Invest in Equity Markets to Achieve Financial Goals

1. Invest in Equity Markets to Achieve Financial Goals

2. Equity Markets • Most of us are working throughout our lives to earn money and fulfill our needs and wants. • It makes financial sense to define our “financial goals” and prepare a “savings and investment plan” to achieve them. • This “savings and investment plan” should be as per your risk profile, time to goal, amount available for investment. • You must meet a registered investment advisor OR Financial planner who will help you design a personalized plan. • Example of financial goals could be saving to buy a house, meeting children’s education expenses, starting your own business, marriage expenses and planning for retirement. • Let us understand the reasons why one should “Invest in equity markets to achieve financial goals” • Equity as an asset class is the most promising in the long-term and investing in equity through stocks and equity mutual funds is the recommended method to achieve long-term financial goals.

3. Beats Inflation • In the long term the equity market indices (represented by BSE Sensex from 1979 –index=100) have given a long-term average of 15% to 16% p.a. annualized returns if one looks at a long-term period of 15 to 30 years. • Compare this with the long-term average 6.5% to 7.5% inflation rate in India and it is clear that the potential returns from equity as an asset class can far outpace inflation

4. Tax-Free • As per the current income tax law, if you invest in equity stocks or equity oriented mutual fund and sell your investment after 1 year, then the capital gains(if any) are tax-free. • Dividends received from equity stocks and equity oriented mutual funds are also tax-free. • Hence, investing in Stocks and Equity mutual funds through the SIP route and holding each SIP instalment for more than 1 year makes your returns tax-free. • Many leading broking houses and investment advisers are offering stock and mutual fund model portfolio baskets which are tailored as per the risk profile. • In the long term as per your financial goals (take 10 to 50 year time frame) it means that all the gains that you will make will be fully tax-free!

5. Transparent • All listed stocks have daily prices available and their financial performance balance sheet and annual reports are available. • You can approach an investment advisor /leading stock broker who will guide you. • All mutual fund open-ended schemes declare daily NAVs (net asset value) and monthly portfolios hence you will know exactly the value of your investment as well as the underlying stocks in your portfolio.

6. Affordable • In case of equity mutual funds, the minimum investment amount is Rs500 per month and there is no upper limit on the maximum investment amount. • In case of equity stocks, you can consult your investment advisor who will guide you on the minimum investment required.

7. Flexible • Having registered for an equity stock OR a mutual fund – SIP, you can also invest additional amounts whenever you receive an unexpected Lump-sum amount from any source.

8. Liquid • You can sell your stocks OR the units of your fund at the daily stock price/ fund NAV (net asset value) and get your money back into your bank account in 2 to 3 working days. • In case you sell before 1 year of holding, then there may be an exit load charged by the fund house. There may also be a STT (securities transaction tax) charged. • Investing in equity markets as per this method will help you achieve your financial goals.

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