A guide for Retail Investors to invest in equity

A guide for Retail Investors to invest in equity

Enough has been spoken about the markets in last few months, including the never-seen-before kind of drops and recoveries. In such times, one would have assumed that retail investors would have beaten a hasty retreat, hoping to come back when markets seem a bit saner.


Surprisingly, that is not the case. The below 2 published data points indicate otherwise.

  • New demat account openings for most brokers have surged, with anywhere between 50 to 200% increases being reported, many of them first-time users.



What this seems to indicate are 2 things

  1. Retail investors took advantage of the available time (due to the lockdown) and the valuations (in March & April post the ~ 35% crash) to enter and invest in the stock market to make some “quick” returns


  1. Considering that the bulk of these new additions are online, it can be presumed that the average new investor is young and technology-savvy, while not afraid to take risks while seeking to make a quick buck


Is this good news? Well, it depends on how one looks at it. History indicates that institutional investors are generally smarter than retail, who usually enter late to the party. The average holding returns of mutual funds is significantly higher than the average investor returns in the same funds, underscoring this fact.


On the other hand, the fact that the market participation is broadening and that too in times of market distress is heartening and shows some maturity in the mind of the average retail investor. This millennial generation is possibly different and smarter than its precursors. They are also adopting the new “do-it-yourself” way, already popular in developed countries.


That said, trading in the stock market for short term gains is fraught with risks, and can result in substantial capital loss, if one doesn’t have a good hang of what one is doing. Having an Investment Framework based on the following 4 levers can possibly help today’s investor to increase his or her chances of success in the stock market.


  1. Strong Knowledge-based Investment Hypothesis

Know each stock you invest in. Spend time on research, make sure you understand the company and its prospects, and do not get lured by tips and penny stock advice. This is fundamental to your framework and dilution here is akin to having a rotten foundation, leading your structure to fall, sooner or later.


  1. Laid-down Investment Horizons & Goals

Even the best race-car driver needs a destination, a target. Similarly, map your purchase to an outcome based on your investment hypothesis, with a time-horizon in mind. Tie it to a goal, so that neither does your horizon become a moving target, nor are you tempted to exit early during adversities, impacting your goal.


  1. Clear & Documented Process for Exits

Based on your investment hypothesis, you will know when you need to book profits, in case your target/goal is met. Similarly, however good your investment hypothesis might have been, factors change and hypotheses fail. So have a clear plan to exit in case things don’t play out the way you saw them. Having a documented process for both value-based and time-based exits, with clear rationales, is a good way to both, limit your losses and not fall in love with your darlings.


  1. Diversify Adequately

However good your stock selection maybe, expecting each to be a winner is unreasonable. Diversification is a hedge against both, failed hypotheses as well as capital loss. Build a portfolio of 15-20 stocks over time and have a cap on each stock as a % of your portfolio. 6 winners out of 10 is a good enough ratio for the portfolio.



Dear retail investor, Success in the stock market is an outcome of 3 factors – Relevant Knowledge, Robust Process and Resilient Temperament. Please use the above-mentioned levers to build a personal Investment Framework and whenever you feel swayed by emotion, go back to it and read it. You will find that not only is it helpful in the stock market, but in everyday life too. Happy investing!


Image credit: MayoFinance, Unsplash


Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families invest for their financial needs, follow their passions and achieve financial independence.

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A slightly modified version of this article was published recently on fpstudycircle.com.

If IPL teams were equity mutual funds, which categories would they belong to?

If IPL teams were equity mutual funds, which categories would they belong to?

In the last couple of years, there has been a lot said and done with respect to categorization of mutual funds. The regulator has attempted to put some structure in place for fund houses and managers through the categorization guidelines, in order to help investors make informed choices.


That said, it can still be quite confusing for the lay investor to understand these categories. Thankfully, there is something else that is universally understood. Cricket! And within it, IPL!

Fans know every team’s strengths and weaknesses while having his or her favourite teams to root for. So, if equity mutual fund categories were IPL 2020 teams, who would they be?


Read our latest article, published on Moneycontrol.




Image credit: Moneycontrol


Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families invest for their financial needs, follow their passions and achieve financial independence.

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8 timeless money lessons reiterated during the pandemic

8 timeless money lessons reiterated during the pandemic

For most people, the last few months has been a never-before experience. Whether it is about finding out how secure is your financial position in this crisis, or about understanding what is really important for you versus isn’t, or about looking for new opportunities in an otherwise generally hopeless time, it has been a period of discovery.


For me, this period has reiterated a few money lessons which I have learnt and personally tried to follow over the last few years. If anything, this crisis has confirmed to me that the path towards financial, in fact, overall well-being lies along successfully practicing these lessons.


Read about them in our latest article, published on Moneycontrol.




Image credit: Moneycontrol


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Loans for Goals: 5 steps to use leverage for your financial well-being

Loans for Goals: 5 steps to use leverage for your financial well-being

A few months back, I met a friend of mine who was down from the US on a holiday. This is someone who had done quite well for himself over the last nearly 20 years in the US, and has built a fairly large investment portfolio. As part of it, he has also successfully built a real estate portfolio over the years in the US. Discussions veered towards that, and he said something that made me sit up.


His words were “I love Leverage”.


The use of the word “Leverage” instead of “Debt” somehow made all the difference for me to look at it in a new light. Yes, loans are bad, and one should be debt-free in one’s pursuit of financial well-being. That said, I have since also realized that Debt is not as one-dimensional as one thinks it is.


Coming back to the original question, let’s look at Debt differently and build some simple rules around it, which can be generally followed, towards one’s financial well-being.


Read our latest article below, published on Moneycontrol.





Image credit: Moneycontrol


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Personal Income Tax – which regime should I go for, New or Old?

Personal Income Tax – which regime should I go for, New or Old?


As the economy slowly begins to start up and get back on its feet, it is the time of the year, post extensions, when companies require you to let them know what income deductions you will be availing of in the current financial year and the quantum of investments in various tax saving schemes. This year, however, there is an added dimension to this, you will have to also let your company know if you will be availing of the previous tax regime or the new one.

While this decision is entirely dependent on your ability and willingness to invest in tax-saving instruments as well as various deductions available to you, we are writing to give you some broad indications of which one may be suitable for you.

Below is a quick recap of the tax slabs in both the old and new regimes. The rows highlighted in grey in the new regime are the income slabs which are benefited on income tax versus the old regime. Also, important to remember that if you choose the old regime you can avail of various deductions, whereas you cannot avail of any deductions in the new regime.

Most availed deduction/exemptions in the old regime are as follows

  • Standard deduction (available by default to everyone)
  • Sec 80C – up to Rs 1.5L (normally taken care by the EPF contribution for employees, as also school tuition fee or principal repayment of house)
  • Sec 80D & Sec 80DD – Medical insurance Premium paid for self and Parents
  • HRA benefit
  • Home loan interest repaid


Let us look at which option seems beneficial under various scenarios.


You are able to avail of entire 80C and 80D medical benefit without investing in any further instruments

What we have noticed with a large part of our customers is EPF or NPS contributions take care of the entire Sec 80C limit. In a few cases where it is not so, the education tuition fees of children or principal repaid from home loan can cover up.

No one takes health insurance to save tax. It is supremely important to have a medical insurance to ensure that your financial goals are not de-railed thanks to an illness.   Most customers do have medical insurance and are able to claim a deduction of 25K for self and family. If you are paying the premium for senior citizen parents, you can get a further deduction of 50K.

Since you are not forced to invest any further money to save tax it normally makes sense to stay with old regime.


You have a home loan

If you have a home loan, it is a no-brainer to stick to the old regime, primarily because you will get home loan interest deduction upto 2L apart from availing 80C for principal repayment.


You are a senior citizen investing in PPF for 80C and have fixed deposits or Senior citizen saving scheme

If you are a senior citizen who has been investing in PPF for many years and are comfortable investing further and you hold substantial FDs or Senior Citizen Savings Scheme (SCSS) it would be beneficial to stick to the old regime. This is because you get deduction of Rs 50,000 on interest paid under section 80TTB. This is over and above 1.5L deductions under 80C for investments in PPF.

If you are wondering why a senior citizen will be investing in PPF, many of our customers use this as a tax-free estate planning device. They keep investing and leave it behind for their children. As part of asset allocation, they put some part of their debt monies into such schemes.


HRA deduction

If you are eligible for HRA deductions and can avail of deductions under 80C for your ongoing investments or expenses, it is an added reason to be in old regime.


If you are taking Voluntary Retirement and expect to get a compensation amount

Compensation upto Rs 5L received under voluntary retirement scheme is exempt from tax once in your life time. If you are choosing to avail of Voluntary retirement this year, you should stick with the old tax regime.

While the above are basic pointers, there are additional benefits available to you if you choose to invest Rs 50,000 in the NPS scheme, have an educational loan or plan to donate to recognised institutions, in all such cases the old regime is beneficial.

As you can see, I have highlighted many cases where the old regime is beneficial. You must be wondering why bring a new tax structure if it is not beneficial for most. The key to this is that you can claim deductions without making fresh investments in sub-optimal instruments only to avail of the tax deductions. Also, we have looked at the above primarily from a salaried employee’s perspective.

For self-employed or professionals where Sec 80C is not a given, they will need to invest money to avail of tax benefits. In many cases, the choice of investments will be at cross-purposes to their financial goals. In such cases it would be better to opt for new regime and invest your money in instruments of your choice which are aligned with your overall financial goals.

If you have already made the choice of tax regime as a salaried employee, you can change your mind at the time of filing your tax. This is not an option with non-salaried people. As mentioned earlier it is always a good idea to consult with your financial advisor/ tax consultant to get advice which is customised to your unique situation. However, the above pointers may help you understand the reasoning behind the choice.

Image credit: Gerd Altmann, Pixabay

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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Dear woman, don’t be risk-averse in choosing your investments

Dear woman, don’t be risk-averse in choosing your investments

Last week, I did a financial well-being session at a well-known corporate, the participants being predominantly women in their 30s. While they were all keen on taking charge of their finances and made for an attentive audience, most of them were extremely risk-averse.


This was startling, since women, usually, are not in a hurry. They are very patient, and once they understand the way a product is built and have realistic expectations of the short-term as well as long-term performance, they wait out the turbulent times patiently and truly stay put for the long term.


Given this fact, it was surprising to see that most of the women mentioned earlier were shying away from equity since they perceived the volatility in the short term as risk. There are several compelling reasons for women to take more interest and understand the best options available to them when it comes to investing. Here are three big ones.


Read our latest article, published on Moneycontrol.




Image credit: Moneycontrol


Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

Lessons in managing money from Test cricket as we get into the 2020s

Lessons in managing money from Test cricket as we get into the 2020s

In the last decade or so, the Twenty-20 (T20) format has overtaken the traditional formats of cricket, due to its shorter match-time, fast-paced and glitzy game, adapted rules to make it more interesting as well as in-studio add-ons. While purists may not appreciate these “dilutions”, they have definitely democratized cricket, taking it to newer audiences both in existing countries where cricket is played, as well as to more countries across continents, moving the game up several notches in the global rankings of universal popularity as well as revenues.


Interestingly, we have also recently entered the 2020s decade. With the dawn of 2020, another decade just passed on! Already 2 decades of the new millennium are gone and it has been a full 2 years since the 21st century turned an adult! With attention spans shortening and the pace of life and changes to it both getting quicker, it sometimes seems that even time is playing a T20 version of its game on us.

While this fast-paced “T20 version” of life can get addictive, its effects can be quite corrosive! It has never been easier to acquire “look-rich” symbols of wealth, with literally everything, including luxury cars, now available at the click of a button on “easy” EMIs. There has been a dramatic change in the way people have managed their cashflows (Income vs Expenses) in the last few years, and this is also reflected in the household savings rate (as a % of GDP), which is down to 17.2% in 2017-18 from 23.6% in 2011-12 (data source – Forbes India, 2nd Jan, 2020).


The newer generation of investors also think quite differently as compared to their previous generation, placing far more emphasis on the present and the here-and-now while being not-as-concerned with what the future holds. Apart from re-defining their needs, this thinking also stems partly from a much higher level of self-belief and confidence in one’s own abilities, as compared to what the earlier generation had at this age.


That being the case, in these changing times, does managing one’s money also evolve a-la cricket and have its own “T20” version of the rules? In my view some things will not change, especially lessons on managing one’s money. They remain universal and relevant, just like Test matches in today’s T20 age, and if anything may become more relevant in the coming uncertain and high-speed decades. So, what are some of those lessons that you can take from Test cricket, to manage your money in today’s T20 times? Here are 7 simple ones.



  1. BE PATIENT – Test cricket can be boring, and needs to be played session by session


Test cricket can at times put you to sleep, and definitely test your patience, with its long-drawn out game, and sometimes non-result-oriented approach. Similarly, managing your money well can also be, rather, needs to be boring, and is a long-term repetitive process, year on year, with regular reviews and course corrections.


The great Warren Buffett says “The stock market is designed to transfer money from the impatient to the patient.”



  1. MAKE FEWER MISTAKES – The winner is the team which loses fewer wickets than the other


This is one the biggest differences between Test cricket and the other formats, since victory goes to the more resilient team, one that loses fewer wickets than the opponent. Similarly, a very productive approach in investing is to make as few mistakes as possible, and definitely, lesser than the broader market.


Charlie Munger once said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”



  1. PROTECT YOUR CAPITAL – Defense is the best form of offence


The “test” in Test cricket possibly stands for a “test of a team’s defenses”, since the team needs to stay at the crease, ball after ball, over after over, without losing an unnecessary wicket. Similarly, being prudent with your money is about preserving your capital as well as possible for as long as one can, rather, it’s about maximizing returns with as minimum risk as possible.


In Anthony Robbin’s words, “Don’t think in terms of taking huge risks to get huge rewards, think about the least amount of risk for the greatest reward and be disciplined about that.”



  1. LOOK FOR CONSISTENCY – Boundaries are not as important as exploiting the field and running between the wickets is


A team that keeps the scoreboard ticking over after over, without unnecessary flashiness or risks serves its chances better. Similarly, a prudent investment strategy should make your money needs to grow consistently, with lower volatility, giving you much peace of mind.


Paul Samuelson’s advice – “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”.



  1. ACTIVELY MANAGE ASSET ALLOCATION – Test cricket doesn’t have slog overs or power plays, instead, conditions determine how the game needs to be played


Test cricket doesn’t have pre-set match templates, needing one to score more in the early or late overs. Right from the decision post the toss, its about watching conditions and adapting your game accordingly. Similarly, when it comes to investing, there is no absolute good or bad asset class. Managing Asset Allocation on an ongoing basis is key to a stable and successful investment portfolio.


David I. Lampe reminds us what our parents also used to say “Asset Allocation is not that different from what mom told us growing up: don’t put all your eggs in one basket.”



  1. ADEQUATELY DIVERSIFY – Test cricket requires a full complement of quality players, each of whom is a specialist. In the shorter form, you can make do with pinch-hitters and all-rounders.


While in a shorter format, teams can get away in games with a few multi-talented players, in test cricket, even one weak link gets shown up over the course of the match. Every player is important and needs to bring to the ground specialist skills that will help the team prevail over the other. Similarly, a good investment portfolio is adequately-diversified to take care of risk (while not being over-diversified to dilute quality), and does not depend only on a few concentrated bets to deliver, while the rest of the portfolio underperforms.


Chris Lutz says “The purpose of diversification is so that when one investment goes down or is not doing well, you are insulated from the result because of the others you have in place.”



  1. STAY THE COURSE – Lastly, Test cricket is about winning the series. There can be comebacks, though difficult. Unlike in the shorter form, where one bad day can send you out of the World Cup.


Lastly, Test cricket is unique in that, it gives you a second chance. A bad day at work (or in the market) doesn’t send you home (or wipe you out). Similarly, Investing is about having a well-planned and adaptable strategy, not making catastrophic mistakes while learning from the smaller ones (not just yours) and staying the course even when things look bad.


Let me end with Peter Lynch’s wise words on staying the course “You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you are not ready, you won’t do well in the markets.”



Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.



Image credits: Rahul Dravid – Photo Division, Ministry of I&B, Govt. of India, through Google (labelled for reuse); MS Dhoni – Wikipedia, through Google (labelled for reuse)

6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

So, what gets people to have a serious look at their finances and take some concrete steps towards assessing their financial position and formulating a plan for their financial security?


Of course, there are some people who are “born” meticulous and organized and hence have their plans all chalked out. But for most of us (based on our experiences), it usually doesn’t happen gradually, rather needs a trigger of some sort in our lives. The trigger could be some sort of personal experience or something that has happened with someone close, or even the sudden unpleasant remembrance of some childhood memory.


But until this happens, managing your own money takes a back-seat, while prioritizing work, family, current needs, perceived emergencies and in the absence of all this, pure lethargy. So, here are six reasons why many still haven’t got around to putting their finances in order, and one reason why some have.






  1. “Whats the hurry? My goals are far away, I have enough time on my side” – THE CAREFREE

Some of us typically think we have a lot of time, and many a times mistake urgent for important. We avoid contemplating the future, thinking that it has a way of sorting itself out. We usually need some unpleasant shock to make us realize that the future is something that doesn’t just happen, but needs to be planned for.




  1. “I know I have to save, but I don’t have any savings left after I pay my EMIs!” THE OVERSTRETCHED

Some of us love running after material acquisitions. We hanker after the latest gadgets. We usually also end up having a lot of unsecured debt (either a personal loan or revolving debt on our credit cards) because we keep running into sudden cash-flow issues. For us, planning horizons are not long.




  1. “I know it’s important, but am too caught up right now, will do it as soon as I can” THE ALWAYS-ON-THE-TREADMILL

Many of realize the importance of putting our finances in order, but somehow never seem to think it important enough to be top of the list. We would be putting in 12 hours at work and still think that’s not enough to meet our commitments. Somehow, crises have a way of finding us and keeping us always in fire-fighting mode.




  1. “I have checked with my friend, colleague as well as online, I just don’t know whose advice is right!” THE CONFUSED

Then there are some of us who will ask, then validate, then re-validate and then re-re-validate. We will seek inputs from the colleague, the friend, the neighbourhood uncle and maybe then go online to check whether we are missing a point of view. Trusting someone and taking decisions doesn’t come easy to us.




  1. “I am sorted, I have invested my savings in some hot stocks and I also have these 2 apartments” – THE KNOW-IT-ALL

A few are us are those who are both knowledgeable and also proud of our knowledge. We will be clear on why things are and how they are going to unfold. We usually have strong views of our own on money and investments eg. owning multiple houses through leverage since we believe we “understand” real estate, buying some stocks because “they are tipped to do well”, and so on.




  1. “I think this is not the right time, market is too high, it might crash” – THE PERFECTIONIST

And then, there are some of us who understand both the need to keep their finances in order and can see the benefits of doing so, but just are waiting for the “right time”. For us, the market is either “too high” and likely to fall, or “too low” and therefore may not go up in a hurry. Strangely, we don’t have a problem seeing our money idle in the bank while we make up our mind.




  1. “I know time is important, every day lost is lost forever. I am in it for the long haul” – THE MARATHONER

Then, finally there are a few of us who understand the value of time and the benefits of long-term-investing. At the same time, we take our time to ask the right questions, understand the value of financial planning, and then quickly get into action mode. Lastly, we are disciplined, at least about money, and once we make up our mind, we trust our judgement and get on with it. Truly, we are called a “planner’s delight”.




So, do some of these “reasons” seem familiar? Which one is yours? Most people we see have more than one, sometimes even a few of these. But importantly, it is when you put on the last “reasoning hat”, that things start moving for you on the personal finances front. For some its timely, for some late, but as the popular saying goes, better late than never.



Image credit: Anemone123%, Pixabay



Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

The Finwise Take on Budget 2020-21

The Finwise Take on Budget 2020-21

Over the years, the significance of the Union Budget has come down and doesn’t have such an impact on our everyday lives, and hence doesn’t interest too many of us anymore. That said, there are still some, especially those in the finance businesses, for whom listening to the Budget is a yearly ritual.

Budget 2020 and its impact on your personal financial plan

But given the negative news as well as poor economy numbers over the last couple of quarters, we would dare say that the FY21 Budget presented last week had more than a usual number of people waiting for it. For most, last week would have been one of anticipation for Saturday to arrive and hope that the finance minister has something up her sleeve to magically move the economy into 4th gear, trigger consumption, improve rural incomes, increase investment, ease credit flows and banking woes and overall reverse the prevailing sentiment, while of course ensuring that the fiscal deficit doesn’t scarily worsen.

Many articles have already dissected the Budget presentation as well as the detailed document post that, so we will not attempt a repeat of that. But even for the most disinterested observers, the least they would have expected is how the budget will put more money into our pocket or at least ease our difficulties in dealing with taxes. So, we have looked at how this year’s budget has panned out for your personal finances and identified 6 changes which could affect you personally.



  1. Changes in Income Tax structure

Who doesn’t love choices? Whether its plain simple breakfast or choosing your next outfit we love it when we have choice, don’t we? However, that doesn’t seem to apply to Taxation structures. This year’s budget has changed the tax slabs but left the choice of sticking to the previous tax slabs or switching to the new ones to you. The catch is if you switch to the new tax slabs, you cannot avail of any of the deductions & exemptions currently available. Here is a quick look at the tax slabs that are currently in existence and the new ones which you can choose to switch to.


How do you decide which of the two options you should choose? What you need to look at is the deductions and exemptions you are currently availing of. The most popular ones being

  1. Rs 1.5 lakh under 80 C, the default option for most being EPF (ELSS, PPF, Life Insurance, School fees, Principal repayment of home-loan etc)
  2. Medical insurance premium under section 80D of Rs 25,000 for self and Rs 50,000 for senior citizen parents (total of Rs 1,00,000 if both self and parents are senior citizens)
  3. Additional deduction of Rs 50,000 for investments in NPS
  4. Deduction of 2L on interested paid on a home loan under section 24(b)


Prevailing & Proposed Optional Income Tax Slabs proposed in Budget 2020

Broadly, if you are claiming home loan interest deduction apart from 80C, you are better off with the previous tax slabs. But if you are not and do not have default investments like EPF for claiming deductions under section 80C and you are currently investing in products especially for the deductions, you can opt for the new slabs.


Finwise Take While there is a choice being given currently, the intention clearly articulated has been to move away in the coming future from the exemption and deductions being offered currently. Given this scenario, if you are buying a house or starting a new NPS account primarily to avail of the exemption you may want to rethink your decision.

Currently, a large number of investment decisions are made (and products are sold) at the last moment, primarily on their tax-saving features. We think this is a good step since the products thus bought will pass the tests of suitability towards risk profile and time horizon, and will help investors create substantially more wealth than now. You would be better off seeking the help of a financial advisor to help you make the right decisions customised to your needs, especially given the above.



  1. Increased insurance cover for FDs

Currently each depositor in a bank is insured upto Rs 1,00,000 inclusive of both principal and interest. This budget has increased this insurance limit to Rs 5,00,000, and this would help increase coverage and bring a greater number of impacted people under the insurance fold in case of bank defaults. This will give a lot of comfort, especially to senior citizens, for whom this is the investment of choice.


Finwise Take While increased insurance cover is a welcome step, it can give investors, especially senior citizens who look for that extra percentage point to prop up their meagre savings, a false sense of security about otherwise “dangerous” investment options in this space.

Our belief is that this insurance benefit is a “perceived” comfort. This insurance is payable by the Deposit Insurance and Credit Guarantee Corporation of India, a subsidiary of the RBI. DICGC will wait for the “defaulter” bank to be liquidated and de-registered, post which the DICGC receives claims from the banks and then pays out the claims, post necessary validations. The wait can be many years for impacted customers, and this risk is definitely not worth taking for extra percentage point of interest.

Our advice to our customers has always been to be safe with debt investments and not take any kind of risk with debt. Credit risk while investing in banks like PMC was ignored and has now come to the forefront. Insurance or no insurance, it is important not be lured by a few percentage points higher return. We often tell our customers to beware of higher interest rates, which some banks or institutions are offering, since higher-then-prevailing interest rate means higher than intended risk, which is opaque to the retail investor and our stance holds going forward too.



  1. TDS introduced for FDs in cooperative banks

Now, cooperative banks will also need to deduct tax at source on fixed deposits and recurring deposits if the interest exceeds 40K (50K for Senior citizens).


Finwise Take Earlier this was another big draw for investors to invest in co-operative bank FDs, apart from the higher interest rates. This welcome move will encourage people to think beyond tax and interest rate, while choosing their bank for FDs.



  1. Cap of 7.5L on exemption to retirement contribution by employer

As of now employer contributes 12% of basic towards EPF, Rs. 1,50,000 towards super annuation and 10% of basic towards NPS, and any amount of contribution to retirement benefits is exempt from income tax ie. is deducted from your gross income to calculate taxable income. The new budget has introduced a cap to this exemption, from the next FY, only contributions upto Rs 7,50,000 put together towards all retirement benefits will be exempt and any contribution over and above that will be taxed at your slab rate.


Finwise Take This is a big change and has a significant impact on high net-worth individuals having corporate careers. Senior corporate professionals earning approx. Rs 1 cr or above are likely to be impacted by this while, of course, actual impacts will be dependent on individual salary structures. For eg. someone earning a basic of Rs 2,50,000 per month, will have an annual retirement benefit contribution of Rs 8.1 lakh (assuming contributions to all 3 benefits – EPF, Super-annuation & NPS), and will cross this tax-exempt threshold. For people with such high salaries, this will mean rejigging compensation structures to reduce institutionalized retirement benefits, which in turn will have the negative impact of also reducing the retirement corpuses that these benefits create, requiring such individuals to plan better individually for their retirement.



  1. No more Dividend Distribution Tax

Currently, dividends received from shares and mutual funds are not taxed in your hands, they are paid post payment of DDT. DDT for shares is 20.56%, equity mutual funds is 11.64% and debt mutual funds is 29.12% before paying out the dividends. With new budget provision the dividend will be added to your income and taxed as per your income slab.


Finwise Take While this is a welcome step for corporates, especially MNCs, since dividend income to MNC shareholders was earlier taxed and is now free, it not such good news for retail investors, especially those in the higher tax brackets.

If you have a largely direct-equity portfolio, the dividend yield will fall substantially. You should consider shifting to equity mutual funds under the growth option where the tax outflow is capped at 10% long-term capital gain, that too on redemption, for investments over one year.

If you have invested in equity mutual funds (both pure equity & equity hybrid) in the dividend option, you should shift to the growth option immediately, for reasons similar to above, since the differential impacts here are even higher than in direct equity.

For debt mutual funds, the approach was dual. For people either in lower tax brackets or for long-term debt allocations (> 3 years), it always made sense to remain in growth, since both tax slab rate and LTCG on debt is lower. Whereas only for investors in the highest tax slab for short term investments (< 3 years), dividend option was better, since the STCG on debt is as per tax slab. With this change now, across the board, growth is the option to go with in debt mutual funds.

Also, one needs to remember that this has made tax-returns filing a bit more cumbersome, since dividend incomes now need to be added to overall incomes to calculate taxes, which earlier was not the case, with DDT.

Just in case an investor in the lower tax bracket is holding on to debt funds under the dividend scheme (due to poor advice or ignorant purchase), they will be hugely benefited as they would need to pay tax as per slab which is lower than the 29.12% being paid by the debt funds.



  1. Key changes for NRIs

Announcements in this section set the cat among the pigeons for NRIs, before clarifications led to clarity and calm. Some key changes

  • Taxation of global incomes of NRIs who are not tax-resident in any other country
  • Definition of Resident-tax – 120 or more days in India (reduced from earlier 182 days)
  • Definition of Resident but not ordinarily-resident – transition period increased to 4 years (from earlier 2 years)


Finwise Take → After giving a big scare to NRIs based out of the Middle East regarding taxing global income, there has been clarity that global income of residents of any country will not be taxed. While this doesn’t impact people resident in tax-free countries, people working in the merchant navy etc. may be impacted, since their long-period travels across the world may lead them to fall into this category of Non-Resident Indian but not resident of any other country.

In addition, such people will be doubly impacted by the second clause above, since they need to ensure they live in India for less than 120 days to classify as non-resident, as against 182 days earlier.

The last clause above is beneficial for NRI’s returning to India after living abroad for many years since it will give them more time without taxing their global income.



Do note that these are broad-based observations and not necessarily one-size-fits-all, do consult your financial planner / advisor for customized advice on your particular situation.



Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

But I am scared of Equity!

But I am scared of Equity!

During most client financial planning conversations, the financial planning process generates a sort of awakening. For some, its like “blinkers off”, while for some others, it’s like “a huge load off my shoulders”. For some, it’s a scientific validation of their understanding of their finances, while for others, some aspects come as a rude shock. But usually for everybody, the discussions lead to a clear shared understanding of their current financial position, a discovery of what their financial future priorities are and what they need to do going forward to achieve them.

As a part of our conversations, we also transparently share the short-term volatilities that asset classes like equities have, which could lead to a capital loss of even 20-30%, even if temporary. Over the course of our discussions, most customers end up building comfort with various available asset classes, as well as the differences between them. With our help, they also get to know what (and how) they will need to invest in each asset class to achieve which goal, and get comfortable with the risk-return trade-offs of each asset class.

Rarely though, we come across some customers who are quite resistant to the idea of investing a part of their savings into equity, irrespective of how critical it is to achieve their financial goals. When we try to understand more, the following deeper truths emerge

  • I do not want to take any risk, I am very conservative
  • I just don’t understand Equity
  • I have no idea of how the stock market works
  • I am worried that I will lose all my money
  • I prefer to invest in something I understand – like Real Estate or Gold

To many of you, these reasons may sound familiar. So, how can these worries be addressed?

For us, these worries are opportunities for us to understand customers better so that we are able to adapt their investments to their risk appetites in the best possible way, while enabling them to meet their goals. At the same time, it is also an opportunity for customers to understand a bit more about various asset classes, especially the ones they do not know much about, confront their beliefs and overcome their fears.

Irrespective of your mental approach towards decisions, the below rationales should help you to understand and update your beliefs about the risks attached with equity.

  • History shows that while in the short-term, investments in equities are very volatile, in the long-term, a well-selected and adequately-diversified portfolio of equity mutual funds is very safe from a capital loss perspective. The below table illustrates this
  • A significant part of our own portfolio is in equities and we are usually invested in most recommendations to our customers. Our own experiences in investing in equities has been very positive. This also helps build confidence in our customers that we have skin in the game and that our interests are aligned.
  • Many customers who come to us have a significant % of their Net Worth in Real Estate, which hasn’t had a great run in the last decade or so. That being the case, the risk of remaining further invested in Real Estate is higher, and investing in equities not only helps them meet their goals more safely, it also reduces risk in their portfolio through diversification.

As a people, we are used to taking risks in many aspects of our life. We take those risks by managing them better, by constantly building and updating our understanding of the risks and taking appropriate corrective actions, when needed. Our approach to risks in investing needs to be similar.

Equities are an important asset class, arguably the most important from a wealth creation perspective, and much needed for all of us to meet our long-term financial goals. Avoiding Equities due to your fears of them is something that can severely impact your financial security in the future. The better thing to do would be to understand your reasons for fearing equities and seek the correct information in order to overcome them.

Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

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