May 13, 2002 11:51 PM
8656 Views
(Updated May 14, 2002 12:04 AM)
The Rs.1 crore Dream :
The day I get Rs.1 Crore! That will be the end of my work life.I may earn that money by hook or crook may it be bank robbery or a lottery or KBC !! I shall make a deposit with the bank for an FD @9%. That will earn me Rs.9 Lakhs for the year & approx Rs.6.3 Lakhs net of tax. I think that should suffice for an individuals needs and that of his family and save also . I shall stop working & I shall live happily ever after without any tension.
But, If wishes were horses , beggars would ride !! & till then I need to abide by what I have to write here or who knows I may even attain the target in the stock market boom
Why Invest
Savings done by people are for varied reasons , viz
For making a living * out of Investing activities which may be trading activities in the stock markets or by earning interest from deposits. Trading activities are basically earning the difference by the buying & selling of shares & stocks in the markets.
Post retirement expenses: To care of self & the dependants of the family afetr his retirement a person hhas to plan how one has to go about investing his post retirement benefits.
Education of children & their Marriage or any unforeseen circumstances: These are occasions & circumstances where a person ends up spending a lot of money. One also has to provide for contingencies that might arise in the future.
Tax benefits:
In the Indian scenario, the government encourages investment by giving rebates in taxes and deduction from the taxable income. These are section 88 rebate where in a maximum investment of Rs.100000/- is permissible for which one can get a rebate from tax of Rs.15000/- to Rs.20000/-.. There are other deductions like 80CCC which is a pension fund contribution upto a max of Rs.10000/- where one can save tax of upto Rs.3000/-. In case the investment is being made in Real estate by taking a loan then Income from House property allows a deduction of Rs 150000/- for a self occupied property where one ends up saving upto Rs.50000/-. & the in case it’s a let out property there is no limit to the investment.
Possible options
Equity Shares * are either through a primary or secondary market . Primary market is where the investors buys from a public issue of the company. While a secondary issue is a case where already issued shares that are listed in the stock exchange are traded in.
Mutual Funds * are either open ended or closed ended. Open-ended funds are those which can be bought or sold at any point of time. While closed ended schemes are the funds which have a fixed maturity date upto which these cannot be redeemed. Open Ended Mutual fundsmay be either Equity funds or Debt funds or Index funds , Sectoral funds , Gilt funds and Balanced Funds.
Fixed Deposits, Debentures & Bonds : *These are basically low risk investment options from which interest is earned on a regular basis. However the term of investment varies. Bonds & deposits are for longer periods & fixed Deposits may be for a short as well as long upto a max of 3/5 years. Certain Govt bonds are also tax free. FD’s may also be in banks.
Chit Funds : This kind of investment where in a pool of members of the chit fund deposit money on a regular basis. It works like the recurring deposit scheme in a bank. Auctions are held on a monthly basis, which may be bought by people in case of need & the returns from these go in reducing the monthly outflow for all the members.
Insurance: There are various insurance companies like LIC & some private operators like ICICI Prudential, HDFC Standard life etc which offer whole life or endowment policies which also cover the life of individuals. Some policies also provide for medical expenses. Tax benefit can be availed in most schemes.
Real Estate & Bullion : Real estate includes investment in Land or houses. Real Estate des require a lot of investment. There is a chance of good capital appreciation. Bullion i.e. Gold & Silver is also another safe investment option. The Govt also comes out with Gold Deposit schemes.
Gauging what you are , what u want & what u have :
One has to save on a regularly. One the basis of what he has to invest he has to plan things out. Liquidity of funds is a factor that needs to be considers while planning an investment.Basically there are three types of investors: Investors who are ready to take high risk, moderate risk or no risk at all. One should gauge what he wants so as to plan what to invest & how.For a high risk canditate, Real Estate, Equities & Derivatives are good options. For a moderate risk candidate, Equity or balanced Mutual Funds, Bullion etc are options & for no risk candidates Debt funds, Fixed Deposits Debntures Bonds etc. On the conclusions made from the above one must choose the best possible alternative on the basis of permutations & combinations available for investment is to be chosen.
My dream formula can be your formula ………..
With the income that I had dreamt of ie Rs. 4 Lakhs net of expenses out of Rs.6.3 Lakhs , my investment will be :
40 % in Equity Shares : Rs.1.60 Lakhs
25 % in Mutual Funds : Rs.1 Lakhs ( Equity, Debt & Balanced Funds )
35 % in Interest Bearing Avenues. Rs.1.4 Lakhs .
