How to Select the Right Portfolio Management Service for You?

Portfolio Management Services, Portfolio Management, PMS advisory services, Portfolio Management Services in India

Portfolio Management Schemes (PMS) have done well, so you may be looking to invest in one of them.  Since the minimum investment into a PMS is Rs 50 Lakh, you may not be able to diversify as one does for Mutual Funds.  Further, most schemes also have an exit load up to 2-3 years.  Hence, choosing the right PMS becomes critical for you. A few points to consider:  

  • Establish clarity of purpose

There should be clarity and understanding of your risk appetite while choosing your service provider. i.e. Do you want the highest returns (which comes with higher volatility) or a consistent performer who manages risk well. You should accordingly shortlist the most suitable ones.

  • Vet the credentials of your PMS provider

Make sure that you have gone through all the required credentials of the provider like the past track record, transparency, and risk-adjusted returns; and draw out a comparison. Ultimately, there should be a consensus of minds before finalizing any deal and you shouldn’t be discriminating based on past performances alone.

  • Make informed decisions about the cost structure

You should be well-versed with the cost structure. It should be flexible enough to accommodate all your financial constraints and should allow you to choose between fixed and variable fee options. Annual fund management charges normally apply both for fixed and variable fee structures.  Variable fees are normally computed as a percentage of the profits generated above a threshold but would have a lower fixed fee component. Make sure that your manager briefs you about the expense structure apart from the fund management fees.

  • Choose a fund that aligns with your goals

Whether it is a large or multi or small cap fund, choose a fund based upon your risk-taking capacity. You may also choose your strategy based on the market environment as it keeps oscillating between large and midcap funds.  One way to take a mid path through a multi-cap fund.  It’s important to see what you are capable of and align your investments accordingly.

  • Allocate your funds suitably

While the PMS requires you to invest in lumpsum, many PMS houses have created a systematic transfer approach into the equity fund. They take your money into a debt fund and allocate it in a phased manner based on your instruction.  This protects you from the risk of buying equity at its peak value and a down-cycle may impact you adversely.

Things to watch out for

First, going after the highest returns could also mean higher risk. Ask yourself if you have the risk appetite to bear higher losses. In any case, you can mitigate risks through systematic transfer mechanisms.

Secondly, pay attention to your portfolio size. Considering the minimum investment is Rs 50 lakhs, track what percentage of your investment is going into this scheme. Some portfolio managers may allow mutual fund strategies to lower the risk for you.

Remember, diversification complements your safety margin with a value-driven approach. It also helps smooth out the effects of changes in stock price momentum and other market risks. If it’s too complex, get a professional to help you there.

Yes, there’s a better way to spend your Diwali bonus!

Security beats uncertainty. Light triumphs darkness. Hope prevails over fear. And that is the reason for this season. We at Right Horizons are inspired by the human propensity for security and peace. Investments, when done right, are made up of such timeless themes.

Calendar 2020 has made trivial pursuits seem all too trivial. Savings, investments, and security are taking center stage. 

Here are 5 learning on how to navigate this bear market.

  • The science of security: Invest in what counts

Security is both a feeling and a reality. And the two are not the same. To guarantee security for real, it is important to gauge the market flows and sentiment. Lights, clothes, and other festive gifts are all cute. And holidays aren’t happening until we have a vaccine that works. What is comfortable is rarely profitable in investing. Don’t you think sparking off a new plan with your Diwali bonus might do some good? Invest your time into doing a financial plan if you have not done it already. This would be the best Diwali gift for you and your family.

  • The better way: Pay yourself first

If you stripped investments of the jargon, it’s pretty simple. Like Warren Buffet maintains: Pay yourself first. This may mean taking time off for a meaningful chat with your mutual fund’s planner and educating yourself first. If you’re already savvy, go on right ahead to invest in plans that resonate with your goals. Try your hand at debt and equity mutual funds, and if you have a larger capital, look at other options like portfolio management schemes. 

  • The death of decision anxiety: Asset allocation

Global studies have shown that asset allocation has a higher impact on portfolio performance. This removes the decision anxiety of shopping and gives you a more balanced, risk-free, and data-driven approach to spending your disposable income.  There are multiple competitive discounts on gold. Make your Dhanteras-Diwali extra special this year. Start investing in gold funds, especially if you’re expecting to plan for your children’s weddings.

  • Lifestyle changes are welcome: Investing as a way of life

In the wake of the pandemic, everyone is forced to make massive lifestyle changes. Pumping up your existing investments is a great way to use your bonus or even lower expenses on account of the pandemic impact. It could be as simple as boosting your SIP to reach your investment goals faster.

  • The reason for the season: Legacy and dynamic themes

You’ve revisited your portfolio and re-shuffled your investments. Given the global atmosphere, you can also add more value to your gifting choices. It’s time to show your loved ones that you care, more so if they’re far away. Pass your learnings on to your children and pay it forward. And remind them of the reason for this season: light, love, and life. 

Go on, make the right choice. We’ve got you. Both you and yours.

Lessons from the CoVID 19 Lockdown

The CoVID19 pandemic and the consequent lockdown has brought in a humbling experience to many of us, including individuals and/or businesses thought to be foolproof of themselves given their indispensable nature of product or services. Barring food and dailies (groceries) none of the presumed basic services needed to mankind have become affected adversely. Alas, none has been spared. The neighborhood barber/salon or the cobbler who mends shoes right up to liquor barons (barring regulatory risk) and would have thought to be proof from any eventuality have faced different levels of threat during this pandemic. India’s service economy which is almost 2/3rd of the GDP has taken a massive hit. At the business and at individual levels, the lessons the current crisis has have been of very basic nature. On the principles of “risk management” most of the lessons that this crisis offers are rudimentary. A quick look at basic lessons from this crisis.
Cash is King
We need to write this title in large and bold font in our minds and actions. Cash if the blood of any business and a key element of an individual’s personal financial wellbeing. Without enough cash businesses freeze or worse, go bankrupt. Without cash, an individual’s household can face immense hardship and probably make or break the family and household. The current crisis has brought out this basic element of money management to the fore. Many businesses (large and small) and individuals all are strapped for cash during these times, however, people who had planned for crisis level reserve for cash would emerge out of this crisis stronger and would be able to grab opportunities crisis’ bring after they pass. So, what is the lesson from this crisis to us all? Keeping reserve or emergency cash/liquidity, always, is as basic as it should be. For a business, 3-4 months of cash burn should be available to tide over during such unforeseen times, and similarly for individuals, 4-6 months cash for expenses should always be kept at call. People who followed this golden rule will find it easier to tide over the current situation without much hassle.
Health is Wealth
This again is as basic as one can understand. Health is not acquired without effort. To remain healthy – physically and mentally, individuals must put effort into eating good food, resting enough, and working out physically. Similarly, for mental health, individuals require attainment of inner peace, sound conscience, and a positive attitude. All the above is easy to attain if the practice of working towards it is regular and not when the crisis is on the horizon. The second aspect of health is a risk. The first part was risk mitigation by doing many things as explained earlier, the second and the most important part is risk transfer. Despite all the care and work on your health, it could be possible that your health is compromised due to reasons beyond your control; risk transfer helps you to cover health failure without any financial damage. The best form of risk transfer is “health insurance”. And to plan for the same when there is time is again a basic thing to do. Individuals should be prepared to pay a small cost to cover himself/herself and family from any health eventuality. The health risk is real. Recognize and prepare for the same without delay.
Multi-tasking is underrated
The CoVID19 crisis has taught this one thing – one more time. Specialists are overrated and generalists are underrated. The crisis has been easy for generalists. Everyone who depended on a specialist for everything from household chores, outsourcings kitchen (and cooking), and technical staff and many more things, have been rendered faced with a big handicap. People who could easily mold and become a self-service oriented person are having a relatively easier life during this crisis. Multi-tasking on the home front or office front should be the way forward. Cooking, housekeeping, fixing the small things, doing office duties with minimal help and above all ability to learn quickly – technical as well as basic stuff is the key to ever remain relevant. The faster one learns this the better prepared he/she is for the current and future crisis.
Upskilling has no age bar
Why is it that suddenly everyone is rushing to get enrolled for the online course? That is because nobody knows what kind of skills the world would demand, in 2021. People are rushing to upskill/upgrade their knowledge for the fear of being left out once the world re-opens. While that might sound a good thing to do, upskilling and staying relevant is a continuous process. It does not start during the crisis and ends when the world is normal. Leaning a new skill does not have an age bar. To stay productive and relevant an individual must repeatedly upskill and upgrade continuously. This way, the person would be the sought-after individual when the normalcy returns. Corporate / businesses are looking at human talent that is ready and easy to plug/play during difficult times. Upskilling/upgrading requires time and an individual should set the same aside regularly and not just when crisis hits the horizon.

NOT a Contagion – Impact of the FT Debt Debacle

Introduction
Last week, Franklin Templeton India funds, in the debt category, went into freeze with investors in 6 of the large schemes locked out of redemptions and any sort of movement till further notice. This has come at a distressing time of CoVID19 crises where incomes of individuals, businesses, and MSME’s have been severely impacted. The investors in these funds are severely impacted due to their dependence on these funds for their immediate or medium-term cash flows and now above all the safety of their monies. In some cases, it could be most of the savings/corpus that has been put to work. The investment rationale for most investors in these funds have been
1. The general safety of such category of funds
2. Getting regular incomes on their investment
3. General faith in the system and/or
4. Established product type.
While this might be the case, in good times or bad the onus of safety of investors’ fund lies with himself and the rule of “Caveat Emptor” or “Buyer Beware” always prevails. This is true for any investment or generally parting of monies from an investor to a third person.
The FT Debt Debacle
The situation with Franklin Templeton funds could have happened with any other AMC given the dislocation in the financial markets and the positioning of the funds in the current market environment.
For starters, Franklin debt funds were positioned to deliver higher returns as compared with competition and thereby were invested into marginally higher risk than the general markets. This strategy works well under most circumstances given that liquidity and funds flows keep investors and borrowers from accessing / rolling over monies quickly.
Secondly, the line between swimming in the middle of the pool to the deep end of the pool is often non-existent (not even blurred). This results in asset managers taking marginally higher risk without any commensurate return benefit. This is obvious in hindsight and might appear rationale during normal times. Both for investors and asset managers. In the case of FT funds, most investments were in risky papers without commensurate returns.
Thirdly, the diversification in asset managers strategy on funds ought to save the day. Unfortunately, the asset manager had not differentiated between its medium-term funds and ultra-short-term funds, using the same strategy across these funds. Clearly, the investor has been taken for a royal ride here, for no fault of his.
Finally, most of us are guilty of being slightly complacent when things are going to get rough. The first indication of the FT issue was evident when in a couple of these funds’ exposure to Vodafone and Yes Bank papers were side pocketed in 2019. Prudence dictates that the troubled ship be abandoned before the stampede begins.

How are we impacted, and are we prepared?
The current CoVID19 pandemic has been mild so far and there are numerous reasons – including on-time assessment and steps taken, higher immunity, sunshine factor, etc. There is much literature on the topic in the public domain. The financial impact is still yet to come to full-blown proportions but can be assessed individually by each one of us. The individual and collective response to the situation is developing in nature and as weeks go by, the complete impact of the same would be evident.
There is a great economic impact on several direct sectors such as tourism and aviation, transportation and logistics, and MSME’s. Stage II of the financial contagion (Risk Aversion) is being felt across businesses and individuals alike. The central bank (RBI) and capital market regulator (The SEBI) has so far responded to the situation like other peers across the globe. Stage III of complete liquidity freeze and volume collapse is unlikely to happen soon in India given the evolving situation and talks about normalcy returning in a phased manner soon. The systemic liquidity so far has been managed; however, the deeper impact could be felt if the situation lasts longer than everyone is prepared for.
Most of the participants are barely prepared for such emergency situations which is all-pervasive and systemic. And yet some sectors/participants are better than those who are severely impacted. Staples, non-durables, and certain services have been relatively smooth, so far. The lessons from the current episode for individuals and institutions should be to be prepared for a war-like situation for 4-6 months during any market cycle. This means putting up safety nets around – Liquidity, business/income continuity, risk management, back-up plan (secondary work-related stuff), and communication. For instance, unscheduled maintenance for industries, skill upgrade for workforce or individuals, and strategic planning for normalcy. All these and more should be a part of any individual or business plan when there is still time.
Conclusion
From an individual perspective, investors who are now stuck into the current frozen FT debt funds; the following things are necessary.
1. Access your liquidity conditions and work on a plan to sort it out. There is a great likelihood that your money would be returned soon
2. Ask questions around your investment methods and know why you ended up in the current situation. If only a small portion of your overall investment is in these funds, you have already done a good job.
3. No, there is NO reason to panic and start pulling out of every conceivable investment, since that way you could be creating a chain reaction and worse you will end up jeopardizing your objective (goals) and your return profile

For those who have no exposure to FT funds frozen or have FT equity funds, it might be a good time to reassess your exposure. While that might be the case, if your liquidity profile, asset allocation and goal planning is mapped, there is little concern for you. There is no point in losing sleep over things in which everyone is in the same boat and you are well prepared than others. Chances are you will come out stronger than most.

Your Checklist On Taxes For The Financial Year End!

We are just a few days to go before this financial year (2019-20) comes to a close. Though you have time till July 31st, 2020 to file your income tax returns, there are a number of activities that you need to do by March 31st, 2020 to claim the benefits in this assessment year (AY 2020 – 21). The finance minister came out with a series of extensions in dates till June 30th, 2020; but this is restricted mainly to tax saving investments.   Thus, you may have a bit of a breather on your tax saving investments.  Here is a checklist of items that you should go through to make sure that you have availed all the tax benefits available under different provisions of the Income Tax Act.

 

  • Set off your capital gains for the year with the losses:  If you do have capital gains for the year upto January 2020 when markets were relatively buoyant, you would have a number of stocks or even mutual funds that would be showing losses.  You can book some losses and set off the capital gains. You would want to optimise your capital gains in a difficult year. Do check if you have exit loads on your mutual funds before booking the losses.  This needs to be executed by March 31 for one to avail of the benefit.
  • Section 80C: You can claim deduction of up to Rs 1.5 lakhs from your gross taxable income by investing in schemes eligible u/s 80C. These schemes are EPF, VPF, PPF, NSC, tax saver bank FDs, life insurance premiums, mutual fund ELSS etc. Tax payers who are not getting a salaried income and not having PF and other tax saving investments must make sure that they avail maximum benefits. Senior citizens and parents of girl children can claim deductions by investing in Senior Citizens Savings Scheme and Sukanya Samruddhi Yojana subject to the overall Rs 1.5 lakhs 80C limit. Investors paying home loan EMIs can claim deduction for principal payments made during the financial year. Benefit extended till June 30th.
  • Section 80D (Medical insurance): You can claim Rs 25,000 of additional deduction for medical insurance premiums for yourself and your family (seni or citizens can claim up to Rs 50,000). You can claim a further deduction of Rs 25,000 for medical insurance premiums of dependent parents (Rs 30,000 if your parents are senior citizens).  Benefit extended till June 30th.
  • Section 80CCD (NPS): You claim additional Rs 50,000 deduction, over and above Section 80C limit of Rs 1.5 lakhs, by investing in National Pension Scheme. You can claim total deduction of Rs 2 lakhs by investing Rs 1.5 lakhs u/s 80C and Rs 50,000 in NPS. Benefit extended till June 30th.
  • Section 24 (Interest payment on home loan): You can claim up to Rs 2 lakhs deduction for interest payments in your home loan EMI for self-occupied house. If you are paying home loan EMIs for a let out house, the loss is restricted to Rs 2 lakhs in a financial year.
  • Section 80E (Interest payment on higher education loan): If you have taken loan for your, spouse or children’s higher education, then the entire interest payment can be claimed as deduction from your gross taxable income.
  • Section 80G (donations to charities): Donation made to tax exempt charities is allowed to be claimed as deduction at the rate of 50% or 100% (of the contributed amount) depending on the charity and as per approval granted by prescribed income tax authorities.

 

  • Check your surcharge bracket:  You maybe able to claim exemptions/deductions and set off your losses to reduce your net income to below the surcharge brackets (Rs 50 lakh / 1 Cr / 2 Cr / 5 Cr) if your income is on the border.  Plan before March 31st, because only tax saving investments are extended till June 30th.

 

  • Pay Advance Tax by March 31st: Tax payers who have income from other sources (e.g. rent, FD interest, capital gains etc) should make sure that they pay advance tax by March 31st, 2020. If you have worked in two different companies, you are likely to have to pay additional taxes for the year when you consolidate the two form 16s. If do not pay Advance Tax on time, you will have to pay interest @ of 0.75% per month of delayed tax payment (reduced from 1% per month for the period upto June 30th), even if you file your IT returns on time. For example, if your tax obligation over and above tax deducted at source (TDS) on March 31st is Rs 5 lakhs, you will have to pay Rs 16,250 as interest if you are filing your ITR and paying tax on July 31st

Summary

You can save a lot of money in taxes by availing the benefits available under different provisions of Income Tax Act. In this article, we have shared with you a checklist of items that you should review and make sure that you get maximum benefits. In addition to the tax savings avenues shared in this article, there may be other depending on your specific situations. If you need help with your tax planning feel free to email us at contactus@righthorizons.com .

Should I invest in NPS?


Should I invest in NPS?

NPS or the National Pension Scheme is relatively a recent introduction by the government. The NPS helps individuals to plan for their retirement income. Being a long term need it encourages people to invest into NPS from an early age by also giving tax benefits while you invest.

Talk to our certified “Senior financial planning advisors and Investment Advisory ”.

* – If you are salaried, upto 10% of your salary can be invested into NPS. There is an additional deduction available for NPS to the extent of Rs 50,000 which is over and above the limit of section 80C.
* – NPS is a low cost scheme that allows you to choose how the funds are invested. You can invest both in equities and also safer debt instruments. The equity exposure is capped to 50% for investors, which reduced the flexibility.
* – One needs to keep in mind that NPS is has restrictions on withdrawals. One can withdraw amounts for specific needs.
* – After 60 years, 60% of the corpus can be withdrawn in lump-sum. This has now been made tax free. The pension that you receive is taxable.
* – NPS is definitely and option to consider as part of one’s pension planning. It provides tax benefits on investing and is a very low cost scheme. On the flip-side keep in mind that the scheme is not as flexible as avenues like Mutual Funds and liquidity is poor.

Talk to our certified “Senior financial planning advisors and wealth managers”.

Call us +91 98453 99780
Email : contactus@righthorizons.com

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How do I retire early


Let me give you an example of myself. I had a goal of retiring from corporate life and getting into the entrepreneurship mode at the age of 35. However, I was able to do this almost 5 years earlier. I will share with you what actually helped me achieve this goal of mine.

Talk to our certified “Senior financial planning advisors and wealth managers”.

* – Firstly, you need to outline your goal clearly. Many people I know do not end up achieving their goal is because they have a moving target.
* – Secondly, you need to have a clear game plan for the same. Ideally, you should do a financial plan and then decide on a practical time frame for retiring.
* – Thirdly, be disciplined as you work towards your goal. This is actually the most boring phase and needs to be followed though over many years. Hence, tracking on how you are doing Vs your goal is an important factor towards achieving your goal.
* – You need to be able to find the right mix of aggression to be able to achieve your goal early, but also be cautious so as not to lose you returns.

Talk to our certified “Senior financial planning advisors and wealth managers”.

Call us +91 98453 99780

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The Ultimate Secret Of FINANCIAL PLANNING

We all knows the game called Kahn Banger Crorepati 

Show Host – Amithab bachan !  

And crorepati cheque has taken by only one women in India I.e Binita Jain

She won final cheque in episode and is planning to utilise the winning amount to set up a dental clinic for her son.

Do You know KBC ?

KBC( Kaun Banega Carorepati)   was launched for the first time in July,2000. It is a  show which provides  healthy entertainment and also helps in enhancing knowledge. 

Every one loves to be their in hot seat and try to ans all the Questions and get the big cheque from the hands of film star

Now let u also know this one more person who withdrawn Rs 2.3Cr   with a small investment like 1 lakh now his bank got 230 times more from what he just invested.


ELSS vs Equity Diversified Mutual Funds

Life is all about competition.  Who is the best? Are you good or is your friend better? There is competition even among personal finance products. While most personal finance products are good, which one would help meet financial goals. This is the call you have to make.

This is a story of a fight between two friends, Satish and Suman. Not a physical fight, but an intense competition. Both of them were in their early thirties and worked in reputed IT Firms. They liked to compete with each other and today the fight was which financial product was better. Was it ELSS or equity diversified mutual funds? Satish says ELSS and Suman says equity diversified funds. Who is right?

For those who don’t know, an equity diversified mutual fund invests in stocks across sectors. If you are an aggressive investor, try equity diversified mutual funds. Money is in stocks and there’s a measure of protection as the investment is spread across sectors like pharma, IT, Oil and Gas, Automobiles and so on, called diversification.

Lets take a look at the opponent, Equity Linked Saving Schemes or ELSS. ELSS is a type of equity diversified mutual fund where most of the investment is in stocks. It has a compulsory 3 year lock-in which means you cannot touch this investment for 3 years. What’s special about ELSS is it’s the only tax saving mutual fund. ELSS enjoys a tax deduction under Section 80C of the income tax act, up to Rs 1.5 Lakhs a year. Does this make ELSS better than equity diversified mutual funds? Let’s find out.

ELSS vs Equity Diversified Mutual Funds

ELSS is a long term investment

ELSS has a 3 year lock-in and forces you to stay invested for this time period. Equity is an excellent investment only if you stay invested for the long term. A bare minimum of 3 years is a must. This is where ELSS scores over equity diversified mutual funds.

Equity diversified mutual funds have no lock-in and allows an exit, whenever you wish. This is bad for you as most investors exit when stock markets crash. The key to make money in stocks is to stay invested in the market for the long term. Invest in ELSS with a time horizon of 7 years.

ELSS Saves Tax

Lets say you invest the same amount in an equity diversified scheme and an ELSS. Both of them give the same returns, but ELSS wins over the diversified fund as it enjoys the Section 80C benefit. ELSS is an excellent investment if you fall in the higher tax brackets.

If you fall in the 30% tax bracket, invest up to Rs 1.5 Lakhs a year in ELSS and save Rs 46,800 a year. ELSS enjoys Section 80C tax deduction and beats equity diversified mutual funds.

ELSS is like killing two birds with one stone. You get good returns and you save tax. Top ELSS schemes have given an average of 16-20% over 5 years. This is higher than equity diversified schemes. Then there’s the tax benefit.

Satish earns Rs 11 Lakhs a year and falls in the 30% tax bracket. He invests Rs 1.5 Lakhs a year in ELSS via SIPs. This helps him save 30% on Rs 1,50,000 which is Rs 45,000 + a cess of 4% which is Rs 1,800. Satish saves Rs 46,800 a year by investing in ELSS.

ELSS is a stepping stone to equity diversified mutual funds

In recent times many first-timers are investing in equity. Novice investors are rushing to equity diversified mutual funds without understanding them, in the hope of quick profits.

Why not first invest in ELSS and then try equity diversified mutual funds? ELSS with a compulsory lock-in, forces you to stay invested for the long term. ELSS handholds you and helps get familiar with equity. You can now invest in equity diversified funds with confidence and make a profit.

Today, stock markets are falling and many first-time investors are heading for the exit in panic. Many of these investors have bought high and sold low, taking home immense losses. If these panic-stricken investors had invested in ELSS, they would not have been able to exit the stock market and in a few years, they would have seen profits.

What do you take home from this article?

  • ELSS sticks to the top 500 Companies and an ELSS comparison must be made with large-cap funds.
  • ELSS generally beats large-cap funds as it enjoys a tax advantage.
  • ELSS enjoys true competition from multi-cap funds, which invest in large-cap, mid-cap and small-cap Companies.
  • ELSS funds have locking, but face lesser redemption pressure on market falls and hence could deliver superior returns in the long term.