O C T O B E R 2 0 2 3 • L 70 NO.1 PERSONAL FINANCE MAGAZINE W W W.O U T LO O K M O N EY.

C O M

CELINE M. AND
HUBERT A. DASS
allocate funds for
festive expenses
much in advance

SPEND
SPECIAL
STORY
MULTI-ASSET

SMARTLY FUNDS ARE

IN FLAVOUR.

SAVE
SHOULD
YOU BUY?

SAGELY
A guide to festive
shopping and how RNI NO. DELENG/2002/08292

to balance it with
investments
8 904150 800027 10
 Editor’s Note

BE YOUR OWN
CHOICE ARCHITECT
I
n their insightful book, Nudge: The Final Edition, authors Richard H.
Thaler and Cass R. Sunstein talk about individuals who can be labelled as
“choice architects” because of the power they wield through simple actions.
They explain by giving the example of a director of food services for a chain
of schools, who could affect the food choice of children by simply rearranging
the food items at the display counter of the cafés. In a way, she could nudge
children into eating certain food items.
This festive season, when you will no doubt go out with your shopping bag or
log into your favourite app, be ready to encounter several similar “nudges” that
might entice you to choose or buy certain items. One of the ways to navigate
through this maze of nudges is to create some of your own.
Explaining “choice architecture” in more detail further in the book, the
authors elaborate on how there was a higher possibility of making people
behave or follow a certain course of action by not just nudging them in a
NIDHI SINHA certain direction, but also ensuring that the nudges make it easy for them to
Editor, Outlook Money follow it. “If you want to encourage some action or activity, Make It Easy,” they
nidhi@outlookindia.com say. So, don’t just be the “choice architect” for yourself, but while formulating
those nudges, ensure they are easy to follow, too.
First, make a list of what you plan to buy to get past the shelves of nudges
beckoning at you. Get into the details while making it. Don’t just include the
expensive item heads like a consumer good or house repair, but also the smaller
ones like all the items you’ll need for the string of festivals round the corner, the
gifts you plan to buy for your loved ones for the different occasions, the items
you plan to cook or order, and so on.
Second, bifurcate the list as per your needs and wants. You may want to get
the most expensive lighting for your home, but diyas with some stringed bulbs
is all you may need to make your home look beautiful. But don’t forget to assess
the needs of each of the family members—from a pair of spectacles for the
oldest member to the first cycle for the youngest.
Third, recalibrate your budget by taking into account all the extra funds you
can lay your hands on. But don’t just allocate everything to your spending list,
keep a percentage for your saving as well. All the shopping you did all year
round (there was a time when most households went on a spending spree only
during festival time, but that’s not the case anymore) may help you trim that
spending list to fit into your budget. For instance, you may have already picked
up a dress fit for the festivities a few months ago because you liked it then but
couldn’t find an occasion to wear it.
This festive season, Fourth, make another list—one of don’ts. Don’t dip into the savings part.
be the choice If you fall short of money, when it comes to spending, don’t be in a hurry to
architect for borrow. Assess if you can repay the debt before taking one. If you are already in
yourself by debt, prioritise repaying before everything else.
Making your own list of nudges doesn’t mean you don’t indulge yourself this
creating your
festive season. The key is in striking the right balance but that can happen only
own nudges, but
if you are in control. How you spend and what you spend on are deeply personal
ensure they are decisions but being the “choice architect” for yourself can “make it easy” for you
easy to follow, too and ensure this year’s festive spending does not result into financial distress.

www.outlookmoney.com October 2023 Outlook Money 3

 Talkback

New Milestone
I was among the first few readers when the first
avatar of this present glitzy special edition of S E P T E M B E R 2 0 2 3 • L 70 NO.1 PERSONAL FINANCE MAGAZINE W W W.O UT LO O K M O N EY.C O M

Outlook Money was launched. I congratulate

EDITOR
you all on reaching the publication’s silver jubilee Nidhi Sinha
ANNIVERSARY
milestone. I laid my hands on it in my early 30s to SPECIAL
EDITION

delve into the world of finance and would eagerly DEPUTY EDITOR
Kundan Kishore
wait for every issue. Later, I subscribed to it so as
not to lose out on any valuable subject. I am still ASSOCIATE EDITOR
GET YOUR MONEY DECISIONS RIGHT Sanjeeb Baruah
an avid reader. Though I am retired now, I feel this RNI NO. DELENG/2002/08292

ˇˢˣ Ѓnan˖ial e˫ˣert˦ tackle

magazine is my mentor in the realm of investing. 8 904150 800027 09

key questions on investing, insurance,
˕anking, ta˫ation an˗ Ѓnancial ˣlanning
SENIOR ASSISTANT EDITOR
Looking forward to more path-breaking issues Sutirtha Sanyal
towards the golden jubilee edition. ASSISTANT EDITOR
Sham Sunder, email SEPTEMBER | 2023 Meghna Maiti

SENIOR SUB EDITOR

Versha Jain

Need-Based Planning in the September 2023 issue piqued CORRESPONDENT-CUM-SUB EDITOR

The story, Tie Products To Your my interest when I saw the growing Aaron Varghese Charly

Needs published in the September life expectancy number and the need DESIGN
2023 issue was informative. I invest to have proper financial planning. As Arijit Das Choudhary,
in secured instruments so that the tax benefits are not there in the new Ashvin Chitroda,
Mahanthi Keshav,
money can grow, without thinking tax regime, one can invest anywhere. Rehana Farhan Shaikh,
much about any goals. Also, real I invest in FDs, and SIPs and plan to Rohina Singh,
Saahil Bhatia (illustrator),
estate always looks as an attractive build a decent corpus. As I will have Vinay Dominic,
option to me but it locks up the no pension, financial planning is not a
money. I realise that most of the real choice but a necessity. CHIEF PHOTO CO-ORDINATOR
Shruti Singh
assets come to use only for the next Shubhra Patel, email
generations. After reading this, I feel BUSINESS OFFICE
I should review and invest in better Targeting Millennials CHIEF EXECUTIVE OFFICER
Indranil Roy
passive income-generating tools. Most of the articles in the magazine
Sukirat Pant, email are targeting the millennials: how CHIEF STRATEGY OFFICER
Suchetana Ray
they should plan for retirement, what
Healthy Retirement type of policies they should take asset VICE PRESIDENT
I like reading Outlook Money allocation, etc. But there are millions Tushar Kanti Ghosh

whenever I get time. The article, of senior citizens who have retired DIRECTOR-BRAND AND MARKETING
MF Recipe To Healthy Retirement, without pension facilities. You should Shrutika Dewan
guide them regarding investment mostly CIRCULATION & SUBSCRIPTIONS
Retirement
short-term, health policies, and how Gagan Kohli
to live happily without depending on
PRODUCTION
By SWARUP MOHANTY, Director & CEO, Mirae Asset Investment Managers (India) By NILANJAN DEY, Director, Wishlist Capital

MF RECIPE TO HEALTHY RETIREMENT

The average life expectancy in India has doubled since 1950s, and with the rising
cost of living, mutual funds could be the medicine to ensure our funds outlive us
TIE PRODUCTS TO YOUR NEEDS
If you don’t invest in products suitable to your needs, your retirement goals will
remain a dream, regardless of the fancy assets that you acquire
anybody. I am a super senior citizen GENERAL MANAGER
W T of 85 years. I regularly read Outlook Shashank Dixit
hen India became a plan, because they want to retire far insurance as investment. While term here is a tide in the affairs EYES ON THE PRIZE fees, commissions, charges, and
republic in 1950, the earlier. They take a path of savings insurance is important, but beyond of men, or so goes an An average individual needs to brokerages. Thus, cost awareness
average life expectancy and investing in inflation-beating that one must look at investment oft-quoted quip from keep his eyes on the prize—his keeps the average retirement plan fit
was 35.21 years, in products offering a corpus better and not insurance. Mutual funds can Shakespeare’s vast body of ultimate aspiration. To be specific, and fine.
2022 it stood at 70.19 and by 2100 it than what traditional investment help solve this conundrum. work. For men, and I allude to the he wants to replace his active income The narrative seems particularly
will become 81.96 years, according to products would permit them to do. It’s an established fact that in the straight-laced citizens of this mighty stream (it will terminate when he twisted insofar as the retiree’s
UN estimates. Taking 2022 numbers India ranks 41 (44) in the Global long term, equity creates wealth; land irrespective of gender; the tide superannuates) with passive, post- exposure to insurance is concerned.

Money but I do not find useful

from a financial perspective, the Pension Index survey 2022 by Mercer however, a consistent participation in question comes in the shape of retirement income. This is always a Costs are indeed heavy, especially
average life can be divided in three CFS. India had an overall index value to this asset class remains a a poser. When should they begin to challenge for the uninitiated. in the context of traditional plans.
phases—early phase, accumulation of 44.4 in 2022, up from 43.3 in 2021 challenge. Investors flirt with plan for retirement, now or later? How can passive income be Endowments and annuities, both
phase and the transition phase. but lower than 45.7 for 2020. equities during bull runs and desert And the answer comes pat: for most, ensured? Well, in the free markets popular options in the insurance

ACCOUNTS
The early phase refers to the The penetration of private them during bearish phases, though it should start immediately. that we see everywhere, there are space, are often loaded with big-time
years of growing up, getting formal pension plans remains low in they should be doing exactly the I do not wish to be flippant, but few guarantees. Passive income, expenses. ‘Buyer beware’ is the only
education and early years of job India and with more than 95 per opposite of it. experience tells me that hesitation therefore, must come from certain advice in such a scenario.
(10-28 years). The accumulation Mutual funds can help address on this front will be tantamount assured income and market-

guidelines for people like me. Please

of wealth phase (28-58 years) is
WITH EVERY DECADE, this issue with their best product to foolishness. And when I refer determined products. The latter TO EACH HIS OWN

VICE PRESIDENT
when we excel at our work, change offerings, popularly known as the to a retirement plan, I mean one must be chosen carefully, especially Each individual must craft his own
jobs for a better standard of living, AVERAGE AGE WILL systematic investment plans (SIPs). A that checks all the boxes. Ergo, because performance is spawned specific plan and not opt for any
earn, spend, save and invest. The INCREASE, AND SO 20-30-year SIP investment in equity a randomly purchased pension by skill, ability, luck and other universal metric. Each retirement-
transition phase is when there are no WILL THE NEED FOR mutual funds will give you these scheme does not fit the description, factors, most of which can never be minded investor has a list of to-
earnings, but only expenses (from 59 FINANCIAL SUPPORT three benefits: nor does an oddball investment in controlled by the individuals. dos special for him. Think of an

Diwan Singh Bisht

till death). Regular participation irrespective the alluring real estate. Ditto for a Control or the lack of it, indeed, individual who may be a 35-year-old

devote a few issues exclusively for senior

The most critical question in the of market conditions quick-fix allocation to a few star- forces one’s eyes off the prize. An lady with family and a business
third phase is whether the money Power of compounding grade mutual funds. investor with little or no direct to look after. But several factors
will outlive us or we will outlive it. cent of the total workforce being Tax benefits (in case of equity Instead, I mean a step-by-step control over his portfolio is likely will certainly make her unique. So
The planning for third phase must in the unorganised sector, and the linked saving scheme or ELSS). programme, which must begin with to pay a hefty price. His transaction borrowing ideas from others while
start in the second phase. The second new tax regime expected to be the At the end of this accumulation the fundamental realisation that the costs, for instance, may act as planning retirement is one thing, but
phase decides whether the golden default regime in the future, it is phase, you should be able to achieve right products must follow the plan. the spoiler. His overall returns to copy blindly will perhaps be naïve,
years of retirement will be a boon important that investors take control a decent corpus. After this, one can To disregard the need for planning may well be impacted by sundry which has no place in the humdrum
or bane. One of the biggest myths of their finances and do not depend go for systematic withdrawal plan strikes at the very root of personal world of risk and returns.
of the third phase is the notion that
expenses reduce. As a matter of fact,
most retirement plans do not include
the medical expenses which come
along unannounced.
Of late, many people seem
much on the subsidies or the tax
exemptions offered.

CHOOSE MUTUAL FUND

AS RETIREMENT VEHICLE
It’s important to be aware and
depending on the planned expenses
and the remainder continues
to remain invested and gets
compounded with time.
Remember that with every passing
decade, the average age will increase
finance. Far too many of us end up
with needless real estate, funds,
and insurance policies. As I said, an
assembly of all sorts of investment
products is not a retirement plan per
se. Not when the motley collection
EACH INDIVIDUAL
MUST CRAFT HIS OWN
SPECIFIC PLAN AND
Ultimately, the conjoined ideas of
risk and returns will determine the
efficacy of a retirement plan. On the
grand stage of life, people are merely
players who have their exits and
entrances, genuine and honest plans
and super senior citizens. CREDIT CONTROL
NOT OPT FOR ANY

Mallem Hanumantha Rao, email

to be following the financial start investing as early as possible. and so will the need for strong hangs in an empty space not are supremely important. The sooner
UNIVERSAL METRIC

Manisha Mishra
independence, retire early (FIRE) Incidentally, most investors confuse financial support. characterised by a proper plan. we realise this, the better it is.

88 Outlook Money September 2023 www.outlookmoney.com www.outlookmoney.com September 2023 Outlook Money 89

COMPANY SECRETARY & LAW OFFICER

Correction: The infographic on the model investment portfolio for aggressive investors Ankit Mangal
on page 20 of the cover story in September 2023 issue should have been equity instead
of debt at 70-80% and vice versa. We deeply regret the unintended error on our part.

Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, New Delhi 110029, or
letters@outlookmoney.com. Please mention your full name and residential address.

4 Outlook Money October 2023 www.outlookmoney.com

 A monthly SIP
of ` 10,000@ in
HDFC Flexi Cap Fund
since its inception
has bloomed into
~ ` 14.35 Crore^.
A. HDFC Flexi Cap Fund - SIP Performance - Regular Plan - Growth Option
Since Inception 15 year SIP 10 year SIP 5 year SIP 3 year SIP 1 year SIP
Total Amount Invested (` in lacs) 34.40 18.00 12.00 6.00 3.60 1.20
Market Value as on August 31, 2023 (` in lacs) 1,435.38 64.53 27.73 10.26 5.10 1.36
Returns (%) 20.79 15.52 15.98 21.61 24.03 25.26
Benchmark Returns (%)# 14.84 13.89 14.43 17.38 15.83 19.72
Additional Benchmark Returns (%)## 13.70 13.08 13.50 15.45 13.41 13.48
Past performance may or may not be sustained in the future. @Assuming ` 10,000 invested systematically on the first Business Day of every month since January 01, 1995 (Scheme
Inception Date). CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return) for Regular Plan - Growth Option. The above
investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. SIP - Systematic Investment Plan.
HDFC AMC / HDFC MF is not guaranteeing or assuring any returns on investments in the Scheme.

B. HDFC Flexi Cap Fund - Performance - Regular Plan - Growth Option NAV as at August 31, 2023 ` 1310.426 (per unit)
Period Scheme Returns (%) Scheme Benchmark Additional Benchmark Value of investment of (`) 10,000
Returns (%)# Returns (%)## Scheme Benchmark Additional Benchmark
(`) (`)# (`)##
Last 1 Year 19.54 11.39 9.50 11,959 11,142 10,953
Last 3 Years 30.54 23.10 20.58 22,244 18,655 17,532
Last 5 Years 14.49 12.33 11.83 19,676 17,893 17,495
Since Inception* 18.53 12.10 11.48 13,10,426 2,64,518 2,25,833
Common notes for the above table A & B: #NIFTY 500 (Total Returns Index) ##NIFTY 50 (Total Returns Index). *Inception Date: January 01, 1995. The scheme is managed by
Ms. Roshi Jain since July 29, 2022. As NIFTY 50 TRI data is not available since inception of the scheme, additional benchmark performance is calculated using composite
CAGR of NIFTY 50 PRI values from January 1, 1995 to June 29, 1999 and TRI values since June 30, 1999. ^As on August 31, 2023.
C. Performance of Other Funds Managed by Ms. Roshi Jain, Fund Manager of HDFC Flexi Cap Fund
(who manages total 3 schemes which have completed one year) Returns (%) as on August 31, 2023
Scheme Managing Scheme since Last 1 year (%) Last 3 years (%) Last 5 years (%)
HDFC Focused 30 Fund January 13, 2022 19.51 30.33 13.67
Benchmark - NIFTY 500 (Total Returns Index) 11.39 23.10 12.33
HDFC TaxSaver January 13, 2022 18.17 25.69 11.56
Benchmark - NIFTY 500 (Total Returns Index) 11.39 23.10 12.33
Common notes for the above table B & C: Past performance may or may not be sustained in the future. Returns greater than 1 year period are Compounded Annualised
(CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure.
The expenses of the Direct Plan under the scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. The above returns
are of Regular Plan - Growth Option.

HDFC FLEXI CAP FUND (An Open-ended Dynamic Equity Scheme Investing Across Large Cap, Mid Cap & Small Cap Stocks) is suitable for investors
who are seeking*:z To generate long-term capital appreciation/income | z Investments predominantly in equity & equity-related instruments
*Investors should consult their financial advisers, if in doubt about whether the product is suitable for them.
Name and Riskometer of Benchmark Name of scheme(s) Riskometer# of the Scheme(s)
NIFTY 500 (Total Returns Index) Modera
oderate High tely
to te M Hi
Modera w era
oderate High tely
Mo Lo

gh

z HDFC Flexi Cap Fund

d

o M
w t erate Hi
HDFC Focused 30 Fund Contact your MFD / RIA today.
Mo Lo

Very

z
gh

High
Low
d

z HDFC TaxSaver
Very
High
Low

RISKOMETER
Investors understand that their principal will be at
RISKOMETER very high risk
Benchmark and Scheme Riskometer as on August 31, 2023
#For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
 CONTENTS
OCTOBER 2023 O VOLUME 22 O ISSUE 10

COVER STORY

10 26 32 38
THE BALANCE GOLD SHOPPING: BUYING A SPREADING
BETWEEN BUY NEW OR HOUSE? ASSESS JOY BY WAY
SPENDING CHANGE OLD? THE FREEBIES OF GIVING
AND SAVING Gold lovers may be Freebies from developers Want to donate for a
It’s easy to go readying themselves may look attractive, but cause this festive
overboard with your for a buying spree. they should not be the season? You can make
expenses during festival They may want to only factors to settle for the usual donations in
time. The key is to strike explore if exchanging old a real estate deal. cash, kind or by way
a balance between gold with new makes Evaluate other factors of volunteering to the
spending and saving more sense before signing up cause that you care for

Cover Photo: DINESH PARAB

Disclaimer: Views expressed by various contributors in the maga˭ine under the section ϟSpotlight’ are their own and not necessarily reЄect the opinions,
beliefs and view points of Outlook Money editorial. These are advertorial pages.

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Published for the month of October 2023;
Released on October 1, 2023. Total no. of pages ʫʧ
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Outlook Money does not accept responsibility for any investment decision
taken by readers on the basis of information provided herein.
The objective is to keep readers better informed and
help them decide for themselves.
 Contents

withdraw cash using UPI

from regular and UPI ATMs
IN
TE
R
EQ NAT
UI IO
T Y NA
EQU
IT Y 44 60
L A FRIEND IN NEED
SPECIAL STORY FOR DIABETICS
Diabetes-speciЃc plans
MANY-IN-ONE: WHICH are customised for the
needs of diabetic patients
ASSET ALLOCATION
and some of them have
RE SUITS YOU? less waiting period,
ITs
subject to the severity of
Six multi-asset allocation funds the disease. Know your
have been launched this year options before buying one
and more are in the pipeline.
ES
ITI Are they right for you?
OD
62
M
C OM

COLUMN
THERE’S NO BLACK
AND WHITE
Our Ѓnancial decisions are
not just about numbers or
charts. They are much
50 Retirement
more than listing do’s and
COLUMN dont’s, needs and wants,
writes Larissa Fernand
WHAT TO DO WITH
SMALL CAPS?
With the right acumen, 66 72
investors can use small- INTERVIEW WHAT’S NEW
cap funds to energise REGULATORY
their portfolios, writes M. Balakrishnan, ED & COO,
IDFC FIRST Bank speaks to
ROUNDUP
Nilanjan Dey
Nidhi Sinha, editor, Outlook Regulatory changes
Money, and Suchetana between September 1 and
52 Ray, editor, Outlook
Business, about the bank’s
September 21, 2023 and
how they will impact you
OLM50 digital innovation, interest
SBI Small Cap: rate direction and the
Long-Term Hauler importance of Ѓnancial 82
literacy and retirement EXPLAINER
54 planning
OVERDRAFT
COLUMN An overdraft is a credit
HOW INDEXATION facility that banks extend
to accountholders by
WORKS IN MFS allowing them to withdraw
The Finance Act, 2023 has more than their balance
taken away indexation
beneЃt from debt mutual
69
funds, but those having HOW DEBT FUNDS
35-65 per cent exposure BENEFIT RETIREES
ALSO READ
to equity are still eligible
for it, writes Joydeep Sen Kaustubh Gupta, Co-Head
of Fixed Income at Aditya 73
Birla Sun Life AMC, says, GEN-Z QUERIES
58 that Ѓxed-income mutual
HERE’S HOW TO
funds offer stability,
reliable income and a way
74
WITHDRAW to systematically manage QUERIES
CASH FROM cash Єow needs, which is
ATMs USING UPI crucial for retirees 81
We give step-by-step HOMEBUYER’S
guides on how to GUIDE TO GURUGRAM

8 Outlook Money October 2023 www.outlookmoney.com

 Cover Story

TREADING THE FINE

BALANCE BETWEEN
SPENDING AND SAVING
It’s easy to go overboard with your expenses during festival time. Take
stock of your spending and saving accounts to strike the right balance

By Meghna Maiti

10 Outlook Money October 2023 www.outlookmoney.com

D
iwali is among the décor to indulging in sumptuous income from investments to spend
biggest of festivals feasts and exchanging gifts, the on festive buying. They also go for
that Indians celebrate, expenses can pile up rather quickly. Diwali offers to get the most out of
but it is actually This year is expected to be no discount sales during the period.
the culmination different. According to the India Festivities can always tempt you
of a series of festivals that starts Consumer Sentiment Index (CSI) to spend more than what you had
with Onam, Raksha Bandhan, report by Axis My India, a consumer orginally planned for, but doing so
Janmashtami, the Navratras data intelligence company, 23 per can come back to bite you in the
and Durga Puja. This year, the cent of respondents plan to shop future if you overindulge and end up
festive season started early when more during the festive period being a spendthrift.
Chandrayaan-3 reached the moon as compared to last year and 28 So, here’s a guide to help you
on August 23, 2023, according to per cent intend to maintain their embark on a different kind of
Prime Minister Narendra Modi. spending habits at the same level as celebration—one that not only
When it comes to festivals, before, indicating that the consumer illuminates your surroundings, but
Indians go all out to add colour sentiment will remain stable. also brightens your financial future.
and zing to the celebrations. From Like every year, Celine M. Dass, For that, you will have to strike the
shopping for new clothes and home 72, who was a shipping coordinator right balance between enjoying the
festivities while safeguarding your
financial well-being.
FESTIVITIES
CAN ALWAYS SPENDING ACCOUNT
TEMPT YOU TO Budget: The first step is to make
a list of the things you want to buy
SPEND MORE or spend on, and allocate a budget
THAN WHAT YOU for each head. Says Nita Menezes,
HAD PLANNED founder and CEO, Financially
FOR, BUT DOING Smart, a financial planning firm:
“Develop a budget that directs your
SO CAN COME finances to where they are needed,
BACK TO BITE both for the present and the future.
YOU IF YOU Having clear communication with
END UP BEING your family about your budget will
ensure that everyone is on the same
SPENDTHRIFT page, thus averting disappointments
during the festivities.”
for a consortium of shipping Kamalika Mukhopadhyay, a
companies before she retired, and 38-year-old businesswoman residing
her husband, Hubert A. Dass, in Delhi, and her husband, Nitin
73, who worked as a logistics and Sharma, 38, and an entrepreneur,
operations manager at a Dubai- eagerly anticipate the arrival of the
based retail company previously, festive season every year. Besides
now both settled in Mumbai, are allocating funds for the larger
already planning to celebrate Diwali expenses, such as buying gifts for
with sweets, décor and more. friends and family, and jewellery
Despite being devout Catholics, they and clothing for themselves, she also
have always embraced Diwali with allocates separately for expenses
their neighbours and family friends. like deep-cleaning of their home
To ensure they can fully enjoy and buying sweets. “In Delhi, Diwali
and participate in the festivities, holds great significance, and we
Celine and Hubert have set up some allocate a substantial budget for this
budgeting practices over the years. occasion,” says Mukhopadhyay.
Now retired, they consistently As a safe practice, track your
Illustration: Saahil save and allocate a portion of their expenses regularly to ensure you

www.outlookmoney.com October 2023 Outlook Money 11

 Cover Story

Photo: Suresh K Pandey

KAMALIKA
stay within your budget. MUKHOPADHYAY, Track Expenses: Tracking your
Prioritise: It is essential that you 38, NITIN expenses diligently is paramount
assess your situation and spend SHARMA, 38 to ensure that there are no signs
accordingly. For instance, if you plan Based out of Delhi of extra burden on your current or
to spend on home improvement future finances. “Categorise your
this season, you could cut down spending, prioritise essentials, and
on extravagant gifts or expensive trim discretionary expenses, if
The couple earmarks
jewellery, or postpone replacing needed. Budgeting apps or a simple
separate funds
your air conditioner or refrigerator. excel sheet can also help you track
towards buying gifts
Or, you may want to postpone the expenses,” says Menezes.
for friends and family,
renovation if you don’t have enough
jewellery and clothes
money, and go for a repaint instead. SAVING ACCOUNT
for themselves, and for
Says Kiran Telang, a Mumbai- The festive season is considered
deep cleaning of their
based certified financial planner auspicious for investing and buying
house and for buying
and author: “Festival spending assets, such as a house, gold and
sweets. They also buy
can take various forms—shopping other assets. Incidentally, this is
gifts in advance or take
for clothes, jewellery, gifting, also the time when many employees
benefits of sale offers
redecorating the home, travelling recieve their Diwali bonus, which
to save on expenses
and other such things. One needs to makes such investments possible.
figure out what is most important Gold: You can invest physically
among the many such things.” in gold by buying coins, jewellery,

12 Outlook Money October 2023 www.outlookmoney.com

 Cover Story

or bars from trusted jewellers or

dealers. Digitally, you can consider
THE GIFTING GUIDE gold exchange-traded funds (ETFs),
which track gold prices, or Sovereign
Gold Bonds issued by the Reserve
Bank of India (RBI) when they
open for subscription. You can also
explore gold monetisation schemes
from banks which allow you to earn
interest on your gold deposits with
the bank.
Diversifying between physical and
digital gold will allow you to balance
tradition with modern financial
instruments, thus providing you
with security and returns over time
Be Moneywise Look for sales, discounts, while also allowing you to embrace
and deals, explore the festive spirit. For a strategy on
thrift stores, online
Establish a dedicated gold shopping, read Gold Shopping:
marketplaces, and local
budget for gifts in your artisans for unique gifts
overall financial plan

Budget-Friendly YOU CAN USE A

Allocate an amount that
does not put a strain on Gift Ideas
PART OF YOUR
your finances BONUS TO INVEST
Refurbished IN GOLD, EQUITY,
Keep a record of your gift Electronics: Explore
refurbished products MUTUAL FUNDS,
purchases to stay within
your budget from manufacturers or OR FOR HOME
reputable third parties RENOVATION,
Avoid using credit cards to REPAIR OR EVEN
shop for gifts to prevent Custom Photo Gifts:
Create a photo calendar, FOR MAKING THE
accumulating debt
framed picture, or photo DOWNPAYMENT
book capturing special
Get creative and craft moments with recipients
OF YOUR
meaningful DIY gifts like NEW HOME
homemade candles
Subscription Services: Gift
subscriptions to streaming
DIY gifts are not only services, magazines, or Buy New Or Change Old?, Page 26.
budget-friendly, but also book clubs During her working years, Celine
add a personal touch would use her bonus earnings to
purchase gold jewellery on the
Homemade Treats: Make
laddoos at home or a jar auspicious occasion of Dhanteras.
Shop Smart of murabba, or, a basket of Investments: According to
homemade goodies Bhuvanaa Shreeram, co-founder
and head of financial planning at
Establish price limits for House of Alpha, a financial planning
different categories of Plants Or Succulents: firm, mutual funds, stocks, and
recipients (family, friends, Give a potted plant or a other instruments can be good
colleagues) to ensure succulent, symbolising investment options, depending on
you don’t overspend growth and lasting care your objective, time frame, need for
returns and overall risk appetite. In
fact, you can invest your bonus or

14 Outlook Money October 2023 www.outlookmoney.com

 My Life Goals

Travel the world

Give back to society
Buy a holiday home
Plan for retirement
Premium club membership

Kuch galtiyan sudhaari

nahi ja sakti
INVEST IN
Bandhan Retirement Fund
SCAN TO KNOW YOUR FUTURE
NFO Opens:
28th September 2023
NFO Closes:
12th October 2023
Bandhan Retirement Fund
(An open-ended retirement solution oriented scheme having a lock-in of 5 years or till retirement age
(whichever is earlier))
This product is suitable for investors who are seeking*:
• Capital appreciation and income generation over long term.
• A hybrid scheme with investment in equity and equity related instruments as well as debt and
money market instruments.
*,nvestors should consult their Ƭnancial advisers if in doubt about whether the product is suitable for them.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
 Cover Story

FESTIVE SHOPPING GUIDE

In this season of offers, here’s how to read the fine print and buy the best

T
he festive season
brings a deluge of
special offers and
discounts on everything from
apparel to gadgets, and cars to
houses. Here’s how to hunt for
the best deals.

START THE HUNT

Don’t wait for the deals to pop
up on your screens. Instead,
proactively browse through
the different websites for the
best deal on offer. For instance,
you may get better deals on
company websites as compared
to those on e-commerce
websites or vice-versa. So, if you
have been planning to buy a car
or looking to paint your house,
check the websites of your
favourite car brands and paint
companies and compare prices.
Do note that some retailers readily available at the same price from various sellers, and gives a
and even e-commerce platforms range at an e-commerce seller. cashback for every purchase. “Once
offer significant discounts on Says Anand Kumar Bajaj, founder, you have earned `250 or more
products that have been in managing director and CEO of as confi rmed cashback/rewards,
their inventory for a long time. PayNearby, a fi ntech platform, you can transfer this to your bank
By comparing prices across which partners with ONDC, account or redeem as gift cards,”
different websites and stores, “Th rough ONDC, buyers can access CashKaro says on its website.
you can discover variations deals through numerous apps, But do not go on buying spree
in price tags and uncover which makes it a go-to destination just because of the discounts. Only
additional discount offers. for seeking the best festive deals.” buy what you actually need.

EXPLORE ONDC TRY ‘DISCOUNT’ APPS LEVERAGE CARD OFFERS

Consider exploring the Open Some apps also offer coupons and Says Bani Saluja, chief marketing
Network for Digital Commerce cashbacks. They aggregate special officer, American Express: “At this
(ONDC) platform for buying offers from various sellers, thus time of the year one often makes
products, such as apparel, allowing you to view major discount high-value purchases and, hence, it
gadgets or even for ordering offers from the market. They also is important to keep in mind if such
food. It will connect you with offer cashback and coupon codes spends can help you cross a spend
local sellers offering unique for extra discounts. CashKaro, for milestone and earn bonus points or
products that may not be instance, compiles special offers vouchers on your card.”

16 Outlook Money October 2023 www.outlookmoney.com

 extra funds to make investments IT’S EASY TO
that will help cement your future.
As almost every brand rolls out Home: If you are planning to buy GET SWAYED BY
special offers during the festive a house, you could use your bonus OFFERS DURING
season, keep an eye on these to make the downpayment. Make FESTIVALS, BUT
promotional programs. Says Saluja: a smart choice before settling on IT IS PRUDENT
“While taking advantage of these a property though (see Buying A
offers, do not overlook your loyalty House? Assess The Freebies, Page 32) TO STRIKE A
programs, especially those tied to If you are living in your own FINE BALANCE
your credit cards.” house, home improvement is a BETWEEN
Some e-commerce platforms regular cost, but you may consider SHORTLIVED JOY
offer tie-ups with specific cards; it an investment for your comfort
check these out too. Says Abhijit in the coming years. It could range
AND LONGTERM
Chakravorty, managing director from a few thousand rupees for FINANCIAL
and CEO, SBI Card: “Card issuers minor repairs to several lakhs or SECURITY
regularly roll out exciting offers more for major renovations.
for customers on their card Utilising your Diwali bonus
spends. During the upcoming for home improvement purposes minimum payments on others. This
festive season, customers should that cannot be postponed is a wise strategic approach will reduce the
analyse credit card features such choice. Begin by identifying critical interest costs and accelerate debt
as shopping benefits, credit limit, repairs or upgrades that enhance reduction. Says Shreeram: “It is
reward points etc.” It is also a good safety, such as fi xing leaks or important to have a well-thought-
time to redeem reward points. major electrical issues. Structural out plan on how to use the bonus.
upgrades cost more money, but can Interest on such debts can quickly
NOCOST EMI OPTIONS be beneficial in the long run. eat into any potential gains you’d
Keep an eye out for no-cost equated make from investments.”
monthly instalment (EMI) offers STRIKING A BALANCE Every year it might be prudent
during the festive season. These It’s easy to get swayed by the to review and adjust this balance to
usually allow you to split the cost multitude of offers and discounts, align with your changing priorities.
of your purchase into interest-free but the prudent choice would be to
instalments of up to 24 months. strike a balance between short-term PLAN AHEAD
Says Pallav Jain, founder and CEO, joy and long-term financial security. Balancing short-term and long-term
Shopse, a digital EMI fintech To start with, you could split the financial goals necessitates prudent
marketplace: “Consumers should available funds based on necessity— planning. First, identify your
fi rst assess their fi nancial health apportion some money for festival immediate, short-term objectives,
and repayment feasibility before expenses and the rest towards such as festive expenses, alongside
selecting a pay-later product. It is long-term savings. “This approach your long-term financial aspirations,
also imperative to check the offer ensures continual progress toward such as savings and investments.
transparency to avoid any hidden your financial objectives while Says Telang: “It is a good idea to
charges or heavy interest rates.” you savour the festivities without keep a margin of 5-10 per cent in
But don’t forget to check the financial concerns,” says Menezes. the monthly expenses to cover up
processing fee and other costs. Says Another aspect that can help such things as home improvement,
Ashish Tiwari, chief marketing maintain this balance is to assess gadget repair and/or replacement.
officer, of consumer finance debt. For instance, if you receive You can also earmark a separate
provider Home Credit India, “These a substantial bonus and have corpus depending on the quantum
could be convenience charges or unmanageable high-interest debt, of expenses that you envisage. If
tenure extension charges. Ensure the best strategy would be to use you don’t put such measures into
that the retailer and fi nancing the bonus to get out of the debt trap place on an ongoing basis, you may
partner are reputable and instead of spending it elsewhere. have to dip into your long-term
transparent in their dealings.” Prioritise debts with higher investments to meet the needs.”
Aaron Verghese Charly interest rates, then allocate a Festival Fund: Planning for festival
substantial portion of your bonus spending should be integrated into
towards these debts while making your financial strategy at the start of

www.outlookmoney.com October 2023 Outlook Money 17

 Cover Story

the year. One effective way to do this

is by treating festival expenses as a
short-term financial goal.
To prepare for the increased costs
as well as maintain a healthy cash
flow, make an overall estimate of the
expenses in your annual budget for
gifts, decorations, special meals, and
travel expenses. Once you have a
clear picture of these costs, calculate
how much surplus income you can
set aside each month to meet these
expenses comfortably.
Consider having a dedicated
savings account specifically for your
festival fund. Automate monthly
transfers from your primary account
to this fund. This will ensure that
you accumulate the necessary funds
throughout the year, thus making it
easier for you to cover your festive
expenses without causing financial
strain during the celebrations.

NAVIGATE A SHORTFALL
Should you find yourself facing

Photo: Dinesh Parab

a shortfall of funds, revisit your
budget. Recalibrate your list and
look for income sources that can
come to your rescue. But stay
away from debt that you will find
difficult to repay. Adds Menezes:
“Keep your Specific, Measurable,
Achievable, Relevant, and Time-
bound (S.M.A.R.T.) goals in mind,
using them as your compass to make CELINE M. DASS (72) procuring gifts in advance or
informed financial decisions. Avoid AND HUBERT during sales. We take advantage
over-reliance on credit cards and the A. DASS (73) of the special offers and discounts
debt trap they may lead to.” available during the Diwali season.”
Trim unnecessary expenditures shopping for the festive The idea is to keep things simple.
season at a mall in Mumbai
in the months leading up to the Celebrations do not need to come
celebration to reallocate resources. at the expense of overspending and
Diwali is still at least a month away, In their working years, debt. Prioritise essential aspects
so divvying up the budget over they diligently saved of the festival, like quality time
the period can help distribute the a portion of their with loved ones, over extravagant
financial load that you may get income, to spend on gifts or parties. “We never planned
burdened with later. Explore cost- Diwali festivities in strategically on how to spend in
effective alternatives for gifts and the year. Now, retired, Diwali. But we always lived within
decorations and take advantage of the septugenarian our means, and so never had to
discounts and special offers. couple save from their grapple with any debt. We managed
Says Kamalika: “We use various investment income to strike a balance between spending
strategies to control our expenses, and saving,” says Celine.
such as reusing decorations and meghna@outlookindia.com

18 Outlook Money October 2023 www.outlookmoney.com

&OLLOWUSON

-UTUAL&UNDINVESTMENTSARESUBJECTTOMARKETRISKS READALLSCHEMERELATEDDOCUMENTSCAREFULLY
 Cover Story

GOLD SHOPPING: BUY

NEW OR CHANGE OLD?
Gold lovers may be readying themselves for a buying spree. But does
it make sense to exchange old gold instead of buying new
jewellery and invest the money elsewhere?

By Amit Sethi

26 Outlook Money October 2023 www.outlookmoney.com

 T
he festive season in and whether it makes sense to buy
India is not just about new jewellery instead.
spending money on
goodies and indulging THE PROCESS OF
your wants, but EXCHANGING
also about making investments. People exchange gold for different
And when it comes to making reasons—it could be about wanting
investments during this time, gold to wear new designs, or because of
is still on top of the list for most. wear and tear of old jewellery, or
Over the years, gold buying has simply because of lack of adequate
taken several different forms. First, budget to buy new jewellery. In
many Indians have switched to non- the process, people typically end
physical gold and prefer to invest up spending more money, which
in instruments, such as Sovereign constitutes their incremental
Gold Bonds (SGBs), and gold mutual auspicious spending.
funds and exchange-traded funds However, the process of
(ETFs). Second, gold in physical exchanging gold jewellery may not
always be smooth given lack of
standardisation in the market.
IN INDIA, MANY If you plan to exchange your gold
FAMILIES PASS jewellery from the same jeweller
ON JEWELLERY from where you purchased it,
then they usually give you the full
TO THE NEXT value of the gold according to its
GENERATION, purity and the prevailing market
BUT THE NEWER price, while you have to make an
GENERATION payment towards additional gold
(if any), making charges and taxes
PREFERS TO on the new jewellery (see Cost Of
EXCHANGE OLD Exchanging Jewellery).
ONES WITH NEW If you plan to exchange the
BY INVESTING A gold from a different jeweller and
not from where it was originally
LITTLE EXTRA purchased, then you may have to
undergo a different process, and
form remains a popular choice. For it is important to understand all
instance, it is considered auspicious the details very carefully. Every
to buy metal on the festival of jewellery may have a different set
Dhanteras. Similarly, gold jewellery of terms and conditions though
is an intrinsic part of Indian there are some commonalities (see
weddings, and many Hindu families Common Steps For Exchange).
organise weddings in November. Also, most jewellers prefer to melt
Third, with the age-old tradition of the old gold item to ascertain
accumulating gold in India, many the purity and expect that you
families pass on jewellery to the would buy another item from
next generation, but the newer them in exchange.
generation, typically, prefers to Says Hareesh V., head of
exchange the old ones with new commodities at Geojit Financial
ones by investing a little extra. Services, “The jeweller uses a digital
Since physical gold is still the or mechanical scale to measure the
popular choice during the festive weight of the gold item. Knowing
season, let’s understand what the weight is essential, because it
Illustration: Saahil exchanging gold jewellery entails is used in conjunction with purity

www.outlookmoney.com October 2023 Outlook Money 27

 Cover Story

COST OF EXCHANGING
JEWELLERY

OLD NEW
Jewellery Jewellery

Weight (In Grams) 20 20

Purity in Karats 22 22

Market price
(`) of 24 Karat 59,918 59,918
Gold/10 Grams*

Making Charges (%) NA 15%

Tax (%) NA 3%

Price of Jewellery (`) 1,09,850 1,30,117

How Much You Pay After

Adjusting Cost of Old Jewellery?** `20,267

Note: Table only for illustrative purpose. Making charges may vary
between different jewellers and the type of jewellery bought
*As per the closing rate mentioned in MCX (for 5 Feb 2024 expiry) on
September 15, 2023
**Assuming that jeweller offers the same buying and selling rate on
gold jewellery, and the exchange is happening at the same jeweller

REENA AND RONAK to calculate the value of the gold. 41, a couple based in Vadodara,
PATEL, BOTH 41, In India, gold is typically measured feels the exchange process is more
WITH CHILDREN in terms of purity, with the most streamlined now than it was 5-10
common purities being 24 karats years ago. Says Ronak, who runs a
at their residence (99.9 per cent purity), 22 karats (91.6 construction business, “I remember
in Vadodara per cent purity), and 18 karats (75 the first time we approached a
per cent purity). Some jewellers may local jeweller to exchange a broken
The couple say the perform a scratch and acid test to gold chain, way back in 2014. The
exchange process is confirm the purity of the gold.” 20-gram gold chain was gifted by
more streamlined than The most reliable way to my grandfather, so we didn’t know
it was before. In 2014, determine the purity of gold in from which jeweller it was originally
a jeweller offered India is by looking for the hallmark purchased. The local jeweller looked
them `37,500 for certification on the jewellery or at the chain and by naked eye
an old gold chain. the gold items. “The Bureau of observation, he determined that the
Recently, after tests, Indian Standards (BIS) provides chain had 18K purity. He offered
another jeweller offered hallmarking services to certify the an exchange price of `37,500 for
them `1.12 lakh purity of gold. Hallmarked gold is my chain, based on the prevailing
trusted for its purity,” says Hareesh. buying rate of `25,000 per 10 grams
Reena and Ronak Patel, both for 24K purity gold. The gold price

28 Outlook Money October 2023 www.outlookmoney.com

at that time was around `26,500 per to high making charges of 5-25 per

COMMON
10 grams.” They didn’t go ahead with cent, the cost of exchange is high.
the exchange then. Besides, jewellery entails storage
Recently, when they went to
exchange the same chain, the
STEPS FOR and locker charges, too.”
She adds: “Physical gold and
jeweller put it in a gold analyser
machine and told them the metal
EXCHANGE jewellery are personal assets that
don’t add to the value of net worth
had 22K purity. “He asked us if we
This is how most jewellers of an investor. Investing in gold bars
wanted to go ahead with the process exchange gold not bought or gold coins is a bit better than
of melting to know the exact value. from their stores: investing in jewellery.”
After our consent, they melted the Also, when you buy jewellery
chain, and the purity was 22.1K. as an investment, you will need to
The market rate of gold on that day stay loyal to the same jeweller for
was `60,500 per 10 grams, but the exchanging it with new jewellery.
jeweller’s rate was a little higher at Even buying coins and bars from
`61,000 per 10 grams as their buying banks can be a problem when you
and selling rate was the same. want to liquidate it. “Coins and
We got `1.12 lakh for that chain bars once sold by banks are never
in exchange value,” says Ronak. bought back. Hence, customers
He and Reena, who runs a bakery
business, bought another gold item Jeweller will ascertain
in exchange and the price of the old the approximate value of INVESTING IN
chain was adjusted in the billing. the gold jewellery using
acid tests and gold purity
GOLD JEWELLERY
SHOULD YOU BUY NEW analyser machines COMES WITH THE
GOLD JEWELLERY? ADDED COST OF
Gold is an asset, which can add The customer is informed MAKING CHARGES
value to one’s investment portfolio. about the approximate
So, what should those who do not value of gold based on
AND TAXES,
want to get rid of an old piece and its purity, weight and the WHILE GOLD
can afford to buy new gold do? prevailing gold rate COINS AND BARS
Remember that investing in HAVE LIQUIDITY
physical gold, especially jewellery, If the customer wishes
comes with the added cost of to exchange gold at that ISSUS AS BANKS
making charges, taxes and issues value, the jeweller will melt DO NOT BUY
the piece in a furnace to
related to purity. Most of the THEM BACK
ascertain its actual purity.
jewellers from whom one purchases
jewellery may offer 100 per cent
exchange value, but they don’t After melting, the jeweller are compelled to sell it outside
will determine the final
return the 100 per cent value of gold and they usually deduct a huge
exchange value of the
in cash. If the customer asks for cash gold and inform the
amount in the name of wastage and
by returning the gold jewellery, they customer of the exact melting charges. At the same time,
may deduct a certain percentage value of the old gold item if customers wish to liquidate their
from the value of gold. This usually gold at the same jeweller from whom
ranges from 3-5 per cent. The jeweller will expect they bought, they usually deduct less
Says Dilshad Billimoria, board the customer to buy charges,” says Hareesh.
member, Association of Registered a gold item from their Availability of more avenues
Investment Advisors (ARIA), and a store and will adjust the has also taken away some of the
Sebi-registered investment advisor: exchange price of the old sheen from investing in new gold
“Jewellery has sentimental and jewellery at the time of jewellery. Neha (42) and Anand
emotional value and is normally the final billing Jain (47), a couple based in Thane,
passed down generations, especially Mumbai, who run a clothing and
old jewellery designs. However, due garment manufacturing business

www.outlookmoney.com October 2023 Outlook Money 29

 Cover Story

for the last three decades, exchange

jewellery for ornamental needs.
But for investments, they have
switched to assets, such as mutual
fund schemes and others. “Earlier,
adding gold jewellery also allowed
us an opportunity to diversify our
investment portfolio. The gold rate
from the year 2000 to 2010 was
mostly below `15,000 per 10 grams,
but in the last 10-15 years, the price
has more than quadrupled, so now
there is no point in buying gold
jewellery for investment purpose,”
says Anand. The couple now prefers
exchanging old gold jewellery for
new if there is a requirement for a
specific ornament.

WHAT SHOULD YOU DO?

Experts believe that gold can be a
good hedge against inflation, and
investing in it can add the required
diversification to one’s investment
portfolio. But from an investment
perspective, there are better options
available in the market such as gold
ETFs, SGBs, gold mutual funds, etc.
Says Billimoria, “Historically,
gold prices have grown by 5-11 per
cent depending on the state of the
economy. In rising inflation, gold is
a hedge, and from the point of asset
allocation and diversification, gold
Photo: Dinesh Parab

is a good investment, but not in the

form of bars or jewellery.” However,
she says other asset classes, like
fixed income, Public Provident Fund
(PPF), and corporate fixed deposits
offer the same asset allocation and
diversification with better returns
and liquidity.
NEHA, 42; ANAND JAIN, 47 In short, exchanging old gold can
take care of your need for auspicious
at their residence in Thane
gold buying in physical form but
you will have to stick to the same
The couple who run a clothing and garment business, jeweller. You can use the rest to
previously bought gold jewellery to diversify their invest either in non-physical gold
investments when gold cost `15,000 per 10 gram. But or look at other avenues. Keeping
now they do not buy jewellery for investment. Instead, your investment and jewellery needs
they prefer exchanging old jewellery as and when needed apart will help you decide.
The author is an Independent
Financial Journalist

30 Outlook Money October 2023 www.outlookmoney.com

.
 Cover Story

BUYING A HOUSE?
ASSESS THE FREEBIES
Freebies from property developers may look attractive, but they should
not be the only factors to settle for a real estate deal. Apart from
evaluating the offers, assess the builder, too

By Sanjeeb Baruah

T
he festive season is Today Homes Pvt. Ltd, promised a years. Meanwhile, he had to continue
when many people discount of `200 per square foot if paying for his rented house in
plan to make large he completed his booking by paying Munirka in South Delhi.
purchases like a home, the required 10 per cent of the total When Pattnaik finally took
especially as many real value along with the first instalment possession of his flat in Sector
estate developers offer attractive as per the construction-linked plan 135, Noida, most of the facilities
freebies. Looking out for your dream he had chosen, before Diwali in promised, such as a swimming pool,
home can be a time-consuming November 2010. clubhouse, park, covered parking,
process if you want to do the due Two months later, in January etc, hadn’t been completed. But that
diligence thoroughly and look for 2011, he made another deal to pay in was not all: a bigger trouble awaited
potential surprises that may lie full for his two-bedroom plus study the family and the other residents
hidden in the builder’s closet. house after receiving a substantial when the builder fi led for insolvency
These days, almost all real estate discount, with the delivery date in 2017. As a result, the flats couldn’t
developers in major markets in fi xed within 30 months. Though he be registered, and there’s still a status
India provide freebies, discounts thought he was benefitting from the quo. The owners moved their case to
and other offers that an average deals, ultimately, he faced losses as the National Company Law Tribunal
homebuyer may fall for. But if you the possession got delayed by four (NCLT), where a final hearing is
make a hasty decision without pending.
checking crucial details like Says Pattnaik: “I was lucky to
the builder’s land ownership, DEVELOPERS get possession in 2016, while about
outstanding debt, possible legal 600 buyers are still waiting for the
battles, ability to repay loans,
USUALLY OFFER delivery of their flats. It saved a lot
management practices, reputation, DISCOUNTS AND of money which I would have spent
etc., you may have an incomplete ATTRACTIVE on my rented house otherwise. More
picture of the project. PAYMENT than that, I live in my own house,
In cases where there are problems which gives me a special feeling. The
with these aspects, freebies may be
SCHEMES TO only pain point is that the flat is still
worth little in the long term. Take GENERATE CASH not registered.”
the case of Saroj Pattnaik, 46, who FLOWS AND
lives in Greater Noida with his wife GET MAXIMUM ARE FREEBIES BAD?
and 13-year-old daughter. Most real estate developers
Pattnaik booked his flat by
BOOKINGS AT traditionally dole out freebies in
making an initial payment of `1 THE TIME OF the festival season after spring and
lakh in May 2010. The builder, LAUNCH autumn, mainly to attract potential

32 Outlook Money October 2023 www.outlookmoney.com

buyers and differentiate themselves However, freebies do not lower tool in a competitive market to
from their competitors. the property’s base price. “Since create buzz and generate interest in
Says Rahul Purohit, national sales they impact the rate of returns, a property. These offers go beyond
head of Square Yards, an online real developers resort to limited-period the conventional benefits, enabling
estate marketplace, “Freebies like freebie offers,” adds Purohit. buyers to make substantial savings
nil goods and services tax (GST), Still, taking a broad sweep with on their property investments.”
luxury holidays, gold coins, property a prejudiced view to label freebies Instead you must do your due
registrations, etc. act as incentives as outright bad or offered with a diligence to ensure the freebies and
for homebuyers, resulting in higher malicious intent to cheat is not the deal are worth their while.
footfall and decent sales. However, right either. Says Ankit Gupta,
developers locked with excess director of The Reach Group, a SAFEGUARD YOUR DEAL
inventory and debt often offer them real estate developer, “To some Know Your Budget And Needs:
to clear off their pending stock and extent, festive offers and freebies While freebies may seem attractive,
generate cash flow.” serve as an effective marketing they can sometimes lead to financial
troubles for the homebuyers as these
concessions may be available only on
more expensive properties. Builders
may nudge you to buy a bigger house
FREEBIES DO NOT LOWER THE PROPERTY’S at a higher cost or in a prime location
BASE PRICE. DEVELOPERS USUALLY RESORT to avail of these benefits.
TO LIMITEDPERIOD FREEBIE OFFERS Sunil Dewali, co-CEO of

www.outlookmoney.com October 2023 Outlook Money 33

 Cover Story

Photo: Tribhuvan Tiwari

Andromeda Sales & Distribution, SAROJ PATTNAIK, “Developers often offer steep
a loan distributor, says, “People 46, DHRITI discounts and attractive payment
should stick to their budget and RANJANA RAY, 43 schemes during project launches
not be swayed by properties to generate cash flow and register
Greater Noida
offering freebies that may come at maximum bookings. However,
an additional cost. It’s crucial to one can only enjoy such privileges
prioritise financial stability and when they are handed the keys to
ensure the property aligns with one’s Saroj Pattnaik booked their home within the scheduled
budgetary constraints.” a home in Greater timeline, which only a reputed real
Gupta agrees that freebies Noida in May 2010, but estate developer can promise.”
attract people, but “they should be finally got his house in Aman Sarin, director and CEO
viewed as supplementary benefits 2016, without any of of Anant Raj Ltd, a real estate
rather than the primary criteria for the promised facilities. developer, explains, “The builder’s
choosing a property. The foremost He is still lucky reputation stands as a cornerstone
consideration should always be compared to the other in the realm of the property market.
whether the property meets the buyers in the project, When individuals invest their
buyer’s essential requirements. It as the builder, Today hard-earned savings and embark on
can be a wise choice if a property long-term loans to secure a home,
Homes Pvt. Ltd, filed
aligns with their needs and comes they should prioritise the evaluation
for bankruptcy in 2017.
with attractive schemes and offers.” of the builder’s credentials.”
His main worry now is
Check The Builder’s Reputation: Homebuyers should also consider
that his house is still
The builder’s reputation could have whether an undue delay due to the
unregistered
an impact on the construction developer’s weak financial position
quality, delivery timeline and other or wilful default could wreck their
financial implications. Says Purohit: plans of owning a dream home, like

34 Outlook Money October 2023 www.outlookmoney.com

 Cover Story

But could banks also be more

than willing to entertain customers
for loans in projects where they
DO YOUR DUE Don’t get tempted into a
have invested? Dewali believes this
DILIGENCE deal you cannot afford
perspective holds merit. “Banks
that have invested in a project have
Keep an open mind and
a vested interest in its success. This
evaluate the offers
not only implies that they have
confidence in the project’s viability
Check if any bank is but may also lead them to offer
sponsoring the project, as
more favourable terms to potential
it reduces the changes of
borrowers, such as competitive
a financial default
interest rates or flexible repayment
options,” he says.
Evaluate the builder’s ability
Also, in pre-approved housing
to execute the project
projects, the loan sanctioning
process of banks tends to be faster
Check if there are any as the lender is already familiar with
legal battles involving the
the project and possesses all the
project or the builder
necessary documents.

Check if the builder is WHAT SHOULD YOU DO?

registered with Rera and
As a buyer, keep an open mind
the details provided
and not take freebies at face value.
Instead, focus on getting correct
information about the project.
One of the ways to look for such
information is checking the records
it happened with Pattnaik. cash flow for the task will be sound. at Real Estate Regulatory Authority
The builder’s ability to deliver a According to Dewali, a bank’s (Rera), which scrutinises builders’
quality project on time should be involvement in a project is a sign of track record, past project deliveries,
the primary aspect that homebuyers the bank’s stringent due diligence financial stability, legal standing of
should consider before looking at the into the project, which reduces the the projects, and other vital factors.
freebies on offer, as, ultimately, they buyers’ risk. “However, buyers should Besides, Rera ensures that builders
will be residing in these houses. conduct their own due diligence and can only start a project after it checks
Adds Sarin: “Historically, buyers not just rely on the bank for checking and approves all the parameters in
have been enticed by lavish launches, the project’s viability,” he adds. the registration process. It may be,
events, presentations and glossy however, noted that several cases are
catalogues, but the essence of a home stuck with Rera as well.
lies in its construction and delivery.” The giveaways offered during
Check List of Sponsoring Banks:
THE LOAN project launches or on occasions like
Most major banks fund real estate SANCTIONING Diwali, Christmas, and New Year,
projects today. So, checking the list PROCESS IN shouldn’t be high on your priority list
of sponsoring banks is a vital factor PREAPPROVED when looking to buy a house as they
that homerbuyers should consider as may unnecessarily distract you from
it can indicate the project’s financial
PROJECTS IS asking bonafide questions regarding
health and whether the developer can FASTER, AS your purchase. In the excitement of
complete it within schedule. Besides, BANKS ARE buying a house, don’t miss out on
says Purohit, these days banks also FAMILIAR WITH checking relevant information about
thoroughly analyse the developer’s the builder or the project.
track record and reputation before
THE PROJECT Don’t forget to separate the grains
financing a project. So, the chances AND ALSO HAVE from the chaff.
of project delays are minimal as the THE DOCUMENTS sanjeeb@outlookindia.com

36 Outlook Money October 2023 www.outlookmoney.com

Aim to unlock the
opportunities for
potential growth
and regular Income.

Invest in
ICICI Prudential
Equity Savings Fund

To invest, contact your Mutual Fund Distributor IPRUTOUCH App | www.iciciprumf.com

0923

ICICI Prudential Equity Savings Fund (An open ended scheme investing in equity, arbitrage
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
 Cover Story

SPREADING JOY
BY WAY OF GIVING
Want to donate for a cause this festive season?
You can make the usual donations in cash, kind or by way
of volunteering to the cause that you care for

By Versha Jain

L
ast year, Sarika, an Elizabeth Dunn of the University of The decision to do charity,
IT professional based British Columbia, said that spending however, is only the first step. The
in Noida who did money on other people can increase next and more crucial step is to select
not want to reveal happiness among donors. an NGO or a cause close to your
her real name, spent Like Sarika, many people prefer heart. For Sarika, choosing the NGO
Diwali with children at Saikripa, to donate during the festive season, was easy, because she found it in her
a non-governmental organisation though many do it throughout neighbourhood and felt for the cause.
(NGO) that works for homeless and the year. Anant Arora, chief
abandoned children. The family, sustainability and communications HOW TO SELECT AN NGO?
consisting of her husband and son, officer, The Akshaya Patra There are approximately 3 million
decided to not spend anything on Foundation, says: “Many people NGOs in India working for different
crackers, expensive lighting and choose to donate at monthly causes, according to various
new clothes, and re-channelled the intervals, ensuring consistent estimates. NGO-DARPAN, the
money as a donation to the NGO. support. However, some donors government portal launched in 2015,
She says, “We wanted to have a prefer to contribute during festivals, where NGOs can self-declare their
different experience on Diwali with aligning giving with the spirit of information, has 173,757 registered
underpriviledged children. It was a celebration and sharing.” NGOs and voluntary organisations
wonderful experience. My son was (VOs), as on September 13, 2023.
hesitant in the beginning, but was Choose The Cause: Anupam
happy at the end of the day.” ONCE YOU Roongta, 40, a research analyst
Everyone may have different based in Jaipur, feels for the cause
reasons and modes of donating, but
HAVE ZEROED of education and has been a regular
for most donors, charity generates IN ON AN donor for almost 10 years. Roongta,
positive emotions. A research ORGANISATION, who picked up the habit of charity
paper, The Emotional Rewards Of RUN A CHECK BY from his father, donates to several
Prosocial Spending Are Robust charities, including the Akshay
and Replicable in Large Samples,
WAY OF VISITS, Patra Foundation, which provides
published in the Harvard Business INTERACT WITH food to schoolchildren under the
School’s publications in December OTHER DONORS, PM POSHAN Abhiyaan (formerly
2022, confirms that. In the paper, CHECK ITS the Mid-Day Meal Scheme) in
Harvard Business School assistant partnership with the government.
professor Ashley Whillans,
WORK, AND THE Charity organisations work in
Canadian researchers Lara Aknin IMPACT IT HAS varied fields, from humanitarian to
of Simon Fraser University, and CREATED environmental causes. Therefore, it

38 Outlook Money October 2023 www.outlookmoney.com

 Illustration: Saahil

makes sense to choose the cause you welfare sector is being catered to As for Sarika, the choice of
feel connected to. by 68,122 NGOs, followed by those Saikripa was an instinctive one.
NGO-DARPAN shows that Uttar focusing on children at 63,879. “While I was exploring NGOs to
Pradesh has the highest number of Filter out the ones working in the donate, I found Saikripa, called them
NGOs registered with it, followed area you feel passionate about, be and felt that it would be the right
by Maharashtra, Delhi, West Bengal it about uplifting underprivileged choice,” she says.
and Tamil Nadu. The highest children, women empowerment, Check The Genuineness: Once you
number of NGOs are working in education, or global warming. have zeroed in on the organisation,
the field of education and literacy, As it is a voluntary act, instinct make sure you check how genuine
at 100,464. The health and family plays a role in choosing the cause. and authentic it is. Do a basic search
on the internet and check its website.
If possible, visit the NGO to find out
more details about its work. If you
know someone who already donates
NGODARPAN, THE GOVERNMENT PORTAL to the NGO, you can check with
LAUNCHED IN 2015, HAS 173,757 REGISTERED them about the impact it creates on
NGOs AND VOLUNTARY ORGANISATIONS the ground. You may also want to

www.outlookmoney.com October 2023 Outlook Money 39

 Cover Story

compare it with a few other NGOs

working in similar areas.
Moreover, if you want to donate
to derive satisfaction, you may want
to know whether your money is
reaching the right people. Ensure
that the NGO answers your queries
to your satisfaction on how the
funds are being utilised and the
impact it is creating.
For instance, according to
Roongta, Akshay Patra Foundation
shares the utilisation certificate to
each donor, disclosing the amount
they donated, how it was utilised,
in which particular district, which
kitchen and how many students
were impacted.
Arora says: “Each meal costs us
`15.57. Of this, `8.56 is provided
by the government in the form of
subsidies and grains, while `6.56
is raised through donations from
corporate and individual donors
from within the country and abroad.
As for state-wise funding, it varies
from state to state, depending on
the number of schools and students
covered under the programme in
each state.”
In 2022-23, the foundation
received approximately 53 per cent
of its donations from corporates, 19
per cent from individual donors and
about 27 per cent from trusts and
other foundations.
Likewise, Smile Foundation
receives around 10 per cent of ANUPAM ROONGTA This deduction is, however,
its donations from individual 40, Jaipur available only on donations made to
donors. “Value-wise, individual specific NGOs. The list is notified
donors contribute 10-11 per cent by the income tax department. For
of our annual funds received on example, many private trusts do not
The research analyst
average. The remaining funds come have 80G registration and donations
has been donating
from corporate and institutional to such NGOs won’t qualify for tax
for the last 10 years,
supporters,” says Shived Saxena, benefits.
head, Individual Giving, Smile having picked up Says Gopal Bohra, partner, direct
Foundation. the habit from his taxation, N. A. Shah Associates:
Consider Tax Benefit: Besides father. He offers “Section 80G (1) and (2) of the
the emotional benefits, charity also subscription-based Income-tax Act, 1961 deals with
offers tangible benefits—you may get stock recommendation the deduction on donation made
a 100 per cent tax deduction on the service, and the online by a taxpayer to any charitable
donation amount under Section 80G fee paid by his clients is organisation. There are around 10-
of the Income-tax Act, 1961. redirected to the NGO 20 items that are specified for a 100

40 Outlook Money October 2023 www.outlookmoney.com

 Cover Story

that individual giving picks up after

September each year and goes on till
WHEN SECTION When donations are March, which marks the period for
made to NGOs specified filing of income tax returns. April
80G BENEFIT IS by the income tax to August marks the relatively lean
AVAILABLE department season in terms of individual giving
in India. The month of October
heralds a long festive season, and it
Donations to some
applies across India.”
NGOs qualify for
100% deduction, but
some only for 50% HOW TO DONATE
Money is only one of the ways in
which you can do charity. Some other
Deduction is available ways include volunteering, spending
on any amount, time with the beneficiaries and
subject to 10% of others.
adjusted total income Roongta is not able to spend time
with the beneficiaries he donates
to, but he has found an innovative
way to continue donating. He
WHEN SECTION If you choose the offers subscription-based stock
80G BENEFIT IS new tax regime recommendation service, and the
fees his clients pay online on his
NOT AVAILABLE website go directly to the NGO.
When it comes to money, it is
For cash donation
advisable to avoid donating in cash.
exceeding `2,000
That’s because Section 80G benefits
are not available for any donation in
cash exceeding `2,000 in a year.
On donations in kind, Amid the evolving fintech space,
such as clothes, food these charitable organisations
items, books, etc. and NGOs also receive donations
through different modes, such as
cash, cheque, unified payments
interface (UPI), among others.
Says Arora: “Akshaya Patra
Foundation accepts donations
per cent benefit; donations for the MANY PRIVATE through monthly electronic clearing
rest offer a 50 per cent benefit on the system (ECS), UPI, credit card,
TRUSTS DO
donation amount. These are subject digital wallet, QR code on its website,
to 10 per cent of the total income.” NOT HAVE 80G bank and wire transfer, and cheques.”
For instance, donations to Smile REGISTRATION. In the end, it is up to you to think
Foundation, which has been working SO, DONATIONS of charity as a one-time donation or
for the underprivileged since 2002, TO THESE WILL a way of life but, more importantly,
get tax benefit up to 50 per cent of choose the one you feel for.
the donated amount.
NOT QUALIFY As for Sarika, she plans to go
However, if you are making your FOR TAX BENFITS. back to the same NGO this year, but
decision to donate on the basis of YOU CAN CHECK this time she has also invited her
this criteria, do remember that the THE LIST UNDER extended family to partake in the
deduction under Section 80G is festivities with the underprivileged
not available under the new income
SECTION 80G(1) children so that they too can
tax regime. AND 80G (2) FOR experience the joy of giving.
Says Saxena: “We have observed BETTER CLARITY versha@outlookindia.com

42 Outlook Money October 2023 www.outlookmoney.com

 MUTUAL FUNDS SOLUTIONS SERIES – PART 1

Do You Want To Make Your

Home Loan Interest-Free?
Making your home loan interest free may sound too good to be true, but the power of
investing in SIPs of equity-based mutual funds can make the dream come true

F
or countless Indians, owning This startling revelation can be an SIP of Rs 4,500 per month. If you
a house is a cherished dream, disheartening, making you feel as do this and your money grows at an
symbolizing progress and though you are paying much more average annual compounded rate of 14
personal achievement. While the than what you initially borrowed. percent, similar to the returns delivered
aspiration to own a home remains by the widely tracked index S&P BSE-
strong, the reality of high real estate The MF Solution Sensex which delivered 14.92 percent
cost means that many turn to home The interest outgo on your home loan returns, over the past 20 years (from
loans to bridge the gap between can be hard on your wallet. But guess September 16, 2003, to September
their dreams and current financial what, we’ve got some good news and 15, 2023), as of September 15, 2023,
capacity. But what might initially a solution for you, thanks to the power you could potentially accumulate
seem like a reasonable solution can of mutual fund systematic investment approximately Rs 59.24 lakh in 20 years.
turn into a challenging financial plans (SIPs). You can use SIPs to make This effective investment approach is
burden. your home loan interest-free. SIPs applicable to various loan amounts.
ensure that you buy more units when Equity investment can be a viable
The Problem the prices are lower and fewer units solution for long-term goals. So, if you
The twist in this story emerges when when the prices are higher. are thinking about buying a house and
you consider the interest payment Here’s what you can do. When your getting a loan, remember that there are
on home loans. As individuals make EMI starts, you can set aside 10 per smart ways to handle the extra money
monthly payments towards their cent of your EMI amount and invest you are made to pay as interest. With
loans, a substantial portion goes in an SIP. Let’s understand using the a bit of smart planning, you can make
toward the interest payment at least example discussed above. If your EMI your dream of having a home more
in the initial years. amount is Rs 45,000, you need to start affordable and less stressful.
For instance, if you take a home
loan of Rs. 50,00,000 for 20 years at How SIPs in MFs can help?
an interest rate of 9 per cent, your
equated monthly instalment (EMI) If you invest an amount equal to a small part of your EMI in a mutual fund SIP, you can
comes around Rs 45,000 per month. accumulate an amount close to the total interest you pay
In the first five years, around 75
per cent of your EMI goes towards How Much You Pay How SIPs can help?
interest payments. It takes almost
12 years for the principal amount to Home Loan Amount Rs. 50,00,000 SIP Amount (10 per cent of EMI) Rs 4,500
supersede the interest amount. EMI Per Month Rs 45,000 Investment Tenure 20 years
Over time, this interest can Interest rate* 9% Returns Market-linked# 14%
accumulate to an amount that Tenure 20 years
surpasses the principal itself. In the Total Interest Payable Rs 57,96,711 Total Corpus accumulated Rs 59,23, 588
example mentioned above, for a Difference in SIP Corpus vs. Interest Payable - Rs. 1,27,877
home loan of Rs 50,00,000, you end up
*Source: RBI (Weighted Average Lending Rates 9.19% as per latest available data). # Market-Linked data of SIP is based
paying a total interest of Rs 57,96,711 on investing every month in the S&P BSE Sensex TRI from September 16, 2003 – September 15, 2023
over 20 years. Numbers are rounded off for calculation purposes

Disclaimer
The views expressed herein are based on internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations
meant as guidelines only, which need to be confirmed before relying on them. These views alone are not sufficient and should not be used for the development or
implementation of an investment strategy in any manner whatsoever. Taxation and other expenses have not been considered for SIP returns mentioned above. SIP does not
assure a profit or guarantee protection against loss in a declining market. Past performance may or not be sustained in future.

AN INVESTOR EDUCATION AND AWARENESS INITIATIVE BY SBI MUTUAL FUND.

Investors should deal only with registered Mutual Funds, details of which can be verified on the SEBI website (https://www.sebi.gov.in) under ‘Intermediaries/Market
Infrastructure Institutions’. Please refer to website of mutual funds for process of completing one-time KYC (Know Your Customer) including process for change in address,
phone number, bank details etc. Investors may lodge complaints on https://www.scores.gov.in against registered intermediaries if they are unsatisfied with their responses.
SCORES facilitates you to lodge your complaint online with SEBI and subsequently view its status.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
 Special Story

MANY-IN-ONE: WHICH
COMBINATION OF
ASSETS SUITS YOU?

Y AL
U IT I O N
EQ

EQNAT
U IT
Y

R
TE
IN

ASSET
REITs
ALLOCATION
CO
MM
OD
ITI
ES

Six multi-asset allocation funds have been launched this year

and more are in the pipeline. Are they right for you?

44 Outlook Money October 2023 www.outlookmoney.com

Kundan Kishore Oswal Multi Asset Fund and among investors (see Multi Asset Vs
Nippon India Multi Asset Fund— Balanced Advantage Funds).

A
were launched after a gap of 10 However, the tumultuous market
sset allocation has long years. Before that, merely six multi- conditions of 2022 triggered a
been considered the asset funds were in existence. significant paradigm shift in the
fundamental principle Almost two-and-a-half years investment landscape. In response
of smart investing, but after the last fund in the category to the prevailing volatility and the
it’s only recently that multi-asset came out, Baroda BNP Paribas evolving needs of investors, fund
allocation funds have captured the Mutual Fund launched Baroda houses started recalibrating their
spotlight. Six multi-asset funds BNP Paribas Multi Asset Fund in strategies, transitioning from a
have already been launched this November 2022. In 2023, six other two-asset class approach to a more
year and more are on the horizon, fund houses followed suit. diversified one, encompassing
awaiting the regulatory green light. Though there are only about 16 multiple asset classes.
The recent emergence is not multi-asset funds in the industry
without reason. In 2022, the two currently, the concept is not new. What Differentiates Them?
critical asset classes—equity and They have been in existence for Multiple Exposure: Multi-asset
debt—saw tepid returns, and more than two decades in India. funds fuse various asset classes,
commodities, such as gold proved such as equities, debt instruments,
to be beacons of hope, providing a commodities, and even alternative
sanctuary to the investors. investments, into a single
On the equity side, the broader investment vehicle.
tracked equity indices, Sensex and With investors They have the flexibility to switch
Nifty, posted lower single-digit
returns with 4.44 per cent and 4.32
noticing from one asset category to another
depending on the market condition.
per cent, respectively, while on the immediate This allows investors to capitalise
debt side, Crisil Composite Bond gain in assets on the strengths of each asset class
index posted merely 2.46 per cent. while mitigating the risks associated
In comparison, gold gave 14 per other than with individual market fluctuations.
cent return over the same period. equity and Says D.P. Singh, joint CEO,

debt, the
With investors noticing SBI Mutual fund: “By investing
immediate gain in assets other than in multi-asset allocation funds,
equity and debt, the multi-asset multi-asset investors automatically get
strategy became the flavour of the
season, and as expected, mutual
strategy has exposure to multiple asset classes
through one fund.”
funds weren’t left far behind. Multi- become The main benefit of the risk
assets funds, which can diversify popular return framework that the category
across multiple asset classes such as provides is that investors need not
equity, debt, gold and others, and try and time the market. Multi-
promised to safeguard investments asset funds bring objectivity to
in unfavorable market conditions the asset allocation process on a
became a favourite with investors. Earlier, the multi-asset strategy dynamic basis. Fund managers do
It may be noted that though did not garner much attention the asset allocation on your behalf
experts consistently extol the because debt instruments were the as per the market conditions. Adds
virtues of asset allocation, it’s not most trusted cushions for investors. Singh: “These funds not only help
always that the strategy catches the Barring 2021 and 2022, debt has in automating the asset allocation,
fancy of investors. always given returns in the range of but also do it optimally as allocation
7-10 per cent. So, investors relied to each asset class is dynamically
Rise Of Multi-Asset Funds heavily on a combination of debt managed based on the fund
In 2020, when the market was and equity for their asset allocation. manager’s view of the economy
going through heightened volatility This made balanced advantage and market cycles.” This way, your
during the Covid-19 pandemic, funds (BAF), which primarily invest downside is limited and there is an
three multi-asset schemes—Tata in equity and related instruments opportunity for growth as well.
Multi Asset Opp Fund, Motilal (arbitrage) and debt, more popular Besides, you don’t have to go

www.outlookmoney.com October 2023 Outlook Money 45

 Special Story

The main HOW THEY FARED

beneЃt o˙ the Multi-asset funds have typically fared well
over the long term
risk return
˙ramework is Returns (%)

that investors Scheme Name 1 Year 3 Year 5 Year 7 Year 10 Year

need not time
the market.
The ˙und ICICI Pru
20.98 27.76 15.96 15.08 16.77
Multi-Asset
manager will
rebalance the
Quant
port˙olio Multi Asset
9.95 27.40 22.58 16.63 14.10

HDFC 12.86 15.36 11.58 10.38 11.19

Multi-Asset
the extra mile to monitor and can
avoid some of the associated costs
SBI
of switching. Says Singh, “If done
Multi Asset 15.87 13.84 11.86 10.02 10.91
individually, switching between
Allocation
asset classes would require investors
to monitor the trends of each asset Axis
class, rebalance the portfolio and Multi Asset 6.06 13.16 10.63 9.57 9.99
be liable for taxes, charges etc. Allocation
when moving between asset classes.
This is not the case when the fund UTI
manager rebalances the portfolio in 16.44 13.29 8.99 8.56 9.23
Multi Asset
such funds.”
Low Volatility: In the scheme
information document (SID) issued Motilal
Oswal 15.89 7.59 NA NA NA
along with their latest multi-asset
Multi Asset
fund, DSP Multi Asset Allocation
Fund, DSP Mutual Fund wrote:
“Investing in a multi-asset allocation Nippon India
Multi Asset 16.22 16.00 NA NA NA
strategy gives you the opportunity
to get equity-like returns but with
about half the volatility. Over the
Tata Multi
last 23 years, domestic stocks (Nifty
Asset Opp 13.43 18.34 NA NA NA
50 TRI) gave an annual return
of 12.8 per cent with a standard
deviation of 22 per cent, whereas Category
a multi-asset approach achieved Average 14.19 16.97 13.6 11.7 12.03
a 12.2 per cent return with lower
standard deviation of 12 per cent.”
Outlook Money ran some Funds that have not completed a year not included
numbers to gauge low volatility in Returns as on Sept 18, 2023
multi-asset funds as claimed by Source: Accord Fintech
various fund houses.

46 Outlook Money October 2023 www.outlookmoney.com

 AUM GROWTH: MULTI-ASSET VS
BALANCED ADVANTAGE FUNDS
The growth in the assets under management (AUM) of multi-asset funds has surpassed that
of balanced advantage funds only recently. However, the overall AUM of BAFs remain higher

BAF Multi Assets On a 100-scale base

300

250

200

150

100
% Growth in AUM
50
Dec-21
Jan-22
Jan-21
Feb-21

Oct-22

Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Mar-21
Apr-21
May-21
Jun-21
July-21
Aug-21
Sep-21
Oct-21
Nov-21

Feb-22
Mar-22
Apr-22
May-22
Jun-22
July-22
Aug-22
Sep-22

Nov-22
0

We found that standard Prudential Large and Mid Cap, the better returns and protected
deviation, which measures the standard deviation was 4.56, while themselves against downsides.
volatility in a fund, is much lower for ICICI Prudential Multi Asset For instance, ICICI Prudential
in multi-asset funds compared to Fund, it was 3.45. This clearly shows Multi Asset Allocation Fund, one
equity funds. that multi-asset funds provide of the oldest funds, has delivered
For instance, on the basis of better risk-adjusted returns. 16.77 per cent returns in the last 10
three-year rolling returns, the Downside Protection: When we years, the highest in the category
standard deviation of SBI Large dug deeper into the performance, over the period. On 10- and 7-year
and Mid Cap Fund was 4.32, while we found that the ones that have basis, the category average stands at
that of SBI Multi Asset Allocation stayed true to the promise of 12.03 per cent and 11.70 per cent,
fund was 2.40. Similarly, for ICICI dynamic asset allocation delivered respectively. This is better than the
much-hyped BAF category, which
delivered 11.93 per cent and 9.18
per cent in last 10 and seven years,
respectively.
Those multi-asset ˙unds that
Should You Invest?
stayed true to the promise o˙ The multi-asset fund category
dynamic asset allocation gave provides a relevant solution to the
better returns and beat downsides long-term needs of investors.
Says Anthony Heredia, managing
director and CEO, Mahindra
Manulife Mutual Fund, “We firmly

www.outlookmoney.com October 2023 Outlook Money 47

 Special Story

NEW INVESTMENTS: MULTI-ASSET VS

BALANCED ADVANTAGE FUNDS
ˇ˛˘˜ˡЄˢ˪˦˥˘ˠ˔˜ˡ˛˜˚˛˘˥˜ˡ˕˔˟˔ˡ˖˘˗˔˗˩˔ˡ˧˔˚˘˙˨ˡ˗˦˧˛ˢ˨˚˛˜ˡ˩˘˦˧ˠ˘ˡ˧˦
˜ˡˠ˨˟˧˜ʠ˔˦˦˘˧˙˨ˡ˗˦˛˔˩˘˥˜˦˘ˡ˥˘˖˘ˡ˧˟ˬ

ʵʴʹ ˀ˨˟˧˜ʴ˦˦˘˧˦ ʼˡЄˢ˪ʛ` ˖˥ʜ

18000
16000
14000
12000
10000
8000
6000
4000
2000
0
-2000
-4000
Dec-21

July-22

Sep-22
Jan-21
Feb-21

Mar-21
Apr-21

Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
May-21
Jun-21

July-21
Aug-21
Sep-21
Oct-21
Nov-21

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22

Aug-22

believe that it not only helps Heredia also believes that this Fund: “We have an internal
investors diversify their portfolios category has universal appeal and quantitative asset allocation
effectively, but also provides should become a core part of every framework, which helps in deciding
a proven and optimised asset investor’s portfolio. the strategic allocation to each
allocation strategy. They do so by Regardless, you need to carefully asset class based on volatility. For
harnessing the power of diverse choose a fund because not all example, the allocation is higher if
asset classes such as equities, schemes follow the same asset the perceived risk of the asset class
bonds, and alternative investments allocation strategy. This is because is lower. The model then adjusts the
(gold, silver, commodities etc.) all different fund houses use different allocation towards each asset class
carefully managed to maintain a in-house models. based on the return expectations of
balanced risk-return outcome.” Says Singh from SBI Mutual each one of them considering the
prevailing macroeconomic factors.”
As a result, their returns also
vary. For instance, over three years,
the best return from a multi-asset
Investors should choose funds fund is 27.75 per cent, while the

carefully as not all schemes follow

worst performer gave 7.59 per cent
(see How They Fared).
the same asset allocation strategy, So, instead of riding on the new
and follow own in-house strategies fund offer wave, it’s better to stick
with a funds which have a proven
track record.
kundan@outlookindia.com

48 Outlook Money October 2023 www.outlookmoney.com

Knowledge, Caution, And
Responsible Action Key To
Becoming A Successful Investor
You may manage your investments yourself or hire an expert,
but equally important is to educate oneself about options,
exercise caution, and act responsibly to minimise risks.
K S RAO

B
eing a smart and responsible risks before committing your funds.
investor is crucial in today’s ever- Additionally, factor in your risk tolerance Head - Investor Education &
changing world. Making informed and investment horizon—investments Distribution Development,
decisions and actively managing one’s with higher risks often come with Aditya Birla Sun Life Asset
investments ensures financial success potentially higher returns, but they may Management Company Ltd
and contributes to the economy’s not be suitable for everyone.
overall growth. You must arm yourself Investing is not just about making
with knowledge, exercise caution, and money; it’s also about aligning your world. As sustainable finance continues
act responsibly to minimise risks and investments with your values and to gain momentum, investors must
become a successful investor. Here are supporting positive change in the develop resilience and navigate this
some tips to help you become a smart evolving landscape. As a responsible
and responsible investor. investor, consider your investments’
First and foremost, educate yourself environmental, social, and governance
about various investment options and (ESG) factors. Companies prioritising
strategies. Stay updated on financial Diversify your sustainability, ethical practices, and good
news, read books about investment investment portfolio; governance can yield positive returns
principles, or take online courses to while contributing to a better society.
enhance your knowledge. A well- allocating your By investing in socially responsible
informed investor is better equipped assets across companies, you can support businesses
to evaluate potential investment that align with your values and promote
opportunities and make sound different classes, positive change.
decisions that align with their financial Regularly monitor and review your
goals. Investor resilience, financial
such as stocks, investments. Periodically evaluate the
planning, and mutual funds are closely bonds, real estate, performance of your portfolio and make
interconnected when it comes to necessary adjustments to align it with
achieving your long-term financial goals.
or mutual funds, can your changing financial goals. Staying
Furthermore, diversify your help mitigate risks engaged with your investments allows
investment portfolio. Allocating you to spot any underperforming assets
your assets across different classes, or identify new growth opportunities.
such as stocks, bonds, real estate, or Finally, seek advice from
mutual funds, can help mitigate risks. professionals. Consulting with financial
Diversification reduces the reliance on advisors or investment experts can
a single investment and increases the provide valuable insights and help you
likelihood of achieving positive returns make well-informed decisions. However,
over time.
This year, World always be cautious of potential conflicts
When investing, remember that Investor Week – 2023 of interest and ensure you understand
patience is vital. Avoid chasing short- the charges associated with their
term gains or attempting to time
is being celebrated services.
the market. Instead, focus on a long- in India from October In conclusion, being a smart
term approach that aligns with your and responsible investor requires
investment objectives. Successful
9th -14th, 2023. This continuous learning, diversification,
investing requires discipline and resisting article is around the patience, thorough research,
the temptation to make impulsive consideration of ESG factors, regular
decisions during market fluctuations.
theme of the year - monitoring, and seeking professional
Conduct thorough research before Investor resilience and advice. By adopting these principles,
making any investment decisions. you can become a more successful
Analyse a company or asset’s
sustainable finances. investor while contributing to a
performance history and potential sustainable and prosperous future.

Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The articles provide general information and should
not be considered financial advice. Consulting with a qualified professional is recommended to assess your is recommended to assess your individual
circumstances and make appropriate financial decision.
 Investment

BY NILANJAN DEY, Director, Wishlist Capital

What To Do With Small Caps?

Small is beautiful but only if one has the right acumen for it. Investors need small-cap
funds to energise the portfolio which holds large-cap and mid-cap funds

A
t the outset, I would cap indices are all up significantly. Allocation Holds The Key
like to start with an The NSE Small Cap 50 Index, for Individual investors must scrutinise
innocuous fact—the instance, now stands at 5,850 points their overall allocation strategy. Are
number of folios in (mid-September). Its 52-week they over-exposed to risky assets in
small-cap funds has accelerated by low and high are 3,984 and 6,047 the mid-and small-cap spaces? If the
more than two-and-a-half times over points, respectively. The NSE Small answer is in the affirmative, then this
the last couple of years. That number Cap 100 Index, too, has surged to is the time to change it.
stands at 13 million at this juncture. 12,725 points, its 52-week low and Additionally, there is need for
And now, a deeper interpretation high being 8,682 and 13,079 points, realignment of weightages. Investors
beyond the apparent innocence respectively, according to data who have allocated, say, 75 per cent
of the statement. Small caps have from the National Stock Exchange to small-caps may consider paring it
not only generated an enormous (NSE). In sum, this demonstrates to more reasonable levels. This will
interest, they have surpassed their the extraordinary potential of this ultimately lead to a more balanced
previous records. For the first time, category of stocks. and, therefore, less risky portfolio
the number of small-cap folios is The major debating point that with greater room for other market
almost equal to that of large-caps, emerges from the trend is: have cap categories.
and in fact, higher than that of common investors stretched Rebalancing may also help
mid-caps. themselves too much? Is this over- investors sharpen their returns
So, how do we interpret this in the bought position a cause of concern? over time. This rationale has been
current context? What inference, if To answer these queries, we need to tested time and again, and historical
any, should investors draw from this focus on a few important matters. evidence underlines the truth in the
phenomenon? What strategy must argument, too. For those who pursue
they follow if some of them are over- long-term investment strategies,
exposed to the “smallies”? We will
Overexposure to small rebalancing is strongly advocated.
find out the answers, and they are Professional advisors also suggest
bound to reveal a major trend or two. caps will hurt the most the same to their clients.
But, first, a bit about the latest when the tide turns and The reason is not that difficult to
market conditions and the role being the growth in the markets understand. Overexposure to small
played by the mid- and small-cap hits a roadblock. Small caps will hurt the most when the tide
segments. The second category
caps are vulnerable to turns and the secular growth in the
seems especially vulnerable to markets hits a roadblock. After all,
market forces. headwinds, much more small caps are extremely vulnerable
For the record, the key small- than large caps to headwinds, perhaps a lot more

50 Outlook Money October 2023 www.outlookmoney.com

than large caps. Now, a potentially volatile small-cap If your risk appetire
In fact, the current scenario has space is compelling investors to look
prompted a louder call in favour at large caps (and mid-caps, too)
permits a switch, and
of the large caps. Large-cap funds, once again. Some quarters are said emerging circumstances
I must point out, were not too to have already taken the first step encourage you, go
preferred till recently because a big on this front. Others are planning to ahead with the switch.
chunk of the market was aware of book profits in small-caps and switch A change in asset mix will
their limitations. The latter have to large-caps.
been evident in the most recent The trend, it is felt, will define
probably help you fetch
performance figures as well. investor behaviour in the weeks to elevated returns
come. More particularly, the run-up
Large Caps To The Fore Again? to the general election will witness a
In order to continue with the same larger number of defensive moves. It want. However, such choice should
logic, let’s look at the latest returns is widely believed in investor circles be guided by your risk-taking ability.
generated by large-cap players. that Indians will exercise their right At the end of the day, it is really a
The average fund in this category is to vote in the early days of calendar simple question. If your risk appetite
permits a switch, and emerging
circumstances encourage you, go
ahead with the switch. A change
in asset mix will probably help you
fetch elevated returns. The end, once
again, will justify the means.

Don’t Ignore Small Altogether

As things stand, small-cap funds
seem to have a mind of their own.
Over long stretches of time, a
number of them have displayed an
outstanding performance. Therefore,
even conservative investors often
tend to have limited exposure to
these funds.
Let us for a moment imagine a
mutual fund investor’s life without
small caps. It just might resemble a
drab desert, one without any green
verge in sight!
I will use the desert analogy
not likely to impress anyone (when year 2024. Till then, market will once more to liken small caps to the
compared to the small caps), which witness mixed sentiments. occasional watering hole among the
will merely underscore the relatively Will a move from, say, AU Small dunes. The travelling caravan, which
low-key nature of its performance. Finance Bank to ICICI Bank be looks forward to it, is often tempted
Admittedly, large caps are justified? I cite these names as by a mirage. However, a smart
very nearly a defensive bet for mere examples of stocks, the first investor, guided by a fit and proper
conservative investors. The large-cap being a small-cap and the second financial plan, seeks the oasis and
funds in question are mostly focused a super-large cap? The answer is avoids the mirage.
on the major index constituents. difficult to determine. Only the Small is beautiful indeed, but
These are the stocks representing investor concerned will be able only if one has the right acumen for
the nation’s largest corporates, to understand this and clarify it. Investors need small-cap funds
representing diverse industries. A efficiently. to energise their portfolio, and add
discerning section of investors tend The point is, switching from a power to the large-cap and mid-cap
to prefer this investment lot and small-cap fund to a large-cap fund is funds they hold. A combination of
dedicate a significant part of the an individual choice. As an investor, the three makes way for the modern-
overall allocation to large-caps. you are free to choose whatever you day equivalent of nirvana.

www.outlookmoney.com October 2023 Outlook Money 51

 Mutual Funds Guide OLM 50

SBI Small Cap: Long-Term Hauler

Kundan Kishore Fund Details

I
Category Equity-Small Cap Expense Ratio 0.69
n an ever-evolving market, where NAV `152.93 1% on or before a
the dynamics of investment Exit Load
Fund Manager R. Srinivasan year, nil therefter
choices change with every season,
Launch Date January 1, 2013 Asset Under
mid- and small-cap indices have taken `20,911.7 crore
Min Investment `5,000 Management
the centerstage now. In the last three
years, they have delivered stellar
returns, and funds tracking them have
also followed suit. The BSE Small
Cap-TRI index, which serves as a 11.53% 7.15% 3.33% 2.95%
Capital Goods Hospitality Blue Star SBFC Finance
barometer for the small-cap segment,
posted an impressive compounded 61% 2.84%
Others 6.93% Kalpataru
annual growth rate (CAGR) of 36 per FMCG Projects
cent in the last three years. In the last
Top 5
six months also, they have rewarded Portfolio Portfolio
investors with impressive returns. Allocation Holdings 2.68%
So, if you think you have missed your Finolex
Industries
chance, you can still start with your
investment now and make gains. 6.77% 2.68%
If you are thinking of adding a 6.62% Consumer Carborundum
Chemicals Durables Universal
small-cap flavour in your portfolio, 85.52% Others
you may like to consider SBI Small
Cap Fund. The fund has a proven
track record of rewarding long-term Performance Fund Return Benchmark Return Category Average
investors, by posting an impressive
CAGR of 28.34 per cent in the last
10 years. However, the fund has 35.85
34.44 %
lagged on performance in the last 29.47 32.45 %
%
one and three years. It delivered %
24.40 21.55 21.55
18.90 per cent in the last one year
18.64 %
% 16.84 %
against the category average of % %
24.40 per cent, and over three years,
32.35 per cent against the category
average of 35.85 per cent. The recent
underperformance should not be a
cause for concern though as no fund
1 Year 3 Years 5 Years
remains the top performer forever.
In terms of portfolio composition, Return as on September 20, 2023 Source: AccordЃntech

the fund follows a focused approach

where quality takes precedence over
quantity. In comparison to other small increased its exposure in hospitality but at the same time, they have the
cap funds, which have an overloaded and, given the rally in the sector now, potential to offer long-term returns.
portfolio of 100-plus stocks, SBI Small it bodes well for investors. So, if you are thinking from a long
Cap has invested in 55 companies However, it should be noted that term perspective of say 7-10 years,
from 22 sectors. The top five sectors small-cap funds come with a higher you may like to add this fund in your
that dominate the portfolio are capital level of risk when compared to mid- portfolio. Given higher volatility, it’s
goods, consumer durables, FMCG, cap and large-cap funds. The reason best to invest by way of systematic
chemicals, and construction. In the is that they invest in relatively smaller investment plans (SIPs).
last one year, the fund has gradually and often lesser known companies, kundan@outlookindia.com

52 Outlook Money October 2023 www.outlookmoney.com

OUTLOOK MONEY WEBINAR SERIES

Early Life Lessons are the Biggest Teachers

There are financial lessons hidden in the simple things we learnt from our
parents and schoolteachers that can come in handy
He also gave the example of
his father, who was a dramatist.
“I learnt from him that you may
make mistakes but try not to repeat
them, and you need to resort to
improvisation sometimes to get
“FINANCIAL things in order,” said Trivedi.
LESSONS TO LEARN Sapre invoked Kabir and his
humble lifestyle to highlight that
FROM TEACHERS” a simple attitude in life can take
investors ahead. “No matter how
Moderator
much money you are sitting on,
K. S. Rao Amit Trivedi Vinayak Sapre Nidhi Sinha, Editor, Outlook Money
you need to stay humble. My father
Head – Investor Education and Author, Speaker, Blogger Financial Coach, Author,
Distribution Development,
Aditya Birla Sun Life AMC Limited
& Trainer Blogger and Public Speaker used to say that income minus
TO KNOW MORE ABOUT PLEASE VISIT:
www.outlookmoney.com ego is equal to happiness,” he said.
z An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund.
zAll investors have to go through a one-time KYC (Know Your Customer) process. Investors to invest only with SEBI registered Mutual Funds. For further information on KYC, list of SEBI registered Mutual Funds and
Sapre highlighted going after
redressal of complaints including details about SEBI SCORES portal, visit link https://mutualfund.adityabirlacapital.com/investor-education/education/kyc-and-redressal for further details.
zMutual Fund investments are subject to market risks, read all scheme related documents carefully. buying things that other people
possess cannot be a recipe to
happiness.

FINANCIAL EDUCATION AT
SCHOOL

T
eachers have a major role in patience and that too can be
the lives of most of us. Teachers applied in one’s financial life. The Though financial education is not
impart many life lessons to us, lesson of patience especially comes part of the school curriculum,
from setting educational and other handy in a bull market,” said Rao. but some of the values that we
goals to being patient and consistent Trivedi spoke about his learn at school like patience and
towards whatever we do. On the grandmother, who was a having a long-term perspective for
occasion of Teachers Day, Outlook schoolteacher and taught him the examinations can be life lessons
Money in association with Aditya importance of not wasting food. “That that can be used by everyone, said
Birla Sun Life Mutual Fund organised lesson can be applied to everything. Rao.
a panel discussion on “Financial For instance, people thing money is Indeed, staying invested in
Lessons To Learn From Teachers”. The only for investment, but it starts from the market with a long-term
members of the panel were K.S. Rao, saving and that can only happen perspective can go a long way.
head of the investor education and when wastages are plugged. Not Trivedi said that besides the
distribution development at Aditya wasting money is a good financial regular curriculum, sports and
Birla Sun Life AMC; Amit Trivedi, an habit to inculcate,” he said. other school activities also have
author, speaker, blogger and trainer; lessons. “Just like you need to
and Vinayak Sapre, a financial coach, pick up multiple school activities,
author, blogger and public speaker. the concept of diversification in
The panel was moderated by Nidhi investments can help,” he said.
Sinha, editor, Outlook Money. Here Diversify your Plus, the system of regular school
are some edited excerpts: examinations also highlights the
investment portfolio; importance of portfolio review,
MEMORABLE FINANCIAL allocating your he said. Besides, the way students
LESSONS assets across need to keep reading books and
Rao, who comes from a family of newspapers, investors too need
teachers, highlighted the lesson different classes, to keep updating their knowledge
of building a solid educational such as stocks, and play on their strengths.
foundation that he learnt from his In conclusion, the speakers
parents and grandparents. “Also, bonds, real estate, agreed that while there are many
they taught me that one should or mutual funds, can sources of knowledge in the
never stop learning and that lesson market these days, it’s important to
can be extended to finances too.
help mitigate risks approach the most genuine ones.
Similarly, I learnt from my yoga In that sense, choose your financial
teacher that the art was about teachers with care.

To watch the complete interview, visit: www.outlookmoney.com

 ʼˡ˩˘˦˧ˠ˘ˡ˧

BY JOYDEEP SEN, ʶˢ˥ˣˢ˥˔˧˘ˇ˥˔˜ˡ˘˥˔ˡ˗ʴ˨˧˛ˢ˥

How Indexation Works In MFs

ˇ˛˘ʹ˜ˡ˔ˡ˖˘ʴ˖˧ʟʥʣʥʦ˛˔˦˧˔˞˘ˡ˔˪˔ˬ˧˛˘˜ˡ˗˘˫˔˧˜ˢˡ˕˘ˡ˘Ѓ˧˙˥ˢˠ˗˘˕˧ˠ˨˧˨˔˟˙˨ˡ˗˦˕˨˧
˧˛ˢ˦˘˛˔˩˜ˡ˚ʦʨʠʩʨˣ˘˥˖˘ˡ˧˘˫ˣˢ˦˨˥˘˧ˢ˘ˤ˨˜˧ˬ˔˥˘˦˧˜˟˟˘˟˜˚˜˕˟˘˙ˢ˥˜˧

T
he Finance Act, 2023, has Now, we have to distinguish between domestic equity are taxable as equity
taken away the indexation what we understand as debt funds funds, and those with less than 35 per
benefit from debt mutual and what has been stated in the cent exposure qualify as debt funds.
funds. It states that the Finance Act, 2023. The Act talks In the mid-bracket, the taxation
gains from the growth option of about funds with less than 35 per is taken as it is for non-equity, as
funds with equity allocation of less cent allocation to domestic equity. the allocation to equity is less than
than 35 per cent will be taxed as Hence, it includes debt funds, gold 65 per cent. But as indexation is still
short-term capital gains (STCG), funds, international equity, or, for available, they get its benefit.
irrespective of the holding period. that matter, any fund with equity
STCG from non-equity funds are allocation less than 35 per cent. How Does Indexation Work?
taxable at the marginal slab rate. Another aspect to note is that it So, how does indexation work? You
At the highest tax bracket, it is 30 is not mentioned anywhere that have to invest in the growth option
per cent plus surcharge and cess. It indexation benefit has been removed. of the fund and remain invested for
effectively means that the indexation It states that gains from funds with at least three years. There is a cost
benefit, which was there for a equity allocation less than 35 per cent inflation index (CII) announced by the
holding period of three years, is not will be taxed as STCG, irrespective of tax authorities every year. When you
available anymore. the holding period. finally redeem your fund with the asset
The taxation of equity funds management company (AMC), which
remains the same as before. Gains New Taxation Category is a sale for tax purposes, the gains
from equity funds held for more The new category for taxation become taxable. Also, your purchase
than a year in the growth option will purpose comprises funds with equity cost gets “indexed up” with reference
be taken as long-term capital gain allocation between 35 and 65 per to the CII of the year of sale divided by
(LTCG), and will be taxed at 10 per cent of the portfolio. Funds with the CII of the year of purchase.
cent plus surcharge and cess. On a more than 65 per cent exposure to Let us see this with an example.
holding period of less than one year, A debt fund investment made up
equity funds are taxable at 15 per to March 31, 2023, is eligible for
cent plus surcharge and cess. Funds with over 65 per indexation, whenever you redeem.
The changes in mutual fund cent exposure to domestic Let us say you invested in a fund
taxation through the Finance Act
equity are taxable as in March 2020, during the new fund
2023, has opened up a third category offering (NFO) with net asset value
of funds for taxation purpose. At equity funds, and those (NAV) of `10. You redeemed the fund
present, the two existing categories with less than 35 per cent in July 2023, which means a holding
for taxation are equity and debt. exposure as debt funds period of more than three years,

54 Outlook Money October 2023 www.outlookmoney.com

at a NAV of `13. The CII for your
investment year (2019-20) was 289
and for redemption year (2023-24), it
has been announced as 348.
Hence, your purchase cost of `10
gets indexed up to 348/289 X `10 =
`12.04. The taxable component of
your gain, subsequent to indexation,
is `13 minus `12.04 = `0.96.
Taking the taxation rate at 20 per
cent, and ignoring the surcharge and
cess for simplicity, the amount of tax
comes to `0.19. Effectively, the tax
incidence of 19 paise on a gain of `3
over the investment period is on the
lower side. It is 6.4 per cent in our
example.

Eligible Funds
Illustration: Saahil
Now the big question is, which funds
fall under this mid-bracket, and are
eligible for indexation? The most
likely candidates, as you would have
History shows that in of holding (10 per cent vis-à-vis your
guessed, are hybrid funds. marginal slab rate), against three
By definition, debt funds cannot most years, indexation years required for indexation benefit.
have as much equity, and equity leads to a tax incidence
funds by definition have more than of less than 10 per cent Conclusion
65 per cent equity. However, in of the gains, which is For your debt fund investments,
hybrid funds also, it is not possible to
˕˘ˡ˘Ѓ˖˜˔˟˙ˢ˥ˬˢ˨ it is advisable to execute fresh
run any and every fund with equity investments in a new folio. This
allocation in the range of 35-65 per will avoid confusion with your
cent. The Securities and Exchange investments in debt funds done till
Board of India (Sebi) categorisation Limitation Of funds March 31, 2023. Taxation works on a
rules provide the contours for all There are six hybrid fund categories, first-in-first-out basis, so a new folio
fund categories. of which one is MAF. Certain for fresh debt fund investments will
At present, few AMCs have hybrid categories are bound by demark between the old and new
positioned their multi-asset funds Sebi regulations and cannot be deployment.
(MAF) in this bracket of 35-65 per positioned in the bracket of 35-65 per Tax efficiency over a holding
cent allocation to domestic equity. cent in equity. period of more than three years
Sebi’s definition of MAF says Conservative hybrid funds invest depends on the extent of indexation,
allocation to at least three asset a maximum of 25 per cent in equity. which is done with reference to cost
classes (for example, equity, debt, In aggressive hybrid funds, arbitrage inflation index. History shows that in
gold or any other), and allocation funds and equity savings funds, the most years, indexation leads to a tax
of at least 10 per cent in each asset minimum allocation to equity is incidence of less than 10 per cent of
class. Hence, the AMCs have the 65 per cent. That leaves aside only the gains, which is beneficial for you.
flexibility to define the extent of balanced advantage funds (BAF), For your non-equity fund
allocation to equity. which are usually run as equity funds. investments, if you have a horizon of
However, before you invest in Repositioning of BAF for indexation more than three years and prefer to
an MAF, check with the AMC for benefit is technically possible, but an avail of indexation, you may consider
indexation benefit on it. AMC will do it only if the majority of eligible MAFs.
For example, if the AMC runs 70 investors prefer it. From the taxation However, remember that taxation
per cent in equity, it is an equity fund perspective, investors prefer equity is only one criterion for the decision,
for tax purposes and not eligible for taxation. The reason is that tax your fund allocation should be based
the indexation. efficiency is available after one year on your needs and suitability.

www.outlookmoney.com October 2023 Outlook Money 55

 INDIAN RESPONSIBLE TOURISM
STATE SUMMIT & AWARDS
RAJASTHAN 2023
2nd Edition
in association with
RAJASTHAN TOURISM
This October!

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 Banking

Here’s How To Withdraw Step-By-Step

Process
Cash From ATMs Using UPI
From
Aaron Varghese Charly the National Payments and the safe while the card
Corporation of India reader, PIN pad, function UPI ATMs

O
(NPCI). At the summit, keys and receipt slot that
ur digital delegates and leaders were are present in traditional Step 1: Select the desired
payments encouraged to use UPI ATMs are not included,” withdrawal amount
revolution in transactions while in India. says Sumil Vikamsey, (`100, `500, `1,000, `2,000,
the form of the Unified The latest buzz in this managing director and and `5,000).
Payments Interface (UPI) space is the launch of chief executive officer, cash
took centre stage at the the first UPI ATM, built business, Hitachi Payment Step 2: Once you select
recently concluded G20 and operated by Hitachi Services. the amount, a QR code
summit. Just before global Payment Services, in While this white-label will pop up. Scan the QR
leaders came to attend association with NPCI. The ATM is meant exclusively code using the UPI app on
the summit, Reserve UPI ATM offers a cardless for UPI, even regular your device.
Bank of India (RBI) and interoperable cash ATMs allow cardless cash
Governor Shaktikanta Das withdrawal facility. “The withdrawal using UPI . Let’s Step 3: Enter your UPI
announced the launch of ATM machine consists of understand the steps of how PIN to authorise the
new UPI products built by only the screen, cash slot these withdrawals work. transaction.

Growing UPI Step 4: Collect the cash.

Transactions
From
Regular ATMs

Step 1: Choose the

withdraw cash option
on any ATM.

Step 2: Next, choose

the UPI option—UPI
Cash Withdrawal or UPI
10 billion Cardless Cash.
The number of UPI
transactions in Points To Note
Step 3: The ATM screen
August 2023,
You can withdraw cardless cash will then show a QR
up from 9.96 billion
in the previous up to a maximum withdrawal (ICCW) code you need to scan
month of `5,000. technology. from your device.

To access this
75% service, you need
Cardless
transactions rely
Step 4: Enter your UPI
PIN to authorise the
Percentage of a UPI app installed
on mobile devices transaction.
retail digital on your Android or
payment volume iOS device. and OTP, while the
that UPI UPI-ATM operates Step 5: You can then
handles UPI ATMs leverage through QR-based proceed to withdraw
the interoperable UPI cash withdrawals. the money.

58 Outlook Money October 2023 www.outlookmoney.com

 READ WHAT IS RACY, RELIABLE AND IRREPRESSIBLE
OUTLOOK-ICARE RANKINGS 2023 NO.1 PERSONAL FINANCE MAGAZINE ¥›Ǣ–¥ȏǤ¦’ǢƒȇǤ¥œǢ¥Ǧ’ƒɕǤ›žǢ–ƒǪº”ȅǢȕ¥¡ɓ¥ŧǢ¡Ǣ”ƒȇǤ¡ƧŬ
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Demisexual. As old structures of love and intimacy

collapse, how are Indians navigating new relationships?
WWW.OUTLOOKMONEY.COM D

WHO’S YOUR
FINANCIAL
I LIKE DIY.
ADVISOR?
DO I NEED
GETTING THE RIGHT ADVICE CAN
ADVICE?
PLAY A MAJOR ROLE IN ACHIEVING
FINANCIAL FREEDOM, BUT NOT
EVERYONE HAS ACCESS TO IT. HOW
DO YOU DEFINE RIGHT ADVICE
AND WHERE’S SMALL-TOWN
INDIA SEEKING IT FROM?

SORRY, WHO ELSE

SHOULD I
NO RIAs
IN MY CITY GO TO?
Ǥ¦›Ǣˆžď”ȅ¢
ƒȇ›ȏǦ›ȷ

—¦ǢóƒǢďǤ’¢ȍ• j˜–’Ǧ½œǢ¥–”Ǧ
›ȷǤ†ǢoǤ’¦ǢǤ¥ƒ
—ȏˆ¡§ĉ›ȏǤ”

Radical Love RN I N O. 7 0 4 4 / 1 9 6 1
RNI NO. DELENG/2002/08292
Ǥ¦›Ǣˆžď”ȅ¢’“Ǣ¥›Ǭˆȅ jŧšǢ’›ȷ’™Ǣ¦ǦďƒDzǤ’ Ǥ¡ƧŪ™ȅȍƒȍƒǤ¡ƒǢ¥ƒȇďǤ’Ǥ¦›ǢžœǦ
ˆȅ’Ǣ¡–Ǧ–Ǥ”œɉƒȍ™Ǣȏ•–ȅƒǧ—ǣœȍŠ–ǢzwǤ–›Ǣɓ‘¥ȅfhœ¦f—”Ǣ›Ǣ–¡Ǥ–Ǥ›ɓ’
RNI NO. DELHIN/2009/26981

8 904150 800010 24
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 Insurance

A FRIEND IN NEED
FOR DIABETICS
Diabetes-speciЃc plans are customised for the needs of diabetic patients and
some of them have less waiting period, subject to the severity of the
disease. Know your options before buying one

By Meghna Maiti

N
umbers don’t lie, and
certain numbers can
be scary. According to
a study by the Indian
Council of Medical Research–India
Diabetes (ICMR-INDIAB), published
in medical journal The Lancet in June
2023, 101 million Indians are diabetic
and 136 million are pre-diabetic. The
numbers, the study says, are much
higher than earlier reported figures.
The World Health Organization
(WHO) estimates that 77 million
Indians above 18 years are diabetic and
nearly 25 million are pre-diabetic.
“India is consistently retaining
its position as the global capital
for diabetes. It is a lifestyle disease
with long-term multisystemic
complications which requires a holistic
treatment. Managing and treating diabetes-specific plans and comparing programs, nutritional counselling,
diabetes-related complications can them with regular health insurance and specialised diabetic management
be expensive, especially during plans to help you decide. tools and resources. They also cover
hospitalisation and it can put a strain diabetes-related expenses, such as on
on one’s finances,” says Madhumathi What Makes Them Different? surgeries, kidney problems and others.
Ramakrishnan, senior vice-president, Diabetic-specific plans are customised Type 1 diabetes is an autoimmune
Star Health and Allied Insurance. to provide specialised benefits and condition where the body’s immune
Given the rising incidence of services that cater to the unique system attacks and destroys insulin-
diabetes in India and the steep requirements of diabetics. Diabetes producing cells in the pancreas. This
associated costs, buying a health patients need regular blood glucose results in a lifelong dependence on
insurance to cover hospitalisation monitoring and medical prescriptions. insulin injections for blood sugar
is advisable, especially if you have a They are also susceptible to high risk regulation. Type 2 diabetes is primarily
family history of diabetes. But which for diabetic neuropathy, vision loss, linked to lifestyle factors, such as poor
policy should you buy? Should you stroke, cardiovascular diseases, and diet and physical inactivity, leading
go for diabetes-specific plans or settle other health ailments. to insulin resistance. People afflicted
for a regular policy? We have tried to These plans may encompass with this rely on medication, diet, and
answer these questions by exploring coverage for diabetic education exercise to keep diabetes in check.

60 Outlook Money October 2023 www.outlookmoney.com

 CHECK BEFORE YOU BUY
ʻ˘˥˘Ϡ˦˔˟˜˦˧ˢ˙˗˜˔˕˘˧˘˦ʠ˦ˣ˘˖˜Ѓ˖˛˘˔˟˧˛˜ˡ˦˨˥˔ˡ˖˘ˣ˟˔ˡ˦˪˜˧˛˧˛˘˟ˢ˪˘˦˧˪˔˜˧˜ˡ˚ˣ˘˥˜ˢ˗

Add ons, and Waiting Period

Insurer Plan Name Premium
costs if any For PED

ˁ˜˩˔ʵ˨ˣ˔ʻ˘˔˟˧˛ Ϣʷ˜˦˘˔˦˘ˀ˔ˡ˔˚˘ˠ˘ˡ˧ Day 1 cover

˅˘ʴ˦˦˨˥˘ʥʡʣ `15,736
ʼˡ˦˨˥˔ˡ˖˘ `ʧʟʩʣʥϣ

ʴ˗˜˧ˬ˔ʵ˜˥˟˔ʻ˘˔˟˧˛ ʴ˖˧˜˩ʻ˘˔˟˧˛˃˟˔˧˜ˡ˨ˠ
`ʥʪʟʩʦʣ NA ʦʣ˗˔ˬ˦
ʼˡ˦˨˥˔ˡ˖˘ ʸˡ˛˔ˡ˖˘˗ʛʷ˜˔˕˘˧˘˦ʜ

ʶ˔˥˘ʻ˘˔˟˧˛ʼˡ˦˨˥˔ˡ˖˘ ʶ˔˥˘ˆ˨ˣ˥˘ˠ˘ `ʤʨʟʤʥʥ Ϣʼˡ˦˧˔ˡ˧ʶˢ˩˘˥`ʥʟʬʤʧϣ ʦʣ˗˔ˬ˦

ˀ˔ˡ˜ˣ˔˟ʶ˜˚ˡ˔ ˃˥˜ˠ˘ʴ˖˧˜˩˘
`ʤʦʟʩʦʥ NA ʬʣ˗˔ˬ˦
ʻ˘˔˟˧˛ʼˡ˦˨˥˔ˡ˖˘ ʛʷ˜˔˕˘˧˘˦ʢ˃ʵʢʴ˦˧˛ˠ˔ʜ

ˆ˧˔˥ʻ˘˔˟˧˛ʼˡ˦˨˥˔ˡ˖˘ ˆˠ˔˥˧ʻ˘˔˟˧˛˃˥ˢ `13,548 `6,774 1 year

#The speciЃcs are for a policy with a sum insured of `10 lakh, meant for a 45-year-old male who has diabetes and lives in Delhi.

Premium includes GST; NA: Not available; PED: pre-existing disease

Note: Policies have been listed as per the waiting period and are not recommendations; List is not exhaustive Source: Policyba˭aar

Comprehensive health plans, while Which Policy Do I Choose? PED. So, these products would have a
providing extensive coverage, may not As diabetes is covered under a regular waiting period for PEDs applicable for
offer disease-specific customisation. health policy you may ask: why diseases other than diabetes.”
should I buy a diabetes-specific plan? However, diabetes specific plans
Who Are They Meant For? Says Singhal, “Choosing between may have a waiting period from 30
Typically, diabetes-specific plans are a regular plan and a diabetes-specific days up to four years, though some
designed for individuals with Type 1 health insurance will depend on plans offer coverage from Day 1. So
diabetes, those who develop diabetes the severity of their condition. one must consider the waiting period
before the age of 30, or those with Most people (80-85 per cent), with when selecting a diabetes policy.
severe diabetic conditions. moderate diabetes can go for a Premiums: Diabetes-specific plans
So, if you have diabetes, a diabetes- regular health plan. However, they have a higher premium because they
specific health plan will be better. should disclose their pre-existing offer customisation and relatively
Says Parthanil Ghosh, president of condition, including the severity, low waiting period. “These may also
retail business, HDFC ERGO General HbA1c levels, and the age at which include benefits of a regular health
Insurance: “Diabetes health insurance they were diagnosed.” plan, such as accidental injuries and
plans are specifically designed for A regular health plan covers critical illnesses. So, their premiums
people who are already diabetic.” hospitalisation costs, including for are comparatively expensive,” says
Of course, it is subject to the diabetes, and reimburses it up to the Girish Nayak, chief - technology and
patient’s condition and the level of limit insured. “For the rest 15-20 per health UW & claims, ICICI Lombard.
severity. “We recommend a plan with cent who have moderate to severe
day 1 coverage by undergoing the diabetes, high diabetes, or Type 1 What To Keep In Mind
required pre-policy medical test. Day diabetes (which is often not accepted Opt for a policy with a shorter
1 covers are usually available to those in regular health plans), there are waiting period. Be vigilant about
with no end organ damage with lesser diabetes-specific plans,” says Singhal. co-payments or sub-limits, as they
premiums when they undergo pre- Waiting Period: When diabetics can impact out-of-pocket expenses,
acceptance tests,” says Ramakrishnan. enrol in a regular health policy they and lastly, make complete disclosure
“Also, those with a family history are considered as customers with a of your past and ongoing medical
of diabetes may buy diabetic-specific pre-existing disease (PED). Regular treatments to avoid any disputes
plans as they are more likely to be health policies cover PEDs only after a arising out of your claim.
affected by the disease,” says Siddharth waiting period of 2-4 years. If you are buying a regular health
Singhal, business head of health Says Ghosh: “A few products are plan, check if it includes coverage for
insurance, Policybazaar.com, an designed specifically for diabetics, diabetes-related complications.
insurance aggregator. where diabetes is not considered as a meghna@outlookindia.com

www.outlookmoney.com October 2023 Outlook Money 61

 Behavioural Finance

BY ʿʴ˅ʼˆˆʴʹʸ˅ˁʴˁʷʟ ʼˡ˩˘˦˧ˠ˘ˡ˧ˆˣ˘˖˜˔˟˜˦˧ʟˀˢ˥ˡ˜ˡ˚˦˧˔˥ʼˡ˗˜˔

ˇ˛˘˥˘Ϡ˦ˁˢʵ˟˔˖˞ʴˡ˗ˊ˛˜˧˘
˂˨˥Ѓˡ˔ˡ˖˜˔˟˗˘˖˜˦˜ˢˡ˦˔˥˘ˡˢ˧˝˨˦˧˔˕ˢ˨˧ˡ˨ˠ˕˘˥˦ˢ˥˖˛˔˥˧˦ʡˇ˛˘ˬ˔˥˘ˠ˨˖˛ˠˢ˥˘˧˛˔ˡ
˟˜˦˧˜ˡ˚ˢ˙˗ˢϠ˦˔ˡ˗˗ˢˡ˧Ϡ˦ʟ˔ˡ˗ˡ˘˘˗˦˔ˡ˗˪˔ˡ˧˦

A
friend called me the at Santa Clara University. Statman ʸ˫ˣ˥˘˦˦˜˩˘
other day with a very suggests that we need to view our ˄ʭˊ˛˔˧˗ˢ˘˦˜˧˦˔ˬ˔˕ˢ˨˧ˠ˘ʲ
interesting query. He preferences, wants and errors What is the image I want to create for
wanted to purchase a through the prism of benefits. And myself? What is this saying about me
home espresso machine, and after this helps individuals choose wisely. to others? These expressive benefits
much back-and-forth narrowed What do people want? They want convey to us and to others our
down on the gold standard. three benefits: utilitarian, expressive, values, tastes, and status.
The two Italian models were Lelit and emotional. So it is not just about eating out,
Bianca 2.21 and La Marzocco Linea but the restaurants you frequent.
Micra. The first would set him back Utilitarian Where do you want people to see
by `2.21 lakh, while the other by ˄ʭˊ˛˔˧˗ˢ˘˦˜˧˗ˢ˙ˢ˥ˠ˘ʲ you? Which locations will tempt you
`3.41 lakh. A watch has the utilitarian benefit to post a picture on social media?
My friend is passionate about of informing you what the time is. Along similar lines, it is not just
baking and coffee. I suspect that he The utilitarian benefits of a car are in any car. A Tata Nexon EV Prime
surreptitiously nurtures the dream ferrying us from one place to another. will tell the world that I am
of running his own café, or a coffee The utilitarian benefit of a restaurant conscious about the environment
bar. And he had set his heart on this is in feeding us when we are hungry and I take responsibility for my
purchase. or when we have not cooked consumption. On the other hand,
So what was holding him that he sufficiently to feed our guests. The the Jaguar I-Pace conveys the same
kept wavering on this decision for utilitarian benefits of investments are while simultaneously screaming
the past year? Well, the tug of war to create wealth so that one day we your status.
between his heart and mind was don’t have to work.
because he could not justify the cost ʸmotional
to himself. Somewhere in his mind, ˄ʭʻˢ˪˗ˢ˘˦˜˧ˠ˔˞˘ˠ˘˙˘˘˟ʲ
he believed that it was not right to An insurance policy will make me
spend so much on a “want”. Utilitarian, expressive and feel secure. A huge corpus will make
This black-and-white classification ˘ˠˢ˧˜ˢˡ˔˟˕˘ˡ˘Ѓ˧˦˚ˢ me feel safe. A lottery gives me hope.
of need and want is where he erred. beyond the need versus Investing in a portfolio management
I answered him based on the
˪˔ˡ˧˖˔˧˘˚ˢ˥˜˦˔˧˜ˢˡʡʼ˧ service (PMS) makes me proud.
tremendous research and brilliant An electric vehicle makes me feel
insights of author and behavioural speaks of our values, virtuous and responsible. A Jaguar
finance expert Meir Statman, the identity, insecurities, and gives me confidence like no other.
Glenn Klimek Professor of Finance desire for social status All your decisions will rest on the

62 Outlook Money October 2023 www.outlookmoney.com

confluence of the above. Humans are the need versus want categorisation. gathering, it is socially unacceptable
designed in such a way that we aspire It speaks of our values, identity, to introduce yourself as a rich man
for much more than just meeting insecurities, and desire for social if you cannot state that you have
our basic needs for survival. People status. invested in a hedge fund. That, of
express themselves in the houses I love how Statman says it: “We course, will indicate that you are a
they own, the cars they drive, the are neither computer-like rational, rich man, because not everyone is
clothes they wear, the restaurants nor bumbling irrational. We are all a qualified investor who is allowed
they frequent, the accessories they normal: having wants such as not to to buy those hedge funds. That is
buy, the gadgets they own, where be poor and to be rich, and making the expressive benefit. In India, the
they go for a holiday, and so on. We our way towards them. And yes, equivalent would be a PMS where the
can argue about how money is being because we are human, we will make entry point is a minimum of `50 lakh.
spent and which is the “right way”, mistakes along the way.” A young person investing bulk of
and which is a “good” investment or Owning a house is different from her money in fixed deposits (FD) will
bad. But these are futile discussions renting, even though in both cases satisfy her want of tranquillity. The
because it never stops at utility. you’ll have shelter. Some seek the volatile stock market won’t affect her.
We want to make a statement.What emotional and expressive benefit She can liquidate FDs whenever she
wants. And she is smug knowing that
her money is not getting “wasted” in
a savings account. But eventually she
will have to reconsider its utility if she
wants to have a reasonable amount to
sustain her in retirement.
Another example is a target-date
fund. There is an emotional benefit
because this approach boasts
simplicity. The individual doesn’t
have to worry about adjusting the
asset allocation. With a target-date
fund they gain utilitarian benefits
and also a sense of calm and
comfort that they are doing the
right thing and are on their way to
achieving their goal.
Similarly, investing in index funds
says that I’m going to get utilitarian
we buy and own has expressive and in ownership—pride. “Yeah, I own benefits and higher returns because
emotional benefits, too, and they the place. I might have a mortgage not everybody can beat the market.
must never be ignored. on it, but I own the place. I’m a
Why do we save, invest and homeowner.” On the other hand, ʸ˩˘ˡ˧˨˔˟˟ˬϨ
grow our wealth? That’s because some may be like to live in a lovely Human beings are not robots.
we don’t want to work in our old neighbourhood where they can’t Everything is not about a number
age or be dependent on someone. afford to buy a home but living there or chart. It is much more than a
But it is more than just that. It is in a rented house satisfies them in a listing of do’s and don’ts, and needs
because we fear poverty and detest way that can’t be accounted for by an and wants. We have desires, hopes,
the social stigma it carries. We want excel sheet. insecurities and obligations. And
to experience the freedom to walk Statman even talks about financial how they play out is shaped by our
away that only a monetary safety investments within this paradigm. circumstances, life experiences,
net can provide. We want to express Ask someone why they invest in gender, age, cultures, etc.
gratitude to our parents by offering hedge funds, and they will tell you Don’t judge another’s decision.
them a lifestyle that they could never about the potential for high returns Walk in your lane. So what has my
envisage. We want our parents to feel and strategies not known to many. friend decided? It doesn’t matter.
proud of us. They probably believe it even if Based on the decision matrix that I
All these utilitarian, expressive evidence suggests otherwise. presented him with, he will do what
and emotional benefits go beyond But it is also the case that in a he believes is best for him.

www.outlookmoney.com October 2023 Outlook Money 63

Why Your Investment
Success Hinges on Right
Decisions
The success of an investment doesn’t depend on the situational
demands or variables in the market but on the ability to read and
understand the context without our cognitive biases.

VIKAS SHARMA, CFPCM, CEO & Co-founder, Goalchi Capital Services LLPs

I
n the world of investing, a impact financial decisions. regarding any topic, such as the
realm often dominated by Identifying and understanding market will have a great bull run.
numbers, graphs, and forward these biases is a step towards Now, you will only acknowledge
projections, there rests a pivotal modulating our financial behaviour the information that validates your
yet underemphasised cornerstone: advantageously. Here are some viewpoint, leading you to make
Behaviour. The significance of key biases to be cognizant of while lopsided decisions that may go
behaviour in financial decision- navigating financial decisions: against you.
making cannot be overstated, as it t
Herd Behaviour: Individuals, t
Recency Bias: Decisions anchored
often steers the ship in turbulent swayed by their peers or media on recent events, ignoring the
waters of market volatility. frenzy, often invest in assets long-term trends or probabilities,
“Psychological research had a irrespective of their alignment can lead to myopic financial
great impact on shaping the theories with personal financial goals or risk choices.
of behavioural finance. One such tolerance. t
Loss Aversion: The tendency
remarkable series of experiments was to hold on to loss-making
the Asch Conformity Experiments investments in the hope of
conducted in the 1950s by Solomon recovery, often when selling might
Asch.” These experiments highlighted be a more prudent choice.
Identifying and
the tendency among individuals t
Anchoring Bias: Latching onto
to conform to a group’s incorrect understanding the initial piece of information to
consensus, illustrating the perilous cognitive biases determine an investment’s value
‘herd behaviour’. This form of is a step towards often leads to misguided financial
cognitive bias, among others, plays a decisions.
crucial role when individuals engage modulating our
with financial markets. financial behaviour Investment success hinges heavily on
Investor behaviour, according advantageously. the decisions we make, the emotions
to multiple studies, is a linchpin we harbour, and the patience we
to long-term investment success. exercise. A disciplined approach,
Dalbar Associates, a notable US- coupled with a rational mindset,
based investment research firm, has is the guiding compass towards
underscored through their long- t
Overconfidence Bias: financial goals amidst the stormy
term studies that investor behaviour Overestimating one’s financial seas of market uncertainties.
significantly influences the trajectory acumen often leads to In an era where algorithms and
of investment outcomes, often more unwarranted risks, detrimentally analytics hold significant sway, the
than the fund performance itself. impacting financial health. profound impact of our behaviours
Morningstar, another industry t
Confirmation Bias: A bias where on investment outcomes must not
stalwart, recently shone a light one seeks and acknowledges be relegated to the backseat. Our
on the ‘Behaviour Gap’, a term information that conforms to their journey through the investment
representing the discrepancy pre-conceived notions and beliefs landscape is not just about reacting
between the returns of investments and often ignores information or to market trends but mastering the
and the investors over a specified facts that contradict their pre- art of behavioural finance to navigate
period. This gap underscores how existing beliefs. With this bias, through the undulating paths of
behavioural biases can detrimentally it’s like you made up your mind uncertainties.

Disclaimer
Equities can fluctuate and carry risk. A long-term approach and professional financial advice are recommended when considering investment strategies discussed in this article.
 Retirement

Retire Right
PLAN WISELY, INVEST SMARTLY, SPEND CAREFULLY

CHOOSING THE RIGHT PLAN

WILL LEAD YOU TO INVEST IN THE
MOST SUITABLE PRODUCTS THAT
WILL, ULTIMATELY, ENSURE A
³x ÁR¨ ³Á‫«ٳ‬0ÁX«0x0zÁnXI0
 Retirement

‘AI-Driven Unique
And Unbiased Solutions,
Are The Way Forward’
IDFC FIRST Bank has posted stellar results, and is looking at innovation, riding high on
its digital capabilities. In a freewheeling interview with Nidhi Sinha, editor, Outlook Money,
and Suchetana Ray, editor, Outlook Business, the bank’s executive director and chief
ȉȬƲȯƇɅǛǾǍ٪ȉnj˚٪ƤƲȯ٪tƇƫǕǛɥƇǾƇǾ٪ƇdzƇǯȯǛȷǕǾƇǾ٪ɅƇdzǯȷ٪ƇƣȉɍɅ٪Ǖȉɦ٪ɅǕƲɬ٪ɍȷƲ٪ƫǛǍǛɅƇdz٪ƤƇȬƇƣǛdzǛɅǛƲȷ٪
to enhance customer experience, where interest rates are headed, and its commitment
ɅȉɦƇȯƫȷ٪ǛȷȷɍƲȷ٪ȉnj٪˚٪ǾƇǾƤǛƇdz٪ɦƲdzdz‫ع‬ƣƲǛǾǍ‫ؙ‬٪ǛǾƤdzɍƫǛǾǍ٪ɅǕƲ٪ǯƲɬ٪ǛȷȷɍƲ٪ȉnj٪ȯƲɅǛȯƲǼƲǾɅ٪ȬdzƇǾǾǛǾǍ

IDFC FIRST Bank has

transformed itself into
a digital-oriented retail
bank and invested in
digital capabilities. How
have you helped reshape
customers and how are
they reshaping you as
a bank?
We have been in banking for almost
two-and-a-half decades, and there
has been a dramatic change over
this period. There was a time when
people used to flood into branches,
and the core idea was to open new
branches and have more people to
service them. Those days, innovation
used to be around physical services
like navigating people to the right
counter, ensure prompt service etc.
Today, customers do not walk
into branches. All of us have 100-
150 apps on our phones because
that’s the way people have started
interacting. Today, your day-to-day
life is driven by digital interface
and apps as a way of interacting
with various stakeholders, and it is
equally applicable to banking. We
have picked up that cue and worked
on making it better.
While we are a very young
bank and do not have a legacy in Madhivanan Balakrishnan
terms of the number of branches, ED & COO, IDFC FIRST Bank
infrastructure, etc., we are singularly

66 Outlook Money October 2023 www.outlookmoney.com

focused on how to create that unique prices are now cooling down with We often see deposits
moment of experience for every the country having received decent rates not moving in sync
transaction that our customers do rain. Our house view is that this with the repo rates in
and every advice or information that current interest regime will continue a rising interest rate
they get. for some more time. scenario compared to the
We address questions like: Can We’re not expecting an upward lending rates, in terms
the mobile app be the most effective spike again. In that respect, I think of proportion. Could you
tool to access any of the banking the FD rates will stay put for some explain why that happens
services and not just payments? time. The current and savings and what are the factors
For example, can it help you access account (CASA) ratios are heading that banks consider
the customer service centre easily? southwards, but not on an absolute during the rate-setting
Is there a mechanism to do things level. The volumes of deposits exercise?
yourself by making it easy, say, by continue to inch upwards. With rates We do our asset-liability meetings at
changing the interface and making rising, people are happier to block a very high frequency, so that we are
the journeys more intuitive. their funds in FDs for now. updated about the market dynamics
Banking is essentially a bunch of and the resultant impact on the
processes orchestrated to deliver an bank’s assets and liabilities.
outcome, so the question is “how In addition to the level of repo
to integrate the front-end app with
processes in the back-end that are
We are not rates, deposits rates are also
dependent on individual banks’
seamless. I think as a bank, we expecting an deposits mix (CASA versus term
are extremely savvy, and we try to upward spike deposit composition), expected
keep pace with the fast-changing in interest advances growth, funding
scenarios. That's why we'll see new requirements, and the market
versions coming in frequently and rates again. In liquidity condition. Overall, deposit
new experiences being enabled for that respect, rates, typically, respond to the
customers. I think the changes in policy rates with a lag
We intend to virtually create a
world around finance, so that our
FD rates will due to the sticky nature of interest
rates offered on CASA, while
customers can be served easily stay put for changes in term deposits rates
anywhere, anytime. But, at the same some time happen much faster.
time, we are also there physically— Further, on the assets side, it
our branches, our customer service differs from bank to bank, and a
centres are there to help our lot of factors are considered like
customers whenever needed and to the portfolio mix the bank has, the
reassure them. fixed and variable rates, the average
The future is going to be a unique tenure of the loan, and so on.
and hybrid world, because in certain Being a retail bank, we are well-
aspects, you need that human touch. So, is it a good time to balanced if we take care of the asset-
lock into FDs? liability mix in line with the tenure
Equity investments got Certainly. On the debt side, it’s a and other portfolio parameters. To
a digital push post Covid. good time to lock into FDs. On the my mind, with every reset in the
But the current high flip side, even the equity markets are interest rate on a variable basis, we
interest rates seem to doing well and it’s not that equities are able to transmit the effect to our
ǕƇɥƲ٪ǼƇƫƲ٪˚٪ɫƲƫ٪ƫƲȬȉȷǛɅȷ٪ are out of favour. It’s been a nice and customers with a reasonable amount
(FDs) a favourite again. calibrated growth at this point of of efficiency.
Where are the interest time. And even though the overall There are certain banks which are
rates headed now? global macroeconomic scenario able to transmit it very quickly, that’s
From the macroeconomic indicators can be considered mixed, given the because of the way the portfolios
that we have been looking at, things situation in the developed markets, are structured. For instance, a bank
seem to be cooling down a bit. Even India seems to be in a good place. which predominantly has a variable
though we are all aware about how Both in terms of sentiments and mortgage business, the transparency
the tomato prices shot up and food performance, the Indian market is in could be high. But if I’m doing
inflation was sort of heating up a bit, a much better position. a big chunk of consumer loans,

www.outlookmoney.com October 2023 Outlook Money 67

 Retirement

which are primarily at fixed rates of is for them as it lets compounding how much you should allocate and
interest, then we need to manage work its magic on their investments. where and when are very critical.
the mapping accordingly. As an From a financial services Everybody would have heard and
industry, we have been keeping pace perspective, there’s no single solution read about Warren Buffet and
with transmissions compared to the for everyone and its different strokes his disciplined way of long-term
earlier days. for different people, depending investing, but translating the same
upon the individual’s life stage. into your own life is very important.
Banks have always It’s, therefore, important to make I think banks, financial
been seen as trustworthy a conscious effort to plan for one’s institutions, media organisations
institutions, especially retirement while still young. and the government should all play
by senior citizens, whose a very active role to ensure that
population is steadily ƇǾ٪˚ǾƇǾƤǛƇdz٪dzǛɅƲȯƇƤɬ٪ we don’t end up like some of the
increasing. The elderly play a role in spreading developed countries where we have
population is projected awareness about the need too much of debt in terms of pension
to more than double by to plan for retirement? management and similar liabilities.
2036 to 225 million and What role can the
then reach 425 million ǍȉɥƲȯǾǼƲǾɅ٪ƇǾƫ٪˚ǾƇǾƤǛƇdz٪ What is your advice
by 2061, according to institutions play? to individuals regarding
Census 2011. In this retirement planning in
scenario, the conversation terms of investment and
on retirement planning other strategies?
becomes extremely It is necessary People typically think about planning
important. What are your that people in only after they attain a certain
thoughts on this? amount of net worth. That’s when
While India has been very lucky to
their 40s strike a they feel that I need an external
have a strong demographic dividend, balance between advisor to come and tell me what
wherein we have one of the largest saving and to do with my money. They look at
young working population that
resides here, I think many people are
spending, and private bankers, wealth managers,
or relationship managers, but there
touching the age of 40. So, in another plan for their is confusion about whether that
20 years, there’s going to be a big future. The earlier person is doing what’s good for the
skew in the 60-plus population. they start the organisation or for the customer. I
Another aspect is that post Covid, think this is where the concept of an
people’s perception of their lives better it is app or a site works; it can tell you
has undergone a big change. People what you have, and what you need
have now become more careful, to have, let’s say five years down
and they want to live a better and the line. I think your ability to plan
more balanced life. Given this becomes better when you realise that
change in behaviour and the reality the concept of AI-driven decisions
of the demographic situation, I can be designed to be unbiased.
think retirement planning is very Financial literacy can certainly play a One can develop the ability to
important. huge role in empowering people. run models which can throw out
While in the very old days, my The earlier generation was more solutions that are unique to you as
parents and maybe their parents, traditional, but today’s generation an individual, after understanding
used to save and then spend, now as is well exposed to the various your needs and risk-taking
India becomes a more dramatic and options, such as digital apps and capability. So, digitisation tools,
consumerist society, people borrow sites for managing their investments. combined with robust models
first to spend and then save. It is Those in the age group of 40 years will play a big role. Banks with
necessary that people in their 40s are reasonably well-educated and a huge amount of data at their
strike a balance between both these have a higher financial literacy disposal are at the forefront of this
aspects—saving and spending—and level as compared to their previous evolution along with the necessary
plan their future better. It is very generation. But planning is a advisory skills.
important that they appreciate that complex topic. Given the multiple nidhi@outlookindia.com
the earlier they start, the better it options available, decisions like suchetana@outlookindia.com

68 Outlook Money October 2023 www.outlookmoney.com

 Retirement

By KAUSTUBH GUPTA, Co-Head of Fixed Income at Aditya Birla Sun Life AMC

HOW DEBT FUNDS BENEFIT RETIREES

Fixed-income mutual funds offer stability, reliable income and a way to
ɀɵɀɎƺȅƏɎǣƬƏǼǼɵȅƏȇƏǕƺƬƏɀǝˢȒɯȇƺƺƳɀًɯǝǣƬǝǣɀƬȸɖƬǣƏǼǔȒȸȸƺɎǣȸƺƺɀ

F
ixed-income mutual funds CAPITAL PRESERVATION have the time or ability to recover
play a crucial role in retire- Fixed income as an asset class from market downturns. A signifi-
ment planning by provid- takes centre stage when an investor cant portion in fixed income can
ing a relatively stable and focuses on capital preservation and help ensure reliable income during
predictable source of income. They generation of a steady stream of cash uncertain market conditions.
can be an important component of flows. This, typically, happens when
a diversified investment portfolio, an individual is nearing retirement LIQUIDITY & CASH FLOW
especially for retirees who want to or has low risk tolerance. Debt funds are more liquid than
minimise risk and preserve capital Debt funds primarily invest in other fixed-income investments. You
while generating returns. Here are fixed-income securities like govern- can buy or sell these investments
some key roles debt funds play to ment bonds, corporate bonds, etc. relatively quickly without significant
achieve retirement planning goal. These investments are considered transaction costs.
less volatile compared to equities. The need for a dependable income
ASSET ALLOCATION This stability helps in preserving after retirement to cover monthly ex-
Effective asset allocation involves capital, which is crucial for retirees. penses is paramount. Fixed-income
investing across asset classes like investments, particularly debt funds,
equities, fixed income, and possibly RISK MANAGEMENT play a key role in meeting this need.
real estate. This diversification helps Debt funds come in various catego- A systematic withdrawal plan (SWP)
in reducing the impact of market ries and types, each with a different is a powerful tool in this regard. It
volatility on overall returns. Besides, risk profile and investment strategy. provides a steady source of income,
it helps align one’s risk tolerance This allows investors to choose funds mimicking a pension-like structure.
with financial objectives, whether it based on their requirements. Debt SWPs are useful for retirees who no
is growth, income, or a blend of both. funds are generally considered to longer have regular income.
Asset allocation allows retirees to be low on risk compared to equity Let’s say, you have a saving of
plan for the long term, as their finan- investments. `1 crore. At age 60, you invest the
cial needs and risk tolerance changes While they may not have the same amount in a fixed-income fund and
with time. Proper allocation provides returns potential, they are less likely start a SWP. Assuming a 6 per cent
flexibility to adjust the portfolio mix to experience significant losses. This return per annum on investment and
as per circumstances. is important for retirees who may not a withdrawal rate of 4 per cent per
A balanced approach helps en- year, you will get `35,000 per month
sure that their investments can last for 25 years. At the age of 85, you will
throughout their retirement years. An be left with `1,92,48,594. Do note
allocation to fixed-income mutual SYSTEMATIC that the returns are not guaranteed.
funds is a cornerstone to retirement WITHDRAWAL PLAN In a nutshell, fixed-income mutual
planning. It provides a structured ap- funds are essential for retirees as they
proach to managing risk, generating
IS A POWERFUL TOOL provide stability, reliable income,
income, preserving capital and also TO CREATE MONTHLY and a way to systematically manage
acts as a counterbalance to equities. CASH FLOW cash flow needs.

www.outlookmoney.com October 2023 Outlook Money 69

 #celebrateretirement

COMING SOON!
India’s first event focused on retirement

2-DAY EXPO
O

O 4000+ ATTENDEES

Jio World Convention Centre, Mumbai

23-24th January 2024

retirement.outlookindia.com
IDFC FIRST Bank
and Outlook present
“40After40”
This Initiative is aimed At Spreading
Awareness & Creating Conversations
Around “The Important But Often-Ignored
Need For Retirement Planning”

Outlook Group announces the launch of its highly

The elderly work all their lives, and
anticipated retirement planning event, “40After40”,
in association with IDFC FIRST Bank. A one-of-its-kind suddenly realise they are close to
platform, “40After40” is a two-day event and expo, retirement in their late 50s. In any case
which will be held at Jio Centre in Mumbai on January they face many age-related issues like
23-24, 2024. It’s a one-stop shop for all conversations health. They may also feel loneliness
around timely retirement, panel discussions, chats, which is sad. To top this up, if they are
masterclasses, interactions with planners, product
presentations etc.
short of financial resources, it’s a hard
feeling. While physical ageing related
The Need For 40After40 Event issues are caused by nature, at least,
The event is an extension of Outlook Money’s on the finances front, they could plan
drive towards spreading awareness and creating to have a better life.
conversations around the important but often-ignored
need for retirement planning, making it the only media
house with a dedicated website https://retirement.
could plan to have a better life.
outlookindia.com/ on editorial content around retirement.
It aims to provide invaluable insights and expert guidance Keeping this feeling in mind, IDFC FIRST Bank is proud
to individuals, helping them make informed decisions to to join hands with Outlook Money to highlight the
secure a prosperous retirement. importance of retirement planning and address the
financial needs of the elderly early. It is in line with our
In this endeavor, IDFC FIRST Bank will be the presenting
customer-friendly philosophy and our endeavour to
sponsors and will add the voice of its experts to spread
provide lasting solutions to them.
the message of timely retirement planning. Hence,
collaborating with IDFC FIRST Bank, a prominent financial I feel that once the regular source of income winds down,
institution known for its customer-centric approach and elderly become very sensitive to even small debits to
robust solutions, adds further credibility and expertise their account. Even if a bank debits their account for Rs.
to the “40After40” event. Together, Outlook Group 15 a quarter for say SMS charges, they feel the pinch.
and IDFC FIRST Bank aim to equip attendees with the Our Bank has a policy of never touching the savings bank
necessary knowledge and tools to embark on a secure account for this reason or that, say for Debit card fees,
and fulfilling retirement journey. ATM fees, IMPS, RTGS, NEFT, Demand Draft issuance
or whatever reason, all we need is maintain minimum
Talking about the collaboration, V. Vaidyanathan, MD &
balance of Rs. 10,000. IDFC FIRST Bank does not charge
CEO, IDFC FIRST Bank, said, “The elderly work all their
premature withdrawal charges on Fixed Deposits for
lives, and suddenly realise they are close to retirement
Senior Citizens.
in their late 50s. In any case they face many age-related
issues like health. They may also feel loneliness which is Like this we are thinking of a number of solutions for
sad. To top this up, if they are short of financial resources, the elderly, and we want to help people plan their
it’s a hard feeling. While physical ageing related issues retirement, the education of their children, the marriage
are caused by nature, at least, on the finances front, they of their children, their health insurance and so on. ”
 What’s New

REGULATORY
Regulatory
changes from
September
1-21, 2023,

ROUNDUP
and how they
will impact
you

funds, stocks, etc., and

CAPITAL MARKETS help minimise frauds and
mis-selling of instruments.
DEADLINE
FLEXIBILITY
EXTENSION
Change: Sebi provides
Change: Sebi extends
flexibility to LCs to
deadline to add or opt-
issue debt securities for
out nominees for demat
meeting their incremental
accounts and submit PAN
financing needs.
and KYC details for physi-
Impact: It will facilitate
cal securities till December
the ease of doing
31, 2023.
Impact: It will ensure TRANSPARENCY with the regulator and business and compliance
strictly adhere to its over three years while
that proceeds from demat Change: Sebi will allow regulations, while barring dispensing the need for
accounts reach the legal only online remittance unregistered entities LCs to file a statement
heirs or the right benefi- through its website to IPEF. from partnering with regarding compliance
ciaries, and facilitate ease Impact: It will ease and MFs and stockbrokers for with the framework.
of business. Also, inves- expedite the payment promotional activities.
Sebi: Securities and
tors will get more time to process and enhance Impact: It will help Exchange Board of India;
comply with the directives accessibility for all investors get accurate and LC: Large Corporates; PAN:
and avoid having their contributors to the fund. Permanent Account Number;
unbiased information
KYC: Know-Your-Customer;
folios frozen due to a lack Change: Sebi has asked about various investment IPEF: Investor Protection
of proper documents. finfluencers to register instruments, like mutual Education Fund.

EASE OF PROCESS to bear costs to replace

PENSION BANKING the papers in case of loss
Change: PFRDA or damage.
introduces the default
Impact: It will help
scheme option for NPS PROPERTY address customer
Tier II accounts, which will DOCUMENTS grievances and disputes
initially be available only
to government employees. Change: RBI asks all REs over delays, and promote
to release original property responsible lending conduct
Previously, it was provided
documents within 30 days among the REs.
only with Tier I accounts.
after full repayment of the RBI: Reserve Bank of India; RE:
Impact: It will enable Registered Entity
loan amount, and arrange
NPS Tier II account
for their delivery from a
holders to contribute to
bank branch or where the
the fund without needing
records are available. In
to separately select fund
the event of the borrower’s
managers to manage money,
demise, the REs must
thus easing the process.
ensure proper procedure
PFRDA: Pension Fund Regulatory to return the papers to the
And Development Authority;
NPS: National Pension System legal heirs. REs also have

*List is not exhaustive | Compiled by Sanjeeb Baurah

72 Outlook Money October 2023 www.outlookmoney.com

 Gen Z Corner

Class I Heirs Have Equal Entitlement

Queries Pulkit Karia, Surat

I have my parents and

younger brother in the family.
We live in a rented house
but now want to buy a house
of our own. My father is
exploring different properties
where we can move after
around two years. I have
been working for a few years
and have `3 lakh savings
that I want to contribute in
the house purchase. Please
suggest where I should keep
my money to maximise it
within this time.

Ravi G. Reddy, Vijayavada late mother being a Class I heir in Please remember to choose safe
this case is entitled to a share in her options with this money because the
My maternal grandfather father’s property. time frame of the investment is just
and his brother jointly owned In this context, the share your two years.
a land parcel as ancestral late mother inherited would be Option 1: Park the money in bank
property. My mother was considered as her separate property fixed deposits (FDs). The interest
the only child of her parents. to which Section 15(1)(a) of the rates are high right now and you can
Unfortunately she passed Hindu Succession Act, 1956 would be get good rates. Go in for a cumulative
away a couple of years applicable. Pursuant to this provision, FD and try to match the time when
ago, whereas my maternal the sons, daughters and husband of you require the money with the
grandfather had passed the deceased female are entitled for a tenure of the FD. However, investing
away long ago. Neither he share in the property, simultaneously. in an FD for any such purpose where
nor my mother left behind Consequently, being a Class I heir the time period is not exactly known
any Will. Now, the family of of your mother, you are entitled to a may not be advantageous.
my maternal grandfather’s share in the property. Option 2: Park the money in debt
brother is planning to sell the It has also been held by the mutual funds. You are likely to earn
land. As I do not possess any Supreme Court of India in better returns now in debt mutual
documents of the property, Arunachala Gounder vs. Ponnusamy funds than FDs in the current
do I have any rightful claim in Civil Appeal No. 6659 of 2011 that interest rate scenario.
the property? in case, a female Hindu dies leaving If you wish to contribute even
behind her husband or any issue, then more, you can either explore taking
Yes, you would be entitled to a share Section 15(1)(a) comes into operation a loan yourself or offer to contribute
in the property of your maternal and the properties left behind, partly if your family is likely to take a
grandfather. The quantum of your including the properties which she loan. You can contribute for the loan
share would depend on the other inherited from her parents would equated monthly instalments (EMIs).
Class I heirs surviving at the time of devolve simultaneously upon her Please note that you will get
your maternal grandfather’s demise. husband and her issues as provided in the tax benefits on the home loan
Considering that your late maternal in the Hindu Succession Act 1956. payment only when the property has
grandfather did not leave behind any M.S. MANI GUPTA your name too.
Will, his property would devolve by Partner, Sarthak Advocates and COL SANJEEV GOVILA
way of intestate succession and your Solicitors (Retd), CEO, Hum Fauji Initiatives

www.outlookmoney.com October 2023 Outlook Money 73

 Queries

Health Cover Unlikely After a Stroke

ANKUR KAUL, LUDHIANA you health insurance excluding the You can buy a family floater
pre-existing diseases (PED). However, insurance policy covering each
Last year, I suffered a stroke, you can buy health insurance cover member for at least equal to 50 per
and spent a lot on treatment. for rest of the family members where cent of your annual income. It means
I am a teacher and was in the you can be the proposer/payer for tax if your annual income is `12 lakh
school when it happened. My benefit purpose. and there are three members in the
school does not offer group family to cover, you require `18 lakh
health insurance. Is it not cover (50 per cent of `12 lakh × 3).
mandatory for employers to You can visit various websites to
offer a health cover? I want to compare the companies or connect
get cover for my entire family with your financial planner to know
now. Could you suggest a good policy options.
health insurance plan, given Giving health insurance to the
my medical condition? employee depends on various criteria.
It is at the discretion of the employer
Most companies do not give health so you can enquire with them.
insurance after a stroke. However,
there are companies that may offer Hina Shah, CFPCM & Coach

RAMESH PILLAI, TRICHUR offers some relaxations, if you follow financial year when it was purchased,
certain conditions. If you try and sell the tax benefits taken under Section
I have a house that I wanted the old house within one year of the 80C will be reversed and become
to sell to buy another house. purchase of the new house, LTCG taxable in the year of sale, but the
My old house is not yet sold, from it can be used to repay the home interest payment deduction under
but I got a good property offer loan of the new house within one Section 24B will remain untouched.
which I managed to secure by year of its purchase. However, the Under Section 54EC, exemption
taking a home loan. Will the new house should be in the name of LTCG from land and building sale
sale proceeds from my old of the old house seller. In case of is allowed if gains are reinvested in
house, whenever it is sold, be buying an under-construction house, specified bonds issued by the Railway
taxable as I don’t plan to buy an additional condition is that the Finance Corporation, the National
more properties to invest the construction must be completed Highways Authority of India, the
sale proceeds? within three years of selling the Rural Electrification Corporation,
previous housing property. etc., within six months from the date
If a housing property is held for less While computing LTCG, include of the sale. However, there is cap at
than 24 months, it is considered a stamp duty, registration charge, `50 lakh for this investment which
short-term capital asset. Gains made brokerage fee as well as repair and comes with five years of lock-in. The
on selling such assets are short-term renovation expenses to increase maturity amount on these bonds is
capital gains (STCG), and taxed as the deduction limit. Note that the tax-free but interest is taxable.
per the income slab. There are no deduction is available only when the You can reduce tax liability by
exemptions available on STCG. If a gain is not more than `2 crore on setting off LTCG from house sale
housing property is held for more property sale. The seller can claim against long-term loss from other
than 24 months, it is a long-term this benefit only once in a lifetime. assets’ sale, including stocks and gold.
capital asset and gains from it are If you sell the property within three LTCG can be adjusted with losses
called long-term capital gains (LTCG). years of its purchase, it will mean carried forward in the last eight years.
LTCG will be taxed at 20.8 per cent reversal of all tax benefits and gains
along with indexation benefits. treatment as STCG. If the house is Uma S. Chander, CFPCM, Founder
Section 54 of the Income-tax Act sold within five years of the end of Handholding Financials

74 Outlook Money October 2023 www.outlookmoney.com

 #celebrateretirement

O 2-DAY EXPO O 4000+ ATTENDEES

Jio World Convention Centre

23-24th January 2024, Mumbai

retirement.outlookindia.com
SIP Pays Off Well for Those Who Stays
Invested For The Long Term
Patience is the key to
generate wealth and a
Systematic Investment
Plan (SIP) will offer
you that opportunity to
achieve your long-term
financial goals

N
irmal Krishnan (45) is a medical
practitioner who has a small
family with his wife Nimmi Nirmal
and two children - a son Pranav and a
daughter Malavika. Being responsible
parents, they had desired to have a
stable financial future for their children
and for their own retirement as well. For L to R: Ms. Nimmi Nirmal with son Pranav Nirmal and Mr. Nirmal
the same, they knew that investments Krishnan with daughter Malavika Nirmal
were important to financially secure
their future.
However, being a busy medical meeting him, I could sense that he As an investment vehicle, mutual funds
professional, it was difficult for Dr. had a desire to build a sizable portfolio have all the investment strategies and
Krishnan to make prudent investment and had a fair understanding about basics inbuilt in them. “Risk management
decisions. Moreover, with a plethora of why investments were important. This in the investment portfolio is one of the
available investment avenues, he did not worked well for me,” says Mr. Varghese. top priorities. And it is needless to say
know where to put his money to yield that mutual funds are well-equipped to
the desired results. Focus on Financial Education take care of this aspect of investment,”
To begin with, they discussed in detail elaborates Mr. Varghese.
Meeting with Mr. Varghese about discipline, patience, consistency, Looking at the family’s liquidity
In 2016, Dr. Krishnan met Richie goal-based financial planning and most situation, the Nirmal family was
Varghese, his mutual fund distributor. importantly the various asset classes suggested to start their investment
As a seasoned investment professional and their market cycles. Along with journey with a systematic investment
Mr. Varghese gave a patient hearing to it, Dr. Krishnan was apprised about of Rs 50,000 on a monthly basis. Mr.
Dr. Krishnan and understood the latter’s benefits of asset allocation strategy Varghese cherry picked a couple of
needs, risk appetite, future goals and through diversification. “Educating mutual fund schemes for the Nirmals
psyche towards investments. clients is one of the most important which were suitable for long-term
Dr. Krishnan had just crossed aspects which we continuously work wealth creation in accordance with Dr.
the mid-30s age bracket and was towards. This helps clients stay for the Krishnan’s risk taking capability. While
understandably concerned about long-term and are focused on goals. In doing so, Mr. Varghese ensured that
his money management. “I had the fact, educated clients make my work asset allocation strategy is well in place
realisation that I was clearly a bit late easy,” quips Mr. Varghese. in order to weed out the concentration
and could not afford to delay it any risks from the portfolio.
further,” recalls Dr. Krishnan. Investment Strategy
Mr. Varghese knew how to navigate Dr. After a couple of meetings, Mr. Varghese Investment journey till the Pandemic
Krishnan. “ The best part was he followed recommended to the Nirmals that they hit in 2020
‘better late than never’ principle. After should invest through mutual funds. Though the systematic investment

Disclaimer
The perspectives and insights presented in this article reflect the personal views of Mr. Richie P Varghese, Founder of TRUSTINVEST Financial Services,
and may not align with those of Outlook Money. The case study discussed is based on Mr. Varghese’s experience with his client, Nirmal Krishnan. The
financial results mentioned are unique to his situation and may not apply to every individual. This article is designed to provide general information
and is not a substitute for professional investment advice. Readers are urged to consult with a certified financial advisor before making investment
decisions based on the information provided in this article.
 PORTFOLIO BUILDER

Lessons to be Learnt:
Dr. Krishnan desires to attain financial goals but not sure where to invest
He meets Mr. Varghese, his financial planner, and agrees for systematic investments through
Mutual Funds in 2016
He is recommended to put Rs 50000 on a monthly basis
He is informed about investment basics and knows patience is the key
First four years Dr. Krishnan could not see much of a growth
He was advised to keep patience and not exit
During the Pandemic, upon Varghese’s advice, he invested a large lump sum
Within a year, as the market bounced back, he could attain the target of Rs 1 crore
Investment in Mutual Funds must be linked to goals
Patience and trust on the advisor is the key for successful financial journey

journey began on a good note, the but scaled over 50% more, Dr. Krishnan
markets entered a long consolidation could see the moment he was waiting
phase during 2016-2018. The volatility for all along. The value of his portfolio
did not let the investment grow as Markets do not hit his target of Rs 1 crore mark. The
per the expectations. Dr. Krishnan additional purchases done during the
turned a bit worried as he could always perform in a pandemic readily helped Dr. Krishnan
see not much of an appreciation in linear fashion and achieved his target. The Nirmals are
his portfolio. Mr. Varghese readily a happy family today and they give
understood the psychology of Dr. such periods should, credit to Mr. Varghese continuous
Krishnan and strongly hand held him instead, be taken support and vision for making their
during such times. financial goals come true.
“The majority of the investors tend as opportunities to
to lose their patience when they see Lessons to be Learnt
not much rise in their investments, average out the cost It was an eye opener experience for
Mr. Krishnan was not an exception,” of investments by Dr. Krishnan as he could actually see
reminisces Mr. Varghese. He the fruits of wealth creation. “I am
explained that markets do not always continuing SIPs. thankful to Mr. Varghese for making
perform in a linear fashion and such my financial dream come true. Without
periods should, instead, be taken as his guidance, it would not have been
opportunities to average out the cost possible to reach my target,” says Dr.
of investments by continuing SIPs. Dr. Krishnan.
Krishnan understood the logic and According to him, it was a great
decided to continue. This strategy nearly a third of the value, upon Mr. learning experience. “While staying
ensured that Nirmals accumulate more Varghese’s advice, the Nirmals put in a systematic and patient, we must link
units at lower prices which would help lump sum of Rs 7 lakh. This triggered your investment in mutual funds to our
in offering high compounding returns the turnaround in Dr. Krishnan’s goals. Apart from this, one needs to
when the market cycles go upwards. portfolios. In one shot, he was able to select schemes as per our goals. Above
accumulate units at levels he did not all, we need to trust our financial
The Market Crash during the witness since he started his investment planner,” concludes Dr. Krishnan.
Pandemic journey. Meanwhile, he continued
Though Dr. Krishnan continued with with his monthly SIPs which further
his investments, he was not getting helped him gather more units at lower
satisfaction. But little did he know valuations. “I reminded Mr. Krishnan
that he would see the worst time for about his financial goals and suggested
his portfolio during the Pandemic. As to continue with SIPs patiently,” says
the lockdown was announced and Mr. Varghese. He was well aware that
Pandemic spread, the steep erosion investment executions were done pretty
in the market in no time unsettled Dr. well and now there will be only one
Krishnan. Mr. Varghese quickly came to outcome — robust growth.
his rescue and advised that it was not
the time to exit but to invest more. The Achievement of Target Amount
suggestions worked and Dr. Krishnan Mr. Varghese’s vision came true. Within By Richie P Varghese
agreed to do so. a year when the market bounced back Founder, TRUSTINVEST Financial Services
In April, 2020 while the markets lost and not only recovered the lost ground
Why Multi-Asset
Investing Helps Generate
Positive Returns
Since the performance of an asset class varies from
year to year, a multi-asset allocation approach can be
a better option for your portfolio if you are aiming for
positive returns in the long term
PRAVIN BHALERAO, Managing Partner, Pranitya Wealth LLPFINANCIAL

A
Vanguard study reveals that asset allocation schemes. They obligatorily invest a minimum of 10%
dictates up to 90% of long-term portfolio returns, across three distinct asset classes. Numerous fund houses
dwarfing security selection at a mere 10%. The offer these, with five having a track record exceeding
dynamic world of investing encompasses a plethora five years. CRISIL’s research substantiates the consistent
of assets: equity, debt, gold, mutual funds, silver, REITs, superiority of diversified portfolios over equity-only funds
INVITs, and more. Such diversity further underscores between 2003-2017.
the impossibility of predicting a consistent winner. The
solution? Diversification across asset When juxtaposed with dynamic asset
classes via multi-asset mutual fund allocation funds, multi-asset funds often
schemes. emerge superior, especially from a risk-
adjusted standpoint.
Benefits of Diversifying Across For favourable
Multiple Assets Every asset class Why Opt for Multi-Asset
boasts its unique market cycle equity taxation, Allocation? Equities might be
and reaction to global events. The most fund houses lucrative over extended periods, but
COVID-19 pandemic, for instance, saw ignoring the cyclical nature of all asset
equities plummet while gold surged, maintain an equity classes can be detrimental. External
and debt held firm. By spanning allocation of 65 factors, such as geopolitical tensions or
multiple asset classes, investors harness pandemics, can destabilize one asset
the dual advantages of diversification
per cent and the while bolstering another. By veering
and reduced portfolio volatility. remaining 35 per towards the top-performing asset
Predominantly, multi-asset funds cent is directed periodically, investors inadvertently
comprise equity (65% for tax benefits), damage their portfolios. Multi-asset
with the remainder distributed among towards debt funds obviate such concerns, offering a
debt instruments and commodities. instruments and diversified portfolio tailored by experts
based on prevailing market conditions.
Defining Multi-Asset Category As commodities.
per SEBI’s classification, multi-asset Tax Implications The financial
funds are a subcategory of hybrid composition of a multi-asset fund
determines its taxation. Fund of Funds or
ETFs attract debt taxation. Conversely, an
equity allocation surpassing 65% entails equity taxation.
TOP PERFORMING MULTIASSET RETURNS There is a third category which is aiming at a minimum
FUNDS 5YEAR RETURNS of 35% equity but not exceeding 65%, and the rest in
the other asset classes directly (not through ETF) then it
ICICI Prudential Multi Asset Fund 16.82% attracts 20% tax with indexation benefit for holding more
than three years.
HDFC Multi Asset Fund 13.10%
Axis Multi Asset Fund 12.27% Conclusion Multi-asset funds are a worthy addition
SBI Multi Asset Fund 12.69% to any portfolio, guaranteeing diversification, reduced
volatility, and potential return augmentation. However,
Source: Value Research as of September 25, 2023; funds before diving in, ensure the fund’s strategy resonates
exceeding 1000 crs corpus. with your financial goals and risk tolerance.

Disclaimer
The views are personal and are not part of the Outlook Money editorial Feature.
The Art of
Emotionally
Intelligent Investing
8nlocking ͤnancial success through
introspection, emotional mastery,
and moving beyond mere data-driven
decision-making in investing.
SATHYA P & RAKESH S,
Founders, Ascend Financial Inc

W
e all know the concept of simple but not easy. It’s the jewellery need not be ignored, accumulate for these purchases
truth to everything worth having; be it relationships or by investing through gold ETF. Keep it real, make a genuine
health, and investing is no exception. While acumen effort and make it count.
helps to simplify concepts, it takes skill to ease the process.
We often approach personal finance as information that Awareness is key
is to be learned rather than a skill that must be practiced. Investment perceptions and reasoning are never truly objective.
Learning the ropes helps; but it only takes you so far. We work A consistent state of self-awareness can temper the influence
for money, but we fail to make it work for us and this is not of cognitive biases that are rooted in past experiences, cultural
because we don’t know better; it’s because we don’t feel better. influences, and societal norms. So, it is important to not just
Understanding investment facets does not alter behaviour. be aware but also dig deeper and understand why we end
Achieving financial independence takes more than just up losing control of our own thoughts and feelings in the
financial skills. It relies on far subtler but important skills like not face of these factors? For instance, why do you lean towards
making a habit to spend even though we feel entitled to it. The negativity often? Could unresolved resentment over some past
skill here is of making a choice with money. investing episode be a factor? Or why is there
Then there is a saying no to chasing returns a persistent need to always be right about
and making peace with market volatility skill. your choices? Look at the problems clinically
These are perhaps the most important skills to adopt favourable solutions.
which investors generally lack. Building these Spend on desires,
skills not only demand focus and energy, they but practice Emotional partnership
mandate repetitiveness to the point until you When it comes to managing emotions, start
start performing them on auto-pilot. saving even if it’s easy. Facts and figures will only influence
Procrastination, impulsiveness, laziness a small sum. The decisions. Building habits and changing
and greediness are all emotional problems. behaviour require effort. Habits in general
These make the task of investing difficult positive outcome respond to cues and rewards. If you have
because emotional problems demand from habits is been dodging the savings bullet, shift
assessment of our own behaviour and the focus from the habit to the routine.
investor behaviour is rarely driven by logic. highly underrated. Get into a routine of budgeting your
Logic and information can influence intent cashflows. Now, direct your attention to the
but ultimately feelings determine actions. emotional benefits that come with choices.
Since we can’t fool our self, we tie ourselves in For example: the feeling of being secure
confusing web of apps, investment tips and knowing there is money for emergency, the
tricks, explore strategies and algorithms when the answers really sense of debt-free purchases etc. Make small bargains with
are within us. yourself. A psychological hack is to develop implementation
intentions. It is nothing but setting for little if/then habits that
Journey to better investing can unconsciously direct your behaviour. For instance, if you
Self-awareness and emotional management foster investing are going to spend on replenishing your wardrobe then make a
skills. Begin with self-inquiry. This will typically trigger conditional offer to up your investments by 10% for the next few
defensiveness so be reasonable than rational in your months. Any negative emotion or shortcoming (be it obsession
judgements. Embracing reasonability also allows room for more to time the market or shying away from risk) can be overcome if
pragmatic choices. Facts and charts demonstrating superior you open yourself up to a challenge, analyse and adjust to them.
returns from indices and funds hold little significance to psyche There isn’t a “do X so you can achieve Y and feel Z” formula.
and investing habits. Instead, there are only broad guidelines to follow while making
Spend on desires but practice saving even if it’s a small money decisions. Through consistent and conscious practice of
sum. The positive outcome from habits are highly underrated. identifying strong and weak emotions, acknowledging biases,
Indulge your impulses for trading but counterbalance it with and challenging them, we can hone the much-desired skills to
professionally managed well-diversified funds. Fetish for improve our finances.

Disclaimer
The views are personal and are not part of the Outlook Money editorial Feature.
How A Freedom SIP
Can Set You Free From
Financial Worries
A Systematic Investment Plan (SIP) is like the foundation
stone for ͤnancial freedom, as it instils investing discipline
and sensible spending habits to help achieve your goals.
SANJEEV MISHRA, S S Fund Distributor Pvt Ltd.

A
s human beings, we are all born free. However, as time answer lies in being disciplined with investments and starting
passes, we all feel constrained, unable to live our lives on the journey early on. Helping you in this journey is ICICI
as we choose. This is why, as individuals, we are always Prudential which offers a feature called Freedom SIP.
seeking freedom—freedom to follow our passion, freedom to Freedom SIP is a feature that helps create secondary cash
travel the world anytime, freedom to decide when to retire, and flows. The process is very simple. You start your journey to
freedom to live the life we have always imagined. But as they say, freedom with a monthly SIP in a scheme of your choice. The SIP
there is no such thing as a free lunch. Everything, including our enables you to consistently invest your money and accumulate
freedom, has a cost. wealth over time. Once the SIP timeframe is over, the entire
amount is moved to a different scheme which has a lower risk
Different people need freedom for different profile. At this stage, the aim is to protect the
purposes. No matter what stage of life you are capital created. It is from this account that the
at, your desire for freedom does not abate. Systematic Withdrawal Plan (SWP) will be
t
Young college pass-out: If you are a young initiated.
college pass-out then you primarily have
two paths that lie ahead of you—you either Determine whether Benefits of Freedom SIP
dream of pursuing a non-conventional t
A goal-based investing solution:
career or you opt for corporate life as it
the goal for which When you drive down a road without
gives financial stability. While in the former you are investing knowing where you are going, you run the
case, you have the fear of not having cash risk of getting lost and losing time. That is
flows and being financially dependent on
is short-term, why having a goal or a destination is very
your parents, in the case of the latter, you mid-term, or long- important. Once you have a goal, you can
might have a stable cash flow but you are tag your investments to it and start your
still left with a feeling of emptiness.
term to select the investing journey accordingly.
t
Working professional: As a young working appropriate asset t
Freedom to choose tenures:
professional, you inarguably have a few There are some goals that must be met in
liabilities and responsibilities which could
classes to help earn the short term, medium term, and long term.
include EMIs, utility bills, children’s school the desired returns. Freedom SIP allows you to choose from a
fees, etc. Thus, the financial stability of a wide range of tenures, ensuring that you can
steady job is very important to you. Hence, tag multiple goals to your investments.
the dream of becoming an entrepreneur t
Inculcates the habit of long-term
remains unfulfilled. investing: It is all too easy to get swayed by
t
Working professional with grown-up children: At this stage, market sentiment and make sub-optimal investment decisions
your aim is to ensure that children are financially secure, in response to the market’s ebbs and flows. However, SIP can
both today and in the future. Thus, legacy planning becomes help you avoid many behavioural traps while reaping the
important. At the same time, you are also at the juncture benefits of long-term investing.
where you need to ensure that you have enough funds saved t
Freedom to choose from a wide range of schemes based
for your retirement. It is possible that to secure the financial on your needs and risk appetite: Every individual is different,
future of your next generation, you are compromising on your with varied risk profiles, return requirements, and investment
aspirations. time frames. Freedom SIP allows you to choose from a diverse
t
Nearing retirement: At some point, all of you would have range of schemes spanning risk profiles and tenures, ensuring
dreamt about your retirement and thought of everything that that your investments can meet your unique needs.
you’ll do during your golden years. However, if not planned
well, many may end up working even during their retirement To conclude, while money can’t buy happiness, it may set
years due to a shortfall in their retirement kitty. you free. Thus, it is imperative that you plan your investments
optimally by choosing the investment options that are best
Freedom to live your life, your way suited to your requirements and embark on your path to financial
The question then is, what do you need to become free? The freedom.

Disclaimer
The views are personal and are not part of the Outlook Money editorial Feature.
 Real Estate

Homebuyer’s Guide to Gurugram

G
urugram is one of the most ahead of the 3BHK in demand due
sought-after destinations in to price appreciation and repo rate
Delhi NCR for homes in the revisions as homebuyers switched
mid segment (`30 lakh-`1 crore) and from 3BHK to 2BHK homes. Price-
premium segment (above `1 crore) wise, the demand for properties
category. For Q2 2023, over 4,197 worth `1 crore and above was
new housing units were launched in around 44 per cent of the demand
the city. Other than new launches, (online search). Properties worth
the demand for 2BHK gained traction `3 crore and above saw a dip from
with 44 per cent of the total demand, last quarter. Builder floors and
followed by 3BHK and above with 29 apartments were the most searched
per cent demand share. 2BHK edged category in Q2 2023.

Locality Avg price

Demand By Number Of Supply
per sq. ft (`)
Share (%) Bedrooms Share (%))

19 1BHK 17
CENTRAL GURGAON
44 2BHK 37
Sector 57 7,136
29 3BHK 29 Sector 27 8,373
6 4BHK 11 Sector 28 9,832
2 Above 4BHK 6 DWARKA EXPRESSWAY
Sector 37C 4,296
Sector 103 4,831
Demand By Property Supply
Share (%) Type Share (%)) GOLF COURSE EXTENSION
Sector 67 5,473
43 Apartment 52
Sector 56 7,867
26 Builder Floor 21
GOLF COURSE ROAD
17 Independent House 6
Sector 53 11,288
8 Plot 18 Sector 54 17,068
6 Villa 3
NEW GURGAON
Sector 93 4,479
Sector 92 5,468
Demand Supply Sector 95 7,252
By Budget
Share (%) Share (%))
SOHNA ROAD
8 < `30 Lakh 28 Sector 49 7,379
15 `30-60 Lakh 10 Sector 47 7,643
16 `60-100 Lakh 11
SOUTHERN PERIPHERAL ROAD
44 `1-3 Crore 46 Sector 70 5,744
17 Above `3 Crore 9 Sector 72 8,487
Source: Square Yards *List is not exhaustive

www.outlookmoney.com October 2023 Outlook Money 81

 ʸ˫ˣ˟˔˜ˡ˘˥

Overdraft
Sutirtha Sanyal

I magine that you need to make a

sudden payment through your
bank account but do not have enough
balance. In such situations, the
overdraft facility offered by banks
can come in handy. An overdraft is
a credit facility that banks extend to
accountholders by allowing them to
withdraw more than their balance in
accounts. You need to have a savings,
salary, current or cash credit account
with a bank to avail of the facility.

MAIN FEATURES
Banks charge an interest only
on the overdraft utilised. For
instance, if the bank allows you
an overdraft of `2 lakh, but you
use `50,000, then the bank will
charge interest only on `50,000.

Overdraft facility can be availed

of at short notice with minimal
TYPES OF OVERDRAFT ˣ˔ˣ˘˥˪ˢ˥˞˔ˡ˗˪˜˧˛ˢ˨˧˖ˢ˟˟˔˧˘˥˔˟ SHOULD YOU GO FOR IT?
You can also take an unsecured
You can take a secured ˇ˛˘˔ˠˢ˨ˡ˧ˢ˙˜ˡ˧˘˥˘˦˧ˬˢ˨ˣ˔ˬ
overdraft without any collateral.
overdraft from a bank against ˢˡ˔ˡˢ˩˘˥˗˥˔˙˧˜˦ʟ˧ˬˣ˜˖˔˟˟ˬʟ
ˬˢ˨˥˦˔˟˔˥ˬʟЃ˫˘˗˗˘ˣˢ˦˜˧˦ʟ ˛˜˚˛˘˥˧˛˔ˡ˧˛˘ˣ˘˥˦ˢˡ˔˟˟ˢ˔ˡʟ
˦˛˔˥˘˦ʟ˟˜˙˘˜ˡ˦˨˥˔ˡ˖˘ˣˢ˟˜˖˜˘˦ˢ˥ Account balance, credit score ˧˛ˢ˨˚˛˧˛˘˨ˣ˙˥ˢˡ˧˥˔˧˘ˠ˔ˬ˕˘
equity instruments. ˔ˡ˗˥˘ˣ˔ˬˠ˘ˡ˧˛˜˦˧ˢ˥ˬ˔˥˘˦ˢˠ˘ lower. This is because interest
of the factors considered to on overdraft is calculated using
determine the overdraft limit. the average daily balance
ˇ˛˘˥˘˔˥˘˧˪ˢ˧ˬˣ˘˦ˢ˙
overdraft—authorised and technique, due to which the
unauthorised. An overdraft is usually allowed ˘˙˙˘˖˧˜˩˘ˣ˔ˬˢ˨˧˜ˡ˖˥˘˔˦˘˦ʡ
˙ˢ˥˦˛ˢ˥˧˘˥˧˜ˠ˘ˣ˘˥˜ˢ˗˦ʟ˦˔ˬʟ˔
week, month, or at most a year. Overdraft is not viable for the
In the authorised version, there
is an arrangement between the long term and should be used
bank and the accountholder on ˙ˢ˥˦˛ˢ˥˧ʠ˧˘˥ˠ˖˔˦˛Єˢ˪ˡ˘˘˗˦ʡ
the limit of the overdraft.
Overdraft interest could vary
In the unauthorised version, between banks, but one can
banks allow it even without take an overdraft only at a bank
any formal agreement. Where where one has an account.
˔ˡˢ˩˘˥˗˥˔˙˧˘˫˖˘˘˗˦˧˛˘
authorised limit, it is also In case of joint borrowers, they
counted as unauthorised. ˔˥˘˘ˤ˨˔˟˟ˬ˟˜˔˕˟˘˙ˢ˥˥˘ˣ˔ˬˠ˘ˡ˧ʡ

82 Outlook Money October 2023 www.outlookmoney.com

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