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[blogannie]

What is a Systematic Investment Plan in Mutual Funds?

Everyone has a dream of buying a house, car, a family vacation to some exotic destination, etc. it is possible to achieve your dream only by working actively towards them. Investing in mutual funds through a systematic investment plan is the best way that help you to achieve your goals.

Let us have a look at what a systematic investment plan is and how it benefits you.

What is a systematic investment plan?

A systematic investment plan or SIP is an investment mode through which you can invest in mutual funds. As the term indicates, it is a systematic method of investing a fixed amount of money periodically. This investment can be monthly, quarterly or semi-annual, etc. When you invest steadily in this manner, it is easy to meet your financial goals.

How does SIP work?

When you invest through SIP, you invest a fixed amount for a given period. This amount allows you to purchase a certain number of fund units. If you continue to do this for a long time, you get to invest in the fund during all the highs and lows. In other words, you do not need to time the market to make your investment. Market timing can be a risky proportion as one can invest at the wrong time. SIP removes this factor of unpredictability.

Having decided on the investment tenure and frequency, you can choose to automate your investments. Give a standard instruction to your bank to transfer the amount directly from your bank account to the mutual fund SIP of your choice on a fixed date every month.

Benefits of investing in SIP

The following are the benefits of investing in SIP.

Power of compounding

compounding occurs when the returns you earn on your investments start to earn returns. When you regularly invest through SIPs, your returns get reinvested. Overtime results in a snowball effect that may increase your potential return manifold. You can seek help from the financial consultants in Chennai to know about the power of compounding in SIPs. An ideal way to maximize the gain is to invest for an extended period. This also means that you may benefit by investing as early as possible.

Low initial investment

You can invest in mutual funds through SIP with just Rs.500 per month. This can be an affordable way of investing without hurting your wallet. You can increase your monthly investment with a raise in your income through the SIP step-up feature. Mutual fund houses allow the investors to top up their SIP regularly. So even if you start with Rs.500 or Rs.1000 every month, you can invest more over the years. This strategy helps you to reach your financial goals at a faster rate.

Rupee cost averaging

Rupee cost averaging is a concept in which you can purchase more units when the Net Asset Value(NAV) of the fund is low and lesser units when NAV is high. Essentially it averages out your purchasing cost over the tenure of the investment period. You do not need to worry about how to time the market when you invest through SIP.

Convenience

SIP can be a convenient mode of investing. Like most investors, you may not have the time for extensive market research and analysis to adjust or balance your portfolio. You can seek help from the mutual fund consultants in Chennai to know about the convenience of investing through SIP. So once you pick a good fund, you can give standing instruction to the bank and let the SIPs take care of your monthly investments.

How to start SIP investment?

The following are the steps to start SIP investments.

Complete your KYC

Every fund house requires the investors to complete the KYC documentation before starting their investment. You need to submit your identity proof, address proof, and photographs. In recent times, e-KYC options are also available. You can complete the formalities online without visiting the AMC.

Set your investment goals

The first step is to understand what you wish to accomplish through SIP investments. List down your financial goals. This is necessary because every mutual fund is designed with specific objectives. Hence identify your goals and look for funds that achieve your goals.

Choose the SIP

Once you select the particular fund, it is necessary to choose the SIP parameters. Fill in the details for the questions like investment tenure, frequency of the investment, investment amount, and enter the relevant information based on your goal and financial situation.

Choosing the proper investment plan in a mutual fund through SIP helps you to invest a steady amount over a fixed period and earn a reasonable return over a long period.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Redemption of Mutual Funds

Choosing the right time to redeem the mutual fund is an important decision and it is based on several factors. You must carry out detailed research of the fund's performance and reasons for redemption. The investors act based on the sentiments and redeem units as a reflex action as soon as they feel the fund is underperforming or the market is jittery. However, this is not a better option. Investors should understand that even uncertain markets carry some opportunities for giving good returns.

Mutual funds are professionally managed by the fund managers whose decisions are proactive and are based on the perceived market movements. But in case if the fund performs poorly consistently for a long period, you may choose to exit.

What is Mutual Fund Redemption?

Mutual fund redemption is a process of withdrawing units in order to obtain your returns from the funds. When you go for mutual fund redemption, you will receive funds in your account almost instantly. Hence mutual funds are very beneficial. The financial consultants in Chennai would help to gain knowledge about mutual fund redemption.

How to Redeem Mutual Fund Units?

You can redeem your mutual fund through online or offline methods. The redemption can be done on any business day through a convenient method. Mutual fund redemption should be done in a smart way to ensure that you get a good return. One should take note that the price of mutual fund units should be fixed only once a day. Hence as a financially sensible investor, you should ideally request a redemption within the time set by your finance house or before the financial market closes its transaction. Your money would be redeemed at the net asset value (NAV) of your fund for that particular day, NAV includes the total of all the assets of a certain fund less than a liability.

Mutual Fund Redemption with a Redemption Form

If you want to redeem your mutual fund physically, you will be required to get a redemption request form in which you have to fill in all the required details such as unit holder’s name, name of the mutual fund scheme, folio number, the number of units to be redeemed from the scheme, plan details, etc. you can seek help from the mutual fund consultants in Chennai to fill the form. Once you have filled the form, you have to sign it and submit it to the designated officer of the registrar or the asset management company (AMC). you can also present it to a fund house that accepts transactions. The funds resulting from your redemption will be transferred to the fund holder’s bank account.

Online Mutual Fund Redemption

You can also redeem your mutual funds online by visiting the official website of the mutual funds. In case, if you got a mutual fund by going to a third-party mutual fund web portal, you can redeem it on your portal itself.

You have to choose an online transaction on the website.

To access your mutual fund, you need to log in to the website using the folio number and your permanent account number (PAN).

You have to choose your scheme and select the number of units you would like to redeem.

You will then have to confirm your transactions.

Apart from redeeming your mutual fund online through the mutual fund website or web portal, you may also redeem through central providers such as Karvy, CAMS (Computer Age Management Service Pvt ltd), etc.

How long will it take to receive your fund redemption amount?

When you redeem your mutual fund, you would typically receive your unit funds within 1 to 5 working days. If you redeem a debt-related fund or a liquid fund, you will get your money within 1 to 2 working days. On the other hand, when you redeem an equity mutual fund, you will receive the money within 4 to 5 working days.

You can make a simple calculation to know the approximate amount of the mutual fund investment. You must gain adequate knowledge to redeem your fund unit in mutual funds.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What do you need to start a mutual fund?

Mutual funds are becoming very popular among the investors due to the benefits they provide. Among the various advantages, some of the most important advantages of a mutual fund are you can start with any amount, you can diversify across multiple stocks and other instruments like debt, gold, etc, you can start automated monthly investments, and also you can invest without requiring to open a Demat account.

Steps to invest in mutual funds

The following are the steps to invest in mutual funds.

Understand the risk capacity and risk tolerance. This process of identifying the risk you are capable of handling is referred to as risk profiling.

The next step is asset allocation. Once you identify your risk profile, you should divide the money between the different asset classes. Ideally your asset allocation should have a mix of both equity and debt instruments so as to balance out the risk.

Then you should identify the funds invested in each asset class. You can compare the mutual funds based on the investment objective and past performance.

Decide on the mutual fund schemes you will be investing in and make the application online or offline.

Diversification of your investment and follow-ups are important to ensure that you get the best out of your investment.

How to invest in Mutual Funds?

Before you decide to invest in mutual funds, it is good to keep the following points in your mind. Doing so will help you to choose the right kind of funds to invest in and help you accumulate wealth over time.

Identify your purpose of investing

This is the first step towards investing in mutual funds. You need to define your investment goals which can be buying a house, child’s education, wedding, retirement, etc. you can seek help from the financial consultants in Chennai to fix your investment objectives. If you do not have a specific goal, you should at least have a clarity on how much wealth you wish to accumulate and on how much time. Identifying an investment objective helps the investor zero in on the investment options based on the level of risk, payment method, lock-in period, etc.

Fulfil the Know Your Customer requirements

In order to invest in the mutual funds, investor need to comply with the KYC guidelines. For this, the investor needs to submit the copies of Permanent Account Number (PAN) card, proof of residence, age proof, etc as specified by the fund house.

Know about the schemes available

The mutual fund market is flooded with options. There are schemes to suit almost every need of an investor. Before investing, make sure that you have done the homework by exploring the market to understand the different types of schemes available. You can make use of mutual fund consultants in Chennai to know the schemes. After you have done that, align it with your investment objective, your risk appetite, your affordability and see what suits you the best. And in the end, it is your money. You need to ensure that it is used to fetch the maximum returns.

Consider the risk factors

Remember that investing in mutual funds comes with a set of risks. Schemes that offer high returns come with high risks. If you have a high appetite for risk and wish to accomplish high returns, you can invest inequity schemes. On the other hand, if you do not want to risk your investment and are ok with the moderate returns. You can go for debt schemes.

After you have identified your investment objectives, fulfilled the KYC requirements, and explored the various schemes, you can start investing in mutual funds. A bank account is mandatory while making an investment in mutual funds.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

How to Choose the Best Mutual Funds?

Choosing the best mutual funds is based on several parameters. The parameters include investment horizon, risk tolerance, and return expectation. Some other parameters to be considered in picking the right mutual fund are expense ratio, past performance, fund manager experience, and assets under management. As an investor, you must do research to choose the type of mutual fund to invest in.

Here are some of the parameters to be considered while choosing the type of mutual funds.

Goals

This is the basic parameter. When you invest in a mutual fund, your target should be in your mind. This is said to be the purpose of investments. You must have a clear idea about how long you are planning for investment and with what return expectations. When you do not have a clear goal, you would end up investing in small fluctuations.

The goal can be short term such as purchasing utilizing goods, down payment for a house, and planning an international trip. It can be for the long term like planning your retirements and planning for the education of the children. Depending on why you are investing, you can select the type of mutual funds. It can be of debt, equity, or hybrid mutual funds. For example, for some investors, the main investment objective is to gain capital appreciation on their investments. For others, it may be tax saving.

Risk

Risk comes from not knowing what you are getting into. The investor should analyze the risk associated with the investment before selecting the mutual funds. He should check if the risk is comfortable. The investor can make use of financial consultants in Chennai to know about the risk parameters associated with the mutual fund scheme.

Equity mutual funds are subject to market fluctuation. Therefore an equity-oriented portfolio could witness volatility as well in the short term. The return can be substantially higher than other types of funds. These types of funds are suitable for long-term aggressive investors.

Debt mutual funds are stable with returns lower than equity funds. This type of fund is suitable for conservative investors. The high-risk funds are credit risk funds, hybrid funds, multi-cap funds, mid-cap funds, and small-cap funds. Medium risk funds are low duration funds, ultra-short duration funds, and balanced advantage funds. The low-risk funds are overnight, liquid funds, gilt funds, and large-cap funds.

Liquidity

Investors should know when to require the investment. When your need is short, you cannot prefer equity funds as you cannot expect the returns in the short term. When you stay with the investment for one year or more, the equity mutual funds can generate the expected return. It is good to work compound when the money is left untouched for a long period. If you want to raise money for a short period, you can go with liquid funds.

Investment strategy

Most investors ignore this type of investing. But it holds a crucial place in the success of the investment portfolio. An investment strategy is referred to as the investment approach. It is the strategy that the fund house adopts to make some investment decisions. If the investment strategy is not in line with the investment philosophy then there would be some conflicts that lead you to exit the investment with some undesirable prices.

Fund performance

The fund performance should be considered for a reasonable time frame. This is to ensure that the investment has gone through multiple market cycles. This helps in providing some consistent returns over some time. In case, if the fund is not able to beat its benchmarks in three, five, or ten years. Then the fund is not a good investment. While evaluating the performance of the fund, it is good to check the performance details of the fund manager or the fund management team.

Expense Ratio

The expense ratio is the commission or fee charged from the investor for the proper management of their investments. It is the fund manager’s fee that is levied upon all the investors for ensuring profit across the investments. As an investor, you must target mutual funds that have a lower expense ratio. This is because the percentage seems to be very less but when calculated across your total investment portfolio, it will have a large impact. The expense ratio is the derivative of Asset Under Management (AUM). The larger the AUM, the lesser the expense ratio.

Entry and Exit Loads

Entry load is the fee charged by the fund house from the investors. An exit load fund is a fee charged at the end of a mutual fund scheme. This is chargeable only when the investor exits within a short period. You can seek help from the mutual fund consultants in Chennai to know about the entry and exit funds. This is to discourage the quick exit and immediate outflow of cash from the fund house. The entry load has been removed from the fund house. As an investor, you must lookout for a mutual fund scheme that has minimal entry and exit load.

Taxes

Making money from your investment is taxable as per the Income Tax Act. In the equity funds, the long-term capital gains are taxed at 10% over an exemption limit of 1 lakh. The short-term capital gains are taxed at 15%.

These are the parameters to be considered before picking up the right mutual fund for your investment. A right mutual fund plays a vital role in earning high returns over a specific period.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing

[blogannie]

Types of Mutual Funds

Mutual funds are gaining a lot of popularity in recent times as an effective investment channel. Choosing the right type of mutual fund is very essential in achieving your investment goals. There are several types of mutual funds based on structure, asset class, investment objective, specialty, and risk.

Types of Mutual Funds based on Structure

Open-Ended Funds

These are the funds in which units are open for purchase or redemption throughout the year. All the purchases or redemption of these funds units are done prevailing NAV’s. These funds allow the investors to invest how long they want. There is no limit on how much can be invested in the fund. They also tend to be actively managed which means that there is a fund manager who picks the places where the investments will be made.

Close-ended Funds

These are the funds in which the units can be purchased only during the initial offer period. Units can be redeemed at specified maturity date. To provide for liquidity, these schemes are listed on the stock exchange. Unlike open-ended mutual funds, once the units or stocks are bought, they cannot be sold back to the mutual funds; instead, they can be sold through the stock market at the prevailing prices of the shares.

Interval Funds

These are the funds that have the features of both open-ended and close-ended in that they are opened for the repurchase of shares at different intervals during the fund tenure. You can seek help from the financial consultants in Chennai to know about the interval funds. The fund management company offers repurchase units from existing unitholders during these intervals. If unitholders wish to they can offload in favor of the funds.

Types of Mutual Funds based on Asset Class

Equity Funds

These are the funds that are invested in equity or shares. These funds are considered to be high-risk funds and provide high returns. Equity funds also include specialty funds like infrastructure, fast-moving consumer goods, and banking.

Debt Funds

These are the funds that invest in debt instruments. For example, company debentures, fixed income assets, etc. these are safe investments that provide fixed returns. You can seek help from the Mutual fund consultants in Chennai to know about the debt funds. These funds do not deduct tax on sources. If the earning from the investment is more than Rs.10,000 then the investor is liable to pay the tax.

Money Market Funds

These are the funds that invest in liquid instruments. It is the safest investment and offers a moderate return. The money market is referred to as the cash market and comes with risks in terms of interest risk, reinvestment risk, and credit risks.

Balanced or Hybrid Fund

These are the funds that are invested in asset classes. In some cases, the proportion of equity is higher than the debt. Thus risk and returns are balanced out. The risks in the debt market are lower than in the equity market.

Types of Mutual Funds based on Investment Objective

Growth Funds

In growth funds, money is invested primarily in equity stocks to provide capital appreciation. These are risky funds with a long-term investment timeline. This is ideal for people planning for high returns.

Income Funds

In these funds, money is invested primarily in fixed-income investments such as bonds, debentures, etc, to provide capital protection and regular income to investors.

Liquid Funds

Money is primarily invested in short-term instruments to provide liquidity. It is considered to be low on risk and offers moderate returns. It is suitable for investors with a plan of short-term investment timeline.

Tax-saving Funds

These funds primarily invest in equity shares. Investments made in these funds are qualified for deduction from the Income Tax Act. it is high on risks and provides high returns if the fund performs well.

Capital Protection Funds

These funds are split between the fixed income investments and equity markets. It is done to ensure the protection of the principle that has been invested.

Fixed Maturity Funds

Fixed maturity funds are those in which the assets are invested in debts and money market instruments where the maturity date is either the same or earlier than that of it.

Types of Mutual funds based on Specialty

Sector Funds

These are the funds that are invested in a particular sector of the market i. e, infrastructure funds are invested in the companies that are related to the infrastructure sectors.

Index Funds

These funds are invested in instruments that represent a particular index on an exchange to mirror the movement and the return in those indexes.

Fund of Funds

These are the funds that are invested in other mutual funds and returns depending on the performance of the target funds. These funds can also be referred to as multi-manager funds. These investments are relatively safe.

Emerging Market Funds

These are the funds in which the investments are made in developing countries that show good prospects for the future. It comes with a higher risk due to the political and economical situations that are prevailing in the country.

These are some of the types of mutual funds. Choosing the right fund is most important because it helps in achieving your investment goals with low risks.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What are the Parts of an Insurance Policy?

An insurance policy document contains the nuts and bolts of your insurance. It spells out the terms and conditions of your policy. It is the reference point for you and the insurance company about coverage, exclusions, rules, and the claim positions. These policies are very much essential to read but are not always easy to understand.

Why should you review your insurance policy?

An insurance policy is a legal contract between the insurer (insurance company) and the insured (policyholder). Reading and understanding the insurance policy is very important as it describes the coverage you have under the conditions you assume. Being an informed policyholder can prevent disagreements between you and the insurer if you need to file a claim for a loss.

Parts of an insurance policy

The following are the five parts of an insurance policy.

Declarations page

The declaration page is also called the “Dec Page” though it can be longer than one page. It summarizes the key details of your policy and it is the first part you encounter. This page contains,

Type and the name of the coverage to be provided.

Policy details like policy number, premium, and policy period.

Names of the people covered and assets.

Dollar limits on the coverage and your corresponding deductibility.

A list of endorsements is included in the policy and their total number.

Discounts applied to the policy.

Review your declaration page carefully and contact the insurance company if you have any clarifications and if there are some errors or missing information. As a legal contract, the policy’s language governs when it is enforced in the court of law.

Definitions

The definition section contains common words, narrows their meanings, and helps to avoid the ambiguity that could work against the insurer in the court of law. Common words may have limited definitions in a particular insurance contract. Defined terms are also listed throughout the policies in some special formats like italics, boldface font, and quotations to show that they have specific definitions. You can prefer financial consultants in Chennai to know about the common terms and their definitions. In general, the words that are not defined are open to interpretation, but defined ones should be reviewed carefully for coverage inclusions and exclusions.

Insuring Agreements

Insuring agreements are typically the main part of the policy. They define who and what is covered by the insurance policy and what the insurer promises to do and not to do in exchange for the premium. This could mean paying for bodily injury, property damage, and legal defense costs up to the policy limits in the covered car accidents. The insuring agreement might be seen as a policies coverage or another name that indicates your coverage. Each coverage part would have its insurance agreement.

The insuring agreement often gives a broad overview of the scope of coverage and then narrows it down to the exclusion and inclusion section. It is important to read these three sections to get a clear picture of precisely what is and what is not covered so that you might know the coverage.

Exclusions and limitations

An exclusion section typically follows the insuring agreement and lists the things that are not covered. For example, the homeowner policies generally exclude damage from perils like floods and earthquakes. Auto policies may exclude damage from wear and tear. You can seek help from the insurance consultants in Chennai to know about the exclusions in the policy. The policy may provide a section for an exception to exclusions, to avoid having to list all possible exclusions and coverage.

Policy limits are listed on the declaration page and describe how they are applied in the limits of liability. Limitations list the maximum dollar amount or percentage of total loss that might be reimbursed under the policy in a given period or claim.

Conditions

The condition section includes the policy provisions that qualify or limit the insurance company’s promise to pay or perform which means if you do not meet the conditions then the insurer would deny your claim. One condition you might see in the homeowner policy is protecting your property after the loss to prevent further damage or allowing the insurer to inspect a fire damage claim before you begin the repair work. Some other conditions may relate to subrogation rights, loss reporting, and settlement, or cancellation and non-renewal.

Thus the insurance provides you a peace of mind that you are protected in the event of a loss. It is essential to understand your contract so that you are confident of your premium covers.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Why do we need insurance?

There is no denying that you will be in great peace of mind when you know that you and your loved ones are financially secure in various unforeseen situations. Uncertainties can happen at any moment in life. These situations include unfortunate death, a medical emergency, damage to your vehicle, property, etc. Bearing the financial impact of these situations would empty up your pocket. Then you need to dip into your savings which you have earned for your loved ones. There comes the need for insurance to protect you and your family with financial support against all risks linked to your life such as health, life, and property.

Types of insurance

There are several types of insurance available and you can choose among them as per your need.

Life insurance

Life insurance is what you can avail to safeguard your family in case of your death during the tenor of the policy. The most basic form of insurance available to buyers is life insurance. It secures your family financially with a lump sum amount paid out in the event of the policy holder’s death within the policy period.

Health insurance

This type of insurance is purchased to cover your medical emergencies revolving around various health issues such as hospitalization, treatments, and so on. These insurance plans come in handy in case of medical emergencies. You can also avail cashless facilities across the network hospitals of the insurer.

Child plans

These insurance policies are saving instruments that generate a lump sum amount when the children reach a certain age for pursuing higher studies. The financial consultants in Chennai would help you with the child plans using insurance. In these plans, the life assured is that the child or the recipients of the funds and the parents are the policyholders.

Home insurance

These insurance plans cover any damages to the home on account of accidents, mishaps, and natural calamities, among other such events.

Auto insurance

These insurance plans for vehicles, including bikes, cars. These offer protection against natural calamities, damages to third parties (people who have incurred losses or been hurt in an accident with the policyholder’s vehicle), and also damage to the vehicles along with mishaps and accidents.

Need for insurance

The following are the reasons that describe the importance of insurance.

Insurance acts as a financial backup at the time of emergency

None of us know what the future holds. Unexpected emergencies such as injury, illness, accidents, and even death leave you and your family facing a huge emotional strain. Insurance plans help you emotionally and financially to rebuild your life.

Insurance secures retirement

A retirement policy is a type of insurance plan that helps you to save a part of your income over a long period and makes you financially secure after retirement. The accumulated income would be given back to the insured person as a pension.

Insurance helps in securing future

Your present life might be stable with a steady flow of income that meets your and your family’s needs. But life is uncertain. Some unexpected crisis may shake your life. Without you, your family will not be able to meet your financial requirements. With the help of insurance, you can secure your family with a sum of money to take care of their needs.

Insurance encourages savings

Several life insurance plans such as money-back policies help in saving a certain amount in the form of a premium every year. You can seek help from the insurance consultants in Chennai to know about how to save money using insurance. Unlike a basic life insurance plan that gives the money back at the time of maturity, a money-back policy pays an amount to the policyholder after a few years of investment.

Insurance gives peace of mind

Along with financial security, insurance also gives peace of mind. Your home insurance policy would help you to get coverage for the damages to the home. Any insurance plan comes in handy in a time of crisis.

Thus insurance is very much needed in today’s uncertainties. Evaluate your financial situation and choose the best-suited insurance policy for your future financial needs.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

How to Trade Commodities?

The Indian investment market offers a lot of investment plans. Most of us usually invest in fixed deposits, Public Provident Fund (PPF), recurring deposits, insurance, bonds, etc. A few of us invest in shares. If you want to diversify your portfolio you can opt for investing in commodities.

Commodities offer immense potential to become a separate asset class for market investors. Most investors feel that investing in commodities is riskier and complicated. But commodities are easy to understand concerning the demand and supply. Retail investors must understand the risk and advantages of investing in commodities before making huge investments. Pricing in commodities is less volatile when compared to bonds and equities. Thus it provides an efficient portfolio diversification option.

Basics of Commodity

Commodities can be classified basically into five types. Agricultural, metals and materials, precious metals, energy, and services. Agricultural commodities include soybeans, pepper, coriander, turmeric, etc. while bullion comprises gold and silver. Energy includes crude oil, natural gas, furnace oil, and Brent crude. Whereas metals consist of copper, lead, zinc, aluminum, and nickel.

Spot and Future price

The spot price is the price in the cash market where one buys and sells goods on the spot whereas the future price is the price of the commodity at a future date. For example, the spot price of gold is Rs.14700 per 10 grams today. Then one month's future price would be Rs.14800 whereas two-month future price would be Rs.14950. The difference between the spot and the futures price is the cost of carrying i.e, interest cost, storing, insurance, etc. generally future prices are higher than the spot price.

Regularised Exchange

At present, the regulator forward market commission allows future trading in around 120 countries. India has 22 commodity exchanges that have been set up to be under the overall control of the forwarding market commission. To trade in commodity futures, the main trade exchanges are Universal Commodity Exchange, National Commodity and Derivative Exchange (NCDEX), Multi Commodity Exchange of India (MCX), and National Multi Commodity Exchange of India. All these have electronic trading and settlement systems and a national presence. The financial consultants in Chennai help you with the regularized exchange. All you need is a bank account. You also need a separate commodity Demat account from the National Securities Depository to trade on commodities in NCDEX just like stocks.

What is Commodity's future contract?

A commodity future contract is a commitment to make or accept the delivery of a specific quantity and quality of commodity during a specific month on a future date at a price agreed upon on committing. It is an agreement to buy and sell a set amount of commodity at a certain time in the future at a certain price. It is a standard contract fixed by the particular future commodity exchange that includes the size, the place where the delivery can be made, the types and the quality of commodities to be delivered, and the price of the transaction. Commodities that are traded in commodity exchange must be delivered at the contracted price without considering the changes in the market price. Commodity future contract is one of the avenues for retail investors and traders to participate. You can seek help from Commodity trading in Chennai to know about the commodity futures contracts. Trading in commodity futures contracts is risky for beginners. It is generally believed that most investors lose in commodity futures. This is because they didn’t trade with discipline and fell victim to greed and fear.

How does it work?

When you buy futures you do not need to pay the entire amount but just a fixed percentage of the cost. This cost is said to be margin. For example, you bought a gold future contract at Rs.72000 per 100 grams. The margin set by MCX for gold is 3.5%. So you end up paying about Rs.2520 which is called margin. The low margin means you can buy gold futures which represent a large amount of gold by paying only a fraction of the price. The next day the price of gold futures rose to Rs.73000 per 100 grams. Then Rs.1000 would be credited to your account and when the price falls to R s. 72500 then Rs.500 would be debited from your account.

Choose a Broker

To trade in commodities you need to choose a broker. Several established equity brokers have membership in NCDEX and MCX and offer commodity future services. Some of them also offer trading through the internet. You may also get a list of members through exchanges and choose a broker among them.

Transaction in commodity futures

The transaction in the commodity futures market is made electronically on the commodity exchange through the brokers. The seller will have a broker and a buyer will also have a broker. They will then transact an order for a purchase and sale. The buyer and seller of commodity futures have obligations. The buyer is obligated to take the delivery and pay for the cash commodity in a specific time frame. The seller is obligated to deliver the commodity for which he will be paid the price that was decided in the exchange by the brokers. The buyer and the seller can eliminate their obligations by offsetting their trade at the exchange before the contract comes due.

This is how trading with commodities on a commodity exchange works. It is good to have detailed knowledge about the commodity market to yield a high amount of profit.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

How does Health Insurance work?

Health insurance is a legal agreement between you and the insurance company. It includes certain health plans that make you pay some amount for certain medical care and service. So you don’t have to pay all the costs on your own.

Working of health insurance

Health insurance helps to lower the amount you pay for your medical care. The working of a health plan varies.

You have to pay a premium which is usually a monthly payment. This is the fee for having the health plan.

Most health plans have a deductible. A deductible is how much you pay out of your pocket for medical expenses unless your health plan kicks in to share a percentage of the costs.

Once you meet your deductible. Your plan kicks in and starts sharing costs with your plans. For example, your health plan may pay 80% of medical expenses and you have to pay the remaining 20%. This is said to be coinsurance. Most insurance ID cards show your deductible and coinsurance.

Preventive care typically covers 100%. This includes your annual checkups, flu shots, vaccination for kids, certain wellness screening, and more. You can seek help from the insurance consultants in Chennai to know about preventive care. Some plans require a copay i.e, you must pay a small amount at the first visit of the doctor.

You save money when you stay in-network. Network providers agree to give a low rate to the insurance company customer. You can usually find a number of network providers on the health insurance websites or by calling or asking them for a network provider. This is the key part of how health insurance works to help keep your costs low.

Your health insurance may also come with extra no-cost programs and services. This may include health and wellness discounts for service and products, incentive programs where you can earn cash awards, and other prices for completing health activities.

How do you get health insurance?

The employer may provide you with a health plan as a part of your job. They work with the insurance company to design the health plan that offers you. Your employer may also choose to add certain programs and services to your benefits. The financial consultants in Chennai will provide you the information about health insurance. If you didn’t get a plan through your employer, you can buy one on your own through a state or federal health exchange. You can buy one directly through a health insurance company like Cigna. You will find a variety of plan options to help meet your specific needs.

What does health insurance cover?

Health insurance may cover a wide range of medical care and services. These often include preventive and non-preventive care as well as emergency care, behavioral health, and sometimes vision and hearing. What you pay out of your pocket and what your plan pays depends on various factors. These factors include whether you have met your deductible, what your coinsurance is, if you are getting care from your in-network providers and facilities, if your care is preventive or not, etc.

Here are some of the examples of health insurance benefits that your plan may cover.

Preventive visits: things like annual checkups are covered 100%.

Vaccinations: some vaccinations are covered 100% too. For example, many plans pay for an annual flu shot and some kind of childhood vaccinations.

Non-preventive doctor visits: For in-network doctors and specialists you get a reduced rate as a part of the network. Your plan helps pay its share of the cost once you have met your deductible.

Hospitalization: your plan helps pay its share of the cost once you have met your deductible. You will pay less if you go to a hospital that’s in your plan’s network if required.

Emergency Room: many health plans do not require you to go to an in-network ER in an emergency, but plans can offer.

Lab work: if you go to an in-network lab, your cost for lab work will be lower. Your health plan negotiates lower than them.

Additional and Supplementary coverage that is added to your health plan. Coverage for cancer care, accident coverage, and more can help you pay for care that is often costly and expected.

This is the working and the benefits that the health insurance covers. Having basic knowledge about health insurance helps you to plan your medical emergencies.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Role of Commodity Market in India

The commodity market has been around for several years. It was only in 2013, the regulator permitted the exchange-traded mechanism. The commodity market plays an essential part of the economy and plays several crucial roles. There have been several issues of liquidity and several issues of multiple regulatory jurisdictions but at least there is a platform for viewing and trading the commodities. There are some very important functions a commodity market can perform in India.

Helps in portfolio diversification

The new-age investor is intelligent and on a constant lookout for some attractive investment avenues to diversify his portfolio. However, traditional instruments such as equities, mutual funds, fixed deposits, and gold continue to be the top choice for many. Commodity trading provides an excellent opportunity for all investors to explore a new category of assets that includes agricultural products, Bullins, metals, and livestock.

Distributes the risk

The commodity market plays a vital role in minimizing the risks that are faced by investors. Commodities can be used as hedging instruments as the risk is distributed among a large group of investors. For example, a jewelry manufacturer who is keen to hedge against the price volatility of gold can buy gold futures to lock in the price.

Increases the investment in the Agri sector

Due to the shortage of strong-post harvest infrastructure, a lot of food grains get spoiled. As a result, a substantial amount of food grain is lost in the transmission process. This impacts the price directly and hence affects the farmers and the end-consumers. The viable commodity market has become profitable for farmers, brokers, and the middleman. This leads to an increase in investment in the agricultural ecosystem. These investments can be utilized for the betterment of warehouse and transport facilities.

Results in predictable pricing

Some commodities are extremely elastic and the manufacturers have to ensure stability to protect their market shares. Commodity futures play a vital role in providing more predictability in price. The commodity trading in Chennai helps you in predicting the price of the commodities. In the absence of the commodity market, the manufacturers have to face severe short-term price movements.

This leads to better aggregation and financing in the Agri sector

A big challenge to Indian agriculture is that the farmers are too small and hence too dispersed. Currently, the middleman plays the role of aggregator but it is not exactly a transparent mechanism. An organized commodity market ensures an effective aggregation of agricultural products. Financing is the second aspect of the commodity market. Farmers are also benefited from the institutional mechanism given by this market to raise financing and reduce their dependence on an unorganized sector. The sales of the agricultural products also take place in a streamlined fashion due to such a market.

Reduces speculative excess

The speculative demand for commodities such as gold is extremely high. The demand for gold is often generated for speculative purposes, resulting in high imports and utilization of foreign exchange resources. You can seek help from the financial consultants in Chennai to know about how to reduce the speculative excess. However, there are no corresponding benefits of such a speculative demand. With a strong gold commodity market in place, it would be easier to absorb the speculative demand and safeguard forex resources.

Achieve food security through the commodity market

How does the government of India achieve food security through the commodity market? There was a report recently that the grains in Punjab are destroyed due to poor warehousing. Currently, this is the risk that all the farmers are forced to take. These farmers can make use of the future market for selling the future of their grains and lock the price. This ensures the farmers from the susceptibility of price fluctuation. Currently, farmers are hit by the weak pulse price due to oversupply in the Indian market. In many western markets, the farmers use the future market to prevent price fluctuations.

The role of the commodity market in India cannot be underestimated. The commodity market plays a crucial role in regulating price discovery and hedging price risk to safeguard the investors.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What is Commodity Exchange?

A commodity exchange is a legal entity that determines and enforces the rules and procedures for trading standardized commodity contracts and related investment products. A commodity exchange also refers to the physical center in which buying and selling of commodities take place. The commodities market is massive which trades over trillions of dollars every day.

Traders rarely deliver any physical commodities through commodity exchange. Instead, they trade futures contracts, where the parties agree to buy or sell a specific amount of commodity at an agreed price regardless of what is currently traded in the market at a predetermined expiration date. The most traded commodity futures contract is crude oil. There are several types of modern commodity exchanges which include metals, fuels, and agricultural commodities exchanges.

Understanding Commodities Exchange

Commodity exchanges are the center places where commodities are traded. The commodity market begins with the trading of agricultural products such as corn, cattle, wheat, etc. The modern commodity market trades many types of investment vehicles which are often utilized by many investors from commodity products to investment speculators.

The two best types of commodity exchange in the United States are Chicago Mercantile Exchange (CME) group and New York Mercantile Exchange (NYMEX). The commodity trading in Chennai helps you to understand the commodity exchange. CME Group is the world’s leading and most diverse derivative market place handling three billion contracts while the NYMEX is one part of the CME. The most well-known commodity exchange in Europe is the Intercontinental Exchange (ICE). Similar to CME and NYMEX, ICE is an electronic commodity exchange with no physical trading floor. In a cost-competitive environment, electronic commodity exchange is becoming more prevalent. The only physical commodity exchange that is available in Europe is London Metal Exchange (LME). The LME is the world center for trading industrial metals and more than three-quarters of all non-ferrous metals are transacted there.

Limitations of Commodity Exchange

The nature of commodity exchange is changing rapidly. The trend is in the direction of electronic trading and away from the traditional open outcry trading where the trader meets face-to-face and the trade in which is known as a trading pit. The financial consultants in Chennai would help you to know about the commodity exchange. With an open outcry system, traders communicate buy and sell orders through hand and verbal signals.

Types of commodities

A commodity is a basic good that is interchangeable with other commodities of the same type. They are generally used in the production of goods and services. Even though we may not realize commodities have a very important place in our day-to-day lives. For example, cotton is used in making clothes.

The following is the list of most traded commodities in the world.

Crude Oil

One of the most important commodities in the world. Crude oil is an unrefined petroleum product that occurs naturally. It is used in the production of different products such as gasoline and petrochemicals. The price of crude oil is mainly based on the NYMEX future price. The third business day after the 25th calendar day of the month preceding the delivery month is the last trading day of the crude oil.

Gold

It is one of the world’s most widely traded precious metals. While investors can buy and sell physical commodities, traders typically trade gold futures contracts on commodity exchanges. The last day for trading gold is the last business day of the delivery month.

Lumber

This industry provides two main products for the end-users such as softwood and hardwood. Softwood is primarily used in construction while hardwood is used in flooring and furniture construction and to make panels and cabinets. The business day immediately preceding the 16th calendar day of the contract month is the last trading day of the month.

Natural Gas

This commodity is used to heat things, to generate electricity, and has been used in commercial industries. The final trading day of the month for trading natural gas is three business days prior to the first day of the delivery month.

Cotton

It is the most widely used fiber in the world. Cotton fibers are collected and made into yarn for textiles for clothing and other household purposes. The last day of trading for cotton is 17 business days from the end of the month.

The commodity exchange is a marketplace in which commodities of all kinds are bought or sold to earn high profits. Knowing about the commodity exchange helps you to earn more.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Risk Management Process in Insurance

A risk management process is a framework of identifying, evaluating, and controlling the potential threats that happen to a business. It will consider different strategies to address exposure within a tolerance level acceptable to the business.

Risk management is a framework of identifying and managing the risks that prevents the business from achieving its objectives. Mistakes and accidents are invariable in business and can be very costly and time consuming. Considering what risks have potential to throw your business off track, could mean the difference between the success and failure. The key to risk management is understanding what pitfalls your business is exposed to.

What can a risk management process achieve?

No business is possible without a risk. But the question is how much risk is tolerable to achieve the strategic objective of the business. A risk management process ensures you to achieve your objective by avoiding the unnecessary risks. The development of a risk management framework will help you to understand the risk appetite in business. Finding a balance between risk and reward is a continual challenge for any business. A formal risk management process will assist you in understanding what risks are acceptable and which need to be transferred.

How does a risk management process work?

All risk management processes follow the same principles that enable your business to manage uncertainty in an effective and systematic way.

Identify risks to your business

The first step of the risk management process is to investigate and detail risks that might affect the business or objective. There are a number of risk management tools available such as risk assessment and risk reviews that can help you with identifying and recording risks.

Analyze and measure the impact

The second step of the risk management process is to determine the likelihood and consequence of each risk. By evaluating each risk, it is possible to quantify the potential to impact the business or objective. A risk register is a valuable risk management tool to record and score the potential risks

Decide which risks are unacceptable

The third step of the risk management process is to make decisions concerning which risks are acceptable compared with your risk appetite. Risks that are acceptable can be monitored and reviewed on a regular basis. The unacceptable risks must be avoided or reduced or transferred.

Mitigate or transfer unacceptable risks

The fourth step of the risk management process is to take action to the risks that are unacceptable and can be transferred to an acceptable risk tolerance level for the business. You must always find a way to mitigate the exposure by transferring unacceptable risks from your balance sheet.

Contingency planning

The fifty step of the risk management process is to consider the risk that cannot be managed. If your initial plan to control the risks fails then you must come up with another plan that helps you to control the risks. The financial consultants in Chennai would help you in planning efficiently to control the unmanageable risks.

Monitor and review regularly

The sixth step of the risk management process is to continually monitor, review, and report on risks on the objective and business. The risk management framework does not finish once the risks are identified, analyzed, and controlled. Your business objectives will be continued to be exposed to new and emerging risks.

What are the risk management process tools available?

The following are the risk management process tools to monitor and report on risks within your organization.

Risk assessments

Risk assessments are completed per activity with an aim of identifying the hazard and risk factors that have the potential to cause harm and evaluate the risk associated with that hazard.

Risk reviews

Risk reviews are completed with a view across the entire company with an aim of determining the appropriate ways to eliminate the hazard or control the risk when the hazard cannot be eliminated. The insurance consultancy in Chennai will guide in the risk reviews so that you can eliminate the risks in an efficient manner.

Risk register

Risk register identifies the key areas of risk in terms of potential frequency and impact, highlights issues that require attention and allocates responsibility. Once you identify the risk, you can use a simple spreadsheet with a basic scoring mechanism as a risk register.

Business continuity planning

The business continuity planning will consider the major risk of your company and identify both the short and long term solutions to mitigate the impact. There will be a specific business continuity plan to your organization and it identifies the responsibility with a crisis management hierarchy when an incident occurs.

These are the working of the risk management process and its tools. Having a basic understanding about the risk management process helps you to manage your risk appetite.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Benefits of Investing in Commodity

A successful trading venture needs funds to operate profitability. The investment commodity of a business reflects the short-term uses of funds. This short-term usage of funds delves into the various requirements of the firm and ranges from resource management to administrative purposes. Liquidity is used to acquire stock that on being sold results in an inflow of liquidity, either immediately or after a time lag in case the sales are on credit. The rate of turnover of current assets about total sales of a given period is of critical importance to the total funds employed in those assets.

The amount needed to be invested in current assets is affected by many factors and may fluctuate over some time, manufacturing cycle, production policies, credit terms, growth and expansion needs, and inventory turnover are some of the important factors influencing the determination of investment in the commodity.

Inflation magnifies the need for investment in the commodity. The constant rise in the costs of inputs, if not accompanied by a corresponding increase in output prices, puts an additional strain on the management. However, by taking several measures on the production front and by keeping a strict watch on managed costs and expanding collection of credit sales, etc. The management can contain or at least minimize the upward thrusts for additional investment in a commodity.

Benefits of investment in commodity

The following are the benefits of investing in commodities.

Potential Returns

Some factors make the price of individual commodities fluctuate such as supply and demand, inflation, and the overall health of the economy. In the past few years, demand has increased due to massive global infrastructure projects in turn influencing commodity prices. The related industries have observed a rise in commodity prices because of the positive impact on the company stocks.

Potential Hedge against Inflation

Inflation is capable of fluctuating stock values and bonds which can result in price hikes for commodities. The financial consultants in Chennai would help you with the potential Hedge against inflation. Although in periods of high inflation commodities have a strong performance, investors should understand that the commodities are much more volatile compared to other types of investment.

Diversified investment portfolio

Having a diversified portfolio means an ideal asset association plan. Commodity plays a vital role in a diversified investment portfolio. It is suggested to invest in raw materials simultaneously if you are already investing in stocks and bonds.

Transparency in the process

Trading is supposed to be a transparent process in commodity futures. The action will lead you to have a fair price which in turn is controlled by large-scale participation. In turn, it reflects different outlooks and perspectives of a wider section of people who deal with the commodity.

Profitable Returns

If the liquidity is huge the commodities are riskier in form of investments. You can seek help from the commodity market training in Chennai to know about the profitable returns. Companies are likely to have either a huge profit or they can experience heavy losses which means if you make investments right you can make huge profits in the commodity market.

Cushioning against market fluctuation

You would need more money to buy commodity goods from different parts of the world in case the rupee becomes less valuable. Mainly during inflation investors sell off their stocks and bonds to invest in commodities. Hence the prices of commodities will act as a hedge against the market risks.

The best bet for price safety and surety

All the time of inflation, when the economy dips, the prices of commodities usually go up. In turn, the price of raw materials is also supposed to have a price rise. Hence there will be a few commodities that can bring you profit.

Trading on Lower Margin

As a trader, you are supposed to deposit 5 to 10% of the total value of the contract as a margin with your broker which is less compared to other asset classes. These low margins allow an individual to invest and take a larger position at a lesser capital.

These are the benefits of investing in commodities. As an investor, you must make the right choice of the commodity to invest in to make a decent return.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

Features of Life Insurance

The average penetration and density of life insurance is merely 2.76%. There have been improvements in this arena but overall growth has been very slow in India. Many people are not aware of the benefits of life insurance and numbers for penetration are an indicator of the same. Accidents and mishaps are the strongest indicator of how fragile human life can be and how we need to systematically insure our lives. Insurance is an important tool for providing an individual’s family with safety and security. It acts as a protective cover to safeguard the insured dependents.

Life insurance is crucial for families to feel security and a sense of confidence to continue their lives without losing their everyday stability. Here comes the features and advantages of life insurance.

Features of life insurance plans

Policyholder: a policy holder is an individual who pays the premium of a life insurance policy and signs a life insurance contract with the life insurance company.

Premium: A premium is the cost that a policyholder pays the life insurance company for covering his life.

Maturity: Maturity is a stage at which the policy term is completed and the life insurance contract ends.

Insured: Insured is an individual whose life is insured via life insurance. After his death, the insurance company is accountable to provide a financial amount to the dependents.

Sum Assured: The amount an insurance company pays the dependents of the insured if those events which are specified in the life insurance contract occurs.

Policy term: A policy term is the specific duration listed in the life insurance contract for which the insurance company provides the life cover and the time period during which the contract is active.

Nominee: A nominee is an individual listed in the life insurance contract who is entitled to receive the predetermined insurance compensation, as a part of the policy.

Claim: on the insured’s demise, the nominee can fill a claim with the insurance provider in order to receive the predetermined amount.

Key advantages of life insurance in India

The following are some of the advantages of life insurance policy.

Death Benefits

Life insurance enables the individuals to protect themselves and their families in case of any unfortunate happening in the life of an insurer. The insurance consultants in Chennai help you to know about death benefits. The insurance company pays an amount that is equivalent to the sum assured as specified in the contract along with applicable bonuses. This is said to be the death benefit.

Investment components

Certain whole life insurance policies offer two benefits of both insurance and investment. While one half of the premium is paid to the insurance and the other half is invested in equity or debts or the combination of both. You would receive the best result from both the world as a protective covering from insurance and a high return through investments. You can make the most from the component by investing in funds that are aligned with your investment horizon and risk appetite. Some policies allow you to switch between the funds as per your evolving goals.

Maturity benefits

Life insurance policies can also double the saving instruments by offering maturity benefits. If the insured survives the policy term and no claims have to be made, the total premiums paid are returned at the time of maturity of policy. You can seek help from the financial consultants in Chennai to know about the maturity benefits. In this manner, your life insurance plan can have a savings component, while also offering a protective cover.

Tax Benefits

Under the umbrella of section 80C of the income tax Act, individuals can reduce the tax liabilities by investing in specific instruments. Term insurance is one of them. Under section 80C, the premium paid for your life insurance policy is eligible to attain a maximum tax deduction of up to 1.5 lakhs. In addition to this, under section 10D, any payout you receive from your insurance is completely tax-free. If you have opted for a health-related rider such as critical illness or surgical care rider, you can also avail tax deduction under 80D of income tax Act.

Coverage against liabilities

To fulfil your dreams and attain your goals, you may have required a certain amount of financial support in the form of loans, mortgages, and other types of debts. Be it student loans or credit card debt, dealing with such liabilities can be a source of great financial strain, without a steady stream of income. While you may have the funds to pay off a part of your loans now, your family may find it difficult to manage such liabilities in the event of their unfortunate demise, owing to the loss of income. Thus, taking a life insurance policy ensures that the family has the financial means to steadily meet your loan and mortgage repayments, even in your absence.

Riders

You can opt for riders to enhance the life insurance coverage. A number of riders, ranging from critical illness to accidental total permanent disability are available and help to protect you and your loved ones against instances wherein your life cover may not come into play.

Life insurance plans are absolutely necessary in recent days. Life insurance is a risk minimization and protection tool that can be insured and their dependents in multiple ways while dealing with a variety of life events.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What is a Certificate of Deposit?

The certificate of deposit (CD) was introduced in India in 1989 to increase the range of money market instruments in the country and thereby gives greater flexibility to the investors in the maximum utilization of the short-term funds.

A Certificate of Deposit (CD) is a money market instrument that is issued in a dematerialized form against the fund deposited in the bank over a specific period. The Reserve Bank of India (RBI) issues guidelines for Certificate of Deposit from time to time.

Eligibility for Certificate of Deposit

The Certificates of Deposit are issued by scheduled commercial banks and select financial institutions in India as followed by RBI within a limit. Certificates of Deposits are issued to individuals, companies, corporations, and funds among others. It can also be issued to Non-Resident Indians but on a non-repatriable basis only. It is important to note that banks and financial institutions cannot provide loans against Certificates of Deposits. At the same time, banks cannot buy their Certificates of Deposits before the latter’s maturity. However, the above-mentioned norms can be relaxed by RBI over a specific period. The bank has to maintain a Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) on the price of a Certificate of Deposits.

Format of Certificates of Deposits

The banks and financial institutions must issue Certificates of Deposits in dematerialized form only. However, an investor can seek a certificate in a physical form as per Depositories Act, 1996. If an investor can seek a certificate in a physical form, the bank informs the Financial Market Department in Reserve Bank Of India, Mumbai. The Certificates of Deposits entail stamp duty charges as well. The mutual fund consultants in Chennai help you to know about the Certificates of Deposits. If Certificates of Deposits are to be issued in a physical form, the bank should ensure that it is issued in a good quality paper. A Certificate of Deposits has to be signed by two or more signatories.

Minimum size and maturity of Certificates of Deposits

The Certificates of Deposits can be issued for a minimum of 1 lakh by a single issuer and in multiples of 1 lakh. The maturity of the Certificates of Deposits depends upon the investor. For instance, if the Certificates of Deposits issued by the bank matures by not less than 7 days and not above one year while the Certificates of Deposits issued by the financial institutions matures not by less than 1 year and not more than 3 years.

Transferability

Certificates of Deposits that are not held in an electronic form can be transferred by endorsement and delivery. However, a Certificate of Deposits held in a Demat form is transferred according to the guidelines followed by the Demat securities.

Discount

A Certificate of Deposit can be issued at a discount on its face value. Furthermore, banks and financial institutions can issue Certificates of Deposits on a floating rate basis. However, the method of calculating the floating rate is market-based.

Reporting

Bank’s fortnightly return should include Certificates of Deposits as per section 42 of the RBI Act, 1934. The banks and financial institutions should report the Certificates of Deposits under the Online Returns Filing System (ORFS).

Advantage of issuing CD in India

There are many benefits of issuing CDs among investors. They are listed below.

Security

The Certificates of Deposits would not eat up your capital due to market volatility. It is completely a secure financial instrument with an assured sum of maturity similar to traditional insurance. You can seek help from the financial consultants in Chennai to know about the security of Certificates of Deposits. The money you put in your Certificates of Deposits will continue to increase and there is no risk of any loss. It is a very secure short to mid-term investment.

High-interest rate

This benefit attracts most of the investors towards the Certificates of Deposits. They offer a large rate of interest which can go as high as 7.8% on the lump sum deposited than traditional saving accounts whose interest rate average around 4%

Flexibility

You can opt for monthly payouts, annual payouts, or a lump sum withdrawal of your CD at maturity. You can pick the duration and price you want to invest although it has to fit certain parameters set by the bank. Tailoring the CD as per your needs helps you to get the most of it.

Low maintenance cost

When it comes to the market there are always brokerage costs for the delivery, buying, and selling of shares. There are no additional costs associated with the CD. you only pay what you invest with some banks.

Issuing a Certificate of Deposits is a secure way to invest in the short to mid-term. It is good to know about the basics of Certificates of Deposits to invest in financially securing your future.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What are Financial Goals in the Stock market?

Financial goals are the specific monetary amount you are committed to obtaining that allows you to realize the vision for your life. Financial goals have to be aligned with the long term and it can be putting children to school, planning for a retirement lifestyle, and staying out of debt. Good financial goals are detailed.

Types of Financial goals

In investment strategy, the Financial Industry Regulatory Authority (FINRA) defines the financial goals as three types such as long-term goals, mid-term goals, and short-term goals. It is extremely useful. Setting a time frame for your financial goals allows you to strategize more effectively and it will equip you to plan each step you need to take to move closer to each one.

Long-term Goals

Long-term goals such as planning your retirement or paying off your mortgage, are further out on the horizon. Your long-term goals contain several short-term and mid-term goals. It is always a wise idea to break down the large goals into smaller or more immediate goals.

Short-term Goals

In addition to smaller and narrower goals that contribute to long-term goals, you may also need some short-term goals for things you like to afford shortly. For example, renovating the house or a trip to France. The short-term goals should have a reason. It is good to give your financial goals specific and exciting names that conjure up images and feelings that thrill you. The power of financial psychology not only helps you to achieve your goals but also encourages you to visualize the future and what success would look like. This applies to all financial goals, not only short-term goals.

Mid-term goals

Mid-term or intermediate goals may include endeavors such as saving the premium amount for an annuity that would provide you a lifetime income, improving your credit score or obtaining capital to start your own business. You may want to explore ways to generate passive income or consult the financial consultants in Chennai to help you plan your retirement. Each of these examples of mid-term goals has a time frame of three to ten years and is the stepping stone to a larger goal.

How to Set Financial Goals?

Here are the six steps for setting a financial goal.

Figure out what matters to you. Put everything, from the practical and pressing to the whimsical and distant, on the table for inspection and weighing.

Sort out what is within reach, what will take a bit of time, and which must be a part of a long-term strategy.

Apply a SMART goal strategy that is Specific, Measurable, Achievable, Relevant, and Timely.

Create a realistic budget. Get a strong handle on what is coming in and what is going out. Then work it to address your goal. Use your budget to plug leaks in your financial goals

With any luck, your tough, realistic, water-tight budget will show a handful of leftover money. Whatever the amount it, have it automatically directed to a separate account made to address the first couple things on your list of priorities.

Monitor your progress. Make sure that you are hitting certain benchmarks. If not, take some time to reevaluate what went wrong.

How to Achieve Your Financial Goals?

The best way to reach your financial goal is to make a plan to prioritize your goals. When you examine your own goal, you would discover that some of them are broad and far-reaching, while the others are narrow in scope. You can seek help from the stock market training in Chennai to acquire knowledge about achieving financial goals. You can separate your goals into three categories of time.

The short-term financial goals take under one year to achieve. For example, taking a vacation, buying a new refrigerator, or paying off a specific debt.

The mid-term financial goals cannot be achieved right away but should not take many years to accomplish. Examples are purchasing a car, finishing a degree or certification, or paying off your credit card debts.

The long-term financial goals take several years to accomplish and as a result, it requires a long commitment and more money. For example, buying a home, saving for children’s college education, or a comfortable retirement.

The process of setting a financial goal involves deciding what goals you intend to reach, estimating the amount of money needed, other resources required and planning how long you expect to take to reach each of your goals.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.

[blogannie]

What is a Portfolio?

A portfolio is defined as the collection of financial assets and investment tools that are held by an individual, a financial institution, or an investment firm. To develop a profitable portfolio, it is necessary to know about its fundamentals and the factors that are influencing it.

As per definition, a portfolio is a collection of assets owned by an investor. The collection of assets may be stocks, funds, derivatives, property, cash equivalent, bonds, etc. individuals invest their money on these assets to generate revenue by ensuring that their capital gain does not erode. Depending upon, once knowledge about how to handle their investment, the individual may either manage their portfolio or seek help from some financial advisors. Diversification is a vital concept in portfolio management.

Components of a Portfolio

The major components of an investment portfolio are listed below.

Stocks

The stocks refer to the shares of the company and the investor who owns the stocks becomes a part of the particular company. The percentage of ownership is based on the number of stocks of that company held by the individual. The shareholders would receive a portion of the company's profit in the form of dividends. You can attend the stock market training in Chennai to know about the stocks. Investors can also generate high returns by selling the stocks at a higher price. However, they come with a significant risk factor.

Bonds

Bonds come with a maturity date and are less riskier than stocks. On maturity, the investor receives the principal amount along with the interest.

Alternatives

Besides bonds and stocks, the investor can also add other alternative investment instruments like oil, real estate, gold, etc.

Types of Portfolio

Though there are several types of portfolios, the investors choose the one that matches their investment intent and risk capacity. Based on the investment strategies, the following are the common types of portfolios.

Income portfolio

This type of portfolio emphasizes more on securing a steady flow of income from investment avenues. In other words, it is not mainly focused on potential capital appreciation. For instance, income-driven investors invest in stocks that generate regular dividends instead of those that show a track of price appreciation.

Growth portfolio

A growth portfolio mostly parks money into the growth stocks of a company that is in its active growth stage. Typically, growth portfolios are subjected to risk to a greater extent. This type of portfolio is known for presenting higher risk and reward aspects.

Value portfolio

This portfolio puts money in cheap assets in valuation and focuses on securing bargains in the investment market. When the economy is struggling and the companies are barely surviving, value-oriented investors look for profitable companies whose shares are priced lower than their share value. The financial consultants in Chennai help you by providing enough information about the value portfolio. When the market revives the portfolio holders generate substantial earnings.

Factors that affect portfolio allocation

The following are the factors that tend to influence an investor’s portfolio allocation to a greater extent.

Risk tolerance

The investors' risk appetite impacts how they are going to allocate their financial assets and investments into their portfolios. One can quickly gauge the risk tolerance level of the company in their portfolio. For instance, conservative investors do not build their portfolio with large-cap value stocks, investment-grade bonds, cash equivalents, market index funds, etc. Conversely, the individuals with high-risk appetites may include investments like small-cap, large-cap growth stocks, high-yield bonds, gold, oil, real estate, etc. in their portfolio.

Time horizon

The time frame of putting money on a particular investment option is also quite crucial for building a profitable portfolio. It is suggested that an investor must modify their portfolio to achieve a conservative asset allocation mix as they appear nearer to the financial goals. It is followed to prevent accumulated earnings of their investment portfolio from eroding.

Typically investors who are nearing their retirement are recommended to invest a more significant portion of their portfolio in less risky assets like cash and bonds and the remainder in high-yielding options. On the other hand, those who have just begun their career are suggested to invest a large portion of their portfolio into high-risk-reward investment options.

Need for portfolio management

The following are the underlying needs for active portfolio management.

It helps to the cushion-investment oriented risk and increases the scope of generating more profits.

Helps to develop sound strategies and rebalance asset composition as per their current market conditions so that the investor can make more of their existing investments.

It enables quick customization based on immediate financial needs and the market condition.

Helps to understand which investment works best under which market condition and how to distribute resources into different asset classes.

The portfolio should match your financial goals and define an appropriate portfolio and investing according helps to earn high returns.

Disclaimer: Trading and investments in Equities and Commodities are subject to market risk, there is no assurance or guarantee of the returns. These are the suggestions to make you familiar with the process. Get a word from an expert before investing.