Mutual Fund Archives

How to invest in index funds for retirement planning

Advait had just turned 23 when he began working with a large IT firm, which paid him a handsome salary. While his colleagues spent almost all their income on upgrading their lifestyles, travelling and partying, Advait was focused on setting aside and investing a portion of his salary each month. He had picked up this habit from his parents, who were both private sector employees – given the lack of a pension, they had begun allocating funds to their retirement corpus from the time Advait was young. And this helped him realise the importance of planning and compound interest when investing for financial goals such as secure retirement.

You may wonder why someone aged 23 should be so fiscally prudent, especially regarding retirement, which may appear so far off. As Pietros Maneos once said, “A penny saved is just a penny earned, unless of course you double that penny every day for 30 days, which is then $5,368,709.12.”

Retirement planning is a journey that must be marked by financial foresight, smart investment decisions, and a clear vision of a comfortable and secure future. You cannot invest all your money in riskier assets like equities in the quest for returns, and neither should you park all your funds in a fixed deposit, given the rising inflation and the comparatively low interest rates, which will end up eroding your wealth in the longer term. In investing, one strategy has gained considerable attention for its potential to help individuals achieve their retirement goals with lower costs and less stress, and that is index funds. Let us understand why index funds make an excellent choice for retirement planning.

What are index funds?

Index funds are a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific market index, such as the Nifty 50. These funds are passively managed, meaning they do not rely on active stock selection by a portfolio manager. Instead, they mirror the holdings and weightings of the chosen index. The key principle behind index funds is simplicity – rather than attempting to beat the market, they strive to match its performance. This approach has several notable advantages that make index funds an attractive option for retirement planning.

Read: 7 things you must know about index fund

Index funds in retirement planning

First and foremost, index funds are known for their cost-efficiency. Since they do not require the expertise of active fund managers or extensive research, they typically have lower management fees and expense ratios, translating to more of your money working for you over time. For financial goals like retirement, which are usually a decade or more down the line, the lower costs depicted by index funds can be an enormous bonus since high fees can eat away at your corpus. Secondly, when you invest in index funds, your portfolio gets diversified automatically, given the broad market or segment exposure offered by benchmarks like Nifty 50. This diversification helps spread risk and reduces the impact of poor-performing individual investments.

Another advantage of index funds is their consistency. The objective of index funds is to track an index’s performance, and this consistency can be particularly reassuring for retirement planning, as it minimises the uncertainty associated with actively managed funds. The passive nature of index funds is also a boon for retirement funds because managing investments can be stressful, especially as you near retirement. Index funds require less active decision-making, reducing the emotional toll often associated with market volatility. A key aspect also revolves around the historic performance of many index funds, which have outperformed actively managed funds, especially large cap funds, over the long term, making them a reliable choice for building wealth for retirement.

How to invest in index funds

Investing in index funds for your retirement plan can be done simply and efficiently by –

Defining your retirement goals: Begin by determining your retirement goals, which involve setting the age at which you plan to retire, envisioning your desired retirement lifestyle, and estimating the income you will require during retirement.
Evaluating risk tolerance: Take into account your risk tolerance, which may be influenced by factors such as your age, financial circumstances, and comfort level with market fluctuations. Index funds offer a range of options, from conservative bond indexes to more aggressive stock indexes, enabling you to align your investments with your risk tolerance.
Selecting suitable funds: Conduct thorough research and choose index funds that best align with your retirement goals and risk tolerance. Look for funds with low expense ratios and a track record of effectively tracking their respective indexes.
Opening an investment account: Open an investment account with a brokerage or financial institution. Many online platforms provide easy access to a wide variety of index funds.
Emphasising diversification: While index funds inherently offer diversification, you can further diversify your portfolio by investing in multiple index funds that represent different asset classes, such as stocks, bonds, and international markets.
Establishing automatic debits: Consistent contributions over time can help your retirement savings grow steadily. Set up automatic transfers to your investment account to ensure that you consistently add to your portfolio and benefit from the power of compounding interest.
Rebalancing when necessary: Regularly review your portfolio and rebalance it, if required, to maintain your desired asset allocation. Rebalancing ensures that your investments stay in line with your long-term goals.

Retirement planning is a journey that requires careful consideration, sound strategies, and disciplined investing, and index funds have emerged as a powerful tool. By embracing index funds and aligning them with your retirement goals, you can enhance the likelihood of achieving the comfortable and financially stable retirement you deserve. Remember, the key to successful retirement planning is starting early, staying committed, and making informed investment decisions along the way.

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Attention MF investors: Update your nomination details or opt out of nomination by Sept 30, 2023

By Team Wealthzi

This is to inform you that, in accordance with SEBI Circulars #SEBI/HO/IMD/IMD–II DOF3/P/CIR/2022/82 dated June 15, 2022, and SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/47 dated March 28, 2023, all existing individual mutual fund unit holders who have not yet registered their nomination or opted out of nomination must do so before September 30, 2023. If they fail to do so, their folios will be frozen for any debits, including redemption.

What is nomination?

Nomination is a process by which you appoint a person to receive your mutual fund investments in the event of your death. This ensures that your loved ones have access to your financial assets quickly and easily, without having to go through a lengthy legal process.

How to update your nomination details or opt out of nomination

You can update your nomination details or opt out of nomination online using the following links:

To use the online facility, you must have your PAN and either email or mobile number registered with your mutual fund folio. If your folio has joint holders, the contact details available in the KYC records will be used for all joint holders, and OTP validation from all holders is mandatory to update the details online.

If you are unable to update your nomination details or opt out of nomination online, you can contact your mutual fund company for assistance.

Why is it important to update your nomination details or opt out of nomination?

By updating your nomination details or opting out of nomination, you can ensure that your loved ones have access to your mutual fund investments in the event of your death. This will help them to avoid financial hardship and ensure that your financial legacy is preserved.

We urge all existing individual mutual fund unit holders to update their nomination details or opt out of nomination before September 30, 2023.

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6 compelling reasons to start investing for retirement now

Did you know that 86% of Indians above the age of 50 years regretted not starting early to save for their retirement, according to the India Retirement Index Study (IRIS) conducted by Kantar for Max Life Insurance Company?

If you don’t want to regret it, then it is essential to start saving and investing for your retirement at the earliest.

However, we understand that it is easier said than done. Moreover, when you are young, retirement is the last thing on your mind.

In this article, we will look at some reasons why we should invest for our retirement as soon as possible.

Benefit from the compounding effect

When you start investing for your retirement, you can get the full benefits of the power of compounding. Compound interest is nothing but the interest you get on the interest you earned on your initial amount from previous periods.

Time is the most crucial element to gain the complete benefit of compounding. This is because the longer you stay invested, the higher the impact of compound interest on your initial investment will be. So even if you invested a higher amount at a later stage, you might still accumulate a lower amount than a person who started investing earlier than you, even if it was a smaller amount.

For instance, let us consider the example of two friends, Priya and Riya. Both of them started working on the same day. However, Priya started to invest from the first month with ₹5000 per month, but Riya started investing after 10 years with ₹ 10,000 per month.

So, after 20 years from their first paycheck, Priya and Riya had invested ₹ 12 lakhs each.

However, if we consider an annual average return rate of 12%, then Priya would have accumulated ₹ 50 lakhs while Riya’s investment value would be ₹23.23 lakhs. That is almost less than half of Priya’s accumulated amount.

That’s the power of compound interest.

Fewer obligations

When you are younger, you have fewer obligations. During this time, you might not have a dependent spouse, children, or elderly parents who are financially dependent on you. If you are not yet a parent, you might not have to think about the children’s education and other related expenses. As a result, you can save a higher amount towards your retirement.

In your 40s, although your earnings power is higher than in your 20s, you will have many responsibilities, such as paying home loan EMI, children’s educational expenses and saving money for future education. So, the percentage of your income you can earmark your retirement will decrease.

Take higher risk and reap higher rewards

When you are young, you can take higher risks. This is because investing in risky asset classes such as equities requires a longer time frame. Equity investments have the potential to give higher returns than other asset classes over the long term. When you start investing early for retirement, you have the bandwidth to take higher risks and invest in equities, which can help you reap higher returns over the long term. As we have already seen the power of compounding, you can accumulate a larger retirement corpus by investing in equities for the long term.

Read: How to invest in mutual funds for your retirement

Inflation

Inflation is a silent killer that diminishes our purchasing power. The amount of items and services that we can buy with a certain amount today will not remain the same after 10 or 20 years. You will need more money to buy the same amount of items and services after a few years.

For instance, the value of Rs. 1 lakh will go down to ₹29,000 in 20 years, even considering an average inflation rate of 6%.

So, assuming that your current monthly expense is ₹ 25,000, then you will need ₹33,700 in five years and ₹.2.57 lakhs in 4 years to buy the same amount of goods and services.

The only way to ensure that your savings don’t outrun your expenses during your retirement life is to start investing early and ensure that your investments are growing at a higher rate than inflation. Again, equity as an asset class has historically given higher returns than the inflation rate.

Increase in life expectancy

According to UN Estimates, India’s expectancy will hit 81.96 in 2100. To put this into context, India’s life expectancy in 2022 was 70.19, and it was 35.21 in 1950.

This means the average number of years a person will live after retirement will increase. As a result, you will need more money to live out your post-retired life.

For instance, if you consider your life expectancy to be 80. In this scenario, you will need Rs.2.25 crores for 20 years post-retirement. We are considering a present earnings of ₹ 40,000, a basic monthly expense of ₹ 25,000, and the present age as 35.

However, when the life expectancy goes up to 90 years, you need ₹3.17 crores to fund your expenses after retirement. It is important to note that we are considering that your money after your retirement will grow at 7.5% every year. We are assuming an inflation rate of 6%.

So, we have seen that you will need to accumulate more money with increased life expectancy.

Increase in healthcare costs

Did you know that the medical inflation in India is the highest in Asia? India’s medical inflation was recorded at 14% in 2021. Medical inflation includes the cost of hospitalisation, medicines, consultation charges, and lab tests. This means you have to pay more to get healthcare-related products and services.

We are all aware that medical expenses are most likely to form a bulk of monthly expenses after retirement. Hence, even if your other expenses go down, expenses regarding medicines and treatments might go up. As a result, you need to start investing early to take care of your post-retirement expenses.

Conclusion

In this current scenario, retirement is a non-negotiable financial goal. With the rising costs and the changing scenarios, it has become imperative to start investing early for retirement.

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7 things you must know about index fund

Are you becoming more interested in investing in index funds and fulfilling your goals? As of July 31, 2023, the total Assets Under Management (AUM) under index funds stood at Rs.1.8 lakh crore in India up from Rs. 94,589.50 crore in July 31, 2022 i.e. almost 90% up in one year.

So, why are investors getting hooked on index funds? Let’s find out.

Ease of understanding

Picking the right mutual fund is crucial for achieving investment returns. However, everyone only has a little time and know-how of the funds to select the right fund. Here comes index funds, which mirror specific market indices and invest in the same underlying assets as the market index and in the same proportion. This helps the investors easily acquire knowledge of the underlying assets and helps in tracking the fund’s performance by comparing it with the market index itself.

Lesser expenses

The fund managers of index funds do not have to pick the underlying securities, such as stocks or bonds, for the fund, nor do they have to reallocate the assets from time to time. Due to this reason, the expense ratio of index funds is lower than actively managed funds, where the fund manager has all the responsibilities and rights to choose the underlying assets and change them according to market conditions.

Correlated returns

Since the index funds replicate the market index it follows, the returns of the fund are positively correlated with the movement of the index. For instance, suppose an index fund mirrors the Nifty 50, and the index rose by 10% in the month. Look at the Nifty 50-linked index fund. You will find that the price of one unit of the mutual fund, i.e., Net Asset Value (NAV) of the fund, had also increased by around 10% in the same period. This makes tracking the performance of the funds easier for investors.

No fund manager’s bias

Fund managers decide the underlying assets of any mutual fund except for index funds. Here, the fund manager must maintain the exact ratio of each underlying security as per the benchmark index. For instance, if an index fund is linked to the Nifty 50, then the fund manager has to invest in the same fifty stocks that are in the Nifty 50 index. Moreover, the ratio of each stock has to be the same in the fund as in the index. This leads to no fund manager’s bias, which helps investors get returns similar to the index.

Index funds’ investment strategy

Most of the mutual funds try to outperform the benchmark index they track. However, the index funds investment strategy is not to beat the benchmark but rather to replicate it. This makes the index funds suitable for investors looking for returns similar to the index.

Tracking error

Every mutual fund has a benchmark index that is used to measure the fund’s performance. In actively managed funds, the fund manager aims to beat the returns the benchmark indices offer.

However, the index fund aims to match the benchmark’s returns. The difference between the fund’s and benchmark’s returns is called the tracking error. We can say that the index fund with a low tracking error has done better at replicating the underlying index than an index fund with a higher tracking error.

Different types of index funds

Index funds can be categorised based on the type of the underlying benchmark index. There are:

Broad market index funds are linked to broader indices such as Nifty 50 and S&P 500.

Market capitalisation index funds are linked to indices comprised of companies’ stocks falling under certain market capitalisation.

Smart Beta Index Funds are linked to indices that follow certain factors or investment strategies. There are also thematic index funds linked to indices with specific investment themes and strategies.

Sector-based index funds are linked to indices with stocks of any particular sector, for instance, Nifty IT or Nifty Bank.

Debt Index Funds are linked to bond indices or any other fixed-income indices.

Commodity Index funds are linked to indices having commodities in them, such as the Gold Index.

Wrapping up

Index funds have emerged as a powerful tool for achieving financial goals. Their simplicity, low expenses, and ability to deliver correlated returns with benchmark indices make them popular among investors.

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How to analyse the performance of a fund?

Before investing in a mutual fund, it is important to analyse the performance of the fund. Most of us simply look at the returns of mutual funds and invest as per our friend’s suggestions.

However, there are better ways to analyse the performance of a fund. In this article, we will discuss some key parameters that can help us analyse a mutual fund.

Check the Fund’s Rolling Returns

Compounded Annual Growth Rate (CAGR) is the most common type of return that is used to measure the fund’s performance over a specific period. However, CAGR shows the fund’s performance as of a specific date. It does not show the performance of the fund during the entire period.

On the other hand, rolling returns show the scheme’s annualised returns taken for the specific rolling returns period, e.g., one year over a specific period, say 10 years. In this case, the fund’s rolling returns will consider the one-year return the fund gave daily during these 10 years.

The rolling returns data gives us a better picture of the fund’s consistency and how the fund has performed over time.

Compare The Performance of an Actively-Managed Mutual Fund With Its Benchmark

As investors, if we are investing in an actively-managed mutual fund that a fund manager manages, we will expect the fund to provide higher returns than the benchmark index.

The benchmark index is the broader market index used to judge the fund’s performance. Depending on the type of mutual fund, every mutual fund has a specific benchmark index.

For example, Nifty 50 can be a benchmark index for large cap funds. If a fund gives higher returns than the benchmark index, we can say that it has performed better than its benchmark.

So, when analysing two funds of the same category, if Fund A has beaten its benchmark by a higher degree than Fund B, we can say that Fund A has performed better than Fund B.

Check the Fund’s Consistency

The second way to analyse the performance of a fund is to check the returns consistency of the fund. To do this, we can check the fund’s performance during various time periods and business cycles.

It is easier for a fund to give good returns during a market rally. However, we can see the fund’s real mettle during tough periods when the markets are trending lower. If the fund has consistently beaten its benchmark and peers over the long term, say ten years or more when the market was trending downwards, it is a better performer than other funds.

Conduct Peer-to-Peer Comparisons

In addition to comparing the fund’s performance against its benchmark, we can check its returns against its peers. Here, a large cap fund is compared against other large cap funds.

For instance, a fund might have beaten the benchmark by 1%, but if other funds have beaten the same benchmark by more than 1%, then the fund we are analysing has performed poorly compared to its peers.

Check Sharpe Ratio or Risk-adjusted Returns

We know that every mutual fund carries risk, although the risk of the funds will depend on the fund category. Typically, debt funds carry lower risks than equity funds in the short run.

A high return generally comes on the back of high risks. So, we expect a fund to take a high risk to generate high returns.

However, we need to see if the fund delivers high returns for every extra unit of risk taken. This shows if the fund can handle the risk they have taken in a much more effective way.

The Sharpe Ratio helps us check if the fund is giving higher returns for every extra unit of risk.

A higher Sharpe ratio indicates a better risk-adjusted return. It means the fund is giving higher returns relative to its risk than other mutual funds, so when comparing two mutual funds, the fund with the higher Sharpe ratio is the better fund.

When analysing a fund’s performance, it’s essential to consider these various factors that can provide insights into its past, present, and potential future performance.

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7 simple ways to beat investment FOMO

Have you ever felt regret or anxiety about missing out on a potentially profitable investment opportunity? We can call it FOMO (fear of missing out) in investing.

It is a very common thing and happens with a lot of us.

However, it is essential to keep the FOMO from getting the best of us. FOMO can lead us to hasty investment decisions, such as buying a stock or a mutual fund without research which can impact us negatively.

So, managing your FOMO and taking rational investment decision is essential.

Let’s see how we can keep FOMO at bay.

Break free from the herd

We all behave differently under different circumstances. Take a moment to reflect on what makes you feel guilty about not investing in the popular option. Do you feel like you lost the chance of gaining big bucks, or do you feel alienated from others?

If you feel the same emotions when you see your friends getting married or going on foreign vacations, the real reason might be envy or your innate wish to fit in.

Many of us want to feel like we are a part of a group. This is nothing but herd mentality. True, this mentality was important when humans were hunters and gatherers, but it can be detrimental when it comes to your finances.

So, instead of giving charge to your emotional mind, bring your logical and rational mind to the centre stage.

Overcome comparison and start investing at your own pace

If you feel you have missed the bus and think you are too late to start investing, there is nothing to worry about. We all have our own timelines.

I started investing when I was 25. Now, I see students who have already invested a decent amount through side hustles. When I was a student, internet access was quite limited. So, it would be wrong if I compared myself with them. Moreover, I have also seen people who haven’t started investing and like to spend their money travelling and living their lives. That is also okay.

So, there is no need to be hard on yourself. If you have realised that you need to invest, you need to plan for your next steps. The main criteria for investing shouldn’t be the action of your peers.

Assess your financial grounds

Now that you have realised the importance of investing, the first thing that you need to do is understand yourself. What type of investor are you? Are you willing to take on higher risks and handle the short-term market volatility of equity investments?

This is not an exhaustive list. But, the important thing is to understand where you currently stand on financial grounds such as your income, debt and other financial obligations.

After considering all these factors, you can determine how much risk you can take on your overall investment portfolio.

It is easy to look up to your friend who has made a massive kill in crypto and regret it. But your financial situation might be vastly different from your friend’s financial status. So, it is essential to know yourself before you catch FOMO.

Identify your investment goals

Raise your hands if you want to earn returns from our investments and see your money double within a short span of time. But have you asked yourself why you want to see your money double?

Leaving aside the fact that it feels good to have more money and splurge on it, we all have different reasons. Some of us want to build a retirement corpus so that we don’t have to ask for money from our children when they are old and grey, while some want to travel to a different country every year for a month.

So, determine your goals and classify them into short-term, medium-term and long-term ones. You can then research to figure out the best way to achieve your goals.

Carry out diligent research

Researching the investment options that give you FOMO is the best way to tackle it. Are you jealous of your friend’s spectacular gains in a small-cap fund or a small-cap stock? Research about that respective fund or stock. You can check the volatility of the fund or stock. You might find that your friend has a high-risk appetite and stayed invested despite double-digit negative returns for a considerable amount of time. But the main question is, do you expect the performance of the fund or stock to repeat in the near future, and do you have the risk appetite to handle the volatility?

No investment strategy works all the time

When you research that particular investment option, you will observe that the investment option didn’t perform well all the time. There will be years when it underperformed its peers and gave spectacular returns for two to three consecutive years. It is because the market works in cycles, and the performance of most investment options comes in ebbs and flows.

Be patient

Waiting is the best way to curb any FOMO that you are feeling. Everything looks hunky-dory when you are in the honeymoon phase, and then reality strikes.

If you ever experience FOMO, it’s best to wait and observe how the new investment option is doing before making any decisions. Taking time to evaluate will give you a clearer understanding of the situation.

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Changes in Debt Funds taxation: What it means for you

The government has made a significant shift in the taxation of debt mutual funds. From 1^st April 2023, there will no longer be long-term capital gains benefit with indexation for a holding period greater than three years. This change means investments will now be taxed as per your income slab, regardless of the investment duration.

In the current scenario, if investors invest in non-equity schemes, i.e., debt funds, gold ETFs, and international funds, for less than 36 months, they are currently subject to a marginal rate of interest tax. Investors can take advantage of 20% tax with indexation advantages for holding periods longer than 36 months, which makes them attractive compared to other traditional saving instruments such as bank FDs, National Savings Certificate(NSC) and others.

What can debt fund investors do?

While this might come as a blow to many investors, now that it is here, we need to understand how to go about it.

With indexation benefits out of the picture, it may adversely impact the tax you have to pay on your debt funds investment. Indexation acted as compensation for inflation. However, if we compare bank FDs, debt funds still have the upper hand. It is because the returns in debt funds accumulate and compound over time. This is not the case in FDs. In FDs, the interest income above ₹40,000 for individuals below 60 years is subjected to a 10% TDS (Tax Deducted at Source). In addition, interest on FDs comes under ‘income from other sources’ and is added to the total income and taxed accordingly. But in debt funds, there is no tax on returns until you redeem your units. Hence, even though the returns on debt funds might be similar to other debt products, there is potential to earn more in a debt fund.

Also, open-ended debt funds are extremely liquid. You can invest and redeem at any time. However, with bank FDs, you might have to pay a penalty charge for early withdrawal.

In addition to debt funds, the recent changes also impact international funds. However, there is an exemption for funds with 35% or more of their equity invested in domestic markets. As a result, you can look at funds that invest in domestic and international stocks.

If you are into gold funds and gold ETFs, you can look at sovereign gold bonds if you have an investment horizon of seven years. However, the primary issuance of these bonds is open during certain days of the year as per the schedule fixed by RBI. Liquidity might also be an issue if you sell your investments before seven years.

Conclusion: This blog post explored the key change in non-equity funds and what it means for investors like you. It is important not to make rash decisions and to make informed decisions about future investments in debt funds.

What Happens When There is No Nomination in Mutual Funds

If you are reading this, there is a high chance that you know about mutual funds or have already invested in mutual funds. Mutual funds are investment vehicles that pool investors’ money together and invest in a diversified portfolio of securities, such as stocks, bonds, and other assets. One key aspect of mutual fund investing is the nomination process. This is the process that allows investors to designate a person or entity to receive the benefits of their investments in case of their untimely demise.

However, we have seen many instances where investors may fail to nominate a person to receive their mutual fund holdings after death. Moreover, they might need to remember to update their nominee details after marriage. This can lead to various complications and legal issues, as the distribution of the deceased investor’s assets may be subject to lengthy legal battles or delays. In such cases, the mutual fund company may be required to freeze the investor’s account until the rightful heirs are determined, resulting in a loss of investment opportunities and potential gains.

In this article, we will look at the steps you need to take to claim the mutual fund units when there is no nomination so that mutual fund investments are seamlessly transferred to you after the death of your loved one.

Here are the documents that you will need to make a claim:

Transmission Request Form (Form T3) for Transmission of Units to your account
Death Certificate of the deceased unitholder(s) in original or photocopy duly attested by a Notary Public or a Gazette Officer.
Copy of PAN Card or guardian if the claimant is a minor.
KYC Acknowledgment or KYC Form of the claimant. In the case of a minor, the claimant form of the guardian will be required.
Cancelled cheque with your name pre-printed or a copy of your recent bank statement or passbook. It should not be more than three months old.

In addition to these documents, you will need to take care of a few formalities depending on the amount of money you are claiming. The process is a little easier if the amount is less than ₹ 2 lakhs.

Here are additional requirements if the transmission amount is up to ₹2 Lakh:

The Bank Manager needs to verify your signature, as indicated in Annexure-Ia. In the case of minors, the guardian’s signature must be verified (for an account in the minor’s name or a joint account with the guardian).
Any appropriate document that indicates the relationship between you and the deceased investor.
As per Annexure-II, Bond of Indemnity needs to be provided by all legal heirs to transfer ownership of units without a legal representative. However, the bond of indemnity is not required if you submit the Succession Certificate or Probate of Will or Letter of Administration where you are named as a beneficiary. In this case, an affidavit as per Annexure-III is sufficient.
Each legal heir must submit an individual affidavit, as stated in Annexure-III, to be recognized as an heir.
The NOC from other legal heirs as per Annexure-IV should also be provided, as applicable.

Now, if the transmission amount is more than ₹2 lakhs, in that case, you need the signature on the transfer to be attested by a Notary Public or a Judicial Magistrate First Class (JMFC). If the claimant is a minor, then the signature of the guardian needs to be attested.

In addition to that, individual affidavits need to be given by each legal heir along with a notarised copy of the probated will or succession certificate or letter of administration or court decree in case of Intestate Succession.

So, it is best to nominate the right person so that your beneficiaries don’t have to undergo all these tedious processes. And, if you are the heir, you can request them to check if they have nominated the right person and revise it if it needs to change.

Recently, the market regulator, The Securities and Exchange Board of India (SEBI), has made a new rule which states investors should submit a nomination or give a signed declaration to opt out of the nomination. This option will be available to investors who subscribed to mutual fund units on or after August 1, 2022. The folios will be frozen for investors who don’t comply with it. The deadline for this exercise is March 31, 2023.

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Checklist for NRIs planning to settle in India

Are you a Non-Resident Indian (NRI) considering settling down in India? If so, there are several essential things to keep in mind before making a move.

In this article, we’ll explore some of the critical financial things NRIs should consider when settling in India.

But first, let us talk about the RNOR status.

A Non-Resident Indian’s status transforms from “non-resident” to “Resident but Not Ordinarily Resident (RNOR)” when they move permanently back to India. RNOR is essentially a temporary status granted to NRI returning to India before becoming legal citizens.

To have the RNOR status, you must have resided outside India for at least 729 days out of the previous seven fiscal years, or you must have been an NRI for nine of the ten financial years prior.

However, after three years, you automatically become a regular Indian citizen, and your income and gains on investments are taxed accordingly.

Bank Accounts:

Undoubtedly, bank accounts are the first thing you need to handle when you come back to India.

As an NRI, you might have a Non-Resident External (NRE) account or Non-Resident Ordinary (NRO) account. These are rupee-denominated accounts that can be opened in the form of savings, current or term deposits. NRO accounts let NRIs handle their income earned in India, whether rental income, dividend or interest. An NRE account is used for parking foreign earnings, which are free to be repatriated.

But now that you are back in India, you will have to convert your NRE/NRO account to a regular savings account. It is important to convert your account, as a delay can cause trouble.

Fixed Deposits:

When we talk about fixed deposits, as an NRI, you might hold NRE/NRO FDs or FCNR Account (Foreign Currency Non Resident) deposit accounts.

In the case of NRE/NRO FDs, you have to convert them to regular fixed deposits, just like the savings account with a guaranteed interest rate. However, the interest would be taxed according to your income tax bracket.

FCNR deposit is a type of account that enables non-resident Indians to park money in a foreign currency and earn tax-free returns. These deposits range from one to five years for specific currencies such as USD, Australian and Canadian dollars, Sterling pounds, Yen and the Euro. You might hold it till maturity. But if you desire to keep holding the foreign currency, you will need to convert it into a resident foreign currency (RFC) account.

Mutual funds

If you already have mutual fund investments in India, you must notify your bank of the shift in your residency status as soon as feasible. By doing this, you can make sure that any modifications to your mutual fund assets, such as liquidations or top-ups, go off without a hitch.

Stock investment

If you have a Portfolio Investment Services (PIS) account, you will have to close your account and open a regular brokerage, or Demat account meant for regular residents.

Insurance policies

After you return to India, you must buy insurance policies covering your life and health. The reason for this is that insurance policies purchased in another country will not be valid in India.

Physical assets:

You can continue holding your investments, such as land and buildings, even after becoming a resident individual. As per Section 6(4) of FEMA, you can keep your foreign assets without seeking any permission from the Reserve Bank of India or any other regulatory body. It doesn’t require any planning on your part. When you become a resident of India, you will have to pay income tax on your overseas property income.

Conclusion:

Settling down in India as an NRI can be an exciting but daunting prospect. However, by taking the time to prepare and plan, you can ensure a smooth transition and a successful move.

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What do you need to know about investing in Quant Funds

Quant funds, also known as quantitative funds, are a type of mutual fund that combine the principles of mathematics, data, and computer science to build an investment portfolio or a fund. These funds use algorithms to analyse vast amounts of data to identify trends, uncover correlations, and make investment decisions. Quant funds are relatively new, but they are quickly growing in popularity due to their ability to provide better returns than traditional funds.

In this article, we talk all about Quant Funds.

How Quant Funds operate

Quant funds rely on investing techniques that are algorithmic or systematically programmed. As a result, they donâ€™t base their investment decisions on human managersâ€™ expertise, wisdom, or viewpoints.

Various quant-based models have different trading signals, such as economic data and company news. Quant funds develop complex models around momentum, quality, value, and financial strength, utilising their custom algorithms created employing cutting-edge technologies.

Different money managers have their quant investment framework. For example, V-L-R-Tâ€‹ is the investment framework for Quant Mutual Fund. V stands for valuation, L for liquidity, R is risk appetite, and T is time which is being aware of the cycles that control the interaction of the other three elements.

Unlike an actively managed fund, where the fund manager plays an active role in researching and taking investment decisions, the quant fund manager only implements any small-scale portfolio adjustments that are to be made. The fund managerâ€™s daily responsibilities are restricted to keeping an eye on the fundâ€™s performance and ensuring the portfolio is in line with the modelâ€™s predictions.

Much of the quant modelâ€™s labour-intensive testing and simulation is done before the quant fund is introduced, and the fund manager oversees the modelâ€™s improvement over time as the markets change.

It is known as quantitative investing. They are also known as quantitative funds since they utilise quantitative analysis rather than fundamental analysis.

The emergence of quant funds and the rise in the number of big data-related solutions was spurred by more accessible access to a wider variety of market data. The data sets that quant fund managers may deal with have greatly expanded thanks to advancements in financial technology and rising innovation in automation, providing managers with ever more robust data feeds for a more exhaustive examination of scenarios and time horizons.

Types of Quant Funds

In India, quant funds often use â€œsingle factorâ€ or â€œmulti-factorâ€ based models, which are intended to narrow the fundâ€™s investing universe down to a â€œmodel portfolioâ€ based on these characteristics.

Single-factor quant: These are the most prevalent type of quantitative method. These have typically revolved around ratios that include valuations expressed through P/E, P/B, and dividend yield, etc., quality expressed through ratios like return on equity and return on capital employed, etc., or volatility expressed as Standard Deviation and Beta.

The companies belonging to the investment universe are ranked and chosen based on one or more of these variables individually. The shortlisted companies will be featured in the final portfolio.

Multi-factor quants:

Due to the marketâ€™s complexity and volatile nature, there isnâ€™t a single method, approach, or point of view that can consistently outperform others. Many factors are constantly interacting with one another in many ways. And this gives rise to a multi-factor quant model.

These models incorporate two or more elements intended to produce a finer result regarding greater returns and generally reduced risk. As a result, these components are thoroughly tested to determine if they work well together and are continually assessed to make adjustments as new information becomes available.

Benefits of Quant Mutual Funds

Here are some of the benefits of investing in a Quant Mutual Fund:

Data-Driven Decision Making: Quant funds use data and sophisticated algorithms to analyse market trends and make investment decisions as per the fundâ€™s mandate. As a result, the fund is free from emotional biases that might sometimes impact traditionally actively managed funds.

Increased Efficiency: As these funds are based on algorithms, they can analyse vast amounts of data in real time and quickly make changes as per the current events and market movements.

Potential for Higher Returns: Quant funds use advanced techniques to identify and capitalise on market inefficiencies. Their shorter reaction time also allows them to take quick investment calls, potentially leading to higher returns for investors over the long term.

Professional Management: Just like a regular mutual fund, a quant fund is also managed by experienced fund managers who use their expertise and technology to make informed investment decisions.

Disadvantages of Quant Mutual Funds

Itâ€™s important to note that while quant mutual funds have many benefits, they also have disadvantages. Here are some of them:

Difficult for investors to understand: As we have seen earlier, quant mutual funds rely on complex algorithms and data analysis to make investment decisions. This complexity can make it difficult for investors to understand how their investments are being managed.

Dependence on technology: These funds rely heavily on algorithms to make investment decisions. It can result in the underperformance of the fund if the algorithms set by the fund manager are flawed.

Lack of human judgment: While the lack of emotions from investment decisions might be a positive factor, the lack of human judgment in the decision-making process can result in missed opportunities or poor investment decisions.

Linked to market: Just like regular mutual funds, quant mutual funds are also subject to market risk and can experience losses if the market performs poorly. Additionally, funds might also underperform compared to their peers in the fund category.

List of Top Quant Funds

Many fund houses have launched quant funds under the thematic fund category.

Here are some of the top-performing quant funds:

Quant Flexi Cap: Quant Flexi Cap is the top performer in the flexi cap category in the three-year and five-year horizon with 35.58% and 17.95% returns as on 10^th Feb 2023. NIFTY 500 TRI is the benchmark of the fund. This fund has assets worth â‚¹990 crores as on 31^st Jan 2023. The fund has a higher portfolio turnover of 84% compared to its peers.

Quant Quantamental Fund: This fund is a thematic fund that can be compared to other quant funds of the different fund houses. This fund is ranked third in terms of its one-year return of 17.43%.

Nippon India Quant Fund: Nippon Indiaâ€™s Quant Fund ranked 10^th out of 35 funds in the thematic fund category with a one-year return of 5.96%. The fund has delivered a three-year return of 17.81%. The AUM of the fund is â‚¹35 crores.

Quant Focused Fund: The fund is the top performing actively managed large cap fund with a three-year return of 22.95% return. It also has a stellar performance with a 10-year return of 17.40%.

Conclusion:

Quant Funds are gaining popularity among investors as they are performing better than their peers. The working of these funds is more complicated than traditional funds, but the easiest way to understand a quant fund is to think about a fund that employs algorithms to determine which stock is likely to outperform the market by considering the various factors that make up the model.

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