Why HNIs should consider Investing in AIF's

Why HNIs should consider Investing in AIF's

→ Driven by a high-performing market & low interest rates globally, India has increasingly become the preferred investment destination for global investors seeking double-digit returns. India attracted the highest ever FDI inflow of close to $70 billion during the first 9 months of FY 2020-21. It is, therefore, no surprise that millions of Indians are taking to more sophisticated investment vehicles & financial instruments as India continues to multiply wealth. This marks a paradigm shift from traditional physical assets, such as real estate, gold & bank deposits.

→ In addition to mutual funds & equities, Alternative Investment Funds (AIFs) have witnessed significant interest from domestic investors.

What are Alternative Investment Funds (AIFs)?
→ Alternative Investment Funds differ from regular conventional investments like public equities or debt securities. These funds are privately pooled funds which invest in venture capital, private equity, hedge funds, infrastructure, etc.
→ Currently, there are nearly 700 AIF's with over ₹ 4 trillion in investments, an impressive 15x growth since 2015.

What's driving AIFs in India
→ India is one of the fastest growing economies with a vibrant business ecosystem & the third largest startup ecosystem globally. Furthermore, Covid has resulted in major changes such as digitalization across industries, the rapid rise of health tech, widespread adoption of remote work, etc. The startup ecosystem, hence, is well poised to drive digital adoption in India and will be the real delta driving the economy in this decade. This is corroborated by the significant fundraising by India-focused funds in 2020, that raised $3 billion despite the pandemic.
→ In order to continue its fast-paced growth, however, infrastructure conforming to global standards is imperative for our country. AIF's have provided a viable route to make investments in public & private infrastructure much more accessible to investors who wish to capitalize on the opportunity presented by the development needs of India. This serves as a lucrative investment alternative for investors while contributing significantly to the overall economic growth.
→ To put things into perspective, India has already seen a record number of 12 Companies attain unicorn status to date in 2021. Additionally, more startups are getting public-market ready & set to launch their IPO's. These are strong indicators of the Indian market moving towards maturity. AIF's stand to benefit from the developments taking place in the venture ecosystem in addition to the overall infrastructure development drive by public & private players alike.

Growth of AIFs in India
→ The key growth enabler for AIF's has been the funds’ ability to customize & curate products across asset classes. These funds are managed by experienced fund managers who adopt sophisticated strategies. Therefore, these funds do not correlate to the stock market & help investors add diversification & reduce volatility in their portfolios. Proprietary investment techniques coupled with strategic diversification has led to higher returns compared to mutual funds, stocks & bonds.
→ The growth must also be attributed to growing investor awareness & flexibility in product offerings. More HNI's are setting up professionally-run family offices with specific investment mandates & allocation strategies. Investors can appropriate a portion of investable capital to different alternative products based on their risk appetite & target returns.
→ AIF's funds are generally subject to higher volatility, liquidity & credit risks than investments in traditional securities, which may act as a deterrent for investors. Investors today, however, have access to various products that offer high liquidity & low volatility. Most importantly, well-managed funds with a keen focus on comprehensive credit analysis & monitoring can greatly reduce the credit risk involved. For example, venture debt has the potential to yield high double-digit returns with reasonable certainty owing to the nature of the product. It also allows investors to participate in the equity upside, while earning a relatively predictable return on the debt component with regular payouts.
→ Although a long way to go, the investment narrative of India is changing as investors have started to embrace India’s growth story with domestic investors playing a pivotal role. This is driven by the belief that the country can build shared prosperity by transforming the way the economy creates value.

Join my telegram channel for more updates : https://t.me/moneplan

Comparison : Safety of Savings Bank A/c, Fixed Deposits Vs Stocks & Mutual Fund Investments

Comparison : Safety of Savings Bank A/c, Fixed Deposits Vs Stocks & Mutual Fund Investments

→ In Fixed Deposits & Saving Account, your money doesn't grow but eventually die in fight against Inflation.
→ But In Stock market, your money will Grow & will transform into Wealth Creation.
→ If you don't much understand about Investing than Invest your Hard earned savings in Sector leaders in SIP mode or do SIP in ETF's (Niftybees, Juniorbees, N100 & GoldBees)
→ Real Investing is to be done for a time horizon 5-10-15-20 Years - Not for 3 months to 24 months period.
→ There is very big difference in Investor & Trader.
→ Lifestyle inflation is the biggest threat to our financial independence & retirement planning.
→ You are not truly Wealthy, until & unless you own your Time & Wisdom.
→ It might take months, years OR a Decade, but ultimately everything in Stock Market will revert back to you in More Meaningful & Fruitful Way if you truly desire.

→ "Try to be a master on PATIENCE". Only patience will makes your successful in stock market.
→ The journey will be very Long & Difficult.

→ When we Invest knowing all the facts in Mind & the Right Vision, Big Money Follows.

Join my telegram channel for more updates : https://t.me/moneplan

Now - Perfect Time to invest in Gold : Sovereign Gold Bonds : 2021 Series (#SGB)

Now - Perfect Time to invest in Gold : Sovereign Gold Bonds 2021

Current Scenario when the pandemic has caused significant disruption with :
→ Falling interest rates: have reduced the returns from Fixed Income Instruments
→ Equity markets plunged significantly due to panic selling caused after spread of COVID-19 & thereafter have continued to be volatile
→ Gold gets attractive as an investment class when equity & debt markets are volatile
All of this leaves Gold in a sweet spot

Why invest in Sovereign Gold Bonds :
Returns: Interest of 2.5% on the Issue Price & which is payable of half yearly basis + Appreciation of Gold
Safety: Sovereign Guarantee on redemption of Money (Principal) as well as on the interest earned
Elimination of risk and hassle-free holding as it eliminates cost of Storage as in physical gold
Liquidity: Tenure of 8 years with exit options in fifth, sixth & seventh year
Tradeable on stock exchanges from the date to be notified by RBI
Taxation Benefit: Exemption from Capital Gains Tax on redemption. 

No TDS Applicable on Interest paid
Indexation Benefit: Will be provided on LTCG arising to any person on transfer of bond
Collateral: Accepted as collateral – Can be kept as collateral / security against Secured Loans
Disclaimer: Please consult your Tax consultant for Taxation purposes..

Risks associated with investing in Sovereign Gold Bonds :
→ Gold is traditionally a very safe investment & typically the risk associated with Sovereign gold bonds is very low
→ However, given the fact that gold rates depend on market performance, any drop in gold rates could put the capital at risk, which would be the case even if one owned physical gold
→ Regardless of market rates, an investor should take solace in the fact that the amount of gold he purchased doesn’t change

Eligibility for Investing in Sovereign Gold Bonds :
→ Resident Individuals, HUFs, trusts, universities & charitable institutions
→ Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB
→ Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

Join my telegram channel for more updates : https://t.me/moneplan

Comparison & Difference between Index Funds v/s ETF's

Comparison & Difference between Index Funds v/s ETF's
While index funds and ETF’s look similar, there are multiple differences you need to keep in mind before investing in either of them.

Let me highlight the important ones :

1. NAV (Net Asset Value ): Index Funds can be bought/sold like any other open-ended MF at the day end NAV from the AMC where as ETF’s can be bought like a normal stock during trading hours at the real time NAV/Traded Price or iNAV.

2. Expense Ratio: Theoretically, expense ratio of ETF is less than Index Funds but it does not include the brokerage to be paid while buying/selling the ETF through a broker on the exchange & hence don’t compare expense ratios directly between Index & ETF’s.

3. SIP/SWP/STP's: Index fund allows SIP, SWP, STP & ETF’s don’t.

4. DEMAT Account: Demat is mandatory for ETF’s & optional for Index Funds.

5. Bid-Ask Spread: This is extremely important. It is possible that the traded ETF may not have enough volumes & hence the traded price may be different from the live NAV (iNAV/actual to be NAV) resulting in additional cost.

6. Index Funds Vs ETF's - Retails Investor's Choice: What should retail investors choose between Index & ETF? - Retail should stick to index funds over ETF’s.

7. What to look for in Index funds before investing?
a. Index you want to invest in – Sensex, Nifty, S&P 500, Nifty next 50 etc. – depending on the risk/return expectation & diversification requirement of the portfolio
b. Expense Ratio – Lower the better.
c. Tracking differences and Tracking errors of the funds – Lower the better.


How does the AMC make sure the Traded price is close to iNAV?
a. Creating awareness about the ETF where by having natural secondary market liquidity.
b. AMC’s appoint market makers, whose job is to create liquidity in the ETF by quoting buying/selling prices on the exchange & there by keeping the Traded price close to iNAV.
c. If a large investor wants to buy/sell large quantity (Pre defined, lets say ₹ 50 Lakh worth of investment for an example), then the investor can directly reach the AMC & AMC will buy & sell directly at the iNAV & the investor does not need to go through the exchange.

Join my telegram channel for more updates : https://t.me/moneplan

Debt Funds Vs Bank FDs – Which is more tax-efficient in the long run?

Debt Funds Vs Bank FDs – Which is more tax-efficient in the long run?

(Visit my telegram channel to get daily updates @t.me/MonePlan)

In India, fixed deposits (FD's) continue to dominate the terrain of ‘comfort investments’ for a sizable section of investors, to guaranteed returns & low risks associated with fixed deposit investments, they have been the go-to investment option in India.

However, the tide is slowly turning against fixed deposits, not that people are moving to other investment avenues en masse & ditching FD's completely, but the realization is slowly gaining ground among a section of investors that returns offered by FD's may not be enough to beat inflation in the long run. Interest rates have been slipping since the last few years & lower rates tend to bring down yields on bank FDs. Add taxes to the mix & the investor is left with little in the name of profit. The returns offered by any long term investment avenue can be significantly eroded because of taxation policies.

This is slowly pushing more investors, especially those who want to avoid the riskier equities route to tap into debt funds. Depending on the fund you have invested in, debt funds can offer more impressive annualized returns & what’s more besides coupon payments you can also earn capital gains when bond prices go up as a consequence of falling interest rates. In terms of long term benefits debt funds outscore FD's when it comes to taxation.

Taxation on FD interest earned & Dividends on Debt Funds :

The interest that you earn on bank FD's is considered as your income when it comes to tax compliances. Your FD interest will fall under the subhead ‘Income from Other Sources’ in your Income Tax return. For example, if you fall in the 30% tax bracket & invest ₹ 10,00,000 in an FD for a year that offers 8% interest, your total corpus on maturity will amount to ₹ 10,82,999 and your gains after taxes will be ₹ 10,57,104 which effectively means that your post tax yield is around 5-6% which may not be high enough to tackle inflation in the long run.

One can argue that when it comes to debt funds, the dividend taxation is a villain especially after an amendment was made in the Union Budget 2020 that mandated that dividends received by investors would be added to their taxable income & taxed at their respective income tax slab rates. Previously, dividends were tax-free in the hands of investors as the companies paid dividend distribution tax (DDT) before sharing their profits with investors in the form of dividends. But what makes the case stronger for debt funds despite the dividend taxation conundrum is the fact that the dividend payout is an option that you can choose as an investor & if the tax bite is too much, you can always opt for the growth option.

Taxation on Capital Gains :

The fundamental difference between how fixed deposits & debt mutual funds are taxed is based on when the returns are taxed. For holding period less than three years there is no difference in how FD's & debt funds taxation work – the gains will be added to your income & you will have to pay income tax according to your income.

However, when the holding period is more than 3 years, the FD taxation formula remains the same but the taxation on debt funds changes. After three years, debt fund gains are classified as capital gains & the tax slabs differs for varying holding periods. If your debt funds have been held for more than three years, the gains would be classified as Long Term Capital Gains which attracts taxes of 20% with indexation & 10% without indexation. Indexation adjusts the purchase price of an asset to account for rise in inflation in the period between the purchase & sale of the asset. In the long run, indexation reduces your capital gains & ultimately your tax liabilities.

Another difference comes into play when you factor in TDS (tax deducted at source). For FD's, TDS is applicable on the interest earned if it is more than ₹ 40,000 a year (general citizen) & ₹ 50,000 a year of you are a senior citizen. You can adjust TDS with your tax liability by submitting Form 15G/15H to the bank & later claim a refund but it is a tideous procedure, whereas, with debt funds, you do not have to worry about TDS being levied when you sell your units.

Besides higher returns & lower tax burdens in the long run which would give you an extra mileage in the race against inflation, debt funds are also highly liquid and you can redeem them at a very short notice.

Join my telegram channel for more updates : https://t.me/moneplan

Why should retail investors go for Exchange Traded Funds (ETF's) rather than Direct Equity?

Why should retail investors go for exchange traded funds (ETF's) rather than Direct Equity?

Direct Equity investment has the potential to deliver much higher returns than fixed income products but for retail investors, it is not easy to handle the risk.

> Undoubtedly, Equity investment can provide much higher return than fixed-income instruments. But equities are subject to market risk & may become highly volatile at times when the economic outlook of the country becomes uncertain like the one we witnessed last year when the Covid pandemic broke out in the country. 

> To handle the risk involved in direct equity investment requires expertise, which most retail investors lack. So financial planners mainly advise retail investors to go through the ETF route to get a higher return at lower risk.

Here are key advantages of ETF over Direct Equity Investments :

1. Risk : An ETF is a type of mutual fund that invests in Equities of an Underlying Index in the same proportion as that of the underlying index. As ETFs track a particular index there is no scope for fund managers' discretion, which sometimes may go wrong. So by investing in ETFs retail investors can expect the return of an index at much lower risk than that of direct equity investment.

2. Diversification : To minimise the risk of Equity investment you need to have a portfolio of stocks across sectors so that if one stock or sector does not perform then returns from other stocks will offset the losses of non-performing sectors/stocks & overall you get a decent return. But to create a proper diversified portfolio one needs to have the understanding of different sectors & stocks & retail investors mainly lack this knowledge.

But by going through the ETF route, you get a readymade portfolio composed of the same stocks in the same ratio as its benchmark index has. Hence the risk gets minimised.

3. Capital Requirement : In case of direct equity, an investor needs to invest a sizable corpus to create a portfolio of stocks that can tackle market risk. But in ETFs you can start with as low as ₹ 5,000 investment & can own a portfolio that is equally efficient as that of the underlying index in handling risk.

4. Taxation : Indirect equity investment, an investor is liable to pay capital gain tax each time he sells stocks depending on period of investment & amount of gain/loss.

However, in the case of an ETF investors are required to pay capital gain tax only when they sell units & not on every transactions made by the fund to realign the portfolio with the benchmark index.

Join my telegram channel for more updates : https://t.me/moneplan

Various Invesment Options Available for NRI's

India is fast becoming an economic powerhouse. The massive development in the last two decades has made the country one of the attractive destinations for investors from around the world. At the same time, various investment options for NRI have led Indian Diaspora living in different countries like the US, Europe & across the globe to make successful investments here.

• If you are new to NRI investment, you must know what is NRI investment? 
• What are the best options for NRI investment in India? 
• What are the benefits of investment in India? Find out the answers below.

What is NRI Investment?

According to the rules, NRI or Non-resident Indian is a citizen of India who spends less than 183 days in the country in a given financial year. The tax year stretches from April 1st to March 31st in the succeeding year. As a non-resident Indian, you don’t have to pay taxes. 

NRI investment is the investment opportunity that can be utilized by the NRI's to make profits & earn more money.

So, what is the best investment for NRI in India? 

There are many options you can choose from. 

We have listed the best 6 best options which can give you a great return on investment & profits.

1. Fixed Deposits :

• Fixed Deposits or bank deposits is one of the most common types of investment made by NRI's in India. 
• Bank FDs are considered the safest investment option as there are hardly any instances of banks defaulting on them.
• NRIs can start FD's through their FCNR, NRO, or NRE accounts. 
• The rate of interest depends on the bank, amount & tenure of deposit.
• As the name indicates, you deposit money in your account for a fixed time period. 
• You can withdraw the money plus the interest once the period ends. 

1. Fixed deposits in the NRE Account : You may consider opening an NRE account in Indian Rupees. The interest you earn is tax-free, but you may be taxed in your country of residence. The interest rate ranges from 5%-7% depending on the tenure of the deposit.
2. Fixed deposits in the NRO Account : You may use the NRO Account to control your Indian income. For instance, you may receive rental income or dividends from shares & mutual funds that can be paid into the NRO Account. You can remit a maximum amount of $1 million from your NRO account after producing the relevant documents.
3. Fixed deposits in FCNR Account : You can open the FCNR (Foreign-Currency Non-Resident Account) in any foreign currency. It may have a tenure of one to five years. The interest you earn is tax-exempt. Moreover, foreign exchange fluctuations have no impact on the deposits in the FCNR account. 

• There are generally three kinds of Bank Savings Accounts for NRI's namely: 

1. NRE - Non Residential External Account : Money of such an account is kept in rupees. It’s easy to return the money to dollars. Interest rates on these accounts vary depending on the deposit size &/or bank. You can expect interest rates to be around 7% to 9% per year.
   
2. NRO - Non Resident Ordinary Account : This account type is generally used by NRI’s to control their Indian income. Rent income, dividends from investments or pension funds can be paid into these accounts. These accounts have a current limit of $1 million that is allowed to be transferred from this account to a U.S. Account per year. Take note the interest earned on an NRO Fixed Deposit is taxed at a rate of 30%.
3. FCNR - Foreign Currency Non-Resident : Foreign currencies are stored in these accounts. It helps to avoid the currency fluctuations that take place in financial markets. The currency you deposit into the account will determine the interest rate of it. Dollars should cause an interest rate of between 2% to 3%. You can take money from this account at any time & it is not taxed by the Indian government.

The easy deposit process, repatriation of funds & tax exemption for the interest make it an attractive option to invest in.

1. (A) Fixed Deposits : Government Securities :

• Government Securities or G-Secs are a low-risk investment option backed by the Government of India. 
• They are issued in treasury bills or bonds, whose maturity ranges from a few days to several years. 
• These bonds may have fixed interest rates or floating rates that are determined based on market-related changes. 
• Since these are backed by the Government of India, there is no risk of default if you hold it to maturity. 
• However, G-Secs are tradeable securities & their prices in the market are liable to fluctuate based on external factors.
• For longer-term investment strategies, NRI’s can look at the following types of dated government securities :
1. Fixed Rate Government bonds – The interest rate on this bond is fixed.
2. Floating Rate Government bonds – The interest rate on this bond will change according to the market-related changes.
3. Capital Index Bonds (CPI bonds) – These bonds have a coupon payment rate that is adjusted according to the inflation rates of the Indian market.

1. (B) Fixed Deposits : Bonds & NCD's (Non Convertible Debentures) :

Bonds & NCD's have risk involved, but it can also serve as a good investment option. There are three main bond categories :

1. PSU Bonds – Public Sector Undertakings Bonds (PSU) are contracts with a maturity date. You in effect loan money to a Company & they promise to repay it with interest on a specific date (called the maturity date). The interest rate on a PSU will be determined by the creditworthiness of the Company who issues it. These investments are taxed at 20% if you sell it after owning it for more than 3 years.
2. Non-Convertible Debentures (NCD) – This debt is secured by the Company’s assets. The interest rate will, therefore, be a bit lower as secured debt has less risk involved. But, the interest rate on NCD's will still be very competitive when compared to returns on investments like equities. 
3. Perpetual Bonds – These bonds don’t have a maturity date so there is no date by which it pays out. The issuing Company, however, promises to pay the holder a set amount of returns per year. The holders of perpetual bonds trade it on the open market. Market conditions and your willingness to sell will determine if you make a profit with the selling of this investment.

1. (C) Fixed Deposits : Certificate of Deposits (CD's) :

• Certificate of Deposits (CD's) is usually used as a short termed investment. 
• It almost works like a fixed deposit, but the holder of a CD may sell it. 
• You need a dematerialized account to buy and sell CD's. 
• A CD has a maturity date by which it promises to repay a certain amount. 
• Please note, amounts invested into CD's are typically very hard to return to dollars.

2. Equity Investments (Direct Equities) :

• If you are a risk-taker & would want to invest aggressively, equity is the best option for NRIs.
• According to RBI, NRI's can invest in the stock market under the Portfolio Investment Scheme – PIS. (Please Note : Your are permitted to hold only one PIS Account in India)
• A dedicated NRE or NRO bank account is necessary.
• Moreover, a SEBI trading account plus a Demat account that holds shares in electronic form are a must for Equity investments by NRI's.
• However, there is a restriction imposed by the RBI on the maximum limit of a Company's stock an NRI can hold, which currently is 10% of the Paid Up capital of the Company.
• NRI's are not allowed to do Intra-Day trading & short selling of stocks.
• Though the taxation rules for Capital Gains are same for NRI's & Resident Indians, the tax on the gains is Tax Deducted at Source (TDS) for NRI's, by the brokerage at 100% on the Tax Liability.

3. Mutual Funds Investment (MF's) :

Mutual Funds are large pools of money of investors’ money which is managed by qualified and certified professional fund managers. Mutual Funds currently operate under strict regulations of the Securities Exchange Board of India (SEBI). Mutual funds are a bit riskier than fixed deposits, but that is why the returns of mutual funds are more than that of fixed deposit accounts.

• Mutual Funds are riskier than fixed deposits.
• But it provides a better return on investment then Fixed Deposits.
• NRIs would need a bank account in India & use India Rupees for Mutual Fund Investment as foreign currencies are not allowed.
• NRI's can invest in all categories of MF's i.e. Equity Funds, Debt Funds, Balanced Funds, Liquid Funds etc.
• Though investing in MF's looks simple & easier compared to direct equities, it is important to understand the risk profile & investment strategy of each fund before investing.
• As per SEBI mandate & regulations, all MF's grade the MF schemes according to their risk profiles as Low, Moderately Low, Moderately High & High etc. 
• MF scheme are classified as Open Ended, Close Ended & Interval Schemes.
• Depending on the Investment philosophy & nature MF schemes are further re-classified into Equity Funds, Debt Funds, Balance Funds & Hybrid Funds.
• Depending on Investment strategy the are futher re-classified as Sector Funds, Contra Funds, Index Funds etc.
• NRI's can invest across any of these MF's from an NRE or NRO Account, but the repatriation rules will vary depending on whether investment are made from NRE or NRO Account.
• Taxation on Capital Gains on MF Scheme varies according to the type of scheme & holding period of the invested MF. 
• Please note there some limitations for NRI's residing in the US & Canada to invest in Indian MF's due to strict FATCA rules which mandate all the Fund Houses to report to the US Goverment, comprehensive details of all MF transcations of US Citizens including NRI's on a regular basis.
• The eight AMC (Asset Management Companies) of MF Houses which currently accept Investment from US & Canada based NRI's are :
1. ICICI Prudential Mutual Fund
2. SBI Mutual Fund
3. UTI Mutual Fund
4. Birla Sunlife Mutual Fund
5. Sundaram Mutual Fund
6. L&T Mutual Fund
7. PPFAS Mutual Fund
8. DHFL Pramerica Mutual Fund

Predominantly, there are two types of Mutual Funds - Equity Funds & Debt Funds.

3.(A) Mutual Fund Investments : ULIP's : Unit Linked Insurance Plans :

• ULIP stands for Unit-Linked Insurance Plan & combines the benefits of investment & insurance. 
• The hybrid option allocates a portion of your premium towards offering you a life cover & the rest is invested in a variety of financial instruments. 
• A ULIP typically has a lock-in period of 5 years. 
• You can claim tax benefits under section 80C of the Income Tax Act.

4. (NPS) National Pension Scheme :

• National Pension Scheme is a Government backed scheme with tax benefits.
• An NRI between the age of 18 years to 60 years can open an NPS account with a POP (Point of Presence) in India.
• You may open an NPS account with the bank where you have your NRO or NRE account for convenience. 
• Moreover, the pension from the National Pension System will be paid in Indian Rupees.
• You may also open an eNPS account if you have a PAN card or an Aadhaar Card.
• You may consider using your NRO or NRE bank account to invest in the National Pension System.
• There are two types of NPS : Tier 1 & Tier 2 Account with different rules & regulations.
• You may opt for the active choice where you decide on the asset allocation in Equity (E), Corporate Bonds (C) & Government Securities (G).
• However, you can allocate a maximum of only 75% towards Equities.
• You may also opt for auto choice where asset allocation is done according to life stages (Age) if you cannot decide on the right investment proportions.
• If you withdraw from NPS before 60 years you can withdraw only 20% of the accumulated corpus.
• You must compulsorily annuitise the remaining 80% of the Corpus.
• If you are 60 years of age or older at the time of withdrawal, you can withdraw 60% of the Corpus & the remaining 40% must compulsorily be used to buy an annuity plan.
• It is a safer option than bank deposits or in that case PPF.
• NPS offers an annual interest rate of 12-14% as well.
• The matured amount is exempted from tax.

5. Real Estate :

• Among the best investment options for NRIs, Real Estate is a popular one because of the emotional quotient attached to owning property in India.
• As an NRI, you are allowed to invest only in residental & commercial properties & cannot purchase agricultural land, farmland or plantations.
• Investing in property has two benefits : earning regular income through rent & benefit from capital appreciation.
• However, you can own such properties provided you have received it as a gift or as inheritance & the sale proceeds have to be mandatorily received in NRO Account, to which repartriation restrictions apply.
  

6. Others :

• NRIs can invest in other options like Government securities, treasury bills, debentures, national saving certificates, debt instruments, etc.
• The tax benefits or implications may differ from one option to another.

How to Identify & Pick & Hold to a Multi-Bagger Stock

Everyone loves to pick multi-bagger stocks. Though the framework to select multi-baggers is quite well-known, we hardly find investors having stocks that multiplied several times in value in their portfolio. 

Here are some mistakes that investors make in identifying or holding on to multi-baggers.

1. Fundamentals: You don’t know what you don’t know :

Investors in general have evolved & they are quite aware of the fact that they are not buying stocks, but are investing in businesses. Hence, an understanding of businesses is a must. But given the dynamic world we are living in, even sound & fundamentally strong companies can go out of business & that is what I meant with “we don’t know what we don’t know.” A Company which is fundamentally sound & strong today may not exist tomorrow. This may be because the very problem which that company is solving now may not exist tomorrow or their products may no longer be needed. There are enough examples such as Kodak, Nokia & Blackberry, which were the market leaders of their time.  Though one cannot predict everything, there is a strong need to identify businesses in this light.

2. Too much focus on the P/E Multiples :

There is a constant talk about the Price/Earnings (PE) ratio, but when it comes to identifying a multi-bagger, a high or low PE may or may not make a huge difference. In fact, look at TESLA stock, which defies rule & also proves the “Greater Fool Theory” that people are willing to pay a much higher price in anticipation of disruptive growth in future. So, do not focus too much on buying a low PE stock; rather, look out for disruptive opportunities while identifying a multi-bagger.

3. Do you understand the Sector well?

Always remember the fact that every stock has a story & you need to pick up those sectors which you understand & believe in. You may also look out for the sectors where you have a core competency like your immediate work area, be it the IT, FMCG or any other industry. Avoid investing on borrowed confidence & the tips given by friends or relatives.

For example, someone in the financial services sector may understand the importance of how the overall Life insurance, Health insurance & Equity market landscape will evolve in India. Examples of leading players include HDFC Life, SBI Life, or AMC or financial firms’ stocks such as HDFC AMC or Aditya Birla Capital.  So, choose a sector which you understand & you can find enough Multi-baggers across sectors as we did in the past, with the likes of Berger Paints, Bajaj Finance, Balkrishna Industries, Eicher Motors & many more.

4. How many MRFs do you have?

We give too much importance to identifying a multi-bagger than holding on to that stock. Take my word, making money is really easy unless you are in a hurry. Though it is easier said than done, let me share a real-life case of my friend’s father who is holding on to the MRF stock which he purchased at ₹ 18. Guess the current market price? It’s ₹ 88,906 per share!

Now, how can you beat that? A person has seen the price go from ₹ 18 to ₹ 89,000 & yet resists the temptation to sell. It is indeed a very difficult task & that is where the test of your patience comes in where most of the investors fail. That is why having a concrete plan & knowing why you invest in a particular stock in the first place is very important to decide your exit strategy.

5. Diversify, but don’t become a Mutual Fund :

Over-diversification will never allow you to have a multi-bagger. Instead, it’s better to go deep with a maximum of say six to seven stocks from different sectors or on the basis your risk profile & return expectations. Diversification is important for your overall asset allocation but not with respect to your stocks, so in case you invest in too many stocks which many do, then you would eventually be running a mutual fund scheme of your own. And that process may get you a decent return but never exponentially higher returns which is the objective behind a multi-bagger.

6. The role of Luck : 

Like it or not, luck plays a small role. I doubt those who claim to know which stock can become a multi-bagger in future. This is important for you to know given the current COVID times & the way many new-age investors who made good money since the lockdown period. The recent sharp rally in the markets & your recent success may not be repeatable often.

What is a DVR Share, How Does DVR Work & Everything You must know about DVR Shares

"One Share, One Vote" had been the bed-rock principle of the financial world for years, until the year 2000, when DVR shares were introduced in India for the first time. 

But what is DVR share? DVR stands for stocks that have Differential Voting Rights. Meaning that the shareholders with DVR shares have higher or lower voting rights as compared to shareholders who have equity shares. But under the Indian law, Companies are not allowed to issue equity shares with superior voting rights, so the only DVR shares issued in the Stock Market are those with limited voting rights.

How is a DVR share different from an ordinary share?

DVR shares are different from ordinary shares in two prominent ways.

1. They offer lower voting rights as compared to ordinary shares. So, the shareholder might not have the right to vote, but other rights such as bonus shares, rights share issue, etc. remain intact. 
2. DVR shares are generally offered at a discount which means the investment amount can be significantly lower as compared to investing in ordinary shares. 
3. Shareholders with DVR shares get higher dividends as compared to ordinary shares to compensate for the sacrifice of their vote.

Why do companies issue DVR shares?

To grow & expand in today’s world, companies need capital. Often, the founders & main stakeholders have to reach out to potential shareholders who would be willing to invest in the company. But this also means diluting the power & giving away some of the control. DVR shares help companies protect their interest while enabling them to raise that additional capital required to keep the business going.

So, issuing DVR shares is a brilliant solution in getting investors who are looking for investments but don’t want to participate in the workings of the business. The company can also control how many voting rights they want to give away. DVR shares also provide a safeguard against hostile takeovers. Without voting rights, shareholders can’t gain majority & challenge to take-over the control of the Company.

Why should you invest in DVR shares?

1. Strategic Investment – DVR shares provide you with an opportunity to reap the benefits of a highly successful business venture without having to worry about the day to day affairs of the company. 
2. Discounted Rates – DVR shares are listed on the stock market at lower costs which means your investment budget is smaller too. 
3. Better Dividends – DVR shares offer higher returns as compared to ordinary shares. As high as 10–20%. And since these shares are quoted at discounted rates, the dividend yields are much more profitable.

Conclusion :

While DVR shares might not have taken off in India in a big way, the latest amendment by SEBI may go a long way in enhancing the attractiveness of DVR shares in the Indian Stock Market. According to this amendment, SEBI has approved a framework that allows individual companies to issue shares with superior voting rights & disallows further issuance of shares that have lower voting rights. Moreover, the Government has also relaxed the norms for start-ups, where they can now have up to 74% DVR shares of the total capital as compared to the previous 26%. This move will enable companies to retain control while raising equity capital. How it impacts the world of the stock market is yet to be determined.

What are the Top 5 Tax Saving Investments for 2021

 What are the top 5 tax saving investments for 2021

There’s no denying that 2020 was a financially tough year for many people across the world. The rise of the COVID-19 pandemic had a huge impact on saving and spending trends. Many people came to realise that saving for an uncertain future was vital. Your financial priorities surely have also changed during the economic slowdown the COVID-19 pandemic caused. Let's take a look at how this can affect your tax planning investments for 2021.

• What are some of the non-negotiable options you can look into? 
• Are there any tax-savings methods that you can benefit from, particularly?.

There are several options available to you if you’re considering saving on your taxes in 2021. These savings options are greatly beneficial to your future. Here are five useful ways to save tax with the right investment plans for 2021.

• Life & Health Insurance 

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Among the plethora of tax-saving products in the market, a key way to financially secure your future is to use savings plans such as the National Pension Scheme (NPS) or the Public Provident Fund (PPF). Using these tax-saving tools will give you peace of mind for any of your future financial needs. NPS and PPF encourage you to save so that you can access a regular pension in your retirement years. The Public Provident Fund allows you to only invest up to ₹1.5 lakh in one financial year. You can make this payment in 12 instalments or less. This risk-free investment option has a lock-in period of 15 years & also generates a high-interest rate at the end of its tenure.

• Mutual Funds and Equity-Linked Saving Schemes (ELSS)

Mutual funds are a fairly popular choice used to save taxes. Depending on your financial goal, you can choose from a range of tools that best suits you. Another alternative investment option is Equity-Linked Savings Schemes (ELSS). ELSS has similar advantages to that of mutual funds but with the added advantage of being a tax-saving option. The standout feature of this choice is that it has the shortest lock-in period of 3 years. An investment of up to ₹1.5 lakh in one financial year can be claimed as tax-deductible under Section 80C of the Income Tax Act.

• Tax-saving Fixed Deposits

ULIPs or United Linked Insurance Plans have been noted to be the best investment options in India. It offers you the dual benefit of acting as an investment as well as an insurance plan. For a ULIP, an insurance company invests part of the premium in shares or bonds & the balance amount is utilized as an insurance cover. This segregation of the premium is handled by a fund manager employed by the insurance companies. Under Section 80C of the Income Tax Act, investing in ULIPs can help you save a substantial amount when you are filing your taxes. ULIPs come with a lock-of of a five year period, so it would be advisable to plan before investing in ULIPs.

• National Savings Certificate (NSC)

As far as fixed income tax savings go, the National Savings Certificate is a reliable savings scheme that is spearheaded by the government itself. You can open an NSC at any post office. This savings tool is designed to encourage mid-income folk to invest and is similar to Fixed Deposits or even the PPF. The NSC is a low-risk tax saving investment option. If you opt for an NSC, you can avail a tax deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act.

Others Deductions : Declaring home or education loans are also two other ways by which you can be eligible for tax deductions. They are eligible for tax deductions under Section 80C of the Income Tax Act.