How to Calculate the National Pension Scheme?

The National Pension Scheme is a government-run pension scheme that offers excellent retirement saving options to all the citizens of India. Anyone employed in the private or public sector can get enrolled in the NPS and build up a retirement corpus for himself. The National Pension Scheme offers various other benefits too, and this makes the scheme an ideal choice for those who like planning ahead for their golden years. Take a look at this article to know more about the NPS and how you can invest properly in the scheme to get the best returns.

Using the NPS calculator online

As stated, you need to plan your retirement corpus in accordance to your needs. You can invest in various sums in the NPS account, with the minimum yearly amount being INR 1000. It is always a good idea to use the NPS calculator online to calculate how much you should invest in order to have a secured retirement. The online NPS calculator takes the following into consideration:

• Age -
  This is an important factor as the age will determine how many years you have to save in the NPS account.
  
  

• Principal -
  The amount you invest will determine your return.
  
  

• Interest -
  The interest you expect to earn will also have an impact on the NPS investment online.
  
  

• Percentage of an annuity -
  The percentage of the fund you want to invest in the annuity is another important factor that the NPS calculator will look for.

Once you enter these figures in the NPS calculator online, your returns will be shown to you.

NPS investment online

It is very easy to start an NPS investment online. You can use any reliable app such as the ETmoney app and instantly start an online NPS account. The advantages of having your NPS investment online include:

• Very easy to open -
  You can open a National Pension Scheme account online in a very simple and hassle-free manner. You can simply download the ETmoney app and get the job done in a matter of a few minutes. You can do so from the comforts of your own home, as the account is accessible remotely. 

• Easy to make payments -
  You can make all future contributions to the NPS account online with the click of a few buttons only. This makes it very simple for you to be regular and more disciplined with your savings in the NPS account.
  
  

• Can keep track -
  The National Savings Scheme details are available on the app you use to open the account. If you need to go and fetch any information related to the account, or you want to go over the details of your account, you can do so online in a matter of a few minutes.
  
  

• Easy to make withdrawals -
  Partial withdrawals are allowed in NPS after you complete seven years in the policy. If you need to make a withdrawal to meet an emergency, you can raise a request for it online and have the money in your bank account in a very short span of time.

The documentation is very simple and so you can instantly open the NPS account online. You just need a few basic KYC documents and your online NPS account will be set up.

The final word

If you are looking to invest in a reliable pension scheme, NPS is one of the best options you have. You can use a very effective NPS calculator online to calculate your returns before you invest. Then, you can make the NPS investment online in a trustworthy and quick manner. With so many benefits on offer, you should open the NPS account right away, if you have not done so already.

How is Fixed Deposit better than any other investment?

A fixed deposit is a very good and safe investment option that many people opt for. There are several benefits you get when you open a fixed deposit account. From steady rates of interest to low risk and FD helps to stabilize your financial portfolio while bringing in some good returns. Read on to know more about the fixed deposit rates and other benefits and understand why you need to make a few FD investments as well.

Factors that make a fixed deposit a great investment

It is always a good idea to invest in a fixed deposit. You can download a good personal finance app and start your FD investments today. Here are a few reasons why:

1. Better interest than RDs -
   There are two types of bank deposits that you can go for - the fixed deposits and the recurring deposits. While both are safe and fruitful, you get better interest rates in FDs than you do in RDs. The FD interest rates in SBI, for example, range between 5% and 6%, while the RD interest rates stay around 4% to 5%. Therefore, you get high-interest returns when you invest in an FD.
   
   

2. Better liquidity than post office schemes -
   Another reason for you to consider a fixed deposit is that it offers better liquidity as compared to the post office savings schemes. The popular post office schemes such as the PPF and NSC have long lock-in periods that last for years. Even if you have an emergency, you don't have access to your own funds. This is not the case with the FDs, as you can break a fixed deposit at any time if needed. The fixed deposits are also available in short durations, at times as low as 7 days. The fixed deposit rates differ with the duration, but an FD is definitely more flexible.
   
   

3. Less risk than mutual funds -
   The FD interest rates in SBI, as well as other banks, are fixed. They do not change as per the market conditions. This fetches you fixed returns, unlike that of the mutual funds. A mutual fund is a much riskier savings option as compared to a fixed deposit. It surely has the potential to earn higher returns, but the risk is much higher and not suitable for everyone.
   
   

4. Guaranteed returns -
   If you want to earn some safe and fixed yields, depending upon a fixed deposit is a good idea. The fixed deposit rates are always fixed so you know right from the beginning how much you stand to earn. This helps you to make and stick to financial goals in an easy and successful manner.
   
   

5. Tax saving -
   If you log in to your personal finance app and look for some tax-saving investments, you will find the fixed deposits there as well! Yes, there are some special fixed deposits that help you to save tax. These FDs have a slightly different interest rate structure and lock-in period clause. Read the terms carefully and then invest to get the best returns and to save your tax as well. Tax Saving Fixed Deposits have a lock-in of 5 years.
   
   

6. Reliable -
   And last but not the least, you get to make a very reliable and bankable investment when you opt for a fixed deposit. As you know, the FD interest rates in SBI and other banks are fixed. All the other clauses are fixed and transparent too, so there is no room for any ambiguity or confusion. As a result, you end up with a secured and reliable investment.

The final word

These are the factors that prove that a fixed deposit is indeed one of the best investment options that you have. Download a good personal finance app and start your FD investments right away.

Do Thematic Mutual Funds Really Add Value to Your Investment Portfolio and how

 Mutual funds come in different varieties and thematic funds are one such variety of mutual funds. Thematic funds are equity-oriented schemes which invest in the stocks of companies reflecting a common theme. For instance, if the theme is finance, thematic mutual funds would invest in stocks of banks, NBFCs, insurance companies and other companies which fall under the purview of finance. Similarly, for infrastructure themed mutual funds, the fund manager would pick stocks of companies related to the infrastructure industry like cement, construction, power, steel, etc. 

Thematic v/s sectoral funds

Thematic funds are more diverse compared to sectoral mutual funds. Sectoral funds invest in a particular sector like banking, insurance, power, etc. Thematic funds, on the other hand, reflect a particular theme and combine different sectors under the same theme. So, while sectoral funds have concentrated portfolios, thematic mutual funds have diversified ones.

Are thematic funds valuable to your portfolio?

To answer this question you need to have a look at the benefits offered by the top thematic mutual funds in India. Here are such benefits –

• Diversification 

The first benefit which thematic funds offer is the benefit of diversification. By investing in a thematic fund you can get exposure to stocks of companies engaged in different sectors. The companies might also have different market capitalizations allowing you to invest in multi-cap stocks. Thus, for diversifying your portfolio, you can invest in top thematic mutual funds in India.

• Good returns

Selection of the best thematic mutual funds online is the key to getting good returns on your investments. If you choose the right theme, you can get such attractive returns that even outperform the market. So, before investing in the best thematic mutual funds online, monitor the market sentiments across different themes. For instance, infrastructure boomed when the Government introduced the Smart City concept. In recent times, housing could be a good theme as there is an increasing demand for affordable housing. So, monitor potential themes and then choose the best thematic mutual funds online so that you can generate exceptional returns on your investments.

• Low tax rates

Since thematic mutual funds are equity-oriented schemes, you can get the benefit of equity taxation. Short term capital gains, if you redeem your funds within 12 months, would be taxed @15%. Long term capital gains, on the other hand, would be tax-free up to Rs.1 lakh and the excess would be taxed @10%. The tax rates are low allowing you maximum returns.

So, thematic mutual funds do add value to your portfolio and you can consider them for their returns and diversification. However, you should be careful about picking the right theme. Some of the top thematic mutual funds in India are as follows –

Name of the fund	1-year return*	3-year returns*	5-year returns*
SBI Magnum COMMA Fund	27.96%	5.94%	17.31%
ICICI Prudential FMCG Fund	10.67%	8.3%	12.62%
Franklin India Opportunities Fund	24.95%	6.85%	11.78%
Nippon India Quant Fund	16.82%	6.55%	10.61%
SBI Magnum Equity ESG Fund	12.92%	10.37%	12.63%

(Source: https://www.etmoney.com/mutual-funds/equity/thematic/44)
(*Returns as on 11th December 2020) 

Invest in thematic funds through ETMONEY’s personal finance app which allows you to invest online with ease. Download the personal finance app on your Smartphone and register on it. Compare the best thematic funds and pick the one which is the best. You can also invest without any commission or brokerage fee through ETMONEY’s personal finance app which is easy, convenient and cost-free.

Top Reasons and factors when should switch away from small and mid-cap funds

Small and mid-cap mutual funds are equity-oriented schemes which invest in the stocks of small and mid-cap companies of the financial markets. Companies having a market capitalization below Rs. 5000 crores are called small-cap companies while those with a market capitalization of Rs.5000 to Rs.10, 000 crores are called mid-cap companies. Mutual funds which invest in stocks of such companies are called small and mid-cap funds respectively. 

When you invest in the best midcap mutual fund online or the best small-cap fund, you can get the following advantages –

• Attractive returns when the market is bullish

• Equity taxation on your investments

• Quick short-term returns when the markets are rising 

In fact, when the equity market has a positive sentiment, investing in the best midcap mutual fund online or in small-cap funds is quite lucrative. It is because mid and small-cap companies are in their development stages and when they grow, their market valuation rises considerably. Thus, when the market is on a high, the stock of these companies posts the maximum growth allowing you to earn attractive returns. However, the risk profile of such funds cannot be avoided. There are some instances when you should switch away from the top mid-cap fund or small-cap fund which you might have invested into. The top three reasons for such switch are as follows –

1. When the market is expected to correct itself

If the stock market is providing very good returns and the valuation of small and midcap companies is increasing consistently, there might be a market correction in future, especially when the rise in valuation is not supported by the company’s performance. When the correction happens, small and midcap stocks might suffer the highest fall in value. So, if you believe that the market is quite high and might take a corrective course in the near future, you should switch away from small and midcap funds.

2. When the market becomes unstable and uncertain

The recent COVID pandemic was an example when the stock market became highly uncertain and unstable and a crash followed. Though the market is now recovering, if there is another cycle of instability, your small and midcap investments are bound to suffer. Since small and midcap companies face the highest market volatility, you should switch away from such mutual funds when the market starts falling and becomes unstable. By switching away, you can protect your returns from being eroded.

3. If you have a short-term investment horizon

If you have a short-term investment horizon and you would need funds in the next couple of years, switching away from small and midcap funds would be ideal. This is because these funds are highly volatile and if the market becomes bearish, you might end up losing your capital. So, unless you have a long term horizon, try and switch your investments from the top mid-cap funds to other mutual fund schemes for better returns.

Investment in small and midcap funds should be done only when you understand the inherent risk-return trade-off of your investment. You can get the best returns through the top mid-cap funds and small-cap funds but you should also know when you switch your investments to preserve your returns. So, manage your investments wisely for maximum gains. 

To invest in a suitable mutual fund scheme, you can download the ETMONEY App on your Smartphone. The ETMONEY App helps you to invest in the best midcap mutual fund online and also switch your investments when needed. So, use the ETMONEY App to invest and also for managing your investments as per changing market dynamics.

What are the risks when you invest in mid-cap schemes?

Mid-cap funds in India are equity-oriented mutual fund schemes which invest in the stocks of mid-cap companies, i.e. companies which have a medium market capitalization ranging from Rs.500 crores to Rs.10, 000 crores. These companies are in their growth stages and so, when markets become bullish, mid-cap funds in India can offer attractive returns to investors. This return is what pulls investors to mid-cap funds but what about the risks involved?

Being an equity mutual fund scheme, mid-cap funds are, by default, in the high-risk category. This risk is heightened by the fact that mid-cap funds invest in growing companies which are not fully established in the market. Here are some of the risks associated with mid-cap funds in India which you should know about –

• Volatility risk

If there is a fall in the market or when the market enters a bearish phase, mid-cap stocks lose out the most. In such cases, mid-cap funds can even offer negative returns. So, mid-cap funds have a high risk of market volatility and their returns are dependent on a bullish market or growing market.

• Liquidity risk

In a bearish market, finding buyers for mid-cap stocks is an issue because the value of such stocks falls considerably in a crisis. As such, fund managers of mid-cap funds find it difficult finding buyers for the portfolio if they want to sell specific stocks and the fund, therefore, carries liquidity risk.

• Limited stock choices

There are a limited number of quality mid-cap stocks which fund managers can pick to create a good portfolio. When investors start favouring mid-cap funds and investments increase, fund managers find it difficult to find the quality stock. They either dilute their stockholding or pick up stocks of less valuable companies which has a risk of affecting the valuation of the fund portfolio. Thus, under mid-cap funds, fresh investments might be stopped by fund managers when they do not have suitable opportunities for investments.

These are some of the relevant risks which are associated with mid-cap funds in India. Despite these risks, the return potential of these funds cannot be ignored, especially if you pick the top-performing mid-cap mutual fund. So, if you have a high-risk appetite and want to invest for the long haul, you can invest in mid-cap mutual funds. Some of the top-performing mid-cap mutual funds are as follows –

Name of the fund	1-year return*	3-year returns*	5-year returns*
Axis Midcap Fund	18.46%	13.52%	14.43%
DSP Midcap Fund	18.26%	6.94%	13.59%
Invesco India Midcap Fund	17.66%	7.69%	12.74%
Kotak Emerging Equity Fund	15.17%	5.52%	12.9%
PGIM India Midcap Opportunities Fund	38.31%	8.69%	NA

(*Returns as on 20th November 2020)
(Source: https://www.etmoney.com/mutual-funds/equity/mid-cap/35)

To invest in these top-performing mid-cap mutual funds in India you can choose ETMONEY’s best personal finance platform. ETMONEY has the best personal finance platform because it allows you to invest in the best mutual fund schemes online with some simple click your mouse or by tapping the touchscreen of your Smartphone. ETMONEY offers you the choice to invest through its website or its mobile app making it easier for you to invest and manage your investments on the go. What’s more, no commission or brokerage is charged by ETMONEY which solders its image as the best personal finance platform for all your investment needs.

NPS vs pension plans from insurance companies: which is better?

Retirement planning is essential if you want to create a substantial corpus to last you for your life. When doing so, choosing a suitable investment avenue is also crucial.

There are different types of retirement saving solutions available in the market. Two of the most popular of them are the National Pension System (NPS) and life insurance pension plans. Which do you think is better?

What is the NPS scheme?

The NPS scheme is a retirement scheme which helps you create a retirement corpus and also receive pensions from the accumulated corpus. Your investments to the NPS scheme online are allocated to market-linked funds for maximum returns.

What are life insurance pension plans?

Life insurance pension plans are retirement oriented plans which come in two variants. The deferred pension plan is one which helps you accumulate a retirement corpus. The immediate annuity plan, on the other hand, pays lifetime annuities immediately after you buy the plan. You can choose either or both of these plans to plan your retirement.

NPS v/s life insurance pension plans – which is better?

To find out which scheme is a better alternative, let’s have a look at the similarities and differences between the two –

• Similarities 

• Both NPS and deferred pension plans help in the creation of a retirement corpus

• Market linked returns can be availed under NPS and unit-linked pension plans

• Lifelong pensions are paid by both NPS and immediate annuity plans

• You can commute up to 60% of the accumulated corpus under both the schemes

• Partial withdrawals are allowed under both the schemes

• Tax benefit on the amount invested and the commuted corpus is available under both the schemes

• The facility of switching is available under both NPS and unit-linked deferred pension plans

• Differences 

• You can withdraw from the NPS scheme online from the third year. Under unit linked deferred pension plans, such withdrawals are allowed from the sixth year

• NPS plans provide an additional tax benefit under Section 80CCD (1B). Moreover, if your employer contributes to the NPS scheme, the additional deduction can be claimed under Section 80 CCD (2) both under the old tax regime and the new tax regime

• You have the choice of selecting and also switching the pension fund manager under NPS. Under unit linked pension plans, the company once selected cannot be changed

Which is better?

The NPS scheme scores points over life insurance pension plans in many aspects. Firstly, the additional tax benefit makes NPS schemes a clear winner. Under the new tax regime, you wouldn’t be able to claim tax benefits if you invest in life insurance pension plans but the NPS scheme would give you such tax benefits if your employer contributes to it. Secondly, access to funds is allowed within a shorter time span in the NPS scheme. Lastly, the facility to change the pension fund manager is an advantage as it allows you to pick the company which gives the maximum returns. Taking these points into consideration, the NPS scheme is a better choice for retirement planning.

To invest in the NPS scheme online you can choose ETMONEY’s best personal finance platform. This best personal finance platform allows you to invest through a computer or through your Smartphone through the ETMONEY app. Moreover, you can invest and complete your KYC formalities online with a minimum of hassles.

So, choose the NPS scheme for building a retirement corpus and invest in it through the best personal finance platform of ETMONEY.