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  • The Essential Things You Need to Know About Mutual fund investment

    The Essential Things You Need to Know About Mutual fund investment

    There are more than 12,000 financial investment funds currently. Among them are the Mutual fund investments, which belong to the category of Undertakings for Collective Investment in Transferable Securities (UCITS).

    When you want to invest, there is, on the one hand, the bank investment which gives a rather low return, but without risk and on the other hand, more risky financial investments with a good return. How does a MFI work? What is the taxation on the performance of a MFI? Here is a full article on mutual funds.

    What is an MFI?

    In order to grasp the subject of MFIs as a whole, it is important to come back to the definition of these and their functioning.

    Mutual funds (MFI): definition

    MFI: pooling of capital

    The mutual fund consists of a pooling of capital invested by holders of financial securities (investors). A security holder is a person who has invested in one or more MFIs and who, in return, holds a share (pro rata of the securities). Security holders are co-owners of the fund.

    There are several classes:

    Monetary: the risk is minimal

    Shareholder: for a Mutual fund investment of this class, 60% in action and 40% free. The risks are significant, but the return is high.

    Bond: few risks with a so-called modest but more regular performance.

    Alternative management: the risks are high.

    With formula: there are the guarantee funds (without risk of loss), the funds known as protected with a limited risk and the funds with promises (amount indicated in advance).

    Streamlined: these are mainly life insurance contracts that have linearity in their management and in their performance.

    How an MFI works

    It is a company that manages the fund. Each holder of securities invested and it is the company which will decide where to place this money according to the objectives of the fund. An MFI does not have a legal personality; each co-owner engages his responsibility up to his invested capital, neither more nor less.

    There are different types of MFI:

    Company MFI (MFIE):these funds are intended for employees who wish to invest in their business. It is an employee participation in the results of the company.

    Risk MFI (MFIR):as its name suggests, it is for so-called “risk” products with a minimum mandatory investment of 50% in European stocks not listed on the stock exchange. In return for the risks incurred, there is a tax advantage on these shares if they are kept for at least 5 years. Advantage which consists of a tax exemption (social security contributions remain compulsory). This type of MFI is now called FPCI (Professional Capital Investment Fund).

    MFI in innovation (MFII): the fund must be invested at least 60% in companies not listed on the stock exchange, in an innovation sector (high-tech sector) with high capital gains. This is for example the case of the Internet, telecommunications or even electronics. It is also a risk fund which gives the right to a tax reduction of 28% of the amount of capital invested with a ceiling (€ 3,000 for a single person, € 6,000 for a couple). It will, of course, be necessary to keep this investment for at least 5 years.

    Real Estate Investment Funds: in shares only. They can be managed by distributors, custodians or management companies.

    Futures market mutual fund (FCIMT): it is the same principle as a MFI to which two additional constraints are added. 50% must be held in cash and be a formula fund with the amount of the fund determined in advance.

    Taxation and MFI calculation

    For the accounting of a MFI, it is necessary to differentiate income from capital gains. In fact, to be able to file your income tax return, you will not put these two things in the same box.

    Since January 1, 2018, the taxation of financial investments has changed. The 2018 Finance Law introduced the single flat-rate levy (PFU) which brings a levy up to 30% including 12.8% tax and 17.2% social security levy. This fixed deduction is calculated on the capital gains recorded on the sale of capital shares. It is also calculated when you are going to declare your income from securities and movable capital.

    Did you know?

    • You can choose the PFU or the progressive tax scale for your income tax return. It must be requested before the end of the year preceding the declaration. This choice is correlated with your income. There are tax details for each type of mutual fund.
    • To calculate and know the performance of your capital, simply subtract the assets from the liabilities.
    • The liabilities are equivalent to the number of shares of security holders and the assets are all that relates to financial instruments, the market, etc. To make the calculation, the assets are frozen through the MFI’s portfolio. This gives the value of the asset. By dividing the value of the assets by the number of shares of security holders, you will have the net asset value of the fund.

    MFI or Investment Company with variable capital (SICAV)?

    It is important to differentiate between a SICAV and a MFI thanks to their definition:

    SICAV: SociétéAnonyme (SA), a legal person managed by shareholders with a board of directors. Each shareholder has the right to vote. For a SICAV to be created, a minimum capital of 7.5 million euros is required.

    MFI: it is a little on the same principle as an SARL since each holder of securities is entitled to a number of shares proportional to its investment capital. To create a fund, the entry ticket amounts to € 400,000.

    When we already look at these two definitions, we can see that the legal status is not the same. Then there is a difference in the risks taken and the nature of the investors. For a MFI, you have a more lucrative return with greater risks than for a SICAV. Only the capital is limited.

    What should be remembered is that these are collective investment undertakings for transferable securities (UCITS) which operate almost similarly with differences in status. To make your choice, you can refer to the document that was sent to you during your investment search: the Key Investor Information Document (KIID). It is this document which will detail all the data concerning the fund in question: performance, strategy, risks, costs, etc.

    Good to know: SICAVs are often more suitable for so-called experienced investors because they are decision-makers, which is not the case for a MFI. Find out more.

    Frequently Asked Questions

    How to translate MFI in English?

    We could translate this by mutual funds. It is the same translation for a SICAV or a UCITS. Indeed, our French acronyms do not exist as is in English. It will therefore be necessary to explain in more detail what an MFI is to make the difference with the others.

    How to subscribe to a MFI?

    To subscribe, simply go to an online banking establishment, with a broker or an insurer to make your request. In exchange you will receive the KIID which will give you an idea of ​​the risks and costs incurred. Then it only remains to choose.

     

  • Options for Saving in Retirement

    Options for Saving in Retirement

    Retirement still seems far away? What if it was the best time to prepare it? From the age of 40, your purchasing power increases and you have good visibility into the future. So thinking how to save for retirement? The options are right here.

    You have twenty years ahead of you to prepare for your retirement, which leaves you with many opportunities to seize. Overview of solutions to best prepare for your retirement.

    Investing in real estate

    Investing in stone is often presented as the first investment to make. Even if everyone does not think about real estate in preparation for retirement, it has many advantages on this side. So How to save for retirement? Here we are with the best deals.

    The acquisition of your principal residence must be a priority. Having a home when you retire offers real security. You no longer have to pay rent at a time when your income is decreasing. You also have guaranteed accommodation: by being a tenant, you may have to separate from your accommodation if the owner wishes to recover it.

    In addition, depending on the location of the accommodation, it can gain value over the years. You can then make a capital gain during the resale if you want to move to change the region or buy smaller once the children are gone, for example!

    If you are already an owner, consider rental property

    Subscribe to a new mortgage when the previous one is reimbursed or about to be reimbursed? This can be very useful for your retirement: you can deduct the interest on your loan from your property income and this rental income can supplement your pension after retirement. Depending on your plans, you can also consider making this investment with a view to occupying it during your retirement. And if you don’t want to keep it at retirement, you can resell it. That can be used as a contribution to finance other projects.

    How to build retirement savings at 40?

    Investing in real estate is very useful, but other solutions are possible, with rates, unlocking possibilities, etc. different. 45 is therefore the time to increase your savings effort alongside real estate. To start, check that you always have sufficient precautionary savings in liquid devices (Booklet A or Sustainable Development Booklet). Once this precautionary savings possibly completed, there are many solutions to prepare for retirement.

    Life insurance, to combine flexibility and performance

    A life insurance is a contract that allows to gradually building capital for retirement. However, this capital remains available at all times if you have to recover these funds before your retirement.

    Most contracts allow very broad investment choices, from the safest to the most dynamic. And you can change the distribution of your investments at any time within your contract. With twenty years before you retire, you can afford a dose of risk in order to hope for a better return. It is better to hold than to run, and it may be more interesting to allow yourself a dose of risk which you will have time to catch up than to stay on devices with returns close to or even below inflation.

    This solution allows you to prepare for your retirement at 40 with flexibility. You pay what you want, when you want. Try to make regular payments (even small amounts) to build up your savings smoothly. You can always adjust the amount of your regular payments, either up if your income increases, or down otherwise. In case of difficulty, you can even stop them.

    You can supplement these regular payments with additional payments according to your possibilities: exceptional cash inflow, 13th month, etc. This will allow you to improve your retirement capital! You also get out of your contract as you wish in capital or in annuity according to your projects. The capital will allow you to finance a retirement project. The annuity guarantees you additional income for life.

    A PEA if you are looking for a dynamic investment

    The Equity Savings Plan is more risky because it allows you to invest only in European stock market securities. But it offers interesting performance potential over time. To smooth the stock market fluctuations and reduce the uncertainty on what the PEA will ultimately yield favor these investments over long periods (at least over 8 years) and progressive investments. You take less risk by investing € 500 per month for 12 months, rather than € 6,000 at once! When you retire, you can choose to recover your savings in the form of capital or additional income paid for life and exempt from income tax. Only social security contributions will be due.

    Prepare for retirement from age 40 with specific savings products

    The Popular Retirement Savings Plan allows you to benefit today from tax advantages on your payments and tomorrow from an additional income. However, the amounts saved can only be recovered at the time of your retirement except in certain exceptional cases. Depending on your personal situation the possible savings already acquired and your tax situation, it is therefore important to adapt these payments on these contracts. Today’s retirement is mainly in annuity, which allows you to secure additional income for life.

    If you are an employee, prepare your retirement with company offers

    With corporate savings plans (PEE) or collective retirement savings plans (Perco) , you benefit from tax advantages and the contribution of your business. In return, savings can be blocked. You can most often make voluntary payments, at your convenience (capped) or simply pay the profit-sharing or the participation of your company. You save for your retirement effortlessly, your employer finances part of your retirement supplement! If you are self-employed, take an interest in the individual retirement savings solutions that you can set up. The Pacte law will transform the Perco into a universal PER, with slightly different methods.

    What about the financial markets?

    There is still a long time between now and retirement. Depending on your risk appetite, it may be wise to invest part of your savings on the financial markets. They are more risky, but offer greater performance potential over a long period of time. In conclusion, diversify your savings to 40 years to prepare for retirement! Among the different solutions for preparing for retirement, each has advantages and disadvantages.

    Conclusion

    Real estate presents a certain security but is illiquid, that is to say that you are not guaranteed to be able to recover your investment quickly if you have an urgent need to sell. Savings products are differentiated by their yield potential, their risk, their unlocking possibilities. Diversified savings, that is to say carefully distributed among different solutions, allows you to adapt to your needs and the events you may face while optimizing your capital and your earnings.

  • What Is Investment – and How To Start Investing

    What Is Investment – and How To Start Investing

    Invest in your future. Invest in your career. Invest in your dreams. Investing is a very used verb to talk about goals and plans – but when it comes to money, do you know what investment is?

    Investment is, in short, taking an amount today and trying to turn it into more money in the future.

    Like? It’s not magic, but understanding how the financial market works and choosing a category or type of investment that fits your profile.

    There is a myth that to start investing you need to already have a lot of money – but that couldn’t be further from the truth: anyone can invest, no matter how much money they have.

    What It Takes To Start Investing

    • The first step is to set your expectations: most of the time, investments pay off in the medium and long term. Don’t expect to make a lot of money overnight;
    • The second step is to know that investing needs to be a habit: always set aside an amount per month, however small;
    • The third step is to look for a financial institution (bank or broker) and evaluate the options they offer.

    What is investment: know the different types

    Making an investment means setting aside an amount of money and putting it somewhere where that amount pays off over time.

    It is possible to invest in real estate, for example, invest in buy-to-let properties and selling it for a higher price – but this is far from being the only (or the best) option for those who want to start investing.

    Those who have little money and no experience in the market can – and should – have some kind of investment. In that case, there are several financial products that are easier to manage and understand.

    If your goal is to keep the money yielding, without having the trouble of managing it often, there is certainly a type of financial product that fits your profile.

    What are financial products – and how do they make your money pay off

    Financial products are different options that common people have to profit from everyday operations carried out in the financial market.

    When you invest your money in a financial product or asset, you are, most of the time, lending that amount to banks and financial institutions to carry out different types of operations.

    That money you “borrowed” is returned with interest – which is nothing more than how much your investment yielded.

    In other words: you choose a product, put your money in it and, depending on the type of application, you know exactly when you will earn more over time (in the case of Fixed Income products. See more about this option below ).

    But beware: every investment is a gamble. The more risk you are willing to take, the greater the payoff if it works out.

    Understand the risk of investments: Fixed Income and Variable Income

    Each type of application has its own risks, yields and terms.

    Deciding which products fit your profile depends on your knowledge of the market, your goals, your current financial position, and how much risk you are willing to take.

    Basically, the financial products you can invest in fall into two types — and the risks vary between them:

    Fixed Income

    In Fixed Income , investors have more clarity on how much their money will yield.

    Fixed income investments can be of two types:

    Prefixed – when there is a certainty about what your return will be at the end of the application, e.g., 6% per year.

    Fixed rates – when the income is linked to some other index of the economy. In this case, the investor knows that his money will yield according to something specific – but he doesn’t know exactly how much because this indicator has its fluctuations.

    Variable income

    As the name implies, variable income investments have rates of return that vary over time. In other words: profitability varies all the time, which means that the risks are greater. Here, the return is greater, but the possibility of losing is also great. The stock exchange is the market’s main variable income asset.

    How to choose: fixed income or variable income?

    At first glance, Equity Income may seem more advantageous than Fixed Income as it provides better chances of earnings. However, you need to be careful with this idea.

    In the financial market, the return of an asset is proportional to its risk . That is, the greater the return possible, the greater the risk.

    The stories of investors who became millionaires by investing in stocks are famous. But that didn’t come without a risk: in the same way, there are investors who lost everything overnight by betting on the stock market.

    The stock exchange is an example of an extremely volatile market. Investing in stocks involves cold blood and knowledge to deal with swings.

    On the other hand, Fixed Income offers constant and stable income, which gives the investor more peace of mind, especially when thinking about the long term

    Therefore, if you are going to start investing now, the recommendation is to give preference to investments in Fixed Income.

    With them, you can create an emergency reserve and don’t run so many risks – besides being able to withdraw the amount when you need it.

    When this reserve already exists, you can start thinking about investing in other less safe products with more interesting returns.

    Summary:

    We summarize the important points:

    • Investment is a way to make your money pay off over time;
    • There are several forms of investment, but it is important to understand that each one has different risks and returns;
    • Banks or financial institutions offer different investment products to their clients;
    • Within the category of financial investments, there are two main types: fixed income and variable income;
    • Fixed income ones have a certain income, while with the variable income option, the client does not know how much he will have at the time of redeeming the investment;
    • As a general rule, the greater the risk, the higher the return. For those just starting out, it is recommended to invest in lower risk options with a more guaranteed return (even if a little lower) – such as fixed income products.

    Author Bio: Jonathan is Founder of SPV Mortgages. He can help you find and secure the best limited company mortgage options to push your property investment dreams forward. As specialist mortgage brokers with over 10 years of industry knowledge, he has helped experienced landlords and first-time investors across the country; saving you time and money in tracking down the best rates.

     

     

  • 4 Strategies you can use for investing in crypto

    4 Strategies you can use for investing in crypto

    Provided By Tax Software Company, Sovos

    The term “cryptocurrency” seems to be the latest craze among investors who wish to make money by investing in Bitcoin and other cryptocurrencies. Investors can find expert bits of advice which might help them to understand this dynamic world of uncertainties but would limit their possibility of making money. People perceive cryptocurrencies or specifically Bitcoins as the best possible way of achieving financial success. There is, however, much more to the crypto-world than Bitcoin, which can be learned by opting an effective cryptocurrency course. Here is a list of four strategies that can be used while investing in crypto:

    1. Rupee cost averaging: This strategy is more like the one that allows you to invest every month in mutual funds. In this type of strategy, you start to invest a portion of your investment at regular intervals for buying a fixed amount of cryptocurrency. Investors using such strategies do not consider the price or the fluctuations in their securities but just invest a dedicated amount to keep up with their investment strategy. This way they can plan for the future and save up a good amount of sum in crypto currency. This strategy is adored by most of the investors who choose to invest in crypto currency.
    2. Profit re-investing: If you are investing in cryptocurrency for too long and you have a hold on a particular currency, then according to this strategy you must start investing in other currencies as well. This way you can easily conquer the uncertainties and challenges arising at constant intervals in the market. You just must keep an eye on the situations where the graph shows parabolic curves. This strategy is a perfect fit for people who wish to make a limited number of investments.
    3. Balanced portfolio strategy: In this type of strategy, investors are advised to invest equally in all the currencies. You will be suggested to uniformly distribute your allocated amount for investment into parts and be able to compare them evenly. This strategy is a perfect fit for people who want to build a diversified portfolio and expose themselves to different kinds of cryptocurrencies. It will eventually elevate the chances of your success and get the best price as well.
    4. Unbalanced portfolio strategy: You may use the Unbalanced Portfolio Strategy while investing in cryptocurrency to benefit from the currencies you believe would perform best at that very particular moment. You will dole out a specific currency during investments in this strategy based on how well you believe each currency would compete. According to this strategy, you can invest a major amount of your investment in Bitcoin, a comparatively smaller amount on Monero and the rest of other allocations. Following that, each investment will be divided into specified proportions.

    So, if you are looking for a perfect strategy that could fit into your investment plans while considering the volatile market of cryptocurrencies, then you must consider all the aforementioned strategies before making any investments. You can also sign up for a cryptocurrency course to develop a deeper understanding of this unstable market.

     

  • DIFFERENT TYPES OF FINANCIAL PRODUCTS EXPLAINED

    DIFFERENT TYPES OF FINANCIAL PRODUCTS EXPLAINED

    Working professionals have been able to save some money now though they have been working from home since last few months. They are now looking out for investment destinations to park these savings and earn returns on them. However, the only problem is they find it difficult to understand different asset classes as most of them are somewhat complex.

    We have identified some of these financial products with a detailed explanation for a better understanding of these working professionals.

    You can also apply for 12-month payday loans from direct lenders to invest money in these financial products or to finance your basic needs if you are out of a job. These are unsecured loans which are even meant for bad credit borrowers, which are often ignored by established commercial banks.

    These loans have an instant decision. Thus the approval or rejection decision is given on the same day, and the loan amount is transferred in the next hour, once it is approved.

    Let’s now look at these financial products in a bit detail, here it goes:

    • Equity Investing: You first need to have a Demat or Trading Account with a broker who is registered with The Financial Conduct Authority (FCA). After which you can start your investing or trading journey by buying stocks of companies. The returns on your investment here are in two forms, namely share price appreciation and dividend.

    You become a shareholder and thus, small owner of the companies in your portfolio. As a prudent investor, prefer to diversify your investments across different companies in different industries. Avoid putting all your money in just one company’s stock. The risk is higher here. Thus analysts suggest diversifying one’s portfolio for better returns and lower risk.

    • Mutual Funds: These are somewhat similar to equity investing with the difference being that here a fund manager is investing your money on your behalf. Mutual funds collect money from a pool of investors and the fund manager who is managing that fund will invest this money as per his research and knowledge.

    The Net Asset Value (NAV) of that fund will decide your returns. You can invest money in a mutual fund as one-time lump sum investment in one go, or you can start a Systematic Investment Plan (SIP) wherein you need to pay a fixed amount every month.

    The risk here is relatively less compared to equity investment if you are a novice investor. It is advised by many market veterans that if you are planning to invest in mutual funds then stay invested for long-term that is for 10-15 years or more to benefit from the effect of compounding on your returns.

    Also, the tax on your returns is less if you are investing from more than 5 years. Thus, it is preferable to attach a long-term financial goal like your child’s higher studies or his/her wedding to a mutual fund.

    • Derivatives: This is also known as F&O Market, which is Futures and Options as these are the most traded instruments in the derivatives segment. They derive their value from the underlying asset, which could be a share, commodity, index, or currency, and thus they are known as derivatives.

    They fall in the category of risky investment category as they are highly volatile as futures and options come with an expiry. Both of them are traded on the London Stock Exchange, and traders can trade them using their Demat account.

    Futures have an obligation which needs to be honoured at expiry while options give you a right to buy or sell before expiry, there is no obligation in options. Derivatives can make you a millionaire in a few months, or it can twist your fortunes another way round as well, thus trade derivatives with strict stop losses to minimize the downside.

    • Commodities Trading: This segment deals with buying and selling commodities like natural gas, crude oil, gold, silver, copper, iron, rubber, cotton, the power to name a few.

     You can speculate on future prices of these commodities and accordingly take a position on them. However, to be profitable you need to have knowledge about the commodity you are planning to trade and as a practice; you should follow every news related to that commodity.

    Commodity trading is good for short-term gains, but you have to track and monitor them for better returns constantly. If your trading capital is low, then you can approach direct lenders for 12-month payday loans.

    Currency Trading: The most active and the most volatile market, the currency market is open all day as when one market closes, other opens based on time zone difference.

     In this, currency traders take a position on currencies like US Dollar, Euros, Pound Sterling, Indian Rupee, Swiss Francs etc. They bet on the prices of these currencies vis-à-vis Dollar or other currency, the exchange rate. This trading is the most difficult and complex financial product as the potential for both upside and downside is high.

    Either you will go from rags to riches or another way round. Go for currency trading only when you are 100% sure else avoid taking such risk and settle for less risky instruments and asset classes.

    These were some of the complex financial products simplified for your understanding. We hope you got the basic idea about them along with the risk-reward ratio.

    There are other less complex financial products as well like bank deposits, real estate, gold ETFs etc. which have low risk and your money is comparatively safer. Decide which asset class is right for you based on your risk-taking ability, don’t just blindly follow others.

     

     

     

     

  • Five Tips for Financing Investment Property

    Five Tips for Financing Investment Property

    Real estate investments have the potential to provide a steady income for investors—presuming they can get their hands on the financing required to get in the game. There are many financing options available, and the primary differences boil down to how much the loan is going to cost the investor. The higher the cost of the loan, the lower the long-term income potential of the investment. If you want to maximize the profitability of your venture, getting the best mortgage is critical. Here’s what you need to know to get the best loan possible.

    1. Tidy Up Your Credit

    A credit score in the mid 600s may be enough to qualify for a basic investment loan, but the terms will not be on the investor’s side. With low credit scores come high down payments and high interest rates, neither of which will help your profitability. The higher your credit score, the better the terms of the loan—and a score over 740 will typically qualify borrowers for the best terms available from most lenders.

    2. Organize Your Financial Documentation

    Most lenders want to see that you have either the income or the available cash to cover your existing obligations and the new loan you’re trying to secure. You’ll be allowed to count a certain portion of the investment property’s income in your application, but having the right documentation to show the rest of your income and cash reserves will speed up the process. Gather your tax returns from the last two years, including W-2s, 1099s, and other income statements, along with bank statements, recent pay stubs, and anything else relating to your current income—especially if you have new sources of income that are not on previous tax returns.

    3. Reduce Current Debts

    Most lenders consider your debt-to-income ratio to make sure you’re not using all your current income to pay obligations and have nothing to spend on food and the electric bill. If you’re unable to boost your income levels, paying down debts is the way to go. For borrowers who already meet the minimum requirements for a lender, reducing that ratio can help you get better terms for your loan.

    4. Document the Property’s Cash Flow

    Most lenders are primarily concerned with your ability to repay a loan. Some lean heavily on your personal ability to pay, as demonstrated by your past (i.e., your credit score) and your current income levels. Others, called asset-based lenders, will be satisfied with a property that can demonstrate a high debt service coverage ratio, or the ratio of the projected income of the property to the total amount of the mortgage payments, taxes, and insurance. In essence, the more income that remains once the debts have been paid, the higher the score; the higher the score, the better the terms of the loan.

    5. Cast a Wide Net

    From an outside perspective, it may seem like most lenders are the same and that loans do not vary considerably from one lender to the next. The truth is that there can be significant differences from lender to lender. First, the fees associated with the mortgage will vary, and even a fraction of a percent difference in interest rates will have a major impact on the long-term cost of your loan. Borrowers should take the time to apply to several lenders and include conventional lenders as well as asset-based lenders so they can compare and contrast their options.

    Protecting Your Investment

    Once you’ve done the hard work of finding the best loan for your investment property, the next step is to maximize the profits from that investment. Many first-time investors are overwhelmed with the day-to-day operation of rental properties, especially if there are multiple units and many tenants to juggle. It can be easy to make costly mistakes in the initial months, especially if your property has vacancies, and you don’t have the marketing skills to attract tenants or the screening skills to choose the right one. New investors may find that working with an experienced property management company will help ensure the venture gets off to the best possible start to provide long-term income and security.