Who should Invest in Debt Funds?
Debt funds are ideal for investors who aim for regular income, but are risk-averse. Debt funds are less volatile and, hence, are less risky than equity funds. If you have been saving in traditional fixed income products like Bank Deposits, and looking for steady returns with low volatility, debt Mutual Funds could be a better option, as they help you achieve your financial goals in a more tax efficient manner and therefore earn better returns.
Things to Consider as an Investor
1. Risk
Debt funds suffer from credit risk and interest rate risk which make them riskier than bank FDs.
2. Return
Even though debt funds are fixed-income havens, they don’t offer guaranteed returns. The Net Asset Value (NAV)of a debt fund tends to fall with a rise in the overall interest rates in the economy. Hence, they are suitable for a falling interest rate regime.
3. Investment Horizon
You can invest in Debt funds for a range of investment horizons.
Category J) Ideal Period
Liquid Funds K) 1 Day and Above
Ultra Short Term Funds L) 0-3 Months
Short Term Funds M) 3 -12 Months
Medium Term Funds N) 1-3 Years
Credit Risk Funds O) 3 Years and Above
4. Financial Goals
Debt funds can be an ideal partner in your portfolio to achieve a variety of goals. You can use debt funds as an alternate source of income to supplement your income from salary. Additionally, budding investors can invest some portion in debt funds for purpose of liquidity. Retirees may invest the bulk of retirement benefits in a debt fund to receive the pension.
5. Tax on Gains
When you invest in debt funds, you earn capital gains which are taxable. The rate of taxation is based on how long you stay invested in a debt fund called as the holding period. A capital gain made during a period of less than 3 years is known as a Short term Capital Gain (STCG). A capital gain made over a period of 3 years or more is known as Long-term Capital Gains (LTCG). STCG from debt funds are also added to the investor’s income and taxed according to his income slab. TCG from debt funds is taxed at the rate of 20% after indexation
J) Will Drafting: Why is a WILL Important?
01 .Without a valid WILL, the distribution of your assets will be according to the rules of intestacy – not according to your wishes.
02. You will be decision maker for your own assets and can make arrangements for married daughters , friends , lifelong worker or charity
03 .If you have a child or children, a valid WILL is necessary to make arrangements for the children should the parents die, It is extremely important to have a WILL in place if the children are under 18 and would need someone to look after their inheritance or to have a guardian appointed for them.
04. A WILL may & reduce family conflicts in future, if any.
05. The most important thing about a WILL is that it leaves comprehensible and explicit instructions about the deceased’s property and estate.
06 A WILL specifies the inheritor of each share of the property and lessens the scope of any confusion that might arise in future. It therefore helps in mitigating family disputes.
07 A person making a WILL creates a safety garb for his /her minor children. He /She can appoint a guardian of his /her choice and also make any financial arrangements for them.
08 A WILL can be instrumental in protecting one’s business. One can pass on their company and power of attorney to one’s preferred heirs thereby reducing friction in business ventures.
09 WILL may not only specify the inheritance in favour of friends and family members but may also include a charity or transfer to any other organisation.
10 The best thing about a WILL is that it is not an irrevocable instrument. A WILL can be revoked during the lifetime of the testator. A WILL can also be modified. If circumstances change and the testator become dissatisfied with the behavior of any of his relatives, he can exclude his name from his WILL. Alternate Investment Funds (AIF’s): AIF are investments primarily made by HNI’s or institutional investors into asset classes other than stocks, bonds and cash.
K) AIF’s usually include real estate, private equity, hedge funds and venture capital funds or investments using strategies that go beyond traditional ways of investing, such as long/short or arbitrage strategies. Because alternatives tend to behave differently than typical stock and bond investments, adding them to a portfolio may provide broader diversification, reduce risk, and enhance returns. Rajshri Capital is empanelled with exceptional third-party AIF providers so that investors can diversify their portfolio and benefit from their high-return opportunities in the long- run.
L) Portfolio Management Services: Portfolio Management Services (PMS) is a customized and professionally managed investment vehicle that uses different investment strategies to take advantage of market linked opportunities. PMS is ideal for high-net worth individuals (HNI’s) who are willing to take on risk and gain market exposure, by investing directly into a basket of securities such as equities, fixed income, structured products, etc. Rajshri Capital is empanelled with a wide range of reputed third-party PMS providers across India, such as AMC’s and financial institutions which provide their specialized
PMS offerings.
M) Tax Planning: There is more to tax planning than exemptions available on savings. With our advice, you will pay the right amount of tax, not more and not less. You will also know how to tax proof your incomes and gains. After all, your capital is more productive in your hands and it can work wonders for you if planned properly.
We guide you in the Planning & managing your finances and achieving your financial goals. Basic planning starts with Tax planning as good tax planning can increase the take home salary. These investments can also cater to a few of your needs if this is well planned. Tax planning is not restricted only to tax savings investments (Section 80C). There are several other components E.g HRA, Home Loans, LTA, Reimbursements, etc to reduce the taxable income.
Our Advice:
• By careful planning, one can reduce tax liability substantially.
• Declaring at the start of the FY is most important
• Don’t wait for last minute. Start in April and use monthly investments to reduce
risk. It will be easier on your pocket as well.
• Try and achieve tax planning and also planning for your needs simultaneously
• Use tax efficient investment avenues. You should not be paying too much tax on their returns
Approach to Investment
I believe in a disciplined and research-driven approach to investing. By understanding each client’s financial goals, risk appetite, and investment horizon, I create diversified mutual fund portfolios that aim to maximize returns while managing risk. My commitment to regular portfolio reviews ensures that clients are on track to meet their objectives, even as market conditions change.
