June 1, 2017

India has a rich tradition of passing down teachings and wisdom through oral communication. While in older times, it was sages passing down knowledge to their pupils, this tradition has now expanded to include everyone. Elders from all walks of life now pass on their learnings and wisdom to guide the next generation. They do so to help them navigate the world with ease and to live a safe, fruitful and prosperous life.

They are often communicated to you by your parents or other elders in the form of advice and suggestions. However, well-intentioned as they may be, there are many cases where your elders’ advice could actually end up being bad for you.

In this piece, I’m going to highlight three such outdated pieces of ‘investment wisdom’ that don’t hold good anymore:

  1. Physical gold is a good investment: Since time immemorial, gold has been coveted and prized as a ‘valuable’ metal. Even today, gold is considered to be a sign of prosperity. However, when buying gold you need to be clear on what you’re buying it for – if it is for ornamentation, jewellery, coins and the like, then sure, buy away. 

    Financial gold refers to instruments that derive their value from gold, and have gold as the underlying investment – but on paper. They are cheaper as there are are no making charges or wastage charges. You don’t have to worry about storage and theft, and they’re easy to buy and sell. Do note: Our experts recommend keeping your exposure to gold at around 8 to 10 percent of your investment portfolio. This will help you diversify among other asset classes so that one acts as a cushion when another under performs.

  1. Real estate gives superior returns: Another favourite of the old-guard is real-estate. Many people harp on about how their property fetched them massive returns on selling it. However, what these people fail to note is a) the time period over which they ‘earned’ these returns,  b) the other costs over and above their purchase price that went into maintaining their property and c) comparing the returns of the same investment made for the same time period in other investments such as the equity markets.

    If you factor these in, the returns don’t seem as impressive anymore. In fact, the equity market has given significantly higher returns than prime locations in Mumbai. The only reason people ‘earn more’ in real estate is the ‘discipline’ they show in holding on to their investments. Similar good investing habits – from proper research to the discipline to hold on – in equity investments could garner far superior returns. 

  2. Fixed Deposits (FDs) are the best way to invest: There was once a time, back in the 90s, when bank FDs were delivering double-digit returns – some as high as 12%. However, that time is in the past. Today, 3-year or longer FDs from banks such as SBIs have an interest rate of just 6.25% per annum before taxes (Source: SBI). After taxes, this comes down to just 4.3% for those in the highest tax bracket! This barely beats inflation, giving you scarcely enough growth to build any significant amount of wealth.

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Yes, money is not everything! Money cannot be the only means of happiness! But, money surely makes a difference when it comes to converting your dreams into reality, dealing with an emergency, or leading a comfortable life.

Here are more reasons to support why ‘more money’ should be your everyday mantra.

1. More money means more freedom!:

The freedom that allows you to try new things, offer more choices and make new investments. You deserve money as much as anyone else can. Aiming for more does not mean you are greedy, rather having more can equip you and place you in a better position to even be charitable, which you may otherwise cannot afford.

2. More confidence and purposefulness:

Nothing gets better in life than the sense of accomplishment. You could achieve all your life’s goals with ease, making all your dreams come true. You can offer excellent higher education to your kids at the same time enjoy a dream vacation along with your spouse. All these are possible with more money.

3. Rule out the stress of having less or insufficient funds:

Opposite to more money is less money, which can be sucking! Your sinking reserves can get you into stress. Meanwhile, if you have to face an unexpected expense, you look around for help and borrow money, which is not a good money behavior. Your money should be your savior when it comes to dealing with any sort of expansion or unexpected expense.

4. Effectively deal with inflation:

The tricky part of inflation is that it can’t be seen in the money we earn but can be seen only in expenses. Only earning more helps combat inflation and fulfill the future needs. Moreover, life is too short that people outlive their money very soon. Financial requirements grow with time, bringing in the need for more money.

5. You can retire early with dignity:

For many, retirement is the single biggest money concern and having more money can help you retire early with dignity. You will not be a dependant on your offspring. Have more money to make your retired life the happiest phase of life.

Get rid of every limiting idea or belief that blocks your way to deserving ‘more money’. Plan your finances thoroughly based on the current financial status. Periodical evaluation of the performance of your financial planning is important too.

For expert personal finance advice, approach MONEYMINDZ, an online fiduciary making quality services available to every individual.

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TDS is an abbreviation for ‘Tax Deducted at Source’. TDS has been introduced to collect tax from the source from where an Individual’s income is generated.

The government uses TDS as a tool to collect tax so as to minimize the tax evasion by taxing the income (partially or wholly) at the time it is generated rather than at a later date.

TDS is applicable on the various incomes received such as salaries, interest received, commission received etc.

TDS is not applicable to all incomes and all persons for all transactions. Different rates of TDS have been prescribed by the Income Tax Act for different payments and different categories of recipients. For example, payment of redemption proceeds by a debt mutual fund to a resident individual is not subject to TDS but for a Non-resident Indian is subject to TDS.

TDS works on the concept that every person making specified type of payments to any person shall deduct tax at the rates prescribed in the Income Tax Act at source and deposit the same into the government’s account.

The person who is making the payment is responsible for deducting the tax and depositing the same with government. This person is known as ‘deductor’. On the other hand, the person who receives the payment after the tax deduction is called ‘deductee’. Form26AS is a statement which shows the amount of tax deducted and deposited in a person’s name/PAN.

An individual can, therefore, view/check the TDS from incomes paid to him by viewing this Form 26AS. Each deductor is also duty bound to issue a TDS certificate certifying how much amount is deducted in the deductee’s name and deposited with the government.

How TDS works :

The entity making a payment (which is subject to TDS) deducts a certain percentage of the amount paid, as tax and pays the balance to the recipient. The recipient also gets a certificate from the deductor stating the amount of TDS. The deductee can claim this TDS amount as tax paid by him (i.e. the deductee) for the financial year in which it is deducted.

The deductor is duty bound to deposit the TDS with the government. Once deposited this amount reflects in the Form 26AS of individual deductees on the TRACES website linked to the income tax department’s e-filing website.

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