5 points to keep in mind before you make a tax saving investment
Ready to make a tax saving investment? Here are the points that you should keep in mind:
Do I need the product?
A lot of times, our decision is based on a family history of investing in an instrument, or because a friend or colleague purchased the same product, or because the salesperson provided a fantastic pitch. You need to evaluate whether you really need the product, because most of the tax saving investment options will lock up your funds for a couple of years. If you choose a product that you do not require, you are stuck with it whether you like it or not – in some cases you will also be required to keep making payments if you want to keep your investment from lapsing. Keep in mind your financial needs, your age and your investment horizon before you decide to buy a product.
Have I researched enough?
Before you purchase, evaluate whether you are completely sure you are choosing the best product. Check:
Do I need the product?
A lot of times, our decision is based on a family history of investing in an instrument, or because a friend or colleague purchased the same product, or because the salesperson provided a fantastic pitch. You need to evaluate whether you really need the product, because most of the tax saving investment options will lock up your funds for a couple of years. If you choose a product that you do not require, you are stuck with it whether you like it or not – in some cases you will also be required to keep making payments if you want to keep your investment from lapsing. Keep in mind your financial needs, your age and your investment horizon before you decide to buy a product.
Have I researched enough?
Before you purchase, evaluate whether you are completely sure you are choosing the best product. Check:
- Do I know how the product works and the risks involved?
- Have I got a good deal?
- Are charges transparent?
- Do I have an exit option?
- Have I read the disclosures clearly?
Do I have money left for emergency needs?
Because your money is going to be locked up for a while, remember to maintain sufficient reserves with you for an emergency requirement. A good rule of thumb is to have at least four to six times your monthly income in savings which can be withdrawn immediately as required.
Do I know my risk tolerance?
Every product that delivers a good return comes with the downside of risk. You need to evaluate if you have the capacity to withstand the risk of capital loss on your investments. Your bank / financial institution will be able to help you with a risk profiling before it recommends products for you. Your risk tolerance is determined based on various factors like your age, your dependence on your investments for withdrawing cash, your knowledge of various products and the degree to which you can accept a loss on your investment value
Have I spread my investments across different products?
Remember the golden rule of investments – diversify! The idea is to spread your investment pool across different classes of products so that you are not hit hard in case some products underperform and you also get the benefit of high returns when they perform well. If you park all your tax saving investments in secure and low risk products, you won’t be able to get the benefit of high returns. Again, if you concentrate your investments entirely around market linked products, you stand to risk a significant loss of capital when the markets turn bad.
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Tax Benefits will be as per applicable tax laws. The user/investor needs to verify all the facts and circumstances with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. Tax laws are subject to amendments from time to time.
Standard Chartered Bank, India is a distributor or referrer of the relevant third party investment products. In its capacity of a distributor or referrer of relevant third party investment product, Standard Chartered Bank, India may offer advice which is incidental to its activity of distribution/referral. Nothing in this document should be construed as ‘Investment Advice’ as defined under the Securities and Exchange Board of India (Investment Advisors) Regulations, 2013 or otherwise.
Standard Chartered Bank, India having its corporate office at Crescenzo Building C-38/C-39 G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 is a licensed Corporate Agent of ICICI Prudential Life Insurance Company Limited (IRDA registration no. 105) for life insurance products, Royal Sundaram Alliance Insurance Company Limited for general insurance products and Max Bupa Health Insurance Company Limited (IRDA Registration no. 145) for standalone health insurance products vide composite license number 1096736. Insurance is the subject matter of solicitation.
