Understanding & using SWP effectively
Understanding & using SWP effectively
Saving and investing is a big part of financial planning. Sometimes, even planning for your spending and cash inflows becomes a vital component of financial planning. If you are looking for regular and predictable cash flow from your investments then the automatic choice for most of us would be bank fixed deposits and postal deposits. However, lower interest rates on these schemes have made people worry about their future income needs.
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Most of us are aware of SIP (Systematic Investment Plan) for creating long-term wealth. The SWP (Systematic Withdrawal Plan) is like the reverse of SIP wherein instead of investing money at regular intervals, investors withdraw/redeem a fixed amount from a scheme in an automated way.
Planning for a phase of life wherein you are dependent on cash inflows, for whatever purpose is an important element of financial planning. The SWP serves as a perfect tool in such a scenario. Usually, the investor would make the initial investment in the chosen fund (fresh) and then plan for SWP, either immediately or starting at a later date. The investor has the flexibility to customize the amount and the frequency of withdrawal and the period of withdrawal - fixed instalments or till the balance is available in the fund. The underlying fund would continue to grow, generating wealth for the investor, helping beat inflation and making sure that the fund lasts longer and the SWP continues for a longer period of time. The SWP is also a smarter and more tax-friendly way of withdrawing money and financing your needs.
A very common scenario and purpose of SWP would be retirement planning. Here, the investment would be normally made in a hybrid scheme which has a mix of both primary asset classes - equity and debt. While equity is for the long-term and debt is usually for the short term, the hybrid fund provides the ideal combo for financing retirement needs. The equity portfolio of portfolio will give that extra boost to the fund to grow and last longer. However, the choice of the fund category and scheme would depend on how much risk you want to take and how soon you wish your SWP to start (investment horizon). Regardless of where you invest, an SWP can be smartly used as your own pension /annuity product.
A SWP can also be started in financial situations where there is a temporary need to supplement your monthly income. The recent pandemic saw people losing jobs and having a cut in their regular income. If you have adequate investments already with you, an SWP could be used as a tool to tide over your unplanned financial stress. Note that in times when you have surplus cash inflows, aggressive savings should be done using SIP instead of withdrawing with SWP.
Another smart use of SWP would be in scenarios where you invest and dedicate a corpus for a specific objective/regular expense and an SWP is created to finance the same. The corpus would keep growing slowly while small withdrawal amounts would be credited to the bank account and from this, the intended expenses would be met. Even these expenses can be automated to ease your life. As an investor, you would only need to keep track of the fund balance from time to time and replenish it, if required. There can be many scenarios where such an approach can be used in financial planning. A few examples are cited below.
  • Investing on behalf of children and then having SWP for education fees and pocket money.
  • Investing on behalf of the wife and then having SWP for monthly household expenses, utility bill payments, etc.
  • Investing on behalf of dependent parents and then having SWP for meeting their expenses.
This is an interesting question. What should be your sustainable or safe rate of withdrawal in order to make sure that your fund lasts for the required period of time and even longer? A complementary question would be, what should be my investment corpus to have the desired stream of money last for the required period of time? This is in fact at the heart of everyone trying to retire early and for those who are reaching retirement soon.
The withdrawal rate is the percentage of corpus you intend to withdraw every year. So a 4% rate would mean that you are withdrawing Rs.1,00,000 every year (Rs.8,333 monthly) on a corpus of Rs.25 lakhs. Obviously, the lower the withdrawal rate and the higher the investment corpus, the better. Also, the expected returns from the fund also matter in replenishing itself and growing to finance withdrawals for a longer period of time. Usually, experts have pointed out that a 3-4% rate is safe but there are also critics who say that it should be lower to account for uncertainties and living standard improvements. The rate of withdrawal on your SWP should be such that it makes sense and is as per your needs, else a higher rate would mean that your corpus gets exhausted too early, living you stranded.
Just like SIP bring discipline in investing, SWP brings discipline in withdrawals. You also benefit from rupee cost averaging with SWP, since a fixed amount is redeemed on a regular basis and one is not too much concerned about market volatility. When market conditions are favourable, fewer units will be redeemed and when conditions are adverse, more units will be redeemed. With SWP, redemptions will be spread out evenly and it will protect you when redeeming a large amount at a time when markets are low.
The amount withdrawn in an SWP consists of both the original investment (on the earliest date) and the capital gains on it. The liability to pay tax is only applicable to the capital gains component and not to the entire amount on First-In-First-Out (FIFO) basis. Moreover, no TDS deduction is applicable for investors on SWP withdrawals, unlike FDs. However, based on the type of scheme and withdrawal amount, capital gains tax will be applicable. With SWP, you can smartly reduce your capital gain tax liabilities. Here is an overview of taxation on different types of mutual funds.
Type Equity Oriented funds Debt funds
Short-term CG tax 15% (less than 1 year) As per the tax slab (less than 3 years)
Long-term CG tax 10% without indexation, in excess of Rs. 1 lakh 20% after indexation
SWP in mutual funds is an efficient way to have a regular source of income. However, SWP must be carefully planned with your financial goals and objectives in mind. Unplanned SWP implementation may jeopardise your financial wealth and objectives.
To plan your investments, seek the advice of experts whose wealth management strategy will benefit you in the long run. They provide investment in a variety of asset classes and manage your investment portfolio so that you can enjoy the returns without having to worry about anything.
NJ E-wealth
Preparing Yourself For Rainy Days
Preparing Yourself For Rainy Days
Even though the COVID-19 global pandemic began more than two years ago, we are still feeling the effects and disruptions in our lives. If we've learned anything from COVID-19, it's that the only thing certain in life is uncertainty.
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As a general rule, for wealth creation and financial freedom, we need to save aggressively over a short period of time. People looking to retire early too need to cut expenses and save more in a short time. Cutting down on your expenses becomes avoidable if you feel that your financial situation is not good and if you feel that there are bad times ahead. To stay prepared for such a situation, one needs to cut back on non-essential and discretionary expenses. Examine your spending habits and make a note of any such expenses you could forego. It will make you save more and make your cash last longer during a crisis. Frugality, minimalism and short-term sacrifices, to the extent you feel comfortable, will surely pay off in the long run and save you in your rainy days.
The primary step in preparing for a rainy day is to set aside a sufficient emergency fund. When unexpected expenses exceed your monthly budget, an emergency fund can help you stay afloat.
There is no universal measure for emergency funds. As a general rule, save at least three months' worth of your regular expenses. This amount of money cannot be saved overnight. The trick is to start saving small amounts regularly and consistently so that you can accumulate your desired amount over time. Even if you can only save a small amount, it will give you a sense of security if you need money right away. To avoid being tempted to spend your emergency fund, keep it in a separate savings account.
It is easier said than done to protect your loved ones and prepare for the worst-case scenario, but it is critical in today's world to be prepared for the unexpected. It is vital to ensure that you have sufficient insurance coverage for all possible scenarios. To help mitigate the financial impact of any unexpected event, people of all ages and income levels should purchase insurance policies as required, covering the different risks that they are exposed to. This includes the risks of the 4 Ds' - death, disease, disability and damages.
Apart from life insurance and health insurance, one must also explore other insurance covers like personal accident, critical illness, travel insurance, global health insurance, etc for personal coverage. In addition, vehicle insurance with comprehensive coverage, home insurance, shopkeepers insurance, fire & marine insurance, professional indemnity, etc can also be explored on a need basis.
Sometimes, the salary from your primary job is not enough to make ends meet. So, having a side hustle or a passive source of income pays off. As a result, you can save and invest the money you earn from them to create wealth, an emergency fund or to fund your discretionary expenses, without affecting your monthly budget. It is an excellent way of improving your financial security and hedging against your primary income source. Having multiple income sources can be a boon in times of crisis and it is something everyone should aspire for.
It is always better to have low liabilities and debt, regardless of your financial situation. As a general principle, your monthly debt repayments, or EMIs, should ideally be lower than 30% and never more than 50% of your net income. Having too much debt can lead to a cycle of overwhelming stress and the inability to save for future financial security. With credit easily available, most of us would be tempted to fall into the debt trap, spending more on non-asset creating, personal and consumer loans, at the cost of future wealth creation. In times of financial difficulties, your debt burden will be the primary cause of high stress on you and your finances.
You don't require any crystal ball to be prepared for unexpected events you couldn't have predicted. You don't need to know where they will occur, or even what they do, to protect your personal finances and safeguard your financial goals. The above things can help you not just tide over bad times and situations of financial stress but also prepare you to face uncertainties in life with confidence. As the new year starts, let us step up our finances and indeed our financial objectives and behaviour and set the right tone for the rest of the year.
NJ E-wealth
Introduction to Global Health Insurance Cover
Introduction to Global Health Insurance Cover
The world has become a smaller place. Today, be it education, career, business or leisure /holidays, the national boundaries have blurred for us. All these are no longer big news to us. But the time is ripe to add one more motive to this list - medical treatments. When we are planning the best for us when it comes to the said things, why not add medical care and intervention to this list? Treatment in foreign countries offering the most advanced health care treatments is no longer limited to just the super-rich and the celebrities. It is also time for you to think of it as an option available to you.
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Global health insurance plans are designed to cover your hospitalization costs, whether planned or unplanned, seamlessly anywhere across the globe. Coverage usually includes in-patient and out-patient treatment expenses, air ambulance, and emergency treatments subject to the policy's terms and conditions. The main advantage of having this policy is getting medical attention whenever and wherever required, be it in the country you reside in or any foreign land.
A global health insurance policy is not the same as a travel insurance policy. A global health cover is designed for those who need to have the option of treatments abroad, whether planned or unplanned. In case you are in India and planning treatment /hospitalization outside India, the same needs to be certified by a verified medical practitioner and you need to intimate the insurance company before travelling abroad for treatment.
When it comes to healthcare, many international destinations provide highly advanced treatment facilities. These facilities enable the insured to receive the best treatment possible for even the most critical illnesses. It even allows the insured to choose the hospital or doctor of his choice for faster, more comprehensive, and better international healthcare. Many policies even cover consultations with foreign doctors.
With global health coverage, you get financial security in the event of a health emergency as well. If you face a medical emergency in outside India with no financial/personal support, it can be scary. However, with global coverage, you can receive treatment without worrying about financial implications.
Global health insurance coverage can also aid with day-to-day medical expenses that you and your family may encounter outside India.
Under Section 80D of the income tax act, the insured can claim a deduction of up to Rs. 25,000 if the policyholder's age is below 60 years.
Buying any insurance policy requires you to have proper due diligence. With global health cover too, you should have a proper understanding of what you are getting. Here are a few things to keep in mind.
  • The scope of the countries covered under the policy.
  • Policy terms & conditions related to pre-hospitalisation, post-hospitalisation costs, OPD treatments, copayment clauses, coverages & exclusions, waiting periods for pre-existing diseases, etc. These may vary from insurer to insurer.
  • For international coverage, most plans have a specified sum insured and certain illnesses listed. You must choose an adequate coverage amount, given the high cost of treatment abroad. Usually, a cover of at least Rs.3 crores should be considered.
  • Take note of the hospital network that the insurance company has. Usually, insurance companies have tie-ups with internal platforms with hospital chains and networks offering cashless facilities.
  • Check the credibility of the insurance company for handling international claims and the claim registration process.
The healthcare you aspire for is today closely linked to your financial status and lifestyle. The benefits offered by global health policies are quite exhaustive. Such a policy offers you great peace of mind and access to quality healthcare at a global level, whether you are a business person, an employee, an avid traveller or a normal individual who has never stepped outside India. Get in touch with your insurance expert to know more and find the right product for yourself. Who knows? This can lead to something no less than a blessing.
loans
No, the tenure of the loan cannot be changed once the loan is disbursed.
a) LAS term Loan application where the securities are pledged and loan account number is generated.
To cancel the same, the client needs to raise a query on E- wealth Desk.
E-wealth Desk >> Help & Support >> Send query [Query Type: Loan against security(LAS) related >> Query Subtype: Request for Loan cancellation (before Disbursement)]. Submit a request.
(https://ewa.njindiaonline.com/ewa/help-and-support/send-query)

b) LAS term Loan application where the securities are not pledged and loan account number is not generated.
Client has to send mail at loanservices@njgroup.in for Loan Cancellation.
Sub: Request for Loan Cancellation before Disbursement for UCC: 000000
Name:
UCC:
Ref. No.
Reason For cancellation:
Fund Manager INTERVIEW
patner Interview
Mr. Niket Shah
Fund Manager - Motilal Oswal Asset Management Company Limited
Niket has 8 years of rich experience in tracking the Midcap stocks covering array of sectors like consumers, media, e commerce, chemicals, textiles and Agri . He holds M.M.S. - Finance (Master of Management Sciences) from Wellingkar Institute of Management, Mumbai.
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Kotak Deepak Amrutlal (ARN-127784)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Deepak A Kotak
  • Retirement Assessment
  • Child Future Assessment
  • Portfolio Review
  • Mutual Fund:Debt / Equity / ELSS

"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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