To stand out among 1.35 billion people, to meet the growing needs, to build a career of their choice, students wish to pursue their higher education from premier institutions in India or abroad. But most often quality education comes at a very high price, and it may not be possible for parents to fund such expensive education from their existing resources. Education Loan offered by banks and NBFC's lays the way out, every year tens of lakhs of Indian students take education loans to pursue higher education and professional courses. Sometimes it is also not about affordability, many students take education loans because they don't want to burden their parents with their exorbitant education cost. Education loans brings higher education within students' reach, and also offers tax benefits on the interest paid on these loans under Section 80E of the income tax Act.

However, there are certain key points that you must take note of in context of education loan, that will help you better manage the loan:

Getting the Loan

• Compare before you choose: The rate of interest on education loan varies between banks as well as between the loan amount. The difference in interest rates charged by different banks on the same amount of loan can be as high as 4-5%. Also, your college may have a tie up with certain banks, and these banks may offer a discount on the interest rate. So, compare the loan terms of different banks including interest rates, processing fee, repayment terms, etc., before choosing the bank.
• Get the loan in tranches: Generally, the fee for higher education is payable in tranches, it can be semester wise or half yearly or quarterly, etc. It is ideal that you get the entire loan amount sanctioned, but withdraw only when your fee is due, since the banks will be charging the interest only from the time the loan amount is disbursed.

Repayment

We will first talk about the Repercussions of non repayment of EMI's

• Non Repayment of EMI's can result in imposition of Penalties.
• The Bank can seize the collateral attached to the loan.
• Credit score of the borrower as well as the co-borrower (usually parents of the borrower) gets tarnished, which hampers your access to any other loans, like home loans or car loans in the future.

Post the 2008 global recession, many students failed in repaying their loans because of lack of or underpaid jobs and have faced the above repercussions. Although the situation has improved, but still there are cases when students do not get jobs immediately after college. So, it is very important that when you take an education loan, you must have a repayment strategy in place.

The income in the initial years of your career is low, but the EMI's will be there, it is ideal to keep your expenses limited to make sure you don't miss your EMI's, also try to save some money after paying the EMI's and expenses and build an emergency corpus to ensure there is no disruption in the flow of EMI's in scenarios like a job loss, a sudden expense, etc. You can opt for the Auto debit option for your EMI's, so that repayment is taken care of automatically.

The Education loan EMI's generally starts after a year from the end of the course or six months after the job starts. This relief period is called the grace period or the moratorium period. The grace period is also a good time to start saving and creating a corpus for your education loan, since there will be no outflow of EMI's. This corpus will help you in filling any gaps in repayment that may arise in the future. You can invest your saving in a Liquid Mutual Fund, so that you get a better rate of return than what you will get in your saving account, you can make partial withdrawals plus it is highly liquid, so you can easily withdraw even one EMI from your liquid fund in case you are likely to skip one for lack of money.

Generally only simple interest is charged during study period, if you pay this simple interest during your course itself, it can significantly bring down your EMI's later.

What if you do not get a job? Before the bank starts penalizing you by levying heavy penalties for non repayment, and yours and your parents' CIBIL score is affected, talk to the bank representatives, a suitable alternative could be figured out and your loan repayment may be relaxed. The bank may either extend the moratorium period or reduce the EMI by extending the loan tenure, etc. You will find a job sooner or later, the idea is to keep the bank in the loop to avoid any negative consequences.

Before closing the article, we have a piece of advice for the readers, Start investing from Day 1 of your job, if the burden of Education loan EMI is too heavy, so is the need to get into the investing routine and securing your future. Start with a small amount, say with an SIP of Rs 1,000 and increase the amount gradually. Education Loan is probably the first loan taken by an individual, it teaches you a lot about money and debt management in the early stages of your career itself. We hope that the above passage will help you in managing your education loan well.

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What are your goals for your post Retirement Life? Pursuing all the things you wanted to but could not do over the last three or four decades, for there was no time. Learn guitar, knit socks for your grand kids, go for beach holidays, chill with your childhood buddies, make Pinnis for family, explore your spiritual side, do yoga, gratify your philanthropic spirit.

But wait, have you saved enough for your goals? Will you have a corpus big enough to accommodate your wishes?

No!

Then who is going to pay for the beach holidays, the guitar class?

Your Kids?

All the best in that case!

One of the major misconceptions which Indian society is living under until today is: There will be Reciprocal of Responsibilities. We believe that since we take care of our kids, invest in their upbringing, education, marriage, career; our kids will eventually return the favour by supporting us and funding our dreams in our old age. Based on this belief, and in our attempt to bestow the best upon our children and securing their future, we go so overboard that we forgo ours. There are instances when people break their retirement corpus or even take a loan in their old age for sponsoring their kids' education, these are clear signs of inviting trouble.

Do you want to work till 70 years of age? What if your medical conditions don't support your intention? It could be about survival, forget fulfilling the fantasies.

It isn't that your kids won't intend to, they might, but what if they aren't able to afford your dreams? They may be willing to chip in wherever they can, but then their kids education will be more important for them than your yoga class or your beach holiday, and in that case, your retirement life will not be as rosy as you thought. You will have to sacrifice the last few years of your life with your spouse, compromising. The holiday, the guitar class, the yoga class, these aren't your goals, these are your dreams, the real retirement goal is to ensure that you are able to provide for your dreams.

So, how do you go about planning for your Retirement goal?

For achieving a happy retirement life, you should do the following:

• Firstly, Invest for your Retirement. Helping your kids grow so that they can stand up on their feet is your responsibility, so is your responsibility towards yourself, helping yourself stand up tall during your old age. Your kids can get an education loan for pursuing expensive higher education, they can take a loan for marriage or save some money and tie the knot in the court, but there is no alternate source of finance available for your retirement, but your Retirement Corpus. Hence, if you haven't started yet, and are too busy with life and responsibilities, it's time to be a little self centered and start investing for your retirement. You must seek advise from a professional for guidance on the investment product you should choose according to your age and risk profile.
• Secondly, as you age, your medical expenses will rise, you'll be a vulnerable target for diseases and hospitalization expenses can dig a big hole in your pocket. Hence, it's essential to create an armor with a health insurance plan, so that you do not dip into your retirement corpus for your medical needs.
• Thirdly, make sure the loans you have taken are repaid before you retire, including the home loan, and there is no EMI obligation left at the time when there are no inflows. Your retirement life must be stress free, and a major step in this direction would be that you shouldn't be carrying the burden of your debts beyond your earning years.

So, to conclude, if you are amongst those set of parents who are spending every penny they earn on their kids, then this article is just for you. It's great if you are working towards your kids future, their education, their marriage, but if you are doing it at the cost of your own future, then you are opening doors to your ill fate. Preparing for your old age is your prime responsibility, and it comes before all other goals. And about your kids, it's important to raise kind and modest human beings. It is important to inculcate compassion, family values, love and respect in your kids; overseas education and a grand wedding are discretionary.

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There are so many people out there who are yet to inaugurate their investing process. Either we just don't want to invest or we keep on delaying investing, some of us feel investing is exclusive to the rich only, some are terrified of losing, while for some investing is simply not their cup of tea. This article intends to highlight the primary factors behind this reluctance and why we should get over them.

We have come up with three primary excuses which people use to support the unwilling outlook, which are:

1. I don't have any money to invest: “Mere pas paise nhi hai abhi invest karne ko”, “Aage ghar me shaadi a rhi hai”, “Abhi itna kharcha ho gya hai”, “Next year bonus milega, tab start karenge”, are among the usual explanations we give to ourselves for not laying the foundation stone of investing. We keep on procrastinating investing for years on back of the same justification “Lack of money”. You will not invest until the time you count investing among your other necessities. Investing isn't about the spare money rather it's about sparing money for our future. Our 30 earning years must provide for the 30 earning plus the 30 non earning (Retirement) years. To make it possible, an individual must start investing from the beginning of the earning years, the more we postpone, we are actually shrinking the resources of our 30 golden (Retirement) years. You don't need lakhs or even thousands of rupees to start, you can begin investing with a Rs 500 SIP in a Mutual Fund also. What is important here is 1. Realization and 2. Intention. The investors must realize that investing is a fundamental need and he must be earnest in his approach to investing.

2. Investing will deteriorate my current quality of life: Another factor which keeps people from investing is, they feel investing will take away a significant chunk of their income, which they otherwise spend on gratifying their lifestyle needs. People, especially those who are in the early stages of their career, live a paycheque to paycheque life, they spend most of their incomes on clothes, gadgets, accessories, shoes, restaurants, etc. About investing, they feel if they carve out money for investing, they will have to compromise on their lifestyle. As described above, investing is a necessity, and about lifestyle, investing in fact will only accelerate your quality of life. As they say, “Paise se paisa banta hai”, the money you invest today will create more money for you in the future, which means an upgraded lifestyle, and it also means there will be no disruption in your lifestyle, since you have created your financial backup. If you cut one pizza and one t-shirt every month, you'll probably have your one month's SIP ready. Having one less pizza and t-shirt won't hamper your quality of life today, but it will work to shape your future, for good.

3. I have Rich parents: Another logic for not investing is a well off family background. It's great if you have a base prepared, probably you do not have to struggle in life as much as those who have to start from scratch, but it doesn't mean that you do not need to secure your future. Never let your future rest on inheritance, and there are multiple reasons why we say this:

• You might not be a part of their Will altogether, they might donate their property to a temple, or you aren't entitled to as much share as you were expecting; and this factor is capable of sabotaging your life.
• They may not always remain rich, they may want to help you but can't, because the riches are gone.
• Thirdly, they may be willing to take care of your future, but what if you are gone before they do, who will take care of your family?

So, the bottomline is, never lean on your parents fortune, you have to invest for yourself for shaping your own fate.

To conclude, Investing is one thing, which should be done by everyone, according to individual financial capacities, it shouldn't be given a pass for some lame perceptions and excuses, excuses are very easy to make, but may not be the right thing to do. Lastly, it needs commitment and intent, and not a lot of money to invest.

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Mutual funds have witnessed a growth in popularity over the past few years. The trend has seen retail investors increasingly participating in mutual funds. However, there is also a high level of misinformation and myths surrounding mutual fund investing in the minds of the common investor. The low awareness levels breeds many misconceptions that refrain both existing and prospective investors from making the most that mutual funds has to offer.

In this article, we debunk 10 of the common mutual fund myths often heard on the streets....

Myth 1: "Mutual Funds invests only in equities."
Fact: Mutual Funds is a like a vehicle carrying which can carry any investment product. The underlying investments of a mutual fund scheme can be in any asset class, be it equities, pure debt products, money market instruments or a mix of these. The fact is mutual funds offers schemes in all of these asset classes. This can be known from the Average Assets Under Management (AAUM) which in Equity oriented schemes is Rs.2.35 Lac Crores and in Debt oriented schemes is Rs.4.44 Lac Crores (Dec. end, 2010).

An investor can easily come to know where the investments would be made from scheme objective and stated asset allocation. Mutual Funds have different schemes like Equity or Growth Fund which invest predominantly in stocks of equity markets, Debt funds which invest into debt products like government bonds, corporate debentures and treasury bills. Balanced Funds mix equity and debt both, Money market or Liquid Funds invest in short term debt instruments.

Thus, mutual funds is not just about equities but it also offers a lot more choice to suit the needs of any investor.

Myth 2: "I invest in Direct Equity. So there is no need to invest in Mutual Funds."
Fact: As explained, mutual fund does not only invest only in equity and investor may look at mutual funds for all asset classes, including equities. Investing directly in equities requires proper research, time and adequate capital. Often investors end up investing in few companies and a small number of equities of a company which are not backed by thorough research but on 'tips'. Mutual Fund helps investor to invest in number of equities with the same amount of capital. Thus there is a strong benefit of diversification as the investments do not get concentrated in very few of the stocks or in a single stock which is very risky. Further still, there is the benefit of experience and professional expertise of the Fund Manager and the research team which makes the investment decisions on your behalf. This is again a major benefit since most of us do not have the time, expertise and infrastructure to actively manage our direct equity investments.

It is thus, wiser to invest in mutual funds and gain from the diversification and professional expertise of the fund house.

Myth 3: "Mutual Funds are very risky as mentioned in their advertisement - “Mutual Funds are subject to market risks."?
Fact: The warning is a statutory requirement to make investors aware that the investments made by mutual funds are in products, the value of which is driven by markets and hence cannot be guaranteed. In other words, it means that the funds cannot promise guaranteed returns to the investor.

Investors should understand that the risk depends a lot on which scheme are you investing in and for what duration. One can reduce risk by choosing the right asset class and investing for the right duration. The risk for a debt scheme will be far lesser compared to a sector specific or small-cap focused equity scheme. Investing in equities through SIP or Systematic Investment Plan, where you contributed at regular intervals, also helps reducing risk a lot. Further, the diversification into multiple stocks /products and asset classes in a mutual fund scheme also helps reduce the risk as compared to investing directly. Rather than fearing risk, one should understand the same and invest wisely according to one's own risk appetite and investment objective.

Myth 4: "Mutual fund investments do not give handsome returns."
Fact: This is not a correct statement to make as it generalises all mutual fund schemes for performance. When comparing performance of products, the underlying asset class should be similar in nature and comparison should be made with relevant benchmarks. Historically, in general, mutual fund schemes have proven to be a very good performing investment vehicle for investors. There have been visible benefits of professional expertise and diversification of portfolio on the returns of mutual fund schemes. Mutual fund schemes have also largely outperformed general market indices in past. This can be seen from the average returns of diversified equity schemes, as a group, which is at 23.58% in 10 years as compared to the Sensex which has given 17.77% (as on 11/03/2011). (Source : Internal, calculated taking 36 schemes in to consideration)

Myth 5: "It is always better to invest in the mutual fund with the low NAV than high NAV."
Fact: There is no difference in returns when investing in a higher or a lower NAV of a mutual fund scheme. The NAV is quite different from a stock price. An investment of Rs.10,000 in two mutual fund schemes of NAV say 15 & 45 will yield the same returns to you, assuming similar performance of the schemes. The NAV is a mathematically calculated price of the scheme based on the price of underlying securities. An NFO at Rs.10/- or an existing NAV of Rs.15 or 45, will invest in the same stocks at the prevailing market price. Thus, a lower NAV or higher NAV doesn't matter while investing between two mutual fund schemes. This perception is can also be seen when an investor invests in a NFO thinking that the NFO is available at unit price of say Rs.10/-. Investors should look at other important factors while investing in schemes rather than looking at NAV.

Myth 6: "It is better to invest in a mutual fund that gives good dividends."
Fact: While investing in a mutual fund, investors can choose between the growth and the dividend options. Most mutual fund schemes offer the choice of Growth / Dividend Reinvestment and Dividend Payout option to the investors. It is not mandatory for mutual funds to pay dividends regularly if they are offering such options.

Between a growth option and a dividend reinvestment option of a mutual fund equity scheme, there is the no difference in the returns. While in growth option, the NAV increases, in a dividend reinvestment option, the units increases proportionately. However, an investor can choose an option of dividend payout if there is a need of liquidity. The decision as to which option to opt should be on the basis of returns performance. An investor should consider other important factors of a scheme and his own requirements while investing in an scheme or opting for an option.

Myth 7: "My funds get locked if I invest in mutual funds."
Fact: There is no lock-in period in mutual fund schemes per say and it depends on the actual scheme being purchased. For a person investing in an open-ended schemes, there is complete freedom to enter and exit the scheme at any time. There is a lock-in period of 3 years in ELSS (Equity Linked Savings Scheme) since it offers tax savings under section 80C. In a closed ended fund, the option to resale to the mutual fund AMC is not available, though one can sale in on stock exchange, if it is listed there.

Myth 8: One cannot invest in mutual funds online like in stocks."
Fact: Mutual funds are now also available on stock exchange trading platform and one can make online transacts in mutual funds. The mutual funds will be held in your demat account and you can transact with your Trading Account as provided by your broker. This is a recent development and now brings a lot of flexibility and convenience to investors as they can transact without making any physical application. Mutual funds, however, also continue to be available through the physical route and most investors are yet to switch to the online mode. With growing awareness about the benefits of this online route, more & more investors will find it easier to manage their investments in the online mode than through the physical route.

Myth 9: "SIP is a scheme and every AMC is having an SIP scheme."
Fact: SIP is not a scheme floated by mutual funds. It is a way of investing in mutual funds. Through SIP, an investor can invest a specific amount and at regular period of interval in mutual fund schemes. As SIP is a way of investing in mutual funds, it can be done with any scheme of mutual funds.

SIPs are popular because they help you invest a small amount, often as low as Rs.500, regularly in schemes and accumulate considerable wealth in long term. SIPs also help in automatically timing the markets. This disciplined approach has historically seen investments perform very well for the investors.

Myth 10: "SIP should be started only when market falls."
Fact: SIP can be best started at any time. Through SIP investor can take advantage of market volatility as he will be investing a specific amount at regular time interval. By doing this, his money gets invested in the mutual fund scheme when the NAV of the schemes is high and at the same time when NAV of the scheme is low. By doing this the investment will be done at the average market price over a longer period of time. If the investor is investing through SIP, it really will have no effect whether the SIP is started when the market is at peak or the market has seen a fall.

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