September 30, 2022

Are ELSS profitable during market downturns?

Apr 25, 2022

The stock market faces a slew of risks, including the Russian invasion, rising oil costs and inflation, an impending rate hike, tighter liquidity, and sluggish economic development. It’s a long list. Many mutual fund investors are worried, particularly first-time and new investors. Some want to know if they can put their equity mutual fund investments on hold this year, particularly tax advantaged or ELSS funds.

As you might expect, the issue isn’t about ELSS funds; instead, investors ask for a strategy for their stock investments. When things appear to be in turmoil, many investors try to avoid taking any chances. They wish to reduce or eliminate their equity mutual fund investments. They want to make a risk-reduction investment allocation modification.

 

ELSS mutual funds offer a way to make decent returns while avoiding taxes. At least 80% of the assets of these funds are invested in equities. As a result, the potential returns are directly related to the stock market’s success. If you want to invest for a long-term goal like building a retirement fund or purchasing a new home, this could be a good alternative.

Here are the best strategies to make profits in a bearish market with ELSS:

Tax Savings: ELSS funds have been the only type of mutual fund that can claim a tax deduction of up to Rs 1.5 lakh per year if you invest in the plan. These funds are eligible for tax deductions under Section 80C of the Internal Revenue Code.

Even after the new tax system, which makes long-term capital gains from ELSS over Rs 1 lakh taxable, these funds remain one of the finest tax-saving investments. Compared to alternative investment options such as Unit Linked Insurance Plans (ULIPs) or Public Provident Funds, these provide better post-tax returns (PPF).

Short lock-in period: ELSS funds are locked in for three years, unlike other assets such as the Public Provident Fund, Employees Provident Fund, and National Savings Certificate, which have a five-year minimum lock-in duration.

Long-term return: Funds can grow if they are not redeemed after the three-year lock-in period has passed. Because these funds invest in equities, they can build significant wealth over time.

Higher Returns: Because these funds invest in equities, they benefit from the market’s increased returns. ELSS funds can provide you with twice as high returns as a traditional savings account. According to statistics, ELSS offers roughly 12% returns over ten years. Compared to PPF, which generates approximately 8%, this is a considerable boost.

Lower tax on profits: An ELSS fund is invested for at least three years. As a result, any profits from the sales of ELSS funds are long-term in nature.

Gains beyond Rs 1,00,000 are currently taxable at 10% under the current law. On the other hand, short-term capital gains are taxed at a rate of 15%. As a result, ELSS funds automatically result in decreased tax bills.

Benefit of compounding: Investing in equities funds with a long time horizon, such as 5-10 years, is usually recommended. By default, ELSS funds provide a disciplined long-term investment due to the lock-in period. This technique allows investors to benefit from the long-term power of compounding.

SIP Option: Investors who want to invest in ELSS might do so through a systematic investment plan (SIP). It enables the investor to invest a predetermined amount at predetermined periods. This permits the salaried class to regularly invest a set amount of money from their savings, usually once a month.

Final Thoughts

The asset allocation of ELSS mutual funds is mostly made up of equities and equity-linked instruments such as listed shares (65 percent of the portfolio). They might also be exposed to fixed-income securities.

While the three-year lock-in time is required, an investor has the option to continue investing after the lock-in period has expired, unlike with other tax-saving products, where your money matures or stops collecting interest once the lock-in period has expired. An investor can stay in the fund for as long as they wish, and the longer they stay, the smaller their investment risk is, while their chances of earning a greater return increase.

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Looking To Avail a Home Loan Balance Transfer to Deal with Higher Home Loan Rates? Here are Some Pointers

Apr 21, 2022

Now your dream of owning a home can be achieved easily by opting for a home loan. For a home loan, you just need to fund up to 10-25 percent of the home value while the remaining cost is funded by the lender. Additionally, to provide repayment flexibility, most lenders offer the loan amount for an extended period of usually up to 20 years. Availability of long tenures allows you to make repayments in the form of easy affordable EMIs.

This said, during the extended time period, you may come across various home loan offers from other lenders that can be highly cost effective. In such a case, you can avail a unique option called a home loan balance transfer.

What is a home loan balance transfer?

A home loan balance transfer is the act of transferring your home loan from your current lender to another lender for better terms and conditions, lower interest rates or extension/reduction in repayment tenures. Availing a lower interest rate through the balance transfer option allows you to lower your EMI, which results in reduction in your overall loan cost. Technically, when you opt for the transfer option, your new lender pays off your outstanding home loan balance to your existing home loan lender. After this, your existing loan account is closed and simultaneously your new account opens, where a lower interest rate is charged.

Pointers to consider before availing a home loan balance transfer –

  • Calculate your savings in interest cost

The major goal of a home loan balance transfer is to lower the interest cost of your existing home loan, particularly if you secured the loan at an extremely higher rate, without impacting your existing investments and liquidity. However, as the balance transfer facility is looked upon as a fresh home loan application, your new lender levies processing charge, administrative fee, and other fees during the balance transfer application processing. Hence, you must compute your overall savings in the interest cost after factoring in such charges. You must avail the transfer facility only if your total savings in interest is considerably higher after factoring in the expenses involved in availing it. For calculation of your total savings in interest cost, use the home loan transfer calculator. Note that the home loan balance transfer calculator usually asks for your requested loan amount, requested repayment tenure, income, monthly obligation, loan principal outstanding and other details to compute your total savings and your EMI.

  • Renegotiate the interest rate with your existing home loan lender

As a home loan transfer option is looked upon as a fresh loan, you will again have to undergo the loan evaluation, documentation, property evaluation and various other evaluation processes linked with fresh application. All of it can take up substantial effort and time. Thus, you must try and renegotiate the offered interest rate with your existing home loan lender before making the transfer. Go for the transfer option only if your existing home loan lender disagrees to match the rates offered by your new lender.

Ending note

The prevailing low interest rate regime has allowed many lenders to provide lower home loan rates beginning from 6.55 % p.a. With such low interest rates on offer, you may contemplate to avail the balance transfer facility to transfer your existing loan to another lender to get a lower rate and better conditions. However, before you make the move, ensure to use a home loan finance calculator to understand if the transfer is worth it. The home loan takeover calculator accurately computes your savings in interest cost. If your savings in interest cost is substantial, opt for the balance transfer option.

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Why You Need Business Insurance for Florists and What to Consider

Apr 12, 2022

Business owners need a variety of insurance coverage, and for good reason. Depending on the scope of your business and the risks you face, you may need business insurance to protect your assets, your employees, and your business’s operations. Florists need the same types of business insurance as other small-business owners, including health insurance, workers’ compensation, and liability insurance. Here are some good reasons why you should get Business Insurance for Florists and what to consider when looking for a policy.

Importance of Business Insurance in a Flower Shop

For all small business owners, business insurance is an essential part of a sound financial plan. It provides peace of mind by protecting your assets, employees, and operations from risks that could cause significant financial losses.

Business owners have many types of business insurance coverage to choose from, including health insurance, workers’ compensation, and liability insurance. Florists also need these types of coverage as well as business insurance for their shop in order to be fully protected with their current business operations and the possibility they take on more staff or invest their time and money into the growth of their flower shop.

The importance of having this type of coverage cannot be overlooked. Businesses that have not invested in adequate coverage have found themselves at risk through inadequate protection due to unforeseen events such as lost income when a key staff member becomes ill or injured, destruction caused by acts of nature, theft or vandalism that impacts cash flow or inventory costs associated with stock replacement. And it doesn’t stop there; you may even find yourself personally liable for damages caused by negligence on your part if you don’t have proper coverage for your employees.

For the florist’s flower shop it is vital that they are properly covered financially from any event that may result in a loss of income such as theft or any other act of vandalism that causes damage to the inventory which would result in lost income

What to Look For in a Florist Business Insurance Policy

Different types of businesses require different types of business insurance. And since the type of risks your florist business faces may be different, you should look for a policy that has the necessary coverage to protect your business and its assets, your employees, and your operations.

Here are some important aspects to consider in business insurance for florists:

  • Personal property
  • Business property such as machinery or equipment
  • General liability
  • Product liability
  • Workers’ compensation
  • Health insurance for employees

The bottom line is it’s worth getting business insurance, and you should start looking into it now. It’s a pretty intimidating process because there are a lot of different names for different types of insurance that may be needed. It can be daunting trying to figure out what your needs are and which type of business insurance will suit your needs the best. But if you want to protect your employees and your assets, then it’s worth exploring all the options to find the best fit for your business.

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