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Are mid-cap mutual funds good for our portfolio? How to invest online?

Mid-cap Mutual Funds invest in stocks which rank between 101 to 250 in terms of market capitalization. SEBI guidelines mandate these funds to invest a minimum of 65% of their total assets in stocks of mid-cap companies. Generally, the market cap of these companies ranges between 5000 to 20,000 crores.

Mid-Cap Equity Fund Features

  1. Return

Companies in this category are in their “growth” stage. Unlike large-cap stocks (which have already reached their peak and are often market leaders), these companies are yet to reach their maximum potential. Hence, they have the potential to grow at a rapid pace and offer higher returns to investors. It is often said that the mid-cap today can be the large-cap of tomorrow!

  1. Risk

Mid-cap stocks are extremely sensitive to market volatility. In their attempt to grow faster, they might invest in riskier instruments. However, compared to small-cap funds they are relatively less risky.

  1. Investment Horizon

One of the most prominent equity fund features is the volatility faced by them in the short run. Hence, from an investment horizon perspective, holding them for a longer time makes more economic sense. Mid-cap funds require at least 7-10 years to generate their optimal result.

  1. Liquidity

Mid-cap mutual funds do not score very high on this parameter. Owing to a smaller capital base, these funds sometimes suffer from liquidity constraints. The liquidity score (a measurement of the time taken by a mutual fund scheme to liquidate their holdings) of mid-cap funds tends to be on the higher side.

  1. Valuation 

Mid-cap companies tend to be relatively under-researched and hence undervalued. Value investors believe that they can be a great means of long-term wealth creation when the markets correct itself and realize their intrinsic worth.

Are mid-cap mutual funds good for your portfolio

Now that you know the key mid-cap equity fund features, the question arises if they are a good decision for your portfolio. Mid-cap funds are suitable for investors who meet the following parameters:

  1. Risk Appetite

Investors who are looking for options to grow their wealth faster and have a high-risk tolerance can invest in these funds.

  1. Investment Horizon

Investors who have long-term financial goals or can remain invested for a long time period (minimum 7-8 years) will be able to make the most out of mid-caps.

  1. Age

As these funds take time to materialize into superior returns, sooner you start these investments, better it is. Hence, younger investors will get more time to remain invested and make higher earnings out of these investments.

However, do not make the below-mentioned errors while picking mid-cap funds.

  1. Mid-cap funds are a long-term commitment. The long-term outlook is a critical equity fund feature. Hence, while selecting the right mid-cap fund for your portfolio, do not take any decisions basis short-term market outlook.
  2. Your own asset allocation should dictate your mid-cap choice. Even the best fund will not be able to yield the desired results if it is not in sync with your personalized asset allocation.
  1. Past track-record of a fund, its star ratings, etc. are important selection parameters. However, you should not depend solely on any one of these factors. All of them needs to be analyzed simultaneously to arrive at the right decision.
  2. While we all look at numbers, trends and other data points while making our fund-related decisions, we often ignore the qualitative aspects. These factors (fund manager’s experience, portfolio characteristics, AMC’s investment philosophy, etc.) play an important role in a fund’s performance in the long run.

How to buy mid-cap funds online?

If you want to buy mid-cap funds online, you need to complete the KYC process and provide the necessary documentary proof (Photograph, Identity Proof and Address Proof). The KYC process can be done with any intermediary (SEBI authorized) such as the fund house, KRAs or online platforms.

Upon successful completion, you can choose the fund and start investing. It is an extremely simple and hassle-free process.

Final Words

If you have a strong risk appetite and can bear some short-term pains for long term gains, mid-cap funds are perfect for you. Especially when you can buy the mid-cap funds online from the comfort of your home, the gains on your investment seems even sweeter!

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Tax harvesting – A way to save taxes on your capital gains!

How to reduce long term capital gains tax
The strategy which reduces your tax which is applicable to your Mutual fund’s long term capital gains is called tax harvesting. So what is tax harvesting and how it is applicable in reducing tax
To understand tax harvesting first have to understand how long term capital gain is taxed.
In 2018 Long term capital gain are reintroduced on equities
According to Rule In a financial year, More than 1 Lakh capital gain is taxed 10%
Therefore if you want to pay less tax or not to pay tax, You should ensure than your capital gain should not build up or cross the tax-free limit and that’s what called Tax harvesting all about
Tax Harvesting is a strategy in which you try to sell your mutual fund investments to book long term capital gain and reinvest in same mutual fund.

Difference between Tax Deduction vs Tax Exemption vs Tax Rebate

We easily understand terms like income or savings, because they are relatable. But, Tax Exemption, Tax Rebate, and Tax Deductions sound tiring and dull, even though these have the potential to reduce our tax burden.
lets under difference between Tax Exemption, Tax rebate, the Tax deduction
Tax Deduction: In simple word, through income tax deduction your gross taxable income become less and due to this deduction you pay less tax. The standard deduction is the first way of tax deduction.
Tax Exemption: Its meaning is you not need to pay Tax on some component of your income ‘
Tax exemption mainly allows salaried people to reduce their taxable income through different allowances like HRA, Travel allowance, LTA, Children education allowance, gratuity.
Tax Rebate: It is your final deduction or like final bargain after-tax exemption and tax deduction claims on your taxable income.

How to make a claim in your health insurance plan?

A health insurance policy comes to your aid in medical emergencies. It pays for the medical costs which you incur in case you or your family member gets hospitalized. The medical expenses can put a financial strain on you and when you have a health insurance plan, this strain can be minimized. That is why it is always recommended to invest in a good health insurance cover for yourself and your family.

While a health insurance plan can promise a good scope of coverage, you need to know the process of making a claim in your policy. Only when you follow the correct claim procedure can your health plan come to your rescue in a medical emergency. Many individuals are unaware of the claim process of health insurance plans and so here is the detailed guide to a health insurance claim process –

Types of health insurance claims

Health insurance claims or of two types – cashless and reimbursement. The cashless claim is when you seek treatments in a hospital which is tied-up with the insurance company. In such cases, the insurance company directly settles your medical bills with the hospital and you don’t incur the associated medical costs. Reimbursement claims, on the other hand, are incurred when you get treated in a non-network hospital. In such cases, you bear the medical expenses yourself and then get the expenses reimbursed from the insurance company.

The process of both these types of claims is mentioned below –

Process of cashless claims

  1. In case of any medical emergency which is covered under your health insurance plan, contact the insurance company to find the list of networked hospitals in your locality. The list can also be checked online on the insurance company’s website.
  2. Fill up a pre-authorization form for cashless treatments and submit it with the insurance company or its TPA (Third Party Administrator). The form is available at the hospital which is tied-up with the insurance company. The form should be filled and submitted within 24 hours of emergency hospitalization. In case of planned hospitalization, the form should be submitted at least 3-4 days before you get hospitalized.
  3. Based on the pre-authorization form, your cashless claim is approved by the insurance company
  4. Once the claim is approved, you would be able to avail cashless treatments at the hospital
  5. After you are discharged, collect all medical bills and reports from the hospital. Fill up a claim form and submit it with all the bills and reports for the full settlement of your claim.

Process of reimbursement claims

  1. If you are treated at a hospital which is not tied-up with your health insurance provider, you would have to pay all the medical bills from your own pockets
  2. Once you are discharged, collect the medical bills, reports and all hospital receipts
  3. Fill up a claim form and submit it with all the medical bills in original
  4. The insurance company would verify your claim and the associated bills and then reimburse you for the medical costs which you have incurred.

Documents required for a valid claim

Whether you avail a cashless claim or get reimbursement, the following documents would have to be submitted to the insurance company –

  1. The claim form, filled and signed
  2. Policy document
  3. Identity proof of the insured who is hospitalized
  4. Medical bills, in original
  5. Hospital reports and bills
  6. Doctor’s prescription which advised hospitalization
  7. Any other document as needed by the insurance company

Nowadays, health insurance companies have simplified their claim settlement process. They promise to settle your claims at the earliest if you follow the proper procedures and submit all the required documents. Especially in case of cashless claims, approvals can be received quickly if you fill and submit the pre-authorization form at the earliest. So, know the claim process of health insurance plans so that you can have a hassle-free claim experience when you suffer a claim.


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Coronavirus & Your Mutual Fund Investments

Coronavirus has everyone worried. It’s potential social and economic impact has rattled global markets and things are getting scarier every day. While we are worried about our health, to some extent we are worried about our money too.
Since the outbreak of Coronavirus, the markets saw sharp corrections, and the selling pressure will continue for some more time. But, this is not the first time! During previous pandemics too, markets fell sharply only to emerge stronger than ever before.
what should you do?
keep calm and before you redeem your investments, take a pause and think in 5-7 years down the time, you wouldn’t even remember this phase, just like past pandemics. At the same time don’t go overboard with investing. Let your asset allocation dictate how much or if you should invest. Crashes and all-time highs will happen in the future too so use this time to be ready for whatever happens in your investment journey.

4 Reasons Why Personal Health Insurance is Important? Should You Rely only on Group Health Insurance

Why should I buy a health insurance policy when my company is giving me that benefit. This is one of the most common answers given by working professionals. And to be fair they have a valid point. But relying only on the group health cover might not be the smartest idea.

Life’s journey is not always as smooth as we want it to be. Unexpected events or disasters can and do happen, it might come at any time from any direction, and if you are not well prepared, it may leave you at a financial wreck.

So how do you make sure you are well prepared for any eventuality in your life?

The straightforward answer is — Insurance.

Should you opt for floater funds?

Debt Funds are a conservative investor’s delight. They have two important factors – safety and stability which many investors look out for while investing their hard-earned money. There are 16 variants of these schemes which helps investors choose a scheme as per their needs and financial goals. In this article, we will talk about a relatively unknown debt scheme – Floater Funds.

Portfolio composition of Floater Funds

SEBI defines Floater Funds as open-ended debt mutual funds which predominantly invest in floating-rate instruments. Minimum 65% of the total assets are invested in bonds or instruments with variable rates. Fund houses can allocate the balance funds towards fixed-income generating instruments. 

Floater Fund schemes seek to capitalize on the interest rate fluctuations and generate superior returns for the investors. The key difference between these funds and other debt funds is that while other debt funds have a specific interest rate (coupon rate), floater funds have a variable interest rate. The rate for floater funds changes in relation to the market interest rate.

Key characteristics of floater funds

Risk

A floater fund is characterized as a scheme with limited risk. The high concentration of good quality debt instruments helps to mitigate (or at least minimize) the investment risk.

  1. Investment Tenure

There are two types of floater funds:

  • Short-Term

These floater funds invest majorly in short-term, highly liquid debt instruments. For instance, treasury bills, government securities, etc. The tenure of these funds tends to be below one year.

  • Long-Term

Long-term floater funds usually invest in debt funds for the long term duration such as corporate bonds, debentures, etc.

  1. Returns

Floater Fund investments have the potential to generate superior returns than other debt funds for the long term. While the principal investment remains secure, the market fluctuations help in generating higher returns. Especially in a rising market, these funds become a lucrative investment alternative.

  1. Taxation

Gains from floater fund investments are taxed as long-term capital gains when the floater fund investments are held for a minimum period of three years. Long-term capital gains tax rate is 20% after taking into consideration the indexation benefits. Short-term capital gains (if the holding period is less than three years) is added to your overall income and taxed as per the applicable income tax slabs.

Impact of interest rate fluctuations on floater fund investments

The ROI of floater funds depends heavily on fluctuations in market interest rates. One of the main causes of rate fluctuations is the changes made in the Repo Rate. Repo Rate is the rate at which RBI lends money to financial institutions such as the public sector and commercial banks. When RBI increases the Repo Rate, it leads to a rise in the returns generated by government bonds and other such zero risk instruments. This, in turn, increases the yield of debt funds for the long term which invest in such instruments including floater funds.

Is floater funds risk-free?

Contrary to popular belief, floater fund investments are not devoid of all risks. While it is true that they are less risky (when compared to pure equity funds), they are not zero risk investment options. In fact, no floater fund investment can be completely risk-free. If you want to invest in floater funds, you should analyze the securities held by the fund to determine the quality of the portfolio. Higher is the quality of the securities, lesser is the risk for your floater fund investment. 

Top-performing floater funds in India

Here is a list of the best floater funds available in India:

  1. ICICI Prudential Floating Interest Fund
  2. Aditya Birla Sun Life Floating Rate Fund
  3. Nippon India Floating Rate Fund
  4. HDFC Floating Rate Debt Fund
  5. Franklin India Floating Rate Fund
  6. UTI Floater Fund

Final Words

Floater Funds are a good choice for investors who have low to limited risk appetite. They are a stable alternative with the potential to generate good returns. So if you are someone who was shying away from the world of mutual funds because of the risks, you can give these schemes a shot.

Mutual Fund Review: HDFC Midcap Opportunities Fund | Mid-cap Fund Analysis 2019 | Should you invest?

Mutual Fund Review: HDFC Midcap Opportunities Fund
The midcap fund is much risky vs large-cap fund due to more volatile
but over the long run, they are a seriously good instrument for wealth creation
HDFC Midcap Opportunities Fund is a huge fund, the single fund represent almost 1
out every 3 rupees that get invested in the mid-cap category
HDFC Midcap Opportunities Fund grows 700% from last 5 years, therefore HDFC Midcap Opportunities Fund is one of the fastest-growing mid-cap funds

What is Public Provident Fund (PPF) and its benefits

What is Public Provident Fund (PPF) and its benefits
PPF or Public Provident Fund is one of the most popular mediums used by taxpayers to save tax under Section 80c.

Public Provident Fund Features:

Risk-return equation

The interest rate for Jan -Mar 2020: 7.9%

Low risk and one of the safest investment

Investment limit is yearly 500 to 1.5 Lakh

In PPF it is mandatory to invest yearly in PPF for 15 Years

Lock-In the period of PPF is 15 Years

Partial withdrawal option for selective reasons from 7th year

Tax benefits: PPF is only a tax saving option which qualifies EEE(exempt, exempt, exempt)

Means your investment get three benefits :

1: No tax on the invested amount under section 80C

2: No tax on returns from PPF

3: No tax on the maturity amount