If you invest in tax saving schemes right now, you can get your money back early. For example: If you have planned to invest in Fixed Deposit which can’t be withdrawn for 5 years, if you deposit today you will get your money back in 2013 December and you can use this money for tax investment again. Where as if you save it in March, you will get it back only in 2014 March and you will have to again go in search of cash.

Most of us spend all the cash in hand all through the year and try to find some cash in March. If we don’t find cash in March then your tax plan will go wrong.

Some people are of the opinion that even if I save on 31st March it will still come under this financial year, but this is not clever thing if you are trying to invest in Tax Saving Equity linked funds (ELSS) or Public Provident Fund. You will stand to loose 4 months of interest free income.

Some of us will wait till the year end to submit the medical bills or bills of books purchased for research etc. There is a chance of bills getting lost. It’s better to submit these bills every month to the concerned department in your office.

What about the investments I have made in the financial year ?

Before making any tax saving investments, it is always better to review the investments you have already made in the current financial year. In case you have made investments through Systematic investment planning (SIP), or already contributed to PPF, add all the amounts and plan for the remaining amount.

Get your calculations right:

• For employees there is PPF and it will anyway come under Section 80C. Some employees also would have taken health insurance, life insurance, or group insurance policy. First calculate the amount you have already paid towards premium.
• For those who have taken home loan, calculate the EMI you have paid for all the months. See the interest and principal component in that. You can get the principal paid on the loan exempt under Section 80C. You can claim exemption on interest up to 1.5 Lakh per annum.
• Also take into consideration, the tuition fee you have paid for your kids (allowed only for 2 kids).
• Take into consideration all the above and then decide on the amount for which you have to do tax planning.

• After all your tax planning is done if you are falling under 10% tax bracket and tax payable is not less than two to three thousand, it’s better to pay the tax instead of making investments only for saving these two or three thousands.
• Accounts folks in your office would have already informed you the amount of tax payable. Once you have calculated the amount invested so far, return from the amount invested, and the amount to be invested, all that you need to decide is to where to invest.
• If you don’t have the appetite to take risk invest in National Savings Certificates and Bank Fixed Deposits and if you are planning to invest for long term, put your money in Public Provident Fund.
• If you have the ability to bear risk, invest in Tax Saving Funds or ULIPs.

Instead of investing your money at once, it’s better to choose SIP and invest in 5 equal installments.

Image Credit: Kevin

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I often wonder when I read about the bailout packages dished out by Governments all around the world to aid banks and other financial institutions that are on the verge of bankruptcy especially the amount of money spent in bailouts in last couple of months is staggering. I am even surprised that there was not a single protest from anywhere and these financial criminals go unpunished. It is the common man who is going to bear the burden of additional tax and increased debt.

Why should tax payer’s money be used for bailing out greedy banks and corporations that have done business only with profit as motive and no concern for morals or ethics and absolutely no concern for the consequences for their acts. Putting public money in corporate coffers is just not acceptable. Financial crisis that has happened is a man made crisis done through substandard policies, deregulation and greed. I can understand putting in public money for natural disasters like earthquakes or folds. Governments all over the world have spent trillions of dollars on bailouts already

This kind of bailout is ABSURD!

We must collectively protest this .This is real money, my money, your money, our money which is hard earned paid in the form of tax.

Why should banks and financial institutions which never cared about the creditworthiness of people who lined up for loans or the soundness of derivatives business be rewarded. We should not allow government to write checks on tax payers’ account. This measure will increase the budget deficit by a significant amount, with no guarantee of recovering the amount and not holding anyone accountable for the misdeeds they have done.

What is the signal you are sending to the corporate world and investors through these bail outs? Do your businesses as you like and we will reward you for the blind errors you might commit. Is this the right way?

As far as I am concerned, there should be a thorough probe into the events that have led to this disaster and every CEO, Executive or Government who were part of this financial carnage should be jailed, their assets sold and put in a bailout fund.

It is time to wake up and realize that greed is the basis for all the financial disasters and find a way, may be strict disclosure norms, increasing the transparency in strategic decision making, making one responsible for his actions and

Few weeks back Finance Ministers of several Asian, Europe and Americas countries met and decided to act rapidly on the financial crisis

And now stock markets are being artificially manipulated by bailouts by governments.

When corporations see that the demand is coming down , it is natural for the stock to take a beating. But every other day we see CRR, SLR rate cuts which means our money is loaned back to us and the market stages a rally of any significance. FIIs and Badla traders slowly and routinely remove their money from our markets to invest elsewhere leaving the retail investor in a fix.

It is certainly not a good thing for a responsible, saving, taxpaying citizen, with no defaulted loans or credit card debt to compensate for the that Wall Street gamblers will go bust on their stupid and greedy bets, over-leveraged and poorly managed businesses with huge losses.

Let me tell you some interesting fact. Lehman has set aside $2.5 billion as bonus for their employees even as they went bankrupt for the great performance they showed in pushing the bank to bankruptcy.

What do you call this?

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Only when you sow at the right time and harvest at the right time will you get a good yield. Investments are no exception. You need to know the right fund, right time to invest and right time to sell.

If someone asks me, for how long should I hold my investment, I would tell him ‘Eternity’

says world’s most successful investment guru Warren Buffet.

Underlying truth in his statement is that the longer we hold on to an investment the better it is. But how many of us can think in these lines?  Before we lean when to sell we should also learn when not to sell. Most of the investors get ready to sell the share when market is going down and share value is falling.  If Sensex  falls by 30% or more how many of us can still hold on to the fund/share? How many will realize that it’s the right time for investment.

Now coming to the point, when should one sell a Mutual fund?

1. Is the performance not satisfactory?

It’s important to choose right fund even if the investment is for long term. Now how do we find the right fund ?

One way is to compare the performance of Equity funds with that of Nifty or Sensex.  Another way is to find out the average growth of all equity funds and compare individual funds with that average. We just have to ensure to compare apple with apple. We can’t compare a diversified equity fund with say a sector fund.

Also we should not compare large cap funds with mid cap funds. It takes time for the seed to grow and start yielding fruits. Same is the case with investments too. We have to give adequate time for the investment to generate returns. Many fund houses declare the performance of funds with in 3 months.  We should be aware that this is too short a time to come to conclusion about the fund.  We need to monitor the returns for at least 3 years.

Any fund which is 3 years old and has generated a return a return which is 10 % less than the Index or peer funds, then it’s time to get rid of that fund units.

2. Has there been a change in the profile of the fund?

In the olden days, funds which had 50 % of capital invested in equities were considered as equity funds.  Now they have t invest at least 65% in stocks to be called an equity fund. To generate more returns fund managers often increase exposure to stocks to much higher %. Retail investor will not be able to bear risk beyond a certain point.

If you believe that the fund managers are alarmingly increasing the risk by increasing exposure to equity then you should start thinking about getting rid of that fund units.

3. Has the fund manager changed?

Exit of a fund manager is sign of danger. Though company says that a single person going out might not affect the performance, we still need to look at the performance of the fund.

If the outgoing  managers funds have yielded superior returns when compared to the funds of other managers, then it time you should start thinking about getting rid of that fund units whose manager is going out.

4. Periodical review of the investments:

If you are investing in a fund, ultimately you are responsible for the gain or loss made. So you have to ensure that not more than 50 % of your total money is put into stocks or equity funds. Keep a tab on the shareholding pattern of your fund.

When you see that your exposure to equities is crossing 50% of your total portfolio, you will have to sell some fund units to bring back the balance

In all these circumstances, if you sell units which have been held for more than a year you don’t have to bear the burden of tax.  If you want to sell units, when you have made adequate return or when there is an emergency just keep the above points in mind.

If you are new to mutual funds, take a look at the slideshow below. It definitely will give you some gyaan esp slides 20 onwards

Credit: Rahul Guhathakurta & Zardar Badami

This slideshow is covered under “Fair Usage” policy

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