Things I wish I had known 15 years back!

( Warning :- This article is loaded with  "Hindsight bias")


I have been an avid saver and investor over the last decade. I have immensely benefited from my saving and investment habit. Looking back, I think I could have done better in these areas. ( Not an exhaustive list but the things that are on top of my mind at this point of time)

1. I should have "fully loaded" my  PPF  account from first year.

I opened a PPF account 15 years ago( good decision). But I didn't fully invest into it every year. During the initial years, I kept PPF account active by doing some minimum investment. NSC or ELSS was my preferred choice for parking the money. The reason being "15 years in PPF" looked "too long " for me.

I probably didn't understand the power of compounding and also that PPF is more tax efficient than NSC.

This mistake was corrected a few years back and now the PPF account is extended for the next 5 years :-).

2. Choosing growth option in Equity fund.

During initial investment years I thought , Dividends from equity funds was the most efficient way of "profit booking"  a.k.a risk mitigation and it was better than growth plan. But didn't realize that in effect , dividends also broke compounding and selling units of growth option was the best way to book profits , if at all needed.

Now, most of my Equity MF investments are under growth option ( Direct plan- learn more)

3. Should have avoided more money in tax inefficient FD.

Bank FDs were my favourite investment to start with.

FDs are the least efficient way of investing for people in higher tax bracket. It doesn't help to beat inflation and no indexation benefit is available for FD investments.Having all your debt investments in FD is tax inefficient.

Of late, I use debt vehicles that defer taxation till withdrawal.

4. Having too many accounts.

I  used to open one SB account whenever I switched jobs and wanted to hold all the five star funds ! Attractive bank FD rate hoardings led to many banks for opening FDs.

Having too many accounts eother it be SB, FD, demat or MF folio makes life difficult for you. Simple is always better!

Realising this, started closing  many accounts and consolidating folios. Still some more work left here!.

Benefit of #direct mutual fund #investing

From 1st of January, 2013 SEBI introduced the option of investing in the "Direct Plan" of  the existing schemes of mutual funds.( When you send your application to the fund house directly without a "broker code" or transact online without a broker code - it is called a direct investment)

Wanted to check how the "direct" schemes have fared over the "regular" schemes. Roughly for the two year period, the following difference is seen in NAV between direct and regular schemes of randomly chosen equity MF schemes.

Please note that although the percentage difference might look small,the benefit will be seen more" clearly" depending on the absolute sum of corpus invested in the schemes.Example, investor having more than 1 crore in a scheme would have saved more than 1.5 lakhs in two years.( savings till date- not looking into future savings) 

If you know to choose the right schemes ( it is not as complicated as knowing the right "stocks"), you should try and opt for direct investing in mutual fund schemes.

Fund- Growth Scheme	Regular	Direct	Diff* %
HDFC Top 200	352.025	356.157	1.17%
ICICI Pru Dynamic	188.7277	191.4078	1.42%
UTI Opportunities	49.2846	50.0483	1.55%
Franklin India Bluechip	347.7465	353.3355	1.61%
Reliance Growth	786.723	797.0294	1.31%
Sundaram Select Midcap Fund	323.8099	327.5543	1.16%
Birla Sun Life Frontline Equity	161.57	164.3	1.69%
* Difference in returns for the period 1 Jan 2013 to 16 Jan 2015
Direct schemes were introduced on 1  Jan 2013

Wishing you a successful "direct" investing.

Mutual funds - difference in dividend declaration- Regular and Direct plans

Of late, may mutual fund have declared dividends. If you have been wondering that your scheme ( direct) was treated differently from the other for dividend declaration, here's the reason.

No dividends in yourdirect plan?
Don't worry on this count, as thereare valid reasons regarding realisedgains; look at other factors, too

Investors of the HDFC Prudence Fund direct plan received a

dividend of ~1.25 a unit in March. But investors in the regular

plan of the same fund received a dividend of ~3 a unit. Similarly,

in the ICICI Prudential Tax Plan, the direct plan declared a dividend

of 1.5 per cent a unit, while the regular plan declared a dividend

of two per cent a unit.

HDFC Mid-cap Opportunities Fund declared a dividend of

~1.75 for the regular plan in February but did not declare any

dividend for the direct plan. Similarly, in January, ICICI

Prudential Discovery declared a dividend of ~2.14 for the regular

plan but none in the direct plan.

Data from Value Research says this is not a trend across

mutual funds and schemes. It is specific to some schemes. The

reason why some direct MF plans did not declare dividends or

declared less was because of a Securities and Exchange Board

of India rule that dividends can only be paid from realised

gains, says Dhirendra Kumar of Value Research.

For instance, if the net asset value increases from ~10 to ~13,

the gain is ~3. Earlier, funds used to pay a dividend out of these

gains. Sebi has now said the dividend can be paid only out of

the profits the fund makes, by selling shares and booking profits.

So, if the fund makes a profit of ~1, it can pay dividends only

out of that ~1.

Credits :- Full article on link - 

Mutual Fund - Direct investing - Make use of it!

"Effective 1 January, all asset management companies (AMCs) launched direct plans of all their open-ended MF schemes, a move which was made mandatory by the capital markets regulator, Securities and Exchange Board of India (Sebi), through a circular issued in September."

So, are you still investing through your broker initiated portfolios?

Is there a need to switch to "direct" schemes?

Read the detailed article here. For those who don't have the time, here's the relevant portion which states the benefit in % for direct schemes. This amount may sound trivial but may add up to a huge saving over a period of time.  Please mind the impact of capital gains tax before you do the switch. ( Also note :-you will loose out on STT for switch out from regular plan as in case of normal sale)

According to figures provided to us by Outlook Asia Capital, equity funds have shown a difference of about 0.58% on an annualized basis between the net asset values (NAVs) of direct and normal plans, as on 11 January. We have taken the annualized figures here as the total expense ratio (TER) figures of MF schemes are also annualized. Liquid funds have shown a far lower difference of about 0.05%, so far.