Monday, March 27, 2017

Smart planner's guide to getting a fix on finances
When the objective of people's aspiration is achieved financially, it is termed as a financial goal and to realize it, one is required to time and forecast one’s goals, i.e., the time by which you would like to accomplish your goal.
No goals are big & small since each one has its own purpose and ultimately each goal should contribute towards the betterment of your life both in terms of facilities and a sound level of mental satisfaction.
Even before you finalize the goal
When you start thinking about your financial goals, certain questions come to mind such as
1. Which goals do I need to achieve first in my life?
2. Which goals are in line with the bigger picture of life I have drawn for myself? How should I differentiate between the goals in view of my current situation, future needs and wants?
3. Which goal will give me strength & power after achieving it?
4. 10 years down the line, what basic needs should I be accomplishing? etc.
Questions like these and more many will come into your mind, but before you choose to dedicate yourself to your objectives, it is important to review your list of goals with as much correct information as you can. It is only after answering these questions, that you will notice a streamline pattern of your goals. A prioritized list of goals that is in sync with your needs and in line with the bigger plan of life.
How to Prioritize your Financial Goals
There are many ways to prioritize your goal. It is always advisable to take an overview of various things which are necessary for you. It is true that 'life, like the money invested, should get a return of satisfaction & a growth in your standard of living.
Give a glance on retirement planning
Many people believe that the provident fund, superannuation and gratuity corpus they will receive on retirement will be adequate to ensure a comfortable life during the retirement years. Most of the times, it turns out to be inadequate because you have never given serious thought to inflation and other economic factors. Therefore, a retirement plan should be part of everyone’s list of goals. The main objective should be to ensure that your savings are enough during the earning years so that you can easily maintain a comfortable retired life between the time of retirement till life expectancy.
Understand the difference in consumption and investment expenditure
Many of us have an endless list of lifestyle expenses. However, you should be prudent with your expenses and always understand the difference between your consumption expenditure & investment expenditure.
This can be done by highlighting how the expenditure might affect the chances of the family being able to fulfill some other financial goals and the trade-offs should be clearly understood. Some outflows, like providing education to children, may appear to be consumption expenditure while actually they turn out to be useful investments if the children are capable and contribute to the family income and stature. Such Expenses should be carefully prioritized.
Prepare a budget
At times, Most of us do not realize how much money goes in various avoidable expenses. In order to know these expenses, we should note down all expenses above a certain amount. Let’s say the limit is Rs 1000 or it can be Rs 5,000, depending upon individual level of income. A summation list of expenses at the end of the month can be enlightening to say the least. For example, the total amount spent on eating out or entertainment, when calculated at the end of the month, can make a significant difference to your next month’s budget as well as your lifestyle.
Asset Allocation to various categories of goals
Asset allocation into equity, debt, liquid funds, etc. should be strategically accomplished while considering the need & requirement to achieve that particular goal. The monthly summary of outflows also helps in understanding the current order of priorities. If unusual expenses are kept out (for instance, a hospitalization that was not covered by insurance), the balance outflows can be categorized as retirement savings, loan servicing, essentials and lifestyle expenses etc which may vary from person to person and family to family. Maintenance of asset should be done tactfully and in accordance with the market conditions so as to meet the true value of your goal by the time you want that goal to be achieved.
Lurching time of goals
Some financial goals need to be fulfilled within a specified time frame. For instance, education of the child has to happen within a particular period and progression. The child’s higher education should not be postponed because money is not available at the right time. Other financial goals may have to be deferred to ensure that the critical financial goal is not compromised. For instance, around the time that the family proposes to buy a house, buy a car or an annual holiday may need to be reviewed to make up for the one that is higher on the list of priorities. It is important to remember that too many financial goals around the same time may prove to be more challenging.
Give a glance on gold mines
Sometimes you may earn a jackpot, earn an unexpectedly high annual bonus or win a lottery, etc. A healthy portion of such unexpected income should be set apart for the future, since the family is used to living without that too. These are also situations to take a look at the outstanding loans and consider pre-paying some of them. Various other needs can be fulfilled through this unexpected inflow of money, but that should be done tactfully.
For any query go through this following link https://www.facebook.com/WealthMaximization/ and put the call now button or mail me at vikramk@bajajcapital.com

Saturday, March 25, 2017

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Income Tax is the absolute truth of every salaried person's life, if he/she is earning more than 2.5 Lac INR annually in India. If you too feel that a big chunk of your hard earned money is swiping away in the name of income tax, then in this blog you can learn how to save tax on your income.  There can be no hiding or abstaining from tax paying but certainly there are ways through which you can minimise the taxes levied on your income.

Government of India has confirmed certain sections under which you can claim tax exemption for a part of your income.

Understanding Income Tax

If you have recently started making incomes, then it is important for you to understand how taxes are levied on income.

For the Income Tax Department, your income has two parts: Taxable income and Non-taxable income. Tax is exempted for the part of your income that you justify as non-taxable income. Government of India has limit down 2.5 Lac INR has the tax exempted salary slab. It means, your salary is taxable only if your annual income is more than 2.5 Lac INR.

But, don't worry, even if you are earning more than 2.5 Lac INR annually, then also you can justify some part of your salary, above that 2.5 Lac slab, as non-taxable income.

The part of your salary under components like HRA, Travel Allowance, Medical Allowance, Entertainment Allowance (applicable only to government employees), and some more allowances falls under non-taxable income. But it is completely your employer's choice to consider or not consider these components. If your salary doesn't have these components, then you can't claim tax exemption under these components. Also, each component has a capping amount beyond which tax saving is not permitted.

Tax Saving is a Wealth Creation Opportunity in Disguise

Tax saving is not just a liability but also a wealth creation opportunity in disguise. Section 80 C, 80CCD, 80CCG, are some important sections approved by Govt. Of India, under which you can claim tax exemption by justifying your income as non-taxable. Investments done under these sections, combined, can help you in availing tax exemption of up-to 2.15 Lac INR (1.5 Lac under 80C + 50,000 INR under 80CCD + 15,000 under 80 D).

But tax benefit is just the additional advantage here, as investments made under these sections give you the opportunity of financially securing your future through wealth creation.

Investments for Wealth Creation and Tax Benefits

Under 80 C

Life Insurance : Life Insurance is the right product to ensure the financial security of your loved ones in case of demise and to gain high returns on maturity if the investor survives the policy term period. Various leading companies offer highly lucrative insurance plans offering high sum-assured
and various endowment benefits. To get proper insight of various Life Insurance plans, you must take assistance of some good financial product distributor.

Pension Fund: Post-retirement life (usually after the age of 60) is a key concern for one and all. Knowing that earning will stop, people want to retire wealthy. There are very good pension plans that can even help you retire with crores of rupees apart from providing the tax benefit through out  your service period. It is always recommended to start investing on pension funds from an early age to avail maximum return on maturity.

ELSS: It is an equity mutual fund (MF), and just like other mutual funds it is highly preferred for capital appreciation or wealth creation. ELSS funds have the lowest lock-in period  i.e 3 years and that is the reason of its mass acceptance. Even the returns or dividends received from ELSS funds are tax free. Here also, you may need the assistance of your financial relationship manager, who can analyse the performance of various Mutual Funds in the market and recommend you the best. But, like all Mutual funds, ELSS is also subject to market risks.

Unit Linked Insurance Plans: ULIP is a life insurance product but along with protection benefit, it offers investment benefits as well. It allows the policy holder to invest in various qualified investments such as mutual funds, stocks and bonds. ULIPS are subject to market risks.

Other available options for tax exempted investments under 80 C are Provident Fund, Bank FDs for term deposits of 5 years, Home Loan (principal), POTD Scheme, Senior Citizen Savings Scheme, etc.

Note: You can invest on these financial products as much as you want, but tax benefit is permitted to the maximum investment of 1.5 Lac INR only.

Under 80D

Health Insurance: Having a health insurance avoid financial crisis during unexpected health emergency. Paying small premiums not only gives you high financial coverage against critical illness but also helps in tax benefits and provides peace of mind.

Note: You can have a health insurance policy of any amount but tax benefit is permitted for the maximum annual premium of 15,000 INR.

Under 80CCD

National Pension System: If you have exhausted the 1.5 Lac limit under 80 C, then you can invest additionally in NPS and ensure a monthly income and lump sum money return after your retirement.

Note: Maximum you can invest 50,000 INR for NPS.

So, next time you plan your tax savings don't see it as a liability. It is the opportunity that allows you to make the right investments for financially securing your future apart from saving taxes on your hard earn money.
For any query go through the following link https://www.facebook.com/WealthMaximization/ and put the call now button or mail me your query at vikramk@bajajcapital.com

Thursday, March 23, 2017

Financial Management - " Every Woman's Cup of Tea "
Are you one of those women, who say "financial management is not my cup of tea" because you don't have the academic financial background or sound knowledge about finance, investment, tax saving, money management, etc., then you need to pause and think again.
Financial management, that too for personal finance, is not as difficult as you think, and even if it is difficult, then also you must make efforts to become a pro in personal finance management because your acquired knowledge on this can be the key to many treasures of prosperity. For instance, as a financially aware woman, you will be able to define a clear and smarter path leading to your financial goals. Materializing the dream of wealth creation will become more achievable to you. Also, you will be able to build the best protection shield against life emergencies. In short, if you take hold of your personal finance and plan it wisely, then you attain financial prosperity for yourself and your family too.
How Should Women Do Their Financial Management?
Having a sound financial knowledge, especially an academic financial background is a plus point as one will always know of financial jargons, investment concepts & the intricacies involved in the financial ecosystem. But even if you don't have the academic financial background and you don't understand any of above-mentioned things, then also you can comfortably acquire this knowledge.
For this, no academic background is required. Investment concepts and products are designed in a way that one can easily understand and utilize them. All one need is will and awareness!
For the love of your hard earn money, you can give it a try to be financially aware because this awareness pertaining to investment, tax saving, wealth creation etc will augment your financial prosperity and make you financially secure and independent. 'Preparedness' towards life is the another major outcome of being financially aware.
'Health is Wealth' a cliche quote but an epitome of truth. Health emergencies can swap away the savings of many years. In fact, during health emergencies, 'Wealth Becomes the Health.' Medical facilities are immense and incredible these days, but equally expensive. Thus, in face of health emergencies, having the wealth to afford these facilities becomes the lifeline.
One who is financially aware will always know that 'Health is Wealth' and 'Wealth is Health' and staying prepared for health emergencies is the only way to glide over the possible financial crises.
Here is the wireframe on what you can do for your financial management:
1. Take the Route of Investment: If you are saving the money in your savings account, then be really careful, your money is not growing rather its value will decrease because of inflation. Thus, investment is the only way to grow your money. You need to link your investment with your financial goals so that you can easily fulfill your goals utilizing the amount earned from your investments.
2. Know Your Financial Goals: Emergency fund for any household replacement, children higher education fund, retirement corpus, Vacation, buying a house, looking after elderly parents, you need to realize what are your financial goals?
3. Divide Your Goals: Know clearly which are your short term and long term goals
4. Know the Investment Options Available to You: This information you can easily find online and the popular investment options are Fixed Deposits, Post Office Schemes, Mutual Funds, Direct Stocks, Gold, Real Estate, Bonds, etc.
5. Read up and Get Advice too: All the investment options mentioned above have different features that you need to know in length. Not having an academic financial background is not an obstacle here, because you will definitely have many people in your trusted friends who will have knowledge on this. You can take advice from any of your trusted acquaintance. Moreover, you live in the era of digital world, if you are ready to read then there is no dearth of information. You can read and know all about the investment products. And last but the very important, there are professional organisations available to help you on this. You can take help from professional financial advisers, who will provide you with the detailed and specific overview of each and every investment options available, risk associated and as per your short term & long term goals.
6. Diversify your Portfolio Through Proper Asset Allocation: Once you have become aware of the investment products, you need to create an investment portfolio for yourself. Here, Asset Allocation is core to the construction of your investment portfolio as it allows you to diversify your portfolio, which further helps in minimizing the risk involved in the investments. Each of your investment is an asset. Certain investments are subject to market risk but offer good returns like equities, while some investment products are not risky such as PPF, but offers fewer returns. Thus, asset allocation let you properly diversify your investments (assets) so that you can have a balance of risks versus rewards.
7. Execution is the Key: Everything mentioned above is a 'Strategy' that you need to follow to get the best out of your investments. But a strategy makes sense only when you execute it. Likewise, having knowledge regarding finance management and investment will turn fruitful to you, only if you apply it to yourself and your family's investment matters.
Some Golden Rules:
Having doubts and confusions on which investment products to choose is obvious, but when it comes to investment, there are some golden rules that you can jump into.
Be a Systematic Investor with Systematic Investment Plan (SIP): Mutual funds(Debt or Equity), although linked to market volatility, has the potential of wealth creation. So, if you plan to grow your money, Mutual Funds investment is a good option for you.
But you must be thinking that a considerable market and financial knowledge is required to invest in mutual funds. This is not true because even being a complete layman, you can invest in Mutual Funds. Systematic Investment Plan (SIP) is the right route for women like yourself. Through Systematic Investment Plan, you don't need to think about things like when to enter the market, when to exit, etc. Here, you invest in a systematic manner like monthly or weekly and reap the benefits of rupee cost averaging.
Start Early and Get the Benefit of Power of Compounding: When you start early investing you get the benefit of the power of compounding.
Let's understand the power of compounding with the following example.
Ms. Reena and Ms. Kavita have daughters of same age. Ms. Reena started investing Rs. 4000 for her daughter's future, when she turned 1 year old. Ms. Kavita started a little late and started investing Rs. 7500 for her daughter when she turned 11 years.
Corpus amount when both the daughters of the two ladies turned 23 years old :
 Ms. Reena accumulates 29 Lacs more than Ms. Kavita
- Assumed Rate of Return is 12% and assumed inflation rate is 6%

Thus, Power of Compounding is all about giving your money more time to grow. If you start investing early, you can build a better corpus even by investing small amounts, because your money gets the time to grow. But if you start investing late, then even after investing bigger amounts, your corpus will not be very attractive only because your investment period was short.
Do Right Tax Planning: Being neglectful towards tax saving can cause you heavy loss, thus you must do proper tax planning. Know which tax bracket you or your family income falls into , then accordingly chose your tax saving instruments. Don't do the last minute rush, rather be an early bird and do your tax planning with proper homework.
Always Plan Your Retirement: There is a rule called the rule of 72? According to it, at the rate of 6% annual inflation rate, expenses will double in 72/6= 12 years. Also, do know you the value of today's Rs. 40,000 will become Rs. 2.3 Lakh in next 30 years?
So have you got the calculation? After retirement, you will need more money to meet your lifestyle needs that too without having a regular source of income. Thus, it is very important to invest for your retirement, so that you can retire with a massive corpus. You can do it through NPS (National Pension Scheme), Mutual Funds, and there are many other products.
Be Prepared for Emergencies: While you decide your investment path and walk smoothly on it hoping to be financially secure , you should also stay prepared for possible life emergencies. For this, you should always have some liquid money with you and should also get your medical insurance done. Not just for self, but you should get medical cover for your elderly parents and children. If you are financially dependent on your husband, then you should even encourage your husband to get term insurance or endowment insurance.
For any query put the call now button by the given link https://www.facebook.com/WealthMaximization/ and also like this page or mail me at vikramk@bajajcapital.com


Wednesday, March 22, 2017

We all will remember the year 2016 for the big bang Demonetization. The act of demonetizing Rs 500 and Rs 1000 as legal tender of India has become the source of various economical changes that have put significant impact on our political and social systems as well.
Cashless Economy or digital Economy is one word that has become highly popular post demonetization. Many are advocating that demonetization marks the beginning of cashless economy in India. Incredible growth in the use of debit cards, credit cards, mobile banking, e Commerce sites, online fund-transfer services, etc. in the last month, clearly shows that individuals having access to the digital facility (especially the Urban crowd) are fast embracing the concept of 'Cashless Economy' by adopting cashless transactions in their day-to day requirements.
How To Do Wealth Creation in Cashless Economy?
Definitely, Demonetization impacted the Investment sector. In the current situation, investors are trying to figure out answers to the questions like how to do wealth creation in cashless economy? What should be the investment strategy? The blog highlights the right investment products.
Equity Mutual Funds:
Those looking for long term investment, for them Equity Mutual Fund is one of the most lucrative products to invest on after demonetization. Lower interest rates tend to be positive for equities. Aggressive investors should tide over the short term volatility by staggering investments in Equity Mutual Funds through the SIP / STP route. Through Systematic Investment Plan (SIP) one can invest in small amounts starting from Rs 500.
Moderate to conservative investors may look for Equity oriented Asset Allocation funds such as Balanced Funds, Equity Savings Funds, Monthly Income Plans & CPOFs in decreasing order of riskiness. Investors should also focus on Diversified Equity funds in the Large & Flexi cap space along with Value Style Funds.
Investing on Equity Mutual Funds offers two major benefits. First, it offers inflation-beating returns, if the investment is for a long term. Second, the exit load for these funds is only for 1 year. Also, when the investment period is more than 1 year then the capital gains get exempted from tax liabilities.
Bonds:
Recently, the Reserve Bank of India (RBI) cut the repo rate by 0.25 per cent and from 6.5 per cent, now the repo rate stands at 6.25 per cent. "Since January 2015, the RBI has cut the repo rate by 1.50"-http://economictimes.indiatimes.com/. Because of demonetization, these rates are expected to decrease further and this will further lower the deposit rates. Thus if you are looking for good returns, then bank fixed deposit won't be a very good option at this point of time. Interest rates are expected to fall further.
In such a situation, you can lock high interest rates in your pocket by investing on GOI (Government of India) taxable bonds. These bonds offer 8% assured returns and are 100% secured and guaranteed by Reserve Bank of India.
Minimum investment is Rs. 1000 and there is no ceiling for the maximum investment. The tenure for these bonds is 6 years and pre-mature withdrawal is not allowed. Upon investment, you will get your interest paid half-yearly or cumulatively. For non-cumulative bonds, the half-yearly interest are paid on 1st February and 1st August of each year. Nomination facility is available on these bonds but as it exists in the form of Bond Ledger Account, so these are non-transferable.
For any query put the call now button by following this link https://www.facebook.com/WealthMaximization/ or text me your query at vikramk@bajajcapital.com

Friday, March 17, 2017

Mr. Verma has retired and he has his retirement corpus with him. He needs some part of his corpus to meet his lifestyle expenses but he also wants his corpus to grow further. He understands that keeping the money in his saving accounts is not a good option because in that way his money will not grow, rather its value will diminish in adjustment against the inflation. Also, he understands that FD rates are falling and thus it again won't help his money to grow much.

As a solution to his needs, a typical advisor has recomended him to go for Mutual Fund Investments with dividend option. Although, Mr. Verma sees Mutual fund investments as a promising option for wealth creation but he doesn't see the dividend option as an effective solution for his requirement of regular cash-flow because dividends are not guaranteed and he cannot rely on these to take care of his monthly expenses.

Mr. Verma is confused about what to do?

The all-inclusive solution for Mr. Verma is Systematic Withdrawal Plan (SWP).

Not just Mr. Verma, but many people, especially the retirees, are confused about how to best utilize their retirement or investment corpus. In a nutshell, they want some liquid money to meet their daily expenses and rest they want to invest so that they can create more wealth.

Mutual fund Investments through Systematic Withdrawal Plan (SWP) is the right investment avenue for them. SWP gives you dual benefits, it gives you a source of regular income, and at the same time it gives your money the power to grow by keeping it invested in Mfs.

More Information on SystematicWithdrawal Plan (SWP)

In SWP, you invest a lump sum in Mutual Funds, and then you withdraw a certain amount from your MF investment at a predefined frequency, which can be monthly or quarterly. As an investor, you have two options available for withdrawing your money.

1. Fixed Amount Withdrawal: Here, on each SWP withdrawal date, you will withdraw a fixed sum of money. For example, if you have invested a corpus of Rs. 5, 00,000 in MF through SWP, then under this option, you will be withdrawing a fixed amount, say Rs. 5000, each month.
However, under this option, while withdrawing your monthly amount, you might bother your 'Capital' amount as well, means if your withdrawal amount is more than your capital gain for that month, then the withdrawal will be made using your 'Capital' amount.

2. Capital Gain Withdrawal: Here, you will withdraw only the 'Capital Gains.' For example, if you have invested Rs. 5, 00,000 in an MF portfolio, and on your SWP withdrawal date, your money has grown to Rs. 5,02, 000, then you will be able to withdraw only Rs. 2000, i.e your capital gain for that particular month. This option keeps your 'Capital' intact and it continues getting invested in MF to earn you further capital gains. Likewise, if next month, your 'Capital' money grows to Rs. 5,03, 000, then you will withdraw Rs. 3000 only.

In a nutshell, the first option allows you to withdraw a fixed amount each time but it may bother your 'Capital' investment, if you consume more than your capital gains. The second option may not give you a fixed withdrawal amount each time, but it will keep your 'Capital' investment intact.

How To Do SWP?

The right way of doing Systematic Withdrawal Plan (SWP) is to invest your corpus in a way that it can earn more than what you are consuming. To achieve this, you must deploy your corpus among right kinds of funds such as Short Term Funds, Dynamic Bond Funds or Balanced Funds and pure Equity Funds. You can also take up the strategy of dividing your corpus in the ratio of 70:30 between debt and equity. Finally, you should definitely check the taxation of your withdrawal amount and should try not to bother your 'Capital' investment in a big way.
For more details just go through this link  https://www.facebook.com/WealthMaximization/ and put the call now button or text me your query there or mail me at vikramk@bajajcapital.com

Thursday, March 16, 2017

Both men and women should have sufficient financial knowledge to effectively participate in the money concerns related to themselves and their families. But, in general, especially in India, it is been observed that women have limited financial knowledge and lower access to formal financial products. However, if the ground realities are examined closely, one will realize that women need to have the better financial knowledge and financial planning in comparison to men.

Key Reasons Why Women Must Understand Personal Finance

1. To be Prepared for Emergencies:

Life is beautiful but accustomed to changes. So we can't be in peace believing that circumstances in life will be same for ever. Today when women are talking about equality, they must understand that it is not fair to burden the husband with the financial responsibilities of life and be a dependent on him. Not necessarily, women have to be a working professional and earn to help her family financially. Even women functional as homemakers can help her husband in gaining financial security by providing him the right financial advisory. For this she must strive to keep herself educated about financial needs and  planning of the family.

Also, she must take the emergency perspective under consideration and think about her financial independence as well. Every woman, earning or not earning, has the habit of saving in her piggy banks. They must grow out of piggy banks and wisely invest that money to channelize modes  of wealth creation.

2. To Meet the Rising Cost of Living:

Inflation, as we all know, has risen noticeably in the last few decades. Owning a decent home, sending kids to a good school and living life with an above average standard have become very difficult. As much the man is responsible for these duties, even the woman is responsible. In fact, she can better handle these responsibilities, because women are born talented financial planners since ages. All she needs is the right financial guidance and awareness.

3. Children Get Influenced by Their Mothers

In a study, dated 2009, by the National Endowment for Financial Education, it was found that “direct teaching from parents is more influential on the financial habits of young adults than work experience or high school financial literacy courses.”

Thus, both the parents need to be financially smart. But because in most of the families, the mother is still the primary caregiver, who has the greatest influence on her children, so it is important for a mother to have proper financial awareness. She will be able to shape the outlook of her child by transmitting her adequate financial skills and habits to her children.

4. Women are Usually In-charge of the Day-to-day Expenses of Living

Women is a 'born talented'  financially planner and traditionally, they have taken the role of managing the day-to-day finances, such as paying bills, buying groceries and shopping for clothes.  Women's art of managing day-to-day finances has been one of the most important pillars of financial prosperity of every household. Through right financially knowledge and awareness, women can empower herself groom to be a better financial planner, who will know more about assigning the money in terms of expenditure and saving.

5. Women Tend to Live Longer

When a woman leaves all the financial matters of the household to the male members of her family, she lives a financially dependent life. This can turn challenging in face of unfair and complicated life circumstances. Also, researches done in the past says that women tend to live longer than men. Working professional, entrepreneur or a homemaker, all women should try to attain financial independence to keep herself secured even in those sunset days.

6. To Gain Confidence and Independence

Having sound awareness related to personal financial matters like investment, tax saving, wealth creation etc., not just help the woman at an individual level but she being the family's natural and traditional financial planner, can also help her husband in the investment related matters and help him in gaining financial prosperity. This will certainly help a woman in gaining confidence because her financial knowledge transforms her from a liability to an asset.

In a nutshell, every woman should widen her horizons and must strive to acquire financial knowledge. She must channelize her ways of financial independence through investments and rightly put her knowledge in helping her family to attain financial prosperity. She must adopt the changes in technology and financial domain, and take the support and facilities available to her to keep herself abreast, financially aware and financially independent.
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Monday, March 13, 2017

Hello Everyone.. Today I am going to tell you all some important thing about ELSS....
What is the meaning of ELSS?
ELSS stands for Equity Linked Savings Scheme. These are tax­-saving mutual funds that you can use to save income tax of up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock­-in period of 3 years and invest a majority of their portfolio in the stock market.
What are the tax benefits of ELSS funds?
Investments of up to Rs 1.5 lakh in ELSS funds earn a tax rebate under Section 80C every year. The returns generated on the investments are also tax­-free in the hands of the investor after completion of the 3­ year lock­-in period. In case of SIP investments, redemptions can be done on a first­-in­-first­-out basis since each individual SIP has a lock­-in of 3 years.
What is the ELSS investment tenure?
ELSS funds have a lock­-in of 3 years. But you can stay invested in them, with or without further contributions, for as long as you want. You can also stop an ELSS SIP at any point, but the invested amount can be withdrawn only after 3 years.
Who can invest in ELSS funds?
Individuals as well as HUFs can invest in tax­-saving mutual funds. At present, most mutual fund companies do not accept investments from NRIs who are US and Canadian citizens. NRIs living in other countries can invest in ELSS funds.
Are ELSS funds risky?
ELSS funds don’t guarantee returns because they earn from investments in the equity market.However, the best­ performing funds have displayed the capability of generating inflation­ beating returns over the long­-term. This is something that fixed income tax­ saving investments like PPF and FDs cannot do.
Can I withdraw from ELSS funds?
ELSS funds do not allow premature redemptions before completion of the 3­ year lock­-in period.
What is the ELSS investment limit?
An ELSS investment can be started with a minimum amount of Rs 500. There is no upper limit on how much you can invest in ELSS funds, but tax-saving can be availed on only a maximum of Rs 1.5 lakh a year.
Anything else I should know?
ELSS funds have two plan options: growth and dividend. The growth option is the recommended plan for long­-term wealth creation. Under the dividend option, the investor can choose between dividend payout or dividend reinvestment. The dividend received will not be taxable. If you choose dividend reinvestment, it will be treated as a fresh investment and you can claim tax benefit on it as well.
For any query visit this link https://www.facebook.com/WealthMaximization/ and put the call now button or text me your query at vikramk@bajajcapital.com

Thursday, March 9, 2017

Systematic Withdrawal Plan (SWP): Stream Regular Income From Your Investments
A lot is being spoken about how to ensure a monthly income post retirement. Have you heard about Systematic Withdrawal Plan in this regards? Not just retirement, at any phase of your life, if you wish to automate regular withdrawals from your mutual fund investments, then Systematic Withdrawal Plan can be your preferable solution because it is tax efficient, offers some independence from market instability and also helps in avoiding market timing.

What is Systematic Withdrawal Plan (SWP)?
Systematic Withdrawal Plan is linked to mutual fund investments. It is just the opposite of the much popular concept SIP, also known as Systematic Investment Plan. In SIP, instead of lump sum investment, investors invest small & fixed amounts on a regular basis, similarly in SWP, instead of lump sum withdrawal, fixed amounts can be withdrawn at regular intervals.
How Systematic Withdrawal Plan (SWP) Works?
Suppose you have 10,000 units of a mutual fund schemes, where NAV per unit is Rs 20. This means the total cost of your units is Rs. 2 Lakh. On lump sum withdrawal, you will get Rs. 2 Lakhs only but if you opt the SWP way then there are chances of getting more benefits. How?
Through SWP, you will withdraw a fixed amount (say Rs. 5000) on a regular basis (say on a monthly basis). This month if the NAV is Rs. 20, then for withdrawing Rs. 5000, your 250 units will get used (Rs 5000 / Rs 20 NAV= 250 units). Your balance units are 9,750 worth Rs. 1,95,000 @ Rs. 20 NAV.
Now, suppose next month the NAV per unit turns out to be Rs. 20.15, then for withdrawing Rs. 5000, you have to utilize 248.14 units (Rs 5000/Rs 20.15 NAV= 248.14 units). Thus, your balance units are 9,502.86 worth Rs. 1,91,462 @ Rs. 20.15 NAV.
If you observe here, you have withdrawn Rs 10000 from your total investment of Rs. 2 Lakhs, so the balance amount should be Rs. 1,90,000. But because you took the SWP route, your balance amount is Rs. 1,91, 462. Thus, you gained Rs. 1,462 in 2 months.
Top Features of Systematic Withdrawal Plan
- Fixed amount gets credited to the investors' account monthly/quarterly/half yearly
- Remaining amount can be withdrawn anytime
- Tax efficient returns in comparison of FDs/Bonds
- Withdrawal amount can be increased by investing more in the same SWP scheme
- SWP can be stopped or shifted to another scheme
- SWP can be started from immediate next month of investment.
Why SWP is a Tax-Efficient Way in Comparison to Traditional Debt Products like Bonds/FDs?
Traditionally, debt funds with dividend option were the preferable products to stream a regular income from investments, but these are not tax-efficient because all the dividends attract dividend distribution tax (DDT) at the rate of approximately 28%. Dividend distribution tax (DDT) is applicable on all non-equity funds and it includes income funds, monthly income plans, gilt funds, ultra short-term funds, etc.
In comparison to this tax liability, Mutual Funds' Monthly income plan with SWP is a better and tax efficient solution because the actual tax liability of these withdrawals are much lower if the units are held for more than a year. Because in such a situation, the withdrawals are treated as long-term capital gain and thus taxed at preferential rates (10.3% without indexation, or 20.6% with indexation).
A simple example will give you a better understanding.
Let's assume two investors - A and B. Investor A invests Rs. 15,00,000 in mutual funds' monthly Income Plan with SWP and Investor B invests Rs. 15,00,000 in Bonds/FDs. Both the investors are in 30% income tax bracket.
Mr. A is withdrawing through SWP from his Mutual Funds at 8% p.a rate and Mr. B is getting 8% returns per annum on his Bond/FD investments done for 10 years. For both, their monthly income works out to Rs. 10,000 p.m. Here is the illustration of their tax liability.

MIP SWP Plan
In this case, Mr. A would pay only Rs. 37, 535 as tax under capital gains while Mr. B will have to pay Rs, 3,60,000as tax on interest income.
Mutual funds are subject to market risks. The example is for illustration only and the calculations don't include any surcharge or income tax exemptions and assume that funds are not taken out even after 10 years.
SWP option is useful for retirees, businessmen/professionals, housewives, students studying abroad and rest all who wish to stream a monthly income from their investments in a tax efficient way. SWP option is available in most of the mutual Fund schemes, but investors should choose one that suits their risk appetite.
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It's the time of tax saving. Start as soon as possible before ending this month. Because it can add value in your pocket by saving your taxes. You have many options to save your taxes by investing money at various places like Mutual Fund, General Insurance, Life Insurance, Government Bonds etc. By investing in these schemes you will get double benefit. i.e- your tax saving & your wealth maximization. Just put your query here. I'll get back to you very soon.. Just click on this link and like this page for following updates :- https://www.facebook.com/WealthMaximization/

Wednesday, March 8, 2017

How SIP is a Better Route for Mutual Fund Investment ?
Mutual funds investments have helped many in creating wealth. Using this financial tool, investors with long term goals have built corpus for their financial aspirations such as retirement, children higher eduction & wedding and others.
However, there are still many, who don't have proper clarity about mutual funds, especially risk averse investors. Such investors can take up the Systematic Investment Plan (SIP) route of MF investment. This blog explains how SIP is a better way of MF investment.
Good Things About SIP
No Need to Time The Market: It is believed by majority that to benefit from mutual funds, one needs to have proper knowledge about market timings, like when to invest and when to withdraw.
This is where SIP stands as the better and convenient route of MF investment. EVERY TIME IS THE GOOD TIME TO INVEST THROUGH SIP.

 You need not to time the market. Simply, keep investing regularly (preferrably on monthly basis) irrespective of the market high or low.
No Need of Lump-sum Money for Investing: Through SIP you can invest as minimum as RS. 500. There is no need of having a lump-sum amount. Just like a recurring deposit, you need to make a monthly investment of a fixed amount of your choice. You can do that simply by giving post-dated cheque or by opting for auto-debit from your bank account.
You Can start Early: For investing in SIP, you don't need to wait till you accumulate a lump-sum amount. You can start a SIP from your early years of earnings. At the age of 25, if you start an SIP of only Rs 2000/month, you can expect to get approximately Rs 59.3 Lakhs when you will turn 60.
* Rs 59.3 Lakhs calculated at 15% rate of return and adjusted against 6% inflation rate.
You Become a Disciplined Investor: The habit of saving doesn't come easy to all. SIP is effective in making you a regular and disciplined investor.
SIP: Three Things You Must Consider
Be Committed to Investing: In SIP, you don't need to time the market but only important factor here is your commitment. You must stick to your investment schedule and shouldn't get bothered by the market rise or fall.
Invest for Longer Period: SIP is benefiting, only if you are investing for at least 3 to 5 years. Longer is your investment period, better will be your returns. The smart way is to link SIP with your long term financial aspirations like retirement, daughter's wedding, children higher education and keep investing for 10 to 15 years.
Select the Right Fund to Invest: Selection of the right fund plan is also important. There are fund plans that are giving 18%to 20% rate of return but only when the investment period is long. There are variety of mutual fund plans to choose form. Taking the advice of a financial advisor, you can learn more about these funds and understand which is the right type of fund to invest.

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Tuesday, March 7, 2017

FINANCIAL PLANNING FOR WEALTH MAXIMIZATION....

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