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Tag: tax-free bonds

  • What are Stocks & Bonds and Which one is Right for You

    Stocks and bonds should be a common term that everyone should know. But sadly, most of us don’t have adequate knowledge on what a stock or bond is. Here we can look at the meaning of stocks and bonds and even analyze which one is the best option for you as an individual.

    What are Stocks
    Benefits of Stocks
    What are Bonds
    Benefits of Bonds
    Which one is Right for you
    FAQ

    What are Stocks

    Stocks represents the ownership of a fraction of a corporation. Most of the time when a company requires extra capital, they list their company’s stocks on the stock market. In simple terms, they sell a part of the share of their company to the general public and in return, they would receive money.

    When you buy a share of the company you become an owner of the company. The person who buys the shares of the company will be called an investor and the company which lists their stocks will be a Public limited company.

    The companies will have to show their business activities every year to the general public. It will be available to each and every individual even if you don’t hold a share in the company.

    There are two groups of people in the stock market. One group are investors who buy the shares of companies and hold them for years expecting the share prices to rise. The second group is traders – they buy and sell different shares of different companies in a short period of time mostly in a single day.

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    Benefits of Stocks

    Stocks are considered to be risky. But if invested wisely you would get unimaginable returns from it. Stocks are also called as equities. People consider stocks as one of the investment options. Stocks have proven to beat the inflation rates over the years and is a form of security that shows that you hold a piece of ownership in the company.

    Certain companies even provide dividends to their stockholders. Dividends are part of the profits the company earns during the year. So, in addition to the increasing of the value of stocks, you would even receive a part of the company’s profits with it.

    Bombay Stock Exchange
    Bombay Stock Exchange

    What are Bonds

    Bonds are also a financial instrument. In simple terms, if the company or the government requires money, they issue bond certificates. Sometimes government would require some funds to develop a new road or come up with new infrastructure in the city or companies. The government would want to open new branches at that time so they would opt to raise funds through the issue of bonds.

    When you buy a bond certificate you are lending money to the government or the companies. They will have to pay back the money they owe you plus the interest.

    There are different types of bonds and there are agencies that rate the bond. The bond certificates with the highest rating will be the safest bond and vice versa.

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    Benefits of Bonds

    Bonds are less risky than shares. They provide higher returns compared to bank deposits. There are certain bonds that are tax-free or even charged less tax compared to other instruments. Bondholders will have more preference than shareholders in a company.

    If the company is closing down, the bond holders will be paid first and then the shareholders will be paid. However, while buying a bond one should wisely choose it according to the credit ratings given to the bonds and a proper check about the company issuing the bonds.

    Which one is Right for you

    Stocks and bonds have their own advantages and disadvantages. Stocks are considered to be riskier than bonds. Whereas stocks can provide really high returns than bonds. If you are ready to take high risks you can invest in stocks but if you want comparatively lower risk then you can go for investing in bonds.

    However, one cannot blindly invest in either stocks or bonds. Before you invest in stocks you will have to learn the basics of the stock market, fundamental and technical analysis. You should always do your own research before investing in stocks and never invest based on anyone else’s advice.

    Even investing in bonds requires prior research. You will have to check the ratings and then invest in bonds. Certain investors invest in bonds and stock markets together to manage their risk. They will invest in proper ratios so that they will be able to get an average return from both instruments.

    Choosing to invest in stocks or bonds can be according to your risk appetite.

    FAQ

    What are the 4 types of stocks?

    Growth stocks, Yield stocks, IPOs, and Defensive stocks are the 4 types of Stocks.

    What is the safest investment?

    Certificates of deposit (CDs), money market accounts, municipal bonds and Treasury Inflation-Protected Securities (TIPS) are among the safest types of investments.

    What stocks lost the most in 2020?

    Occidental Petroleum Corp, (OXY) Coty (COTY), Marathon Oil Corp, (MRO) TechnipFMC (FTI), Carnival Corp. (CCL) stocks lost the most in 2020.

    Conclusion

    If you do not have the time to do the research of a company there are companies that invest on behalf of you. There will be fund managers who would invest your money on behalf of you and provide you with the returns. Those are called Mutual fund companies. Now there are apps like Groww, smallcase, Etc., which help you in investing in bonds and stocks.

  • 5 Best Investment Options For Retirees

    Putting funds into risk-free speculation choices is as significant as having a different venture portfolio.

    When paying attention to contributing, the profits produced from your speculations can give money related steadiness later on.

    The investment can give money related security and pay one in great heights in later stages and that is the major reason for thinking of investment option after retirement.

    Fixed Deposit

    For senior residents, Fixed Deposit(FD) is one of the most widely recognized budgetary instrument to put away their cash. They want to contribute a lot of their cash in bank FD’s because the primary venture sum is viewed as more secure when contrasted with interests in value and the previous likewise offers guaranteed return as interest. And often times this is the only investment portfolio for 70 year old people. They usually prefer investment in Fixed Deposits because of tax exemption under Section 80C.

    Normally, senior residents open an FD account with the save money with which they as of now have their current bank account. Be that as it may, it will request that you complete your Know-Your-Customer (KYC) process. You will be required to give a self-validated duplicate.

    Some Interesting Facts about Fixed Deposit

    • Senior residents are normally offered higher loan costs when contrasted with the overall population. By and large, banks offer a 0.50 percent higher interest rate. Senior residents can pick whether they wish to get customary intrigue payouts i.e, cumulative or non-cumulative interest rates.
    • There is no restriction on the most extreme sum that you can put resources into an FD.
    • Banks have characterized a period including min and max for which FD record can be opened with them. Normally, one can put money into an FD for a base 7 days and a limit of 10 years. You can pick the period inside this range as per your requirements.

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    Retirees often don’t know where to invest retirement money ? However, apart from FD’s, there are other safest investments schemes too where you can invest your money.

    5 Best Investment Schemes

    1. Post Office Monthly Income Scheme

    This is the best reserve funds plot that empowers you to invest a limit of Rs.4.5 lakh for single possession and up to Rs.9 lakh for joint accounts.

    This month to month salary plot in India offers you a loan cost up to 7.6%, according to rates declared in Q2 2019 out of a plan that is known to offer dependable returns, however, the pay is available.

    SCSS is an excellent plan for senior residents who need a not too bad hazard-free profit for a corpus subsidize.

    The post office offers different sorts of store plans for those hoping to contribute. These plans are otherwise called little reserve funds plans. A portion of these plans, for example, NSC, SCSS, and so on additionally offer expense sparing advantages under charge 80C of the Income-charge Act.

    So this scheme offers tax-saving benefits too under section 80C of the Income-tax Act.

    The interest rates  are amended every quarter by the government with a lock-in period of 5 years for the principal allowing pre-mature withdraws after a year. The Maximum amount invested is 15 lakh.

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    2. Mutual Funds (MF’s)

    At the point when one resigns and there is a probability of the retirement reaching out for an additional two decades or progressively, at that point contributing a bit of the fund in mutual funds expect significance.  

    Best Investment Options for Retirees
    Grow with Mutual funds

    MF’s can likewise be a piece of a retiree’s portfolio. Tax collection from debt fund settles on it, more than normal deposits, particularly for those in the most elevated or high-income society.

    3. Tax-Free Bonds

    Tax-exempt securities, even though not as of now accessible in the essential market, can likewise highlight in a retiree’s portfolio. They are given principally by government-supported organizations, for example, Indian Railway Finance Corporation Ltd (IRFC), Power Finance Corporation Ltd (PFC), National Highways Authority of India (NHAI) One, they are long haul speculations and full-grown following 10, 15, 20 years.

    5 Best Investment Options for Retirees
    Investment options for retirees

    4. Public Provident Fund (PPF)

    There are two explanations behind this: its tax-exempt intrigue and the annual compounding rule. Since the PPF has a long residency of 15 years, the effect of compounding is tremendous, particularly in the later years.

    Further, because the premium earned is assured by sovereign assurance, it makes it safe speculation. For example, retirement PPF is a debt item and it produces an income flow.

    5. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

    PMVVY is for senior residents matured 60 years or more to give them a guaranteed return of 7.4 percent per annum. The plan offers benefits salary payable month to month, quarterly, half-yearly, or yearly as selected. The base amount sum is Rs 1,000 every month and most extreme Rs 9,250 every month. The greatest sum that can be put resources into the plan Rs 15 lakh. The residency of the plan is 10 years. The plan is accessible till March 31, 2023.

    This is a plan offered by the Life protection Corporation (LIC) of India.

    So, these were some of the best short term investment options for retirees. However, the considering any of these is totally depends upon the capacity of risk taking power of the individual as some of the schemes are subject to market forces.