Success formula for equity investing

Most of us want to invest in equity to make fast money. The reason is simple, all data shows that equity has given very good returns over a period of time. But then all good returns have their share of risk. It’s looks too easy, whom do you trust on the advice to invest. One of the best things to do is invest in a portfolio of equity shares and review them on a regular basis. Get rid of the ones not doing well, this is the most difficult part for most investors, they tend to hold on to them. You do not review your equity shares daily, it will be futile. If you had the time, then you and the rest of the world would have been doing only this. If you look at the list of wealthy people, you would have noticed that their wealth is in the form of equity shares. They invest their money in shares of a company, which they believe will grow, the company might be their own or of someone else.

So if they can get rich by holding shares, why not you and me. The challenge is picking the right shares. These wealthy people, believe in making money by participating in the growth story of the company, you and me can also do the same. But then we are lazy and want tips. What tips do you want? Look around, what do you and your neighbor’s use daily? Buy shares of those companies. If you trust those products to use daily, then the company would be growing for sure, so you should participate in the growth. There are many persons who give tips or follow tips given by many, but only a few make money. This is because only those who stuck with the shares made money. Daily trading does not make money in the long run, unless that is your full time job.

So what should one do? The easiest way would be to go for a well-diversified mutual fund scheme, where the fund manager does the job of stock selection. Best would be a index fund, here the fund manager does not need to do much, the index is managed by the stock exchange, all he has to do is ensure that his scheme is in tune with the index.

Transfer and invest funds legally

Many persons who have not filed returns are getting intimations from Income Tax department. The main reason is to identify and find out if the amount invested by that person has escaped tax. Many of them transfer money to senior citizens to gain the extra percentage in bank fixed deposits. Why do all that and put the senior citizen through all the pain and pressure in their old age because of income tax intimations, when there are easier ways to save tax and better ways to increase your tax free income. Here are some options

• Whenever you transfer amounts to your relatives invest in tax free investments, first benefit is amounts transferred to relatives is free of gift tax and the second would be that since it is invested in tax free investments the income would be tax free. The income received can be reinvested anywhere after that and would not be clubbed with the income of the person giving gift.
• You can invest in your minor child’s name for tax free income up to Rs.1,500/- per child (max 2 children), so taxable income generated in minor child’s name is tax free to the extend of Rs. 1,500/- per child. Also once the child becomes an adult, the income generated would not be clubbed with your income.
• Invest your money in equity, either in the form of direct shares or units of Equity Mutual Funds, any investment kept for more than a year is free of capital gains tax. Any dividend received is also tax free.
• In case you are investing in your parents name ensure that the income generated does not exceed the taxable income slab.

Just do the above and become tension free, your family will also be happy.