Invest In Stocks If You Understand Market Well
Priya Sinha, email
I want to invest in equity. Should I choose equity mutual funds or invest directly in stocks? If I go with stocks, should I open a demat account with a zero-brokerage platform or a full-service broker? How are they different?
Mutual funds offer diversification, professional management, and suit long-term goals even with small systematic investment plans (SIPs), making them ideal for beginners.
Investing in direct stocks offers potentially higher returns and zero expense ratios, but requires significant market understanding and analytical and research skills. They also carry higher risks. For newcomers, a better alternative is to start with index funds to understand stock markets, before attempting to invest in direct equities.
If you opt for direct stock investing, you will need a demat account. Zero brokerage services are cheaper, app-based, and good for do-it-yourself (DIY) investors who don’t need advice. In contrast, full-service brokers charge more but offer research inputs and personal assistance. Your choice should depend on your investment knowledge and need for guidance.
Col Sanjeev Govila (Retd), CFP, CEO, Hum Fauji Initiatives
Kritank Sharma, emal
I recently started working and opted for Employees’ Provident Fund (EPF) deductions. I also invest in Public Provident Fund (PPF) regularly. Now, I have the option to switch to a consultant role with no EPF deduction. Should I switch?
Whether you wish to continue as an employee or switch to a consultant role would depend on your financial goals, desired take-home income, job security, and tax situation.
Employees are taxed as per income slabs, with limited deductions. On the other hand, consultants can claim expenses against income, thus reducing their overall tax liability. If income stability is important, staying employed is advisable, unless you have a long-term consulting contract.
In employment, 12 per cent of your basic salary goes to EPF, offering long-term, tax-efficient savings. As a consultant, EPF contributions aren’t mandatory. However, if you’re already disciplined about saving through PPF, that can serve as a good long-term investment alternative. Choose the structure that aligns with your financial planning style—secure and systematic as an employee, or flexible and tax-efficient as a consultant.
Deepak Kumar Jain, Founder and CEO, TaxManager.in
Saurabh Mehta, email
I took a home loan of Rs 35 lakh from HDFC in 2020, at 7.25 per cent interest per annum. The interest dropped to 6.9 per cent and then increased to 9.45 per cent in 2023. Some of my colleagues’ home loan interests have fallen. But mine hasn’t. How can I reduce it?
If your home loan rate hasn’t dropped despite recent repo rate cuts by the Reserve Bank of India (RBI), it may be tied to an older benchmark. Since 2019, most new loans follow the repo linked lending rate (RLLR), which adjusts more quickly with RBI repo rate changes. But you took your loan from HDFC before its merger with HDFC Bank in 2023. So, it possibly still follows the retail prime lending rate (RPLR), which is slower to reflect policy changes.
Ask your bank what benchmark your loan uses. If it’s not RLLR, request a switch to that structure. This could make your rate more responsive to repo rate cuts.
If your lender doesn’t offer a lower rate, you may transfer it to another bank, but compare the overall cost, including processing and documentation fees. You can also use offers from other lenders to negotiate with your bank for a lower rate.
Amit Prakash Singh, Co-Founder & Chief Business Officer, Urban Money