Have you wondered what’s so special about Systematic Investment Plans (SIP)? One of the main reasons for recommending the SIP strategy of investment is to maximize your profits. Ask any mutual funds‘ expert how to achieve a long-term financial goal and her/his answer would be, “Start an SIP investment in an equity-based mutual fund”. But before we get to that, let’s understand what an SIP is.

What is SIP?

An SIP is a mode of investment in mutual fund schemes. It allows individuals to periodically invest small amounts over a specific period. The frequency of the investment can be daily, weekly, monthly, quarterly, or annually.

The popularity of investing via SIP in mutual funds has gone up in the past few years and several individuals have discovered the charm of investing in mutual funds via SIPs. Another factor that led to the popularity of SIPs and mutual funds is AMFI’s [Association of Mutual Funds in India] ‘Mutual Fund Sahi Hai’ campaign.

The SIP methodology aids you to stagger your investments in equity mutual fund schemes over a specific period. Mutual fund experts believe that staggering your investments is a better way to invest in mutual funds as SIPs help average out purchase costs and maximize profits. This concept is known as rupee cost averaging. It allows you to purchase more units of a mutual fund when the markets are low and vice versa. What’s more, SIPs are a convenient tool for salaried individuals to invest in mutual funds regularly. Here’s a quick guide on how to invest in SIP.

You can engage in an SIP mutual fund investment with a pre-fixed amount regularly, depending on your convenience, through post-dated cheques or electronic transfers. For this, you have to fill up an SIP mandate form and an application form on which you need to indicate a date of choice on which the SIP should be debited. Subsequent SIPs will be automatically debited courtesy of the standing instructions you provide with this application. You can submit these forms to the office of the Investor Service Centre/Mutual Fund or the closest service centre of the Registrar & Transfer Agent.

You also need to specify the amount that will be debited from your account and credited to the mutual fund scheme periodically. You can start investing with amounts as low as Rs. 500 per month. You can use a SIP Calculator to calculate the returns you would earn on your SIP investments and also tells you how much you would need to invest every month to earn a target corpus.

Why should you be a part of the mutual fund SIP revolution?

SIP investment helps inculcate financial discipline into your life. It also aids you to invest regularly without wrestling with market movements, research, etc.

Another benefit of investing via SIP is the power of compounding. When you regularly invest for a long duration, you get to earn returns on the returns earned by your investments, i.e. your money starts to compound. This helps build a large corpus over time that ultimately helps you achieve your long-term financial goals.

Choosing to start an SIP is the first step towards financial independence and the sooner you start, the more beneficial it would turn out for you.

Two-wheeler insurance cover protects your bike by compensating you in case of partial or total damage. However, the amount of protection and the extent of the coverage completely depends on the type of policy chosen by a buyer.

In a third-party policy, only the property or person of the third-party is covered. This comes as a mandatory requirement to all bike owners in India. The second type of cover is a comprehensive two wheeler insurance policy and it includes compensation for own damage as well as third-party damage.

Several factors are considered to calculate the premium amount, such as:

• The model of bike
• The modifications and specifications
• The type of applied motor insurance
• The age of the bike

In simple words, a two-wheeler loses its value as it ages due to things like wear and tear, etc. This process is known as depreciation. When filing claims, you don’t receive the complete value of your bike due to depreciation. Therefore, people lack interest in filing insurance claims even on valid grounds.

A comprehensive policy comes with a unique option of add-ons. It is an extended cover applied to strengthen the existing basic cover and provide a sense of financial security. You can even opt for these while purchasing motor insurance online. One such additional cover would be the Zero Depreciation add-on. If you opt for this cover, the depreciation amount won’t be considered, i.e. there will be no deduction and you will receive the original value of your bike.

Advantages of a Zero Depreciation cover

• A Zero Depreciation cover enhances and adds more value to your existing comprehensive policy.
• It gives an assured sense of security and mental satisfaction knowing that your two-wheeler is secured.
• No out-of-pocket expenses.
• Makes the basic insurance policy stronger and more efficient.
• When settling claims for the vehicle parts that are insured, the insurer does not consider depreciation.

More insight on Zero Depreciation cover

• A Zero Depreciation cover can be bought while buying a new insurance policy or at the time of renewal.
• The coverage applies to a wide range of materials, including fiberglass, plastic, rubber, and nylon.
• The cover can only be purchased for new bikes or bikes that are up to two-years-old.
• The number of claims you can make on this cover completely depends on the insurance company you’re opting.
• Damages resulting from normal wear and tear won’t be included in the Zero Depreciation cover.
• This cover can be applied to bikes with modifications.
• Damages from mechanical breakdowns are not included in the cover.

To be able to make a motor insurance claim, make sure to renew the Zero Depreciation cover annually, provided your vehicle is eligible for this cover, and enjoy its benefits. For people living in accident-prone areas or people with expensive bikes, this cover is a must-have. If you don’t already have it, opt for it during renewal or get ready to face the effects of depreciation.

Add-on covers in two-wheeler and car insurance are a type of extension purchased over the basic comprehensive motor insurance policy to strengthen it. It should be noted with concern that even the basic comprehensive insurance plans for two- or four-wheelers have quite some limitations.

An add-on cover, thus, provides customized protection that is offered upon agreement with the motor insurance providers.

Different types of add-on covers that you can choose from

Zero Depreciation

Zero Depreciation/Depreciation Shield is the cover provided against deductions of wear and tear in the case of an insurance claim. Through this, the net value of the claimed amount is higher as compared to the deducted amount for depreciation. Nonetheless, buying a Zero Depreciation add-on cover for you car insurance policy gets you full compensation for the cost of repair and replacement from the insurer in the case of an accident. Note that tyres and batteries are not covered under the Zero Depreciation cover.

24*7 Spot Assistance

This cover provides quick response in terms of help in the case of a mechanical or technical breakdown or even an accident. Moreover, it is a package that contains a variety of services that you receive from the site of the event.

Following are some of its features:

• You get minor repairs of the covered vehicle on the site
• Assistance in battery jump-starting
• Emergency fuel delivery
• Emptying the fuel tank and reservation of the fuel safely when the need be
• Tyre refitting
• Towing the vehicle from the site to the garage.

Engine Protection cover

This is a customized protection plan for the engine. This covers a person from the complete failure of the gearbox or the engine that may result from natural causes.

Its extent in coverage includes

• The gearbox and the engine are repaired when need be and replaced when damaged beyond repair
• Labour costs for repair and maintenance
• Engine maintaining charges
• Replacement of minor parts

Consumables Expense cover

Expenses that are incurred as a result of replacing consumables won’t be covered under a regular motor insurance policy. The consumable parts include bolts, nuts, oil and lubricants, coolants, grease, gaskets, among others.

Key & Lock Replacement cover

In case you lose your vehicle keys, you receive a fixed amount or actuals incurred for the cost of replacing it. If you are one of those people who tend to lose or misplace their keys, then this cover is a must-have for you.

A very important point to note would be that add-on covers cannot be purchased with a third-party policy. Only if you have opted for a comprehensive two wheeler insurance or car policy can you buy these extra covers and customize your existing plan as per your needs.

These additional covers can be purchased online while purchasing a new policy or during renewal. Remember that these add to your premium amount and so it is advised to first calculate the amount using an insurance premium calculator online and then go ahead before making a purchase. Remember, always avoid buying add-ons that you won’t require.

Loan Against Property [LAP] is a product that has become a popular resort in times of financial need. It is offered by most leading financial companies and banks. The type of loan can be availed by providing your property as a collateral. Funds obtained through an LAP can be used for several purposes that includes business expenses, marriages and educational fees to name a few.

If you are looking to secure a loan against property, there are some aspects that you must be clear of. This will ensure that you do not face hassles during the process or disappointment with loan denial. Here are some things that you must be aware of before applying for a loan against property.

Eligibility check by banks – The bank you pick for your property mortgage loan will evaluate and verify your provided information before approval. Several aspects such as your property value, payment track record, credit history and more are closely checked. Depending on the findings, you loan eligibility may increase or reduce. Thus, ensure that you provide all the information to best of your knowledge and have all the required documents well in place.

LTV [Loan to Value] ratio – The LTV ration is decided based on the market value of the property that you provide as collateral. Typically, it may be limited to 40-80% of the market value of the property. Based on the same, you may be granted a loan that ranges anywhere from Rs. 10 lakhs to Rs. 5 Crore.

Flexible tenors – Financial companies offer flexible tenors on mortgage loan against property. Depending on other affecting factors, you can opt for a tenor of 1 to 15 years. A longer tenor makes for a viable option if you have a fixed budget plan while it will also ease your EMI payments.

Default can cause loss of property – You must be aware that not paying your EMIs on time or defaulting in anyway can lead to the risk of losing your property. This is the property that you provide as collateral. For this reason, you should avoid pushing your lending capacity. Over-leveraging yourself brings with it a higher chance of default. It is important to evaluate your budget and stick within your means for the monthly EMIs.

A loan against property is a great way to raise money. However, it is important to note the above factors and make an informed decision keeping in mind your repaying capabilities.

The thought of saving money for your retirement may have struck you several times. However, you have been deterred from your plans on several occasions. Experts continue to emphasize the importance of investing money in your retirement early on. It is essential to support the lifestyle that you wish to live in the years to come.

When planning your retirement corpus, one of the most difficult questions to approach is how much money should you save? What is the total fund amount that it would take for you to support a comfortable retirement?

Well, there is no one-fitting answer for the total corpus approach that you should use when saving for your retirement. It essentially means that it differs based on the lifestyle that would like to live in your later years. Consider the several goals that you aim to achieve during the period. These could include buying a vacation home, going on a foreign trip, funding the educational fees of your grand-kids or just about anything. Closely consider all the possible goals that come to your mind and move towards building a strong savings goal.

Rule of thumb to follow

A general rule of thumb that you can follow is having a ‘replacement income’. This essentially means having 80 percent of the yearly salary that you have earned while working. If you make 10 lakhs a year when employed, you should have at least 8 lakhs a year when retired. Once you have this amount at hand, you can then multiply it by the average life expectancy after you retire. This can be a minimum amount and you can add in the extra requirement based on your goals.

Aspects to consider when saving for retirement

There are two aspects to consider when placing a mark on the amount to save during retirement. These include:

Retirement and inflation – It is important to keep inflation in mind when deciding your retirement corpus. Over time, the rate of goods and services are bound to increase. This will decrease the stretch- ability of your rupee. Unless you invest in a special kind of retirement fund, your retirement savings remain flat. Thus, closely consider this aspect when deciding on your plan.

Use a mix of investment options – Your retirement plan must include different investment options such as senior citizen savings accounts, fixed deposits, mutual funds and more. Keeping a balance will ensure that you get the best returns. Senior citizen savings accounts are specially formulated with higher interest rates. On the other hand, options such as mutual funds can earn you high returns with a higher degree of risk. You must make an informed choice for better retirement planning.

Cashless payment has become a major part of our lifestyle and payment behavior. Credit cards are one of the most popularly used modes of cashless payments and the plastic card has become an essential part of wallets. This can be credited to the fact that a large number of retailers accept credit card payments. Additionally, users can also avail of a large number of benefits associated with credit cards.

If you are deciding on whether you must use one for your daily bill payments, here are some reasons why you must:

Payment flexibility – Even with a well-planned budget, it can be difficult to meet significant expenses in one go. This is when a credit card turns to be a very suitable option. They bring you the useful option of making large payments without any stress of carrying a large amount of cash. Credit cards offer interest free period upto 48 days so that you get enough time to manage your budget effectively.

Convenient automatic payment – A significant aspect of using a credit card is that it helps you avoid the possibility of missing a due date. You can trust the payment of several bills such as telephone bills, WiFi bills, cable bills and more to the automatic ‘set and forget’ mode using a credit card. Thus, when the due date nears, the bill will already be paid through automation.

Easy EMI payment – There may be months when your expenses may not be manageable. Based on your eligibility, credit cards can assist you with easy EMIs. Big purchases can be handled through easy installments without denting your monthly budget.

Earn reward points – Credit cards let you enjoy numerous reward points and cashbacks. Using your card for daily bill payments is a good way to pile on your points. Several brands and retailers collaborate with credit card issuers to offer users lucrative deals from time to time. The rewards you earn can be used to boost your financial returns. However, you must not bind yourself by this factor and make unwanted spending.

Safe payment mode – Credit cards offer consumer protection. This means that it comes with a minimum risk of fraud. If there is a theft of identity or unauthorized transaction, the same may be reported to the issuer and resolved.

While credit cards are known to bring great value when used responsibly. From carrying several payment benefits and facilities to being a safe option with cashless transactions, credit cards can truly prove to bring you immense financial bliss.

First salary is all about achievement, being excited, dreams coming true, pride, and being successful. Everybody has plans for what to do with their first salary, but not many would think of investing that hard-earned money. It may sound unappealing to invest your first paycheck, as you may want to spend it freely without being accountable to anyone.

However, do not forget that you are accountable to your retirement, your ambitions and your financial goals. The retirement corpus or any other financial goal cannot be achieved over night. The path towards achieving financial goal is time, consistency and long-term investing.

Let’s look at the example below to understand the importance and benefit of starting your investments early.

Mr. X started investing Rs 1,000/month for 10 years and Mr. Y started investing double the amount of Mr. X i.e. Rs 2000/month after 5 years [assuming growth at the rate of 12%].

From the above table we can see that even though Mr. Y’s monthly investments were double than that of Mr. X’s, but Mr. Y’s corpus was still not as large as that of Mr. X. This is because of the power of compounding where time horizon plays an important role. Power of compounding is nothing but the growth of your principal amount by adding the previous year’s returns to it.

This highlights the importance of starting early and staying invested for a longer time to reap the benefits of reinvesting the amount earned over and above the principal amount. This is how Mr. X has built a larger corpus because of the reinvestment of his earnings over a long period of time.

Now let’s look at some tips to smartly invest your first salary

Create a budget

Since budgeting helps you to plan your saving and spending pattern, it will ensure you always have enough money to meet your expenses after saving. The thumb rule for saving is to save a minimum of 20% of your salary. Do not spend before saving, always save and then spend. Certain expenses like electricity bill, loan repayment, grocery bills, etc. cannot be avoided. Make provisions for such expenses and then plan your savings structure.

Decide your financial goal

Having a financial goal is important as it gives you direction to save wisely, in terms of the investment amount and tenure required to reach that financial goal. Marking your financial goals as short, medium or long term, and taking inflation into account will help you arrive at a target for each of your financial goals. Based on these targets, you can then start planning your investments more efficiently.

Start a Monthly SIP

A Systematic Investment Plan (SIP) helps you start your investment with an amount as small as Rs 500. That way an investor need not have a large disposable income to develop a discipline-based investing habit. Through an SIP, you invest a predetermined amount periodically at a date specified by you. An investor need not worry about timing the market either as the SIP helps in lowering the overall cost of investment by investing at different stages of market movement.

Buy an Insurance

Insurance planning is also an important part of life planning, be it medical or life insurance. Buying an insurance plan at a young age leads to lower premiums with substantial life cover. Being insured ensures financial well-being of your family even in your absence.

Invest in ELSS to plan your taxes

An investor should look at financial planning and tax planning as a combined activity. An Equity Linked Saving Scheme (ELSS) helps an investor save taxes under section 80C of Income Tax Act by investing an amount of up to Rs 1.5 lakh in the scheme. Investors can then claim this investment as deduction from the total taxable income. When compared with other tax saving instruments, an investment in an ELSS fund has the lowest lock-in period of three years and also has the potential to generate wealth in the long run as it invests in the equity market.

As they say, the early bird gets the worm. Similarly, the earlier you start investing, the better it is as your risk-taking capacity is higher when you are younger. Also, the sooner you begin, the smaller is your investing capital, which gets compounded over a long period of time. So start your financial planning at the earliest as this would also help make investing a part of your lifestyle and help plan a better financial future.

With medical costs rising steadily in India in the last few years, availing a health insurance policy has no longer remained an option. To afford competent medical care without the need for spending exorbitantly, individuals can opt for any of the health insurance policies available in the market.

Now, health insurance policies can be broadly divided into several types, depending on the coverage they provide. Among them, two of the most important ones include –

• Individual health insurance policy
• Corporate health insurance policy

To know which one you should opt for that will effectively meet your requirements, you must first learn about what each of them entails.

Individual Health Insurance Policy – An individual health insurance policy that provides coverage for medical expenses of a single individual. This insurance policy can be availed by an individual for him/her, as well as for his/her family members. Here, the sum insured can be used to cover only a single individual.

Corporate/Group Health Insurance Policy – Corporate health insurance policies are the ones that organisations purchase for their employees. The employees working in an organisation are covered under a single insurance policy, which can extend to cover their family members as well.

But, is a corporate health insurance policy enough to provide comprehensive coverage as far as medical expenses in India are concerned?

Let’s find out!

Comparison Between Individual and Corporate Health Insurance Policies

The difference between these two types of health insurance policies can be illustrated in the table below:

Now, when it comes to deciding which one is the better option for availing competent healthcare, it is best to choose an individual health insurance policy because it will allow you the scope for customizing it as per your requirements. Even though corporate health insurance policies are cheaper, the benefits offered under them are also limited, as compared to individual insurance policies.

Which Policy Will be Better for Availing Coverage for Your Family?

While corporate health insurance policies extend their benefits to cover the employee’s family, they might not be enough to cover the medical expenses incurred for seeking specialised treatment.

For instance, you might need maternity care benefits for your spouse, which might not be covered under the corporate health insurance policies.

You might also need a senior citizen health insurance policy for your elderly parents, which might not be provided by the corporate health insurance policy. Which is why, it is always better to avail an individual or family floater health insurance policy to make sure that your family is appropriately covered.

Most individuals choose to avail an individual insurance policy in addition to their corporate health insurance policy to make sure that they are financially protected against any health-related liability that might arise.

So, make sure you check the benefits offered under each policy and look through the fine prints of the policy before you make a choice!