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With just two days to go for the income tax returns filing deadline, amidst the last minute hustle, chances of mistakes are high. Either the website won’t work because there are many who have joined in the last minute rush, or you don’t remember your passwords, or you end up filing the wrong return, etc., because of the commotion. So here are some quick tips to help you avoid the errors.

1. Gather your documents: First thing, get all the required documents together, like your Form 16 or business income details, your Form 26 AS (You’ll get this from the e-filing website), Section 80C investment proofs, interest statements from your banks, statements of interest and principal paid on home loans, education loans, etc., statements of house rent paid where HRA isn’t received, medical insurance premiums paid, documents detailing various expenditure that can be claimed like medical bills, etc.

2. Pay Self Assessment Tax, if any: Before filing the ITR, check if you haven’t underpaid your taxes. Calculate the total tax amount that you ought to pay, the possible sources of omission are rental incomes, interest incomes, etc. A common case of underpayment of taxes is interest paid on savings or fixed deposits. The banks deduct a TDS @ 10% for any interest income paid above Rs 10,000. Now the possible disparities are:

• You fall under a higher tax bracket, but TDS is deducted @ 10%.
• You have more than one bank accounts and your total interest income exceeds Rs 10,000, but one or more banks haven’t deducted TDS because interest paid by them was less than Rs 10,000.

Assess your total tax liability and deduct the total taxes paid by you (Refer Form 26AS for total taxes paid) and pay the difference as Self Assessment Tax, either through net banking or your bank branch. Add the challan number to the set of documents you gathered in Step 1.

3. Start Filing: Once all the groundwork is done, the next step is to get into action. Follow the following tips to avoid errors.

1. Select the correct ITR Form.

2. Check the general information section, make sure all your personal details like mobile number, address, employer category etc. are correct. If not, make the required changes.

3. Enter all your incomes, including interest income, rental income, business income, etc. and fill in the corresponding schedules.

4. Fill in all the deductions, your investments, health insurance premiums, interest paid on loans, donations paid, etc. One section that people often omit is Section 80TTA. As per this section, interest income of up-to Rs 10,000 from savings account is exempt from tax. So, if your interest income is up to Rs 10,000 enter that amount or if it is greater than Rs 10,000 then too you can claim Rs 10,000 as deduction under this section.

5. Fill in the details of the self assessment tax, from step 2

4. Review: Before submitting, review the ITR thoroughly, so that you can fix mistakes, if any.

5. Submit before 31st July: Finally, click the submit button, and remember to do it before the deadline.

Since August last year when the resolution to implement GST was passed, the common man is preparing himself for the regime and is eager to learn the implications of GST on his lifestyle, what products will be cheaper and the things for which, he will have to shell out more money.

The implementation of GST is the biggest ever tax reform in the country, which will ease doing business in India by removing operational hindrances caused due to multiple levies under the current tax structure. With the introduction of the one tax – one country system, goods can move freely from one state to another. No more long waiting hours at state borders, or filling numerous forms, the central and state sales taxes and duties will all be replaced by GST, resulting in operational efficiency and reduced logistics’ costs.

GST has been propagated as a reform to simplify the tax structure while protecting the common man’s interests. Therefore, taxes on most essentials will be cut significantly, there will be zero taxes also on some items whereas luxury goods are targeted and will be taxed on the higher side. There are five tax slabs under the GST arrangement 0%, 5%, 12%, 18% and 28%, and all products and services will fall under either of the five brackets (excepting a few, like gold)

The time has finally come, and GST will be implemented in a week’s time. So, at this point we have brought for you a snapshot of the impact of GST on your pocket.

Daily consumption Products: table Various consumer goods that we buy on a daily basis, hold the lion’s share in our monthly budget. A snapshot of GST rates on various daily consumption products:

On the whole, essentials among the daily consumption items will attract lower tax, and hence will become cheaper whereas processed food items will inflate the cost.

Mobiles & Computers: Mobile phones will attract a 12% tax, plus a 10% basic customs duty may be levied on imported mobiles, so overall the device will be expensive than before. Mobile phone bills and data packs will also contribute to the misery, as until now a 15% Service tax was applicable on these services which will now increase to 18% under GST. Cost of Laptops and Desktops will also increase as they will attract an 18% GST from July 1 as against the current 15%.

Travel: As the government is following a progressive taxation approach, hotels with a tariff of less than Rs 1,000 fall under the 0% slab, AC hotels, under the 18% slab and luxury hotels in the 28% slab. Similarly, economy travel by trains (all classes) or by Air will bear 5% tax, while for business class air tickets, you will have to pay a 12% GST.

Restaurant bills: For the connoisseurs, who love eating at fine dines, there is good news. Food in all air-conditioned and five star restaurants will attract an 18% tax as against the current 20-24%. For Non AC Restaurant food bills, you have to pay a 12% GST.

Movies: On movie tickets priced above Rs 100, you will have to pay 28% tax. In some states, the service tax on movie tickets is skyrocketing, the 28% tax slab will be a sigh of relief for cinema lovers. Whereas in other states, where the service tax was lower, movie watching will become dearer.

Gold Jewelery: There is no difference in the tax incidence on gold, as gold will attract a 3% GST and previously VAT and excise duty on gold summed to 3%. The difference lies in making charges, which would attract an 18% GST as against NIL earlier. So, if you are planning to buy Gold jewelery, do it now.

A favourable incidence of GST implementation for the common man is pre-GST clearance Sale. Online shopping websites as well as retail outlets are offering huge discounts on apparels, footwear, electronics, appliances, etc., with a view to clear their stocks before the implementation of GST. Carmakers are also offering delectable discounts to clear their inventory. So, if you are planning to buy any of these products in the future, you can encash the discount opportunity and buy now.

Another favourable by-product of GST is job creation. Companies need to get their accounts in place, so there is a greater demand for professionals versed with GST laws. Lawyers, CA’s, accountants, IT guys for synching the tech platform of companies with new laws, are in huge demand these days. The tax base is also expected to broaden, with an increased number of small businessmen falling under GST regime, again leading to an increase in the demand for accountants.

To sum up, it is expected that as an immediate impact of GST, there may be a rise in the inflationary pressure, however in the long run, the adverse impact on various sectors will be neutralized. Until now goods and services were taxed separately, so a businessman who was paying VAT as well as service tax, could not set off his service tax cost against the VAT paid, and vice-versa, thus increasing the cost of his offering. And this amplified cost was then passed on to his ultimate customer. However GST envelopes the entire universe of goods and services, excepting a few sectors, so this businessman can now avail input tax credit for the GST paid on services against GST paid on goods, or otherwise. Due to this flexibility, the cascading effect of taxes will be wiped out, the cost would decrease, and the benefit of which, will be transmitted to the consumer. So, eventually the cost of all products and services will alleviate for the end customer in times to come.

Mutual funds can help investors create wealth over the long term powered with disciplined savings and patience in the right asset class.

Equity mutual funds have been able to outperform all other classes of investment over a long period of time. Let’s say you had invested R 1,00,000 in a fixed deposit 15 years back at an interest rate of 8% (half yearly compounding), it would be worth R 3,24,340* today. If you had invested the same amount in a diversified equity mutual fund, it would have been worth R 22,12,423* today, i.e. almost 7 times more than what you got in the Fixed Deposit. (* % returns in diversified equity schemes is 22.93% for 15 years)

“If you want to make big money, go for a large number of smalls”

Investing in Mutual Funds has become convenient and simpler with Systematic Investment Plan (SIP) option. SIP is a tool which enables us fulfill our dreams comfortably. SIP is a disciplined approach towards investing in mutual funds. Apart from being a disciplined & convenient approach to investing, SIP enables the investor to benefit from Compounding & Averaging.

So, those investors, who started believing in mutual funds, they gave it a shot with small SIPs, they started SIPs in the last 4-5 yrs to experiment as they were doing it for the first time. But the irony is, even after their incomes have increased, the SIP amounts are still the same. Neither have the number of SIPs increased nor their contributions. Their SIPs performed well over the years and have helped them get closer to their goals while creating wealth. With an increase in income, the savings should increase, and ideally this will lead to a proportional increase in investments. It means that you can target for bigger goals, with your present income. A right increase in your SIP, can help you achieve larger goals.

Let us see what a small difference can make to your wealth. Ram started an SIP of R 5,000, 5 years back in a diversified equity fund. His investment’s worth today is R 488,149*, against his investment value of R 3,00,000. Shyam stretched his savings a bit and started an SIP of R 10,000 in the same fund at the same time. The value of his investment today is R 9,76,298*, against his investment value of R 6,00,000. The pains of saving extra R 5,000 monthly by Shyam is today greatly outmatched & compensated by almost R 5 Lacs of extra wealth he managed to create over Ram. (*% SIP returns in diversified equity schemes is 19.55% for 5 years: Source NJ Research)

You must also periodically review your goals and your income. You may now want to go for an international vacation, while your previous goal was a trip to Kerala. Or, you had started an SIP for your son’s education, but now you have a daughter too. So, in order to meet higher goals and invest the extra savings, you must increase your SIP’s periodically. You shall start a new SIP for your daughter’s education, as it is a new goal, and the maturity date would be different and you can increase the value of the SIP for your vacation.

Today you might not be able to afford a larger SIP for your retirement, because of higher expenses and other commitments . Your retirement is due 20 years hence and you may want to have a huge corpus created at that time. You shall explain your requirements to your financial advisor & he will help you find your optimum SIP value which will help you in achieving your goal. He will guide you and will suggest a smaller SIP, in case you don’t want to go for a higher SIP currently, so you can make the start and as and when you move ahead in life, with higher incomes, he will help you in gradually increasing your SIP amount. You will also be meeting your other life goals with time, and the amount used in SIP’s aimed at achieving these goals can also be directed towards your retirement goal.

The master plan to long term wealth creation and actualization of distant goals is ‘Increase your SIP regularly’. If you do more SIP today, probably you can retire earlier and buy a bigger house than expected and go for a Europe trip rather than South Asia. At the end of the day it is your money, in case of troubles you can always redeem it or stop the SIP, till such time, it makes more sense to increase your SIP for future rather than upgrading to an I phone 7.

So, the bottomline is although your present SIPs will help you achieve your present goals. But your saving will increase with increase in your income each year and it should be invested and secondly, the quantity and quality of your goals will also change, which will require more and higher SIPs. You must contact your advisor and ask him to review your goals and help you decide the right SIP amount for you. The review should be done periodically, so that you don’t lose track. Increasing your SIP is not a hectic task, but it is very important and should not be ignored. It is as easy as shopping on an App, you just have to go to the NJ App, and do the needful.

Baghban is a captivating and a heart melting hindi movie with a mix of all the bollywood masala, emotions and songs. You all might remember crying an ocean at the melodramatic scenes, fluttering at the peppy numbers, going awww at the fairy-tale chemistry between Amitabh and Hema Malini, but might not have looked at it from a financial point of view. In this article, we will review the movie from a financial angle. Although the film was critically acclaimed for direction, story, acting, etc., it also has a very important life message for it’s viewers. The movie was a perfect example of “the backlash of no retirement planning”.

In Baghban, Amitabh Bachchan has four kids and he spends all his money on the upbringing of his kids and meeting his family needs, as many Indian families do, he even takes a loan against his gratuity for his sons, expecting that his sons will take care of the old couple after retirement. Amitabh retires, and then came the series of atrocities. None of the sons is willing to take responsibility of the poor couple, they finally decide to split them, with one parent living with one son for six months and then rotating to another son. Next lies a life of dismay for the couple, and the misery is accentuated because of the grief of living separately. Finally after six months, when the date of moving them to the other son came, the couple decide to elope, thus leaving their future to fate, since they have no money.

In the movie, fate was on the couple’s side, and their adopted son, Salman Khan, bumps in to take care of his mum and dad. Luck favours them a little more, Amitabh had been writing a book on his plight during those six months in his son’s house, the book gets published and it is a huge success. Amitabh gets immense appreciation and huge money from the sales of the book, to take care of the rest of his life.

This film has taught us a very important lesson for life, “Plan for your Retirement”

We all want to give the best education and quality of life to our children, but in the process many parents forget about their own future. Getting our kids into the best schools and colleges or foreign universities cost a bomb. And in order to pay for the skyrocketing fee and expenses, or to sponsor our kids’ extravagant weddings, we sell our investments, property, we compromise on our present and even put our future on stake.

The idea is not discouraging you from spending on your kids, and saving for your retirement only, rather keeping both, your retirement and kids’ future separate. The money that you have saved for your retirement is not meant for your kids’ education and the kids’ education money is distinct from your retirement money. Here, you must keep in mind that most times people withdraw from their retirement corpus because they have either not planned or under planned for their kids. You need to carefully plan for both goals independently. And this should be followed religiously at all times.

Secondly, nuclear families are becoming the norm. Parents wish to retire in a serene and quiet place, in the hills or along the beach and want to spend a peaceful life, away from the hustle and bustle of cities. While the kids want to have an independent life in the cities, some even move abroad for their careers. And the kids may not be able to afford or willing to take care of two families. So, if you want to live your dream of a peaceful retirement, you need to save & plan for your future financial independence.

The bottomline is, neither are we getting any messiah ‘Salman Khan’, nor are we becoming a celebrity writer. Sadly real life is different from reel life. There is an interesting dialogue between Amitabh Bachchan and his boss when he wants to take a loan against his gratuity for his son, the latter advises Amitabh “Retirement ke baad apna paisa hi sabse badi taakat hota hai”. And it holds absolutely true. So, during your working life, ensure that you are investing for securing enough strength for your post-retirement years. Love your children, spend time with them, give them a good education, but do not be a traitor to your own future. Manage your finances in a way that you are able to gratify your kids’ future as well as yours.

There is a strong correlation between your investments and your goals. To make life simple, every goal must have an investment attached to it. To justify its presence, the investment must qualify in two tests viz. it must mature at the time of attainment of the goal and the maturity value of the investment must be adequate to meet the goal. We have spoken a lot about the investment options that are available and how they can be customised according to your goals. Today we would talk about the latter, i.e. the basis of investments “your goals”. Most people do not invest because of lack of excitement to achieve or lack of knowledge. “Plan for your retirement” may not excite you, but “Having R5 crore at the time you retire” or “Getting R50,000 a month even after retirement” would definitely excite you. It’s just a matter of choosing the right set of words. You have to make your goals simple and exciting and your financial advisor will take care of the need for knowledge. Personal finance, saving and investments are terms which might scare you off, but a little modification in your perception and presentation of these terms can make things smoother to understand and apply. As a part of the simplification process, you must make your goals exciting, as the thrill will motivate you to invest for them and work to achieve them. Following are a few key points which can help you make your goals exciting:

Pen down your goals

We do remember what is important for us, what do we want to achieve at the back of our minds, yet it is prudent to write down your goals along with the target date. Writing down your goals will remind you constantly that you have to work hard to achieve them, you can go on check marking the ones you’ve

accomplished. You can review the list to track your status and edit them as per your requirements. So, whatever short and long term goals you have set for yourself, just write them down irrespective of how and when you’ll achieve them.

“Written goals have a way of

transforming wishes into wants;

cant’s into cans; dreams into plans;

and plans into reality”

~ Michael Korda

Step by step

If you are the one who is averse to investments, try your luck with investing for one short term goal. Start with a small step – you may go for a one year debt mutual fund to actualise your dream of going for a vacation with your wife, the one which you have been postponing for dearth of money. After one year, when you get the first hand experience, you will not be hesitant but an eager investor. The contentment of achieving one goal will help you in setting and working for the next goal. The joy which you will imbibe

from this vacation will motivate you to invest for your next goal, and this motivation will set you on track.

Challenge yourself

If you feel you may not be able to conserve money from your income, to provide for your investments, “Challenge Yourself”. Your income is limited and you have a lavish lifestyle. Due to maintenance of your standard of living, you have not been able to own a house and it is your dream to have your own house. However, you feel setting a goal to buy a house is of no point since you will not be able to achieve it. It is only you who can help yourself at this point. Provoke yourself, start with a short period, say a month, develop a conviction that you will not waste money in parties, fine dines and shopping, and for this month you will limit your expenses to necessities only. After a month, when you see the extra money, you’ll realize that your dream can be actualized. And at that point, the goal of buying a house occupies a place in your mission list.

Process driven

Make a list of short and long term goals. Break down your longer term goals into short term goals. Let’s say you want to leave certain assets for your kids to inherit. This is a very long term goal. But before that you must provide for their education,

BIRDS AND THEIR YOUNG: You must have often seen a nest in the corner of an attic below the stairs of your house, or on the pot hanging in your balcony or on a tree in your backyard. You must have also noticed a bird or two fluttering around that nest, a cat on the lookout for food, the small eggs and the next generation of baby birds crawling and eventually flying out into the world. But have you ever thought of how the parent birds look for a safe place, make the nest, breed and hatch the eggs, protect them from wind, rain, storm and against the evil cats and raise their baby to the point when they can fly independently. It is because of their fostering, protection and the care that they offer to their young ones, are the latter able to carry on their legacy. The entire process is a challenge, and the birds invest huge efforts in winning the challenge. This story is an illustration for the readers to understand the importance of protection and care. It is very important to create wealth by investing your money wisely, yet it is all the more important to protect your wealth from evils. The assets that you have built can be blown up in a moment if you do not provide adequate protection. Changes and uncertainties are constant, and by protection we mean you should be prepared for and be able to shield your wealth from these uncertainties.

We have brought certain rules & strategies that you may follow in order to protect your assets:

Diversification: The Golden rule to protect your assets is “Don’t put all your eggs in one basket” because if the basket falls, you’ll be left with nothing. Having a heterogeneous portfolio doesn’t mean you will achieve humongous returns. But is has the potential to improve returns at a given level of risk. The idea is to mitigate the negative impact of one asset with the positive ones. A well diversified portfolio is the one which will survive the jolts of the downturn. Let’s say A has 60% assets spread across health care, technology, manufacturing, infrastructure and FMCG sectors and 40% spread across Bonds, debt funds and FD’s. While his friend B has put all his money in health care and infrastructure sectors only. Let’s say both these sectors were growing, but suddenly there is a sharp fall in the infrastructure stocks. A’s portfolio of 10 different sectors and classes will cover the risk posed by infrastructure, but B’s health care alone will not be able to make up for infra losses.

Beat Inflation: If you need R 50,000 a month to fund your household expenses today, you will probably be needing R 1 lakh ten years later to meet the same expenses. So, if you have put your money into Bank FD’ s assuming that this money will fund your life expenses post retirement, then beware!, because the post tax returns that Bank FD provides will barely cover he inflation expenses, forget about increasing your wealth. So, you must invest in options where your savings increase at a faster pace than inflation. So if you are here for the long haul, you must allocate a certain percentage of your portfolio to equities, since equities have historically delivered good returns and has overpowered inflation.

Get Adequate Insurance: Mr ABC invested some money in a mutual fund scheme for the purpose of funding his daughter’s wedding, which is expected to happen in the next 3-5 years, and suddenly his wife is detected with a tumor and she needs immediate surgery, and he is left with no choice but to meet the hospital expenses with the daughter’s wedding fund. His plans of a grand wedding are shattered and he has no clue of how will he now finance the wedding expenses. Don’t let this happen to you. Don’t be Mr ABC, you need to protect the wealth that you saved for a particular purpose by not letting emergencies overpower your goals. If Mr ABC would have got himself and his family members insured with health insurance, the emergency medical expenses would have been taken care of by his insurance, leaving his wealth untouched. You must protect your family with an adequate term life insurance also, so in case of the unexpected, your family is able to survive and fulfill the goals that you dream of.

Save & Invest More: Never stop saving and investing. Make it a habit, it will build your wealth. Even if you have allocated money for all your goals or have accomplished majority of your goals, you should never stop investing. You can blow that money up in luxury, or you can build your wealth for your better future. The latter is a better choice, since all days are not the same. Save for a rainy day. When you don’t work, your savings will work for you.

Don’t be Emotional in Money matters: Emotions are an integral part of human beings. You are a big fan of Akshay Kumar, you would never miss his movie even if it deserves an Oscar for insanity. Nevertheless, it is sane enough to invest R500 on a weekend to spend some quality time with your loved ones. But when it comes to investments, do not go by your emotions. Rather seek professional advice. Do not respond to slumps or surges, you can never make money by reacting to market fluctuations.

Follow a Personal Financial Plan: An investor must always have and follow a plan. Your financial advisor will guide you and devise a pathway according to your requirements and goals. There are various hindrances which will come in our way, some expected while others unexpected, and these will try to deviate you from your plan. But you have to be prepared and provide for these events while moving on your path unbroken. We get up in the morning, and after our morning ablutions, we pray to God, it is a daily practice. Likewise, you must make it a routine to follow your financial plan.

The above rules are like illusionary walls
around your wealth and you have to keep
these walls strong and intact to ensure that
there is no leakage at any point of time.”

need to do. This is fully justified and much needed as there is a large population of adults who are yet to plan for their retirement. However, there is not much being written about the decisions that you need to take the after and during your retirement. The time is finally approaching, you are 59.5 years old, and have a big corpus expected to arrive soon. All your goals must have been achieved by now, and the only major goal left would be to maintain your lifestyle after retirement. You have been dreaming throughout your life about how this golden period would be, and how you’ll travel all the places which are left unchecked on your list with your spouse. Along with these questions, there are more pressing ones like … what will I do with the money? How should I start deploying my funds? that keeps ringing in your mind. In this article, we shall talk about a few of these important decisions that you need to make post retirement but before that let us do a reality check on the retirement scenario present in India…

Reality Check

As per the WHO’s World Statistics Report 2016, the life expectancy at birth was 68.3 years in India which breaks down to 66.9 years for men and 69.9 for women in year 2015. The life expectancy at various ages

has been continuously increasing owing to better medical facilities. Life expectancy at 60 was 17.9 years between 2009 and 2013 compared to 16.2 years between 1991 and 1995. Life expectancy at 60 was always more for female and male with the difference being of nearly 2.5 years.

However this is a global figure for all Indians, urban and educated population in India have significantly higher life expectancies. some advanced states like Kerala have life expectancy over 75 years. Another eye opening stats shared by HSBC recently is that data nearly 47% of ‘working’ people in India have either not

started saving for their retirement or have stopped or faced difficulties while saving. Clearly, we are expected to live longer than the figures presented here which means that we would likely have over 20 years of post retirement life.

Asset Allocation

An important decision before investing is the amount of kitty you have and the asset allocation needed which will sustain your kitty till you need it during your retirement. Most people prefer not to risk their money

at all and divert their entire retirement corpus to traditional debt products, such as fixed deposits or bonds or insurance policies. These schemes do offer protection of principal but yield low returns. Since the returns will not be able to catch up with inflation, you might fall short of funds in future. Instead, debt mutual fund schemes do offer better post tax returns at acceptable levels of risks for you.

In a falling interest rate scenario like India, debt funds are considered as good investment option even for long term. Further, if your retirement kitty itself is small which may not last long, then there must be some planning on growing that kitty. This can be possible with a small portion of your kitty, say up to 20% being invested in equities for long term (over 5 years at least) where 80% of the kitty is for risk-free consumption during that time. You may further reduce this risk by investing slowly through Systematic Transfer Plan (STP)

from a debt to equity scheme.

Regular flow of Income

Since there would be no new money coming in, you should go for lump sum investments with regular return options like Systematic Withdrawal Plan (SWP) or dividend option schemes of mutual funds for meeting for your monthly expenses. You may also be receiving rental incomes or you you may deposit a lump sum in

fixed deposits or bonds to yield interest income. Those who do not have adequate kitty or regular flow of money may be forced to pursue some commercial activities post retirement, which is not a bad choice even if you have a adequate kitty with you. Working, for money or otherwise, after retirement can help you be more active and alert and this will help you socially, economically and physically too…

Health Coverage

Medical expenses will shoot up like never before in your retirement period and you may never anticipate what will hit you and when. The best idea is to get adequate health insurance coverage as soon as possible. Ask your children to cover you and your spouse in their personal family floater health policies. Most big organisations also provide parents health coverage at nominal costs – ask your children to enrol for the same at earliest. It can be a big relief for you and your children when any need arises. An important point to note is never to discontinue any running health policy you have, unless required. Buying a new policy at this age can be costly and you will have limited choices to choose from.Other important decisions…

Contingency funds

Apart from your regular expenses, emergencies can pop up from anywhere and anytime. You must be able to meet those contingencies and be prepared for them with the help of an emergency fund. This fund should be liquid enough to be able to serve the purpose and in such arrangement, if possible, that it can be accessible by your family too.

Estate Planning

If you have not done it yet, you must do it at the earliest. It is better to hire a professional or a reputed service provider to make your will. However, will is only one instrument of estate planning and you may like to set up private trusts, have business succession planning done, make gift arrangements, etc. Appointing of appropriate nominees and joint holders for your assets is also important at this stage. As far as a will document is concerned, it is the basic need to ensure that your assets are transferred in the manner you like instead of the law taking its course. Ensure that you have done all necessary pre-planning and discussions

for same to avoid any family disputes that may arise later.

Managing investments

Keep it simple:

Don’t try to complicate your portfolio by including products which you do not understand. Invest in something only after you have acquired adequate knowledge about its functioning, return generating capabilities, risks involved, etc. If it is difficult to comprehend, you might as well omit it than keeping the possibility of facing difficult circumstances later. Don’t lock in: Retirees often put a huge lump sum in annuity schemes offered by insurance companies or some other pension / small savings schemes in lieu of regular cash flow throughout your life or for certain number of years. It offers certain benefits like regular income, it covers longevity risk, and reinvestment risk. On the flip side, these investments are illiquid, offer lower returns and the returns are taxable. So you should consider these pros and cons before investing in such pension plans, and allocate a appropriate portion of your portfolio to the same.

Tax Awareness:

The returns of most investments are taxable and tax may be deducted at source. If you are not falling

under a tax bracket, you should take care that you are not paying taxes. For e.g. interest on bank deposits is taxable if it exceeds R10,000 in a particular year. So you should make sure that you submit form 15H in time, so that your interest is tax free. You should also consider the tax impact of various investment products before investing.

Your income meets your needs and looks after your present, and your savings and investments create wealth for you and takes care of your future.

Welcome to the investment world!

It’s great that you are thinking about your future and are ready to take the first step on to the ladder. When we invest, what we see is gains coming through and how our investment will be quadrupled within a short span of time. What we often overlook is the darker side of the mirror. Whenever you try your hands on something new, mistakes are bound to happen and it’s okay, since we learn from our mistakes. But when it comes to investments, mistakes are counted in financial terms. And it is always good to avoid the mistakes and save our money. It is better not to get very high hopes of making quick money and you should be aware of few things. Following are the common money mistakes which not only a newcomer but any investor can commit:

Money making is the only goal
This is the primary mistake of an investor. He believes that he is investing and he will profit from it soon. If someone asks him, what’s the purpose behind him investing? What future goal will he be able to meet with the investment? He most likely will not have an answer. And when need arises, he would either not have the money, since it’s illiquid or it is not sufficient to fulfill the need. The solution to this is make it a point that you will plan before you perform. Plan and allocate your investment into different goal paths.

TV We believe that the TV journalist or the author of a magazine article on investments is the God of investments, whatever he says is set in stone. What we do not realize is, if he actually knew what’s going to happen next and where to invest, he would have been the next Bill Gates. He would not have been giving free advice. The solution is switch to a movie channel and relax.

Emotions
Emotions play a very important role in our investment practice. You would somehow have a very strong conviction in a particular stock. You would fall in love with that stock because you have read so much about it, you like the brand, or at times the investment manager is from your hometown and you know he is very knowledgeable. However, these investments are not a good deal and not performing. But because of your emotional connect, you believe that a day will come when they will perform and you will gain and the day might never come. So, keep your emotions separate from your investments, the latter should not be influenced by the former, rather should be based on thorough research and performance records.

No time horizon
Not having a time horizon in mind, or having a time frame too short to meet a goal, is a problem. You have to give appropriate time to an investment to get the best out of it. It is better to invest according to the time period left to accomplish a goal.

Speculation
Some investors are often tempted by speculation. Easy and quick money appeals and in order to make money quickly, they become speculators and not investors. They engage in risky transactions like hedging, take short and long positions and attempt to profit from fluctuations in the market, than by capital gains, interests and dividends. They deal in huge amounts, and they can’t afford to purchase these stocks. The result is if the price of the purchase transaction is higher than the sale transaction, they are bound to book losses. Most new investors are wiped out because of such speculative activities. So, we should always keep in mind that we are investors and not punters.

Trying to average out
An experienced investor is easily able to get rid of a wrong product that has entered his portfolio, he would book a loss and concentrate on the rest. On the contrary, an unseasoned one would try to average out the purchase price by buying more of the This strategy has offered historic trading losses especially in the short term. Investors need to accept the fact that a wrong stock has entered and it has to be removed to protect the health of his portfolio. It is better to go by the advice of a financial advisor, and rely on the mutual fund managers because they are experienced enough to handle such things.

Lose focus easily
We tend to purchase and sell at very short intervals based on others’ recommendations. One friend who is an active trader suggested, stock A is the best, so we will also invest in A, another friend who is a researcher suggested stock B will outperform all others, so we will sell A and buy B. Lack of conviction in a particular product would lead you nowhere, you would not be able to ripe the benefits of either.

Market timing
Even the big shots have not been able to time the market, nobody can predict what will happen next. Some investors on the basis of their research try to time the market and it does nothing but damage. Investors should rely on professionals, they shall resort to mutual funds, concentrate on their goals and should not panic due to a here and there in the market conditions.

Ignoring the cost
Every investment has a cost associated with it. You have to pay commissions in stock trading, real estate investment exit loads for mutual funds. Investors generally analyse their profits on gross basis and compare products likewise. However, commissions form a part of the cost and at times can bring down the profits significantly. So, you should consider the impact of costs while evaluating a particular investment.

Lack of diversification
Some investors do not have a proper financial plan or even if they have, they often go off track. They tend to purchase a particular product or invest in a particular segment only. This inclination results in lack of a diversified portfolio and if that particular segment or stock fares poorly, his entire portfolio fails, because there is nothing else which can cover up.

Procrastination
Procrastination is the mother of failure. The markets move very fast and we take time in researching and by the time we go ahead with implementing our research, the markets have moved to a different level, however our strategy is the same. And thus we lose out because of improper time management. All these mistakes are mainly due to lack of planning and knowledge. The investor should resort to the services of a financial advisor, devise a proper financial plan and invest accordingly. He should go for professionally managed mutual funds than burning his hands by experimenting on his own.

Many research reports and survey came out with the facts that still there is huge amount of money get invested into Fixed Deposits. figures presented in all such reports testify the fact that whenever we want to invest for a long term, fixed deposits are our favorite option.

Why do we invest in FDs?

Better Interest rates: Since fixed deposits offer better rate of returns than saving accounts, we prefer investing in the former. Safe: We invest in fixed deposits in banks because we believe it is the safest investment option and other avenues carry a greater degree of risk than Fds. Traditional: We invest in Fixed Deposits because it is tried and tested. Our parents, relatives, friends, practically everyone, invests in Fixed Deposits. ‘So even I must have one’ is the logic behind the investment.

Did you know?

There are some interesting facts about fixed deposits which are often overlooked:

TDS is deducted from the maturity value if the total interest from your accounts including the FD account exceeds R10,000. If you are falling under a 20% or a 30% slab, then too the TDS will be deducted @ 10% and you will have to pay the remaining as a self assessment tax. Most people realize this at the time of

filing the returns, which is mostly the last date, since this TDS reflects in your account on the income tax website. You can however submit form 15G/15 H to the bank, but then again it needs to be deposited every year.

Interest rates are falling and are expected to fall further with easing inflation. Currently, the interest rates are in the 7-7.5% range for a five year FD in banks. If you check the rates 15 years back, this rate is much lower now and the trend is likely to continue.

Are there any other options ??

BONDS are another great option to invest your money. Bonds are issued by banks or public sector entities. Bonds are offered for a fixed tenure by the issuer at a fixed rate of interest. You can either buy the bonds at the time of their issue or from Secondary market where they are traded after the issue.

Credit Rating

Bonds are analyzed by credit rating agencies like ICRA, CRISIL, etc., for their credibility and they give them credit ratings. The ratings are like AAA, AAA+, AAA-, AA, BB, BBB, etc. and each rating represent varied levels of safety with regard to payments of interest and principal. The better the rating, the lesser the risk. So the investor must always look for bonds with good ratings.

Tenure

You must also consider the tenure of the bond, it should be in line with your investment horizon. Though, there is an option of secondary market trade, but there is always an interest rate risk if you encash it before maturity. So, if you are heading towards the bank for investing in a fixed deposit, change your direction to Bond, which bears all features of the former with added advantages of higher income and less complications.