Advantages offer by Credit Cards

No Need to Carry Cash

Credit cards reduce the need to carry cash as it allows the cardholder to make payments for almost every form of purchase, from shopping to dining to entertainment. Credit cardholders can also make online payments and transactions using their credit cards.

Helps in Meeting Emergency Expenses

Emergencies can come without intimation, and certain expenses, such as emergency medical expenses, cannot be postponed or avoided. Credit cards can come in handy in such cases, especially when you are short of funds.

Enhances your Purchasing Power

 A credit card allows users to spend more than they earn. As cardholders can pay their credit card dues in installments, one does not need to compromise their spending during the holiday season or vacation due to a shortage of cash.

Interest-Free Credit

All credit card offers the cardholders an interest-free period wherein no interest is charged on the money borrowed by them. Interest is charged only on account of credit card due to being paid to post the due date of the payment.

Rearward Points and cash backs

Many credit cards offer reward points and cash backs when the cardholders use their credit cards to make payments. These reward points can be acquired and redeemed in the future to avail benefits such as discount coupons, free purchases, etc.

Building a Credit History

Credit Cards helps you build a credit history when you do not have any other forms of loans. When a cardholder repays their credit card dues on time, they create a good credit history, which is reflected in their CIBIL score. This credit history is vital at the time of applying for loans as most banks and financial institutions can reject a loan application purely by their CIBIL score and credit history.

Helps Tracking Purchases and Spending Habits

Using a credit card for making payments allows people to track their purchases and spending as the credit card statements provide a detailed list of transactions incurred by the cardholder. This ability to track purchases and spending habits can help the cardholders to analyze and control their spending habits.

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Some of the Advantages of a Demat Account are as follows :

Reduction of Risks

Physical share certificates are prone to risks such as theft, damage during storage, losses, etc. Another risk physical share certificates offer the chance of counterfeit share certificates. Demat accounts these risks are shares, and other securities are stored in an electronic form within your Demat account.

The ability to Invest in Odd Lots

Physical share certificates come in fixed lots, for instance, a lot of 100 shares. If an investor wants to share 50-shares, it is not possible to split a share certificate and buy or sell an odd number of shares. Whereas using a Demat account, investors can buy or sell as many shares, even transact in a single share without any complications of restrictions.

Reduction of Costs

Using physical share certificates involved increased costs such as stamp duty cost, handling charges, the cost involved storing them securely, etc. Demat expenses have eliminated these expenses.

Time-Saving

Investors can buy and sell shares using a Demat account with a click of a button. As all transaction is done online and electronically without any paperwork, Demat account saves time and money of the account holder.

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Common Features of Credit Cards and Debit Cards

Some of the characteristic features of credit cards and debit cards include:

Both these cards allow cardholders to make cashless transactions and purchases, both online and offline.

Both these cardholders are offered online banking facilities wherein they can check their purchases and transactions, statements of account, etc.

Both these cards offer robust security features such as unique PIN codes, SMS-OPTs for online transactions ensuring that your cards are not misused in case these are lost or stolen.

Both these cards can be easily blocked, either using online banking or contacting the customer care of the issuer of the card in case the card has been lost or stolen.

Difference Between Credit Cards and Debit Cards

Here are some differences between Credit Cards and Debit Cards:

While Debit cards allow you to make transactions using the money you already have in your bank account, Credit cards act as short-term lending to the cardholder to make purchases and transactions.

While Credit card expenses need to be paid back by the cardholder, debit cardholders pay for their transaction directly from their bank accounts at the time of their transaction.

While Credit cardholders can access details of their transactions and expense on their credit card statements, debit cardholders need to refer to their bank statements to track their payments and transactions

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Here are some factors to be taken into consideration before investing in a mutual fund.

Your Investment style and objective

Every investor invests in a mutual fund to earn substantial profits and not incur losses. However, you need to take into consideration your risk-taking appetite before choosing a mutual fund to invest your money. For instance, if you have a low-risk desire and are satisfied with lower returns without taking many risks, in that case, you should opt for a debt fund. Whereas, if you have a higher risk-taking appetite, you can choose to invest in mutual funds that invest inequities. It is essential to select a mutual fund whose objectives and financial goals are in alignment with yours.

Past Performance of the Mutual Fund

Before you invest in a mutual fund, an investor must examine the fund’s past performance in terms of NAV growth, which is an indicator of the fund’s performance over the past few years. While past performance cannot guarantee future returns, it does indicate that the fund is managed by experienced and knowledgeable fund managers who have the potential of growing the fund in the coming future.

Expense Ratio

Not every rupee you invest in a mutual fund goes into investing, and every mutual fund has an expense ratio that is utilized to covert the expense such as salaries, overheads and other costs involved in managing the fund. A high expense ratio means that a lesser portion of your investment is being invested in the financial markets, which can directly affect your future returns. With this, it is essential to check and compare the expense ratio of different mutual funds before making your investment decision.

 Exit Load

Exit load is another direct cost an investor needs to incur. Exit load is a small percentage of your NAV; thus, a high exit load can leave a substantial dent in your investment value. Exit load comes into action when you plan to sell your units; as a result of this, a higher exit load will erode a portion of your investment. However, it is recommended to stay invested in mutual funds for an extended period of time to ensure healthy returns from any mutual fund.

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What is Sensex?

The BSE or the Bombay Stock Exchange is the 11th largest stock exchange in the world and is the oldest Asian Stock Exchange. The Bombay Stock Exchange is located on Dalal Street in Mumbai and also referred to as one of the fastest stock exchanges in the world.

Sensex is known as the market index of the Bombay Stock Exchange and also is known as the BSE30. The Sensex consists of 30 of the most well established and financially robust stocks listed on the Bombay Stock Exchange. These 30 stocks are spread across multiple sectors and industries, offering an equal representation of the entire stock market.

The Sensex functions a market movement indicator for the Bombay Stock Exchange, which means if the Sensex falls, the prices most of the stocks listed on the BSE also fall, and if the Sensex rises, the prices of most commodities listed on the BSE also rises.

What is Nifty?

NIFTY is the market index of the National stock exchange and also is known as the NIFTY 50. Just like the Bombay Stock Exchange, NIFTY comprises of 50 of the most well established and financially robust stocks listed on the National Stock Exchange. These 50 stocks are spread across multiple sectors and industries, offering an equal representation of the entire stock market.

The NIFTY consists of 50 of the most well established and financially robust stocks listed on the National Stock Exchange. These 50 stocks are spread across multiple sectors and industries, offering an equal representation of the entire stock market.

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To evaluate which analysis method is better, we need to understand what exactly are these techniques of financial analysis.

Fundamental Analysis

Fundamental analysis is a technique of financial analysis that aims towards discovering the prevailing value of a business. This means calculating the intrinsic price of the company and its stock. Fundamental analysis takes into account economic factors such as revenue, profit margins, earnings per share, P/E ratio, sectoral fundamentals, and industry analysis.

Fundamental analysis analyses and compares the growth or decline of structural factors such as revenues, profit margins over some time. For instance, analyze whether the revenues or profits of a company have increased or declined compared to previous financial years, etc.

It also compares the financial performance of a business with its industry peers during the same period. For instance, if company A has a net margin of 10% and the company has a net margin of 12%, in such a case, investing in the stock of company B can be considered much attractive.

Technical Analysis

Technical analysis can be referred to as a methodology used for the evaluation of stocks and securities with the aid of market generated statistics. Technical analysis heavily relies on charts, patterns, and other statistical tools. 

Some of the most widely used charts and patterns used for technical analysis include price trends, trading volume, changes in moving averages, statistical indicators, etc.  

The Verdict

While the fundamental analysis was the most preferred form of financial analysis for stock traders and investors during most of the 20th Century, technical analysis has gained widespread popularity and acceptance as a financial analysis tool.

But coming back to the question, which is the better financial analysis technique? It is difficult to provide an accurate answer as both fundamental and technical analysis have their pros and cons. Nonetheless, both these techniques have the same end-goal, i.e., maximizing your returns on investment. Rather than wondering which method is better, it is crucial to focus on the importance of doing your research and financial analysis before making an investment decision. 

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Analyze your Debt Situation

It would be best if you analyze your income and debt position. i.e., your monthly outgoing towards servicing your debt and your savings after meeting your monthly expenses and debt servicing. If you have adequate savings after meeting your debt obligations and expenses, you should invest your savings.

Analyze Nature of your Debt

Before investing when you’re in debt, it is vital to analyze the nature of your debt. In your debt comprises of high-interest debts such as personal loans and credit card debt, you should divert your savings to reduce this debt instead of investing, and you can opt to invest your savings if your debt comprises of low-interest debt such as home loan, motor vehicle loans, etc.

Tax Deductible Debt

Particular debt, such as home loan, have tax deduction benefits. For instance, you can avail of tax deduction on interest paid on home loans up to Rs. 2 lakhs per annum Under Section 80EE of the Income Tax Act. If your debt is allowing you to avail of tax deduction benefits, you should continue these debts and invest your savings, whereas if your investments do not offer tax deduction benefits, you can select to invest your savings in reducing their debt rather than making an investment.

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Some of the most popular loans offered by almost every bank are:

Personal Loans

Personal loans are unsecured loans provided by banks, which can be used for nearly anything except investing in shares. The borrower is required to provide necessary KYC documents along with proof of income. Generally, borrowers need to have a good CIBIL score to avail a personal loan, and most banks inform the applicants about the approval or denial of their applications in a matter of 2-4 working days.

Being an unsecured loan, personal loans levy a high rate of interest, which can vary between 14 percent to 21 percent depending upon the risk profile of the applicant.

Home Loans

Home loans are one of the most popular forms of loans, and almost every 8 out of 10 residential property transactions involve a home loan. Home loans are long term loans and can be taken for a period of up to 30 years at an attractive rate of interest, which starts at 8.35 percent.

Home loans can be taken to purchase a new residential property, an investment property, a second home, buying land property, construction of a new house, purchasing under-construction properties, finance home extensions, and renovations, etc.

Car and Two-Wheeler Loans

As the name suggests, car and two-wheeler loans are used for purchasing a motor-vehicles. Like every loan, the borrow is required to submit mandatory KYC documents and proof of income. It is also vital for the borrower to have a good CIBIL score to avail of a car and two-wheeler loan at attractive rates of interest. Most car and two-wheeler dealerships have existing tie-ups with commercial banks with make application and disbursement of the car and two-wheeler loan a seamless process.

Car and two-wheeler loans are secured loans, and in the event of default of loan installments, the bank has the freedom to repossess the motor vehicle or two-wheeler hypothecated against the loan.

Education Loans

Education loans are offered to students to pursue higher education in reputed universities in India and abroad. Education loans can cover various expenses such as college or university fees, cost of travel to the location of the university, living expenses for the duration of the course, etc. 

Borrowers are required to submit documents such as prior educational credentials, letters of invitation from the university, and other KYC documents. At times, the parents of the borrowers might need to provide a personal guarantee, which states that the parents will repay the loan in an event the borrower defaults on the loan repayments.

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Types of Mutual Funds in India

Equity Funds

These mutual funds invest in the equity market, and the primary object of the fund is to offer maximum returns on investment to the investors. These mutual funds are the high-risk investment, and its performance is linked with the performance of the stock market. These mutual funds are well-suited as a long-term investment.

Sector Funds

Sector funds are mutual funds that invest exclusively in the shares of companies that a selected sector or industry. For instance, a mutual fund might opt to invest only within the tech sector or the oil industry. While these funds can offer high returns, these are also deemed as high risk due to a lack of diversification of investment.

Index Funds

Index funds are mutual funds that invest in the pattern of the market indices, such as the SENSEX, NIFTY, etc. The NAV of these funds can rise and fall based on the performance of the market indices.

Tax Saving Funds

Tax saving mutual funds offer investor tax benefit under section 80C of the Income Tax Act, 1961. Investment in these mutual funds can offer taxpayer rebates of up to Rs. 1.5 lakhs under u/s 80C, thereby reducing their overall taxable income and tax liability. These mutual funds are suitable for individuals who wish to invest for the long-term and avail of tax-saving benefits.

Debt Funds

These mutual funds invest mostly into debt or fixed income securities such as debentures, government securities, corporate bonds, commercial papers, and other forms of money market instruments. Debt funds are suitable for investors who have a low-risk appetite or are seeking a steady regular income

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Nonetheless, a debt trap does not need to be permanent, and there are a few ways of escaping a situation of a debt trap:

Analyze the Nature of your Debt

Every form of debt has a different cost of capital, while certain debts such as home loans and other forms of secured might attract a low rate of interest, unsecured loans such as personal and business loans, credit card debts attract a high rate of interest.

It is wise to raise low-cost loans to pay off high interest-bearing loans. This reduces the overall monthly debt repayment obligation and interest payments, this helps you to escape a debt trap.

Reduce Your Expenses

The best way to escape a debt trap is to pay off your debts as fast as possible. While it might not be possible to pay off your entire debts at a single go, you can reduce your expenses, increase your savings, and divert these savings of foreclosing a small portion of your debt. You can also use a significant part of your annual performance bonuses, Diwali bonus, leave encashment, etc. towards foreclosing a small portion of your loan. This will help you reduce your debt obligation faster and slowly and steadily escape the debt trap.

Find ways to Increase your Income

While most of us rely on your monthly salaries as our sole source of income, there are other ways to increase your income from another source. You can use your other skills and talents to earn a freelance income on the side, after working hours and weekends. This new income can use their additional income to pay off their debts and gradually escape a debt trap.

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