Ms. Pooja, a 42-year-old professional, was walking home after work when she suddenly suffered from a heart attack and had to be taken to the hospital immediately. Though she survived the attack, she had to undergo an angioplasty. The doctors informed her that the cost of the angioplasty was around INR 1 lakh. While Ms. Pooja was covered under a mediclaim policy, it did not offer coverage for the surgery. Her family members had to make last-minute arrangements for funds to meet her treatment costs. Pooja was not only worried about her recovery, but was also burdened under the financial debt of exorbitant medical bills.

Like Ms. Pooja, many are unaware that basic health insurance plans do not provide coverage against critical illnesses. You, therefore, have to make out-of-pocket expenses towards the treatment of the same. A simple solution to such an issue is to avail of coverage under a critical illness policy.

About critical illness policy

Critical illnesses refer to life-threatening diseases such as kidney failure, heart attack, stroke, cancer, and permanent paralysis, among others. A critical illness policy is an insurance product that offers financial protection against such dreaded diseases. The insurance provider is liable to pay a lump sum amount upon diagnosis of the any of the critical illness as mentioned in the policy document.

Reasons to invest in a health insurance policy that includes critical illness

The benefits of purchasing a critical illness coverage are numerous. Following are six major reasons why you should purchase such a policy at the earliest.

1. Provides financial security

Since the insurance provider offers a lump sum amount upon diagnosis of the disease, you may meet the cost of your treatment rather easily. You do not have to deplete your life savings or suffer from a major monetary blow. You may also use the lump sum amount to cover numerous other financial obligations, like lifestyle expenses, travel expenditure in case treatment is to be received at a far-away location, repayment of an existing debt, among others.

2. Offers coverage against medical inflation

Medical inflation in India has reached a high of 13% to 15%. Private hospitals charge around INR 1.25 lakh to INR 2 lakh for an open heart surgery. The expenses incurred towards a valve surgery is even higher, with the cost ranging anywhere between INR 2.5 lakh to INR 2.75 lakh. Besides, the cost of diagnostic tests can be financially burdensome as well. For example, coronary angiography, which is a test that displays the insides of the coronary arteries, costs around INR 10,000 to INR 15,000. A critical policy comes to your rescue against rising medical costs. You may avail of quality treatment and focus on a speedy recovery by utilizing the lump sum amount received to pay for your treatment.

3. Acts as income replacement

Diagnosis of a critical illness may affect your ability to work. You may be unable to generate income, for a temporary or even a permanent basis. Besides, your family will be left in a financial crunch if you are the breadwinner. You may, therefore, buy health insurance to ensure that your financial needs are taken care of even if you have contracted a critical illness. The salary that you used to draw from your workplace may be compensated through the sum assured amount offered by the insurer.

4. Supplements your employer insurance

It is important to note that employer group policies generally do not cover critical illnesses. Additionally, you may lose insurance benefits if you switch the company or quit your current job. Opting for a critical illness cover, therefore, supplements your employer insurance policy while providing critical illness coverage at the same time.

5. Ensures lower rates upon early purchase

The risk of contracting a critical illness is lower while you are young. Insurers perceive you as a low-risk individual and offer the benefit of low premiums when you invest in health plans early in life. Since the cost of premiums depends on age, you may consider investing in a critical illness policy as early as possible. Additionally, you may enjoy higher sum insured if you are in a lower age range.

6. Provides general tax benefit

Premiums payable towards your policy is allowed as deduction from your taxable income. Section 80D of the Income Tax Act, 1961, offers tax benefit in this regard. You may avail of tax benefit up to a maximum limit of INR 25,000 on premiums paid for self, spouse, and dependent children. You may claim an additional deduction of INR 25,000 towards premiums paid for covering your parents (if your parents are not senior citizens). If you are above 60 years of age, you may claim a higher tax benefit of INR 50,000. Besides, covering your retired parents will fetch you an additional INR 50,000 tax benefit. This means that you may usurp total tax benefit of INR 1 lakh (INR 50,000 + INR 50,000). Reducing tax liability is, therefore, one of the numerous health insurance benefits.

It is rightly said that health is wealth. You may protect your health by investing in a health plan that covers critical illnesses. By doing so, you may receive the much-needed financial support during challenging times.

There is often some confusion associated with Unit-Linked Insurance Plans [ULIPs] and Equity-Linked Savings Scheme [ELSS]. Both these financial instruments are eligible for tax benefits under the Income Tax Act.

However, there are some differences between these products and it is important to understand these before you make an investment decision. Here are five such differences.

1. Life coverage

ULIPs are insurance plans that combine life cover along with investments. A portion of the premium may be invested in various products such as debt, equity, money market, or hybrid instruments. The minimum sum assured is ten times the annual premium, which is seven times if you are over 45 years old at the time of investing.

In comparison, ELSS plans are diversified equity schemes that primarily invest in the stock markets. Unlike ULIPs, ELSS plans are only investment products and do not provide any life cover.

It is important to clearly understand your personal needs before you decide to invest in either of these two products.

2. Taxability

Investments made in a ULIP plan or ELSS plan are eligible for tax deductions under section 80C of the Income Tax Act. The deduction is limited to a maximum amount of INR 1.5 lakh per annum.

ELSS plans fall under the EEE [Exempt, Exempt, Exempt] category. This means the investment amount, the earnings thereon, and the maturity proceeds are also exempt from taxes. The minimum lock-in period for ELSS plans is three years.

Investments made in ULIPs are eligible for a tax deduction when you remain invested for at least five years, which is the minimum lock-in period. Moreover, the maturity proceeds are also eligible for tax benefits. However, if the annual premium exceeds 10% of the sum assured, the maturity proceeds are added to your income and taxed at your regular income tax rate.

3. Transparency and charges

ELSS funds levy only a single charge known as the ‘expense ratio’ or the fund management fee. This fee is adjusted against the Net Asset Value [NAV] of the fund and not separately charged. This allows you to determine the potential returns on your investment thereby providing complete transparency.

On the other hand, when you invest in ULIPs, a higher percentage of the total charges are levied during the initial investment period. The premium allocation charge, fund management fee, mortality charges, and policy administration charges are some of the fees associated with ULIP investments. After deducting all these charges, the balance amount is invested in different financial instruments. The charges are higher initially and reduce when you remain invested for the long-term, which may deliver lower returns on your investments. Moreover, you do not exactly know where your money is invested, which offers limited transparency. Additionally, some insurers may levy some of the charges by reducing the number of units and not the NAV, which also reduces the transparency.

This is an important difference between ULIP vs. ELSS and should be considered when you make the investment decision.

4. Switching option

A portion of your ULIP premium is invested in different financial instruments. ULIPs allow you to switch your investment from one fund to another in case of any such need. Therefore, you are able to mitigate the risk posed due to market volatility. Additionally, as you grow older, you may reduce your equity exposure by switching your investment to debt instruments. Insurance companies offer a limited number of free switches and you need to consider this while making any switches.

In comparison, such versatility is not available when you invest in ELSS plans. You cannot switch or exit your investment until the end of the minimum lock-in period. However, you may consider the dividend option to avail of regular returns on your investments.

5. Lock-in period

When you invest in a ULIP, you need to hold your investment for at least five years. During this period, you are unable to exit the investment or discontinue paying the premium. In case, you want to discontinue before the lock-in period, you will have to pay discontinuation charges with the balance money shifted to a discontinuation fund.

On the other hand, the minimum lock-in period for ELSS investments is three years. You cannot exit before the end of this period, which means there is no exit load for such investments.

Although you may exit both ULIP and ELSS at the end of their respective lock-in periods, it is recommended you hold your investments for a longer duration to maximize your returns. It is advisable you hold your ULIP investment for ten to 15 years while remaining invested in ELSS plans for seven to ten years is recommended.

ELSS and ULIPs are risky investments because the returns are dependent on the market performance. However, ULIPs are versatile because, in case of a market downturn, you have the flexibility of switching to debt products to prevent loss of your investment. This option is not available when you invest in ELSS plans. Moreover, ULIPs include life coverage, which is not included in ELSS. There are certain ULIP benefits and specific advantages of investing in ELSS plans. However, you need to take into consideration some factors while making your investment decision. Some of these include your risk taking capability, expected returns on investment, financial objective, and investment horizon.

It is recommended you research all the different options and evaluate your specific needs to make an accurate investment decision.

The year 2018 looks promising when we talk about the realty stocks. Until now the investors never wanted to invest in the realty stocks due to its volatility and not fetching good and desirable returns. In spite of suffering a negative CAGR during the financial year 2012~16 where the Nifty Realty Index was at -13% CAGR return, Nifty had started gaining grounds in the year 2017. The reasons for the improvement in the index was cited to be enhancement in the domestic scenario. The government also left no stone unturned as it launched various initiatives like REIT.

There have been some stocks that have given around 24% return in the H1FY18, as per the latest share market news. Talking about the top 5 realty stocks in 2018, the list goes like this

• Indiabulls Real Estate Ltd.
• Godrej Properties Ltd.
• Unitech Ltd.
• Prestige Estate Projects Ltd.
• And, Phoenix Mills Ltd.

A major gainer, Indiabulls Real Estate Ltd [IBREL], was able to achieve a whopping 153% gain in the last two quarters. Indiabulls Real Estate Ltd, which is a real estate arm of Indiabulls Financial Services [IBFSL], aims to have a development in the residential properties. They focus on the top cities like NCR, Mumbai and Chennai. They also focus on the rental of commercial properties. They have major development projects in the city of Mumbai. If we come to the exact CAGR in the past 3 years, it has been at 20%.

Godrej Properties Ltd is another proud name on the list. Quite popular and famous, Godrej Properties Ltd is a trusted name, that works best in the realty market. In the H1FY18, the Godrej stock has achieved 54% growth. Godrej properties share price has been impressive. Godrej Properties is from Godrej Group and is actively involved in the construction and real estate development business. The company is mainly into developing the residential property, commercial property, and township projects all across in India. The company is present nationally though it chiefly concentrates more on the top cities like Mumbai, which holds 56% of the total revenue of the year 2017, Del-NCR, Bangalore, and Pune.

Unitech Ltd is another worthwhile addition. The company’s stock has grown by 35%in the first half of FY18. The company has a diverse product line. It focusses on the residential property, commercial property, Special Economic Zones [SEZs], IT Parks, industrial parks, logistic parks, hospitality sector, retail and entertainment projects.

Prestige Estate Projects Ltd boasts of having 25% growth in the first half of the financial year 2018. The company is better known in South India. They also have a diversified segment like Residential, Commercial, Retail, Hospitality and Real estate services. The Company have had its projects in the south cities of Bengaluru, Chennai, Kochi, Hyderabad and Mysuru. The projects like Prestige Shantniketan and UB City in Bangalore are the most successful ones.

Phoenix Mills Ltd has been a gainer too with 24% jump in the first half of the FY18. The company is into the development of the large-scale, mixed-format retail development in the country. The most well-known malls in India, High Street Phoenix [HSP] in Parel, Mumbai, is a successful project of the company.

Note – This is based on personal analysis and investing should be done based on your secondary research.

The Reserve Bank of India, in its recent disclosure has revealed that loan against shares as also loan against securities have been on a steady rise for a few months now. Such a phenomenon can be accounted for by means of the entry of the stock market in the financial run, as a result of which financial securities are becoming mortgages aiding in availing retail loans.If one is to believe the statistics released by the financial bulletin of RBI, it can be seen that popularity of loan against shares have risen by twenty five percent as compared to last year’s number. Let us now move onto an analysis of the growing trend of availing loan against securities.

Principal reason for the shift

With the increase in expenditure on the part of the consumer behind retail loans, investors have obviously been on the lookout for better alternatives to upgrade finances for various monetary requirements. Such a thing has been provided by loan against shares because they have come up with a range of competitive rates of interest that lowers interest expenditure by a good margin in comparison to the traditional personal loans.

The shift, however, cannot just be attributed to lower rates of interest as the tough criterions of eligibility for a personal loan often came in the way of loans being sanctioned for various investors. It is also important to understand that while both banking and non-banking financial services provide loan against shares, not all types of shares and advances are approved in the services’ list of collaterals. Most of these services will usually let you know of the clauses that qualify your shares and advances as a mortgage for the loan amount.

Advantages that have enabled the shift

One of the foremost things to understand is that once your loan amount has been fixed and your loan against shares has been sanctioned, the bank will open a current account for management of the loan. On having this account, you will now be charged an interest rate based on only the amount you withdraw from the account at a time and until you have replenished it, instead of on the complete loan amount. There is also the factor of the ever increasing value of securities in the security dominated market, which further increases the share value of your securities, thus providing you with a higher loan to value ratio.

Limitations posed to non-banking institutions

It comes as no surprise that non-banking financial institutions would often charge higher rates of interest and in an attempt to avoid problematic situations arising out of such a practice, the Reserve Bank of India has commanded lenders from non-banking institutions to maintain a loan to value ratio of not more than fifty percent in case of assets amounting to more than hundred crores.

It must be understood, therefore, that both public and private sector banks are willing to offer loan against securities as also debentures keeping in mind the factor of risk appertaining to the shares that are being mortgaged as also the client’s repayment history.

Goods and Services Tax is the biggest tax reform we have witnessed. It has given birth to a completely new and unified tax structure in India. It replaces the indirect taxes like Excise duty, Service Tax, VAT, CST etc. This new tax regime is known to remove the cascading effect of tax on the business of the products and services. This tax structure was levied to make the products and services available to consumers at a lesser price. It was also supposed to be helpful in increasing the production capacity and the buying power of a common man. In short, it was supposed to increase the GDP at least by 1% to 3%.

According to the latest news on GST, India has announced a growth of 7.1% for the financial year 2016-17 and for the March, it was 6.1%. Talking about the recent GDP Data for July to September Quarter, the country’s GDP has been pegged at 6.3% as compared to 5.7% in the previous quarter. We are expecting the GDP figure to be 6.7% in the financial year 2018, 7.3% in financial year 2019, and 7.5% in the financial year 2020.

Now assessing the impact of GST on our GDP, here are the positive points:

• Since there is now one tax rate, it has created a unified market in terms of tax implementation. This has helped the seamless transaction of goods and services all across the states.
• The cost of the transaction has reduced, as the news on GST confirms. As per a study, it was inferred that there were about ten types of taxes which were levied on the road transport. GST has eliminated all and hence has considerably reduced the transportation cost.
• As the GST has now been implemented, the export of goods and services has become competitive due to the non-effect of cascading taxes on goods and products. As per a study by NCAER, they recommended that GST is a revolution and has the potential to increase the country’s GDP by at least 0.9% to 1.7%.
• GST is a more transparent tax structure. This will help garner more revenue to the government since GST will improve the tax compliances. Even the corruption will be reduced significantly.
• Since GST has replaced all the taxes, the exemption in excise duty to manufactures has also become void, giving more revenue to government, resulting in a higher GDP.

Talking about the negative impact on GDP,

• With GST slabs of 18% and 28%, some services have become costlier leading to short-term inflation. As per DBS bank study also, GST will lead to the rise in inflation.
• As per some experts, GST has impacted the Real Estate negatively because it has added a 10% cost reducing the demand by 12%.
• Some experts believe that IGST, CGST AND SGST are nothing but newer names of Central Excise, VAT, CST and Service Tax etc.

We have positives and negatives of almost everything. But overall, we are expecting a positive impact on of GST on GDP. For more business news and updates, subscribe to BloombergQuint.

There is a difference between an inter-day trade and an intra-day one while trading in stock market. Both can help you make money. Want to know how? Get a better grasp of the concepts before delving into the investing challenges within the stock market.

Introduction to Trading

If you are contemplating about trading bonds and shares in the stock market to earn extra or even quite a bit of money, comprehending the discrepancy between an intra-day and inter-day trade could make you get your stock market broker into a mess.

Your trading plan, as an investor in the stock market, may be either short-term or even long-term; letting the stocks mature over time to yield more in the distant future.

Time Frame with Trading

The meaning of inter-day is “inside or within” the day. In trading terminology, intra-day trading is generally known as day trading.

With an intra-day trade, you take an arrangement in a stock, equity or foreign currency combinations once the stock markets open and close the location before the stock markets close within the same day.

On the other hand with inter-day trading, you keep trading locations open on a minimum up to the close of the stock markets and during the night. Swing trading is a general method to portray the practice of having a hold on locations from even a day to a week approximately.

Day Trading is Dangerous Work

The perception of day trading sounds like the correct way to move forward. It is easy because you trade in the stock market during the day and secure your profits by the end of the day before the stock markets close for the night.

As you explore potential trading policies, there is a very elevated point of interest in intra-day trading and many investors and business selling suggestions about it.

On the other hand, the U.S. Securities and Exchange Commission’s webpage has a comprehensive page dedicated to the hazards of trying to make money from day trading stock markets.

The SEC has made a point that a majority of the trainee day traders lose quite a bit of their trading currency when they begin and you have to bear in mind that there are no “easy profits” with this method of stock market trading.

Rules and Restrictions

Depending on the type of stock you are trading, the laws might be considerably diverse for intra-day and inter-day trades. Stock market trading laws supply elevated points of control for intra-day trades. Influence helps you make more profits from a lesser amount of changes during the day. For stock market traders, normal day trading will effect in the outline day trader label.

Trading Effect on Markets

The rules which affect trading accounts at the close of stock and futures markets is of crucial importance, if you fluctuate trade or inter-day trade. Say, if a day trader does not close a position by the time a market closes that particular trade then then makes it to the inter-day trading list! This is one of the reasons day traders close out trades right on time. Resultantly, the closing price of a security may hold greater significance than all the hullabaloo of the day for the closing trader.

There is a very famous saying when it comes to investing – Risk & Rewards are two sides of the same coin and just like every person has some personal & unique traits, investing is also personal as it depends on investor’s age, his assets & liabilities, dependencies, etc. Many investors take a very ‘conservative approach’ to investing as they perfectly fine getting steady returns on their investments as these investments are less-impacted by market volatility e.g. Fixed Deposits, Post office schemes, etc. The other category of investors take a slightly ‘aggressive approach’ since they are well-informed about the local & global investment scenarios & possess a more ‘long-term vision’ when it comes to executing their investments.

Mutual Fund is one such investment vehicle which has been gaining popularity amongst investors as it is less risky than investing directly in stocks, with returns that can be significantly higher when compared to traditional investments. The #MutualFundsSahiHain campaign initiated by SEBI & AMFI has driven interest from many investors who are willing to invest in Mutual Funds for ‘long-term wealth creation’. There are different types of Mutual Funds – Fixed income funds, Growth Funds, Money market funds, Equity Funds, Growth Funds, etc. and each of them has varied investment strategies and cater to a varied set of investors. Growth Funds are called as ‘Blue-Chip Mutual Funds’ and today we have a close look at the same.

What are BlueChip Mutual Funds

Unlike other categories of Mutual Funds where funds might be invested in small-cap or mid-cap companies, in BlueChip Mutual Funds the investment is done in select large-cap companies that have established business models and a proven financial track record. Some of the BlueChip companies are Tata Motors, Reliance, Infosys, ICICI Bank etc.

Portfolio of large-cap/BlueChip stocks comprise of large-cap companies from diversified sectors and are selected by experienced fund managers. Even in adverse market scenarios, BlueChip stocks are capable of generating profits for its investors since they have been in business for a long time. ICICI Prudential BlueChip Fund [earlier called as ICICI Prudential Focused BlueChip Equity Fund] is one such fund that has an AAUM [Average Assets Under Management] of Rs 17,496 Crores [as on 30th June 2018]. It is an open-ended equity scheme that predominantly invests in large-cap stocks. Below is the performance of the fund since last one year, an indicator that it is able to manage steady performance even in turbulent times.

Why invest in BlueChip Funds?

Though different funds follow different guidelines, there are some BlueChip Mutual Funds that also invest in mid-cap companies. From an investor’s perspective, BlueChip funds are more suited for investors who have a moderately high-risk appetite and are in the market for long-term wealth creation e.g. retirement planning, higher education for children, etc.

By investing in the scheme, investors get an opportunity to get some of the best minds in the country [who are running these BlueChip companies] to create wealth for them. For example, ICICI Prudential BlueChip Fund follows a ‘Buy and Hold’ approach and takes exposure in high conviction stocks with an aim to generate alpha. The scheme follows a benchmark-hugging approach where the portfolio is diversified and the investment is made across different sectors. The fund aims to Make big companies work for you so that you can create wealth in that process!

Though Bluechip stocks have high price/share, they are normally considered a safe investment option as they remain largely unaffected by an economic downturn and are less volatile. Even in today’s times when the entire market is on a downturn, BlueChip stocks are still consistent in performance. This makes BlueChip funds a worthy investment for wealth-creation.

BlueChip Mutual Funds – Worth the hype?

So far we have discussed BlueChip Mutual Funds, but you might ponder whether it is the right fund to have in your investment portfolio? Let’s have a look at ‘Why’ in BlueChip Mutual Funds.

Risk Diversification

Any investor would want his portfolio to be more diversified so that his investments are not affected by the impact on ‘one particular sector’. BlueChip Mutual Funds are the ideal way to diversify your portfolio and also mitigate risk.

Dividend

You would follow any BlueChip stock e.g. ICICI, Reliance, Infosys, etc. very closely when they have their Annual General Meeting’ as most of the companies also declare dividend at that time which is passed on to their retail investors. As BlueChip Mutual Funds invest in such large-cap companies with a proven track record, they also reap good returns. Hence, Dividend becomes an additional income-source/bonus when it comes to these funds. Below is the snapshot on how ICICI BlueChip Mutual Fund generated dividends for its investors. As seen from the snapshot, in order to diversify risks & generate good returns, it has invested funds in companies catering to Technology [IT], Energy, Telecom, Housing, etc. [Source]

Steady Returns

As BlueChip companies have a strong & experienced management team, they are able to show consistent performance thereby showing increased investor confidence. Hence, investors in BlueChip Mutual funds can expect consistent returns from their investments as BlueChip companies have a significantly low debt-to-equity ratio.

These factors summarize why BlueChip Mutual Funds are here to stay and a very good investment option for retail investors. ICICI Bluechip Mutual Fund is one such investment option that has been ranked number 2 in Large Cap fund category by CRISIL [quarter ending June 2018)] and investment gurus are recommending to stay invested in the scheme due to its consistent performance [Source]. Below are some of the features of the ICICI Bluechip Mutual Fund.

Conclusion

If you are an investor looking at long-term wealth creation and do not want to invest directly in stocks, BlueChip Mutual fund is an excellent investment vehicle to diversify your portfolio to generate good returns.

Note – Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing. The author has come up with the article based on his knowledge and investments made in mutual funds.