07 Aug

Investment Ideas- January, 2018

Equity markets in India and globally have done extremely well in the past few years. The returns in the last year (calendar 2017) of a portfolio of large cap stocks (SENSEX or NIFTY) would have been more than 25%. Returns of portfolios of mid and small companies would have been much higher. The large returns are also responsible for the higher inflows into equity mutual funds, IPO’s and higher secondary market transactions.
We would however, like to be cautious and advise the following:
1. Investors whose exposure in equity is greater than 50% of their overall portfolio should trim it down to below 50%.
2. Investors whose financial goals are less than 5 years away should not have allocation of more than 25% in equity assets.
3. Investors should also reduce their expectations of future returns of equity, as equity markets are no longer cheap.
4. It would also be a good time to consolidate equity investments by exiting non-core portfolios like under performing stocks, mutual funds and ULIP’s.
5. However, Investors whose equity allocations are much lower than their target allocation should continue their investments. Regular investments would be a good way to build equity portfolio for such clients.
6. Equity investments give good long term returns, however they can be very volatile in the shorter term. Investors having a stomach for volatility will continue to enjoy the fruits of long term investing in equities.
7. However, one-time investments could be initiated in Dynamic Asset Allocation funds. These funds move the allocation between equity and debt based on relative market valuations.

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 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

11th January 2018

07 Aug

Investment Ideas- November 2017

1. NRI’s who have been invested in Public Provident Fund (PPF) and Nation Savings Schemes (NSC) would have an automatic closure of their accounts as per the recent notification. NRI’s need to act on this at the earliest.

2. Banks have been reducing their interest rates and the latest reduction was by State Bank of India which has reduced its rates to 6.25% p.a. This would affect a lot of investors who depend on Fixed Deposits for their regular income. However, they need to be careful in building their portfolios in other investments which might have market risks involved.

3. Fixed income Mutual Funds would be a good avenue for a lot of investors who are in the tax bracket and also looking at a tax efficient regular income.

4. Investors having one time surplus, looking at equity linked returns with lower volatility could explore dynamic equity funds which move allocation between equity and fixed income products based on relative market valuation. Invest in these for an investment horizon of at least 3 to 5 years.

5. Do not be lured by the IPO’s that come into the markets as the long term performance of IPO’s has not been very good. Do not get swayed by 1 or 2 very large return giving stocks.

6. Equity markets have been scaling new heights which would attract lot of investors, due to their very good short term past performance. However, a disciplined approach with a lot of emphasis on asset allocation is the need of the hour to avoid mistakes.

7. Avoid investing in insurance linked investment structures, either traditional or market linked as part of your investment portfolios. There are alternative products doing this job at lower costs and giving better returns.

8. Plan your taxes well by investing in well performing tax saving products well before the end of the year (before 31st March, 2018). We suggest tax saving mutual funds (ELSS) and PPF.

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 while implementing any of the above ideas.
5. The above are mere suggestions and not Investment Advice as individual cases might differ.

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

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
INA200004250

07 Aug

NRI’s and Debt Mutual Funds

It is been observed that NRI’s have large allocation of Fixed Deposits especially Rupee deposits (NRE).This is because of the assured return and zero taxation as per the Indian Income Tax Act for Non-Residents. However, this situation can change when the said NRI moves back to India either because of retirement or because of a job loss. In that case, the NRE FD’s would become fully taxable post losing the NRI status (one of the conditions is being in India for 182 days or more in a financial year). While retirement is a planned event, sudden job loss or change in one’s employment position cannot be forecasted. Hence, it would be very important to make the portfolio tax efficient so as to take care of these changed scenarios.

We hence recommend such NRI’s to have an allocation to Debt Mutual Funds which could be conservative and also tax efficient. Debt Mutual Funds do not invest in shares/equities but invest in FD like instruments i.e. government or corporate bonds. Hence, they are less volatile in comparison to other market linked instruments.

As per the current tax laws, long term gains of Debt Mutual Funds (after 3 years) are taxed post indexation (which considers growth post inflation) at a concessional rate of 20%. Assuming the debt funds/FD gave a return of 8% p.a. and the annual inflation was 6% p.a., then the tax would be only on the net 2% p.a.(at flat 20%) in case of Debt Mutual Funds. It would be noted that for FD’s, the entire growth of 8% would be fully taxed (as much as 30% in some cases). Unlike FD’s, the taxation for Debt Funds is only on withdrawals and not on growth. So, one can postpone taxation till the time of withdrawal. It also helps to plan a regular income portfolio (for retiring NRI’s) with debt mutual funds as the taxation would be very low unlike FD’s.

NRI’s could invest in Debt Mutual Funds when they are NRI’s and then change the status to Resident Indians post becoming a Resident Indian. There is no tax implication on the same. Also, NRI’s could invest their NRO funds in Debt Mutual Funds instead of NRO deposits as there is no TDS implication on the growth of Debt Mutual Funds.

The past performance returns of these funds for the last 3and 5 years would have been in the range of 9% p.a. to 10% p.a. (not assured).

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 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, then feel free to connect to me at 9845557582 or naveen@naveenrego.com

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
Reg no.: INA200004250

30th August 2017

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-CFPCM
SEBI Registered Investment Adviser
INA200004250

01st August, 2019

14 Jun

Mistakes people can make with the current state of equity markets

Equity markets in India have given very good returns in comparison with other asset classes (in the recent past). The higher returns of equity products are driving further investments into them. Their case is also made better because post demonetization in India, assets like gold and real estate have become stagnant. Also, interest rates on Fixed Deposits and Government Savings (like postal savings) are also being dropped continuously. Lower returns in other economies and easy liquidity is also attracting global capital to Indian equity markets.

Higher returns of equity would get reflected in one’s equity portfolio through stocks, equity mutual funds, Equity PMS and ULIP (Unit Linked Insurance Plans). However, during such euphoric phase’s lot of investors make fundamental mistakes, only to regret later. I have listed some of them for the benefit of readers. The word equity below would mean Direct Equity, Equity PMS, Equity Mutual Fund, Hybrid Mutual Fund and ULIPs (Unit Linked Insurance Plans).

1. Equity oriented Portfolio for regular monthly income: Lower Interest rates have made many first time investors move to hybrid equity products like balanced mutual funds for their regular income requirements. Many are driven by the high past returns in comparison to the current FD rates. Do note, equity portfolios are best suited for building wealth over a period of time. They are however very volatile in short term and can give lot of sleepless nights. Investors can have a terrible experience if equity assets are the predominant source of regular income. Do note 12% p.a. return over the last 5 years in not equivalent to 12% p.a. every year or 1% per month.

2. Equity oriented Portfolio as an alternative to banking products: : Many bankers and agents are suggesting equity oriented portfolios ( ULIP’s , equity mutual funds and balanced funds) to their customers as an higher return alternative to Fixed Deposits. Please note that these are market linked investments and hence do not assure higher returns. ULIPs, apart from having market risk, also carry higher charges/expenses. If one is coming in these for a time horizon less than 5 years, than the experience might not be very good.

3. Increasing allocation to Equity Oriented Portfolio due to past performance: Allocation to equity should be based on one’s risk profile and investment horizon. Having larger allocation in equity oriented portfolio with an investment horizon of less than 3 years would be extremely dangerous. Do not get influenced by the past returns.

4. Lured by assured dividends of equity/balanced funds: Many balanced mutual funds have started declaring regular monthly dividends which is attracting many investors believing these are assured regular income. Do note that, dividends are not a statutory obligation but are given as part of the profits of the mutual funds. Hence, investors should have made adequate provisions in other asset classes/financial products for regular income. Dividends should only be a secondary source of income.

5. Investing large portion in Midcap and Small Cap Stocks/Funds: Portfolios allocated to these have given phenomenal returns in the recent past. However, please understand that these carry very large risks in comparison to diversified portfolios.

To conclude, equity continues to be one of the best asset classes to beat inflation and to get tax efficient returns. However, not respecting the risk factors of equity can have a very bad effect on investor’s portfolio (in the shorter term) and their future experiences.

“It is best to learn from past mistakes than losing one’s hard earned money”.

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 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

14th June 2017

25 Nov

Investment Ideas – Nov 2016

1. Interest rates on Fixed Income options like Fixed Deposits and Postal Schemes would go down considerably as banks are flush with funds. This would affect lot of investors who have a larger share in such type of investments. However, such investors should be careful before shifting allocations to other investment options and the same should be done after clearly understanding the risk factors well. Do not invest in any financial product which you can’t understand well or else take services of a professional advisor.

2. Medium Term Debt Mutual Funds would have given around 10% p.a. post tax returns in last 3 years and above. Please understand the future returns of this too would fall, in line with overall downward movement in interest rates. However, they would still be better for conservative investors for their tax efficiency.

3. Liquid and Ultra Short Term Mutual Funds would also have a dip in returns due to the reasons mentioned above. They would however continue to be a better bet than savings/current account or short term deposits. Investors could look at debit card facilities with some liquid/ultra short term mutual funds. This would be a superior alternative to debit cards with bank accounts.

4. Equity markets are volatile and have dipped considerably due to numerous factors. While existing portfolios would have a dip in value, long term investors should not be really bothered with such developments. The following set of investors should look at increasing allocations to equity instruments in the current time:
a. Investors whose overall allocations in equity are lesser than 25% of their overall wealth. Typical investors would be retired individuals and conservative investors.
b. Investors who do not want the money for the next 5 years and are bit aggressive, should look at a minimum allocations to equity at 50% of their overall wealth.

However, allocations to equity should be done on a portfolio basis (ideally diversified equity mutual funds) with investments spread equally over next 6-12 months. Regular investing would help one to benefit from any further volatility. Regular investors in equity mutual funds could temporarily increase the SIP’s/STP’s for the next 6-12 months to benefit from the current opportunities. Kindly understand investments in equity products carry very large short term volatility and hence any investments should not be done with less than 5 years time frame keeping the overall allocations in mind.

5. Many bankers and distributors would be selling products like traditional/ market linked life insurance schemes and capital protection hybrid mutual funds as savings options better than FD’s(mostly to NRI’s) and balanced funds for regular income( to Retired people). Do note many of these are not well suited for an investor’s portfolio (but makes tremendous sense for seller). Do not fall prey to aggressive selling or an emotional push so that you regret later in leisure.

6. Real Estate would continue to disappoint for some more time. However, this phase would give opportunities for people to buy real estate for actual use. Bargain hard for discounts on completed projects. Also, do not jump into buying property just because the interest rates are lower. Do not have more than 50% allocation to Real Estate (excluding self occupied house) any time. Do not base your future return expectations on the basis of past performance.

7. Be tax compliant and use the provisions of tax laws to reduce taxable income. Invest in a good and reliable tax consultant. Government would be behind tax evaders with a vengeance.

8. Give lot of importance to estate planning. Have proper nominations in place and draft a will, if possible, to avoid future family conflict.

9. Always consult a financial planner (one who is certified and registered with the regulator) for professional guidance and see to it that his/her commercial interests are in alignment with your financial plans. The quality of advice received from a professional would have a large impact on your overall portfolio. There is nothing called free advice.
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. Past performance of any asset class is not an indicator of future performance.
3. It is very important to consult a professional planner while implementing any of the above ideas.
4. The above are mere suggestions and not Investment Advice 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.

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser

19 Nov

India MODIFIED- the way forward

The actions taken by the Indian government to curb black money and counterfeit notes would have far reaching implications on the way one earns, spends and saves. While I would not like to go into the details, I have touched on the following which concerns individuals:

Impact of Earnings of Individuals: While the salaried would not get affected as their income was always fully taxed, the impact would be felt by self employed professionals and businessman (where there is chance of hiding a part of income). It would be good for this class of people to put their incomes in order and be fully tax compliant. The benefits of being tax compliant would be to get loans at cheaper rates and have total peace of mind. The accounted income/saving could also be deployed in tax compliant well regulated products (rather than in unproductive assets or expenditures) to get better tax efficient returns. The savings by lower loan rates and better growth through productive investments would more than make up for the taxes paid to the government.

Impact on Spending of Individuals: Transactions would be more electronic (cards or wallets) than cash and would be more from the accounted income. This would also curb unnecessary spending thereby bringing down the overall inflation and benefitting each one of us.

Impact on Savings of Individuals: Majority of savers in India have large allocations to Fixed Income bearing instruments like Fixed Deposits and Postal Savings including traditional Life Insurance Savings plan. Interest rates would go down considerably thereby impacting a large section of the savers. It would be prudent for this class of savers to look at instruments beyond fixed income to manage their earnings.

Other key points:

Real Estate would have a massive slowdown as most of the transactions had a cash component. It would however be an interesting asset class to watch as discounted sales would begin soon. This could be a value buy for investors after some serious discounts.

Equity and Equity Mutual Funds would be favoured asset class from a long term horizon (5 years and above) for giving inflation beating tax efficient returns. However, it would be very important to build this portfolio gradually to avoid any major heartburn. Do not invest with less than 5 years term or for getting regular income (even if promised).

Debt Mutual Funds would be a superior tax efficient alternative to Fixed Deposits for individuals in the higher tax bracket. The returns would be around the FD rates but would be highly tax efficient.

Gold also might not give fantastic returns due to curb on black money. However, investors could have allocation to this more from a diversification angle. Sovereign Gold Bonds issued by the Government from time to time would be a better way to accumulate this asset class.

Do not invest in Life Insurance Linked savings and pension plans as there are better and cheaper alternatives.

Do not give importance to rumours through various social media on taxation and currency related issues. Always check the authenticity of source before acting on it.

Conclusion:

While many would need to go through the short term pain, the long term outlook is a big positive for the country. Tax compliance and investments in productive assets would help our country to become a super power in the years ahead. Are you game?

Note:
1. All investments are subject to various types of risks. Kindly understand the risk factors clearly before investing.
2. It is very important to consult a professional; planner or Investment Advisor while implementing any of the above ideas.
3. The above are mere suggestions and not Investment Advice 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 past Investment Ideas in the blog section.

Happy Investing!!

Naveen Julian Rego-CFP
SEBI Registered Investment Advisor

10 Jun

Financial Consumers- Make the best choice

 

Financial Consumers- Make the best choice

The way one takes financial advice and buys financial product is going through a tremendous change globally including India. The purpose of this article is to give a clear understanding to the financial consumer on appropriate choices one should make. The word distributor used in the article stands for agents, broker employees or bankers selling financial products

Typically many of the financial consumers used to take financial advice from the distributors of the financial products. This inherently had a conflict of interest as the distributor would sell higher commission products then what is appropriate to the client situation. However, consumers liked this arrangement as the distributor/agent would handhold the client with documentation related work and charge no extra fees for the advice/service (though they still did earn commissions for this).

But this is changing big time as regulatory compliance, technology, introduction of direct options and disclosures are breaking the traditional models upside down.

Let me dwell more on the above areas:

Regulatory compliance: As per the regulator (SEBI), anyone giving financial advice has to be registered with it. These are called Registered Investment Advisers (RIA). To become a RIA one has to be suitably qualified (CFP or pass some certified exams). RIA should act as a fiduciary (always acting in the client’s interest) and disclose any conflict of interest upfront. RIA’s would charge fees depending whether it is one time sitting (like plan construction) or annual retainer model.

Technology: The execution of financial transactions would gradually move totally to a technology driven platform without much of paper work. Financial Consumers would be able to transact on their own or supported by the financial distributors. Financial and Portfolio reporting would be easily available through internet connecting devices.

Direct Options: Products like Mutual Funds and Life Insurance today come with Direct options. These could be bought directly from the financial institution bypassing the distributor. This would save costs for the consumer. Typically in a mutual fund the cost saving would be around 1% p.a. (equity funds) to 0.50% (debt mutual funds) which would be the remuneration of the financial distributor. In a life insurance, the online term plans would be cheaper by around 30-50% on the annual premium. However, the commissions for financial products would also be on their way down reducing the arbitrage between direct and intermediary option.

Disclosures: The regulator is making it mandatory for disclosures of salaries of important personnel of financial institutions (mutual funds/life insurance), brokerage and commission received by distributors and any conflict of interest in RIA’s working. This increases the transparency.

The way forward would be something like this:

Step 1: Approach a Registered Investment Adviser if you want unbiased advice on your financial condition. The fees charged would depend on the time taken and the size of portfolio. Opt for an annual retainer model in case you want regular reviews and discussions. Else, engage him/her only when required. Also, understand if the RIA would assist in implementing the plan and cost/charges for the same.

Step 2: Implement the financial plan execution through direct model on a technology driven platform to save costs. This could be done by the consumer or in assistance with RIA. Also, evaluate the implementation option (including the services) of the distributor if it still makes sense for ease of operation.

If you believe that your financial distributor is giving free advice, then these are the numbers for you. Assuming your entire financial networth is Rs 50 lakhs with Rs 30 lakhs in fixed income options (FD, PPF, EPF etc). The remaining Rs 20 lakhs is invested in Equity Mutual Funds through a distributor (who basically gives Mutual Fund related advice only). The earnings of the MF distributor (and cost to the customer) would be roughly Rs 20,000 p.a. The same consumer could approach a RIA around the same total remuneration and get comprehensive advice and implementation support.

Feel free to get in touch with me at naveen@naveenrego.com or 9845557582 for more clarity on this. We would be more than delighted to make your financial engagement better.
“Jago Grahak Jago”. After all it’s your money!!

Have a wonderful day!!

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser

09 Apr

Investment Ideas-April 2016

Investment Ideas-April 2016

• Equity markets continue to be volatile for quite some time. Investors who have investment horizons greater than 5 years should use such times to increase their equity allocation. Actually, regular investments in equity mutual funds (SIP’s or STP’s) are the best way to benefit from market volatility. Do not get disturbed and postpone equity investments by focussing on your current equity portfolio values. Bad times in any asset class are good times to invest in that asset class.

• Debt or fixed income mutual funds are excellent tax efficient investment options for Residents compared to Fixed Deposits. NRI’s could use this to invest their NRO funds as they are quite tax efficient than NRO deposits. Also, returning NRI’s could plan investments in such schemes 3-5 years before their actual return to reduce their taxation post becoming a Resident. Returns of these schemes could be slightly better than FD but the clincher is tax efficiency.

• Residents and NRI’s (for their Indian income) should use the benefits of Sec 80C to reduce taxable income. Investments here should also take care of other financial goals. Our suggestion has been to invest monthly in tax saving mutual funds (ELSS). These not only give market linked returns over longer term but the gains and dividends are tax exempt. Regular investments reduce the risk of market timing and give inflation beating returns. Start investing right now.

• Investors can avoid investments in NPS to reduce taxable income or otherwise. Even after taking immediate tax benefits, the long returns of the product would be lower than a simple equity mutual fund. It would be better to pay tax and stay invested in a good equity mutual fund. The maturity proceeds of NPS are also quite complicated as on date.

• Interest rates (FD’s, PPF and Postal Savings) are on their way down. Do not increase the risk profile of your portfolio just to earn better returns. Have a proper asset allocation plan which takes care of safety, liquidity, returns and taxation. Stay away from any guaranteed/assured not regulated schemes. This might be a fraud.

• Investments for long term goals (like retirement, children’s education and marriage) should be done through equity linked instruments like equity mutual funds. These would be volatile in the short term but give inflation beating returns in longer term. Regular SIP’s are the best way to fund these goals. Review them as the goals are approaching near. Fixed income instruments like PPF, Sukanya Samruddhi Scheme, RD etc would never be able to beat returns given by equity funds over longer time frame.

• Retired investors should also have allocation to equity mutual funds of about 25% of their entire wealth. This would help them to give inflation beating returns besides tax efficiency. Fixed Deposits could be swapped with debt mutual funds for reducing taxable income. Drawing money (SWP) from debt or a hybrid mutual fund is an excellent tax efficient strategy to earn monthly income.

• Real Estate would continue to disappoint for some more time. However, this phase would give opportunities for people to buy real estate for actual use. Bargain hard for discounts on completed projects. Also, do not jump into buying property just because the interest rates are lower. Do not have more than 50% allocation to Real Estate (excluding self occupied house) any time.

• Avoid investment linked insurance schemes for funding any goals (tax saving, children’s saving, retirement etc) as these are non transparent, expensive and yield low returns. If you have already done this mistake then review and restructure at the earliest.

• Have a comprehensive medical insurance plan to take care of medical expenses. Also, have a pure term insurance plan if you believe you have large responsibilities and liabilities. Review them regularly.

• Do not fall prey to calls from fraudsters asking you to share your important details (password etc) or making you buy insurance with easy bonus. There is nothing called easy money.

• Avoid trading in direct equity and derivatives. These are for professionals and full timers. Else, wealth would get transferred from you to the brokers. Concentrate on your profession (for higher returns) and family (for peace and happiness) instead. Do not search for excitement in your financial portfolio.

• Be tax compliant and use the provisions of tax laws to reduce taxable income. Invest in a good and reliable tax consultant. Use their skills for reducing taxes and not for wealth building and financial planning.

• There is no point in accumulating wealth without a proper goal. Retire early whenever the portfolio is enough to take care of all important financial goals. Do not plan too much for nominees.

• Give lot of importance to estate planning. Have proper nominations in place and draft a will, if possible, to avoid future family conflict.

• Always consult a financial planner (one who is certified and registered with the regulator) for professional guidance and see to it that his/her commercial interests are in alignment with your financial plans. The quality of advice received from a professional would have a large impact on your overall portfolio. There is nothing called free advice.
Note:
1. Mutual Fund investments are subject to market risks. Kindly read the scheme information documents 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 Advice 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.

Naveen Julian Rego-CFP
SEBI Registered Investment Adviser

14 Jan

Investment Ideas-Jan 2016

Investment Ideas –Jan 2016

• The recent volatility in equity markets would have disturbed many investors. However, equity as an asset class is bound to be volatile over shorter time frames. That is their characteristic. To benefit the most from this asset class its best to go the professional way (equity mutual funds) and invest regularly. To give some figures, regular monthly investing (SIP)in top 25 equity funds over last 10 years would have yielded more than 15% p.a. despite all market noise. So if you can concentrate on your long term goal without being too much bothered about short term fluctuations, regular investing (SIP) in equity mutual funds is the way to build sustainable wealth.
• Fixed Deposits returns are on their way down and also extremely tax in-efficient. One could look at Medium term Debt Mutual funds for tax efficiency or hybrid mutual funds for better returns.
• Investors (especially retired) looking at regular monthly income should exploit the tax advantages of mutual fund portfolios and relatively better returns. A well designed regular income portfolio from mutual funds would yield very healthy regular income besides being extremely tax efficient. FD’s, Postal Monthly Income Scheme, Annuities or Senior Citizen Bonds would be no comparison to the above.
• Tax Savings Mutual Funds would be the best in its category to give tax deduction and inflation beating
• returns (dividends or capital gains). These have beaten the category favourite PPF both on returns (in the past) and tax efficiency and would continue to do so over the long term albeit with short term volatility.
• Avoid any insurance linked savings instruments as an investment avenue. This is true for resident and NRI’s. These would build wealth for the seller than the person buying them. Restructure these policies to avoid further damage. Buy pure term insurance instead, if you indeed need life cover.
• NRI’s planning to return to India (permanently) need to align their portfolios gradually with Indian tax laws. Always give importance to tax efficient returns while designing such portfolios. Mutual Funds would be a good vehicle.
• Be extremely careful of Financial Frauds. Never share your banking passwords and personal details with any unknown entities. Do not fall prey to greed and high return guarantee instruments. After all it’s your hard earned money.
• Real Estate would continue to struggle in giving good returns. Equity Mutual Funds invested well would be a better bet both for returns and tax efficiency.
Note:
1. Investments in all asset classes are not assured as they have market risks.
2. Matching your investment horizon with the right investment product can greatly reduce the sudden surprises.
3. We request you to consult us before initiating any strategy as your personal circumstances may be different from others.
4. Assured return strategies are highly taxable and do not beat inflation.

Wishing you all the very best in 2016.

Naveen Rego
CERTIFIED FINANCIAL PLANNER