WHAT IS INVESTMENT ? (PART-1)

                                           THIS IS THE ONLY RIGHT TIME TO INVEST !!

WHAT IS INVESTMENT?

 TABLE OF CONTENT

   *  WHAT IS INVESTMENT

*       * HOW INVESTMENT WORKS

§       *  WHY DO YOU HAVE TO INVEST YOUR MONEY?

§        *  TYPES OF INVESTMENT OPTIONS IN INDIA  

o   MARKET LINKED INVESTMENTS

o   MUTUAL FUNDS

o   NATIONAL PENSION SCHEME (NPS)

o   FIXES RETURN INVESTMENT

o   FIXED DEPOSITS

o   RECURRING DEPOSIT

o   POST OFFICE SCHEMES

§ 

Investments are assets that allow money to grow. Investments are made to profit from the appreciation useful over time. They generate income in two ways for investors. Firstly, investors can sell it and earn from capital gains. Secondly, investors can earn from regular income within the sort of interest or dividends.

There are different types of investments within the financial market. the foremost common one is investing in stocks through stock exchanges, corporate bonds, fixed deposits, land, and gold. Investments accompany A level of risk. differing types of investments have differing types of risks. Investors can invest in multiple assets (investments) and make a diversified portfolio which will earn them good returns. A well-diversified portfolio helps in reducing the general portfolio risk.

HOW DOES INVESTMENT WORK?

HOW DOES INVESTMENT WORK?

Investing refers to acquiring an asset today to profit from it within the future. Investors invest money with an intent to get money either through capital appreciation over time or through regular income from the investment. Investing includes the acquisition of shares, bonds, and property or machinery to supply goods. It also includes investing in education which will help earn knowledge and improve skills that will help earn an income within the future.

Investing involves a particular level of risk. Investors invest for future growth, but there's always an opportunity that the investments might lose value. the businesses one invested in might go bankrupt, resulting in the loss of investors’ money. Hence investors need to practice caution before investing.

Investors need to assess their investment goals and align them with the investment objectives of several investments. Finally, they will choose the one that most closely fits their requirements. After investing, investors need to monitor their investment portfolio continuously and realign it, if necessary. If investors lack the time and knowledge to try to So, they will always take financial advisors’ help. Financial advisors help investors to pick the simplest investments that suit them and also continuously monitor them. They charge a little fee for the services they supply.

WHY DO YOU HAVE TO INVEST YOUR MONEY?

WHY DO YOU HAVE TO INVEST YOUR MONEY?

Saving money from every paycheck creates a savings fund. However, having savings in one’s checking account will earn little to no interest by the end of the day. this is often because the bank account doesn’t give inflation-beating returns. Hence resulting in loss of buying power. And within the end of the day, one might find yourself losing money by just saving it. By investing, investors can make money work for them. the most objective of investing is to earn future income. Also, investments will help meet unexpected and unforeseen expenses and aid in times of any emergency. Below are the explanations for why one should invest money.

Aid in times of emergency: Investments are often liquidated easily, and they act as an aid in times of any emergency. One can sell their assets or take a loan against them.

Meet future financial goals: Investors invest to realize future financial goals like retirement or buying a car or house. Investing now can benefit investors by helping them meet their future financial goals. Hence investors need to do financial planning and invest strategically towards achieving their goals.

Have a secure future: Investing will assure a secure future. Investing provides a second source of income. Hence, even in times of loss of income, investors can use their investments to assist them financially until they find another source of income. Moreover, investments can help secure the long-term of an investor.

TYPES OF INVESTMENT OPTIONS IN INDIA

TYPES OF INVESTMENT OPTIONS IN INDIA?

Market Linked Investments

Market-linked investments are those investments whose return depends on the market. In other words, if the market is performing well, the returns from these investments are good. Below are the foremost popular investments with market-linked returns.

Stocks

The most common equity investment is investing in stocks through stock exchanges. Investors invest in stocks with a motive to earn from capital gains, also as earn regular income through dividends. Investors benefit when the share prices of the stocks they invested go up. But there's always an opportunity that investors can lose the cash they invested.

Since the returns from stocks are market-linked, these are the riskiest investments. Share prices fluctuate a day on the stock exchange, and hence investors should invest in stocks with an extended-term investment horizon. Investors need to practice patience with this equity investment.

MARKET LINKED INVESTMENT IN INDIA 

One needs a Demat and trading account to take a position in equities and trade on the stock exchange. A Demat account will hold that share while a trading account will facilitate the trade. Returns from investing in shares are taxable. Short-term capital gains are taxable at 15%. At an equivalent time, future capital gains are taxable at 10% (if the gains are above INR 1 lakh) once a year.

Mutual Funds

Mutual funds are investment vehicles that pool money from investors with similar objectives. They invest in equity and debt instruments like shares, government bonds, and company bonds strategically. A portfolio manager or a fund manager manages the open-end fund portfolio.

The portfolio of the open-end fund is predicated on its investment objective. Mutual funds differ supported the asset class, its investment objective, etc. most categories of mutual funds are equity mutual funds, debt mutual funds, hybrid funds. Equity funds invest in shares, debt mutual funds invest in debt securities, and hybrid funds invest in equity and debt securities. There also are equity mutual funds that provide tax benefits. These are ELSS funds (Equity Linked Savings Scheme) and investment in these equity funds qualify for tax exemption under Section 80C of the tax Act, 1961.

MUTUAL FUNDS INVESTMENT IN INDIA 

Returns from open-end funds are often calculated using the mutual fund calculator. One can use a SIP calculator or lumpsum returns calculator to estimate their returns from mutual funds. Also, the returns from mutual funds are taxable. Short-term capital gains of an equity fund are taxable at 15%. At an equivalent time, future capital gains are taxable at 10%, if the gains are quite INR 1,00,000 once a year. For debt mutual funds, the short-term gains are taxable as individual investors' tax slabs rates. While future capital gains are taxable at 10% without indexation benefit and 20% with indexation benefit.

National Pension Scheme (NPS)

National Pension System may be a retirement scheme backed by the govt. These investment avenues are for investors who want to save lots for retirement and at an equivalent time, save tax. Investors need to invest within the National Pension System during the tenure of their employment. and that they can withdraw a neighborhood of their investment at the time of retirement while the remainder is employed to shop for an annuity. With an annuity, the investor can receive a hard and fast amount of cash monthly.

NPS returns are market-linked as investors need to choose fund managers and asset classes supported by their age. However, they're low-risk investments because the government backs them. Returns from the NPS scheme are often calculated using the NPS calculator. Mr. MONEY’s NPS calculator is liberal to use and is out there online. NPS has two accounts, Tier I, a default account, and Tier II, a voluntary account. Investments in NPS qualify for tax exemption to INR 2 lakhs under Section 80C, and 80CCD of the tax Act, 1961.

Upon maturity, only 60% of the accumulated money is often withdrawn. The remaining 40% is employed to shop for an annuity. the whole 60% amount is tax-free within the hands of investors.

TYPES OF INVESTMENT OPTIONS IN INDIA 

Fixed return investments

Fixed return investments are those whose returns aren’t hooked into the market. In other words, investors get a hard and fast and guaranteed return by investing during this sort of investment scheme. Below are a couple of the favored fixed return investments.

Fixed Deposit

A fixed deposit is among the widely used savings investments that give fixed returns to investors. The tenure of an FD varies from seven days to 10 years. The depositor invests a payment amount at the start of the tenure for the scheme’s entire duration. The minimum investment amount for bank fixed deposits is INR 100, and also there's no limit on the utmost investment amount.

Furthermore, fixed deposits offer guaranteed returns and are the foremost popular investment vehicles. Banks and financial institutions offer fixed deposits, and therefore the FD rate ranges between 3%-7%. Also, oldster depositors are offered a further FD rate of 0.5% on their bank fixed deposits. One can estimate the interest and maturity amount on FDs employing a fixed deposit calculator. Mr. MONEY’s fixed deposit calculator is liberal to use and is out there online.

Investments in tax-saving FDs qualify for tax exemption under Section 80C of the tax Act, 1961. However, investments altogether other FDs don't qualify for a tax write-off. The interest income is taxable as per individual investors’ tax slab rates. Moreover, the interest income is subject to TDS of 10%, if the PAN Card is submitted, and 20% if the Pan card isn’t submitted. and therefore, the TDS threshold limit is INR 40,000 for normal investors and INR 50,000 for oldster investors. Investors can estimate liabilities using Mr. MONEY’s tax calculator. The tax calculator is out there online and is also liberal to use.

Recurring Deposit

Recurring deposits are popular savings options that provide fixed interest on deposits. These investment avenues allow individuals to save lots of a little fixed amount regularly every month. The RD interest rates are predetermined, and upon maturity, one gets a payment amount. The recurring deposit tenure ranges between six months to 10 years.

The interest in RD investment plans is compounded every quarter. The RD rates vary from bank to bank, because the interest rates are supported by the tenure of the deposit and deposit amount. In India, the RD interest rates are within the range of three .50% to 8.50%. Furthermore, oldster depositors are eligible for extra interest rates. One can estimate the maturity amount and interest earned from an RD investment using Mr. MONEY’s RD Calculator. Returns from RDs are taxable as per individual investors’ tax slab rates.

Post Office Schemes

VARIOUS TYPES OF POST-INVESTMENT SCHEMES

Post office savings schemes are offered by India Post. the govt of India backs all the schemes, and hence the returns are guaranteed. Furthermore, some schemes offer tax benefits up to INR 1,50,000 under Section 80C of the tax Act, 1961. Following are the schemes that the Post office offers:

Post Office bank account

5-Year Post Office Recurring time deposit account (RD)

Post Office certificate of deposit Account (TD)

Post Office Monthly Income Scheme Account (MIS)

Senior Citizen Savings Scheme (SCSS)

Public Provident Fund Account (PPF)

National Savings Certificates (NSC)

Kisan Vikas Patra (KVP)

Sukanya Sam Riddhi Accounts (SSA)

Public Provident Fund (PPF) and Employee Provident Fund (EPF)

Public Provident Fund is launched by the National Savings Institute and is one among the post office savings schemes. Also, some nationalized and personal banks are authorized to simply accept these investments. the govt backs it, and hence returns are guaranteed. The rate of interest on PPF for the present quarter is 7.10% (January – March 2021). The interest payments are made on 31st March per annum. PPF features a lock-in period of 15 years. Also, one can further extend the scheme in blocks of 5 years. All citizens of India can invest in PPF. However, HUFs and NRIs cannot open a PPF account.

Ministry of Labour regulates Employee Provident Fund, a Government of India scheme. It comes under the purview of the worker Provident Fund and Miscellaneous Provisions Act,1952. Employee Provident Fund Organisation (EPFO) manages the savings scheme.

PDF aims to create a sufficient retirement corpus for a private. The fund comprises monetary contributions from both employer and employee. Each of them contributes 12% of the employee’s basic salary (Basic + Dearness allowance) towards the fund monthly. On retirement, the worker receives the whole contribution (of both employee and employer) as a payment with interest. Furthermore, the interest accrued is tax-free.