Investment dilemma
Submitted by achintc on Thu, 2008-10-09 13:51.I have a problem which I want to share with you.
I am really confused as to where should I invest some money in order to save on taxes and do some good investment. It¢s not a big sum but then I just want to make a beginning and as all of us know that well begun is half done.
I am sure most of my us have faced the same conundrum at some point in time.
OK, Let us weigh the options.
Considering the current volatility in the markets, I am a bit apprehensive about investing in stocks, MF's, ELSS because I am a total newbie to all these (of course Mr. Agashe did impart some theoretical knowledge but that seems to be like ages ago and honestly the ground realities do not look like the same ). Although everyone says its a good time to invest (since the markets are low) but I have been hearing this for the past couple of months and since then BSE Sensex has tanked further and is touching new lows almost every week. (How happy and relieved I feel now not to have trusted all those rumors)
I browsed the internet for information on ULIPS (thought to be safer as well as tax free) and found out that it is really a very long term investment.(>> 7-8 years)
Again the current FD rates (Guess SBI is offering 10.5% for one year) are very tempting but not good enough (since its taxed )
I have heard a few things about PPF (which is tax free), Bonds, NSC's but do not have enough knowledge about them.
So after getting exhausted searching for information on the net (which led to more confusion), I thought why not try the most reliable source, hence this post.
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a quick investment list
PUMBA 06-08
some options
Its always fantastic to start early..
I know when I write below options, the economy around us is painting a complex picture (financial turmoil @ US, Europe markets and the uncertainty in major Asian markets)
Sensex falling reminds of text book rules and Prof gyaan - its the time where people start buying stocks typically of companies where growth projections will be robust once the right mood sets in, sectors where business is bound to happen through global as well as domestic demand/investment et all... All said and done, at your novice stage, its advisable to be cautious about venturing directly into stock market. Hang on for some time, follow trends closely and start making informed decisions when situation stabilizes.
Some immediate options -
1) Starting with mutual funds is always a good option primarily due to the diversified risk portfolio - especially the SIP (systematic Investment Plan), ELSS etc
2) PPF - a public provident fund account. It's government backed, currently 8 per cent per annum returns, and tax exemptions on its interest earnings and the final corpus, its effective post-tax return currently works out to approx 11% (for someone paying approx 31 % tax)
At this time, any 8-10% returns investment option should be appreciated, when markets go crazy, any positives in investment may well be a sign of smart investment till real opportunity beckons.
Also do refer to the below link to understand tax exemption categories -
http://specials.rediff.com/money/2008/feb/07tax1.htm
Knowing how much you will be taxed in your first assessment year should be a starting guideline on how much you need to invest to save tax from hitting you