Why you need to start financial planning early

Why you need to start financial planning early

Why it needs to start early?


‘A stitch in time saves nine’ goes a famous saying which stresses on the importance of time. The same holds true for financial planning. Do you know why?
Given its importance, a financial plan is essential for every individual. It helps you in meeting your financial goals in a systematic manner and gives you financial independence. Besides being important, it is advised that financial planning should be started as early as possible. Having a financial plan early in your life is beneficial because of the umpteen benefits you can get from it. If you are wondering what the benefits are, here are some for your knowledge –

• It inculcates a sense of discipline in you
When you start earning, you find various avenues to spend your limited income on. This leads to overspending which eats away your income. You are, thereafter, left with no money to create savings which is bad. When you have a clear cut financial plan early in life you become aware of your future liabilities and goals. You also know the funds required to meet those goals. Having financial goals instils a sense of financial discipline in you. You start saving early to reach the desired corpus and develop a saving habit which lasts your lifetime.

• You can save affordable amounts regularly
When you plan your finances early, you start saving early. When you start saving early you have time on your hands. This time lets you create a substantial corpus by saving little affordable amounts every month. Your investments earn compound interest which, over time, multiplies your savings manifold. If you don’t believe me, see for yourself how the power of compounding works wonders –
The following details are assumed for calculation purposes –

Just by delaying your investments for 10 years, your corpus becomes one-third! Surprising, isn’t it? If you want the same corpus when you start late, your monthly saving should be more than Rs.14, 000 which is more than double of what you are required to save when you start early.
Thus, by having a financial plan early in life you don’t have to stress your earnings and you can create sufficient funds for future.

• You can save more and avoid debts
When you start saving early you get longer investment tenure. As demonstrated above, this longer tenure, coupled with compound interest yields very high returns. Thus, you can create sufficient savings for your life’s goals. When you have good savings you don’t have to take loans or debts to meet your financial liabilities. You can utilize your investments and avoid paying interest payments on loans.

• You can learn from your mistakes
Making mistakes is common. You might make mistakes when you are new to the financial sector. You are learning the ropes and you create a financial plan which, according to you, gives you financial security. However, if your financial plan falls apart, you have a time advantage. You can take rectifying measures and rebuild your financial portfolio. Since you have time on your side, rebuilding another financial plan would not put a dent on your financial goals. You can learn valuable financial lessons from your mistakes and plan your finances for the future more carefully. Thus, early financial planning lets you rebuild your financial portfolio and your mistakes don’t prove financially hazardous.

A financial plan is necessary to handle your finances better. Ideally, you should resort to financial planning when you start earning. However, even if you have been delayed in formulating a financial plan, don’t wait any longer. Start at the earliest and reap the benefits of having a good financial plan to back your goals.

Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


How to maximise your tax savings?

How to maximise your tax savings?  As tax season approaches, the first question on everyone’s mind is how to save tax. One of the easiest ways to save tax in India is claiming deductions on your income. By following these income tax saving tips, you can end up saving a significant amount of tax.  Here are some ways to save tax in India.   How to save Income Tax in India using deductions:   Deductions are a reduction from your taxable income. There are several provisions of the Income Tax Act which help you reduce taxable income.   Section 80C: This is by far the most popular section. It covers a wide range of investments and expenses that provide you ways to save tax. The deduction is limited to Rs. 1,50,000. Some of the investments you can make to save tax in India under Section 80C are:   Public Provident Fund (PPF) Employee Provident Fund (EPF) Tax saving fixed deposit (FD) Equity Linked Saving Scheme (ELSS) National Savings Certificate (NSC) Senior Citizen Savings Scheme (SCSS) Principal repayment on home loan* Tuition fees for children Stamp duty and registration fees on the purchase of a house Sukanya Samriddhi Yojna (SSY)   Section 80CCC: Investment in an annuity plan by Life Insurance Corporation (LIC) or any other insurer gets a deduction under this section. Together with Section 80C, you can claim a total deduction of Rs. 1,50,000.   Section 80CCD Investment in the National Pension Scheme gets a deduction of Rs. 50,000   Section 80D: The premiums you pay towards health insurance for yourself, spouse and dependent children are tax deductible. If you are under 60, you can claim a maximum deduction of Rs 25,000. If you are a senior citizen, you can claim a deduction of up to Rs 50,000. You can also claim an additional deduction for premiums you are paying towards your parents’ health insurance. If your parents are under 60, you can claim an additional deduction of Rs 25,000. If they are above 60, you can claim Rs 50,000 as a deduction.   Section 80DD/Section 80U: These sections give a deduction for disability either to the person (80U) or for a person dependent on the taxpayer.   Section 80DDB: If any money has been spent on treating specified disabilities, you can get a deduction between Rs. 40,000 to Rs.1,00,000 depending on the age of the person getting treated.   Section 80E: Tax rebate on education loans are only valid up to eight years starting from the year you begin repaying the loan. If your loan tenure exceeds eight years, then you cannot claim a deduction for interest paid beyond the eight years.  Note that if you repay the loan before the eight-year tenure, then tax deduction will be allowed for that period only.   Section 80G: Amounts paid to charitable institutions etc. as donations get a deduction up to a certain limit depending on the charity you donate to.   Section 80GG: -          House rent allowance is part of your salary, and you can claim a deduction for HRA. However, if you pay rent, but do not receive HRA from your employer, you can claim deduction under Section 80GG towards the rent you pay.   Section 80GGA: -          Amounts paid for scientific research and development get a deduction of the amount paid.   Section 80TTA: Interest on savings bank or post office account gets a deduction up to Rs. 10,000. This deduction is allowed on interest earned – From a savings account with a bank, co-operative bank or post office Section 80TTB: Interest on savings and fixed deposit accounts held by senior citizens in a bank, co-operative bank or post office gets a deduction of Rs. 50,000. How to save tax in India using exemptions:   Another way to be tax efficient is to ensure you earn tax-exempt income   Dividend income from equities and mutual fund together is exempt up to Rs. 1 lakh (This is the aggregate amount of exemption for both equity and MF) Interest on Public Provident Fund/Employee Provident Fund and withdrawals Amounts received on life insurance policies (Link to last week’s Tax Thursday https://www.indianivesh.in/kb-blog/know-life-and-health-insurance-tax-benefits) Allowances for salaried employees   By ensuring you make the right investments and are aware of the Income Tax rules, you can significantly save on your tax expenses.   Note: *Annual interest component of up to Rs. 2 lakh (Rs. 3 lakh for senior citizens) can be claimed as a deduction against income under Section 24 of the Income Tax Act 

read more


Importance of Financial Planning

Why financial planning is importantIs earning money enough? No, it is not. Though the money you earn is important, if you don’t channel it into savings and use it to fulfil your financial goals, it doesn’t fulfil its purpose. Having sufficient corpus to meet your financial liabilities and having financial freedom is what is important. Financial freedom can be achieved if you plan your finances. Here is where financial planning comes into the picture. It is an imperative tool with which you can plan your finances, create the required investments and generate funds for meeting your financial goals. Though experts stress the importance of financial planning, many of you ignore it. Why? Don’t you realize the importance?If you don’t, here are some points which would help you see why financial planning is important - Why financial planning is important?Financial planning is important because of the various benefits it provides. If you have a well chalked-out financial plan you can not only handle your money efficiently, but also save for financial independence. Here are the benefits of financial planning and knowing them you would understand what makes it important – • You will have a contingency planThe first step of a financial plan is to have contingency funds. This fund helps you in meeting the financial strain faced in an unplanned contingency. Thus, when you develop a financial plan, you have provisions for meeting contingencies and your financial stability is not threatened. • It helps in budgetingA problem which many of you face very often is splurging through your monthly income. Either because of overspending or spending on unaffordable items, you blow a hole in your pockets which threatens your financial stability. This overspending and splurging can be avoided with a well-defined financial plan. Financial planning helps you create a planned budget. This budget gives you a guideline of your income and expenses and helps you save your income.• It gives a direction to your financial goalsHaving a financial plan means having a defined picture of your financial goals. Whether you want to save for your children’s future or for buying a house or for your retirement, financial planning gives you a sense of direction. You understand your financial goals and can save towards their fulfilment. • You become financially independentWhen you have planned your finances, you can meet any challenge life throws at you and deal with its financial implications. You wouldn’t have to depend on anyone to help you. Moreover, since all your goals would be planned in advance, you would have the security of knowing that there would be funds to fulfil your goals at the specified time. This brings in financial independence, something coveted by everyone. • You can earn tax benefitsWhen it comes to saving, there are many investment avenues which are tax-saving in nature. However, their tenure and returns vary. When you have a proper financial portfolio you know your goals and their tenure. Based on your financial goals you can pick those investment avenues which help you save tax and maximize your returns. Conclusion All in all, financial planning is important. If you want to live a stress-free life in terms of financial security, a well-defined financial plan is required. If you want to meet all your life’s goals head on, a financial plan is required. Moreover, the above benefits are also promised when you have a proper financial plan in place. So, if you have financial responsibilities and you want to achieve financial freedom, resort to financial planning.DisclaimerInvestment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

read more

Are you Investment ready?

*All fields are mandatory

related stories view all

  • Financial Markets - Overview, Structure, and Types

    What is Financial Market? A market is defined as a place where goods and services are bought and sold. Along similar lines, a financial market is one where financial products and services are bought and sold regularly. Financial markets deal in the purchase and sale of different types of investments, loans, financial services, etc. The demand and supply of financial instruments determine their price, and the price is, therefore, quite dynamic. Financial markets form a bridge between investors and borrowers. It brings together individuals and entities that have surplus funds and those who are in a deficit of funds so that funds can be transferred between them. This transfer of funds is done through different types of financial instruments that operate in the financial markets. Structure of the Indian financial market The Indian financial market is divided into two main types – the money market and capital market. The capital market is further sub-divided into different types of financial markets. Let's understand –   Let’s understand each type of financial market in details – Money market The money market is a marketplace for short-term borrowing and lending. Securities that have a maturity period of less than a year are traded on money markets. The assets traded in money markets are usually risk-free and are very liquid. Since the maturity period is low, the risk of volatility is low, and the returns are also low. Money market instruments are debt oriented instruments with fixed returns. Some common examples of money market instruments include Treasury Bills, Certificates of Deposits, Commercial Papers, etc. Capital market Contrary to the money market is the capital market, which deals in long-term securities. Securities whose maturity period is more than a year are traded on the capital market. Capital market trades in both debt and equity-oriented securities. Individuals, companies, financial institutions, NRIs, foreign institutional investors, etc. are participants of the capital market. The capital market is divided into two sub-categories which are as follows – Primary market Also called the New Issue Market, the primary market is that part of the capital market, which is engaged in the issuance of new securities. The newly issued securities are then purchased from the issuer of such securities directly. For instance, if a company offers an IPO (Initial Public Offering) and sells its shares to the public, it forms a part of the primary capital market. Investors directly buy the shares from the company, and no middlemen are involved. Similarly, if an already listed company issues more shares, called Follow-on Public Offerings (FPO), such shares can be bought by investors directly from the company. Secondary market The secondary capital market is where the securities bought in the primary capital market are traded between buyers and sellers. Stock trading is a very common example of a secondary capital market wherein investors sell their owned stocks to interested buyers for a profit. A secondary market is characterised by an intermediary and the trading of securities takes place with the help of such intermediary. While securities in the primary market can be traded only once, securities in the secondary market can be traded any number of times. The stock exchange is a part of the secondary market wherein you can trade in stocks of different companies that have already been offered by the company at an earlier date. Other types of financial markets Besides the above-mentioned types of financial markets, there are other types of financial markets operating in India. These include the following – Commodity market This market deals in the trading of a commodity like gold, silver, metals, grains, pulses, oil, etc. Derivatives market Derivative markets are those where futures and options are traded. Foreign exchange market Under a foreign exchange market, currencies of different countries are traded. This is the most liquid financial market since currencies can be easily sold and bought. The rate fluctuations of currencies make them favourable for traders who look to book profits by buying at a lower rate and selling at a higher one. Bond market Bond market deals in trading of Government and corporate bonds, which are offered by Governments and companies to raise capital. Bonds are debt instruments that have a fixed rate of return. Moreover, bonds also have a specific tenure, and the bond market is, thus, not very liquid. Banking market The banking market consists of banks and non-banking financial companies which provide banking services to individuals like the collection of deposits, the opening of bank accounts, offering loans, etc. Financial market and services The services offered by financial markets today are as follows – They provide a platform for buyers and sellers to trade on financial products The financial market determines the price of financial instruments traded on it. This price is based on the demand and supply mechanism of the instrument and can move up and down frequently The market provides liquidity to investors when they need to sell off their investments for funds The market provides funds to borrowers when they need financial assistance The Indian financial market is influential in the economic growth of India as a whole The financial market helps in mobilization of funds from investors to borrowers Thus, the financial market and its services are varied, and that makes the financial market an important component of the Indian economy. Regulators of financial markets Financial markets and services offered by them should be regulated so that the participants of the market follow the laws of trading. As such, there are different regulators of the market that ensure that all participants trade fairly. These regulators are as follows – Reserve Bank of India RBI is the regulator for banks and non-banking financial companies. It is the central bank of India entrusted with the formulation of monetary policies, credit policies, and foreign exchange policies, among others. Banks and financial institutions have to abide by RBI's rules and regulations to work in the financial market. Securities and Exchange Board of India SEBI is the primary regulator of the capital market, which consists of both the primary as well as the secondary capital market. Trading done in the capital market is governed under SEBI's rules and laws. Insurance Regulatory and Development Authority IRDA governs the rules and regulations which are to be followed by insurance companies and their intermediaries. Thus, IRDA is a regulator of the insurance market, both life, and general insurance market. Financial markets today have evolved and have become quite competitive with the participation of multiple players. They directly play a part in the growth of India's economy and allows investors and borrowers to trade in financial products and services in an easy and smooth manner. To take advantage of the Financial markets and varied investing opportunities, consider the team at IndiaNivesh, which is well-versed with types of markets and regulatory bodies.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more
  • SIP – Different Types of Systematic Investment Plans in India

    Mutual funds now are a household name and building a mutual fund portfolio is synonymous with wealth creation. As the mutual fund industry continues to grow leaps and bounds, SIPs are considered one of the key growth drivers for this industry. SIPs help the investors to invest in a systematic and disciplined manners. Online SIP investments starting with Rs 500 per month (for few schemes min SIP amount is as low as Rs. 100 per month); digital distribution and hassle-free onboarding of investors, all have resulted in making an investment for SIPs most favoured investment option. To stay relevant with times and improvise their offerings, AMCs now offer many different types of SIP so that investors can choose the most suitable type of SIP for investment best suited to their individual needs and profile. Here are the different types of SIP investment available for investors- 1. Regular SIP One of the simplest and easiest forms of SIP investment is a regular SIP, wherein you invest a fixed amount at regular intervals. The time interval can be monthly, bi-monthly, quarterly or semi-annually. You can also choose daily or weekly SIPs, though it is not recommended in most cases. When you make your first SIP payment, you are required to choose your desired time interval, amount of the SIP and the tenure of the SIP. In a regular SIP, you cannot change the amount during the tenure of the investment. If you are a salaried employee, choosing a monthly SIP, usually in the first ten days of the month, once your salary is credited to your bank account is highly recommended. 2. Step-up SIP Without a doubt, SIPs help brings about financial discipline in your life. Over time, as your earnings increase, it is important to increase your investments as well so as to keep them aligned with your income level and financial goals. A step-up SIP, also termed as a top-up SIP, is an automated solution to increase your SIP contribution either by a fixed amount or a fixed percentage after a specific time. Using Step-up SIPs will help you reach achieve your goals faster and also help in long-term wealth creation. 3. Flexible SIP For investors with irregular income, even after being well aware of the benefits of SIPs, the biggest reason for not starting a SIP is not being able to keep up with the fixed periodic investments. A flexible SIP is a perfect solution for such investors as it gives the flexibility to start, pause, decrease or increase your SIP. Depending on your flow of funds, you can change the SIP amount seven days before the SIP date. In case, there is no intimation of change, then the default amount entered is deducted for the SIP. 4. Perpetual SIP Normally, when you choose a regular SIP, it has a fixed tenure, with a starting date and an end date. But, if you are unsure about how long you want to continue the SIP, you can opt for a perpetual SIP. In case of a perpetual SIP, you leave the end date column blank and you can redeem your SIP once you have reached your financial goal. If you opt for a perpetual SIP, then it is important that you monitor the returns of your investment, to keep a track of the fund’s performance over time. 5. Trigger SIP A trigger SIP is for seasoned investors, who have sound knowledge of the financial markets and are accustomed to tracking the market performance daily. Using a trigger SIP, an investor can choose an index level, a particular event or NAV to start the SIP. An investor can set trigger points for upside and downside conditions and can redeem the amount on achieving the pre-specified target. Investors can oscillate their investments between debt and equity schemes within the same fund house. A trigger SIP is recommended only for investors who have a thorough understanding of financial markets. 6. SIP with Insurance Insurance is an important part of financial planning. In order to make mutual fund offerings more lucrative, certain fund houses offer free insurance cover if you opt for SIPs with a longer duration. The initial cover is usually ten times the first SIP and gradually increases over time. This feature is only for equity mutual fund schemes. The term insurance offered is just an add-on feature and does not impact the performance of the fund. 7. Multi SIP The multi-SIP enables starting SIP investment in multiple schemes of a fund house through a single instrument. This facility can help investors to build a diversified portfolio. Investors can start SIP in various schemes using a single form and payment instruction, thereby reducing the paperwork involved.   CONCLUSION Over the last few years, SIP returns have earned investor confidence and are the most preferred investment option of retail investors. If you are unsure on how to choose the right SIP for you and want correct guidance, then consult our expert financial advisors at IndiaNivesh for best-suited SIPs for investments.

    read more
  • Know What is Pre-Market Trading & How it Works in Share Market

    Most of us are aware that trading takes place on the stock exchange between 9.15am and 3.30pm. But what if we told you that it is only partially correct. Some trading (though low in volume) also takes place during the extended trading hour periods. Read on to know about more about this additional trading window and its significance. What is Pre-Market Trading Pre-market Trading is a global phenomenon and refers to trading that takes place before the usual trading hours. The usual trading hours for Indian stock markets is 9:15 am to 3:30 pm. Pre-open market stock trading is a special trading window of 15 minutes prior to the start of the working hours for the stock markets. Hence, the time frame between 9:00 am and 9:15 am is considered as the pre-open market session. This feature was first introduced by NSE and BSE in October 2010. The objective behind a pre-market trading It was observed that there was tremendous volatility in the first couple of minutes of trading hours. The core objective behind having a pre-market trading session is to stabilise the market especially when heavy volatility is expected due to some overnight major events or corporate announcements. These could be election results, reforms or new economic policies, declaration of mergers and acquisitions, delisting of shares, open offers, change (especially downgrading) in credit ratings, debt-restructuring, market rumours etc. The additional 15 minutes allows the stock markets to arrive at the right premarket stock price and not get carried away by external events or announcements. In India, premarket future or options trading is not permitted. Pre-market Trading Session – Breakdown of the 15 minutes The premarket trading period can be further bifurcated into three slots:Order Entry or CollectionThe Order Entry session starts at 9:00 am and lasts for eight minutes. The following activities are undertaken during this timeframe Placing of orders for purchase or selling of stocks Changes or modification in orders Cancellation of orders After 9:08am (i.e. completion of order entry session), orders are not accepted by the stock markets Order MatchThe Order Matching session starts at 9:08am and continues for the next four minutes. The following activities are undertaken during this timeframe Confirmation of orders placed during the Order Entry session Order Matching Calculation of stock opening price for the regular session that starts at 9:15am During the Order Match session, one cannot buy, modify, cancel or sell their orders. Limit orders (i.e. order quantity and price is specified) are given priority over the market orders (order quantity and price are not specified) during the execution time. Buffer TimeThe last three minutes of the premarket trading session (i.e. 9:12 am to 9:15 am) is considered as buffer time. This period is used to ensure a seamless transition to regular trading hours. Any abnormalities from the previous two slots are addressed during this time.   Calculation of Opening price during the pre-market stock trading session The opening price of the stock during this session is determined during the second phase i.e. Order Match session. It is done with the help of a specific methodology. This calculation method is referred to as the call auction methodology or the equilibrium price. The stock price which corresponds to the maximum quantity of tradable shares is known as the equilibrium price. It is a factor of demand and supply. The orders placed during the first eight minutes are matched at the equilibrium price and then traded accordingly. Some scenarios: If the highest tradable quantity corresponds to two different stock prices, then the stock price with the lower unmatched orders is taken as the equilibrium price. For example:   Stock Price Order (Buy) Order (Sell) Demand Supply Max Tradable Quantity Size Unmatched Orders (Demand minus supply) 105 1275 1160 25000 20000 20000 5000 99 2000 8000 20000 30000 20000 -10000   Though the maximum tradable quantity is same in both the cases, the equilibrium price will be considered as 105 as it has a minimum unmatched order size If the values of the highest tradable quantity and unmatched orders are same or equidistant, but they correspond to two different stock price, then the above methodology cannot be applied. In this case, the equilibrium price is taken as the stock price which is closer in value to the closing price of the previous day. For example, Stock Price Order (Buy) Order (Sell) Demand Supply Max Tradable Quantity Size Unmatched Orders (Demand minus supply) 105 1275 1160 25000 20000 20000 5000 99 2000 8000 20000 25000 20000 -5000 Assuming the closing price on the previous day was Rs. 110, then the equilibrium price in the above example will be Rs. 105.   What about orders that remain unmatched or are not traded in the pre-open session? Orders that are not traded or remain unmatched are carried forward to the general trading session. The opening price of these orders is determined in the following manner: Limit Orders i.e. orders wherein the price and quantity are already specified are carried forward at the same mentioned price Market Orders i.e. orders wherein the price and quantity are not specified are carried forward at: If the opening price was ascertained during the pre-open trading session but order not traded, then at the determined price If the opening price was not discovered, then they are carried forward at the previous day’s closing price   Stock Markets tend to be overwhelming for many investors. The concept of premarket trading can further compound the complexity level. However, as an investor, you should always remember that help is just around the corner. Professional experts like IndiaNivesh can help to simplify and demystify the entire process. The team at IndiaNivesh keeps a close eye on this Pre-market session to comprehend the mood and strength of the stock market. They track the pre-market stock prices and take the best decisions for your portfolio basis the market sentiments. Moreover, since they offer a wide range of services (broking, mutual funds, institutional equities, private equity, strategic investments, corporate advisory, etc.) they have a holistic view of the market and the economy. Their expert opinion can help you to amp up your investment game. You can read more about their offerings, vision and accomplishments on their website https://www.indianivesh.in/Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

    read more