23 Sep

Focus on the big picture

Focus on the big picture
Investing is not always about getting the highest returns or beating the markets. It should be about achieving one’s financial goals like safety for family, better life for children, maintaining one’s lifestyle on retirement, building a secondary passive stream of income or creating wealth.
Hence, as financial consumers it is more important to get the macro picture right rather than being too bothered with smaller things. Let me explain this with suitable examples. Do note that the numbers and names are chosen randomly but they would be suited to your personal finances too.
1. Ram and Dennis are of the same age and earning similar incomes of roughly Rs 50,000 p.m. While Ram saves 50% of his income and invest @ 6% p.a. while Dennis saves only 20% of his income and searches for high return products which yield 15% p.a. consistently (tough to find though). Fast forward 10 years. Ram accumulates Rs 41 lakhs whereas Dennis dabbling for high return products could only accumulate Rs 27.50 lakhs. While earning high returns are not in our control, focusing on more savings is definitely within our control. Message is focus on Savings and not high returns.

2. Anu has a financial portfolio of roughly Rs 2 crores. She has Rs 10 lakhs invested in equity markets and equity mutual funds (roughly 5%). The remaining (95%) are deployed in FD’s and other fixed income bearing instruments which yield her 5% p.a. Anu spends lot of time tracking markets and gets very worried with the volatility. Now let us imagine, even if she earns 20% returns from equity portfolio, her overall returns will only increase to 5.75% p.a. which is still a small number. Was the allocation in equity worth the effort?? Anu would do well to focus her energy on her 95% wealth which is stagnating. Message is focus on good meaningful allocations to get better outcomes.

3. Tenali has an overall financial wealth which is roughly Rs 5 crores. He had invested roughly Rs 20 lakhs in a mutual fund which got stuck because of supposedly aggressive investments. This has given him such a rude shock that he is not able to come out of it. But think of it –this investment is hardly 4% of his wealth. This loss could be made good easily by prudent management of his other 96% wealth. Message is focus on the overall numbers and don’t get disheartened if some small portions go bad.

4. Desmond is a rich retired man with financial wealth of Rs 3 crores with predominant investments in safe investments. He has invested Rs 15 lakhs in equity products (just 5%) and is constantly complaining that equity does not give good returns. His monthly lifestyle expenses are a maximum Rs 50,000. Even if the Rs 3 crores are conservatively deployed, he can manage his regular expenses well. There is no need of equity linked allocation for Desmond which is spoiling his peace of mind. Message is focus on the financial goal and not high returns.

5. Ravi loves the growth of the equity markets and is fairly convinced of its long-term prospects. He however fears the short-term extreme volatility of equity assets. He has hence marked his allocation to equity between 35% to 50% and the remaining in conservative allocation. The equity allocation is also fairly diversified in different strategies to give better risk adjusted growth. Message is to focus on asset allocation and diversification.
The list and examples can go and on. But the message is very clear. Focus on the big picture which can make meaningful difference to your financial life. Everything else is a plain distraction.
As financial planners, we have been continuously advocating the principles of asset allocation, diversification and cost control so as to make the most of investment opportunities based on one’s risk profile. We believe if Risks are managed well, the returns will take care of itself.
Do connect with me at 98455 57582 or naveen@naveenrego.com, for getting your focus on the big picture in managing your personal finances right.

Wishing you all a safe and exciting investment experience.

Note:
1. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
2. The above are mere suggestions and not Investment Advice as individual cases might differ.

Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser
INA200004250

22nd September 2020

23 Sep

Boom times in Equity Markets- Invest/Stay or Exit?

Boom times in Equity Markets- Invest/Stay or Exit?

As I write this, equity markets locally and globally are on fire. While things on the ground have got worst, the equity markets are rocking. This new found love with equity-oriented portfolio is driven more by the generous monetary policy being followed by most of the central banks across the globe. Interest rates have been reduced drastically (near zero in some economies) which is fueling investment in equity assets. As long as the interest rates are kept lower, equity markets will give a damn to corporate earnings.
The big question is till when the party will last?
And what should be the typical strategy of an equity investor be- invest more, withdraw or stay invested?
My guess is- best times to invest in equity portfolios for very high short-term returns are slightly behind us. Does this mean there would be a big crash? My humble answer is nobody knows. But one has to be selfish to his/her condition and act accordingly. The following points will help:
1. Maximum allocation to equity linked portfolio should not be more than 50% of one’s wealth. Investors who are looking for regular income like retirees or those having a very low risk profile should have the equity exposure limited to 25% or lower.
2. Aggressive extra investments which were planned to be done on a regular basis to benefit from the earlier lower prices can be scaled down now. These could ideally be moved to safer asset classes like fixed income debt mutual funds or Fixed Deposits based on tax efficiency.
3. Regular investments in equity investments for those financial goals which are very far (5 years and more) and those investors whose allocation to equity is much lower based on their risk profile can continue investing and benefit the fruits of long-term investing. However, avoid one-time investments.
4. Investors who have breached their equity allocation limits need to gradually scale down (exit) on a regular basis and de-risk themselves. They could also invest increment savings to safer asset classes like fixed income debt mutual funds or Fixed Deposits.
5. Exit those equity portfolios gradually which have a financial goal maturing in the next 3-5 years and move that to safer assets as mentioned earlier.
6. Non-core equity portfolios should be the first to be exited. Best time to clean up now.
7. Equity portfolios should be sufficiently diversified (not over diversified though) across styles and geography.
8. For clients who have large exposures to US Markets through technology stocks (either stock options or active purchases), the humble advice is diversify.
9. Do not expect returns of last 3-4 months to cloud your future investments.
10. Speculative transactions and day trading is a strict NO-NO.
The intention of a well-designed financial plan is to help one to reach their financial goals and not always to get highest returns. As long as we manage the risks better- returns will take care of themselves. So, a focus on asset allocation (not put all the money in one basket- spread in equity, fixed income, gold and real estate), diversification (not to have a style bias within an asset class) and lower costs would surely help.
So, go and revisit your financial plan and your overall allocation strategy. Now is the time to do it. If confused, then take the services of a fee only financial planner who can give an unbiased opinion of your condition.
We request you to get in touch with us at 98455 57582/ 9741157582 or naveen@naveenrego.com, for strategies to create long term sustainable wealth.

Wishing you all a safe and exciting investment experience.

Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser
INA200004250

22 July 2020

23 Sep

The costs of Investing- Are you Penny Wise and Pound Foolish?

The costs of Investing- Are you Penny Wise and Pound Foolish?

We all invest in financial products to fund our financial goals. Some might do this on their own and some might take the help of financial intermediaries (like agents, planners and advisers). Whatever mode one follows, the cost of investing can have a large bearing on your overall returns in the years to come. While benefits from investments will accrue over longer period of time and are uncertain, the costs are more or less certain. Hence, having a broad understanding of the costs/expenses is very important.
The costs of investing can be broadly divided into product costs and intermediary costs.
Product Costs:
Financial products like Bank Fixed deposits, savings account and government savings schemes (typically postal savings) do not reduce their costs if approached directly by you. However, one can have substantial lower costs for Corporate/NBFC FDs, Mutual Funds, insurance plans and equity transactions through discount brokerage firms if done directly. Within this direct option, we might have specific plans in insurance and mutual funds products which have lower costs than others without much change in benefits.
Intermediary Costs:
These costs might be like the brokerage you pay to the broker/agent (one time or annually – generally embedded within the product) or the fees one pays (one time or annually) to a fee only Financial Planner.
Let me explain this with numbers for your benefit. Mr. Rakesh Pinto has a total financial wealth of Rs 1 crore. He deploys Rs 75 lakhs in Assured return schemes (based on conservative risk profile) like FD’s, PPF and other government schemes. The remaining (25%) investment are done in equity mutual funds. The costs would be as follows:
1. Consulting an agent or done oneself through a broker’s online platform: Rs 50,000/-p.a. (product cost Rs 25,000 p.a. and agents/brokers earnings Rs 25,000 p.a.)
2. Consulting a Fee only Financial Planner: Rs 41,250/-p.a. (product cost Rs 16,250 p.a. and planners’ fees Rs 25,000 p.a.).
With the above numbers, it is absolutely clear that partnering a fee only financial planner does not increase the costs (actually decreases the costs) of investing which is the traditional thinking. The benefits would be much more if the portfolio sizes are larger or proportion of market linked portfolio is larger.
The above Expenses/Costs have been derived based on the general expenses charged by mutual funds. These are as follows: Regular active equity funds annual expenses 2% p.a., direct active equity funds 1% p.a., direct passive equity funds 0.25% p.a., direct active and passive equally split portfolio 0.65% p.a., FD and government savings schemes no reduction in costs and Annual fees of a Fee only Financial Planner is Rs 25,000/-( for a Rs 1 crore portfolio). We have left other financial products costs like direct equity and PMS for the sake of simplicity.
The regular option of equity funds is generally advised by financial agents/bankers/brokers. The extra expenses over the direct option is their earnings. So, it could be noted that the advice from your agent/broker or the online platform is not coming free.
Direct modes of investing in mutual funds/passive funds is generally advised by Fee only Financial Planners who charge an annual fee. They would also help in building a direct equity/ETF portfolio as part of equity allocation to bring down the annual costs still more. The costs of investing would still go down if recommended to buy insurance plan directly online as online insurance plan expenses are much lower
While lower costs of investing are the obvious benefit in partnering a fee only Financial Planner, the other kicker is the unbiased financial advice. A fee only financial planner would also help a client to avoid costly mistakes (this is the cost of investing based on one’s own partial knowledge) and hunt for tax efficient products thereby increasing the benefits of this partnership.
However, there could be an argument that one can research and invest directly in active and passive options at much lower costs without the support of a fee only financial planner. It is quite possible. But one should be able to devote their quality time and effort in managing this. And quality time and effort do not come free. It will eat into one’s family or professional time. Costly mistakes done in this strategy can make this quite expensive affair (time and money lost) for many people.
I leave the choice to manage one’s personal wealth to the reader. Always know that any choice made has a cost to be paid. Don’t be penny wise and pound foolish!!
We request you to get in touch with us at 98455 57582 or naveen@naveenrego.com, for strategies to create long term sustainable wealth at much lower costs.

Wishing you all a safe and exciting investment experience.

Note:

1. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
2. The above are mere suggestions and not Investment Advice as individual cases might differ.

Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser
INA200004250

18 June 2020

01 Jun

Investing in Equity Portfolios-Tough Times or Opportunity?

Investing in Equity Portfolios-Tough Times or Opportunity?

Many of whom are investors in Equity Portfolios and who have been invested in equity (either through direct stock portfolio, equity mutual funds or ULIPs) would have been going through some tough times when checking their current equity portfolio values. Media had also played its part in fuelling the negativity among investors.

My intention of this article is to be pragmatic and practical about the whole stuff.

Equity investments are not for regular income, linear returns, liquidity and stability. For that one should get invested in PSU Bank Fixed Deposits or Savings Account. The core to investing in equities is Returns, Returns and Returns.

Equity oriented investments are to give the kicker in one’s portfolio. They are volatile and can massively underperform stable investments in the shorter time frame and sometimes longer time frames such as these. However, over longer time frames (predominantly) they can massively outperform stable asset classes.

So that brings us to a million-dollar question, how much of our wealth should one invest in equity portfolios. There is no right answer but with my experience the following points will help:
1. Invest that money which you do not require for minimum 5 years. After 1 year, ask this question again and take appropriate actions. Continue this process each year.
2. Invest that money which even if it goes down by 25-50% in short term (like a year) does not give you sleepless nights and disturb your lifestyle. It is quite possible such events happen at regular intervals. We are reminded of March 2020 (30% fall) or Subprime crisis in 2008-09 (60% fall).
3. Invest after you have enough balances for your emergencies and you do not have to depend on equity markets for your survival.
4. Invest ideally a minimum 25% and a maximum 50% of your financial wealth in equity portfolios. This will reduce the shock on your overall wealth during bad phases and help you to be patient with your equity investments.
5. Regular investing is a good way to reduce the risk of market timing. Invest more during volatile phase to reduce the acquisition costs.
6. The portfolio should have low cost bias as higher cost can eat into returns over a period of time. Towards this end allocation to low cost direct equity mutual funds and index funds would help.
7. 50% of one’s portfolio could be the core portfolio which give domestic and international diversification. These should be held for longer time frames. Ideally passive index funds tracking larger companies would be the most suitable.
8. The remaining 50% could be satellite portfolios consisting of direct stocks, active equity funds, international funds or thematic funds. These needs to be exited as and when the target returns are achieved. These might have higher costs.
9. Allocation to equity portfolio through Unit Linked Insurance Plans (ULIPs) are perfectly avoidable for their non transparency, illiquidity and higher costs.
10. Rebalance one’s portfolio ruthlessly or if target returns are achieved in some portions of the portfolio. Track your holdings once or maximum twice a year. You don’t have to check their values daily. Tracking does not increase returns.

The current situation:

I have been often asked this question whether it is a good time to invest in equity-oriented portfolios now. My simple take is “Ask yourself will COVID 19 be with us after 5 years?” If the answer is clear NO, then we are already late in investing. Equity portfolios are already up between 15% to 30% from March 23, 2020 when the equity markets hit their rock bottom recently.

For all those who still waiting for things to be clear for starting your equity investing do note that “if you are late to the party and the music is loud enough…you probably will be washing vessels of your friends”. Join the party now.

To those pessimistic investors who had not so good experience in last 5 years with their equity investments including regular investments, I have only one thing to say. Hang on- the next 5 years will wash away the sins of the past 5 years. If possible, invest more now.

To those investors who had some bitter experience in debt mutual funds including Franklin Templeton winding up 6 of their debt mutual funds, do note there is no point in cribbing. Move on and keep investing in equity as per your overall allocation. Equity markets will reward for your current pain. And FT will gradually pay most of the money.

Just to close- equity portfolios will give you all the pain, torture and suffering in the short term. But wealth was never made easy.

Stay safe, follow social distancing but don’t miss once in a life time opportunity with COVID investing.

We request you to get in touch with us at 98455 57582/ 9741157582 or naveen@naveenrego.com, for strategies to create long term sustainable wealth.

Wishing you all a safe and exciting investment experience.

Disclosure:
My personal (including my family) portfolio have a very large equity bias (more than 50%) to make the most of current times. I also had a decent exposure in one of the FT wound up scheme.

Note:
1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
3. Past performance of any asset class is not an indicator of future performance.
4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
5. The above are mere suggestions and not Investment Advice as individual cases might differ.

Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser
INA200004250

22 Apr

Important points for Returning NRIs / PIOs

The following points are very important for NRIs/PIOs who are coming back permanently or planning to stay back in India for an indefinite period:

1. NRE deposits become taxable from the day you land back in India. This is because NRE deposits are tax exempt for NRIs (as per FEMA). Anyone planning to settle back or stay back for an indefinite period of time becomes Resident in India immediately, as per FEMA. The NRE deposits should be marked as Resident or moved to RFC (Resident Foreign Currency Account) ideally within 3 months.

2. FCNR deposits/RFC deposits and any international income is tax exempt till the time you are an NRI (as per Income Tax Act) in 9 out of the last 10 years or been in India for less than 729 days in the last 7 years. In simple terms, a person who has been an NRI for more than 10 years at a stretch, might get another 2 years to enjoy this. This intermediate phase is also called RNOR (Resident but Not ordinarily Resident).

3. Once a returning NRI becomes a Resident and Ordinarily Resident (ROR), all his domestic and international income is fully taxed.

The following strategy would help in managing Personal finances:

1. Plan to move to India post October of any year to enjoy one additional year as an NRI as per IT Act. However, if you have stayed in India for more than 365 days in the last4 years then plan to come back to India only after February.

2. Restrict the taxable income in India by using tax efficient options like RFC and FCNR during the RNOR (intermediate) phase. Also, one could look at exploring investments in tax efficient mutual funds during this phase. It could be noted that debt mutual funds would be taxed at concessional tax rates if the units are held longer than 3 years.

3. Restrict income from taxable Fixed deposits and any other taxable incomes (like rentals) so that they are below Rs. 6.50 lakhs p.a.

4. Use tax saving deductions like Sec 80C (maximum Rs. 1.50 lakhs p.a.) to bring the taxable income to below Rs. 5 lakhs (there is no tax for income below Rs. 5 lakhs).

5. Invest extra funds in tax efficient options like debt mutual fund (for conservativeness) and equity mutual funds and gold products for aggressiveness, based on your risk appetite.

The portfolio construct should balance safety (through FDs, RFC, FCNR), liquidity (through savings account/liquid mutual funds), growth (through equity and gold) and tax efficiency.

Equity and gold allocation should be between 25 to 35% of your entire financial wealth based on one’s risk taking ability. Invest this portion gradually. Regular income should be managed by FD’s, RFC and FCNR. You could also look at rental income and gradual withdrawals from debt funds to increase your regular income. However, do not get over exposed to real estate as it is an illiquid asset.

Invest in appropriate insurance covers like health, house and any vehicle insurance. In case, if there is a need for life insurance, buy a pure term plan. Traditional, ULIP and Pension Plans of Insurance companies are easily avoidable.

Have a proper nomination and a registered will so that your wealth is easily transferred to your dependents.

Note:

  1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
  2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
  3. Past performance of any asset class is not an indicator of future performance.
  4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
  5. The above are mere suggestions and not Investment Advice as individual cases might differ.

In case, you would like professional financial guidance, than feel free to connect to me at 9845557582 or naveen@naveenrego.com.

Naveen Julian Rego-CFPCM

SEBI Registered Investment Adviser

INA200004250

21st April, 2020

09 Mar

Investments Ideas- March 2020

The events of the past few days have been affecting financial markets domestically and globally thereby affecting clients’ Personal Finances. While these factors are definitely not in any ones control, the following principles can help greatly to navigate a volatile external environment:

1. Asset allocation strategy- where assets are spread in different baskets based on one’s risk profile. These could be in aggressive assets like Equity (and sometimes Real Estate) and conservative assets like fixed income avenues. Also, allocation to Gold related investments are suggested as a hedging strategy.

2. Diversification strategy- so that there is no single style bias in an asset class. Examples could be Investments in fixed income through fixed deposits and various styles of debt mutual funds. Investments in equity through direct equity and equity (active and passive) mutual funds across various styles and market caps.

3. Time diversification- in aggressive assets like equity linked assets to reduce the risk of market timing.

Our Financial Planning Philosophy always strives to do this, so as to avoid negative surprises. Following the above strategy does not assure very high returns but gives a balanced approach to the entire portfolio.

The way forward:

1. If one’s allocation in equity linked assets has not reached the target as per the risk profile of the individual, then continue investing gradually and benefit from the volatility. Someone else’s problem becomes your opportunity. If you have already reached your target allocation, then sit back and enjoy the roller coaster.

2. Equity linked assets are not suitable for giving linear stable returns but best for giving inflation beating volatile returns. Don’t track them closely now, but enjoy their long term fruits. We know it is difficult but, who has made money easily.

3. Allocate the conservative allocation to fixed income through debt mutual funds for investors in the taxable brackets. Opt for safer debt funds as the primary function of debt funds is stability and not high returns. For those investors who are not in the tax bracket and/or NRIs could allocate this portion to the safety of fixed deposits of banks.

4. Have an emergency or a short term portfolio whose primary function is liquidity, stability and returns, in that order. This will help you to give time to your aggressive portfolio if at all you require unforeseen liquidity.

5. Over long periods of time, financial product selection and market timing would not be the critical factor in your overall portfolio return. On the contrary, a strategy focused on process, discipline, financial goals, time horizon, patience, asset allocation and diversification could be the key factors to earn better risk adjusted returns.

We request you to get in touch with us at 9845557582 or naveen@naveenrego.com, if your Personal Financial Portfolios are keeping you awake at night.

Wishing you all a safe and exciting investment experience.

Note:

  1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
  2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
  3. Past performance of any asset class is not an indicator of future performance.
  4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
  5. The above are mere suggestions and not Investment Advice as individual cases might differ.

Naveen Julian Rego-CFPCM

SEBI Registered Investment Adviser

INA200004250

07th March, 2020

07 Jan

Investment Ideas- Jan 2020

Greeting of the New Year 2020!

Predicting movements in interest rates, foreign currency, government policies, personal taxation rates, inflation and financial markets is a foolish exercise as these are not in one’s control. Hence, controlling the controllable would be very critical in achieving one’s financial goals. The following points which are in one’s control could be followed in managing one’s Personal Finances in the year to come and in the future:

1. Live within your means and spend after you save.

2. Invest in self (be it in a training programme, certification course, etc, so as to keep updated) because that will pay the highest financial returns, in this ever changing world.

3. Buy adequate insurance to cover all risks which would affect yours and family’s finances.

4. Invest your savings in well regulated, tax efficient products.

5. Have an Asset Allocation Policy i.e split your assets between different assets classes based on your risk profile, time horizon and financial requirements. The portfolio should be allocated between aggressive, conservative and liquid assets.

6. Aggressive assets will help build wealth with larger volatility and non- linear returns. Conservative assets would give stability/ regular income and liquid assets could be used in case of emergencies.

7. Within an asset class, diversify across styles to reduce the risk of concentration and style bias.

8. Invest in volatile assets like equity in a gradual manner so as to reduce the risk of market timing.

9. Do not compare returns between asset classes as it would be like comparing apples and oranges.

10. Focus on low cost products and options wherever available. But do not associate low cost with high returns.

11. Do not let greed, emotions and personal biases drive your financial investment decisions.

11. Rebalance your portfolio based on asset allocation policies at least once a year based on your financial condition, risk profile and tax situation. Let not the immediate past performance dictate the financial allocation.

12. Manage market risk. However, avoid fraudulent transactions.

13. In case this sounds too complicated, engage with a Financial Planner who is registered under a regulated body, and where there is no conflict of interest.

14. There is nothing called free lunch in financial markets and financial advise. In case, one wants to manage their own personal finances, then one needs to invest their time and resources which will eat into their professional and family time. On the other hand, partnering with a Financial Planner helps one to focus on their other passions in life.

Over long periods of time, financial product selection and market timing would not be the critical factor in your overall portfolio return. On the contrary, a strategy focused on process, discipline, financial goals, time horizon, patience, asset allocation and diversification could be the key factors to earn better risk adjusted returns.

We wish the year 2020 and beyond, will help you to build your wealth in the most appropriate way so as to reap the benefits of safety, liquidity, tax efficiency and returns.

Note:

1. Market linked investments like Stocks, mutual funds are subject to market risks. Read scheme related documents carefully before investing.

2. Past performance of any asset class is not an indicator of future performance.

3. Do visit www.naveenrego.com for the disclosure statement.

4. Assumptions on growth rates are purely indicative.

Naveen Julian Rego-CFPCM

SEBI Registered Investment Adviser

INA200004250

03rd January, 2020

07 Aug

Investment Ideas- August 2019

1. Equity markets are going through severe market volatility and within that, especially mid and small sized companies had a very large fall. This would have affected all the investors who would have invested in the last 1-2 years and also older investors in their incremental portfolios.
2. Clients whose equity allocations have still not reached their target allocations based on their risk profile or those who are funding their long term goals should continue to invest in equity instruments in spite of the short term volatility. Regular investing (in a portfolio of equity stocks or equity mutual funds) would be a good way to benefit from such opportunities. It would be injurious to one’s financial wealth if one does something contrary to this.
3. It would be important for investors to focus on things which are controllable than those which are not in their control. Hence, a focus on Asset Allocation, diversification, regular investing, tax efficient investments, discipline and patience would be very important.
4. Investors could also look at low cost products like ETFs, Index funds, Direct funds and Direct Equity, to reduce the overall cost of the portfolio.
5. Have a fixed income allocation to give stability, liquidity and stable returns to your overall portfolio. This would come very handy during volatile times like these. Debt mutual funds would be an ideal option considering their tax efficiency not withstanding their volatility in the last 1 year.
6. Interest rates would move down gradually and it would be good for investors (including NRIs) to lock-in long term interest rates in their Fixed Deposits.
7. Be tax compliant and file your returns on time. This would help one to carry forward any losses.
8. Investors could also have diversification in International stocks through International Equity Mutual funds.
9. Investors with short term horizon could invest in liquid funds (up to 3 months), Ultra Short Term Funds (up to 3-6 months) and in Arbitrage funds (between 6 months to 1 year) to get better returns compared to the banking products.
10. Avoid complicated products especially tradition insurance plans, Unit linked insurance plans and structured products. This would be more costly and non transparent.
11. Over long periods of time, financial product selection and market timing would not be the critical factor in your overall portfolio return. On the contrary, a strategy focused on process, discipline, financial goals, time horizon, patience, asset allocation and diversification could be the key factors to earn better risk adjusted returns. Do not confuse luck with skill.
12. Always have an emergency and protection portfolio. This would comprise of emergency fund (to take care of mandatory expenses of 6 to 12 months), medical insurance, disability insurance and term insurance. Kindly note emergencies do not come with any prior intimation but will have a large affect on your entire personal finances.
13. Talk to your Financial Planner (who is experienced, qualified and registered), in case of any doubt. Financial Planners will not assure you any returns but, give you clarity on your Long Term financial journey.

Note:
1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
3. Past performance of any asset class is not an indicator of future performance.
4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
5. The above are mere suggestions and not Investment Advice as individual cases might differ.

In case, you would like professional financial guidance, than feel free to connect to me at 9845557582 or naveen@naveenrego.com.

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
INA200004250

01st August, 2019

07 Aug

Debt Mutual Funds – an excellent alternative to Banking products

There is a common misconception about mutual funds. Many believe that they invest in only equity related asset class and are very risky. However, this is very far from truth. Each Mutual Fund scheme invests as per the mandate of the fund. The mandate of each scheme differs. It could be investing in equities of large or small companies, or in gold or investing in fixed income instruments like bonds or debentures. The riskiness of each type of scheme depends on the mandate of the scheme.
Most of us (Resident & NRI’s) invest in Bank Fixed Deposits or Savings Account. The ease and convenience of investing makes them very attractive. However, please note the money taken by banks are then onward invested into instruments like government securities, corporate bonds, loans etc. The bank after keeping their margins passes on the returns to the depositors. The returns to the depositors would then be subjected to TDS or income taxes.
Similarly, debt mutual funds also invest in debt instruments of corporate and government. Typically their cost of operation is much lower than banks and as such investors in debt mutual fund can potentially get higher returns than similar maturity deposits. Also, the returns from a debt mutual funds are tax efficient as gains after 3 years (long term gains) are taxed at concessional tax rates ( net of inflation) whereas bank deposits ( Resident and NRO) are taxed at marginal tax rates. It could also be noted that only realized gains are taxable in debt mutual funds whereas even non realized gains (Resident /NRO) are taxed in case of banking products.
The following type of schemes is suggested for each category of investors (residents & NRI’s)
1. Overnight/ Liquid Mutual Funds: for investment horizon between 1 day to 3 months. Excellent alternative to savings and current account to deploy short term surplus. The returns typically would be the short term money market rates.
2. Ultra Short term Mutual Funds: for investment horizon of between 3-6 months. Excellent alternative to short term deposits of between 3-6 months. The returns typically would be the money market rates of 3-6 months.
3. Short Term Mutual Funds: for investment horizon between 6-36 months. Excellent alternative to deposits of 6-36 months. The returns typically would be the money market/ short term debt market rates of 6-36 months.
4. Medium Term/ Long Term Debt Mutual Funds: for investment horizon of more than 3 years. These would be an excellent alternative to 3 year plus FDs (Resident and NRO) as the taxation would be very low as the taxation is post inflation. The returns typically would be the long term debt market rates.

Some of the other salient features are:

• NRIs can invest on a fully repatriable basis from NRE account.
• NRIs can also invest the balances of NRO accounts on non-repatriable basis.
• One can invest anytime including additional purchases. Full and partial exits could be done at any time.
• The transactions could be done either online or offline.
• No TDS for residents on the withdrawals. No tax implication on growth.
• No entry loads. Exit loads depend on the type of the schemes.
• Much safer than equity scheme in the short term. Returns do not depend on the equity markets.
• Fully regulated by SEBI under the Ministry of Finance.
• Returning NRI’s can plan to invest quite early to reduce the taxable income once the Residency changes and Indian tax laws apply.
Illustration: If one has an average balance of Rs 1 lakh in his/her savings account for a year, the savings account at 3.50% p.a. would yield Rs. 3,500. The same money invested in a liquid mutual fund (at around 7% p.a. (not assured)) would yield approximately Rs. 7,000 which is double the savings account rate.

Note:
1. Mutual Fund Investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
2. It is very important to consult a professional planner while implementing any of the above ideas.
3. The above are mere suggestions and not Investment Advise as individual cases might differ

In case, some of the above ideas appeal to you and you would like professional guidance, then feel free to connect to me at 9845557582 or naveen@naveenrego.com.

Do visit us at www.naveenrego.com to read the disclosure statement and our past Investment Ideas in the blog section.

Happy Investing!!

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
INA200004250

10th July, 2019

07 Aug

Value Additions by Our fee based Financial Planning Practice

The professional financial planning and advisory fees charged by us are visible and possibly pinch many clients. However, the fees should be seen in the context of the following value additions done by us while engaging our financial planning services:

  1. Tax Efficiency: Financial advice given by us will make the financial portfolio tax efficient in relation to what it was before thereby, reducing the overall taxes in the years to come.

  2. Lower costs: Financial product costs which are not generally visible can eat into the overall returns. We would help in selecting low cost variants of similar products which would considerably save on costs, thereby benefiting the clients in increasing returns.

  3. Wealth Protection: We give a lot of emphasis to contingency funds and protection of our clients’ wealth through proper selection of insurance plans. Building up a contingency fund and low cost insurance portfolios are a very important priority in our practise.

  4. Process-based Approach: We have a process based approach where we fix an overall asset allocation strategy taking into consideration the risk profile, time horizon and financial goals of the client. This would not make the client too aggressive or conservative and thereby get better risk-adjusted returns.

  5. Diversification: A well diversified strategy within an asset class will mitigate the risk of product/ style concentration. We always have a diversified strategy within an asset class so as to avoid negative surprises.

  6. Product Selection: We would assist in selecting superior products within an asset class thereby increasing Returns and not Risks.

  7. Investment Strategy: Investment in certain financial products need to be done on a gradual basis and /or based on opportunities. Exits also need to be done based on certain factors. We would have an overall strategy for the same rather than having an adhoc approach.

  8. Transparency: As our only earning in the Financial Planning engagement is fees and not commissions, we will be on the same side as the client. Unnecessary product suggestion or portfolio churning would not be the motive while constructing and reviewing the Financial Plan.

  9. Financial Path: We will build an overall path for the client’s financial journey so that the client is able to reach his financial goals with minimum hurdles.

  10. Counselling: We will counsel the client on a lot of issues which may not be of financial nature but may have a financial bearing on the client’s personal finances.

  11. Saying NO: Many a times we would say NO to certain financial products/ strategies keeping in mind the overall benefit of the client. This would save the client on unnecessary costs and regrets.

  12. Regulations: We are registered with SEBI as an Investment Adviser (with registration No. INA200004250) which makes us more accountable for your personal finances.

The above value additions are not easily measurable but the fees to be paid to us, are. It would hence be wise to check the overall benefits before accepting/rejecting our fee based proposition. Our fees are also on the overall financial wealth (rather than only one asset class or product) so that, we get a better overview on your overall finances to give the best advice. One might be a good driver and follow good traffic discipline. However, it still pays to renew one’s motor vehicle Insurance, just in case some other vehicle hits yours!! Partnering with us would help you to protect your financial wealth.

We are passionate about our profession and look forward to engage and continue our association in the years to come. Feel free to get in touch with us for any further clarifications on the same.

Naveen Julian Rego-CFPCM

SEBI Registered Investment Adviser

INA200004250

23rd July, 2019