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Are you taking the right investing decisions?

Much like the overconfident hare in the fable of “The Tortoise and the Hare”, people can well fall prey to the exaggerated notions of their own infallibility. Are you then, the tortoise or the hare, when it comes to handling your money or investing? What if we were to tell you that overconfidence bias can impact your investment decisions?

There is a very fine line of distinction between confidence and overconfidence. Overconfidence is the difference between ‘what you know’ and ‘what you think you know’.

A colleague of mine had no idea about investing and more specifically, about buying and selling stocks. It was during the regular lunch break discussions about the rising equity market, that he got fascinated with the idea of investing. What next? He started following the prices of stocks and in a trending market, he felt that he is successfully being able to predict the market movement.

The next logical step for him was to open a brokerage account with an equity broker. Kicked by his exuberance about the newly acquired skill, he started buying and selling stocks in small quantities. And his excitement knew no bounds when he started making some money. With the initial success he started to believe that he had the ability to predict the market. And that he had acquired a skill which could help him make money on a continuous and consistent basis. With the increased confidence he started taking bigger bets. But as equity markets do not behave rationally in the short run, there was an unforeseen event in the economy and his stocks started to fall. Seeing his portfolio in red, he had to exit all his positions and he lost faith in equity markets.

How do we then prevent ourselves from being overconfident about our financial decisions?

A financial decision demands a thorough review of attendant factors.

  • Are you getting sold on something that is too good to be true?
  • Are you being over enthusiastic? Optimism is good; but an excess of enthusiasm can be fraught with risk, because it involves haste and haste preempts caution.
  • Do you have enough logical reasons for the financial decision you are about to take? Remember, each deal presents distinct challenges. Tackle them wisely and.
  • Have you reflected enough on your past experiences and mistakes?
  • Have you consulted an expert advisor for a second opinion on your decision?

Determining answers to these questions will serve to offset the ‘overconfidence bias’ into your investment patterns.

How do we help?

Overconfidence is largely a result of misjudging one’s own judgement. At CAGRfunds, we give you the “second opinion” that you might just be looking for. We not only conduct a FREE audit of your current portfolio, but also give you the right financial advice for all your future goals. We therefore ensure that you do not mistakenly take very concentrated exposures to a particular asset class.

Write to us at contact@cagrfunds.com for a FREE audit of your existing portfolio.

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Is tax eating away a major chunk of your salary?

A few years back, a text message popped up: “Dear Customer, salary of Rs. ABCDE for the month of May 2017 has been credited to your account XXXXXXXXXXXXX”.

Happiness?? Not for me. Not when I was expecting a six figure salary but ended up with a five figure one, all thanks to the tax that I had been paying so diligently.

The emotional impact was of a nature that I felt compelled to consult a tax consultant. And to my absolute horror, I discovered that I was solely responsible for the reduction of a digit in my monthly pay package. Before I could get into any further depression, my consultant served me with the much needed ray of hope – several ways of saving tax to increase my income in hand.

1. If you live in a rented accommodation, you can save some tax

A salaried employee living on rent can save some tax by presenting the rent bills to his organization. Such expenses can be claimed under the House Rent Allowance (HRA) offered by the company.

2. Did you know you can reduce taxes by holidaying??

Leave Travel Allowance (LTA) can be claimed twice in a block of every four years. You can get your actual travel bills reimbursed for any travel that you might have done. However, every company has policies relating to what qualifies for LTA. If unclaimed against travel, LTA becomes fully taxable.

3. Check if your salary includes medical allowance

More often than not, medical allowance is part of the CTC. Medical expenses to the extent of Rs. 15000 are exempted from tax in any financial year. However, one usually needs to submit actual medical bills to one’s company to get the same reimbursed. So now you can worry a little less about the rising medical costs!!

4. Save tax as you invest your money under section 80C

Under section 80C, we can make investments into several instruments and the amount of investment made is deductible from our taxable income. However, the upper cap of such benefit is Rs. 1,50,000. Public Provision Fund (PPF), Employee Provident Fund (EPF which is part of your salary) and Tax Saving mutual funds are a few such instruments which fall under this category.

5. Planning for retirement can help reduce tax further

While section 80C gives benefits of up to Rs. 1,50,000, section 80CCD(1B) gives a further benefit of up to Rs. 50,000. This benefit accrues by way of investing in the National Pension Scheme or NPS. Also, investing in NPS helps generate better returns as compared to bank deposits as they have a diversified exposure across asset classes. But, the only consideration with NPS is that you cannot withdraw your  money till you attain the age of 60.

 How do we help?

At CAGRfunds, we help you plan your tax outgo by making you aware of expenses that you can claim as deduction. We also apprise you of various investment avenues which either help reduce tax or earn tax free returns. For example, after studying one’s profile, we recommend the best tax saving (Under section 80C) mutual funds. We also help plan tax by educating our investors about benefits of equity and debt mutual funds vis-à-vis other products.

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Salary over by 15th? 6 ways in which you can make it last longer

‘A penny saved is a penny earned’. Yet every month there comes a time when we have to choose between an evening out with friends or a boring dinner at home. Yes, a financial crunch is a bad situation but the truth is that we have all been there and done that. So let us tell you simple yet effective ways to last your salary a little longer.

1. Start budgeting:

Have an opinion on the Annual Budget? Well, how many of us have documented a budget for ourselves? There you are – Step 1: Budget your expenses. This helps us prioritize and thus keep a check on discretionary expenses. So yes, this means you cannot set aside money for a pair of shoes without paying your insurance premium. Learning how to choose what purchase desire can be postponed is probably the key here.

2. Make a list:

How many times have you gone out to the neighborhood departmental store and returned with stuff you had not planned to buy? Making unnecessary purchases is a tempting urge. And the best way to control this urge is to make a list of what is necessary and stick to it firmly. Tick the ones that you’ve taken and look only for those present in the list.

3. Do not get lured by combo offers

How exciting are BOGO (Buy One Get One) offers!! Sometimes they excite us so much that we end up buying 2 of something we didn’t need at all. If you are on a tight budget, this temptation could be dangerous. Allocation of money on the basis of need is the essential element here. Deals like these are usually to tempt the customers to buy things they don’t want. Are you going to fall prey to this tactic? Now you won’t!

 4. Use Prepaid plans

Despite excellent postpaid plans, we tend to be careless about the frequency and duration of our phone calls. Long distance calls, roaming and data consumption is something we don’t really keep a tab on. If this describes you, then you probably need to shift to a pre – paid plan. A pre – paid plan will not only help you reduce your phone bills, but will also help you inculcate a habit of putting a budget to the same.

5. Restrict usage of credit card:

While usage of plastic money is something even our Government is encouraging, it has its own flip sides. You must have felt the psychological difference when you pay with cash vs a credit card. When the crisp notes flow out of your wallet to the cashier, you tend to realize the amount of expense you are making. However, with a credit card, we sometimes don’t even look at the bill and just hand over our card for a convenient swipe. It is only when we get our credit card bills that our eye balls tend to drop out. Therefore, it is almost compulsory for us to restrict usage of credit card. We also recommend that you minimizing the number of credit cards you possess. However, as we move towards a cashless economy and rightly so, using a debit card is better to keep expenses in check.

6. Pay your credit card dues on time:

Often times, we overlook the due date of our credit card bills. While the bill amount might be low, penalty charges for late payment can be as high as 36% annually. Unknowingly, a sizable cash outflow indeed. It is therefore of utmost importance to pay our credit card bills before due date. A helpful tip in this regard is to pre schedule the payment a day prior to the due date. That ensures that the bill is paid even if we forget or get busy with something else.

How do we help?

At CAGRfunds, we help you craft a financial plan which will help you manage your salary better. We guide you to make disciplined investments right at the start of the month. This enables you to not worry about savings. As a result you become more organized with your spendings.

Whatsapp or call us on +91 9769356440 to know more.

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Wedding on the cards? Here are 6 financial planning tips for the newly – weds!

It is the wedding season and some of you who have recently gotten married or are about to tie the knot in the next few weeks must be aware of the enormous scale of wedding expenses. While it could be difficult to limit these expenses, post your wedding some cognitive steps should be taken for financial planning together with your partner. In order to preempt the chances of encountering incompatibility in financial matters, couples should opt for a plan that is fully acceptable to both partners and promises security for the future.

So before you fly up and away for your coveted honeymoon, here are 6 financial planning tips for you to be aware of.

1. Share and pool ideas to formulate an effective plan

It is very important that newly-wed couples engage in honest conversation that will serve to build a healthy climate of understanding and trust between them. Whereas the couple’s individual financial planning mechanism may have been flawless and effective before marriage, the need for absolute clarity on the way forward is critical to a future that is free of conflict and financial hassles.

2. Decide on a joint or a separate account

In a marriage, the importance of trust cannot be minimized and the couple’s financial standing, as individuals, occupies a space that revolves around the pivot of trust. The couple should not shy away from fundamental decisions such as whether to opt for a joint bank account, where the cash flow can be viewed and managed by either, or separate accounts, especially if both partners are earning members. In either case, it is best not to compromise on the aspect of mutual trust.

3. Build a fund for emergency situations

While the individual partners may have been inclined to spend money lavishly or feed off parents’ income before marriage, it is time for discipline and a sense of responsibility, once the equation changes with the newly wedded status. Adversities, especially those that arise due to financial pressures, should be anticipated and planned for.  Such challenges can take the form of an unexpected illness, a loan repayment schedule interruption or even a failed job. Ideally, this fund should amount to the sum of the expenses of a few months.

4. Save prudently

Saving is a habit which like any other, grows on people. The couple should earmark a fixed amount that will go into their savings. This amount should be determined after accounting for regular and incidental expenses that will be necessary for both sustenance and for lifestyle choices. The ground rule should be that finances are planned to allow for a reasonable and consistent remittance towards savings.

5. Invest smartly

Savings by itself is not sufficient to cater to all our future goals. Income declines or ceases altogether, as life advances and states such as retirement become a reality. It is at such junctures in life that we need a hefty corpus to sustain our lifestyle. It is therefore inevitable to continuously invest your savings in instruments that suit your profile. Inflation and the galloping cost of living can strain the best of financial plans. As such, it may be a wise decision to make the money in a savings account generate enhanced monetary benefits through judicious investment.

6. Get an Investment Plan

It is possible that prior to marriage, the couple had adequate allocation to different asset classes on an individual basis. However, post marriage, one should always look at the combined portfolio. This leads to a need for redesigning your investment plan. The help of a financial expert can be a practical and productive consideration, in this regard.