Registered Retirement Income Fund

Registered Retirement Income Fund (RRIF) is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan.

An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to:

  • hire professional investment managers, which may potentially be able to offer better returns and more adequate risk management;
  • benefit from economies of scale, i.e., lower transaction costs;
  • increase the asset diversification to reduce some unsystematic risk.

It remains unclear whether professional active investment managers can reliably enhance risk adjusted returns by an amount that exceeds fees and expenses of investment management. Terminology varies with country but investment funds are often referred to as investment poolscollective investment vehiclescollective investment schemesmanaged funds, or simply funds. The regulatory term is undertaking for collective investment in transferable securities, or short collective investment undertaking (cf. Law). An investment fund may be held by the public, such as a mutual fund, exchange-traded fund, special-purpose acquisition company or closed-end fund, or it may be sold only in a private placement, such as a hedge fund or private equity fund. The term also includes specialized vehicles such as collective and common trust funds, which are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts.

Investment funds are promoted with a wide range of investment aims either targeting specific geographic regions (e.g., emerging markets or Europe) or specified industry sectors (e.g., technology). Depending on the country there is normally a bias towards the domestic market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance, and other factors such as fees.


Constitution and Terminology of Collective Investment

Constitution and terminology 

Collective investment vehicles may be formed under company law, by legal trust or by statute. The nature of the vehicle and its limitations are often linked to its constitutional nature and the associated tax rules for the type of structure within a given jurisdiction.

Typically there is:

  • fund manager or investment manager who manages the investment decisions.
  • fund administrator who manages the trading, reconciliations, valuation and unit pricing.
  • board of directors or trustees who safeguard the assets and ensure compliance with laws, regulations and rules.
  • The shareholders or unit holders who own (or have rights to) the assets and associated income.
  • A “marketing” or “distribution” company to promote and sell shares/units of the fund.

Please see below for general information on specific forms of vehicles in different jurisdictions.

Net asset value 

The net asset value or NAV is the value of a vehicle’s assets minus the value of its liabilities. The method for calculating this varies between vehicle types and jurisdiction and can be subject to complex regulation.

Open-end fund 

An open-end fund is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund’s net asset value. Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed, the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of the underlying assets.

Closed-end fund 

closed-end fund issues a limited number of shares (or units) in an initial public offering (or IPO) or through private placement. If shares are issued through an IPO,they are then traded on an exchange or directly through the fund manager to create a secondary market subject to market forces. If demand for the shares is high, they may trade at a premium to net asset value. If demand is low they may trade at a discount to net asset value. Further share (or unit) offerings may be made by the vehicle if demand is high although this may affect the share price.


Why Should One Invest in Mutual Funds?

Why should one invest in Mutual Funds?

One should never invest in Mutual Funds, but should invest through them.

To elaborate, we invest in various investment avenues based on our requirements, e.g. for capital growth – we invest in equity shares, for safety of capital and regular income – we buy fixed income products.

The concern for most investors is: how to know which instruments are best for them? One may not have enough abilities, time or interest to conduct the research.

To manage investments, one can outsource certain tasks one is unable to do. Anyone can outsource ‘managing one’s investments’ to a professional firm – the Mutual Fund company. Mutual Funds offer various avenues to fulfill different objectives, which investors can choose from based on one’s unique situation and objective.

Mutual Fund companies manage all administrative activities including paperwork. They also facilitate accounting and reporting the progress of the investment portfolios through a combination of Net Asset Values (NAVs) and the account statements.

Mutual Fund is a great convenience for those who need to invest their money for future requirements. A team of professionals manages the money and the investors can enjoy the fruits of this expertise without getting involved in the mundane tasks.


How to Invest in HDFC Funds

HDFC Mutual Funds

HDFC Mutual Fund has left no stone unturned to cater to investors from all walks of life. Be it any financial goal – long-term, short-term, retirement, tax-saving and so on – HDFC has that plan for you. Majority of the mutual fund products they offer have CRISIL ratings of 3 and more. Investors from any income background have a gamut of choice in every asset classes and risk profile. In fact, the risk factor of the products range from very low to high. Investors can choose as per their risk appetite.For instance, In short, ELSS funds have made it easier for investors to define their financial goals – available in both close-ended and open-ended funds.

2. How to invest in HDFC Funds

It is easier than ever to shortlist any HDFC mutual fund product and invest. ClearTax has always been a reliable platform to find hand-picked funds that suit your investment purpose and risk profile. Now, you can also select any product from a particular fund house (say, an HDFC mutual fund) from ClearTax Save portal. One of the advantages of going through us is, you need to do your KYC formalities only once. The entire investment process will take no more than 7 minutes.

ClearTax gives you a quick and seamless process in 3 steps.

Step 1: Click on the fund(s) and enter how much you want to invest monthly/quarterly/annually

Step 2: Fill in your personal info in respective columns

Step 3: Pay online by card or NetBanking – the entire process takes less than 7 minutes

3. KYC process through ClearTax

Money laundering and corruption can cripple the economy and the stability of our country. Here, Know Your Customer (KYC) and In-Person Verification (IPV) can help a financial institution significantly. However, ClearTax doesn’t believe in inconveniencing their investors. So they have enabled a way to do KYC in a quick and simple way. What’s more, if investing via ClearTax Save, investor needs to do it only once for their first investment.

Know Your Customer or KYC process is a government and RBI mandate for all financial institutions, including AMCs. If you are investing via ClearTax, you need to do it only once. We will simply retrieve the KYC details for all future investments.

ClearTax has made KYC verification an instant and simple process as mentioned below.

We have an Aadhaar-based KYC in which you enter the OTP sent to your Aadhaar-registered mobile numberYou may also upload the scanned copies of your documents on our ClearTax Save portal

4. Documents required to invest via ClearTax

ID Proofs: You can submit Xerox copy of PAN Card, Passport, Aadhaar Card, Voter ID or Driving License. Other central government approved documents like NREGA job card are also accepted.

Residential proofs: You can submit the same ID proof (except PAN), if the address on it is your current residential address. Rental/lease agreement, most utility bill and ration card can also serve the purpose. If your permanent address and correspondence address are not the same, then submit proof for both.


Individual Savings Account

An Individual Savings Account is a class of retail investment arrangements available to residents of the United Kingdom. It qualifies for a favourable tax status. Payments into the account are made from after-tax income. The account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme either. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn. Funds cannot be used as security for a loan.Until the Lifetime ISA was introduced in 2017 it was not a specific retirement product, but any type can be a useful tool for retirement planning alongside pensions.

Transfer rules

Transfers between providers are allowed. A transfer from a Cash ISA to another Cash ISA must usually be completed within 15 business days. Any other type of account transfer must usually be completed within 30 days. There are a range of restrictions and workarounds:

  • The transfer must be carried out by the managers. If a saver withdraws the money from the existing manager, the subsequent reinvestment will be treated as a new ISA subscription and is subject to the current year’s subscription limit. HMRC allows a single cash ISA self-transfer by withdrawing and redepositing per year. All current year money must be removed from the source account. 
  • When transferring it is still necessary to comply with the rule that you can have only one cash ISA manager and one S&S ISA manager in use at the same time with money paid in from the current tax year. Transfer of cash ISA money paid in during the current year must be all of the money if it is to another cash ISA manager. If the transfer is from cash to another type the transfer can be partial but must be to either the first ISA of the year of that type or to the one already used for current year money. After the transfer to the other type the money counts against its limit, not the cash limit.
  • Before transferring stocks from one ISA manager/platform/provider to another it is worth checking that the new provider will accept all the stocks held in your ISA. Providers have different criteria for deciding if a particular stock can or cannot qualify for ISA status within their platform and you may have little choice but to liquidate that stock or withdraw it from the ISA wrapper.
  • For current year money you can transfer from a cash ISA to a S&S ISA then withdraw the money from the S&S ISA and redeposit some or all the money into another cash ISA, subject to the annual contribution limit. This allows you to circumvent “new money only” restrictions imposed by some cash ISAs that will not accept transfers in, provided you have sufficient annual allowance available.


Benefits of a Savings Account

Sweep facility: Under this, the deposit balance gets transferred automatically to a slab with a higher rate of interest than the standard rate as soon as it exceeds a pre-determined level. However, this facility does not kick in automatically; as an account holder, you have to complete a few formalities to activate it.

Discount benefits: Banks often offer discounts and cashback schemes to savings account holders at ‘partner locations’ such as specific petrol pumps if payments are made through that bank’s debit card. This can also apply to restaurants, shopping sites and more.

Locker facility: Account holders can be offered up to 30% discount on annual locker fees, but not all banks offer this scheme. Besides, qualification for the facility can depend on the type of savings account you have.

International debit cards: Sometimes your bank may offer a free debit card that is valid abroad.

Automated bill payments: If given standing instructions, banks these days can clear bills on your behalf – those related to credit cards, utilities (electricity, mobile etc.), insurance premiums, and others.

Last words 
So, when you’re getting a savings account, ensure it offers you all these features and more. And make the most use of them to have a safe, convenient and delightful banking experience.


Some Features of Certificates of Deposit

Offered by banks, CDs are deposits that banks pay a higher interest rate for because they are locked in for a longer period of time. CDs typically allow depositors to invest their cash in investments between three and five years, although some are even less (starting at one month) or can go up to 10 years. If you’ve got limited time, three years is a solid option, but remember – the longer the investment, the higher the yield, so you may want to opt for a five-year option. And while you may be able to receive monthly interest payments if you like, many investors choose to wait until their CDs have matured and cash in on the amassed interest at the end. And, as a plus, the FDIC will back your deposit up to $250,000 per person.

 Some features of Certificates of Deposit are:

  • A larger principal should/may receive a higher interest rate.
  • A longer term usually earns a higher interest rate, except in the case of an inverted yield curve (e.g., preceding a recession).
  • Smaller institutions tend to offer higher interest rates than larger ones.
  • Personal CD accounts generally receive higher interest rates than business CD accounts.
  • Banks and credit unions that are not insured by the FDIC or NCUA generally offer higher interest rates.

CDs typically require a minimum deposit, and may offer higher rates for larger deposits. The best rates are generally offered on “Jumbo CDs” with minimum deposits of $100,000.

The consumer who opens a CD may receive a paper certificate, but it is now common for a CD to consist simply of a book entry and an item shown in the consumer’s periodic bank statements. That is, there is often no “certificate” as such. Consumers who want a hard copy that verifies their CD purchase may request a paper statement from the bank, or print out their own from the financial institution’s online banking service.


Best Short Term Investment Options

1) Bank FDs or Postal Term Deposits-I think we do not need any explanation of this. If you have an internet banking facility, then I suggest booking your FDs online. The advantage is, it is easy to handle and at the same time, if you redeem online, then the you get the cash immediately in your savings account. Returns from FDs are taxable as per your tax slab (whether they are normal FDs or tax-saving FDs). You can deposit anywhere from 7 days to 10 Yrs. However, I will not suggest using this if your time horizon is more than 3 years. If the goal is more than 3 years, then the above said debt funds or Arbitrage funds are more tax efficient.

Even you can use the Post Office Term Deposits. However, when it comes to facility and service. Post Office lags behind. However, never try to go for Corporate FDs. The reason is, currently the company, which you are going to invest, may have a high credit rating. However, after a few years, if the company not performed well, then the same rating agency may downgrade it. Then is it possible for you to come out of the deposit? These deposits may offer you a higher interest rate than Bank FDs. However, such high return will come with associated risks.

2) Recurring Deposits (RDs) -This is one more type of secured investment. This product is ideally suitable to those who not able to invest a lump sum and looking for monthly investment. Either you can use Bank RDs or Postal RD. Ideally bank offers RD of minimum tenure with 6 months to a maximum of 10 Yrs. Interest received on RD is taxable as per your tax slab.

3) 5-Yrs National Savings Certificate (NSC) -You can invest in Postal NSC of 5 years, only if you are sure that goal is exactly at 5 years from today. You can claim deduction under Sec.80C. However, the interest on NSC will be taxable.

I wrote a post on how one can reduce their tax liability on NSC interest. Please go through and read a below post.

4) Monthly Income Schemes (MIPs) -If you are expecting for regular fixed monthly income, then I suggest to go for Postal MIP. However, I do not recommend you the MIPs offered by mutual funds. The reason is, even though the name of such funds is MIP, but there is no guarantee that they offer you monthly income. Ideally, these funds invest around 10% to 20% of a portfolio in equity and rest in debt instruments (usually of higher duration). Hence, these two points make it bit risky than the other debt funds I referred above. Why take a risk, when you have the same taxation like other debt funds discussed above? Hence, restrict your monthly requirement to Postal MIP or Senior Citizen Savings Scheme (SCSS).


Best Children’s Saving Accounts

Children’s Savings Accounts (CSAs) are a type of savings accounts in the United States, usually specifically designed for higher education savings. They are often available through state or local government programs or nonprofit organizations, in partnership with banks and credit unions. CSAs can be based in state-sponsored 529 plans or other investment products such as Coverdell Education Savings Account, and usually allow deposits from children, parents, and relatives as well as third parties such as school districts and scholarship programs. Many CSAs begin with an initial deposit from government or a nonprofit in the name of the child and subsequent family contributions are often encouraged by matching funds. CSAs often incorporate incentives to encourage saving by disadvantaged youth and families. Withdrawals from CSAs are generally limited to higher education expenses, after the child turns 18. Following college graduation, unspent funds can often be used for other asset purchases (first-time homeownership, small business development, or sometimes cars) or for retirement savings. CSA programs can also include financial education to teach children and families about financial institutions’ products, smart consuming and saving practices, and strategies for long-term investing.

Waste no time

Planning for your child’s education is a long-term financial goal. The best time to start planning for your child’s future needs is when he or she is born. Assuming your child will go to college at the age of 18, you will have nearly two decades to create the right-sized fund for your child’s need. The effect of compounded growth will allow you to achieve this goal with small, monthly contributions.

Insure yourself

Life insurance should be seen as a protection cover for your family first, though it is also popularly used as an investment. In case of your untimely demise, your life cover should help replace your income, keep your family afloat financially, and help your children achieve their life goals. Your life cover should be at least 10-20 times your current annual income. With a term insurance plan, you can achieve this coverage requirement and ensure financial safety for your family even in death.


Excellent Child Investment Plan of Sukanya Samriddhi Account

Many parents these days look at the Unit Linked Insurance Plans and children saving plans that insurance companies and fund houses tend to provide. They do provide insurance and some sort of safety comfort for your child’s education, but, the returns are poor. In fact, if you deduct the expense associated with these child’s plans your returns are reduced. If you want to secure your child’s education, expenses in case of your sudden demise go for a plain vanilla term insurance plan that will take care of everything. Following the insurance you can look at the following options to build a solid corpus for your child’s education. Here are a few great child investment saving plans.

Sukanya Samriddhi Account

Another good scheme to invest and which can help build a corpus for your child’s education and is an excellent child investment plan is the Sukanya Samriddhi Account. This scheme offers an interest rate of 8.5 per cent and is tax free. Of course, you can consider this only if you have a girl child. There is also a tax benefit offered under Sec 80C of the income tax act. One has to be careful that this scheme is only for the girl child. So, if you have a girl child and plan to save for her marriage or her education, you can go for this scheme. Again, the lock-in is the only worry, but, then you are building a sound corpus for a longer time. The only problem with this scheme is that there could be revision in interest rates from time to time. The interest rate offered is way higher than banks, which is a big positive. Again, there could be a upward revision in interest rates, when the government moved for a revision later this month.