Financial Cocktail Samosas: Bitesized Money Morsels For You, 21/06/2023

It’s an All-Time High for the Past, Not for the Future

The stock market is the device for transferring money from the impatient to the patient, said Warren Buffet.

An investor often faces a dilemma in both trends of the market. When the market goes down, it creates anxiety to save capital from erosion, and during the upside, we are always in a hurry to book profit and exit from the market.  There is a general perception in the market that whenever the equity market reaches a new high, the market will now correct itself and hence one should just get out without even a preliminary analysis of why the markets are acting in the way they are doing.

Upside movement of the market is just an ongoing process. All-time highs are a normal and inevitable part of long-term equity investing. When the economy is expected to do well, markets will move up and breach its last high; there’s nothing strange or unique about it. Also, when the market indexes move upward, it shows the confidence of investors in the prosperity and growth of the nation’s economy in the long term, as is happening today.

As visible in the above graph (highlighted in red), the market has broken so many all-time highs that you would not be able to count them – after a previous high is broken and the market moves up, every day is an All-Time High (ATH)!

So, how do you deal with ATH? Find out why is it moving up and if you are convinced that it is due to solid fundamental factors, then do not see everyday movement, do not pay attention to negative noises or Whatsapp gyans – just stay invested, further looking for solid investment opportunities.

(Contributed by Ujjwal Dubey, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Key Things to Know Before Filing Your Income Tax Returns

As the Income tax returns filing have been started, here are some key things to know before filing your Income Tax Return (ITR):-

🟢 Keeping Documents Ready
Keep all the documents ready related to your income, investments, and expenses such as Form 16, salary slips, bank statements, TDS certificates, investment proofs, and bills.

🟢 Know your income and tax liability
You need to know your total income for the year, as well as any taxes that have already been deducted from your income (such as TDS).

🟢 Choosing the Correct ITR Form & Tax Regime
Choose the ITR form that is right for you based on your income and filing status. Also, there have been several changes in the new regime, choose the suitable regime for yourself considering all the deductions and exemptions available to you. If you are our existing investor, just get in touch with your financial advisor in the company and we will work out the best tax regime for you.

🟢 Check the Form 26AS and AIS
Form 26AS provides details of the taxes deducted, collected, and paid during the financial year, whereas AIS provides us the details of interest, dividends, securities transactions, mutual fund transactions, etc. One should check and reconcile the record with these forms as they help you in filing the ITR properly.

🟢 Keep the deadline in mind
The deadline to file ITR for the financial year 2022-23 is 31 July 2023. Please file your ITR before the deadline to avoid last-minute hassles and a penalty.

🟢 Seeking Professional Help
If you find the process tedious or do not want to engage in this complicated process, consider seeking professional assistance. We have also started the ITR filing for our investors.

(Contributed by Yogesh Gola, Relationship Manager, Advisory Desk, Hum Fauji Initiatives)

Why Do We Have To Look Beyond Traditional Fixed Income Investments?

Investing your money has many options today – fixed income instruments, mutual funds, stocks, real estate, P2P, and even bitcoin and the lowly bank FDs – deciding where to invest can be difficult. Each choice has its own role and rewards for investors, making direct comparison difficult.

When we talk about the Fixed Income option in Mutual Funds, the only thing that is fixed about it is its unfixed character!

Fixed income (or Debt) MFs are frequently assumed to provide fixed returns. The truth is that Debt MFs generate returns that correspond to changes in interest rates and unless a Debt MF is purchased and held to maturity, investments are exposed to interest rate fluctuations.

Sometimes, Debt MFs that promise higher returns may contain riskier assets. This is because some issuers may include lower-grade instruments in the portfolio to try to achieve better returns. It’s important to be cautious when considering these options.

For a long time, other fixed-income investments have been popular among Indian investors. However, mutual funds offer an appealing alternative. Not only can they potentially generate higher returns while keeping similar safety, but they also have tax advantages like you don’t have to pay taxes on your returns while your investment is growing and if you want a regular income, use the SWP (Systematic Withdrawal Plan) route to save about 70% tax. Additionally, mutual funds have a good track record of outpacing inflation, which helps protect your wealth.

As you embark on your investment journey, remember to make informed choices, seek guidance from professionals, and stay focused on your objectives. The world of investments is full of opportunities for those who are willing to explore and take smart risks.

(Contributed by Sweta Kumari, Financial Planner, Team Vikrant, Hum Fauji Initiatives)

What Did Our Clients Ask Us in the Past 7 Days?

Q1: I started investments with you at the beginning of 2021. It’s been almost 1.5 years and my returns are not even at par with bank FDs. I wish to route my investment to a suitable alternative that can earn me decent inflation-beating returns. What will you suggest?

It is quite obvious to have expectations when making any investments, and the expectations are always portfolio returns. However, one thing that we need to remember while investing is that time is of great essence. The way we experience a lot of emotions in life, investments too are a roller coaster that go through several ups and downs.

It is always prudent to classify your investments based on the time horizon in hand. Shorter term goals are always associated with safer debt investing while those with a time horizon of more than 5 years are mostly correlated to equity investing.

Equity investing is not an easy game to play. Patience is the only key to get it done right. It involves taking a long-term view of investments and resisting the urge to react quickly. Successful investors are those who tend to wait and watch, and analyze markets and trends over time before making a decision. Equity markets move in cycles and it often takes 5-7 years to go through a full cycle of a sharp rise, decline, stagnation and back. To get to optimum return levels, we need to go through an entire cycle which of course would not happen in a year or two. Such a period is too short a period for equity investing.

All you need to do is ride the wave and be patient with your investments. They will deliver what is required out of them!

Q2: I came to you for getting good returns on my portfolio. While you gave me a good amount of equity, some part of my portfolio was also allocated to debt instruments. Now when stock markets are rising, my returns are lower. What do you say to this?

We understand your concern about the allocation of your portfolio in debt instruments and the lower returns compared to the rising stock market. Your financial well-being and goals are crucial, and we want to address your concerns while considering the emotional and behavioral aspects of investing.

Investing involves managing risks and uncertainties apart from giving you good returns. Debt instruments provide stability during market volatility, acting as a safety net for your capital and offering peace of mind. Diversifying your portfolio with debt instruments creates a balanced and secure approach, preventing impulsive decisions driven by short-term market trends. It ensures a disciplined and rational investment strategy, shielding you from the emotional rollercoaster of the stock market.

During market downturns, debt instruments act as a buffer against significant losses, providing comforting reassurance for your financial future. Please remember, investing is a long-term journey. We’re here to support you and provide guidance to ensure your portfolio reflects your goals, risk tolerance, and emotional well-being. Taking undue and unnecessary risks with your hard-earned money is never our agenda and never a wise way to manage your financial future by any financial advisor.

(Contributed by Team Advisory & HNI Desk)

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