Investment = wealth creation or at least what you want to believe. However, whether it is due to mistakes, ignorance or a lack of financial literacy, your investments might not give you the desired results and might also result in a loss.What can you do to avoid losing money through your investments?
Investing is an art and unless you learn to master the art properly, your investments might leak money rather than accumulating it into a corpus that you need.
So, here are 9 tips on how not to lose money by investing right –
What is the basis of your investment? Creation of funds for your financial goals, isn’t it? So, start at your goals first. It is useless planning a journey anyways without having a destination in mind.
So, jot down your financial goals, both short-term and long-term. This listing would give you two distinct benefits – it would help you find out the corpus needed for each goal as well as the time horizon.
These two inputs form the basis of your financial plan and so, knowing your goals is the groundwork that you need to do before you jump on the investment bandwagon.
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2) Risk Profiling
The next thing to find out is your risk appetite. Risk appetite means your capacity of taking risks. Depending on your risk appetite the investment avenues would be selected.
If you don’t mind taking risks, you can invest in equity-oriented avenues and if you are risk-averse, fixed income avenues would be better.
Risk profiling should assess your tendency to bear risk vis-à-vis your age. Nobody like losing money and so, risky avenues are always seen with a bit of hesitation.
However, if given time, risks tend to smoothen out and you can get very good returns from risky investment avenues, i.e. equity. So, even if you are risk-averse, you can invest in equity provided – age is on your side and you have a long term investment horizon.
When you are young, you can give your investments time, time which minimizes the inherent risk. So, equity is suitable for long term goals. Do not lose your money by investing in the promise of equity for a quick buck.
Equity is highly volatile and while it can give quick gains, it can result in capital erosion too.
3) Tax Planning
Many of you also lose out on your returns because you don’t plan your taxes properly. Remember every investment avenue has its own tax implication.
If you understand such implication and then plan your investments around them, you would be able to save tax and generate good post-tax returns.
So, tax planning is essential, both when investing as well as on redemption. Find out which avenues help you save tax on investment so that you can reduce your taxable income while saving (Section 80C should be understood properly).
Then, when you redeem, check how your gains would be taxed and if you could do anything to avoid or reduce the possible taxation. A very common example is redeeming equity mutual funds.
If you redeem your investments within a year, a short term capital gains tax of 15% would apply on the returns that you have earned. On the other hand, if you redeem them after a year, you would be able to save tax if your returns are within Rs.1 lakh.
Even if your returns are greater than Rs.1 lakh, only the excess return would be taxed, and that too at 10%. So, if you are redeeming your mutual fund investments, check for the tax implication to see if you can save tax.
Losing money is not only through negative returns but also by not planning your taxes efficiently and letting them eat into your returns.
4) Know When to Hold and When to Redeem
This is a very technical aspect, especially when investing in equity stocks or equity mutual funds. Balancing between holding and redeeming is a fine line, one that you should toe with careful consideration.
If you hold your investments and the market falls further, you would lose money. On the other hand, if you redeem or switch and then the market rises, you would lose again as you could have earned better profits.
So, this is a tightrope and many investors fall flat while trying to walk it.
Wondering what you should do? Well, the answer lies in the first two points discussed earlier – goals and risk appetite.
If the market is falling and your goals are long term in nature, you can hold onto your investments as the market would correct itself, no matter its bearish run. In fact, the Sensex has emerged stronger after every crash. Have a look –
If you are on the initial curve of the fall, you can also book your profits and switch to debt mutual funds to protect against the volatility.
If you have a low-risk appetite, then also you should book your returns and switch to debt to prevent losing money.
5) Invest When the Market is Down
When the market is in a bear run and falling, it is a good time to invest as the stocks would be undervalued. Thereafter, when the market would rise, your investments would give you attractive returns.
So, a falling market is not necessarily a sign of losses. If you look on the brighter side, you can actually make profits by investing in undervalued stocks at that time.
That being said, try and buy good companies at a cheaper value and not bad stocks. Good companies would give good returns but bad ones would never do, even when the market is bullish.
So, try and choose the best-rated stocks with a high Price/Earnings (P/E) ratio as these companies would deliver good profits.
Which is your favourite investment avenue? If only one or two names spring to your mind, it is a cause of concern. Can you live on one food for your entire life? Variety is the needed spice, isn’t it, both from the taste and nutrition point of view?
So why play favourites with investments?
Your portfolio should be a mix of different investment avenues with different asset classes.
You need a mix of –
– Equity and debt investments
– Long term and short term products
– Fixed and liquid avenues
So while mutual funds are good, a little bit of fixed deposit should also be a part of your portfolio. Similarly, if gold is your preferred avenue, invest in equity too for liquidity and better returns.
A skewed portfolio, with a majority of one or two investment avenues, is a recipe for disaster. If any one of the avenues does not perform well, your entire investments would be in jeopardy.
For example, if you have a heavy proportion of real estate investments, where would you get money for emergency needs?
Too much exposure to equity is fatal in a market crash and too much investment in fixed income avenues is suicidal from an inflation point of view.
What you need is a balance of flavours, a balance of nutrition and a balance of investment avenues. Create a balanced and diversified portfolio and losing money on investments would be a thing of the past.
7) Factor in Inflation
Remember that inflation always eats into the purchasing power of money. Moreover, inflation is a reality and if the economy is growing, there would always be inflation.
So, when you invest, factor in this inflation. Invest in avenues that give you inflation-adjusted returns, i.e. returns that have a positive value even after factoring in inflation.
If you invest in avenues where the returns are not inflation adjusted, you would ultimately lose money even though the avenues give returns because such returns would have a low real worth. For example, say a fixed deposit scheme gives you a return of 6% per annum.
If the inflation in the country is 6.5% per annum, the return that you get from your fixed deposits is actually negative.
Let’s see it in monetary perspective.
Rs.100 would fetch you a return of Rs.6 in a fixed deposit scheme. You plan on buying an item costing Rs.6 with the return that you get. Now, after a year, inflation has driven the cost of the item to Rs.7 but you get a return of Rs.6 from the deposit scheme. Is the return worth it especially since you can no longer afford to buy the article that you wanted?
Inflation, therefore, puts a leak into your returns, a leak that can be plugged by choosing inflation-adjusted investment avenues.
8) Review Your Financial Portfolio, Regularly
Another mistake that most investors make is that they invest and forget. This is another reason why they end up losing money on their returns. How many times do you opt for rollover of your fixed deposits on maturity?
Your financial needs keep changing with changing lifestyle. Your financial portfolio, therefore, needs to change to keep pace with your changing needs.
Change is the only constant and if your portfolio is stagnant you would lose out on the opportunities of maximizing your returns. So, make it a point to review your portfolio periodically, at least once every 6 months or a year.
This reviewing helps you make the necessary changes to your investments. You can redeem your investments if the time is right, you can make additional investments into a fund that is performing exceptionally well, or, you can switch around your portfolio to change the investment combinations.
Review and shuffle your portfolio to reflect whatever you think is the need of the hour to keep your investments relevant and to maximize returns.
Do you know why investors lose money even when they try and pick the best investment avenues? Lack of financial knowledge, that’s why and in India, financial literacy is depressingly low.
As per a Standard & Poor survey conducted in the year 2014, more than 76% of Indian adults did not understand the basics of financial planning. Have a look at the numbers of the survey –
Lack of financial awareness is the reason why investors cannot plan their financial right. They have limited knowledge of risk diversification, inflation, interest-earning, etc.
As such, they fail to choose the right avenues that would help them get the best returns on their money. The result – they lose out on returns. Financial literacy is, therefore, the foundation for building an effective financial portfolio. It is the bedrock of your finances and if you get the knowledge part right, you can avoid losing money on investments.
Here are few courses on Koppr Academy that will help you to get the right knowledge in Finance
If financial literacy is not your strong suit, you can take the help of online courses designed to impart the necessary wisdom. We have curated some of the most comprehensive financial courses on different financial instruments and financial planning as a whole. You can take the help of our courses and learn the ABC of finance.
Acknowledging is winning half the battle in investing right. Armed with sufficient financial knowledge, if you avoid the earlier discussed pitfalls, you can create a leak-proof financial portfolio which prevents loss of money either because of losses, tax cuts or improper financial planning.
So, start your financial journey on a strong footing. Learn the basics first – our courses are there to help you. Then start your investment journey. Plan your goals, understand your risk appetite, plan your taxes, invest right, redeem right, have a diversified portfolio and do a periodic review.
Plug your portfolio leaks and avoid making losses by investing right.
The year 2020 passed in a blur. While it started on a positive note, the Coronavirus pandemic and the subsequent lockdowns brought about an economic slowdown in the country.Even the financial markets buckled under the global effect of the pandemic. The BSE and NSE, which were at their highest values at 42,273 and 12,362 in the first month of January, fell by 38% when the pandemic struck.The tourism, hospitality and entertainment sectors also fell by more than 40% due to lockdowns and transportation restrictions. (Source: https://www.researchsquare.com/article/rs-57471/v1.pdf). Though the markets are regaining their luster slowly, investors are confused about where to invest in 2021for maximum gains. What do you think?Though 2020 was a roller-coaster, investors are eyeing the year 2021 with hope. Investment in 2021 is primarily guided by the recovery of the financial markets after the pandemic as the industry is waking up and normalcy is being restored.Certified financial planners have also pitched in their recommendations for investments in 2021. Here are, therefore, some of the lucrative investment opportunities for 2021
For most risk-loving investors, stock trading and investing into direct equity always holds attraction. Even though the equity market suffered losses in the beginning half of 2020 on the pandemic fears, the market is correcting itself and as of the market closing time on 27th November 2020, the NSE and BSE are already at their pre-COVID levels of 12,968.95 and 44,149.72 respectively. (Source: https://www.financialexpress.com/market/stock-market/).
The boost in the stock exchange was largely due to the promise of the COVID vaccine which is almost in its ready stages. This has resulted in positive market sentiments globally and so, direct equity is once again looking good.
Moreover, history has been a witness that the stock market always bounces back even after a crash, whether it was the Harshad Mehta scam or the 2008 crash. If you invest over a long term period, direct equity is known to yield exponential returns.
Have a look at how the stock market has performed over the last 30 years –
For investors who do not like direct exposure to equity but want to invest in a diversified portfolio, mutual funds are the best solutions. Mutual funds are beneficial because –
They help you own a diversified portfolio
They come in different variants and you can choose a scheme which is relevant to your investment preference and risk appetite
ELSS funds allow you the benefit of tax saving on your investments
They are professionally managed allowing you to invest in the best stocks and instruments
You can invest in mutual fund schemes with as low as Rs.500 making them ideal for small-time investors too who want market-exposure with limited savings
Given these benefits, the mutual fund market is another avenue which you can explore. In fact, equity mutual funds are less risky compared to direct equity because of the diversification that they provide.
As far as returns are concerned, some equity funds have even outperformed the stock market in several instances. For example, Invesco India’s Growth Opportunities Fund, a large and mid-cap fund, has consistently outperformed the S & P BSE Index over the years. Have a look –
So, as far as returns are concerned, you don’t have to worry. You can also choose SIPs to invest every month in a disciplined manner and build up a substantial corpus over a long term horizon.
In fact, the mutual fund industry has become so popular, that investors are increasingly investing in the avenue to bank upon its returns. The AUM of the mutual fund industry has, therefore, consistently grown over the years –
Have you invested in the National Pension System introduced by the Government? If not, you can consider it in 2021. The reasons? Let’s see –
#1 – It helps you create an earmarked corpus for retirement
#2 – The scheme is market-linked promising inflation-adjusted returns
#3 – You get lifelong incomes in the form of pension after maturity
#4 – Investments into the scheme are tax-free under Section 80CCD (1B) up to Rs.1.5 lakhs
#5 – Additional investments, up to Rs.50, 000 can be claimed as a deduction under Section 80 CCD (1B)
Moreover, if you choose the new tax regime and if your employer contributes to the NPS scheme on your behalf, such contributions would be allowed as a deduction from your taxable income for up to 10% of your basic salary and dearness allowance under Section 80CCD (2).
Besides the market-linked returns, the additional tax benefit, both under the old tax regime and the new one, tilts the scales in favour of the NPS scheme.
You can invest in the scheme for long term capital accumulation for your retirement. On maturity, you would be allowed to withdraw up to 60% of the accumulated corpus as tax-free income which would also be tax-free in your hands.
So, if tax-saving and retirement planning is your goal, you cannot go wrong with the NPS scheme.
4) Invest in Fixed Deposits (FD)
This is the avenue for traditional investors who are averse to any kind of market risk and want secured and safe returns. Fixed deposits have been an Indian favourite for a long time and this favour is not going to end anytime soon.
Even though the interest rate on fixed-income instruments, including fixed deposits, has been slashed in recent times, fixed deposits continue to find investors for the safety that they promise.
The popularity of fixed deposit schemes, especially when volatility struck during the pandemic, increased and the trend is expected to continue in 2021.
So, if you want to be safe with your investments, you can choose fixed deposit schemes. However, do not dedicate a large portion of your investment in fixed deposit schemes.
Direct about 5% to 10% of your investment in fixed deposit schemes and the rest should be invested in other market-linked avenues. If you are choosing fixed deposits, here are some tips which you can follow –
Invest in 5-year fixed deposit schemes offered by banks and post offices. These schemes allow tax-saving on investment under Section 80C
If you want higher returns, opt for fixed deposit schemes offered by NBFCs (Non-Banking Financial Companies)
Compare the rate of fixed deposit schemes across institutions and choose the scheme which has the highest rate
Do not withdraw your deposits before the completion of the tenure. It would attract a withdrawal penalty which would reduce your interest earnings.
For risk-free returns you can also choose debt mutual funds which would help you earn inflation-adjusted returns and also earn the benefit of indexation if you redeem your funds after 3 years.
5) Invest in Unit Linked Insurance Plans (ULIP)
While the primary objective of insurance plans is to offer financial protection against premature death, Unit Linked Insurance Plans (ULIPs) serve a dual purpose. Besides allowing insurance coverage, these plans also help you create wealth, a la mutual funds.
ULIPs work on the model of mutual funds. The premium that you pay is invested into different funds of your choice. Each of these funds invests in the capital market depending of the fund’s objective.
For example, equity funds invest in equity stocks while debt funds invest in debt instruments. Depending on the growth of the underlying assets, the NAV of the fund grows and you can earn returns on your investments.
In case of death during the policy tenure, you get higher of the sum assured or the fund value and on maturity, the fund value is paid. The distinct advantages of ULIPs are as follows –
Invested premiums qualify for tax deduction under Section 80C up to Rs.1.5 lakhs
A single policy gives you the option of different types of investment funds to choose from – equity, debt and hybrid. You can invest in one or more funds as you’re your investment preference. Moreover, you can switch between the chosen funds during the policy tenure depending on the market movements. This switching is completely tax-free and almost all ULIPs allow free switches up to a specific number of times
Partial withdrawals from the fund value can be made from the 6th policy year. These withdrawals are also completely tax-free in nature
The death benefit received is completely tax-free
If the premium paid is up to 10% of the sum assured, the maturity benefit received on maturity is also completely tax-free under Section 10 (10D) of the Income Tax Act, 1961
Moreover, the charges involved under ULIPs have also reduced in recent times pitching them as a favourable product against mutual funds.
6) Invest in Real Estate
This avenue is for those investors who want to bank on the growth in the real estate market. In 2019 the real estate market was valued at Rs.12, 000 crores and it is expected to reach Rs.65. 000 crores by 2040.
In 2019, real estate investments amounted to Rs.43, 780 crores and the number is expected to increase in the coming years. (Source: https://www.ibef.org/industry/real-estate-india.aspx) The introduction of RERA, reduced interest rates on home loans and the need to own a house are the major driving factors for the growth of the real estate industry.
Housing is one of the basic needs of individuals and if you want to create an asset, you can explore the real estate market as the pandemic has led to a reduction in the prices which would be good for you.
Moreover, if you avail a home loan to invest in a home, you would be able to avail tax benefits under Sections 80C, 80EEA and 24 on the principal as well as on the interest payable on the loan.
The loan would also improve your credit score and allow you to own your dream house. So, if you have considerable funds at your disposal, opt for real estate either for owning your house or for creation of an asset.
Gold is another investment avenue which you can consider if you are looking to hedge against volatility and uncertainty. Gold holds a traditional value for Indian investors as festivities, weddings and gifting is marked with physical gold ornaments and jewellery.
From an investment point of view, however, different avenues are in vogue in recent years with the availability of gold ETFs, gold mutual funds and, the all new, digital gold.
These gold investment avenues are getting much attention because of their safety, liquidity and ease of investing in small amounts.
When it comes to returns, gold is a safe haven, especially if you are looking for long-term savings. Gold gives cyclical returns and when the markets are volatile, gold is looked upon as a safe investment avenue and its prices surge.
The very recent example is the COVID pandemic wherein the prices of gold jumped in April and May when the pandemic struck India. Moreover, over the last few years, gold has outperformed the Sensex in terms of returns. Have a look –
So, you can consider gold as an investment avenue but invest in Gold ETFs or gold mutual funds for liquidity and safety of storage rather than physical gold. You can also trade in gold through these investment avenues and book returns when the price of gold climbs.
2021 is supposed to be a breath of fresh air for the Indian economy and the financial markets as the effect of the unprecedented COVID pandemic is expected to ebb.
Use the afore-mentioned 2021 investment opportunities and make wise investment choices to grow your wealth especially if the pandemic ate into your portfolio in 2020. Plan your investment strategy for 2021.
Understand the avenues before you choose them and then pick suitable options based on your investment need, financial planning in 2021 and, most importantly, risk profile. Also monitor your portfolio regularly so that you can make changes to it as per your changing financial needs and market dynamics and keep your portfolio profitable in all seasons.
Here’s a FREE financial planning tool to help you with your investments in 2021
The Indian economy has a plethora of investment options these days with Exchange Traded funds (ETFs) being a very lucrative alternative. Last five years has witnessed a phenomenal 30-times volume growth in the domain of ETFs, attributed to pension funds and increasing investor awareness.Seventeen asset management companies have launched ETFs based on Nifty50, which contributes to 49% of the total market share, as of September 2020.The fund manager purchased stocks from Nifty50, which allowed the fund to offer returns, similar to those of the index. The total AUM of ETF is pegged at INR 2.07 lakh crore as of 31-Aug-2020, out of which nearly half of it was focused on ETFs that were based on the Nifty50 alone. However, retail investment is quite low on this product compared to the mutual funds, which is one of the main retarding factors to its growth. Hence more awareness needs to be created on how to invest in ETFs to foster an upward trending growth curve. Let us explore an investor’s guide to fine out how to invest in ETFs.
ETFs were launched in India in December 2001, though the fund flow in the ETF industry was very scanty till August 2015. Research shows that the effective growth in Nifty50 AUM and in the industry has taken place only in the last five years.
An Exchange Traded Fund (ETF) is basically a fund that pools in funds from several investors and can be traded on the stock exchange or the secondary capital market, similar to shares.
You need to have a Demat account and a Trading account to start investing in ETFs if done via an investment firm. It is a passively managed fund with a designated fund manager and has a Net Asset Value (NAV) like a mutual fund.
Though they are traded like stocks, their individual price is not determined by the Net Asset Value (NAV), instead by the demand and supply mechanism operating in the market.
Since ETFs track benchmark indices, their returns are closely linked to market movements, to overcome most mutual fund investment schemes. The buying and selling of the ETF units are usually done by any registered broker at any of the recognised and listed stock exchanges in India.
Since the units of the ETF are listed on the stock exchange and the Net Asset Value (NAV) varies according to the market sentiments, they are not traded like any other normal open ended equity fund.
The investor has the liberty to trade in as many units as feasible on the exchange, without any kind of restrictions being imposed on them.
To state it very simply, ETFs are investment funds that track indices like the CNX Nifty or BSE Sensex, etc. Hence, when you decide to invest in the shares of an ETF, you are investing in the shares of a portfolio that tracks the yield and return of its native index.
Investing in ETFs does not entail it to outperform their corresponding index, rather replicate the performance of the Index as they depict the true picture of the market.
Are Exchange Traded Funds (ETFs) a Lucrative Option for Investment?
Exchange traded funds (ETFs) are a safe bet for beginner investors due to their innumerable benefits like higher daily liquidity and lower fund fees as compared to the mutual funds. Here’s a FREE course on mutual funds
Few factors like the wide range of investment choices, low expense ratios, high liquidity, option of diversification, low investment threshold etc. make them an attractive investment option for the individual investors.
These special attributes render the ETFs to be perfect options for adopting various trading and investment strategies to be used by new traders and investors. ETFs are a lucrative investment option due to the following reasons:
Diversification of the portfolio –
In today’s volatile market, diversification of the financial portfolio is mandatory and hence the need for ETFs, which can introduce investors to a huge variety of market segments.
You can diversify your mutual fund portfolio by investing in Gold ETFs, by using the price of physical gold as its benchmark. You can also diversify your wealth among ETFs covering different types of investments like commodities or bonds.
High Liquidity due to absence of a lock-in period
Investment in Exchange Traded Funds help in portfolio diversification along with providing liquidity. They are open ended funds with no lock-in period, which gives them the liberty to withdraw their holdings according to their requirement.
Since there is no holding period, investing in ETF is a lucrative investment option.
Cost Efficiency due to Passive Management–
The expense ratio for maintaining the ETFs are comparatively lower as they are not actively managed like majority of the mutual funds.
Since there are no management fees or commissions involved, the incremental value of the overall fund is usually increased.
An ETF held with a low expense ratio can add on to the pay-outs if held for very long. For example, index ETFs just track the index, so the portfolio manager does not need to manage the fund. This calls for a lower management expense ratio (MER).
Single and transparent transactions –
Investing in ETFs require you to make one single transaction similar to owning a mini portfolio.
Therefore, when you have to track the performance of this portfolio, for example if you have invested in a Gold ETF, you would need to track the price movements of gold only as a daily commodity, which is much easier for the investor.
Also most of the ETFs publish their holdings on a daily basis, hence you can find out their holdings, their relative weightage in the funds and if there has been any movement, thereby fostering transparency in the financial chain..
Offer flexibility to buy and sell –
Unlike mutual funds, ETFs can be purchased and sold from an investment firm or at the stock exchanges on a daily basis, similar to the intraday trading mechanism.
They have the flexibility to be bought short and sold at a profit margin in a day during the market operating hours, at the current market price at the time of the transaction.
Professional Fund Management –
Though ETFs maintenance or operation costs are pretty low, they are very professionally managed.
Tax Efficiency –
ETFs are considered to be equity oriented schemes, which entails them to follow a taxation norm similar to any other equity related investment scheme.
Types of Exchange Traded Funds
With several options among ETFs available in the financial markets these days, consumers tend to get perplexed in which to invest.
Hence there are 4 broad categories of ETFs that one can invest in, namely:
Equity ETFs – Equity ETFs usually track the movement of sector or industry specific stocks. Here the performance of the index or the specific sector is replicated by investing in stocks accordingly.
International exposure ETFs – There are few ETFs that track stock indices of foreign stock markets. Since they give the investors an opportunity to gain exposure in some international markets, they are actively involved in weaving the growth stories for few economies.
Debt ETFs – Few exchange-traded funds try trading in fixed-income securities.
Gold ETFs – Gold investment is always considered a great hedge against currency fluctuation and a volatile market. However, investments in physical gold is faced with several concerns like quality, security, resale, taxation, etc. Hence, Gold ETFs are a safe option where you can invest in gold bullion, thereby having gold in your portfolio without the risk or fear of investing in physical gold.
Factors to be kept in mind before you decide to invest in an ETF
Today’s financial market is flooded by too many options even within the ETFs. There are four factors that one must consider before you decide to invest in an ETF:
Trading Volume of the ETF – You should chose an ETF with higher trading volume if you need liquidity and a good price for the units traded on the stock exchange.
Class of the ETF – Since ETFs are of four types, equity, international, gold and debt, once a category is finally selected, its sub category also needs to be decided. The specific sector ETF or their market capitalization needs to be focused upon if you are investing in an equity ETF.
Lower Expense Ratio – Usually the expense ratio of an ETF is much lower than an actively managed fund. But even then many fund houses offer more discounts on the expense ratios to attract more investors, thereby increasing the chances of higher returns.
Lower Tracking Order – ETFs usually track an index as they invest in securities that comprise the index in a manner that the returns are almost similar to those offered by the index, thereby making some differences feasible between the returns offered by the index and the ETF. Tracking error usually identifies variance in the performance of the ETF in comparison to the underlying index. If the tracking error is lower, the returns of the ETF will be closer to that of the index. Therefore, you should always invest in ETFs with a lower tracking error.
Comparison between Mutual Funds, Stocks and ETFs
A detailed study on ETFs has been quite helpful in understanding the market and drawing a comparison between them as against the mutual funds and stocks:
Exchange Traded Funds
A financial set up comprising of a pool of money collected from many investors to invest in different securities like bonds, stocks, money market vehicles and various other assets.
The investment capital raised by a company through the issue of shares, thereby signifying some ownership in that company for the investors.
An exchange traded fund (ETF) is an asset class consisting of a collection of securities like stocks, that track an underlying index or a specific sector.
Though the exposure is diversified, there are market specific risks.
Very risky proposition as the performance of the stocks are directly proportional to the company’s performance.
Though the asset class is diversified, it however carries market related risks.
Mutual fund trading is done only once a day after the financial market is closed.
Can be traded throughout the day.
Can be traded throughout the day.
Degree of Control
Not very highly regulated or controlled investment.
Very highly controlled investment.
Higher control on these type of investments as compared to mutual funds but lesser than stocks.
Tax Implications on ETFs
The taxation policy applicable on ETFs are quite unique as compared to the tax treatment meted out to mutual funds.
The index ETFs and sectoral ETFs are considered as equity-oriented schemes from the tax perspective. They have the unique selling proposition of creating and redeeming shares with in-kind transactions, which are not rendered as sales.
Since there is no sale involved, they are not taxable.
However, if you plan to sell your ETF investment, this transaction will be taxable. The tenure of holding onto this ETF investment will decide if it was a short-term or long-term profit or loss.
Therefore, research reveals that short term capital gains from ETF units held for less than one year are taxed at 15% vis-a-vis the long term capital gains on ETF units being held for more than one year, being taxed at 10% without any indexation benefit.
If you are a new investor planning to enter the Indian financial market, ETFs consisting of a basket of securities offer a well-diversified approach. They are a much better proposition than purchasing the stocks directly for first time investors.
You should do a thorough research on the investment options available and devise a suitable investment plan based on your financial objectives, tenure to invest, intricacies of investing in ETFs and your risk tolerance level.
Since these funds are passively managed, they are cost efficient and usually match the returns offered by the index.
Also if you are an aggressive investor, ETFs are still a good option for stable investments if utmost planning is done well in advance.
Thus, with adequate knowledge and research, all the first time investors should allocate some of their funds to ETFs for a better wealth creation.
The economy in current times has varied investment options. If you have decided to make a foray into the world of investing, there are an incredible array of options, ranging from stocks to equities to mutual funds and gold funds, to name a few.Since the financial market is very dynamic, newer stocks could be volatile and hard to realise its returns.However, gold investment is a very lucrative investment option as it can reap better returns especially in the long term and it is one of the world’s oldest commodities, which instill people’s trust more readily than the other asset forms.It is considered to be the best insurance policy and hence an essential component of your financial portfolio. It is usually believed that one should consider allocating about 5% to 15% of their portfolio in gold or gold oriented investments.So let us see here, how to invest in gold especially for beginners. You should know varied nuances on how one should go about making an investment in gold.
The people of India have been investing in gold for several reasons like cultural and religious, since time immemorial.
But in today’s dynamic market, gold investment as a very good investment option is considered to be quite favourable as well.
It has a long term store of value i.e. it is a valuable asset that definitely maintains its intrinsic value intact without depreciating over the years.
If you ever face any economic crisis, gold comes in handy as it can work as a safety deposit box thereby making it superior to the other investment options.
It is also considered an attractive means of investment due to its consistent outperformance of the currency value and always has a strong presence in the market, even if the market collapses.
A lot of investors also like the fact that gold is a tangible asset form, wherein you can actually hold the gold ornament or the gold coin in your hand. So once you hold it in your hands, the feeling is surreal and you realise that the investment is real.
While on the other hand, other assets like bonds, stocks and mutual funds are usually given to the investor in the form of a piece of paper.
Liquid money usually involves a ‘promise to pay’, though gold does not require any such promise. In the last 3500 years’ history, gold prices have never been pegged at zero, thereby making it the only real financial instrument that is not an investor’s liability at any point of time.
The guide to Investing in Gold clearly states that gold helps to diversify your financial portfolio, thereby protecting the portfolio against any market volatility.
Gold is believed to have a low or a negative correlation with the other asset classes, like stocks and equity.
Even if gold may seem to be a volatile investment, that should not discourage you from making the investment.
History states that gold always increases in value and even if other traditional investments fail or falter, gold still reaps returns. Gold also offers good returns when the SENSEX generates good profits.
Gold investment is very lucrative as it provides a hedge instrument against inflation. The currency value usually drops as the inflation rates increase for a nation.
However, research states that gold prices have almost doubled in the last five years despite a rise in the inflation rates. In India, since inflation rates usually tend to transcend the interest rates, investment in gold is considered a good hedge against inflation.
Buying gold is also very essential in today’s volatile market due to its liquidity, which means that gold can always be bought and sold instantaneously.
If the need arises, you can sell all the gold stocks as they are highly liquid in nature. Even though the US dollar might rise or fall, the gold value is retained as it is, because it is placed in the global marketplace.
You do not need to possess any specialized knowledge to buy gold, it is fairly simple and straight-forward, thereby rendering it as an easy investment option for all the investors.
However, for investments in other stocks and mutual funds, you need some knowledge about the financial market volatility to make the right decision.
Purchasing jewellery and ornaments is the best option to invest in gold, as witnessed in historical times. Several religious and traditional customs during any occasion like a marriage, engagement ceremony, the birth of a child in the family was definitely an opportunity to make a gold purchase.
However, different ways to buy and own gold as a financial instrument have emerged now with the advent of paper gold, gold funds and physical gold like jewellery, gold bars, etc. to diversify your portfolio.
Hence you as an investor can get confused at times, with the type of gold you should buy and the place from where you should buy. You can invest in stocks in gold mining, refining and production.
Given below are a few gold investment options that you should consider before taking the plunge.
Digital Gold Investment –Digital gold investment is the most cost-effective and lucrative means to invest in gold online. This way you can buy as well as sell gold in small fractions in absolutely no time, with a bare minimum of INR 10 too.The digital gold is usually backed by physical 24-carat gold and is linked to the actual real-time gold price movements. Majorly the companies offering to sell digital gold ensures that it is stored in properly secured vaults for insurance.
Digital gold investment can be sold at any time and the funds will be credited to your account within two business days. The digital gold has zero making charge unlike the other jewellery or other forms of physical gold options and you can view your assets online.
Also, there are a few digital gold platforms that allow you to possibly convert them into physical gold on public demand.
Gold Bars or Coins – Many investors invest in gold bars or coins as they do not require any skilled artistry and hence no making charges are levied on them.
These bars and coins are easily available at the banks, online shopping or e-commerce websites, jewellers and many NBFCs, i.e. non-banking financial companies.
Gold Sovereign Bonds – Gold Sovereign Bonds one of the safest ways for digital gold investment and are issued by the Reserve bank of India (RBI), on behalf of the Government of India.There is a lock-in tenure of 5 years for these bongs with the overall period being 8 years and annualised yield of a rate of interest of 2.5% p.a.
Gold Mutual Funds – Gold Mutual Funds usually invest in many gold reserves either directly or indirectly and include stocks of companies associated with mining and gold production, physical gold as well as distribution syndicates.Their performance is highly impacted by the gold price movements in the country.
Gold Exchange Traded Funds (ETFs) – The Exchange Traded Funds allow you to trade gold on the stock exchange while having both the pros and cons of investing in ETFs and the advantage of investing in gold.Investors with a smaller risk appetite often choose a gold ETF as it is a smaller investment compared to the gold bullion, while the broad exposure can minimize your risk. Investing in gold as an ETF does not require the gold to be stored as a physical commodity.
Gold Savings Schemes – There are various schemes available to help people make gold investments in instalments.There are a few predetermined amounts that you can deposit with the jeweller every month for a certain period. Once the period is over, you can buy gold from the same jeweller at a value equivalent to the amount deposited plus a bonus that is offered by the jeweller and can purchase gold at the ongoing gold price on maturity.
Jewellery – Indians have an emotional connect with gold jewellery, be it for traditions or any auspicious occasion.Since it is a valuable metal, its safety is very vital to the investors.
Also the making charges can go up to 25% depending on the design which is recoverable even when you plan to sell the jewellery.
How or Where to Invest in Gold?
If you are wondering the right market place to buy gold bullion, a government mint connected gold dealer or seller is the best place to ensure that you receive the real gold. You can buy it physically or online and any currency can be traded for gold bullion.
But if you are procuring gold from an unknown source, its purity certificate should be obtained.
E*TRADE can offer future contracts at a reasonable price, where gold futures can be traded only during certain months and at certain times during the day. You can take a short position if the commodity is sold at a lower price later.
If you buy gold in anticipation of a price rise, you can assume the long position. Research states that futures contracts can be chosen for more financial integrity, flexibility and leverage, that you can get from trading in physical commodities.
How to Determine the Price of Gold in India?
Gold price is impacted by demand and supply. As the demand for gold rises, prices increase and when the investors sell gold, the price drops due to excessive supply.
Movement in gold price behaves very differently than the other commodities, as the precious metal inculcates trust. When the other commodities’ performance decreases, demand for gold increases as people believes that the gold value will be intact.
This increased demand causes prices to soar higher thereby manifesting the desired effect and rekindling the trust in the yellow metal.
During an economic recession, a lot of panic is created amongst investors as stock markets crash. But people keep their focus on gold intact and the “gold rush” boosts gold price, thereby imbibing more investments in gold or gold stocks.
Tax Rates for Gold Investments
You should keep yourself well updated of the several taxation norms on gold, applicable in lieu of the profits that have been earned from the gold investments. You attract the capital gains tax in India when you sell gold.
In case the gold is held by you for less than three years, the returns earned are classified as STCG or short term capital gains and the taxes levied on it will be in accordance to the tax slab that is applicable to you.
In case you stay invested in the gold fund for a period of more than three years, the profits on it are called LTCG or long-term capital gains and are levied tax at a flat rate of 20%.
The Road Ahead for Investing Gold in India
Although the yellow metal’s price had plummeted from 2011 to 2018, 2019 saw some price correction, after which the pandemic driven India again saw a huge increase in the price of the commodity.
There is no certainty that this trend would continue but the movement in price will certainly impact your decision making.
There are also other factors that have to be kept in mind like the economic and political, geopolitical turmoil, while the future road is paved.
The dynamism in gold value makes them a not so favourable investment option for people who are quite anxious about the daily market performance.
So if you can handle a dynamic ride that entails such risky moments but ensures a substantial potential payoff at the end of this journey, then only you should take the initiative to invest in gold stocks.
Investment in gold is considered a long-term investment as it grows in value over time, though short-term investment is more volatile as the returns fluctuate a lot.
Based on the current and future economic conditions, gold is attractive in both the long term and short-term, but adequate research needs to be done to decipher if this is the right investment option for you.
If you have decided to move ahead to make an investment in gold, you should consider your financial objectives, risk-taking capacity, tenure and the investment horizon apart from using this beginner’s guide as a ready reckoner manual.
Hence, investing in a gold fund is very lucrative to strengthen your financial position for the long term.
Markets can be unpredictable and volatile. You may sometimes hesitate to invest out of fear of losing the capital.Hence, spreading risk across or diversification is an important part of investing. If you are looking out for a financial product that can offer you diversification and capital preservation in order to meet your unique risk-return objectives, you can consider structured products as an investment option.
A structured product is a result of financial innovation that offers an investment solution that can be structured as per your risk-return profile. Most of the wealth managers often come up with structured products for their high net worth (HNI) clients.
Structured products are market-linked investment solutions that are hybrid in nature and are tailor-made to adapt to your unique needs such as risk-return objectives and liquidity requirements.
Basically, the investment strategy of a structured product is non-traditional in nature that combines two or more asset classes (conventional assets combined with derivative products) to meet your specific needs.
This integrated investment solution is highly customisable and can offer you efficient diversification to your investment portfolio.
The performance of structured products is often linked to the performance of the NIFTY index.
A typical structured product comprises bonds, equities and derivatives as an underlying asset class.
These products can either come with capital protection (full or partial return of principal) feature or without a capital protection feature.
The objective is to enhance your investment return by investing in market-linked instruments such as bonds and equities while balancing out the risk during a market downturn by investing in complementary instruments like derivatives.
What are the Components of Structured Products?
Structured products with debt securities/bonds and equity derivative exposures are quite popular in India.
Typically, the following are the components of structured products in India:
A bond: Capital protection is offered by the bond component as the issuer of the bond promises to return the principal. In the case of structured products without capital protection, you can expect additional income and stability.
Equities (one or more): Equities as underlying assets enhance the return potential of the investment. There would be a single equity instrument or basket of securities such as stocks along with ETFs that follow a popular index, foreign currencies, etc.
A derivative product: The derivative component helps to balance out the overall risk. Options are commonly included as a derivative component in a structured product depending on the risk-tolerance level.
How does a Structured Product Work?
Though structured product majorly comprises traditional assets like bonds, it is strategized in a way to replace the usual returns of the bonds with non-traditional payoffs from other underlying assets, such as derivative products.
Let’s understand the working of a structured product with a simple example. Let’s assume, you invest Rs. 1,000 in a structured product with capital protection feature for five years.
That means you would receive the initial investment on maturity (on completion of a five years period) along with the return linked to the performance of an underlying asset over the period of five years. In this case, Rs.800 out of your Rs. 1,000 is invested in bonds or debt instruments whose value reaches up to Rs. 1,000 at the end of maturity, i.e. five years.
This is because the fund manager would invest in fixed coupon debentures to preserve your capital.
Now, the remaining Rs. 200 would be invested in equities and derivatives to generate the return and income.
The final return would depend on the performance of the particular index that the securities follow.
If the performance of the index is positive, say 25% over the last five years, then you would receive total return along with the amount invested (capital) on maturity.
In case, the performance of the index falls below the level at which investment was made, you would only receive the amount invested (capital) on maturity.
What are the Key Features of Structured Products?
Structured products are issued by the private banking teams, wealth management firms and non-banking financial companies (NBFCs).
The top issuers in India include Edelweiss Capital Limited and Kotak Securities Ltd. including some of the foreign players like Merrill Lynch and Co. Inc and Citigroup Inc.
Following are the features of structured products –
Asset composition: Structured products are hybrid investment products with a complex composition of assets.Basically, structured products consist of fixed income securities like bonds as a large component for capital preservation along with equities and derivative products as an underlying asset class for capital growth and income.
The right composition of asset classes allows the structured products to maximise the probability of return with efficient management of risk.
Investment amount: The ticket size for the investment into structured products may vary across issuers.In India, structured products are generally designed for high net worth investors (HNIs) starting with the minimum ticket size of Rs. 25 lakhs.
Most of these investments are done through PMS (portfolio management services) and the guidelines of PMS are followed for the minimum cap on investment amount also.
Risk-return profile: Risk-return profile of the structured product may vary totally depending on the way in which the particular product is structured.Being a highly customisable investment product, structured products can be modelled to suit the needs of conservative to highly aggressive investors.
As the return of this product is linked to the performance of an index, the return generated generally ranges from CAGR (Compound annual growth rate) of 10% to 25% or even higher depending on the composition, market conditions and various other factors.
Apart from the market risk, structured products are also subjected to the credit risk of the issuer as a bond being the major component.
Tenure: Generally, structured products come with limited maturity which requires you as an investor to stay invested for the specific period.In India, the maturity of structured products ranges from 12 months to 36 months as these products are structured around the equity market.
Professional management: Structured products are designed and managed professionally to meet the risk-return objectives of the investors.With professional management, structured products are effectively managed with various strategies to meet the return requirement.
The structured product offers flexibility to meet the requirement even during the market downturn.
The fees for the professional management of structured products may vary across issuers.
Structured Products Market in India
In India, structured products started garnering the limelight sometimes during 2007 and 2008.
Structured products are also referred to as market-linked debentures (MLDs).
According to CARE Ratings, the structured product segment or market-linked debentures in India will increase in size by the issuance of up to Rs. 17,000 Cr. in FY 2020 in comparison to Rs. 12,246 Cr in FY 2019.
You can take a look at the report issued by CARE ratings on this.
What are the Benefits of Investing in Structured Products?
Considering the market volatility in recent years, structured products are gaining popularity. You can benefit from the market upside by investing in structured products while limiting your risk during the economic downturn.
Mainly, the following are the benefits of investing in structured products
Customised view: As structured products are highly customisable, it enables you as an investor to have a view on the market for two to three years specifically and then monetize the same.
Capital protection: Most of the structured products come with capital protection features that make it a suitable choice for risk-averse investors. However, all types of investors can invest in structured products to benefit the diversification it offers.
Higher return potential: Along with capital protection, structured products can generate attractive returns depending on the performance of the index the underlying asset is linked to.
Risk return dynamics: Structure product boosts the portfolio return by investing in growth assets and manages risk efficiently by investing in derivatives.
Hybrid exposure:Exposure to two or more asset classes and mix of traditional and non-traditional assets offer efficient diversification to your investment portfolio.
Tax efficiency in Structured Products: Structured products are gazing the focus of high net worth investors (HNIs) and institutional investors due to its tax efficiency.When it comes to the tax treatment of structured products, long-term capital gains are taxed at 10% (for the investments held for more than 36 months) + surcharge for listed market linked debentures (MLDs).However, considering the complexity of the structured products, it is important to consult tax experts and seek advice before you invest in any structured product.
What are the Various Types of Structured Products
In India, structured products are mainly categorised in two types based on their benefits offerings and the way they are modelled.
Conservative structured products: Conservative structured products are the investment solutions that come with capital protection themes. The upside participation of these products in the risk asset returns is relatively lower.
Let’s take an example to understand this. Let’s assume you have invested in a conservative structured product with 140% upside participation in equity markets till maturity.
That means, on maturity if the market falls below the index level at which it was invested, you get back your principal.
Here, 140% upside participation means, if the index or benchmark increases 10%, then you would receive a 14% return on the equities/derivatives portion of your investment.
Aggressive structured products: Aggressive structured products are the investment solutions that come without capital protection features. The upside participation of these products in the risk asset returns is relatively higher.
Let’s take an example to understand this. Let’s assume you have invested in an aggressive structured product with 200% upside participation in equity markets till maturity.
That means, on maturity if the index fails to cross the level, you may lose out on a part of your capital also. But, there is potential for higher returns also depending on the performance of the index.
What are the Important Points to Keep in Mind While investing in Structured Products?
If you are considering investing in structured products for diversification or for higher returns along with the preservation of capital, here are a few important things for you to keep in mind.
Liquidity: First important point to keep in mind is the liquidity element in these investment solutions. In comparison to other short-term or medium-term investment options, structured products are not liquid in nature.As structured products pre-packaged investment solutions with limited maturity period, you are required to stay invested in the product till maturity to reap the benefits.
However, some of the markets linked debentures that are listed on an exchange can provide you with intermittent liquidity.
Suitability to your risk appetite: Specifically when you are investing in a structured product with partial protection of capital or without capital protection features, you need to access your individual risk profile, as there are chances of losing in an aggressive structure.
Credit risk: Though many structured products come with capital protection themes, the complete return of capital on maturity may still depend on the credit risk of the debenture issuer.
Hence, considering the credit profile of the issuer is also important while investing in a structured product.You need to also access the fixed income portion of the structured product to understand the ratings and to prefer the investments with higher ratings to avoid the credit risk.
Sometimes, a structured product (with capital protection) that comes with a cap on upside participation may limit your gains.
It is important to understand the complex nature of the structured product, the risk associated with each underlying asset needs to be understood before investing in this investment solution.
To sum up, the volatile market has created the need for a financial product that can sustain during all seasons of the market.
An investment solution like structured products that are highly customisable, tax-efficient and also offer attractive returns along with capital protection, are an apt choice for high net worth investors.
Professional design, management and diversification offered by the structured products manage the risk effectively along with enhancing the return.
Structured products can help you achieve your goals with its unique structure and investment strategy in every market situation.
Financial responsibilities and obligations keep cropping up from time to time. Some are planned while others are unplanned. For most of your financial responsibilities you plan and save in advance and yet sometimes your savings might not prove sufficient. Moreover, if an uncertain expense comes up, you might need additional funding to meet the financial obligation that you face. This is where loans come into the picture.
Loans are a source of funds which you can avail from financial institutions like banks and non-banking financial companies. The loan allows you a lump sum fund at a specific rate of interest which is fixed by the lender. Thereafter, you can choose the repayment tenure over which you can repay the loan in small and affordable instalments.
Types of loans
Banks and financial institutions offer a range of loans which can be availed for different financial needs. Loans can be broadly divided into two categories –
Secured loans are secured against an asset while unsecured loans are not. Unsecured loans are offered based on your financial status and secured loans are offered based on the value of the asset against which they are secured.
Some of the commonly available secured and unsecured loans include the following –
Type of loan
Unsecured multipurpose loan for financing various personal or commercial financial needs
Secured loan to buy a vehicle
Secured loan to fund higher education
Secured loan to finance the purchase of consumer durables
Secured loan to purchase a home or a plot of land
Secured or unsecured loan to meet the financial needs of a business
Moreover, loans can be categorized as good loans or bad loans. Bad loans are those which have a high interest rate and severely impact your credit score in case of defaults. Good loans, on the other hand, are those which build up a good credit score and also offer tax benefits.
Here’s how you can manage your debts effectively
Important aspects of a loan
Here are some of the main components of a loan which you should know about –
Loan amount or principal
This is the amount of loan which you borrow from a lender.
EMI means Equated Monthly Instalment. This is the amount of money which is payable every month to repay the loan. The EMI consists of a part of the principal amount of the loan and the interest payable thereon. With each EMI paid the loan amount reduces.
The loan that you avail should be paid back within a specified duration. This duration, over which the loan is repaid, is called the repayment cycle of the loan. The lender specifies the minimum and the maximum repayment tenure that is available for the loan. You, as a borrower, then, can choose the repayment cycle as per your affordability.
Rate of interest
Rate of interest is the interest charged by the lender on the loan amount that you have availed. The interest is calculated on the outstanding balance of loan and the amount reduces after each EMI payment.
The EMI of the loan is calculated taking into consideration the principal, the rate of interest and the repayment cycle of the loan. Here’s how these factors impact the EMI –
Principal – Higher the principal of the loan, higher would be the EMI
Rate of interest – Higher the rate of interest, higher would be the EMI
Repayment cycle – Longer the duration of the repayment cycle, lower would be the EMI
You can choose the principal and the repayment cycle but the rate of interest is determined by the lender. You can calculate the EMI before availing the loan to ensure that the EMIs are affordable and can be repaid easily.
Credit cards are quite popular among individuals for financial transactions. But did you know that credit cards are a type of personal loan?
Credit cards allow you to buy first and then pay later. There is a billing cycle and the entire transactions done within the cycle are payable within a due date. If you pay the entire outstanding amount within the due date, no interest is charged. However, if you don’t pay the amount or pay partially, interest is charged on the outstanding balance as well as on credit transactions done in the next billing cycle too.
Credit cards have high interest rates and can prove to be a bad loan if you don’t pay your bills on time. However, on the positive side, credit cards allow reward points and other benefits on your transactions. So, if you use a credit card wisely, it can prove to be a good tool.
Management of credit card debts
To ensure that credit cards give you the best benefits, you need to manage their usage. Let’s understand how –
The concept of MAD and revolving credit
Credit cards allow you a revolving credit facility wherein you can carry forward your outstanding credit card balance to the next subsequent months. For this revolving credit benefit, there is a limit of Minimum Amount Due (MAD). MAD signifies the minimum credit card due which you should pay in the current billing cycle to avail the revolving credit facility. Once the MAD is paid, the remaining credit card bill can be revolved to the next month.
Paying off MAD, though convenient, is not recommended. It is because the amount that you carry forward to the next cycle attracts interest. Since credit card interest rates are high, you tend to accumulate considerable interest expenses on the revolved credit. Moreover, if the credit is revolved, you also attract interest on the amount spent on the card in the next billing cycle from the first date of the cycle. This is also disadvantageous. Thus, you should not revolve your credit and pay the entire amount of your credit card debt within the due date.
To pay off your credit card debt, here are some tips which you can use –
Using your income and/or your savings
Converting the debt into affordable EMIs
Availing a personal loan
Using your investments
Personal loans – the most popular loans
Personal loans are quite popular among individuals as they are unsecured, easily available and allow funds for different uses. However, these loans have a high interest rate and affect the credit score adversely. So, here are the best practices and mistakes of availing a personal loan –
The credit score is a measure of your creditworthiness. It tells the lender how likely you are to repay a loan that you avail. The score ranges from 300 to 900 and the higher the score you have, the better would be the chances of getting a loan easily.
Your credit score is calculated by authorized credit bureaus like Equifax, CIBIL, etc. It is calculated taking into consideration the following factors –
Repayment history – if you have no repayment defaults, the score would be high
Credit mix – if you have a good mix of secured and unsecured loans, your score would be high
Credit utilisation – the lower the credit that you have availed, the higher would be your score
Credit history – if you have a good history of credit, your score would be high
How does loan impact your credit score?
The availability of loans solely depends on your credit score. The score tells the lender of your repayment risk and thus they consider the score before sanctioning the loan. Loans are usually allowed if you have a credit score of 600 or 650. For lower scores, loans are rejected. A score of 750-900 is the best score to get a loan easily.
Understand the loans available, how they work and how you can manage them to your advantage. Loans can prove to be a good source of funding your needs and if you manage them well you can avail and repay the loan easily. For a complete guide on management of debt, you can go through this financial planning course and get the complete knowledge on how to manage your liabilities to the best of your advantage.