The Must Know PPF Withdrawal Rules

You have been saving money in your Public Provident Fund (PPF) account for a long time, and it’s finally time to take out some of it. But there are a lot of withdrawal rules that you need to know before you can do that.

Don’t worry; we’ve got your back! This article will discuss every aspect you need to consider before proceeding with a PPF withdrawal in India.

Overview of the PPF Withdrawal Rules

Public Provident Fund (PPF) is a popular investment scheme in India that allows individuals to save money for their future while availing of tax benefits. It is a long-term savings scheme with a maturity period of 15 years, and investors can contribute an amount of up to 1.5 lakh INR every year.

The PPF withdrawal rules are designed for convenience and flexibility. You can withdraw up to 50 per cent of the accumulated balance at the end of the fourth year, and the following withdrawal opportunities are available subsequently:

  • After completion of 5th year
  • After completion of 7th year
  • On completion of each year after 7th year
  • During the 15th financial year, when your account matures

The amount you can withdraw at one time cannot exceed 1/3rd of your total PPF balance at the end of 2nd preceding financial year. Additionally, premature closure of a PPF account is allowed only after the completion of 5 years or in cases where the account holder needs funds for medical treatment or other emergency needs.

When Can You Withdraw as per the PPF Withdrawal Rules?

Public Provident Fund (PPF) is a long-term saving scheme offered by the Indian government. It provides a safe retirement corpus with tax exemption and has a loyalty bonus for investments. Its popularity has grown over the years because of the safe and guaranteed returns it offers.

But things get a bit tricky when it comes to PPF withdrawal rules. You can withdraw from your PPF account only after your entire tenure of 15 years or at maturity. In case you need to access those funds earlier, there are certain conditions where you may be allowed to withdraw before maturity.

For instance, once you’ve completed 7 years in PPF, you may be able to withdraw up to 50% of the balance accumulated up till then, but only once in the entire tenure. Additionally, after 12 years, you can take loans from your PPF account of up to 25% of the balance at any point (not just once). Any previous loans taken must be repaid before taking further loans or partial withdrawal facilities. In either case, an administrative fee is applicable for such early withdrawals.

Partial PPF Withdrawal Rules

If investing in a PPF account, you should know the partial withdrawal rules since life is full of surprises, and things don’t always go as planned.


According to PPF withdrawal rules in India, you become eligible to make partial withdrawals from your account six years after opening the account. However, the number of partial withdrawals you make each year is limited to one. Here are other vital points that you need to keep in mind about partial withdrawals:

  1. The minimum amount for a partial withdrawal must be Rs 500, with no maximum limit.
  2. You can withdraw up to 50% of the balance that stood at the end of the fourth year preceding the year of withdrawal or at the end of the preceding year – whichever is lower.
  3. Partial withdrawals are allowed only during the extension period. They won’t be permitted once your account matures, even if it is extended beyond 15 years.
  4. Partial withdrawals will not reduce your loan eligibility from a PPF account either, but only if it’s within 30% of the balance available at the beginning of the financial year when calculated individually or as mentioned above over a consecutive block of three years.

Tax Benefits of Investing in Public Provident Fund

Tax benefits are one of the significant attractions of investing in a public provident fund. If you want to maximize your investment, understanding the tax benefits associated with PPF is essential. The following are the tax benefits of investing in a PPF:

Tax Deductible Contributions

Up to Rs 1.5 Lakh per annum is allowed as a deduction from your income for investing in PPF. The amount includes all contributions you and/or anyone else made on your behalf. However, only one individual can claim this deduction each financial year. If you and your spouse invest in their personal PPF account, one of you will have to forgo the deduction.

Tax-Free Interest Earnings

The interest earned on your PPF investment is completely tax-free, which means that all the interest you earn on your investments will be added to your bank balance instead of being deducted for taxes!

Tax-Free Maturity Amounts

The total amount accumulated at maturity (i.e., principal + interest) is also completely tax-free and exempt from taxation under Section 10(11) of the Income Tax Act, 1961. So when it comes time to withdraw your funds or close the account after 15 years, you won’t have to worry about paying any taxes!

Loan Facility from the Public Provident Fund Account

The PPF has an excellent loan facility, too! After paying all due instalments, you can take a loan from your PPF account anytime between the third and sixth year of opening your account.

You have to apply for the loan and get it approved. Still, you can use it to cover emergency expenses like medical bills, or tuition fees. The amount you can borrow is dependent on the amount you’ve paid in your account. The maximum loan allowed is 25 per cent of the lower balances at the end of either the second or third year preceding the year the loan is applied for. You must repay this loan within 36 months in equal instalments.

It’s important to note that if you don’t repay these loans on time, your account will be frozen until it’s repaid. Any interest due will not be credited to your account. So, make sure to keep track of when these payments are due!

Tax Implications according to the PPF Withdrawal Rules

In case you have to withdraw funds from your Public Provident Fund (PPF) account, you should know that there will be some tax implications:

Withdrawing at Maturity

The great news is that your PPF contribution is eligible for tax deductions under Section 80C. If you withdraw your amount at the maturity of 15 years, it will be exempt from federal taxes when the amount is withdrawn.

Partial Withdrawal

You can also partially withdraw from your PPF account up to a specific limit. Any money removed from the account post-completion of 5 financial years and before completion of 15 years is taxable under Income Tax Act 1961 in the year it was withdrawn.

Premature Closure of Account

In exceptional cases where premature closure of a PPF account is allowed, any withdrawal becomes taxable unless this condition is fulfilled – withdrawals made before completing 5 financial years would only qualify as tax-free if the amount is used for higher education or specialized medical treatment.


In conclusion, with a PPF fund, you get many advantages regarding returns, security, and tax benefits. The PPF withdrawal rules are straightforward, and the investment can be held in perpetuity if you wish. The rules offer flexibility and the ability to make partial withdrawals if needed. It is a great choice for those who want to save for retirement and provide a comfortable financial future for themselves and their families.


Q1. Can we withdraw PPF any time?

A PPF account holder is eligible to withdraw funds only if the account has existed for at least 5 years.

Q2. How much can we withdraw from PPF after 7 years?

A PPF account holder can withdraw up to 50% of the amount after 7 years, beginning with the end of the year when the first contribution was made.

Q3. What happens if you stop investing in PPF?

It is not possible to discontinue Public Provident Fund account. You must deposit a minimum of Rs.500 in a financial year. If you fail to do so, a penalty of Rs.50 will be applied each year along with arrears of Rs.500 for each year missed.

Atal Pension Yojana: A Comprehensive Guide

Pension is an important aspect of financial planning, particularly for individuals in the unorganized sector who do not have access to formal pension schemes. The Government of India has launched several pension schemes to provide social security to the people in the unorganized sector, and one such scheme is the Atal Pension Yojana (APY).

Launched in May 2015, the Atal Pension Yojana is a government-sponsored pension scheme that provides a regular pension income to workers in the unorganized sector. The scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA) and is open to all Indian citizens between the ages of 18 and 40.

Features of Atal Pension Yojana

  1. Eligibility criteria:
  • To be eligible for the Atal Pension Yojana, the subscriber must be an Indian citizen between the ages of 18 and 40. Since the contribution is made till the age of 60, it implies that the contribution period is 20 years or more.
  • The scheme is open to all individuals who are not enrolled in any other formal pension scheme.
  • The person should have a savings bank account or a post office savings bank account.
  • The government has announced that from October 1, 2022, all income taxpayers are not eligible to apply for the Atal Pension Yojana (APY). This is to ensure that the scheme’s benefits go to the underprivileged.
  1. Contribution:
  • The subscriber can choose the contribution amount, which depends on the pension amount they wish to receive.
  • The minimum contribution amount varies from Rs. 42 to Rs. 1,454 per month, depending on the subscriber’s chosen pension amount.
  • The contributions are made until the subscriber reaches the age of 60.
  1. Pension amount: The Atal Pension Yojana provides a guaranteed minimum pension of Rs. 1,000 to Rs. 5,000 per month, depending on the contribution amount and the age at which the person joins the scheme.

Source of the image
  1. Co-contribution by the government:
  • The government provides a co-contribution of 50% of the subscriber’s contribution or Rs. 1,000 per year, whichever is lower, to eligible subscribers who join the scheme before December 31 2025.
  • Only after the Central Record Keeping Agency receives confirmation that the subscriber has paid all the year’s instalments does the Pension Fund Regulatory and Development Authority (PFRDA) pay the government contribution to the eligible Permanent Retirement Account Number (PRANs).
  1. Nomination: The subscriber can nominate a nominee to receive the pension in case of their death.

Advantages of Atal Pension Yojana

  1. Social security: The Atal Pension Yojana provides social security to workers in the unorganized sector who do not have access to formal pension schemes
  2. Guaranteed pension: The scheme provides a guaranteed minimum pension, which ensures a regular income for subscribers during their retirement.
  3. Affordable contributions: The contribution amounts are affordable and vary based on the pension amount chosen by the subscriber.
  4. Co-contribution by the government: The government provides a co-contribution of 50% of the subscriber’s contribution or Rs. 1,000 per year, whichever is lower, which helps build a larger corpus for the subscriber.
  5. Tax benefits: The contributions made towards the Atal Pension Yojana are eligible for tax benefits under Section 80CCD of the Income Tax Act.

How to apply for Atal Pension Yojana

The Atal Pension Yojana can be applied online or offline. To apply for the scheme online, the subscriber can visit the scheme’s official website and fill in the online application form. To apply for the scheme offline, the subscriber can visit the nearest bank or post office and fill in the application form.

Documents required for Atal Pension Yojana

The following documents are required to apply for the Atal Pension Yojana:

  • Aadhaar card or a proof of identity and address
  • Savings bank account details
  • Mobile number

Note: The subscriber is also required to provide the nominee’s details.

Withdrawal Rules of Atal Pension Yojana 

  1. On attaining the age of 60 years:
  • After 60 years, subscribers will request the guaranteed minimum monthly pension or a greater pension if investment returns exceed the guaranteed returns included in APY from the associated bank.
  • After death, the spouse (default nominee) receives a similar monthly pension.
  • After the subscriber and spouse die, the nominee will get pension funds accrued until age 60.
  1. Exit before the age of 60 years:
  • In accordance with NPS rules for a pre-mature exit, PFRDA may allow exit before 60 in extraordinary situations, such as beneficiary death or terminal illness.
  • If a subscriber who has received Government co-contribution leaves APY voluntarily, they will only be repaid their payments and the net actual accrued income on them (after deducting the account maintenance charges). Subscribers will not receive the Government co-contribution and its accrued income.
  1. Death of the subscriber before 60 years of age: The spouse or nominee will receive a full refund of the accumulated corpus under APY. However, the spouse or nominee will not be entitled to a pension.

Terms of Penalty in Atal Pension Yojana

The following penalty penalties are applied if the recipient delays paying contributions:

  • 1 for monthly contributions of up to Rs. 100.
  • 2 for monthly contributions within Rs. 101 and Rs. 500.
  • 5 for monthly contributions within Rs. 501 and Rs. 1000.
  • 10 for monthly contributions of Rs. 1001 and above.

The account will be frozen if payment defaults for six consecutive months. If this continues for twelve consecutive months, the account will be deactivated, and the amount accumulated and interest will be returned to the respective individual.


The Atal Pension Yojana is a simple and effective scheme that provides social security to millions of workers in the unorganized sector. The scheme offers a guaranteed minimum pension, affordable contributions, and tax benefits, making it an attractive option for individuals wishing to secure their financial future during retirement. With the growing awareness about the importance of financial planning and retirement, the scheme is likely to attract more subscribers in the future.

What is the Kisan Vikas Patra Scheme and why should you know about it?

What is the Kisan Vikas Patra Scheme?

Kisan Vikas Patra is a small-savings certificate programme launched by India Post in 1988 with the motive of inculcating the habit of long-term investment discipline in people. As per the most recent update, the scheme’s duration is now 124 months, i.e., 10 years & 4 months. Initially, the scheme was targeted towards farmers, hence the name, but today anybody who fulfils the eligibility criteria can avail of the scheme. KVP is a safe and secure option that the Government of India guarantees.

Why was the Kisan Vikas Patra Scheme launched?

At the time of its launch, India was largely an agrarian and rural society. Unfortunately, most of the rural population did not have access to formal banking services due to a lack of infrastructure, low financial literacy, and the high cost of accessing these services. This is why the government launched the Kisan Vikas Patra scheme in 1988 to enable the farming population to save without risking their funds and still earn a good return.

Since KVP was made available at post offices nationwide, it was much easier for people in rural areas to invest in it. Moreover, this scheme was designed for long-term investing because a majority of the rural population did not have retirement funds or pension plans. By investing in KVP, individuals could support themselves in their old age.

What are the eligibility criteria for Kisan Vikas Patra Scheme?

  • A candidate must be 18 years or older.
  • A candidate must be a citizen of India.
  • Adults may apply on behalf of minor applicants.
  • Adults may apply on behalf of a person of unsound mind.
  • Non-Resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to invest in KVP.

What is the investment amount required for Kisan Vikas Patra Scheme?

  • The minimum investment amount needed is Rs.1000, with no upper limit.
  • In 2014, the Government of India made PAN card proof necessary for investments above Rs.50,000. This was done to prevent money laundering.
  • If depositing Rs.10 lakh or above, the applicant must submit income proofs, including ITR documents, salary slips, bank statements, etc.

What are the different types of KVP certificates?

There are three types of KVP certificates:

  1. Single Holder Type – This certificate is furnished to an adult. An adult can also obtain the certificate for a minor, where it will be issued in their name.
  2. Joint A Type – In this case, the certificate is issued to two adults who will both be receivers of the pay-out at the end of the tenure. However, if one of the account holders dies before maturity, then the amount will be given to the second holder.
  3. Joint B Type – In this type, the certificate is again issued in the name of two adults, but the difference is that the pay-out is given to only one of the two certificate holders or to the one who survives till maturity

What is the current interest rate of the Kisan Vikas Patra Scheme?

As announced on December 30, 2022, KVP deposits made in the first quarter of 2023, i.e., January to March, will earn an annual compounded interest rate of 7.2%. This means that if you invest in a lump sum in KVP right now, your money will double by the end of 120 months.

It is important to note that the Kisan Vikas Patra interest rate is revised every quarter by the Union Government, with the next revision scheduled around the end of March 2023.

What are the documents required for availing of a KVP certificate?

  • Form A must be duly submitted to the nearest post office or one of the designated banks.
  • Form A1 is required when applying through an agent.
  • KYC documents like Aadhar Card, PAN Card, Passport, Voter’s ID, Driving License, etc., as identity proofs.

How to apply for Kisan Vikas Patra online?

  1. Log in to your DOP internet banking account.
  2. Click on General Services > Service Requests > New Requests
  3. Under “New Requests,” choose “KVP Account.”
  4. Enter the KVP minimum deposit amount and choose the debit card linked to your Post Office Savings account.
  5. Agree to the terms and conditions, enter your OTP, and click “Submit” to view/download your deposit receipt.

What are the rules regarding premature withdrawals in the KVP Scheme?

  • If the withdrawal is made within 1 year, no interest will be given. Moreover, the investor will also have to pay a penalty as per the regulations of the scheme.
  • If the withdrawal is made after 1 year but before 2.5 years, the investors will receive interest but at a reduced rate.
  • If the withdrawal is made after 2.5 years, the investor will not have to pay any penalty and will also receive interest at the applicable rate.


The Kisan Vikas Patra is one of the safest options for investment, with profitable returns guaranteed by the government and protection from market risks. The scheme provides financial security for the long term and thus benefits people with low-risk tolerance.


  1. Can the KVP certificate be used as collateral for securing a loan? Yes.
  1. Is KVP eligible for deductions under Section 80C? No.
  1. Is KVP taxable? Yes, the returns from KVP are completely taxable. However, the withdrawals made after the scheme’s maturity are exempt from Tax Deducted at Source (TDS).
  1. Can the KVP certificate be transferred to another person? Yes, it can be transferred from one person to another in some cases with the consent of an officer of the post office or bank.
  2. Can the KVP be transferred from one post office/bank to another? Yes, it can be transferred to another post office/bank by filling out and submitting Form B.

Portfolio Construction — What is it and How to do it.

Randomly selecting stocks/mutual funds and creating ad-hoc portfolios? Maybe it is time for a change and to do things orderly. Portfolio construction is the process of selecting and allocating assets to create a diversified investment portfolio that meets an investor’s financial goals and risk tolerance. A well-constructed portfolio can help investors achieve their investment objectives while minimizing risk. 

In this blog, we will discuss the key principles of portfolio construction and elaborate on how to construct a portfolio that fits your investment needs. 

Step 1: Determine your investment objectives and risk tolerance

Before constructing a portfolio, you need to determine your investment objectives and risk tolerance. That is the first step. Your investment objectives should be specific and measurable, such as achieving a certain rate of return, generating income, or preserving capital. For e.g., If you are investing towards a down payment for your dream home then your strategy will be different than when you are in your retirement years and looking to preserve capital. Therefore, it is crucial to first establish the objective. 

Risk tolerance refers to the amount of risk you are willing to take on in order to achieve your investment objectives. It’s important to understand your risk tolerance because it can affect the types of assets you choose to include in your portfolio.

Step 2: Choose your asset allocation

Asset allocation is the process of dividing your portfolio among different asset classes, such as domestic stocks, international stocks,  bonds, and cash. The goal of asset allocation is to create a diversified portfolio that can potentially maximize returns while minimizing risk.

The optimal asset allocation for your portfolio will depend on your investment objectives and risk tolerance. Generally, younger investors with a longer investment horizon and a higher risk tolerance may have a higher allocation to equities, while older investors with a shorter investment horizon and a lower risk tolerance may have a higher allocation to fixed-income securities.

Step 3: Select your investments

Once you have determined your asset allocation, it’s time to select the investments that will make up your portfolio. It’s important to diversify your investments within each asset class to reduce risk and increase potential returns.

For equities, you can choose to invest in individual stocks, mutual funds, or exchange-traded funds (ETFs). It’s important to consider the company’s financial health, growth prospects, and valuation when selecting individual stocks. Alternatively, mutual funds and ETFs provide instant diversification by investing in a basket of stocks.

For fixed-income securities, you can choose to invest in individual bonds or bond funds. When selecting individual bonds, it’s important to consider the creditworthiness of the issuer, the maturity date, and the yield. Bond funds provide diversification by investing in a portfolio of bonds.

Step 4: Monitor and rebalance your portfolio

Once you have constructed your portfolio, it’s important to monitor it regularly and rebalance it as necessary. Over time, changes in market conditions or individual investments can cause your portfolio to become unbalanced.

Rebalancing involves selling overperforming assets and buying underperforming assets to bring your portfolio back to its original asset allocation. Rebalancing can help you stay on track with your investment objectives and risk tolerance. However, you should be careful to note here that frequent rebalancing can have tax implications for you. Instead, monitor it periodically i.e. every month/quarter and only rebalance your portfolio once the allocation of an asset class moves too far away from its original intended percentage.

For e.g., If you have an overall equity allocation of 80% and due to the bull market that moves to 90% — then you should consider gradually scaling that exposure down to bring it in line with your risk profile and original asset allocation. 

You can see an example of how we rebalance our portfolios and the reason why and when we do it.


In conclusion, portfolio construction is an important process for any investor looking to achieve their financial goals. By determining your investment objectives and risk tolerance, choosing your asset allocation, selecting your investments, and monitoring and rebalancing your portfolio, you can construct a portfolio that meets your needs and helps you achieve your investment objectives.


1. What are the steps in portfolio construction?

There are 4 steps in portfolio construction i.e. 1) Determine your investment objectives and risk tolerance 2) Choose your asset allocation 3) Select your investments and 4) Monitor and rebalance periodically.

2. What is the purpose of portfolio construction?

The purpose of portfolio construction is to bring more structure to your investments and invest in a systematic/disciplined rather than investing randomly with no clear direction or purpose. This can help you create a portfolio that is more in sync with your goals and help you reach them on time.

3. Does portfolio construction guarantee returns?

No, constructing your portfolio in a systematic manner does not guarantee returns. However, it is a much better and more manageable way of investing than doing it based on your own whim and instincts.

    How to start investing in Mutual Funds: A 6-step process

    Looking to start investing in mutual funds but don’t know where to start? If you’re new to the world of investing, the process can seem very confusing. In this blog, we’ll walk you through a detailed and simple 6-step process and teach you how to start investing in mutual funds. 

    Before we get into the specifics of how to start investing in mutual funds, let’s first understand what mutual funds are.

    What are Mutual Funds?

    A mutual fund is a type of investment vehicle that pools money from multiple investors to purchase stocks, bonds, or other assets. These funds are managed by professional fund managers who use the pooled money to buy and sell securities to achieve the investment objectives of the fund. Mutual funds offer investors the potential for diversification, professional management, and access to a range of asset classes that may not be available to individual investors.

    How to start investing in mutual funds: 6-step process

    Step 1: Determine your investment objective

    The first step in starting your mutual fund investment journey is to determine your investment objective. Your investment objective should be aligned with your financial goals. It’s essential to know why you’re investing and how much you’re willing to invest. If you’re looking to save for a short-term goal such as a vacation or a down payment on a house, you might want to consider investing in a debt mutual fund. If you’re looking to build wealth over the long term, you may want to consider equity mutual funds

    Step 2: Assess your risk tolerance and appetite

    It is critical to establish your own risk appetite. And while ‘risk’ may look like an abstract concept, it is important to understand it. Put simply, your willingness to take risks depends on your ability to withstand the ups and downs of the market. And your unique life situation. For e.g. It is normally seen that as people age, their risk tolerance reduces gradually as they have a no. of dependents who rely on them financially. While if you are early in your career, you can take on more risk as you have fewer responsibilities. There are many tools available online for free which can help you assess your risk tolerance.  

    Step 3: Choose a Mutual Fund

    Once you’ve determined your investment objective and risk appetite, the next step is to choose a mutual fund that aligns with your investment goals. There are several types of mutual funds available in India, including equity funds, debt funds, hybrid funds, index funds, international funds etc. To choose a mutual fund, you need to consider various factors such as fund performance, expense ratio, the fund manager’s experience, the fund’s investment objective, and risk tolerance.

    In India today there are over 8,000+ mutual fund schemes offered by over 44 mutual fund companies. If you do not know how to select a scheme that is appropriate for you, it is always recommended to take the help of an expert like a mutual fund distributor or an investment advisor. 

    Step 4: Complete Your KYC

    Before you start investing in mutual funds, you need to also complete your Know Your Customer (KYC) process. KYC is a one-time process that involves providing your identity proof, address proof, and other details to the fund house. KYC helps mutual fund companies verify their investors’ identity, preventing money laundering and fraudulent activities. You can complete your KYC very easily today by authenticating your details via your Aadhaar card. The entire process doesn’t take more than 5-10 minutes. Once you have completed your KYC, you do not need to do it every time for different mutual fund companies. 

    Step 5: Open an Account

    You can invest in mutual funds through either Statement of Account (SOA) mode or demat mode. Both are effectively digital modes of transactions but while the latter requires you to open a separate demat/trading account, the former can be done with just your email id. You can also visit an individual fund house’s website and open an account but that can be a very cumbersome process if you are investing with different mutual fund companies. If you don’t know where to begin your investment journey, it is always better to take the help of a registered distributor/advisor who can guide you and present you with relevant solutions for your specific needs. 

    Step 6: Start Investing

    Once your account is set up, you’re ready to start investing. You can invest in mutual funds either through a lump sum investment or a systematic investment plan (SIP). A lump sum investment involves investing a large amount of money in a mutual fund in one go. On the other hand, a SIP involves investing a fixed amount of money at regular intervals, such as monthly, quarterly, or yearly.

    When investing in mutual funds, it’s essential to keep a few things in mind:

    1. Diversify your portfolio: It’s important to spread your investments across various mutual funds to diversify your portfolio and reduce your risk.
    2. Review your portfolio regularly: It’s essential to review your mutual fund portfolio regularly and make any necessary changes based on your financial goals, risk tolerance, and market conditions.
    3. Stay Invested: Mutual funds are long-term investments, and it’s important to stay invested and not make hasty decisions based on short-term market fluctuations.
    4. Keep an eye on the expenses: Mutual funds charge fees and expenses for managing the fund, and these can impact your returns over time. It’s important to choose funds with lower expense ratios to maximize your returns.
    5. Consult a financial advisor: If you’re new to investing or not sure which mutual fund to choose, it’s a good idea to consult a financial advisor. A financial advisor can help you choose the right funds based on your financial goals, risk tolerance, and investment horizon.

    With this post, we hope we helped you to understand how to start investing in mutual funds.

    In conclusion, investing in mutual funds can be a great way to build wealth in India. By following these steps and keeping the above points in mind, you can make informed investment decisions and achieve your financial goals. Remember to start small, diversify your portfolio, and review your investments regularly to maximize your returns. With a little bit of patience and discipline, you can become a successful mutual fund investor. 


    1. How should a beginner start investing in mutual funds? 

    A beginner can start investing in mutual funds by simply following the above steps.

    2. What is the minimum holding period of mutual funds?

    While there is no minimum holding period for mutual funds, some specific funds may charge an exit load if you redeem the investments before 1 year. Else, you can withdraw your money whenever you want.

    3. What are the 5 types of mutual funds? 

    The 5 official types of mutual funds are a) Equity Funds b) Debt funds c) Hybrid funds d) Solution-oriented funds and e) Other funds/Index Funds

      How to build a Mutual Fund Portfolio : A 5-step process

      Invested in all ‘top-performing funds’ and yet not able to achieve your financial goals? Or do you have 10-15 mutual funds in your portfolio? Then, this post is for you. In this blog, we will go through a detailed and systematic 5-step process on how you can build a mutual fund portfolio that can help you reach your financial goals. 

      But, before we answer that question, let’s first understand the 5 different types of mutual fund schemes as per the official SEBI categorisation. Knowing this in detail will help us in selecting the appropriate schemes which are in line with our overall goals. 

      5 types of mutual funds (official SEBI categorisation): 

        1. Equity schemes: An equity scheme is a fund that primarily invests in equity or equity-related instruments. 
        2. Debt schemes: A debt scheme primarily invests in fixed-income instruments like bonds, commercial papers, and certificates of deposits issued by the government or corporate
        3. Hybrid schemes: Hybrid schemes invest in a mix of debt and equity instruments
        4. Solution-oriented schemes: Solution-oriented schemes are targeted towards a particular goal like children’s education or retirement with a statutory lock-in of 5 years 
        5. Other schemes: These primarily include investments in index funds and fund of funds (Fofs) that invest internationally. 

          All the different funds offered by mutual fund companies fit into one of the above categories. If you see categories like ‘Liquid’ or ‘Money Market’ in various websites or news then please know that those officially come under the ‘Debt schemes’ category. It is not a separate category by itself. To keep things simple for this post, we will not delve into the various sub-schemes under the above categories. You can visit the official documentation to learn more about it. 

          Ok, now that we know what different categories of mutual fund schemes are, let’s see how we can make use of that information to create a mutual fund portfolio.

          How to create a mutual fund portfolio (with example):

          Step 1: Assess your risk tolerance and time horizon:

          It is often seen that most investors invest randomly without ascertaining both these attributes. Assessing your risk level and time horizon for investing is a prerequisite for creating a good mutual fund portfolio. To assess the former, you can make use of the various free tools available online. For e.g. Let’s say that your risk profile is ‘Aggressive’ and you are looking to invest for more than 7-8 years. Move to the next step only when you have a clear answer to both questions. 

          Step 2: Determine the asset allocation

          Put simply, asset allocation is a process by which we decide how much of our money goes to each asset class i.e. equities, and debt. Continuing from the above example, since we are an ‘Aggressive’ investor and have a time horizon of 7-8 years – we will allocate approximately 80% of our money to ‘Equity schemes’ given their potential to generate wealth over the long term. The remaining 20% will be invested in ‘Debt schemes’ due to their ability to protect us from the ups and downs of the market. 

          In investing, this is called an ‘80-20’ portfolio. And since there is no specific formula to determine an asset allocation, we that’s why use the ‘risk’ level and time horizon as inputs. 

          Step 3: Establish Core/Satellite holdings

          After deciding on the asset allocation, we then split our portfolio into a Core/Satellite approach. In simpler terms, the ‘Core’ of your portfolio remains stable and does not require frequent changes. The ‘Satellite’ portion of your portfolio is one where you take more short-term, tactical bets.

          E.g. If you are bullish on the Electric Vehicle trend, you can accordingly select a fund that has exposure to EV stocks. ‘Satellite’ holdings typically constitute about 20% of the allocation of the asset allocation i.e. If you are investing 80% in equities, then about 20% x 80% or 16% can be invested in such holdings. The balance is allotted to the ‘Core’ portion. 

          Step 4: Select the appropriate funds under the selected scheme category

          Once the asset allocation has been decided and the ‘Core/Satellite’ split is done, we then move on to selecting the appropriate schemes from each of the categories. Now, fund selection is a bit more complicated in that it requires assessing the quantitative and qualitative of each of the funds. Again, for the simplicity of this post – we have selected 4-5 equity mutual funds for our equity allocation and 2 debt mutual funds for the balance. For the equity allocation, before selecting funds make sure that you check the holdings overlap between to make sure you are adequately diversified. 

          Asset ClassCore / Satellite 



          Allocation (%)
          Equity CoreFund 120%
          Fund 217.5%
          Fund 314%
          Fund 412.5%
          SatelliteFund 516%
          DebtCoreFund 112%
          SatelliteFund 28%

          Step 5: Rebalance and monitor periodically 

          Finally! Your portfolio has been created. If it has been done rightly, you do not need to monitor it daily. Investing in mutual funds and stocks requires two completely different mindsets. Review your portfolio once every quarter/bi-annually and re-balance it to its original asset allocation if it has drifted too far away from it. Adding unnecessary complexity with frequent buying/selling will only add to your tax bill. 


          1. What are the 5 types of mutual funds? 

          The five official types of mutual funds are – a) Equity schemes b) Debt schemes c) Hybrid schemes d) Solution-oriented schemes and e) Other schemes 

          2. How many mutual funds are good in a portfolio? 

          If done correctly, you do not need more than 4-5 funds in your mutual fund portfolio for your equity allocation. For your debt allocation, have at most 2 funds across different sub-schemes. 

          3. How often should I review and rebalance my mutual fund portfolio? 

          You should review your portfolio once every 3-6 months to track its performance. However, if a particular fund is not performing to your expectations – give it some time. Every fund goes through its cycle. Do not frequently update your portfolios.  

          4. If I follow the above process, can I be assured of good returns?

          The outlined process is simply a more disciplined approach to investing in mutual funds. The returns are not assured. 

          What is India VIX ? Everything You Need to Know

          Every investor must have come across the term “India VIX”, but what does it mean? India VIX stands for India Volatility Index. Before going into the details of this index, we must understand what market volatility even means and the risks associated with it. 

          Volatility is an investment terminology that describes periods of unpredictable movements in the securities market. These sharp price movements are not necessarily associated with the decline in prices; there might also be sudden price rises.

          In statistical terms, volatility can be described as the standard deviation of a market over a given period. If the price fluctuates significantly in a short period, the market is supposed to be highly volatile. If the price remains relatively stable, it is said to be less volatile.

          But what causes these fluctuations?

          There can be a plethora of reasons; some of them are:

          1. Government decisions on trade and legislation.
          2. Economic reports, including inflation data, quarterly GDP, consumer spending figures, etc.
          3. Industry-specific factors like a weather event in a major oil-producing region can increase international oil prices.
          4. Positive or negative company performance.

          While volatility might seem scary initially, it is a normal part of long-term investing. By accepting volatility as an inevitable part of investing, investors can be better prepared and more likely to react rationally.

          What exactly is India VIX? 

          India VIX or India Volatility Index is a volatile index used to measure the anticipation of volatility in the near term, i.e., 30 days. In India, the index was first introduced by NSE in 2003 to help investors better understand the market before making their next investment or to keep track of their existing investments.

          India VIX is nothing like the price index. 

          It is imperative to understand that India VIX is not similar to price indices like the NIFTY FIFTY in any way. While the price indices are calculated by considering the price movement of the underlying equities, the volatile index is determined by considering the order book of the underlying index options and is represented in percentage form.

          How is the value for India VIX derived?

          The value of India VIX is derived using the Black & Scholes (B&S) Model. It is an equation used widely to price option contracts and requires five input variables: the strike price of an option, the current stock price, the time to expiration, the risk-free rate, and the volatility. Bid-ask spreads of NIFTY futures contracts traded on the NSE’s F&O segment are used to calculate the India VIX. Volatility is directly proportional to the India VIX level; hence a higher index level indicates greater volatility.

          For example, a VIX value of 17 for India indicates that over the next 30 days, traders anticipate a 17% increase in volatility. That is, during the next 30 days, investors expect the NIFTY to fluctuate between +17 and -17 per cent from its current value.

          Further, historical patterns imply an inverse relationship between NIFTY and India VIX. When the India VIX index drops, the NIFTY tends to increase, and vice-versa.

          The theoretical value of the VIX fluctuates between 15 and 35. Low volatility would be indicated by a reading of 15 or less, while a reading of 35 or more would indicate high volatility.

          What elements are considered while calculating the India Volatility Index? 

          The volatility index, or India VIX, is calculated by taking into account four key factors: time to expiration, interest rates, forward index level and bid-ask. Let us discuss in the following points:

          1. Time of Expiration – To attain the level of precision demanded by the traders, the time to expiry is computed in minutes instead of taking days.
          2. Interest Rates – When calculating the risk-free interest rate for the respective expiration months of the NIFTY options contract, the applicable 30-to-90-day tenure rate is considered.
          3. Forward Index Level – The forward index level determines the out-of-the-money options contract that is considered when computing the volatility index. It also determines the at-the-money strike, which aids in choosing the said options contract.
          4. Bid-Ask – The ATM strike price, accessible at a little lower level than the forward index level, serves as the strike price for the NIFTY option contract. India VIX is calculated by taking into account the bid and ask prices for the options contracts.

          How to utilize India VIX? 

          1. The VIX accurately measures market risk for stock traders. It shows intraday and short-term stock traders whether market volatility is rising or falling. They can adjust their strategy accordingly.
          2. Long-term investors also benefit from VIX. Short-term volatility rarely bothers long-term investors. Institutional investors and proprietary desks have risk and MTM loss limits. They can hedge with puts when the VIX rises to play the market both ways.
          3. Options traders can leverage VIX too. Volatility usually determines option purchases. Options buyers win more when volatility rises. Option sellers will benefit from time value waste as the VIX falls.
          4. VIX accurately gauges index movement. Since VIX’s debut, VIX and NIFTY have had a negative association. This knowledge is helpful for index trades.
          5. Portfolio and mutual fund managers utilize VIX regularly. They can increase their exposure to high beta equities when the VIX peaks and low beta stocks when it bottoms.

          India VIX has most definitely proven to be a dependable tool to asses market volatility and is helping alleviate the fears of investors and stock traders.


          PMS vs Mutual Funds: Which Is The Best Way To Invest Money?

          PMS vs Mutual Funds — This is a topic that confuses a lot of people. It can be challenging to decide which of the two to choose. Mutual funds and Portfolio Management Services (PMS) are both professionally managed investments where the portfolio is managed by a licensed fund manager. They assist investors in achieving their financial objectives and give them access to the capital markets (equities or debt). What makes the two different, then? The latter is open to everyone, but the former is only available to wealthy investors. Read on to learn more about PMS vs Mutual Funds.

          What is a PMS?

          A professional fund manager maintains your portfolio as part of a wealth management service called portfolio management service (PMS). Your money is invested in equities and securities by the fund manager following extensive market research. They either make independent investment decisions, obtain your approval prior to each transaction, or offer advice services but need you to carry out the transactions yourself. They offer their services in exchange for a fee, which is typically a cut of the earnings or a portion of the investment. The portfolio is also tailored by the fund manager based on your financial objectives, level of risk tolerance, and length of the investment.

          What are Mutual Funds?

          Investments known as mutual funds pool the capital of multiple investors and make stock and security purchases in accordance with the fund’s aim. Investors have no input in any decisions a fund manager makes about a portfolio because they are all taken independently. Prior to selecting the assets for the portfolio, they do in-depth market research and charge the clients a nominal fee. Mutual funds must disclose information on a daily and monthly basis and are controlled by the Association of Mutual Funds in India. Investors can choose from a variety of mutual funds on the market based on their financial objectives, the time horizon for investing, and the level of risk tolerance.

          Advantages of a PMS

          • Professional management: In PMS, your portfolio is managed by an accomplished fund manager. They know how to handle a portfolio in various market situations and effectively manage your investments to boost returns over time.
          • Portfolio customization: Fund managers alter the portfolio in accordance with your objectives, degrees of risk tolerance, the time horizon for investments, and age. Before deciding on the securities for your portfolio, they will take all of this into account.
          • Transparency: As a PMS fund investor, you have access to full details on every transaction. Additionally, you don’t need to wait for the fund house to provide reports on a monthly, quarterly, or semi-annual basis to know the state of the portfolio and its holdings.
          • Regular monitoring: The fund management will keep a close eye on your portfolio’s performance. They will instantly change the portfolio if they discover any deviations.

          Advantages of Mutual Funds

          • Low entry threshold: You need only 500 rupees to begin investing in mutual funds. You don’t need to invest a lot of money in them.
          • A variety of investment methods: You can use a systematic investing plan to make one-time or recurring investments in mutual funds (SIP). You can select one of the two alternatives based on your needs.
          • Transparency: The fund house is obligated to routinely disclose the portfolio holdings, expense ratio, and net asset value (NAV). Your investments will be transparent as a result.
          • Diversification: By investing in a single mutual fund, you can access a wide range of equities and assets. This makes sure that the various securities in your portfolio are well-diversified.
          • Professional management: It is used when managing mutual funds. They are well-versed in their disciplines, have a wealth of expertise, and know how to manage a portfolio in various market conditions.

          PMS vs Mutual Funds: The differences

          The following are the key distinctions on pms vs mutual funds:

          Investment amount

          While the minimum ticket size for PMS is Rs. 50 lakhs, the minimum investment amount for mutual funds is Rs. 500 through SIP. Therefore, unlike PMS funds, mutual funds are readily available to all investors.


          Investors in mutual funds are subject to a predetermined fee that is deducted from the fund’s net asset value (NAV). There are no taxes due by investors on specific transactions.

          In contrast, PMS employs a hybrid structure where it charges a fixed price and also takes a portion of the earnings. It also charges a performance-based fee by taking a cut of the profits.

          Professional leadership

          In mutual funds, which are professionally managed investments, a knowledgeable fund manager chooses the stocks and other securities for the portfolio after conducting extensive market research. Investors have no influence over the portfolio, and the managers choose the stocks based on their assessment.

          Before making any investments in PMS funds, the fund manager consults the investor. Sometimes they operate autonomously and decide everything related to investing only after receiving investor consent. The majority of the time, investors must, however, approve every transaction.

          Flexibility in the portfolio

          Despite severe market conditions, mutual funds are required by law to maintain their equity and debt asset allocations. For instance, a fund can only be considered an equity fund if 65% of its assets are allocated to stocks. The fund manager cannot reduce the equity asset allocation in a volatile market to sustain performance.

          Depending on the state of the market, the fund manager may alter the asset allocation in PMS funds.

          pms v/s mutual funds

          Individualized portfolio

          An investor’s needs cannot be accommodated by a mutual fund portfolio. This is such that personalization is not possible when there are several investors in a mutual fund, which pools money from a number of investors.

          According to the investor’s objectives, level of risk tolerance, age, investment horizon, and available resources, the fund management tailors the portfolio in PMS funds.


          All information pertaining to mutual funds must be published on a regular basis. Thus, before investing in a fund, investors can examine its returns, costs, and portfolio.

          The fund’s information in PMS is not accessible to the general public. All information about the fund and its transactions is only visible to the investor. As a result, it can be challenging for investors to contrast two PMS funds before selecting one.


          Investors in mutual funds only pay tax on their investments when they redeem them. Depending on whether the gain is long-term or short-term, the tax is applied.

          Investors must pay tax on each purchase and sale of stocks when investing in PMS funds, though.


          Mutual funds are well-liked investment options that might be bought with no paperwork from the fund corporation or any site that provides them. However, because there is so much documentation required, investing in PMS funds is far more difficult. The procedure of creating a PMS account takes time as well.


          You can invest in stocks through mutual funds as well as PMS funds. However, it’s crucial to choose which one best suits you at what time. If you have limited resources are getting started with investing for the first time and want the convenience to invest regularly, mutual funds can be the ideal option for you. If you have complicated financial needs and at least Rs 50 lakhs, you can consider a PMS. However, always consider the tax implications of both options and choose the one that best meets your goals, wants, budget, and requirements based on the advantages and differences listed above on pms vs mutual funds.

          What are Emergency Funds? A Detailed Introduction

          The world is full of uncertainties. No one knew that COVID-19 would disrupt our lives and create a “new normal”. Many of us were unprepared for a global pandemic that led to many problems ranging from job losses to health emergencies. To be well prepared for any such unexpected occurrences in the future, it is essential to have an emergency fund.

          So, what exactly is an emergency fund? 

          Emergency funds refer to a corpus of funds set aside for unanticipated financial shortfalls. They are kept explicitly for crises and must not be used for routine tasks.

          But why do you need an emergency fund? 

          Primarily, having an emergency fund increases your financial security. People often do not have money preserved for unfortunate times, and when bad luck rings their doorbell, they must rely on external debt or other savings like the retirement fund to keep themselves afloat. The need for emergency funds can arise anytime in the form of car repairs, home repairs, medical bills, or loss of income. The requirement may be big or small, but it is always recommended to have liquid funds available for emergencies.

          The peace of mind that comes with knowing that you have a certain amount of money put aside to deal with unplanned emergencies is priceless.

          The next big question is how much you should put in your emergency fund. 

          The short answer is it varies. It depends on several factors, including your income, expenses, way of living, pre-existing debts, etc. Maybe for someone living alone, 3 months’ worth of expenses could be sufficient for an emergency fund, but for someone who is the family’s sole breadwinner, they might have to save 6 months or more of their expenses.

          How to calculate the fund requirement? 

          A good safety net is to keep at least 6 months’ worth of your expenses in the emergency fund. For that, first, make a list of all your necessary expenses in a month. This requires you to distinguish between extravagant expenses and essentials. Here is a reference list:

          What necessary monthly expenditure includes:

          1. Rents, bills, and debt payments
          2. Food
          3. Medicine costs
          4. Transportation costs
          5. Savings or employee pension contributions
          6. Money given to dependents

          What necessary monthly expenditure does not include:

          1. Vacations
          2. Expensive clothes, electronics, bags, etc.

          Once you have a clear idea about your total monthly expenses, you can multiply it by 6 (or whatever number of months you choose) to determine your emergency fund target amount.

          How to build your emergency fund? 

          Once you have determined the amount you want to set aside for emergencies, you need to plan how you’ll save that much because there’s a good chance that you do not have that amount readily available. You can use the following formula as a guide towards efficient savings:

          For example – Suppose your Emergency Fund Target is Rs. 1,80,000, and the amount you already have towards the target is Rs. 60,000. You aim to get the emergency fund ready in 6 months. This means the amount that you will need to save per month = (1,80,000 – 60,000)/6 = 1,20,000/6 = Rs. 20,000.

          The most confusing part of this process is where to keep the emergency funds. 

          As discussed previously, the foremost requirement from an emergency fund is liquidity. So, should you keep the entire amount in your cash or bank account? No, you would want to earn decent returns on your funds, but you would also like to be careful of market volatility and its risks. Thus, the ideal thing would be to spread this money across liquid funds, short-term Recurring Deposits (RDs) and debt mutual funds.

          For example – Suppose you have successfully accumulated Rs. 1,80,000 as stated above. Now, you may decide to keep Rs. 30,000 in cash at home and Rs. 50,000 in your savings bank account and invest the remaining Rs. 1,00,000 in a liquid mutual fund.

          What are liquid funds? 

          A liquid fund is a class of debt funds that invests in debt instruments with a maturity of less than 91 days. These are high-rate papers which are not affected by fluctuations in interest rates. Hence, they successfully earn decent returns without being volatile.

          The final question we will address is how to redeem these funds in emergencies and what to do after the emergency fund has been used. 

          Most liquid funds allow instant redemption of up to Rs. 50,000 or 90% of the invested amount. Thus, you can redeem the money whenever needed, and it will be directly credited to your linked bank account. Make sure to check whether the facility of instant redemption is available before investing in any fund.

          Once you have utilized the firm for an emergency, it is time to restart the process of fund accumulation all over again. Obviously, this will require you to make certain lifestyle changes to accommodate those extra savings, but till now, you would have realized that it is totally worth it. Emergencies do not occur with an invitation, so it is necessary always to be prepared.

          If you need any help setting up your emergency fund or are confused about where to invest, you can contact us at Daulat because we are always here for you!

          Confused about how to manage money post-retirement? The 4% Rule is here to help you out!

          Retirement is the second inning of a person’s life, and the idea of a significant change like it might seem daunting to some people, especially when it comes to managing money. If you do not know how much you need to save for retirement, a good initiation point can be referring to the 4% retirement rule.

          The roots of the 4% rule lie in the historical data of stock and bond returns from 1926 to 1976, covering 50 years. Until the 1990s, many believed that the 5% rule was more effective; however, real-life experiences led people to think that 4% was sufficient. Thus, to resolve this issue, William Bengen, a financial advisor, conducted extensive research in 1994 covering returns from 1930 to 1970, including periods of serious economic downfalls. He concluded that the 4% rule is ideal even in recessionary times and can provide funds to retirees for up to 30 years.

          So, what exactly does the 4% retirement rule say? 

          The idea is that retirees can withdraw 4% of their investments in the first year of their retirement. Then in the subsequent years, they can increase this amount by adjusting for inflation. This rule typically applies to an investment portfolio consisting of 50% stock and 50% debt.

          We must remember that the ideal withdrawal amount also hugely depends on the retiree’s life expectancy. It also depends on the environment you live in and the future inflationary trends. Also, this rule assumes that the person is retiring at age 65, so if someone plans to retire earlier or later, their financial plan changes.

          How to implement the 4% rule?

          The investment portfolio, once you reach your retirement age, looks very different from when you were young and just getting started. Ideally, you should have a majority of your investments in debt with a small allocation towards low-cost passive index funds. Such an asset allocation provides an optimal balance between capital growth and protection. For e.g. you can have approximately 70-80% of your portfolio in debt mutual funds with the balance in equity. This ensures that you are able to steadily withdraw the 4% out of the growth of the debt fund without dipping into your capital.


          1. The rule is fairly simple to follow.
          2. It provides the retiree with a predictable income stream.
          3. It prevents retirees from running out of money post-retirement, thus providing protection.


          1. There exists a need to comply with the rule strictly. Moreover, the response to lifestyle changes is negligible.
          2. In the current market conditions of 2023, there is soaring inflation and low yields on equity and bonds compared to when this rule was formulated.
          3. It is outdated and does not guarantee protection in the long term.

          Tweaks to the 4% Retirement Rule

          This rule should not be written in stone and may just be a beginning guideline for financial planners and retirees. Sometimes it can be too rigid, and thus, there is a need to include a degree of flexibility. With changing times, there emerge changing needs and varying market conditions; thus, the withdrawal plan should be failproof to these changes.

          Debates over the 4% rule have been going on for decades. While some financial planners believe that the 4% rule is too conservative and it should be increased to 5%, others believe that it is too liberal and may lead to running out of savings quickly, thus suggesting a reduction to 3.3%. There is no correct answer, so another plausible solution is to revisit the withdrawal rate yearly.

          Nonetheless, the 4% rule is a good start to estimate how much money you require after retirement. But how? 

          Make a list of all the essential costs, including:

          1. Annual medicine costs
          2. Rent or mortgage
          3. Annual grocery costs
          4. Annual transportation and travel costs
          5. Health emergencies and long-term care costs

          Of course, this list is not exhaustive and varies individually, but these categories apply to almost everyone. It is also recommended to consult professional financial planners and advisors who can help you navigate saving schemes and investments. You can reach out to experts at Daulat because we are always here for you!