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Being in 2020
Being In 2020 In a country where people like to play safe, ‘Investment’ is often frowned upon. Most of us possess little or no knowledge what-so-ever about the various aspects of investments. This results in a fear of even looking into this ocean of opportunities. But, let me assure you, investments with the right skills, anyone can surf on its highest tides. The first thing to keep in mind before investing is that it is not like a savings account. Saving in a bank account may seem harmless they don’t provide with the returns one expects on their capitals. Over a lengthy period, saving money in a bank, with a fixed rate of return, may render fruitless when we take inflation in the account. Investments in securities like stocks and bonds exploits the remarkable property of capital to earn capital. Even though with the considerable risks involved in such investments, we can minimise these risks with the help of informed choices. Once we have understood the difference between savings and investments and have opted for investments, we need to be more specific on our goals and time-frame for which we want to invest in securities. The goals can be anything, buying your own car, own home or securing enough money to retire in style. The goals help in defining the time-frame for the investments, which is a very important aspect to keep in mind if we want to achieve a high yield for our investments. The purpose of deciding the time-frame gets clear with the concepts of compounding. Compounding is a process in which an asset’s earnings, from either capital gains or interest, generate additional earnings by reinvesting. This growth, calculated using exponential functions, occurs because the investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods. In simple words, if you invest ₹100 at a fixed rate of return of 10%, at the end of the first year, you will get ₹10. But, at the end of the second year, when you expect a return of another ₹10, you will get ₹11. This is because the returns at the end of the first year add with the principal amount and get reinvested at the same rate of 10%. This gives justice to the old saying ‘time is money’. The other aspect which can be great for your portfolio is Diversification. There are many options available for an investor, and it is important to analyse every option. The risks and returns in any investment are directly proportional. The higher the risk, the higher will be the returns. But diversification can minimise these risks. This means rather than investing all your capital in one kind of sector or security, we can invest it in multiple sectors. With a diversified portfolio of investments, returns from better-performing investments can help offset those that underperform. This may not fully protect you against the losses, but surely can minimise them. As an end note, think of your accountant as your best-friend, for an excellent accountant is the key to brilliant investments. Excel Solutions, ( Tally Authorised 3* Channel Partner) Pune www.excelsolutionstally.com https://www.facebook.com/excelsolutionstally/ https://twitter.com/excelsolu_tally https://www.linkedin.com/company/excelsolutionstally/
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CAPITAL GAIN TAX
Capital Gain Tax To express it in simple words, Capital Gain Tax is the tax one needs to pay on the profit he earns on selling ‘capital assets'. It comes under the jurisdiction of the Income Tax Department as the gains as considered as ‘income’. Depending on the time for which an individual holds the assets, CGT is divided into two sections, viz. Long-Term Capital Tax and Short-Term Capital Tax. The next question which comes to our mind is, what are capital assets? Few examples of capital assets are immovable properties (like land, building, house), vehicles, patents, trademarks, household leases, machinery and jewellery. Other than this, capital assets include any direct rights, which is of Indian companies, consists of the rights of management or ownership control as well as other holding rights. Exemptions from capital gains are as follows: ● Any stock, consumables or raw material, held for business or profession. ● Goods held for personal use such as clothes and furniture. ● 6½% gold bonds (1977), 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government ● Individual bearer bonds (1991) ● Gold deposit bond issued under the gold deposit scheme (1999) or deposit certificates issued under the Gold Monetisation Scheme, 2015 ● Agricultural land in rural India Assets held for longer than the specified time are said to be long-term assets. Stocks, equities, preference shares or securities (like bonds or government securities) held for more than 12 months classify as long-term assets. Real estate held for more than 24 months is a long-term asset. Debt funds or any other form of assets can be retained for 36 months before they are considered as a long-term asset. Assets held for a time shorter than the period mentioned above are short-term assets. The tax rates for short-term and long-term gains differ considerably. The tax rate for long-term equities is 10%, only on profits over and above ₹ 1 lakh, whereas, on all other long-term assets, it is a hefty 20%. For short-term gains, all assets except those based on securities are included in income and are taxable based on income tax slabs. A tax rate of 15% applies to short-term security-based assets. It means, if capital is invested in equities in the same company for more than three years, no tax has to be paid if the gains are less than ₹ 1 lakh. If redeemed within three years, the capital gains will be added to your income and will be taxed as per your income tax slab rate. Your accountant can recommend many investments that provide benefits of exemptions under the Income Tax Act on Capital Gains. Think of your accountant as your best-friend, for an excellent accountant is a key to brilliant investments. Excel Solutions, Pune 9764902320 www.excelsolutionstally.com
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Systematic Investment Plan Vs Lump-sum Investment.
Systematic Investment Plan Vs Lump-sum Investment. One of the most pertaining questions in the mind of every other young investor is whether to invest in Systematic Investment Plans (SIPs) or Lump-sum Investment Plans. Both of them may seem equally beneficial for naïve eyes. Still, both have their cons along with their pros and are suitable for a particular type of investors. If chosen carefully, both can yield impressive returns even over a small period. We hear of SIPs a lot through advertisements on TV and radio, but we seldom listen to what it is. Systematic Investment Plans or SIPs allow the investors to invest a small amount of money in a mutual fund over a long period. Investors can start with even a minimal amount of money, say ₹500 a month. It is a fixed amount pre-decided with the consent of the investor and the mutual fund company. The cost of the investment averages over the period and thus reduces the stress on the investor. But this also implies that the returns also average out over the investment period. SIPs are most suited for investors who have little or no knowledge about how the market and Sensex work or have no time to be concerned with it. Investments over a long period ensure that the investor is unharmed by the ever-changing trends of the market. Investing in SIPs develop a habit of saving in the investor, which is very useful in the long run. On the other hand, Lump sum investment means investing a large amount of all at once. The money can be windfall gains, like inheriting a significant amount of money or acquiring funds by selling an asset. Lump-sum investments can also be made with capital saved over a period. Such substantial investment yields significant returns, exploiting the inherited property of the money to earn money, to its best. The success and profits of Lump Sum investments depend entirely on the ability of the investor to judge the market trends. They are primarily affected by the time of entry in the market. Money invested when the market is at one of its lower points yields impressive returns. Investors who land upon windfall gains but possess little knowledge of the market should abstain themselves from investing all the money in a single stroke in Lumpsum Investments. Instead, they are advised to invest this money in schemes like Debt Investments which invests in Government securities or corporate bonds. These fixed returns can, in turn, be used, along with some additional funds from the fixed salaries, can be invested in SIPs. These things can be micro-planned with your accountant. A good accountant will guide you through each step of investment. As we always say, think of your accountant as your best-friend, for an excellent accountant is a key to brilliant investments. Excel Solutions, ( Tally Authorised 3* Channel Partner) Pune www.excelsolutionstally.com https://www.facebook.com/excelsolutionstally/ https://twitter.com/excelsolu_tally https://www.linkedin.com/company/excelsolutionstally/
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Atmanirbhar Bharat
Atmanirbhar Bharat As we all know “Atmanirbhar Bharat” means self-reliant India. It involves analysing India’s current dependence on other countries. How can we reduce it? And try to make a better position in World Trade. Today India is engaged in higher Imports & lower Exports, thereby resulting in Trade Deficit. Total Imports of our country are approximately 23.64% of GDP whereas Exports are 19.74% of GDP. China is on the first position constituting the total imports in India & resulting in a Trade Deficit of approx 50 billion, followed by the United States, United Arab Emirates and so on. Imports from China are five times more than Exports. From clocks & watches, electrical equipment, fertilisers to mineral fuel, we are mainly dependent on China. We not only import necessities from China but also import raw materials from them. China is the largest producer of phones. Even if the phones are not from a Chinese brand, the raw material imported is from China, and Indian brands assemble it. Almost 1/3rd of our population is less than 15 years of age group, resulting in demand for toys. The toys market in India is practically worth 4500 crores, but sadly 80% of our market is acquired by China. The toys imported are of cheap quality and fail most of the safety standard tests. Not only this, but we all have heard a familiar name “Hydroxychloroquine” a drug that is manufactured in India & resulted into the prevention of Covid-19, but the shocking part is that India is dependent on China for the raw material of the medicine. How did China manage to set up such a massive market in India? The answer to this question is quite simple. China initially analysed the demand of the products in India, later provided them at a very cheap cost which in turn resulted in considerable losses to local manufacturers of India. Unfortunately, our local manufacturers had no other option than to shut down their business. It made sure that the Chinese counterparts had no competition in the Indian market. Eventually, when the people developed the habit of using Chinese products, China started selling them at a higher rate by which they earned not only huge profits but also recovered previous losses. This system is known as dumping system. Can we stop this? The answer is yes; we can become self-reliant. There are a lot of products that we can manufacture in India. For this definitely, we require a lot of capital, proper infrastructure, adequate resources & a global market for which our PM emphasised the slogan “Vocal for Local”. The Government of India has now decided to move forward towards self-reliance and “Atmanirbhar Bharat Package” which is a relief package will play a vital role to not only resume normal business activities but also to make our Bharat “Atmanirbhar”. Excel Solutions, Pune www.excelsolutionstally.com https://www.facebook.com/excelsolutionstally/ https://twitter.com/excelsolu_tally https://www.linkedin.com/company/excelsolutionstally/
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Understanding sensex and Nifty
Understanding Sensex and Nifty We all know about the dwindling number of Sensex and Nifty. It is difficult for people who do not know about finance and economics to understand how it works. But to understand Sensex and Nifty is to understand the market and thus, the first step towards being a successful investor. Before going into detail about Sensex and Nifty, we need to have a background about the Stock Exchange. It is a market for securities. India has two Stock Exchanges, viz. BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). BSE, established in the year 1875, was the first Stock Exchange in Asia. It is currently the 12th largest Stock Exchange in the world and has around 5000 companies listed in it. On the other hand, NSE is relatively new and was established in the year 1992. It is currently the 10th largest Stock Exchange in the world but with relatively low listed companies, which count up to 1600. Head offices for both BSE and NSE are in Mumbai, Maharashtra. Sensex and Nifty are indexes used by BSE and NSE respectively to put a number on the financial condition of the country and in turn, the economic situation of the companies listed in Stock Exchanges. BSE tracks top 30 companies while NSE tracks 50 companies. To understand this better, let’s take an example. Suppose company ‘A’ has a total of 250 shares out of which 200 are available of the general public. These 200 shares are used for indexing. It is known as free flow market capitalisation. It is ₹40,000 for ‘A’. Suppose there are 150 share of company ‘B’ available for public and each share costs ₹400. Free flow market capitalisation of ‘B’ will be ₹60,000. Total capitalisation of market now is ₹40,000+₹60,000 = ₹100,000. BSE takes a base index as 100 points and supposes when the first time Sensex was calculated, capitalisation was 10000. Now, if ₹10000 makes 100 points, then ₹100,000 will be 1000 Sensex points. Now, if the prices of shares of ‘A’ increase by ₹50, its capitalisation will be ₹50,000. The total capitalisation will be ₹110,000. So, the Sensex will be 1100 points. When there is an increase in points, it is known as Bull Market. It means that the people are buying a share, and demand is increasing. The condition of the market has improved. The vice-versa is known as Bear Market. Nifty is calculated in the same way but with 50 companies. It is prudent to know that same shares can have different prices at BSE and NSE. It is better to be aware of this difference before opting for one. Your accountant can guide you better on this. Think of your accountant as your best-friend, for an excellent accountant is a key to brilliant investments. Excel Solutions, Pune www.excelsolutionstally.com https://www.facebook.com/excelsolutionstally/ https://twitter.com/excelsolu_tally https://www.linkedin.com/company/excelsolutionstally/
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Financial Derivatives
Financial Derivates Investments are a great way to earn significant returns, but every investment comes with their risks. These risks can be inflation, the uncertainty of market or other external factors. It is always beneficial to be acquainted with methods to minimize these risks. Having a derivative is one such way. Derivative, as the terms suggest, is a financial contract, which has its value dependent on some other underlying asset or group of underlying assets. Most common underlying assets are stocks, bonds, currency exchange rates, commodities, interest rates and market indexes. Derivatives derive their value from the fluctuating prices of these assets. In simple words, it is a contract between a buyer and a seller to trade on a predetermined date in future on a mutually consented selling price. Both the parties agree to execute the trade irrespective of the value of the product at that time. Having a derivative contract is very useful for hedging and putting off potential risks of fluctuation in the prices. Derivates are an effective way of risk management or speculation of the trend of the market. We are going to go through some common types of derivatives. The first one is a Futures Contract or only futures. It is a standardized contract between two parties for the trade of a product on a date in future at a fixed price. Either or both parties use this contract to hedge risks. If either or both the parties are speculators, they can decide to execute the trade before the expiration date-unwind the contract. The second type is Forwards. Forwards are similar to futures, but they are not traded on an exchange. When parties sign forwards contract, they can customize the terms of the agreement. The counterpart risk is that either of the party may not be able to live up to the obligations, and the other party may have no recourse and could lose value. Swaps are one of the most common types of derivative. As the term suggests, the swap contract enables a party to swap one derivative with others. Consider that a person X pays a variable interest at 6% but speculates that the rates are going to appreciate. He signs a swap contract with a company Y for a fixed derivative of 7%. Now, if the price rises to 8%, Y will pay 1% to X, but if the rate remains the same or decrease, X will pay the difference to Y. Swap is one of the most effective ways to minimize risks. The fourth type is the options. The options contract is similar to futures, but the parties are not obligated to execute the trade. Derivatives have a broad scope and could be used in many ways to redeem considerable returns. A good accountant will guide you through each step of derivatives. As we always say, think of your accountant as your best-friend, for an excellent accountant is a key to brilliant investments. Excel Solutions, Pune www.excelsolutionstally.com https://www.facebook.com/excelsolutionstally/ https://twitter.com/excelsolu_tally https://www.linkedin.com/company/excelsolutionstally/
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