Different stairs in investing

Time: 20-25 Min

Category: Important

“Thanks for the session. I researched a bit now; can you tell me how I can double the money in the next 3 years? ” This is the most common type of query I receive after conducting sessions.

I do understand that you would like to invest your money and you do want to see it grow fast, very fast… Consider this analogy - we can buy a fast bike but then we should also be ready to maneuver it during sharp turns and also understand the risk which comes along with high speed.

It’s quite similar with investing - while we do have safer options, which are easy to control; they don’t offer very attractive returns.Then on the other hand we have options which provide very high returns (doubling your money sometimes in six months) though they are risky in nature.

Remember this simple rule:  Higher Returns = Higher Risk

The only way you can reduce the risk while still enjoying higher returns is by gaining experience of investing in the market.

Our advice to you is to consider this as a step by step process. You can assess the progress after every six months based on your understanding and the appetite for the higher risks.

The Ladder of Investing

While there can be other instruments, these are the broad categories. While health and term insurance don’t don’t strictly fall under investment, we feel it’s very important when it comes to investing in yourself.

Step 1: Novice Investors:

You will identify with this if you have never invested or saved consistently over a period of at least 1 year. If that’s you,

I would suggest that you start with FD or RD and first try to create a discipline around keeping aside a part of your money in the form of FD or RD and no matter what, you don’t break your investment till the time period completes.

 

FD’s: This stands for Fixed Deposits i.e. If you have a lot of money lying in your bank and you can invest all that money in one go then FD is the product for you.

RD’s: This stands for Recurring Deposits i.e. If you have zero savings, in that case, you can go for RD. You can set a schedule action whereby every month on a specified date, a nominated amount will get deducted and can get transferred into your RD.

It’s very easy to setup – you can just go to visit the bank account online, and look for FD or RD tab there.

Health Insurance and Term Insurance:

Buy both the insurances for yourself and your family in case you haven’t got one for them.

Note: We recommend Term Insurance rather than ULIP or endowment.

Intermediate Level: Corporate Bonds

This is something which falls between the FD’s and the Mutual Funds as in these you put your money in the FD’s of specific companies i.e. Shriram Transport, HDFC etc. This instruments are also quite safe as CRISIL allocates a ranking to each bond which gets released in the market. (Don’t go for something which is rated below AA+ Category)

They are offer you returns most of the time 1 or 2% above the Bank FD’s rate and also the guarantee that every year your money will surely grow.

Filing Income Tax -Step by Step Process

Last Date to file Income Tax: 31st July 2017

Category: Very Important

It is that time of the year again. Wondering, whether you should file income tax or complex terminology(Section 80C, 80TTA) restraining you from taking the first step. In this article, we would try to answer few of those queries and help you with some of the best resources available to file your taxes.

Let’s try to address the elephant in the house!!

Am I Required to File Income Tax Returns?

It is mandatory to file income tax returns in India if your gross annual income is more than-

Particulars	Amount
For individuals below 60 years	Rs 2.5 Lakhs
For individuals between 60 to 80 years	Rs 3.0 Lakhs
For individuals above 80 years	Rs 5.0 Lakhs

Should File Returns if I Earned Less Than Taxable Income i.e. Less than 2.5 Lakh in this financial year.

Yes, it is advisable to e-file your income tax returns even if you don’t pay taxes. A zero-return filing will be helpful when you need to get your tax refund or apply for a loan or visa.

Let me explain it bit more: The most important benefit of paying taxes and filing your income tax return is that only the income disclosed by you in your income tax return is considered your true income. If you are required to show your income at any place in future, only the amount disclosed in your income tax return would be considered as a valid proof of your income.

Moreover, even if you apply for any Loan from a Bank, you are mandatorily required to show them your income tax return and only the income disclosed in this income tax return would be considered as a valid source of income.

Note: This link by ClearTax addresses a lot of such common queries. Do read!

Let's get the process going.

Now, you have decided to file income tax. What next?

You can directly file on incometaxindiaefiling.gov.in if you are comfortable with taxation terminologies and various sections.

If not, there are various third party sites that simplify the process of efiling, breaking down terminologies into easy to understand descriptions. E.g. http://cleartax.in

The Other advantage with these portals is that for each subsequent year, you are not required to fill the same basic details (like address, aadhaar, bank accounts etc) again. Thus, making subsequent e filling a matter of few clicks.

Use this link to create account on ClearTax: https://cleartax.in/r/1v2wgrsp

• If you have received Form 16 from your employer, follow the instructions here,. You can upload multiple Form 16 (your employer, bank etc)
• If the employer doesn’t provide Form 16, refer to the instructions here

Once the return is efiled, the next important step is to verify it, either by physical post or more recommended e-verification. It's very easy, just follow the steps in this link

Note: From this financial year, the government has made the linking with aadhar Card mandatory; therefore, you do need to possess an aadhar card and keep your aadhar card number handy while filing your returns. 
Follow this link for more information: https://cleartax.in/s/how-to-link-aadhaar-to-pan

Important things to remember:

• Don’t forget to get Form 16 from your bank, Banks deduct TDS if the FD interest income exceeds 10,000. If it does not, it is your responsibility to mention the same.
• Get details of saving bank interest from your bank statement. Generally saving interest is credited at the end of each quarter. Interest up to 10,000 is exempt under section 80TTA
• Do mention all your bank account details.
• Don’t forget to claim LTA, if that forms part of your salary. Note that only 2 journeys can be claimed in a block of 4 years. We are currently on the 1st Jan 2014- 31 Dec 2017 block.
• Do it before the deadline to avoid any penalties.

Disclaimer: A lot of content for this article has been taken from ClearTax.in. We are in no way associated with them. The author of this article is personally using cleartax from past few years and finds it very convenient to use. There might be several other options which you are free to explore.

Saving is about changing Lifestyle

Last week, I was conducting a session at an organization where I had taken an introductory session some 15 days back. A lot of people appreciated the session at that time, took my number, promised to visit my blog and give me a call.

However, not even a single call came.

I was perplexed. One thing which we want to achieve is to make our workshops action oriented i.e. whoever attends them, takes some action according to their capacity for saving/Investing.

I realized, best is to pose the question of saving/investing capacities during the session, to the audience. And I asked them.

For a few minutes, everyone was quiet, but then a participant said that while she actually decided to take action and give me a call, she wasn’t able to do so, as the decision to start saving/investing now was a big one, considering her lifestyle, and that she hadn’t been saving from her salary till now.

Through these sessions, what I am asking all participants to do is to be thoughtful before making any expense and be disciplined and persistent while saving every month. 

One needs to distance oneself from ‘instant gratification’ for ‘something which is delayed or deferred for the next 10 years. This is with respect to your savings and investment - the results will be reaped in the next 10 years or more, depending on the investment and need.

Looking back….

The comment by the participant was a pertinent, as our lifestyles and spending habits have a huge bearing on our decision to save. It also helped me to think how my life changed due to reading about the great investors, trying to follow their suggestion about spending and saving. One has to refrain from instant gratification when it comes to investing as well as spending.

The vice versa is also true. A person who starts following patience and persistence when it comes to money will also start demonstrating the same in his/her spending habits also.

So, at the end, I realize that it’s a choice – I have lived life on both extremes and I have decided that I don’t want to follow a lifestyle which doesn't take care of my future.

Now, let me assure you that this change will not be easy, but the benefits are assured at the end.

  

Do remember- It's your life only you can make it large!

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Kahin Paise na doob jaaye.....

Matlab ab kya karna hain?

20-25 min 

So, you are confused that while you do know the need to invest and also the way i.e. ‘How to invest’ – You are still feel something is missing.

In this article, we will talk about allocation of funds and how you reduce the risk of losing money.

Warren has two rules

1.    Never lose your money

2.    Don’t forget the rule No 1    

Par…Investment is a risky business and loss can happen, then how to enter the stock market.

So, you are correct and while we can’t mitigate the total risk but through proper allocation, we can reduce the level of risk we are taking & this is called a calculated risk.

It’s an important topic because consider a person who earns 10,000 per month and was able to save 5,000 per month. He kept on saving for a year, and that’s when he came to know about the stock market, and he invested his whole saving of 60,000 in the stocks. Some were the good choices, and some went bad.

However, because there was no capital allocation plan – he kept on losing the money in his wrong choices & to rectify his mistakes, he invested more and ended up losing all his gains and also the prior savings.

It’s a basic practice, which has been practiced by our ancestors in the past for their capital allocation.

Simple funda: Jab risk lena hain toh limited paise se loh and then show constraint over it.

Where the stock investment became gambling:

(Lot of people may get angry of this statement, but it’s just my opinion)

There are two ways of investing in stocks i.e. Understanding the companies and thinking about their growth and which is called Fundamental Analysis.

Other is the way in which you try to time the market i.e. You feel for the last four days this stock is falling and now it will start going up and all.

Par shruwat kaise kare

How do I take my 1^st step in Investing?    

 I keep hearing from people that while now they have understood the importance of investing (Stocks) and also want to do it but they just don’t know how to do it.

So, today’s article is for all those who wants to invest, however, are sitting on the fence thinking how to do it.

15-20 Min

While definitely, we will keep this article short for 15 Min approx. through there would be lot of websites & video links for you to follow and read about stock Investing.

Steps in Stock Investing:

1.     Open a Demat Account

a.      This you can open with any bank i.e. HDFC, ICICI or with stock broking agencies such as India Infoline, Karvy etc

2.      Understand the Nuances of buying and selling a stock on the terminal.

a.      This is same for all the platforms with a bit of tweaking based on the platform you are working on.

3.     Figure it out what kind of trader/Investor you are

a.      This is very important, as your strategy changes quite a bit based on this specific decision.

4.     Start reading the Analyst & Annual report of the companies.

5.     Start Investing

In this article– we will be going to each step in detail and I would be giving you some excellent links, which talks about the same and teaches you how you can do that activity.

·      

Open a Demat Account: This is an important step as Demat acts a locker for you, where all your stocks/securities are held after once you have brought them.

Therefore you won’t be able to start investing without having a Demat account. Therefore you do need a bank and Demat account before you start investing.

This is a good video explaining how to open a Demat Account:

https://www.youtube.com/watch?v=txeoPmbgixA - Open a Demat Account.

Moreover, you can just check at your bank and they will send a representative to your home to open a Demat account for you.

Just note one thing: Do compare the brokerage charges of different brokers. As it looks quite low i.e. .05% the transaction e  or .02% of the transaction, however when you are dealing with 1,00,000 it means 500 or 200 Rs during both selling and buying.

Thus you end up paying 600 Rs to your stockbroker. So, try to convince your Demat account holder that you are a serious investor and they should be able to give you either .005 or .002 brokerage charges.

The 4 types of professions in the system

Every coin has got two sides ‘Heads’ or ‘tails’. However, when it comes to people there are multiple types and they are also treated differently according to the category they belong though the good news is they are also taxed accordingly in the system (some more and some less).

It’s like i.e. if there is a huge supply of cotton & sugarcane is rare in some country than for sure the cotton prices are very low & sugarcane will be expensive in this place.

Now, let’s look at any country economy – whom do you think impacts it the most.

If you have thought the answer is 'businessman' then you are correct, as they are the ones who create employment and employ people and thus making the wheels of the economy move, which in return provide the wealth to make better facilities for the common person.

However, would any business run without money? So, the most important people in any economy is the one who have the wealth and who are putting it to use in the form of investment (It may sound unfair that I am saying that the wealthy people are the most important however if they won’t be there then, in fact, there won’t be any jobs available as well). They are the ones who are oiling the machines to keep running smoothly.

So, Let’s see the different kind of people in the system and how much they are taxed (Do see where you fall and can you move to some other category)

1.     Employee or service person: This is a person who goes every day to an office to work and then comes back to his house. The Government feels that they are important however they consume the maximum resources and thus they have to pay the maximum taxes on their salary and they are taxed according to the tax bracket with no incentive.

Their whole salary is transparent i.e. On 1^st of every month the money get transferred to the bank and thereon they withdraw to run their household.

2.      

Freelancers or Consultant: This is a category, which runs it’s own business i.e. while they mostly don’t recruit others but they are their own enterprise.

They have to keep a lookout for the Jobs and don’t depend on a single organization. Therefore, the government gives them an incentive i.e. Whatever expenses they do in finding their next client i.e. Transport, meeting cost etc they can put that in expenditure and no taxes will be levied on it till the time they are justifiable.

3.     Businessman: Now they are the people re not just creating job opportunities for themselves for many others in the system and for doing this they get a huge benefit from the government i.e. They can show all their expense required to expand the company as company expenses and it will be deducted from the profit of the company.

a.     So, if they are going to Goa for a meeting and plan to stay there for 3 extra days –They can actually show the trip for being off 4 days and put that on company expense.

       

     4.     Investors: However, this is one category, which is above all as they put money in the system. Though just to be fair, the government has created two segments in this.

a.     Short term investors: These are those who puts the money for a period of less than a year i.e. they put their money but at the slight hint of profit or loss they take their money out. As no industry can really value this money, therefore these people are taxed at the same rate in which their income falls. So if someone makes more than 10 LPA then they will be taxed at flat 30%.

b.     Long-term Investors: This is my favorite category and also helps the economy the most i.e. If you are willing to put your money and extend it to more than a year than all your gains are tax-free including the dividend. So an investor just doesn’t have to think about the taxes as well.

Note: An investor also needs to pay the Transaction fees and government charges while buying and selling the shares.

And the best part of ‘Investors’ is that anyone can become an investor with an amount as small as 10,000/-

I hope this gives you a clarity pertaining why investing is important and why I promote the long-term investing instead of short term investing.

Hope to see you helping the economy and also save some taxes along the way.

Do read the other articles- if you would like to know how to become a good Long-term investor.

http://newsthatcount.blogspot.in/2017/03/main-bhi-khareed-leta-hoon.html - Main bhi khareed le loon kya.

http://newsthatcount.blogspot.in/2017/01/returns-acha-hain-le-lo.html - Returns ache hain.