Crossover and enjoy the benefits
September 14, 2015
With more crossover investments, you need less time to rebalance your portfolio You can tailor your portfolio to meet your life goals. For instance, if you want to accumulate wealth to meet your son’s or daughter’s college education, you can create an education portfolio for a specific time horizon with assets that will help you meet your goal. But even in such a goal-based investment framework, there are certain investments that you can transfer from one time horizon to another. In this article, we discuss such investments and their associated benefits. Equity holdings Crossover investments are those that you can use for two life goals, when one goal sequentially follows the other. Consider your retirement portfolio. You create this during
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How leave encashment is taxed
August 26, 2015
Government employees get full exemption on quitting, but others don’t Government employees may not draw the hefty pay packets their counterparts in the private sector do. But then, they do enjoy some unique ‘neighbour’s envy, owner’s pride’ benefits. One such goodie is the full tax exemption on the leave encashment they get on calling it quits from their jobs. This can translate into a tidy saving. Say, on leaving her job after years of service, a government employee gets leave encashment of Rs.6 lakh. She gets to take home the entire sum. Had the amount been taxable, she would have been poorer by about Rs. 62,000 to Rs.185,000 depending on her tax slab. Restrictions for some Now, the taxman is
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De-Tax: The HUF route to tax planning
August 26, 2015
Affluent Indian families often use an HUF structure to plan finances and reduce taxes An Hindu Undivided Family (HUF) is a separate legal entity under the Income Tax Act which is eligible for a basic income exemption limit of up to ₹2.5 lakh and several deductions, just like an individual. Under existing laws, the moment an individual (Hindu, Buddhist, Sikh or Jain) is born, he becomes a part of an already existing HUF of his father. Once he marries, another HUF headed by him comes into being. An HUF comprises the karta (the eldest male member), his wife and his three successive generations, which includes children, grandchildren and great grandchildren. It also includes the wives of the sons, grandsons and
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Relying too much on interest rate cuts
August 26, 2015
Monetary policy is no magic wand that will deliver growth. Our demand-constrained economy needs a fiscal stimulus Today, world over economic policy is geared towards resuscitating economies through monetary policy. All central banks have been entrusted with the task of lowering interest rates and adopting unconventional policies like quantitative easing to revive growth. Yet the progress has been uncertain and most of them are still struggling to come to grips with the meltdown that took place after the Lehman crisis. In India discussions invariably come back to the RBI. There is a demand to keep lowering interest rates. Just how important is monetary policy? More importantly, can it be a singular tool for bringing about growth under ceteris paribus conditions?
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Why the ‘100 minus age’ rule doesn’t work
August 26, 2015
It simplistically assumes that age decides your risk appetite and return needs. It doesn’t The world of investing is so complicated that we often jump at thumb rules. One much-abused thumb rule is ‘100 minus age’ to get you to your ideal asset allocation. So if your age is 30, you invest 100 minus 30 (70 per cent of your portfolio) in equities and the rest in debt options. An Indianised version of that (to account for lower longevity) is 80 minus age. This may sound simple, but the truth is that it may not get you to your financial goals. Required return Just think of a private sector employee who, at 50, has just managed to wrap up his
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