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How to start building wealth early with these simple tips.

Starting to build wealth early in life is one of the smartest financial decisions you can make. The earlier you begin saving and investing, the more time your money has to grow.

Here are some simple tips to help you get started on your path to financial success.

1. Create a Budget and Stick to It

Budgeting is the cornerstone of financial management. Start by tracking your income and expenses. Allocate funds for essentials, savings, and discretionary spending. Tools like budgeting apps can help you stay on track.

 

2. Start an Emergency Fund

Life is unpredictable, and having an emergency fund can save you from financial stress during unexpected events. Aim to save at least 3-6 months’ worth of living expenses in a high-yield savings account.

 

3. Invest Early

Time is your greatest ally when it comes to investing. Start with small amounts in low-cost index funds or ETFs. The power of compound interest will help your money grow significantly over time.

 

4. Avoid High-Interest Debt

High-interest debt, like credit card debt, can be a significant barrier to building wealth. Pay off your balances in full each month or consider consolidating debts with a lower interest rate.

 

5. Continuously Educate Yourself

Financial literacy is crucial for wealth building. Read books, take online courses, and follow reputable financial blogs and podcasts to stay informed about personal finance and investing.

 

6. Set Financial Goals

Clear, achievable financial goals give you direction and motivation. Whether it’s saving for a down payment on a house, building a retirement fund, or planning a vacation, set short-term and long-term goals.

 

7. Automate Your Savings

Automating your savings ensures consistency. Set up automatic transfers to your savings and investment accounts. This “pay yourself first” approach can help you build wealth effortlessly.

Why Wait for Later?

You can still achieve financial success even if you start late, but why wait? Starting early provides the advantage of time, allowing your investments to grow and compound. The sooner you start, the more opportunities you have to recover from market downturns and take advantage of growth periods.

Here are some key points to emphasize:

1. Power of Compounding: The earlier you start, the more time your money has to grow. Compounding can significantly boost your wealth over time.


2. Risk Management: Starting early allows you to take more calculated risks, as you have time to recover from potential losses.


3. Financial Discipline: Early investing instills good financial habits, helping you to consistently save and invest a portion of your income.

Share Your Experience

If you’ve learned the importance of starting early in your investing journey, the best thing you can do is to educate the next generation. Sharing your experiences and insights can help others avoid the pitfalls of delaying their financial planning.

Conclusion

In conclusion, starting early is a crucial strategy for building wealth. Just as in cricket, maintaining a steady pace from the beginning can lead to a win. Don’t wait for later – Start your investing journey now and set yourself up for financial success. Also, remember that by sharing your knowledge and experience, you can help others make informed decisions and secure their financial futures.

What is Systematic Withdrawal Plan (SWP)? How It Works.

Are you looking for a reliable source of monthly income from your investments? If yes, then consider the Systematic Withdrawal Plan (SWP). This investment strategy is designed to provide a steady cash flow, ensuring you have regular funds credited to your bank account. Here’s a closer look at how SWP works and why it could be a great fit for your financial needs.

What is SWP in Mutual Fund?

SWP stands for Systematic Withdrawal Plan. The SWP meaning in mutual funds is an extended facility that enables you to withdraw money from your mutual funds in a systematic manner. In an SWP, you can choose your withdrawal amount, frequency, and duration according to your needs. The systematic withdrawal plan (SWP) provides a steady income stream. The main advantage of the best SWP plans in India is it is especially useful for people who want to get a steady stream of income such as retirees. 

 

Here are some important features of a Systematic Withdrawal Plan:

 

  1. Provides a regular stream of income.
  2. Systematically cash in your investment units at regular intervals.
  3. You can choose the amount, frequency, and start and end dates of the SWP plan.
  4. You can either withdraw a fixed amount or only the capital appreciation.

How Does a Systematic Withdrawal Plan Work?

Here’s a step-by-step explanation of how a SWP works:

 

1. Investment in Mutual Funds: First, you need to invest a lump sum in a mutual fund scheme. This can be done through various mutual fund companies offering a range of schemes based on your risk appetite and financial goals.

 

2. Choosing Withdrawal Amount and Frequency: Once your investment is in place, you decide the amount you want to withdraw and how often. For example, you might choose to withdraw Rs.5000 every month.

 

3. Automatic Withdrawals: Based on your instructions, the mutual fund company will automatically redeem the specified amount from your investment at the chosen frequency. These redemptions continue until your investment is exhausted or you decide to stop the SWP.

 

4. Receiving Funds: The withdrawn amount is credited to your bank account on the specified date, providing you with a regular income stream.

 Benefits of SWP

 

1. Regular Income: Ensures a steady stream of income, perfect for retirees or those looking for a predictable cash flow.

 

2. Flexibility: Adjust the withdrawal amount based on your changing financial needs. 

 

3. Tax Efficiency: Enjoy the tax benefits that come with this plan, enhancing your overall returns. 

 

4. Customizable: Tailor the plan to suit your financial goals and time horizon. 

 

5. Rupee Cost Averaging: Since SWPs involve regular withdrawals, they help mitigate the risk of market volatility by averaging out the impact over time.

 

Things to Consider

1. Fund Performance: The success of your SWP largely depends on the performance of the mutual fund you have invested in. It’s important to choose funds with a good track record.

 

2. Withdrawal Rate: Ensure that the withdrawal rate is sustainable. Withdrawing too much too quickly can exhaust your investment prematurely.

 

3. Market Conditions: During market downturns, the value of your investment can decline, potentially affecting the sustainability of your SWP.

Conclusion

A Systematic Withdrawal Plan (SWP) can be a powerful tool for managing your finances, providing a steady income stream while maintaining the growth potential of your investments. By understanding how SWPs work and considering the factors involved, you can make informed decisions that align with your financial goals. Whether you’re planning for retirement or seeking regular income, a SWP might be the right solution for you.

What to do when markets are at all time high?

When the market reaches all-time highs, selling all your investments and book profit can be tempting. However, do not let market highs entice you to make impulsive decisions. Your investment decision must align with your long-term goals, not short-term market movements. If you’d like more detailed information on specific investment strategies or market analysis, please let me know!

Certainly! Let’s expand further on each point:

1. Understanding the situation:

 

First, let’s clarify what it means when we say the stock market all-time high. It simply means that the stock market has reached a peak level, surpassing previous record highs. Now, that’s great news for existing investors who have been in the market for a while, but it can also raise some questions and concerns as to what the investors should do next.

2. Don’t panic:

 

This is the most important piece of advice. Just because the market all-time high, it does not mean that it will lead to a market crash.  History shows that markets tend to go up over the long term. So, there have been 63 sessions in the last 20 years since 2020 when the NIFTY 50 ended a month on a new high. And Only in 23 months, the markets fell after a new high. In other words, there have been 40 sessions in the last 20 years when the stock markets kept rising high and clocked new highs after new highs.

3. Diversify your portfolio:

 

One of the key principles of investing is diversification. Regardless of market conditions, it’s always crucial to have a well-balanced portfolio. Diversification helps to spread the risk. So, even if one sector or asset class in your portfolio falters, your overall portfolio will remain stable.

4. Stay Invested for the Long Term:

 

Another important point to remember is that if you have a long-term investment horizon, regardless of whether the market goes up or down, stay invested until you achieve your investment horizon to achieve your financial goals. Trying to time the market and selling when the markets are at an all-time high and buying back it later can be a little risky and maybe even difficult to execute successfully.

5. Rupee – Cost Averaging:

 

A strategy that can help you navigate at a nifty all-time high is rupee-cost averaging. This means investing a fixed amount of money at regular intervals of time through mutual fund SIP regardless of the market conditions. It helps mitigate the impact of market volatility.

6. Review Your Risk Tolerance:

 

It’s very crucial to review your risk tolerance at different intervals of time. Ask yourself questions such as how comfortable you are with short-term market falls or losses in your investments. If market volatility makes you nervous, consider adjusting your asset allocation which is on the more conservative side.

7. Research and Due Diligence:

 

Before making any investment decisions, or investment choices, make sure you do your proper research. Look at a company’s fundamentals, its growth potential, and the industry it operates in, and then make informed investment choices.

8. Have an Exit Strategy:

 

Having an exit strategy is crucial. Deciding well in advance when to sell or when to trim your positions when the market conditions change. This can help you protect your gains and limit your potential losses.

9. Consult a Financial Advisor:

 

If you’re unsure about your investment strategy in a high market, consider consulting a financial advisor. They can provide personalized advice tailored to your financial goals and risk tolerance.

Conclusion:

So, there you have it. Some essential tips for investors to consider when the stock market is at an all-time high. Remember, investing is a long-term game, and it’s essential to stay invested to achieve your financial goals. Happy investing, and may your portfolio always be on the upswing!

How to Build Wealth with Long-Term Investing.

Would you like to secure your financial future but don’t know where to start? Long-term investing could be the solution. In this simple guide, we’ll explain the basics of long-term investing and show you how to begin your journey toward financial freedom.

What is Long-Term Investing?

Long-term investing is a strategy where you buy and hold investments for an extended period, typically years or even decades. Unlike day trading or trying to time the market, long-term investors focus on the fundamental strength of their investments and are willing to ride out short-term fluctuations in the market.

The Advantages of Long-Term Investing

Why choose long-term investing over other strategies? Here are a few reasons:

1. Higher Returns: Long-term investing gives your investments more time to grow and compound. The longer your money is invested, the greater your returns can be.

 

2. Reduced Stress: By taking a long-term approach, you can avoid the stress and anxiety that often come with trying to time the market. Instead of worrying about short-term fluctuations, you can focus on your long-term goals.

 

3. Potential for Higher Returns: Historically, the stock market has delivered strong returns over the long term. By staying invested for years or even decades, you give your investments the best chance to grow and succeed.

How to Get Started

Are you ready to begin long-term investing? Here’s a step-by-step guide to help you get started:

1. Educate Yourself: Take the time to learn about the basics of investing, including different asset classes, risk tolerance, and portfolio diversification. The more you know, the better equipped you’ll be to make informed investment decisions.

 

2. Set Clear Goals: Define your financial goals and objectives. Are you saving for retirement, a down payment on a house, or your children’s education? Knowing your goals will help you determine the right investment strategy for you.

 

3. Create a Diversified Portfolio: Spread your investments across a mix of asset classes, such as stocks, bonds, and real estate. Diversification can help reduce risk and protect your portfolio from market volatility.

 

4. Stay Consistent: Consistency is key to long-term investing success. Set up a regular investment plan, such as automatic contributions to your retirement account or a Systematic Investment Plan (SIP) for mutual funds, and stick to it, regardless of market fluctuations.

Conclusion

Long-term investing is a powerful strategy for building wealth and achieving your financial goals. By taking a patience approach and staying focused on the long term, you can unlock the full potential of the stock market and create a brighter financial future for yourself and your loved ones. So what are you waiting for? Start investing today and watch your wealth grow over time.

What happens to my ‘regular’ plan units when switching to a ‘direct’ plan?

 

What will happen to my units with the ‘regular’ plan after I switch to the ‘direct’ plan? Will all units be converted to the direct plan as per the NAV on the switch date or as per the previous SIP dates? – Gajanan G. Khandkar

 

Switching from a ‘regular’ plan to a ‘direct’ plan in mutual funds is similar to moving your investment from one fund to another. While the money doesn’t move through your bank account, it is treated as selling your units in the regular plan and buying new ones in the direct plan. This means you will have to pay capital gains tax and perhaps an exit load.

 

But do remember that when switching funds, while the investment value stays the same, the number of units might change due to the different NAVs of the ‘regular’ and ‘direct’ plans. Let’s simplify this by giving you an example: Say the NAV of the ‘regular’ plan is Rs 10, and you hold 10,000 units. Your total investment in the ‘regular’ plan would be Rs 1 lakh (10,000 x Rs 10).

 

Now, let’s assume that on the date of switching, the NAV of the ‘direct’ plan is Rs 11. In this case, while the investment amount of Rs 1 lakh remains the same, the number of units allotted to you will be slightly different. It will be 8,333.33 units (Rs 1 lakh divided by Rs 11).

 

Source- Valueresearchonline

A four-step guide to bringing women closer to financial empowerment

 

When it comes to investing, women show more prowess than men. In fact, Warren Buffett stated once that he invests ‘like a woman.’ This hints at the fact that women have a temperament better suited to this discipline.

 

The numbers back this theory, too. According to Fidelity Investments, women investors tend to achieve 40 basis points (0.4 per cent) higher returns based on the study of the annual performance of 5.2 million accounts. A separate study by Berkeley University found a difference of nearly 1 per cent in investments made by women.

 

That’s because women aren’t as concerned by the constant market fluctuations, and they do not look to outsmart the market by tinkering with their investments. In short, they keep investing simple.

 

Yet, some women take a backseat.

 

A primary reason can be the social prejudices that continue to hold them back. Statements such as ‘women are not good with numbers’ or ‘men are better at math’ often discourage them from making financial decisions. Men are at the helm of household finances, too, leaving women (even highly educated ones) out of key decisions.

 

So, how can more women start making financial decisions on their own? One way would be to break the biases that exist. For this, you need to start learning about personal finance to build up their confidence. To start off, here is a four-step action plan to help achieve your goal.

 

#1 Seek adequate insurance

 

With medical costs rising, it is a genuine concern that a health issue may wipe out your savings. To protect yourself from such an eventuality, you should get medical insurance.

 

If you have dependents that you need to care for, then we suggest going for term life insurance as well. Ideally, it should pay out 10-12 times your annual income when you pass away. This will ensure your loved ones are financially secure in your absence.

 

#2 Control your expenses and plan your savings

 

By tracking expenses and budget planning, you can avoid impulse purchases.

 

Take the help of online calculators to determine your savings goals. Only after you have computed how much to set aside for savings and expenses should you make discretionary purchases.

 

Then, keep track of the amount allocated to your monthly savings, essential expenses and occasional spending. This will help you identify any leaks like outstanding credit balances and loans.

 

#3 Build an emergency fund

 

Suppose an unforeseen event pushes you towards the brink of poverty. While it is an unpleasant reality, an emergency fund can help tide over tough times. It should cover at least six to eight months of expenses. This will help relieve stress and soften the blow of a sudden financial setback.

 

#4 Plunge into the world of investing

 

While you save for a rainy day, you invest to create wealth. That’s the difference between saving and investing.

 

So, where do you begin? The process is quite simple. Start off by investing small amounts of money, and remember these two ground rules:

 

  1. If you have an investment horizon of four to five years, go for fixed deposits or debt mutual funds. While they may offer lower returns as compared to equity funds, they carry much lower risk.
  2. For investments you plan to keep for the longer term (five years or more) to meet your major financial goals (home, retirement, child’s education, etc.), choose equity mutual funds . Compared to many investment avenues, they have the potential to offer attractive returns.

 

Here’s a pro tip for first-time investors: Begin by investing in an index fund that tracks the Nifty 50 Index. If you want to play it even safer, opt for an aggressive hybrid fund. They invest in a mixture of equity and debt. A small allocation to debt cushions the downfall during sharp market declines.

 

Follow this roadmap to become financially independent in the long run. You might make mistakes on the way but don’t get disheartened. It is more important to start investing today. It will be your stairway to financial heaven.

Source- Valueresearchonline

Financial goal: How to plan your newborn’s future over the years

 

There is a very important financial goal that one must keep in mind and usually people do. But often the journey begins with the day when you have a newborn in your life. In fact, if you follow the right path of financial planning, the planning even for this stage goes way before the birth of the newborn. Let us just dissect the amount of expenses we are talking about for the journey that begins with birth


So, coming to the cost that you incur immediately when you have your newborn, the first thing is bringing the child home. Here is a new human in your life who needs sustenance, who needs to thrive. All the resources that you had, you are going to be sharing with your child as well and you are also going to need additional resources for the care and for this child to thrive.

 

So, the number one thing we are looking at here is the cost of food. A lot of mothers breastfeed their child, but there are also a large number of mothers who choose to go back to work pretty early on or may not be able to breastfeed their child. In this case, a huge cost of food comes up, like tins of top feed that the child needs, cost nothing less than Rs 4,000 to Rs 5,000 per month. So, being able to budget for this food cost is very important.

 

Additionally, clothing and shoes and even diapers are all recurring costs because in the initial years, the child is growing very fast and tends to grow out of clothes and shoes very quickly. It is very important to keep up with that.

 

When you talk about recurring visits to the hospital, that is also another thing that you incur in the first six to eight months of having your child because every month you are making a visit to the doctor, you need to get the baby’s weight checked, get the vaccinations done. All these costs start to pile up and they are all recurring in nature. When you think of these recurring costs, it is important you budget for them in your income.

 

How do you budget it and start planning for these kinds of recurring expenses? Broader goals, everyone plans, but how can we plan for these kinds of day to day expenses?


The first step that you need to do here is to try and pre-empt as many expenses as you can. Now, everything is not predictable, depending on what your values are. So, a lot of parents choose to make do with what they have at home for certain things like, cradling the baby and creating an environment for the baby at home.

 

There are certain other parents who would want to childproof their house, buy certain types of furniture, have a cradle, buy a carrier, buy a pram. It completely depends on what your values are and what is important to you in terms of the lifestyle you want as a parent, as a new parent that too. I would say the beginning of this whole thing is just before your delivery, a few days before your delivery, if husband and wife can sit down, if the two spouses can sit down and have this conversation around what are all those costs that you are going to incur on a recurring basis.

 

Apart from that, it is also important that we look at some of the one-time lump sum costs that you are going to incur immediately after the baby’s born. So, for example, buying this furniture for the child, buying a carrier for the child, buying a pram for the child, buying a seat for the child that goes and fits into your car, a baby seat, these are not small costs. These are all in multiples of 1000.

 

You definitely need to sit down and create a budget for yourself, at least based on whatever you can pre-empt and, of course, there are certain expenses that are going to come up which you never expected. Make sure that you also set aside a fund for some of these unplanned expenses.

 

So, let us move on and let us also talk about your loan portfolio, which you might really want to get rid of before this major event in your life.


Talking about loans, one of the important things is that this is also a stage where you may be having loans for a home that you are purchasing. So, you may be paying off a home loan EMI, you may have also bought a car and you may be paying off the car loan EMI as well. So, this is a stage in life where there is a possibility that there will be certain loans outstanding which you may not be able to completely wish away after the baby’s born.

 

I would say that when you look at your income, it is important that you have a plan around how you are going to set aside money for paying off your loan EMIs, making sure these recurring costs of your life are taken care of and at the same time, you are able to set aside something for future you.

 

One of the first steps that you need to take after the baby is born, is to make sure that you have a term life insurance cover and I would say that this is a very important step because the elephant in the room after this baby is born is what happens in a situation if either parent is not around or if both parents are not around. In this case, it is very important that you have an insurance policy in place that gives you that peace of mind and also ensures that your obligations like these loans, as well as the expenses and future goals of your child can be taken care of via insurance claim.

 

What are we talking about over here is also that you need to have your short term goals where it could be having your child, first kindergarten or primary school expense that you need to take care of and longer duration goals can be planned on maybe slowly and after doing a bit of research and whenever it suits you. So how do you actually go in for this, keeping in mind a three-year time frame or a four year time frame, how do you decide on the investment instruments for the primary education expenses?


If you look at it, there are three categories of three phases in the child’s life that you want to take care of. So one is your kindergarten and primary school, which is more of a short to medium term horizon that you are looking at. Then you have the long-term horizon where you want to take care of the child’s secondary education; then there is also taking care of the child’s undergrad college education, post grad education and maybe even the child’s marriage for that matter.

 

So as a priority, if you had to look at your income, you’re paying off your loans first, you are ensuring that the immediate costs are taken care of. Apart from that, you are also setting aside some money for your own retirement, as well as long-term goals for the child that are important to you because this compounding effect that you can leverage in the long term is something that is very, very important. And that should be your priority.

 

Now, when I say that, think of college education, undergrad, post grad, as well as child’s marriage because these are goals where inflation will also have a compounding effect. So you want to keep up or at least try and beat inflation.

 

The second thing is, you have enough time horizon to make small investments towards it and get to that number. Coming to the short term goals that you spoke about, for the short term goals, since these are also recurring in nature, your kindergarten is going to be a recurring cost that you have year on year and same with primary school education and your secondary and your middle school education.

 

Is there a way that you can think about it, in the sense that you can budget for it in your annual income itself? School education, for example, if it is going to cost you two to three lakhs, you need to think of a way in which you can take care of this annual recurring cost by making sure that you set aside money from your annual income.

 

So one way to look at it is to say that I will start a flexible recurring deposit or a liquid fund or a short duration fund, where I am setting aside these amounts as and when they are available to me because these are flexible contributions that I can make and I can set it aside for a short term.

 

The other thing is that I budget for it and when the amount is needed, I have it set aside in my savings account.

 

What also happens is, you have a new one in your life, at the same time, a lot of couples are also growing up in their careers. They have enhanced income and more expenses lined up. How do you dabble between your expenses and your income and your investment during this crucial phase of life?


The first step here is to make sure that you have a financial plan in place. That is absolutely non-negotiable because the moment you have a financial plan, you will be able to understand and identify the goals that are your immediate priority. What is on my list that is urgent as well as important. Those are the ones that give absolute immediate priority to. So even from your income, you will ensure that those immediate expenses and those short term goals are being taken care of.

 

Now the second bit is stuff that is not very urgent, goals that are not urgent but are equally important. Maybe you want to ensure that the child’s undergrad education at least is taken care of. At the same time, another important goal is your retirement. So for these two, you may want to set aside money, but maybe do smaller sums now and step it up as the goal gets closer because at this stage, you are going to have so many different competing goals. You have your loan EMIs also to think about and you have your immediate expenses to think about. So I would say you need to sit down and create this plan for yourself and then figure out what your top priorities are.

 

Source- Economictimes

A guide to securing your child’s future

 

In the constant swirl of daily life, parents grapple with the timeless question: How can we secure our child’s future? With education costs soaring and parents becoming aspirational to send their kids abroad for studies, financial concerns echo louder than ever.

 

This Children’s Day, we tell you how to invest wisely in mutual funds for your child, especially if you should start investments in your child’s name or your own.

 

Investing in mutual funds in the name of the child (minor)

 

As a parent, investing in a child’s name presents operational challenges. You cannot start a mutual fund in the name of your minor child through many online platforms, such as Groww, Zerodha, and 5paisa.

 

Moreover, only select fund houses offer the online option through their website. For most, investors have to visit the branch of the fund house to start a mutual fund in the child’s name. The process involves documentation, including the parent’s/guardian’s proof of the relationship with the minor and the minor’s birthdate.

 

However, the complications don’t end there. The child needs to have a bank account, as the redemption proceeds from the mutual fund will go to that account only. This may pose a risk when the minor gains access to money upon reaching adulthood, especially if they don’t know how to manage money.

 

Also, the transition from minor to major involves paperwork, including filing a MAM (minor attaining majority) form with the AMC requiring the minor’s KYC, PAN, and bank account details.

All in all, a cumbersome process.

 

That said, starting a mutual fund in your child’s name can be considered, especially if you are prone to dipping into your investments now and again. Why? Investing in your child’s name is a potent emotion and motivator. It can be a strong deterrent whenever you have impulsive urges to withdraw money from your kid’s fund.

 

Let’s talk about the taxation aspect

 

Until your child is under 18, realised gains from the fund will be clubbed with your income and taxed. Even dividend income gets added to your total annual income.

 

Once they turn 18, your child will be required to pay taxes on the capital gains in case of any redemption from the fund. However, it is noteworthy that annual income of up to Rs 3,00,000 is exempt from tax under the new tax regime.

 

Choosing the right option

 

The dilemma extends to where to invest. Most of us search for children-specific mutual funds. On paper, the logic appears sound. But read between the lines, and you’ll notice that most of these funds are a clever marketing ploy.

 

Let’s illustrate why we say this: A typical children-targeted fund is hybrid in nature – it holds equity and debt instruments – and doesn’t allow you to redeem any money before five years. On the other hand, a regular hybrid fund has no lock-in period, not even a week’s.

 

What you should do

 

Create a separate folio, i.e. start a mutual fund investment in your name and make your child a nominee. This will offer a practical solution to the challenges of starting a mutual fund in the child’s name.

 

Source- Valueresearchonline

Four ways to save tax on long-term capital gains

 

The reintroduction of long-term capital gains tax of 10 per cent on stocks and equity funds prompted investors to look for ways to reduce their tax liability. So, we show you four methods to reduce tax on your long-term gains made from equity and equity-oriented investments.

 

Use the Rs 1 lakh exemption wisely

 

Investors are allowed a basic exemption of Rs 1 lakh every year on long-term capital gains (LTCG) from the sale of equity shares or equity-oriented fund units.

 

So, if you don’t need to withdraw all your investments at once, consider spreading out your withdrawals over multiple financial years. This way, you can reduce your tax liability.

 

For example: Let’s say you have Rs 2 lakh long-term gains from equity shares. You can cash out Rs 1 lakh in a given year to reduce your tax liability. Try to wait until the next financial year to redeem the remaining Rs 1 lakh to avoid tax on it. If you cash out all at once, you’ll owe Rs 10,000 in taxes [(2 lakh – 1 lakh)*10 per cent].

 

Consider loss realisation

 

Long-term capital gains can be used to set off both short-term and long-term capital losses . If your long-term capital gains, after applying the basic exemption, exceed Rs 1 lakh, consider setting off some losses at the end of the year. This will effectively reduce your tax liability.

 

For instance, imagine you have long-term capital gains of Rs 1.4 lakh and capital losses of Rs 40,000. In such a case, you have to pay taxes on LTCG, as shown in the below table. But if you choose to set off the losses against the gains, you won’t owe any taxes. See the table below.

 

 

Choose the right investment products

 

To reduce capital gains tax, your investment choices matter. For a debt-heavy portfolio, opt for products with debt-like features, like equity savings funds , which are taxed favourably like equities. Avoid investing directly in debt or debt-oriented funds, as they incur higher taxes (especially burdensome if you’re in a tax bracket over 20 per cent).

 

For a mixed portfolio of debt and equity, both face different tax treatments. Consider switching to equity-oriented hybrid funds, which offer exposure to both asset classes with tax treatment similar to equities. For a 60 per cent equity and 40 per cent debt portfolio, equity hybrid funds with over 65 per cent allocation to equity can help you maintain a lower 10 per cent tax rate on your gains.

 

Section 54F (for house purchase)

 

While not applicable to everyone, if you happen to be planning to build a new house or invest in a house property, then Section 54F can assist in minimising your capital gains tax. Here’s how:

 

Step 1: Sell a non-property asset (can be anything like stock investment or gold sale)

 

Step 2: Use the long-term capital gains to:

 

  • Buy a home (ensure you purchase it a year before or within two years after you have sold that non-property asset)

 

  • Construct a home (ensure you build the home within three years of selling the non-property asset)

 

Please note that starting from April 1, 2023, the maximum exemption limit under this section is capped at Rs 10 crore.

 

These are some smart ways to efficiently reduce your tax burden on long-term capital gains. Choose the option that suits your needs to ensure you don’t pay unnecessary high taxes. Remember, money you save is money you earn!

 

 

Source- Valueresearchonline

Best Financial Planning Tips For This Diwali

 

Diwali is the biggest festival celebrated in India and this festival brings us various lessons about financial planning which can be implemented in day-to-day life. While many of us plan well ahead of time for Diwali, there are various things that we need to take care to ensure best financial planning for the coming festive season

 

Most of us work for long hours so that we can make ends meet but we fail to take out the time needed to manage the personal finances. We not only need to earn but we also need to take the time needed to manage the hard-earned money and create that change in our mindset. Diwali is the best time to bring ahead that change and to take care of the financial well being of your family.

 

Let us now have a look at some of the tips that can help you with financial planning this Diwali !!

 

1. Start by improving your financial knowledge

Most of us suffer from low returns on our investments, debt traps, being under insured and having insufficient funds for retirement and so on. One of the major causes of such issues is the fact that we were never taught about managing personal finance. You need to have the right knowledge about managing your finance and this is the first step that you will be taking for the financial well being of your family.

 

2. Create a savings plan for every financial goal

Planning is important in every aspect of life. This is quite essential when it comes to money. One can set their financial goals based on the three kinds, the short, medium and the long-term goals. Such planning will certainly help in your financial well being.

 

3. Have proper budgeting

People can gain control over unwanted expenses by proper budgeting. By knowing how much you are earning and what is being spent, it gets easy to control finances. Budgeting will also help people to identify the area of high expense and will also help you to evaluate on how unnecessary expenses can be curtailed.

 

4. Reduce the burden of loans

One also needs to review the existing loans on timely basis to make sure that we only have loans that will help in increasing our net worth in the future. One example for such loans is educational loan. Bad debts are to be paid immediately. A proper evaluation of debts will help us save on the interest.

 

5. Plan your taxes

Most of us get into a last minute tax planning at the end of the year. You need to do your tax planning by considering your needs, goals and the risk appetite you have. People can talk to financial experts and take help for choosing the best ELSS funds for Tax Planning this Diwali.

 

6. Take Insurance cover

Insurance is a must now days and is the most crucial thing to remember while financial planning. Most of us do take the insurance cover but it is not adequate. While buying the life insurance policy do consider the important factors like living expenses of the present and future and how much does your family need in case a tragedy occurs. Accidental insurance and property insurance too are to be the part of everyone’s insurance portfolio.

 

7. Always have an emergency fund

While many of us do plan for the same, not all of us implement it. Our life is full of uncertainty and hence it is necessary to have an emergency fund. This not only helps us with the financial need during emergencies but also saves us from the stress that arises due to financial crisis.

 

8. Write Your Will

If you haven’t yet created the will, this is the right time to do so. Most of us do not write a will as we think that we do have such assets and also that we have placed a nomination already.  Though nomination is a great help, but it is also advised that one needs to make a will to avoid any family feuds and complications in future.

 

The above-mentioned strategies will certainly help anyone in preserving their wealth, not only for one Diwali, but for many more to come.

 

Source- Motilaloswal