Mutual funds investment in India used to be viewed with trepidation earlier. However, Indians have not only warmed up to this asset class but are embracing it and turning into evolved investors. Although the penetration of the mutual fund industry in India is lower as compared to other countries, the growth of this sector in India is higher than in other nations.Over the previous decade, the mutual fund industry in India has experienced a CAGR of more than 12%.
As of 31st December 2019, the Assets Under Management (AUM) had crossed a new milestone and was worth Rs 27,25,932 crore. Mutual funds investment in India has empowered several individuals to create wealth over a long time.
If you have been contemplating beginning your wealth creation journey with mutual funds but aren’t sure about how to begin, this article will help you address some important questions.
How Do Mutual Funds work?
Investors pool in money to form a mutual fund and an asset management company or an AMC is appointed to manage the fund according to various goals. They have professionals who understand how market and money flow works and then there are trustees of mutual funds who monitor the AMCs activities to ensure that investors’ money is protected and is growing. The AMCs’ invests that money in share market, bonds and securities. The high fluctuation in the stock markets does not ensure a subtle growth of the money and so the professionals in the AMCs come up with a better option. For equity investments they invest, not in one, but several industries. Now, if one of the equity stocks fails to give profit, others can compensate for the loss and balance the debt. Likewise, your money is always protected and growing at a substantial rate.
After investing your money in mutual funds, you are then given units which represent the money invested in the funds. These units are easily redeemable to get back your money, mentioned along with NAV, that is Net Asset Value. The NAV represents the value of one unit of your investment after all your fund expenses and management fees are paid. With this, you can check the market value of your investment by multiplying the given NAV to the number of units you hold.
Types of Mutual Funds Investments
Mutual funds investment in India is possible in two ways, through lump sum amount or SIPs, or Systematic Investment Plan. This makes mutual funds accessible for anyone, for entrepreneurs, salaried, businessmen etc. The gains generated from these investments are then distributed proportionately among the investors depending upon their NAV. On the whole, investment in mutual funds is one of the most viable options for common people in India who are not able to devote their time in markets and look to opt for a better solution for the growth of their money.
Investing in Mutual Funds:
You should keep in mind a few things when investing in mutual funds:
- Understand your risk-taking capacity and capability, referred to as risk profiling.
- Divide your money between various asset classes, asset allocation.
- Compare mutual funds based on investment objectives and past performance, thus identifying each asset class.
- Decide in which mutual fund schemes would you be investing in and apply for application online and offline both.
- Follow-ups and diversification of your investment are important to get the best out of your investment.
Investing in mutual funds will require you to have a well-defined goal answering the question- why are you investing in mutual funds.
After identifying the risks be prepared with your details like address proof, identity proof, a cancelled check and passport-sized photographs. Use your PAN card to complete your KYC details. After completing all the necessary details, get in touch with someone likely to help you invest your money the right way. This could be a broker, an organisation or through some websites or apps. You will be informed of all the required details and then your capital would be invested in that particular mutual fund for substantial growth. The period of investment will depend upon you, giving you the authority to credit your money back to your account whenever required, with a minimal fee deduction.
Understanding the schemes
You might have heard the phrase -” Mutual funds investment are subject to market risks, please read all the scheme related documents carefully”. Adhering to this phrase is important, for you are investing your hard-earned money. Reading about all the schemes and plans before an investment is the most important thing when investing in mutual funds. Direct investment or investment through SIPs, both are beneficial but will come at some risk, resulting in giving you a happy profit.
Mutual funds are a proven way to create wealth over the long term for the busy or lay investor who finds it difficult to invest directly in equity markets. Mutual funds can also be an attractive option for those looking to invest their funds for a relatively shorter duration. It is important to evaluate one’s goals, objectives, risk appetite and investible amount before investing in mutual funds.
Why Gold Loans?
Indian culture has always given importance to gold. It features as a part of traditional Indian practices, both social and religious. It acts as a status symbol for most of the Indian communities.
Gold Loans have now become a swift growing presence in the Indian industry. This is mainly due to the reliability of the value of gold. There has been a steep rise in gold prices in the past four years. This proved them to be an excellent substitute in place of property or shares to be used as collateral for loans. It is also easier to evaluate the gold price today as compared to property or shares whose prices may fluctuate depending on circumstances.
How did Gold Loans become popular?
Starting from Kerala based NBFC’s that introduced this into professional financial circles, this practice has now spread to the majority of the significant financial and banking organizations in India. The swift adoption of this practice is majorly based upon the previously unexploited factors about the Indian community and gold.
The majority of Indian communities have the practice of buying and hoarding gold in the form of ornaments, ritual-based articles, coins, or bars. With the abundance of this highly valued metal being stagnated inside personal lockers or hidden vaults, the new venture of starting Gold Loans was something revolutionary.
Though in unprofessional circles, the concept of lending money in exchange for gold was not new. But it lacked the assurance and security provided by the current Gold Loan schemes set up by the banks. The financial corporations now exploit this opportunity to provide loans without any risks to themselves.
This is because the value of gold keeps increasing every year. Even if the borrower defaults on the payment, the financial corporations can recover their losses quickly by liquidating the gold being held as collateral; in fact, they might even make a profit. This makes it much safer for both the borrower and the financial corporations as compared to personal loans that use the property of the borrower as collateral.
Impact of Gold Loans on the social divide in Indian communities
The practices of the rich and the poor vary significantly in India when the topic of savings comes up. The rich generally have methods of investing in a variety of assets like shares of companies, properties in the form of land or housing. The poor sections of the society, however, only invest their meager savings on gold. This thinking is further reinforced by the fact that so many of the traditional practices in India, such as weddings, encourage the use of gold ornaments and ritual articles made of gold.
Gold acts as an asset that helps the poor class of society to be assured of their savings in the form of gold. Gifts in the form of gold are highly sought after in ceremonies. Though the allure of gold might have decreased amongst those belonging to a more sophisticated class of Indian society, among the poor and middle class, it still holds a lot of influence.
Role of Gold Loans in reducing Debt Traps
The rural sections of Indian society, especially the agrarian sections, are highly dependent on loans for their survival. Traditionally they deal with local money lenders who often take their property papers as collateral in exchange for providing them with loans. The interest rate given by these lenders is also extremely high as rules do not restrict them. The high-interest rates make it difficult for the borrower to repay the loan. Yet again, they end up taking a loan for the next year to get supplies for their agriculture practices. This cycle continues further each year, pushing the borrower deeper into debt every year. In the end, the borrow ends up losing their properties to these money lenders.
Advantages provided by Gold Loans
The general preferences of the Indian community have always been to avoid putting gold as collateral for gold. But gold loans have a lot of benefits that can help Indian communities.
The advantages provided are:
Debt trap avoidance: Gold loans are readily available and completely secure in their process. The default of payment only results in the loss of gold instead of debt.
Swift process: The entire process of getting gold loans is fast and hassle-free. In practical situations, it takes less than 20 minutes to complete the whole procedure and avail the loan.
No Asset Depreciation: Unlike other assets that are used as collateral in loans, gold is straightforward to liquidate and evaluate. Due to its nature of being a liquid asset, the process of securing it is also easily completed.
No restrictions: Gold loans are preferable because they provide a transaction wholly based upon the value of gold placed as collateral. There is no constant surveillance for the loans. The only restriction is that the loan should not be used for any anti-social purposes. Compatibility with the unorganized sector: The gold loan process highly benefits those in the informal or unorganized sector. Unlike other loans, gold loans don’t require the borrower to submit the details of their employment.
Moral pressure forbidding default of loan: Most Indian households are extremely attached to their gold articles. In most circumstances, they hold deep emotional attachments as they might be a family heirloom or keep significance to specific events. Due to this, it is highly unlikely for them to default on their loans and abandon the gold article placed as collateral.
Proper application of the value of gold in the global economy: Currently, India ranks first when it comes to the gold that is held by private households. The estimated amount ranges between 15000-20000 tonnes of gold. Before the existence of gold loans in the Indian financial market, all that gold was kept idle in personal lockers and was effectively useless for the economy. Now, however, it is being used to set in motion a chain reaction of economic activity, triggered through gold loans.
Getting on your life back on track after declaring bankruptcy is so essential to survival. A huge part of getting back on track in life after bankruptcy is learning to rebuild one’s credit. How to rebuild credit after bankruptcy might be a huge question that we may attempt to tackle today in a few minutes’ reading.
Before we go into the process of rebuilding credit, let’s first understand the term ‘bankruptcy.’ Nobody can just declare bankruptcy. There are a few requirements that enable one to file for bankruptcy. There are two variants of bankruptcy, one being – chapter 7 and the other being – chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a more restrictive form of claiming that you will not be able to pay any of your debts. During this process, you are required to liquidate all of your possessions that could help you repay your debt. When it comes to the liquidation of your belongings, even your home and car are included under that. All of your possessions, according to the court, can be mandated for liquidation. Usually, in chapter 7, bankruptcy is an option for individuals who have a minimal amount of income.
Chapter 13 bankruptcy
This is the more commonly used bankruptcy, which also acts like a repayment plan. During this process, a lot of your debts are immediately wiped away after the liquidation of your possessions. The state of residence and the court set up an arrangement for your payment plan that you must follow for an extended period of 5 years. If you complete all your payments, then the court forgives your debts. You must also keep in mind that while the debts are discharged, things like student loans or mortgage payments will not be discharged. Smaller more insignificant credit such as credit card and medical bills will be taken off your debt, after that giving for breathing space, to be able to pay off a major chunk of your debts, according to the plan.
Having understood these types of bankruptcy, let’s focus on how to rebuild your credit after bankruptcy:
- Make sure that your credit reports accurately reflect your bankruptcy details: it is natural for people not to want bankruptcy to appear on the credit report. But looking at from the point of view displaying outstanding or delinquent balances can be more detrimental to your credit score and report it is much better to have a declaration of bankruptcy appear on your credit report. It is always much better to show zero balance on your accounts rather than have a negative balance account. Naturally, creditors should not be able to display negative account information even after the bankruptcy discharges. So check-in, periodically, to see if your credit report is apt. The bank permits want to check their credit report and only once each year. It may cost more to check a couple of months on a regular basis. It is always better to be sure of what your credit report says rather than be in for a shock.
- Make sure to keep paying all your non-bankruptcy accounts on time: after the declaration of bankruptcy, not all your accounts will be included in that bankruptcy plan. As discussed earlier, student loans are one such account. So make sure to continue to pay them on time month actively. Doing this your help you improve your credit score easily. The goal is to show that your financial mishaps are behind you at this particular moment. Even though these accounts are not directly stored in your credit report, they will eventually be reported, especially if one begins to fall behind another payment schedule. Making sure that it doesn’t happen to help with your credit score and report.
- Look for a credit repair company: If you are a person who finds it very hard to manage your finances and make your payments on time, there are plenty of advertisements of companies that can help you build your credit score again. These credit repair companies can help you repair your credit report easily without you having to take much of a headache figuring out how to pay off all your debts.
- Avoid job hopping at all costs: Job changing won’t affect your credit score indicates that you have a problem with discipline for holding onto responsibility. This could become an issue with lenders in the future, and you might not meet the ideal type of borrower on whom Lenders can take a chance.
These are just a few of the ways that you can begin rebuilding your credit after bankruptcy. First, fully understand the type of bankruptcy that you have filed and also follow these steps to help you rebuild your credit after bankruptcy.