How Aggressive Hybrid Funds Works? Top-performing Aggressive Hybrid Funds in India

Choosing between equity and a debt mutual fund scheme can be a challenge when you want exposure to equity but fear market volatility. Equity schemes invest only in equity and debt schemes only in debt. What if you wanted a combination of both?

Hybrid mutual fund schemes fill in this description. They invest in both equity and debt giving you a perfect balance between risk and returns. Hybrid mutual funds come in two variants –

  • Aggressive hybrid funds
  • Balanced hybrid funds

If you are looking at a higher equity exposure with a little investment in debt, you can invest in aggressive hybrid funds online. Aggressive hybrid funds are those which invest at least 65% of the portfolio in equity and equity oriented securities. Thus, when you invest in aggressive hybrid funds online, you are investing in an equity oriented mutual fund scheme which also has a debt allocation. Aggressive hybrid funds, being equity oriented in nature, give you the benefit of equity taxation. 

How do aggressive hybrid funds work?

Under aggressive hybrid funds, the portfolio is allocated between equity and debt. The fund manager invests 65% to 80% of the pooled portfolio to equity oriented securities. The remaining 35% to 20% of the portfolio is invested in debt and related instruments.

When selecting equity instruments, the fund manager has the autonomy to choose between equity stocks and arbitrage opportunities in the equity market. While equity stocks offer good returns but are volatile, arbitrage opportunities allow fund managers to buy a security at a lower price and then sell it at a higher price and make a profit on such sale. Thus, arbitrage opportunities help fund managers to hedge against inflation and volatility risks.

In case of debt, the fund manager can select any type of fixed income instrument depending on its sensitivity to interest rate movements. 

Thereafter, as the underlying assets of the aggressive hybrid fund perform, the fund offers returns and capital appreciation to investors.

Taxation on aggressive hybrid funds

Before investing in aggressive hybrid funds online, you should know about the tax implication on your investments. 

As mentioned earlier, aggressive hybrid funds attract equity taxation. Thus, they are taxed as follows –

  • Investment into an aggressive hybrid fund does not earn you any tax benefit. The invested amount forms part of your taxable income
  • If you redeem your investment within 12 months, the returns earned would be called short term capital gains. Such gains would be taxed @15%
  • If you redeem your investment after 12 months, you would be eligible for long term capital gains tax. Returns up to Rs.1 lakh would be tax-free in such cases. Thereafter, excess returns would be taxed @10%

Benefits of aggressive hybrid funds

By investing in both equity and debt securities, aggressive hybrid funds give you the following benefits –

  • Good returns

A high equity exposure yields good returns, especially over a long term period allowing you to maximize your investments.

  • Stability

The debt component of the portfolio brings stability, especially in volatile markets when the equity might be underperforming. 

  • Hedging opportunity

By investing in arbitrage opportunities, aggressive hybrid funds allow you to hedge against inflationary trends and volatility in the market.

Best aggressive hybrid funds in India

If you are looking to invest in aggressive funds, choose the best aggressive hybrid funds of India. Such funds would give you the best returns as well as stability. Here are the top five aggressive hybrid funds which you might consider –

Name of the fund1-year return*3-year returns*5-year returns*
Mirae Asset Hybrid Equity Fund20.74%6.85%11.1%
Canara Robeco Equity Hybrid Fund11.4%8.58%10.34%
Tata Retirement Savings Moderate Fund9.28%5.46%11.06%
Quant Absolute Fund16.93%8.47%10.06%
Principal Hybrid Equity Fund6.17%3.08%9.86%

(*CAGR returns as on 16th October 2020)

(Source: https://www.etmoney.com/mutual-funds/hybrid/aggressive-hybrid/68

Investing in aggressive hybrid funds

To invest in the best aggressive hybrid funds in India, you can visit the best personal finance website –  www.etmoney.com. ETMONEY is one of the best personal finance websites because it allows you to invest in aggressive hybrid funds online with minimal effort. The whole purchase process is online and the KYC verification is also done online. Moreover, there are no charges or commissions payable for investing in mutual funds through ETMONEY’s best personal finance website. So, invest in aggressive hybrid funds for a diversified portfolio and choose ETMONEY for investing hassle-free.

How Money Market Funds Works?

Debt mutual funds are suitable for those investors who do not like taking risks and want to protect their capital against the volatility of the equity market. Debt mutual funds are sub-divided into different types of funds based on the asset allocation of the fund and the average maturity of the underlying assets. You can opt for short term or long term debt funds depending on your investment needs.

One type of debt mutual fund is the money market fund. As the name suggests, money market funds invest in securities of the money market. These securities are highly liquid as they are frequently traded by investors. Moreover, money market securities have the maximum maturity period of one year which increases their liquidity. Money market mutual funds are those which invest in such short-term money market instruments. These funds are, therefore, marked by two distinctive features – liquidity and short term maturity.

Features of money market funds

Money market funds have the following features –

  • They invest in money market instruments like commercial paper, treasury bills, certificates of deposits, corporate bonds, etc. 
  • They are liquid and suitable for investors who are looking for a short term investment avenue
  • Money market funds have low risk and provide stable returns

How do money market funds work?

The money that you invest in money market funds is pooled into a corpus and then invested in money market securities. According to SEBI’s norms, money market funds invest in securities which have maximum investment duration of one year. Since money market securities are debt instruments, they pay a guaranteed rate of interest which is the source of earnings for investors. The interest earned on the underlying assets helps in providing capital returns to investors. Moreover, top money market funds also aim at capital appreciation by banking on the interest rate movement in the market. When there is a fall in the interest rates, money market funds reallocate their investments to securities with a high tenure. This increases the fund value. On the other hand, if the interest rates rise, the fund tries to invest in short term instruments to minimise capital losses. Thus, by changing the fund allocation in accordance with interest rate movements, money market funds try to provide capital appreciation to their investors.

Money market fund benefits

There are different money market fund benefits which you can avail if you choose to invest in these funds. These benefits are as follows –

  • Liquidity 

Money market instruments are highly liquid and since money market funds invest in these instruments, they also become highly liquid. So, if you are looking to park your surplus cash for a limited time, you can invest in money market funds and redeem the fund instantly whenever needed.

  • Limited interest rate risks

The risk with debt mutual funds is primarily interest rate risks. This risk increases with higher maturity funds. Since money market funds invest in instruments with a low maturity period, they have minimal interest rate risk and can offer good returns even if the interest rate is fluctuating in the market.

  • No volatility risk

Being a type of debt fund, money market funds do not invest in equity. They invest only in debt instruments which provide a guaranteed rate of return on investments. As such, money market funds have no volatility risks and are suitable for investors who are risk-averse and want capital protection.

  • Ease of choosing STP

STP (Systematic Transfer Plan) is a process by which you can invest in equity in a systematic manner rather than at once. You can invest in the top money market funds and choose the STP feature to allocate your investments to equity at regular intervals. 

Investing in money market funds

To avail money market fund benefits and to invest in the best funds, you can choose ETMONEY.com. ETMONEY.com is an online personal finance platform which allows you to invest in the top money market funds of India with some simple clicks of the button. No commission or fee is involved in buying through ETMONEY.com and you can buy online in a paperless way too. So, if you are looking for a short term investment avenue which is also liquid, choose money market funds and invest in the best funds through ETMONEY.com for ease and convenience. 

SIP is power investments, check out why

Mutual funds give you different investment choices. You can choose from a range of mutual fund schemes each of which has a different asset allocation and risk profile. Similarly, when it comes to the modes of investing in mutual funds, there are two options – 

The lump-sum mode of investment is when you invest a lump sum amount one time into a mutual fund scheme at a given NAV.

SIP (Systematic Investment Plan) mode of investment, on the other hand, is when you invest small amounts at regular intervals (usually monthly) into a mutual fund at different NAVs.

The SIP mode of investment is the best mode of investing in mutual funds. Do you know why? Let’s find out –

What makes SIPs powerful?

When you invest in SIP online, here are the benefits which you can avail –

  1. Affordable and easy investments

SIPs are an affordable way to invest in mutual funds. You can invest as low as Rs.500 per month by choosing to invest through SIPs. This amount is low and easily affordable for small investors too. Thus, investors who have a limited capital to invest can choose the best SIP plans for investing in mutual funds with their limited incomes. Since investment is done monthly, it is affordable and does not pinch your pockets.

Moreover, investing in SIPs has become easy as you can do so online. You can choose to invest in SIP online through the mutual fund house itself. Alternatively, you can choose to invest through ETMONEY, the best investment website, which gives you the benefit of choosing the best SIP plans through comparing. You can simply complete your KYC formality online and start investing in SIP online within minutes through ETMONEY’s best investment website. Thus, besides being affordable, SIPs are easy to invest into too.

  1. A disciplined approach to saving

When you choose to invest through SIPs, you create a disciplined investment habit. SIP investments are usually done in monthly instalments through direct debit from your bank account. Thus, once you start a SIP, you can invest every month in a disciplined manner. These disciplined investments help you create wealth with small investments. Moreover, when you invest regularly, you can build up a sizeable corpus even with the little amount you save.

  1. Compounding of returns

Mutual funds give compounded returns wherein the earned returns get added to your investments to earn future returns. As you keep on investing through SIPs, your investments attract compounded returns and through long term investment, you can generate exponential returns through the power of compounding. For instance, if you invest Rs.5000 every month for 20 years at an average interest rate of 12%, you can accumulate a corpus of Rs.49.46 lakhs through the power of compounding. Amazing, isn’t it?

  1. Rupee cost averaging

When you invest in a lump sum, you should time the market to invest at the right time when the markets are expected to increase. If you invest and the markets fall, you would make losses. In the case of SIP investments, however, timing the market is not needed. Your investments are done at a pre-determined date every month. As such, the NAV on the date of investment is considered to buy the units. Even if the market fluctuates during the year, the effective NAV for your investment would be averaged out over different months. This rupee cost averaging factor helps beginners to invest in mutual funds through SIPs as they don’t have to monitor, track and time the market for the right time to invest.

These features and benefits make SIPs a powerful investment tool. You can, therefore, start your mutual fund journey through SIPs. Alternatively, if you are an existing investor you can start a new SIP or top-up an existing one to save more. Always compare and choose the best SIP plans for maximum wealth creation. The best SIP plans would give you the best and consistent returns and help build up your investment portfolio. To compare between SIPs, choose ETMONEY’s best investment website and invest in SIPs without any additional cost.

Tips to safely buy insurance policies through App

Technology has advanced to such a degree that it has made the world a smaller place. Any information that you need is now available on your computer wherever you are. Even mobile phones have evolved and have become Smart. They are not only used for making calls or sending messages. Nowadays, mobile phones have become an all-purpose tool to help you do multiple things.

Special applications have been developed for mobile phones for every use that you can put your phone too. Buying insurance has also become simpler as there are financial apps especially for your phone. These apps help you buy insurance easily in simple steps.

The ETMONEY app is one such mobile application which allows you to insure yourself. Here are the various uses of the app – 

  • You can buy life insurance through ETMONEY app 
  • You can buy health insurance through ETMONEY app
  • You can even invest in mutual funds and NPS scheme online using ETMONEY

ETMONEY is, therefore, a one-stop solution for your investment and insurance needs and can be easily downloaded on your Smartphone. However, online transactions are prone to cyber-attacks and when you do a transaction through the ETMONEY app, the whole process is online. You should, therefore, follow some safety tips when using the app online. Here are some safety tips which should be practised –

  1. Secured connection

Ensure that you use secured connections when using the ETMONEY app. Use your mobile internet or a trusted Wi-Fi to connect to the application. Your home Wi-Fi or office Wi-Fi would be ideal connection points as they would be secured against possible hacking. Do not use unsecured Wi-Fi connections or connections in public places as they are unsecure and pose a threat to your financial transactions.

  1. Use of firewall or anti-virus 

The importance of anti-virus software and firewalls cannot be stressed enough. These measures protect your devices against cyberattacks. So, if you use a computer, make sure you have installed an anti-malware or anti-virus software on your device. Nowadays even mobile phones carry anti-virus software as mobiles have become multi-functional. Check your mobile device for the inbuilt firewalls. If there are none, buy and install an anti-virus on your Smartphone so that it can smartly thwart possible cyberattacks and allow you to do secured financial transactions.

  1. Use of reputed applications

Ever since Smartphones became popular, the market has been flooded with apps for them. You should, however, download and use reputed apps as they are secured, safe and guard your privacy. ETMONEY is one such reputed application which respects your privacy and guards your data through encryption. You can, therefore buy insurance through ETMONEY app without fear.

  1. Locking the app with a password

Make your app secured with a passkey which would be needed to unlock and use the application. If the app is password protected you can prevent misuse of the app of the leakage of sensitive information. So, opt for passwords when using the app and also change your passwords regularly for enhanced safety.

  1. Create a registered account

When you download the app and open it, it asks you to register yourself using your mobile number. This registration ensures that you become a registered user and can lock the app with a password. So, always create a registered account on the app and use the account to buy insurance policies online.

These safety measures ensure that you can buy insurance using apps without any worry about cyber thefts, frauds or phishing. The ETMONEY is a renowned and secured app which you can use freely for buying insurance. However, the knowledge and practice of the above-mentioned tips would go that extra mile to ensure your safety when conducting financial transactions. So, better safe than sorry, right?

How to select the best liquid funds to invest in India?

Where do you park surplus funds for a short period of time?

The probable answer to this question would be a bank account wherein you can easily save your money on a short term basis before you allocate your savings to other fruitful avenues.  However, bank accounts might not always be a smart choice because of the returns that they give. If you have a current account, the interest rate is zero and your money does not earn any return for the time it is saved in the account. Saving accounts, however, do yield interest which usually ranges from 3% to 6%. But what if you can get higher returns?

Liquid mutual funds are an ideal solution for parking your money for a short time. Liquid fund investments are debt mutual funds which have a low-risk profile and a short-term investment horizon. Liquid mutual funds invest in securities which have a maturity period of up to 91 days thereby giving you an avenue for short-term investments. They have high liquidity, very low volatility, low credit risk and no exit load. You can redeem your investments any time from the online liquid fund and get access to funds whenever you want.

Liquid fund investments are ideal for investing your emergency funds and when choosing an online liquid fund, you should be careful. The following factors should be taken into consideration when picking the best liquid mutual fund for your personal finance needs –

  1. The AUM of the fund

The AUM (Assets under Management) of the fund plays a very crucial role in determining which liquid fund investment you should choose. The larger the AUM of the fund the better diversification the fund would offer. This would diversify the risks and offer better returns. Moreover, if the AUM is large, the returns would not be impacted considerably if a large number of investors redeem their investments at the same time. It is because if there is a redemption pressure, the scheme would have to liquidate its holdings prematurely and suffer a penalty. This penalty would impact the returns generated. When the AUM is large, the impact of the penalty would be spread over a larger fund and the returns would not be impacted greatly. So, choose a scheme with a large AUM.

  1. The expense ratio

Another important consideration is the expense ratio. The lower the expense ratio of the fund the better would be the returns. So, compare the available online liquid funds and choose one which has a lower expense ratio for better returns.

  1. Check the asset allocation

Even though liquid funds invest in debt instruments, the asset allocation of the fund should be checked. You should opt for a fund which has a diversified portfolio. The portfolio holding of the scheme should not be concentrated in a few securities. It should be diversified across a range of securities whether they are treasury bills, commercial papers or certificates of deposits. Moreover, the portfolio should invest majorly in high-rated credit securities. Look for ratings of AAA or A1+ as they denote credit quality of underlying assets.

  1. The fund house

When selecting liquid fund investments, always choose reputed and large fund houses. This is because such fund houses have their reputation to take care of and they take on the responsibility of offering the best returns from their liquid funds. Large fund houses are also expected to have a larger AUM which is important when selecting online liquid funds.

All in all, the AUM, the fund house, the expense ratio and the asset allocation of the fund should be given careful consideration when choosing liquid funds for personal finance. Returns, though a factor, are not the only qualifying criterion. There is not much of a difference in returns among different liquid funds. So, returns should be checked but other factors should also be given priority. 

To make things easier, here are some of the best liquid funds which you can choose for your personal finance needs –

Name of the fundAUM as on 30th June 2020Expense Ratio as on 30th June 2020Portfolio Allocation (credit quality) as on 30th June 20203-year returns as on 5th August 20205-year returns as on 5th August 2020
HDFC Liquid FundRs.99,867 crores0.2%A1+ – 46.09%SOV – 35.94%AAA – 4.7%6.49%6.88%
SBI Liquid FundRs.50,762 crores0.18%SOV – 65.55%A1+ – 48%6.52%6.88%
Aditya Birla Sun Life Liquid FundRs.36,679 crores0.21%A1+ – 58.48%SOV – 28.59%AAA – 13.07%6.68%7.02%
Kotak Liquid FundRs.36,040 crores0.2%A1+ – 47.65%SOV – 31.09%AAA – 12.58%6.49%6.87%
Nippon India Liquid FundRs.30,604 crores0.19%A1+ – 55.81%SOV – 45.17%AAA – 1.72%6.68%7.01%

(Source: https://www.etmoney.com/mutual-funds/debt/liquid/57)

Choose any of these funds and invest your money in the best avenue for a short term period.

Most Common Misconceptions About Tax Saving Mutual Funds (ELSS Mutual Funds)

Equity Linked Savings Schemes (ELSS) are widely known as a great tax-saving option. But there are some common misconceptions about this mutual fund category. Read on to know if you have fallen for any of these traps.

  1. ELSS Funds only save taxes

ELSS Funds help bring down your tax liabilities. True. ELSS Funds do only that. FALSE. 

This mutual fund category can be a great vehicle to achieve your wealth creation goals as well. These funds invest in equities which have the potential to generate growing returns in the long run.

  1. ELSS Funds have a shelf life of three years

A common misunderstanding about ELSS Funds is that you need to withdraw your investments from these funds after completion of three years. The lock-in period for these tax-saving mutual funds is definitely defined as three years. However, that refers to the minimum time frame for which you need to remain invested. After the completion of the lock-in period, you are free to remain invested for as long as you want. In fact, equity investments yield the optimum results in the long run. Hence, it is advisable to hold onto your ELSS Funds for a minimum period of five to seven years.

  1. All ELSS Funds have the same structure or composition

This is one bubble that we need to break. Other mutual fund categories have defined guidelines regarding allocation across market capitalization. However, ELSS Funds enjoy complete flexibility in this regard. Hence, some schemes in this category invest predominantly in large-caps, some have higher exposure towards mid and small caps while others adopt a balanced approach. Hence, it is important to understand the portfolio allocation of each scheme to check its alignment with your own risk appetite and financial goals.

  1. You have to continue with the same ELSS

ELSS Funds are not like an insurance policy wherein you need to continue paying your premium every year for the same policy to qualify for the tax deductions and policy coverage. You need not continue to invest in the same ELSS Fund every year. You can even invest in multiple ELSS Funds.

Way to invest in ELSS Funds?

There are two ways to invest in ELSS Fund Online and Offline. 

Investing in ELSS Fund online can be a highly rewarding process. Not only is it simple, quick and hassle-free, but when you invest in ELSS Fund online you get all the relevant information about various schemes under one roof. You can easily complete the e-KYC formalities with the help of an online portal and start your mutual fund journey with just a couple of clicks. 

For offline investments, you need to visit the branch of a fund house or R&T Agent to complete the formalities. 

Best Tax Saving ELSS Funds in India

Here are the ten best tax saving ELSS Funds that will give you savings along with good returns.

  • Canara Robeco Equity Tax Saver Fund
  • Quant Tax Plan
  • Axis Long Term Equity Fund
  • Invesco India Tax Plan
  • Kotak Tax Saver Fund
  • DSP Tax Saver Fund
  • BNP Paribus Long Term Equity Fund
  • Aditya Birla Sun Life Tax Relief 96 Fund
  • Tata India Tax Savings Fund
  • Motilal Oswal Long Term Equity Fund

To sum it up

ELSS Funds are one of the best tax-saving options available in the market. They have the shortest lock-in period, are flexible and have a history of generating superior returns. However, if you are thinking of these mutual funds as only a tax-saving option, you are not realizing the full worth of these gems. They offer a much wider range of benefits. Invest in any of the best tax saving ELSS Funds and your financial life is well-taken care of.

How Floating Rate Debt Mutual Funds Reduce Interest Rate Risk?

Debt Funds are the preferred investment route for conservative investors. But every smart investor knows that even this category comes with its own risks. One of them being interest rate risks. But what if we were to tell you that there are options within the debt fund category that can reduce this risk to a significant extent? Yes, we are talking about Floating Rate Funds. If you want to optimize your debt fund investments and minimize the risks involved, continue reading.

Meaning of Floating Rate Funds

Floating Rate (or Floater) Funds are a type of debt fund. These open-ended debt schemes predominantly invest in floating rate instruments. As per the SEBI guidelines, they need to maintain a minimum investment of 65% (of their total assets) in floating rate instruments.

These funds seek to offer investors a source of flexible income and capitalize on rising interest rates scenarios. Floater Funds returns depend heavily on the overall market conditions and policy changes such as changes made in Repo Rate by RBI.

Floating Rate Fund Advantages

  • Minimised Interest Rate Risk

One of the most important floating rate fund advantages is its ability to bring down interest rate risk associated with debt investments. Interest Rate Risk refers to the potential loss or a depreciation in investment value, as a result of interest rate changes. Bond prices and interest rate movements share an inverse relationship. One goes up, the other goes down. This factor increases the risk in debt fund investments.

However, in case of floating rate funds, the coupon or interest rate is fluctuating and gets reset on a periodic basis. They move in tandem with the prevalent interest rates. As a result, you can hedge effectively against interest rate risk by investing in these funds. These funds give a block-buster performance when the interest rates are on a rise.

  • Relatively less credit risk

Another category of risks that plagues debt funds is credit risk. It is the risk of default on the part of the borrower (bond issuer) to repay principal amount or pay the interest thereon. Floater Funds carry lesser credit risk as compared to some other debt fund variants such as dynamic bond or credit risk funds. The credit risk in floater funds can be circumvented by choosing a scheme that invest in instruments with high credit rating.

  • Yield Potential

Floater Funds have the potential to generate superior returns than investment avenues such as Fixed Deposits and other debt fund variants.

This category generated 8.66% in the one-year timeframe, while the three-year returns are 7.35%.

Year-wise performance

YearReturns
20176.52%
20186.74%
20198.39%

One of the top floating rate funds (Nippon India Floating Rate Fund) generated double-digit returns (10.13%) in the last year.

  • Tax benefits

Floater Funds get the benefit of indexation when they are held for a minimum period of three years. Indexation helps bring down your tax liabilities as it accounts for inflation. The long-term capital gains tax for floater funds is 20% with the benefit of indexation.

Top Floating Rate Funds in India

If you are looking for the best performing funds from this category, look no further. Here are the top floating rate funds in India:

  • Nippon India Floating Rate Fund
  • ICICI Prudential Floating Interest Fund
  • Aditya Birla Sun Life Floating Rate Fund
  • HDFC Floating Rate Debt Fund
  • Franklin India Floating Rate Fund
  • Kotak Floating Rate Fund

Final Words

The numerous floating rate fund advantages make them apt for conservative investors as well as those who want to dilute their portfolio’s risk. For risk-loving investors floater funds are the perfect vehicle to balance out their aggressive investment strategies, especially during times of fluctuations. 

Enjoy the benefit of a term insurance policy even after you emigrate

A term insurance policy provides you an unmatched coverage for financial security for yourself and your family. The policy is a protection oriented life insurance plan which covers the risk of premature death and compensates your family for the financial loss suffered. Moreover, given the fact that the plan has a low premium, it allows you to opt for a high sum assured so that you can create the desired financial corpus for your family’s safety. But does the plan work if you emigrate?

Foreign shores lure many individuals who go abroad for work or business. Such individuals might go and live abroad either for a specified time period or permanently. In such situations, the term insurance policy does not get affected. Let’s understand how –

A term insurance plan covers you against the risk of premature death. This death can occur on Indian soil or in another country. The term plan is not affected by the place of death. You can still enjoy the coverage under your existing policy if you emigrate during the term of the policy. Here are some points which you should keep in mind if you have a term plan and you emigrate –

  • Continue the premium payment

In your existing policy you need to continue paying the premium in Indian currency. Even if you settle abroad you should have an Indian bank account from where the premiums can be paid towards the term plan online. If the premiums are discontinued, the policy would lapse and you would lose the coverage. Moreover, term plans also do not have any surrender value or paid-up value. So, premium continuation is quite important if you want to enjoy the coverage offered by the policy.

  • Payment of claim

In case of death during the tenure of the policy, the insurance company would pay a claim even if you settle abroad. However, the claim would be paid in Indian currency. You should, therefore, ensure that your nominee can contact the insurance company in case of your demise. Claim related documents should be submitted to the company to get the claim.

  • Limited pay term plans

If you are likely to emigrate and you want to buy a term plan online, you can opt for limited pay term plans. Under limited pay term plans, premiums are payable for a limited period while you can enjoy coverage for a longer tenure. These plans, therefore, ensure that the coverage continues even when you emigrate without you having to ensure premium payments throughout the policy tenure.

  • Tax implication

You can still claim the deduction on the term insurance premium under Section 80C if you emigrate. If you have income in India, your investment in a term plan online would be eligible as a tax-free deduction from that income. This would reduce your tax liability. Furthermore, in case of death, the death benefit would be completely tax-free even if you have emigrated.

Remember these points when you emigrate and you can enjoy the benefits of a term insurance plan. Moreover, term insurance plans allow NRIs to buy the policy. So, if you are emigrating and you wish to invest in a term plan online, you can do so even after you emigrate. You can buy a policy as a NRI and enjoy the benefits which the policy has to offer.

Claims under term insurance plans are unaffected by your residency status as long as you are an Indian citizen at the time of buying the policy. Moreover, buying a term plan in India is much more cost-effective than buying the policy in a foreign country where you emigrate to. So, buy a term insurance plan in India at lower premiums and enjoy the benefits of the policy even when you emigrate.

Why debt fund returns are volatile these days?

Debt funds have always been known as the conservative investor’s best friend. They are safer (when compared to equity funds) and usually offer stability to investors. So, when the returns from this category (including the best debt funds) started witnessing volatility, it was sure to cause some arched eyebrows and palpitating hearts. But before you start making panic-struck rash decisions, it is important to understand why are the debt fund returns volatile these days.

Risks in Debt Funds

It is true that debt funds are relatively safer. However, they are not completely risk-free (in fact, no financial instrument is!). Debt Funds have two major risks:

  1. Credit Risk

Credit risk is the risk of default on the part of the borrower to repay the principal loan amount or interest thereon. Credit risk has been on the rise in the country since some time now. Factors such as a slowdown in the real estate sector, the IL&FS fiasco in the year 2018 as well as defaults by big business houses such as DHFL, Zee Group, etc. have contributed to credit risks for the Indian debt funds in the past.

  1. Interest Rate Risk

Bond prices fluctuate as a reaction to changes announced in interest rates. They have the same relationship as the opposite ends of a magnet. One goes up, the other goes down. Whenever there is an increase in the interest rates, the debt fund’s NAV (Net Asset Value) is impacted adversely. 

Reasons for volatility in debt fund returns these days

It is important to understand that debt mutual funds are a part of the overall debt market. Hence, a large-scale credit event or a liquidity crisis is bound to impact the returns of these schemes, even for the best debt funds. 

The month of March (when coronavirus hit our country) witnessed a spike in yields (in the short-term segment) which led to a temporary dip in many debt fund NAVs. This was mainly because of:

  1. Dwindling trade volume and sluggishness in the Indian economy created a sense of panic amongst foreign investors. This led to massive outflows.
  2. Simultaneously, there was an exponential increase in redemptions from the Domestic Institutional Investors as well. 

Lockdown, extreme slowdown of businesses and bank moratorium (wherein borrowers can opt to defer their instalment payments) and tremendous rise in redemptions have increased the chances of default and rendered many papers illiquid.

Is it time to bid adieu to debt funds?

NO. The overall economic situation is in a turmoil. The current volatility in the debt market is a temporary phenomenon and will subdue with resurgence in global and domestic conditions. This category still continues to be one of the preferred investment options. However, what this pandemic and recent volatility in debt markets has taught (or revised our knowledge) is the importance of choosing the right debt fund. Debt funds invest across durations (ranging between one day to more than five years), sectors (corporate bonds, Banking and PSU) and objectives (floater, FMPs credit risk, Gilt, etc). You need to choose the best debt fund as per your risk profile, investment horizon and financial goals, rather than blindly follow recommendations of friends, etc. 

Debt fund investment online and offline

Debt fund investment online is easy, quick and hassle-free. Compared to the offline process, it involves minimal documentation and gets done with a couple of clicks. You can take the help of debt fund investment online portals that are aggregators. They provide relevant information to compare the performance and features of various debt schemes and choose the one which meets your requirements. 

Final Words

RBI has taken numerous initiatives to stimulate demand and revive the bond and money market. Cuts in repo-rates, money infusion into banks through LTRO and supply of forex (USD) to reduce the impact of rupee downfall, will slowly and steadily bring back the debt funds to their former glory. However, all good things take time and hence, patience is of utmost importance. 

Tough times do not last. Tough people (and funds) do. And debt funds are definitely meant to weather these temporary storms and emerge stronger and better in the long run.

What does Health Insurance not cover?

A health insurance policy proves to be a blessing in a medical emergency when you or your family members are hospitalised and you incur a huge medical bill. The policy covers the medical costs and provides financial relief to you and your savings. It is, therefore, advised to invest in the best health insurance for your family. 

Though the scope of a health insurance plan is quite inclusive, there are instances when claims are not paid under the policy. These instances are called policy exclusions which are the medical expenses not covered by a health insurance plan. When you buy health insurance online, you should know about these exclusions so that you know what to expect from the policy. So, here are some of the common exclusions which are not covered even when you buy the best health insurance for your family –

  • Claims during the waiting period

Under every health insurance plan, there are different types of waiting period during which specific claims are inadmissible. These waiting periods include the following –

  • Initial waiting period – claims due to illnesses which occur within the first 30-90 days of buying the policy are not covered. This is the initial waiting period during which claims for any type of illnesses are not paid. However, claims for accidental injuries are admissible from the first day of the policy.
  • Specific diseases waiting periods – specific illnesses and/or treatments are not covered during one or two years from the date of commencement of the policy. Common illnesses and treatments which have this waiting period include treatments for piles, hernia, tonsillectomy, joint replacement surgeries, fibroids, etc.
  • Pre-existing waiting period – if you or your family member suffers from an illness when buying health insurance online, such an illness is called a pre-existing illness. Such illnesses are not covered during an initial waiting period ranging from 1 year to 4 years under different plans.
  • Maternity waiting period – if your health insurance plan has an inbuilt coverage for maternity, such coverage is allowed only after a specified waiting period which can range from 9 months to up to 6 years.

Claims during the above-mentioned waiting periods are not admissible but once the waiting period is over, the health insurance plan pays the claims.

  • Specific treatments

There are specific treatments which are completely excluded from the coverage of health insurance plans. These include cosmetic treatments, dental treatments, LASIK treatments for eyesight correction, fertility treatments, weight management treatments, etc. 

  • Other exclusions

Other instances which are commonly excluded from health insurance plans include medical expenses incurred due to the following instances –

  • Self-inflicted injuries or attempted suicide
  • War, nuclear contamination or allied perils
  • Maternity related expenses unless they are specifically covered under the plan
  • Outpatient expenses unless they are specifically covered under the plan
  • HIV, AIDS or other types of venereal diseases
  • Congenital diseases or birth defects
  • Unproven, unscientific or experimental treatments
  • Injuries or accidents suffered due to alcohol and/drug abuse
  • Injuries or accidents suffered when committing an act of criminal nature
  • Injuries or accidents suffered when participating in hazardous activities
  • Debilitating illnesses
  • Cost of lenses, spectacles or hearing aids, etc.

These are some of the common exclusions which you would find in most health insurance plans. However, under some plans, a few of these exclusions can be a part of the coverage benefit. So, when you buy health insurance online, you should read the coverage and exclusion list of your policy to know exactly what is covered and what is not. Then you should compare and select the best health insurance for your family which has a limited exclusion list and a comprehensive range of coverage benefits. Such a plan would provide the most inclusive coverage to your family ensuring that most of your medical costs get covered and your out-of-pocket expenses are minimized.

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