Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Monday, January 27, 2014

Managing Cash Flow

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

 


Last month, I suggested a systematic withdrawal plan (
SWP) to one of my clients to manage his cash flow with better returns. The first reaction I got was that we have heard of systematic investment plans (SIP), but never of an SWP. I realized that SWPs are not commonly known and used.


As the name suggest, an SWP is the reverse of an SIP. In SWPs, you regularly withdraw a fixed amount of money from a fund. The amount to be withdrawn and the frequency are fixed by the investor, which can be monthly, quarterly or annual for any fixed amount that you wish to receive from your fund whether liquid, equity, or balanced. This mechanism is very important and good for any client who has erratic earnings or a large corpus of fund and has committed expenses. Especially, this is very suitable for retired people.


Although the cash flow can be generated by opting for daily, weekly or monthly dividend option plan but the problem is that the quantum of the payouts is not fixed. Sometimes, if there is no appreciation which can be distributed, you might have no dividends to receive.


The SWPs also provide for tax efficiency. The suggestion is that the client should opt for a growth scheme. In such a case, on every withdrawal, only a small portion is booked as income while the substantial part received is capital. Such income, if long term, may provide very low tax incidence (virtually nil after indexing), while in dividend option, the dividend distribution tax is very high (effective tax rate is 28.33%).


We strongly suggest SWPs for people having a good corpus or an erratic income and regular cash flow requirement. It is also one of the best retirement plans for senior citizens who are looking for growth in their investments and who need fixed withdrawal amount over a period of time.


By the right mix of investment instruments, one can plan the annual withdrawal in such a way that it is less than the expected annual rate of return.


To illustrate, if a client needs say Rs 25,000 per month and has a corpus of Rs 30 lakh, one can distribute his corpus in such a way that he gets a return of 10% per annum. With an SWP of Rs 25,000 per month, he will book income of just around Rs 15,000 in the first year, while he receives Rs 3 lakh in a year and the corpus at the end of the year will also remain around Rs 30 lakh.


The tax incidence on this will be low even considering the highest income slab. For subsequent, years the gain shall be long term leading to very low or no taxation. This will ensure that your SWP can go on forever without eating into your capital. Besides all this, SWP has ease of operations as money comes into your bank account directly at the required frequency with paperwork done only once. 
 

 

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

 

 

Leave a missed Call on 94 8300 8300

 

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

      1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

No comments:

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications
Related Posts Plugin for WordPress, Blogger...

Popular Posts