Should you become an investor or a stock trader? 

The adrenaline flow resulting from trading stocks minute-to-minute or day-to-day, or having black-red-blue-green complicated-looking charts open on the computer terminal, have always created a lure for stock trading over patient stock investing. Media, websites, influencers, 24X7 investing TV channels and even whatsapp group conversations have fanned this feeling of trading creating instant wealth over the boring long-term stock investing.

How many of you have heard of millionaires and billionaires who’ve amassed wealth through trading? Rarely so.

To try and predict the herd behaviour, ie, how the markets will move in a short-term due to how majority of investors will trade in the next hour or day or week or a few months is neither easy, nor possible for almost 100% of retail investors. But what is easy and the best way to invest in the stock markets is to do research, be disciplined and above all, be patient.

Following rules are the only sure-shot way to get great returns from your stock market investments.

  • Follow a disciplined investment approach. In spite of the volatility in the market, the investors who put in money systematically and patiently have seen stable and better returns. Always be patient and follow a disciplined investment approach besides keeping a long-term broad picture in mind.
  • Have realistic expectations. There’s nothing wrong with hoping for the ‘best returns’  from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions. For example, many stocks have generated more than 50% returns during the recent bull market, but having the same expectations all the time will only create disappointment.
  • Create a broad portfolio. Diversification of a portfolio across asset classes and instruments is the key factor to earning optimum returns on investments with minimum risk.
  • Do not let emotions cloud your judgment. Emotional influences on investment decisions can be hard to counter. The optimum response to emotion in investing is to acknowledge it without allowing it to make you deviate from the financial plan that has been created for your financial goals.
(Contributed by Kritika Saini, Relationship Manager, Team Arjun, Hum Fauji Initiatives)

Understanding AIS and TIS Statements

Have you found some humongous numbers reflected in your AIS?

Or have you wondered why some purchase and sales transactions are reflected there when no profit has been booked?

So, what exactly are the AIS and TIS?
An Annual Information Statement (AIS) is a comprehensive statement containing details of financial transactions carried out by you in a financial year, irrespective of whether tax has been deducted or not or whether tax is required to be paid or not. To put it simply, AIS informs the taxpayers what information has the income tax department received from various financial entities about your financial dealings. AIS has been launched to achieve more transparency and simplify the tax system. It also helps to eliminate underreporting of income by tax payers.

The Taxpayer Information Summary (TIS) is the final statement which is used for income tax filing as it shows the amount on which we need to pay tax.

What if there are any errors in AIS?
Since it is a new mechanism in the overall tax filing structure, there might be some errors in this statement.

If some information is incorrect, then every tax payer’s responsibility is to submit online feedback to the income tax department. If the taxpayer submits feedback on AIS and it is accepted, the derived information in TIS will be automatically updated in real-time and can be used to file the ITR.

To submit the feedback: Access Income Tax > Go to services > Select AIS > Click on the transaction > Select Optional > Submit Feedback.

(Contributed by Ayushi Gupta, Financial Planner, Team Arjun, Hum Fauji Initiatives)

How to analyse your own risk profile?

Every single person has a different risk profile as the risk appetite depends on many things – psychological factors, loss bearing capacity, the investor’s age, income and expenses, etc.

 A risk profile is broadly a factor of:
  • Your risk capacity
  • Your risk tolerance and
  • The risk you need to take to achieve your planned financial goals.

There are different types of investors, and you have to check what your risk type is:

1) Conservative: An investor’s top priority is the safety of capital, and he/she is willing to receive minimum or low returns while incurring minimal. Such investors stick to assured return investments and debt mutual funds. Such investors typically maintain a 10-25% Equity and 80-90% Debt in their overall portfolio.

2) Moderately Conservative: Such an investor is willing to accept a small level of risk in exchange for some potential returns over the medium to long term. Such investors typically maintain a 20-35% Equity and 65-80% Debt in their overall portfolio.

3) Moderate: This investor can tolerate a moderate level of risk in exchange for relatively higher potential returns over the medium to long term. Such investors typically maintain a 40-60% Equity and 40-60% Debt in their overall portfolio.

4) Moderately Aggressive:  Such investors are keen to accept high risk in order to maximise potential returns over the medium to long term. They typically maintain a 50-70% Equity and 50-30% Debt in their overall portfolio.

5) Aggressive: These investors accept significant risks to maximise potential returns over the long term and are aware that they may lose a significant part of their capital if they do not maintain discipline and emotional control. Such investors typically maintain a 80-100% Equity and 20-0% Debt in their overall portfolio.

Investing in mutual funds helps you invest across asset classes as per your risk appetite which can be varied as you wish. While investing in MFs, choose a mutual fund category depending on your risk appetite and goals’ time horizon.

(Contributed by Shaheen Akhtar, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)
Got any questions? Connect a financial planner now.

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