Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Tuesday, 20 December 2016

How to Protect Your Retirement Funds from Tax Erosion

There is a popular myth that suggests that the stock market is only for professionals and investing is rather complicated. This has forced several investors to shy away from the stock market. Thus most ordinary investors tend to over look the proven way of beating inflation and protecting their retirement savings from tax erosion. A systematic investment plan popularly referred to as the SIP dispels this myth and provides a way for the ordinary investor to make extraordinary amounts of money over a period of time.

Inflation and taxes greatly erode individuals disposable income and hence their propensity to save. While it is possible to achieve inflation adjusted returns through certain investments the investor may still be required to pay taxes on these returns. In facts most income from investment products like stocks, bonds, real estate assets and even pension income is taxable. Hence a proper tax planning strategy is mandatory for investors.
This is where an SIP comes in.

The beauty of an SIP is that you don't have to invest huge money of money upfront. Instead you have an objective in mind and work towards it gradually. You pick a regular investment schedule and invest consistently in the market over time. This way you take the element of market timing out of investing and simply Rupee cost average over time.

If the market goes down you buy more and if it goes up you buy less. Either way you systematically accumulate wealth over time.SIP's can be done on a wide range of individual stocks and mutual funds. You can have a SIP strategy based on your age and risk tolerance.  Are you considering buying a car or even a house? Maybe you are planning for your retirement or are planning for an extended vacation.  Regardless of what your aspirations maybe the SIP may be the right investment for you.

With a plethora of investment products out there it can be a rather daunting task for the average investor to sift through all of them. Look no further than one of India’s largest fund families Birla Sun Life.  The range of products offered by Birla Sun Life takes the guess work out of investing. Recently Birla Sun Life rolled out their Sabse Important Plan (#BirlaSIP).

The Sabse Important Plan (#BirlaSIP) helps you get familiar with the world of SIP investing and gives you some unique SIP options on some world class investment products run by some of the top asset managers in India. There are a wide range of mutual funds available at your disposal on which you can custom build your SIP. You can craft your own and unique asset allocation strategy by checking out Birla Sun Life’s asset allocation tool.

The Sabse Important Plan (#BirlaSIP) seeks to be your one stop shop for all your SIP needs.  As an investor you get the following benefits:
a1)   You accomplish your goals steadily over time.
b2)   You accumulate significant wealth over time without worrying about the gyrations in the market.
c3)   You Rupee cost average over time into some of India’s best mutual funds.
d4)   You generate significant returns over time by taking relatively lower risk.

Increasingly worried about your dreams and goals? Need some smart financial and tax planning? Why wait any longer?  Do it yourself like a pro with the SabseImportant Plan (#BirlaSIP) from India’s trusted asset manager Birla Sun Life. This way you shield your retirement nest egg from the evil effects of inflation and tax erosion and build considerable wealth over time.

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.