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Business News/ Money / Personal Finance/  Stay informed about tax laws affecting investments with expert advice, says Atul Garg of FinEzzy
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Stay informed about tax laws affecting investments with expert advice, says Atul Garg of FinEzzy

There are generally no stringent restrictions on the types of mutual funds eligible for loans, with both equity and debt funds being commonly considered.

Atul Garg, Founder, FinEzzy (FinEzzy)Premium
Atul Garg, Founder, FinEzzy (FinEzzy)

Determining the optimal blend of active and passive investment strategies involves a nuanced evaluation aligned with your specific financial goals. It’s crucial to synchronize your chosen strategy with your risk tolerance and return objectives, carefully assessing whether an active or passive approach better suits your investment profile, says Atul Garg, Founder, FinEzzy.

In an interview with MintGenie, Garg said that in periods of market turbulence, active strategies may prove advantageous, providing the flexibility to respond promptly to changing conditions. Cost considerations also play a pivotal role, with passive investments typically incurring lower fees.

What advice would you give to new-age investors for achieving their financial goals?

To guide and support emerging investors in their quest to achieve financial success in the dynamic landscape of today’s markets, it is crucial to embrace a comprehensive set of strategies. These recommendations are designed to empower investors with the knowledge and tools necessary for making informed decisions and building a resilient portfolio. By incorporating the following strategies, new-age investors can navigate the complexities of the financial world with confidence and purpose:

  • Continuous learning: Stay informed by regularly consulting financial journals, websites, and newspapers to stay abreast of the latest developments and trends in the financial market.
  • Goal setting: Clearly define your short-term and long-term financial objectives. Avoid succumbing to herd mentality and make decisions aligned with your individual goals.
  • Risk assessment: Understand your tolerance for investment volatility. Conduct a thorough risk assessment to ensure your investment strategy aligns with your risk appetite.
  • Diversification: Spread your investments across various asset classes to reduce risk. Diversification helps safeguard your portfolio against the fluctuations of a single market or asset.
  • Consistent investing: Implement systematic investment plans (SIPs) to foster disciplined investing. Consistency in your investment approach can contribute significantly to long-term financial success.
  • Expert consultation: Seek advice from financial advisors with expertise in the field. Avoid relying solely on informal tips, as professional guidance can provide a more comprehensive and tailored approach to your financial journey.

What are some key wealth management techniques for achieving financial objectives?

To strategically navigate the path toward achieving your financial objectives and ensuring a prosperous future, it is essential to incorporate a set of prudent techniques within your wealth management approach. These techniques serve as guiding principles, offering a structured framework for optimizing your financial resources and fostering long-term success. Here are the key strategies to consider when endeavouring to achieve your financial goals:

  • Asset allocation: Align your investment strategy with your risk tolerance and financial goals through strategic asset allocation. Diversify your investments across different types of assets to achieve a balance that suits your risk appetite while working towards your financial objectives.
  • Diversification: Mitigate risk by investing in a diverse range of asset classes and sectors. Diversification spreads your investments across various instruments, reducing the impact of poor performance in any single area and enhancing the overall resilience of your portfolio.
  • Portfolio review: Regularly review and adjust your investment portfolio based on market shifts and changes in your objectives. Periodic assessments ensure that your portfolio remains aligned with your financial goals and adapts to the dynamic nature of the financial markets.
  • Tax efficiency: Optimize your investments to minimize tax liability. Implement tax-efficient strategies, such as investing in tax-advantaged accounts and taking advantage of tax-saving investment options. By doing so, you can maximize your after-tax returns and preserve more of your wealth.
  • Estate planning: Effectively manage the transfer of your wealth through comprehensive estate planning. This involves organizing your assets, minimizing estate taxes, and ensuring a smooth transition of wealth to the next generation. Thoughtful estate planning is essential for preserving and passing on your financial legacy in a manner aligned with your wishes.

How do you determine the right balance between active and passive investment strategies?

Determining the optimal blend of active and passive investment strategies involves a nuanced evaluation aligned with your specific financial goals. It’s crucial to synchronize your chosen strategy with your risk tolerance and return objectives, carefully assessing whether an active or passive approach better suits your investment profile. 

In periods of market turbulence, active strategies may prove advantageous, providing the flexibility to respond promptly to changing conditions. Cost considerations also play a pivotal role, with passive investments typically incurring lower fees. Weighing these fees against the potential benefits of active management is integral to decision-making. Assessing your investment horizon is key; for long-term objectives, a combination of active and passive strategies could prove beneficial, leveraging the strengths of each. 

Lastly, factor in personal preferences and engagement levels, as an active approach may be suitable for those who enjoy hands-on management, while a more passive stance may align with those seeking a systematic, less involved approach. Through thoughtful consideration of these factors, you can tailor your investment strategy to strike a harmonious balance, ensuring it resonates with your financial goals and personal inclinations.

What are your thoughts on the current interest rates for loans against mutual funds?

Considering the current landscape of interest rates for loans against mutual funds, it’s noteworthy that such loans typically present a favourable alternative compared to unsecured loans, offering relatively lower interest rates. The specific rates, however, are contingent upon both the lending institution and the prevailing economic interest rate environment. Generally falling within the range of approximately 10% to 15% per annum, these rates are influenced by market dynamics and financial policies. 

The advantage of securing loans against mutual funds lies in their lower interest costs, providing borrowers with a cost-effective financing option while leveraging the value of their investment portfolios. It is prudent for individuals contemplating such loans to stay attuned to market trends and explore offerings from different lenders, ensuring informed decision-making aligned with their financial objectives.

Are there specific limitations on mutual fund types eligible for loans, and does it affect credit scores?

There are generally no stringent restrictions on the types of mutual funds eligible for loans, with both equity and debt funds being commonly considered. However, it’s important to note that lenders might exercise caution with equity funds, often offering lower loan amounts due to market volatility. This practice is often referred to as Loan to Value (LTV). While obtaining a loan against mutual funds does not strictly require a credit score, it’s essential to recognize that, like any loan, failure to repay can have adverse effects on your credit score. Conversely, making timely payments can positively influence and improve your credit score over time. Therefore, borrowers should be mindful of their repayment commitments to maintain a positive credit history.

Could you explain the charges associated with taking out loans against mutual funds?

Certainly, when considering loans against mutual funds, it’s important to be aware of the associated charges. Firstly, processing fees are typically involved, representing a small percentage of the loan amount and varying across different lenders. Additionally, some lenders may impose prepayment charges if you decide to repay the loan before the agreed-upon tenure. The interest rates constitute a significant cost factor and should be carefully evaluated. Beyond these, borrowers should also be mindful of potential maintenance or annual fees that may apply, contributing to the overall cost of the loan. Being cognizant of these charges helps individuals make informed decisions and effectively manage the financial implications associated with loans against mutual funds.

How can investors stay informed about changes in tax laws and regulations affecting their investments?

Ensuring a comprehensive understanding of changes in tax laws and regulations impacting investments is essential for prudent financial management. Investors can stay well-informed by regularly following financial news from reputable sources, such as publications, websites, and news channels. Seeking professional advice is another key avenue, as tax professionals and financial advisors specialize in providing the latest insights tailored to individual investment portfolios. Attending workshops or seminars hosted by credible financial institutions or industry experts offers a valuable opportunity to delve deeper into complex regulatory changes and their potential implications. 

Additionally, subscribing to newsletters from financial institutions or advisory services can provide regular updates, keeping investors informed and equipped to navigate the evolving landscape of tax regulations. By incorporating these strategies into their routine, investors can proactively stay ahead of changes and make informed decisions regarding their investments.

Can you share your insights on asset allocation and its role in wealth management?

Certainly! Asset allocation is a cornerstone of effective wealth management, playing a pivotal role in achieving a balance between risk and returns within an investment portfolio. Its significance lies in tailoring the allocation of assets to align with individual financial goals, age, risk tolerance, and investment timeline. By thoughtfully allocating investments across various asset classes, such as stocks, bonds, and cash equivalents, investors can optimize their portfolio’s performance while managing potential risks.

Regular review and rebalancing are essential components of a sound asset allocation strategy. Market dynamics and individual circumstances change over time, making it crucial to reassess the allocation periodically and adjust it to maintain alignment with the desired risk-return profile. This proactive approach allows investors to adapt to evolving market conditions and ensure their portfolios remain well-positioned to meet their financial objectives.

Ultimately, effective asset allocation is about optimizing returns while prudently managing risks. A well-thought-out allocation strategy provides a solid foundation for wealth management, enhancing the potential for long-term financial success while navigating the ever-changing landscape of the financial markets.

How does the flexibility of loans against mutual funds meet the evolving needs of borrowers in today’s financial landscape?

The flexibility of loans against mutual funds proves to be a dynamic solution perfectly aligned with the evolving needs of borrowers in today’s financial landscape. The adaptability of these loans stands out, offering a tailored response to unexpected financial needs or opportunities that may arise. Borrowers enjoy a high level of customization, allowing them to select loan amounts and terms that precisely suit their circumstances. This adaptability is particularly valuable in a fast-paced and dynamic economic environment where financial requirements can vary widely. 

Furthermore, loans against mutual funds provide immediate liquidity without the necessity of selling investments, allowing borrowers to leverage the value of their portfolios without disrupting their long-term investment goals. In terms of convenience, the processing is typically simpler, and disbursement is quicker compared to traditional loans. Some digital applications even boast disbursement times as short as 15 minutes, making these loans an agile and efficient solution for those seeking timely financial support in today’s rapidly changing financial landscape.

 

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Published: 21 Feb 2024, 03:10 PM IST
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