5

5 kinds of fake insurance calls

Hundreds of people fall in the trap of fake insurance calls. The fraudulent callers are increasingly ingenuous and appeal to our sense of fear and greed to part with personal details and money. We have compiled here the different kinds of pitches they make. If you come across any of these, just disconnect the call. Also please share this page with your friends and if you have new pitches to add, please put it in the comment section.

Fake Call 1: This is a call from an LIC service branch,  You can transfer the existing policies to new policies for better returns.

Fake Call 2: There is an annual equity bonus lying unclaimed in your Account, which will be transferred to your Insurance Agent/govt. Please deposit money in a certain bank account to avoid this transfer.

Fake Call 3: Your insurance agent purchased insurance policy of xyz company at the time of purchasing your LIC policy. Dividends from policy of xyz company will be transferred to your agent and xyz insurance company. Please deposit money to transfer this money to your account.

Fake Call 4: You are entitled to loyalty bonus for being a valued customer. This bonus is transferred to agent code instead of your code. Give policy details so that the bonus is properly transferred to you.

Fake Call 5: We are calling from Insurance Verification Department. Give your PAN Card number, Bank Details and Aadhaar number to complete the verification process.

9

Indian Stock Market timings

Indian Stock Market Timings

Trade in the stock market can only be undertaken during a specific time interval in India. Retail customers have to perform such transactions through a brokerage agency between 9.15 a.m. to 3.30 p.m. on weekdays. Most investors undertake purchase/sale of securities listed on the major stock exchanges in India – Bombay stock exchange (BSE) and National Stock exchange (NSE). Indian stock market timings are the same for both these major stock exchanges.

 

Indian stock market timings for trade is divided into three segments:

Pre-opening Timing

This session lasts from 9.00 a.m. to 9.15 a.m. Orders to purchase or sell any securities can be placed during this time. It can be further classified into three sessions:

  • 9:00 a.m. – 9.08 a.m.

During this stock market opening time in India, orders for any transaction can be placed. The order entry is given preference when actual trading begins, as these orders are cleared off in the beginning. Any requests placed during this time can be changed or cancelled according to need, which is beneficial to investors, and no orders can be placed after this period of 8 minutes during the pre-opening session.

  • 9:08 a.m. – 9.12 a.m.

This segment of Indian share market timing is responsible for price determination of security. Price matching order is done by corresponding demand and supply prices to ensure accurate transactions among investors who want to purchase or sell a security, respectively Determination of final prices at which trading will begin during normal Indian stock market timing is done through multilateral order matching system.

Price matching order plays a vital role in determining the price at which the security is transacted during a normal session of Indian stock market timing.

However, benefits of modification of any order already placed in not available during this session.

 

  • 9:12 a.m. – 9.15 a.m.

This time acts as a transition period between preopening and normal Indian share market timing. No additional orders for transactions can be placed during this time. Also, existing bets already placed from 9.08 a.m. – 9.12 a.m. cannot be revoked as well.

Normal Session 

This is the primary Indian share market timing lasting from 9.15 a.m. to 3.30 p.m. Any transactions made during this time follows bilateral order matching system, wherein price determination is done through demand and supply forces. Bilateral order matching system is volatile, thereby inducing several market fluctuations which are ultimately reflected in security prices. To control this volatility, the multi-order system was formulated for the pre-opening session and was incorporated in Indian stock market timings.

Post-closing Session 

Stock market closing time in India is marked at 3.30 p.m. No exchange takes place after this period. However, the determination of closing price is done during this time, which has a significant effect on the following day’s opening security price.

Stock market closing time in India can be divided into two sessions –

  • 3:00 p.m. – 3.40 p.m.

The closing price is calculated using a weighted average of prices at securities trading from 3 p.m. – 3.30 p.m. in a stock exchange. For determining the closing prices of benchmark and sector indices such as Nifty, Sensex, S&P Auto, etc. weighted average prices of listed securities are considered.

  • 3:40 p.m. – 4 p.m.

This period is post stock market closing time when bids for the following day’s trade can be placed. Bids placed during this time are confirmed, provided adequate buyers and sellers are present in the market. These transactions are completed at a stipulated price, irrespective of changes in opening market price.

Thus, capital gains can be realised if opening price exceeds closing price by an investor who has already placed their bids. In case closing price exceeds opening share price, bids can be cancelled during the narrow window of 9.00 a.m. – 9.08 a.m.

The overall stock market operating time in India can be demonstrated by the following table:

S. No. NameTime 
1.Pre-opening session9.00 a.m. – 9.15 a.m.
2.Normal session9.15 a.m. – 3.30 p.m.
3.Closing session3.30 p.m. – 4.00 p.m.

Aftermarket Orders

Post this time frame. No transactions can take place. However, investors can place aftermarket orders, for securities of chosen companies, which would be allocated at opening market price the following day.

Muhurat’ Trading 

Indian stock market is generally closed for any transactions on Diwali, as it is a religious festival celebrated all across the country. However, a one-hour trading session is conducted from 5.30 p.m. to 6.40 pm as it is considered to be auspicious.

 

Income tax Feature Image

Income-tax relief for home buyers

Hello fellow investors
 

As a part of various relief measures taken by the Government in response to the economic slowdown post-COVID-19, the Finance Minister (FM) has announced a very attractive income tax relief for home buyers (new residential properties of value up to Rs 2 crore). Here is what you need to know.  

Income Tax relief for home buyers
 

In case the declared purchase consideration of the land/building is less than the stamp value (circle rate) by up to 20%, there will be no additional tax outgo for both the seller and the purchaser for the period 12th November 2020 to 30th June 2021. Earlier, the acceptable difference was 5% which was to be enhanced to 10% with effect from 01 st April 2021.

This move will also help developers in selling off their unsold inventory at up to 20% below the circle rate and the buyers in getting cheaper homes without any additional tax burden on either party. Let’s look at the relevant provisions of the Income Tax Act to understand the applicable tax relief.

Section 43CA of the Income-tax Act – for the seller

This section provided for deeming of the stamp duty value (circle rate) as sale consideration for the transfer of real estate inventory in the case the circle rate exceeded the declared consideration. The circle rate is the minimum rate per unit area fixed by the state governments for the sale of land or property and is
aimed at reducing stamp duty evasion by declaring lower sale values in the sale-purchase deeds.

Thus, even if the real estate was sold at a price below the circle rate, the circle rate was considered as the sale value for calculation of business profits of the seller. For example, if a house is sold by a developer for Rs 80 lakh but its value as per the circle rate is Rs 96 lakh, the developer is supposed to take Rs 96 lakh as the sale value for
calculating his profit.

Through Finance Act 2018, a difference of 5% between the two rates was declared to be acceptable. This was increased to 10% through Finance Act 2020. Now, the FM has raised this acceptable difference to 20%. Thus, in the above case, the difference is exactly 20% as seen below and the developer can consider Rs 80 lakh for calculating his profits from the sale. 

Section 56(2)(x) of the Income-tax Act for the buyer

This section is applicable to the buyer and provides for stamp duty value to be deemed as purchase consideration even if the purchase was made at a lower price. As per the above example, the buyer is deemed to have received Rs 16 lakh (the difference between the stamp value and the sale consideration) and was supposed to declare this amount as ‘Income from other sources’ and pay tax on the same. Now, he will not have to pay any tax if the difference is up to 20% as is the case in the above example.

In summary, this announcement by the FM comes as a major relief to real estate developers who were struggling to offload their inventory due to lower demand in the market. The benefit is applicable, however, only for the primary sale of residential properties and not for commercial and secondary sales.

Know your Mutual Funds (2)

List of banks for your PPF investments

What is PPF?

Public provident fund is a popular investment scheme among investors courtesy its multiple investor-friendly features and associated benefits. It is a long-term investment scheme popular among individuals who want to earn high but stable returns. Proper safekeeping of the principal amount is the prime target of individuals opening a PPF account.

Why open a PPF account?

public provident fund scheme is ideal for individuals with a low-risk appetite and is okay to invest their money in the long term. Since this plan is mandated by the government, it is backed up with guaranteed returns to protect the financial needs of the masses in India.

You can read more about PPF and things to note in PPF in our article.

Eligibility Criteria

Indian citizens residing in the country are eligible to open a PPF account in his/her name. Minors are also allowed to have a Public provident fund account in their name, provided it is operated by their parent.

Non-residential Indians are not permitted to open a new PPF account. However, any existing account in their name remains active till the completion of tenure. These accounts cannot be extended for 5 years – a benefit available to Indian residents.

Interest in a PPF Account

The interest payable on the public provident fund scheme is determined by the Central Government of India. It aims to provide higher interest than regular accounts maintained by various commercial banks in the country.

Interest rates currently payable on such accounts stands at 7.9% and is subject to quarterly updates at the discretion of the government.

How to Open a PPF Account

Both offline and online procedures are available for an individual provided he/she meets the requisite parameters mentioned in the eligibility criteria. Activating PPF online can be done by visiting the portal of a chosen bank or post office.

The following documents have to be produced at the time of activation of a public provident fund account –

  1. KYC documents verifying the identity of an individual, such as Aadhaar, Voter ID, Driver’s License, etc.
  2. PAN card.
  • Residential address proof.
  1. Form for nominee declaration.
  2. Passport-sized photograph.

Tax Benefits

Income tax exemptions are applicable on the principal amount invested in a PPF as an account. The entire value of an investment can be claimed for tax waiver under section 80C of the Income Tax Act of 1961. However, it should be kept in mind that the total principal that can be invested in one financial year cannot exceed Rs. 1.5 Lakh.

The total interest accrued on PPF investment is also exempt from any tax calculations.

Therefore, the entire amount redeemed from a PPF account upon completion of maturity is not subject to taxation. This policy makes the public provident fund scheme attractive to many investors in India.

List of Banks Offering PPF Accounts

  • Allahabad Bank
  • Corporation Bank
  • Bank of Baroda
  • HDFC Bank
  • ICICI Bank
  • Axis Bank
  • Kotak Mahindra Bank
  • State Bank of India and its subsidiaries which include the following –
    • State Bank of Travancore
    • State Bank of Bikaner and Jaipur
    • State Bank of Hyderabad
    • State Bank of Patiala
    • State Bank of Mysore
  • Canara Bank
  • Bank of India
  • Union Bank of India
  • Oriental Bank of Commerce
  • Central Bank of India
  • Bank of Maharashtra
  • Dena Bank
  • Syndicate Bank
  • United Bank of India
  • Indian Overseas Bank
  • Vijaya Bank
  • IDBI Bank
  • Andhra Bank
  • Punjab National Bank
  • UCO Bank
  • Punjab and Sind Bank

These are some of the common PPF Account opening banks. There are other banks too and if you hold a savings account with another bank that is not on the list, you can find out whether the bank is a PPF Account opening bank or not.

 

17

Harsh Mehta – 1992 Scam – Our Learnings

Hello fellow investors

Ishq hai, toh Risk hai!! Today, I am going to talk about the most acclaimed show of the Indian network currently - Harshad Mehta - 1992 Scam. Don't worry I am not going to give any spoilers. Through this article, it is my attempt to share the learnings about investing that we all can take home and apply.

Harshad Mehta, a name which is could be new to many young investors but is the reason why my father moved to Bombay and took up finance as his profession. He was the living God for many young investors back in 1992 and he also helped many people make money in the market. However, when the basis of his work and reality came to light, he also became the reason for many people losing their entire life savings. 

 


Let's check out the learnings you budding investors can take from the show:

  1. The 3 main fundamentals of investing in the stock market are 1. Have common sense 2. Do research on the fundamentals of the company 3. Do not underestimate how behavior and investors' confidence changes the tides of the market.
  2. The entire show in fact focuses on the fact that the blinding trust of people in Harshad made them buy stocks of companies he was buying even where some of the companies had no business or value. Never just invest in tips + articles - Do your own research, it is your money. 
  3. Fear of missing out (FOMO) can lead to higher losses if not managed properly. You need to be able to control your emotions. Buying when the market is going up in the fear of missing out could make you lose more money. Buy when the price is right, not because everyone else is buying.
  4. When you invest on the basis of a tip from anyone you are gambling in the market, playing your chances not really investing any money on fundamentals.
  5. No one is the god of the market, the market waits and listens to nobody, there are many players and forces that make the market move, and having a proper process which guides you when to enter and when to leave will help you manage your risk of investing. One such process is asset allocation. We have written many articles to explain how this process helps you overcome your fear and FOMO and invest as per your risk-taking capacity.
  6. Equity Investing is RISKY and has always been but over time, various financial institutions and SEBI has better control to protect the interest of investors, having said that there have been many crashes after 1992 which are beyond our control (including the one in March 2020). One thing to remember as an investor is a market high in 1992 was 4000 and 2020 was 40,000. After every crash, the market does bounce back, all you have to do is give it time. Hence, the key to success in Equity Investing has always been Long term !!
  7. There will always be another market crash around us waiting to happen, we can never time that or control. As investors what you and I can control is our learnings, investing basis true fundamentals, and building a balanced portfolio that is designed based on goals and asset allocation, phir Harshad Aaye ya corona, Hume Nahi koi Rona Dhona.

This was a small email with some very detailed take-aways. Do enjoy the show, there are so many things to learn from it and I could not feel more proud to be a part of the time and space where Indian television is making shows which highlight the importance of financial literacy. The main learning from the entire show is that we must know how to manage our money, we must be financially aware so that no one can take any undue advantage of us and our money.

On this note of learning and becoming more aware, I want to inform you that we are coming out soon with our new course on money management - Namaste Money only for you - newbie investors. This will be a detailed online course where we will teach you everything from debt and equity to mutual funds to asset allocation. All our days and nights are going into finalizing the content of this course and opening it for registration. You can read all about 1this course here. Don't forget to give us your feedback.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



16

Digital Gold: Have you pocketed everything you need to know?

Hello fellow investors

Digital Gold is considered as one of the best and most convenient ways to invest in gold for us gold love-stuck Indians. In the past one year, every other payment app like Paytm, Google Pay and now even Amazon Pay has joined the players who offer Digital Gold. Even many stockbrokers have joined the offering to cater to the Indians' love for Gold.

The increasing gold prices and higher returns in the past 1 year have only further affirmed this love. Is this digital gold all that glittery for real?  Have you looked at the fees, cost structure, and the regulations behind buying digital gold? Read this article to understand the various nuances of digital gold and things to consider before buying digital gold (only for convenience)


Digital Gold – Have you pocketed everything you need to know?

The entire mantra of Digital India has been pushed to gold as well and now an investor can purchase gold using payment apps like Paytm, Phone Pe, Google Pay, Amazon Pay, etc.

As investors, it is important to be aware of how Digital Gold functions; where is the money eventually going, and how cost-effective this investment is. Here we will break down these concepts for you and help you have a well-informed discussion about digital gold and it will offer you insights if you should go for it or not.



What is Digital Gold?

Digital Gold is a way to invest in physical gold ‘digitally’. It is offered by 3 main vendors in India – Augmont Gold; MMTC-PAMP India Pvt. Ltd (a joint venture between state-run MMTC Ltd and Swiss firm MKS PAMP) and Digital Gold India Pvt. Ltd with its Safe Gold brand. Various payment apps such as – Paytm (Safe Gold), Google Pay (MMTC-PAMP), Amazon Pay (Safe Gold), and investment platforms such as – Kuvera, Groww, and stockbrokers bring to you this digital gold in partnership with one of the three vendors. There are many new financial service providers who are adding digital gold to their bouquet of services.

So how does this work? When an investor buys gold via these apps, physical gold equivalent to that amount is kept safely in a vault under the security of the vendors. The investor can then choose to sell the gold at any time using the same app or convert it into gold coins (after reaching a certain limit).

Digital gold enables an investor to buy, sell, and accumulate pure gold of finesse 99.99 (24K gold) infractions anytime, anywhere. Thus, even with a minuscule monetary investment of INR 1, an investor can buy gold (even if it’s a minuscule quantity of it) at their convenience regardless of the time and place. What’s more, is that one can do so without worrying about the purity of gold.



Is this product really all gold?

To dig deeper into the digital gold framework and its working, we checked the buying & selling prices on various apps and compared the same to MCX gold prices.

MCX Price on 18 September was INR 51,210

As you can see from the table above, there is a clear difference between the buy and sell price of digital gold. Also, the prices on these apps are much higher than the MCX price for gold.

The gold price is higher on the platforms as they charge convenience fees, gold handling charges, trustee fees, storage charges which are all included in the gold price but there is no breakup of these charges mentioned anywhere. Additionally, a GST of 3% is also payable on the gold price.

Meanwhile, the selling price is substantially lower than the buying price and on top of it, some platforms also charge a convenience fee when you sell the gold.

Making & delivery charges – An investor can take physical delivery of gold in the form of gold coins and jewellery (Paytm has tie-ups with Kalyan Jewellers). While converting to coins, making charges and delivery charges are payable. On the Paytm app, the minimum quantity of 0.5 grams of gold is required to convert to gold coins and the charges vary from 384 for 1 gram gold coin to 944 for 10 gram gold coin (these charges and specifications varies across each app)

Apart from the additional cost, the risk of investing in digital gold is that there is no regulator for the product. When digital gold is bought, the vendor purchases gold of an equivalent amount in the investor's name. Generally, a trustee is appointed to see if the quantity and purity of gold is maintained in line with the gold purchased by the investor. However, currently, there is no regulator to oversee if the trustee is doing the work properly. This is a point of concern because even the apps which help one to buy digital gold are only a medium to buy it. Ultimately gold is stored with the vendors.

In light of the lack of regulatory framework coupled with the high cost of digital gold, other investment options of gold such as sovereign gold bonds & Gold ETF appear more viable when investing larger amounts of money and for longer periods.

On the other hand, digital gold helps us, gold love-struck Indians, to accumulate gold in smaller quantities as investing in large amounts may be out of bounds for a large section of the population. And this can be seen in the high volume of transactions seen by platforms like Paytm in a short span of time.

If you want to know more about the basics of Digital Gold, do check out our video on the same through the following link:
https://www.youtube.com/watch?v=kNnyBJw6sm4&t=2s&ab_channel=WealthCafeFinancial

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



5

Things To Do After You Buy A Health Insurance

Hi there Usually, we have health insurance and discuss how to get health insurance. In this article, we discuss things to do after you buy a health insurance plan. 1.  Understand claim procedures In the case of emergency hospitalization and in the case of planned hospitalization find out the documents and steps necessary to intimate the insurer. Copy this information from the insurer or TPA’s website onto a word processor, print it, and keep it along with the policy document and policy ID card. 2. Recognise that ‘cashless’ is not a right! Health insurance comes with a right to claim reimbursement. However, cashless claims are more of a privilege than a right. It is quite possible that the insurer may either deny cashless or allow it partially and ask the insured to claim the rest of the expenses via reimbursement after the hospitalization is complete. 3. Prepare for the next premium Even if you choose not to increase the cover each year, do not assume the premium will be the same next year. The premium could increase due to other reasons – age of individuals, the risk profile of the entire group covered by the group, underwriting test, and perhaps medical checkups too. Start an online recurring deposit that matures 6-8 weeks before the premium is due.  If you are comfortable, you can choose to put money aside in a liquid fund for your insurances. 4. Understand the implications of sub-limits There is nothing wrong with buying a policy with room-rent sub-limits. The only precaution is to ensure that the room-rent is always lower than that allowed by the sub-limit. This is because every kind of hospital fee (medicines, doctor fees, etc.) is linked to the room rent. So if you choose a room rent higher than that allowed by your policy, you will only be reimbursed (or paid via cashless) a portion of the hospital bill. 5. Recognize the impact of non-medical expenses Hospitalization is not only about paying hospitalization fees! There is a huge list of non-medical expenses that any patient could incur. There are some administrative expenses, household expenses (while you are hospitalized), support staff expenses, and some expenses which get rejected in your insurance. Even if you believe that your health insurance cover is sufficient, these expenses have to be paid. This is where your emergency fund will come in handy. So ensure that you have one in place. 6. Health Cover for family members If you are the earning member it is very crucial to have your own insurance but it is equally important to have health insurance for your family members, as any medical emergency for them would result in a financial setback for you and the entire family. If the budget is a constraint you can consider taking up a family floater plan - watch our youtube video on this.  https://www.youtube.com/watch?v=F0JNvA5a_eQ&ab_channel=WealthCafeFinancial  Health Insurance could be considered as one of the trickiest insurances to buy as the health issues are very different for each person and then each insurance company has varied insurance needs. As a practice, do understand the various clauses of your insurance and have an emergency fund in place to be stressfree of any unforeseen health issues. Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



2

Understanding ‘Mutual Fund Units & NAV

Hello fellow investors

More than 6 months into lockdown, 1 market crash and 1 great recovery, the only constant thing is our learning and our Thursday emails. We started writing our emails soon after lockdown and now we enjoy it so much that we cannot wait for the next Thursday to come and share some insights from the finance world with you. 

In today's email, I am going back to the basics of Mutual Funds and explain what exactly are Mutual Fund Units and NAV and how they help or not help you make investment decisions.


What is a Mutual Fund Unit?


Just as share represent the ownership of Equity, units represent the ownership of Mutual funds. When you invest 5000 INR in a mutual fund and the NAV of the fund is 50 INR - you would get 100 units. 

It is like buying petrol when you go to the petrol pump, you ask them to fille petrol in your car for 1000 INR. If the price per litre is INR 100, you would get 10 litres of petrol in your car.

Let's understand a few facts about Units of Mutual Funds


1. You don't need to buy 1 entire unit of Mutual Fund
You can buy a mutual fund in fractions or parts, it is the amount of money you invest that determines how many units you get. Like when you fill petrol in your car, you tell them fille petrol of INR 1000, if per litre petrol price is 72, you get 13.88 litres of petrol. The same thing happens with Mutual Funds.

 

2. You do not sell all your units to withdraw from Mutual Funds.
As you can partially invest in mutual funds, you can also partially withdraw from mutual funds. You can do that anytime you want (unless they are close-ended schemes)


3. Units are not the same as the share price
Equity Mutual Funds invests in Equity stocks/shares but it does not mean that units are the same thing. The share price is of an individual company and the demand and supply of that particular stock are one of the factors of their share price movements. Such does not happen to mutual fund units.

An average of all the underlying stocks of the mutual funds helps determine the value of each unit which is called as Net Asset Value - NAV.

4. NAV is the price of each unit
The price of each unit of a mutual fund is the NAV. If you want to buy 1 unit of a mutual fund, the price you have to pay is the NAV of that mutual fund’s unit on that day.NAV changes every day. So when the NAV goes up, you gain.

A high NAV does not mean that a particular Mutual Fund is better than the one with a low NAV. NAV price does not determine the value of the Mutual Fund.

NAV= (Total market value of assets invested by the fund-Expenses)/No of Units

5. Mutual fund unit price (NAV) goes up and down

As NAV is determined based on the total market value of the assets invested in by mutual fund which includes shares, bonds, cash, any interest or dividend earned by them and would also capture the movement in the price of shares & bonds, the NAV would also move.

NAV of a fund changes every day where there is a change in the underlying asset, this change helps you know if you are in profit or loss.


Mutual Funds are considered one of the most common forms of investing today, in fact it has generated a lot of wealth for investors who have understood the risk of investing in them and managed it appropriately. We will soon be launching a course on Mutual Funds and more, so stay tuned and keep reading our emailers for a detailed update on the same super soon.

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



4

‘Investing’ in Real Estate?

Hello fellow investors!

Roti - Kapda - Makaan has been the three needs of us Indians and we strive to make that makaan a reality. Once the makaan works as a shelter it becomes our personal asset. When you go for the second or the third property for investment reasons then you should consider the following points before proceeding.

Yes, the returns are good in real estate. We have always stated that Investments is not all about returns, it is about building your portfolio to become financially free. So instead of just comparing past returns of both asset classes and claiming equity is better than real estate or vice versa, we would like to consider other important aspects.


1. Real Estate will skew your Asset Allocation

Investing is all about the right asset allocation. Investing a major portion of your investments in real-estate could skew your allocation in that direction for a very long time.

Once the Real estate is added to your investments, your allocation is considered with 4 assets, Real Estate, Gold, Equity & Debt. Once you choose to buy real estate, it may take a few years for other asset classes to occupy a significant portion of your portfolio. Hence, you should check and consider the reasons for investing in Real-estate.


2. It is hard to assign “present value” and calculate ‘growth’

Most people talk about how much their property is worth without actually speaking to potential buyers. It is only when you do so, you realize what is the real selling price of it. People would rather wait and enjoy lower returns than sell their properties at a price lower than what they want/wish to receive.

There is no designated market price. He who haggles the best wins here. Because of the lack of such a standard price, it makes real estate risky as most times people are stuck with a price they have in their mind without actually checking it for real.


3. It is not liquid enough that you can sell whenever you want.

I am sure you have heard of this, you cannot sell a bathroom to meet a financial emergency unlike Equity, mutual funds, and some debt options which can typically be traded in small amounts and on any business day.

You need to have other liquid assets (i.e. have a balance allocation) to take care of your financial needs.


4. TAX cost, buying another property.

The tax on capital gains from real-estate in a way encourages you to go ahead to buy another property. As per the law, if you want to avoid capital gains tax on real estate you should necessarily reinvest the same in another property or in section 54EC bonds (with low returns) for 3 years to ensure the capital gains are tax-free.


5. Difficult to sell emotionally

Many people post-retirement do not have enough fixed income and other liquid investments to manage their every day cashflows. They are still not able to liquidate their properties for cash and use it for a more relaxed late age. They have an emotional attachment towards it and then it gets rationally difficult to decide to sell.


6. Risk of renting out

No guarantee of regular income. One may need to constantly look for tenants. Issues with paying property and water tax, and the legal hassles associated with tenants not moving out!

We do not intend to discourage you from purchasing houses for the purpose of investments but it is about becoming aware of what are the issues you can face when you do so. Before taking the decisions about investing in real estate, do calculate your returns, the money you would make from the investments in real - estate, and know your numbers. A close analysis for real-estate purchases should be done in a similar way as you would do for any other asset.

Analyze your risk-taking capacity and your goals before you make the final decision.

Happy Investing!

Disclaimer: - The emailers are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.





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