Jayant Harde

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What should you opt for Short-Term or Long-Term Health Insurance Policy?

Every individual living in this country ought to have the right to lead a healthy life. This will be accomplished through access to quality health care services associated with an understanding of one’s personal health desires. We have a tendency to sleep at a time when life-threatening diseases are on the increase. Inactive lifestyles and massive stress associated with work or life normally put North American nations at the chance of developing life-threatening diseases. In the face of all this, insurance coverage is a necessity, a non-negotiable wish that protects you and your family against any medical emergency, accident, etc.

People in this country are slowly warming up to the concept of insurance, but there's a bigger want for folks operating in certain sectors (particularly middle-income groups) to adopt a reasonable health coverage setup. Choosing a health care system could be a terribly difficult matter. Most people aren't aware of the plans and find themselves wedged in technical jargon, which may be quite confusing to them. One common question that arises in the mind of an insurance seeker is what type of insurance health plan they should obtain. Do they pick a brief-term setup or a protracted-term insurance plan? The purpose of this write-up is to clear that air and assist insurance seekers to create an associate's degree au fait selection and aspect with insurance set up that may pay attention to individual health desires similarly to those of their family.

 What is a long-term health insurance plan?

Unlike your regular one-year insurance setup, a long-term insurance setup has a tenure of 2 to 3 years. Therefore, whereas your regular media-claim policy is also valid for twelve months, a protracted term health setup keeps you covered for two to three years. This means, that if you decide on a protracted-term medical plan, you'll be free from reviving your coverage every twelve months.

   Advantages of a long term health Insurance plan  

Breaks you free from the hassle of renewing your health coverage every 12 months.

Most insurance companies will offer a discounted premium, if you opt for long term health insurance plan.

Since long term health insurance plan covers a period of 2 to 3 years, you are immune from any kind of rate revision during that period.

A long –term health insurance policy may also cover pre-existing diseases

The cost of premium may vary depending upon how old you are. Some insurance companies charge lesser rates to younger health insurance seekers.

Long term health Insurance Plan can also help you save tax on your income.

     Disadvantages of long term health Insurance Plan    

Most Insurance companies do not cover senior citizens under long-term health Insurance Plans.

Having to pay a lump sum amount as a premium for a long-term health insurance plan may be stressful for some insurance seekers.

   What is a short–term health insurance plan?

Short-term health insurance policies have a validity period of up to 12 months. After which it has to be renewed or else you can forfeit the right to “no claim bonus” or NCB. Generally, most people take up a short-term health plan so that they don’t have to pay a heavy premium associated with a long-term health plan.

 Advantages of short term health plan

One of the foremost advantages of a short-term health insurance plan is that you do not have to pay a high premium rate.

Till the time you are paying a timely annual premium, the advantages of a long-term insurance plan are equivalent to a long-term insurance plan.

     Short term health care plan can also help you save tax under section 80D of the income tax.

   Disadvantages of short term health plan    

Although the upfront premiums you pay for a short-term medical plan may be less, in the long term it can be an expensive proposition. Insurance companies tend to offer good discounts on premiums to individuals who take up long-term health plans.

 Most short-term health plans often do not cover maternity claims.

 Short-term health plans are not valid for pre-existing conditions or diseases.

If you do not renew your short-term health plan timely, you are likely to forfeit the non –claim bonus.

 To know more about Short-Term or Long-Term Health Insurance Policy, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2022/05/what-should-you-opt-for-short-term-or.html

[jayantharde]

How do Investment plans help at important stages of life?

Start investments early

Investing isn't a one-time call. It's a long method. Investment ought to begin at the start of one’s operating life, notwithstanding however little the number is. However one mustn't lose heart if he/she has not started investment until currently. At no matter stage of the life cycle you're and if you've got not started investment, do it now.

  Discipline

One of the foremost crucial elements to the current journey of long investment is discipline. No matter your investment goal, it cannot be achieved while not regular, disciplined, and rigid habits of saving and investments. Having mentioned the quality rules of investment that area unit common to all or any people, investment portfolios and ensuant quality allocation depend on the life stages of investors.

Rule of 100

We can take steering from the ‘Rule of 100’, a really well-liked thumb rule for quality allocation supported the life cycle of people. During this rule, one has got to deduct one’s age from a hundred which proportion becomes the proportion of investments in equity. Therefore, a young, single, operating individual at the age of twenty-five ought to invest seventy-fifth of his portfolio in equities and for a 45-year-old, spousal equivalent, the investment in equities shouldn't be quite fifty-fifth. However, the rule of a hundred is simply Associate in Nursing quality allocation tool and betting on the chance tolerance and life stage of a personal, investment portfolios should be designed.

 Five life stages

Stage 1– Career commencement: this is often a stage where individuals begin their career, are terribly young, and don't have major responsibilities. Their risk tolerance is high. So, in keeping with the rule of a hundred and reckoning on their age, 75-80% of their portfolio ought to be endowed in equity. The selection of investments ought to embody equity, each direct equity and through equity mutual funds, IPOs, and real estate.

Stage 2 — obtaining married: this is often an awfully vital stage in an exceedingly person life once expenses begin increasing. The money responsibilities amendment then does the investment objectives. The chance tolerance becomes lower to the previous stage in life. Since the age of wedding is usually between 25-30 years, the investment in equities ought to currently return right down to around seventieth. This is often an amount for capital appreciation and investment in high growth equities is usually recommended.

Stage 3 — changing into parents: adulthood is one of all the joyous times in one’s life, however conjointly will increase the responsibility of an individual manifold. The chance appetence becomes not up to the previous 2 stages and therefore the investment in equities ought to come back all the way down to 60-65%. Investments to the tune of 35-40% need to be thought about in debt funds.

Stage 4 – Consolidation: this can be the stage between the age of 40-55, once the kids begin growing older and the desire for upper education increases. This can be the stage where people need to tone down their equity exposure and increase their investments in debt and liquid instruments. A 50/50 exposure in equity and debt instruments ought to be done. The most concern during this section is capital preservation and investment in balanced funds is most well-liked.

Stage 5— Retirement: this can be the last section of life once people need to invest for their retirement. The exposure to equity comes down and investments in liquid funds rise phenomenally. As investments can't be constant for all, correct attention to risk appetence ought to run when developing investment portfolios. This may create each individual secure his future within the very best means.

To know more about How do Investment plans help at important stages of life?, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2022/05/how-do-investment-plans-help-at.html

[jayantharde]

How to structure a Retirement Plan if you are a Business owner?

If you own a business, you're seemingly to remain active in it for as long as you'll be able to. Not like company and government jobs wherever there's a group age until you'll be able to work, a business owner has no such limit.

But not withstanding however you're concerning your business, there'll be a time after you feel that perhaps it's time to require the rear seat. Thus, retirement designing is as vital for a business owner because it is for a salaried individual.

Early retirement designing can assist you retire free from monetary stress and perhaps even be after to one thing distinctive.

Retirement and Pension Plans for Business Owners

As a business owner, you will safeguard your retirement by investing sagely. Your savings should grow over the years. Investment within the following investments will assist you to produce a decent corpus that you simply will use to measure when you retire from your business.

1. Public Provident Fund (PPF)

This is one of the safest investments that you simply will build together with your cash. A PPF theme not solely helps you save however offers interest on your cash still. This theme is obtainable by the govt, thence it's a particularly secure and trustable instrument to speculate in. Here are the items that you simply have to be compelled to understand PPF: a) the present rate is 7.1% every year first Gregorian calendar month 2020. b) you'll be able to invest a most of Rs 1.5 100000 during a given year. c) The term of PPF is fifteen years. This could be extended by another five years once maturity. d) PPF is one of the few investments that relish associate E-E-E standing. That's the number is exempt in any respect 3 stages, investment, interest, and maturity.

2. National Pension Scheme (NPS)

The NPS or National Pension scheme may be a common retirement saving scheme for used yet as freelance folks. A national pension scheme, or NPS, may be a market-linked investment scheme. During this scheme, you'll invest your cash in market-linked funds like debt, equity, etc.

3. Unit Linked Insurance Plan (ULIPs)

So, there aren't any fastened returns in NPS; these depend upon the market performance of your assets. Here are unit the key options of NPS for retirement planning: a) you'll opt to invest by choosing one among the two options: machine and Active b) within the active fund choice, you wish to come to a decision in what quantitative relation your funds are going to be endowed c) The machine choice works on pre-defined tips d) NPS matures solely once you retire or the age of sixty e) you'll solely withdraw an hour of the worth once your retirement. The remainder is to be endowed in associate degree regular payment.

It is a sort of life assurance policy however with wealthy investment options. If you invest in ULIPs for your retirement design, you'll be able to invest within the market and grow your fund’s worth. At an equivalent time, your life is additionally financially coated. Key options of ULIPs for business owners' retirement are as follows: a) ULIP combines the advantage of each insurance and investment in an exceedingly single arrangement b) you'll be able to invest in pure equity, pure debt or hybrid funds inside an equivalent arrange c) choice to switch between funds multiple times d) automatic portfolio management for aggressive investors e) Tax savings, as well as untaxed regular financial gain anytime when the lock-in of 5 years. You can invest within the fund possibility as per your risk appetency and preference.

4. Pension Plans

A pension is a financial gain that you just receive once retirement. In a very program, you wish to speculate frequently whereas you run your business. From this, a daily financial gain stream is created for you once you retire. Pension plans square measure of the many types: a) Postponed regular payment Plans With this setup, you invest your cash and can begin receiving financial gain at a later date. b) Immediate regular payment Plans Here, the regular pay-outs begin in real-time when your contribution c) Pension with Life cowl These are the plans that are from life assurance firms. A payment quantity is given to the beneficiary if you die throughout the term Annuity plans from Canara HSBC Oriental Bank of Commerce life assurance, like bonded Income4Life, provide you with bonded edges and guarantee an everyday financial gain stream for you.

5. Mutual Funds

A open-end investment company also can assist you to grow your wealth. An open-end investment company could be a form of investment fund that's created from the money invested by an outsized variety of investors. This additive fund is then invested in market security to earn returns. There are many sorts of mutual funds accessible. a) Equity Mutual Funds b) Debt Funds c) Liquid Funds d) Hybrid Funds Mutual funds haven't any bound limit or amount of investment. So you'll be able to use these funds to speculate even when your retirement. This may keep your cash operating.

To know more about how business owner structure their retirement plan, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2022/05/how-to-structure-retirement-plan-if-you.html

[jayantharde]

What are the benefits of Financial Planning?

The benefits of non-public money designing

There are uncounted benefits of monetary designing that return straightaway from having a budget. From emotional and health-associated advantages to social and money advantages, money designing encompasses a web positive impact on each facet of your life.

While many dozen advantages exist, there are some that have a lot of impact than others. Below are many key advantages that return as an instantaneous result of making a budget.

The method of monetary designing helps you set goals

Money designing may be a nice supply of motivation and commitment

Money plans give a guide for action and decision-making

Money plans set performance standards

Money design has further emotional and psychological state advantages

Money designing is shown to enhance money outcomes

With these in mind, let’s take a lot of elaborate to investigate all of those to induce a far better understanding of the advantages of monetary design and also the impact it will wear your life.

Benefit 1. Money designing helps you set and reach your goals

Financial plans facilitate people’s produce and set goals to figure towards. Goals square measure what provides folks direction and purpose in their lives. Once people have clear goals in mind, it provides them one thing to concentrate on.

People that have clear goals they square measure they're actively operating towards are around ten times a lot of probably to succeed. Yes, 10 times! That alone ought to be enough motivation to form a concept for your finances.

Financial goals square measure vital for folks to possess once it involves having a stable and gratifying life. Personal finances square measure an intimate a part of each person’s life as a result of cash is commonly a medium to assist folks to deliver the goods their most cherished life goals. It’s notably vital to balance short-run, medium-term, and long goals along with your finances.

Here square measures a couple of recommendations for setting and achieving solid money goals:

Personalize your goals: it's vital to form positive that you simply have personalized goals per the life that you simply need to measure and per your personal state of affairs.

  Make educated goals: Having an understanding of what things square measure required to guard and establish yourself financially is incredibly vital. It's vital to try to do your analysis and due diligence once you set your goals.

  Review your goals often: A lot of you review your goals the upper chance you've got of achieving them. This can be as a result of anytime you review them you're that specializing in them. We tend to accomplish the items that we tend to concentrate on. This can be why Savology recommends that you simply review your goals often, a minimum of monthly. Many folks review their goals daily and notice success in doing this.

  Set good Goals: you wish to understand what your goal really is and once it's thought about to be completed. With a sensible goal, the secret is to possess a selected goal that's measurable, achievable, relevant, and timely.

  Visualize your goals: The act of visualizing your goals before they happen could be a powerful technique to assist you to gain momentum toward achieving them. Michael Jordan continuously took the last shot in his mind before he ever took one in the world. Visualize your money goals a day so as to form them a reality.

  Align goals with values: once goals square measure aligned along with your values it creates a far stronger motivation to accomplish them. Once you have a powerful enough “why” behind the goals you're seeking to accomplish, you'll notice the way to form the goal happen.

 Benefit 2. Money plans area unit an excellent supply of motivation and commitment

People don't seem to be typically motivated after they don't have clear goals and don't grasp what's expected of them. A plan reduces uncertainty around finances by providing clarity and indicating what you're expected to accomplish. You're additional seemingly to figure toward a goal that you just grasp and perceive.

When you have a transparent decision to action through a plan, the paradox isn't any longer there to cloud your judgment. After you area unit able to create positive changes in your life, then the setup leaves space for small hesitation. This permits for faster action that will increase follow-through. The longer you wait before taking action, the less seemingly you may be to require action.

Motivation and commitment to goals area unit terribly extremely correlative with:

Having a plan in situ

Having a giant enough reason “why” behind your setup

Making it easier to accomplish your goals

Benefit 3. Money plans offer a guide for action and decision-making

Financial plans will direct actions toward desired outcomes.

When actions are coordinated and centred on specific outcomes they're far more effective. Savology has been able to determine and facilitate solving the matter that a lot of millennials don’t recognize wherever to induce started with their finances.

Taking action with money choices may be laborious for a mess of reasons. There are heaps of stress and shame around cash that make folks wish to avoid talking or puzzling over it. Personal finances typically incorporate terms that a lot of people aren't accustomed to. This creates an excellent larger drawback once you add to the very fact that money choices are typically massive choices that may have lasting consequences, negatively or completely poignant you for in the future.

Personal finances have several layers to them and it may be laborious for one to form money choices once there are such a large amount of choices out there.

A budget can assist you to determine clear actions to require so as placing yourself within the best money position. Once a sure professional spells out what things got to be done, it's abundant easier to require action confidently.

Benefit 4. Money coming up with has extra emotional and psychological state edges

There are emotional and psychological state edges behind having an entire financial statement. People with an idea are less stressed and have a tendency to be additional optimistic concerning their future compared to those who don't have any style of financial statement.

Having a financial statement that you simply will talk over will increase heedfulness concerning your personal finances that successively lower stress levels around cash. Once you have an idea in situ, you're additional possible to beat setbacks.

A recent survey indicated that eighty-three % of individuals with a written financial statement feel higher concerning their finances once only 1 year.

More significantly, once people improve their lives in one space it's a natural carry-over result in alternative areas in their life. This implies that having a written financial statement not solely improves your finances, however, it will facilitate your overall health and well-being.

Benefit 5. Money plans facilitate set performance standards

Planning outlines desired outcomes still as milestones to define progress. These give a typical for assessing once things area unit progressing and once they want correction.

There are unit general money standards that people ought to be meeting so as to be in an exceedingly sensible place financially. These embrace having cash put aside for emergencies, not usurping an excessive amount of debt, saving for retirement and additional. After you have a personalised decide to follow, it permits you to understand specifically what steps you would like to be taking to satisfy your goals.

A few examples embrace the following:

Increasing your savings rate to fifteen to avoid wasting enough to retire by sixty five

Pay down $10,000 in high-interest debt to lower your debt-to-income magnitude relation

Get an extra $150,000 in term insurance to possess adequate coverage for your family

When you have a financial statement to live yourself against it permits for each self-reformation and self-evaluation. You'll have a comparison to overall standards and suggestions that may bring you to the most effective money position for your goals and objectives.

Benefit 6. Money designing is understood to enhance money outcomes

Last but not least, having a plan usually improves money outcomes over time. Those with plans square measure additional possible to be ready for money emergencies and retirement.

A plan permits you to start with the tip in mind. This provides folks the right perspective to balance their current goals and wishes vs future goals and wishes. An inspiration helps folks to administer attention to the long run yet as these days.

Savology’s own research found that folks with a written plan square measure 2 and 0.5 times the additional possible to save lot enough cash for retirement. You've got to understand higher, so as to try to higher. A written plan helps people to understand higher in order that they'll begin to try to higher.

To know more about Benefits of Financial Planning, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2022/05/what-are-benefits-of-financial-planning.html

[jayantharde]

What is Indexation and how does it help you?

What is the meaning of Indexation?

As the market fluctuates, investors square measure exposed to a lot of risks. The investor’s returns don't seem to be evidently because of the unpredictability of the market and growing inflation. What is more, whereas computing capital returns on the sale of associate degree quality or investment, the taxation law takes under consideration market volatility and inflation.

Indexation involves the rescue during this state of affairs. The Hindi word for regulation is suchikaran. Indexation, as the name implies, may be a system of economic management within which wages and interests square measure connected to a value of the living index to mitigate the results of inflation.

As a result, regulation aids in the management of associate degree investment’s gain or loss. It's a technique of adjusting financial gain payments employing a price level to take care of an associate degree individual’s buying power once inflation. This conjointly aids within the hindrance of taxation debilitating investment earnings.

Indexation has the good thing about helping within the regulation of investment purchase costs, and it applies to long-run investments such as debt funds and different assets. It permits you the choice of accelerating the asset’s price, which helps to mitigate the negative price impact of inflation.

Indexation makes finance a profitable theme since it will increase the probability of a considerable profit, even once taxes.

Benefits of Indexation

Indexation is one of the foremost well-structured and trustworthy provisions for investors trying to save lots of cash on their semi-permanent investments. The regulation permits investors to reinforce the asset’s buying value, therefore reducing the negative impact of inflation on prices.

Indexation makes debt open-end fund investment a profitable setup since it permits investors to get a healthy profit even once tax deductions. By applying the value of the inflation index, regulation aids in the reduction of semi-permanent capital gains, lowering the taxable financial gain.

Index-linked investments area unit most popular over ancient mounted deposits because of the assorted advantages of regulation, together with remunerative returns, stability, and liquidity.

How to calculate indexation benefit?

In order to regulate the capital gain, the Cost Inflation Index (CII) is taken into consideration which is declared by the Central Government in every financial year.

Long term capital gain on a debt mutual fund which comes with indexation benefit.

The following formula is used to determine the actual value of profit gained by an investor:

Actual value of profit (after indexation) = cost of purchase * (CII of the year of selling/ CII of the year of purchase)

Let us now see this with the help of an example:

Indexation example and calculation

Suppose, MR. Arun purchased Debt Mutual Fund of 7000 units at Rs. 23 in the Financial Year 2012-13 and later sold it at Rs. 36 in the Financial Year 2019-2020. As the units were held for more than 36 months the same qualifies for indexation benefit.

The profit realized in the above transaction is 7000 (36-23) = Rs. 91000

Let us first arrive at the Inflation-adjusted Price – Inflation-adjusted Purchase Price: (289/200)*23 = 33.235 (For Cost Inflation Index refer to the table below)

Now we calculate the LTCG for the same:

7000 x (Rs. 36 – Rs. 33.235) = Rs. 19,355

The tax calculation for the above-stated example will be:

Applicable tax of 20% on Rs. 19,355 = Rs. 3,871

How are area unit capital gains calculated in a very Debt Mutual Fund?

Capital gain in easy terms comes back or profit incurred by merchandising Associate in Nursing quality be it tangible (property, house, etc) or intangible (bonds, equity, fund, etc). Financial gain is largely the distinction between the acquisition price of Associate in Nursing quality and therefore the terms.

For example- Man Varun invested with Rs. five lakhs in a very Debt fund within the year 2015. The worth of the fund currently stands at Rs. eight hundred thousand within the year 2020. The future financial gain earned on the investment by man. Varun is three hundred thousand.

There are unit 2 styles of Capital Gains on Debt Mutual funds: future and short-term financial gain. Any quality control for over thirty-six months could be a future financial gain whereas any quality control for fewer than twelve months is a brief-term financial gain.

How is regulation applied to Debt Funds?

Indexation helps in saving taxes on future Debt Mutual Funds. The regulation permits one to boost the acquisition value exploitation of the value inflation index. Allow us to currently see however regulation is applied in Debt Mutual Fund:

Suppose Mr. Ram purchased a Debt investment firm of 5000 units at Rs. eighteen within the fiscal year 2012-13 and later sold it at Rs. twenty-seven within the fiscal year 2018-2019. Because the units were controlled for over thirty-six months a similar qualifies for regulation profit.

The profit realized on top of dealing is 5000 (27-18) = Rs. 45000

Let us initial make the inflation-adjusted value – Inflation-adjusted terms: (280/200)*18 = twenty five.2 (For value Inflation Index consult with the table below)

Now we tend to calculate the LTCG for a similar:

5000 x (Rs. 27 – Rs. 25.2) = Rs. 9000

The tax calculation for the above-stated example are:

Applicable tax of 2 hundredth on Rs. 9000 = Rs. 1800

The tax rate on future financial gain for Debt Funds is 2 hundredth. This is often a far higher choice for investors apart from the traditional mounted Deposits.

To know more about What is Indexation and how does it help you?, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

[jayantharde]

Are PPF & EPF part of Debt Portfolio?

This question was posed to us by a reader. So, let's start by addressing the two instruments.

The Employees' Provident Fund, or EPF, is a retirement fund for organized sector employees, managed by the Employees' Provident Fund Organization, or EPFO.

Under the EPF scheme, a salaried employee pays 12% of basic salary (plus dearness allowance) every month, and an additional 12% is contributed by the employer. In total, 24% goes towards the EPF account. The interest rate is currently fixed at 8.5%.

The Public Provident Fund, or PPF, is a government-backed small-saving scheme. Though started in 1968 with the objective of providing social security during retirement to workers in the unorganized sector and for self-employed individuals, it has become a very popular tax-saving instrument. The interest rate is 7.1%; this is fixed every quarter.

*Are these debt instruments?*

A debt investment is one that offers a fixed return to the investor with a promise to repay the principal over a predetermined tenure. There are variations but this is the broad premise. Going by that definition, both the EPF and PPF are debt investments —an assured rate of return, and the principal will be returned over a predetermined tenure.

So yes, they are both part of the debt portfolio. BUT, they cannot be the only part of your portfolio. The reason being that both these investments have very long lock-in periods. They score on safety since they are both backed by the government. They have an assured return. But liquidity is not their strong point. The lock-in periods are long and premature withdrawals are applicable only for specified and predetermined situations. To compensate, debt funds must form a part of your portfolio.

*How should you decide which debt funds?*

Keep the EPF and PPF as your base.

You can then select funds that are low on both, duration and credit risk. Do not deviate from this rule and you will avoid credit risk and interest rate risk. The advantage of such debt mutual funds is that investors get the benefit of lower tax rates (if held for > 3 years) and market returns. The appreciation in these funds is not only from the accrual of interest income, but possible capital appreciation due to interest rate movements.

Once you have the above in place, and you have cash to spare, then you can look for higher returns. But do not exceed 20% of your debt allocation to such funds. Here are some suggestions:

”Gik funds.*

These funds have no credit risk or risk of default. Their risk is interest rate movements. If you expect interest rates to dip in the future, you could consider a tactical bet here.

Dynamic bond funds can also be considered.

Credit risk funds can be opted for by a seasoned investor who is willing to take that extra risk.

The fixed-income portion of the portfolio is predominantly focused on capital preservation and protecting the purchasing power of the invested corpus. He suggests treading cautiously and sticking to high-quality fixed-income investments as the core portion of the fixed-income allocation.

It's a personal choice.

The type of funds you select will depend on your holding period and your understanding of their strategy.

A family member who does not understand debt funds only has money in EPF and PPF. On the other hand, a colleague told me that the PPF and fixed deposits have no place in his portfolio because the debt allocation is taken care of by debt mutual funds and EPF.

My debt portfolio comprises a fixed deposit, debt funds, as well as PPF and EPF. This includes my Emergency Fund.

”Do you have an Emergency Fund?*

To ensure that you do not tap into your portfolio during times of emergency, we strongly advocate that you have an Emergency Fund. Should you urgently need money, you may have to sell your equity investments which would be a problem if the market is at a low.

The Emergency Fund corpus must be at least six months of basic expenses. This can be part of your debt allocation. But when you use it, ensure that you replenish it.

To know more about PPF & EPF, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2021/07/are-ppf-epf-part-of-debt-portfolio.html

[jayantharde]

Why buy life insurance online?

If you are in your twenties or thirties, you may recall insurance agents knocking on your house and attempting to persuade your parents of the benefits of purchasing a specific policy that they were selling. Your parents may have even complied, unaware that the so-called policy that was being recommended as the best for them was actually the greatest for the agent himself, as it earned him the biggest commission!

Those days, however, are long gone. With 52 million active internet users in the country today, who use the online platform to buy anything from groceries to gadgets, it's no surprise that they're interested in purchasing online life insurance policies as well. The life insurance industry is playing an important role in the expansion of e-commerce in India, and it is growing in popularity across the country. And not without reason. If you're still not convinced, here are some reasons why you should choose online insurance coverage.

Lower cost

When making any purchase, the first thing that springs to mind is price, and insurance is no exception. The majority of internet life insurance plans are at least 50% less expensive than their physical counterparts. This is achievable due to two key factors. For starters, because you buy directly from the insurer, there are no middleman expenses that are passed on to you. Second, insurance companies operate on the assumption that customers who purchase policies online have a lower mortality risk than those who purchase policies in person. As a result, they are willing to sell them things at a lesser price. As a result, online policies are much less expensive.

Higher sum assured

Because of the lower costs involved, the average sum assured in online plans is higher than in offline life insurance products. Aside from smart marketing efforts by insurers, the per-day costs of acquiring an insurance policy are displayed. For example, it is not uncommon to come across an advertisement claiming that insurance worth Rs 50 lakhs is available for a daily premium of Rs 8.5. It's understandable that you'd be enticed to acquire a policy that's this cheap!

Empowering the customer

Insurance firms' websites clearly display all product information, including features, tenure, and riders. As a result, clients who want to make an online purchase can readily obtain this information and make an informed selection. They are no longer required to rely on an agent or any other entity with a vested interest to provide them with the necessary information.

Easy reputation check

With the widespread use of social media and forums where people share their experiences with each and every purchase they make, it is now simple to check the reputation of the insurer and the product for which you are applying. The majority of a company's reputation is based on how well it settles lawsuits. When selecting a product, you can search the web to see what past customers have experienced with regard to the claims settlement of a specific life insurance programme. As a result of this information, you may make a more informed decision.

Overall transparency

There is nothing an insurer can withhold from you today because everything about the product in question is online, from its features to the customer experience to the regulatory action that is relevant in case there is a problem on your end. As a result, you can rely on complete transparency.

However, one must keep in mind that, while purchasing insurance online has numerous advantages, there is no advice involved. As a result, the onus is entirely on you, the consumer, to conduct proper due diligence and select a product that is compatible with your overall financial strategy.

To know more about Why it is important to buy life insurance online?, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2021/07/why-buy-life-insurance-online.html

[jayantharde]

What are Mutual funds and why should you invest in Mutual Funds While You Are Still Young?

Mutual funds are currently one of the most popular investing solutions. A mutual fund is an investment vehicle formed when an asset management company (AMC) or fund house aggregates money from a number of individual and institutional investors that share similar financial goals. The pooled investment is managed by a fund manager, who is a finance professional. The fund manager invests in securities such as stocks and bonds that are consistent with the investing mandate.

Mutual funds are an excellent way for individual investors to gain exposure to a professionally managed portfolio. You can also diversify your portfolio by investing in mutual funds, as the asset allocation will cover a wide range of instruments. Investors would be assigned fund units based on the amount invested. As a result, each investor will experience profits or losses that are directly equal to the amount invested. The fund manager's primary goal is to maximise returns for investors by investing in assets that align with the fund's objectives. Mutual fund performance is determined by the underlying assets.

5 reasons why you should invest in mutual funds while you are still young

1.To benefit from power of compounding

If you devote enough time to it, money will grow.

Compounding is the process of earning returns on previous returns. Because of compounding, your assets grow at a comparatively higher rate over time when compared to the case in which you invest late. As a result, the earlier you begin to invest, the better mutual fund returns you will receive when you need the money to achieve your goal.

Furthermore, mutual funds are a simple way to invest. You won't have complicated financial needs in your twenties and thirties. Mutual funds are a good alternative for young investors to invest in and benefit from the power of compounding twenty-thirty years down the road because they are simple to purchase. Based on your investment objective and time horizon, you can choose from Equity, Debt, Hybrid Funds, and FOF mutual funds and begin investing.

2.To add financial discipline to your life

You start investing early; you achieve your financial goals.

When you begin investing at a young age, it demonstrates that you are already committed to your financial goals. Your early years of life are the optimum time to instil the habit of financial discipline. Young investors can reach maturity and achieve their financial goals considerably sooner.

It is critical to invest with goals in mind and defined entry and exit points. Begin making tiny regular mutual fund investments to add financial discipline to your life. It allows you to make regular investments and instil financial discipline in your life.

3.To improve your risk appetite

The longer the time horizon you have to keep your money invested, the more aggressive you can be in your investments.

An investor must invest in accordance with his or her risk tolerance. And it is true that younger people have a higher risk tolerance when it comes to investing and can opt to remain aggressive in their financial plans—the risk profile swings to conservative as one gets older. Volatile market swings are simpler to digest while you are young since you have more time to adjust your financial plans if something goes wrong.

Young people's financial plans tend to be flexible. With lengthier investment periods, you may choose to swap between plans, i.e. choose Plan B if Plan A does not work out.

4.To generate wealth for your future self

If you give time, investments generate stable, good returns.

Short-term financial markets fluctuate more than long-term markets. When you begin investing in top mutual funds at a young age, you allow your investment time to grow into a larger corpus. You can adjust your investment strategy based on your financial plans over time.

It should be noted that equities mutual funds may provide superior returns over a longer time horizon than shorter time horizons. Mutual funds might assist you in amassing wealth over time.

5.To save taxes

With Mutual funds, you can save taxes.

Through equity-linked savings schemes (ELSS), mutual investments can help you save taxes. Aside from normal income, every financial gain is taxed, including profits on bank fixed deposits, mutual funds, and stocks. Money invested in fixed income instruments is taxed differently than money invested in stocks.

Investing tax-efficiently does not have to be difficult, but it does necessitate some forethought. While taxes should never be the primary motivator for an investment strategy, increased tax awareness has the potential to improve your after-tax returns.

Conclusion

The earlier you begin investing, the better. So, if you have savings and are looking for the optimal moment to invest in the greatest sorts of mutual funds, understand that ‘time in the market' always beats ‘timing the market.' Begin with tiny regular investments right away.

To know more about why should we invest in Mutual Funds while we are still young, you can visit our website http://www.jayantharde.com or contact our representative at [phone] or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

Source: https://hardejayant.blogspot.com/2021/06/what-are-mutual-funds-and-why-should.html

[jayantharde]

What are the benefits of Motor Vehicle insurance to the customer?

Most consumers choose the cheapest motor vehicle insurance only to be disappointed later when their vehicle is stolen, involved in an accident, or when selling the vehicle. When you acquire car insurance online or offline, it protects your interests as the policyholder in a range of situations, just like any other type of insurance.

Some of the primary reasons why one should invest in motor insurance online and ensure timely motor insurance renewal are as follows:

Liability is reduced.

Damages are paid for.

It is less expensive to purchase auto insurance online.

Hospitalization is covered.

In the event of death, the family receives recompense.

Pay your premiums and you'll have coverage at all times.

Each of these reasons has been discussed in detail in the following sections.

Motor Insurance Reduces Liability

Because third-party automobile insurance is required in India, it automatically protects vehicle owners from accidents caused by the policyholder. For example, if the policyholder causes an accident that damages another person's vehicle or injures a person, the policy protects the policyholder from legal implications and pays for treatment.

Motor Vehicle Insurance Pays for Damages

Another advantage provided by motor vehicle insurance is that it covers for damages, which are fairly expensive, especially when the harm is committed by someone else. However, this insurance cover allows policyholders to relax because the insurer pays the bill in such instances, and it will not burn a large hole in the pocket, resulting in an unexpected expense.

In addition, policyholders can register a request for car insurance online from the convenience of their own homes. Furthermore, the entire process is more clear, rapid, and needless to say, efficient.

Purchasing Vehicle Insurance Online is Cheaper

In fact, policyholders can save money by purchasing motor insurance online, as this reduces operational costs significantly. Insurance firms pass on this benefit to customers in the form of relatively competitive premiums, making online motor insurance in India advantageous for both sides.

Pay Premiums and Enjoy Coverage at All Times Using Motor Insurance Calculator

Motor insurance policyholders can use a Motor Insurance Calculator to see how much premium they will need to pay in order to receive comprehensive coverage. Also, especially for salaried folks, it is best to use a motor insurance calculator to set aside some money each month that can be paid towards the cost. This is really useful, especially when it comes to renewing automobile insurance.

To know more about the benefits of Motor Vehicle insurance to the customer, you can visit our website http://www.jayantharde.com or contact our representative at [phone] or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

Source: https://hardejayant.blogspot.com/2021/06/what-are-benefits-of-motor-vehicle.html

[jayantharde]

What are the benefits of buying health insurance at an early age?

Medical emergencies can strike at any time. Given today's rising inflation and escalating medical costs, an unexpected medical procedure might devastate your life savings like a pack of cards. The youth are constantly preoccupied with work and relationship goals; they are unlikely to think about health insurance.

Most young individuals believe that health insurance is only for the elderly and married people. Some people may consider health insurance to be an extra expense that will deplete their funds. Few people believe that their job health insurance is adequate. However, it is more prudent to purchase health insurance before the age of 30 rather than after the age of 40.

Here are ten reasons to buy health insurance at an early age.

WAITING PERIOD:

There is a waiting period in health insurance policies during which the insured individual cannot file a claim, even if it is a medical emergency. The majority of health insurance policies have a waiting period of 30 to 90 days, with some extending up to four years. Most insurance companies include a list of conditions that have a waiting time, such as knee replacement, cataract surgery, and so on. When you buy health insurance before the 30s, you can easily wait it out without any health concerns.

EXTENSIVE COVER AT A LOWER PREMIUM:

People aged 25 to 30 have a lower risk of developing illnesses or severe disorders. Based on this premise, insurance firms charge this age group a lesser rate than the older group. You can also reap the benefits of comprehensive coverage if you make this investment at a young age.

DURATION:

Health insurance policies have an upper age limit. If you purchase health insurance at a young age, the upper limit will not apply to you. You can also obtain health insurance for a longer period of time.

BROADER COVERAGE:

As previously said, insurance companies provide more coverage to persons aged 25 to 30 due to their lesser vulnerability to diseases and other disorders. Diseases, OPD charges, childcare treatments, maternity benefits, post-maternity fees, and other items are now included in the expanded coverage.

PRE-EXISTING CONDITIONS:

The majority of health insurance policies exclude coverage for pre-existing medical disorders. You will not receive adequate coverage if you purchase health insurance in your 40s and 50s when the likelihood of existing conditions is higher. Get your health insurance when you're young and in good health.

NO CLAIM BONUS:

When you do not have any claims in the previous year of your health insurance policy, you will receive a 'no claim bonus' (NCB). When you purchase health insurance at a young age, you are more likely to have no claims and thus qualify for this incentive upon policy renewal. With the NCB earned over the years, you can enjoy improved coverage in your old age.

WIDER CHOICE OF PLANS:

When you're between the ages of 25 and 30, you have a greater range of health-care options than when you're in your 40s or 50s. Before deciding on a health insurance policy, you can compare the sum assured, coverage, and other important characteristics.

LOWER REJECTION RATE:

When you are young, your chances of getting sick or developing a medical condition are reduced. However, as you get older, your health and immunity will weaken, increasing your chance of sickness. The risk factor is used by insurance firms to reject insurance applications. When you apply for health insurance at a young age, your chances of rejection are lower.

BETTER FINANCIAL PLANNING:

After you have taken care of your own and your family's health, you can redirect your funds to other long-term investments. Even after retirement, early health insurance provides higher coverage for medical bills and emergencies.

EFFECTS OF A SEDENTARY LIFESTYLE:

Youth should ideally be less susceptible to chronic illnesses and disorders. However, as a result of their sedentary lifestyle, increased pollution, and bad diet, lifestyle diseases have become more widespread in young people. Unfortunately, being youthful or fit does not provide foolproof protection against diseases or accidents. As a result, even children must view health insurance as an investment rather than an expense.

Overall, it is preferable to make this financial commitment when you are young and healthy to reap greater benefits later in life. Health bonus insurance should provide you with adequate coverage so that you may concentrate solely on treatment and recovery in the event of a medical emergency.

To know more about the benefits of buying health insurance at an early age, you can visit our website http://www.jayantharde.com or contact our representative at [phone] or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

Source: https://hardejayant.blogspot.com/2021/06/what-are-benefits-of-buying-health.html

[jayantharde]

Is Coronavirus treatment covered in Care- Health Insurance for the family?

The first human case of the novel coronavirus disease (COVID-19) was reported in December 2019, and the total number of patients has become 102,034,770 worldwide (according to Worldometer). To date, there have been 10,720,971 confirmed cases in India and, a total of 10,394,352 people have recovered, but for those still suffering from the disease, it is critical to get the best medical care possible.

Scientists have succeeded in developing an efficient COVID-19 vaccine. However, until we receive a vaccine shot, we are in a perilous scenario that necessitates the most stringent safety precautions to protect our loved ones. In today's world of uncertainties and potential health dangers, a health insurance plan acts as a financial shield while also protecting your health in the best way possible.

Among the several actions and efforts undertaken by the Indian government, the insurance industry has also developed different coronavirus-specific basic and standard policies.

What is Corona Kavach Policy?

The Corona Kavach Policy is intended to cover COVID-19-related hospitalised medical expenses in accordance with the Insurance Regulatory and Development Authority of India's (IRDAI) recommendation. During the hospitalisation period, the policyholder is additionally covered for any co-morbid medical conditions caused by the coronavirus.

A Corona Kavach Policy is an indemnity health insurance policy created specifically to cover hospitalisation and medical expenses associated with Covid-19 treatment. This coverage covered pre-and post-hospitalization expenses, as well as domiciliary expenditures, home care treatment expenses, and AYUSH therapy incurred by the insured in the event of a positive Covid-19 disease test.

Importance of Corona Kavach Policy

The globe witnessed unprecedented occurrences in 2020 as a result of the Coronavirus sickness, or COVID-19. It has caused individuals to remain confined to their homes and has disrupted commercial activities, impacting the global economy. Furthermore, health professionals claim that people, particularly those in the vulnerable category, are more exposed to the disease's hazards and complications. Taking precautionary precautions is the best way to ensure a healthier future in these times. It also entails preparing for any medical emergency and taking precautions to protect your funds by purchasing a Corona mediclaim policy.

The pandemic's spread has had an influence on economic activity. When there is a risk of financial difficulties, dealing with a medical emergency without a safety net is difficult. Preparation and the correct investment will keep your anxieties at bay. So, pick coronavirus health insurance in India to protect your loved ones' health. Choosing this coverage is a simple process because you may select your insurance and pay the payment online without leaving your house.

What's Covered Under Corona Kavach Health Insurance?

Covid Hospitalisation Expense Cover: This is an indemnity-based coverage that covers hospitalisation fees incurred as a result of coronavirus therapy.

Ambulance Cover: The costs of a road ambulance while transporting a patient to a hospital are covered up to Rs 2,000.

Hospital Cash Benefit: This policy provides a daily cash benefit of up to 0.5 percent of the sum insured as Hospital Cash Benefit for a specified number of days as specified in the policy agreement.

Home Treatment Coverage: Depending on the patient's health, the coverage also covers treatment received at home for 14 days. If the patient receives coronavirus treatment at home, home care treatment is covered.

Pre-Hospitalisation Coverage: For a period of 15 days, this policy covers treatment expenses incurred prior to hospitalisation, such as consultation fees, tests, and check-ups.

AYUSH Treatment Cover: Corona Kavach policy covers AYUSH treatment charges as well, including Ayurveda, Unani, Sidha, Homeopathy treatment. However, the treatment must be obtained from a licenced hospital.

No Deductible: The sum insured might range between Rs 50,000 and Rs 500,000. However, there are no deductibles.

ICU Expense Coverage: COVID patients are frequently hospitalised to the ICU. Expenses are unquestionably on the high side. No need to worry, the policy will cover it as well.

No Cap on Room Rent: Some insurers do not impose a cap on room rent while hospitalised if you choose a single private room.

There are difficulties in life, and one of them is an illness. As a result, having mediclaim coverage that covers your hospital expenditures will keep you financially secure during difficult times.

To know more about Is Coronavirus treatment covered in Care- Health Insurance for the family, you can visit our website http://www.jayantharde.com or contact our representative at [phone] or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

Source: https://hardejayant.blogspot.com/2021/06/is-coronavirus-treatment-covered-in.html

[jayantharde]

An analysis of Dividend vis-a-vis SWP

Of late we see that there is a lot of interest in Mutual Fund Dividends and Systematic Withdrawal Plan (SWP) as income solutions for investors. Many investors prefer dividend options for regular income, but there is a growing interest in SWP in the last few years. Let us now compare and contrast the two solutions. Let us also discuss various factors, which can help investors make informed decisions.

*What is dividend option?*

In Dividend Option the profits made by a scheme are distributed to investors at regular intervals as dividends. SEBI stipulates that dividends can be paid from accumulated profits. Investors should note that, as per SEBI regulations, only realized profits (when portfolio securities are sold at profit) are eligible to be distributed as dividends. Fund Managers may not pay the entire profit realized by the scheme during an particular period as dividends. They may retain certain amount of profits in the accumulated profits reserve, so that they can continue to make dividend payments during rainy days (periods in which the scheme does not make profits). It is important for investors to note the following with regard to Dividend options:-

*1. Mutual fund dividends are not assured* They are paid at the discretion of the fund manager/AMC. Schemes which were paying regular dividends can stop paying dividends for an indefinite period of time.

*2. Mutual Fund schemes can reduce or increase dividend* payout rate at their discretion – depending on market conditions and outlook.

*3. There is no fixed day* of a month for monthly dividend payments. The AMC decides the day on which dividend will be paid in a particular month or quarter.

*4. The dividend paid per unit will be stripped* from the NAV of the scheme and ex-dividend NAV of the scheme will be net of dividend pay-out.

*5. Mutual Fund dividends are tax free in the hands of the investors* but the AMC has to pay dividend distribution tax (DDT) before paying dividends. The DDT rate is 28.84% for debt mutual funds. In 2018 Budget, the Government introduced 10% DDT for equity or equity oriented mutual funds (prior to FY 2019, dividends paid by equity funds were tax free).

*Dividend impact on NAV*

Dividend plans with differing frequencies of dividend distribution have different NAVs, I.e. if a scheme has 4 dividend options, each option will have a different NAV.

*Difference with Stock Dividends*

When stocks declare dividends, the market takes it as a strong sign that the company is doing well and the business is generating enough profits to not only continue/expand operations but also give some amount back to investors.

As a result, when companies declare dividends, usually the stock price doesn’t decrease by as much as the dividend amount due to this positive signal.

However, with mutual fund dividends, this entire signaling effect is not applicable.

In fact, since not giving dividends often leaves investors annoyed, many funds give back capital even when they should be staying invested.

When stocks announce dividends, the original investment stays & the effects of compounding stay intact – any dividend earned doesn’t reduce the original investment. However, with mutual fund dividends, this compounding effect is diminished as the investor periodically reduces his invested amount.

If your objective is to receive a periodic income from your investments, then rather than opting for the dividend plan, you should choose the growth plan and setup systematic withdrawals of similar amounts.

Unlike paying DDT on the entire amount received as dividends, in this case the investor will only pay the appropriate capital gains tax on just the amount of gains, and not the total amount withdrawn.

Mutual fund dividends plans aren’t usually focused on earning dividend income, unless it’s defined in the stated objective.

Instead, they are more akin to systematic withdrawal plans that enable investors to take out some money at pre-defined intervals If the objective is to make periodic withdrawals, the same can be achieved in a more tax-efficient manner than the Dividend plan, as discussed above.

On the other hand, if the objective is to receive a periodic income from your investments above capital appreciation, then investors should invest in stocks directly.

*SWP or SYSTEMATIC WITHDRAWAL PLAN*

SWP is an investment option offered by mutual funds, whereby investors can draw a fixed amount every month (or any other interval as specified by the AMC) from a mutual fund scheme on a fixed day of any month (or any other interval).

The AMC makes SWP payments to investors by redeeming the required number of units at prevailing NAVs; the balance units remain invested and grow in value with growth in scheme NAV. You can think of SWP as a series of redemptions from your lump sum investment to meet your cash-flow needs. SWP facility registration offers investors the convenience of the AMC taking care of the redemptions on an ongoing basis.

The biggest advantage of SWP versus dividend option is assurance of fixed cash-flows as long as there is sufficient unit balance. Investors opting for SWP should note the following:-

1. Cash-flows will be generated for you by redeeming units of scheme where you have invested. Your unit balance will go down over time.

2. If you want more cash-flows, higher number of units will have to be redeemed and your unit balance will be lower and vice versa. You should choose your withdrawal rate carefully.

3. You will continue to receive fixed SWP payments irrespective of market conditions, but you should remember that in bear markets more units will have to be redeemed to meet your SWP payments.

4. SWP payments made within the exit load period of a scheme will attract requisite charges. Therefore, it is recommended that you begin your SWP after the exit load period.

*Is SWP always better than dividends?*

SWP can be better or worse than dividend option, depending on the decisions made by the investor. If the SWP withdrawal rate is reasonably low, then in the long term SWP can give superior post tax returns. However, if the SWP withdrawal rate is too high then the units will diminish at a faster rate and the investor runs the risk of running out of funds. Ideally, the SWP withdrawal rate should be lower than the average long term ROI of the scheme. While SWP gives investors the convenience of fixed regular cashflows, investors should also be flexible about reducing their withdrawal rates in severe market conditions (e.g. severe bear market lasting for several quarters).

*1. Systematic Withdrawal Plan is used to redeem your investment from a mutual fund scheme in a phased manner. Unlike lump sum withdrawals, SWP enables you to withdraw money in installments. It can be viewed as an opposite of SIP. In SIP, you channelize your bank account savings into the preferred mutual fund scheme. Whereas in SWP, you channelize your investments from the scheme to the savings bank account. It is one of the strategies to deal with market fluctuations.

With the Systematic Withdrawal Plan, you can customize the cash flow as per your requirement. You can choose to either withdraw just the capital gains on your investment or a fixed amount. This way you will not only have your money still invested in the scheme, but you will also be able to access regular income and returns. The money that you withdraw can be used to reinvest in some other fund or can be retained by you in the form of cash.

*2. Why do I need a Systematic Withdrawal Plan?*

You may know that your mutual investments always face the market fluctuations. It means that these fluctuations may impact the fund NAV adversely. Especially, when an individual is approaching a goal, the fund returns may erode if not withdrawn on time. So, with the help of an SWP, you can time your withdrawals as per the financial needs. If your goal requires to be funded in a phased manner, then you may opt for an SWP. It will ensure availability of the funds at the right time. In this way, goal accomplishment may not get delayed owing to a cash crunch.

SWP also helps investors who want a second income in addition to their salary from the job. With this plan, you as an investor can create a flow of income from your investment that is regular. If you seek to have periodic incomes for your travel or other needs, this is a great way to set this provision. It should be created in such a way that when you need cash the most, it is available.

*3. Why is the Systematic Withdrawal Plan a good investment option?*

There are two main reasons why this is a wise investment strategy. Firstly, these withdrawals which are also referred to as redemptions, are not subject to tax deductions at source. The capital gains though are taxed on the withdrawn amount. You may also opt for setting up your withdrawal in such a manner that you only draw the appreciation that is made on the investment amount. This keeps your capital invested while at the same time you enjoy the gains on a regular interval.

*4. The withdrawal options*

With the fixed withdrawal option, you can access a specified amount from your investment on either a monthly or a quarterly basis. With the appreciation withdrawal option, you may withdraw only the appreciated amount on a monthly or a quarterly duration.

*5. How does a Systematic Withdrawal Plan work?*

When you choose a Systematic Withdrawal Plan, it affects your mutual fund account as well. It is important to note that an SWP is not the same as opening a fixed deposit account in a bank where you receive monthly interests. With a fixed deposit, the corpus value is not impacted when you withdraw the interest but in the case of a systematic withdrawal plan in mutual fund schemes, the value of your fund is reduced by the number of units you withdraw.

With each withdrawal, your mutual fund will see a decline in its units. At higher NAVs, you may redeem fewer units to fulfill the cash requirements. Conversely, as the NAV falls, it would have the opposite effect, requiring the redemption of more units. An important aspect of benefiting from this plan and making the most of it is by planning the SWP keeping in mind your needs and your end goal. It can have a detrimental effect on the value of your fund if you go for unplanned withdrawals.

*6. Tax Implications of Systematic Withdrawal Plans*

The redemption via systematic withdrawal plan is subject to taxation.

In case of debt funds, if your holding period is less than 36 months, then the amount that you withdraw will form a part of your income. It will then be taxed according to your income slab. On the other hand, if the holding period is more than 36 months, then the long-term capital gains will be taxed at 20% with indexation.

In case of equity funds, if your holding period is less than 1 year, then the withdrawn amount will be taxed at the rate of 15%. On the other hand, if the holding period is more than 1 year, then the long-term capital gains will be taxed at 10% without indexation.

*7. SWP payments are subject to capital gains tax.*

In debt funds capital gains made in units redeemed for SWP within the first 3 years from the date of investment will be taxed as per the income tax rate of the investor. Capital Gains (debt funds) made in units redeemed after 3 years from date of investment will be taxed at 20% after allowing for indexation. In equity funds capital gains in units redeemed within 12 months from date of investment will be taxed at 15%. Capital gains in units redeemed after 12 months is tax free, as long as the total capital gains in a financial year do not exceed 1 lakh.

*Tax Efficiency - Dividend or Growth*

The dividend option has been advocated as the way to earn regular cash flows from the mutual fund investment. The impression that the dividend is an extra return has made investors choose this option to the detriment of their long-term goals which will suffer because the dividends actually bleed the longterm corpus that is being built and reduces the compounding benefit to the portfolio.

Investors choose the dividend option on the basis of two misconceptions—one, investing in debt funds with monthly dividend option is equivalent to getting monthly income from the mutual funds, and second, that this dividend is profits that they are reaping out of their mutual fund investment over and above the NAV. I constantly dissuade them of these notions and try and educate them that the dividend is coming out of their investment.

There have been instances of misselling too, where the dividend is projected as a guaranteed feature. The latest instance involved the balanced fund category in 2017, where Fixed Income investors were lured into these schemes on the basis of the continuous dividend paying record of the schemes in the good equity market scenario of 2015-2017. However, this ended when markets crashed in 2018, and the category since then has been seeing huge outflows every month.

A better way to generate regular cash flows from mutual fund investments is to redeem units periodically to the extent required. Unlike the dividend option where there is no certainty on the amount of dividend and the dividend decision is made by the fund management, mutual funds provide the facility of systematic withdrawal plans (SWP) where investors can specify the amount of money required and the periodicity and the mutual fund will execute it by redeeming the required number of units. Using the SWP option gives certainty of income that is not there in the dividend option.

You must not confuse return with cash flow. If you need cash flow then you must select the SWP, which is not only tax-efficient but also does not create the illusion that this is additional income, The drawback, if it can be considered that, is the capital invested may also be withdrawn over time. As long as your annual withdrawal rate is well below the expected return and you judiciously calibrate the process where needed, your capital remains intact over time.

The dividend and growth option were played-off against each other since the tax treatment of returns as dividend and as capital gains were taxed differently.

But with a 10% dividend distribution tax now being imposed on dividends that are distributed and a longterm capital gain tax of 10% on gains over ₹1 lakh per annum in case of equity funds, and a dividend distribution tax of 25% and LTCG of 20% with indexation benefits on debt funds, the choice becomes a little more nuanced.

How do they stack up? In case of equity funds, the DDT of 10% is applicable on the entire amount of dividend. If a systematic withdrawal plan was used to withdraw a specified amount, then the tax will apply only on the capital gains over ₹1 lakh per annum and not on the total amount withdrawn.

The SWP option to generate post-tax returns is clearly superior to the dividend option. In case of debt funds, the availability of indexation benefits on long-term capital gains makes the SWP option even more attractive from a tax perspective. In the SWP option the units held will go down as redemption happens. In the dividend option, the NAV will deduce as dividends are paid out.

The dividend re-investment option, a sub-sect of the dividend option, hits the investor twice-over with tax. First, the DDT is deducted when the dividend is paid, even if it is re-invested in the same scheme. Second, when the investor withdraws the investment, there is a capital gains tax, too, that they are liable to pay. This double tax whammy makes this option completely useless for the investor seeking growth in investments.

Investors in mutual funds are looking for either long term capital appreciation or income from their investments. The dividend pay-out and re-investment options do not give investors any advantage in either of these goals on a post-tax basis. The combination of growth option along with a systematic withdrawal plan is what works for investors in the current tax scenario. Investors should consider switching their investments into the growth option to limit the damage.

Remember, there are exit loads and taxes applicable on such switches, which need to be taken into account.

*CONCLUSION*

We have compared Dividend option. SWP gives the comfort of predictable cash-flows and superior post tax returns. Unlike dividends, SWP gives power to the investor to decide cash-flows. However, this power can be a double edged sword and therefore, must be exercised with utmost caution and great restraint - investor's withdrawal rate should be reasonable low, so that he can create wealth in the long run. My view is SWP rate should not be more than 7-8%.

To know more about Dividend vis-a-vis SWP, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2021/04/an-analysis-of-dividend-vis-vis-swp.html

[jayantharde]

Different parameters for balance sheetreading

*1. BOOK VALUE PER SHARE*

The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders. The term "book value" is a company's assets minus its liabilities and is sometimes referred to as stockholder's equity, owner's equity, shareholder's equity, or simply equity.

Common stockholder's equity, or owner's equity, can be found on the Balance Sheet for the company. In the absence of Preference  Shares, the total stockholder's equity is used.

*Concept of Book Value per Share*

Book value per share is just one of the methods for comparison in evaluating a company. Enterprise value, or firm value, market value, market capitalization, and other methods may be used in different circumstances or compared to one another for contrast, e.g, Enterprise Value would look at the market value of the company's equity plus its debt, whereas Book Value per share only looks at the equity on the balance sheet. Conceptually, book value per share is similar to net worth, meaning it as assets minus debt, and may be looked at as though what would occur if operations were to cease. One must consider that the balance sheet may not reflect with certain accuracy, what would actually occur if a company did sell all of their assets.

*Use of Book Value per Share*

The book value per share may be used by some investors to determine the equity in a company relative to the market value of the company, which is the price of its stock. For example, a company that is currently trading for Rs. 20 but has a book value of Rs. 10 is selling at twice its equity. This example is referred to as price to book value (P/B), in which book value per share is used in the denominator. In contrast to book value, the market price reflects the future growth potential of the company.

Book value per share is also used in the Return on Equity formula, (ROE), when calculating on a per share basis. ROE is net income divided by stockholder's equity. Net income on a per share basis is referred to as EPS, (Earnings per Share). Book value per share is expressing stockholder's equity on a per share basis.

*2. INVENTORY TURNOVER RATIO*

*Definition*

Inventory turnover ratio, defined as how many times the entire inventory of a company has been sold during an accounting period, is a major factor to success in any business that holds inventory. It shows how well a company manages its inventory levels and how frequently a company replenishes its inventory. In general, a higher inventory turnover is better because inventories are the least liquid form of asset.

*Inventory Turnover Ratio Analysis Explanation*

Inventory turnover ratio explanations occur very simply through an illustration of high and low turnover ratios. Despite this, many businesses do not survive due to issues with inventory. A low inventory turnover ratio shows that a company may be overstocking or deficiencies in the product line or marketing effort. It is a sign of ineffective inventory management because inventory usually has a zero rate of return and high storage cost. Higher inventory turnover ratios are considered a positive indicator of effective inventory management. However, a higher inventory turnover ratio does not always mean better performance. It sometimes may indicate inadequate inventory level, which may result in decrease in sales.

*Inventory Turnover Ratio Calculation*

Inventory turnover ratio calculations may appear intimidating at first but are fairly easy once a person understands the key concepts of inventory turnover.

*Cash Tied Up In Inventory*

When your cash is tied up in inventory, it is bad news for your company. Make it your goal to increase inventory turnover to free up cash.

*3. RETURN ON NET WORTH*

*Definition*

Return on Networth is a ratio developed from the perspective of the investor and not the company. By looking at this, the investor sees if entire net profit was passed on to him, how much return he would  be getting. It explains the efficiency of the shareholders’ capital to generate profit.

*Formula*

Return on Net Worth (RONW) is a measure of profitability of a company expressed in percentage. It is calculated by dividing the net income of the firm by shareholders’ equity. The net income used is for the past 12 months. It can be represented mathematically as follows:

RONW = Net Income ÷ Shareholders’ Equity

RONW = 100,000 / 500,000 = 0.2 or 20%

The net income should be of the past year and the equity should be as of the end of the period for which return on net worth is being calculated. Also, equity should be adjusted for stock splits and should not include preference shares.

*Explanation*

In terms of its implication, return on net worth indicates how much profit has been generated for every rupee of equity investment. Even more plainly, return on net worth is a measure of how well the company is utilizing the money invested by shareholders.

A high return on net worth percentage is indicative of the prudent use of shareholders’ money while a low percentage indicates less efficient deployment of equity resources.

Return on net worth is considered as a vote of the efficiency of a company’s management with an increasing percentage indicating higher efficiency in generating profit on every dollar invested.

*Interpretation*

For studying this measure, it is important to look at it over several periods of time in order to assess whether the company has been more or less efficient in generating profits on shareholders’ equity over the years. Also, an increasing RONW may result from a decline in value of shareholders’ equity. Hence, a share buyback can artificially increase return on equity from which investors and analysts may draw an incorrect conclusion of higher profits or increased efficiency. Hence, it is important to look at the ratio in its entirety before drawing conclusions about the firm being analyzed.

Combined with return on assets (ROA), return on net worth can show whether leverage is being employed by a company. For instance, if ROE is greater than ROA for the same period, it is a sign of leverage being used to increase profits because higher debt means fewer requirements for equity, which will boost ROE. When comparing different companies in terms of their return on net worth, it is important to ensure that the companies are comparable in terms of the business cycle as well as industry else the measure may not be useful.

For instance, comparison of RONW of a company from the technology and another from the utility sector may not give the right picture as technology companies tend to have lower debt while utility companies usually have high levels of debt. Also, technology companies are usually higher growth companies while utilities are usually stable businesses, thus making a comparison between the ROE of these two companies incorrect.

*4. CASH HOLDING PER SHARE*

*What is Cash Per Share*

Cash per share represents a company's total cash divided by its number of shares outstanding. Cash per share is the percentage of a firm's share price that is immediately accessible for spending on activities such as research and development, mergers and acquisitions, purchasing assets, paying down debt, buying back shares and making dividend payments to shareholders. Cash per share consists of cash and short-term investments. It is money that a firm has on hand; it does not come from borrowing or financing activities.

*Breaking down Cash Per Share*

When a firm has high levels of cash per share, it is holding a significant percentage of its assets in a very liquid form. This decision can indicate economic uncertainty and an unwillingness by firms to invest given the current economic climate. High levels of cash per share can indicate that a firm is performing well, with positive earnings and cash flow and the ability to reinvest in itself. However, high levels of cash per share do not always coincide with overall financial strength. Rather, available cash offers a level of financial flexibility, but can also represent a cost of capital inefficiency if a company holds on to too much cash.

Cash per share can be further broken down into different segments of cash or cash available to various forms of capital (financing).

Free Cash Flow (FCF) is a common cash flow measure highlighting available cash after operations which can be distributed to pay down debt or dividend to equity shareholders. Another common cash flow metric is Free Cash Flow to Equity (FCFE), which is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid.

To know more about parameters for baIance sheetreading, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2021/04/different-parameters-for-baiance.html

[jayantharde]

How Loss Aversion behaviour can destroy your wealth

We spend a huge amount of time trying to make smart decisions with our money. It is possible that we could add just as much value—if not more—by avoiding dumb ones. You, as an investor, must get acquainted with Loss Aversion. It holds that all else being equal, losses fundamentally loom larger than gains.

People talk about risk aversion. But there is also something call loss aversion. It is not that people don't like taking risks. What people don't like is losing things. We feel losses twice as keenly as we feel gains. So, we hate losing Rs 100 as much as we like making Rs 200.

People that go into casinos can validate that when you go in at the start of the night, people tend to spend their chips at the roulette table very carefully, and try and lose money as slowly as possible. But when they get to the end of the night, they just have a few chips left in their pocket, they tend to go for really high risk bets. So, people move from being risk averse at the beginning of the evening when they have lots and then when they've lost that money, they become risk seeking because they're trying to get it back.

*This same behavior gets replicated in investing.*

When people see a stock falling in price or their portfolio falling in value, they feel that they've got to stop losing money. That leads to people selling investments when there's just a small dip in prices.

Equally, if you have a real loser on your hand, suddenly, let's say, fallen by 80%, then people are normally very keen to hang on to it. That even if everything is going wrong, they don't want to sell it at that point, because they're hoping it will get back to the value that they started with.

Something that I find helpful to remember is that an investment that's fallen by 90% is one that's fallen by 80% and then halved. So, actually, loss aversion can really hurt you, not only when you're taking small losses, but also when you're refusing to take big losses.

The key thing is that people tend to want to cut those losses early, which is why the ups and downs of the market causes so many problems. But also, often they sell things that are going well, too early, as well. And so, both sides of the coin can hurt people.

*Stop looking at your portfolio frequently.*

Write your strategy down and revisit it when the market turns volatile. Talk to your adviser before acting. A big mistake people make is that they pay too much attention to their portfolio.

Our most meaningful investment milestones are decades away, but our attention is monopolized by the moment. Paying too much attention to our investments today can put us at risk of missing goals that are years away.

One of the chief side effects of monitoring our investments too closely is that it fuels our aversion to loss. Loss-aversion is but one suitcase among our abundant evolutionary baggage.

The theory is that we feel far greater pain from losses than we experience pleasure from gains of equal magnitude. The tie to evolution is that Fred Flintstone had far greater incentive to avoid being mauled by a saber-toothed tiger than to order another oversize rack of ribs from his already-toppled car.

*Loss aversion can have a meaningful impact on investor behavior.*

In “Myopic Loss Aversion and the Equity Premium Puzzle,” Shlomo Benartzi and Richard Thaler demonstrated that the disconnect between the duration of investor’s goals (retiring 30 years from now, for example) and the frequency with which they monitor their portfolios (typically at least once a year) leads to a behavior they coined “myopic loss aversion.” The likelihood of losses in any given 1-year period is far greater than the probability of losing money over a longer horizon. But the authors found that annual reviews led investors to behave as if their investment horizon was a year out and not 10 or 20 or 30. This leads many to take less risk (by allocating less to stocks, for example) than is necessary to meet their longer-dated goals.

*The best way to shake this behavior is to simply stop paying so much attention to the markets and our portfolios.*

I am a firm believer in an approach to port-folio monitoring and maintenance that borders on benign neglect. There is so much noise in the markets that the signal typically fades into the background. Tuning out the noise will also help to diminish the illusion of control and recency bias.

In recent years, I personally have made a habit of only looking at my own investments once every few months or so. I’ve found that every time I turn up the volume knob on the market’s noise-making apparatus, it’s tempted me to tinker with my portfolio. While it’s tough to put the market on mute, I think we’d all be better served by tuning out a bit more often.

To know more about How Loss Aversion behaviour can destroy your wealth, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

Source: https://hardejayant.blogspot.com/2021/04/how-loss-aversion-behaviour-can-destroy.html

[jayantharde]

Law of Attraction

If you had a magic lamp with a genie who could grant you 3 wishes, what would you ask for? I am sure one of your wishes will be for more money (probably a lot of money). If so, you are not alone. Almost every one wishes he had more financial freedom in his life. Sadly, most of us try to grow our wealth in the wrong way. It is our belief that it is all about working harder or longer hours. But the secret is not about how hard you work. It's about changing the way you think about money.

What is required is how to develop a powerful wealth mindset. It's time to unlock your true money making potential and liberate yourself from financial worries once and for all. Use the law of attraction to overcome your limiting beliefs about money, so that you can generate the wealth in abundance.

*Activating the Law of Attraction*

Law of Attraction is one of the most powerful forces in the world. It surrounds us, affects us and can be used to positively impact our future. Like gravity, it is not something that we can turn on and off. And like gravity, we can choose to fight it, complain about it, or harness its tremendous benefits - just as successful people do.

But sadly it doesn't work for everyone. The issue is not the Law itself. It's how people attempt to apply the teaching. Common and seemingly innocent mistakes can dramatically reduce your results - and even prevent you from achieving any results at all.

*WHAT YOU THINK ABOUT, TALK ABOUT, BELIEVE STRONGLY ABOUT AND FEEL INTENSELY ABOUT, YOU WILL BRING ABOUT.*

Simply put, the Law of Attraction is the ability to attract into our lives whatever we are focusing on. It is believed that regardless of age, nationality or religious belief, we are all susceptible to the laws which govern the Universe, including the Law of Attraction. It is the Law of Attraction which uses the power of the mind to translate whatever is in our thoughts and materialize them into reality. In basic terms, all thoughts turn into things eventually. If you focus on negative doom and gloom you will remain under that cloud. If you focus on positive thoughts and have goals that you aim to achieve you will find a way to achieve them with massive action.

This is why the universe is such an infinitely beautiful place. The Law of Attraction dictates that whatever can be imagined and held in the mind’s eye is achievable if you take action on a plan to get to where you want to be.

*What is Law of Attraction*

The Law of Attraction is one of life’s biggest mysteries. Very few people are fully aware of how much of an impact the Law of Attraction has on their day to day life. Whether we are doing it knowingly or unknowingly, every second of our existence, we are acting as human magnets sending out our thoughts and emotions and attracting back more of what we have put out.

Unfortunately, so many of us are still blind to the potential that is locked deep within us. Consequently, it is all too easy to leave your thoughts and emotions unchecked. This sends out the wrong thoughts and attracts more unwanted emotions and events into your life.

Having said this, discovering that the Law of Attraction is at work within your life should be a great cause for celebration! Once the power of attraction has been understood by you it is no longer secret. Plus, you have learned how to effectively apply these to your everyday life, your entire future is yours to create.

*History Of The Law Of Attraction*

Before you begin to embark on the incredible journey towards true enlightenment in the Law of Attraction, it is important that you understand that you can apply it to your life and it can be effective if the correct tools are used. The practices and beliefs in this law have been igniting the lives of great individuals throughout the course of history.

Hundreds of years ago the Law of Attraction was first thought to have been taught to man by the immortal Buddha. It is believed he wanted it to be known that ‘what you have become is what you have thought’. This is a belief that is deeply intrinsic in the Law of Attraction.

With the spread of this concept to western culture also came the term ‘Karma’, it is a belief that is popular throughout numerous societies. Over the centuries it has been a common understanding amongst many that what you give out to the world (be it anger or happiness, hate or love) is ultimately what can return to your own life in the end. This simple and easy-to-follow concept has been so popular among many for a large number of years. It demonstrates that the idea of the power of attraction is not new whatsoever. It is already recognizable to many of us in a variety of ways.

The main principles of the Law of Attraction can also be discovered in the teachings of many civilizations and religious groups. An example, in the Proverbs 23:7, it reads ‘As a man thinketh in his heart so is he'.

Proof of praise for the Laws of Attraction can be uncovered throughout the ages. You know how you sometimes get really excited about something, it hijacks all your thinking for a couple of days, and then a few months later, after you have long forgotten it, again it randomly pops back into your life? Or have you ever set an outrageous goal, never looked at it again, and later realized you did indeed accomplish it?

*The Secret is the Law of Attraction.*

Under the Law of Attraction, the complete order of the Universe is determined, including everything that comes into your life and everything that you experience. It does so through the magnetic power of your thoughts. Through the Law of Attraction, like attracts like. What you think about, you bring about.

*How is this so?*

Every thought is made up of energy and has its own unique frequency. And when this energy and frequency of a single thought radiates out, it naturally interacts with the material world. And so, as your thought radiates out, it attracts the energy and frequencies of like thoughts, like objects, and even like people, and draws those back to you. That Is Law Of Attraction

In order to use the law of attraction, you must think about what you want, not what you want to avoid.

The three steps of the law of attraction are asking, believing, and receiving.

*Lesson 1:* Like attracts like. As you shout into the woods, so they echo back. In essence, the law of attraction states that what you think and feel determines what you’ll attract into your life. For example, if you focus on all the negative feedback you get, you’ll likely encourage more criticism. You cannot act based on influences. It is therefore, important to put yourself in the right state of mind to achieve your goals, but that alone won’t cut it.

*Lesson 2*: Law of attraction works only when you think positive, not negative. When it comes to our internal monologue, loss aversion is a powerful driving force. We’re a lot more worried about losing what we have, rather than getting what we want. That’s why most of us subconsciously play not to lose, instead of playing to win. In part, this is why people who take more risks have less competition. Few people shoot for great than for average.

Plus, if you’re trying to convince yourself, framing something as a win sounds more convincing than fear mongering. That’s why as Better Humans, we always frame headlines in terms of positive transformation, not negative consequences from inaction.

*Lesson 3:* To manifest your dreams, you must ask, believe, and then receive. Besides regularly thinking about your goals, visualizing them, and framing them positively, try an actual, three-step process you can use to make the law of attraction work for you:

*Ask*. This is about being specific in what you want out of life. Vague questions get vague answers. Use a present tense structure and write down what you want from a perspective of gratitude:

Believe. If you don’t have unwavering faith in your goal, why should others? This is about radiating confidence, so that the people you meet along the way will support you. Don’t be blindly optimistic, but in a go-getter spirit.

Receive. Imagine how you’ll feel once you accomplish your goal. What would life be like? Visualize. This’ll prime your actions in the right direction.

Again, one should plan, remain motivated, and believe in himself. However, the one big caveat to all this is that your actions have to back up your state of mind. So think positive, prepare for success and then work like a madman to get what you want.

You can visit our website http://www.jayantharde.com or contact our representative at [phone] or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

[jayantharde]

Married Women's Property Act - Implications on Life Insurance Policies

The Married Women's Property (MWP) Act was enacted with a view to protect the properties of women against the creditors.

Under MWP Act all the properties that belong to the women gets insulated and protected from all the other court attachments or any income tax department attachments that the husband has run up. Let's take an example of a business family; the family could be a trader or a manufacturer or any other business. In due course of business there are some credit limits or there are bank loans, which have been taken by the business. The bank secures these credit limits against the assets of the business and also takes a personal guarantee of the owner of the business which could be the husband or the family.

In case of the untimely death of the husband the bank starts recovering their loans and in the process they liquidate the assets of the business and also they attach the properties that belong to the guarantor, which in this case is the husband.

In order to protect the family; the wife and the children, the life insurance policies that the husband takes; he should make sure that these policies at the time of taking the policies should be taken under the MWP Act because life insurance policies are also entitled to be attached, which means that the claims that paid out on the death of the husband, goes to the bank and not to the surviving members.

The process of taking the policy under MWP is very simple. At the time of making an application one has to fill in MWP addendum. This form is also provided by life insurance companies. In the form one has to fill in the details of his wife and children, whoever he wishes to make beneficiaries in the policy. In case of death, the policy proceeds do not go to anybody else other than the beneficiary as named by you in the policy. There is no attachment because the policy does not belong to the husband.

We talk about life insurance as means of financial protection. What is the sense if the money does not go to the family and gets attached for some other reasons? Let me make a point here, all kind of life insurance policies whether online term policies or any other form of life insurance policies are entitled to be issued under MWP Act and one should definitely make a point that he issues a policy under MWP Act to protect his family.

*How To Protect Insurance Claims From Creditors*

From time immemorial, our society has put the onus of being the primary bread winner for the family on men. Even with the rising women workforce where women are building a career for themselves, men are still considered to be the financial anchor for a lot of families for various reasons. Hence comes the importance of life insurance policies wherein it acts as a Plan B for the family’s financial future.

That is what motivates a lot of men to often invest in life insurance policies so that in case of their premature death the policy benefit would provide financial support to their family. But is this financial support guaranteed? What if there are creditors waiting to get their accounts settled? Can the husband ensure that the policy benefits would be used by his wife and/or children only?

Though it is a bitter pill to swallow, the truth is that the proceeds of a life insurance policy can be claimed by creditors who are owed money. In fact, the proceeds can be claimed by any individual who can prove a legal right of ownership of the money. If that happens, the wife and/or kids would not get the benefit and the whole purpose for which the husband had bought the policy would be wasted. How can you prevent it?

There is a Married Women’s Property clause under life insurance policies which, if selected, would ensure that the proceeds from a life insurance policy would go to the wife and/or child ONLY and cannot be attached for any other purpose.

Let’s understand what the clause is all about.

*The Married Women’s Property (MWP) Act, 1874*

The Married Women’s Property Act was passed in the year 1874 with a view to safeguard the rights of married women and children. Section 6 of the Act states that if a married man buys a life insurance policy on his life and wants the policy’s benefits to be utilised by his wife and/or children, the policy would be considered a trust. The policy cannot be controlled by the man himself, his creditors, court attachments or anyone. The policy shall be deemed to benefit only his wife and/or children.

As per the rulings of the Act, if your client chooses the MWP clause in the life insurance policy that he opts for, the policy benefits would be earmarked for his wife and/or children.

*Must-know facts about MWP in life insurance policies:*

Here are some things which you should know about MWP in the context of life insurance policies.

The beneficiary of the policy can be any of the following.

Only the wife

Only the children

The wife and children jointly. (In this case, the husband can specify the percentage of benefit which should be paid to each beneficiary. He can also specify the benefit to be paid jointly to all or to the survivors).

Nomination is not required in a policy which has a MWP clause. In case of death, the policy benefit is paid to the trustee who acts as a custodian of the money for the beneficiaries (if the trustee and beneficiary are different).

Divorced or widowed men can also opt for this clause. In such cases, the beneficiary would be the children.

In case of Hindu men, adopted children can also be made beneficiaries.

In case of Muslims, the beneficiaries are called ‘Persona Designata’. The beneficiaries are required to be named when the policy is being bought. Moreover, the beneficiaries should exist at the time the policy is being bought. If there are two or more beneficiaries, the share of each beneficiary should be expressly stated.

The policy should be bought by a married man on his own life.

Every policy is treated as a separate trust and it should have a trustee. The wife of the individual or his child, who should be more than 18 years old, should be appointed as a trustee.

Multiple trustees can also be appointed.

The consent of the trustee to act as such is required. This consent should be attached to the life insurance policy document.

If no trustee is appointed, a competent Government Authority would appoint Official Trustees.

The trustee, once appointed, can be changed any time during the term of the policy.

The life insurance policy under which the MWP clause has been opted cannot be surrendered before the completion of the tenure. The husband cannot even assign the policy to someone else’s name.

The MWP clause can be chosen ONLY at the time of buying the policy and not later.

*Most Important Benefit of MWP policies*

By choosing MWP clause in a life insurance policy, a married man can ensure the policy proceeds to reach his wife and/or children for their financial needs. The policy, therefore, becomes a financial cushion for the man’s family. Moreover, no additional charge is levied when the MWP clause is chosen. It is a simple addition to the policy’s terms and conditions which ensures that a man’s family is taken care of even in his absence.

Most importantly MWP is an important clause that can be attached to a life insurance policy if your client has a big loan, so that in case the client dies before the loan is repaid, the proceeds are not attached to the creditors.

So, if your clients have existing life insurance policies check whether they have selected the MWP clause or not. If not, advise them to buy a separate policy and select the clause. Over and above working hard to make sure that their family has the financial means to survive, choosing the MWP clause ensures the financial security of the family even after the death of the husband. So, understand the MWP clause and educate your clients about its benefits so that they get a better financial future.

*FAQs*

Q: Is the woman's stridhan only protected what she inherits from her father's family or is her own salary and investments and earnings are also protected and second, if her husband were to default on his home loan then the wife's salary cannot be attached when the house is foreclosed or a default is declared?

A: The answer to your first question, we are talking about a loan taken on the business, which the husband runs and he has given his personal guarantee towards those loans. So, all the attachments that we refer to are restricted only to the business and the assets of the husband. So, in the first part of your question, the income that the wife is generating, if she has not given her personal guarantee and the stridhan that she inherited from her parents do not get attached in this case.

The second part of your question is, if wife is not a co-borrower in the loan, if she has not given her personal guarantees then her property, her assets, her incomes cannot be attached, just by the virtue of her being the wife of the person who has taken the loan.

Q: Is the converse true, if a wife were to defaults, the husband's property is safe?

A: Not really. The property goes; let's take the example of a housing loan. The house is going to be attached by the bank and they can ask the wife to vacate and vise versa. The idea behind MWP Act is that the entitlement of life insurance proceeds is for the protection of the family and in this case the bank attaches it. So, under MWP Act, they cannot do that.

Q: What are the disadvantages of this policy because it doesn't see too much acceptance or the sales etc are not too good according to what I have read in reports? Are there any disadvantages?

A: The reason why this is not popular because people are not aware that this kind of a facility is available.

Q: Can I get an addendum to an existing life insurance policy?

A: No. The MWP addendum can be attached only at the time of taking the policy. However, to answer the question, if one still wants to protect his family against this then he can do an absolute assignment of the policy even today; after taking the policy even if he is five-ten years down the policy, he can make an absolute assignment of the policy in favour of his wife. So, it does not anymore belong to him, it is not his property and so it cannot be attached.

To know more about Married Women's Property Act, kindly contact Jayant Harde on 9373284136 or [phone]. You can also visit our website: www.jayantharde.com

[jayantharde]

Investment Lessons - Paradoxes of successful investing

Speculation can be fun. But investing is not supposed to be fun. Wise investors saw it for what it is: a temporary price adjustment based on nonfundamental factors. Some people like to keep a small portion of their money in cash for exactly this kind of speculative event.

Speculation is fun. It's why a lot of people love investing, and if you speculate with only money you can afford to lose, events like these can be exciting and sometimes profitable.

If you are new to investing and don't understand the difference between fundamental value and market price, this is not for you.

If you are considering putting money on the line that you need for your present or future security: stop, breathe, and walk away. Just like you wouldn't take your rent money to Las Vegas,  don't put your life savings on the line trying to guess what the herd will do next. If you can't afford to be wrong, don't make the bet. And certainly not with money you cannot afford to lose.

*Bored, confused, and lonely are the long-term investor’s resting state.*

One of the paradoxes of successful investing: When it’s clicking, you tend to feel nothing, or worse.

*Boredom is a common state.*

You put the money in, you leave it alone, watch it fitfully grow, and repeat the process. Less tends to be more when it comes to making investment decisions and trading. The more you do, the more it tends to cost you in the form of inopportune purchases and sales.

But it’s not exciting, and it's hardly good conversation fodder. You’re not going to boast to friends and neighbours about your investment in an index fund or a systematic investment plan (SIP).

Yet, when we reflect on some of the biggest breakthroughs investors have had in achieving better outcomes, we find they stem from removing discretion and enforcing routine. Systematic investing and automatic contributions to the Employee Provident Fund (EPF) is mundane, but valuable in ensuring that investors save and invest on a regular basis. Target-date funds is another unsexy yet very effective step to take decisions like asset allocation, fund selection, and rebalancing off their plate, simplifying matters.

*It can also feel solitary and unsettling.*

Think March 2020, the euro crisis before that, the Global Financial Crisis, and the tech bubble. At times like those, even the most boring and regimented steps we take as investors might seem like an act of valour. You’re charging up that hill while droves of others are clambering down. That’s not going to leave you feeling affirmed or charged up. You’re going to feel dumb and drained, questioning yourself.

*Confusion and doubt often plague the investing process.*

That one went up, why? Wait what, that one lost money? Should I sell my winners and buy my losers? Investing inverts intuition and scrambles patterns, whereas we’re wired to trust our instincts and popular culture lionizes those who follow breadcrumbs or crack codes. Stories are expected to have clear protagonists and antiheroes, follow arcs, impart lessons, or at least reach a satisfying conclusion. Investing is caked in inscrutabilities like cash flows that stretch into perpetuity. You don’t get the guy or gal at the end and there’s no sunset to walk off into. Again, this is when investing is working.

*In the market, there are no heroes or villains. The stock market's workings are purely business.*

There seems to be a morality narrative doing the rounds: GameStop buyers punish short sellers and the rally would also damage hedge funds, which held most of those short positions. (Read: Short selling is not for the faint hearted).

Not too long ago, short sellers were popular heroes. Remember The Big Short? Dr Michael Burry (Christian Bale) shorted collateralized mortgages in his hedge fund and Mark Baum’s character (Steve Carrell) was based on real-life investor Steve Eisman, who (yes) managed a hedge fund and (yes) shorted investments.

Neither The Big Short's portrayal of short-sellers as champions nor WSB's belief that they harm innocent parties can be justified. Burry and Eisman were not heroes. They were professionals who saw the chance to make an investment buck. That was their job, and not a particularly dangerous or noble occupation at that. They neither risked nor saved lives. Admittedly, their trades were financially hazardous--but so, too, is the launch of any local restaurant, which places the founder's capital at risk.

What's more, The Big Short's transactions only profited if homeowners failed. Those investments would languish unless mortgage defaults increased. Quite literally, for Burry and Eisman to be vindicated--that is, for audiences to cheer the success of the film's protagonists--residential homeowners needed to suffer.

Phrasing the matter that way--which is how GameStop's shareholders view the issue--makes short sellers sound depraved indeed. But plenty of long positions also profit from unhappiness. Pharmaceutical companies require medical conditions that need curing, as do hospitals and medical suppliers. For their part, insurers would not exist were there not natural disasters, thefts, and accidents to protect against. Is it unethical to own stock in such companies?

Whether their positions are short or long, investors are investors. And if short sellers sometimes exaggerate their target's shortcomings, so as well do those with long positions. Investment hype flies in both directions. (Elon Musk attacks short sellers but not those who predict grand achievements for his company.)

Nor should hedge funds be regarded as villains. It seems, the belief arises more from symbolism than from actual events. The problem is not crimes that hedge funds have committed--Overcharged their customers?

Underperformed the stock market?--but instead what they represent: Wall Street at its most privileged and coddled.

Neither the motives of WSB's readers nor their methods deserve criticism. If GameStop's buyers invested for personal reasons as well as pecuniary, that is their right. The stock market does not test investor intentions. Whether participants are motivated solely by the wish to make money or have other desires is immaterial. Those who bought GameStop were not nobler than those who had sold it short.

If those trades were legal, as with the GameStop purchase, it is nobody's fault if the market wobbles. If the regulators perceived a problem, then they can devise a solution to prevent its reoccurrence.

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