[saket77]

I see this thread was created more than a decade ago. May be a rank wise asset class/ investment avenue was needed rather than providing a single option. A good portfolio should be a mix of investments spread across different asset classes rather than a single investment avenue.

Thanks.

[Zappo]

While most people nowadays generally speak about the market in some form or the other (either stocks or MF etc) one thought I would like to sow here. While speaking of secured investments we inevitably seem to veer off towards FDs as a prominent choice.

While FD is a secured investment with predictable returns, I think, for those who are in the highest tax slab it makes more sense to look at liquid funds as an alternative. The best of them are about just as secured and liquid as an FD can be. Yet, they give you certain advantages. The returns always are a little more than what the bank interest rates are. And if you are the kind that likes to stay invested a bit longer (those who renew their FDs) you get the advantage of being taxed at a rate lower than your IT bracket and even get the benefits of indexation.

[saket77]

Yes, concur with your thoughts. For people wary of even liquid funds can go for overnight funds where credit risk is almost next to nil. As safe as a bank FD.

Personally, I prefer liquid funds over my savings bank account as it also gives me the flexibility to switch to equity MFs on the day of a market crash. Plus, it gives higher returns than the savings account and I have the funds the next business day in case I need them. Prefer it over FD because of the liquidity they provide. No FD breaking, penalties and all those stuff. Funds almost readily available with good returns.

Coming to NPS (as I got diverted from the other thread to here), in my opinion, this is a good option only for someone in 30% tax bracket, that too for tax savings. Otherwise I don't see NPS as a lucrative investment or even a retirement fund builder tool.

Regards,
Saket

[vrprabhu]

Originally Posted by saket77

.... prefer liquid funds over my savings bank account as it also gives me the flexibility to switch to equity MFs on the day of a market crash...

Would be obliged if you could share what modus operandi you use :-)

And, also, the platform used for investing in liquid funds (which I guess is the money market instrument based funds?)

Originally Posted by saket77

... NPS, in my opinion, is a good option only for someone in 30% tax bracket, that too for tax savings. Otherwise I don't see NPS as a lucrative investment or even a retirement fund builder tool

You are right. But, because :

a. There is no option other than NPS in view of the mandatory subscription requirement by the employer;

and

b. NPS permits additional Rs. 50,000 deductions for your own (separate) contribution and returns are likely to be at par with other annuity based plans

it sort of serves as a additional (back-up) investment for people like me, since 60% of the corpus can be withdrawn at the time of retirement (there weren't any options like this when I started working about four decades back!).

[AdiSolEn]

Earlier, my investments (largely due to me being a minor when they were made) were in real estate (land, and not flats/commercial properties). However, no I do spread my investments in mix of many avenues. Ideally, your investments should be spread across multiple instruments. However, how much money to invest in a specific instrument will depend on the time frame. As far as real estate is concerned, it is always better to invest in land parcels (even better if you are a farmer and can buy agricultural land) as they will offer the highest returns amongst real estate investments!

[saket77]

Originally Posted by vrprabhu

Would be obliged if you could share what modus operandi you use :-)

And, also, the platform used for investing in liquid funds (which I guess is the money market instrument based funds?)

If you are asking about allocation to liquid funds, then you can keep at least two month average expense amount in your savings account apart from the minimum balance requirement, if any. Invest the balance in liquid funds. In case you need that money, you can request for redemption during the business hours and get the money in your bank account by the next business day. You don't pay any penalty or suffer any loss (like in case of FD) due to this redemption order. If you also invest in equity MFs, then you can easily switch surplus funds upto Rs. 2L from your liquid fund on a day when market has crashed and get benefit of lower NAV. Although, this is also possible through savings account but honestly how many of us have that amount waiting for such apt time!!??

I use direct AMC websites and no other platform for MFs. For tracking all investments at one place, I use any online portfolio creator/tracker like that on money control. That way I can track them on daily basis on a click of mouse.

Originally Posted by vrprabhu

You are right. But, because :

a. There is no option other than NPS in view of the mandatory subscription requirement by the employer;

and

b. NPS permits additional Rs. 50,000 deductions for your own (separate) contribution and returns are likely to be at par with other annuity based plans

it sort of serves as a additional (back-up) investment for people like me, since 60% of the corpus can be withdrawn at the time of retirement (there weren't any options like this when I started working about four decades back!).

Yes, when mandatory through employer, you have no choice. But poor annuity rates and GST charges while purchase of annuity are the biggest dampeners in my opinion. Plus you are locked at a rate prevailing currently for life in annuity. So, if someone has been unlucky to have bought it during the last couple of years or so, he/she shall be getting much lower amount as pension as interest rates bottomed during the said period. A bank FD here is far superior and you always have the capital for yourself. In annuity, you get lower pension if you want the capital back (repurchase).

Regards,
Saket.

[SmartCat]

Originally Posted by vrprabhu

And, also, the platform used for investing in liquid funds (which I guess is the money market instrument based funds?

Originally Posted by saket77

I use direct AMC websites and no other platform for MFs. For tracking all investments at one place, I use any online portfolio creator/tracker like that on money control. That way I can track them on daily basis on a click of mouse.

When you use a platform to buy mutual funds, you lose approximately 0.5% per year on equity mutual funds and 0.1 to 0.2% per year on debt funds. This goes to the platform (Eg: ICICIDirect, banking platform) as commission. So investing directly via AMC website makes sense. However, you have to remember 5 different usernames/password.

Solution: https://coin.zerodha.com/

Through this platform, you can invest directly in mutual funds for zero commission with one login/password. Plus, you can track the performance of the mutual funds. Zerodha Coin allows you to directly invest in 5 yr/10 yr government securities and 90 day treasury bills too, bypassing AMCs.

[vrprabhu]

Originally Posted by saket77

If you also invest in equity MFs, then you can easily switch surplus funds upto Rs. 2L from your liquid fund on a day when market has crashed and get benefit of lower NAV. Although, this is also possible through savings account but honestly how many of us have that amount waiting for such apt time!!??

Plus you are locked at a rate prevailing currently for life in annuity. So, if someone has been unlucky to have bought it during the last couple of years or so, he/she shall be getting much lower amount as pension as interest rates bottomed during the said period.

Thanks for the tip. I do have money in Savings Account and can also spend some time (if I make the effort, that is!). Will give it a go. However, I believe that I am reaching a stage where making money figures lower on the priority list - that's another story altogether

Very true as regards annuity purchase. The way interest rates have been hovering around 7% during the last couple of years would have certainly upset the calculations made by those retiring in this period....

Originally Posted by smartcat

When you use a platform to buy mutual funds, you lose approximately 0.5% per year on equity mutual funds and 0.1 to 0.2% per year on debt funds.

Solution: https://coin.zerodha.com/

Thanks, smartcat.

I remember your tip about Screener (am I right?). Did invest some money into stocks about three / four years ago and mostly in plus now.

However, as I have said above, getting lazier day-by-day to put any sensible time and effort into this :-( (till now, used to deduct 30% out of the likely earnings to pay the taxman; as days go by, not only the priorities have shifted, but also thinking of using the money earned on something worthwhile, not necessarily for me or my family, before I plan to make more money)

Can either of you tell me what would be tax implications on the earnings out of liquid funds? Is it short term capital gain or taxed as regular income? Thanks in advance!

[SmartCat]

Originally Posted by vrprabhu

Can either of you tell me what would be tax implications on the earnings out of liquid funds? Is it short term capital gain or taxed as regular income? Thanks in advance!

Liquid funds are taxed like all other debt funds. If you sell before 3 years, you will taxed according to your income tax slab. If you hold for atleast 3 years, tax on interest earned is (20% minus consumer inflation rate per year).

You need to add interest to your income only when you sell the units, not while it is accruing everyday.

[aah78]

Any love for robo-advisors here?

They're picking up well in the US market because of the low initial requirement & low fees (A traditional brokerage firm with a human advisor requires a high initial investment, which is traditionally not feasible for everyone).

I think India has a few start-up robo-advisors. Don't know how well they're doing.

[SmartCat]

Originally Posted by aah78

Any love for robo-advisors here?I think India has a few start-up robo-advisors. Don't know how well they're doing.

Few examples:

1) www.scripbox.com (for mutual fund investing)
2) Angel Broking Arq (for stocks) http://www.angelbroking.com/experience-arq
3) www.marketsmojo.com professional (automated stock picking, coming soon)
4) www.marketsmithindia.com (for stocks)

No clue regarding their performance.

[Zappo]

Originally Posted by smartcat

Liquid funds are taxed like all other debt funds. If you sell before 3 years, you will taxed according to your income tax slab. If you hold for atleast 3 years, tax on interest earned is (20% minus consumer inflation rate per year).

You need to add interest to your income only when you sell the units, not while it is accruing everyday.

If you intend to invest for less than 3 years and are in the highest tax slab (of 30%) it makes more sense to go for the dividend option rather than the growth option. The dividend option is more tax effective.

[prateekm]

25 yo here. I try and travel a lot (leisure), so I could say I invest a lot on experiences

On investments that I can put a value on, I invest in stocks (80%) and MFs (20%). I have someone who handles both, I try and avoid getting my hands dirty on things which I don't have time to research on.

[SmartCat]

Originally Posted by Zappo

If you intend to invest for less than 3 years and are in the highest tax slab (of 30%) it makes more sense to go for the dividend option rather than the growth option. The dividend option is more tax effective.

That loophole was plugged in 2014. Mutual fund houses deduct 29% of interest earned as Dividend Distribution Tax.
https://cafemutual.com/news/industry...p-from-april-1

[Jaguar]

Originally Posted by smartcat

Solution: https://coin.zerodha.com/

Through this platform, you can invest directly in mutual funds for zero commission with one login/password. Plus, you can track the performance of the mutual funds. Zerodha Coin allows you to directly invest in 5 yr/10 yr government securities and 90 day treasury bills too, bypassing AMCs.

One question. How does a platform like this survive on no comission? It takes a lot of effort to create and maintain a trading portal. I am just trying to understand what is the catch. Are they being funded by the AMC? Or are they selling your information to make money? Because at the end of the day, nothing comes for free.