How to apply for NPS?

The NPS or the National Pension System (NPS) is a voluntary retirement scheme set up by the government through which you can save for your old age pension or create a retirement corpus. 

The Process to Register for the National Pensions Scheme

Individuals can register and obtain a subscription to the National Pension System through the online platform eNPS. Registration for the scheme can be done in the following steps.

Step 1 – Go to the eNPS portal available at the official website of the National Pension System.

Step 2 – Choose your subscriber type from the available options ‘Individual Subscriber’ and ‘Corporate Subscriber’.

Step 3 – Choose your suitable residential status. The options include ‘Citizen of India’ and ‘NRI’.

Step 4 – Opt for either Tier I account type or both accounts as a choice of the former is mandatory for long-term savings.

Step 5 – Enter your PAN details and select a suitable bank or PoP. It is ideal to choose a PoP with whom you have an existing relationship such as a savings/current/Demat/account for KYC verification as the chosen PoP will do it.

Step 6 – Upload the scanned copy of your PAN card along with a canceled cheque. The image format should be in .jpg, .jpeg, or .png format with a file size of 4KB to 2MB.

Step 7 – Next, upload your scanned photograph and signature in the same format and size as above.

Step 8 – Once routed to the payment gateway, proceed to pay the required charges via net Banking.

Step 9 – With the completion of payment, your Permanent Retirement Account Number will be generated.

While this was the process of completing PRAN generation for all subscribers, NRIs need to complete a few additional steps as follows.

  • Choose the status of the bank account, i.e., either repatriable or non-repatriable.
  • Provide the details of the NRO or NRE bank account along with the passport’s scanned copy.
  • Choose a suitable communication address, i.e. either permanent or overseas address. Note that communication to the latter attracts additional charges.

Once the PRAN is allotted, an applicant needs to proceed with either of the following steps for authentication.

E-Sign option for authentication

  • On the E-sign/Print & Courier page, choose the E-sign option.
  • Authenticate with OTP sent to the mobile number registered with your Aadhaar card.
  • After the Aadhaar authentication, the registration form is signed successfully, and you do not need to send its physical copy.

Note that service charges are applicable for e-signing your registration form. However, if you are unable to complete the online authentication process, you can opt for the alternative option given below.

Authentication via print and courier

  • To proceed with this authentication process, you need to select the Print & Courier option on the initial page.
  • Next, print the form available on the page, paste the photograph and sign in the dedicated signature block.
  • Send the form within 30 days of PRAN allotment to the address given below. Not doing so will result in temporary freezing of the PRAN.

Address for sending the authentication form – 

Central Recordkeeping Agency (eNPS)

NSDL e-Governance Infrastructure Limited,

1st Floor, Times Tower, Kamala Mills Compound, Senapati Bapat Marg,

Lower Parel, Mumbai – 400 013

Uncategorized - 10/29/2021

How to correct/update Bank details in EPF/UAN online?

The EPFO Online member portal allows a host of services to its members to access, that range from checking their passbook, tracking their EPF fund, transferring their claim online, and a lot more. One such facility that EPF members can avail of is updating their bank details via the UAN portal.

Here are a few simple and easy steps on how to change your EPF Bank details online.

  1. Log on to the official EPFO portal.
  2. Use your UAN login id and password.
  3. Go to the menu section.
  4. Now click the “MANAGE” button.
  5. From the drop-down, click “KYC”.
  6. You will be taken to another landing page.
  7. Now select the “BANK” option.
  • You can see these options: Document Number (Bank Account Number)
  • Name as per Document (Name On Bank Account)
  • IFSC Code
  1. Fill in the required details.
  2. Press the save button.

Once you have made the changes, your online service will show KYC Pending For Approval. This means that you will have to submit the proof of your updated bank details to your employer. Once your employer approves your KYC update request, your new bank account will be added/replaced. A message regarding this will also be conveyed through your registered mobile number.

Wealthcafe Advice:

You are no longer dependent on your employer or your ex-employer to update the details or exit date on the EPFO portal. Linking your Aadhar is mandatory as well as it is crucial to mark your date of exit correctly. Follow the simple steps stated above and you will be able to update your EPF account easily.

 

Uncategorized - 10/29/2021

All You Need to Know About Salary Slips/Payslips

Whether it’s your first payslip or if you’ve been working for years, it’s still important to know how your pay is worked out. Your payslip contains important information, including your payroll number, your gross and net pay, and normally your tax code. It’s important to understand your payslip and how to make sure you’re being paid the right amount.

All employees and workers are entitled to an individual, detailed written payslip – when, or before, they’re paid.

Your written payslip doesn’t have to be on paper – it can be sent to you by email or accessed through a website.

The right to a payslip applies to casual staff as well as employees. It doesn’t apply to independent contractors or people working freelance.

 

Importance of Salary Slip

  • The salary slips act as evidence of employment.
  • It proves that the organization has permanently recruited an employee.
  • This is handy in negotiating with new employers for better pay.
  • Salary slips aid to apply for loans in banks.
  • It is an authentic proof of income and is used to file income tax returns.
  • It serves as proof for PF and insurance deductions.

All employees must receive payslips on a monthly basis as it is the proof of their employment in an organization and is required for various compliance filings like income tax filing and PF return filing. If an employee has not received it, he/she could speak with their payroll team to have it sent automatically post payroll processing.

What are E-Payslips?

In the current technologically advanced times, most employers prefer to make the payslips available online. This digital, online payslip is known as an e-payslip. You can easily view and download the salary slip by logging into your organization’s salary portal.

Components of a Salary Slip

The components are sub-divided into 2 sides which are as follows.

  1. Income or earnings (LHS of your salary slip)
  2. Deductions (RHS of your salary slip)

We look into the various components of a salary slip in the paragraphs below:

Income:

All the income and gains such as your basic salary, allowances, reimbursements, etc are allocated on the left-hand side of the payslip. 

Deductions:

All deductions such as EPF, Professional Tax, TDS, etc are located on the right side of the payslip.

Payslip Format

What is a Salary Slip used for?

If you study the payslip format, you will find that there are many components listed on it. Downloading and understanding each of these components can prove to be very helpful. Listed below are some of the uses of a salary slip.

Maximize Income Tax Savings

Thorough knowledge of the basic pay, house rent allowance, tax deductions, etc., can help you with your income tax planning so that you can maximize savings. For example, under Section 10 of the Income Tax Act, 1961, if you live in rented accommodation, you can claim a part of the House Rent Allowance (HRA) under tax deduction. Also, under Section 80C of the same Act, you can enjoy tax savings against EPF (Employees’ Provident Fund) contribution, which makes up to 12 percent of your basic salary.

To Apply for a Credit Card

You need the monthly salary payment slip even when you apply for a credit card. The document serves as proof of your regularised income and backs your eligibility for the selected credit card.

Prove Employment Status

Your payslip is legal proof of your employment status. If you are looking to get a loan, open a bank account, apply for a visa, etc., you would need to submit copies of your salary slips for the last three months as proof of your last drawn salary.

Resolve Discrepancies in Salary Payment

If you see a change (increase/ decrease) in your monthly salary amount, you can refer to your payslip and check the deductions. In case of discrepancies, you can use the payslip as proof and raise the issue with the finance team of your organization.

For Switching Jobs

When you are looking to seek employment in a different organization, you would need to provide your salary slip to the employer to initiate salary negotiations. This is because your new salary is decided based on your current salary.

Wealth Cafe Learning:

A payslip or salary slip to an employee is the amount of money paid by the employer to you for the month. It contains all of the details mentioning how the salary was calculated and sent to you. We hope you've understood everything about salary slips. 

If you have any queries on your salary slip, do ask in the comments section below.

Uncategorized - 10/29/2021

CTC components

Many a time, the terms like CTC derive a big question mark as to its understanding. Every individual has to find their way through such a dilemma, considering he/she is working in the corporate sector. We, in order to simplify the basic salary structure, have prepared an in-depth article into the world of COST TO COMPANY.

What is CTC?

CTC or Cost to Company is the total amount that a company spends (directly or indirectly) on an employee. It refers to the total salary package of the employee. CTC is inclusive of monthly components such as basic pay, various allowances, reimbursements, etc., and annual components such as gratuity, annual variable pay, annual bonus, etc.

CTC is never equal to the amount of take-home salary of the employee. There are many components in the CTC that one does not receive as part of take-home salary.

CTC = Direct Benefits + Indirect Benefits + Savings Contributions

Fixed Components Variable Components

(Savings & Contribution)
Direct Benefits Indirect Benefits
Basic Salary Interest- Free Loans Employer Provident Fund (EPF)
Dearness Allowance (DA) Food Coupons/Subsidized meals Gratuity
Conveyance Allowance Company Leased Accommodation Performance Variable Bonus 
House Rent Allowance (HRA) Medical and Life Insurance premiums paid by the employer ESOPs/RSUs
Special Allowance Income Tax Savings
Leave Travel Allowance (LTA) Office Space Rent
Vehicle Allowance Medical/Health Insurance 
Telephone/ Mobile Phone Allowance

Let us now discuss common CTC components:

  1. Basic salary

The first and most important part of the CTC is the basic salary. This is the amount that is payable to the employees for their services to the organization. It forms a part of their take-home salary and is subject to income tax.

Usually, employers make sure that the basic salary does not constitute more than 40% of the overall CTC.

  1. Allowances

The next component of the CTC is allowances. Allowances are all the perks and benefits (direct and indirect) that the company offers to the employee. These allowances are

All these allowances forming a part of the CTC are subject to different income tax rules. In India, the Income Tax Act lays down the rules for the taxation of these allowances.

  1. Reimbursements

Occasionally, employees are entitled to several reimbursements like medical treatments, phone bills, newspaper bills, etc. The amount is not received in the salary, but on submission of the bills, reimbursement is given. Generally, there is an upper limit for every category of reimbursement.

  1. EPF

EPF is an investment scheme whereby both employer and employee contribute a certain sum of money to the employee’s benefit. This amount is accessible only after the retirement of a person.

Two cases lie under this:-

– If the basic salary of the employee is less than Rs.15,000, then the employer contributes 12% of the basic pay.

– If the basic salary is more than Rs.15,000, then it is up to the discretion of the employer on how much to contribute. In this case, the employer can contribute 12% of the basic pay or 12% of 15,000 which is Rs.1800.

Thus, both parties are supposed to contribute 12% of the set amount in the Employee’s Provident Fund account. It is mandatory for Indian Registered Companies to make such contributions.

  1. Gratuity

Gratuity is the part of the salary that is received by an employee from the employer for the services offered by the employee upon him or her leaving the job.

Though an employee can receive the gratuity amount only after 5 years, it will be deducted by the employer every year and hence it will get deducted from your CTC.

  1. ESOP

An employee stock ownership plan (ESOP) is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company.

These plans are aimed at improving the performance of the company and increasing the value of the shares by involving stockholders, who are also the employees, in the working of the company. The ESOPs help in minimizing problems related to incentives.

Therefore, It clearly means that CTC is not only the salary, but it also includes many additional benefits. It contains all monetary and non-monetary amounts spent on an employee. 

Uncategorized - 10/29/2021

What is an offer letter? What is included in it?

Receiving an offer letter from an employer or recruiter is an exciting time. It means your skills and experience are valuable and the company wants to hire you. In this article, we'll go over what is a job offer letter, along with typically what's included in it.

What is an offer letter?

An offer letter is a written document that offers a candidate a particular job position for which he/she was interviewed and got selected. It is created to intimate the candidate about his/her employment. It contains the Job title, joining date, finalized package or salary, Reporting manager’s details, role and responsibilities, and other benefits he/she is eligible for.

Once the offer letter is handed over to the candidate, he/she needs to accept to proceed with the hiring process further. The offer letter acceptance can be done verbally or in writing. Basically, It is a documented formality to offer a job and accept the same.

What's Included in a Job Offer Letter

An offer letter confirms employment details such as:

  • Job description: A description of what your overall goals are along with your day-to-day tasks
  • Job title: What your title will be when working at this company
  • Reporting structure: Another item discussed during the interview process, the reporting structure is often included in job offer letters. The reporting structure will detail who you report to, along with who will be reporting to you.
  • Work schedule: The hours you are expected to work each week. The job offer letter should also include your expected start date, which was likely discussed during the hiring process.
  • Salary: The amount you can expect to make on a yearly basis. Also included should be any bonuses or commissions that go along with the job.
  • Benefits information and eligibility: Most full-time jobs come with a benefits package. Your letter will likely include information about this package, including healthcare and retirement benefits.
  • Termination conditions: The job offer letter may detail the conditions that would lead to your termination. This is another important thing to have in writing in case there is a dispute somewhere in the future.
  • Finally, Acknowledgment of offer and confirmation of acceptance

Is a letter of offer a binding contract?

Whether or not a job offer is a binding contract depends on a few things. Technically, they’re all binding contracts, but it’s the terms of the contract that dictate just how binding it is. Most job offer letters will include a formal start date but say nothing about the term of employment (aka the end of it). Instead, there is often a clause describing the employment as an “at-will” contract, which means that either party can terminate it as long as the terms of termination are met (this is where the amount of time necessary for giving notice and the like are taken care of).

Therefore, the job offer letter is important because it relays vital information in writing. If there are any discrepancies after you've begun working, you'll want to have a written record of what you were expecting.

Wealth Cafe Learnings

A job offer letter allows to itemize the facts about the offer, outline the job’s responsibilities and highlight relevant details about the company. If you accept the offer, the letter serves to promote communication and to help orient you to the business environment before they actually start their first day of work.

 

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    Uncategorized - 10/29/2021

    How to do budgeting - different ways in which you can budget

    There are many different budgeting methods out there floating around in the ocean of information that we call the internet. Some are simple and some are complicated.

    A lot of them don’t work. This makes it hard to find a method that will work for you.

    Budgeting methods to consider

    Before picking a new or different budgeting method, you might want to figure out where your money is going so that you know what areas need your attention.

    Once you have an idea of your spending habits and where you can make changes, five different budgeting methods can help you make it happen.  No single budgeting method is best for everyone, so it’s important to compare each and determine what works best for you.

    1. Zero-based budget

    The concept of a zero-based budgeting method is simple: Income minus expenses equals zero.

    This budgeting method is best for people who have a set income each month or at least can reasonably estimate their monthly income. After calculating your monthly income, add up your monthly spending and savings to equal that income amount.

    It’s important to plan out all your expenses as accurately as possible. If you go over one spending category, you’ll need to take cash from another category to make up for it. And if you forget a large expense, it could throw your budget off.

    Zero-based budgeting is the most time-consuming method because you have to dig into the details behind each line item.

    Since there’s less room for error with a zero-based budget, it might be a better option for someone who has already been budgeting for a while. Even then, it’s a good idea to keep extra cash in your checking account as a buffer. Also, have at least a small emergency fund in case you incur a large unexpected expense.

    2. Pay-yourself-first budget

    The pay-yourself-first budget is another simple budgeting method that focuses primarily on savings and debt repayment.

    Paying yourself first is one of the golden rules by many financial planners. Each month you should remove a fixed % of your income as savings and keep it aside. Now use the remaining amount to spend on your monthly expenses.

    So how will you ensure you are paying yourself first?

    We do this by having two separate bank accounts.

    1. Income account – in which your salary/fees, basically any earnings, are credited each month.
    2. Investment Account – in which you shall transfer your savings from your salary account. This account will be for all your investments. You will make all your investments, for example, insurance premiums, mutual fund (SIP), deposits, and equity, from this account.

    This system of having two bank accounts will ensure that you are saving first – as you MUST transfer a fixed sum of money from your income account to your investment account.

    This budget is best for someone who struggles with saving each month or doesn’t want to focus too much on budgeting each expense.

    3. Gullak Method of budgeting/ Envelope system budget

    This budgeting method is similar to the zero-based budget but with one big difference: You do it all with cash. In an envelope budgeting system, you plan out how you’re going to spend your money each month and use an envelope for each spending category. Then you withdraw as much cash as you need to fill each envelope based on your budget.

    As you go grocery shopping, for instance, take your grocery envelope and pay for your items with cash. If you run out, that’s all you can spend in that category for the month unless you want to take cash from other envelopes. Avoid raiding other envelopes too often, though, because it can cause a snowball effect and you can run out of cash before the end of the month.

    The biggest proponent of the envelope system, so it’s a great option for people who espouse their beliefs about money, which focus heavily on paying down debt quickly and using cash, not credit cards.

    But it’s not a good budgeting method for someone who doesn’t feel comfortable having that much cash on hand or prefers using credit cards or debit cards.

    4. 50/30/20 budget

    The 50/30/20 budgeting method is straightforward and requires less work than the zero-based and envelope budgets. The idea is to break down your expenses into three categories:

    • Necessary expenses (50%)
    • Discretionary expenses (30%)
    • Savings and debt payments (20%)

    This budgeting method is a great option for newbie budgeters because it doesn’t require meticulous tracking of all your expenses. You can succeed with this budget as long as you know what counts as a want versus a need and put enough money toward savings and debt.

    The main drawback is that the 50/30/20 rule might be unrealistic for people who have a lot of debt or have big savings goals because 20% isn’t a lot.

    But the good news is that you can customize it to fit your needs. For example, you may want to consider increasing the savings and debt repayments category and decreasing the discretionary or necessary expenses categories.

    In other words, don’t get stuck on the 50/30/20 proportions. Tailor the concept to your needs.

    5. The ‘no’ budget

    This “budgeting” method is based solely on your income and expected expenses and moving your money around each month with intention. That’s it.

    Before You Start the “No Budget” Method, Do a Quick Assessment of Your Income and Typical Monthly Spending

    • Determine your income
    • Determine the total of your bills each month
    • Estimate how much your other spending costs per month
    • Figure out how many extras there would be for debt/savings/investing each month
    • Use these as a baseline number each month going forward

    How to Implement the “No Budget” Method Every Month

    Step 1: At the beginning of the month, as soon as you get paid, pay all your bills first.

    Step 2: Next, save money or pay off the debt in the amount you’ve determined you can afford each month.

    Step 3: Whatever is left over is yours to spend on your variable expenses until you get paid again.

    Important: rules for using the “no budget” method

    1. Don’t use credit cards. this ensures you’ll never overspend.
    2. On the last day of the pay period/month, move any extra money in your bank account over to savings or to pay off debt
    3. Keep a buffer amount in the saving account just in case
    4. Check your bank account regularly
    5. Set up automatic investments and your bills
    6. Review spending at the end of the month 

    While the “no” budget sounds easier than the other methods we’ve listed, it’s not always easy to tell yourself “no.” This budgeting method is best if you’ve demonstrated spending discipline in the past and are confident that you can continue that streak.

    Also, it’s best if you use only a debit card with this budget because it’s tied directly to your bank account and automatically updates your balance.

    Wealth Cafe advice:

    The important thing is to create your own budgeting rather than trying to conform to someone else’s.

    Do that and you will have clarity on how to reach your goals, and you won’t have to worry about being limited in your budget.

    You cannot be in complete control of your money if you’re not budgeting in the best way for you.

    Budgeting method Good for…
    1. Zero-based budget Tracking consistent income and expenses
    2. Pay-yourself-first budget Prioritizing savings over spendings
    3. Gullak Method of budgeting Making your spending more disciplined
    4. 50/30/20 budget Categorizing “needs” over “wants”
    5. The ‘no’ budget Lowering and avoiding unnecessary spends

     

    To conclude, there are different methods of preparing budgets, and there is no best method that fits all. Whatever you do, the important thing is that you develop the habit of managing your money in a way that helps you improve your financial health and achieve your goals.

    To learn more about saving and investing enroll in our course: NM 101- Maximise your Savings

    Money tips - 10/28/2021

    DEEP CLEAN YOUR PORTFOLIO THIS DIWALI

    Bursting crackers, playing card games, or decorating the house--a lot of customs are associated with the festival of Diwali. And among those typical Diwali rituals, there is one aspect that is generally overlooked – cleaning and decluttering!

    Deep cleaning of our houses for Diwali has been an age-old custom. Most families go through similar rituals during this time – they clean every nook and cranny of their houses and yards several days before Diwali arrives. So, why is it so important to deep clean?

    Let me tell you,

    It helps you to declutter your mind, it just relaxes you the way many 2 therapy sessions would (or not). You just have this dopamine rush of completing some tasks. And also, it's great to be in a house that is dust-free and has more space.

    Take stock of everything: It helps you understand what you have and how much. Take a stock of everything you own - clothes, books (I found some great books I got and I haven't read yet, finishing it before the year ends), home decor, candles, and shoes (omg not used them for 2 years now).

    Discard all that you don’t need - Simple rule - what you don't use please discard. I am everything but a hoarder and I love my mother for this. If I don't use something, I discard it and then I buy less of things I don't want to use because discarding them is extremely painful. Thus, becoming a smart shopper. I do not decide after shopping, I decide before shopping.

    No mindless Diwali/Festive Shopping - Ugh I hate it when people buy things just because it is Diwali. Yes, it was great when you did that only once a year. But now we are shopping literally all the time. We always have Myntra or Amazon tabs open on our phones. Hence just shop what you want or don't shop.

    Set budgets - Diwali is all about budgeting guys. Look closely, you will see savings everywhere but Marketing is only showing Spending more.

    Now that we have touched on the budgeting topic, let us talk more about finance with the whole deep cleaning idea. This deep cleaning is not just limited to your wardrobes and homes but also can be extended to your portfolio. Take this opportunity to deep clean your Portfolio

    Ways to Deep Clean your Portfolio

    Collect all the data about all your investments, this is the most time-consuming process if you have not been maintaining it properly. But it is totally worth it, you can also check Mprofit software to maintain your investment information. It is available for free for up to 50 lakhs portfolio value.

    Now check your asset allocation - How much you have in debt, equity and gold. If you have money in real estate for investments (not the house you live in) then add that too. Know how much % you have in each of these asset classes.

    Rebalance or reallocate your Investments as per your risk profile or ideal AA. If you are a regular reader you must know what is your risk profile and ideal asset allocation, for the new bees - check out this blog - One size does not fit all! and our risk calculator to compute your risk profile. 

    Once you know your risk profile, compute your ideal allocation and then compare it with what you already have. Rebalance your portfolio to achieve your ideal allocation. These are some ways to achieve your required asset allocation.

    Declutter your Mutual Funds - When we are talking about decluttering, remember that one of the first things to do is to stop hoarding on mutual funds, buying every other mutual fund is going to make your portfolio messy, and having too many things of one type is only making your diversification worst. So ensure that you have 5 to 6 mutual funds and not more than that and have 1 fund in each category. Time to declutter your mind, wardrobe, and portfolio.

    Read the following article to understand this in more detail - 

    How many mutual funds should you have?

    When to exit from a Mutual Fund or a SIP

    So remember, let it be cleaning your house or your portfolio, both ways you would be welcoming more Laxmi in your life 🙂

    Money tips - 10/25/2021

    What should be my monthly SIP for higher education for a 10 year old?

    xThere has been a petrifying rise in education costs over the past few years. Essentially, this rise has involved increasingly burdening households for the payment, creating a situation in which education beyond the secondary level is essentially unaffordable for most working people, and even school education involves costs for families that can be very high.

    This got one of our clients, Ria, wondering how much money it would take to get her son educated for higher education. 

    Inputs we received from Ria :

    • Her son is currently 10 years old. The time for his post-graduation first year is in 10 years.
    • The current average cost of post-graduation in engineering is 40,00,000 for 4 years of engineering.

    PS: She doesn't want to force her child to do engineering but wants to ensure she has enough funds if he wishes to do so. She probably wants to be ready for overseas expenditures for post-graduation too in case he wishes to do the same.

    Now before we start calculating, please note that the inflation is usually considered as 6% but as we know education cost has been increasing at a higher rate, we generally consider an inflation rate of 10% for education.

    STEP 1:  Risk Profile 

    It is necessary to know your risk profile before you invest in any of your financial goals so that you can invest accordingly.

    Therefore, we suggested Ria do the same. Her Risk Profile was Growth (She computed her risk profile using our calculator from the website -  Risk Calculator). 

    As per the growth risk profile, your investments (portfolio) must be divided in the ratio of 70% in Equity and 30% debt. Also, given that the education goal is a long-term goal, we advise Ria to invest as per her risk profile. For the purpose of calculation, we consider the historic returns of equity at 15% whereas debt returns of 8% approximately. Therefore, her average portfolio return should be 12.9%

    STEP 2: Calculate Monthly Investment Amount  

    Components Amount
    Current Cost of the Goal INR 40,00,000
    Rate of Inflation Assumed 10%
    Future Cost with Inflation INR 77,94,868
    Current investment-linked towards the goal 0
    Expected Returns from Equity 15%
    Expected Returns from Debt 8%
    Suggested Initial Asset Allocation between Debt: Equity-based on their Risk Profile 30:70
    Avg. Portfolio Return Assumed 12.9%
    Monthly Investment Required INR 38,555 

    Above is the self-explanatory working of how much Ria needs to regularly (monthly) invest to accumulate the corpus to her son’s post-graduation expenses. This required an amount of Rs. 38,555 to be invested in a given ratio of 70:30 in equity and debt mutual funds. 

    We also advise Ria that her investments in the ratio of her risk profile would continue till year 7. From year 8 the goal would become a short-term goal and she would have to gradually convert the equity portion to debt. We would not want her to take any risk with her investments and her son’s goal of completing his education. 

    STEP 3: Revisit your portfolio.

    It is important to have a yearly portfolio review and to rebalance the portfolio according to their required asset allocation for every goal based on the time available. 

    Read - Smart investing: Time to rebalance your investment portfolio -to learn more about it

    Wealth cafe advice:

    We also advised Ria to not invest all her savings in her kid's education goal but also keep other goals in mind such as her own retirement goal. One must look at their investments from an overall perspective and not just at one or two things.

    We have a calculator to help you compute the monthly SIPs required to achieve your goals, so you can move around your numbers, in the same way, to compute for yourself. - https://financial.wealthcafe.in/saving-calculator/

    Enroll to our course: NM 105: Plan & achieve your Goals - to make your own financial plan and to learn how the whole investment thing works.

    You can also check out our blog - Goal Based Investing

    Education - 10/14/2021

    What are the differences between Mutual Funds and Smallcase investments?

    As an investor if you want to invest in equity, you have 2 options- you either invest directly via stock market or through equity based mutual funds. A small case is a new and exciting product for retail investors that offers portfolio diversification as an in-built feature. 

     

    What is a smallcase?

    The new term ‘smallcase’ is something that is catching on with digitally savvy investors.

    It is essentially a basket of stocks or ETFs, curated around a specific theme, or a specific investing style. For example Rising Rural Demand - Companies that stand to benefit from increasing rural consumption, IT Tracker-  Companies to efficiently track and invest in the IT sector, etc 

    Under this platform, an investor can either create their own model investment portfolio, also termed as smallcase, or choose from the several existing ones which are created and managed by SEBI (Securities and Exchange Board of India) registered entities. All one needs to begin investing is a trading account and a demat account.

    So again, back to the basic question, how is this any different from a mutual fund?

    Smallcase portfolios often get compared with mutual funds. While the two are similar in that they both minimize risk through diversification, there are some of the prominent differences too.

    Check our course- NM 104: Basics of Mutual Funds - to learn more about Mutual Funds in detail.

     

    Mutual Fund  Small Case
    When you invest in a Mutual Fund, you buy units and not the individual stocks You buy the stock rather than units
    Managed by mutual fund managers of the respective fund house  Managed by different entities including research firms, financial planners, etc
    Predominantly have categorized based on fund size Smallcase portfolio is built on the theme or idea
    Mutual funds have an  expense ratio The cost would vary from broker to broker. They can be a little on a higher side as compared to mutual funds.
    Only the fund manager has the authority to update your fund and add or remove stocks Flexible as it allows you to update your smallcase portfolio and add or remove stocks
    Some mutual funds preclude investors from exiting their investments for a certain period of time No lock-in periods
    Some mutual funds preclude investors from exiting their investments for a certain period of time Needs a higher capital for investing. Since you are directly investing in shares, you will have to buy each unit of them, and to create diversification takes much of your capital
    Mutual funds are managed by experts they have a lower risk Smallcase comes with a higher risk
    There are some mutual funds that are termed ELSS (Equity Linked Saving Schemes) which can give you some tax benefits.  There is no tax benefit

     

    Wealth Cafe Advice:

    Mutual funds can be preferred for investors who are not from a financial background and want to give all the control to a third party to manage the money on their behalf.

    Smallcase on the other hand can be useful for someone who’s with some financial intelligence and understands the technical jargon of the market

    However, You need to have a long-term view towards investing if you want to put your money in smallcases.

    Mutual Funds - 10/14/2021

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