Advisory

Buying a Travel Insurance before your Next Vacation

Buying a travel insurance is an insurance premium which you pay with the hope that you never get to use it. Whether you plan to travel abroad or within the country, if you take a travel insurance policy, it will definitely give you peace of mind and a sense of security. So don’t miss out on this important aspect during your upcoming travel planning and save yourself some sleepless nights and pockets full of money…

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Getting a well-covered travel insurance before your next vacation is as important as the trip itself as it covers your family and you against important unforeseen situations that you may face during your travel, especially if travelling overseas. Travel insurance typically covers two important aspects of any trip – any trip or travel inconveniences and medical emergencies.

For many of us in India, buying a travel insurance before our travel (unless mandated) is considered a useless expense and is often looked upon as an unnecessary hindrance. But one should realise that this insurance covers you against any travel adversities like last minute trip cancellation or delays, natural disasters or unforeseen political or terrorist situations at your destination, hospitalisation, sickness or loss/theft of documents etc.

For international travel, most travellers must ensure that they buy travel insurance, as most western countries mandates having a valid travel insurance at the time of visa application itself. Many countries have this as a pre-condition before anyone can visit their country. However, not many people opt for domestic travel insurance; it has not yet become a norm though it is always advisable to do the same for a smooth travel plan. Even though it is not mandatory, it is always a good idea to opt for travel insurance while travelling within the country as it saves the traveller from possible loss due to cancelled flights, loss of baggage and so on.

Though travel insurance covers health too but you need to keep this in mind that travel insurance is not a substitute for your health insurance taken in your home country. Travel insurance has a medical component that covers you against sudden illness, accident etc.; and the level of coverage will depend on your plan and provider.

In India, the market is flooded with travel insurance companies offering different plans. Now which plan is most suitable for you will depend on many factors, like your destination, the mode of travel, whether you are travelling alone or with family, the amount of valuables you are carrying and so on? However, you must buy an insurance policy that best fits the scope of the travellers such as having a higher health plan for seniors etc.

Insurance companies have different plans catering to different segments such as for senior citizens, students, women etc. If you are a frequent flyer, you even have the option of going for annual plan covering multiple trips. If it is your single annual trip, it is better to go for single trip insurance plan. Sometimes after doing all bookings like hotel, tickets, car etc. you may have to cancel your trip. There are plans where the insurer covers the trip cancellation charges. If you wish to avail this facility make sure your travel insurance covers the trip cancellation charges while buying the policy.

If you plan on adventure activities like ski diving, bungee jumping and other similar activities which have risk elements involved, you need to ask your insurance company to give you package covering any possible accidents in such activities. Mostly policies do not cover high risk adventure activities.

Hospitalisation and doctor costs are very high in western countries so while opting for a policy might feel like an unnecessary expense, do remember that in case of any eventuality, the cost borne by you will be many times higher. It is also prudent to inform the insurance company about any pre-existing medical conditions. You must also read and understand within the fine print about the list of diseases

covered under the travel insurance plan.If any member of the travel team has any pre-existing medical condition, make it a point to check and compare whether it is included in the policy. You can ask for separate cover paying additional cost.Read the document properly to understand all the minute details so that you do not miss out on any important clause. Some policies give you protection only for medical expenses incurred during travel while some may give you reimbursement for medical treatment continued in your home country. Be sure about the options and list of hospitals in the city or country you are visiting.

Make sure you are well aware about the claim procedure and company policies so that your claim is not rejected due to your ignorance or delay. Some policies require written report within a stipulated time along with documents. Check the exclusions so that you know what is approved and what is not. Also, check out the terms and conditions and exclusions, well before you sign the dotted line. Choose the plan with the least exclusions or the one which is best suited to your requirements.

And most important do not forget to check and ensure if your travel insurer is registered with the Insurance Regulatory and Development Authority of India (IRDAI).

Tips for Buying Travel Insurance
1. Plan to purchase your Travel Insurance much in advance and ensure that your insurance covers the entire period of your travel.
2. Fill in the proposal form completely and honestly after getting the necessary medical tests done and always carry a copy.
3. In case you need to extend the period of cover, plan for it before the cover expires.
4. Go through the policy document properly and completely and make a note of the contact details of the agency or hospital servicing the claims.
5. Do not only go by the words of travel agent; do your own research and make an informed choice.
6. Buy policy from a reputed company or a recognized agent.
Expert Inputs
Swetank Shantanu, a Partner with a New Delhi based law firm ‘Legal Consultus’, explains the concept of travel insurance.
Travel insurance indemnifies the travellers from an emergent situation viz. loss of health and also in some cases loss of goods and baggage. The concept of travel insurance is prevalent particularly in the form of protection from accidents and accidental deaths. However, the option of travel insurance with respect to loss of baggage and health lies with the travellers.
As far as the Indian Railways is concerned, the facility of free travel insurance provided by the Indian Railways which was introduced in September 1, 2018. Travellers booking tickets from the IRCTC website or mobile application will have two options: Opt-in or opt-out. The insurance provided by the Indian Railways to passengers travelling on a valid ticket covers risks during the train journey.
Though it is not legally or mandatorily required to have travel insurance in India but it is always advisable to have travel insurance for simple reason that it provides sense of security and peace of mind in case of sudden exigencies while travelling.
In case of deficiency of service, one can always approach the court of law. Insurance policies are contractual obligations between the respective Insurance Company and the passenger/traveller. Hence, the terms and conditions of the policy have to be adhered with strictly by both the passenger/traveller as well as the insurance company. The passenger/traveller may approach the respective Consumer Court under the Consumer Protection Act, 1986 for the redressal of his/her grievances against the insurance company. I may clarify here that it is the Insurance Company only that is responsible for policy issuance and claims settlement. So, going for travel insurance is the need of the time and that too carefully, after having done the homework.

A Demat Account: Meaning, Usage and Advantages

In simple words, a demat account is the account that holds shares and securities in electronic format. In India, it is mandatory for any investor to have a demat account if he is into stock trading. They can also be used for saving SIPs and Mutual Funds. Read on to learn more…

Words: Sangeeta S

For those who use demat accounts and do not know what it means – a ‘Dematerialised’ or ‘Demat’ account makes managing your finances simpler as all investments you make in shares, bonds, mutual funds, securities etc. are in one place and in electronic format. In India, the service is provided only by two depositories namely the National Securities Depositories Limited (NSDL) and the Central

Depository Services Limited (CDSL), and can be availed by the Bank you use as your trading account. What makes it even simpler is that you can access them from any part of the world and they are easy to manage too.
Though it is not mandatory to have a demat account for SIPs or Mutual Funds, having them all in one place

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definitely helps as it is widely accepted. Also, for online trading, it is essential and mandated to have a demat account. To invest in online trading, along with a demat account you will also need a trading account. It is through a trading account that you buy or sell shares, while a demat account is like a bank where you deposit your shares and sold shares are taken from. Some banks offer the facility of saving, demat as well as trading at one place.

Opening a trading account is simple; it can be done online through a broker. It is important that you select a good broker because expertise is crucial in stock market as rates change within minutes. It is a good idea to compare brokerage rates but it is advisable to go for brokers who provide good service rather than ones who charge you less. Once you decide on the broker contact them, fill up the forms, submit the necessary KYC documents and get ready to start trading in the stock market. After verification of your application you will be given your trading account details.

So with your trading and demat account in place you can easily do your trading. Make sure that you link your trading and demat accounts so that you avoid providing demat account details every time you trade. Process is simple, place your order (buying or selling) through your trading account, the stock exchange will process and verify your order and then the shares will be either debited or deposited in your demat account.

Though for your other investments like mutual funds and SIPs you don’t need to mandatorily have a demat account but if you wish you can consolidate all your investments at one place in demat account. Mutual fund investments can be done without a demat account; all you need is proper documents for KYC.

Some Tips for efficiently managing your Demat Account

– It is important that you have understood the terms and conditions of the demat agreement before opening an account. Often people give power of attorney (POA) to their broker which he/she can misuse

– Read all clauses properly before you give any POA or other instructions to your broker

– Always keep your DIS in safe custody; every broker has to provide their client with a pre-numbered booklet

– Check that your DIS book is in a serial order; in case of any missing page get it changed

– DIS has to be filled every time a transaction is done; don’t give blank signed slips to your broker as it can be misused

– You can protect your account by using the freeze option

– Choose a good broker

– Don’t get carried away by advice given on whatsapp or Facebook; do your own study and invest

– Learn to time the stock market; don’t get carried away by short gains

– Review your portfolio at regular intervals

– Don’t allow your broker to trade; signing forms blindly and handing over to your agent may backfire

Some Quick Facts on Demat
Credits – Our expert Manoj Chaturvedi who has rich experience of banking having worked both in India and Europe during last 16 years. He is by qualification an MBA from XLRI, Jamshedpur and LLB from Faculty of Law, Delhi University.

Why Demat?
A demat account helps in complete paperless operations. All your securities get converted to electronic form from physical form. You are free from the hassles of filling up forms and are also free from any risks like forgery, theft etc. All your investments like bonds, mutual funds, shares etc. can be consolidated into one single account.

Can a person have more than one demat account in his name?
Yes, a person can have more than one demat account in his name; there is no restriction on that. An investor can open more than one account in the same name with the same Depository Participant (DP) or different DPs provided all KYC documents are submitted.

Can I change to another depository?
Yes, it is possible. If you have a demat account with a particular depository and for some reasons you wish to change, you will need to fill the Delivery Instruction Slip (DIS) book and submit to your broker.

Can a demat account holder authorize another person to operate the same?
Yes, a demat account holder can authorize any person to operate his/her account by executing a power of attorney (POA) to this effect. In case, any demat account holder wants to re-operate the account on his own, it can be done after having revoked the POA in writing.

Can I transfer shares to another demat account?
Yes, it is very much possible to transfer shares between demat accounts. The duly filled slip has to be submitted to the concerned DP and the transfer is done by NSDL or CDSL after receiving the document forwarded by the DP on behalf of the client. But the shares transferred from and the shares transferred to should fall under the same depositary i.e NSDL to NSDL and CDSL to CDSL.

I have some non-demat shares. How do I transfer them to demat account?
Open a demat account in the name of the person who has shares in the physical form and then ask the broker to demat the physical shares.

Can I have a joint trading account?
A trading account is always a single account that means there cannot be a second holder for a trading account, though you can have a nominee for a trading account. You can have demat account with a second holder and link multiple demat accounts to a single trading account.

Can I have multiple trading accounts?
Yes, you can have multiple trading accounts though not with the same broker. Though a second trading account would give you different trading platforms but it will add to your account opening charges and you will also have the burden of keeping track of two accounts.

Is it mandatory to dematerialize the physical share certificates?
No, it is not mandatory to dematerialize the physical share certificates. But all features of demat now can be accessed on mobile banking and are easy to operate. Bonus / right shares easily get credited to these accounts and transaction cost is also lower than it used to be in physical forms.

The Importance of Making A Will

It is important that we make a Will irrespective of our age, financial status and gender. Not having a Will can create several problems for your loved ones and your legal heirs may have to spend more time, money and energy to claim the money or property rightfully due to them.

Words: Sangeeta S

IF you die without leaving a Will, the law decides on whom your wealth will ultimately be given to. Obviously, we do not want such a thing to happen as it is our wealth and we should be able to decide who should be getting it, right? So make a Will today.
What happens if you die without a Will? When you die without a Will, it is called dying intestate (a person dying without making a will) or intestacy. And in that case, the wealth is divided as per The Indian Succession Act, 1925 which is a law applicable to all Indians except Hindus, Sikhs, Jains, Buddhists and Muslims as they are governed under separate laws of succession. Hindus, Sikhs, Jains and Buddhists are governed by the Hindu Succession Act, 1956. As per the Hindu Succession Act of 1956, if a person dies intestate, his wealth is distributed as defined by the law.
If a male dies intestate then the wealth goes to his heirs belonging to Class I and if they are not available, then it goes to his Class II heirs.

In case both are not available, then the wealth goes to agnates (distant blood relative of male lineage) and if they are also not there, then it is given to the cognates (distant blood relatives of male or female lineage). And lastly if none are available, then the wealth goes to the government. In case of a female dying intestate, the wealth first goes to her children and husband. If the female does not have any children then the property inherited from her parents goes back to her natal (her blood ancestry) family and any property inherited from her husband or in-laws gets transferred to the heirs of her husband.
To avoid such unnecessary complications, it is best to write a Will. A Will supersedes everything so if you do not want your wealth to go into the wrong hands and you wish to save your loved ones from unnecessary complications, it is a great idea to write a Will.
People often confuse between a Will and a nomination; they are two different things. In legal proceedings, Will supersedes a nomination, says an expert from the field.

The best way to avoid complication and ambiguity is to write a clear Will – a Will supersedes everything else.
Writing a Will is really simple and we have discussed this in our earlier issues too. But just to refresh our readers here is a quick recap on ‘how to make a Will’.

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Making of a Will
Anybody can make a Will at any time provided the person is an adult, above 18 years of age and is of sound mind. You can Will all your assets and property to whom you wish to provided you have complete ownership. All you need is a piece of paper where you write your Will. You have to sign the Will or put your thumb impression on the Will in the presence of two witnesses. Both the witnesses also need to sign or put a thumb impression in your presence. Anyone can be a witness to your Will – including the executor.
Now, who is an executor? An executor is the person whom you assign the duty of carrying out your instructions after your death. Anybody above 18 years with a sound mind can be your executor. However, if you have missed appointing an executor in your Will, the court will appoint an administrator to execute your Will. In case the executor appointed by you is incapable of carrying out the execution or is incapable of carrying out the job, in that scenario also the court will appoint an administrator.
Once your Will is ready with signatures, it becomes a valid legal document and getting it registered is not mandatory. However, if you wish to get it registered, do it personally or through an authorized agent. You will be required to present the Will before the registrar for registration. Generally, you do not have to pay stamp duty on Wills but you will have to pay registration fees; the fees and procedure are different for different States of India.
The registration of a Will does not fall under the category of compulsorily registrable document says Rishu Agarwal, Advocate Supreme Court of India and Associate of New Delhi based law firm Legal Consultus, our expert. However, it is always advisable to have the Will registered for a few reasons – firstly, it vindicates the intention of the person who is making the Will, which may be taken into account in case dispute lands up in the court of law. Secondly, in case the original Will is lost, a probate may easily be obtained from the certified copy of the same, he adds.
Will can be changed as many times during one’s lifetime as you desire even if it has been registered. For making changes in a registered Will, you may apply directly or through an agent to the Registrar. Ideally, if you are making substantive changes to a Will in order to convey your wishes properly, you should execute a codicil. A codicil is a written statement which supplements or modifies an existing Will. It must be executed in the same manner as that of the original Will. And lastly, if you want to cancel your Will you have that option too. Make another Will or destroy the earlier Will.
So go ahead and make your Will and of course if you wish you can always withdraw or change your Will anytime you wish.

Succession Certificate
Will is the best option for anyone and everyone. But in case there is no Will the legal heirs have the option of getting a succession certificate to make up for the absence of Will. But it is not as simple as it sounds.
If a male dies without a Will, his wealth does not get transferred automatically to his spouse. All his children and his spouse become equal claimants. And even if the children give consent for the wealth to be transferred to their mother, it has to go through a process which can be complex and may take time too.
To give an example Mr. Sharma (name changed) was careful with all his bank accounts and other investments and had registered his wife as nominee. He also had some shares where he forgot to add nominee. Even his financial advisors did not notice this. Now after his death all the bank accounts got transferred to his wife’s name except the shares. The wife was asked to produce succession certificate from court in order to get the shares transferred to her name. Now since Mr. Sharma had two children so the claimant for the shares was now 3 persons – the wife and two children. The law said, if both the children gave consent then the shares will go to his wife. The children agreed and it looked simple. But our systems are such that this simple case of obtaining succession certificate took complete sixteen months with children travelling several times to appear before the judge to give consent.alvaro-serrano-133360-unsplash
It may not happen in all the cases; some cases may get solved smoothly. It depends on the court and your advocates. Agreed we have laws where in absence of Will succession certificate can be obtained. But if all these can be avoided by a simple process of writing a Will, it is a good idea to write a Will.

General Insurance

Any kind of insurance which is not life-insurance comes under general insurance; it provides financial protection against loss or damage to an asset. Read on to understand more about general insurance.

Words: Sangeeta S

People mostly opt for general insurance only when it is mandatory, say like the car insurance; but insuring your assets can give you protection against uncertainties in life. When we look around we find more and more people opting for Life Insurance compared to General Insurance. Fair enough, one values life more than assets.
But at the same time if you can protect your others assets and valuables too like your home, jewellery, household items etc. then why not? After all life is full of uncertainties and there are possibilities that you may lose/damage your assets due to theft, accident, flood, earthquake, fire, storm…the reason could be any. And there comes the role of General Insurance; it provides you financial protection against any calamity which could risk your assets and valuables. In fact there are covers which even protect you against any cost you incur on legal actions.
The options are plenty; based on your requirement you can select the kind of cover you would need. It is very different from Life Insurance and mostly these are annual contracts which you need to renew every year. The claim is only in case of any event like health issues, theft, fire etc. or else there are no returns as such.
Let us explore few of the general insurance covers available.

Motor Insurance
It is mandatory to get motor insurance as per the Motor Vehicles Act, 1988. It is up to you to opt for the kind of coverage you want – Third Party Liability Cover is

mandatory while Comprehensive Motor Insurance Policy is optional. Going for a third party mandatory cover will not cover your own loss; it covers only third party. Comprehensive covers include both your car as well as the third party and therefore it is definitely a better option.

Health Insurance
This covers you against any expenses made related to health. Plans are many; some companies even customize the plan based on your requirement. You can opt for reimbursement plan or go for cashless facility in the designated hospitals. There is a huge market for this; but make sure you understand the policy well before you sign the dotted line. Understand your personal requirement first and then opt for the one most suitable to you. There are various covers available like comprehensive, floater, individual, surgery cover etc.

Home Insurance
Home Insurance gives protection to your house and even the assets in your home. Broadly it offers two options – one is protection to the structure and second is for the contents. The insurance gives you fire and peril cover, protection against natural and also against man made calamities. Fire and peril cover includes protection against fire, lightning, earthquake, aircraft damages etc., while protection against natural calamities include flood, storm, cyclone etc. Theft, riot, etc. are covered under man made calamities. It does not include damage due to wear and tear, pollution or war.

There are special covers also for your special needs and you may opt for special covers.
Travel Insurance
Travel insurance covers unexpected situations like flight delay, loss of passport or baggage, accidental death, hijack distress and most important medical emergencies. Whether it is business or vacation, travel insurance should not be missed. Any kind of financial emergency can also be covered under travel insurance. It has various categories like student, international, domestic, senior citizen etc. For travelling overseas it is mandatory to get travel insurance done. Read the fine print and understand well what all benefits you can avail as a part of this cover.
Besides these there are also other general insurances which cover the commercial sector. They provide insurance to industries, businessman and others related to industries. The industries include all like textiles, aviation, logistics, pharmaceutical, construction etc. Then you have Marine or Cargo Insurance, rural insurance etc.

Claim Process
Now once you have taken any kind of general insurance it is important that you understand well the benefits you can get and also the claim process. Due to lack of knowledge and awareness many times the claims get rejected. Different insurances have different claim process. Some have time frame, while for some you have to provide evidence. Be fully aware of the entire procedure and all the documents you would need to file your claim.

Expert Questions
To understand the Legal aspect of “General Insurance”, we spoke to our expert Preeti Jha, Associate Advocate with Legal Consultus, a New Delhi based law firm. She has wide experience in advising and handling Insurance matters.

Q. Who should buy general insurance?
A. As the foremost benefit of having a General Insurance is that it safeguards against unexpected loss to the assets and properties of an individual. Hence, any person, who owns an asset, can buy insurance to protect it against losses due to fire or theft or damage etc.

Q. How to buy respective general insurance policy and from whom?
A. There are many options available in the Insurance market. It is important to take basic precautions at the time of purchase of Insurance Policies. Most important is to purchase the policy from Insurance Regulatory Development Authority (IRDA) approved Insurance Companies. Also look for the one having the office/branch office in the proximity for the early reporting of the damages. The same is very important factor in order to claim insurance coverage as the law mandates for the early assessment and inspection of the quantum of damages by the Insurance Surveyors.

Q. What are the appropriate legal remedies available in case of any grievance or deficiency of service on the part of the Insurance Company?
A. Insurance policies are contractual obligations between the respective Insurance Company and the policy holder. Hence, the terms and conditions of the policy have to be strictly adhered to by both the policy holder as well the respective insurance company.
Write to the Insurance Company and give them sufficient time to respond suitably. If they don’t respond, or if the response is not satisfactory, then you can approach for the appropriate legal remedies.

For complaints relating to personal insurance covers up to a value of Rs.20 lakh, you may approach the Insurance Ombudsman in your area. It should be one of the preferred forums for the adjudication of grievances as the ombudsman has a technical team that will go into the merits of each and every case.
The ombudsman has to pass an award within a period of three months from the receipt of the complaint. The award is binding upon the insurance companies.
In case the policy holder is not satisfied with the award of the ombudsman then he can approach another legal forum in accordance with law for redressal of his grievances. An aggrieved policy holder can also lodge a complaint before the IRDA against such Insurance Company.

Q. What is the role of Insurance Regulatory and Development Authority (IRDA)
A. The Insurance Regulatory and Development Authority (IRDA) is a statutory body established under the Insurance Regulatory and Development Authority, 1999 with the intent to protect the interest of the policy holders.
It is the duty of the regulator (IRDA) to ensure that the constituents of conventional general insurance contracts conform to basic standards, and also that the terms used in the general insurance contract are unambiguous and easy to understand.
This is extremely important keeping in view the large number of complaints received of late pertaining to unfair trade practices such as misrepresentation, discrimination, inducements, and failure to maintain records. It defeats the very purpose of a beneficial scheme intended to help the common poor. It is also imperative on the part of the regulator to formulate a code of conduct for the insurance agents. The same is essentially required since unfair practices and misconduct by insurance agents/insurance intermediaries like surveyors form a large chunk of the complaint cases.

Mutual Fund

With mutual funds the investment scenario has changed. It offers options like equity, debt, balanced, hybrid and many such schemes. Based on your personal requirement and financial status you can invest in the scheme suitable to you.

Words: Sangeeta S

When you invest in a Mutual Fund, your funds get professionally managed and are well diversified to offset potential losses. All of us need to save and invest our money but not all of us have the required knowledge or the time to handle complex investment decisions. Mutual Fund offers the services of experts to manage your money. The money collected from several such investors are strategically invested in options like stocks, bonds etc. by professionals called Fund Managers who understand the

market and invest your money for you in lucrative options, based on the risk you have opted for.

Based on the Fund’s objective, the fund is invested in different securities like fixed income or stocks. Different schemes come with different risks and it may happen that the value of an investment may decline over a period, based on the prevailing (stock) market scenario. Or the Government may change or add new regulations.

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Many factors can influence the performance of Mutual Funds. Having a diversified fund can help reduce the risk offsetting the losses from some funds with gains in other. Generally when you invest in Mutual Funds, you get a choice between two plans – Growth Plan and the Dividend Plan. The difference is simple – in Growth Plans, no regular dividend is paid to the investor and so all the profits are reinvested back in the fund and hence your wealth compounds. While in Dividend Plans, the dividends are paid out of profits earned.

How do you decide which option to choose?
According to Rabindar Kumar, a Financial Advisor, the choice of funds would depend on many factors like current market status, the investor’s financial needs, strategy and financial status. If you plan for a long term investment, say for two to four years, a growth fund definitely performs better as compared to dividend plan. In case of dividends, some assets are given as dividends and so the fund required for accumulative growth is reduced. However, if the market gets volatile and NAV gets reduced then with the dividend fund option people feel that at least they have got some returns in the form of dividend. So there cannot be a simple straight answer to this. But overall a long term growth fund performs better.

The main thing to consider is the market status at the time of investment. The fund category is quite diversified like large cap, mid cap or small cap. For people who plan to stay in the portfolio for long time, the large cap fund is a good option as it has been seen that the performance of large cap is generally constant and they perform better. The performance of mid cap and small cap is not constant; some years they perform well while sometimes the performance is not good. For regular investors who keep investing and selling on a regular basis, they generally go for diversification more and invest in small cap or mid cap funds. They go by the current market status and do the investment.

The choice of funds also depends on personal target and financial status. For people who can’t take high risk a debt fund is a good option against equity. In case of a debt fund the principal generally doesn’t go in loss. The returns may not be high but you will keep getting returns. For people looking for regular income, balanced fund is a good option where investment is done in both equity and debt funds.

There is a new scenario where if you go for SWP (Systematic Withdrawal Plan) you save on tax. People feel that now that the dividends are paid after cutting 10 per cent tax SWP is a better option as you save on tax. Our expert clarified that people need to understand the whole thing before switching to SWP from dividend option. SWP will benefit only those whose income is 1 lakh or less than a lakh; beyond 1 lakh you will be taxed here also. While in case of dividends you are not charged anything extra up to 10 lakhs. Only beyond 10 lakhs you will need to pay additional tax of 10 per cent.

Also, when you go for SWP, your units also get redeemed and if the market goes down it may happen that all your units get lost in the form of SWP. While in case of dividend payout at least your units remain intact and you will keep getting dividends as and when the company makes profit. So before making a choice of fund understand the whole scenario. Select a fund based on your personal requirement and financial status. What may suit one may not be suitable for another. Mutual fund is a good option provided you make wise decisions. It is a good idea to take advice of any good financial adviser who understands the market better.

Safety Tips at a Glance
Based on your investment objective your financial advisor will suggest the kind of investment you require. Some of the options include –
Equity/Growth Funds – These funds invest a major part of its corpus in stocks and the investment objective of these funds is long-term capital growth. This is suitable for investors with high risk appetite and long term outlook.
Debt/Income Funds – These funds invest minimum 65% of its corpus in fixed income securities. They provide for low risk, stable income and preservation of capital. These funds are suitable for investors whose main objective is safety of capital with moderate growth.
Balanced Funds – Balanced funds invest in both equities and fixed income instruments. Ideal for investors looking for a combination of income and moderate growth, these funds provide both stability of returns and capital appreciation to investors.
Money Market/ Liquid Funds – Money market/ Liquid funds invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit and Commercial Paper for a period of less than 91 days. They provide easy liquidity, preservation of capital and moderate income.
Gilt Funds – These funds are safer as they invest in government securities.
Why Mutual Funds?
Professional – By investing in mutual funds, you get the services of professional fund managers, which would otherwise be costly for an individual investor.
Diversification – You get the benefit of diversification across different sectors and companies.
Liquidity – They are mostly liquid investment unless there is a lock-in period. Most funds can transfer the money directly to your bank as they are well integrated with the banking system.
Flexibility – You have the flexibility to invest in a wide range of schemes with options for systematic (at regular intervals) investment and withdrawal.
Well regulated – Mutual funds in India are regulated and monitored by the Securities and Exchange Board of India (SEBI); all funds are registered with SEBI and complete transparency is enforced.

Understanding the responsibility in Using Credit Cards

A Credit Card comes with its perks and convenience for users. However, if not handled properly, it can put you in some serious debt and impact your credit rating as well. The mantra is responsible use and knowing the rules of the game so that you can reap the most optimum benefit from its usage…

Words: Sangeeta S

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Credit Cards offer great ease in managing your finances and spending, offering extra credit to you for making your purchases without the inconvenience of carrying cash. However, over-dependence on plastic money and failing to repay your outstanding due can get you in deep trouble. You need to be careful and use it strategically so that it works to your advantage. Keeping certain points in mind can help you maximize your card usage and can work in your favour.

Timely Payments
Your credit card does not offer you a loan; it only gives you credit and you need to pay back in full in a certain time. It works on the principle of ‘buy now and pay later’ but it is important to pay the full amount in time. By doing this, you will avoid paying interest and late fees that will help your credit score to soar up. Missing your payment can get you in trouble with the Bank or Card Company. It is advisable to have a Credit Card only if you can pay your bills on time otherwise Credit Cards are not for you. Not paying your bills on time can call for penalties with very high rates of interest. Set up an automatic payment system or schedule a reminder but always pay your dues on time and never miss your billing dates.

Minimum Payment
The minimum payment is the minimum amount of money that you are required to pay on your Credit Card debt as calculated in your statement each month. You may feel happy that you need to pay a small amount but in the long run, your outstanding will keep increasing as the interest charges will keep adding. With a Credit Card, you get additional time to repay the amount spent so it is important to pay the full amount all at once or pay with heavy interest later. An alternative is to convert the remaining outstanding into EMI’s, as you save an additional charge and have a lower interest rate.

Cash on Credit Card
A Credit Card can be used to withdraw cash, but it is best avoided. When you withdraw cash using your Credit Card, you pay a higher rate of interest with no interest-free period. The interest starts as soon as the money is withdrawn with no grace period. When you use a Debit Card to withdraw money, you are using your own fund while with a Credit Card, it is a cash advance on your Credit Card. The feature of cash advances should only be used in case of any financial emergencies.

Card Security
Online card frauds are frequent and in abundance, so we need to be extra careful while using our Cards – be it credit or debit. You need to protect your PIN and CVV number. Be cautious when you use the card while shopping or in restaurants. When you hand over your card to the person behind the counter, ensure that it is not copied. Use only authorized and trusted sites while using the card for online shopping and make sure you use safe payment options for making online purchases. Never compromise with the security of your card.

Multiple Cards
Different cards are designed for different lifestyles, so choose the one most suitable for your requirements. There are cards designed for travellers, shoppers, online shoppers, frequent fliers etc. so there is no point in having a card that offers benefits that you never use.

Keeping multiple cards as per your requirement is a good idea. In fact, if you keep a gap of 12 to 15 days in the billing cycle of your cards, it will help you as you can use one card in the first half of the month and the other one in the second half. This way you can use the grace period of both the cards and extend the time between your actual swipe and the bill payment to 30-50 days.

Keep a Check
Check your statement every month. It will list all your expenses and in case there is a wrong billing or fraud, you will know immediately, and you can take action. Also, keep a check on your credit score given by the credit bureau. This will help you track all the information in your credit accounts.

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Safety Tips at a Glance
• Sign on the reverse of the card immediately on receipt; unsigned cards can be misused
• If you lose your card, block it immediately and even make a report in the police station
• Always use a secure site while doing any online transaction; look for a lock icon in the status bar of your web browser
• Avoid using your card on suspicious websites or apps; read reviews of a website or app before making a purchase
• Shopping on your own device and on your home server is the safest way; public machines and networks are best avoided
• Never respond to phishing e-mails and don’t click on suspicious links
• Avoid accessing your Internet banking account on unsecured public computers and always remember to log off
• Get yourself enrolled for 3D Secure (Verified by Visa (VBV)/ MasterCard Secure Code (MCSC))
• ‘High-risk’ countries have a track record of many fraudulent activities; get your card replaced if you have used your card in such countries
• Make sure that the card you get back after any transaction is yours only; often cards get exchanged in shops and crowded locations
• Always get your cards swiped in your presence so that the details of your card are not captured anywhere
• Always cut the card in 4 pieces diagonally across magnetic stripe while discarding
• Never give a photocopy of the back of your card to anyone for any reason
• Change your PIN frequently and use a strong one
• If you are a regular online shopper, it is a good idea to keep a separate dedicated card with a small credit limit
• Review your statements thoroughly and never ignore alerts
• Always keep your information current; any change in contact details should be notified to the bank so that your information doesn’t reach the wrong hands
• Keep your system updated with most up-to-date security features