What are Monthly Income Plans in Mutual Funds

Raghav Chakroborthy, new General Manager of a private IT firm, started shooting his doubts to his best friend Madhav, when he wanted to save a part of his income for his two little angels.

“Oh yes of course Raghav!! Now that you have understood how to select mutual fund for your portfolio, I will tell you different schemes in it. You can get your income monthly by getting to Monthly Income Plans (MIP) of Mutual funds.

Monthly Income Plan (MIPs)

See…. In a mutual fund scheme, basically the amount is paid in accordance with the fund objective set by the mutual fund house. As you know, the amount that they distribute is in the form of dividends depends on the profit they make.

These MIPs are generally ‘Debt oriented schemes’. They invest the money in a mixed format- in both equity and debt. They normally keep a ratio of 20:80 or 30:70 or so. Their aim is to give the maximum regular benefits to the investor by reducing the risks.

Being said so, the major part of the fund will be invested in (70 to 100%) Debt instruments like ‘commercial paper, certificate of deposits, government securities, treasury bills etc., so that they can yield interest on them. The remaining will be invested in Equity.

This because the former will give stable, safe and consistent income, while the equity will keep on fluctuating in accordance with the portfolio management.

Now see, even MIP can be done in two ways: MIP Aggressive & MIP Conservative Plans. It depends on the percentage of equity exposure that MIPs take.

The one’s in which the investment in equity max 20% - 30% can be treated as “MIP Aggressive Plans” and the in which investment in equity is between 0-20% are treated as MIP Conservative. MIP Agressive may offer you  better returns on your investment. But yes!! Faster the returns, higher is the risks.”

“So is there any point of risk?” Raghav was taken aback.

“Yes… But if you keep a close eye on a few things it would be easy” Madhav consoled

“What are they?”

“Mmmm… for example:

Normally an MIP is affected by the interest rates. There is an inverse relationship  between interest rate and MIP. When interest rates goes downwards MIP provide better returns and vice-e-versa 

• You have a variety of payout options- monthly, quarterly, half-yearly.
• But they may charge an ‘Exit Load’, of around 1%, if you take it in less than one year of holding.
• I believe that the ideal time for returns in MIPs can be around 3 to 4 years.”

“So it's not necessary that we get a regular income??” Raghav sounded curious.

“Well it not like that… You have two options in MIP say:

Dividend  Option : Dividends  in  MIPs  are  tax  free  in  hands  of  investors but Mutual  Fund companies  have  to  pay  a 28.33% Dividend  Distribution  Tax  (DDT)  including surcharge and cess and  30%  plus  surcharge  and  cess  for  others  (33.99%)  before distributing it to you as investors

Growth Option: If you opt for Growth option, it is subject to Capital Gains Tax. Short Term Capital Gains (if units are held for 36 months or less)  are taxed as per the Income Tax Slab Rate of investors. For Long Term Capital Gains (if units are held for more than 36 months) are taxed at 10% without indexation or 20% with indexation. The indexation benefit inflates the cost of purchase lowering long term gains tax liability, which is not the case of FD.

The tenure of the holding period matters, when one has to decide between growth and dividend options. You can go for the growth option if the holding period is more than a 3 years and for the dividend option if the holding period is less than 1 year

The reason is that gains from investment in Mutual Funds, if redeemed after 3 year in debt schemes, are considered
long-term capital gains. In the case of long-term capital gain, the investor is given the option of choosing between

• 20% tax rate with indexation benefit, and 
• 10% tax rate without the benefit of indexation

Long- and short-term capital loss- The good part of MIP is that any short term capital gains made on MIPs can be set off against short term losses. And long term gain on MIPs can be set off against long term losses.

Check an example of Indexation benefit here

Advantage of MIPs

 

Some of the features of balanced funds are:

1. Provides diversification in its truest sense by investing in bonds and equities
2. Invests a sizable proportion in equities, hence the returns you receive are decent
3. Provides automatic portfolio re-balancing; an added cushion during volatile markets. Therefore, when markets are positive, the fund manager sells equity to maintain its maximum level and vice versa

Investors should bear in mind that MIPs are also subject to market risks as both invest in equities. Neither scheme can guarantee income or returns and one should opt for a fund in line with their risk profile and investment objectives.

The drawback is that MIPs do not guarantee returns. But this is not a big worry as the better performing MIPs have regularly paid dividends. Therefore, for those who want regular incomes, like senior citizens or people with lower incomes, conventional products are better as returns are guaranteed.

PPS: If you think this page and blog will be useful to any of your friends please spread the word. A good way to start is to share this page on your social circle using floating social share bar on the left

Mutual Funds & Insurance Related Articles :-

Benefits of Systematic Investment Plan
What is Systematic Transfer Plan and How it works ? 
Advantages of Equity Linked Savings Schemes
Top 3 Mutual Funds to Invest in 2016 for Long Term
Fixed Maturity Plan : Your Friendly Alternate to Traditional Investment
How to Select Mutual Fund for Portfolio ?
How to Budget your money with 40/30/30 Rule ?
How Much Insurance Do I Need ?
Mutual Fund Versus ULIP 
Why Term Insurance Policy is required till 60 years ?

Equities related article :

Market Order vs Limit Order vs Stop loss Order vs Bracket Order

Risk Management in Broking House for You as Investor
Understand Your Daily Margin Statement
What is Power of Attorney in Online Trading?

Futures & Options related article :

Futures Trading Terminologies
What is Futures Trading?
What is Derivatives ?
What are Forward Contracts ?
Advantages & Disadvantages of Futures Trading ?
Guide to Options Trading
Long Call - Bullish Trading Strategies
Long Put
Short Call - Bearish Strategies
Sell Put - Bullish Strategies
Buy Straddle Option
Short Straddle Option
Synthetic Long Call
Synthetic Long Put
Synthetic Long Futures
Synthetic Long Futures

Synthetic Short Call

Bull Call Spread

Bull Put Spread

In case of any further explanation you can reach me on vipuls1979@gmail.com or tweet me  @vipuls1979

Disclaimer  :-

The Article is only for information purposes and Vipul Shah (https://investkiyakya.blogspot.com) is not providing any professional/investment advice through it. The article does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. https://investkiyakya.blogspot.com disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this article, including without limitation the implied warranties of merchantability and fitness for a particular purpose. https://investkiyakya.blogspot.com and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this guide. Use of this article is at the user’s own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. https://investkiyakya.blogspot.com does not warrant completeness or accuracy of any information published in this guide. All intellectual property rights emerging from this article are and shall remain with https://investkiyakya.blogspot.com. This article is for your personal use and you shall not resell, copy, or redistribute this article , or use it for any commercial purpose. All names and situations depicted in the article are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.

Understanding Fixed Maturity Plan (FMP) , Taxation and Benefits

Fixed Maturity Plan : Your Friendly Alternate to Traditional Investment

Most of us like traditional investments mainly for two reasons:

• It offers assured returns 
• It has a date of maturity

You are comfortable at knowing the value of your savings at maturity accordingly you can plan for your expenses or may be other investments better

What if you have an investment solution that seeks to provide :

• a specific maturity date 
• an exposure to high quality bonds 
• risk adjusted returns along with tax benefit 

 

What is Fixed Maturity Plan : 

Fixed Maturity Plan matures at a pre specified period and it generally invest in fixed income securities like Non-Convertible Debentures(NCDs), Corporate/Government Bonds, Treasury Bills (T-bills), Commercial Papers(CPs), Certificates of Deposit (CDs), Bank FDs and other money market instruments. 

FMP are closed ended mutual fund scheme. FMP invests only in instruments whose duration is similar to its own term i.e., it aligns its term with that of its underlying assets. For example, recent NFO of ICICI Prudential Fixed Maturity Plan - Series 79 - 1126 Days - Plan C will invest in instruments that mature for 1126 days or before that. 

Why a Fixed Maturity Plan?

 

• Fixed Maturity Plans aim is to offer risk adjusted returns along with tax benefits.
• Currently debt security yields are at elevated levels in the 1-3 year space. It could be a good time to lock into high yield debt issuance of various issuers and hold them till maturity to benefit from the prevailing high interest rates.
• While investing in such securities, there is an endeavor to align their maturity with that of the plan to manage the interest rate risk. For instance, an FMP of a three-year maturity will invest only in securities that mature on or before three years.
• Because of the size, the fund might invest in securities which are usually not available to retail investors. These securities might offer various benefits such as better credit quality.
• Moreover, the returns from FMP have a tax advantage. This may vary from investor to investor and is subject to taxation laws. This tax advantage makes FMP an efficient investment choice

Tax Advantages of FMP vs Bank Fixed Deposits

FMP has an advantage when compared to similar investments like Fixed Deposits (FDs). In FDs, Interest earned is added to your income and taxed at your income tax rate. Interest from FD is categorized as "Income from other sources" as per the Income Tax Laws.  In the case of FMP, tax implication depends on the investment option chosen Dividend or Growth

Which option to choose ?

Dividend  Option : Dividends  in  FMPs  are  tax  free  in  hands  of  investors but Mutual  Fund companies  have  to  pay  a 28.33% Dividend  Distribution  Tax  (DDT)  including surcharge and cess and  30%  plus  surcharge  and  cess  for  others  (33.99%)  before distributing it to you as investors

Growth Option: If you opt for Growth option, it is subject to Capital Gains Tax. Short Term Capital Gains (if units are held for 36 months or less)  are taxed as per the Income Tax Slab Rate of investors. For Long Term Capital Gains (if units are held for more than 36 months) are taxed at 10% without indexation or 20% with indexation. The indexation benefit inflates the cost of purchase lowering long term gains tax liability, which is not the case of FD.

The tenure of the holding period matters, when one has to decide between growth and dividend options. You can go for the growth option if the holding period is more than a 3 years and for the dividend option if the holding period is less than 1 year

The reason is that gains from investment in Mutual Funds, if redeemed after 3 year in debt schemes, are considered
long-term capital gains. In the case of long-term capital gain, the investor is given the option of choosing between

• 20% tax rate with indexation benefit, and 
• 10% tax rate without the benefit of indexation

Before discussing the benefits of indexation, let’s first understand the concept. Normally, for calculating capital gains, we reduce the cost from the sale value. For calculating long-term capital gains, the amount invested is multiplied by the inflation multiple (Inflation Index for Redemption Year/Inflation Index for Investment Year) and then this indexed cost is subtracted from the amount realized at redemption. The extent of capital gains gets reduced,and so does the tax liability.

Below table illustrates the returns of Fixed Deposit vs Fixed Maturity Plan

Details	Fixed Deposit	FMP
Amount Invested (A)	100000	100000
Month & Investment Year	Feb-12	Feb-12
Rate of Return	9.50%	9.50%
Holding Period	36 Months	36 Months
Month & Redemption Year	Feb-15	Feb-15
Amount at Maturity	131293	131293
Gain	31293	31293
Index Cost	NA	130446
Capital Gain	31293	847
Tax Rate	30.90%	20.60%
Tax Payable	9670	175
Post Tax return	21623	31118

In our example above Cost Inflation Index (CII) for year of redemption (2014-15) is 1024 and year of purcahse (2011-12) is 785. The indexed cost of purchase = (A*1024/785)
 
Highest bracket of tax rate has been taken based on current IT slabs.

It is difficult to redeem Fixed Maturity Plans before the maturity or final date of redemption. Investors looking for redemption before maturity have to sell the units on the stock exchange. As per guidelines, all FMP schemes are listed on the stock exchanges however; trading is rarely done on the units.


PPS: If you think this page and blog will be useful to any of your friends please spread the word. A good way to start is to share this page on your social circle using floating social share bar on the left

Mutual Funds & Insurance Related Articles :-

Benefits of Systematic Investment Plan
What is Systematic Transfer Plan and How it works ? 
Advantages of Equity Linked Savings Schemes
Top 3 Mutual Funds to Invest in 2016 for Long Term
How Much Insurance Do I Need ?
How to Select Mutual Fund for Portfolio ?
How to Budget your money with 40/30/30 Rule ?
Mutual Fund Versus ULIP 
Why Term Insurance Policy is required till 60 years ?

Equities related article :

Market Order vs Limit Order vs Stop loss Order vs Bracket Order

Risk Management in Broking House for You as Investor
Understand Your Daily Margin Statement
What is Power of Attorney in Online Trading?

Futures & Options related article :

Futures Trading Terminologies
What is Futures Trading?
What is Derivatives ?
What are Forward Contracts ?
Advantages & Disadvantages of Futures Trading ?
Guide to Options Trading
Long Call - Bullish Trading Strategies
Long Put
Short Call - Bearish Strategies
Sell Put - Bullish Strategies
Buy Straddle Option
Short Straddle Option
Synthetic Long Call
Synthetic Long Put
Synthetic Long Futures
Synthetic Long Futures

Synthetic Short Call

Bull Call Spread

Bull Put Spread

In case of any further explanation you can reach me on vipuls1979@gmail.com or tweet me  @vipuls1979

Disclaimer  :-

The Article is only for information purposes and Vipul Shah (https://investkiyakya.blogspot.com) is not providing any professional/investment advice through it. The article does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. https://investkiyakya.blogspot.com disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this article, including without limitation the implied warranties of merchantability and fitness for a particular purpose. https://investkiyakya.blogspot.com and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this guide. Use of this article is at the user’s own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. https://investkiyakya.blogspot.com does not warrant completeness or accuracy of any information published in this guide. All intellectual property rights emerging from this article are and shall remain with https://investkiyakya.blogspot.com. This article is for your personal use and you shall not resell, copy, or redistribute this article , or use it for any commercial purpose. All names and situations depicted in the article are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.

What is Systematic Transfer Plan ? How Does it Work ?

Systematic Transfer Plan is a Strategy where an investor transfers a fixed amount of money from one category of fund to another,usually from a Debt fund to an Equity Fund.

Investing a Lump sum amount in stocks of equity mutual fund could be dicey for some investor considering the volatility of equity markets and returns in equity mutual fund is linked to the performance of stock markets. STP helps to keep a balance of risk and return. Further, it helps investor invest in equity at appropriate time and till then, investor enjoy debt returns.

Benefits of Systematic Transfer Plan (STP) 

Consistent Return : Money invested lumpsum in debt fund earned interest till the time it is transferred to equity fund. The returns in the debt fund are usually higher than returns from savings bank account and assure relative performance.

Averaging of Cost : STP has some integral features of systematic investment plan (SIP). One of the difference between STP and SIP is source of investment. In case of STP money is transferred usually from a debt fund and in case of SIP, it is the investor's bank account. Since it is similar to SIP, STP also helps in rupee averaging cost.

Re-balancing portfolio : An investor's portfolio should be balanced between equity and debt. STP helps in re-balancing the portfolio by reallocating investment from debt to equity or vice versa

How does STP Work ?

Imagine you won a lottery of Rs 5 Lakhs and you want to invest in equity market but at the back of the mind you are not willing to take risk to entirely bet your 5 lakh on equity.

So here you will invest Rs 5 Lakhs via STP. You will have to select a source scheme (debt scheme) and a target scheme (equity scheme) , a fixed transfer date and a fixed amount.
In below example date is 25th of every month & 5000 would be transferred from ICICI Prudential Liquid Growth (DEBT) and transferred to ICICI PRU Value Discovery Fund - Growth (Equity)
Every month Rs 5000 would be transferred from Debt Scheme to Equity Growth Scheme 

STP - Transferor Scheme : ICICI Prudential Liquid Plan - Growth
Period	STP Start Date	Total No. Units Accumulated	Total Amount Transferred	Scheme Market Value(Rs.)
01-Jan-2013 to 08-Jun-2016	01-Jan-13	1,900.87	205,000.00	431,964.74
NAV Date	NAV	Units	Cash Flow	Amount	STCG/LTGC
01-Jan-13	169.91	2,942.77	-500,000.00	500,000.00
27-Jan-13	170.93	2,913.52	5,000.00	495,000.00	STCG
25-Feb-13	172.06	2,884.46	5,000.00	490,000.00	STCG
25-Mar-13	173.19	2,855.59	5,000.00	485,000.00	STCG
25-Apr-13	174.57	2,826.95	5,000.00	480,000.00	STCG
26-May-13	175.83	2,798.51	5,000.00	475,000.00	STCG
25-Jun-13	177	2,770.26	5,000.00	470,000.00	STCG
25-Jul-13	177.78	2,742.14	5,000.00	465,000.00	STCG
25-Aug-13	179.38	2,714.26	5,000.00	460,000.00	STCG
25-Sep-13	181.02	2,686.64	5,000.00	455,000.00	STCG
25-Oct-13	182.53	2,659.25	5,000.00	450,000.00	STCG
25-Nov-13	183.99	2,632.08	5,000.00	445,000.00	STCG
25-Dec-13	185.36	2,605.10	5,000.00	440,000.00	STCG
26-Jan-14	186.81	2,578.34	5,000.00	435,000.00	STCG
25-Feb-14	188.12	2,551.76	5,000.00	430,000.00	STCG
25-Mar-14	189.44	2,525.36	5,000.00	425,000.00	STCG
25-Apr-14	191.01	2,499.19	5,000.00	420,000.00	STCG
25-May-14	192.41	2,473.20	5,000.00	415,000.00	STCG
25-Jun-14	193.82	2,447.41	5,000.00	410,000.00	STCG
25-Jul-14	195.19	2,421.79	5,000.00	405,000.00	STCG
25-Aug-14	196.59	2,396.36	5,000.00	400,000.00	STCG
25-Sep-14	198.03	2,371.11	5,000.00	395,000.00	STCG
26-Oct-14	199.49	2,346.04	5,000.00	390,000.00	STCG
25-Nov-14	200.89	2,321.15	5,000.00	385,000.00	STCG
25-Dec-14	202.28	2,296.44	5,000.00	380,000.00	STCG
26-Jan-15	203.78	2,271.90	5,000.00	375,000.00	STCG
25-Feb-15	205.17	2,247.53	5,000.00	370,000.00	STCG
25-Mar-15	206.51	2,223.32	5,000.00	365,000.00	STCG
26-Apr-15	208.14	2,199.30	5,000.00	360,000.00	STCG
25-May-15	209.52	2,175.43	5,000.00	355,000.00	STCG
25-Jun-15	210.97	2,151.73	5,000.00	350,000.00	STCG
26-Jul-15	212.39	2,128.19	5,000.00	345,000.00	STCG
25-Aug-15	213.75	2,104.80	5,000.00	340,000.00	STCG
27-Sep-15	215.2	2,081.56	5,000.00	335,000.00	STCG
25-Oct-15	216.48	2,058.47	5,000.00	330,000.00	STCG
25-Nov-15	217.84	2,035.52	5,000.00	325,000.00	STCG
27-Dec-15	219.26	2,012.71	5,000.00	320,000.00	STCG
25-Jan-16	220.56	1,990.04	5,000.00	315,000.00	LTCG
25-Feb-16	221.97	1,967.52	5,000.00	310,000.00	LTCG
27-Mar-16	223.5	1,945.14	5,000.00	305,000.00	LTCG
25-Apr-16	225.12	1,922.93	5,000.00	300,000.00	LTCG
25-May-16	226.58	1,900.87	5,000.00	295,000.00	LTCG
08-Jun-16	227.25	1,900.87	431,964.74	295,000.00

From the above table we can identify that, With a lump sum investment of Rs 5 Lakhs in debt fund , even after transfer of 295000 (41 Months x 5000) , your value in debt fund is Rs 431964.74 which is approximate 8.88% return

In case if you withdraw money from liquid funds before 36 months from date of investments then short term capital gain (STCG) is levied else long term capital gain tax is levied (LTCG) and because of this reason it is been mentioned STCG & LTCG in the above example 

Let us see the value of equity growth fund now for which we transferred 5000 every month from debt fund.

STP - Transferee Scheme : ICICI Prudential Value Discovery Fund - Growth
Period	STP Start Date	Total No. Units Accumulated	Total Amount Invested	Scheme Market Value(Rs.)
01-Jan-2013 to 08-Jun-2016	01-Jan-13	2,593.17	205,000.00	301,896.92
NAV Date	NAV	Units	Cash Flow	Amount
25-Jan-13	58.12	86.03	-5,000.00	5,000.00
25-Feb-13	55.31	176.43	-5,000.00	10,000.00
25-Mar-13	52.85	271.04	-5,000.00	15,000.00
25-Apr-13	54.94	362.04	-5,000.00	20,000.00
24-May-13	54.17	454.35	-5,000.00	25,000.00
25-Jun-13	49.97	554.41	-5,000.00	30,000.00
25-Jul-13	50.76	652.91	-5,000.00	35,000.00
23-Aug-13	49.28	754.37	-5,000.00	40,000.00
25-Sep-13	52.99	848.73	-5,000.00	45,000.00
25-Oct-13	55.85	938.25	-5,000.00	50,000.00
25-Nov-13	58.23	1,024.12	-5,000.00	55,000.00
24-Dec-13	61.59	1,105.30	-5,000.00	60,000.00
24-Jan-14	60.26	1,188.28	-5,000.00	65,000.00
25-Feb-14	61.93	1,269.01	-5,000.00	70,000.00
25-Mar-14	66.22	1,344.52	-5,000.00	75,000.00
25-Apr-14	71.66	1,414.29	-5,000.00	80,000.00
23-May-14	84.58	1,473.41	-5,000.00	85,000.00
25-Jun-14	89.11	1,529.52	-5,000.00	90,000.00
25-Jul-14	91.93	1,583.91	-5,000.00	95,000.00
25-Aug-14	96.65	1,635.64	-5,000.00	100,000.00
25-Sep-14	97.86	1,686.73	-5,000.00	105,000.00
22-Oct-14	99.93	1,736.77	-5,000.00	110,000.00
25-Nov-14	105.39	1,784.21	-5,000.00	115,000.00
24-Dec-14	105.06	1,831.80	-5,000.00	120,000.00
23-Jan-15	113.62	1,875.81	-5,000.00	125,000.00
25-Feb-15	114.72	1,919.39	-5,000.00	130,000.00
25-Mar-15	114.3	1,963.14	-5,000.00	135,000.00
24-Apr-15	111.28	2,008.07	-5,000.00	140,000.00
25-May-15	114.89	2,051.59	-5,000.00	145,000.00
25-Jun-15	114.75	2,095.16	-5,000.00	150,000.00
24-Jul-15	117.07	2,137.87	-5,000.00	155,000.00
25-Aug-15	111.71	2,182.63	-5,000.00	160,000.00
24-Sep-15	111.36	2,227.53	-5,000.00	165,000.00
23-Oct-15	115.17	2,270.94	-5,000.00	170,000.00
24-Nov-15	114.08	2,314.77	-5,000.00	175,000.00
24-Dec-15	113.03	2,359.01	-5,000.00	180,000.00
25-Jan-16	105.52	2,406.39	-5,000.00	185,000.00
25-Feb-16	97.5	2,457.68	-5,000.00	190,000.00
23-Mar-16	108.33	2,503.83	-5,000.00	195,000.00
25-Apr-16	112.86	2,548.13	-5,000.00	200,000.00
25-May-16	111.02	2,593.17	-5,000.00	205,000.00
08-Jun-16	116.42	2,593.17	301,896.92	205,000.00

In Equity Fund your amount invested for Rs 205000 is now Rs 301896.92 which is approximate 23.87 returns 

Your Investment value on 5 lakhs is as on debt fund value + equity fund value i.e 431964 + 301896 = 733,860 in 41 months

Can you see the benefits of systematic transfer plan which offers consistent return , re balancing your portfolio and rupee averaging cost.

Be a smart and informed investor – check how much insurance do you need and why you should in invest in Mutual Funds versus ULIP after analyzing the above two you can invest money via SIP in best 3 equity mutual funds in India for Retirement

PPS: If you think this page and blog will be useful to any of your friends please spread the word. A good way to start is to share this page on your social circle using floating social share bar on the left

Mutual Funds & Insurance Related Articles :-

Benefits of Systematic Investment Plan
What is Systematic Transfer Plan and How it works ? 
Advantages of Equity Linked Savings Schemes
Top 3 Mutual Funds to Invest in 2016 for Long Term
How Much Insurance Do I Need ?
How to Select Mutual Fund for Portfolio ?
How to Budget your money with 40/30/30 Rule ?
Mutual Fund Versus ULIP 
Why Term Insurance Policy is required till 60 years ?

Equities related article :

Market Order vs Limit Order vs Stop loss Order vs Bracket Order

Risk Management in Broking House for You as Investor
Understand Your Daily Margin Statement
What is Power of Attorney in Online Trading?

Futures & Options related article :

Futures Trading Terminologies
What is Futures Trading?
What is Derivatives ?
What are Forward Contracts ?
Advantages & Disadvantages of Futures Trading ?
Guide to Options Trading
Long Call - Bullish Trading Strategies
Long Put
Short Call - Bearish Strategies
Sell Put - Bullish Strategies
Buy Straddle Option
Short Straddle Option
Synthetic Long Call
Synthetic Long Put
Synthetic Long Futures
Synthetic Long Futures

Synthetic Short Call

Bull Call Spread

Bull Put Spread

In case of any further explanation you can reach me on vipuls1979@gmail.com or tweet me  @vipuls1979

Disclaimer  :-

The Article is only for information purposes and Vipul Shah (https://investkiyakya.blogspot.com) is not providing any professional/investment advice through it. The article does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. https://investkiyakya.blogspot.com disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this article, including without limitation the implied warranties of merchantability and fitness for a particular purpose. https://investkiyakya.blogspot.com and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this guide. Use of this article is at the user’s own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. https://investkiyakya.blogspot.com does not warrant completeness or accuracy of any information published in this guide. All intellectual property rights emerging from this article are and shall remain with https://investkiyakya.blogspot.com. This article is for your personal use and you shall not resell, copy, or redistribute this article , or use it for any commercial purpose. All names and situations depicted in the article are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.

How to Budget Your Money with 40/30/30 Rule

Whether you are a parent with two kids or recent college graduate working your first job, 40/30/30 guideline can help you assess your budget. This approach often helps to understand the big picture of where the money is going.

Let us break your budget in three buckets (rather than the seemingly infinite categories of some traditional budgeting). It is designed to help you figure out how much you may want to allocate to each area every month, and can also help you determine the order in which your money can be allocated.

40/30/30 broken down

Fixed Costs

These are bills and expenses that dont vary much o monthly basis, like rent or loan payments, utilities and car payments. Also include subscriptions such as gym membership and DTH/Mobile/Internet accounts, in fixed cost because you are committed to payting them on a monthly basis.

When it comes to fixed cost, I would suggest that you aim to keep your monthly total not more than 40% of your take home pay.

Financial Goals

I would recommend keeping aside at least 30% of your take home pay towards important payments or contribution that will help you secure your financial foundation. I believe there are three essential goals everyone should strive for: savings for your goals, savings for retirement and building an emergency fund. But your financial goals can also include larger savings priorities, like a down payment on a new home or child’s education funding and lifestyle goal such as a vacation or a dream car.

Flexible Spending

Finally, consider budgeting not more than 30% of your take home pay towards flexible spending. There are day to day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies or entertainment.

I have included groceries in flexible spending because even though food is a necessity in your budget, how you spend on food can vary. Some days you would prefer to dine out and some days you prefer to make it yourself. It doesn’t really matter what you spend your money on each month in this category, as long as you are aware of your spending and not going over total flexible budget each month

One Note on Taxation

As you might have noticed the 40/30/30 guidelines applies only to take home pay. The deductions that are happening before the salary hitting your bank account is not considered. The deductions may be towards Provident Fund, Income Tax etc. While choosing to invest in retirement plans, equity linked tax savings mutual fund schemes you would save larger amount of taxes depending on Income Tax slab you belong to.

If you are just starting to put together a budget, the 40/30/30 guideline can serve as a useful benchmark for how to divide up your income.  When it comes down to it. Though, how you spend (and save) your money depends on your specific goals and lifestyle.

So be a smart and informed investor – check how much insurance do you need and why you should in invest in Mutual Funds versus ULIP after analyzing the above two you can invest money via sip in best 3 equity mutual funds in India for Retirement

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Bull Call Spread

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In case of any further explanation you can reach me on vipuls1979@gmail.com or tweet me  @vipuls1979

Disclaimer  :-

The Article is only for information purposes and Vipul Shah (https://investkiyakya.blogspot.com) is not providing any professional/investment advice through it. The article does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. https://investkiyakya.blogspot.com disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this article, including without limitation the implied warranties of merchantability and fitness for a particular purpose. https://investkiyakya.blogspot.com and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this guide. Use of this article is at the user’s own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. https://investkiyakya.blogspot.com does not warrant completeness or accuracy of any information published in this guide. All intellectual property rights emerging from this article are and shall remain with https://investkiyakya.blogspot.com. This article is for your personal use and you shall not resell, copy, or redistribute this article , or use it for any commercial purpose. All names and situations depicted in the article are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.