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What is SWP in Mutual Funds?

SWP is an abbreviation that stands for “systematic withdrawal plan.” Similarly to how you can automate your mutual fund investments, you can also automate withdrawals. You can get a certain amount of money every month at a set time. The sum can be either fixed or variable. SWP is most commonly used after retirement. SWP allows investors to withdraw monthly, semi-annually, quarterly, or annually. If you want to invest in a mutual fund but want a steady flow of income, SWP is for you. You can use a systematic withdrawal plan to create a varied portfolio. This will assist you in achieving various financial goals. You can choose to invest across multiple asset classes or in a single fund with a focus on a specific asset class. [B-01] Let’s learn about SWP in Mutual Funds, what it offers, how it works, and so on. What is SWP in Mutual Funds? SWP in Mutual Fund allows investors to withdraw fixed sums from their current assets at regular intervals. A systematic withdrawal plan is the opposite of a SIP. It will enable you to create a plan to get a fixed amount from your mutual funds on a given date and at regular intervals. It lets you withdraw money in instalments instead of all at once. With SIP, your monthly funds are invested in a mutual fund. On the other hand, when you select an SWP plan, you direct the money to your savings bank account rather than the mutual fund scheme. You can tailor your cash flow to your preferences and needs. This can be done by creating withdrawal plans on a monthly or quarterly basis. Investors can withdraw a certain amount of capital gains from their mutual fund investment. You can reinvest that money or use it in its current cash form without making any changes. Let’s look at an example to help us understand better: Let’s say you put Rs 100,000 into a mutual fund for a year and decided to take Rs 5,000 every single month from the MF. This means that Rs 5,000 will be deducted from your investment every month and returned to you. The amount of money still invested after each month has passed will continue to bring in profits from the investment. Why is SWP (Systematic Withdrawal Plan) Necessary? The ups and downs of the market have a direct effect on mutual funds. Especially when the date of maturity is getting close, the changes may hurt the NAV. The market is uncertain, and most mutual funds’ values change based on how the market is doing. So, if you want to get your money back in stages, the SWP plan is a good choice. When you are in a position where you require cash or have other needs, you can rest easy knowing that you will have access to the money. An SWP in a Mutual Fund is a good way to have a second source of income. Except for your monthly payment, it is also a good way to save money. It provides you with a steady flow of income, whether monthly, quarterly, or annually. You can choose this duration based on your choice and the method you use to take the money. How Does an SWP Work? When you, as an investor, decide to use a system called an SWP plan (Systematic Withdrawal Plan), this decision will also impact the mutual fund account. It is essential to remember that opening an SWP account differs from opening an FD account, from which you will typically receive monthly interest. When you withdraw from an FD, the interest you get is deducted from your balance, but the principal remains unaffected. On the other hand, when you use SWP in mutual funds, the fund’s value goes down by the number of units you take out. Benefits of Using SWP The following is a list of benefits that come with using the Systematic Withdrawal Plan: Regular Income SWP plan is designed to generate steady passive income for investors. Therefore, SWP is a cool option for people who need a steady income stream. This can help satisfy the ongoing financial needs of day-to-day activities. It gives you the added benefit of using cash to cover your money needs. Flexibility SWP brings flexibility to mutual funds. It allows you to choose the amount, timing, and frequency of the payments to meet your financial needs. You have the choice to pull out of a mutual fund investment at any time. You can also add more money to your holdings in the fund. You are free to withdraw any asset according to your specific choices, wants, and needs. No TDS In contrast to capital gains, the SWP does not involve any TDS, which is the finest feature of this plan. Capital Appreciation In most cases, the rate at which one can withdraw money from the SWP is lower than the rate at which one can earn money on those funds. It also gives you a chance to see your money grow over time. Who Can Use SWP? A Good Source of Income It provides investors with a steady means of earning income. SWP can become your second source of income. This will be beneficial to you anytime you encounter a difficult financial situation. It can assist you in covering other expenses, such as living costs. Investing in a long-term mutual fund scheme and taking a fixed amount out each month as an SWP is a great way to get a steady flow of income. Individuals That Fall Into the Highest Tax Bracket Because there is no TDS on capital gains, SWP can be beneficial to those in a high tax bracket. At the same time, equity-focused mutual funds have a more manageable capital gains tax rate. Having the Desire to Establish Their Pension Plan SWP plan is also ideal for investors who wish to establish their pensions by placing investments in the corpus mutual fund plan according to the level of risk they are comfortable with. It allows them to earn a consistent income that they can put toward the formation of their pension plan. [B-02] Conclusion A mutual fund investor who takes the time to learn about the SWP plan will realise that it’s an intelligent way to ensure a steady cash flow. It is also possible to configure an SWP to allow withdrawals of only the fraction attributable to the accumulation of capital gains. The returns are tax efficient, and there is no TDS on profits, which significantly differs from most traditional investment options. To learn more about mutual funds and other investment options, visit Piramal Finance. They have many blogs and articles to improve your finance skills.

08-11-2023

Investment

What are the different benefits of investing in gold?

Gold as an investment will never break your expectations. In India, gold is considered a stable investment option apart from ornamentation. Gold trade and investment range from physical gold to virtual one. However, every form of gold is valued. This article will guide you through the top reasons that you should consider investing in gold. [B-01] Why is Gold so valuable for Investing? For centuries, gold is highly regarded on a global scale due to its worth and rich history. Gold as a metal will never lose its quality. It is lustrous and will not corrode. This makes gold a precious tool for investment too. The other reason for its value is the scarcity and the high demand. With these, you can now explore the top benefits of investing in gold. What are the benefits of investing in Gold? Higher Liquidity Liquidity refers to the degree to which something can be converted easily into ready cash. In terms of liquidity, nothing can beat gold. Gold can be converted to ready cash, unlike currency. For example, the Indian rupee can be used easily in India. But when you go to other nations, you must approach a forex market or other dealers. However, this is not the case when it comes to gold. Gold can be converted easily on a global scale. Shelter from Recession Throughout history, the recession has never affected gold. A recession is a period of low economic activity and negative economic growth. When you invest in gold, you will easily overcome the burden of recession. This is because gold will never lose its value. Security against Inflation Investment in gold is not affected by inflation. Inflation refers to the general rise in prices. It is also the time when money loses its value. In other words, the purchasing power of money will decrease. If you look at the price rise of gold, throughout the past, you will invest in gold without a doubt. The gold price has doubled in the past five years and quadrupled (increased four times) in the past ten years. Physical Asset (Tangible Asset) Gold is a physical and tangible asset. You can happily feel it and touch it. Investing in gold is not like a stock or virtual money or bitcoin. No one will hack or steal your gold digitally. This is the best benefit of investing in gold. Easy Purchase Unlike stock and other investments, purchasing gold is easier. There will be no lengthy formalities and requirements. Even when you buy some tangible assets like land or other property, formalities will be more. This makes investing in gold a better option. Investing in Gold is not a Rocket Science If you are planning to invest in a stock or mutual fund, you need specialised knowledge of the market, government policies, etc. But this is not the case in gold investment. All you need is just go, buy and store them. You don’t want to track any market conditions. No need for a Bulk Amount to Invest at a time When you start investing in gold, you can start by taking baby steps. You can save very small amounts and buy accordingly. You will not end up with a lump amount of money as you do in real estate or stocks, or bonds. Risk-Reduction As said earlier, investing in gold reduces the risk of liquidity, inflation, and others. It may be a geopolitical tension, a natural disaster, law and order, or any phenomenon. Gold is always gold! You can liquify it anywhere. Less Maintenance This is the best advantage you could reap from investing in gold. Gold requires less maintenance. Unlike a real estate property, you don’t want to visit it often, clear the weeds, clean the surroundings, etc. But you can never ignore the cost of a box or a bank locker! Perfect Legacy for your Generations Investing in gold is the best legacy you can gift to your future generations. It is also very easy to pass on to the next generation. You don’t want to write a will, look for a property bond, etc. Loan against Gold Investing in gold will also help you in times of emergency. You can pledge your gold as collateral to a lender or any trustworthy institution like Piramal Finance. You can get your amount and pay the interest till the period. After paying the lender will return your gold. Gold Investment Options in India Gold is in different forms such as the following Physical Gold: Physical Gold is what you see in jewelry shops. Physical Gold includes ornaments, bars, and coins. Bars and coins are best for investing when compared to gold jewelry with stones. Digital Gold: The world is becoming more digital and so is the gold. Digital gold is what you can not see through your physical eyes. It is also called e-gold which is almost like stocks. You can buy it for as low as one rupee. Gold ETFs: ETFs are Exchange Traded Funds. Here, you will invest in physical gold on the stock exchanges. These are passive investments in gold. Gold Mutual Funds: Gold Mutual Funds are mutual funds. Here you can invest in gold reserves either directly or indirectly. Gold Loan Interest Rate The gold loan interest rate differs generally from lender to lender. But it ranges from 7% to 29%. The gold loan interest rate also depends on the quality of the gold that you have. i.e, the purity of the gold. [B-02] The Bottom Line We hope that you understand the benefits of investing in gold and the investment options available. Then why doubt? Invest in gold, may it be a recession, inflation, law and order, natural calamity, etc. Gold investing is a cushion in any of these unforeseen conditions. You can get the best gold interest rates in Piramal Finance. Piramal Finance also helps you with any of the financial processes with its expert team. Kindly contact Piramal Finance for doubts, if any.

08-11-2023

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Things To Keep In Mind When Investing In The US Stock Market

Well, you do indeed need to save money for the future. But merely saving money is not enough. You need to make your money grow. This will help you beat the impact of inflation and create a corpus for your future needs. There are many investment schemes present in the market. Though one of the most popular options is stock market investment. When you invest in the stock market, you buy equity shares of various enterprises. Investing in the stock market today is very easy. You can do so with the help of your Demat account on a computer or mobile app. Thanks to the latest technology, investing in the US stock market is now viable. Yes, you can buy shares of companies listed on the US stock market. This option allows you to invest in some of the leading companies that you could not access otherwise. But is it easy to make a stock market investment in the US? What things should you keep in mind? Read on to learn more. [B-01] Fractional ownership of shares In India, you can invest at least one share, i.e., no part-ownership. In the US market, the price of one share can go into the hundreds or even thousands of dollars. E.g., Berkshire Hathaway’s share is priced at around $460k, which means around INR 3.75 crores! As an investor from India, it can be hard for you to spare such a huge amount for only one share. Hence, the SEC in the US has made it easy for small investors to own a part of the companies listed on the US stock market. This is known as fractional ownership under stock market investment. Herein, you can own less than one share of a company, and other investors will own other parts of the shares. This way, you can own anywhere from 1% to 100% of a share in the US stock market. Foreign Exchange When you invest in the stock market today in India, you must invest in Indian Rupee. Likewise, you will have to use US dollars if you invest in the US stock market. But this means you first need to convert your money into US dollars. Only then will you be able to invest in the US stock market. However, this is where another issue arises. The exchange rate between the US dollar and the Indian rupee changes every day. Hence, a stock that costs you $100 today might cost you $101 if you invest in it after a couple of days. So, you need to find out about the present exchange rate before you convert your Indian rupees into US dollars. You will also have to pay a markup based on the agent you choose in this process. This is a fee levied by the agent or the bank for currency conversion. This is one more cost that you need to factor in. Tax Impact Like the profits you make from the stock market in India, profits from US stock markets are also subject to the tax laws of India. So, to invest in the US stock market, you must be familiar with these laws. This will help you avoid any errors in the future. You can be subject to types of taxes in India regarding the US stock market investment, capital gain tax and tax on dividends. A common issue that confuses most investors is that of double taxation. As an Indian, you must pay taxes in India. As an investor in the US, you must also pay taxes to the US government. So, will you have to pay the taxes twice? No, there is an agreement between the USA and India known as the DTAA. This treaty deals with the issue of double taxation and how to avoid it. Per the DTAA, Indian citizens who are making an income in the US do not need to pay taxes twice. This means you will only have to pay taxes on your profits in India. Maximum Amount Earlier, it was hard to make a stock market investment from India in the US. There were many rules that you had to follow. Recently, RBI has made it easy for Indians to invest up to a given amount outside India. This amount is given as per the rules of the Liberal Remittance Scheme, or LRS. Per the present rules, you can invest or send up to US$250,000 outside India without approval. After that, you will need to get approval from the government. This money can be used for US stock market investment. Hence, you need to make sure that the total amount of money you want to invest in the US is not more than $250k in one year. If you plan to invest more than this amount, you will have to get permission from India’s government. [B-02] If you want to invest in the US stock market today, all these points must be considered. This will help you make a wise stock market investment. Though you must learn more about this topic before making a decision. Visit Piramal Finance, which has many articles and blogs to help you learn more about the stock market. This will help you learn skills to make wise investment decisions for your future. Their experts always help you find the best financial products to meet your needs.

08-11-2023

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All You Need To Know About The Importance Of Retirement Planning In India

Your life will never be the same after you retire. There is no need to go to the office and work long hours. No need to worry about targets and meetings. But what about money? Yes, once you retire, your regular source of income will no longer be there. You still need to take care of your living costs and other expenses. This is where the need for retirement planning comes to the fore. It is vital to plan for your retired life while you are still active at work. This will allow you to learn how much you are earning and how much you can save for your life after you retire. There are many factors that you need to consider during retirement planning. Read on to learn all about the importance of this exercise and its impact on your future. [B-01] Start Backwards You need to learn how much money you will need to lead a comfortable life after you retire. There are several factors that you need to take into account here, including Age. Income. EMIs. Life Goals. Cost of Living in Your City. Money Needs Every Month. Insurance Plans. You can make an informed decision when you factor in these aspects in your retirement planning. You don’t want to be in a situation where you didn’t consider these factors. Otherwise, you will struggle to make ends meet after you retire from active work. Retirement Pension Plan You must invest in a pension plan. If you are not covered under a pension plan by your employer, whether in the public or private sector, then you are on your own. With inflation, the cost of living will increase in the future. Moreover, your need for medical care will also increase as you get older. Hence, you need a regular source of income that can help you lead a comfortable life. This is where having a retirement pension plan becomes vital. You can choose to invest in the National Pension Scheme, or NPS. You invest a given amount in the NPS every month until 60. In many cases, your employer can also invest in NPS as a part of your pay package. When you turn 60, you will get 60% of the amount as a lump sum, and the remaining 40% will be used to purchase an annuity. This annuity plan will give you a fixed pension every month. You can also subscribe to the Atal Pension Yojana, which will offer you a regular pension after you turn 60. Else, you can get a retirement pension plan from different insurance companies or NBFCs. These companies offer you the benefit of a regular pension after you retire and several other benefits. The best part about a retirement pension plan is that you can also get income tax benefits from it. Invest in Mutual Funds Mutual funds also offer you many benefits and make a good investment option for your retirement. Most experts agree that you can earn excellent returns when you invest in mutual funds with a long-term horizon. Then, you also get the benefit of compounding, wherein your interest income is re-invested, helping you earn even more interest on the money. You can choose from many types of mutual funds, such as equity, hybrid, or debt funds. The best mutual funds for retirement planning are debt or hybrid funds, as they have less risk than equity. You may also keep your money in equity or hybrid funds when you are young. As you cross 50, then you can move that money to debt funds to reduce the risk. After you retire, you may sell your best mutual funds for retirement and invest in a pension plan. Otherwise, you can opt for an SWP, wherein you get a fixed amount every month while the remaining money still earns profits. Risk-Free Options One vital part of retirement planning is reducing future risks. One thing that the pandemic has taught everyone is that life is uncertain, and the need for money can arise at any point in time. Hence, it is vital to have a balanced investment profile. You must have a mix of risk-free and risky investments here. On the one hand, you can invest in shares and mutual funds. On the other hand, you can also explore risk-free options. These options include fixed deposits, PPF, NSC, and other saving schemes. While these schemes offer less return than investing in equity, they do not carry any risk. So, you must also invest a certain monthly sum in these options. Another benefit of these long-term, risk-free options is that they offer tax benefits as well. Not only is the money you invest subject to tax rebates, but the corpus you get after their maturity is also tax-free. [B-02] To keep your medical costs under control, you also need to have a comprehensive mediclaim policy. This will ensure access to quality care without needing to use your savings. If you have a long time horizon, these risk-free options can also give you a lot of freedom after you retire. Retirement planning is a vital part of your life. You need to start planning for it as soon as possible to have a decent corpus by the time you retire. There are many options to choose from. Hence, you need to compare their pros and cons before you make a decision. If you want to learn more about the best mutual funds for retirement or a retirement pension plan, visit Piramal Finance. They have many blogs and articles that cover this topic in detail. Hence, you can make sound financial decisions after you retire.

08-11-2023

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Benefits of Forex and Currency Trading in India

Do you want to start trading? Do you want to start selling but don’t know about forex and currency trading in India? Do you know that forex trading helps increase your trading capital? Accessibility, liquidity, and globalisation are among the main reasons why the foreign exchange market is so vital. The FX market trades $5 trillion daily, significantly more than the NYSE. In India, daily transactions are soaring. Previously, only banks and institutional investors had made significant investments in this market. With derivative products, even individual investors can leverage this market. In this blog, you will learn all about forex and currency trading in India. [B-01] Benefits of Forex and Currency Trading in India Here are the advantages of forex trading in India: Global Market There are traders in the forex trading market from all over the world. On average, there are transactions worth over $4 trillion every day. Trading benefits greatly from the market’s sheer size. Massive and International The foreign exchange market is truly global because traders from all over the world take part in it. The fact that more than $4 trillion is traded every day shows how important the foreign exchange market is. Most of the other good things about the market as a place to trade forex trading come from its volume, in addition to its size. Excellent for Beginners Forex trading is a good choice for new traders because it is easy to get started. Brokers in the foreign exchange market often provide practice accounts for forex trading. These give new traders a chance to try out their skills in a simulated version of the forex market before they invest any real money. Constant Trading Hours The foreign exchange market is open 24 hours a day, 7 days a week, as long as there is an open market somewhere in the world. For instance, the New York Stock Exchange (NYSE) opens for business at 5 p.m. on Sunday and stays open until Friday at 5 p.m. Leverage By borrowing money from foreign exchange brokers, retail forex traders can open large positions. Leverage ratios are a common way to talk about how much of the money came from borrowing. For example, if your leverage ratio was 1:30, your market investment would be 30 times bigger. Liquidity The foreign exchange market is widely regarded as the most liquid market in existence because of the high volume of forex trading that occurs there around the clock. The term “liquidity” is used to describe an asset’s capacity to be bought and sold with little loss in value. Liquidity in the foreign exchange market lets you make safe trades. Volatility The market is affected by a wide variety of factors, including geopolitics, economic stability, regulations, natural disasters, and trade agreements. All it takes is a minor improvement in any one of these for the market to move drastically. The term “volatility” describes the degree to which a market reacts to changes. Currency value fluctuations that are favourable due to these factors might provide substantial gains. If the values are impacted negatively, however, forex trading may sustain heavy losses. Trading in Either Direction is Permitted In contrast to the stock market, you can trade in either direction or in a neutral way on the foreign exchange market. You can easily go long or short on a currency based on how you think its value will change. Traders are always buying or selling a currency, depending on how the market is doing. Because currencies are so easy to buy and sell, there aren’t as many transaction fees when trading them as there are when trading stocks. Reduced Fees for Financial Dealings You can get started with online foreign exchange trading with a small amount of money. The spreads are what pay the broker’s fee, which is the same as the cost of the transaction itself. The spread is the difference in percentage between the ask and the bid price. It can be shown either in pips or points. Technology One of the benefits of the foreign exchange market is that its players have readily adopted technology despite its novelty. There is an abundance of desktop and mobile programmes that enable international trade in real-time. Forex Trading Hours Every day of the week, from 9 p.m. on Sunday to 10 p.m. on Friday, the foreign exchange market is open (GMT). Currency transactions happen during these long hours because they are done directly between parties instead of through a central exchange. Also, because forex is a truly global market, you can always take advantage of the different active sessions’ currency trading hours. The hours that the currency market is open will change in March, April, October, and November because different countries change their clocks on different days. High Forex Liquidity The foreign exchange market is the most liquid market in the world. This means that a lot of buyers and sellers want to trade at any given time. People, businesses, and banks exchange more than $5 trillion in cash every day. Since the forex market has a lot of liquidity, transactions can be done quickly and easily, which keeps transaction costs low. This lets traders bet on price changes that are only a few pips big. [B-02] Summing Up Dynamic and inclusive, forex trading has advantages over other markets. A skilled trader can profit from the foreign exchange market. Once a trader enters the currency market, there’s no turning back. Even when the domestic market closes, the world market is open. Millions of traders work hard every day to profit from the decentralised market’s growth. Also visit, Piramal Finance for more in-depth, finance-related articles

08-11-2023

Investment

Equity or Commodity? Where to invest?

Investing money is one of the best ways to gain financial security. It has become one of the most lucrative job options for millions across the globe. Investing in the right market with the right strategy yields higher returns. Learning about market volatility, the nature of the investment, and the risks involved in it will determine how far the investment journey is going to go. There are various options for you to choose from. Equity investment and commodity investment are the two most popular options. Both equity investment and commodity trading have higher return rates. But they behave differently under different conditions. There are certain differences between them, as they suit different investment goals. Not only that, but in terms of ownership, market structure, and different levels of risk factors, both options differ from each other. Do you want to know which one is a better option, equity or commodity trading? Then read on to learn the difference between equity and commodity investment. [B-01] What is the equity market, and what is the meaning of equity investment? In the equity market, you buy shares of publicly-held companies and gain a part of the ownership. So, in a nutshell, the market where the buying and selling of these stocks happen is known as the equity market. To be able to trade and invest in stocks on the stock market, you need to have a trading and depository account. You have to permit a brokerage firm to continue investing and trading in stocks. The brokerage firm connects with your relevant stocks and carries out the trade on your behalf. Now that you know what an equity market is and its requisites, it is time to learn about the commodity market and commodity investment. What is the commodity market, and what is the meaning of commodity investment? A commodity is a type of resource that you use in your day-to-day life. Though, in commodity trading, all the commodities are tradable and yield returns. There are two broad types of commodities. First, there are the harder ones, like gold or silver, and the softer ones, like agricultural products and livestock. So, that means a commodity trading platform is a place where the buying and selling of similar products happen. This place can either be physical or virtual. The investment can happen in various ways. It includes direct commodity investment and purchasing commodity futures contracts. What are some of the differences between equity investment and commodity investment? There are a number of differences between equity and commodity investment, and they are: Result of Inflation If inflation is used as a guideline, it is bad news for the stock market. Equity markets perform badly during inflation. This is because of the simple fact that the shares of the company can fall. As they fall, their share prices are also going to fall. But in the case of commodity trading, it performs better during inflation and yields a higher rate of return. You can sell the commodities you hold even at a higher price than you had actually planned. However, for an experienced investor, both equity and commodity investment can yield higher profits. Ownership For equity markets, the ownership of the company remains in your hands, up to a certain percentage. You buy shares of a company in your name. Hence, you have the right to influence certain rules, regulations, and decisions of the company. You might have to wait for favourable conditions. Then you can sell it to another company to gain more profits. As a result, the company’s ownership is transferred to another investor. In the case of commodity trading, such things do not happen most of the time. You don’t have an ownership feature, where you can share the ownership with another investor. The reason for this is that you are probably eligible for future contracts in commodity trading. So, with future contracts, you don’t stand a chance of sharing any type of ownership. Volatility From the perspective of market volatility, commodities are way more volatile than stocks. Commodities like gold, silver, or oil have higher volatility trends in comparison to those stocks. The simple reason is that in commodity trading, commodities have low liquidity. They are influenced by factors like geopolitics and the supply-demand chain. Time factor The time horizon for both the equity market and the commodity market is different. Stocks can be held for both short-term and long-term purposes. This depends on the goals of the investor. Stocks can be held for as little as a trading day or for a longer period. This makes them an ideal long-term investment option. In the case of online commodity trading, the commodity market usually trades in contracts. These contracts have a shorter duration. These commodities have an expiration date as well. This makes it vital for the investor to trade them within a period of time. Margin requirement There are different margin requirements for both equities and commodities. The margin in commodity trading and investment is much lower than that in equity trading and investment. [B-02] Wrapping it up When it comes down to choosing the ideal option, there is no clear answer to that. Both equity and commodity investment have their pros and cons. They behave differently in different environments. The key factors that distinguish them for an investor are their risk appetite and their investment goals. If you have a long-term investment goal and are eyeing a big profit, then you can invest in equity, depending on your risk. If you are aiming for a short-term investment goal, then commodity trading and investing are good options for you. If you’ve read this far and want to learn more about equity and commodity investing, you can go to Piramal Finance. They have many articles and blogs to help you learn more about the world of finance.

08-11-2023

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All You Need To Know About Features And Advantages Of Maturity Plan

Are you looking to diversify your portfolio? Consider fixed maturity plans. These are a type of mutual funds popular among investors who do not like high-risk investment options. A fixed maturity plan commonly called an “FMP,” is a closed-ended debt mutual fund. It gets paid off at the end of a fixed period. They are a great investment option for investors who are looking for quick profits and do not want to take a risk with their money. Fixed maturity plans provide better returns compared to bank fixed deposits. [B-01] Investments in fixed maturity plans can be made at the time of the rollout of the new fund offer (NFO) itself. These are closed-ended funds. So you can not invest money in them once the NFO period closes. You get both your principal and the interest back upon maturity. As we mentioned before, fixed maturity plans are preferred by risk-averse investors. Remember that they are not risk-free. We will learn more about this in the next section. How does a fixed maturity plan work? At the core, they are mutual funds and work like a mutual fund itself. Each maturity plan has a net asset value or NAV. When you invest money in an FMP, your money is invested by the fund’s portfolio manager into a variety of fixed-income instruments with varying maturity dates. The fixed maturity plan itself has a maturity date. So the fund manager chooses instruments whose maturity dates match those of the FMP. Your money is invested in various fixed-income instruments. So you will be given an indicative return while investing in the FMP. However, remember that this return is indicative only and not fixed. Hence, you can get lower returns but higher ones as well. Fixed maturity plans to invest in debt instruments. So they are affected by economic events, interest rate fluctuations, and other factors that affect the debt market. However, the beauty of FMPs is that they can offer you higher returns than traditional debt instruments. They don’t take unnecessary risks. Who should invest in a fixed maturity plan? These instruments are ideal for individuals with a low-risk profile or looking for secure investment options with lower fluctuations compared to the stock market. If you are a stock market investor, fixed maturity plans can be an effective tool for you to mitigate the risk of your stock market investments. Features of a fixed maturity plan Close-ended A fixed maturity plan comes with a definite completion period. This means that your investment will remain locked in until the time of maturity. The most common lock-in period is 3 years. Returns can be predicted A maturity plan invests in fixed-income instruments. These are corporate bonds, certificates of deposit, commercial papers, highly rated non-convertible debentures, government securities, and different kinds of money market instruments. Each of these has either fixed or tentative maturity dates and yields. Hence, you can get an idea of your approximate returns in advance. This is communicated during the new fund offer stage. Hence, it is possible to more or less predict the returns from an FMP. Diversification of a portfolio Whether you are a high-risk investor or have a low-risk profile, a fixed maturity plan can be a great addition to your portfolio. The overall outlook of this portfolio is to keep the risk profile low. So they can help you with diversification by reducing the overall risk of your portfolio. Benefits of investing in a fixed maturity plan Tax efficient From a taxation perspective, fixed maturity plans are treated similarly to debt mutual funds. If you hold an FMP for less than 3 years, you have to pay taxes on short-term capital gains as per your income tax slab rate. If you hold it for more than three years, you will have to pay long-term capital gains at the rate of 20% on the total returns. Stability Debt market instruments are generally less affected by stock market fluctuations. This benefit flows into maturity plans as well. Your money is locked for a specific duration in an FMP. So the fund manager has more freedom to move the money from one debt instrument to another to maximise returns for you. Limited risk A fixed maturity plan is not risk-free. It has less risk as compared to mutual funds and other forms of investment planning. The main drawback is that your money gets locked in until maturity. But then, that’s the case with all other debt instruments as well. Constraints of fixed maturity plans Lower yields If you compare the yield of fixed-maturity plans with equity mutual funds, the earnings are lower. Moreover, fixed maturity plans do not benefit from cyclical movements of the stock market. However, they do benefit from other factors such as interest rate fluctuations and economic cycles. Lock in period As we mentioned at the beginning itself, your money will be locked in once you invest in a fixed-maturity plan. This can be a hindrance if you need the money in between. You might face a dilemma in your life when you have to decide whether you should invest your money in a fixed maturity plan or a fixed deposit. Well, you are not alone. Thousands of people face the same kind of situation in India. [B-02] The best way to resolve this confusion is to ask yourself whether you are willing to take a little amount of risk to give yourself the chance to earn some additional returns. If yes, this instrument is meant for you. Communication of the expected return at the time of investing itself provides peace of mind. Furthermore, estimating total earnings from the start aids in accurate financial planning. Visit Piramal Finance for further details.

08-11-2023

Education

Why is Advertising Important for Small Businesses?

As a small business, it is not easy to compete with big brands. With their huge advertising budgets, you might be worried that your company would go unnoticed. Luckily, there are many smart advertising techniques designed for small businesses that can give your business just the right amount of push. Usually free of cost, they come with several benefits. But first, let us understand why advertising is important for your small business. [B-01] Benefits of Advertising for Small Business Although a small business has a lot to offer, it faces tough competition from big, well-known brands that may or may not have been around for long. Advertising, however, can level the playing field for everyone. Let us take a look at other advantages of small business advertising: Builds GoodwillAs a small business, you need to be creative with your advertising. This helps you build goodwill. A recognisable name will lead people to your brand instead of your competitors. Advertising allows people to learn more about what you offer, helping you increase sales. Improves Customer LoyaltyAdvertising helps build trust among customers. This helps to create a personal connection to your brand. The connection can lead them to become loyal customers who are willing to buy from you time and time again. This results in increased sales and profits for your company. Attracts New CustomersWhen a small business advertises, it is imperative that the advertisement reaches the right audience. Without advertising, a business may go unnoticed by potential customers and fail. Advertising brings new customers to your doorstep in more ways than one. First, advertising creates awareness about your brand. Second, it draws attention to your company or service, which boosts confidence in its quality among those unaware. Third, advertising can be instrumental in spreading the word about what you do through word-of-mouth. And lastly, advertising informs potential clients on how they can access your product or service along with any special rewards or discounts being offered. Advertising helps you compete with larger businessesA small business is often at a disadvantage when it comes to advertising. With marketing budgets higher for large companies, many small businesses struggle with how to promote their brand without breaking the bank. However, advertising is crucial for a small business to compete with large companies. It can also lead to increased sales and brand recognition, resulting in greater profits. Advertising allows you to target the right audienceThe key to advertising for businesses is to target the right audience. You want to ensure that the people you are advertising to are interested in what you’re selling. Factors like age, gender, location, and interests can help determine who your target market is. Advertising is a flexible marketing tool and can be used in different ways for your small business. Local newspapers, outdoor billboards, and social media are just a few of the options available to promote your company. Moreover, advertising helps reach several potential customers at once through digital channels. How to Create an Advertising Plan for Your Small Business? An advertising plan is a necessary component of any business. While it may seem costly, creating an effective marketing strategy will reduce unnecessary expenditures. It will also allow you to grow your business faster. Here are some ways by which you can build an advertising plan for your small business: Establish your marketing goals: What do you want people to understand about your product or service? What do you want them to do? These are some questions you need to ask before creating an advertising strategy for your small business. Decide on the type of advertising best suited for your goals and budget: Depending on the size of your company, advertising could take place through radio and TV ads, print media like newspapers and magazines, billboards and flyers, email blasts, or social media campaigns. When determining which types of advertising would work best, consider how often you’re able to update information (daily vs weekly) as well as how much time is needed for this activity. Make a list of pros and cons: Remember, advertising isn’t just about generating leads. It’s also about keeping existing customers engaged with updates on any newly launched products and services. One way to increase interest in your small business is by highlighting your success. This can be done by posting articles from major publications that mention your company and achievements, using graphics wherever possible. Another great way to advertise for business is by including testimonials from satisfied clients on your website, blog, and social media handles. [B-02] The Bottom Line Finding the right advertising model for your business is important because it will help you reach your potential customers faster. Advertising should be based on the type of customer you are targeting and what they are looking for. Every small business needs to advertise in order to compete with other businesses. While advertising for business might seem challenging, it is necessary if you want to stand out from the competition. Personal loans can be an excellent way to fund a marketing campaign for a small business. For more such blogs and articles, be sure to head over to Piramal Finance.

08-11-2023

Other

Pros and Cons of Commodity Trading

Online commodity trading has emerged as a potential alternative to capital market investments. Standardized contracts and other investment vehicles in commodity trading. Unlike equities stocks, commodities trade through spot, futures, and options contracts. Any change in the supply of goods can cause the market to rise quickly. Some benefits of investing in the commodity market are less volatility. Protection against inflation or geopolitical crises, diversification, and so on. Some problems with trading on the commodity market are high leverage, a greater reliance on macroeconomic factors, etc. [B-01] The next parts discuss these elements to help you make the best decision while trading commodities online. But before we talk more about the pros and cons of commodity investment trading, let’s figure out what “commodity trading” means. What is Commodity Trading? Commodity Trading refers to metal, energy, food (cocoa, rice), and the like. It is commodity trading when these commodities trade hands through commodity exchange. In India, MCX and NCDEX regulate and control commodity market transactions. You need a Demat account and trading account to trade a commodity online. Let us now look at the benefits of Commodity investment trading. History of Commodity Trading Commodity investment trading is not new. The history goes back a long time. When people used to swap a good for another, the practice was a barter system. With the advancement of humans and the evolution of currencies, traders purchased commodities. Now, the exchange of commodities is still carried out throughout the world. Special Commodity investment exchanges have been set up. It is to look after the trade of commodities which functions as stock exchanges. Characteristics of Commodity Markets Like all other financial markets, the Commodity investment market runs on the basic premise of Demand and Supply. Any adjustment in the supply pattern will impact demand and vice versa. If the demand is great and the supply is low, the prices will shoot, and prices will plummet in the case of low demand. Any disturbance in the supply of commodities, such as droughts and floods. Which might impair the supply of agriculture can lead to a rapid increase in the market. The advancement in technology and economic development also affects the Commodity investment markets. India has emerged as a big production participant with a higher volume of industrial metals. This will lead to a shortage in the supply of such industrial metals for the rest of the globe. The Top Advantages of Commodity Market Trading Facilitates Diversification 21st-century investors are more knowledgeable. They know the different benefits of diversification. If you are not familiar with the term diversification, here’s one line to clarify. Diversification splits your wealth over many financial assets. It eventually decreases risks and enhances profits. Commodity investment trading online allows you to diversify your investments. It also reduces the risk of financial loss. Commodities and stocks or bonds typically move in opposite directions. Assume two countries are involved in a conflict. In that circumstance, investors may become concerned and withdraw funds from stocks or bonds to invest in commodities such as gold or silver. If the economy does well, and corporations prove a strong surge in earnings, investors might dump gold or silver and switch to shares. Hence, the presence of commodities in your portfolio might assist you in hedging your risks to maximize the returns. Inflation Inflation is a terrible term for individuals buying physical commodities. But, if you are an online commodity trader, inflation might be your best friend. Inflation means an increase in the prices of commodities. So, if you hold a Commodity investment whose price increases, your portfolio value will likewise increase. This ensures that your purchasing power remains the same even if the inflation rate is at its all-time high. Stocks and bonds generally witness a fall when inflation rises. This is because inflation often dries up liquidity, reducing purchasing power. Liquidity Online commodity investments are 100% liquid since you can sell them anytime. It can help you make them a better option than real estate or fixed deposits. Like stocks, commodities are easy to buy and easy to sell. Hence, commodity derivatives can be a safe bet when you want better authority over your funds. We hope now you know the benefits of commodity market investment. Let us go through the disadvantages of Commodity Training. The Disadvantages of Commodity Market Trading Leverage May Go Out of Hand Online Commodity investment traders get higher leverage than stock traders. But, higher leverage may also make it difficult to control the urge to overtrade. And if the market goes opposite to your calculations, you may lose money against winning it. Excessive Volatility Might Confuse You Back-of-the-envelope calculations suggest that commodities are twice as volatile as stocks. It is also four times more volatile than bonds. And commodities such as crude oil, gold, etc., are more volatile than others. Such large price swings might make you lose focus and play havoc with your calculations. More Exposed to Economic and Geopolitical Factors Commodity investment prices depend on various economic and geopolitical factors. For example, if crude oil production increases, the commodity’s price will drop. During the peak of the COVID-19 pandemic, crude oil prices dropped low. Should You Invest In Commodities? Online commodity trading might provide you with an entirely new route. Commodity trading is frequently regarded as more trustworthy than equity market trading. However, investors with stocks and sectors believe that equities stocks are more profitable. They also find it easy to understand. [B-02] Conclusion: Hence, whether to invest in a Commodity investment or not must be your risk-taking ability. Emotions must not govern it. 5 paisa is the preferred broker of people willing to experience low-cost brokerage and precisive order execution. Click here to learn more on our Piramal Housing Finance website.

08-11-2023