23/03/2011

Tips for safe Investment and wealth creation!


Now days, there are many option available for wealth creation but only requirement is money and right investment with discipline. Investment can be divided into broader two categories i.e. Equity related investment and debt related investment. Before selecting a suitable category of investment, it is advisable to take the opinion of expert person from investment advisor, if you have to determine the suitable category of investment for yourself then before deciding you have to determine your risk taking capacity.

What is risk taking capacity?
There are two factors to determine the risk tolerance capacity of a individual.

1.     Financial risk taking capacity:  Financial Risk taking capacity means how much money you can afford to lose. The more money  you can afford to  put at risk, the more risk tolerance capacity you have.
2.     Emotional risk taking capacity: The Emotional risk taking capacity means how much you stressed will be when you lose money. the more stressed about the loss of money, the less risk taking capacity you have.
On the basis of above risk taking capacity, investors can be divided into three categories:
  • Conservative: These are such investors who are hesitate to take risk. They opt for safety of their principal first. They are having very low risk appetite. 
  • Balanced: These investors who likes to take some amount of risk but still prefer low risk product. They have moderate risk appetite.
  • Aggressive: Risk lover investors come under this category. They have very high risk appetite.
Once you determined yours risk appetite as per above explanation. In my view following are some investment instruments which are available for safe money making and wealth creation systematically.
1.     For conservative Investors: they should go for fixed income product which would ensure capital protection.
  • Public Provident Fund (PPF): it is very easy to open account; it can be open in any PSU Bank or post office. The minimum amount require to start investment is Rs 500/year. Disadvantage or advantage you can say, it have a locking period of 15 years during this period, it cannot be liquidated but loan can be taken against it and a partial withdrawal is permitted after six years. An individual can make investment maximum Rs 70,000 per annum. It has tax exemption under 80(c).
  • National Saving Certificate (NSC): There is no maximum limit for investment and minimum amount required to start investment in NSC is Rs 500/annum. The investment income has tax exemption but interest income is taxable. The scheme is having locking period of 6 years. Premature encashment is not permissible.. It will give an annual interest of 8%.
  • Employee Provident Fund (EPF): this scheme is for working employees. In this employers also contribute to the EPF of Employee. If you have continuously worked for 5 years, then withdrawal is tax free. Premature encashment is permissible under certain circumstances. Current rate of interest for EPF is 8.5%.
  • Life Insurance Plan: Life endowment plan where premium is costly but it will serve dual purpose of insurance and return.
  • Fixed Deposit: In this Scheme minimum amount requirement for investment is Rs. 100/year and vary from bank to bank. The locking period is five years and investment income exceed Rs. 10000/years is taxable at source. Premature withdrawal is not permitted. it have very low interest rate.

  2. Balanced: Balanced category investor can go for some product which are list under conservative categories, also can take balance mutual fund. The exposure of the following product should not be very high.
  • Unit Linked Insurance Plan(ULIP): It has dual benefits i.e. benefits of insurance and investment. The returns are tax free. But it has a locking period of 5 years. For better returns it should be started for longer period. As some portions of investments are in equity market so the investment is subject to market risk. However if investment made for longer period risk can be minimize. 
  3. Aggressive: Investor in this category can go for product list under conservative and balanced categories and also some product which are mentioned below. The exposure to equity should be high. But it may be kept in mind equity will give high return but also can give heavy losses. 
  • Equity linked saving scheme (ELLS): the minimum amount required for investment in ELSS is Rs. 500 and it also depend from fund to fund. The locking periods of all the ELSSs are 3 years. Presently investment and dividend all are tax free. Since ELSS investment are equity market so the investment is subject to stock market risk and return may be varied from fund to fund. Generally ELSSs are outperformed all other mode of investment in long term.
Conclusion: The goal of a person change as per their age, so should your investments. When a person is young and no liability of family and any other financial obligation, higher exposure to equity can be considered. As we grow older, our exposure to equity related product should go down and so should be the exposure of loan. The simple formula for equity investment is 100-your age, means if you are 30 years old the equity exposure should be 100-30=70% of your total earning.

Tips for Signing Contract Papers

Whenever and wherever we are going for any services, lice mobile/telephone connection, any type of Insurances purchase of  home/vehicle, loan from any source etc. the owner or the agent of service provider ask us to sign various type of forms and documents. We the educated and young people who making hard money by sweating lots, are also signing these documents very carelessly and without reading the contents of the document. We are forgetting that the signatures which we are putting on the documents are not just a autograph but we also consenting a legally binding agreement. Therefore one should be very careful before and while signing an agreement.

Contract/agreement are mutually binding documents and once sign, it cannot be alter without the consent of all the involve parties. It contains all the terms and condition which is binding for all the members who have signed it.

What is Contract?
Contract is an agreement which is enforceable by law. Contract creates legally binding relationship and obligation i.e. right and duties between contracting parties where agreement is defines as a promise or set of promise forming consideration for each other. All contracts are agreement but all agreement are not contract.

Before making any contract following points should be ensured.
1.     There should be two or more parties.
2.     Offer and acceptance must be there.
3.     Obligation should be commercial.
4.     The contracting parties should not be minor or person of unsound mind or disqualified from contracting by law.
5.     Lawful object and consideration.
6.     Agreement should not be declared void by any court.

While signing any contract following points should be ensured.
1.     Ensure none of the column left blank. If any place which is blank fill with dash (-) mark.
2.     Don't hesitate to clear your doubt if any arises while signing the documents, if needed take help of expert persons.
3.     Don't come under influence for signing for any documents. This may be a tactic of the parties with mala-fide intension to get the wrong documents signed.
4.     If anybody promised you verbally must be in writing. Don’t believe on verbal promises, these are made to break and influence the people in decision making.
5.     Keep the copy of all the documents and forms you have signed and submitted to the service providers.
6.     Please check the terms and condition which are writing in very tiny letter. these tiny mark terms are hidden conditions.
These points are not exhaustive, it is just a guiding so if you are making any agreement or contract of big financial value, must take the help of experience person. 

It is to know that contract/Agreements are designed to protect both the parties. Just make sure you fully understand all details before signing a contract or agreement.

21/03/2011

5 Points to be known while doing on line trading !

Easily and cheaply availably of  the Board Band Internet connection has encouraged me to go for online trading and forget the broker franchises and do the trading business from my house itself, which has given me lots of freedom which earlier was not available. However for last 3 years, I am doing, trading and for last one year I am doing online trading and following points I read and experienced that one should know about online trading.
  1. Online transaction of equity are subjected to tax liability .
  2. All gain from sell/purchase of equity with a year of the of the date of purchase/ sell are subjected to capital gain tax @ 15% along with applicable surcharge and other tax.
  3. All losses  with a year of the date of purchase are subject to set off against capital gain tax. 
  4. If selling of share after holding of more than a year then gains are exempted from capital gain tax and losses are also not eligible to be set off against the gain
  5. If the total transaction is more than 20 lakh/year then the account need to be audited and treated as business income.


Some points to be ensured before Property Registration

I have purchased one 2 BHK flat after obtaining, housing loan from Bank as  it was my first encounter in real estate so I was not aware about the things should be ensured before registration. But to make this first encounter successful , I gather much information about the things should be ensure before registration. As purchasing of a house was not a simple thing for me, it was a life long earning and saving. As per my experience what are the thing should be ensured before registration are: