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Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. suriseetaram.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. suriseetaram.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
ELSS has a lock-in period of 3 years and has the potential to provide you high returns linked to the market.

When it comes to saving tax, Equity Linked Savings Scheme (short for ELSS) of mutual funds is one of the most favored investment options. It has a lock-in period of 3 years and has the potential to provide you high returns linked to the market. Moreover, there is no limit to making investments in these schemes. However, one should devise a proper strategy while investing in ELSS to gain good returns over a period. This is because the returns are market-linked and not guaranteed. Here are four important strategies that one should adopt while investing money in ELSS.

Invest in lump-sum or in SIP mode?
The best way to invest into an ELSS is to plan by taking stock of your projected Section 80C deficit at the start of the financial year, and then start a monthly SIP to cover the gap. Not only will this make it easier on your pocket, it will also smoothen your long-term returns through rupee cost averaging.

Should you invest in the same fund again?
Investors are at times confused on whether they can invest in the same fund in which they invested in the previous year. Also, how will they get the tax benefit and on maturity how much money they should redeem? Investors can invest in the same ELSS scheme in which they had invested their money in the previous year’s either in form of a lump sum or through an SIP mode. However, you need to keep a track and monitor the fund performance before investing in the same fund. Kaustubh Belapurkar, Director Manager Research, Morningstar Investment Adviser India Pvt. Ltd. said that you can invest in the same ELSS every financial year. In fact, you can invest as much as you like in an ELSS scheme, but you will get tax benefits only up to the prescribed tax exemption limit of a maximum of Rs.1,50,000. “The tax benefit is given basis the transaction date, as long as the investment(s) are made in the same financial year for which you are seeking tax benefits. After completing 3 years, you can place a redemption request for the units that have completed 3 years or more,” he added.

Link it to your financial goal
Make sure you align your ELSS investments to a long-term goal such as your retirement or your child’s education. Doing so will remove the fixation on the 3-year lock-in period and allow you to benefit from a longer investment horizon in the process. In our view, 3 years is too short a time frame for an equity investment anyhow, and investors should ideally not confuse the mandated lock-in period with the ideal holding period for an ELSS.

Create an investment cycle
While investing money in ELSS regularly in every financial year, you can create an investment-free cycle after the third year of your investments. From the fourth year onwards, you can even choose not to invest money from your pocket and still avail tax benefits. Yes, once your first-year investment reaches its maturity, after the third year you can redeem the same amount and invest it in the fourth financial year to avail tax benefit. Similarly, the process can be continued for any number of years.

Source:http://www.moneycontrol.com

PF, gratuity will not be enough to create a corpus that will give you inflation-adjusted returns

In India, most retired government employees get pension, which is a regular payment till he or she is alive. Some private sector companies, too, have similar payment structure in place. In some cases, ex-employers even put in place a family pension, where the pension is paid to the spouse after the death of a former employee. However, for many people employed outside of the government, there is no security of pension. They mostly need to depend on the money they get from the provident fund and gratuity to meet their financial needs after retirement. Although the lump sum payment is usually a good amount if the person who is retiring has worked for several years, given the high rate of inflation even this may not be enough. So, building a pension corpus should be part of the financial plan during the working years of an individual. We look at the basics of what should constitute a pension corpus, a plan that you can put in place while you are still working and how you should shift your pension corpus from relatively high-risk investment products to low-risk ones after retirement. A pension plan must have two phases: The Accumulation phase and The Distribution phase.

During the accumulation phase you are required to invest part of your earnings on a regular basis to create a portfolio of investment products that will eventually become your pension corpus. The distribution phase starts once you retire and don’t have a regular source of income. Or even if you have a regular source of income, such income is not enough to maintain your standard of living. During the accumulation phase, one should build a corpus which upon retirement would become the pension fund for the person and give him/her financial freedom.

The allocation of one’s funds during the accumulation phase would depend upon the profile of the person, the present and future financial needs and the time left for the retirement. Usually, the most preferred distribution of funds during this phase is 40% in equity, 50% in debt and10% in gold. However, one should consult a good financial advisor or a planner to get the allocation that is best suited to one’s needs. This proportion of allocation of funds would have to change once you enter the distribution phase. In that phase, preferable 75% should be in debt, 15% in equity and 10% in gold. Here again, there is no set rule and the proportion of investments as per assets classes will vary from the person to person. In the debt portion in the distribution phase, financial planners usually put the money in growth option of debt mutual funds for a year and then opt for a systematic withdrawal plan (SWP). This ensures regular income for the pensioner. And any rally in the equity market, there is always a rebalancing and money is shifted from equity to debt. Such a plan ensures no income tax or service tax burden on the investor.

Source: UTI Swatantra

From simple websites to dedicated apps, technology not only helps investors make decisions but also allows them to monitor the performance of their portfolio

Increasingly, the use of technology in the investment space is making life easier for all the stakeholders-investors companies that sell investment products, stocks exchanges, banks, the regulators and others. Technology has cut down human intervention, put in additional checks and balances and has also lowered the risk of errors and mistakes. These stakeholders have also launched a host of new technology based applications (or apps) that can assist investors in their decision making, the actual process of investing and in keeping a tab on their investments.

Among the companies in the investment space, while mutual fund houses are using technology to sell their products online and interact better with their investors, stock brokers catering to retail investors mostly have a huge online presence. Insurance companies, too, have moved online in a major way.

Here, we give you some of the technology-driven tools which can help you decide your investments, facilitate your investments and then keep tab of your portfolio.

Online MF Platforms:
To provide mutual fund investors easy access to schemes of all the fund houses under one platform, SEBI has helped two leading bourses-NSE and BSE-set up an electronic segment for buying and selling such schemes.

Online Trading Platforms:
Almost every broker has an online trading portal. These portals also have online training tools for first-time traders, portfolio trackers, news relevant in making investment decisions, alert-based applications and several other investment enablers.

SIP Calculators:
In the last few years, systematic investment plans (SIPs) have become one of the most popular modes of investment in the country. It has become so popular that for those who are not financially savvy, SIP is not a mode of investment but itself an investment product, like a mutual fund scheme, bank fixed deposit and stocks. Most of the online portals have SIP calculators on their sites. You need to put in relevant data and the calculator will give what could be your corpus at the end of your SIP term.

Portfolio Tracker:
This would give you the current value of your full portfolio. You can use this for the stocks that you have in your portfolio as well as the mutual fund schemes. Mutual fund advisors also give their clients the option to register on their site and keep track of their portfolio. Source: UTI Swatantra
Experts advise starting with index funds for an equity portfolio, then step up gradually

In India, an investor interested in equities has the option to invest directly in the stock market. Logically, such a move is a complete miss-step for someone who has no prior experience of dealing with the daily volatility in prices of stocks, the short-term uncertainty with returns and the overall higher risks that stocks carry. Instead, financial planners and advisors say, the best route for first-time investors should be mutual fund. In a mutual fund, the fund manager could become the investor’s de-facto navigator and controller during the formative years. The logic here is that first-time investors should first be exposed to low-risk, low-volatility investments that are linked to the stock market. Then, over time, they should be graduated to products that carry with them higher risks. A first-time investor in equities should never put money in high-risk high-volatility equity products, financial planners say.

Kick off with a no-brainer fund for a beginner:
The road map to investing in index-based exchange traded funds (ETFs), popularly known as index funds, and which are often considered a no-brainer for any investor. Once the investor has some idea about how equity mutual funds work, the next possible step is to invest in a large-cap diversified equity fund. While going for a diversified fund, investors should also be mindful of the disciplined investment approach of the fund manager. The next step-up in the investment ladder for the investor could be mid-cap and small-cap funds, financial advisors say, and the next step should be sectoral funds. Once the investor can understand the nuances of risk and volatility associated with various kinds of equity schemes, he/she could then enter direct equities.

Day Trading an Absolute No-No:
Often it is seen that first-time investors not only take the plunge into the equity market but also start trading (buying and selling) during a single day. Veterans of the stock market feel this is the most dangerous thing to do. Trading is not a plaything for novices in the market, they say. One needs some amount of training, experience and discipline to make money by day trading. Source: UTI Swatantra
Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to suri@suriseetaram.com.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. suriseetaram.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. suriseetaram.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.