SIP Investments And Their Benefits For Investors

Investments are the best way to grow wealth and fulfil your future needs. As savings are never enough, money never grows when kept in your Bank Accounts and pockets. Increase it by investing in financial assets and classes, providing decent returns as savings. As your responsibilities increase, you need to plan a financially secure future.

A Systematic Investment Plan is a mode of Mutual Funds Investment for the long term. You invest periodically every month or quarter throughout the 10 to 15-year tenure. The fixed amount of money can be as low as Rs. 500. By this route, you invest in a time-bound manner without worrying about market dynamics. These benefit over the long term due to average costs and compounding.

Benefits

As you get ready for work or even decide to take a break from it, the investment plan is constantly working towards your goals and helping you keep your success in progress. If you are keen on investing, know these benefits:

Power of compounding

Regular investments in a SIP scheme lead to compounding. It means the investor gets more units when the scheme’s Net Asset Value is low and lesser units when it is high. You earn interest on your interest as it gets added to the original amount and is beneficial for long-term wealth creation.

Rupee cost averaging

Investing through Systematic Plans gives you the advantage of rupee cost averaging. It means you get more units when the scheme’s Net Asset Value is low and vice-versa. It brings down the average unit cost over the long term. Investing in Mutual Funds online has become smoother, thanks to the Mutual Fund app.

Flexibility

As an investor, you get the flexibility to choose the amount, duration and plan interval. You can also modify the amount, change the interval according to your needs, pause, or stop the investment. You do not strain your finances or compromise your needs by investing small amounts regularly.

Investment discipline

Investment through SIP Plans teaches the value of disciplined investing in an investor as they are committed to investing a specific amount for a fixed period which is essential in long-term wealth creation. There is no need to time the market or worry about the potential returns since you invest small amounts.

Power of starting early

The earlier one starts saving and investing regularly, the easier it is to achieve your goals. For instance, if you start investing Rs. 5,000 monthly at 25, a corpus of approximately Rs. 2.76 crore is generated at the time of retirement. If you wait five more years, till 30, the approximate corpus generated falls to Rs. 1.54 crore. There is a difference of Rs. 1.21 crore, the cost of delaying the plan.

Performance

The value of a Mutual Fund Investment depends on the performance of the securities held by the company. When the portfolio performs well, the investments grow and vice versa.

Steps To Actively Manage Your Mutual Fund Portfolio

Mutual Funds are investment vehicles that can assist you in meeting both your immediate and long-term financial goals. However, you cannot take advantage of compounding’s full potential until you put in the effort to manage your portfolio responsibly. When it comes to investing, successful people set off to a good start, maintain discipline, and finish strong while taking calculated risks.

When selecting assets for a Mutual Fund Portfolio, you get overwhelmed by the information freely available online. Investors actively prefer to delegate their capital management to a financial advisor. Though advisors are helpful and often irreplaceable partners in your financial journey, having at least a minimum of knowledge about them is preferable.

Active management

Once you have invested in an MF Portfolio, monitor how well it is performing. If your investment horizon exceeds one year, do not worry about the plan performance daily. However, it is a good habit to keep an eye on the development of your investment and be aware of its performance. The following are some steps to manage the portfolio actively:

Continue SIP

If you are investing through the Systematic Investment Plan, raise your investment while the market slumps. When the market is bearish, it presents an excellent opportunity for fund managers to purchase high-quality stocks at lower costs.

Portfolio rebalancing

Rebalancing in Mutual Fund Portfolio management refers to bringing it back in line with the asset allocation initially intended for it. Because of changes in the market state, the distribution of funds included within your portfolio will shift over time. You should analyse it regularly and compare it to market benchmarks and other industries.

Exit constant underperformers

Periodic reassessment can help you weed out chronically underperforming funds that are not contributing to the growth of your Mutual Fund Portfolio. Analyse past performance compared to that of a peer group and other benchmarks across rolling periods of one to ten years. However, if a fund consistently performs worse than its benchmark, consider selling it as soon as possible.

Fund Fact Sheets

A fund fact sheet enables investors to remain informed and updated on the most important aspects of their funds. These tidbits of information are ideal for beginner investors. It is a one to three-page document that provides insight into the fund’s investment objective, risk level, costs, past performance, and holdings details.

How to monitor?

Monitoring and assessing your Mutual Fund performance through Investment Banking apps is simple. Download it on your smartphone and get daily live updates of your portfolio performance. You can compare the funds quickly, receive timely notifications, investigate the comprehensive features of each fund, and more.

Conclusion

A robust allocation to Equity-Linked Investments can be beneficial to achieve long-term goals like retirement or children’s education. Similarly, Fixed-Income Funds might assist in accomplishing short-term goals.

Understanding Savings Account Tax Implications

Savings Account is a common financial product. The account allows you to park your earnings, reap attractive interest rates and easily access funds when required. You should open a Savings Account if you wish to grow your savings. You can choose to open an account at any leading bank or financial institution. Pay attention to the interest rates when opening the account.

A higher interest rate translates to higher interest income. Let us understand the connection between Savings Account interest rates and their tax implications.

Tax benefits and interest rates

Savings Account rates are calculated considering your closing balance at the end of the day. A higher deposit attracts a higher rate. Generally, an interest rate of 3.25% is offered on deposits up to Rs. 1 lakh. The interest rate hikes as the deposit amount exceed the given slab. Holding a higher account balance is always recommended to maximise your interest earnings. Besides, maintaining the minimum balance requirement contributes to your Savings Account.

Your contributions lead to an appreciation in your principal deposit, increasing your interest earnings.

How are Savings Account interest rates taxed?

Like every investment instrument, interest rates on Savings Account are taxable. When filling your Income Tax Returns, you should declare interest income from your online Bank Account under ‘income from other sources’. You get taxed as per the Income Tax slab rate you fall under. Note that different set of taxation rules apply to senior citizen holders.

There are a few tax deductions granted by the Indian government on your interest earnings. However, only Indian citizens are eligible to claim those.

How can you claim Savings Account tax deductions?

There are two ways to claim tax benefits online Saving Account opening: Section 80 TTA and Section 80 TTB.

Section 80 TTA

This was introduced during the Union Budget of 2013. The tax policy allows people to claim a tax deduction on their interest income. As per Section 80 TTA, you can claim deductions of Rs. 10,000 on the accumulated interest income from all your Savings Accounts. Individuals belonging to Hindu Undivided Family (HUF) and holding the Savings Account can claim this benefit.

Section 80 TTB

This was introduced during the Union Budget of 2018. The primary aim is to allow pensioners and senior citizens to earn more income by availing of the tax benefit. Here, you can claim a tax deduction of Rs. 50,000 on your interest income in a financial year. The tax benefit applies to all interest-generating investments like Saving Bank Account, Fixed Deposits, and Term Deposits. Anyone above the age of 60 years can claim this benefit.

Note: You can avail the mentioned tax deduction over and above Section 80C tax benefit.

Ways To Access Funds In Your Savings Account

Savings Account is a standard financial product that most banks and financial institutions offer. Park your savings here and earn profitable interest rates on your balance. Owing to its interest-generating abilities, Savings Account is considered a good investment instrument. A significant advantage of growing your savings is the ease of access. There is no lock-in period or tenure applicable to Savings Account.

You can access your funds anytime. Following are the ways to access funds in your Savings Account:

ATM withdrawals

The most common way is through ATM withdrawals. All Savings Account holders receive a Debit Card upon opening the account. You can insert it at any ATM to withdraw funds. As a security measure, these cards are inactive when you receive them. You need to activate them to make a transaction. You can easily activate them by setting a PIN at the ATM.

Generally, no charges are applicable to make ATM withdrawals. However, the bank may charge you a basic fee if you withdraw funds from another bank’s ATM. There is also a limit to the funds you can withdraw from your account daily. Reach out to your bank to understand the details.

Bank-to-bank transfer

If your close relative has a personal emergency and needs funds, you can help them out. You need not visit the bank. Just withdraw funds and help your family member. You could also make a direct bank-to-bank transfer. Make sure you activate online services when opting for an online Saving Account opening. You require the beneficiary details to make an instant bank transfer.

Ask them for their Bank Account number, branch name, and IFSC code. Feed them correctly on the bank portal. You can transfer funds and help your relative within minutes.

Direct debit

Direct debit works like an online transaction. This is generally used to make repayments and investments. You can use your online Bank Account to pay utility bills. Give standing instructions to your bank to make periodic payments like utility bills, Insurance premiums, and Loans. The bank directly debits the amount from the account. The automatic payment feature of the Savings Account helps you stay ahead of your bill due dates.

Cashier’s cheque

Another way to access funds is by writing a cheque. You could either write a cheque to yourself or another account holder. You need to deposit the cheque in the bank to receive funds. Make a note of the bank timings before visiting it to deposit your cheque. Alternatively, you can withdraw the cheque at the nearest ATM, provided they have a drop box.

Why Opening NRI Bank Accounts Is Beneficial?

Banking services have evolved. They offer different services besides traditional Savings and Current Accounts. Today, you can open Online, Salary, Special Accounts for women, minors, senior citizens, and so forth. Moreover, all your needs are addressed without stepping foot in the bank. Recognising that more Indians are considering foreign prospects, banks also offer an NRI Account.

These accounts enable non-resident Indians to conduct their transactions from anywhere. But before you open NRI Savings Account, let us understand its benefits.

Advantages

There are three main types of NRI Account: Non-Resident Rupee or NRE Account, Non-Resident Ordinary or NRO accounts, and Foreign Currency Non-Resident or FCNR Account. Here are its benefits:

Repatriation

The best part about NRI Savings Account is the repatriation advantage. You can quickly repatriate and move funds from both NRE and NRO accounts. You can also repatriate the principal sum parked and the interest earned on the deposits from your accounts while you are abroad. While the funds in NRE are freely and fully repatriable, you can repatriate funds from the NRO Account after paying the applicable taxes.

Convenience

These accounts make your life extremely convenient. Most banks allow you to open online accounts. You can be based in any foreign country and open your account remotely simply by filling out the application form and attaching the necessary documents. You can use Net Banking to open this account and avail all the benefits that go with NRI Accounts. Some Indian banks may require you to courier the account opening form with the necessary documents.

Tax Benefits

Before you finalise your NRI service, like NRE, NRO, or FCNR Account, you should read the associated tax benefits and charges. This lets you select the correct account. In India, the interest you earn on both NRE Account and NRE Fixed Deposits is tax-free.

However, the savings parked in the NRO Account and NRO FD are subject to Tax Deduction at Source under the Income Tax laws. Also, you can quickly transfer funds from the NRO to NRE after paying the applicable taxes.

Minimal balance maintenance

Most banks in India have reduced the minimum balance requirement to a massive extent for such accounts. They require their account holders to maintain as low as INR 10,000 as a minimum balance. This has contributed to the popularity of NRE and NRO Accounts among customers.

FCNR deposits

NRI Account holders can also consider FCNR Deposit. This is ideal for customers who want to save their earnings in foreign currencies and earn interest. It is especially beneficial if you make it in a currency higher in value than INR, as it promotes higher savings. Moreover, the interest you earn on such deposits is tax-free in India.

Before you open NRI Account Online, it is important to research the banks offering this service. While opening an account in most banks may be possible, it is better to consider their reputation and choose a nationalised bank. You may also assign a POA to maintain your account on your behalf.

Myths Busted About Online Bank Accounts

 

Digital Banking is considered necessary today. It has become widely popular owing to changing circumstances. Many have started using Digital Banking facilities as a necessity. Most banks realise the need for an online presence. Thus, they are offering Online Banking facilities to customers.

The online Saving Account opening is easy and takes a few minutes. However, many who need it in the current scenario hold back due to varied concerns. This happens due to a lack of awareness and familiarity with the concept. It stops them from taking the necessary steps despite its benefits. Let us break those myths and understand the concept better:

Lacks assistance

It is the common reason that holds back customers from this. Online Banking is easy, and you can operate it without any issues. However, the concern that gets highlighted is that they lack personal touch and guidance. This is a myth, as several online accounts have customer support available to help you with any issue round-the-clock. This assistance is in the form of chat, calls, and home visits.

Unsafe

This is another aspect that stops people from considering an online Bank Account. Although the internet is a tricky place, banks take safety concerns seriously. There are layers of security that every bank offers online. You need to verify your identity to complete any procedure. Options like two-step verification, codes, account details, etc., are provided for safety. 

Meant for tech-savvy people

Banks understand the inclusion of people with different perceptions. Online Banking caters to people from rural areas as well. The user interface and banking processes are simple to understand. Anybody with minimum technical knowledge can quickly grasp it. Hence, you can easily carry out all banking services online without being tech-savvy. 

Limits banking facilities

There is a notion that Digital Banking only means transferring money and paying bills. However, thanks to the Banking app, many options are now viable. You can do a range of activities without visiting the bank. Checking balance statement, opening an account, monitoring Loans, and more gets done online. 

Banking online is an essential step to take. Even banks encourage customers to avail themselves of all the benefits of an online Savings Account. You can carry out banking activities anytime, anywhere. It helps speed up banking activities. You can learn about its fundamentals from banks for clear understanding and ease. These settle quickly with efforts towards adopting the technology.

Preventive Measures To Consider When Opening A Bank Account

With the online revolution and increased smartphone usage, online accounts have become a norm. They are highly convenient if you cannot travel physically to open an account. You save on travel expenses, stress, and fatigue.

Now, you can open a Bank Account online with a physical branch or go to digital banks. The former provides easy opening an account, while the latter offers total online solutions. Whatever you opt for, safety is a concern. Internet Banking has become the primary target for stealing sensitive information. It is necessary to take security measures to tackle them. Here are some of the preventive measures to consider:

Create strong passwords

You need to sign up on the bank website to open the account. For this, you already have the customer ID and password given. You only need to go online and change the provided password. This is crucial whenever you log in each time you do Net or Mobile Banking. Hence, make sure you devise a strong passcode. Avoid using generic numbers, family names, birthdates, etc. Instead, opt for a complex combination of numbers, letters, and symbols.

Check for software updates

The device you use should be updated with the latest software. These are often required to fix bugs and other loopholes. Check whether it is the latest version before opening Savings Account. This way, you avoid any lagging or bugs.

Check the authenticity of websites

You receive several promotional emails for opening an account. These are advertising gigs stating the special offers and facilities provided by banks. However, they involve fraudsters as well. Never click on the provided links for opening the account. Always type the URL manually when doing Net Banking.

Secure data connections

The internet or broadband connection you use affects security too. It is crucial to use trusted and protected networks. Only opt for personal servers. Public WiFis in cafes, stations, outlets, etc., operate in a shared network. These are easy for hackers to use. It is best to avoid them when you open an account on a Banking app or a portal.

Understand bank's security measures

Banks inherently consider premium security steps to ensure your data stays protected. They secure their HTTPS sites, which you check by seeing the lock symbol on the website address. They encrypt your information to avoid stealing information. It is best to examine these minute details while opening the account.  

Use authentic anti-virus programs

These measures fail if your browser and computer are not secured. Install the latest virus and malware prevention software. It blocks out any fraudulent attacks on your device. It also alerts you when you open an unsecured link.