Category Archives: finance

What Are Fixed Income Schemes And Why Investing in Them is Really Good For Investors?

Over a period of time, mutual fund investment has emerged as a feasible and promising investment tool that gives excellent returns to investors by investing their money in markets. As there are different types of mutual funds available for investors who can choose basis the amount they wish to invest, time period of investment, their expectations, and market condition. Before one chooses to invest, it is necessary to have adequate knowledge about various types of mutual funds available. One popular option is investment in fixed income mutual fund schemes. Let’s know what these schemes are and why one should invest in them.

What are fixed income securities?

As their names indicate, a fixed-income security is debt instrument issues by a government, a corporate or other entity to finance and expand their operations. Fixed-income securities are meant to provide investors a return in the form of fixed periodic payments and eventual return of principal at maturity.

Fixed income schemes involve investment in fixed income securities such as bonds, money market instruments, corporate debentures, government securities (Gilts) etc. One primary reason why a large number of investors choose this option is to invest in a variety of Debt and Money Market Instruments of different maturities to get steady income while maintaining a perfect balance between yield, safety and liquidity.

Another reason is that these funds are found to be less risky and promote potential capital appreciation on investments with respect to variation in yield/interest rates.

These funds invest primarily in securities that have fixed maturities and rates of interest. They can be appropriate for both conservative and aggressive investors, depending upon the type of securities in the fund. The total returns given by these funds are generally determined by interest rates.

Irrespective of the kind of underlying security an income fund invests in, most income funds share a few common features, such as diversification and professional management. A majority of income funds pay either interest or dividends (or both) on a monthly basis. Some funds tend to become more liquid than others and the yields on almost all of them rise and fall with interest rates.

Investors looking to invest in fixed income schemes could choose debt funds that invest in short-term papers. After the recent rate cut, the RBI has deducted a total of 150 basis points since the beginning of 2015 when rate easing started and fund managers say further aggressive rate cuts are unlikely.

Financial Planning For a Better Tomorrow

“Month end brings with it a blank bank account”. I am sure everybody has related to this quote because come month end and we are struggling to buy even a packet of milk to make our tea with. Young adults, who have just stepped into professional waters, have a hard time managing their finances because the urge to splurge is too difficult to not indulge in. However, it is necessary to manage your finances in such a way that you have something to spare at the end of the month. Let us go through some financial planning methods which will ensure you do not have to be covered in debt:

• Start saving:

It is not easy to manage temptation but if you can say “no” to the daily dinner from a restaurant and put in a little effort, it can be done. Make it a point to save a certain percent of your salary every month and put it in a place where you cannot touch it eg Mutual fund, SIP & ELSS . Before long, you will have enough money saved up to go to that dream vacation you have been planning since forever.

• Prioritize your expenses:

Something most young adults lack is prioritizing their expenses. You need to understand that a bottle of coke every day is not a necessity but a luxury. Prioritize your expenses and spend only on necessary items. This is not to say that you should starve and not eat out if you forgot your tiffin, but try to minimize unnecessary expenses.

  • Make a budget:

Make a budget in keeping with your salary and stock up on necessary items as soon as you get your salary. This way you do not have to make that late night “Food Panda” call if you are craving a snack at midnight. Try to note down your daily expenses to keep a track of where you spent your money and to gauge your unnecessary spending. If you are able to find a pattern, rectifying the problem will not be so difficult and you will realize before long that your salary is enough for you.

  • Plan ahead:

If you want to spend your old age not dependent on your future children, then you need to invest in an early retirement plan. Think of a retirement scenario and invest in a smart venture to help your money grow instead of mindlessly spending it according to your whims and fancies. As the years go by, you will start accumulating profit from your venture and when that old age dawns on you, you will not be left broke and helpless.

  • Manage debt:

If you possess a credit card, chances are that you use it to splurge. Treat the credit card as an emergency resort. Do not allow the credit card debt to keep piling on because the more it increases the more difficult it is going to be for you to pay it at the end of the month. Pay off your credit card bills as long as they are manageable, otherwise the huge bill will leave you broke.

Start your new journey towards a better tomorrow by implementing some of these methods and become an expert manager of expenses. Never again will you think twice about the money, or lack thereof, in your pocket.