tax on salary and allowances along with professional tax. The In-hand salary after deductions and putting 12% in EPF would be around 40300 INR.

That is the final amount you get in your bank account by the end of each month. When you file for ITR, you can claim the taxable amount by showing the necessary proof.

Note- The above salary calculations are only for the sake of an example. It may vary depending on your salary structure.

Key Takeaways

Studied your salary slip yet?

Be it your very first job or a 5th switch, understanding your salary structure is very important. Don’t let the illusion of CTC rule you. There’s a lot more to that.

From the above breakdown, you will be able to see how your salary structure works. It will also help you negotiate your salary structure with your employer.

Taxation comes into the picture at almost every subsection of your salary. Income tax rules, even though complicated at times, can come in handy if you know how to benefit from them.

Keep track of your expenses under all the allowances. Maintain a spreadsheet to note down your finances. You can also consider various investment avenues to get more tax benefits. Knowing how to divide your salary into savings, investments, and expenses will help you in the long run.

Get in touch with our advisors to analyze your investment portfolio. Start building wealth for your retirement as early as you can.

Gilt Funds: Investment Tips and Tricks

Post author By VNN Wealth
Post date February 10, 2023

Gilt funds are debt mutual funds primarily investing in securities issued by a state or central government.
When the government of India is seeking a loan or funding, they approach the RBI. Reserve Bank Of India lends money to the government by borrowing it from banks or different financial entities.
Fund managers can subscribe to these issued fundings. That’s how the Gilt funds in India work. Fund houses allocate investors’ money into government-issued bonds and securities.
And as the government is involved, these funds are the safest to invest in.
Our team has gathered some tips for you before you make an investment. Read along.

What is the Investment Regime?

Gilt funds have two types of investment options-

1. Varying Maturity- In this type, fund houses allocate at least 80% of total funds to government security of varying maturity periods. You might come across a slightly higher interest-rate risk in these funds.

2. Ten-Year Constant Maturity- Here, fund managers allocate at least 80% of total assets to government securities with a constant duration of 10 years. The interest-rate risk is comparatively lower in these Gilt funds.

Top 3 Advantages of Investing in Gilt Funds

1. Opportunity To Invest In Government Securities

Individual investors cannot easily invest in government securities. By investing in these funds, you can invest in both state and central government securities.
This will add another diverse investment to your portfolio.

2. No Default or Credit Risk

Both the government and the RBI will guarantee your repayments. Gilt funds do not have any default risk, which enables low-risk investment.

3. Decent Returns

Gilt funds may deliver superior returns depending on the interest rate. During a falling interest rate scenario, these funds deliver better returns than bank deposits over a longer duration.

Things to Consider Before Investing in Gilt Funds

1. Investment Horizon

We would always advise keeping an investment horizon of 3 to even 10 years.
Though there is no lock-in period in Gilt funds, you may receive better returns over a long duration.

2. Risk Factor

Even though these funds have zero default or credit risk, you must consider interest rate risk.
Know that the NAV of the single unit of Gilt funds may drop during increasing interest rates. Instead of selling, you can use this opportunity to buy more units.

3. Financial Goals

Two important things that should align with your financial goals are- (A) The maturity period, and (B) The interest rate.
As mentioned above, the rise/fall in interest rate may cause the NAV to fall/rise too. You can avoid high interest-rate risk by understanding the interest rate cycle.
You can reach out to our advisors to know when is the right time for you to invest.

4. Expense Ratio

Similar to any other mutual fund, you will have to pay an expense ratio for Gilt funds too. It’s a small fee that fund houses charge to manage your investments.
As per SEBI guidelines, fund houses can only charge up to 2.25% of total assets in the form of a fee.

Please Note That- Low expense ratio is not always good. You can certainly consider paying a slightly higher expense ratio if the returns are worth it. You sure can maximize your gains if the expense ratio is low. But what if the gains themselves are low?

Taxation On Gilt Funds

You will have to pay tax on short-term capital gains (STCG) and long-term capital gains (LTCG) on Gilt funds.
After the new tax ruled from April 2023,

Tax on both STCG (investment held for less than 3 years) and LTCG (investment held for more than 3 years) will be considered as per your tax slab.

The indexation benefit is no longer applicable for pure debt funds. Only hybrid funds with more than 35% equity exposure can benefit from indexation.

Who Should Invest in Gilt Funds?

Investors who are interested in exploring government securities and wouldn’t mind a longer investment horizon can invest in these funds.
In our experience, if bought at the right time, Gilt funds can compete with equity funds in terms of returns; especially during falling interest rates.

Conclusion

Debt funds have become a popular investment option in the past few years. Investors are willing to explore diverse debt instruments to balance the risk and returns.
Gilt funds are one of the safest debt funds as there is no default or credit risk. Investors interested in Government bonds and securities should absolutely consider investing.
Keep in mind that, you may come across interest rate risk. To balance that, hold your investment for a longer duration, at least 3-5+ years.
To know more about Gilt funds and investment options, reach out to us anytime. Advisors at VNN Wealth can help you choose the gilt fund suitable for your portfolio. Evaluate your profile and plan your next investment with us.

What are Floating Rate Debt Funds?

Exchange Traded Funds

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How To Generate an e-CAS Statement Online?

Post author By VNN Wealth
Post date February 2, 2023

What is CAS?

Consolidated Account Statement or CAS is an account statement that holds the summary of all your investment transactions. CAS statements give you an overview of your mutual fund investments, SIPs, and other financial instruments held under your Demat account.

The statement fetches all the buy/sell investment transactions associated with your PAN.

Usually, fund houses and wealth managers send the statement to investors each month. But even if not, you can easily download e-CAS online from platforms like CAMS.

Why Download e-CAS?

An e-CAS statement helps you keep track of all your investments and profits earned from it.
You can make further investment decisions based on the e-CAS statement.
Even though you can track your investment via an online Demat account, an e-CAS statement keeps you organized and informed.
Most importantly, the e-CAS statement helps you identify and file income tax.

Here is how to quickly download e-CAS online.

Steps to download e-CAS online

You can download e-CAS from various platforms such as CDSL, NSDL, or CAMS.

For the sake of the example, let’s go with CAMS.

CAMS lets you create an account to track each transaction and download statements. But you don’t need to have an account to generate e-CAS.

Step 1- Visit – https://www.camsonline.com/

Step 2- Navigate to the ‘MF Investors’ from the header menu to browse the services for the investors.

From the listed services, we are looking for ‘Statements’.

Under Statements, go with CAS-CAMS+KFintech. It will have all your investment transactions.

Step 3- After selecting CAS-CAMS+KFintech, go ahead and fill in the details.

You can either go with the summary or the detailed statement.
Select the duration for which you want to download the statement.
Select the preferred folio listing.
Provide your email address and create a password.
You will need this same password to open the e-CAS PDF delivered to your email ID.

NOTE- You need to provide the email address associated with all your financial and investment transactions.

The PAN number is optional, but you are free to provide it if you want.

Step 4– Click ‘Submit’.

You will receive the e-CAS pdf to your email ID where you can see all your buy/sell transactions.

Tips Before Downloading the Statement

Download monthly statements instead of yearly ones. It will be easy to keep track of each transaction.
Prefer selecting a detailed report instead of a summary. It will help you plan your future investments.
Make sure to use the same email address across all investment platforms.

We hope this was helpful. Reach out to us for any further queries you may have. Get more Personal Finance Tips from our advisors.

Blogs Investing Basics

What Are Unlisted Shares? How to Apply?

Post author By VNN Wealth
Post date January 24, 2023

Wondering what are Unlisted Shares and how to invest in them? Welcome to the club.

If you have landed on this page, that means you are interested in exploring pre-IPO shares.

Unlisted financial securities can be beneficial for your portfolio if you know where to invest. See our top picks of unlisted shares.

But before that, it’s important to understand everything about unlisted shares.

Shall we?

What Are Unlisted Shares?

As the name suggests, these shares are not listed on the official stock exchange. Yet.

These are privately held shares that may get listed in the future through the IPO process. You can only invest in them via Over The Counter (OTC) market.

What does OTC even mean? It means buying shares over the counter just like you buy a movie ticket. Well, not literally, but similar.

After buying, you receive these shares in your Demat account similar to any other shares. The prices of these shares will go up in a long run. Or whenever the company goes through the IPO process, you have a great opportunity to bag listing gains.

Benefits Of Investing In Unlisted Shares

1. Chance of Earning Superior Returns Via Listing Gains

As unlisted shares are not traded on the stock market, the liquidity is not as flexible. But, it can be used to your benefit.

Most unlisted shares do not fluctuate in price as often as listed shares. They are either undervalued or overvalued and stay the same for a long time.

If you invest in them when they are undervalued, you can earn exponential returns.

There’s also a chance of earning listing gains whenever the company goes on IPO.

Here’s a successful performance of some of the recent listings of unlisted shares-

Stock	Initial Investment Price	Listing Date	IPO Listing Price	Return Multiple
TATA Technologies	230	30 Nov 2023	500	2.17
Nazara Technologies	430	19 March 2022	1101	2.56
Anand Rathi Wealth	160	6 Dec 2021	550	3.44
One97 Communications	1400	11 Nov 2021	2150	1.54
Barbeque Nation	228	26 March 2021	500	2.19

Note- Not all unlisted shares can offer exponential growth or higher listing gains.

2. Lower Volatility

Unlisted shares are a great way to balance your risk profile and diversify your portfolio. These shares are not as volatile as equity shares.

If you have invested in high or moderate-risk stocks, unlisted shares can balance the risk.

You don’t have to pay constant attention to the changing prices. That takes away all the worry about buying and selling these shares as the market changes.

3. Allocation Confirmation

One of the major benefits of investing in pre-IPO is allocation confirmation. Promising IPOs often get oversubscribed during the IPO. There’s a solid chance that you may not get any shares allotted to you.

Furthermore, when you invest pre-IPO, you already hold shares before the company goes live on the share market. This gives you an upper hand during IPO, which brings us to the next point.

4. Pre-Listing Gains

The valuation of private companies grows exponentially before the IPO. There’s often a high demand for these shares just before the IPO. Since the supply is limited, the prices aka the premium for these shares shoot up.

For example, if the issue price for a share is 20Rs and the over-the-counter premium (price) is 40Rs, then people are ready to pay 60rs to get these shares before IPO.

Investors who already own the shares of these companies may earn a huge profit via pre-listing gains.

Tax Implications

Taxation Before The Listing-

The income earned (Capital Gains) after selling the Shares is taxed as per the duration.

Long-Term Capital Gains- If you sell the investment after 24 months (long-term), you will have to pay 20% tax on capital gains after indexation. For NRIs, the tax will be 10% without indexation.
Short-Term Capital Gains- If you sell the shares before 24 months of investments, the tax will be calculated as per your income tax slab.

Taxation After The Listing-

If the unlisted shares get listed on the market, the taxation will be similar to any other listed stock.

You will have to pay a 10% tax on long-term capital gains (investments held for more than a year) above 1 lakh.
If you sell your shares before 12 months, then the tax on short-term capital gains will be 15%.

What Are The Risks of Investing in Unlisted Shares?

1. Lack of regulations

Unlisted shares do not have SEBI or Stock exchange regulations on them. In order to have a secure buy/sell, you will need a trustworthy wealth manager to work with.

2. Lack of Liquidity

Unlisted shares may not offer higher liquidity as the buyers and sellers are fewer on the OTC market. You may have to wait until you find a buyer who is willing to purchase your shares at a suitable price.

For ease of selling/buying unlisted shares, contact VNN Wealth.

3. Lack of Certainty

You might always face a lack of certainty in terms of valuation, company performance, and the possibility of earning listing gains. The only way to avoid uncertainty is by investing in known brands that are likely to get listed.

We have already hand-picked selective companies from the unlisted universe. You can get in touch with us to invest in your choice of unlisted shares.

How to Invest in Unlisted Shares?

The pre-IPO investment process is slightly different. You won’t find them on the stock exchange.

Here’s how you can buy unlisted shares with us-

1: Explore from the list of companies to invest in

2: Click on Invest Now on the shortlisted company

3: Enter Your Investment Amount

4: Fill in your details

5: Upload PAN copy & CML/CMR copy of your Demat account

Once you submit the details, our team will share account details for you to transfer the trade amount.

The shares will reflect in your Demat account within 24 hours.

Conclusion

Unlisted Shares can boost your investment portfolio if you invest in the right company. There is a possibility of earning listing gains, which will generate that extra alpha in your portfolio.

But the key factor to earning superior returns from these shares is to choose the right company(s).

You have the option of investing in many startups to known brands. But not all are going to give you listing gains.

We have already selected the top 5 unlisted shares for you. If you are interested in buying unlisted/Pre-IPO shares, get in touch with us today. Our advisors have been helping clients invest in unlisted companies for the past decade. Join them as you achieve your envisioned financial goals.

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