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best captial protection

Which is the best capital protection investment plan?

by Holistic Leave a Comment | Filed Under: Mutual Funds

Protecting your capital, a BIG task, Isn’t it? You have your higher studies planned, EMI to take care of and a huge college fees for your children awaiting to empty your purse in couple of years. And, of course, unwanted emergencies like health issues and uncertainty at work which can lead to unexpected personal finance problems.

The usual way Investors protect the capital

Normally, in two different situations, the investors look into protecting the capital by preserving it.

    1. When the asset prices are too volatile
    2. When risk is alleged to be high with any particular product

In these scenarios, the investors hide inside their shell to safeguard their hard earned money rather lose it by trying to invest in high risk instruments. After looking at the capital that doesn’t grow due to fear of losing it, the investors seek advice from the experts for options.

Are bank FDs the safest and the best mode of protecting your capital?

The answer is ‘yes’ and ‘no’. When you invest in bank FDs, your money is safe. But, the investors get confused when they struggle to beat inflation with the return they get from bank FDs. Normally, bank FDs offer you an interest of about 8.75%-9.25%. After you pay taxes on the interest earned, you earn returns approximately at 7%. Did you know for the last five years, the inflation rate is at 7.5%? It makes your investment value as same as what you invested initially. You gain nothing extra here.

Understand how these safest capital protection mutual fund schemes work?

You wanting an upside with bank FDs and seeking risk free protection is a clear paradox, you can’t have a cake and eat it too.

You need to understand things clearly. Say For example, you are investing 30 lakhs in a fixed deposit. You are amazed at the statistics comparing capital protection mutual fund schemes over bank FDs given by the banker who sells these, right?

From your capital protection mutual fund scheme

investments, the bank earns a huge sum of approximately 1 lakh as a fee and the banker earns an incentive. This is the reason banks broadcast and advertise extraordinary about their high risk averse HNIs over other capital protection plans. Remember, you gain no hot revenues which does any good to your portfolio.

So, what is the best alternative capital protection plan if not bank FDs?

Well, you have liquid funds to choose from mutual funds. The bankers will not advocate such plans as they incur low fees for them. These fixed mutual liquid funds are the best alternative to your ‘so called safe’ plans in name of bank FDs. There are debt funds that offer low risk products such as capital protection funds and FMPs(Fixed maturity plans).

How does the capital protection funds work?

Understanding how capital protection mutual fund schemes works is not a rocket science. Let me explain it simply. When you choose capital protection mutual fund scheme, 80% of your investment goes into fixed income securities and the remaining 20% is invested in equity funds. This arrangement makes sure your capital is safe as the 80% invested in FDs are kept until the tenure of the scheme. You gain an excess return on your capital through the 20% invested in equity products. A point to remember here is the risk associated with this small portion when the market is volatile. If you are ready to take a little risk with 20% of investing your capital in equities during a volatile market, then go for this scheme.

How does the FMPs work?

The fixed maturity plans gain returns as they are invested in bonds and held until maturity. Your capital is invested in couple of certificates which trade at 9.5% or more. These investments are held until the period of maturity. After deducting the incurred expenses, the investors get a return at the rate of approximately 9%. This is slightly higher than other short term funds or liquid funds.

Ok, how do these investment products differ from bank FDs?

Safer Investment Option

Well, I can’t say this as a difference, but these mutual fund models offer the same level of protection as the bank FDs since these are invested for a fixed period. But, the key difference is the multiple options you get here.

If you want to invest your capital for a shorter period, FMPs offer options to invest for minimum 30 days onwards and available even for 3 years.

Works best at all times

If you want to protect your capital when the bond yields are high, safely invest in FMPs.

Save on Tax with long term capital gains

You pay taxes of about 20% with indexation and 10% without indexation from long term capital debt funds gain. This helps in adjusting the buying price in accordance with inflation and you get an edge from your taxes on interest over normal FDs.

Alternatives to Capital Protection Funds

Capital protection funds invest 80% in debt and 20% in equity. You can do this on your own. That is you can invest 80% of your money in FD or FMP or debt fund and invest the balance 20% in equity funds.

Mostly, the capital protection funds have high expense ratio.
So instead of investing in capital protection funds, you can create your own capital protection asset allocation combination.

Remember, you need to make the investments to work for you, not to the banks. Plan well and save your hard earned capital!

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below. 

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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

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