Posted: 26 Jul 2016 04:46 AM PDT

According to the dictionary, income that is not spent is saving. If you don't spend ten per cent of your monthly income and just keep the cash in a box, then you are saving money, no question about that. It's a simple concept, but by itself, it doesn't get you very far.

The basic reason for that is that money doesn't retain its value. Prices rise and what was worth a hundred rupees last year is probably worth ten or twenty rupees more this year. Inflation eats away at your savings, bit by bit. Historically, inflation in India has always been at a far higher level than in the developed countries. Over the last thirty years, it has varied over a wide range, but has rarely fallen below five or six per cent per year for a sustained period. The long-term average over this entire period is about eight per cent.

Eight per cent doesn't sound all that harmful. It just means that something worth R100 becomes R108. However, that's the annual rate. The inflation rate is a compounding rate, and the inflation of one year feeds into that of the next year, and so on. This means that if you had saved R1 lakh in 1982 and just kept it in a drawer as cash all long, then it would be worth no more than R8,200 today, just 1/12th of its original value!

And don't think that the future is going to be any better. Currently, despite all the efforts of the Reserve Bank, inflation has stayed above seven per cent. Economists now say that high inflation is now 'structural', meaning it's integral to the Indian economy and will likely stay that way.

And that's why we need to not just save, but also to invest our savings. Investment means putting our money into some form whereby it will yield some gains. Most of us are familiar with the 'types of things' that we can invest in. These 'types of things' could be property, gold, bank deposits, shares and deposits. Anything into which we can put in money and have it grow can be called an investment.

Of course, just matching inflation should not be the goal of any smart investor. Anyone who takes the trouble to learn some basics and applies them sensibly, should be able to earn more than enough to retain the value of their money. Investments can become an independent source of income. And if you let this sum accumulate instead of using it as income then it can grow into a serious amount of wealth.

Take the example above. Suppose that same R1 lakh had been invested in 1982 in the shares of a group of leading companies so that their value grew along the same rate as the BSE Sensex. The money would today have grown to R37 lakh! This is far ahead of the rate of inflation. A sum of R37 lakh can buy you a lot more than what R1 lakh could have bought you in 1982. Investing well over long periods of time will not just save you from inflation-- it can also make you rich.

But investing can be as risky as it can be rewarding. Newcomers who start investing with over-optimistic expectations, and without enough knowledge or caution always face the biggest problems.

-----------------------------------------------

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds
Top 10 Tax Saver Mutual Funds to invest in India for 2016
Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund
2. Axis Tax Saver Fund
3. Franklin India TaxShield
4. ICICI Prudential Long Term Equity Fund
5. IDFC Tax Advantage (ELSS) Fund
6. Birla Sun Life Tax Relief 96
7. DSP BlackRock Tax Saver Fund
8. Reliance Tax Saver (ELSS) Fund
9. Religare Tax Plan
10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online
Invest Online
Download Application Forms
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
---------------------------------------------
Leave your comment with mail ID and we will answer them
OR
You can write to us at
PrajnaCapital [at] Gmail [dot] Com
OR
Leave a missed Call on 94 8300 8300

-----------------------------------------------

Annuity

Posted: 26 Jul 2016 03:43 AM PDT

Annuity Online

1 An annuity is a contract under which a corpus sum is created, as a lump sum or in instalments, in return for which the insurance company undertakes to make periodic payments.

2 An annuity is useful in income planning after retirement, as it can generate a regular income over a long period of time, upon investment.

3 The annuity paid depends on the annuity rate applicable at the time of the purchase. The annuity rate is guaranteed for the entire period.

4 The holder of the annuity (annuitant), can decide the frequency of annuity payments--monthly, quarterly, halfyearly or annual.

5 An annuity may be immediate or deferred. In the former, the payments begin immediately upon purchase, while in the latter, the vesting age is some time away.

6 Some products such as insurance-based retirement plans and NPS mandate that a portion of the corpus at retirement should be used to buy an annuity to provide a regular income.

-----------------------------------------------

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds