Life Insurance premiums are eligible for tax saving under section 80C. It is recommended not to purchase unnecessary insurance just to save tax.

If you are a cricket fan, you must have watched the India versus West Indies series in December 2019. Apart from the remarkable performance by the Indian team, led ably by Virat Kohli, what was interesting about the series was the launch of the “Sabse Pehle Life Insurance” campaign.A joint initiative by the Indian life insurance industry, the purpose of this mass media campaign is to raise awareness about the importance of life insurance. And understandably so.&nbsp;Life insurance is one of the most critical parts of your financial health. In fact, true to what the campaign says, life insurance is something that you should get first, even before you begin investing.&nbsp;<h2>Here are three reasons why you should get life insurance as early as possible</h2><ol><li>It provides your dependants with a financial cushion in the event of your untimely death</li><li>Insurance premium for the same cover gets expensive as you grow older</li><li>You can save income tax on the insurance premium you pay</li></ol><h2>Tax benefits on life insurance premium</h2>The life insurance premium you pay in a financial year is tax-deductible under the Rs 1.5 lakh limit of Section 80C of the Income Tax Act.This means that if you pay Rs 50,000 as a premium for your life insurance cover, then this amount can be deducted from your annual taxable income. The limit here is Rs 1.5 lakh under Section 80C.<img src="https://i.wlycdn.com/insights-new-release/articles/life-insurance-save-tax-1.webp" style="box-sizing: border-box; cursor: pointer; padding: 0px 1px; max-width: 100%; color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); text-decoration-style: initial; text-decoration-color: initial; width: 800px;" class="fr-fic fr-dib" alt="Tax benefits on life insurance premium">What’s more, it’s not just the premium you pay for your own life insurance that is tax-deductible. The premium you pay for your spouse’s and child’s life insurance can also be deducted to save taxes under Section 80C.&nbsp;One caveat here is that the entire premium will not be tax-deductible if it exceeds 10% of the sum assured of your life insurance policy. This means that if you have a life insurance policy with sum assured of Rs 5 lakh and your annual premium for the same is Rs 60,000, then the entire Rs 60,000 will not be tax-deductible. Only 10% of the sum assured, which is Rs 50,000 in this case, will be tax-deductible.For policies issued on or before 31 March 2012, an annual premium up to 20% of the sum assured can be used to save taxes.Nevertheless, the life insurance premium can easily help you meet the Rs 1.5 lakh limit under Section 80C. The other options to save taxes under Section 80C include ELSS funds, PPF, 5-year FDs, school tuition fees, etc.<h2>Insurance policies that qualify for under Section 80C</h2>In India, life insurance is almost synonymous with LIC - the Life Insurance Corporation of India. Life insurance policies are often referred to as LIC policies. This has also led to the misconception that only the premium paid for LIC policies can be used to save taxes under Section 80C.<img src="https://i.wlycdn.com/insights-new-release/articles/life-insurance-save-tax-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Insurance policies that qualify for under Section 80C">The truth is that premium paid to any IRDA-approved life insurance company is eligible for tax saving under Section 80C. This includes private insurance providers as well.&nbsp;Apart from this, the premium paid for the following types of policies qualify for tax deduction:<ul style="list-style-type: disc;"><li>Term insurance</li><li>Endowment plans</li><li>Unit linked insurance plans&nbsp;</li></ul><h2>Can tax benefits of life insurance be overturned?</h2>Yes, this can happen. As a policyholder, you have to pay premium regularly for a minimum number of years to retain the tax benefit. In case the policyholder is unable to pay a premium as required then the tax benefit can get overturned.<img src="https://i.wlycdn.com/insights-new-release/articles/life-insurance-save-tax-3.webp" style="box-sizing: border-box; cursor: pointer; padding: 0px 1px; max-width: 100%; color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); text-decoration-style: initial; text-decoration-color: initial; width: 800px;" class="fr-fic fr-dib" alt="Can tax benefits of life insurance be overturned?">Here’s the fine print:<ul style="list-style-type: disc;"><li>Generally, the premium has to be paid for at least 2 years&nbsp;</li><li>Deductions are not allowed on the premium paid in the year in which the policy is being surrendered or terminated</li><li>Deductions claimed in the earlier years will be considered as income for the year in which the policy is surrendered or terminated&nbsp;</li></ul>In a nutshell, life insurance is important because it brings you protection for your loved ones and tax-saving for yourself. Get it as early as you can and start taking advantage of this dual benefit.

How to Use Life Insurance to Save Income Tax?

Before we delve deep into the tax-saving aspect of life insurance, lets be very clear about the real purpose of purchasing a life insurance policy.It compensates the dependents of the insured person in case of unfortunate event like death. This is the exact reason why you should have a life insurance cover.But since there is an added advantage (tax saving) of buying a life cover, people tend to forget the primary reason and focus on this added advantage instead.Result is that instead of trying to maximize the insurance cover at low cost, they try to save maximum possible tax by paying a larger premium.This is the reason why most people consider insurance to be a primarily tax-saving product!We don&rsquo;t deny that tax saving on life insurance policies is an important additional advantage. But purpose of insurance is not just saving taxes. Its bigger than that.But for this article, let us focus only on tax angle of life insurance.How can I save tax by buying life insurance?Under the Section 80C, there are several investment options eligible for tax benefits - like PF, PPF, NSC, ELSS, 5-Year FDs, home loan repayments, etc. (Read more about Section 80C here).Another option is - premium paid for a life insurance policy.So the amount paid towards life insurance premium for yourself, spouse and children qualifies for deduction under Section 80C.Premiums paid for parents, siblings, etc. are not eligible for deduction.The overall limit of Section 80C (of Rs 1.5 lac) is applicable. So total deductions that can be claimed by investing in all other options + life insurance premiums cannot exceed Rs 1.5 lac.Some people have this misconception that only policies sold by LIC are eligible for deduction. This is not true. All policies from LIC as well as other private insurance companies are treated equally.How much tax can you save on insurance premiums?As already mentioned, you can claim the amount paid as life insurance premium for deduction under Section 80C.But even within the limit of 80C, the entire premium amount may NOT be eligible for deduction.Yes. That is right. Unfortunately, very few people know about it.As per rules, annual premium only upto 10% of the sum assured are eligible for tax deduction.So lets say that you have a traditional (endowment or moneyback) policy with sum assured of Rs 5 lac. The premium you are paying is Rs 60,000.Now the entire premium amount will not to be eligible for tax deduction.Only 10% of sum assured, i.e. 10% of Rs 5 lac = Rs 50,000 will be considered.Remaining Rs 10,000 will not qualify for tax deduction under section 80C.Note - If policy is issued on/ before March 31st, 2012, annual premium upto 20% of the Sum Assured is tax deductible.We already knew that traditional insurance plans are bad as investments. And now, its known that there can be instances that these plans don&rsquo;t even offer the tax benefits that were expected of them (as illustrated in the 10%-Rule above).This is the reason why term plans are best choice for insurance. Low premiums and high sum assured (insurance cover) take care of the 10%-Rule. And best part is that you get a much bigger life cover at very low cost.Can tax benefits be overturned?Unfortunately yes.As an insurance policyholder, you have to pay premiums regularly for a minimum* number of years so as to retain the tax benefit claimed. Else, these benefits will be revoked as follows:<ul><li>No deduction allowed for premium paid in the year in which policy is being surrendered or terminated.</li><li>Deductions claimed in earlier years to be considered as income (from previous years) for the year in which policy is surrendered or terminated and taxed accordingly.</li></ul>*Generally, the premiums have to be paid for atleast 2 years to avoid revoking tax benefits.ConclusionIt is natural to try and save as much taxes as possible. After all, it&rsquo;s our hard earned money and we don&rsquo;t want to part with it easily. But it doesn&rsquo;t mean that in an attempt to save taxes, we end up buying wrong financial products and repent later (as most endowment and moneyback policy buyers do when they get to know about term plans).So ofcourse, you should understand the tax implications of all investment options before investing.But never purchase a product only to save taxes.Always have a &lsquo;real&rsquo; primary reason (like investing for future, insurance protection, health protection, etc.) to purchase a financial product. Secondary reason can be tax savings.If you are a young earner looking to save tax, don&rsquo;t look at buying endowment or moneyback insurance plans. Simply purchase a term plan for your insurance needs. As for the investments needs, it&rsquo;s best to stick with either PPF for safety or/and with equity ELSS funds, for higher long-term returns.

Don't go for Life Insurance just to Save Taxes!

The new decade is here! We hope 2019 was great for you and 2020 ends up being even better. It is time to begin the new year with resolutions.

The new decade is here! We hope 2019 was great for you and 2020 ends up being even better. It is the dawn of a new era and as is tradition, it is time to begin the new year with resolutions.Often, the problem with New Year Resolutions is that they are easy to procrastinate. There’s an entire year ahead to fulfill them, after all. Most of us start out enthusiastically, but our enthusiasm towards the resolutions wanes as January turns into February and March and the year keeps trickling on.This is why we decided to bring you money resolutions that you can take and implement in January itself. These are actionable resolutions that will help you improve your personal finances right away. And since taking care of your personal finances should be an ongoing affair, we have also elaborated on how you can keep reaping the benefits of these resolutions all through the year as well.So, without further ado, let’s go right to the money resolutions that you can fulfill today. <h2>1. Buy insurance online</h2>This may seem obvious, but a lot of people in their 20s and 30s don’t have insurance--life or health. Traditional financial wisdom says you should <a href="http://wealthy.in/articles/choose-health-insurance-10" rel="noopener noreferrer" target="_blank">buy insurance</a> even before you begin investing. Insurance can stop your finances from derailing due to unexpected circumstances. What’s more, insurance premiums get costlier the older you get. Hence, the sooner you buy insurance, the better off you will be in the long run.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Buy insurance online">To do:&nbsp;Head to a portal like PolicyBazaar.com or CoverFox.com where you can easily compare different insurance products and purchase a policy that fits your needs. Insurance bought online is much cheaper. Check the insurer’s claim settlement ratio and compare the premium with other policies before you make the final decision.Next steps: Claim income tax benefits at the time of filing returns on the insurance premiums you pay. Life insurance premiums are tax-deductible up to <a href="http://wealthy.in/articles/best-tax-saving-options-3" rel="noopener noreferrer" target="_blank">₹1.5 lakh under Section 80C</a> and health insurance premiums up to ₹25,000 under Section 80D. <h2>2. Book that Summer holiday</h2>Most people with families head out on a vacation during the summer or Diwali holidays. Most of these vacations are planned at the last minute in a rush. So obviously, you end up spending a lot and probably even compromise on the bookings you end up making. And that is if you’re lucky. Most of the times you will have to dump the idea of going on a vacation because everything good is either booked or too expensive to consider.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Book that Summer holiday">To do:&nbsp;Sit down with your family and pick a place you want to visit. Check out the calendar to figure out the holidays you would have and make the bookings right away. Flights are usually cheaper when you book in advance and you will be able to get the hotels of your choice as well.Next steps: Depending on where you’re going, you will need money to spend on vacation. Plan for that now itself by setting aside a little money every month. This way you’ll have the money to spend without having to dig into a single month’s savings. <h2>3. Delete Shopping Apps</h2>How often have you found yourself surfing through shopping apps on your phone out of sheer boredom? Quite often, right? And invariably, you will like something that you don’t really need. So you go ahead and splurge on it. That’s fine as long as this happens once in a while. But in reality, we end up spending a lot of money on purchases that we don’t really need.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Delete Shopping Apps">To do: Delete the shopping apps from your phone. When you need to buy something, you can log-in from a computer. Even if you don’t want to delete the apps, you can at least remove the saved cards from the apps. Having to enter your card details will make you think twice about whether you really need to make that purchase or not.Next steps:&nbsp;Make a note of the things you need to buy and if you can wait till the discount and sales seasons. Offline, as well as online vendors, periodically have sales that you can take advantage of to get things cheaper. <h2>4. Open a new bank account for emergency funds</h2>Having an <a href="http://wealthy.in/articles/emergency-financial-planning-17" rel="noopener noreferrer" target="_blank">emergency fund</a> for exigencies is a sound financial decision. This is the amount you have set aside for unexpected occurrences like medical emergencies, loss of a job, natural disasters, etc. But when this money is kept in the bank account you use on a regular basis, you run the risk of using it for anything other than an emergency. If it is easily and readily accessible, it invariably gets spent.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-4.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Open a new bank account for emergency funds">To do: Open a new savings bank account and park the emergency money there. Make sure this account is not linked to any of your regular spendings. Don’t carry the account’s debit card with you either; leave it in a drawer at home and take it out only in case of an emergency.Next steps: As your income increases or a member is added to your family, top up the emergency fund. Once or twice a year, you can even make a small transaction from the account to ensure it doesn’t become dormant. <h2>5. Stop Automating Bill Payments</h2>Giving your credit card a mandate to pay your card, phone and utility bills automatically every month is convenient. But automating payments can mean you are not able to keep a tab on how much of your money is getting spent on these items. Credit card bills typically have different kinds of charges and interests as well, which people end up paying without being aware of.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-5.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Stop Automating Bill Payments">To do: Pay the bills by yourself every month. It will take up a bit of your time but you will be able to figure out if you’re spending more than you need to on any of the items. This will help you keep your monthly budgets in check and <a href="http://wealthy.in/articles/track-expenses-16" rel="noopener noreferrer" target="_blank">control expenses</a>. Your phone bill, for example, might have services that you don’t actually use.Next steps: Keep a track of your bills and see if your spends increase in any particular month. Paying the bills yourself will also allow you to immediately notice a wrongful charge and have it reverted as soon as possible. <h2>6. Learn to cook</h2>If you think cooking doesn’t have anything to do with money, just go through the long list of taxes and charges that make up your restaurant bills. It is estimated that we pay around 30% over the cost of the food we order when we eat out. The various taxes and charges often outnumber the items we order. This makes eating out not only unhealthy but expensive as well.<img src="https://i.wlycdn.com/insights-new-release/articles/wealth-resolution-6.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Learn to cook">To do: Learn how to cook so that you eat out less. You can begin with the basic types of dishes that are easy to prepare. The next time you feel the urge to eat out or order in from outside, just head over to the kitchen and cook something that will be easy on your stomach as well as the wallet.Next steps: As you get better at cooking, you can turn it into a hobby and start experimenting with different kinds of dishes. This will make a big difference to your savings as well as health, Happy new year. :-)

The new decade is here! We hope 2019 was great for you and 2020 ends up being even better. It is time to begin the new year with resolutions

6 Wealth Resolutions for 2020 that You Can Take Today

New Year, New Resolutions!

PPF has been the favorite of everyone, old and young, to save taxes. But with changing the economic environment and better returns given by equities, is it time for a re-look?

Yes, it’s that time of the year again. Tax saving season is just around the corner and your CA or company’s HR will be knocking on your door very soon for investment proofs.Ideally, one should start investing to save taxes at the beginning of the financial year, but typically, most of us do it towards the end. Nonetheless, irrespective of when you do it, you must invest to save taxes.And usually, the choice a taxpayer has to make under the Rs 1.5 lakh limit of <a href="http://wealthy.in/articles/best-tax-saving-options-3" rel="noopener noreferrer" target="_blank">Section 80C&nbsp;</a>is between the Public Provident Fund (PPF) and Equity Linked Savings Scheme (ELSS). Before we give you a breakdown of these two tax-saving investments, let’s begin with a short introduction of both.<h2>What is PPF?</h2>The Public Provident Fund is a government-backed investment product. It was introduced way back in 1968 and has served generation after generation as a savings plus tax-saving investment instrument. PPF is a debt-oriented investment option and is entirely safe.<img src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What is PPF?">The government offers a guaranteed return on PPF investments, which is usually modified every quarter and has hovered in the 7-8% range over the past few years. PPF investments have a lock-in of 15 years.<h2>What are the ELSS funds?</h2>Equity Linked Savings Schemes are equity-oriented <a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">mutual funds</a> that offer tax-saving benefits. ELSS funds are relatively newer products that are offered by mutual fund companies (also known as asset management companies).Since ELSS funds invest in the stock markets, they don’t offer guaranteed returns. But they are typically used to generate higher returns (in the range of 12-15%) and <a href="http://wealthy.in/articles/long-term-investment-22" rel="noopener noreferrer" target="_blank">create wealth over the long-term</a>. ELSS funds come with a lock-in of 3 years.<img src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What are the ELSS funds?">This, in a gist, is what PPF and ELSS are. The table below is a comparison of both tax-saving investments on different parameters.<h2>Comparison between PPF and ELSS</h2><table style="width: 100%;"><thead><tr><th style="width: 31.5059%;"> </th><th style="width: 28.5557%;">PPF</th><th style="width: 39.9082%;">ELSS</th></tr></thead><tbody><tr><td style="width: 31.5059%;">Returns</td><td style="width: 28.5557%;">7.9% (as on Dec 2019)</td><td style="width: 39.9082%;">12% to 15% (historical average)</td></tr><tr><td style="width: 31.5059%;">Lock-in period</td><td style="width: 28.5557%;">15 years</td><td style="width: 39.9082%;">3 years</td></tr><tr><td style="width: 31.5059%;">Tax-saving potential</td><td style="width: 28.5557%;">Rs 1.5 lakh under Section 80C</td><td style="width: 39.9082%;">Rs 1.5 lakh under Section 80C</td></tr><tr><td style="width: 31.5059%;">Tax on interest/returns</td><td style="width: 28.5557%;">Zero</td><td style="width: 39.9082%;">Zero</td></tr><tr><td style="width: 31.5059%;">Tax on withdrawals after maturity</td><td style="width: 28.5557%;">Zero</td><td style="width: 39.9082%;">10% on returns of over Rs 1 lakh in a financial year</td></tr></tbody></table>As you can see, PPF and ELSS stand head-to-head on taxability parameters. You can invest up to Rs 1.5 lakh under Section 80C in either of the two instruments to save taxes.&nbsp;But, saving taxes should not be the only purpose of making these investments. Because of their long-term nature, both of these tax-saving investments can help you create the wealth of your goals and objectives. And for that, ELSS funds trump PPF.<h2>3 reasons to choose ELSS over PPF</h2><ol><li>Potentially higher returns</li><li>Lower lock-in period</li><li>The existence of EPF</li></ol><h3>Potentially higher returns</h3>The interest rate on PPF has been in decline over many years. Years back, it was 12%, which has now come down to 7.9%. On the other hand, ELSS funds have given an average yearly return of 12% to 15%.&nbsp;Here’s what would have happened if you had Rs 1 lakh in both ELSS funds and PPF between January 2015 to December 2019.<img src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="3 reasons to choose ELSS over PPF: Higher Returns">As is apparent, the difference in returns is startling. PPF may be risk-free, but with a few calculated risks, ELSS funds can help you create real wealth and comfortably beat <a href="http://wealthy.in/articles/actual-inflation-rate-20" rel="noopener noreferrer" target="_blank">inflation</a> over the long-term.&nbsp;<h3>Lower lock-in period</h3>15 years seems like a lifetime, doesn’t it? Especially when you compare it to 3 years. A lower lock-in period means you have quicker access to your money. Sure, in times of dire needs, you can withdraw prematurely from PPF, but that comes with its own penalties.&nbsp;Hence, if 15 years seems like too long a period for you to invest in one instrument, it’s best that you choose ELSS funds instead.<h3>The existence of EPF</h3>If you are a salaried individual, you already will be having the <a href="https://en.wikipedia.org/wiki/Employees'_Provident_Fund_Organisation" rel="noopener noreferrer" target="_blank">Employee Provident Fund (EPF)</a> component in your salary package. EPF is similar to PPF. Your employer would be deducting a part of your salary as your EPF contribution and making an equal contribution on your behalf as well.This pretty much takes care of the debt component of your tax-saving investments and you don’t really need to invest in PPF over and above that as well.&nbsp;<img src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-4.webp" style="width: 800px;" class="fr-fic fr-dib" alt="The existence of EPF"><h2>The final word</h2>In a nutshell, if the choice is between PPF and ELSS funds, for most taxpayers, the latter would make more sense. Investing to save taxes should serve the dual purpose of tax-saving and wealth-building. And since ELSS funds can earn you higher returns as compared to PPF, they should be a major part of your Section 80C investments.

PPF has been the favorite of everyone as a tax saver. But, ELSS may be a better option with the changing economic environment.

PPF or ELSS - Where Should You Invest to Save Tax?

Whenever you ask people about tax-saving options, chances are high that they would recommend either of these 2 products:<ul><li>PPF (Public Provident Fund)</li><li>ELSS (Equity Linked Saving Schemes)</li></ul>But what is the difference between these two? And how to actually decide whether to go with PPF or with ELSS? We help you answer these questions in this article.Saving Taxes (More The Better)As a young salaried person, you already contribute a portion of your salary towards EPF (or Employee Provident Fund). EPF helps you build your savings as well as gives you tax benefits under Section 80C.But more often than not, your EPF contributions alone are not enough to use up the full limit (Rs 1.5 lacs) of Section 80C. Isn&apos;t it?So how do you save more taxes?If we were to ignore other expenses like insurance premiums, home or education loan EMIs, you are left with two more options - PPF and ELSS funds.Both products score heavily as far as tax-savings is concerned. Your contribution in both (upto Rs 1.5 lac) is eligible for deduction. But that is where the similarity ends.PPF Vs. ELSSBroadly speaking, this is how both products compare on basic parameters:<img class="fr-dib" src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-1.png"> No doubt both have some great investor friendly tax benefits. So there is not much to compare on tax parameters.But tax-saving is not the final goal of investments. Isn&apos;t it?We want to earn high returns too.Returns - ELSS Vs. PPFPPF is a government-backed debt product and hence very safe. The returns are guaranteed. ELSS on other hand is a diversified mutual fund of stocks. So naturally, ELSS is riskier than PPF in broader sense.The rates of PPF have been declining for many years now. Years back, it was 12%. Then it came down to 11%, 9.5% and now it stands at 8.1%. And chances are that it will go even lower than 8% soon.On other hand, many ELSS funds have given much returns of 12 to 15% - which is much higher than PPF returns. Infact, some really good ELSS schemes have given more than 15-18% for many years now!So even with increased risks, ELSS give much higher returns as would be proven in examples below:What would have happened if you had invested Rs 1 lac in 2010 in both PPF and ELSS funds (part of Wealthy&rsquo;s portfolio - <a href="https://app.wealthy.in/tax-saver/product">details</a>)?<img class="fr-dib" src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-2.png"> By the end of 2015, the original investment of Rs 1.5 lac would have become Rs 2.5 lac in PPF and Rs 4.1 lac in ELSS funds.And what if you allow your money to remain invested for 15 years (which is the lock-in period for PPF)?<img class="fr-dib" src="https://i.wlycdn.com/insights-new-release/articles/ppf-vs-elss-3.png"> The difference in returns is startling.And this is what a good selection of ELSS funds can help you achieve. The final wealth will be many times more than what a plain PPF can achieve.So even though PPF is risk-free, its low returns (about 8.1%) make it a less attractive product, as far as returns are concerned.And between you and us, its obvious that had it not been for the similar tax benefits, people would not even think about comparing the two.Can You keep your money locked up for 15 Years?No one wants that. And that is the problem with PPF.PPF has a lock-in of 15 years. Yes. That&rsquo;s true. Though partial withdrawals are allowed after 5th year, there is no doubt that liquidity of the product is extremely low.In comparison, ELSS funds have much shorter lock-in period of 3 years.So if you cannot remain invested for 15 years, then PPF is not the right product for you.Finally&hellip;Should you invest in PPF or ELSS?We have already proven that ELSS has shorter lock-in period and higher returns when compared with PPF. Here are few quick pointers to help you finally decide:<ul><li>As a salaried individual, you anyways contribute towards EPF (which is similar to PPF in returns, risk, etc.)</li><li>If you don&rsquo;t have EPF, then you can consider investing in PPF</li><li>But being young, you should invest more in high-return assets like equity-linked products</li><li>ELSS gives you access to such high returns with additional benefit of tax savings</li><li>And don&rsquo;t forget about lock-ins: PPF has a lock-in of 15 years whereas ELSS has it for just 3 years</li></ul>We don&rsquo;t deny that PPF is a great tax-saving product. But tax-benefits alone won&rsquo;t make you wealthy. For that, you need higher returns. Disclaimer -For young individuals having long investment horizons (10-15 years), equity should form a major part of their portfolio. For debt portion of asset base, exposure can be taken by mandatory EPF contributions or periodic PPF contributions (but on basis of individual&rsquo;s risk appetite &amp; advised asset allocation).

PPF is the tax-saving darling of everyone. But could equities (ELSS) be a better choice?

Section 80C is a way to pay less tax and increase take-home salary. If you are not close to retirement, ELSS is a must-do for tax-saving.

Come January and your company’s HR will start knocking on your door. If you work in a company with an open office, they will be knocking on your desk. But knocking, they will be. It will be time to furnish your tax-saving proofs, after all.The last quarter of the financial year, which is January-February-March, is typically when salaried employees have to submit proofs and documents of their tax-saving endeavors. This is also the time when most people make their tax-saving investments.<img alt="Best Tax Saving Options Under Section 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-0.webp">They rush to do them. Which, of course, is not the best way to invest. Investment decisions should be taken after adequate understanding and planning, not to just meet a deadline.If this is your first time-Saving Tax then you must read: <a href="https://www.wealthy.in/articles/tax-saving-guide-23" rel="noopener noreferrer" target="_blank">A Beginner's Guide To Tax Saving In 2019</a><h2>Investing in ELSS funds</h2>With that in mind, we suggest that you start investing to save taxes at the start of the financial year. Or even anytime during the year, not merely at the end. This is especially true if you are investing in Equity Linked Savings Schemes (ELSS).&nbsp;These are tax-saving mutual funds that invest primarily inequities. And spreading your investments in them over a few months is the best way to invest in ELSS funds.<h2>What are ELSS funds?</h2>Let’s understand ELSS funds in more detail. ELSS funds are equity-oriented mutual funds. Just like other equity funds, ELSS funds can also have a portfolio diversified across market capitalization and sectors. The difference being that investments of up to Rs 1.5 lakh made in ELSS funds are tax-deductible under Section 80C of the Income Tax Act. Another benefit of ELSS funds is that they come with the lowest lock-in period of only 3 years.With ELSS funds, you get the best of both worlds: tax-saving and equity returns. When you invest in ELSS funds through SIPs, you also benefit from rupee cost averaging and safeguard your investments against catching a market peak.To get into more details read: <a href="https://www.wealthy.in/articles/ppf-vs-elss-better-tax-saver-29" rel="noopener noreferrer" target="_blank">PPF vs ELSS - Which one is a Better Tax Saver?</a> <h3>ELSS funds versus other tax-saving investments</h3>While ELSS funds are recommended by investment experts, the other popular investment options under Section 80C are <a href="https://en.wikipedia.org/wiki/Fixed_deposit" rel="noopener noreferrer" target="_blank">fixed deposits&nbsp;</a>(FD), <a href="https://en.wikipedia.org/wiki/National_Pension_System" rel="noopener noreferrer" target="_blank">National Pension System&nbsp;</a>(NPS), <a href="https://en.wikipedia.org/wiki/Public_Provident_Fund_(India)" rel="noopener noreferrer" target="_blank">Public Provident Fund&nbsp;</a>(PPF) and <a href="https://en.wikipedia.org/wiki/Unit-linked_insurance_plan" rel="noopener noreferrer" target="_blank">Unit Linked Insurance Plans</a> (ULIP). The table below details how they compare.<table style="width: 100%;"><thead><tr><th colspan="4" style="width: 99.8983%; background-color: rgb(209, 213, 216);"><div style="text-align: center;">Investments under Section 80C</div></th></tr></thead><tbody><tr><td style="width: 16.6534%; background-color: rgb(239, 239, 239); text-align: center;">Investment </td><td style="width: 23.8762%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Lock-in p<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">eriod </td><td style="width: 20.2139%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Expe<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">cted returns </td><td style="width: 39.1961%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Tax o<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">n returns </td></tr><tr><td style="width: 16.6534%; text-align: center;">ELSS</td><td style="width: 23.8762%; text-align: center;">3 years</td><td style="width: 20.2139%; text-align: center;">15-20%</td><td style="width: 39.1961%; text-align: center;">10% on gains over Rs 1 lakh</td></tr><tr><td style="width: 16.6534%; text-align: center;">FD</td><td style="width: 23.8762%; text-align: center;">5 years</td><td style="width: 20.2139%; text-align: center;">5-6%</td><td style="width: 39.1961%; text-align: center;">Interest is taxable</td></tr><tr><td style="width: 16.6534%; text-align: center;">PPF</td><td style="width: 23.8762%; text-align: center;">15 years</td><td style="width: 20.2139%; text-align: center;">7-8%</td><td style="width: 39.1961%; text-align: center;">No tax</td></tr><tr><td style="width: 16.6534%; text-align: center;">NPS</td><td style="width: 23.8762%; text-align: center;">Until retirement</td><td style="width: 20.2139%; text-align: center;">10-12%</td><td style="width: 39.1961%; text-align: center;">Partially taxable</td></tr><tr><td style="width: 16.6534%; text-align: center;">ULIP</td><td style="width: 23.8762%; text-align: center;">5 years</td><td style="width: 20.2139%; text-align: center;">8-10%</td><td style="width: 39.1961%; text-align: center;">No tax</td></tr></tbody></table>As the table shows, ELSS funds make a very strong case in terms of the shorter lock-in period and higher returns. You can begin your tax-saving investments in a few clicks right away with Wealthy. <h2>Understanding Section 80C</h2>Under Section 80C, the Income Tax Department has listed several investments and expenses that can be used to reduce your overall taxable income for a financial year. The upper limit to avail tax deductions under Section 80C is Rs 1.5 lakh.&nbsp;<img alt="Tax Saving Options: Investments under 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-1.webp">The following investments and expenses qualify for deductions under Section 80C:<h2>Investments under 80C</h2><ol><li><h3>Equity Linked Savings Scheme (ELSS)</h3>ELSS are open-ended equity mutual fund schemes, allowing you to invest in equities and get high returns. At the same time, they offer you tax savings. Returns:&nbsp;15–20% (Market returns, Long term historical average) Tax on Returns: Long term - 10% Lock-in Period: 3 years</li><li><h3>Employee Provident Fund (EPF) and the Voluntary Provident Fund (VPF)</h3>Money for your PF gets deducted from your salary. As per PF laws, you and your employer both contribute to it. However, only the employee’s contribution (i.e. your contribution) is counted towards Section 80C investments. Your employer’s contribution isn’t taken into account. VPF is the option to voluntarily make additional contributions to your PF. Returns: 7.9% (2019–20) Tax on Returns: No tax Lock-in Period: Till retirement</li><li><h3>Public Provident Fund (PPF)</h3>PPF is one of the most popular small saving schemes with assured returns. You must note here that the returns are not fixed and can vary from year to year depending on government policies. Returns: 7.9% (2019–20) Tax on Returns: No tax Lock-in Period: 15 years</li><li><h3>Sukanya Samriddhi Account</h3>This scheme is quite popular with parents looking to invest in their daughter’s financial security. This account can be opened at any time from the birth of a girl child till she attains the age of 10 years. The opening amount for this account is Rs 1,000. Thereafter a multiple of Rs 100 can be deposited to the account with a minimum of Rs 1,000 per year. Returns: 8.60% for FY 2016–17 (Yearly compounded) Tax on Returns: No tax Lock-in Period: 21 years (Partial withdrawal, maximum up to 50% of the balance standing at the end of the preceding financial year can be taken after Account holder’s attaining the age of 18 years)</li><li><h3>National Savings Certificate (NSC)</h3>This tax-saving instrument has a maturity period of 10 years. The minimum investment amount is Rs 100 and there is no upper limit. Only in specific cases such as the death of the holder, premature withdrawals are allowed. Returns: 8% (2016–17) Tax on Returns: Accrued interest is taxable in the year in which it has accrued Lock-in Period: 10 years</li><li><h3>Infrastructure Bonds</h3>Popularly called Infra Bonds, these are issued by infrastructure companies and not the government. Returns: (Varies from year to year) Tax on Returns: Interest accrued is taxable. Lock-in Period: 3 to 10 Years</li><li><h3>5-year bank fixed deposits (FDs)</h3>These are widely available. All you need to do is walk into any bank branch, comply with their KYC norms and invest your money in their tax-saving fixed deposit. Returns: 5–6% post-tax (varies) Tax on Returns: Interest is taxable Lock-in Period: 5 years</li><li><h3>Senior Citizen Savings Scheme (SCSS)</h3>This scheme is very popular among senior citizens. According to the scheme, the interest is payable quarterly. The interest is not compounded. Returns: Increased to 9.30% wef 01/04/2015 for FY 2015–16 Tax on Returns: Interests are taxable Lock-in Period: 5 years</li><li><h3>5-year post office time deposit (POTD) scheme</h3>This scheme is very much like a bank fixed deposit. However, they are available for varying time duration: 1 year, 2 years, 3 years and 5 years. Point to note here is that only the 5 years Post office time deposit qualifies for tax saving under section 80C. Interest is paid annually and compounded quarterly. Returns: 7.8% for FY 2015–16 Tax on Returns: Interests are taxable Lock-in Period: 5 years</li><li><h3>Unit Linked Insurance Plan (ULIP)</h3>A ULIP is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. Returns: 8% *(average of five-year return for top-5 performing funds) Tax on Returns: No tax Lock-in Period: 5 years</li></ol> <h2>Expenses under 80C</h2><img alt="Tax Saving Options: Expenses under 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-2.webp"><ol><li><h3>Life Insurance Premiums</h3>The amount paid towards life insurance premium for yourself, your spouse or your children are allowed to be included in Section 80C deduction. You should note that premiums you pay for your father/mother/both or your in-laws are not eligible for deduction under this section. Returns: 0–6% Tax on Returns: No tax Lock-in Period: 5 years In case you are new to tax-saving, you also wanna read:&nbsp;<a href="https://www.wealthy.in/articles/save-tax-with-life-insurance-27" rel="noopener noreferrer" target="_blank">How to Save Taxes with Life Insurance</a></li><li><h3>Tuition fees for children</h3>Payments towards education fees i.e tuition fees, including admission fees or college fees, for full-time education of any two children, qualifies for an income deduction.</li><li><h3>Stamp Duty and Registration Charges for a home:</h3>The amount paid as stamp duty during the purchase of a house and the amount paid for the registration of the documents of the house can be claimed as a deduction under Section 80C. The claim should be made in the year of purchase of the house.</li><li><h3>Home Loan Principal Repayment:</h3>Your home loan repayment EMI that you pay every month consists of two components — Principal and Interest. The principal component of the EMI can be claimed as a deduction under Section 80C. To know more about the tax benefits of home loan read: <a href="https://www.wealthy.in/articles/tax-benefits-home-loan-26">Know the Tax benefits of your Home Loan</a></li></ol> These are the various options that you can use to save taxes under Section 80C. But remember that the entire limit under 80C is Rs 1.5 lakh. Hence, even if the cumulative amount of the investments or expenses that you choose goes beyond the limit, you will be able to claim deductions for only Rs 1.5 lakh. Get started with your tax-saving right away!

What are the Best Tax Saving Options Under Section 80C

Come January and your company’s HR will start knocking on your door. If you work in a company with an open office, they will be knocking on your desk. But knocking, they will be. It will be time to furnish your tax-saving proofs, after all.The last quarter of the financial year, which is January-February-March, is typically when salaried employees have to submit proofs and documents of their tax-saving endeavors. This is also the time when most people make their tax-saving investments.<img alt="Best Tax Saving Options Under Section 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-0.webp">They rush to do them. Which, of course, is not the best way to invest. Investment decisions should be taken after adequate understanding and planning, not to just meet a deadline.If this is your first time-Saving Tax then you must read: <a href="https://www.wealthy.in/articles/tax-saving-guide-23" rel="noopener noreferrer" target="_blank">A Beginner's Guide To Tax Saving In 2019</a><h2>Investing in ELSS funds</h2>With that in mind, we suggest that you start investing to save taxes at the start of the financial year. Or even anytime during the year, not merely at the end. This is especially true if you are investing in Equity Linked Savings Schemes (ELSS).&nbsp;These are tax-saving mutual funds that invest primarily inequities. And spreading your investments in them over a few months is the best way to invest in ELSS funds.<h2>What are ELSS funds?</h2>Let’s understand ELSS funds in more detail. ELSS funds are equity-oriented mutual funds. Just like other equity funds, ELSS funds can also have a portfolio diversified across market capitalization and sectors. The difference being that investments of up to Rs 1.5 lakh made in ELSS funds are tax-deductible under Section 80C of the Income Tax Act. Another benefit of ELSS funds is that they come with the lowest lock-in period of only 3 years.With ELSS funds, you get the best of both worlds: tax-saving and equity returns. When you invest in ELSS funds through SIPs, you also benefit from rupee cost averaging and safeguard your investments against catching a market peak.To get into more details read: <a href="https://www.wealthy.in/articles/ppf-vs-elss-better-tax-saver-29" rel="noopener noreferrer" target="_blank">PPF vs ELSS - Which one is a Better Tax Saver?</a> <h3>ELSS funds versus other tax-saving investments</h3>While ELSS funds are recommended by investment experts, the other popular investment options under Section 80C are <a href="https://en.wikipedia.org/wiki/Fixed_deposit" rel="noopener noreferrer" target="_blank">fixed deposits&nbsp;</a>(FD), <a href="https://en.wikipedia.org/wiki/National_Pension_System" rel="noopener noreferrer" target="_blank">National Pension System&nbsp;</a>(NPS), <a href="https://en.wikipedia.org/wiki/Public_Provident_Fund_(India)" rel="noopener noreferrer" target="_blank">Public Provident Fund&nbsp;</a>(PPF) and <a href="https://en.wikipedia.org/wiki/Unit-linked_insurance_plan" rel="noopener noreferrer" target="_blank">Unit Linked Insurance Plans</a> (ULIP). The table below details how they compare.<table style="width: 100%;"><thead><tr><th colspan="4" style="width: 99.8983%; background-color: rgb(209, 213, 216);"><div style="text-align: center;">Investments under Section 80C</div></th></tr></thead><tbody><tr><td style="width: 16.6534%; background-color: rgb(239, 239, 239); text-align: center;">Investment </td><td style="width: 23.8762%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Lock-in p<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">eriod </td><td style="width: 20.2139%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Expe<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">cted returns </td><td style="width: 39.1961%; background-color: rgb(239, 239, 239); text-align: center;"><span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">Tax o<span style="color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(239, 239, 239); text-decoration-style: initial; text-decoration-color: initial; display: inline !important; float: none;">n returns </td></tr><tr><td style="width: 16.6534%; text-align: center;">ELSS</td><td style="width: 23.8762%; text-align: center;">3 years</td><td style="width: 20.2139%; text-align: center;">15-20%</td><td style="width: 39.1961%; text-align: center;">10% on gains over Rs 1 lakh</td></tr><tr><td style="width: 16.6534%; text-align: center;">FD</td><td style="width: 23.8762%; text-align: center;">5 years</td><td style="width: 20.2139%; text-align: center;">5-6%</td><td style="width: 39.1961%; text-align: center;">Interest is taxable</td></tr><tr><td style="width: 16.6534%; text-align: center;">PPF</td><td style="width: 23.8762%; text-align: center;">15 years</td><td style="width: 20.2139%; text-align: center;">7-8%</td><td style="width: 39.1961%; text-align: center;">No tax</td></tr><tr><td style="width: 16.6534%; text-align: center;">NPS</td><td style="width: 23.8762%; text-align: center;">Until retirement</td><td style="width: 20.2139%; text-align: center;">10-12%</td><td style="width: 39.1961%; text-align: center;">Partially taxable</td></tr><tr><td style="width: 16.6534%; text-align: center;">ULIP</td><td style="width: 23.8762%; text-align: center;">5 years</td><td style="width: 20.2139%; text-align: center;">8-10%</td><td style="width: 39.1961%; text-align: center;">No tax</td></tr></tbody></table>As the table shows, ELSS funds make a very strong case in terms of the shorter lock-in period and higher returns. You can begin your tax-saving investments in a few clicks right away with Wealthy. <h2>Understanding Section 80C</h2>Under Section 80C, the Income Tax Department has listed several investments and expenses that can be used to reduce your overall taxable income for a financial year. The upper limit to avail tax deductions under Section 80C is Rs 1.5 lakh.&nbsp;<img alt="Tax Saving Options: Investments under 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-1.webp">The following investments and expenses qualify for deductions under Section 80C:<h2>Investments under 80C</h2><ol><li><h3>Equity Linked Savings Scheme (ELSS)</h3>ELSS are open-ended equity mutual fund schemes, allowing you to invest in equities and get high returns. At the same time, they offer you tax savings. Returns:&nbsp;15–20% (Market returns, Long term historical average) Tax on Returns: Short term (less than 1 year) - 15% and Long term - 10% Lock-in Period: 3 years</li><li><h3>Employee Provident Fund (EPF) and the Voluntary Provident Fund (VPF)</h3>Money for your PF gets deducted from your salary. As per PF laws, you and your employer both contribute to it. However, only the employee’s contribution (i.e. your contribution) is counted towards Section 80C investments. Your employer’s contribution isn’t taken into account. VPF is the option to voluntarily make additional contributions to your PF. Returns: 7.9% (2019–20) Tax on Returns: No tax Lock-in Period: Till retirement</li><li><h3>Public Provident Fund (PPF)</h3>PPF is one of the most popular small saving schemes with assured returns. You must note here that the returns are not fixed and can vary from year to year depending on government policies. Returns: 7.9% (2019–20) Tax on Returns: No tax Lock-in Period: 15 years</li><li><h3>Sukanya Samriddhi Account</h3>This scheme is quite popular with parents looking to invest in their daughter’s financial security. This account can be opened at any time from the birth of a girl child till she attains the age of 10 years. The opening amount for this account is Rs 1,000. Thereafter a multiple of Rs 100 can be deposited to the account with a minimum of Rs 1,000 per year. Returns: 8.60% for FY 2016–17 (Yearly compounded) Tax on Returns: No tax Lock-in Period: 21 years (Partial withdrawal, maximum up to 50% of the balance standing at the end of the preceding financial year can be taken after Account holder’s attaining the age of 18 years)</li><li><h3>National Savings Certificate (NSC)</h3>This tax-saving instrument has a maturity period of 10 years. The minimum investment amount is Rs 100 and there is no upper limit. Only in specific cases such as the death of the holder, premature withdrawals are allowed. Returns: 8% (2016–17) Tax on Returns: Accrued interest is taxable in the year in which it has accrued Lock-in Period: 10 years</li><li><h3>Infrastructure Bonds</h3>Popularly called Infra Bonds, these are issued by infrastructure companies and not the government. Returns: (Varies from year to year) Tax on Returns: Interest accrued is taxable. Lock-in Period: 3 to 10 Years</li><li><h3>5-year bank fixed deposits (FDs)</h3>These are widely available. All you need to do is walk into any bank branch, comply with their KYC norms and invest your money in their tax-saving fixed deposit. Returns: 5–6% post-tax (varies) Tax on Returns: Interest is taxable Lock-in Period: 5 years</li><li><h3>Senior Citizen Savings Scheme (SCSS)</h3>This scheme is very popular among senior citizens. According to the scheme, the interest is payable quarterly. The interest is not compounded. Returns: Increased to 9.30% wef 01/04/2015 for FY 2015–16 Tax on Returns: Interests are taxable Lock-in Period: 5 years</li><li><h3>5-year post office time deposit (POTD) scheme</h3>This scheme is very much like a bank fixed deposit. However, they are available for varying time duration: 1 year, 2 years, 3 years and 5 years. Point to note here is that only the 5 years Post office time deposit qualifies for tax saving under section 80C. Interest is paid annually and compounded quarterly. Returns: 7.8% for FY 2015–16 Tax on Returns: Interests are taxable Lock-in Period: 5 years</li><li><h3>Unit Linked Insurance Plan (ULIP)</h3>A ULIP is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. Returns: 8% *(average of five-year return for top-5 performing funds) Tax on Returns: No tax Lock-in Period: 5 years</li></ol> <h2>Expenses under 80C</h2><img alt="Tax Saving Options: Expenses under 80C" class="fr-fic fr-dib" style="width: 800px;" src="https://i.wlycdn.com/insights-new-release/articles/tax-savings-2.webp"><ol><li><h3>Life Insurance Premiums</h3>The amount paid towards life insurance premium for yourself, your spouse or your children are allowed to be included in Section 80C deduction. You should note that premiums you pay for your father/mother/both or your in-laws are not eligible for deduction under this section. Returns: 0–6% Tax on Returns: No tax Lock-in Period: 5 years In case you are new to tax-saving, you also wanna read:&nbsp;<a href="https://www.wealthy.in/articles/save-tax-with-life-insurance-27" rel="noopener noreferrer" target="_blank">How to Save Taxes with Life Insurance</a></li><li><h3>Tuition fees for children</h3>Payments towards education fees i.e tuition fees, including admission fees or college fees, for full-time education of any two children, qualifies for an income deduction.</li><li><h3>Stamp Duty and Registration Charges for a home:</h3>The amount paid as stamp duty during the purchase of a house and the amount paid for the registration of the documents of the house can be claimed as a deduction under Section 80C. The claim should be made in the year of purchase of the house.</li><li><h3>Home Loan Principal Repayment:</h3>Your home loan repayment EMI that you pay every month consists of two components — Principal and Interest. The principal component of the EMI can be claimed as a deduction under Section 80C. To know more about the tax benefits of home loan read: <a href="https://www.wealthy.in/articles/tax-benefits-home-loan-26">Know the Tax benefits of your Home Loan</a></li></ol> These are the various options that you can use to save taxes under Section 80C. But remember that the entire limit under 80C is Rs 1.5 lakh. Hence, even if the cumulative amount of the investments or expenses that you choose goes beyond the limit, you will be able to claim deductions for only Rs 1.5 lakh. Get started with your tax-saving right away!

Nobody likes Taxes!

A Systematic Investment Plan, commonly known as an SIP, is widely considered to be the best way to invest in equity mutual funds. But how often?

A Systematic Investment Plan, commonly known as a SIP, is widely considered to be the best way to invest in equity <a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">mutual funds</a>. This isn’t debatable, because data has proven that SIPs trump lump sum investments over the <a href="http://wealthy.in/articles/long-term-investment-22" rel="noopener noreferrer" target="_blank">long-term</a>.&nbsp;What is debatable is the frequency of one’s SIPs. When you think or read or listen about SIP, the frequency that naturally comes to mind is monthly. But is a weekly SIP something worth considering? What about a quarterly SIP?Before we get into the larger debate about SIP frequencies, let’s try to settle this argument with numbers. Let’s say you plan to invest Rs 1,20,000 in a year in a diversified <a href="https://www.wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">equity mutual fund</a>. You can do this by investing Rs 2,500 every week for 52 weeks, Rs 10,000 every month for 12 months or Rs 30,000 every quarter for 4 quarters.<img src="http://i.wlycdn.com/insights-new-release/articles/sip-frequency-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="SIP Frequency: Investment graph">Taking a step back, we can consider investments in HDFC Equity fund between 1 August 2017 and 1 July 2018. Here’s how the three different SIPs would have performed.<table style="width: 100%;"><tbody><tr><td style="width: 25%; background-color: rgb(239, 239, 239);">Frequency </td><td style="width: 25%; background-color: rgb(209, 213, 216); text-align: center;">Weekly </td><td style="width: 25%; background-color: rgb(209, 213, 216); text-align: center;">Monthly</td><td style="width: 25%; background-color: rgb(209, 213, 216); text-align: center;">Quarterly</td></tr><tr><td style="width: 25%; background-color: rgb(209, 213, 216);">Amount invested (INR) </td><td style="width: 25%; text-align: center;">1,20,000</td><td style="width: 25%; text-align: center;">1,20,000</td><td style="width: 25%; text-align: center;">1,20,000</td></tr><tr><td style="width: 25%; background-color: rgb(209, 213, 216);">Worth of amount invested (INR) </td><td style="width: 25%; text-align: center;">1,30,410</td><td style="width: 25%; text-align: center;">1,30,712</td><td style="width: 25%; text-align: center;">1,27,330</td></tr><tr><td style="width: 25%; background-color: rgb(209, 213, 216);">SIP return (%) </td><td style="width: 25%; text-align: center;">4.74%</td><td style="width: 25%; text-align: center;">4.90%</td><td style="width: 25%; text-align: center;">3.22%</td></tr></tbody></table>Source: Value ResearchAs the table shows, the same amount invested in the same equity fund at different frequencies results in monthly SIPs doing the best. While the difference in returns between weekly SIP and monthly SIP is marginal, the difference in returns of quarterly SIP is quite stark.&nbsp;Of course, this data is from one period. If we consider the data of some other period, we might see weekly SIPs doing slightly better than monthly SIPs. But the difference will always be marginal. A weekly SIP is not going to earn you substantially higher returns than a monthly SIP.&nbsp;<img src="http://i.wlycdn.com/insights-new-release/articles/sip-frequency-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="SIP Frequency comparision graph">A quarterly SIP means that your <a href="https://www.wealthy.in/articles/never-save-money-in-banks-6" rel="noopener noreferrer" target="_blank">money is just lying idly in your bank account</a> when it should be invested and working to earn returns for you. So, that makes the least sense. Hence, between a weekly SIP and monthly SIP, what should you pick?<h2>Why go for a monthly SIP?</h2>From the perspective of the way we live our lives, a monthly SIP can work out the best for us.<ol><li>It fits into our routine: Most of us earn a monthly salary. We also pay our rent, utility bills, EMIs, etc on a monthly basis. Hence, we should be investing monthly as well</li><li>It is easier to maintain: Investing should be as simple and straightforward as possible. A monthly SIP is easy to remember and fulfill</li><li>It helps avoid over management: If you invest too frequently, you are likely to review and analyze your investments too frequently, which is unnecessary for most long-term investors</li></ol>An argument that is often made in favor of weekly SIPs is that they save you from timing the market. But this argument doesn’t stand when you have a fixed monthly SIP date. The idea of setting a date for your SIP is that you don’t time the markets and invest at different levels every month. This helps you benefit from rupee cost averaging, especially when you are investing for the long-term.<img src="http://i.wlycdn.com/insights-new-release/articles/sip-frequency-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Why go for a monthly SIP?">On the whole, because SIPs should be a habit that you persist with for long periods of time, a monthly cadence is ideal and adequate for most investors. Remember - when it comes to investing, the simpler, the better.

How Frequent Should Your SIP Be? Quarterly or Monthly or Weekly?

Which is better? Any guesses?

A mutual fund is an investment tool. Many investors get together and pool their money into a mutual fund and are managed by an expert fund management team.

Let’s say you wish to go from Place A to Place B. The most efficient way of going from Place A to Place B is by air. To make this travel, do you fly by a passenger plane or do you book a private jet of your own? For most of us, the answer is the former--we’ll go by a commercial airline.Now, think of this commercial plane as a mutual fund. Just as the airplane helps you go to Place B, a mutual fund helps you reach a specific investment goal in the most efficient manner. A commercial plane is cheaper than a private jet because you are sharing the flying costs with many others. Similarly, a mutual fund is a cost-effective investment tool because you share the fund management fees with other investors.<h2>What is a mutual fund?</h2>A mutual fund helps you reach your goal or objective by allowing you to benefit from the expertise of a fund manager and his or her team. That too, without burning a hole in your pocket.In simplest terms, a mutual fund is an investment tool that is used together by a group of investors. Many investors get together and pool their money into a mutual fund. All of this pooled money is managed by an expert fund management team in alignment with the common goal set for the mutual fund.<img src="https://i.wlycdn.com/insights-new-release/articles/mutual-fund-type-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What is a mutual fund?">This is simply how a mutual fund works. Different mutual funds have different fund objectives. Let’s dig deeper into these types.If you are new to investing then you should also read: <a href="https://www.wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">What is Mutual Fund and Why You Should Care About It?</a><h2>Different types of mutual funds</h2>Mutual funds can broadly be categorized into three segments: equity, debt, and hybrid. This categorization is made in terms of the mutual fund’s underlying asset.<ol><li>Equity mutual funds invest primarily in <a href="https://en.wikipedia.org/wiki/Stock" rel="noopener noreferrer" target="_blank">stocks or shares</a> of listed companies</li><li>Debt mutual funds invest primarily in government papers, corporate bonds or treasury bonds</li><li>Hybrid funds invest in a mix of these assets mentioned above</li></ol><h3> </h3><h3>Equity mutual funds</h3>The shares of companies listed on <a href="https://www.investopedia.com/articles/stocks/09/indian-stock-market.asp" rel="noopener noreferrer" target="_blank">Indian stock exchanges</a> like NSE and BSE are called equities. When you buy shares, you get ownership of the company and you participate in the company’s growth. However, investing in shares is risky and requires a large amount of time, knowledge and expertise. It also requires a lot of money. The answer to these problems is equity mutual funds.&nbsp;<img src="https://i.wlycdn.com/insights-new-release/articles/mutual-fund-type-02.webp" style="width: 800px;" class="fr-fic fr-dib" alt="The shares of companies listed on Indian stock exchanges like NSE and BSE">The fund management team does the hard work of choosing the shares for you and since you don’t buy the shares directly, you can invest as little as Rs 500 in an equity mutual fund as well.<h3>Debt mutual funds</h3>An asset class less risky than equities is debt. These are <a href="https://www.investopedia.com/terms/c/commercialpaper.asp" rel="noopener noreferrer" target="_blank">papers and bonds</a> taken out by the government or corporate companies to raise money. When you buy a bond or paper, you don’t get ownership of the company. You just lend money to the bond issuer for a specific period and the issuer promises to pay you back the money along with interestDebt mutual funds allow you to invest in such government or corporate bonds. Here, once again, you don’t get direct ownership, which is why you are able to buy different kinds of bonds at smaller amounts.<h3>Hybrid mutual funds</h3>Hybrid funds invest in equities as well as debt. Aggressive hybrid funds invest a major part in equities while conservative hybrid funds invest a majorly in debt.&nbsp;Hybrid funds allow you to participate in the growth from equities as well as benefit from the stability of bonds. If chosen right, hybrid funds can give you the best of both worlds.<h2>What do I get when I invest in mutual funds?</h2>All mutual funds allot units to their investors. The investors don’t get direct ownership of the underlying assets of the mutual funds. They get units, which are priced accordingly to the assets owned by the mutual fund.<img src="https://i.wlycdn.com/insights-new-release/articles/mutual-fund-type-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What do I get when I invest in mutual funds?">Mutual funds begin with a unit price of Rs 10, which is called the fund’s NAV (<a href="https://www.investopedia.com/terms/n/nav.asp" rel="noopener noreferrer" target="_blank">Net Asset Value</a>). But remember that a lower NAV does not mean a cheaper fund. The NAV is just the fund’s <a href="https://www.investopedia.com/terms/a/aum.asp" rel="noopener noreferrer" target="_blank">assets under management</a> (AUM) divided by the number of units created. As the fund gets more investments, it creates more units and hence, the NAV fluctuates. This is why the NAV should not be a determining factor in choosing a fund.&nbsp;<h2>Are mutual funds safe?</h2>Yes, mutual funds are safe. Mutual funds are regulated by a government body called the <a href="https://www.investopedia.com/terms/s/sebi.asp" rel="noopener noreferrer" target="_blank">Securities and Exchange Board of India</a> (SEBI). This government body ensures that only trustworthy companies are given the license to run mutual funds. Hence, your mutual fund company will not disappear with your money in the middle of the night. In that aspect, mutual funds are safe.<img src="https://i.wlycdn.com/insights-new-release/articles/mutual-fund-type-04.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Are mutual funds safe?">However, your invested money in mutual funds is subject to market and economic risks. No mutual fund guarantees return. The returns are dependent on the investments made by the mutual fund. Hence, the returns could go up and down, even in the negative. From that perspective, mutual funds are riskier than other investments like fixed deposits, but the higher risk also comes with higher return potential.&nbsp;<h2>Benefits of investing in mutual funds</h2><ol><li>Diversify risks by spreading your investment across asset classes</li><li>Allow a team of experts to take investment calls on your behalf</li><li>Begin your investment journey with small amounts</li><li>Pay only a nominal fee in the form of an annual expense ratio (ER)</li><li>Choose from a range of mutual funds to meet your investment needs</li><li>Redeem investments when you need the money</li></ol><h2>How can you invest in mutual funds?</h2>Mutual fund investments can be made both offline as well as online. The offline route can be taken through a mutual fund distributor or by visiting a fund company’s office. The easier way, of course, is by investing online. Online investments in mutual funds are safe, secure and straightforward. Get started by creating an account on <a href="https://www.wealthy.in/" rel="noopener noreferrer" target="_blank">Wealthy.in.</a>

Types of Mutual Funds And Why it's a Great Investment Tool?

What is a mutual fund? Well, think of a plane.

3 Types of Mutual Funds And Why it's a Great Investment Tool?

In Short, having the right allocation to different asset classes makes a portfolio balanced. The balance here is between risk and reward

One of the most common investment-related advice that you will come across is regarding rebalancing. “Investors should periodically rebalance their portfolio,” is what investment experts advise.&nbsp;Of course, they are right. Periodic rebalancing is very important. But what does rebalancing really mean, why is it so important and how can you do it? Well, these are the questions that we are here to answer.<h2>What makes a portfolio balanced?</h2>Before we get into what rebalancing is, let’s first try to understand why your portfolio should be balanced. A balanced portfolio is one that is invested in <a href="https://www.investopedia.com/terms/a/assetclasses.asp" rel="noopener noreferrer" target="_blank">different types of asset classes</a>. These asset classes could be equity, debt, gold and real estate. For most regular investors, a balanced portfolio would have exposure to equity as well we debt.<img src="https://i.wlycdn.com/insights-new-release/articles/portfolio-rebalance-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Different Assets: What makes a portfolio balanced?">The split across equity and debt would be determined by your <a href="https://www.investopedia.com/investing/figure-out-your-investment-goals/" rel="noopener noreferrer" target="_blank">investment goals</a>, risk appetite, and time horizon. Typically, investors who have long-term goals and more time on hand should have a higher exposure to equity. Conversely, investors with short-term goals should have more of their portfolio in debt.&nbsp;Having the right allocation to different asset classes makes a portfolio balanced. The balance here is between risk and reward. Higher risks can result in higher rewards, which will help you build wealth. But the wealth that has been built needs to be protected as well, which is why your portfolio needs to be balanced.In short, your portfolio should be spread across asset classes and investment types for you to be able to get the best of all worlds.<h2>How does a portfolio get unbalanced?</h2>Obvious question, right? Well, there are many reasons that can lead to your investment portfolio getting unbalanced:<ul style="list-style-type: disc;"><li>Fluctuations in investment values: Let’s say your portfolio is worth Rs 100, out of which Rs 70 is invested in <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">equities</a>. Now, if the value of your equity holdings goes down to Rs 50, then the 70:30 balance that you had set out to achieve will change</li></ul><img src="https://i.wlycdn.com/insights-new-release/articles/portfolio-rebalance-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="How does a portfolio get unbalanced?: Fluctuations in investment values"><ul style="list-style-type: disc;"><li>Changes in mutual fund objectives:&nbsp;<a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">Mutual funds</a> sometimes change their investment objective, which can lead to an equity turning into a hybrid fund, for example. Such a change can shake the balance of your portfolio of your have invested in the fund</li><li>Unplanned redemptions or investments:&nbsp;There can be times when you will redeem a part of your portfolio or make a lump sum investment. Such instances will usually not be planned for and can disrupt the balance of your portfolio</li></ul>If you are investing for the first time then you must also read: <a href="https://www.wealthy.in/articles/avoid-investment-mistakes-41" rel="noopener noreferrer" target="_blank">The 5 Step Guide to Avoid Making Investment Mistakes</a><h2>How to rebalance your portfolio?</h2>The best way to keep a tab on your portfolio’s balance is by checking the asset allocation every six months or once a year, depending on your investment horizon. Check where you are invested, across assets and types. If you see an imbalance, then change the asset allocation to meet the initial portfolio balance you had in mind.<img src="https://i.wlycdn.com/insights-new-release/articles/portfolio-rebalance-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="How to rebalance your portfolio?">Here’s how to rebalance your portfolio:<ol><li>Review the asset allocation: Check whether your portfolio still has the mix of asset classes and investment types that you had initially planned to begin with. You can do this either manually or by using a portfolio management tool like <a href="https://play.google.com/store/apps/details?id=in.wealthy.android.wealthy" rel="noopener noreferrer" target="_blank">Wealthy’s Portfolio Tracker</a></li><li>Buy and sell investments: If you have a higher equity exposure than what you’re comfortable with, then the best thing to do is sell some of your equity shares or mutual funds and invest the amount in debt. And vice versa</li><li>Check back after a year: Or six months, if you have a shorter time period. The idea is to not rebalance your portfolio too often, but also to not leave it unbalanced for too long either. For most investors, an annual rebalance would suffice</li></ol>This, essentially, is all that there is to rebalance your investment portfolio. It’s one of those investment-related things that is easy to procrastinate, but also something that you shouldn’t do.

Having the right allocation to different asset classes makes a portfolio balanced. The balance here is between risk and reward.

The Beginner’s Guide to Re-balancing Investment Portfolio

Re-balancing? What is that?

Sensex is at an all-time high is a great newspaper headline. And as an investor, you should treat it exactly like that rather than an event that changes your investment plans.

Sensex and Nifty are making new lifetime highs regularly these days. As an investor, this is great news as the value of your investments is going up.But many are sitting on the sidelines thinking whether to enter the markets now or once it undergoes a correction (maybe 10-20% kind of fall). These people are afraid that they might suffer losses if they end up investing immediately before the markets fall.No doubt markets are sitting at new highs and might make a few more in the coming months. But does it make sense to wait for a significant correction before investing? Or is it wiser to just continue investing?History often repeats itself and presented below is an analysis of historical data to arrive at an objective answer to this question.<h2 dir="ltr">All-time highs are common. Don’t worry.</h2>Is the market for making a new high for the first time? Not!&nbsp;Have a look at the history of Sensex since 1991.<img style="width: 800px;" class="fr-dib fr-bordered" src="https://lh3.googleusercontent.com/--4xEODWE5xFUUBRCNmcTMxEOtrhHd34gqSTXoD79qmfYc8JrSvNjpN6r4QqonJP-mzxaVcGZifOspkrgsUlD9vUQbR7RxFtlSgKDQv4EpknxttsVOVk4OLJYcgJoCt6b7mJv5du9kTQtAnXYg" alt="The history of Sensex since 1991"> Now statistically speaking, Sensex has made 350+ new highs since 1991. So it is not that uncommon at all.But, if we were to look at the bigger picture, then there have been 6 major time-periods when the SENSEX achieved all-time highs after a considerable period&nbsp;(highs achieved within a short period were considered as part of the larger period).&nbsp;<img style="width: 800px;" class="fr-dib fr-bordered" src="https://lh5.googleusercontent.com/dtrf6JMpzTtY8d8jIFA1cpwBDrelGAnnNfy_oTRkZOGA-6cxFVfuta6D-GhtRGKBBULrpuerMFZ3lJtEqOPEONg5Jir-dKws4MYVWeNwvgsq-fr-SRrRnmC0o30QF6Sq4HbQLE1ezoFhUtiNJw" alt="Sensex highs achieved within a short period were considered as part of the larger period"> Of course, it’s not guaranteed but generally, all-time highs are followed by new all-time highs shortly. And investors who exit the market at new highs or stay out because they feel markets are due for a correction, generally don’t get it right&nbsp;(unless of course, they have an oracle by their side).Probabilistically speaking, you shouldn’t worry too much about markets reaching new highs and being destined for big falls.&nbsp;As investors, you need to focus instead on the bigger picture.Think about the choices that you have - savings account, FD, equity, real estate, gold, etc. And which among these has proven itself to deliver the highest returns when invested in the long term? (there is another subject of asset allocation which we will discuss separately on how too allocate your savings over different asset classes)The answer is <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">equity</a>. And we have enough proof for that.&nbsp;So if you are a <a href="http://wealthy.in/articles/long-term-investment-22" rel="noopener noreferrer" target="_blank">long-term investor</a>, put your efforts in finding the right portfolio that will grow your wealth in years to come. And a portfolio that is made up of equity funds is best suited to do that:<img style="width: 800px;" class="fr-dib" alt="Long Term investments" src="https://lh6.googleusercontent.com/jgRa4Kg3OUgF4EXflJ0Y0CR_M0WknLlcrL87CHUgUSC5G2puYTsjjgZ-xiHh3t99tZ0e18xhfZ4W6gtK0eE92MTLBlVLnGh5D4UwDUlBxgzOHA0YWlHYACkUc2UFygKxojyysn0I"> And don’t worry even if there are small falls in the near term. The long-term outlook is still blindingly bright.The only way to benefit from equity’s phenomenal growth potential is to participate in it; and not by sitting on sidelines predicting the next crash.<h2 dir="ltr">Don’t wait for a Crash to Start Investing</h2>One of the greatest investors ever, Peter Lynch said,<blockquote>“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections than has been lost in corrections themselves.”</blockquote>And this is 100% true!&nbsp; If people had exited the markets predicting a crash (after the fresh highs made in 2004), they would have missed the entire bull run of 2004-2007. There is no guarantee that the market will fall once they cross old highs.Remember that in investing, money is made by being in the market and not by being on the sidelines.If you have a long investment horizon, then waiting for the right time to invest doesn’t help. By trying to time the market and getting ready to make an all-or-nothing kind of investment decision, you’re bound to stress yourself out by waiting alone. It just doesn’t work for most people. And it is an approach destined to ruin your money’s wealth creation potential.<img src="https://i.wlycdn.com/insights-new-release/articles/high-sensex-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Don’t wait for a Crash to Start Investing">Proof that You Profit even if Investing near All-Time HighsHere are three examples where your investments start near new lifetime highs:&nbsp;Example 1: You start investing Rs 5,000 monthly (in Sensex) after the Sensex made a new lifetime high in July 1999 You invested a total of Rs 10.7 lacs which is now worth Rs 40.2 lac (in May-2017) with a rate of return (XIRR) of ~13.4%Example 2: You start investing Rs 5,000 monthly in Sensex after it made a new high in January 2004 You invested a total of Rs 8 lacs which is now worth Rs 18 lac (in May-2017) with a rate of return (XIRR) of ~11.4%Example 3: You start investing Rs 5,000 monthly in an&nbsp;<a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">equity mutual fund</a>&nbsp;immediately after the Sensex made a new high in January 2004 You invested a total of Rs 7.7 lacs which is now worth Rs 30.4 lac (in May-2017) with a rate of return (XIRR) of about 19.8% *The mutual fund referred for this analysis is ICICI Prudential Value Discovery FundEven if you started investing near the all-time highs, you would still have done pretty well. The returns in the above examples, i.e. 13.4%, 11.4%, and 19.8% easily beat the post-tax returns of so-called risk-free instruments like banks FDs (5-7% after-tax returns).&nbsp;<h2 dir="ltr">Action Plan for You</h2>So as investors, what should you be doing?<ul><li><h3>Waiting to start investing? </h3>If you are waiting to start investing to make small monthly contributions, then you should just start without worrying about highs or lows being achieved by the market.&nbsp;If you have large lump-sum, then you should stagger your investments and transfer partial amounts periodically (monthly, quarterly, etc.) into the portfolio of your choice till all the money is invested. &nbsp;</li><li dir="ltr"><h3>Already investing regularly? </h3>Don’t stop your monthly contributions. Automatic monthly deposit (SIP) is perhaps the best way to invest, even at all-time highs.&nbsp;Just ensure that you stick to your portfolio (or your own chosen funds) and monitor that they are at least growing in line with the overall market’s rise. &nbsp;</li><li><h3>Need money in 6-12 months? </h3>Start booking your profits slowly and move out the required money into safer liquid or ultra short-term funds (like Wealthy’s short term conservative portfolio).</li></ul><h2 dir="ltr">Final Thoughts</h2>When markets are making new highs, it might be tempting to book all profits and wait for a correction (to buy again at lower prices). But this approach is about timing the markets and 99% of the people cannot do it.<img src="https://i.wlycdn.com/insights-new-release/articles/high-sensex-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Investing during stock market crash">Market history tells those new all-time highs are nothing to worry about. It’s a perfectly normal market phenomenon.So keep your focus on the Indian economy’s long-term growth and don’t sit on the sidelines endlessly. Participate in this story, invest in your financial goals and make wealth for yourself. And finally, a good rule to control those emotions:&nbsp;“Best time to invest is whenever you have the cash to spare”

Sensex is at an all time high. And as an investor, you should treat it exactly like that rather than an event that changes your investment plans.

Sensex is at an All Time High - Invest Or Not?

Sensex and Nifty are making new lifetime highs regularly these days. As an investor, this is great news as the value of your investments is going up.But there are many who are sitting on the sidelines thinking whether to enter the markets now or once it undergoes a correction (maybe 10-20% kind of fall). These people are afraid that they might suffer losses if they end up investing immediately before the markets fall.&nbsp;No doubt markets are sitting at new highs and might make few more in coming months. But does it really make sense to wait for a significant correction before investing? Or is it wiser to just continue investing?&nbsp;History often repeats itself and presented below is an analysis of historical data to arrive at an objective answer to this question.<h2 dir="ltr">&nbsp;All time highs are common. Don’t worry.</h2>&nbsp;Is the market making a new high for the first time? Absolutely not!&nbsp;Have a look at the history of Sensex since 1991.<img src="https://lh3.googleusercontent.com/--4xEODWE5xFUUBRCNmcTMxEOtrhHd34gqSTXoD79qmfYc8JrSvNjpN6r4QqonJP-mzxaVcGZifOspkrgsUlD9vUQbR7RxFtlSgKDQv4EpknxttsVOVk4OLJYcgJoCt6b7mJv5du9kTQtAnXYg" class="fr-dib fr-bordered" style="width: 719px;"> Now statistically speaking, Sensex has made 350+ new highs since 1991. So it is not that uncommon at all.&nbsp;But if we were to look at the bigger picture, then there have been 6 major time-periods when the SENSEX achieved all-time highs after a considerable period of time&nbsp;(highs achieved within a short period were considered as part of the larger time period).&nbsp;<img src="https://lh5.googleusercontent.com/dtrf6JMpzTtY8d8jIFA1cpwBDrelGAnnNfy_oTRkZOGA-6cxFVfuta6D-GhtRGKBBULrpuerMFZ3lJtEqOPEONg5Jir-dKws4MYVWeNwvgsq-fr-SRrRnmC0o30QF6Sq4HbQLE1ezoFhUtiNJw" class="fr-dib fr-bordered" style="width: 763px;"> Of course it’s not guaranteed but generally, all-time highs are followed by new all-time highs in near future. And investors who exit the market at new highs or stay out because they feel markets are due for a correction, generally don’t get it right&nbsp;(unless of course they have an oracle by their side).Probabilistically speaking, you shouldn’t worry too much about markets reaching new highs and being destined for big falls.&nbsp;As investors, you need to focus instead on the bigger picture.&nbsp;Think about the choices that you have - savings account, FD, equity, real estate, gold, etc. And which among these has proven itself to deliver the highest returns when invested for long term? (there is another subject of asset allocation which we will discuss separately on how too allocate your savings over different asset classes)&nbsp;The answer is equity. And we have enough proof for that.&nbsp;So if you are a long-term investor, put your efforts in finding the right portfolio that will grow your wealth in years to come. And a portfolio that is made up of equity funds is best suited to do that:<img src="https://lh6.googleusercontent.com/jgRa4Kg3OUgF4EXflJ0Y0CR_M0WknLlcrL87CHUgUSC5G2puYTsjjgZ-xiHh3t99tZ0e18xhfZ4W6gtK0eE92MTLBlVLnGh5D4UwDUlBxgzOHA0YWlHYACkUc2UFygKxojyysn0I" alt="Screen Shot 2017-06-10 at 2.45.43 PM.png" class="fr-dib" style="width: 716px;"> And don’t worry even if there are small falls in near term. The long-term outlook is still blindingly bright.&nbsp;The only way to benefit from equity’s phenomenal growth potential is to participate in it; and not by sitting on sidelines predicting the next crash.<h2 dir="ltr">&nbsp;Don’t wait for a Crash to Start Investing</h2>&nbsp;One of the greatest investors ever, Peter Lynch said,“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”&nbsp;And this is 100% true!&nbsp; If people had exited the markets predicting a crash (after the fresh highs made in 2004), they would have missed the entire bull run of 2004-2007. There is absolutely no guarantee that market will fall once they cross old highs.Remember that in investing, money is made by being in the market and not by being on the sidelines.&nbsp;If you have a long investment horizon, then waiting for the right time to invest doesn’t help. By trying to time the market and getting ready to make an all-or-nothing kind of investment decision, you’re bound to stress yourself out by waiting alone. It just doesn’t work for most people. And it is an approach destined to ruin your money’s wealth creation potential.Proof that You Profit even if Investing near All-Time HighsHere are three examples where your investments start near new lifetime highs:&nbsp; <ul><li dir="ltr">Example 1: You start investing Rs 5,000 monthly (in Sensex) after the Sensex made a new lifetime high in July 1999</li></ul>You invested a total of Rs 10.7 lacs which is now worth Rs 40.2 lac (in May-2017) with a rate of return (XIRR) of ~13.4%<ul><li dir="ltr">Example 2: You start investing Rs 5,000 monthly in Sensex after it made a new high in January 2004</li></ul>You invested a total of Rs 8 lacs which is now worth Rs 18 lac (in May-2017) with a rate of return (XIRR) of ~11.4%<ul><li dir="ltr">Example 3: You start investing Rs 5,000 monthly in an equity mutual fund immediately after the Sensex made a new high in January 2004</li></ul>You invested a total of Rs 7.7 lacs which is now worth Rs 30.4 lac (in May-2017) with a rate of return (XIRR) of about 19.8% *The mutual fund referred for this analysis is ICICI Prudential Value Discovery Fund&nbsp;Even if you started investing near the all-time highs, you would still have done pretty well. The returns in the above examples, i.e. 13.4%, 11.4% and 19.8% easily beat the post-tax returns of so-called risk-free instruments like banks FDs (5-7% after tax returns).&nbsp;Action Plan for You So as investors, what should you be doing?<ul><li>Waiting to start investing? &nbsp;If you are waiting to start investing with the intention of making small monthly contributions, then you should just start without worrying about highs or lows being achieved by the market.&nbsp;If you have large lump-sum, then you should stagger your investments and transfer partial amounts periodically (monthly, quarterly, etc.) into portfolio of your choice till all the money is invested. &nbsp;</li><li dir="ltr">Already investing regularly? Don’t stop your monthly contributions. Automatic monthly deposit (SIP) is perhaps the best way to invest, even at all-time highs.&nbsp;Just ensure that the you stick to your portfolio (or your own chosen funds) and monitor that they are are atleast growing in line with overall market’s rise. &nbsp;</li><li>Need money in 6-12 months? Start booking your profits slowly and move out the required money into safer liquid or ultra short-term funds (like Wealthy’s short term conservative portfolio).</li></ul>&nbsp;Final ThoughtsWhen markets are making new highs, it might be tempting to book all profits and wait for correction (to buy again at lower prices). But this approach is about timing the markets and 99% of the people cannot do it.Market history tells that new all-time highs are nothing to worry about. It’s a perfectly normal market phenomenon.So keep your focus on Indian economy’s long-term growth and don’t sit on the sidelines endlessly. Participate in this story, invest for your financial goals and make wealth for yourself. And finally, a good rule to control those emotions:&nbsp;“Best time to invest is whenever you have cash to spare”

Absolutely, yes!

There are multiple ways to Save Tax and Investment is a Major one. But not all investments fall under Tax Savings.

The simplest financial advice that you can get is:<blockquote>Invest to increase your wealth and reduce your taxes.</blockquote>It cannot get simpler than that. Can it? But it is easier said than done.In their over-excited efforts to save taxes, people end up choosing tax-saving investment options that are unsuitable for long-term wealth creation.Result?They save taxes, no doubt. But they fail to create real wealth.In this article, we analyze some of the popular investment + tax saving options for their wealth creation potential.<h2>Section 80C to Your Rescue</h2>Section 80C of Income Tax allows you to claim a deduction for investments made in various financial instruments.<img src="https://i.wlycdn.com/insights-new-release/articles/tax-saving-investment-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Tax Savings Investments under 80C">It also allows you to claim deductions for life insurance premiums, home loan repayments, tuition fee payments, etc. (Read more about <a href="http://wealthy.in/articles/best-tax-saving-options-3" rel="noopener noreferrer" target="_blank">Section 80C</a>). But these are expenses and cannot be linked to wealth building. So we focus specifically on investment options that help you create wealth.Note 1 - There is a limit of Rs 1.5 lac on deductions that can be claimed under Section 80C.Note 2 - Your EPF contributions too form part of Section 80C. But since this is mostly mandatory, there is no point comparing it with other options. Returns are similar to PPF returns.<h2>Investment Options to Save Tax</h2><h3>1. PPF</h3>PPF is a good option for conservative investors looking for certainty in returns.It is one of the most popular long-term investment options that are backed by the Indian Government.<ul><li>Current interest rate is 8.0% - subject to revision every quarter</li><li>PPF account matures after 15 years and the maturity amount is tax-free</li><li>Amount of up to Rs 1.5 lac can be invested in a financial year - which is fully tax-deductible</li><li>Loan facility is available and partial withdrawal is possible after 7th year</li></ul><h3>2. ELSS</h3><a href="http://wealthy.in/articles/ppf-vs-elss-better-tax-saver-29" rel="noopener noreferrer" target="_blank">ELSS or Equity Linked Savings Scheme</a> is an open-ended equity mutual fund that invests in stocks to get higher returns.<ul><li>Good ELSS funds have given more than 15% average returns in the long term</li><li><a href="http://term.It"></a>It offers comparatively higher returns (but not guaranteed) than all other options within Section 80C</li><li>ELSS funds have a lock-in of 3 years and returns after 1 year are tax-free.</li><li>Any amount can be invested in a financial year but a maximum of Rs 1.5 lac can be claimed for deduction</li></ul>ELSS is a good option for investors who want high long-term returns but understand that returns might be volatile in the short-term.<h3>3. Tax-Saving FDs</h3>Bank FDs need no introduction. Tax-saving FDs are a variant of regular FDs that come with a lock-in.<ul><li>Interest rates range from 6-8% before taxes</li><li>Interest is fully taxable and you have to pay taxes on interest annually even though you don’t get the interest in-hand</li><li>After taxes, the returns are reduced substantially to 5-7% - much lower than other options</li></ul><h3>4. NSC</h3>NSC or National Savings Certificate is a fixed income product issued by post offices and backed by the Indian government. Since its fixed-income, one can earn a predefined interest during the holding period.<ul><li>Current interest rate is 8.0%, which is compounded half-yearly but paid on maturity</li><li>The interest rate for an NSC gets locked at the time of investment and stays the same during the holding period</li><li>NSC matures after 5 years</li><li>Interest earned every year is not paid out (and hence no TDS) but is reinvested. So the interest too can be claimed as deduction under section 80C. So NSC interest is taxable but becomes tax-free as it is deemed to be reinvested under Section 80C</li><li>NSC can be purchased in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000</li></ul><h3>5. NPS</h3>NPS or National Pension System is the Indian government’s defined contribution pension plan. NPS allows investors to invest in 3 options - <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">Equity</a>, Government Securities and other non-government Fixed Income securities.<ul><li>NPS is structured as follows:<ul><li>Tier-I Account - Amount invested cannot be withdrawn before the investor reaches 60 years of age</li><li>Tier-II Account - Voluntary. Allowed only with active Tier-I accounts and withdrawals can be made as per subscriber’s requirements</li></ul></li><li>Returns are not guaranteed but depend on the allocation chosen - from amongst the three available options</li><li>On attaining the age of 60, a minimum of 40% of the accumulated corpus has to be used to purchase an annuity. Another 40% of the accumulated corpus can be withdrawn tax-free. Rest 20% can be withdrawn in a lump sum but is taxable. Or one can even withdraw this remaining 20% over 10 years</li><li>With so many restrictions on withdrawal, it's clear that NPS by design discourages subscribers from withdrawing their corpus</li><li>Investments of up to Rs 1.5 lac are eligible for tax benefits under Section 80C. But this benefit is capped at 10% of basic salary</li><li>Additional tax benefit of Rs 50,000 is offered to NPS subscribers</li></ul><h3>6. Ulips</h3>Ulips or Unit-Linked Insurance Plans are hybrid products that combine investment with insurance.<ul><li>ULIP returns are not guaranteed but can range from 5-11% depending on the exact scheme</li><li>Since ULIPs are generally high expense products, it takes a very long time to get good returns from these products (typically several years)</li><li>ULIPs allow investors to switch between equity and debt components easily</li><li>Since ULIPs mix investment with insurance, these are not an ideal investment option</li></ul><h3>7. RGESS</h3>RGESS or Rajiv Gandhi Equity Savings Scheme was launched to incentivize small investors’ participation in stock markets. It offers certain tax breaks to first-time investors.<ul><li>50% of a maximum investments amount of Rs 50,000 qualifies for tax benefits</li><li>Tax benefits of RGESS are available only for first-time investors whose annual income is less than Rs 12 Lac</li><li>One can invest in BSE100, NSE100 stocks, Major PSU stocks or RGESS mutual funds or ETFs</li><li>Since investments are in direct stocks (and MFs that too invest in them), returns are not guaranteed</li></ul><h3>8. Sukanya Samriddhi Account</h3>This government-sponsored scheme was launched specifically for the girl child. Sukanya Samriddhi Account (SSA) can be opened for a girl up to the age of 10 years.<ul><li>The scheme offers 8.5% returns</li><li>The amount can be withdrawn 21 years from account opening date or when the girl gets married, whichever is earlier</li></ul>So many options. Which one(s) to choose?So many investment + tax saving options can leave you confused.But these are not the only ones available. We have only discussed the most popular ones until now. There are others like Sukanya Samriddhi Account, Infrastructure bonds, Post-Office deposits, and whatnot.<h2>Which investment + tax saving option is the best for you?</h2>Before you try to find the answer to that question, remember the main aim of investing your money is not tax savings. Rather, it is to earn good returns at low risk.<img src="https://i.wlycdn.com/insights-new-release/articles/tax-saving-investment-02.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Which investment + tax saving option is the best for you?">There is no point in investing if the only thing you are getting is low returns with tax benefits?Wealthy believes that the path to wealth creation should be simple and offer good returns with low risks.There is no need to clutter your investment portfolio with several products.So what exactly do we recommend for investment + tax savings?If you are young and can accept short-term volatility, then you should invest in just two products:<ul><li>ELSS - Invest a major part of your investible surplus in ELSS funds that give good long-term returns.</li><li>PPF - A smaller part of investments can be made into PPF (or EPF if your employer provides it).</li></ul>This ELSS + PPF portfolio will provide you with adequate diversification as well as give you reasonably good returns in the long term. And of course, you get tax benefits of up to Rs 1.5 lac. Thank the government for that.

How to Maximize Savings with Tax Saving Investments

The simplest financial advice that you can get is:<blockquote>Invest to increase your wealth and reduce your taxes.</blockquote>It cannot get simpler than that. Can it? But it is easier said than done.In their over-excited efforts to save taxes, people end up choosing tax-saving investment options that are unsuitable for long-term wealth creation.Result?They save taxes, no doubt. But they fail to create real wealth.In this article, we analyze some of the popular investment + tax saving options for their wealth creation potential.<h2>Section 80C to Your Rescue</h2>Section 80C of Income Tax allows you to claim a deduction for investments made in various financial instruments.<img src="blob:https://www.wealthy.in/292c9e36-f920-4af5-8900-e0c176c7e003" style="width: 800px;" class="fr-fic fr-dib" alt="Tax Savings Investments under 80C">It also allows you to claim deductions for life insurance premiums, home loan repayments, tuition fee payments, etc. (Read more about <a href="http://wealthy.in/articles/best-tax-saving-options-3" rel="noopener noreferrer" target="_blank">Section 80C</a>). But these are expenses and cannot be linked to wealth building. So we focus specifically on investment options that help you create wealth.Note 1 - There is a limit of Rs 1.5 lac on deductions that can be claimed under Section 80C.Note 2 - Your EPF contributions too form part of Section 80C. But since this is mostly mandatory, there is no point comparing it with other options. Returns are similar to PPF returns.<h2>Investment Options to Save Tax</h2><h3>1. PPF</h3>PPF is a good option for conservative investors looking for certainty in returns.It is one of the most popular long-term investment options that are backed by the Indian Government.<ul><li>Current interest rate is 8.0% - subject to revision every quarter</li><li>PPF account matures after 15 years and the maturity amount is tax-free</li><li>Amount of up to Rs 1.5 lac can be invested in a financial year - which is fully tax-deductible</li><li>Loan facility is available and partial withdrawal is possible after 7th year</li></ul><h3>2. ELSS</h3><a href="http://wealthy.in/articles/ppf-vs-elss-better-tax-saver-29" rel="noopener noreferrer" target="_blank">ELSS or Equity Linked Savings Scheme</a> is an open-ended equity mutual fund that invests in stocks to get higher returns.<ul><li>Good ELSS funds have given more than 15% average returns in the long term</li><li><a href="http://term.It"></a>It offers comparatively higher returns (but not guaranteed) than all other options within Section 80C</li><li>ELSS funds have a lock-in of 3 years and returns after 1 year are tax-free.</li><li>Any amount can be invested in a financial year but a maximum of Rs 1.5 lac can be claimed for deduction</li></ul>ELSS is a good option for investors who want high long-term returns but understand that returns might be volatile in the short-term.<h3>3. Tax-Saving FDs</h3>Bank FDs need no introduction. Tax-saving FDs are a variant of regular FDs that come with a lock-in.<ul><li>Interest rates range from 6-8% before taxes</li><li>Interest is fully taxable and you have to pay taxes on interest annually even though you don’t get the interest in-hand</li><li>After taxes, the returns are reduced substantially to 5-7% - much lower than other options</li></ul><h3>4. NSC</h3>NSC or National Savings Certificate is a fixed income product issued by post offices and backed by the Indian government. Since its fixed-income, one can earn a predefined interest during the holding period.<ul><li>Current interest rate is 8.0%, which is compounded half-yearly but paid on maturity</li><li>The interest rate for an NSC gets locked at the time of investment and stays the same during the holding period</li><li>NSC matures after 5 years</li><li>Interest earned every year is not paid out (and hence no TDS) but is reinvested. So the interest too can be claimed as deduction under section 80C. So NSC interest is taxable but becomes tax-free as it is deemed to be reinvested under Section 80C</li><li>NSC can be purchased in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000</li></ul><h3>5. NPS</h3>NPS or National Pension System is the Indian government’s defined contribution pension plan. NPS allows investors to invest in 3 options - <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">Equity</a>, Government Securities and other non-government Fixed Income securities.<ul><li>NPS is structured as follows:<ul><li>Tier-I Account - Amount invested cannot be withdrawn before the investor reaches 60 years of age</li><li>Tier-II Account - Voluntary. Allowed only with active Tier-I accounts and withdrawals can be made as per subscriber’s requirements</li></ul></li><li>Returns are not guaranteed but depend on the allocation chosen - from amongst the three available options</li><li>On attaining the age of 60, a minimum of 40% of the accumulated corpus has to be used to purchase an annuity. Another 40% of the accumulated corpus can be withdrawn tax-free. Rest 20% can be withdrawn in a lump sum but is taxable. Or one can even withdraw this remaining 20% over 10 years</li><li>With so many restrictions on withdrawal, it's clear that NPS by design discourages subscribers from withdrawing their corpus</li><li>Investments of up to Rs 1.5 lac are eligible for tax benefits under Section 80C. But this benefit is capped at 10% of basic salary</li><li>Additional tax benefit of Rs 50,000 is offered to NPS subscribers</li></ul><h3>6. Ulips</h3>Ulips or Unit-Linked Insurance Plans are hybrid products that combine investment with insurance.<ul><li>ULIP returns are not guaranteed but can range from 5-11% depending on the exact scheme</li><li>Since ULIPs are generally high expense products, it takes a very long time to get good returns from these products (typically several years)</li><li>ULIPs allow investors to switch between equity and debt components easily</li><li>Since ULIPs mix investment with insurance, these are not an ideal investment option</li></ul><h3>7. RGESS</h3>RGESS or Rajiv Gandhi Equity Savings Scheme was launched to incentivize small investors’ participation in stock markets. It offers certain tax breaks to first-time investors.<ul><li>50% of a maximum investments amount of Rs 50,000 qualifies for tax benefits</li><li>Tax benefits of RGESS are available only for first-time investors whose annual income is less than Rs 12 Lac</li><li>One can invest in BSE100, NSE100 stocks, Major PSU stocks or RGESS mutual funds or ETFs</li><li>Since investments are in direct stocks (and MFs that too invest in them), returns are not guaranteed</li></ul><h3>8. Sukanya Samriddhi Account</h3>This government-sponsored scheme was launched specifically for the girl child. Sukanya Samriddhi Account (SSA) can be opened for a girl up to the age of 10 years.<ul><li>The scheme offers 8.5% returns</li><li>The amount can be withdrawn 21 years from account opening date or when the girl gets married, whichever is earlier</li></ul>So many options. Which one(s) to choose?So many investment + tax saving options can leave you confused.But these are not the only ones available. We have only discussed the most popular ones until now. There are others like Sukanya Samriddhi Account, Infrastructure bonds, Post-Office deposits, and whatnot.<h2>Which investment + tax saving option is the best for you?</h2>Before you try to find the answer to that question, remember the main aim of investing your money is not tax savings. Rather, it is to earn good returns at low risk.<img src="blob:https://www.wealthy.in/8d3b1548-82f2-4191-89da-deeb122c02d3" style="width: 800px;" class="fr-fic fr-dib" alt="Which investment + tax saving option is the best for you?">There is no point in investing if the only thing you are getting is low returns with tax benefits?Wealthy believes that the path to wealth creation should be simple and offer good returns with low risks.There is no need to clutter your investment portfolio with several products.So what exactly do we recommend for investment + tax savings?If you are young and can accept short-term volatility, then you should invest in just two products:<ul><li>ELSS - Invest a major part of your investible surplus in ELSS funds that give good long-term returns.</li><li>PPF - A smaller part of investments can be made into PPF (or EPF if your employer provides it).</li></ul>This ELSS + PPF portfolio will provide you with adequate diversification as well as give you reasonably good returns in the long term. And of course, you get tax benefits of up to Rs 1.5 lac. Thank the government for that.

How to master your taxes

Mutual Funds are a very good investment option. MFs bring the benefits of large numbers to your side; they are diversified to optimize the profit with minimum risk, and they are managed professionally.

Mutual Funds are like the new restaurant that’s just opened up in your neighborhood. You know that it serves six different cuisines, but you aren’t sure which all taste good there. And there’s no feeling worse than choosing the wrong dish and having to finish it up!Wouldn’t it be awesome if you could sample a little of all the different things they have to offer and then choose for yourself? Yep, except for one annoying thing: you have to buy the dishes whole. You can’t ask for a fifth of the Fondue and a third of the Dumplings. And your wallet doesn’t have enough for you to afford all the dishes and let them go waste.But you&nbsp;want to try the restaurant out. So, what do you do?You call your friends! You call up six or seven of them, tell them about the new place and go out for dinner. Now, with seven wallets on the bill, you can go ahead and try out all of those dishes you wanted to check out. Each of you gets to sample a little of each of the dishes and you’re all happy because even if you came across that one thing which sucks, the other five were decent enough to offset this.<img src="https://i.wlycdn.com/insights-new-release/articles/what-is-mutual-fund-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What is a Mutual Fund?">Mutual Funds are just like that. Only here, you are more often than not, the friend who gets called over. The person who calls you over is an expert who knows which seven dishes are the best bet you got from a menu of over a hundred.Say Hi to Ms. Simran. She has a lot of experience when it comes to understanding the market and investing wisely. Now, she comes out and tells people that she has a portfolio of stocks, bonds, and cash that she thinks is great and wants to invest in.For that, though, she needs to pool in money from different people so that she can have the benefit of large numbers on her side. To each one who puts their money into this pool, she promises to share the profits in the proportion of their contribution.Suppose ten people decide to go along with her plan and give her some money. One person gives 18,000, another gives 10,000, while someone else gives just 1,000. Overall, she gets 1,00,000 in total, which is a good enough amount for her to invest in the portfolio.She now splits the whole basket of money, which she calls a Mutual Fund (MF), into small units worth 10 each. So, the person who put in 18000, now owns 1800 units of Simran’s MF and is entitled to the profits that come from them. So, in this way, they are similar to owners of shares.<img src="https://i.wlycdn.com/insights-new-release/articles/what-is-mutual-fund-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Who Manages the Mutual Funds?">Understand here that she is a pro at this. She is dead serious about making the most money out of this whole exercise. Maximizing her profit is the only motive she has. And the only way she will make money for herself is when she makes money for all the people who have contributed to the MF. So if you are one of those investors, she is working hard to make sure you get the most money out of it too. Hence, the word “mutual”.&nbsp;Now, at the end of each day’s trading, Simran sits down and figures out how much the MF is worth. One of these days, let’s say she sees that the value of the MF is 1,20,000. This means each of the units of the MF has a value of 12, giving a return of 2 bucks per unit for all the investors. Everyone’s happy. Of course, if the MF goes into losses, everyone shares that as well, in the proportion of the units they own. The “mutual” in the name makes people sink or swim together.In short, the whole process boils down to this:<ol><li>A lot of people pool in money towards a common fund</li><li>Each investor gets units of the fund in the proportion of their contribution</li><li>The fund is well-diversified and is professionally managed</li><li>And finally, the investors share the profits or losses</li></ol><img src="https://i.wlycdn.com/insights-new-release/articles/what-is-mutual-fund-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="couple more things you should know before investing in Mutual Fund">There are a couple more things you should know too:<ul><li name="a98e">You can enter and leave an MF at any time, but you might have to pay a small “exit load” on the way out if you are leaving the MF too early.&nbsp;</li><li name="aca4">Before splitting the profits or losses, the managers of the MF will keep for themselves a profit margin and fee for their services. That is, the investors share in the gains from the MF minus the managers’ cut. SEBI has a cap on the profit margin, though, so you need not worry about the managers taking an over-large cut.&nbsp;</li></ul>So, all-in-all, Mutual Funds are a very good investment option when you are constrained by the restaurant-like problems we started the article with. MFs bring the benefits of large numbers to your side; they are diversified to optimize the profit with minimum risk, and they are managed professionally.&nbsp;A final word of caution:&nbsp;Deciding to invest in mutual funds is the easy part. It becomes tricky when you have to pick the ones you want your money in. Mutual Funds come in all shapes and sizes, which makes things a little complicated if you don’t know how to make out one from the other. So, take a few days to learn more about this.

Mutual Funds are a very good investment option. Mutual Funds are diversified to optimize the profit with minimum risk and they are managed professionally.

What is Mutual Fund and Why You Should Care About It?

Mutual Funds are like the new restaurant that’s just opened up in your neighborhood. You know that it serves six different cuisines, but you aren’t sure which all taste good there. And there’s no feeling worse than choosing the wrong dish and having to finish it up!Wouldn’t it be awesome if you could sample a little of all the different things they have to offer and then choose for yourself? Yep, except for one annoying thing: you have to buy the dishes whole. You can’t ask for a fifth of the Fondue and a third of the Dumplings. And your wallet doesn’t have enough for you to afford all the dishes and let them go waste.But you&nbsp;want to try the restaurant out. So, what do you do?You call your friends! You call up six or seven of them, tell them about the new place and go out for dinner. Now, with seven wallets on the bill, you can go ahead and try out all of those dishes you wanted to check out. Each of you gets to sample a little of each of the dishes and you’re all happy because even if you came across that one thing which sucks, the other five were decent enough to offset this.<img src="blob:https://www.wealthy.in/9279f3cc-ca8a-4430-a355-5fd2b8881c88" style="width: 800px;" class="fr-fic fr-dib" alt="What is a Mutual Fund?">Mutual Funds are just like that. Only here, you are more often than not, the friend who gets called over. The person who calls you over is an expert who knows which seven dishes are the best bet you got from a menu of over a hundred.Say Hi to Ms. Simran. She has a lot of experience when it comes to understanding the market and investing wisely. Now, she comes out and tells people that she has a portfolio of stocks, bonds, and cash that she thinks is great and wants to invest in.For that, though, she needs to pool in money from different people so that she can have the benefit of large numbers on her side. To each one who puts their money into this pool, she promises to share the profits in the proportion of their contribution.Suppose ten people decide to go along with her plan and give her some money. One person gives 18,000, another gives 10,000, while someone else gives just 1,000. Overall, she gets 1,00,000 in total, which is a good enough amount for her to invest in the portfolio.She now splits the whole basket of money, which she calls a Mutual Fund (MF), into small units worth 10 each. So, the person who put in 18000, now owns 1800 units of Simran’s MF and is entitled to the profits that come from them. So, in this way, they are similar to owners of shares.<img src="blob:https://www.wealthy.in/4995d026-9cf9-4821-98ab-f1aaf58010a3" style="width: 800px;" class="fr-fic fr-dib" alt="Who Manages the Mutual Funds?">Understand here that she is a pro at this. She is dead serious about making the most money out of this whole exercise. Maximizing her profit is the only motive she has. And the only way she will make money for herself is when she makes money for all the people who have contributed to the MF. So if you are one of those investors, she is working hard to make sure you get the most money out of it too. Hence, the word “mutual”.&nbsp;Now, at the end of each day’s trading, Simran sits down and figures out how much the MF is worth. One of these days, let’s say she sees that the value of the MF is 1,20,000. This means each of the units of the MF has a value of 12, giving a return of 2 bucks per unit for all the investors. Everyone’s happy. Of course, if the MF goes into losses, everyone shares that as well, in the proportion of the units they own. The “mutual” in the name makes people sink or swim together.In short, the whole process boils down to this:<ol><li>A lot of people pool in money towards a common fund</li><li>Each investor gets units of the fund in the proportion of their contribution</li><li>The fund is well-diversified and is professionally managed</li><li>And finally, the investors share the profits or losses</li></ol><img src="blob:https://www.wealthy.in/aa03804f-2693-49df-b6b1-b5b4c65d5cd4" style="width: 800px;" class="fr-fic fr-dib" alt="couple more things you should know before investing in Mutual Fund">There are a couple more things you should know too:<ul><li name="a98e">You can enter and leave an MF at any time, but you might have to pay a small “exit load” on the way out if you are leaving the MF too early.&nbsp;</li><li name="aca4">Before splitting the profits or losses, the managers of the MF will keep for themselves a profit margin and fee for their services. That is, the investors share in the gains from the MF minus the managers’ cut. SEBI has a cap on the profit margin, though, so you need not worry about the managers taking an over-large cut.&nbsp;</li></ul>So, all-in-all, Mutual Funds are a very good investment option when you are constrained by the restaurant-like problems we started the article with. MFs bring the benefits of large numbers to your side; they are diversified to optimize the profit with minimum risk, and they are managed professionally.&nbsp;A final word of caution:&nbsp;Deciding to invest in mutual funds is the easy part. It becomes tricky when you have to pick the ones you want your money in. Mutual Funds come in all shapes and sizes, which makes things a little complicated if you don’t know how to make out one from the other. So, take a few days to learn more about this.

See what’s beyond ‘subject to market risks’

In the long-term, market crashes are a good opportunity to give your portfolio a boost. The markets will revive sooner or later. And so will your portfolio.

Stock market crashes can be scary. After all, who would want to see their portfolio come down by 20%, 40% or even 50% in&nbsp;a&nbsp;matter&nbsp;of months?But crashes are inevitable. Sooner or later, the markets do crash.The last major crash was in 2008-09. In just a year, markets were down by more than 50%. And some stocks had lost more than 95%. But don’t worry. We don’t want to scare you. Stock market crashes should be welcomed. Sounds strange? Or even stupid?&nbsp;It is not.Stock market crashes can give your portfolio a big boost if you are smart about it.Let’s try and prove that by taking examples of some of the biggest crashes in recent times.<h2 dir="ltr">Recession of 2008-09</h2>All of us remember the <a href="https://www.history.com/topics/21st-century/recession" rel="noopener noreferrer" target="_blank">recession of 2008-09</a>. The credit crisis that started in the US (due to the housing bubble burst) caused Indian markets to fall dramatically too.In just a little more than a year, the Sensex was down from almost 21,000 to 8,100 - a fall of more than 60%! &nbsp;This is how it looked.<img src="https://i.wlycdn.com/articles/Stocks.png" class="fr-dib" style="width: 800px;" alt="Recession of 2008-09"> So if you had a portfolio of say Rs 10 lac at the start of 2008, it would have been reduced to just Rs 3.9 lac if it behaved like Sensex.&nbsp;This was unprecedented.But what happened after the crash? This.<img src="https://i.wlycdn.com/articles/stock2.png" class="fr-dib" style="width: 800px;" alt="After Recession of 2008-09"> After the fall to 8100, Sensex rose to cross 29,000. And all this happened between 2009 and end-2014. That’s a rise of more than 250% in 5 years.<h2 dir="ltr">What exactly does this mean?</h2>Let's compare it with an FD (with post-tax returns of 6.4% - assuming 20% tax on 8% - yielding FD).<img src="https://i.wlycdn.com/articles/stock3.png" class="fr-dib" style="width: 800px;" alt="What exactly does Stock Market Crash mean?"> An investment of Rs 1 lac made in both Sensex and FD at the same time (early 2009), gives dramatically opposite results.Amount invested in Sensex turned into Rs 3.45 lacs whereas that in FD became just Rs 1.4 lac.And this is what we are trying to highlight:When the stock markets crash, it is the best time to invest more. The markets will revive sooner or later. And so will your portfolio.Let’s see another crash that originally forced investors to shun the markets. But which too made money for those who decided to remain invested (and bought more) during the crash.<h2 dir="ltr" style="font-weight: bold;">Dot-Com Bubble of 2000-01</h2><a href="https://www.investopedia.com/terms/d/dotcom-bubble.asp" rel="noopener noreferrer" target="_blank">The dot-com crisis of 2000-01</a> was soon followed by the 9/11 terrorist attacks. Both these events led markets across the world to the tank. Indian markets too fell a lot (see graph below). <img src="https://i.wlycdn.com/articles/stock4.png" class="fr-dib" style="width: 800px;" alt="Dot-Com Bubble of 2000-01"> What happened after that big crash?<img src="https://i.wlycdn.com/articles/stock5.png" class="fr-dib" style="width: 800px;" alt="After Dot-Com Bubble of 2000-01">The markets kept rising like anything.If someone had invested when Sensex had crashed to 3,000 levels in September 2001 (remember 9/11), money would have<ul><li dir="ltr">Doubled by 2004,</li><li dir="ltr">Tripled by 2006, and</li><li dir="ltr">Become 6 times by 2007 (i.e. in 6 years)</li></ul>Let’s not even compare it with FDs this time. And you know why? ;-)And this happens after every big crash. After the crash, markets might remain low for some time. But eventually, the recovery happens and those who stay invested (or invest more during the crisis), make tonnes of money.<h2 dir="ltr" style="font-weight: bold;">What about Recent Big Falls?</h2>During August 2015-February 2016, Sensex came down from its ~28,000 levels to about 23,000, a fall of 18% in six months. Since then the market has regained its losses and as of November 2016 is again close to 28,000 levels.Many smart investors bought more during this crash. And when markets recovered, they were sitting on nice juicy profits.<h2 dir="ltr" style="font-weight: bold;">How to Act Smart in Market Crashes?</h2>No one can predict when the next crash will happen. But it will happen for sure.And when it does happen, it is the best time to invest more (either in stocks or through <a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">Mutual Funds</a>). The best course of action during a stock market crash is to:<ul><li dir="ltr">Continue regular SIPs no matter what</li><li dir="ltr">Invest any surplus money that is not required for a few years, in <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">equity mutual funds</a> or stocks</li></ul>If you know how to pick direct stocks, do so. But understand the risks involved. If you don’t know how to do it, there is no shame in admitting it. Stick to mutual funds where expert fund managers know what they are doing and know how to pick a diversified portfolio of stocks.A stock market crash is an opportunity to invest more and profit from the future recovery of the market.Now that you are smarter, don’t look to survive the next crash. Instead, take advantage of it and become Wealthy.

An Investors Guide to Stock Market Crash

Stock market crashes can be scary. After all, who would want to see their portfolio come down by 20%, 40% or even 50% in&nbsp;matter&nbsp;of months?But crashes are inevitable. Sooner or later, the markets do crash.The last major crash was in 2008-09. In just a year, markets were down by more than 50%. And some stocks had lost more than 95%. But don&rsquo;t worry. We don&rsquo;t want to scare you. Infact, stock market crashes should be welcomed. Sounds strange? Or even stupid?&nbsp;It is not.Stock market crashes can give your portfolio a big boost if you are smart about it.Let&rsquo;s try and prove that by taking examples of some of the biggest crashes in recent times.Recession of 2008-09All of us remember the recession of 2008-09. Credit crisis that started in US (due to housing bubble burst) caused Indian markets to fall dramatically too. In just a little more than a year, the Sensex was down from almost 21,000 to 8,100 - a fall of more than 60%! &nbsp;This is how it looked.<img class="fr-dib" src="https://i.wlycdn.com/articles/Stocks.png"> So if you had a portfolio of say Rs 10 lac at the start of 2008, it would have been reduced to just Rs 3.9 lac if it behaved like Sensex.&nbsp;This was unprecedented.But what happened after the crash? This.<img class="fr-dib" src="https://i.wlycdn.com/articles/stock2.png"> After the fall to 8100, Sensex rose to cross 29,000. And all this happened between 2009 and end-2014. That&rsquo;s a rise of more than 250% in 5 years.&nbsp;What exactly does this mean?Lets compare it with a FD (with post tax returns of 6.4% - assuming 20% tax on 8%-yielding FD).<img class="fr-dib" src="https://i.wlycdn.com/articles/stock3.png"> An investment of Rs 1 lac made in both Sensex and FD at the same time (early 2009), gives dramatically opposite results.Amount invested in Sensex turned into Rs 3.45 lacs whereas that in FD became just Rs 1.4 lac.And this is what we are trying to highlight:When stock markets crash, it is the best time to invest more. The markets will revive sooner or later. And so will your portfolio. Let&rsquo;s see another crash that originally forced investors to shun the markets. But which too made money for those who decided to remain invested (and bought more) during the crash.Dot-Com Bubble of 2000-01Dot-com crisis of 2000-01 was soon followed by the 9/11 terrorist attacks. Both these events led markets across the world to tank. Indian markets too fell a lot (see graph below). <img class="fr-dib" src="https://i.wlycdn.com/articles/stock4.png"> What happened after that big crash?<ol><li> </li></ol><img class="fr-dib" src="https://i.wlycdn.com/articles/stock5.png">The markets kept rising like anything.If someone had invested when Sensex had crashed to 3,000 levels in September 2001 (remember 9/11), money would have<ul><li dir="ltr">Doubled by 2004,</li><li dir="ltr">Tripled by 2006, and</li><li dir="ltr">Become 6 times by 2007 (i.e. in 6 years)</li></ul> Let&rsquo;s not even compare it with FDs this time. And you know why? ;-)And this happens after every big crash. After the crash, markets might remain low for some time. But eventually, the recovery happens and those who stay invested (or invest more during crisis), make tonnes of money.What about Recent Big Falls?During August 2015-February 2016, Sensex came down from its ~28,000 levels to about 23,000, a fall of 18% in six months. Since then the market has regained its losses and as of November 2016 is again close to 28,000 levels.Many smart investors bought more during this crash. And when markets recovered, they were sitting on nice juicy profits.How to Act Smart in Market Crashes?No one can predict when the next crash will happen. But it will happen for sure.And when it does happen, it is the best time to invest more (either in stocks or through MFs). Best course of action during a stock market crash is to:<ul><li dir="ltr">Continue regular SIPs no matter what</li><li dir="ltr">Invest any surplus money that is not required for few years, in equity mutual funds or stocks</li></ul> If you know how to pick direct stocks, do so. But understand the risks involved. If you don&rsquo;t know how to do it, there is no shame in admitting it. Stick to mutual funds where expert fund managers know what they are doing and know how to pick a diversified portfolio of stocks.Stock market crash is an opportunity to invest more and profit from future recovery of market.Now that you are smarter, don&rsquo;t look to survive the next crash. Instead, take advantage of it and become Wealthy.<ol><li> </li></ol>

Welcome Stock Market Crashes with a Big Hug

Selling underperforming stocks and mutual funds is as important as giving away that old pair of denims that you do not wear anymore.

Diwali is right around the corner. And how do most of us prepare for it? By cleaning our homes, of course. It’s one of the many things we do just before the festive season begins.It is not uncommon to receive promotional messages from cleaning services providers during this time of the year as well. Diwali cleaning is a big deal in most parts of the country.The significance of Diwali cleaning stems from the belief that Lakshmi, the Goddess of Prosperity, enters only clean homes. This festive cleaning also signifies letting go of the old and making room for the new in our homes and lives.While we’ll clean our homes this Diwali, wouldn’t it make sense to do the same to our investment portfolios as well? Quite a lot of investors are hoarders when it comes to their investments.<img src="https://i.wlycdn.com/insights-new-release/articles/Diwali-Cleaning-1.png" style="width: 800px;" class="fr-fic fr-dib" alt="Portfolio Cleaning ">Letting go of stocks and mutual funds is difficult for many. Even when their investments are underperforming, investors tend to be unreasonably hopeful and shy away from getting rid of them. But, of course, selling underperforming stocks and <a href="https://www.wealthy.in/insights/articles/What-is-Mutual-Fund-7/" target="_blank">mutual funds</a> is as important as giving away that old pair of de that you don’t wear anymore.So, if you’re ready to give your investment portfolio a thorough Diwali cleaning, here are a few tips and ideas that you would find useful.<h2>1. Be hopeful, but not overly hopeful</h2>It’s very good if you <a href="https://www.wealthy.in/insights/articles/how-can-equities-grow-your-wealth-upto-5-times-5/" target="_blank">invest in equities</a> with a long-term view, but that doesn’t mean that you should continue holding onto an underperforming investment for eternity. If a stock or fund that you’ve invested in keeps doing poorly, then it’s better to book losses and sell it before it keeps getting worse.<img src="https://i.wlycdn.com/insights-new-release/articles/Diwali-Cleaning-2.png" style="width: 800px;" class="fr-fic fr-dib" alt="Clean Portfolio - Book losses and sell it before it keeps getting worse">A 10% loss is better than incurring a 30% or more loss in the hope that the investment might someday turnaround. So, this Diwali, sell the underperformers and reinvest the money in investments that are doing better.<h2>2. Check if your asset allocation is in place</h2>If you invest with specific goals and objectives in mind, and you should, then you would have your investment portfolio allocated to different asset classes. Equity is great for <a href="https://www.wealthy.in/insights/articles/Long-term-Investment-27/" target="_blank">long-term investment strategy</a>, but a short-term goal might call for investments in debt.It’s a good idea to spread your investments across assets in general as well, since every asset type has its own pluses. Equities can help you build wealth while debt can help you protect wealth.<img src="https://i.wlycdn.com/insights-new-release/articles/Diwali-Cleaning-3.png" alt="Clean Portfolio - Book Profits" style="box-sizing: border-box; cursor: pointer; padding: 0px 1px; max-width: 100%; color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); text-decoration-style: initial; text-decoration-color: initial; width: 800px;" class="fr-fic fr-dib">So, review your portfolio this Diwali and check if your portfolio is as balanced as you’d want it to be.<h2>3. Book profits in some cases</h2>When you check how your investments are performing, you might come across some cases where the investment is doing exceptionally well. This would particularly be the case with long-term investments. Since the markets have been volatile, such cases would probably be rare, which makes it even more appealing to book profits.<img src="https://i.wlycdn.com/insights-new-release/articles/Diwali-Cleaning-4.png" style="width: 800px;" class="fr-fic fr-dib" alt="Clean Portfolio - Book Profits">You can even use some of the profits to gift something to your family members or take them out on a vacation.It’s Diwali, after all.These are some of the ideas that you can use to get some portfolio rebalancing and cleaning done.But when you are selling investments, be mindful of the income tax implications on your profits. Long-term capital gains from equities and equity mutual funds of over Rs 1 lakh in a year are subject to 10% tax.If you have held the investment for less than a year, then there might be short-term tax implications. Consider both before you sell.Happy Diwali!

Letting go of stocks is difficult for many. Even when they are underperforming, investors tend to be unreasonably hopeful and shy away from getting rid of them.

How about Some Diwali Cleaning? But, for Your Investment Portfolio

Clean your Portfolio in 3 Simple Steps

Picking multi-bagger stocks is not easy. It takes intensive research and a deep understanding of the business to identify the right stocks.

You probably won’t like to hear this, but we’ll be blunt about it anyway. For your own good, of course. Investing directly in stocks is not a great idea for most of us.That’s right. You’ll ask why, since you might have heard stories about how rewarding stock investments have been to someone or the other. However, such cases are few and far between. The stories of people losing their entire life’s earnings in stocks are even more. And scarier, of course.<img src="https://i.wlycdn.com/insights-new-release/articles/picking-stocks-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Picking Stocks is Best Left to the Professionals">The success stories you might have heard would be about <a href="https://en.wikipedia.org/wiki/Rakesh_Jhunjhunwala" rel="noopener noreferrer" target="_blank">Rakesh Jhunjhunwala</a>&nbsp;multiplying his money about 82 times with his 13-year investment in Titan. Or about the stock market exploits of <a href="https://en.wikipedia.org/wiki/Warren_Buffett" rel="noopener noreferrer" target="_blank">Warren Buffett</a>. These stalwarts have, without doubt, been super successful stock market investors. But there’s a reason for that. Three, actually.<h2>1. How do experts make money from stocks?</h2><ul style="list-style-type: disc;"><li>They spend a lot of time in research: Warren Buffett spends as much as 5 hours every day reading business news and research</li><li>They have a diversified portfolio: Rakesh Jhunjhunwala has over 80 stocks in his portfolio</li><li>They invest long-term: The average holding period for Mr. Jhunjhunwala is 3.5 years while he has held onto some of his most successful investments for more than 10 years</li></ul>And let’s not forget the kind of money they have to invest. These are rich blokes who can afford to let a couple of bets go away.<img src="https://i.wlycdn.com/insights-new-release/articles/picking-stocks-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="1. How do experts make money from stocks?">Regular people like us, on the other hand, cannot afford to lose any of what we have invested. Most of us work hard to not only earn what we do, but also to save what we do. Saving money to invest every month is not easy, which is why it makes it even more important that we invest in instruments that we can rely upon to deliver.In case you are struggling to savings then, here's an article that can help you: <a href="https://www.wealthy.in/articles/track-expenses-16" rel="noopener noreferrer" target="_blank">Track Expenses - How to Know Where Your Money Goes?</a><h2>2. What is required to invest directly in stocks?</h2>To invest in direct stocks, you need time, knowledge and expertise. Researching companies is a full time job. It requires deep knowledge of the financial world and the kind of expertise that can only come with experience.On top of that, you also need huge amounts of money to build a diversified portfolio of stocks. And of course, let’s not forget the importance of periodic monitoring of your investments.<img src="https://i.wlycdn.com/insights-new-release/articles/picking-stocks-3.webp" style="width: 800px;" class="fr-fic fr-dib" alt="2. What is required to invest directly in stocks?">You can do all of this if you’re willing to give up your day job and do just this. On the other hand, you can avail the services of a fund manager whose day job is this--by <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">investing in equity mutual funds</a>.<h2>3. What is the better alternative to direct stocks?</h2>Every equity mutual fund is managed by a professional fund manager and his or her team of research analysts. It is their job to spend time and effort in researching companies. They understand how companies function and the way the stock markets work. They spend huge amounts of time researching and analysing companies to invest in.&nbsp;<img src="https://i.wlycdn.com/insights-new-release/articles/picking-stocks-4.webp" style="width: 800px;" class="fr-fic fr-dib" alt="3. What is the better alternative to direct stocks?">With equity mutual funds, you also don’t need huge amounts to invest. You can begin investing in a diversified mutual fund with as little as Rs 500. This makes equity funds a better way to gain exposure to the stock markets for most lay investors.<em style="box-sizing: border-box; color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); text-decoration-style: initial; text-decoration-color: initial;">Wondering what are mutual funds? Read here:&nbsp;<a href="https://www.wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">What is Mutual Fund and Why You Should Care About It?</a> <article><main><section name="1834">You might still want to invest in stock market, perhaps just for fun. You can do that, but please dedicate only a small part of your funds to dabble into stocks. Make equity mutual funds the core of your portfolio.</section></main></article>

Picking stocks to invest in is not easy. It takes intensive research and a deep understanding of the business to identify the right stocks.

Picking Stocks is Best Left to the Professionals

<article><main><section name="1834">You probably are not going to like us for saying this. But it&rsquo;s true and we care enough to tell you upfront that being romantic about stock-picking is not a great idea.&nbsp;Yes, putting your money directly in stocks is very rewarding, at least for a few top guys. Rakesh Jhunjhunwala multiplied his money 82 times with his 13-year investment in Titan. And let&rsquo;s not get started about Warren Buffet. That guy is the Einstein of stock market. But, the great results are usually limited to few people like them.Let&rsquo;s see what they have got that makes them so good at this.<ul><li name="f22c">They spend a lot of time in research:&nbsp;Warren Buffet spends as much as 5 hours every day reading business news and research.&nbsp;</li><li name="457f">They have a diversified portfolio:&nbsp;Rakesh Jhunjhunwala has over 80 stocks in his portfolio. (Yep, that takes a lot of money.)</li><li name="25a7">They invest long-term:&nbsp;Average hold-period for Mr Jhunjhunwala is 3.5 years while he has held onto some of his most successful investments for more than 10 years.</li></ul>So, when experts say that successful investing is simple, they&rsquo;re right. But simple isn&rsquo;t easy.&nbsp;It takes intensive research to understand individual businesses and figure out how much value they can build for your money in future.It takes a lot of cash to diversify your portfolio like Rakesh Jhunjhunwala. On top of that, you have to monitor the investments regularly and re-allocate money in case things change and your assumptions have to be corrected.&nbsp;To do all of that with a regular day job, where sometimes we end up spending several hours in bad city traffic, is almost impossible.That does not mean we are telling you to stay away from the stock market. That would be just as romantic and stupid. What we are saying is this:Buying equity mutual funds is a better alternative to realize gains of stock market.&nbsp;It not only spreads your bet over tens or hundreds of stocks but you also get a professionally trained and experienced team to pick stocks for you.&nbsp;Fee-structure of mutual funds has also rationalized over last few years and the fee that you pay to mutual funds is a very small percentage of your total investment.It&rsquo;s easier for you and it gets better results.&nbsp;You might still want to invest in stock market, perhaps just for fun. You can do that, but please dedicate only a small part of your funds to dabble into stocks. Make equity mutual funds the core of your portfolio.Wondering what are mutual funds? They are like restaurants. (<a href="https://www.wealthy.in/insights/articles/what-is-a-mutual-fund-and-why-you-should-care-about-it-7" target="_blank">What&rsquo;s a mutual fund?</a>)&nbsp;</section></main></article>

Unless you are Warren Buffett of course!

Gold has been a favourite of Indian households as an investment instrument. If you look at returns then the gold picture doesn’t look great.

For most of us, buying gold is almost a ritual. Depending on which part of the country we belong to, there is at least one day on our cultural calendar, when our parents go out and buy gold.&nbsp;It’s mostly so because gold has always been seen as the safest investment for most middle-class households. It’s been so for thousands of years, and even recently, when gold was on a bull run for over 12 years, the trend compounded our belief.But 2015 is not a good year for investing in gold.&nbsp;Gold prices are on a downward spiral. In global markets, they are at five-year lows and are expected to slide further by the end of this year. In Indian markets, gold prices are down by almost 20% since the highs of 2012.<img src="https://i.wlycdn.com/insights-new-release/articles/dont-invest-in-gold-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Should You Even Consider Gold as an Investment?">Goldman Sachs, one of the leading investment banks of the world, predicts gold prices to slide by another 10% before the end of this year.We know that gold has lost its sheen when traditional countries like India and China, who hold gold in high cultural regard and have been the two largest consumers of gold, have started showing a decline in demand.&nbsp;Indians bought 25% lesser gold in 2015 as compared to the same period in 2014.What makes things a little more sucky for us is that we have to pay more per unit of gold than what our friends globally have to. Yeah, all thanks to a 10% duty that Indian government charges on all gold that is imported in India. If you’re wondering if that duty is going to go away soon, a quick look at our current account deficits will tell you that the duty is here to stay for a long long time.&nbsp;The smarter investors amongst us saw this trend and stopped buying gold three years back. They chose other options to invest their surplus.If you had invested 1,000 rupees in gold three years ago, it would have reduced to about 820 in 2015. You would have lost money, that too quite a bit. That money, when invested in a 3 year FD, would have become 1,300 rupees. And if you had invested it in a basket of top-rated equity mutual funds, you would have had 1950 rupees.&nbsp;<img alt="In last 3 years, 1000 INR invested in gold lost 18% in value" src="https://i.wlycdn.com/articles/avoid-investing-in-gold.jpg" class="fr-dib">Seeing these numbers, why would you ever go for Gold today?There’s one reason we can think of. With wedding season coming up and gold prices going down, it’s cheaper now to buy that exquisite piece of gold jewelry for your friends and family.&nbsp;For any reason other than this, don’t invest in Gold.

Gold has been a favorite of Indian households as an investment instrument. If you look at returns then the gold picture doesn’t look great.

Should You Even Consider Gold as an Investment?

For most of us, buying gold is almost a ritual. Depending on which part of the country we belong to, there is at least one day on our cultural calendar, when our parents go out and buy gold.&nbsp;It&rsquo;s mostly so because gold has always been seen as the safest investment for most middle-class households. It&rsquo;s been so for thousands of years, and even recently, when gold was on a bull run for over 12 years, the trend compounded our belief.&nbsp;But 2015 is not a good year for investing in gold.&nbsp;Gold prices are on a downward spiral. In global markets, they are at five-year lows and are expected to slide further by the end of this year. In Indian markets, gold prices are down by almost 20% since the highs of 2012.Goldman Sachs, one of the leading investment banks of the world, predicts gold prices to slide by another 10% before the end of this year.We know that gold has really lost its sheen when traditional countries like India and China, who hold gold in high cultural regard and have been the two largest consumers of gold, have started showing decline in demand.&nbsp;Indians bought 25% lesser gold in 2015 as compared to the same period in 2014.What makes things a little more sucky for us is that we have to pay more per unit of gold than what our friends globally have to. Yeah, all thanks to a 10% duty that Indian government charges on all gold that is imported in India. If you&rsquo;re wondering if that duty is going to go away soon, a quick look at our current account deficits will tell you that the duty is here to stay for a long long time.&nbsp;The smarter investors amongst us saw this trend and stopped buying gold three years back. They chose other options to invest their surplus.&nbsp;If you had invested 1,000 rupees in gold three years ago, it would have reduced to about 820 in 2015. You would have actually lost money, that too quite a bit. That money when invested in a 3 year FD would have become 1,300 rupees. And if you had invested it in a basket of top-rated equity mutual funds, you would have had 1950 rupees.&nbsp;<img class="fr-dib" src="https://i.wlycdn.com/articles/avoid-investing-in-gold.jpg" alt="avoid investing in gold"> Seeing these numbers, why would you ever go for Gold today?There&rsquo;s one reason we can think of. With wedding season coming up and gold prices going down, it&rsquo;s cheaper now to buy that exquisite piece of gold jewellery for your friends and family.&nbsp;For any reason other than this, don&rsquo;t invest in Gold.&nbsp;

Shine of gold is blinding, isin't it

Think twice before you buy real estate. Delay in possession and unrealistically high prices do not make it a wise investment. Better stay on rent than own one

We all have that one relative who keeps reminding us how so-and-so became a crorepati investing in real estate. And let’s be honest, we all have thought about it at least once. After all, everyone knows that it’s a sure shot bet to multiply your wealth, right?Here’s the reality.&nbsp;There are over 750,000 unsold apartments across major Indian cities.&nbsp;Delhi-NCR alone, our most popular real estate investment destination, could take 5 years or more to sell all of its unsold apartments.Hold on. There are so many middle-class households who don’t own a house. The demand is there, right?&nbsp;Not really.&nbsp;70% of unsold homes in Mumbai cost Rs 1 crore or more.When these houses were being made, somehow the investors speculated that there would be a huge demand for them at those prices. It turns out that the prices are so high that people are better off in rented apartments than paying those hefty EMIs.<img src="https://i.wlycdn.com/insights-new-release/articles/invest-in-real-estate-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Is It The Right Time to Invest in Real Estate?">What makes it all worse is that most of us are no longer confident in purchasing under-construction houses, as there have been so many instances of delayed delivery. And this is a vicious cycle in itself. Not enough buyers imply builders facing cash constraints. Cash constraints lead to a delay in delivery time. Delays in delivery lead to lesser trust in the builders and so fewer buyers put in the money. And on and on it goes.&nbsp;Although the world around us is giving us all these hints, we are still lingering to our dream of investing in real estate. The one reason for this is the belief that real estate prices never go down. On the face of it, it does seem to be true. There’s limited space in the world, the population is still growing at a rapid rate and there’s just so much black money swimming around. No way are these real estate prices going down.&nbsp;But they do. It has happened in the past and it’s happening now.&nbsp;In 1997–2003, when the real estate cycle was on a downturn, Mumbai real estate saw price corrections of about 50%. Yes, it was like having an end-of-season half-rate sale.In 2015, in several separate transactions, private equity funds have bought apartments from well-known developers at a 40% discount over prevailing ask prices. Not kidding!Because we don’t have any real estate exchange that tells us about real-time prices, it is very difficult to know how real estate property is trading. Even if the prices fall, it is very difficult for us to know about it and this keeps feeding into our belief that real estate prices never fall.<img src="https://i.wlycdn.com/insights-new-release/articles/invest-in-real-estate-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Invest in Real Estate: It’s just not worth it right now. ">Of course, there are a few bright patches in commercial real estate like A-grade office space. Occupancy levels are improving as more and more people are opting for better office space, and it is possible to make as much as 8–9% yield.But the ticket prices are so high, sometimes upwards of 2 crores, that it’s very difficult for the average middle-class citizen to even think about it. Add to that the headache of finding the right property manager, who will find the tenants and maintain the property for you.&nbsp;It’s just not worth it right now.&nbsp;Please don’t put your hard-earned money into real estate. All it will accomplish is to add an illiquid, highly risky bet to your portfolio and imbalance it.So, hold your horses and stick to that rented apartment. Paying 35,000 a month for a 1.5 crore house is a much better bet than actually owning it.

There are over 750,000 unsold apartments across major Indian cities. Delay in possession and unrealistically high prices do not make it a wise investment.

Is It The Right Time to Invest in Real Estate?

We all have that one relative who keeps reminding us how so-and-so became a crorepati investing in real estate. And let&rsquo;s be honest, we all have thought about it at least once. After all, everyone knows that it&rsquo;s a sure shot bet to multiply your wealth, right?&nbsp;Here&rsquo;s reality.&nbsp;There are over 750,000 unsold apartments across major Indian cities.&nbsp;Delhi-NCR alone, our most popular real estate investment destination, could take 5 years or more to sell all of its unsold apartments.Hold on. There are so many middle-class households who don&rsquo;t own a house. The demand is there, right?&nbsp;Not really.&nbsp;70% of unsold homes in Mumbai cost Rs 1 crore or more.When these houses were being made, somehow the investors speculated that there would be a huge demand for them at those prices. It turns out that the prices are so high that people are better off in rented apartments than paying those hefty EMIs.&nbsp;What makes it all worse is that most of us are no longer confident of purchasing under-construction houses, as there have been so many instances of delayed delivery. And this is a vicious cycle in itself. Not enough buyers implies builders facing cash constraints. Cash constraints lead to delay in delivery time. Delays in delivery lead to lesser trust in the builders and so fewer buyers put in the money. And on and on it goes.&nbsp;Although the world around us is giving us all these hints, we are still lingering to our dream of investing in real estate. The one reason for this is the belief that real estate prices never go down. On the face of it, it does seem to be true. There&rsquo;s limited space in the world, the population is still growing at a rapid rate and there&rsquo;s just so much black money swimming around. No way are these real estate prices going down.&nbsp;But they do. It has happened in the past and it&rsquo;s happening now.&nbsp;In 1997&ndash;2003, when the real estate cycle was on a downturn, Mumbai real estate saw price corrections of about 50%. Yes, it was like having an end-of-season half-rate sale.&nbsp;In 2015, in several separate transactions, private equity funds have bought apartments from well-known developers at 40% discount over prevailing ask prices. Not kidding!Because we don&rsquo;t have any real estate exchange that tell us about real-time prices, it is very difficult to know how actually real estate property is really trading. Even if the prices fall, it is very difficult for us to know about it and this keeps feeding into our belief that real estate prices never fall.&nbsp;Of course, there are a few bright patches in commercial real estate like A-grade office space. Occupancy levels are improving as more and more people are opting for better office space, and it is possible to make as much as 8&ndash;9% yield.&nbsp;But the ticket prices are so high, sometimes upwards of 2 crores, that it&rsquo;s very difficult for the average middle class citizen to even think about it. Add to that the headache of finding the right property manager, who will find the tenants and maintain the property for you.&nbsp;It&rsquo;s just not worth it right now.&nbsp;Please don&rsquo;t put your hard earned money into real estate. All it will accomplish is to add an illiquid, highly risky bet to your portfolio and imbalance it.So, hold your horses and stick to that rented apartment. Paying 35,000 a month for a 1.5 crore house is a much better bet than actually owning it.&nbsp;

Wait, this can't be true

Is your money in savings account giving you the returns which beats inflation? Perhaps not.

<article><main><section name="bdca">Savings accounts are awesome? they are risk-free, easy to use and give you a sense of security that you associate with banks. They are also a sure-shot way for your money to lose value over time.Losing value? I get interest on what I save!Sure, your money is growing slowly in the account at an average rate of 4% every year without you having to face any risks. But is that 4% enough to keep pace with the rising prices? Not really.As per the reports of the <a href="https://en.wikipedia.org/wiki/Ministry_of_Statistics_and_Programme_Implementation" rel="noopener noreferrer" target="_blank">Ministry of Statistics and Programme Implementation (MOSPI)</a>, in the last 3 years, Inflation in India reached a high of 11.16% in November 2013 and a record low of 3.66% in August of 2015. On average, prices have been rising at a rate of 8.14% every year for the last 3 years.On the face of it, 8.14% may not seem too bad to you. Something that costs you Rs 1 lac today, will cost you only Rs 8000 more next year. But think of it in the long term. With compounding effects, the price will grow into a monster you may not be able to handle.<img src="https://i.wlycdn.com/insights-new-release/articles/never-save-in-bank-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Never Save Your Money In A Bank Account">Let’s look at some real numbers that will help us make the point.&nbsp;</section></main></article><article><main><section name="bdca">The <a href="https://en.wikipedia.org/wiki/Consumer_price_index" rel="noopener noreferrer" target="_blank">Consumer Price Index (CPI)</a> is a price indicator that tells us how much a typical basket of goods would cost for a household. In 1995, the CPI was 37.992, while in 2015, the CPI is 145.642. It means that goods worth Rs 1,00,000 in 1995, would cost Rs 3,83,349 in 2015.&nbsp;Now, if you had kept Rs 1,00,000 in the bank in 1995, it would have grown only to Rs 2,19,112 in 2015, assuming the average interest rate of 4%. This means your money was growing at a slower rate than the prices outside. So, from a practical person’s point of view, your money has lost value sitting in that savings account.<h2 name="bcfc">Beyond the Savings Account</h2>Seeing how money in the bank means less and less over the years, we think it’s time you start educating yourself about other investment methods. You should be looking at ways that will not only grow your wealth over time but will do so in a manner that safeguards you against rising prices.&nbsp;<img src="https://i.wlycdn.com/insights-new-release/articles/never-save-in-bank-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Beyond the Savings Account">If you had taken the same 1,00,000 and <a href="http://wealthy.in/articles/investing-in-equity-2" rel="noopener noreferrer" target="_blank">invested in equities</a> in 1995, assuming a 10% annual return (historical evidence), it would have grown to a staggering 5,60,000. This not only beats inflation but increases your wealth.Members of your family still stick to their savings account, don’t they? Help them out by sharing this article with them. You owe them that much.</section></main></article>

Saving Money in Bank accounts are risk-free, easy to use and sense. They are also a sure-shot way for your money to lose value over time.

Why You Should Never Save Your Money In A Bank Account

<article><main><section name="bdca">Savings accounts are awesome? they are risk-free, easy to use and give you a sense of security that you associate with banks. They are also a sure-shot way for your money to lose value over time.Losing value? I get interest on what I save!&nbsp;Sure, your money is growing slowly in the account at an average rate of 4% every year without you having to face any risks. But is that 4% enough to keep pace with the rising prices? Not really. &nbsp;As per the reports of Ministry of Statistics and Programme Implementation (MOSPI), in the last 3 years, Inflation in India reached a high of 11.16% in November 2013 and a record low of 3.66% in August of 2015. On an average, prices have been rising at the rate of 8.14% every year for the last 3 years.&nbsp;On the face of it, 8.14% may not seem too bad to you. Something that costs you Rs 1 lac today, will cost you only Rs 8000 more next year. But think of it in the long term. With compounding effects, the price will grow into a monster you may not be able to handle.&nbsp;Let&rsquo;s look at some real numbers that will help us make the point.&nbsp;</section></main></article><article><main><section name="bdca">The Consumer Price Index (CPI) is a price indicator that tells us how much a typical basket of goods would cost for a household. In 1995, the CPI was 37.992, while in 2015, the CPI is 145.642. It basically means that, goods worth Rs 1,00,000 in 1995, would cost Rs 3,83,349 in 2015.&nbsp;Now, if you had kept Rs 1,00,000 in the bank in 1995, it would have grown only to Rs 2,19,112 in 2015, assuming the average interest rate of 4%. This means your money was growing at a slower rate than the prices outside. So, from a practical person&rsquo;s point of view, your money has actually lost value sitting in that savings account.&nbsp;Beyond the savings accountSeeing how money in the bank actually means less and less over the years, we think it&rsquo;s time you start educating yourself about other investment methods. You should be looking at ways that will not only grow your wealth over time, but will do so in a manner that safeguards you against rising prices.&nbsp;If you had taken the same 1,00,000 and invested in equities in 1995, assuming a 10% annual return (historical evidence), it would have grown to a staggering 5,60,000. This not only beats inflation, but actually increases your wealth.&nbsp; Members of your family still stick to their savings account, don&rsquo;t they? Help them out by sharing this article to them. You owe them that much.&nbsp;</section></main></article>

The 4% disease your money might have

Startup investing is not always rewarding. Don't rush into becoming an angel investor without understanding the risk reward ratio of startup investing.

In 2004, Peter Thiel put $500,000 in Facebook as an angel investor. When he cashed in his shares in 2012, he got over $1 Billion.In 2000, Masayoshi Son put $20 Million in Alibaba. He is estimated to get over $80 Billion when he cashes in his 34% stock.These stories are the stuff of legends now. Angels betting on Unicorns is the flavor of the season in the whole equities investment market.Even in India, we have several success stories of upstarts becoming highly valued startups, making their angel investors wealthy. <a href="http://makemytrip.com/" rel="noopener noreferrer" target="_blank">MakeMyTrip</a>, <a href="https://www.olacabs.com/" rel="noopener noreferrer" target="_blank">Ola Cabs</a>, <a href="https://www.flipkart.com/" rel="noopener noreferrer" target="_blank">Flipkart</a>, and Druva Software are probably the best examples of this.<img src="https://i.wlycdn.com/insights-new-release/articles/invest-in-startup-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Top Indian Startups">These success stories have led to many people seriously considering investing in startups as the best way to multiply their money. Maybe you are thinking about it too. If that is indeed the case, it brings us, quite literally, to the billion-dollar question:&nbsp;<h2 name="c7ba">Is Angel Investing the right choice for you?</h2>To answer this, let’s take a closer look at what angel investors are faced with.&nbsp;The angel investor typically invests a small sum at a very early stage of the company and waits for the company to grow big. Every successful investment multiplies the money 30–100 times while every bad one returns a big fat zero.&nbsp;This means the angel has to invest in multiple companies, in the hope that at least one or two will reap the huge returns.To top that, unlike publicly listed companies, startup stock is not liquid. You can’t sell it whenever you want. It often takes 4–7 years to cash out from a successful startup investment. One needs to have a lot of money and a lot of patience to play this game.Take <a href="https://www.ycombinator.com/" rel="noopener noreferrer" target="_blank">Y Combinator</a>, for example. They invested in 940 companies over the last 10 years and today they are one of the most successful investors. They had the cash to bet on nearly a thousand startups and patience to wait for companies like Airbnb, Dropbox, Zenefits, Stripe and InstaCart to make it worth their while.<img alt="angel investing in startupsIs Angel Investing the right choice for you?" src="https://i.wlycdn.com/articles/angel-investing-in-startups.png" class="fr-dib" style="width: 800px;">Y Combinator’s enviable early-stage success (yes, 5% hit rate is enviable) is down to its people. Before starting as investors, the founders were entrepreneurs themselves.They have the experience, network, know-how, and intellect to answer questions like these:<ul><li name="71f9">Is this product/service providing a solution for a large need?</li><li name="71f9">Does this team have the capability to execute?</li><li name="33ad">What are the barriers to scale?</li><li name="9c17">Can technology disrupt existing business models or create new markets?</li></ul>Compare this to an individual investor, which is probably what you are going to be. More often than not, an individual investor has to depend on one variable alone: the quality of the team. Maybe they went to school together or have heard great things about the founders of their friends.Assessing a startup investment is both an art and science and it’s something that one becomes better at only with experience.Let’s run the numbers for you.&nbsp;To be an investor of any worth, you’ll have to put in at least 5 lakh rupees in any company. Assuming that you can match Y Combinator’s success rate of 5%, you will need at least 20 companies to get that one unicorn. This means you’ll have to put in at least 1 crore.&nbsp;If you are willing to commit that kind of money over the next few years, then startup investing might be a good strategy for you. And even if you have that kind of money, it is better to make those first few investments along-with experienced startup investors.<img src="https://i.wlycdn.com/insights-new-release/articles/invest-in-startup-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What it takes to become an Angel Investor">In any case, until you reach a life-stage where you can build a portfolio of startups, you are better off investing in other equity asset classes, as a top-rated <a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">mutual fund</a>.

Investing in a Startup is not always rewarding. Don't rush into becoming an angel investor without understanding the risk reward ratio of startup investing.

Is Investing in a Startup Worth It?

In 2004, Peter Thiel put $500,000 in Facebook as an angel investor. When he cashed in his shares in 2012, he got over $1 Billion.In 2000, Masayoshi Son put $20 Million in Alibaba. He is estimated to get over $80 Billion when he cashes in his 34% stock.&nbsp;These stories are the stuff of legends now. Angels betting on Unicorns is the flavour of the season in the whole equities investment market. Even in India, we have several success stories of upstarts becoming highly valued startups, making their angel investors really really wealthy. MakeMyTrip, Ola Cabs, Flipkart, and Druva Software are probably the best examples of this.These success stories have led to many people seriously considering investing in startups as the best way to multiply their money. Maybe you are thinking about it too. If that is indeed the case, it brings us, quite literally, to the billion-dollar question: Is Angel Investing the right choice for you?To answer this, let&rsquo;s take a closer look at what angel investors are actually faced with.&nbsp;The angel investor typically invests a small sum at a very early stage of the company and waits for the company to grow big. Every successful investment multiplies the money 30&ndash;100 times while every bad one returns a big fat zero.&nbsp;This means the angel has to invest in multiple companies, in the hope that at least one or two will reap the huge returns. To top that, unlike publicly listed companies, startup stock is not liquid. You can&rsquo;t sell it whenever you want. It often takes 4&ndash;7 years to cash out from a successful startup investment. One really needs to have a lot of money and a lot of patience to play this game.&nbsp;Take Y Combinator, for example. They invested in 940 companies over the last 10 years and today they are one of the most successful investors. They had the cash to bet on nearly a thousand startups and patience to wait for companies like AirBnB, Dropbox, Zenefits, Stripe and InstaCart to make it worth their while.<img class="fr-dib" src="https://i.wlycdn.com/articles/angel-investing-in-startups.png" alt="angel investing in startups">Y Combinator&rsquo;s enviable early-stage success (yes, 5% hit rate is enviable) is down to its people. Before starting out as investors, the founders were entrepreneurs themselves. They have the experience, network, know-how and intellect to answer questions like these:<ul><li name="71f9">Is this product/service providing a solution for a large need?</li><li name="71f9">Does this team have the capability to execute?</li><li name="33ad">What are the barriers to scale?</li><li name="9c17">Can technology disrupt existing business models or create new markets?</li></ul>Compare this to an individual investor, which is probably what you are going to be. More often than not, an individual investor has to depend on one variable alone: the quality of the team. Maybe they went to school together or have heard great things about the founders from their friends. Assessing a startup investment is both an art and science and it&rsquo;s something that one becomes better at only with experience.Let&rsquo;s run the numbers for you.&nbsp;To be an investor of any worth, you&rsquo;ll have to put in at least 5 lakh rupees in any company. Assuming that you can match Y Combinator&rsquo;s success rate of 5%, you will need at least 20 companies to get that one unicorn. This means, you&rsquo;ll have to put in at least 1 crore.&nbsp;If you are willing to commit that kind of money over next few years, then startup investing might be a good strategy for you. And even if you have that kind of money, it is better to make those first few investments along-with experienced startup investors.In any case, until you reach a life-stage where you can build a portfolio of startups, you are better off investing in other equity asset classes, like a top-rated mutual fund.

Maybe, maybe not

Over long-term, equities give better returns than all other asset classes.

Back in April 2008, a 23-year old engineer started putting 10% of his salary every year in “equities”. Over the next eight years, his 5.5 lacs become 13.5 lacs, multiplying his wealth by two and a half times. Today, he is one happy 30-year old.But wait,&nbsp;you’d say.&nbsp;Didn’t you say my wealth will grow three to five times when I invest in equities? Two and a half falls a little short of that claim, don’t you think? And what are these magical ‘equities’ anyway?<h2 name="c94a">What is Equity?</h2>Well, to put it very very simply, Equity implies Ownership. You may not be an owner&nbsp;in the sense that you can dictate what goes on in the company on a day-to-day basis, but you are entitled to a portion in the profits of the company if it chooses to distribute the profits through <a href="https://en.wikipedia.org/wiki/Dividend" rel="noopener noreferrer" target="_blank">dividends</a>.&nbsp;Confused? Let’s take an example.Suppose company ABC Inc. wants to raise money to run its business. It goes to the stock market and says that it has divided itself nominally into 100,000 shares. Now, you hear this news and you go ahead and buy 1000 of these shares at their market value.So, you are now a 1% owner of the company ABC. If a year later ABC wants to share its profits amongst its owners, rather than reinvesting those profits for higher returns, you are entitled to receive 1% of whatever the profits are. Hurray!<img src="https://i.wlycdn.com/insights-new-release/articles/investing-in-equity-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What is Equity?">Now, usually, the returns through dividends are not that much and that is not what we were referring to when we said it will multiply your wealth. The real money is in buying, holding and selling the shares themselves.&nbsp;Compared to today, the company whose shares you are holding will either go uphill or downhill in the future. Depending on how well it does, the value of the company in the market will increase and as a result, the value of the stock you are holding will go up too.Now imagine that instead of one, you hold stock of multiple companies through a mutual fund. So the total value of your equity investment will go up depending on the overall performance of these companies taken together. Over time, once the value is high enough for your satisfaction, you can sell it off and get your money.In the remainder of this article, we argue that if you are patient enough, you can multiply your money by up to 5 times through this process. Please note here that we are discussing stock or shares in a <a href="https://en.wikipedia.org/wiki/Public_company" rel="noopener noreferrer" target="_blank">publicly listed company</a> like Infosys. However, equity can be in a private firm as well.&nbsp;<h2 name="9d24">How to multiply your wealth by 5 times?</h2>OK, now that you understand equities a little better, let’s get back to our engineer friend’s investments and see why we made the outrageous claim.<img src="https://i.wlycdn.com/insights-new-release/articles/investing-in-equity-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="How to multiply your wealth by 5 times?">When he started in April 2008, he put a total of 40,000 in a top-rated equity mutual fund. Every subsequent year, accounting for a 15% increase in his income, he put in more and more money in that equity mutual fund. You can see in the table below how much each of those amounts has grown to today.<div class="table-papa"><div class="panel panel-white"><div class="panel-body table-responsive"><table class="striped-table table" style="margin-right: calc(0%); width: 100%;"><thead><tr><th style="text-align: center;">Date of Investment</th><th style="text-align: center;">Amount Invested (Rs)</th><th style="text-align: center;">Value in October 2015* (Rs)</th><th style="text-align: center;">Multiplication Factor</th></tr></thead><tbody><tr><td style="text-align: center;">April 2008</td><td style="text-align: center;">40,000</td><td style="text-align: center;">175,926</td><td style="text-align: center;">4.4x</td></tr><tr><td style="text-align: center;">April 2009</td><td style="text-align: center;">46,000</td><td style="text-align: center;">251,421</td><td style="text-align: center;">5.5x</td></tr><tr><td style="text-align: center;">April 2010</td><td style="text-align: center;">52,900</td><td style="text-align: center;">160,474</td><td style="text-align: center;">3.0x</td></tr><tr><td style="text-align: center;">April 2011</td><td style="text-align: center;">60,835</td><td style="text-align: center;">159,887</td><td style="text-align: center;">2.6x</td></tr><tr><td style="text-align: center;">April 2012</td><td style="text-align: center;">69,960</td><td style="text-align: center;">156,616</td><td style="text-align: center;">2.2x</td></tr><tr><td style="text-align: center;">April 2013</td><td style="text-align: center;">80,454</td><td style="text-align: center;">180,514</td><td style="text-align: center;">2.2x</td></tr><tr><td style="text-align: center;">April 2014</td><td style="text-align: center;">92,522</td><td style="text-align: center;">163,348</td><td style="text-align: center;">1.8x</td></tr><tr><td style="text-align: center;">April 2015</td><td style="text-align: center;">106,401</td><td style="text-align: center;">107,432</td><td style="text-align: center;">1.0x</td></tr></tbody></table></div>*We have considered a top-rated equity mutual fund for the analysis</div></div>As you can notice, Equity rewards Patience. The investments in 2008 and 2009 have increased by more than four times. This is what we meant when we said that equities could grow your wealth. If you stick to it long enough, your rewards could go up by 5 times.<h2 name="0d79">How does equity do compared to other investment opportunities?</h2>We ran an analysis by taking the same investment amounts and checked how much our friend’s money would have amounted to had he gone for the other options.<img alt="How does equity do compared to other investment opportunities?" src="https://i.wlycdn.com/articles/mutual-funds-outperformed-other-asset-classes" class="fr-dib">** Interest rate of long-term Bank FDs, greater than 3 years, was considered for analysisAs you can see, his choice of putting his money in equities has far outstripped the other options like <a href="http://wealthy.in/articles/invest-in-gold-33" rel="noopener noreferrer" target="_blank">Gold</a>, <a href="http://wealthy.in/articles/ppf-vs-elss-better-tax-saver-29" rel="noopener noreferrer" target="_blank">Public Provident Fund (PPF)</a> and Bank Fixed Deposits.&nbsp;On top of that, Equity Investment is not risky.&nbsp;Are you kidding me? The stock market goes up and down all the time!Yes, it does, but we are talking long term here — upwards of 5 years. Individual companies may go down real bad, but a good equity mutual fund typically gives you good returns overall. If you stay disciplined and don’t get worked up each time your investment portfolio goes down in notional value, you will see that equities will reward you, unlike any other investment choice.&nbsp;This brings us to the big daddy of all questions:<h2 name="7656">How can you invest in equities?</h2>If you are sold to the idea that equities are a good enough investment choice for you, there are several ways you can go ahead and do it. You can:<ul style="list-style-type: disc;"><li name="2917">Buy units of equity <a href="http://wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">mutual funds</a></li><li name="75bd">Purchase stock of a listed company from BSE or NSE</li><li name="0ca2"><a href="http://wealthy.in/articles/investing-in-startup-4%20wealthy.in/articles/what-is-mutual-fund-32" rel="noopener noreferrer" target="_blank">Invest in your friend’s startup</a></li></ul>We have discussed each of these in greater detail in the subsequent articles of this section. Do check them out.&nbsp;And yeah, most importantly, Happy Investing!If you liked the article and are sold to the idea that equities can increase your wealth 5 times over, do recommend this article to the people you care about.&nbsp;

Growing Wealth with Equities are not risky. Investing in Equity could give you better returns than Gold, Public Provident Fund and Bank Fixed Deposits.

How to Grow your Wealth by Investing in Equity

What is this risky business

Managing wealth encompasses various parts of one’s finances. When all of them are put together, they lead to financial well-being.

This is the story of Mr. Arora. A small business owner, Mr. Arora lives in Delhi with his family of four. Like most people in their middle age, Mr. Arora believes that he’s taken care of his family’s financial health by investing in the stock market. He’s read up about investing and spreads his savings across stocks as well as mutual funds.<img src="http://i.wlycdn.com/insights-new-release/articles/wealth-management-1-min.webp" style="box-sizing: border-box; cursor: pointer; padding: 0px 1px; max-width: 100%; color: rgb(34, 34, 34); font-family: Avenir-Book; font-size: 20px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); text-decoration-style: initial; text-decoration-color: initial; width: 800px;" class="fr-fic fr-dib" alt="What's Wealth Management &amp; How It’s Different from Investing?">Having started his <a href="https://www.investopedia.com/terms/s/systematicinvestmentplan.asp" rel="noopener noreferrer" target="_blank">systematic investments</a>, Mr. Arora sits happily with the belief that his family’s finances are taken care of. But what Mr. Arora doesn’t realize is that investing is just one of the many aspects of wealth management that he needs to focus on.&nbsp;Managing wealth encompasses various parts of one’s finances. When all of them are put together, they lead to financial well-being. Let’s understand what wealth management means and how it goes beyond mere investing.<h2>What is Wealth Management?</h2>Wealth management is more than just investments; it is a holistic view of one’s financial life. Managing one’s wealth from more than one perspective requires an understanding of different financial aspects, services, and products.&nbsp;Wealth management begins when all of these are taken care of. Investing is merely just one part of it. Many people tend to believe that wealth management is for the rich. Wealth management is often considered to be a service that rich people avail. But that is a thing of the past. Today, wealth management is of as much importance to the middle class as it is to the rich. Maybe, even more.<img src="http://i.wlycdn.com/insights-new-release/articles/wealth-management-2-min.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What is Wealth Management?">You might think that you don’t have a lot of wealth but even then, whatever you have needs to be managed, protected and built further. The amount of wealth you have doesn't matter. What matters is how well you’re able to manage it. Good management of your wealth will lead you to hold onto what you have and build upon it as well.&nbsp;<h2>What does wealth management include?</h2>For most of us and middle-class people like Mr. Arora, wealth management would comprise the following few things:<ul style="list-style-type: disc;"><li>Saving&nbsp;</li><li>Insurance&nbsp;</li><li>Investments</li><li>Asset allocation</li><li>Goal setting</li></ul><img src="http://i.wlycdn.com/insights-new-release/articles/wealth-management-3-min.webp" style="width: 800px;" class="fr-fic fr-dib" alt="What does wealth management include?">One can’t and one shouldn’t spend everything that they earn. Saving some of what you make is the first step towards managing and building wealth. If you don’t save, you won’t have any money to buy insurance or to invest. There is no thumb rule on how much you should save, but 10% of your monthly income is a good place to start.The second part of wealth management is insurance. This includes life insurance as well as <a href="http://What%20is%20Health%20Insurance%20and%20How%20to%20Choose%20One?" rel="noopener noreferrer" target="_blank">health insurance</a>. Both types of insurance are equally important and ideally, should be bought before you begin your investment journey. Life insurance is important because it can help your dependents in case of your untimely demise. Medical insurance is critical because it can save you from losing your accumulated wealth in case of a medical emergency.&nbsp;Remember: insurance should be treated as an expense and your aim shouldn’t be to <a href="https://www.wealthy.in/articles/truths-about-life-insurance-1" rel="noopener noreferrer" target="_blank">earn any returns out of your insurance policies</a>.<img src="http://i.wlycdn.com/insights-new-release/articles/wealth-management-4-min.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Insurance - Wealth Management">Once insurance is taken care of, it’s time to start investing. Enough has been said about investing and why it is important. Investing helps you grow your money. But investing shouldn’t be done without giving thought to the other two aspects of wealth management--asset allocation and goal setting.Investments can be made in different types of assets like equity, debt, and gold. The asset you choose to primarily allocate your investments in would depend on the type of risks you can take and your investment objectives. This is where goal setting comes in.<a href="http://wealthy.in/articles/long-term-investment-22" rel="noopener noreferrer" target="_blank">Long-term</a> goals allow you to take higher risks, which means you can invest more in equities. On the other hand, short-term goals require your investments to be relatively safer. Hence, for short-term goals, you can allocate a higher amount to debt instruments. Setting goals will help you achieve optimal asset allocation and eventually, meet your investment objectives.This is how wealth management goes beyond investing. For someone like Mr. Arora, the other aspects of wealth management are as important as investing.

What's Wealth Management & How It’s Different from Investing?

No! Wealth Management is not same as just investing.

Start investing when you are young to fully realize the power of compounding. Grow your money by investing early.

It is believed that Albert Einstein once said that compounding interest is the eighth wonder of the world. We can’t confirm if he actually did say this or not, but if he did, he wasn’t far from the truth.Imagine this: You have a bar of your favorite chocolate in the fridge. You don’t eat it today and when you open up the fridge tomorrow, there are two bars of chocolate. Interesting, right? You still don’t eat any of the chocolates and the next day, there are three chocolates in the fridge.Sounds like magic, doesn’t it? Well, this is how compounding interest works and it is no less than magic.&nbsp;<img src="https://i.wlycdn.com/insights-new-release/articles/power-of-compounding-1.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Compounding Quote by Albert Einstein">Compounding interest is when you earn interest on your interest. In comparison, simple interest is when you earn interest on your investments alone.For example, let’s say you invest Rs. 100 and earn a 10% interest on it in a year. So, at the end of the first year, you will have Rs. 110. Now, if you leave your investment as it is, in the second year, you will earn 10% interest in not only the invested Rs. 100 but the Rs. 10 worth of interest earned earlier as well. That is -- you will earn interest on Rs. 110.&nbsp;This is how compounding interest helps you gain by allowing you to earn more as you stay invested. This might seem insignificant for a period of 1 or 2 years, but the real magic begins when you invest for a long period of time.Let’s say you invest Rs. 10,000 every year for a period of 5 years. If you earn 10% compounding interest on your investments, here’s how the magic will unfold to hike up the value of your invested Rs. 50,000.<table style="width: 100%;"><thead><tr><th colspan="5" style="background-color: rgb(209, 213, 216); width: 99.8983%;"><div style="text-align: center;">Power of Compounding Interest</div></th></tr></thead><tbody><tr><td style="width: 9.8375%; text-align: center;"><div data-empty="true" style="text-align: center;">Year</div></td><td style="width: 30.2439%; text-align: center;">Opening balance </td><td style="width: 20%; text-align: center;">Investment</td><td style="width: 20%; text-align: center;">Interest at 10%</td><td style="width: 20%; text-align: center;">Closing balance</td></tr><tr><td style="width: 9.8375%; text-align: center;">1</td><td style="width: 30.2439%; text-align: center;">-</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 1,000</td><td style="width: 20%; text-align: center;">Rs. 11,000</td></tr><tr><td style="width: 9.8375%; text-align: center;">2</td><td style="width: 30.2439%; text-align: center;">Rs. 11,000</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 2,100</td><td style="width: 20%; text-align: center;">Rs. 23,100</td></tr><tr><td style="width: 9.8375%; text-align: center;">3</td><td style="width: 30.2439%; text-align: center;">Rs. 23,100</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 3,310</td><td style="width: 20%; text-align: center;">Rs. 36,410</td></tr><tr><td style="width: 9.8375%; text-align: center;">4</td><td style="width: 30.2439%; text-align: center;">Rs. 36,410</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 4,641</td><td style="width: 20%; text-align: center;">Rs. 51,051</td></tr><tr><td style="width: 9.8375%; text-align: center;">5</td><td style="width: 30.2439%; text-align: center;">Rs. 51,051</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 6,105</td><td style="width: 20%; text-align: center;">Rs. 67,156</td></tr><tr><td colspan="2" style="width: 40.0814%;"><div style="text-align: right;">Total</div></td><td style="width: 20%; text-align: center;">Rs. 50,000</td><td style="width: 20%; text-align: center;"> </td><td style="width: 20%; text-align: center;">Rs. 67,156</td></tr></tbody></table>Thanks to compounding interest, your Rs. 50,000 grew to Rs. 67,156. You earned interest worth Rs. 17,156. If you had earned simple interest of 10%, you would have earned just Rs. 5,000 on your investments.&nbsp;Compounding interest helped you earn Rs. 12,156 more!<img src="https://i.wlycdn.com/insights-new-release/articles/power-of-compounding-2.webp" style="width: 800px;" class="fr-fic fr-dib" alt="Increasing Compounding Interest">But this is just the start. More magic happens when you not only invest every year but increase your investment amount as well. Investment experts, after all, recommend that you increase the amount you invest every year.Your salary or your income goes up every year, which is why your quantum of investment should go up as well. Another reason is that inflation also goes up every year. Hence, it helps when your investments are also earning for you.See how the magic of compounding interest unfolds when you increase your investments by 10% year on year.<table style="width: 100%;"><thead><tr><th colspan="5" style="background-color: rgb(209, 213, 216); width: 99.8983%;"><div style="text-align: center;">Power of Compounding Interest with Increasing Investments</div></th></tr></thead><tbody><tr><td style="width: 9.8375%; text-align: center;"><div data-empty="true" style="text-align: center;">Year</div></td><td style="width: 30.2439%; text-align: center;">Opening balance</td><td style="width: 20%; text-align: center;">Investment</td><td style="width: 20%; text-align: center;">Interest at 10%</td><td style="width: 20%; text-align: center;">Closing balance</td></tr><tr><td style="width: 9.8375%; text-align: center;">1</td><td style="width: 30.2439%; text-align: center;">-</td><td style="width: 20%; text-align: center;">Rs. 10,000</td><td style="width: 20%; text-align: center;">Rs. 1,000</td><td style="width: 20%; text-align: center;">Rs. 11,000</td></tr><tr><td style="width: 9.8375%; text-align: center;">2</td><td style="width: 30.2439%; text-align: center;">Rs. 11,000</td><td style="width: 20%; text-align: center;">Rs. 11,000</td><td style="width: 20%; text-align: center;">Rs. 2,200</td><td style="width: 20%; text-align: center;">Rs. 24,200</td></tr><tr><td style="width: 9.8375%; text-align: center;">3</td><td style="width: 30.2439%; text-align: center;">Rs. 24,200</td><td style="width: 20%; text-align: center;">Rs. 12,100</td><td style="width: 20%; text-align: center;">Rs. 3,630</td><td style="width: 20%; text-align: center;">Rs. 39,930</td></tr><tr><td style="width: 9.8375%; text-align: center;">4</td><td style="width: 30.2439%; text-align: center;">Rs. 39,930</td><td style="width: 20%; text-align: center;">Rs. 13,310</td><td style="width: 20%; text-align: center;">Rs. 5,324</td><td style="width: 20%; text-align: center;">Rs. 58,564</td></tr><tr><td style="width: 9.8375%; text-align: center;">5</td><td style="width: 30.2439%; text-align: center;">Rs. 58,564</td><td style="width: 20%; text-align: center;">Rs. 14,641</td><td style="width: 20%; text-align: center;">Rs. 7,320</td><td style="width: 20%; text-align: center;">Rs. 80,525</td></tr><tr><td colspan="2" style="width: 40.0814%;"><div style="text-align: right;">Total</div></td><td style="width: 20%; text-align: center;">Rs. 61,051</td><td style="width: 20%; text-align: center;"> </td><td style="width: 20%; text-align: center;">Rs. 80,525</td></tr></tbody></table>The Rs. 61,051 you invested over 5 years turned to Rs. 80,525, which is an interest earned worth Rs. 19,474. Here, simple interest would have gotten you Rs. 6,105 only!Here's a graph to explain the difference between Simple and Compound Interest<img src="https://i.wlycdn.com/insights-new-release/articles/compound-interest-5.webp" style="width: 800px;" class="fr-fic fr-dib" alt="a graph to explain the difference between Simple and Compound Interest">Yes, compounding interest is magical. But it’s not magic that will happen overnight.&nbsp;Compounding takes its own time to turn fruitful. You need to do the following two things to benefit from compounding interest:<ul style="list-style-type: disc;"><li>Start early: If you’re young, you have time on your side and the power of compounding needs nothing else more than time to flourish. Start investing as early as you can. But of course, if you haven’t started yet, you can start now. It’s never too late. Learn how to get started here: <a href="http://wealthy.in/articles/5-steps-financial-freedom-18" rel="noopener noreferrer" target="_blank">5 Steps to Achieve Financial Freedom</a> </li><li>Stay at it: Successful investors are patient investors. Even when the going is tough, when the markets are turbulent, the best thing you can do for yourself is not only stay invested, but also continue investing. Learn more about long-term investment here: <a href="https://www.wealthy.in/articles/long-term-investment-22" rel="noopener noreferrer" target="_blank">What Is Long-term Investing and Does It Really Work?</a></li></ul> <blockquote>Remember:&nbsp;investing is a marathon, not a sprint. And compounding interest is the ally that will help you reach the finish line and beyond with ease.&nbsp;</blockquote>

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