THEECONOMICTIMES www.etwealth.co | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | January 16-22, 2023 | 24 pages | `8 INCREASE THE VALUE OF YOUR HOUSE P10 Don’t get carried away by all the investing sermons P7 Find out how to gift money to your grandkids P13 Why turnover ratios matter for stocks P8 Here’s what Himachal has in store P14 IS IT TIME TO GO PASSIVE? Persistent lag in several actively managed funds cannot be ignored any longer. Focus on investing principles no matter which path you take. P2

PHOTOS: GETTY IMAGES By Sanket Dhanorkar I n recent years, the active versus passive debate has intensified. On social media platforms, it’s a slugfest replete with mudslinging, half-truths and outright lies. The active backers swear by the wisdom and capabilities of the haloed fund managers. They frown upon indexing as lazy, and insist that better rewards await discerning investors. The passive patrons bow only to the index. They scoff at the futile pursuit of alpha and believe the humble index holds the aces. Amidst this tussle, the truth gets lost somewhere. The numbers thrown around favouring either argument tell a story, but often mask perspective. One can get lost in the statistics and risk losing sight of basic investing principles. In this week’s cover story, we distil the numbers and reveal the true picture. We also discuss finer aspects that are often overlooked. What the numbers say Let us dive into the essence of the argument—the inability of active funds to beat the index. These funds charge a hefty fee for giving better returns than the index. Their failure to do so consistently would make simple indexing the superior alternative. The typical approach to gauge this is to compare the funds’ performance with that of its benchmark index (See: Fair comparison?). Sebi’s new rules on clearly defined fund mandates and investible universe of securities have made such a comparison more credible. For the purpose of this comparison, we considered the regular plan variant of the respective equity funds. While direct plans yield higher return, these command a tiny share of the retail assets. Bulk of the money continues to be routed through regular Persistent lag in several actively managed funds cannot be ignored. Focus on investing principles before pursuing either path. IS IT TIME TO GO PASSIVE? Large cap, focused and ELSS funds have disappointed over 5 years Large cap, mid cap and large & mid cap funds have struggled over 3 years Flexi cap funds are fi nding the large cap bias in their portfolio a drag. Only one large cap scheme has beaten its index over the past fi ve years. FUND CATEGORY AVG FUND RETURN (CAGR %) INDEX RETURN (CAGR %) % OF FUNDS OUTPERFORMING INDEX % OF AUM OUTPERFORMING INDEX Value 9.3 11.5 22% 51% Flexi Cap 10.3 11.5 42% 46% Focused 9.6 11.5 25% 10% Large & Mid Cap 10.4 11.7 33% 44% Mid Cap 10.7 11.2 45% 66% Small cap 11.7 6.6 86% 95% ELSS 9.7 11.5 19% 18% Large Cap 9.9 12.0 4% 4% FUND CATEGORY AVG FUND RETURN (CAGR %) INDEX RETURN (CAGR %) % OF FUNDS OUTPERFORMING INDEX % OF AUM OUTPERFORMING INDEX Value 19.0 17.2 67% 78% Flexi Cap 16.2 17.2 32% 41% Focused 15.0 17.2 38% 31% Large & Mid Cap 17.4 19.9 11% 7% Mid Cap 22.1 24.6 20% 12% Small cap 29.2 26.4 64% 79% ELSS 16.0 17.2 37% 32% Large Cap 13.3 15.2 17% 25% 3 YEARS (POINT TO POINT) 5 YEARS (POINT TO POINT) Compiled by ETIG >[email protected] 05 cover story The Economic Times Wealth January 16-22, 2023

family fi nance 06 The Economic Times Wealth January 16-22, 2023 Write to us for expert advice Looking for a professional to analyse your investment portfolio? Write to us at [email protected] with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals. Insurance portfolio Premiums are indicative and could vary for different insurers. GOAL FUTURE COST (`) / TIME TO ACHIEVE RESOURCES USED MONTHLY INVESTMENT NEEDED (`) Emergency fund 7.1 lakh Cash - Buying a house 2.65 crore / 1 yr Cash, FD, Ulip, real estate - Buying a car 8.48 lakh / 1 yr Cash, FD - 1st child’s education 52.4 lakh / 15 yrs Stocks - 2nd child’s education 62.4 lakh / 18 yrs PPF, debt funds, insurance - 1st child’s wedding 2.2 crore / 26 yrs Stocks, mutual funds - 2nd child’s wedding 2.7 crore / 29 yrs PPF 31,864 Retirement 1.5 crore / 22 yrs Bonds, NPS, EPF, PPF - Investible surplus needed 31,864 INSURANCE EXISTING COVER (`) EXISTING MONTHLY PREMIUM (`) SUGGESTIONS SUGGESTED MONTHLY PREMIUM (`) Life insurance Term plan (1) 1.5 crore 1,083 Continue 1,083 Traditional plans (2) 8 lakh 1,750 Continue 1,750 Ulip (1) 10.1 lakh - Continue - TOTAL 1.6 crore 2,833 - 2,833 Health insurance Employer’s - -- - Own 5 lakh 737 Include child and raise cover to `10 lakh 1,250 TOTAL 5 lakh 737 1,250 Critical illness & accidental disability - -- - TOTAL - - - - Insurance cost - 3,570 - 4,083 How to invest for goals Annual return on corpus assumed to be 8%. Inflation assumed to be 6%. by Riju Mehta A jay & Supriya Bajaj are both employed and bring in a combined salary of `4.4 lakh a month. They have a two-year-old child and live in a rented house in Mumbai. They also own a house worth `55.9 lakh, which fetches them a rent of `11,000 a month, and for which they have taken a loan of `18.5 lakh, paying an EMI of `28,710. Their goals include building an emergency corpus, buying a car and a house, saving for two children’s education and weddings, and their own retirement. Financial planner Anup Bansal from Scripbox suggests the couple repay their home loan with their cash holding. Next, they should build an emergency corpus of `7.1 lakh by allocating their cash and investing it in a liquid fund. They want to buy a car worth `8.48 lakh in a year, for which they can use a portion of their cash and fixed deposit. In a year’s time, they also want to buy a house worth `2.65 crore. For this they can assign their existing house, a part of their cash and fixed deposit, and the proceeds from their Ulip. In addition, they will have to take a loan of `1.06 crore for 20 years, which will result in an EMI of `94,199. For their existing and future child’s higher education in 15 and 18 years, they will need `52.4 lakh and `62.4 lakh, respectively. For the former, they can allocate stocks, and for the latter, they can use the PPF, debt funds and insurance proceeds. No additional investment is needed for these goals. For the children’s weddings in 26 and 29 years, they will need `2.2 crore and `2.7 crore, respectively. For the former, they can assign their stocks and mutual funds, and for the latter, the remaining PPF corpus. Besides, they will have to assign an SIP of `31,864 to meet the latter goal. For retirement, they will need `1.5 crore in 22 years, and can allocate their EPF, PPF, NPS and bonds. No additional investment is needed for the goal. After using all the existing resources and fresh investment, the couple will still be left with a large investible surplus of nearly `2.1 lakh a month, which can be invested in mutual funds for wealth creation. For life insurance, Ajay has a term plan of `1.5 crore, two traditional plans and a Ulip, all worth `18 lakh. Bansal suggests they continue with these and don’t take any more life cover. For health insurance, they have a `5 lakh cover. They should include their child and raise the cover to `10 lakh, at a cost of `1,250 a month. High savings to ease journey High income and an early start to investments will help Mumbai-based Bajajs to meet all their goals. Cash flow EXISTING (`) SUGGESTED (`) Income 4.51 lakh 4.4 lakh Outflow Household expenses 60,833 60,833 Rent 27,000 - Loan EMI 28,710 94,199 Insurance premium 3,570 4,083 Investment 65,000 2.75 lakh Total outflow 1.85 lakh 4.34 lakh Surplus 2.65 lakh 5,885 Financial plan by Anup Bansal, Chief Business Offi cer, Scripbox LIABILITIES CURRENT VALUE (`) Home loan 18.5 lakh Total liabilities 18.5 lakh Net worth `3.9 crore Portfolio AJAY & SUPRIYA BAJAJ, 38 & 36 YEARS, SERVICE, MUMBAI ASSET CURRENT VALUE (`) Real estate 55.92 lakh Cash 90.01 lakh Debt EPF 1.35 crore PPF 21.1 lakh Fixed deposits 13.1 lakh Insurance 11.25 lakh Bonds 7.52 lakh NPS 3.42 lakh Debt funds 2.95 lakh Equity Mutual funds 42 lakh Stocks 31.45 lakh Total 4.14 crore

DHIRENDRA KUMAR CEO, VALUE RESEARCH money mysteries T here’s this funny T-shirt slogan in Hindi, which supposedly started as a notice in some college canteen, “Yaha par gyan na baante, yaha sab gyani hai.” Perhaps nowhere is this more true than in investing. Over decades of thinking, talking and listening about investing, I still continue to be amazed by the sheer amount of conversation that revolves around esoteric economic factors that the investor should actually not pay any attention to. Every day, analysts, economists, investment managers and other sundry talking heads appear on TV channels and newspapers and now social media, talk endlessly about interest rates, the fiscal situation, inflation rates, demographic shifts, oil prices, trade flows, quantitative easing or tightening and a lot more in the same vein. Somehow, all this is supposed to serve as inputs to yours and my decision-making process about our own investments. The reality is that all this is almost completely useless for you and me as far as making actual investment decisions about what stocks to buy and what stocks to not buy. Actually, all this gyan that is distributed is not just useless, but worse than useless—it actually harms you as an investor. It harms you by distracting you, by taking attention away from the ‘X Factor’, which is what really matters in your quest to generate wealth from your stock investment. So what is this ‘X Factor’? It’s the simplest and most straightforward idea in the world: understand your own financial needs and constraints, and depending on what you prefer, work on identifying good stocks and good funds that will fit your needs. Investing is about investments. A discussion about actual investing must not be about these macro gyan factors, none of which are in your control. It should be about revenues, margins, profits, market shares, product pipelines, management quality and all those things that actually decide the money-making potential of a company and therefore, the wealth generated by investors. The job of the investor is to not making economic predictions but identifying suitable investments. Investing is a bottomup activity, not a top down one. For good reason. None of these gyan factors are in your control. What the RBI or the Fed does to interest rates or what calamity befalls in some geopolitical arena is outside your ambit. Common sense dictates that it’s better to focus on what one can control. You have control over when you invest, what you invest in, what price you invest at and whether you invest at all. You can control whether you invest it in a great excitement in some bubble, or whether you invest systematically and gradually. You also have complete control over the money you are going to invest. A geat reason why focusing on companies is better than on the gyan factors is that the former tend to be fact-based while the latter are opinion-based. “It’s much easier to BS at the macro level than it is to BS at the micro level.” That’s Nassim Nicholas Taleb (obviously!) explaining why bottom-up is way better than top-down. Bottom-up is reality while top-down could just be empty talk, and usually is. You make money by doing the right things at a micro level, by choosing the right stocks or funds. Do note that I’m not claiming that larger All the macro gyan in the world doesn’t help us investors make money. Only finding good stocks and funds does, says Dhirendra Kumar. Just get the basics right. Rest will follow The job of the investor is to not making economic predictions but identifying suitable investments. Investing is a bottom-up activity, not a top down one. Please send your feedback to [email protected] economic factors do not matter—of course they do. What I am saying is that you and I gain no advantage from trying to take those factors as inputs into our own decision making. There’s no point in doing that. Let’s just get the basics right, the larger issues will take care of themselves. Or not, it doesn’t matter much. The Economic Times Wealth January 16-22, 2023 07 guest column

by Sameer Bhardwaj T he Indian economy is expected to grow faster than the world economy in 2023, shows IMF projections. Factors like buoyancy in capital-intensive industries, rising credit growth and PLI benefits are expected to provide support. However, volatility will remain due to global macro headwinds. As the markets are at a crossroads of headwinds and tailwinds, careful assessment of strengths and weaknesses of a company is required before investing. One way of assessing a company’s fundamentals is by looking at its asset efficiency. The activity or turnover ratios provide strong insights into the same. Fixed asset turnover, asset turnover and inventory turnover are some of the activity ratios that are frequently used for assessing the productivity of operating assets. These ratios indicate asset efficiency by determining the effectiveness of a firm in utilising its assets for generating sales revenue. In other words, such ratios determine the speed at which the assets are converted into sales. The higher the turnover ratios, the better the asset efficiency. The fixed asset turnover ratio measures the efficiency of fixed assets like plant and machinery and is calculated by dividing the net sales by the average fixed assets. On the other hand, the asset turnover ratio measures the efficiency of total assets (fixed and current). The other ratio, inventory turnover, measures the management of the inventory (stock of raw materials or finished goods) and states how many times a company has sold its inventory over a defined time period. Among these ratios, the fixed asset turnover can also indicate the level of capacity utilisation of a company or an industry, says the Bank of Baroda August 2022 report. Capacity utilisation helps to determine the degree to which an organisation is achieving its full production potential. Generally, higher the capacity utilisation, the lower the costs per unit, which helps a company gain an edge over competitors. “Capacity utilisation is an indicator of the optimal level of functioning of any company or industry. It is hence more indicative of progress than growth in production or net sales which are subject to base effects,” adds the report. Looking at the macro level, the capacity utilisation of the manufacturing sector of the Indian economy stood at 72.4% in the first quarter of 2022-23, according to RBI >[email protected]

by Namrata Dadwal T hink of wooing a prospective tenant as a marketing strategy. You have to convince them that your house is worth the rent you are asking, and to do this you need to showcase your property in the best light possible. A big no-no is clutter, unclean kitchen and toilets, broken doors or windowpanes, and non-functioning lights and appliances. So, ensure that the house is clean and everything is in working order. However, some cost-effective steps can help you to also enhance your house, making it more appealing to would-be renters. Furnishings “On an average, semi-furnished homes command 10-12% higher rents than unfurnished houses across the major cities in India, while furnished homes command about 18-20% higher rents than semi-furnished ones,” says Siddhart Goel, Head of Research, Magicbricks. This makes sense as it’s difficult for tenants to lug a lot of furniture or heavy appliances every time they move, so they prefer houses that come with ACs, geysers and water purifiers. You can add to these by installing curtains and a few pieces of furniture like small tables or a double bed. Curtains and blinds are always a plus, especially if you have large or too many windows. Go for neutral colours as those appeal to mostly everyone. It will also help if you have service packages in place for all your appliances and let the tenants know about that. These aren’t expensive but will relieve tenants that they won’t have to pay extra. It will also ensure the longevity of the appliances, which will benefit you too in the long run. Kitchen and bathrooms Most tenants are fussy about these rooms the most. One way to impress them is to show that the chimney, exhaust fans, taps and drains are all in good working condition. If you have hard water in your area, install filters for showers, taps and bidets. To upgrade the kitchen, you can just GETTYIMAGES Quick ways to upgrade walls and flooring WALLS Here are some options if you just need to spruce up a few walls, part of a wall or cover damage due to seepage. FLOORING You can instantly change the look of a room by using these quick-fi x methods. ITEM COST BENEFIT CHALLENGE Wall tile of size 30x20 cm `25 - 40 per sq ft They are easier to clean and maintain than paint or wallpaper You will have to pay additional labour and adhesive charges Self-adhesive wallpaper (1.5 x 16 ft) `350 - 1,500 These are DIY, will hardly take any time to install, and you have a wide range of choices You need to be careful while applying to avoid folds, bumps or air pockets Foam wall paper sticker (2x2 ft) `220 - 500 You can stick them yourself to cover small areas easily They aren’t good to cover seepage and are prone to stains PVC wall panels `50 - 150 per sq ft These are water, heat and termite resistant, and come in a variety of colours and patterns You will have to pay additional labour charges ITEM COST BENEFIT CHALLENGE Professional floor scrubbing `5-10 per sq ft It uses a single disc machine to get rid of accumulated grime, especially in grouts None Peel & stick floor tiles (27 sq ft) `2,800 - 4,000 These are DIY and look similar to wooden floors These may get slippery when wet Wood floor panel `60 - 240 per sq ft This can be installed quickly and give a premium look You will have to pay additional labour charges change the shutters of your cabinets or put a self-adhesive laminate. These laminates or PVC vinyl are easy to apply and can also be removed and re-applied. In case some wall tiles in the kitchen or bathroom are cracked, you can cover these with stick-on single tiles. These are heat and water resistant, so suitable for both rooms. Another way to improve the look of your bathroom is to change the seat cover of the WC as replacing the entire equipment can be expensive. Just this small change will make the flush look newer. If possible, install a shower rod and curtain, or if you have the resources, a single transparent panel to give your bathroom a more luxe look. Hard water filter: `850 - `2,900 PVC roll (45x300 cm): `300 - `1,500 Stick-on tile (12x12 ft): `350 - `2,000 Toilet seat cover: `700 - `2,200 Lighting and balcony Ventilation and lighting are of paramount importance. “Opt for ceiling lights rather than wall lights as they brighten up a room more. Put screens for windows so that they can be opened to let in fresh air. Adding a few hardy and air-purifying plants like snake plant and ZZ plant adds to the appeal of the house,” says Shruti Maheshwari, founder of Studio Midas, an interior designing company. If power cuts are common in your area, install a couple of inverter lights rather than an entire inverter itself. If your balcony floor is damaged, you could cover it with a water fountain, pots or artificial grass, which is easy to maintain. Inverter LED bulb: `350 - `900 Mesh screen (3x4 ft): `360 - `580 Artificial grass (2x10 ft): `1,200 - `2,000 (depends on thickness) Please send your feedback to [email protected] Simple and economical ways to spruce up your house and negotiate for a higher rent. Tips to increase the rental value of your house 10 The Economic Times Wealth January 16-22, 2023 real estate

11 your queries The Economic Times Wealth January 16-22, 2023 Yes, you are entitled to claim exemption for long term capital gains. As per the provisions of Section 54 of the Income-tax Act, an individual can claim the exemption for long term capital gains arising from a residential house if the amount of capital gain is utilised for purchase of new residential house within 2 years after the sale of old house. Hence, you can claim exemption if you buy a new flat. Further, the amount of capital gain should be utilised in purchase of a new asset before the due date of furnishing return of income. In case, the amount of capital gain is not appropriated by the due date of return filing, it shall be deposited before furnishing of return of income with the nationalised bank and shall be utilized in accordance with Capital Gains Account Scheme (CGAS). Hence, if you buy the new flat by the due date of filing of tax return-31 July 2023, then you are not required to deposit the amount in CGAS and you can keep the amount in your savings account till then. Only if the amount is not utilised till that date, then you need to deposit the amount in CGAS. Long term capital gains shall be calculated by deducting the ‘indexed cost’ of acquisition and any expenses on transfer from the sales price. The indexed cost is calculated by multiplying the cost with the index of the year of sale divided by the index of the year of purchase. For example, if the flat was purchased in 2002-03, the index for that year was 105 and the index for 2022-23 is 331. Hence the cost shall be multiplied with 331 and divided by 105 to arrive at indexed cost. Please also note that the sales price ordinarily shall not be less than the circle rate of property as on the date of sale. Start with listing your financial goals and then add the amount you’ll require for each one of them in the present day and when the goal is due. For example, your daughter’s college education is 17 years away. You can get a rough idea about the fee structure for a few basic courses. Let’s assume that the fee for a course is around `40 lakh today. This amount then needs to be adjusted for inflation to estimate the future cost. Education inflation in India hovers at 8-10%, which means that this fee will be around `1.5 crore in the next 17 years assuming 8% inflation. You need to then calculate the amount of investment needed based on the product chosen. If it’s a fixed income then keep returns at 7%, and for mutual funds consider 11-12% returns. To meet this goal using mutual funds, you’ll need to invest `25,000 per month. For goals such as retirement, longevity and returns during retirement become important inputs in addition to inflation and current expenses. To invest in mutual funds, instead of waiting for market corrections, take exposure via SIP as it will bring in convenience and discipline with investing. Check your insurance cover for adequacy. The thumb rule is that one should ideally have 300 times one’s current monthly income needs to retire comfortably. Assuming your monthly expense of `2.5 lakh includes payment towards your house, at 6% inflation and 10% growth of your retirement fund, your existing mutual fund portfolio should be enough to sustain your retirement. If you haven’t included payments towards your house in your expenses, then your current corpus would not be sufficient for you to retire. Your existing property investments would be more than enough to support your children’s education. Alternatively, you could use your retirement corpus to fund their education. However, if you intend to do the latter, then you’d need to increase your corpus to `8.5 crore to be on the safer side before you retire. Calculate all your existing and planned liabilities and deduct them from your corpus to understand the exact size of your portfolio. Recalculate your expenses after allocating an amount for additional expenses such as travel and education in future. Take a call on additional asset building and retirement depending on how much you need to add to your portfolio to retire securely. Above all, remain adequately protected with health insurance. Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. QUESTION OF THE WEEK I am 35 and have a 3-year-old son and 1-year-old daughter. My wife and I earn `1.6 lakh per month and we live in Bangalore in our own flat. The housing loan has already been paid. We don’t have any liability, and our current monthly expenses are `50,000. I have `16 lakh in investments, spread over `3 lakh in FDs, `2 lakh in stocks, `10 lakh in MFs and `1 lakh in cash. I do invest in MFs but not via SIPs. How should I plan my investments? I want to sell my 20-year-old dwelling and buy a new house. I want to complete the transaction before 31 March 2023 or before filing my IT return in June/July 2023 and use the entire proceeds to buy the new flat. Am I entitled to claim exemption for long-term capital gain? Can I put the entire proceeds in my savings account after selling my old property till I buy a new house? Is it necessary to open a capital gain account in a nationalised bank? Is long-term capital gain equal to actual sale price minus circle rate of my property prevailing at sub-registrar’s office? Amit Maheshwari Partner, AKM Global I am 48 and self-employed while my working wife is 47. Our sons are aged 16 and 12. I have `7.4 crore in mutual funds, `1.4 crore in shares and `26 lakh in PPF. I have shares of an unlisted company worth `1 crore, from which I earn `50,000-90,000 in dividend each year. My current house is valued at `1.4 crore and I can sell this house or rent it after three years. I have booked a new house which will be ready in three years and I need to pay `2.6 crore more till then. I have an office property worth `1.25 crore and I can sell this after two years. We have a vacant flat in Mumbai valued at `3.5 crore today and we don’t intend to rent or sell it for at least 15 years. Our current monthly expenses are `2.5 lakh. My wife earns `3 lakh per month and will work for at least 10 more years. She invests `1.5 lakh per month through SIPs in MFs. I wish to retire immediately and buy a car worth `1.5 crore. We need `1 crore for each of our son’s education. I have a term plan of `1.5 crore, while my wife is covered for `50 lakh. Can I retire today? Should I go for a home loan for the `2.6 crore to be paid for the new house? Is it wise to spend `1.5 crore on a car? How much can we allot towards travel every year for the next 15 years? It depends on whether you plan to hold the money for the long term. In such a case, it makes sense to go for the direct plan and save on costs. If your holding period is 2-3 years, then the cost of tax outflows may be higher than the benefit of going direct. When you go direct for fresh investments, try to keep your portfolio simple with bias towards index funds where possible, unless you are consulting a fee-based adviser. The risk of making wrong investment decisions may outweigh the cost saved from going direct unless you do your ground work well. I invested in the regular plan of a mutual fund through the Netbanking portal of my bank. Later, I switched to the direct option of the same fund on another platform. I have over `11.5 lakh worth of unrealised profits in the regular plan. Does it make sense to hold the investments in the regular plan or should I redeem and invest the money in the direct plan? Vidya Bala Co-Founder, PrimeInvestor.in QA & Adhil Shetty CEO, BankBazaar Prableen Bajpai Founder FinFix® Research & Analytics Ask our experts Have a question for the experts? [email protected]

Small savings schemes are instruments used by the Central Government to encourage citizens to save 1regularly. Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta. smart things to know The small savings instruments include PPF, SSY, SCSS, NSC, post offi ce deposits and KVP. 2 PAPER WORK :: Pradhan Mantri Vaya Vandana Yojana (PMVVY) The Pradhan Mantri Vaya Vandana Yojana was introduced in 2019 to provide a regular stream of income to senior citizens. Applications for this are being accepted till 31 March 2023. This scheme is offered by LIC and has a tenure of 10 years with a guaranteed monthly income. :: Points to note z Loan can be availed on the policy after completion of three years, up to to a maximum of 75% of the value of the policy. z The policy is subject to freelook period and a customer can 3 return it within 15 days. They typically provide returns that are usually higher than bank fi xed deposits. 5 Interest rates for these schemes are reviewed every quarter by the government. They also come with a sovereign guarantee and tax benefi ts. 4 Small savings schemes Purchase price This depends upon the pension payout options chosen: annual, half-yearly, quarterly or monthly. The policy can be purchased at a minimum price of `1,56,658 (for `12,000 annual pension) to a maximum amount of `14,49,086 (for `1,11,000 annual pension) under the annual pension option. In case of the monthly one, the price ranges from `1,62,162 (`12,000 annual pension) to `15 lakh (`1,11,000 annual pension). Online/Offline The scheme can be purchased from an LIC registered agent or online through the website www.licindia.in. Benefits The fi rst instalment of pension is paid after 1 year, 6 months, 3 months or 1 month from the date of purchase, depending on the mode chosen. Apart from guaranteed pension at the rate of 7.4% payable monthly, the policy provides death benefi t of refund of purchase price to the benefi ciary on the death of the pensioner during the policy term. GETTY IMAGES S ujoy is compromising his financial security by placing his dependence on a source of funds that he neither knows when he will receive or how much he will receive. The assets that his parents have built will first be used by them for their own needs. With longer and fuller lives, a great part of the wealth will be used by them in their lifetime. They may even choose to not to leave their entire wealth for him. Sujoy can neither control nor estimate what will come to him as inheritance and when it will come. If he waits till he knows that and then start his own saving plan, he may be losing the benefit of compounding that an early start would have given his investments. He will then have to save much more to catch up or even cut back on his long-term goals. Even if Sujoy was sure of getting a good inheritance, it is something that he will probably be able to use only at a later stage in his life. He will need to build assets for the short and medium-term goals of his family. Depending upon his parents for every large requirement of funds will be a difficult choice for both sides. His other option would be to look for loans. But without assets against which he can borrow, his borrowing will be at a very high cost and will further weaken his financial situation. Sujoy must not allow his expected inheritance to undermine his financial independence and must have a saving and investment plan. Since he is young and yet to start on his familial responsibilities, it is not too late for that. The inheritance that he is expecting should give him the security to take more aggressive decisions with his investments but not stop him from building his wealth. When he gets his inheritance, it can help him accelerate his goals and leave him with surpluses that he can enjoy. Sujoy is a management graduate in his late 20s and has been working with a telecom company for the past seven years. Sujoy enjoys spending money on the good things in life and has barely any savings. He has no dependents but wants to get married in the next couple of years. His parents live independently in their own home in Bangalore. They live an upper-middle class life and have a married daughter too. Sujoy’s argument, when he is advised to start saving some money, is that he will inherit his parents’ assets and that is more than sufficient to fund his retirement and other goals. The money he earns is for him to spend as he wants. What is Sujoy missing in the way he has planned his financial future? Who can apply? Anyone above the age of 60 years can participate in the scheme. There is no maximum entry age. The policy has a tenure of 10 years from the date of issue. The total amount for all the policies held under the PMVVY scheme by a senior citizen cannot exceed `15 lakh. Why you must not depend on an inheritance Have your own saving plan because there is no guarantee how much or by when you will get an inheritance. fi nancial planning planning 12 The Economic Times Wealth January 16-22, 2023

Please send your feedback to [email protected] Gifting to grandchildren is a mixed feeling of indulgence, love, responsibility and righteousness. The question of legacy comes in: let us do something we will be remembered by. Then law and procedure takes over. There was a time when family wealth was primarily held in land, jewellery and such physical assets. Agriculture and business were the primary sources of income. The laws then unfortunately did not allow the girl child to get a share of the family wealth. Many traditions in Indian society have arisen from the use of rituals and ceremonies to pass on some of the wealth to the girls on the occasion of their wedding, the birth of the child and many other such events. We have long moved on from that pattern of wealth accumulation. Salary, investment and business incomes dominate the scene today. Daughters are now entitled to their share of inherited wealth. But the distribution of wealth still leans on rituals and ceremonies. Birth of a grandchild triggers these very sentiments when wealth must be shared and distribution must signal family wealth and status. Modern grandparents realise the futility of gifting gold ornaments and clothes. The occasion demands it, they yet say, and oblige without much protest. But there are many that want to give money and investments as gifts that allow the grandchild to use it as required, or use it for funding life goals such as education. But the investment options for grandparents are fraught with many procedural issues and paperwork, apart from requiring an understanding of product features. Many years ago when my child was turning one, her grandparents bought a bond that was marketed to make her a lakhpathi. Investing a small amount today would do. Many grandparents bought them, only to find a few years later that these bonds had a call option and ended short of target. Let’s list the points to keep in mind while investing for the grandchild. First, the child is a minor incapable of making a financial decision. The law considers any contractual decisions made before the age of 18 as null and void. Therefore, the investment has to be made, managed and operated by someone else on behalf of the child. Second, parents of the child are the natural guardians under law. Therefore they are free to open a bank account or make investments on behalf of their minor child. Grandparents are third parties. They are not natural guardians unless the unfortunate circumstances of passing away of the parents leads to the courts appointing them as such. Third, investments in the name of a minor child can be made only in products that allow such a facility. Not all do. The minor child’s birth certificate is mandatory to establish a minority. It also shows the name of the parents, who must be registered as guardians for the investment. Fourth, contributions can be made by the grandparent into specified mutual funds, post office saving products, bank deposits, equity shares and bonds. In all these cases, the products must allow a third party (grandparent) to make an investment for the child (minor) with the guardians (parents) that operate the account. KYC and Aadhaar, PAN card linking will be required for parents as well as grandparents contributing the funds. The product features may include a lock in period or a limit on the amount that can be contributed every year. Fifth, the Indian tax laws allow gifts to be received from a specific list of relatives. These gifts are not taxed in the hands of the recipient. A grandchild receiving an annual monetary gift from the grandparent does not pay taxes on the gift itself. However, any income arising from the gift is taxable. For example, a grandparent can make a deposit into the minor bank account of the grandchild. But the interest income arising from the deposit is taxable. Since the child is a minor, this income will be clubbed with the income of the guardian and taxed. Clubbing provisions also stipulate that the minor’s income must be clubbed with that of the parent whose income is higher. Sixth, all investment accounts of a minor will only be on a sole holding basis. Minors cannot be joint holders. Seventh, when the child attains the age of 18, the money invested can be accessed. However, the minor now turned major must have a PAN and complete KYC process and have their signature attested by the banker, to be able to access the money. Guardians cannot operate the account once the minor turns major. The summary of these provisions in terms of actual gifting will pan out as follows: The parents open a bank account for the minor child: grandparent invests; the interest income is taxed in the hands of the parent. The grandparent buys a bond, saving certificate for the minor child. Maturity proceeds go to the child after turning major and completing the paperwork. The grandparent invests in a child specific mutual fund product as a third party. Can also do a SIP with the upper limit of `50,000. The fund folio is held in the name of the child with parents as guardians. The process is somewhat different if the parents and the child are living abroad. Tax laws of the host country will apply for gifts, income, and clubbing. There may also be limits on how much can be received as taxexempt gift in a year. Grandparents who want to give gifts in the form of money or investment have to operate necessarily through the parents who are the natural guardians of the minor child. There is no bypassing this. It might be procedurally easy to give the money to the parent and ask them to make the investment for the child. Many insist on their name being associated with the gift, alas. It might make sense to acknowledge that the parents know what’s best for their child and that the grandparent comes only next in line. Grandparents can make the investment in their own account and name the grandchild as the nominee. Even in this case, a minor nominee registration needs the guardian’s details. Grandparents can write a Will that bequeaths a portion to their grandchild. These choices might make sense when the grandchild lives abroad. There are no tax implications for the child or parents until the date of bequest. Grandparents are adamant that their gifts are acts of love. Why needlessly complicate this with procedures? Aren’t acts of love in themselves a priceless gift? Do they have to be monetised? UMA SHASHIKANT IS CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING Grandparents who want to give gifts in the form of money or investment have to operate necessarily through the parents who are the natural guardians of the minor child. There is no bypassing this. Gifts for the grandchildrenGETTY IMAGES Grandparents wanting to gift investments must be aware of processes involved, says Uma Shashikant. 13 fi nancial planning planning The Economic Times Wealth January 16-22, 2023

bus: `1,924 (Delhi-Chandigarh, 1 hour) `240-1,289 (Chandigarh-Shimla, 3.5 hours, HRTC/Volvo) Cost by train: `710-840 (Class 2A/CC) (Delhi-Kalka/ Chandigarh, 4-6 hours) `265-800 (Class 2A/CC) (Kalka-Shimla, 4-5.5 hours) Cost by road bus: `505-661(HRTC) `950 onwards (Volvo/private bus (9-11 hours) Himachal Pradesh SHIMLA Start DAY 7-8 DAY 11-12 DAY 4-6 DAY 1-3 DAY 9-10 travel 14 The Economic Times Wealth January 16-22, 2023 If, instead of taking foreign holidays, you prefer to travel in India, here’s a series to help plan a vacation in each of the 28 states and 8 Union Territories. We highlight tourist attractions, culinary choices, modes of travel, and the costs involved. In the ninth part of the series, Riju Mehta takes you to Himachal Pradesh.

SMART STATS SMART STATS The Economic Times Wealth January 16-22, 2023 In This Section MUTUAL FUNDS - P16 LOANS AND DEPOSITS - P18 ALTERNATIVE INVESTMENTS- P19 ET WEALTH TOP 50 STOCKS Every week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this is the listing of the top 50 stocks based on the composite rating to help ease your fortune hunt. 1 Fastgrowingstocks Top 5 stocks with the highest revenue growth (%) over the previous year Cyient SBI Cards & Payment Eris Lifesciences Adani Ports & SEZ Greenply Industries 2 Leastexpensivestocks Top 5 stocks with the lowest price-earnings ratio Oil & Natural Gas Corp Oil India CESC Coal India Manappuram Finance 3 BestPEGs Top 5 stocks with the least price earnings to growth ratio Britannia Inds Oil India LIC Housing Finance Tata Power Co L&T Finance Holdings 5 Least risky Top 5 stocks with the lowest downside risk Embassy Office Parks CESC ITC Britannia Inds Cipla India 4 Income generators Top 5 stocks with the highest dividend yield (%) Coal India 21.09 Oil & Natural Gas Corp 8.00 Embassy Office Parks 6.19 Oil India 6.06 CESC 6.00 SEE DOWNSIDE RISK AND BEAR BETA COLUMNS IN THE ADJACENT TABLE. *REVENUE AND NET PROFIT GROWTH IS BASED ON CONSENSUS ANALYSTS' EXPECTATIONS. NR: NOT IN THE RANKING. >[email protected]) FIGURES ARE IN `. USE THIS CALCULATOR TO CHECK YOUR LOAN AFFORDABILITY. FOR EXAMPLE, A `5 LAKH LOAN AT 12% FOR 10 YEARS WILL TRANSLATE INTO AN EMI OF `1,435 X 5 = `7,175 HOME LOAN RATES Your EMI for a loan of `1 lakh @ 7% @ 8% @ 9% @ 10% TENURE 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 1,980 2,028 2,076 2,125 899 956 1,014 1,075 1,161 1,213 1,267 1,322 775 836 900 965 707 772 839 909 With effect from October 2019, all banks have made the transition to external benchmarks for pricing new home loans. Most banks have picked the RBI repo rate as the external benchmark. REPO RATE: 6.25% Interest (%) Minimum investment (`) Maximum investment (`) Features Tax benefits Sukanya Samriddhi Yojana 7.60 250 1.5 lakh p.a. One account per girl child 80C Senior Citizens' Savings Scheme 8.00 1,000 15 lakh 5-year tenure, minimum age 60 yrs 80C Public Provident Fund 7.10 500 1.5 lakh p.a. 15-year tenure, tax-free returns 80C Kisan Vikas Patra 7.20 1,000 No limit Can be encashed after 2.5 years Nil 5-year NSC VIII Issue 7.00 1,000 No limit No TDS 80C Time deposit 6.60-7.00 1,000 No limit Available in 1, 2, 3, 5 year tenures 80C# Post Office Monthly Income Scheme 7.10 1,000 Single 4.5 lakh 5-year tenure, monthly returns Nil Joint 9 lakh 5-year tenure, monthly returns Nil Recurring deposits 5.80 100 No limit 5-year tenure Nil Savings account 4.00 500 No limit `10,000 interest tax-free Nil >[email protected] with “Portfolio Doctor” as the subject. Mention the following information: z Names of the funds you hold. z Current value of the investment. z If you have SIPs running in any of them. z The financial goals for which you invested. z How much you need for each financial goal. z How far away is each goal. WRITE TO US FOR HELP RAJ KHOSLA, Managing Director and Founder, MyMoneyMantra PORTFOLIOS ANALYSED BY ARINDAM Assumptions used in the calculations Equity funds Debt options 12% 8% RETURNS Education expenses For all other goals 10% 7% INFLATION `47,16,184 `1,07,118 , `73,618 The goals can be reached using the mutual TOTAL funds marked in the same colour. Early start brings ambitious goals within easy reach Anup Ramteke is saving for multiple goals. Here’s what the doctor has advised: Needs to restart some terminated SIPs. Opt for balanced allocation to debt in NPS. Review investments and rebalance at least once in a year. Reduce risk when goal is near so that you don’t miss the target. Note from the doctor Investing in equity funds for past 10 years. Has been investing irregularly and without any pattern. Also invests in direct stocks via monthly contributions. Direct stocks can be volatile. Switch to funds instead. House goal is very near. Switch from equity to debt. PORTFOLIO CHECK-UP Take loan to fund kids’ education goals TOTAL `4,18,411 `37,000 PORTFOLIO CHECK-UP Investing in equity funds for past 4-5 years. Education goals are ambitious and take up all resources. Nothing left to fund retirement. Take loan for education instead. Review investments and rebalance at least once in a year. Reduce risk when goal is near so that you don’t miss the target. SON’S EDUCATION: 18 years PRESENT COST: `25 lakh FUTURE COST: `1.15 crore 2 RETIREMENT INCOME: 18 years CURRENT NEED: `1.8 crore (`75,000 a month) FUTURE COST: `6.08 crore 3 GOALS 1 DAUGHTER’S EDUCATION: 8 years PRESENT COST: `25 lakh FUTURE COST: `53.6 lakh Shravan Kumar is saving for his children’s studies and retirement. Here’s what the doctor advised: mutual funds The Economic Times Wealth January 16-22, 2023 23 PORTFOLIO DOCTOR

Supply by BHK PRICE RANGE: `3,100-12,000 psf DISTANCES: KIAL Airport : 39 km SMVT Bengaluru Railway Station: 16 km 2 BHK 850 (sqft) `70 lakh (avg) 3 BHK 1,200 (sqft) `1.10 crore (avg) >3 BHK 2,400 (sqft) `2.70 crore (avg) Note: Map not to scale WHITEFIELD, BENGALURU LOCALITY SNAPSHOT Whitefield, in east Bengaluru, is one of the fast-growing micro markets owing to its proximity to key employment hubs. Locality hosts many prominent gated communities/integrated townships, IT/business parks, malls and other social infrastructure. Enjoys good connectivity to the city via Outer Ring Road (ORR), Old Madras Road (OMR), Old Airport Road and Whitefield Main Road. Key employment hubs in Whitefield-KIADB Export Promotion Industrial Area, ITPL and Brigade Tech Park. Hospitals: Sri Satya Sai Baba, Manipal | Schools: Deens Academy, Narayana E-Techno School | Malls: Nexus Whitefield, Phoenix. NH-44: 8 km Whitefield Kundalahalli Kadugodi Hoodi Varthur Gunjur KIADB ITPL Brigade Tech Park Whitefield Main Rd NH-44 16% 28% 18% 20% 18% 25% 24% 27% 19% 5% India’s No.1 Property Site Capital Value 2 BHK Rent (`/sqft) (`/month) Top Locality Whitefi eld is highly in demand because of its proximity to employment hubs. Prominent area in Bengaluru HOT SPOT REALTY your feedback & more... 24 The Economic Times Wealth January 16-22, 2023 Tax saving for senior citizens The cover story on taxation was an exhaustive guide for taxpayers. While the NPS and the PPF are the most prevalent due to a large investor base, tax-saving insurance and Ulips are preferred options, considering investors’ requirements. However, the temptation of annuities or pension funds are a mirage as we don’t know how long we will get them as the timeline of our life is uncertain. This lowers the preference for pension funds. Investments should be such that they suit our long-term needs and provide reasonable liquidity at any point of time. Vinod Johri I am thankful to ET Wealth for the detailed, useful information in your latest cover story ‘Best ways to save tax’. It’s a timely article for readers on the various options that they can invest in to save income tax. Great job done by you. B.L. Hedaoo Dhirendra Kumar always gives constructive information in his column ‘Money Mysteries’. But there are many conservative investors who believe in investing only in FDs of nationalised banks.They do not understand the language of mutual funds, irrespective of explaining to them the growth of their money, probably due to fear of risks and losing money. The best suggestion given by Kumar is to follow the strategy of investing in FDs and diversified equity funds and balanced funds through SIPs. N.K. Thukral Your article, ‘Direct plans not for all’, was very useful. As informed therein, only 19% of retail assets are in direct plans. It is because majority of the retail investors are not aware of the higher returns they get at the end due to low The information about travelling in Haryana in your feature ‘State Secrets’ was quite interesting. However, it would be helpful if you could add photos of all the places you have described in the story for readers to understand better. Harihar Joshi I read Uma Shashikant’s ‘ Simple resolutions for 2023’ with profound interest. Of her 10 resolutions, the one that was very close to my heart and has become a habit is ‘making donations’. I donate regularly to feeding cows as well as pay the school fee of my industrious car driver’s daughter every year. It’s a blissful experience. S. Ramakrishnasayee I wait every Monday morning for ET Wealth to catch up on money matters. The columns by Dhirendra Kumar and Uma Shashikant are wonderfully scripted, educative and thought-provoking. Their selection of topics and penning them in simple language is a treat. The investments return monitor and statistics pages are also good to track. Mukunda Rao Readers’ response, online and in print, to ET Wealth stories has been enlightening. We pick some that add information and perspective to our articles from previous issues. expense ratio. Also, this information is not disclosed by the distributors to the investors. The difference of corpus the investors get as per the table in your story should be an eye-opener for retail investors. Sebi should encourage small investors to invest in direct plans. H.V.M. Rao PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co. Ltd. by Rajeev Yadav at Times House, 7, Bahadur Shah Zafar Marg, New Delhi-110 002, Phone: 011-23322000, Fax: 011-23323346 and printed by him at The Times of India Press, 13 & 15/1, Site IV, Industrial Area, Sahibabad, UP. Regd. Office: Dr Dadabhai Naoroji Road, Mumbai 400 001. EDITOR: Babar Zaidi (Responsible for selection of news under PRB Act). © Reproduction in whole or in part without written permission of the publisher is prohibited. All rights reserved. RNI NO. DELENG/2011/37994. MADE IN NEW DELHI VOLUME 13 NO. 03 The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the >[email protected]; SMS ETWS to 58888