Check Charges Before Loan Transfer
Niharika Singh, Email
I want to invest in mutual funds each month. Is a systematic investment plan (SIP) the only option, or should I invest whenever the market is down? Please advise which strategy is better.
SIPs ensure disciplined investing, and averages out ups and downs through rupee-cost averaging. It removes the guesswork of market timing and reduces emotional decision-making.
Investing During Market Downturn: While buying on dips may seem profitable, it requires market timing skills, which even professionals struggle with. If you miss the best recovery days, your long-term returns can suffer significantly.
Risk Of Staying In Cash: Waiting for market corrections means your money stays idle in a savings account or fixed deposit, earning lower returns than equity markets.
Psychological Barriers: When markets crash, investors often hesitate to invest, expecting further declines, and end up missing the eventual rebound. What is the lowest point to enter is not easy to know except in hindsight. Consequently, those who try this strategy, keep delaying entry till it gets too late.
Hybrid Approach: A practical hybrid approach is to maintain a core SIP investment while keeping some funds ready to deploy during significant market corrections (10 per cent or more). This will provide both consistency and opportunistic benefits. However, remember not to use this strategy till you have got adequate experience and have been in the stock markets at least for one full boom-bust cycle.
Col Sanjeev Govila (retd) CFP, CEO, Hum Fauji Initiatives
Aman Tyagi, Email
I am currently working as a consultant. My employer deducts nothing other than the tax deducted at source (TDS) from my salary. What are the tax benefits on this salary structure compared to a regular employee?
As a consultant your income is taxable under ‘Profits and Gains from Business & Profession’ head under the Income-tax Act, 1961. Hence, the tax is only on the profits, that is income less expenditure. Therefore, whatever you spend to carry on the profession are allowed as a deduction. However, as an employee you are taxable under the head ‘salaries’. You get a standard deduction of Rs 50,000 under the old regime in addition to other deductions like conveyance allowance, and Rs 75,000 under the new regime. So, subject to your employer’s terms and conditions you may take a call. If your expenditure for rendering your services is less than the standard deduction, you may continue receiving salary or vice-versa.
Vivek Jalan, Tax Connect Advisory Services LLP
Piyush Anand, Email
I have an outstanding home loan of Rs 27 lakh at 9.45 per cent interest per annum (p.a.). An agent has now advised me to consider transferring the loan to a new lender offering approximately 8.5 per cent. Does this make sense?
Yes, it makes sense to consider transferring your home loan if you can secure a lower interest rate of 8.5 per cent p.a. compared to your current rate of 9.45 per cent. This 1 per cent difference is good enough to consider transfer. A lower interest rate means more cash in your pocket each month, allowing you to allocate funds to savings or other expenses. Additionally, refinancing might come with improved loan terms.
However, keep in mind the transfer charges and ensure that the savings from the lower interest rate outweigh this cost. Running the numbers and possibly consulting with a financial advisor can help you make an informed decision.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution