The Downside of Mutual Funds

I remember the day vividly. It was 2 years ago when I received my first paycheck and despite spending more money in a month than I ever spent in my entire college life, I still had a significant amount of money left in my bank account.

And it was the constant pressure of this very unused and unutilized money lying fruitlessly in my bank account that compelled me to finally ask myself the billion dollar question that every lazy and financially challenged (read: ignorant) person avoids asking himself-

“Where should I invest my savings?”

The choices, like always, were all myriad and unappealing. After all, banks had such low-interest rates, investing in fixed deposits hampered my prized liquidity and PPFs with their 15 years of lock-in period? Don’t even talk about it! What about the stock market? Come on, I was a beginner dude. 

This was until I came across my saviour (Or so I thought) – our very own-Mutual funds! 

No wonder they are so popular.

My money would be managed by professionals with diversified portfolios. I don’t have to care about tracking those complex and cumbersome movements of the stock market.

What else could one ask for? 🙂

But hey, there’s a catch here (like always).

Sorry to break it to you, dear reader. But, the picture isn’t as rosy as you thought it to be. After all, all that glitters is not gold and appearances are more often than not- deceptive.

Don’t believe me?

 “How can the innocent and innately attractive mutual funds have any downsides?” you ask.

Okay, let me tell introduce you to some lesser known facts about mutual funds:

  • Management fees and other expenses-

Well, remember the ads about Mutual Funds you literally know by heart now?

They have large legal and accounting expenses.

They pay salaries.

They mail you your statements every month.

And they have their own profits to make and expenses to cover.

Who do you think pays for them?

Most mutual funds charge fees around 1% to 1.5% annually as a fee for managing the funds, fund managers’ salary, distribution costs etc. In all cases, costs will decrease your overall rate of return. This is one of the most important downsides to using mutual funds and thus, should certainly be evaluated.

  • Excess cash                                                   

Because people occasionally want to withdraw their mutual funds, there must always be funds available – in cash – for payouts. It is great for liquidity, but it also means some of the fund’s money is not earning interest and money sitting around as cash is not working for you and thus is not very advantageous.

  • No guarantee of returns

Although expected returns will be quoted, it is impossible to find a mutual fund with a guaranteed return. This is because all assets carry some degree of risk. However, some mutual funds will carry a higher level of risk than others depending on how well it is diversified.  

  • Too much diversification

Although diversification is one of the keys to successful investing, many mutual fund investors tend to over diversify. Over diversification increases the operating cost of a fund, demands greater due diligence and dilutes the relative advantages of diversification.

  • No Investment Control:

While a mutual fund allows you to select a general type of investment by industry or sector, the fund manager is responsible for choosing the specific investments, and you have no input on this. The fund managers make all of the decisions about which securities to buy and sell and when to do so.

  • Too many variants

To the investor, making a choice among many funds becomes tough when so many variants of the same product are available in the market.  If the funds are similar in objective and performance, investors may find it tough to differentiate the products and make the right choice for their needs.

The bottom line:

There are disadvantages and advantages of investing in each and every investment vehicle. What needs to be considered is whether the advantages outweigh the disadvantages. The probability of a successful portfolio increases dramatically when you do your homework and scrutinize well the downsides and upsides.

Go ahead. Keep learning, saving and investing!

Know what Credit Score means in Daily Life

Credit Score’-sounds like a heavy technical finance word. (I often use it to impress my non-finance friends. Trust me, it works like a charm! 😉 )

But hey! -Why are we even talking about it here?

Well, what if I tell you that these two words have a considerable and far-reaching impact on your life?

That they can shatter your humble dream of buying that 2 BHK near your crush’s apartment, of showing off your swag in the latest sedan or finally beginning your own start-up (even if it is a revolutionary idea) to pieces.

Really? How?  You would ask me.

Really!

It is because banks check your credit score before granting you any loans whether it is home, car, personal or business loan.

But it’s not just banks who may take your credit score into account – surveys have found your credit score can affect everything from whether you’re able to rent an apartment to who may be willing to date you.

  • Insurance companies – check your credit score before giving you any insurance policies. The higher your score, the better your insurance rates may be.
  • Credit Card companies –check your credit score before handing over that exclusive Platinum card to you.
  • Utility companies – electricity, phone, and cable – check your credit score as part of the application process. Yep, cell phone companies check your credit too! Want to buy the latest I phone 7 (On EMI of course). Guess what you need? A good credit score!
  • Certain jobs – especially those in upper management or the finance industry, require you to have a good credit history. They want to see if their cash and assets are in safe hands.
  • Landlords, property managers, and rental agencies – review potential tenants’ credit reports. They look for a pattern of missed payments or other negative information which may require you to pay a larger deposit.

(I know you suddenly have the urge to check your credit score. We will come to that soon!)

Firstly, what exactly do these two words mean?

A credit score is actually a numeric summary of your credit history. It can range from 300 to 900. Generally, the higher the number, the more trustworthy you appear to lenders. The lower your score, the more difficulty you will face.

Credit history comprises the number of times you paid your loans on time, your credit card bills on time, the percentage of total credit limit that you are using, the age of your credit cards and loan accounts (the older, the better).

In India, there are four credit information companies licensed by Reserve Bank of India (RBI) –

  • Credit Information Bureau India Ltd. (CIBIL)
  • Equifax Credit Information Services
  • Experian Credit Information
  • High Mark Credit Information Services.

The most popular one is the CIBIL credit score. This score ranges from 300 to 900, with 900 being the best score.

Living within your means, using debt wisely and paying all bills—including credit card minimum payment on time, are some of the smart financial moves to help you improve your credit score. It reduces the amount you pay for the borrowed money and put more money in your pocket to save and invest.

However, a lousy credit score doesn’t either mean you’re a bad person — it might just mean you put some unexpected bills on a credit card and had trouble paying, or that you missed a car payment when you lost your job. See below what can give you a bad score

  • Paying credit card bills late
  • Not paying credit card bills at all
  • Defaulting on a loan
  • High credit card balances
  • Having an account charged off

 

 

 

 

 

And now the one you had been waiting for – How to check your credit score?

Official CIBIL website- You can get your credit score by filling the ‘CIBIL Online Credit Score Request Form’ and paying a nominal price for the report. You will be asked your PAN number, DOB etc. to complete this form.

https://www.cibil.com/creditscore/

  • Websites like paisabazaar.com and bankbazaar.com – actually provide you with a detailed report on your credit score absolutely FREE!! You can know your chances of getting a loan approval easily.

Now the time for good news!

The RBI had mandated every credit information company in the country to release one free full credit report to every individual from January 1, 2017. It is supposed to be a detailed report carrying the records of your credit history, including repayment track record of all your credit card bills and any current or previous loans. You can apply for it once a year between January and December from one of the credit information companies.

So what are you waiting for? Go and quickly find out your credit score. Or better still, go and impress your IT friends with some finance jargon! 😉

 

How To Master Your Credit Card Points

Remember the day you gave your heart to that ‘Little Black Dress’ at Zara only to find that you are 1000 bucks short on cash and a gentle swipe of this savior helped you walk away from the store with a beautiful dress and a more beautiful smile?

What about the day you finally materialized your Bangkok plan even without the money to pay for the tickets then because you had this angel come to your rescue?

Or the day you reached early at the Airport and binged on all those free (okay, complimentary) chocolate pastries while sitting on an exquisite leather couch in the lounge because of this plastic card?

And the day this savior helped you- little, ‘almost on the verge of broke’ mortal afford that elusive phone, dream home theatre, incredible DSLR camera and thundering speakers through EMI options and the flexibility to simply pay later.

Yes! I am talking about that all time savior we carry in our pockets every day. Our very own, always there for us – Our Credit cards!

 

 

But hey, the benefits of owning a credit card don’t just stop here!

Every time you swipe/use these plastic wonders you gain additional benefits in the form of reward points. “But those points are useless because we never redeem them”, you would argue. Well, it isn’t difficult and once you start redeeming your points, you will only regret all the times you didn’t do it in the past.  

First of all, let us begin with ways to increase your reward points without increasing your expenses.

  • Make unavoidable business purchases using a credit card-  If you are a start-up or even run an old business, try making your day to day business expenses through your card. You will not even realize when you accumulated enough points to be eligible to get a free flight ticket to Singapore.

To all those who would come up with their tax woes after reading this– Small traders and businesses with a turnover of up to Rs 2 crore will pay less tax if they accept payments through banking and digital means from FY 2017-18.It means your vendors benefit too from your credit card swipes!

  • Make purchases from the Credit card portal/website to earn additional points and get amazing deals – Most good credit card companies have their websites or portals where you can get amazing deals on various electronics/hotels/flight tickets and also earn additional points. Just go to Google and type the name of your Credit Card. You will find a login page where you can register and login.
  • Sign up for value Credit Cards( after some research) to enjoy the free signing bonus points that most companies provide to promote their cards – Imagine earning reward points for just getting a new card. Trust me, I am not kidding! 😉
  • Too much traveling? Sign up for Travel Credit cards – Travel a lot? Most credit card companies have exclusive travel cards which provide much better deals on booking flights than the simple cards and you can fulfill your Europe or Australia dream much quickly. There are additional benefits if you are loyal to a particular airline! (We all look for the cheapest flights. I know! )

Secondly, how to redeem these points?

  •  If you have an account in the Bank whose credit card you own, nothing could be better. Just link your card to your account through Net Banking. You will easily see your reward points and how to redeem them from the Net Banking portal itself.
  • Use Google wisely. Type your credit card name and sign in to the rewards page of your particular card. You will be asked your card number, name etc. Choose your gift and click on ‘redeem’. Your gift will reach you soon!

However, there are some things that you need to remember while enjoying the benefits of your credit card:

  • Pay bills on time to avoid late charges/interest – It is of no use to have 2000 reward points which are equivalent to Rs. 500 and paying Rs. 500 as penalty charges because you forgot to pay your bill.
  • Sign up for cards after checking the joining/annual fee – Yes, new cards give you the benefit of additional bonus points. But, do not sign up unless you are sure that the benefit of points is greater than its annual fee!

Just a little effort and research on these plastic saviors and you aren’t far away from MASTERING YOUR REWARD POINTS!

 

 

 

Wrapping up Year 2016!!

Only by knowing and accepting the past, can one build a better future!

So, on the first day of the year 2017, let Fintuned take you through some interesting moments of 2016 in our own ‘un’conventional way. Wish you a very happy 2017.

Cheers !!

Say Hello to instant money transfers

India moves a step closer to becoming a cashless economy this month with the launch of unified payment interface (UPI), the brainchild of RBI governor Raghuram Rajan. 

“For a number of years, we have been saying we need a revolution in banking in India. I think we can confidently say the revolution is upon us. What we have in India is the most sophisticated public payments infrastructure in the world,” Rajan said at the launch of the UPI.

What exactly is UPI?

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It’s a secure and free way to transfer money instantly, any bank to any bank with contacts in your phone. It will allow users to pay for transactions as low as Rs 50 and go all the way up to Rs 1 lakh.

The UPI system will allow customers to send money and make payments almost as easily as sending a text message. Fund transfer will be possible 24*7, including sundays and public holidays.

It can be used in many day to day activities. To name a few:

  • Paying utility bills
  • Buying railway and movie tickets
  • Direct payment at online shopping websites and retail stores instead of using cash, or cards, or wallet
  • Transfer of money to friends and relatives

How does it affect me?

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Painful account numbers or IFSC codes are no longer required!

Further, no time will be wasted to add beneficiary as you just need one unique virtual payment address.

Rs. 0.50 per transaction will be charged. On your bank statement, it will appear as IMPS transaction.

 

What is this virtual address?

Think of it like a new & unique email ID for payments such as name@bankname.com or a mobile number@bankname.com

For example, if you want to receive or make payment through a particular bank account, you just have to give your virtual financial address (XYZ@sbi) to the other party.

Is it safe?

Absolutely!!! The new interface is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used by banks for real-time transfer of cash. Similar to OTPs, UPI will have MPIN to authenticate the transactions, as mandated by RBI.

In case of a transaction failing, customers will be able to raise a complaint from within the app itself.

Final thoughts?

Some 21 banks have already enabled UPI on their own apps, some of which are already available on the Google Playstore; the iOS (Apple) version will come later. India being an Android country, UPI has rightly focused on getting the more important version first.

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All in all, a great move to make cashless payments faster, easier and smoother for millions of people in India.

Do not forget to share your thoughts on it.

Cheers!!

Announcing Interesting Tie-Ups This Holi

Before we even begin, here is wishing all our patrons a very very happy holi. This is not only a festival where we make the environment absolutely colorful (as in the pic below) but more than that, it imparts a much more significant message 

Holi celebrations

“Togetherness”

Staying true to the spirit of the amazing festival of Holi, Fintuned wishes to share something very special that it has achieved today. In our continuing efforts, we have tied up with some absolutely interesting ventures who you can reach out to for anything in their domain. How can you reach them? Its quite simple actually – 

About us –> Partnerships 

We are absolutely excited with this development and hope that you are too. Stay Fintuned!

Cheers

Driving Financial Content!

New Initiatives by Fintuned to promote high quality financial content on a consistent basis.

As you would have realized, we at Fintuned have consciously determined to become a leading domestic platform for aggregation and consumption of financial content. In keeping with that, we have embarked on two wonderful initiatives that will only help us drive quality content on a consistent basis. So, allow us a chance to take you through these initiatives quickly:

  1. Involving Guest Contributors and driving diverse financial content: In alignment with our vision to promote great financial content, we are on-boarding guest contributors who love writing and sharing their thoughts. Currently, all the good folks (read: family and friends) are doing this on a voluntary basis and for now, we are going to keep it that way. So, if you are interested in associating with us as well, just drop in a line.
  2. Submit your story: Stories are enriching, enchanting and take you through a tour where you discover a lot many things. Inspired by the incredible work done by our friends at TheBetterIndiawe wish to share positive financial stories from people across the country (keeping the confidentiality in our head) and make sure that the same reaches out to people in a better way. Have a great story to tell? Just drop in a line to fintuned.net@gmail.com

Let us know if you have any suggestions on these initiatives and we will be all ears! In the meanwhile, please show your support on our Facebook Page.

Cheers,

Mihir

We Are Back (Again)!

The last time around we took a break from continuing with interesting, interactive and informative content, it was a long one! And this time, we did the same thing. So, even if we might not be the trend-setters for now, we are definitely trend followers 😉

Jokes apart, it would be completely unfair on our part to not explain the re-occurrence of this prolonged break and before we announce the big comeback with all the pomp and show, let us briefly go over the rationale behind this intermittent presence.

You would appreciate the fact that this portal is run by people who work actively with some enterprise and owing to that, Fintuned often slips to number two (or even further down) on their priority list. This is coupled with the lack of bandwidth to achieve ambitious targets and together, both these reasons lead to greater inattention towards the portal. Well, we wouldn’t say that this problem has been solved completely. However, we have figured out the way we wish to run Fintuned and in a “sustainable way”.

So, what have we done? For starters, we are now just two members who will be focusing qualitatively on holistic maintenance of Fintuned. To be sure, it doesn’t definitely mean that we wish to just stick to two people who look after everything. Most certainly, we are hungry for participation and will strongly entertain people who would love to work with us in any way possible. 

*However, we would like to keep the nature of the association temporary so as not to build absolute dependency on our well-wisher till the time he/she is totally ready to join the bandwagon.

Taking it further, something else that we will practice from now on is to set achievable targets for Fintuned. Again, it certainly doesn’t imply that we will work with a survivor attitude. It just conveys the fact that we wish to lay a strong foundation and duly acknowledge the time and effort that shall be required.

From here on, everyone who has supported us in some way or the other will definitely see consistent hard work employed in building a genuine, interesting and an informative resource. On that note, we can surely shout out

“It’s good to be back”

Stay Tuned For More and Look Forward to a Great Year 🙂