What is Multi Cap Fund

 

Should you invest in SBI Multicap Fund NFO

SBI mutual fund will shortly be in launching a New Fund Offer (NFO) for a multicap equity fund, SBI Multicap Equity Fund. The NFO launches on February 14 and closes on February 28, 2022

What are Multicap Funds?

Multicap mutual funds are diversified equity mutual fund schemes which invest across market cap segments i.e. LARGE CAP, MID CAP and SMALL CAP. Multicap funds are mix of above three caps. Multicap Funds are new concept , earlier there used to be  individual cap funds like Large Cap funds, or Mid cap Funds or Small Cap funds , but now SEBI has approved a new category of Fund called Multicap fund which is a mix of all three caps.  As per SEBI’s circular in September 2020, multicap funds must invest at least 25% of their assets in large cap stocks, at least 25% in midcap stocks and at least 25% in small cap stocks. Investors should note that multicap funds will have minimum 50% exposure to midcaps and small caps.

What is Large Cap , Mid Cap & Small Cap

In short these are Equity funds of Large Companies , Mid Size Companies & Small size companies. 

How Multicap Funds work :

 We all know that economy of any country keeps changing . Different segments of the market outperform each other in different market conditions ..When market is in bear mode  Large caps usually outperform small and madcap & When market is in bull mode Midcap and small cap stocks tend to outperform  Large cap. So multicap funds adjust itself as per market scenario , when market is in bear mode Fund manager increases the proportion of Large cap as per need and when market is in bull mode Fund manager reduces proportion of Large cap and increases mid cap and small cap  giving the best optimum result.

 Should you Invest in SBI Multicap Fund

 SBI MF house is Launching Multicap Fund on 14^th Feb till 28^th Feb , during this NFO period fund is available at a Price of Rs. 10 per unit . After that fund  will be available as per NAV of the day .

 SBI Mutual Fund has a proven track record of delivering superior performance across product categories i.e. large cap funds, mid cap funds and small cap funds.

SBI MF’s long term track record gives us the confidence about SBI Multicap Fund’s alpha creation potential in the future too.

What are  strategies of SBI MF to create higher returns in Multicap Fund

1.     The fund will not have any sector or style bias as the outcome of portfolio selection will be based on the analyst recommendations, the company said in its statement. “The Fund combines the strength of high conviction stock ideas of the sector analysts that will be selected from the fund house’s active coverage universe (~350 companies). The high conviction ideas recommended by the analysts are arrived at after a robust 7-step research process wherein ranks and confidence scores are assigned to each recommendation.."

2.    Unconstrained, sector agnostic approach.

3.    Active Stock Management with Bottom-up strategy.

4.    High Conviction Play through Analyst Portfolio.

5.    Style Agnostic with broader opportunity set for stock selection.

6.    Strong pedigree of Investment Expertise across market cap.

7. The fund offers MITRA SIP feature, which will let investors invest through a Systematic Investment Plan (SIP) and simultaneously register a Systematic Withdrawal Plan (SWP) which will be activated at the end of the SIP period to generate tax-efficient regular cash flows.

 

Conclusion  :

     SBI  Multicap Fund  will be  an ideal investment option for investors who would like a mix across market cap as they provide diversification of opportunities and growth potential while getting the benefit of limiting downside risk and who have a investment time horizon of minimum 3 years for best result as the fund will be a pure equity fund and such funds are volatile in short period of time.

@Ajit Kumar Singh

How to get Rs. 1,30,000 (Rs. 1.30 Lakh ) monthly pension

 

How to get Rs. 1,30,000 (Rs. 1.30 Lakh )  monthly pension

Assume you or your spouse are 35 years old and wish to get a monthly pension of Rs  1.30 Lakh or  Rs.50,000 after reaching the age of 60. In this case, you will have to deposit Rs 15,000 in this scheme on a monthly basis. You must put this money aside until you reach the age of 60. In this manner, you will have to deposit Rs 45 lakh in this scheme over a period of 25 years. Your maturity amount will be roughly Rs 2 crore when you reach the age of 60.

With Rs. 2 crore in hand  @ age of 60,  you have 2 options :

1.     Invest full amount in purchase of Annuity , in that case you can get Rs. 1 Lakh per month life time as pension assuming 6% annuity purchase rate.

2.     Take back  60 percent of this, or around Rs 1.20 crore, in a single sum called commuted pension which is Tax Free, (and invest in Mutual Fund with SWP of Rs. 80000 pm life time and your corpus keeps growing too)  with the remaining Rs 80 Lakh available as  annuity purchase.

If the annuity rate is 7% at the time, you will receive a monthly pension of around Rs 50,000 for life time .

In the event of the scheme holder's death, the remaining amount will be paid out in a lump payment to his or her nominee.

Please Note that pension is treated as Salary for Tax purpose so Income from Pension is Taxable at your slab rate in case of Annuity. However Income from SWP is subject to capital gain which is exempt upto Rs. 1 lakh per year)

 

@Ajit Kumar Singh

 

How to make your wife rich and self reliant ??

Your wife would get Rs 45,000 every month as pension and a lumpsum of around  Rs. 60 Lakh for as little investment as Rs. 5000 pm.

If you want your wife to become self-reliant so that in your absence there is a regular income in the house and in future, your wife does not depend on anyone for money, then you can arrange regular income for her today. For this you should invest in National Pension Scheme.

Open new pension system account in the name of wife: You can open a New Pension System (NPS) account in the name of your wife. The NPS account will give a lump sum amount to your wife on attaining the age of 60 years. Along with this, they will also have regular income in the form of pension every month. Not only this, with NPS account you can also decide how much pension your wife will get every month. With this, your wife will not depend on anyone for money after the age of 60. Let us know about this scheme in detail.

You can deposit money every month or yearly as per your convenience in the New Pension System (NPS) account. You can open an NPS account in the name of your wife with just Rs 1,000. The NPS account matures at the age of 60. Under the new rules, if you want, you can run the NPS account even till the age of the wife is 65 years.

Monthly income up to 45 thousand: For example, if your wife is 30 years old and you invest Rs 5000 every month in her NPS account. If she gets 10 per cent return on investment annually, then at the age of 60, she will have a total of Rs 1.12 crore in his account. They will get about 45 lakh rupees out of this. Apart from this, they will start getting pension around Rs 45,000 every month. The most important thing is that they will continue to get this pension for life.

How much will she get pension?

• Age- 30 years
• Total investment period – 30 years
• Monthly contribution –  Rs 5,000
• Estimated return on investment- 10 per cent
• Total pension fund – Rs 1,11,98,471 (can be withdrawn on maturity)
• Amount to buy annuity plan – 44, Rs 79,388
• Estimated annuity rate 8 per cent – Rs 67,19,083
• Monthly pension – Rs 44,793.

NPS is the Social Security Scheme of the Central Government. The money you invest in this scheme is managed by a professional fund managers like in Mutual Funds. The central government appoints these professional managers to manage the fund.. In such a situation, your investment in NPS is completely safe. However, the return on the money you invest under this scheme is not guaranteed however past analysis  shows  NPS has given an average  10-11%  since its inception.

Note : Contribution to NPS can be made either like SIP or Lumpsum . Minimum Rs. 6000 per year should be contributed (Rs. 500 pm) . There is no maximum limit to contribute , so if you contribute Rs, 10000 pm for 30 years there is likely that your wife may get pension of around Rs. 90000 pm  AND a lumpsum on exit.

 

Digital Currency and Blockchain

 What is Digital Currency &  Blockchain ???

 In the Budget speech Finance Minister Nirmala Sitaraman has mentioned about introduction of Digital Currency using the Blockchain.

 Now every one wondering what is Digital Currency and Blockchain .

 What is Digital Currency

 Digital money  (or digital currency) refers to any means of payment that exists in a purely electronic form. ... Digital money is exchanged using technologies such as smartphones, credit cards, UPI and online cryptocurrency exchanges.

 What is Blockchain..

 The Blockchain is a software protocol (like SMTP is for email). On which Digital Currency (and other transactions ) will run . It is comprised of several pieces: a database, software application, Internet , some connected computers, etc.

 Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.

 The blockchain is used for the secure transfer of items like money, property, contracts, etc, without requiring a third-party intermediary like a bank or government. Once data is recorded inside a blockchain, it is very difficult to change it.

 

Sometimes the term is used for Bitcoin Blockchain or The Ethereum Blockchain, and sometimes, it’s other virtual currencies or digital tokens. However, it may be noted that

 

Bitcoin is digital currency and Bloackchain is a software on which Bitcoin is traded.

• Blockchain is not Bitcoin,( or Cryptocurrency  or digital currency), but it is the technology behind Bitcoin or Digital Currency.
• Bitcoin is the digital token, and the blockchain is the ledger to keep track of who owns the digital tokens
• You can’t have Bitcoin without blockchain, but you can have a blockchain without Bitcoin.

Applications of Blockchain Technology

Here are some common applications of Blockchain:

• It is used to create a secure and transparent digital ledger of all transactions.
• It allows you to create a tamper-proof record of academic achievement that is accessible to all students and teachers.
• It is used for creating a more efficient system for trading securities.
• Lenders use blockchain to execute collateralized loans through smart contracts
• Using blockchain technology to record real estate transactions can provide a more secure and accessible means of verifying and transferring ownership.
• Use for keeping data like Social Security number, date of birth, and other identifying information on a public ledger.
• Blockchain technology is also used in the logistics industry as it helps to track items as they move through a logistics or supply chain network.

Limitations of Blockchain technology

Higher costs: Nodes seek higher rewards for completing Transactions in a business that work on the principle of Supply and Demand

Slower transactions: Nodes prioritize transactions with higher rewards, backlogs of transactions build-up
Smaller ledger: It is not possible to a full copy of the Blockchain, potentially which can affect immutability, consensus, etc.

Transaction costs, network speed: The transactions cost of Bitcoin is quite high after being touted as ‘nearly free’ for the first few years.

Risk of error: There is always a risk of error, as long as the human factor is involved. In case a blockchain serves as a database, all the incoming data has to be of high quality. However, human involvement can quickly resolve the error.

Wasteful: Every node that runs the blockchain has to maintain consensus across the blockchain. This offers very low downtime and makes data stored on the blockchain forever unchangeable. However, all this is wasteful because each node repeats a task to reach a consensus.

@Ajit Kumar Singh : Writer is a pure Finance Professional but knowledge of Financial Technology and Financial Software.