Back to Blog Why NPS is better than other long term retirement plans? March 29, 2022 What is NPS? The National Pension System, or NPS, is a retirement plan introduced by the Government of India in 2004, and is regulated by the Pension Fund Regulatory Development Authority (PFRDA). With this retirement plan, money invested by you and others is pooled together and then reinvested into the market by professional fund managers vetted by the PFRDA. These investments are made in a diverse portfolio that consists of government bonds, bills, corporate shares and debentures. They accumulate over time and provide you with market based returns on your investments, which you can withdraw on your retirement. Who should invest in NPS? While NPS is available to all Indian citizens between the ages of 18-70, its end goal is to provide you with financial security on your retirement. Hence, it is best suited for people who are looking for a stable retirement plan and have a relatively low tolerance towards market risks. Moreover, NPS also provides tax rebates of upto Rs. 2 lakhs under Sections 80C and 80CCD of the Indian Income Tax Act. NPS allocates a portion of the accumulated corpus to equity investments, which are exposed to market fluctuations, returns and risks. The percentage of your investments that goes towards these can be decided by you, within a few limitations. It is important that you decide the right option for you depending on your investment goals, earnings and living expenses, and most importantly, your risk tolerance. NPS vs EPF While both Employees’ Provident Fund (EPF) and NPS are managed by the government, there are some factors that make them different, and may be a differentiating factor when it comes to choosing which one you want to invest in. The similarity between these retirement plans is that they both invest your money across debts and equities. The difference between them is that you do not get to choose your fund manager with EPF. In the case of NPS though, not only can you choose the fund manager, but you can also switch between fund managers if you are not happy with the performance of your funds. NPS can be said to be a more evolved retirement plan that takes into consideration your age and risk appetite. It allows you to decide on the assets you want to invest in based on your return expectations. NPS vs ELSS ELSS is a form of equity mutual fund which allows you the benefit of saving taxes, on investments upto Rs. 1.5 lakh under Section 80C, just like NPS. However, with the NPS, you also have the option to save an additional Rs 50,000 under section 80CCD (1B). Also, on maturity, you have the provision to withdraw 60% of the entire corpus as a lump sum entirely devoid of taxes, while the remaining amount is used to purchase annuity. Since ELSS is entirely based on equity, it carries a substantial amount of risk, while NPS caps equity allocation at 75% which makes it comparatively safer than ELSS. Furthermore, NPS also allows you to invest in assets like corporate bonds and government securities, which are safer than equities. Therefore, if you are looking for a retirement plan which is secure and also lowers your taxes, NPS can be a good option. NPS vs PPF Public Provident Fund, or PPF, is another savings scheme that was introduced by the Government of India, and was designed to provide fixed returns, and is not limited to pensions, unlike the NPS, which is exclusively a pension savings scheme. Since NPS is market based and carries a certain amount of risk, the average returns are higher in the long term. While it cannot be guaranteed that NPS is better than PPF, it can definitely be said that NPS can help you create a higher corpus in the long run which can help you secure your finances better. NPS vs Mutual Funds The National Pension System operates in a similar manner to that of a mutual fund, and invests your money in equities. However, unlike equity mutual funds, which are entirely based on equity market investments, NPS has a capping of 75% in the equity market, which makes it relatively safer to invest in. Furthermore, the tax savings on investments of up to Rs. 2 lakh, with NPS, also adds to the benefits, while any returns from mutual funds are subject to taxes. If you are looking to create a corpus that provides you with regular income on retirement, NPS should be the ideal choice because of the lower risk and tax benefits.To conclude, every investor has different goals for their investments and a specific mindset. You should always consult your financial advisor before you make any investment decision. If you are looking to have a stable and smart retirement plan that provides you with multiple benefits, you can choose to go with NPS by KFintech here at nps.kfintech.com. Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog Factors to consider when opening a demat account March 26, 2022 A demat account is necessary if you want to trade in the stock market, securities or other equities. If you’ve thought about trading in the stock market, you probably already know this. A demat account is essentially, just like a bank account. The difference between them is that a bank account holds your money, while a demat account keeps your shares. Since both these accounts concern your finances, there are several factors that you should keep in mind when opening one of them. While opening a demat account online is a fairly easy procedure, choosing the right one is not as simple. As an investor, especially if you are a beginner, there are a number of factors that you should consider before you finalize a service provider for your demat account. Let us take a look at some of these factors you must look at. Is the legacy of the company good enough? Whenever it comes to managing your finances, you must always consider the trust and the investor base associated with the company you choose. It is essential to look for a platform that maintains a strong base of investors, along with a presence all across the country. This ensures that your service provider of choice is trustworthy and it will help filter out operators who may not be able to deliver on the promise of excellent returns. It is best to take some time to research and do the due diligence on the legacy of your chosen depository participant, along with their customer base, the duration they have operated for, and the number of branches they operate. Does it provide robust security? Everything choice we make has its own set of pros and cons. While the virtual world provides several advantages, there is also a security risk that comes with it. We need to take in to account this risk, even more so when it concerns your finances. Your demat account provider must be equipped with state of the art security softwares and firewalls that can properly protect your financial information. Any data must be encrypted with the highest security levels when moving between servers. Should you have the same demat and trading account broker? Although most brokers operate both your demat and trading accounts, there can be scenarios, where a broker does not have a Depository Participant license, which is required for a broker to be able to open and maintain a demat account. In such cases, it is essential to submit the debit instruction slip to your broker on time after selling your shares. Failing to do so results in a bad delivery and you may end up incurring losses. Having one entity as both your broker and Depository Participant will make the procedure seamless, making your experience simpler and easier. It is definitely better to have the same broker for both types of accounts. What are the demat charges involved? While many services advertise that you can open a free demat account with them, it is important to understand that account opening charges are just one of the costs associated with maintaining your demat account. An annual maintenance charge may be billed to keep your account maintained. This charge is usually dependent on the valuation of shares present in your demat account. Every time you sell a share, and it gets debited to your demat account, a charge is incurred by NSDL or CDSL to the Depository Participant, which is also billed to you. You could also be charged a fee every time you request a physical statement, apart from any other charges that may be covered under the fine print. It is important to know and understand all of these charges since they are important and cannot be avoided, which will impact the returns you see from your trades. Is the banking, broking and custody seamless? In case your broker is a bank, the banking, broking and custody charges can be handled entirely seamlessly by the bank. The major advantage of having the same entity function as your banker and broker is that you can use NEFT, RTGS or UPI payment methods since they are usually free. Most brokers, on the other hand, charge a nominal amount in case you use an authorized payment gateway. The more seamless the process is, the easier your life gets. Does the DP provide high quality support services? Trading in the stock market is time sensitive and faster services result in more efficient trading and returns on investment. A Depository Participant should not be judged just on the basis of routine transactions, but also on the basis of the ancillary services they provide. You should consider the time duration taken by them to get your physical shares dematerialized and whether your account is automatically credited with corporate actions. Moreover, you should also consider the efficiency with which issues like customer complaints, lien and pledge are dealt with. Ensuring all these meet your requirements helps you get a more satisfactory service experience. Are there pending complaints against the DP? Through checks about the service standards of the DP are essential to judge their work hygiene and quality. A major red flag is if a Depository Participant has many pending complaints on the service level with SEBI. Furthermore, you should also ensure that there are no ongoing regulatory investigations against them. While it is true that everything you read online may not be correct, a large percentage of reviews being negative is definitely a point of concern. If you are looking to make investments and are in need of a demat account, you can create one with KFintech here https://ipo.kfintech.com/ Featured Posts What is an IPO, how do you invest in it, and what should you consider?What is an IPO? Why do companies do it, and how is it important? 5 Important Things to Check Before Investing in an IPOHow to Improve Your Chances of Getting IPO AllotmentIPO vs FPO: Understanding the Difference for Smarter Investing
Back to Blog What’s the deal with IPOs? March 24, 2022 As the name suggests, an IPO, or an Initial Public Offering, can be considered to be a company’s debut on the stock market as a publicly traded company, changing from being a privately held entity. The company that is issuing the IPO raises the capital in the primary market, and after the completion of the IPO, all investors can trade its shares, which is then referred to as the secondary market. While from the perspective of an investor, an IPO presents an opportunity to attain shares of a company that showcases the potential to grow, to the company, it is an opportunity to raise capital from the public market and use the funds for purposes that will help them achieve their ambitions of growth. Why does a company launch an IPO? While it may seem to be a simple process to bring a company into the public market, the process is long and involves a lot of steps that need to be completed. Starting from making the choice of an investment bank to ensuring the regulatory filings, there are several stages before a business can offer the shares of their company to the public. This may raise a question about why companies should trade their companies publicly, and dilute their shares. To answer this question, it is important to understand the following advantages of going public. Increased Capital: By publicly trading their company, a business has the opportunity to raise a higher capital than they could have been able to as a privately held company. The other methods of raising capital, in the form of loans, are riskier and more expensive than launching an IPO. Furthermore, a loan limits the capital raised, while an IPO allows the company to raise capital from the public market. Publicity gain: Offering an IPO allows a company to gain publicity by being listed on the stock exchange. This results in the company becoming more recognisable to the public, increasing consumer trust in the brand, its products and services. This increase in publicity also facilitates smoother acquisitions and mergers along with higher cash flow due to the publicly listed shares. Credibility Formation: A result of being a publicly listed company after an IPO causes the company to have an increased visibility, which also increases the credibility of the company. Assessment of Valuation: After a company is listed in the stock exchange, the valuation of the organisation is bsaically equal to the amount that investors are willing to pay for it. This allows investors to know and understand the valuation of the company. A proper valuation assessment also makes it easier to carry out mergers and acquisitions when needed. What kind of companies are launching IPOs? In the current scenario, a lot of companies, including new-age consumer tech companies and startups are pursuing an IPO. The year 2021 proved to be a record year for IPOs, witnessing investments worth over Rs 1.3 lakh crore across 65 IPOs. This record amount was more than four times the entire amount that was raised in 2020 by IPOs, which amounted to Rs 26,628 crore. With the Indian IPO ecosystem growing at a rapid pace, it is expected that 2022 will also bear witness to a very active IPO market. For you as an investor, it is expected to be one of the best seasons to take part in the IPO boom, and secure your future. While investors will see increased chances of investing in the market, it should be noted that in 2021, a lot of companies experienced a downturn after launching their IPO, which has resulted in investors becoming much more cognisant of current market situations. Companies likely to have an IPO in 2022 include the likes of the highly anticipated LIC, along with companies like Pharmeasy, MobiKwik and Ixigo. In 2021, new age digital firms like Zomato and Nykaa succeeded in gaining the highest amounts in fresh capital. However, PayTM, which raised Rs.18,300 crores through their IPO, surpassing Coal India in the amount of capital raised, saw a decline in their share prices. Should you invest in an IPO directly? Many investors buy the shares of an IPO with the intent of associating themselves with a company and earning long term gains for themselves in the process. However, there are also investors who invest in IPOs with the specific purpose of listing short-term gains. Depending on the demand of a company’s shares, the listing price (the price that you actually see for a stock on the stock market) of a company can be either higher or lower than the offer price. If the demand for a company’s shares is high, the listing price becomes higher than the offer price, and you stand to make significant returns on your investment. However, according to financial experts, when it comes to well-managed companies, it is usually advisable to stay invested for the long term after investing in their IPO to give yourself the best chance of maximising your returns. Many investors are not fulfilling their maximum potential gains by exiting their investments too quickly after listing. In such cases, a thematic fund, or an equity mutual fund serves you well because they hold investments for a longer time after listing. With the IPO frenzy currently going on, it is also possible that many investors do not get shares allotted to them in the IPO. In such cases, you can also choose to take the mutual fund route to an IPO. However, it is always best to consult your financial advisor before you make an investment decision. Featured Posts What is an IPO, how do you invest in it, and what should you consider?What is an IPO? Why do companies do it, and how is it important? 5 Important Things to Check Before Investing in an IPOHow to Improve Your Chances of Getting IPO AllotmentIPO vs FPO: Understanding the Difference for Smarter Investing
Back to Blog 3 Reasons Why You Need A Demat Account March 22, 2022 To understand why we need a Demat account, we should first understand what a demat account is and what it does. Just like a bank account protects your money, a demat account is responsible for holding your shares and securities in a consolidated electronic format. A demat account aims at making your trades in the equity market easier and simpler by gathering all your crucial information together in one place. It allows you to conduct transactions of shares and stocks conveniently under a single roof without the hassle of needless paperwork. The stock market is now open for everyone who desires to generate wealth from investments in the equities market. In years past, it used to be the case that a broker was hired to seek their opinion on which investments to go for. You, as an investor would not have been able to enter the stock market without having a broker. The advent of online trading, however, has made this huge opportunity available for the masses. Online trading gives you the provision to make trades directly in the market without having a broker. However, a demat account is mandatory before you begin your investment journey. If you are already an investor, you are surely familiar with the term Demat account, even if you do not hold one yourself. There are many investors who feel conflicted on the opinion of holding a demat account, or have a certain trust ingrained in the traditional trading methods. The following points would hopefully help you make up your mind about opening a demat account. Time saving Stock market trades are time sensitive and require heavy observation to make the right decisions. In such a time sensitive market, traditional methods of trading, that take a lot of time to complete a single transaction, can cause you to miss out on precious moments that could have been used for making additional purchases and sales of security holdings. It is hugely beneficial to have a demat account since the trading process is conducted electronically and requires much lesser time than traditional methods. In today’s day and age, a demat account has become a necessity for investors who are entering the stock market. Easy Storage Physically held shares and security certificates come with the hassle of storing them securely, as they are prone to theft and damage. A demat account changes the form of the shares and securities, from being a physical document to a virtual one. This makes storing them easy, and these electronic forms of shareholding are easily bought, sold or transferred. With traditional trading methods, you were required to put in a lot of effort into acquiring the shares of your choice, and it used to be a difficult process since you would not be allowed into the stock market directly. Your only gateway possible was by having a broker. With a demat account, you are free from all these problems. The Mandate SEBI has issued a mandate wherein all investors are required to hold a demat account in order to conduct transactions. Therefore, it is essential for all investors, who are interested in making trades online, to hold a demat account. They are required to choose their depository participant and ensure that their demat account is ready before they begin trading in stocks and shares in the equity market. In case you are interested in making trades in the stock market, and are looking for a demat account, you can open one here https://ipo.kfintech.com/ with KFintech. You have the option to choose a depository participant from a list of 50+ DPs. If you already have a Demat account, you can refer your family and friends, and earn upto Rs. 400 for every account that is successfuly opened. While they can go with the depository participants of their choice, you also have the option to choose a depository participant for them. Featured Posts What is an IPO, how do you invest in it, and what should you consider?What is an IPO? Why do companies do it, and how is it important? 5 Important Things to Check Before Investing in an IPOHow to Improve Your Chances of Getting IPO AllotmentIPO vs FPO: Understanding the Difference for Smarter Investing
Back to Blog Why should NPS never be overlooked in tax planning? February 17, 2022 For most of us, retirement may seem to be a long way off. It may look like we have a lot of time on our hands to plan for the retirement of our dreams, but more often than not, it arrives sooner than we anticipated. The key to a stress free retirement is having a great retirement plan, one that not only meets all your needs, but also gives you more than that. While there are many retirement plans that are at your disposal, not every plan suits your requirements. It is crucial that you take the time to sort out your priorities and decide a retirement plan before you proceed with it. The National Pension System, introduced by the Government of India in 2004, is among one of the most beneficial retirement plans. Apart from the trust that comes with being associated with a government fund, it also provides substantial benefits and a healthy monthly compensation as pension after your retirement. The NPS is a great tool, not only for planning your retirement, but also to help with your taxes. Tax Free Money on Maturity? Yes, investing in the NPS effectively makes your accumulated corpus tax-free on maturity. According to the current rules on taxation, if you are a subscriber to the National Pension System, you are eligible to withdraw 60% of the corpus at maturity, completely tax-free. For the remaining 40% of the corpus, you are required to buy an annuity, which is also exempted from the taxation systems. This effectively means that the entire corpus we invest becomes tax-free. However, the monthly payments that you receive as pension after your retirement will be taxable, which will qualify under the base tax exemption limit. This means that only a portion of that income will be taxed. Since the National Pension System is a government retirement plan, the taxation rules are very investor friendly, which makes it an attractive venture for us all. A true-blue retirement plan? As young individuals, we all think retirement is far away, and that we have time to save up for it. While we are busy living our lives, our retirement age dawns upon us sooner than we realise. It is important to make savings that can help us lead our desired lifestyle even after retirement. Moreover, starting early means that we can accumulate a higher corpus, which can lead to more payouts. The lock-in period of NPS until our retirement is a blessing in disguise because it prevents us from misusing our retirement funds for unnecessary expenses. We can still opt for a loan in case of emergencies, but we cannot get a loan for our expenses post retirement. It is important that we start saving early and restrict ourselves from using the amount for other miscellaneous expenses. Highly regulated at super low costs? The National Pension System is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which is a government body, assuring the protection of your rights and interests with utmost efficiency. This is a crucial aspect, taking into account the long term investments which concern your life after retirement. The financial goal in this scenario is to ensure a good, stable life after retirement, which is among the most important but vulnerable phases of your life. A Diverse Portfolio? The amount you invest into your NPS account is pooled together into a larger investment fund, which is then further invested into the market by fund managers vetted by the PFRDA. These investments are made in a diversified portfolio comprising government bonds, bills, corporate debentures, and shares. Over time, these investments multiply and form a substantial corpus, a part of which you can withdraw as lump sum post retirement. Furthermore, NPS also allows you the provision to choose from multiple fund managers and different asset allocation options. Depending on your risk and return expectations, you can choose the options that best suit your needs. You can also switch between funds if the performance is not upto your expectations. Investing from your home? You can apply for a National Pension System account online, upon which you receive a Permanent Retirement Account Number (PRAN). A PRAN is a unique number that remains constant throughout your lifetime, even if you change cities or jobs. Upon opening the account, you are given access to an online portal which allows you to track and manage your NPS account. All updates, statements, fund performance details, and new investments can be done using the portal. It can also be used to switch between different funds. Not having to visit financial institutions, or stand in those long and tiring queues, is surely an advantage. The advantages provided by the National Pension System are hard to ignore, and if you are an investor looking for a retirement plan, delay no more. Apply for NPS with KFintech here https://nps.kfintech.com/ Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog NPS – Budget Impacts on State Government Employees February 16, 2022 The term “pension” is almost synonymous with retirement, and we think about retirement as a time of leisure when we can do whatever we like. While this concept is true, it is also important to have a stable retirement plan that allows you to enjoy this next adventure of your life. Coming to retirement plans, the National Pension System (NPS) is one that was introduced by the Government of India in 2004. Under this retirement scheme, an individual can make monthly contributions to their NPS accounts, the funds from which are then pooled together to form a larger fund. This fund is then reinvested into the market by fund managers who are vetted by the Pension Fund Regulatory Development Authority (PFRDA). Investments can be made in to government bonds, bills, corporate debentures and shares, which makes the portfolio highly diverse. Apart from the option to choose between different investment forms, you can also choose between fund managers, along with provisions to switch between schemes and fund managers, keeping within certain guidelines. Being introduced by the government, NPS is among the most trusted retirement plans, and apart from these benefits mentioned above, also provides tax benefits. What are the tax benefits provided by NPS? If you are an individual who is subscribed to the National Pension System, you are entitled to claim tax benefits under section 80C of the Income Tax Act, 1961. Under the act, you are entitled to receive tax deductions with a limit of ₹1.5 lac as under Sec 80 CCD. If you hold a Tier I NPS account, you are eligible for an additional tax benefit of ₹50,000 that is over and above the deductible amount of ₹1.5 lac. If you are a government or a corporate employee, a portion of your salary can be contributed to NPS, which can also be deducted from your taxable income, helping you further lower your taxes. The new budget for the year of 2022-23 is also proposing some changes which can increase these tax deductions and benefit the NPS subscribers even more. What was proposed in the new budget? Supratim Bandhyopadhyay, the Chairman of the PFRDA, mentioned that the employees of the State Government, who previously had a tax deduction limit of 10%, would enjoy the benefit of the tax deduction limit being increased up to 14%. This brings state government employees at par with employees of the central government, enhancing the social security benefits of the state government employees. According to the Financial Minister of the Indian Government, Smt Nirmala Sitharaman, this move is made to provide both the central and state government employees with equal treatment. Apart from bringing in parity between the employees of the government at both levels, this step would also increase the amount saved by the state government employees, giving them the opportunity to make other investments. How will government employees be affected? If you are subscribed to the National Pension System, you are eligible to receive a tax deduction benefit under three different sections of the Income Tax Act, 1961. Under section 80CCD(1), you have the eligibility to make deductions of upto ₹1.5lac, which comes under the limit of the same amount under section 80C. Over and above the deductions of 80C, NPS provides further deductions of upto ₹50,000 which comes under section 80CCD (1b). However, this deduction is only applicable if you are a tier I NPS account holder. This means that you can claim total deductions of ₹2 Lacs under these two sections. As per the memorandum of the new budget, the increased tax deduction percentage will help increase the corpus that can be accumulated. Having the provision to invest more in the NPS would mean higher returns on retirement, which would give the State Government employees more social security, similar to Central government employees. Not only does this bring about equality in both the levels of the governments, but it also paves the path for individuals to have a more stable future upon their retirement. Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog Is the NPS distribution model at an Inflection Point? February 15, 2022 With PFRDA’s impetus on revised POP compensation, the demand for National Pension System (NPS) is likely to gain traction in the country with 1.4 million-plus customers as of March 31, 2021, the total pension AUM was Rs. 5,62,338 crore, up 38.18 percent year over year. NPS has a lot of space to develop because of the proposed tax breaks in the budget. Furthermore, given the underutilization of NPS in India and the absence of social security infrastructure, we feel that Pension Funds have a lot of space to grow. Intending to maximize the reach & to increase the footprint of the National Pension System (NPS), pension regulator PFRDA has notified increased charges for NPS-related services offered by POP w.e.f February 1, 2022. This increase is across initial subscriber registration, initial contribution, all subsequent contribution, and persistency charges. The proposed revision of the POP compensation structure anticipates strengthening the inclusion of distributors in the entire value chain by increasing potential revenue. Regulator’s policies aiming at expanding the NPS market, such as the inclusion of agents, increase in revenue, and many only indicate better prospects for the market players going ahead. With the increase in POP revenues, key players are keen to onboard distributors to expand their market by offering attractive revenue payout to the agents. Agents / MFDs will act in a fiduciary capacity towards their clients and assist their clients at all stages of NPS, from onboarding to withdrawal. Agents will be required to choose a POP to extend NPS services to their investors and add a revenue stream to their existing cash flows. Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog Make sure you retire with a pension | How to choose the best retirement plan? February 7, 2022 You have a certain lifestyle that you are accustomed to, and it is reasonably easy to understand that you would want the same lifestyle moving forward, if not a better one. While you work hard to build a stable life for yourself and your loved ones, you also have a responsibility to secure your own future. In order to do so, it is essential to have a proper retirement plan in place. When planning your retirement, here are answers to some questions you should be asking. What exactly is a Retirement Plan?A retirement plan gives you the opportunity to relish your retirement by giving you a regular income, which can help you sustain your finances. While it may seem that retirement is a long way off, it is not. Retirement comes sooner than you think and that is why it is important to figure out what you need from your retirement plan. Moreover, having a retirement plan also ensures that you are prepared for an emergency, however far-fetched that might be.Planning for retirement now means ensuring that you make systematic savings over time, which, in turn, gives you returns when you need a steady source of income the most. While retirement means that you are void of your usual income from your employer/client, your sustenance costs do not go down. This includes your usual cost of living, medical expenses, and any others associated with your lifestyle.While every retirement plan is unique with their own attributes, the National Pension System is a retirement plan that supersedes most other retirement plans by a large margin. Why do you need a retirement plan?You can be the master of your trade, and can possess a great deal of knowledge, but what we can never be certain of, is what the future holds for us. While we hope that it is certainly bright and the best, it does not hurt to take precautions and ensure safety in case of uncertainties. Saving now, to ensure that you do not have to struggle in the future, is one of the biggest precautions we can take while we’re still gainfully employed.Moreover, retirement plans like the National Pension System, an initiative by the Government of India, ensures that you save a significant amount of money every year in taxes. You can save as much as ₹62,400 every year over and above the tax redemptions you can get on other investments.This retirement plan not only ensures that you have an adequate amount of income every month after retirement as a pension, but also saves you money right now with its tax benefits, which make it a prospect that is hard to pass by. What makes NPS a special retirement plan?The National Pension System, or the NPS, is a government initiative that was introduced in 2004 and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), and has appointed KFintech as Central Recordkeeping Agency (CRA).What makes NPS special is its ability to increase in value over time. The funds invested into the National Pension System are pooled together and then reinvested into the market as government bonds, bills, corporate debentures, and shares, making it a highly diversified portfolio. These funds are invested by portfolio managers who have been vetted by the PFRDA. These investments increase in value over time and accumulate to form a substantial corpus that you can withdraw on retirement as lump sum, and in the form of monthly payouts as pension.The National Pension System is among the most flexible retirement plans because it gives you the liberty to have the investment schemes and the fund managers of your choice. Depending on the returns you expect from your investment, you can make the necessary choices. Moreover, you can also switch between schemes and fund managers, keeping in accordance with certain regulations.The National Pension System also provides you with substantial tax benefits. You can save upto ₹1,50,000 under section 80CCD, plus an additional amount of upto ₹50,000 under section 80CCD (1B). This attribute of NPS makes it a retirement plan with dual benefits, of both saving your money as well as ensuring that you have a superior return on your investments.This scheme is open to all Indian citizens between the ages of 18 and 75. If you are looking for a retirement plan, you check the National Pension System with KFintech here <https://nps.kfintech.com/> Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog NPS – Is it a stable retirement plan? February 3, 2022 When you think about retirement, you immediately have a picture of leisure and a whole lot of time on your hands. Daydreaming aside, it is important to note that your retirement can be however you want it to be. Retirement is one of the phases of your life that requires intricate early planning and disciplined saving, such that your lifestyle does not get compromised when you retire for good. In order to do that, you should look for a stable and sustainable retirement plan that caters to your long term needs. While there are many retirement plans available that are provided by numerous service providers, it is important to choose the right one, because this concerns your potential future, and the lifestyle that comes along with it. Therefore, there are certain questions that might come to your mind. Let’s examine them one by one! Why is early planning and saving important?To ensure that your future is safe and you are equipped with the essentials to continue the lifestyle of your choice, it is integral to save enough while you have a steady source of income. While it may seem that your retirement years are far and you have plenty of time, it is true that time flows swiftly, and before you realise, your retirement will be imminent. Moreover, early planning and early saving is important to develop a disciplined habit that enables you to make the best decisions.For instance, if you start early, the biggest advantage that you have is time, and the opportunity to segregate your savings, so that you do not face the burden of saving a large amount in a small time. Although it is understandable that expenses are more than savings in the younger years, it is important to realise that smart savings will help you fulfil your long term goals efficiently, and also put your retirement planning into a clearer perspective. What is NPS?Among the many retirement plans that are available for subscription from multiple similar service providers, NPS, or the National Pension System is among the most sustainable ones. A retirement savings plan that has been introduced by the Government of India, this is a voluntary scheme that enables you to make smart segregated savings during your work life. The motive behind this plan is to create an opportunity that provides adequate income after retirement to Indian citizens.In the National Pension System, or the NPS, the investments are pooled together into a pension fund which are then further invested into a diversified portfolio that comprises Government Bonds, Bills, Corporate Debentures, and Shares. These investments are made by professional fund managers who are vetted by the Pension Fund Regulatory and Development Authority (PFRDA), under approved guidelines. These investments grow and form a substantial sum over the years, which can then be withdrawn as lump-sum and monthly dividends as pension on your retirement.Apart from providing substantial long term returns, there are several other benefits that NPS provides, which makes it one of the most sustainable retirement plans. Benefits of NPSFlexibility: One of the most lucrative benefits provided by the National Pension System is the flexibility that it comes with. You have the option to choose from a number of investment options, and the fund managers. You can choose your investment option according to the expected returns and monitor the growth of your portfolio. You also have the option to switch between fund managers and investment options keeping in line with the guidelines.Tax Benefits: One of the most attractive benefits of the NPS, along with letting you make savings for your retirement, is that it also allows you to make tax redemptions letting you save more money. The National Pension System allows you to make tax redemptions of upto 2 lacs per annum as per 80CCD and 80CCD (1B).Portability: Once you open an account with NPS, you get a Permanent Retirement Account Number (PRAN), which is unique and stays with you throughout your lifetime. This allows you to make your NPS account to become portable between jobs, even if your location changes. This ensures that your corpus remains constant.Regulations: The National Pension System is regulated by the PFRDA, which is a government body, and follows transparent investment norms. Not only does it build trust, it also ensures that NPS accounts are among the lowest charging accounts in terms of maintenance, which, in the long term can lead to saving substantial amounts of money.These benefits make the National Pension System, or the NPS, one of the most sustainable and stable retirement plans around. The smart segregated savings, coupled with long term returns and tax benefits make NPS a really worthwhile investment option. If you are looking for a suitable investment plan, you can choose to invest in NPS with KFintech, which is one of the Central Record Keeping Agencies in the country. Featured Posts NPS Calculator: A Complete Guide to Planning Your Retirement SmartlyWhat is an NPS calculator and how do you use it to plan your retirement?NPS Retirement Plan: Building a Corpus for Your Future? How can it help?7 Key Benefits of Investing in the National Pension System (NPS)Planning to Register for e-NPS? Avoid These Common Mistakes
Back to Blog Everything You Wanted To Know About IPOs February 1, 2022 The IPO landscape in India witnessed massive fundraising last year, worth more than 1 lakh crores. It was a record-breaking year, and the amount raised was nearly 62% more than the total raised in the three-year period between 2018-2020. So, what exactly is an IPO?Initial Public Offering, or an IPO, can be defined as the process by which a private limited company enlists its shares on a stock exchange, by virtue of which, the shares are made available to the public for purchase. While many individuals would think of an IPO as an opportunity to make huge amounts of money, it is important to understand that these investments are risky and that there are chances of them delivering inconsistent returns.The company which puts the shares up for sale to the public is called an “issuer”, and the guidance required to take the company public is provided by multiple investment banks. Once the IPO is received, the shares of the company are made public which are then traded into the open market and are bought or sold by the investors in the stock market.Taking a company public is a challenging and time-consuming process, which requires intensive paperwork and a lot of preparation, since the company will be open to public scrutiny after receiving the IPO. Therefore, most companies planning an IPO hire an underwriter, which in most cases, is an investment bank. The investment bank takes care of providing relevant guidance to the company and helps them set a reasonable initial price for the public offering. The underwriter also helps them set up for the IPO by creating key documents for the investors and also scheduling meetings for potential investors. How does investing in an IPO benefit you?While there are no guarantees, investing in an IPO can help you reap the benefits of a lifetime.● Investing in the initial public offering lets you be a part of the company from the initial public growth. Being a part of the company right from the start gives you the opportunity to have significant growth in a very short span of time. Even in the long run, the company may have the prospects of providing substantial returns.● More often than not, the IPO price is the cheapest price of investment. This is because the price is the initial public offered price, which changes post the IPO issue. The prices of the shares after the IPO would depend on the market rates and the best rates that brokers can offer. Therefore, getting a chance to have the shares of a company at the lowest price is never a bad option.● Depending on the number of shares that are owned by an individual, they are entitled to dividends and bonuses as earned by the company. The sharing of the dividends is shared prior in an open declaration by the management of the company.● Provided that the company has a stable business model and good financial performance, investing in the company during an IPO can result in the creation of substantial long-term wealth and can fulfil your financial goals. Why an IPO investment might not always be beneficial?Just like any other investment opportunity, while there are definitely huge rewards to be had, there are also risks associated with the same. ● Investing in an IPO carries the same factors and, in most cases, investing in an IPO is associated with more risk than investing in the shares of a public company which is already established. The main reason for this is that there is very little information available to the public before the investment is made, and there are a lot more unknown variables at play.● It is not mandatory that an IPO will perform well even if the public is excited and waiting for the company to become public. If the business model and the financial performance of the company is not upto the mark, it can still prove to be a bad investment. Despite the fact that IPOs sometimes do end up letting investors earn a huge amount of money, more often than not, the statistics are the other way around. What do you need to know before investing in an IPO?● In case you want to make an investment in an Initial Public Offering, the first thing that you need to do is conduct a thorough background check of the company that you are looking to invest in.● It is imperative that you go through their prospectus and understand the goals of the company for issuing an IPO. Furthermore, you can also analyze how the company is looking to spend the funds.● These factors aside, it is crucial to realize that the market landscape and the competition can affect the performance of an IPO, which in turn can make the investment go bad. In 2022, it is expected that IPO numbers will grow even more, with several tech companies entering the market. You should conduct thorough analysis and research before you invest in any IPO. Although the initial offering price is much lower, it is difficult to get an allotment for the IPO. Therefore, the alternative route is to invest in an IPO through a Mutual Fund. You should always consult your financial advisor before investing and be aware of the market risks that come with the investments. Featured Posts What is an IPO, how do you invest in it, and what should you consider?What is an IPO? Why do companies do it, and how is it important? 5 Important Things to Check Before Investing in an IPOHow to Improve Your Chances of Getting IPO AllotmentIPO vs FPO: Understanding the Difference for Smarter Investing