How To Become Financially Literate ...

How To Become Financially Literate? 

 

Have you ever come across the term "financial literacy"? Does the term sound complicated to you? Do you consider yourself financially literate? 

 

In this blog, we will learn about financial literacy, why it is important, and how to become a financially literate person. 

 

Simply put, financial literacy is understanding your finances. It involves learning money management skills, keeping track of your expenses, learning concepts of investing and borrowings and making wise decisions.

 

Why is financial literacy important? 

Financial literacy is a crucial skill in today’s era. You cannot solely focus on earning money and expect your money to grow over time if you are unaware of how to manage it well. Hence, financial education is vital. 

 

Here's why financial literacy is important: 

 

● It helps expand your knowledge in the finance field and make wise decisions in life

● Assist in understanding financial concepts like debt, interest rates, credit scores etc

● Aids in reaching one's financial goals

● Protects you from frauds like online scams

● Increases your confidence in life

 

Best ways to become a financially literate person

 

Learn financial jargon

 

You cannot expect to understand advanced English if you don’t know the basics. Similarly, to learn and comprehend technical and financial concepts, you need to understand the basic terms like debt, asset, liability, capital, equity, depreciation etc. 

Learn about budgeting 

You must have heard from people like budgeting isn’t needed, or you need solely to focus on earning more, but that's not true. It is vital to know where your money is coming from and where it is going. You must have a record of every penny earned and spent. This will help you in reducing unnecessary spending habits.

 

Understand saving and investing

 

A lot of people want to retire early, but earning more money doesn't necessarily mean you're getting wealthier. Usually, when a person earns more, they spend more. It is important to lower expenses and find ways to save money to become wealthy over time 

 

Understanding credit

 

You must know what credit is and how it works, as credit is an essential part of life. Your credit history reflects your creditworthiness. You must learn some common concepts about credit, such as the importance of credit and how to improve your credit score. 

 

Get help from finance experts

 

Once you have gained enough knowledge about the basics, it is time to talk to experts who specialize in the specific field. Financial experts can help you in managing your debt and finances better and assist you in reaching your end goals. Having ample knowledge provides you with relevant questions to ask experts. 

 

Final thoughts

 

Now that you know what financial literacy is and its importance in one’s life, you must know the actual learning lies in execution.

 

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

9830146206

 

Where can debt mutual fund investors invest in a rising interest rate scenario?

Where can debt mutual fund investors invest in a rising interest rate scenario?

 

The Reserve Bank of India, in its bi-monthly monetary policy held in June, hiked its key interest rate by 50 bps. This comes on the back of a 40 bps hike done between the policy meet, taking the total hike of interest rate to 90 bps in five weeks. One basis point is equal to 1/100th of 1%. 

 

The central bank has also hinted at more rate hikes in the coming months to counter high inflation in the economy. 

 

This means that the rising yields of domestic fixed income instruments are expected to rise in the future. Yield is the returns that investment brings in over a certain amount of time. It is shown as a percentage of the amount invested, the value of the security on the market. 

 

Debt mutual fund investors are sitting on massive losses since interest rates are at a historic high. This raises the question of where to invest debt funds in a rising interest rate scenario and how should they invest in this environment. 

 

Let us know more. 

 

Yield versus price problem 

 

The first and the most fundamental thing that debt mutual fund investors should understand is that we cannot compare the lateral movement of yield rise with the equity market. In the case of a rise in yields, there is an inverse relationship with the price of the underlying debt security prices. So when yields rise, they rise because the price of the securities has fallen, and vice versa when yields fall. 

So, in the current situation, the price of securities has fallen as yields have risen. However, there is a disproportionate change in prices and yields across maturity of debt securities. For instance, long-maturity papers become unattractive during such times as investors are locked in for a long duration in such securities. Thus their prices fall more steeply compared with short maturity papers as these will mature sold. Thus new securities with higher yields can be bought in their place to spruce up the portfolio returns.

Investments in short maturity debt funds turn attractive

 

As explained above, short-term debt securities thus are less affected by the yield rise and thus can turn out to be an attractive opportunity for investors in the debt space. An investor can take exposure to space by investing in short-term debt mutual funds and money market funds since these funds invest in short-term papers.

 

Floating rate debt funds

 

This fund can also prove to be an attractive investment opportunity for debt fund investors. Floating rate debt funds invest in securities and structured papers that reset the yield basis the underlying environment and covenants. Thus they are ably placed to provide a higher yield to the portfolio. 

 

Dynamic bond funds

 

Investors who believe that the central banks might not raise interest rates much or would not want to juggle their portfolios regularly as per the changes in the interest rate environment can look at the dynamic bond fund category. These funds, as the name suggests, dynamically alter the portfolio maturity (underlying set of securities) basis the changing situation and thus can move across the yield and duration curve. Therefore, investors do not have to look at moving across various debt fund categories.

 

Summing up 

 

Debt mutual funds provide various options for investors to invest basis their risk-return profile and investment horizon. Investors looking to invest in the short to medium term can invest in debt mutual fund categories outlined in the article above to benefit from the rising interest rate scenario. These funds can not only generate better returns than the traditional fixed income instruments but also give better tax-adjusted returns through indexation benefits for investments beyond three years horizon. It is, however, important to do due diligence before investing. You can contact us to know the suitable debt fund schemes based on your requirement.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

 Raja Bhattacharjee

Email:  investment.junctions@gmail.com

 Phone: 09830146206 / Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

 

Plan for your Financial Independence

 

By 2031, the population of people more than 65 years old is expected to grow the fastest (75%) among all the age groups. The only way to ensure a safety net for the golden years is by fast-tracking financial freedom by investing as much money as early and frequently as one can. It is necessary to create a stream of passive income which will take create of one’s lifestyle needs. Your active income (Salary, Business or Professional Income) does not provide a guarantee of future returns. The savings (Passive Income) you make that’s the passive income it is used at the time of emergency and never stays stable and keeps decreasing. Freedom adds the benefits here. They will never let your ‘Passive Income’ i.e. savings decrease they will stay constant or increase.

Let me share a story with you all. One of our clients Mr. Dinesh Mishra (24 years) asked for a Passive income source after 15 years for his Mother’s pension. As he has lost his father last year (2021) in an accident. Mr. Mishra as a single child has to face all the liabilities and side by side he has to save for his marriage also. After 15 years he will have a family (wife & children) and more liabilities. In this aspect, he wants to secure a regular cash flow for his mother. Understanding his situation we have proposed a concept where hehas to invest 10000/- per month regularly in a disciplined manner through a  Systematic Investment Plan (SIP) and enjoy the benefits of a monthly cash flow of 30000/-  for his Mother via a Systematic Withdrawal Plan (SWP) post completion of SIP period after 15 years. This concept is known as Freedom SIP.

Freedom SIP comprises of three processes:

a. SIP: SIP will be registered into an open-ended equity, hybrid or fund of funds scheme for a pre-defined period of either 8 years, 10 years, 12 years or 15 years under the monthly frequency. The minimum amount for SIP shall be the minimum Monthly SIP installments amount for the respective schemes.

b. Switch: On completion of the chosen SIP period, the units accumulated through Freedom SIP shall be transferred to the selected target scheme.

c. SWP: Post the transfer, SWP is to be activated for an amount which is as per the matrix below or as per the amount mentioned by the investor in the mandate form.

Freedom SIP has four options. 8,10,12 or 15 years.

  

 When you start investing in freedom SIP remember that if the market goes down there will be no effect on your future return. The amount will remain the same. The concept is made in such a manner that it can sustain in all market conditions. After doing lots of research work then only this plan is introduced by ICICI. Start investing today, call us for further Q&A .

 Raja Bhattacharjee

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

 

For More details click

https://u4873.app.goo.gl/eVZxVkfs6NJoZMrEA.

*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Direct Stocks vs Equity Mutual Funds: Which is Better?

Direct Stocks vs Equity Mutual Funds: Which is Better?

If you ask anyone if they have invested in equities, the most common response that you will get from them is, ‘no baba; it is very risky. I am happy with my fixed deposits.’ Their response stems from what they have seen in their friend circle or what they have experienced. While everyone knows that equities give the highest return on a long-term basis, the risk associated with it deters many investors from investing in equities.

However, what many people do not know that there is another smooth way to take equity exposure, and that is through mutual funds.

Mutual funds pool money from many investors and expert fund managers manage it. While you can pick up the stock of your choice when you are directly investing in equities, the fund manager takes the investment calls in a mutual fund.   

Here’s some of the difference between Mutual Funds and Direct Stocks that will help you to figure out the right option for you.

You don’t need to be an expert to invest in mutual funds

When you invest in equities through mutual funds, you don’t need to be an expert in stock picking. Fund managers pick up stocks that they expect will be the best for their investors according to their investment objectives. In the case of direct equities, you will have to do the research and pick up stocks. In many cases, it is seen that many people invest in stocks as per their friend’s suggestion, and this is where they go wrong and end up with sour memories. Investing in direct stocks requires expertise. If you are new to the world of investing, investing in mutual funds will be the better option for you.

The risk in mutual funds is lesser than investing directly in stocks

The risk associated with direct stocks is higher than investing in mutual funds. Mutual funds have a diversified portfolio, and fund managers invest on an average of 30 stocks across different sectors and market capitalisation. This reduces the risk associated with an individual stock. E.g., if stock A is not performing well due to some sector-specific problem, the underperformance of the stock will be offset by the other stocks in the portfolio.

Moreover, the market regulator has capped the investment in a single listed stock at 10%. That means that if the total assets of the fund is say Rs.100, then the total investment in one stock can’t be more than Rs.10. This reduces the risk when compared to investing in direct stocks, where the total allocation to a single stock in your portfolio would be higher.

Equity mutual funds are for the long run

Equities tend to be volatile in the short term, but in the long term, the returns tend to average out and give attractive returns than other asset classes. Direct stocks can be for trading and investing purposes. However, equity mutual funds are only for the long term. Equity funds may give attractive returns if you stay invested for more than five years.

Fulfil your goals through SIPs in equity mutual funds

One of the most important parts of investing is discipline. Having a disciplined approach will make sure that you can meet your goals. Mutual funds have a facility through which you can invest a fixed sum of money periodically called as a systematic investment plan(SIP).  By investing in equity mutual funds through SIP, you will be investing in a fixed amount of money irrespective of the market levels. Rupee cost averaging is one of the most important benefits of SIP. Through SIPs, you will be allotted lesser units when the market is going up and more units when the market is low. Once the SIP mandate is set, the investment amount will be automatically debited from your bank account. This gives you the best of both worlds. However, in the case of direct stocks, you do not have the option to automate your investments and pay a certain amount of money every month.

Conclusion:

When choosing whether to go for direct equities or through mutual funds, you need to ask yourself what kind of investor are you. Do you have the market knowledge or the time to do extensive market research to pick the right stocks for yourself? Can you bear the risk associated with investing in just a few stocks? If the answer to these questions is a resounding NO, then investing in equities through mutual funds may be the best option for you.

If you want to know more about investing in mutual funds, get in touch with your financial advisor. He or she will be able to guide you and clear all your doubts. 

Happy Investing!

Raja Bhattacharjee

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

website: https://www.investmentjunctions.com

 

We should stop looking..

Have you ever got stuck up in traffic? I am sure you have. Just imagine your car is  new brand with powerful engine, but unable to move an inch because of heavy traffic. And you get what? Frustrated! What happens when you cannot move but the smaller cars in lane next to you is moving faster than you because that lane has lesser traffic than the one in which you are driving. More Frustration! Right?

As a human being it is obvious that you would have strong urge to change the lane and move to the faster lane. And using your driving skills you change the lane. The moment later the lane which you left starts moving and the new lane in which you entered stops moving due to traffic. Now what? Height of frustration!

If there is a smile on your face while reading this, it means you have already have experienced it, probably not just once but more than once you have changed the lane and mostly reached the height of frustration.

Not just driving whenever in our life when we see someone is moving faster than us we try to change the course and find ourselves caught in trap and then feels like we should have stayed in our lane.

Changing Mutual Fund scheme based on Past Performance

So is the case with Mutual Fund schemes. Most investors after investing in mutual fund scheme start comparing the return of their schemes with that of other mutual fund schemes. And many times we change the mutual fund schemes and switch our money into other better  performing mutual fund scheme in the recent past. And what happens next?

In recent times, Past Performance has become major criteria of the mutual fund selection system. Investing based on recent past performance is as risky as driving a car by looking only into the rear view mirror. While driving, rear view mirror is useful but more than rear view it is your front view which is more important for smooth and safe journey.

Past track record definitely helps in understanding the quality of scheme and ability of  management team but recent past performance is not the guarantee for the future.

What else matters while selecting scheme?

Apart from Recent past performance, one should look at consistency of return which can be derived from rolling return analysis for various periods, which requires lot of data crunching rather than just finding out the past one year return.

One should also look at how fund has performed during the best and worst period in past compared to its benchmark and category return.

You also cannot avoid looking at risk parameters. If some fund is generating superior return then it is also necessary to check at what cost. How much risk or volatility is it adding into portfolio?

Choosing fund from a basket of hundreds of funds requires lots of data, analytical skills, education, and experience. One can do it by own but it is very risky. It is always advisable to take the help of qualified professionals for building a quality portfolio and stick to it with discipline.

Frequently changing lanes rarely helps, in driving or investing.

Happy Investing!

Raja Bhattacharjee

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com