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Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. , its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
The best time to start investing is today You are different and so are your needs Why your returns are not the same as the market’s return? Understanding Taxation in Mutual Fund Investments
Universities globally are slowly opening their doors once again to foreign students. As more students get vaccinated, it’s also easier for them to board the next flight out. However, many families’ savings have been ravaged due to the COVID-19 pandemic and there is less money to be spent on an expensive foreign education. But there are ways in which you can reduce your financial burden. Apply for instalment option on fees

Earlier, foreign universities demanded tuition fees upfront for the full year. “Now, some foreign universities are allowing deferred payment options. So, you can pay the fees per semester or for the modules selected in the semester,” says Naveen Chopra, Founder & Chairman of TCGlobal. Some universities allow you to pay the tuition fees in instalments. This is beyond the regular scholarship being offered to eligible students. This eases the burden of tuition fees if parents are fully financing the course. Foreign universities extend such financial assistance to students’ families, if parents have lost jobs, face medical emergency, or suffer pay cuts, etc. Such families need to submit proof that their family is affected due to COVID-19.

“We advise those unable to afford the foreign education fees due to the impact of COVID-19 on the family, to defer the admission. Do not put an additional burden on your parents and make them sell the property, gold jewellery, etc.

Fast track your studies
Kanwar Singh, 24, of Jaipur, has enrolled for a two-year Masters in Analytics program from a university in New Jersey, United States of America (USA). The total estimated cost of a two-year program is Rs 90 lakh. This includes tuition fees of the university, living expenses, travel costs, etc. Aside from his parents’ savings, he took an education loan of Rs 55 lakh at 9.8 per cent interest. He has 39 credits to be completed within two years. But he plans to complete the program within three semesters by enrolling for additional credits every semester. So, he will opt for 13 credits every semester, instead of 9-10 credits. Fast tracking his course brings down his education fees to roughly Rs 55 lakh, down from Rs 70 lakh. “I can even join the workforce early after completing the program,” says Singh.

Tap alumni network for financial aid
Pune-based Aniket Rastogi, 27, is headed for London in September. His estimated tuition fee is Rs 20 lakh and living expenses are Rs 13 lakh. He has secured a scholarship of Rs 3 lakh from the university. His parents had saved for the foreign education and had planned to finance the full expenses. Unfortunately in April 2021, his family got affected due to COVID. Most of the savings for foreign education got exhausted in paying off hospital expenses. “Post the COVID treatment, I thought my dream of foreign education was shattered,” says Rastogi. Rastogi approached his university for help. The university connected him to the alumni network for financial aid. The alumni evaluated the academic grades, past internships, work experiences, and saw his family’s COVID-19 history. He managed to raise around Rs 10 lakh from the alumni network. “Some universities have made funds available to students whose families were affected due to COVID-19. Parents should inquire about special financial aid in such circumstances.  These universities have kept the fund aside by raising from the alumni association to support the students,” says Dhaval Mehta, CEO & Founder of TNI Career Counselling. He adds that if you write to the university with your financial constraint, the authorities support students and parents in every possible way.

Care while selecting a university and applying for a loan
Select universities with care. “Measure the education quality,” says Rohan Ganeriwala, Co-Founder & Director of Collegify. He adds that you must avoid falling into fake university traps and spoil your children’s future.
Have an emergency fund
One of the fall-outs of any big financial crisis is to deal with sudden risks e.g. job loss, loss of income in business, unexpected large expenses, etc. Even if these risks do not materialize, the prospect of having to face these risks is a frightening one for most middle income households. The very purpose of an emergency fund is to enable you to face these risks without having to liquidate your long term assets. Financial planners recommend that you should have an emergency fund that can meet 6 to 12 months of your regular monthly expenses, should you face a sudden exigency. Debt mutual fund schemes like overnight funds, liquid funds and ultra-short duration funds are suitable instruments for parking your emergency funds.

Invest in financial assets
Physical assets like land, real estate, gold jewellery, etc. still hold a lot of allure for average Indian households. Though the proportion of physical assets in average household savings have come down over the last 10 years (source: RBI), many Indian households have a large percentage of their net worth still invested in physical assets. Physical assets can be very difficult to liquidate during a major crisis and can often lead to distress sale in extreme situations. Further, sale of physical assets often require physical interactions and a lot of time to complete. Financial assets, on the other hand, are much more liquid. Most financial transactions can be carried out online. The COVID-19 crisis has shown that financial assets are much more useful in extreme situations.

Do not panic
Volatility can be very stressful emotionally. No one likes to see investments made with their hard earned money go down. Volatility can be extreme as we saw during the first wave of COVID-19 pandemic and before that during the Global Financial Crisis of 2008. But if you panic and sell, you will make a permanent loss. Being patient is of utmost importance during a crisis. Asset allocation is your best friend in uncertain conditions

There is low or even negative correlation between performances of different asset classes in different market conditions. Diversifying across different asset classes limit downside risk and provides stability to your portfolio across investment cycles.

COVID-19 has been one of the worst crises that we have seen in our lifetimes. This is not going to be the last crisis that we will ever face. But lessons learnt from this crisis will help us be better prepared to face future crises and emerge stronger from it. The lessons learnt from this crisis are certainly not new, since we have discussed these in our blog several times over the last few years, but a crisis of the magnitude of COVID-19 tells us, how important these basic lessons are. You can also discuss with your financial advisor how to be better prepared for the future.

Increasing participation of retail investors in mutual funds has led to a steep growth in its size. A considerable section of the fresh inflows came from fresh investors, many of whom lack fundamental understanding of the commonly-used mutual fund terms. Let’s understand 5 commonly used mutual fund terms that new mutual fund investors should be aware about:

Net Asset Value (NAV)
NAV refers to the per unit value of a mutual fund scheme. It is obtained by dividing AUM (Asset Under Management) with total units outstanding on a specific date. AUM refers to the market value of securities like shares, cash, derivatives, bonds, gold, etc held by the mutual fund. 

Dividend & Growth Option
Dividend option allows one to avail dividend as and when they are declared by the mutual funds. Many investors opt for this option due to the misconception that mutual fund dividends are an additional source of income. However, what they fail to understand is such declared dividends are paid out from their fund’s own AUM. As an outcome, NAV of the dividend declaring mutual fund falls by the amount of dividend paid. Moreover, the dividend amount is calculated as per the funds’ face value and not based on their NAVs.

Systematic Investment Plan (SIP)
New mutual fund investors mostly consider SIP to be a separate investment product. However, SIP is an automated mode of investment where a predetermined amount is automatically deducted from the investor’s bank account at a pre-set date for purchasing units in the selected mutual fund. Automated investment mode allows regular investment and saves investors from being influenced by twin emotions of greed and fear. Moreover, regular investments in mutual funds through SIP also instil financial discipline and ensure rupee cost averaging during bearish market phases/market corrections.

Expense Ratio
Expense ratio refers to the proportion of mutual fund’s daily net assets utilized for meeting its annual operating expenses. Annual operating expenses include various costs incurred for fund management, advertising, administration and commissions to distributors and agents. As fund houses do not need to pay any commission to distributors selling the direct plan, operating expenses of direct plans can be up to 1% lower than their regular counterparts. The savings made in operating expenses remain invested in direct plans, which allow them to generate much higher returns over the long term due to the power of compounding.

Benchmark Index
Fund houses make use of particular indices as a reference point to measure mutual funds’ performance. For instance, mid cap funds might use the NSE midcap index as a benchmark while large cap funds might use SENSEX, NIFTY50 or BSE 100 indices. A fund outperforming its benchmark index by a wide margin can be considered as a better performing fund.

Early retirement is the personal goal I hear of the most these days. Among the young who are in their 30s, working for another 30 years seems daunting. It is now established that one won’t work for the same employer all life; but not willing to work at all is relatively new. But quite fair I would think.

Work was not all consuming like it is for the youngsters these days. There are so many who routinely clock in 80-hour work weeks. Wait a minute,that amounts to working literally every waking hour. It is little wonder that they realise this cannot be sustained.

It is cruel that there are several professions from the high brow consulting and private equity, to professionally demanding medicine, that make long hours of work a norm. But even simpler professions like call centres, logistics management, selling and customer care have now begun to seek long hours. Then there are those that work across time zones in technology and software, music and composition, writing and content, media and filmmaking with scant regard for the clock and the list goes on. There seems to be no escape from long work days that many times spill into the weekend.

What young earners have realised is that complaining about work hours is futile when the job is interesting, peers are engaging and when the money is good. They, therefore, see their careers as front-ended with opportunity, money, growth and status. What their parents achieved in 35 long years of work, they realistically hope to achieve in 15 years. Early retirement then makes sense as not just the end of the slog, but as a well earned pivot that enables them to pursue what they wish. And seek the much elusive balance between work and life.

It is also important to see how stressful growing up itself has been for this generation brought up by helicopter parents. Forced into learning music, sports, accumulating social work hours, amidst perennially preparing for competitive exams and top scores, this generation has primed itself for slog, even as it desires to break off and follow the heart.

The second profession is a Marriage that many in their 30s carry in their heart. Many do not want to acquire assets, ‘settle’ into it, or have children, before they are ready to focus on life as separate from work. In that utopia they would live in the quiet of the woods, sleep to the sound of the winds, eat food off their gardens and live a simple life. How does one prepare for such a transition? First, building a corpus to fall back on is crucial. The corpus must be large enough to generate an income adequate to take care of the basics. There must be enough money to pay for rent, food, utilities and education and perhaps leave a small surplus for indulgences. This corpus must grow over the years, ideally at a rate that beats inflation.

Second, arriving at this corpus is not a function of just earnings, savings and investments. It is about what the new lifestyle would be. Is there a break from comforts, expenses, burdens, expectations of the present? Without a clear understanding of how different that would be, quitting a job can be risky. What earlier retirees saw as lifestyle compromise after retirement, the young are seeing as lifestyle rework.

Third, retirement needs to be about pursuing a different purpose in life. Else it would be boring, hedonistic and wasteful. Without making a choice about what it is one likes to pursue to meaningfully engage with the world, or the community one lives in, to contribute, to divert one’s energies into, early retirement can be harmful to mental and physical health. One cannot blame burning out as the excuse to do nothing for years.

Fourth, finding an alternative earning career is important. One could choose to write, teach math or music, become a farmer, work as a tourist guide, or devote oneself to a cause one feels strongly about. But all these pursuits must result in some income that can cover some expenses. That will reduce the stress on the corpus.

Fifth, one needs to be mentally prepared for the change one is romancing about. Living on a farm means getting comfortable with other life forms that will live with you; being willing to take what nature offers as heat, rains, and such unpredictable living conditions; being able to put up with lower levels of infrastructural comfort; being willing to cook each and every meal every day; and so on. There is enough to dishearten the weak in many of these alternative propositions.

Sixth, one must be willing to consider how these lifestyle changes will impact what one does for entertainment, social interaction, schooling, healthcare, and such everyday decisions that urban living allows one to take for granted. Many desire travel as their priority. Travel calls for good levels of physical fitness; willingness to put up with physical discomforts of travel; Comfort with new environments, languages and food; and so on.

Seventh, one should be open minded about calling off the experiment and returning to the mainstream if that is needed. Many like to take what they call a ‘break’ so they are able to experiment with an alternative and then make a choice. The early days of romanticising work from home and enjoying freshly cooked homefare with closed ones, has given way to frustration about being trapped indoors in these last 18 months. Novelty wears off faster than we imagine.

Eighth, retiring early and beginning a new life should not mean throwing away the fundamental principles of personal finance. One will still need wealth management and asset allocation; one will have to be adequately insured; one must monitor how the assets are performing; and one must actively ensure that the money is working hard even if one has retired to a more sedentary existence. The number of years one must fight inflation means the assets must grow in value—both from investment in growth avenues and regular accretion and accumulation of the corpus.

There is no harm in contemplating early retirement. But thinking through the elements of both financing it and sustaining it are quite underestimated it would seem.
Please mark all your queries / responses to
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. , its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.