TAX PLANNING

Tax planning is arrangement of financial activities in such a way that maximum tax benefits, as provided in income tax act, are availed of. Usually people confuse tax planning with tax avoidance and tax evasion. But these three are different terms.
TAX AVOIDANCE: It is the act of dodging without directly breaking the law. It is done with a purpose to defraud the revenue.
TAX EVASION: Through tax evasion dishonest tax payers try to reduce their taxes by concealing income, inflation of expenses, etc.

The most important step in tax planning is divide and rule i.e. total income of family should be divided […] Read more

INVESTMENT ALTERNATIVES AVAILABLE

There are various alternatives available for investment. Few investment alternatives discussed here:

1. CASH & DEPOSITS: It bears minimum risk.

2. FIXED INCOME SECURITIES: It offers fixed periodical returns.

3. SHARES: The value of share changes according to the market’s view of the worth of the company.

4. UNIT TRUSTS: Unit trust investments can generate income in the form of interests, dividends and capital gains.

5. PROPERTIES/REAL ESTATE: It is less liquid and involves less risk.

6. LIFE INSURANCE: One should not buy insurance solely as investment as it involves cost which other alternatives may not involve.

7. COMMODITIES: Commodities can be bought as physicals where the […] Read more

DERIVATIVES AND TYPES

Derivatives are one type of securities whose price is derived from the underlying assets i.e. a commodity or bond or equity or currency, that is why they are known as derivatives.. As derivatives are merely contracts between two or more parties, anything like weather or rain can be used as underlying assets.

Types of Derivatives are:

1. FUTURE CONTRACTS: Future contracts are no different from forward contracts as they serve the same purpose. The main difference between a future and forward is that Futures are standardized contracts whereas forwards are tailor made. Method of operation of future is also different.

2. FORWARD […] Read more

ASSET CLASSES FOR INVESTORS

For building a successful balanced portfolio one has to understand different asset classes and as per their risk appetite, one has to build his or her portfolio from his risk return point of view.

Asset class is grouping of similar investments whose prices tend to move together.
These are different asset classes for investment:
1.STOCK/EQUITIES: It has highest risk and return potential is also higher.

2.FIXED INCOME/BONDS: It has low risk and high return potential.

3. CASH:It has lowest risk but high return potential.

4. REAL ESTATE:

One should use all 4 asset classes to build his/her portfolio.

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