40 Times Returns in 20 Years: Investing in Birla Sun Life Fund is a True Wealth Creator

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Investing in a good mutual fund scheme allows individuals to live a life they have always longed for. It gives them the freedom to finance their dreams, needs and desires. Though there are a good many mutual fund schemes available for investors, finding the one that suits one’s requirement is a tough task altogether.

If you are planning to invest in a mutual fund scheme that promises long-term capital growth at a relatively moderate risk, Birla Sun Life advantage fund tops the list here. Launched on 24th February 1995, it is an open-ended equity scheme that let investors earn long-term capital gains through a diversified research based investment approach. Investors willing to invest in a Birla Sun Life Advantage fund can invest in this fund with a minimum of Rs 5,000. The Face Value of the fund is Rs 10/unit.

The Entry Load and the Exit Load

The entry load in the Birla Sun Life Advantage Fund is Nil. Investors planning to invest in Birla Sun Life advantage fund can invest both in Dividend (profits are given to investors from time to time) and growth (profits are put back into the scheme that results in higher NAV).

The table below illustrates the daily NAV and price:-

Scheme Net Access Value (NAV)    Sale Price Repurchase Price Date
Aditya Birla Sun Life Advantage Fund -Reg Dividend 107.32 107.32 106.25 24th Nov 17
Aditya Birla Sun Life Advantage Fund -Reg Growth 438.86 438.86 434.47 24th Nov 17

Birla Sun Life Mutual Fund is a joint venture between Aditya Birla Group and Sun Life Financial. Apart from Birla Sun Life Advantage Fund, below is the list of other open-ended fund schemes offered by Birla Sun Life Mutual Fund:-

  1. Birla Bond Index Fund
  2. Birla Income Plus
  3. Birla Sun Life International Equity Fund
  4. Birla Sun Life Cash Manager
  5. Birla Sun Life Short Term Fund
  6. Birla Infrastructure Fund
  7. Birla Sun Life Savings Fund
  8. Birla Sun Life India Reforms Fund
  9. Birla Sun Life Equity Fund
  10. Birla MNC Fund
  11. Birla Sun Life Freedom Fund
  12. Birla Sun Life Savings Fund
  13. Birla Sun Life Government Securities Fund
  14. Birla Sun Life Buy India Fund
  15. Birla Sun Life Income Fund
  16. Birla Sun Life Tax Relief 96
  17. Birla Sun Life New Millennium Fund

Gone are the days when investing was just restricted to pension schemes, bank fixed deposits, etc. However now, mutual funds are raising high on the minds of people looking to invest their hard-earned money for a secured livelihood. The reason why a good many people nowadays are keen to invest in mutual fund is that it gives them the flexibility to start buying units or shares with a relatively small amount. Some funds also allow the investor to buy more units regularly by paying smaller installments as well. Professional management is the other factor that persuades investors to invest in Mutual fund schemes. These are managed by experts who have the education, skills, and resources with which they invest your money in the right fund that promises long-term capital gains.

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Bharat 22 ETF: Diversification Can Give Better Returns

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Bharat 22 is the second Indian government backed Exchange Traded Fund (ETF) designed to partially liquidate government stake in 22 leading public sector and SUUTI companies. The introduction of this ETF in thus part of the government’s plan to reach the proposed Rs 72,500 Cr. disinvestment target for the financial year 2017 – 2018. The first government based CPSE ETF was launched in March 2014 with an AUM of Rs. 5,000Cr and is managed by Reliance Mutual Fund AMC.

When compared to the previous CPSE ETF, the ICICI Prudential Mutual Fund AMC managed Bharat 22 ETF is more diversified as it has investments in 22 listed companies. While the CPSE ETF had exposure in only PSU companies, the Bharat 22 will have exposure in both PSU companies and public sector banks such as SBI and Bank of Baroda which feature substantial Government ownership. Furthermore, Bharat 22 ETF will also invest in a few other companies where the Government holds a stake through the Specified Undertaking of the Unit Trust of India (SUUTI) mechanism. SUUTI companies in the Bharat 22 ETF portfolio include Larsen&Toubro, Axis Bank and ITC.

In addition, the Bharat 22 ETF will be invested across multiple sectors including Industrial (e.g. L&T), utilities (e.g. Power Grid etc), banking (e.g. SBI, Axis Bank etc), FMCG (e.g. ITC), energy (e.g. Indian Oil, BPCL etc), and materials (e.g. National Aluminium). The Bharat 22 ETF, being mainly a large-cap oriented fund, is expected to have only 10% portfolio exposure to mid and small-cap stocks.

The Advantages of Bharat 22 ETF diversification

Individual stocks are subject to high risks from competitors, sector dynamics and market conditions. Thus the risk associated with the individual stock investment cannot be diversified through individual stock investments. However, the market risk of equity investments can be controlled to a significant extent by investing in a larger portfolio of companies (to combat company-specific risk) and investing in assorted sectors (to combat sector-specific risk). Different sectors tend to lie at different stages of the business cycle. Some sectors such as mining and energy are highly susceptible to business cycles which can last for years, while other sectors such as FMCG feature only seasonal variations in demand. The portfolio of Bharat ETF 22 features a high degree of diversification across multiple sectors which are expected to balance the individual volatility of different sectors.  So all in all, it can be stated that diversification can deliver better results as it enables the ETF perform equally well in a wide range of market conditions. For sufficient diversification, a fund should invest in various types of stocks diversified across sectors as well as market capitalization. Hence the Bharat 22 ETF is one of the best exchange traded funds for investors seeking indirect exposure to public sector stock while maintaining a high level of liquidity.

Conclusion

Bharat 22 ETF is a diversified exchange-traded fund which will track Bharat 22 index that is meant to provide good returns to investors planning to invest for the long term and simultaneously enable the government to reach disinvestment goals. The components of the Bharat 22 index work on various reforms and initiatives set by the current government in power like the Goods and Services Tax (GST), Infrastructure Reforms, Direct Benefit Transfer of subsidy, Financial Inclusion, Digital and Cashless Economy, etc. which improves the earnings of the constituent companies which ultimately benefits the investors. Like the CPSE ETF, the Government also offered lucrative discounts of 3% on the face value of the Bharat 22 ETF units during the NFO period.

Things to Note Before Transferring your Home Loan

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Most individuals tend to opt for refinancing or a home loan transfer to avail lower interest rates available in the market. Usually, any borrower who is about two or more years into the loan tenure does not get the opportunity of getting the benefit of falling interest rates in the market. The Reserve Bank of India is also asking the lenders to pass on the benefit of lower interest rates to the existing borrowers.

If any individual thinks that he is stuck with a bank or financial institution, which charges high interest rates on a home loan then he can opt to transfer his home loan to a bank or financial institution that charges a lower rate of interest. Before opting for transfer of home loan, such individuals can also discuss with their current bank or financial institution on re-negotiating the interest rates based on the good repayment track record, etc. If the bank denies re-negotiation, then they could shift to a bank that offers a home loan at a lower interest rate.

Process for Home Loan Transfer

  1. Close the Deal with the Existing Bank: When you want to make a home loan transfer, then it becomes essential to get approval from the existing bank or financial institution. You need to submit a letter to existing bank to request a home loan transfer. Bank will send you a consent letter or a No Objection Certificate (NOC) along with a statement mentioning the outstanding amount.
  2. Provide the letter to the New Lender: Give the NOC to the new bank or financial institution to approve your loan amount to the old lender for an account closure.
  3. Transfer Documents: Post the completion of the transaction, your property documents will be handed over to the new lender. The leftover post-dated cheques are cancelled. Also, stay cautious at this step to ensure that you do not leave any document from being transferred.

Things to Consider Before Home Loan Transfer

Following are the top 5 things that you need to consider before you opt for a home loan transfer to make sure you get the best deal.

  • Check the market for affordable interest rates: Before you opt to transfer your home loan to another lender, it becomes essential for you to check the interest rates offered by various lenders in the market. You should also check the type of interest system the lender is based on and whether they are floating or fixed.
  • Study the lender’s profile: There are various banks and financial institutions that are competing in the market and are ready to lend you money. Each of these banks and financial institutions has made a certain reputation in the field. You should be aware of your chosen lender’s service. So, go through reviews and testimonials on several platforms as choosing a trustworthy lender is a must.
  • Check for charges and costs: A home loan balance transfer can come with numerous costs such as processing fee, application fee, legal fee and even prepayment charges concerning your new and existing lender. Carefully understand all the costs you have to pay and ask your lenders all questions you have in mind about the costs. Make sure you negotiate for low fees and penalties.
  • Read the Terms and Conditions Carefully: Low interest rates may seem attractive, but it is important to be aware of all the terms and conditions of your new lender. Go through the documents containing the terms and condition provided by the bank and check if it contains any hidden charges or any important condition you are unaware of.
  • Ensure that you switch early in the tenure: Balance transfer in the second half of the tenure is worthless as most of your interest led EMI payments have already been made. If you plan to transfer home loan then ensure that you do in the earlier half of the tenure. This will benefit you as you will be paying lower home loan interest rate when you make a home loan transfer.

What Things should I Remember Before Applying for Home Loan in India?

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Buying a home depends on the funds you have and the amount of home loan you can avail. Taking a home loan is not as easy as it is said. Though it appears that banks are eager to lend, but getting a loan sanctioned can be a tedious task. Home loans are the major hurdle, which an individual looking for an affordable home deal need to cross. Getting approval for a home loan involves a lot of paperwork and documentation, which can be time consuming and exhaust someone looking for a home and also applying for a home loan.

But before you decide on borrowing and choosing a home loan in India, here are 5 things that you should keep in mind before applying for a home loan in India.

  1. Know the Maximum Loan Eligibility: The loan amount that will be sanctioned depends on the income and previous track record or credit history when it comes to repaying the loans and credit card dues. After assessing the income generally, home loan lenders provide 80 percent of the value of the property. While assessing the income, the lender usually considers only the income heads, which can be used to repay the loan. For instance, the medical allowances and travel allowances are deducted from the monthly net salary as you are expected to spend the amount received for the respective activities they are provided for.
  2. Check CIBIL Score: The home loan eligibility depends on the credit worthiness of the individual. Credit Information Bureau India Limited assist in providing a credit score on a scale of 300 to 900, which is based on your previous credit card usage, existing loans, loan repayments etc. The CIBIL score also depends on the number of times you have applied for a loan or a credit card. The more an individual applies for the loan, CIBIL considers it being credit hungry and the chance of getting a loan is minimized. CIBIL credit rating and net salary, which includes variable heads and existing loans, are the vital components in deciding the repayment capacity of the applicant.
  3. Type of interest rate: Before taking a home loan, you should have clarity about different types of interest rates. The type of interest rate you choose also leaves an impact on the monthly EMIs to be paid. One should be aware of the difference between a fixed rate home loan and floating rate home loan. In fixed rate home loan, the EMIs don’t vary over the loan tenure. So, a fixed rate home loan is beneficial when the interest rates are expected to rise in the near future. In floating rate home loan, the interest rate is determined based on the prevailing base rates plus a floating rate. The EMIs are based on the base rates. And a floating rate home loan is beneficial when the interest rates are expected to fall in the near future.
  4. Loan Tenure: You should decide your loan tenure wisely as the loan tenure can impact your EMI payments and interest paid. To calculate EMI of the home loan, one has to consider home loan amount, interest rate and tenure. The amount of the monthly EMI is inversely proportional to the home loan tenure and the interest amount is directly proportional to the loan tenure. In case of longer loan tenure, the monthly EMI amount is lower and the total interest paid is higher. In case of short loan tenure, the monthly EMI amount will be high but total interest paid amount will be less.
  5. Read the Documents: Do not sign the marked spots blindly without even reading anything mentioned in it. You should check the documents carefully and read all the terms and conditions to know about different charges applicable and other charges like processing fee, late payment fee etc.

Why is a credit card better than a debit card?

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Credit cards and Debit cards are the most powerful and useful financial elements of our life, which assist you in carrying your money securely. In addition to securing your money, these cards also help in using them anywhere. If you are out of cash, it provides you the convenience of making payments at any restaurant or in a multiplex. You can also withdraw cash using any ATM machine.

Nowadays, everyone desires to get some attractive offers and discounts on both online and offline purchases. But, with credit card you get attractive offers and discounts without even spending your money. When making payments with the plastic cards, either you have the money in your bank account to pay for your payments or you have insufficient money to make the purchase. With debit card, it is necessary to at least have the amount of money required to complete the transaction. But with credit card, you can make the transaction and your bank will make the payment on your behalf. The basic difference between a debit card and a credit card is where the cards pull money from. A debit card is linked to the individual’s bank account. On the other hand, a credit card is linked to the issuer or the bank that charges it to your line of credit.

Debit and credit cards come with several attractive offers and discounts on online and offline purchases. Most of you would be having at least one credit card and debit card in your pocket. But no matter how useful they are, or how much convenience and protection they provide, they have some important differences, which make credit card more beneficial than debit card.

Difference between Debit and Credit Cards

Debit cards come with the convenience of cashless transaction and relieve us from the stress of carrying cash. It also provides us the convenience of accessing your money through ATMs to withdraw cash if in need. Debit Card is linked to your bank account and is ideal for rapid and hassle free transactions. When you make any transaction using your debit card (online or offline), the same amount gets debited from your bank account instantly. Your bank will send SMS and email alerts to inform you about the transaction being made by you. It helps to keep a track of your spending.

Credit cards function differently than Debit cards. The Debit Card is linked to the cardholder’s bank account, whereas on the other hand credit card is linked to the bank that provided the card and offers you a line of credit. So, when you make any transaction using your credit card, you are not charged for the payment and your bank makes the payment on your behalf. But, the same amount will be charged to your credit card bill, which will be generated the next month and then you have to make the payment for the same.

5 Reasons Why People should use Credit Cards instead of Debit Cards

  1. Reward Points: With credit cards, you can get reward points that you can use to receive free gifts, vouchers, cash back rewards and much more. But, there are rarely any banks, which provide reward programs with any debit cards
  2. EMI: When making purchases using the debit card, you have to pay the entire bill amount at one go. Whereas, with a credit card, you get the convenience of paying your bill amount by converting your purchases into EMIs of up to 24 months. You do have to pay interest every month on the outstanding amount with some additional charges.
  3. Credit Score: Credit reports are based on the previous credit history that is tracked by credit bureaus. Credit card helps build your credit history, which makes it easy for you to get a loan approval in future. However, your debit cards are not tracked by credit bureaus. Thus, your debit card usage does not affect your credit score at all. Thus, using a credit card and making repayments on time can assist you to build a credit score.

The above-mentioned reasons will help you in making your mind why you should use credit cards instead of debit cards.

How we can invest in mutual funds?

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A mutual fund is one of the popular investment options where the Asset Management Company (AMC) collects the money from several investors and further invests it in different instruments such as debt, equity, money market and securities. The consequent profit, after deductions by the AMC, is circulated among the investors according to their mutual fund investment portfolios.

Even though mutual fund investments are subjected to market risks, more people are keen to invest money in it because it can provide good returns despite mitigating losses. What’s good about investing in mutual funds is that you need not have to be an expert on the market since investments here are made by a group of experts who decide how to invest, when to invest and where to invest.

So now that you know what mutual funds are, it’s time to understand how you can invest in mutual funds:-

  1. Asset allocation: To start with mutual funds investment, the first thing here is to understand what kind of portfolio you want. This step is also known as asset allocation. Always allocate your assets in a way that it forms a perfect amalgamation of high and low-risk funds. As a general rule, the amount of funds you invest to low-risk debt instruments should be equal to your age. This means, any individual who is 35 years of age, should allocate only 35% of their funds toward debt instruments. This will protect them against any risk in the remaining assets that they have invested in.
  2. Shortlist funds type: Shortlisting the fund type is considered an important part of mutual funds investment. Once you have allocated your assets properly as per your needs, the next step is to study and compare different type of mutual funds on the basis of their past performance and investment perspective. For this, you can refer to the shareholder’s reports and prospectus provided by the AMC. The prospectus will help you get complete information about different types of fund while the shareholder’s report will assist you in understanding the past performances and regularity of returns. Apart from the research work, you must also determine your financial goals and get answers to questions like Are you investing just to substitute your income or for retirement/marriage? What is the time limit of return you are comfortable with? While short listing funds type.
  3. Compare funds: Once you have shortlisted the funds, you should compare and pick the right funds. For example, when looking for a mutual fund,
  4. Check the past records of the funds from shareholder’s report or through online websites.
  5. Look for the top 5 funds in the asset class that match your financial goals, time frame, and risk profile.
  6. Check performance of the funds for a different time frame, such as 3 months, 6 months, and so on.
  7. Check for the fund managers profiles and asset allocators by going through the prospectus of that particular mutual fund.
  8. Understand how important the diversification is: However safe your mutual fund investment may appear, it may be risky at some level. Therefore, the best way to expand your investment is by allocating assets in instruments that are not completely correlated. Make sure that your mutual fund’s portfolio is a concoction of equity, mixed market, debt, gold and other types of funds to balance out the risk factor.

Conclusion

So now when you have made the mutual fund investment in the selected funds, it is also necessary to keep a track of the funds you have invested in. Even though your funds are managed by investors, having a thorough knowledge of your portfolio is important.

How to Make a Crore with Mutual Funds by Investing Rs. 4,000 in a Month?

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A vast majority of us wants to be rich but often wonder if their dream could be true someday. Well, the answer to this question is yes, all of us can become rich if we work towards it. But how can one make this possible? The answer to this is Mutual Funds. Investing in mutual funds can be your quick route to be rich. Most individuals prefer investing in mutual funds when they have a large sum of money to spare. According to them investing lump sum money in funds will help them achieve their financial goals faster. This is also one of the reasons why most people defer investing indefinitely. Contrary to their common belief, investing bit by bit can also help them achieve their goals without compromising on their other financial commitments that comes along in their life.

Investing a small amount of Rs. 4,000 every month in an equity scheme can help them create an amount of Rs. 1 crore in a period little over 15 years. To make this possible all you need is discipline, which nothing other than SIP (Systematic Investment Planning) can bring when you invest. But before we start discussing about the investment strategy, let us first talk a bit about savings and investment risks.

Savings and Investment Risks

Saving money is difficult especially in this modern setup where you need to maintain a lifestyle to fit in the crowd. So how does one save money? The answer is simple: save first and spend later. This way you can control your expenses, save more and accordingly invest money to reach your financial goals.

Before you start investing, understand that investments involve risks. Be it stocks, shares, bonds or mutual funds, there is always a certain amount of risk involved. Another important rule of an investment is that riskier an investment is, greater will be the potential returns. If you want to take high risk, it is better to start investing as early as possible. It is because young investors have fewer responsibilities and resultantly higher risk appetite and risk tolerance than investors in their mid-40s. Another reason for starting early is that when you’re young you get longer time to recover from losses.

How to make a crore with mutual funds investment?

With time due to inflation, one crore price has lost its charm but the amount still means a lot to several people. Now for those who are wondering how much they should invest to achieve this financial goal, the answer is that they can start with an amount as low as Rs. 4,000 per month investment for the first year. From the next year that is the second year, they can increase their monthly investment amount by Rs. 1,000. Let’s consider that they have taken an aggressive investment approach and managed to get returns of 10% per annum. In the table given below, we have explained how the SIP value is expected to grow over the next few years at a 10% rate.

Table1. Table showing year by year growth of an SIP investment that is increased by Rs. 1,000 every year*

Year SIP Amount/month Total Savings During the Year Total Investment Value at end of year
1st Year 4,000 48,000 50,658
2nd Year 5,000 60,000 1,33,220
3rd Year 6,000 72,000 2,52,447
4th Year 7,000 84,000 4,13,749
5th Year 8,000 96,000 6,23,262
10th Year 13,000 1,56,000 26,72,391
15th Year 18,000 2,16,000 74,65,602
20th Year 23,000 2,76,000 1,74,23,264

*Figures given in the table are suggestive and based on a constant growth at 10% per annum, which in real-life situation is not possible.

You can see in the table given above that you can definitely achieve the goal of becoming a ‘crorepati’ in 20 years. If you start with an amount greater than Rs. 4,000 then your dream of being a ‘crorepati’ can come true sooner.

Important Points that Can Get You Maximum Returns on Mutual Fund Investments

Besides SIP, there are other important points that an investor must consider to get the best out of their mutual fund investments:

  • Invest keeping your financial goal and risk appetite in mind.
  • Diversify your investment portfolio.
  • Put money in sectors that will outperform.
  • Start investing as early as possible.