Strategies to invest in the stock market

We have heard or seen very often, when the market is up, people start investing and when it is down people start selling. This trend is actually with novice investors who are very punctual about reading the newspaper and see the sensex going up and feel the need to enter or when the market falls they feel it is the right time to exit. Frankly this is the worst strategy. That is why most of us do not make it big in the stock market, we sell the winning stocks early and losing stock late. I have even seen some persons holding on to losing stocks hoping for a resurrection. Also most of us do our investment based on tips of brokers, friends and experts on television. Any free advice is risky, you should do research on stocks and then buy. Remember all stocks do not rise at the same time nor do all stock keep rising through their life.

There would be some persons who did make some extraordinary gains, but not all of us are lucky. But there are some who have taken the pains to research before entering the stock market and these persons have made money. Because these persons have either done the proper research or paid for the research, before investing. They just did not go blindly with the tips. They read when to enter the market and when to come out, they have discipline. They book profits when they need to and hold stock when needed. They just do not go by newspapers and television interviews.

 

Here are some tips to succeed in the stock market

Do a research of the sector and then the stock you want to buy.

• If your research is good, do not worry if the market is up or down, since you have purchased a stock and not the market.
• Start with small investments in a stock and buy with every fall.
• Invest for the long term
• Invest in Large-caps, since there is liquidity in these stocks. If you want to go in for mid-cap or small-cap, ensure your research is through.
• Do not just keep buying, keep a maximum of 10 to 15 stocks, which are from 3 to 5 different sectors and where the stock has strong growth prospects.
• When the fundamentals of the stock deteriorate  ….. exit
• Don’t go for all IPO’s, research before investing.

If you find all this difficult or do not have the time, switch to mutual funds, the fund managers will do all the above for you. For wealth creation, thinking and working long term is most important, do not react to short term market changes. Long term is better from tax angle as well, there is no tax on long term capital gains. Stock market is not a gambling den, if you do look at it as a gambling den, then be ready to lose heavily as well. Look at the stock market as a wealth creation opportunity. Hope these tips help you, all the best.

 

Tax Saving Options

It’s that time of the year where most of us run to save tax, as our organizations ask us to submit proof.

The most popular section for saving tax is Section 80C. Let us look at the various avenues available to us under this section. Remember that this section gives us deduction not only for investments but also expenses. The total amount allowed under this section is Rs. 1,50,000/-. Let us look at the options available:

• Principle amount of Home Loan: If you have been repaying your Home loan EMI’s, the principle amount of the home loan is eligible for deduction. Please note that the interest amount is allowed as a deduction under section 24 against income from house property. The amount of stamp duty and Registration fee is also allowed as deduction if a person has not taken a housing loan.
• Tuition Fee: This is allowed for only the tuition fee paid to any school, college or university for education of children. The maximum allowed is Rs. 1,00,000/- per child. You can claim exemption only for 2 children.
• Life Insurance Premium: Any premium paid for insuring your own life or that of your child or spouse is allowed as deduction. You have to ensure that the premium paid does not exceed 10% of the assured amount.
• PF: In case of salaried employees your own contribution to PF (compulsory or voluntary) is allowed as deduction.
• PPF: Any contribution to PPF is allowed as deduction.
• 5 Year Bank Fixed Deposits: The principle amount invested is allowed as deduction. Interest amount received is taxable.
• 5 year postal time deposit: This is similar to bank fixed deposit. Interest amount received is taxable.
• NSC: There are 2 types available 5 years and 10 years. Any investment is eligible for deduction. Interest amount received is taxable and also can be claimed under section 80C as investment, as interest is treated as reinvested.
• Senior Citizen Saving Scheme: investment in this scheme is allowed as deduction, but this is available only for those above the age of 55. Interest amount received is taxable.
• ELSS: any investment in this is available as deduction.  

Try and plan your tax saving wisely, if after doing any of the above, you exhausts you 80C limit, do not do any other investment under this section unless it is as per your financial goals.

If you have a housing loan, interest paid on housing loan to the extend of Rs. 2,50,000/- is allowed as deduction, under income from house property for self-occupied property.

Premium for health insurance is allowed as deduction under section 80D upto Rs. 15,000/- for self and family and Rs. 20,000/- for Sr. Citizens.

Make use of the options given to you and save tax. Tax saved is money earned.