Finally many people like me have chance to take take plunge in the rising and booming Real estate sector , Any one who does not have Crores and Lacs to invest in flats , plots etc , to earn the capital appreciation will to be able to invest even small amounts like 5,000 or 10,000.
What are Real Estate Mutual Funds ?
They are simple close ended mutual funds which will invest in Real-estate , as simple as that … The lock in period will be 3 yrs. These REMF will invest in properties and they will be owners of those properties , they will also rent out these properties and pass on the rents to the investors as dividend. And when the mutual fund matures , it sells its holdings and pay us the returns.
REMF’s will be listed on Stock Exchanges and they will be traded just like shares.
How do they work exactly ?
Lets take simple example :
You invest Rs 20,000 in some ABC REMF and one unit costs Rs 10 at the start , so you get 2000 units. many people like you will also invest and Suppose the total money they get from investors in 10 crores. Now they invest this money as per the laws defined for them. Suppose they receive 50 lacs as rental income from their investments in a year and the total investments has grown to 12 crores (because of rise in value of properties and other factors).
From this 50 lacs they will distribute dividend and you will recieve your share for 2000 units and the unit value will be around Rs 12.
Rules and Restrictions for REMF’s
– They will have to invest atleast 35% in completed projects , ready flats , shops , houses etc.
– At least 75% should be invested in real estate and related Securities.
– They can partner with real estate developers and invest maximum of 15% in the project (not in company).
– The NAV will be published on daily basis.
– Most probably they will be in category of debt funds. Tax treatment not clear at the moment.
– Further caps will be imposed on the fund on investments in a single city, project or securities issued by associate companies and sponsors. Funds are not allowed to invest in assets owned by the sponsor or the asset management company or any of its associates during the last five years the aforesaid entities hold tenancy or lease rights.
– The cities for investment by real estate mutual funds would include 35 cities in million-plus urban agglomerates and 27 under the million-plus category as per the Census 2001
They are still to be launched , keep a watch !!!
I would be happy to read your comments or disagreement on any topic. Please leave a comment.
ULIPS are investment cum insurance products, You take an insurance worth XYZ amount and then you pay some premium every year. Out of your premiums some amount is cut as administrative expenses (Premium allocation) and out of rest the mortality charges are cut for your insurance and the rest is invested in market linked things.
Some important points about ULIPS to note here :
1. You decide the tenure of your Insurance and the insurance amount, depending on which mortality charges are cut from your premium you pay.
2. The Premium allocation charges are very high in initial years (especially 1st year) and then reduces in later years. That’s the reason one should be invested in ULIP for long period to get maximum benefit.
3. The investor can switch between the investment style as and when he wants (max 4 free switches in most of the cases, there after some nominal fees).
4. ULIPS must be considered for long term investment products, so that the high cost in initial years are averaged out over longer period.
Advantages of buying ULIPS :
– The switching over different styles is not costly, you are not charged when you switch, which make them flexible.
– ULIPS are innovative products and suits people who want long term wealth creation with some insurance too..
Disadvantages of buying ULIPS :
– They are not good product for people who require high cover and can pay less cover, because premium depends on the cover. Higher the cover, higher the premium. So these people must take term insurance for there life insurance.
– For people investing only for tax benefit must avoid them as they will prove to be costly in short term because of there high allocation charges.
5 Benefits of investing in ULIPS
1. Tax benefit
ULIPS have sec 80C benefit, but for that you have to pay minimum of 3 years premiums to avail this tax benefit. You can not stop ULIPS before 3 years to get tax saving benefit. You will get the tax benefits at 3 different stages –
Entry level: You will get tax exemption on the premiums you are paying for ULIPS
Switch advantage: You don’t need to pay any taxes if you switch the policy from equity to debt or vice versa.
Exit level: The amount you will be getting after maturity period will also be completely tax free.
2. Goal based investing or planning
ULIPS also helps your to secure your future goals like retirement planning, wealth creation or your child’s education planning.
3. Freedom to choose your cover
You can choose the cover for your policy. In most of the insurance companies, the cover provided is 10 times your premium, however some of the insurance companies are providing the insurance covers of upto 40 times of your premiums.
4. Liquidity
ULIPS also provides you the benefit of partial withdrawal which will help you in case of emergency.
5. Option to choose your investment type
The money actually invested is invested as per your directions … ULIPS have different plans with different risk-return profile. One plan may have allocation of 80-20 to equity and debt, some other can have 50-50 and some can have 20-80 and like this.
ULIPS have become very popular in last some years as agents have put there life and souls in advertising them and making people believe that they are wonderful product. Every product is wonderful for some or the other. If you can take good risk , need less insurance and closely want to monitor markets and economy so that you can switch your investments from one plan to other, ULIPS are great for you … else they are not..
Evaluate yourself and dive 😉
I would be happy to read your comments or disagreement on any topic. Please leave a comment.
What is Financial Planning? Its a little stupid definition, but its just planning you finances. You plan your Investments in such a way which meets your financial goals over time.
You must be very disciplined when you do this, you must know from where you the money is going to come to you and how are you going to save or invest it, and in future how are you going to achieve your goals.
Steps in Financial Planning
1. List down your Goals
Prepare a list of financial goals. It can be any requirement like Buying Home, Car, Child Education, Child Marriage, Vacation, Retirement etc. Along with this there must be a very clear timeline associated with the Goal. Something like “I want to buy a Car after 3 years, which will cost 10 Lacs at that time”.
2. List down Your Cash Flows
Prepare the list of your cash flows, cash flow means, how money is coming and going? Any money coming in is Cash inflow and Any Expenses is Cash outflow.
It it help you understand how money is coming to you and how is is utilized and how much is remaining for investing purpose.
Example (yearly) :
By Doing this , you can get very clear of how you are going to get money and how you are going to spend it, and how much you are left with to spend.
3. Understand and figure out your Risk-appetite
This is a very important part of financial Planning, Risk appetite is the amount of risk a person can take while investing. How much money you can afford to loose in order to earn high returns defines your risk taking ability.
For Example:
If you are ready to loose 60% of your money , your risk appetite is high
When you are ready to loose 25% of your money , your risk appetite is moderate
If not at all ready to loose your money even 1% , you are not at all a risk taker.
It depends on you which category you belong in. it depends on individuals Psychology, Family Conditions, Attitude etc.
Generally people in there early age have more risk appetite as they have less responsibilities and more freedom to invest. Later when they get married and have responsibilities, they cant risk money to loose.
4. List down your Financial Goals
At this point, you must be clear with your goals. Financial goals are the list of things for which you need money and you must have a predefined target time.
Example:
Ajay earns Rs 3,00,000 per year with Rs 1,00,000 left for investment, he has moderate risk appetite.
Goals:
1. Buy a Car within 2 years worth 5 lacs.
2. Vacations in New Zealand worth 8 Lacs within 4 yrs.
3. Buy home worth 40 lacs in 10 years.
Here, Goals are not compatible with amount invested per year and with that kind of risk-appetite.
Therefore, Goals must be realistic and achievable, it must not look totally irrelevant.
Watch this video to know the financial planning services by Jagoinvestor :
5. Make sure your Goals are realistic
At this point you must make sure that your goals do not look unrealistic and unachievable. If they do, then you must either lower your goals or increase risk appetite or increase the investible amount per year. This gist of the matter is, Be Realistic !!!
6. Make the Plan
Once you are done with all these steps, Its the time for the planning.
But for a short term goal like vacation in 1-2 yrs, don’t invest in equities, rather go for a debt fund or a fixed deposit.
In this way, you have to be clear how you are going to invest for achieving your goals.
7. Review and Take advice
Revise your steps and make sure everything is correct. If you are unclear about anything meet some one who is more knowledgeable than you, See a financial planner or a knowledgeable friend.
8. Take Action and keep Reviewing
The last step is to take Action and start executing the plan with discipline and make sure you change you goals, risk appetite as time passes and these things change over time.
I would be happy to read your comments or disagreement on any topic. Please leave a comment.
Do you remember the price of a movie ticket or any or your favorite thing few years back? It is the same today also? I don’t think so. It has increased by some numbers. This increase in the price is known as inflation. In this article I’m going to tell you what is inflation and how it can affect your investment.
Inflation :
Inflation is the increase in the rate of prices caused because of devaluation of the currency. Is is also known as the decrease in purchasing power of the currency.
Its a tool to measure the increase in prices. If inflation is 6%, it means on an average the prices have increased by 6%, means anything which had cost of Rs.100 last year will cost 106 this year. (Its a average price and not exclusively for some item)
For example:
Considering inflation at 6%, the value of Rs.100 will go down to Rs.53.86 in 10 yrs and to 29.01 in 20 yrs. In order to keep value of you money same, the absolute return earned must be greater then inflation.
Inflation vs returns on different financial products
Fixed Deposit :
Investing in Fixed Deposits just retains its value, but people feel that they get good returns upto 8.5 or 9.0%.
There is a tax of 3.5% on your FD returns and then if you adjust inflation of 6% after that, you will realize that though your Rs.100 has become 109 in a year, you have to pay 3 or 3.5 tax on that, and then if you have Rs.106 after that, you can purchase the same thing which you could have purchased in Rs.100 a year ago.
Hence, FD don’t give returns in real sense, they just keep your buying power. (considering inflation + tax = return from FD)
Gold investment :
Investing in GOLD is considered the traditional way of investment and also it is consider as the best way to beat inflation. Historically Gold has always outperformed inflation. It has generated 13.66% annualized return since 15 years, which is almost double of the inflation rate.
See the graph given below, in this graph the returns of gold investment since 20 years is given. You can see that how gold prices have moved or increased in last 2o years.
Image source: www.Bemoneyaware.com
Cash in bank :
The worst thing one can do is to keep Cash in Bank account, instead of investing it in any product. The returns generated from this saving can not beat the inflation rate.
For example: Suppose you have some cash in your savings account on which the interest rate applicable is around 4-4.5%, whereas the inflation is around 6%. Here the returns can not even meet inflation rate.
Cash must only be kept to a limit which may fulfill your emergency needs (preferably 3 times of you salary). Any extra amount must be invested.
Mutual fund :
Mutual fund is an investment in stocks so the returns are volatile here but if you consider it as a long term investment product then you will realize that it has given returns way higher and beat the inflation rate by almost double.
So this is the difference between the inflation rate and the returns of different financial or investment products. Now you can compare the returns and choose which product is suitable for you to invest in.
We can help you to improve your portfolio by making a perfect financial planning for you. If you have any doubt or query you can ask us by simply leaving your concern in our comment section.
“You only have to do a very few things right in your life, so as long as you don’t do too many things wrong.” – Warren Buffet. What should be your motive as an investor? – To earn great return on your investments with minimum risk, right?
We generally take good amount of risk to get more return, and many times we get it 🙂 … It might happen that if we make good profit 2 times , we make 1 loss also because of the high risk we take. And we think its fair getting the losses, and you are right if you think so. We cant get profit always, if we take risk we have to accept losses.
But is it a good strategy?
Its questionable, lets explore on this topic today. Lets try to find answer of a question, what is better?
1. Taking high risk for high return at the cost of losses some times.
2. Avoid getting losses at the cost of just moderate return and not great return.
Case Study :
– Robert do not understand much about investments, but still invests in high risk high return instruments like shares and risky mutual funds. He invests Rs.1,00,000 for 5 yrs and gets returns of 50%, -35%, 30%, -20% and 45% for 5 yrs.
– Ajay does not take much risk and invests in something which gives him better returns than conventional FD’s or PPF, but has risk component much lower than Robert case. he earns return of 8%, 17%, -10%, 20%, 15%.
Observation : A fixed deposit will give similar kind of returns 1,00,000 * (1 + 8.5/100) ^ 5 = Rs.1,50,365
Why did this happen?
Getting 0% profit overall is better than getting X % loss after getting X% profit. if you get 40% profit and then 40% loss on your investment of 1,00,000, it will first become 1,40,000 after profit and then it will become 1,40,000 * (1 – .40) = 1,40,000 * .6 = 84,000, which is a loss of 16%.
So even if you get 40% profit, a loss of 28.57% is enough to wipe out that whole profit earned.
If Robert never got those losses and only profit, his final amount would be Rs.2,82,750. Just loss of 35% and 20% ate way most of it. On the other hand Ajay, who put more efforts on avoiding losses on the cost of getting less return way rewarded more at the end.
The return percentage required to cover the losses is more than then percentage loss.
Watch this video by Harsh Goela. In his talk, Harsh Goela talks about the stigma surrounding stock markets. He clarifies how it is different from gambling and how proper knowledge and avoiding reckless indulgence can yield profitable results.
Learning and Moral
What do we learn from this article and the examples above?
The important part of investments are not earning great returns but taking measures to avoid losses. Earning high returns must be secondary goal, the major goal must be to avoid losses at any cost though we have to compromise on moderate returns. Because one loss is enough to wipe out major portion of your profits and the hard work you take to earn great returns.
I would be happy to read your comments or disagreement on any topic. Please leave a comment.
People give 100% time to there work, but not even 1% for the motive behind the hard work they put, which is to generate long term wealth, for buying home, children education.
I have seen people who earn well, but fail to invest it properly, in fact in a wrong way, and hence they loose on that. Whats the use of working so hard if you cant invest it properly to achieve you goals, Is there any use of your working for so many years, and after all we work for money, and if we cant manage that money or don’t take some serious time to manage it, I personally consider it as waste.
One of my friend has taken a ULIP policy to save tax without knowing what it is. The insurance he gets on that ULIP is 1.25 lacs with yearly premium of 25,000 with health insurance premium of 4.5k.
he didn’t pay any attention to what he is buying, Does he really need it, how is it going to be beneficial to him.
One of my other friend took a Endowment policy with insurance of 10 lacs for 15 years with premium of around 90,000, when i asked her, how many financial dependents she had, she was clueless and when I cleared what i am asking she said, “No one”.
People don’t take any interest in knowing/learning/asking about financial instruments from anyone and take idiotic decisions, loosing there hard earned money. It does not take 1 hr / week or 4 hrs/month or 1 day / year to take fair decision (if not best) regarding your finances.
If people start giving 1% time to there investments and finances and 99% to there work compared to 100% time to work, they can do much better. A person earning 20,000 per month can generate more wealth than a person earning 50,000/month, with better investment technique.
“Money does not grow just by investing more, but disciplined and great investing technique.”
What do you think is the biggest reason for people in India for not taking financial planning serious?
There are 3 Mutual Funds Options (Growth , dividend , dividend Re-investment) and we will discuss those today. There are lot of misconceptions and myths which add to confusion in the world of mutual funds and agents use it against investors and make them fool …
Different Options in Mutual funds
1. Growth Option
Under this option you get the units at the time of buying and you have same number of units till the end. The NAV keeps changing according to performance.
2. Dividend Option
This is the most misunderstood option in mutual fund.
Dividend option in mutual funds means that you will be repaid some amount of your investments every year and it will be called as “dividends”, this helps those people who want some regular returns every year from their investments in mutual funds.
People think that dividend is something extra which they receive other then their investments which is not true 🙂
Dividend is declared per unit basis, if you have 100 units and MF declares dividend Rs.4 per unit, you receive Rs.400, and you think that your earlier investments have the same worth, where as it decreases by the amount you receive as dividend, because its paid out of your investments only.
The NAV of the unit goes down after paying dividend proportionately.
Example : Let assume you have Rs 1 lac of units in a mutual fund with NAV of Rs 100, you will have 1000 units. dividend declared : Rs 20 per unit
How it works :
You will get Rs 20,000 and then your remaining worth will be Rs 80,000 and as you have 1000 units, the NAV will go down to 80. So your actual worth is same as Rs 1 lac. The only advantage to you is that you are getting liquidity with your investments and getting regular cash every year, unlike growth option.
Agents generally lure investors to invest in NFO’s claiming that if company declared dividends, they will get more dividend compared to existing funds as they will have more units, Which is nothing but a idiotic myth 🙂
3. Dividend reinvestment
In this option ,the step is as follows
Re-adjust the NAV assuming that dividend is paid.
After that buy more units of same MF with that dividend money and allot it. So ultimately the number of units increases and the NAV goes down. In this case dividend money is not given to the investor but re-invested in the same scheme.
Example : Let assume you have Rs 1 lac of units in a mutual fund with NAV of Rs.100, you will have 1000 units. dividend declared : Rs.20 per unit
How it works :
Your dividend will be Rs.20,000 , and NAV will come down to Rs.80 like it happened above. Now this 20,000 will be re-invested in same mutual fund and you will get extra 250 units (20000/80).
Your Total units = 1250
NAV = Rs.80
Worth = 1250 * 80 = 1,00,000
Which one is better Dividend or Growth?
It depends. There is no thumb rule to decide which one is better then the other, it depends on the situation and your needs.
Watch the video to learn more about growth and dividend option:
When is Growth Option better?
If you are a person who earns well and does not need regular money back from your investment and if you are looking at long term investments then growth option is best for you because your investments gets compounded, which does not happen on the dividend part in dividend option as it goes back to investor and its never part of future growth.
When is Dividend Option better?
If you are a person who need regular money every year from investments for some purpose, It may happen that you have more responsibilities and more dependents and if any small money which you get extra every year is helpful to you , in that case you can go for dividend option.
Conclusion : Different options in mutual funds are for different types of investors, before investing just see what do you want from your investments and take appropriate option.
Returns in long term from Dividend and Growth :
Below is an example which shows the returns from similar funds with growth and dividend options and there performance over 3 years.
I would be happy to read your comments or disagreement on any topic. Please leave a comment.
SIP is a way of investing in Mutual Funds where you pay a fixed amount each month for a fixed tenure.
Like If you take an SIP of 5,000 for 1 year on Jan 1, 2008, you will be paying Rs 5,000 per month for next 12 months.
Please understand that its not a financial instrument, but a way of investing in mutual funds, some people confuse SIP with PPF, NSC, and mutual funds, they think they can invest in “SIP”, its just a mode of investment.
SIP CALCULATOR :
When to invest in mutual funds through SIP?
Investment through SIP must be done only when markets are uncertain or very volatile, when you don’t know which side they are headed to ..
SIP will be beneficial only if markets really are volatile or going down after you invested. If it happens that markets turns bullish and starts going up, in that case SIP will not be beneficial and will give less return compared to lumpsum investment in start.
SIP is a simple concept and hence very powerful, lets see some reasons why its worth investing through SIP
Reasons to invest through SIP in Mutual Funds?
More convenient for average person on wallet
Its more easy for a person to invest in small amount every month, rather than a lump sum amount. Investing through SIP is lighter on wallet. Its easy to pay Rs 5,000 per month for 1 years, rather than investing 60,000 at a same time.
It brings your average cost price for unit down (in volatile market)
The biggest advantage of SIP is this part, There is a concept of rupee-cost averaging, In SIP you buy less when market and NAV are UP and you get more units when they are low. When this happens, the average cost of per unit is lower.
Lets take an example of “Ajay” who invests 1,000 per month through SIP starting Jan 2, 2007.
How SIP helps in this case ? See the result below :
ADVANTAGES of SIP
Makes you a disciplined Investor
The other advantage of SIP is that it makes you a disciplined investor. Once you start SIP, each month you have to contribute certain money in mutual fund and that habit is cultivated.
DISADVANTAGES OF SIP :
It will not work in bullish markets or when market goes up over time
When market goes up and keeps growing over time, the units bought every time will be at high price then the previous one, which will ultimately bring the average cost up , compared to the lump sum investment at the start.
In case of tax saving fund, the lock in period gets extended for every investment.
Tax saver mutual funds lock your money for 3 yrs, When you invest through SIP, each of your investment is locked separately for 3 yrs from the date of investment. So if you pay your first installment on Jan 2007, it will locked till Jan 1 2010, then the installment paid on Feb 1, 2007 will be locked till Feb 1, 2010 and like this each installment will be locked with the gap of 1 month.
In which type of markets do you think SIP will not work?
Today we will discuss How to build a Diversified Portfolio and hence and strong portfolio and why we need it? If you don’t understand a lot of terms and terminologies related to investing and finance, have a quick look at terms and terminologies page to quickly understand the terms. it will take 5 minutes.
What is Portfolio?
Your investments all together is your portfolio, as simple as that. So, if i have
10,000 in shares
20,000 in real estate
1000 cash
that’s my portfolio
What is an Asset Class?
An Asset class is something where we can invest and build assets. If i buy a Home or land, i build an asset in real estate category, if i buy anything in shares or mutual funds (equity), i create assets in Equity asset class.
Commodities : trading in commodities, leave it if you don’t understand
Gold or Silver : Recently these are also counted as Asset classes
Cash : that’s the hottest thing 🙂
Now what is a Diversified Portfolio?
As the heading says, Diversified portfolio is a portfolio which is not heavily invested in some asset class, but has balance over every asset class, There is no thumb rule that what percentage of your portfolio shall go in which asset class. It depends purely on :
When you diversify you investments over different asset class, not only your money gets diversified, but also risk, so if some particular asset class is not performing well, it will affect only that part of your portfolio and not whole of it.
Obviously it also effects the returns, you returns are collection of returns from all the asset class, so even if some asset class did not perform over a period, it doesn’t affect you hardly.
Watch this video to know how to diversify your portfolio:
Every asset class provides some thing like :
Equity : Very High returns , Volatility , Liquidity
Debt : Low but Secure returns , No liquidity
Real Estate : Good returns , stability , No liquidity
Gold : Hedge against inflation , Stability
Cash : High liquidity
Every asset class provides some thing good and some thing bad . Diversification helps in getting all benefits in some or the other way and being at the center of all. With diversified portfolio you get all the elements of : Good returns, Stable returns, Liquidity, Security
Lets see some examples :
1. Anyone who was heavily invested in “Debt” around 2003-2004 didn’t get high returns from the zooming stock markets (equity) for 4-5 yrs
2. Anyone who was heavily invested in Equity around start of 2008, saw his investments go down by 40-60%.
3. Anyone who is totally invested in Debt cant get instant money if required, either he has to take some loan over those investments or break his PF or FD etc.
That does not mean, non-diversification always hits …
1. Anyone heavily invested in Equities before the bull run of stock markets in 2003 onwards made fortunes (but at their risk).
2. And people who had most of there money in GOLD in 2007 got the highest returns compared to any asset class.
3. It totally depends on person to person. I hope this point is cleared. Also , inside every asset class , another level of diversification is important. Like in Equity there are different categories like Large Cap , Mid Cap , Small Cap . Read Magic of SIP
In Mutual funds there are sectoral funds , equity diversified , balanced funds , debt funds , liquid funds etc . Another level of diversification is also necessary to achieve high level of diversification .
Case study
Ajay a software engineer earning Rs 35,000 monthly (post tax) with a Family of 3 (1 wife and 1 kid) has following portfolio
Expenditure : 20,000 per month
Portfolio :
Tax savers Mutual funds : 1 lacs (locked for another 2 years)
Real Estate (a land in his native place , pahari in UP) : 3.75 lacs
Fixed Deposits (for 5 years) : 2 lacs
PPF : 3 lacs
Cash (in bank) : Rs 25,000
Insurance Payout : He pay 55,000 per year as life insurance premium for an endowment policy, for which he is insured for 12.5 lacs for 20 years. he started this policy before 4 years.
His Future plans
1. His goals are to buy a home in another 5 years for which he need down payment of 3-4 lacs
2. Want to save 10 lacs for his son education in 10 years
3. He want to retire early with monthly income of 45,000 at least . Read 6 steps of retirement Planning .
This Portfolio looks like diversified, and yes it is, but not in a well mannered way.
The asset wise allocation is
His exposure to different asset class is not well balanced according to his over all situation
Life insurance is very less and and not at all enough . For this he is paying a hefty amount every year which adds a lot to his burden.
His Equity Allocation needs to go up
And Debt allocation needs to go down
His cash needs to go up for liquidity. none of his investments in any asset class provide liquidity or near term liquidity, If he needs 1 lacs suddenly he cant get it, or will get it after breaking his FD.
The first thing he must do is to restructure his portfolio.
1. He shall surrender his existing Endowment policy and take a Term Insurance 35-40 lacs for 20 years for which he will pay around 13000-14000 per Annam. he will save surplus of 40,000 per year because of this.Also when he surrenders the policy he will get back around Rs. 2.4 lacs back.
2. He must invest more in Shares and Mutual funds (as his risk taking capabilities is more because of his less age and less dependents)
3. The land in his native place is not appreciating in value much faster unlike other places like other real-estate hot spots. He shall consider buying his home sooner and sell his land at native place. if he sells his land he will get around 4 lacs.
4. With the money he gets from surrendering policy (2.4 lacs) and selling his land (4 lacs), he will get around 6.4 lacs and he should utilize this money as the down payment for new flat and rest he can take as Home Loan. (Want to know how EMI on home loan is calculated? click here ) He can do it later if he wants (when he can afford the monthly EMI)
5. He shall consider increasing his Cash to a level which can meet his contingent needs if any arised.
As per the standard rule, he shall have at least 2 to 3 times of his monthly expenses as contingency fund, which is totally liquid.
6.Also apart from Cash and investing in Tax saver mutual funds, he shall consider investing in some non-tax saver mutual funds which also gives him near liquidity.
7. He may leave the debt investments as it is. If he wants he can break his FD in case he is going for the Home loan, he can increase the down payment part from this money.
8. In case he is going to take home loan after 1 year , he can also take some loan on his PPF , at least for some part he will pay less interest than the home loan.
9. Also he shall invest some money in GOLD, to give more stability and security to his portfolio.
10. At last he shall consider taking a Family floater Health Insurance plan, which helps him to secure his Family from and health problems or illness.
Recommended Portfolio
Apart from His Home (considering he takes Home soon)
Diversification does not say that you have to invest in some money in every asset class for sure, the idea behind it is just that the risk is minimized by diversification and the portfolio is more stable. Happy diversifying 🙂 and Leave comments …
There is just one word which can describe the year 2008-2009 tax structure … GREAT. This article will tell you everything about tax in 2008. Following things will be discussed :
1. Tax Slab in 2008 for salaried employees
2. How much will you save?
The exemption limit for the year 2008 is 1.5 lacs, which means that if your taxable income is upto 1.5 lacs, you don’t pay any tax.
What is Taxable Income?
The pay which you get has many components, like HRA, conveyance allowance and others.
Out of this income, some things are deductible on your hand and after deducting you arrive at an amount called Taxable income, on which you have to pay income tax.
Taxable Income = Your Gross Salary – (HRA) – (Investments under Sec 80 C) – (Conveyance allowance) – (Health insurance Premium, Sec 80D) and some more things which you may claim.
The slab for the year 2008-09 is as follows:
Exemption Limit for Men = 1.5 lacs
The Exemption Limit for Women = 1.8 lacs
Exemption limit for Senior Citizens = 2.25 lacs
3% Education cess also on the tax amount after tax and surcharge (if any)
What is surcharge?
* If salary is above 10 lacs, a 10% surcharge will also be applicable.
Example : Ajay earns Rs 14 lacs
Total Income (14 lac ) – amount under sec 80c (1 lac) – HRA (Rs 70k , for example) – Conveyence allowance (9,600 , 800*12) – health Insurance (10k , max 15k) under sec 80D (its seperate from sec 80C) = 14 lacs – 1,94,800 = 12,05,200
