What Should You Do When the Market Falls?

How do you feel when the market falls? Do you get worried of losing money? scared? worried?

So let me make this a little better for you. Most of investors worry when the market falls, and they think of selling stocks or redeeming Mutual Funds. But the smart investor does the exact opposite and in fact purchases the funds or stocks when the market is low hence, he gets the benefit of buying units or shares at a lower price. And when market is Bullish or rises back he has make more profit compared to what he would usually make if the market did not fall.

Does this interest you or make sense?

Now I want to tell you about the Rupee cost average.

This is specifically for SIPs Systematic Investment Plans.

1. What is rupee cost averaging?

To be able to earn high returns from the market it’s important that you buy low and sell high.

The investment strategy that is deployed to overcome the challenge of timing the market is rupee cost averaging, a concept also employed by mutual fund systematic investment (SIPs).

Putting in a fixed amount when the market falls, you end up buying more number of units, and when the market rises, you buy fewer units. Over time, the purchase price or cost of buying mutual fund units averages out, which is referred to as rupee cost averaging, Consistent investment over long periods means that the cost of purchasing reduces, increasing your gains.

2.   How does it work?

         Benefits:-

1. Tackles Volatillity- It, helps deal with market volatility because a fixed amount is invested regularly, irrespective of the market highs and lows.

2. Avoids timing:- One doesn’t need to time the market, looking for lows and highs, as the money is invested regularly.

3. Reduces Cost :- Over a longer investing time frame, the cost of units comes down, increasing the gains.

4. Ease of investing:- investors can choose the amount they are comfortable with instead of putting in a lump sum.

5. Discipline :- It rules out impulsive exit and entry, and inculcates disciplined investing for the longer term.

Hope you were able to understand what you should do when the market falls. For more clarification and to get your financial planning done, you can book a call with the link in the bio

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Suman Manjrekar

Infinite Wealth Coach

7 CRUCIAL PERSONAL FINANCE LESSONS

 

7 CRUCIAL PERSONAL FINANCE LESSONS  that I learned from my life.

Save this for future reference:-

1. Buy to impress = Less Money: Spending money to show people how much money you have is the fastest way to have less money. When you realize you don't need other's approval, You start saving more money and focus on what truly matters- your wealth-building and financial success.
2. Average Friends = average life: We are the average of the five people we spend the most time with. We get inspired by the people around us and when we see them growing financially we get out of our comfort zone to grow like them.
3. Marrying in money: Marrying someone with similar financial goals and values is essential. It is very difficult for a married couple to accumulate wealth if one is a spendthrift. A household divided in its financial orientation is unlikely to accumulate significant wealth.
4. Investing = Long : Setting long- term financial objectives has been transformative for me. Instead of focusing on short- term gains. I have learned to invest in my future by contributing to retirement accounts, saving for emergencies, and building cash-flowing. If you are starting to build your investment portfolio, focus on where it will be in the while compounding returns.
5. Cash is King: Life is unpredictable. Research shows that having an emergency fund covering 3-6 months of living expenses can be a financial lifesaver. Without this cushion, You are one emergency away from a financial disaster, which could lead you into a cycle of debt.
6. Money buys freedom: The greatest purchase money can buy is freedom. Freedom to choose not to work, to control your time or to live life the way you want.
7. Financial literacy = Wealth: In a world of financial Pitfalls, being financially literate is your best defense against scams and bad investments. Being economically savvy equips you with the tools to make informed decisions, safeguard your money, and ensure a more secure financial future.

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Financial Tips for Financial Stability

 

Here are some financial planning tips that can help you achieve financial stability:

1. Create a budget: Track your income and expenses to understand where your money is going.

2. Set financial goals: Short-term (e.g., saving for a vacation) and long-term (e.g., retirement).

3. Prioritize needs over wants: Distinguish between essential expenses and discretionary spending.

4. Build an emergency fund: Save 3-6 months' worth of expenses for unexpected events.

5. Invest wisely: Consider low-risk investments like mutual funds or fixed deposits.

6. Pay off high-interest debt: Focus on clearing high-interest loans or credit card balances.

7. Monitor and adjust: Regularly review your budget and financial progress.

8. Avoid impulse purchases: Think twice before making non-essential buys.

9. Take advantage of tax benefits: Utilize tax-saving instruments like PF or ELSS.

10. Seek professional advice: Consult a financial advisor for personalized guidance.

Remember, financial stability is not overnight win! Start with small steps, and be consistent.

Tax Deduction of Tution Fees.

 

Tax Deduction on Tuition Fees under Section 80C

Section 80 C of the Income Tax Act has provisions for tax deductions on tuition/education fees paid by a parent towards educating his/her children. Taxpayers can avail of deductions up to Rs 1.5 lakh under Section 80C with other investments also eligible for this rebate.

Parents can claim the tuition fee paid by them towards their children’s education as deductions, ensuring that they save TAX even if they don’t have other tax-saving instruments. Parents can claim the actual fee paid by them in a particular financial year.

Tuition Fees Eligibility for Tax Deduction under Section 80C

• Claimant Eligibility: Only parents or legal guardians can claim this deduction, which also extends to fees paid for adopted children.

• Individual Assessee: This deduction is exclusively available to individual taxpayers. Hindu Undivided Families (HUFs) and corporations are not eligible for this deduction.

• Number of Children: Each parent can claim this deduction for a maximum of two children. If both parents are taxpayers, they can collectively claim deductions for up to four children.

• Maximum Limit: The highest deduction limit is Rs 1.5 lakh per financial year.

• Maximum Age: There is no specified minimum age requirement for the child.

• Tuition Fee: The deduction pertains solely to full-time educational fees and does not include development fees, donations, private coaching charges, or other expenses such as hostel and library fees.

• Recognized Institution: The educational institution must be located in India and possess the requisite affiliations.

• Deduction Mode: This deduction is applicable only based on actual payment, not based on amounts payable.

Payments not eligible for Tax Deduction

Tuition fee deduction does not cover the following educational expenses:

• One-time school admission charges

• Transportation costs

• Charges for extra classes

• Fee for curricular activities

• Charges for smart classes

• Costs related to sports and activity classes

• Expenses for coaching or private tuition

• Hostel fees

• Mess charges

• Boarding fees

• Library costs

• Stationery expenses

• Excursion fees

• School donations or college donations

• School development work charges or college development work charges

• Late school payment

• Readmission fees

(The list above is not exhaustive)

In addition to the aforementioned exclusions that pertain to non-deductible tuition fees, other exclusions cannot be claimed as deductions under Section 80C despite being categorized as tuition fee expenses. These mainly include:

• Tuition fees for part-time courses

• Tuition fees paid to foreign institutes, or colleges, or universities

• Tuition fees that are not paid for children but for oneself, a spouse, brother, sister, or relative

• Tuition fees for Indian schools in foreign countries

Tax Deduction on Tuition Fees under Section 10

Section 10 of the Income Tax Act offers an additional tool for taxpayers to save some of their tax. Under this provision, salaried individual taxpayers are eligible to save tax to the tune of Rs 100 per month per child.

This amount can be availed for a maximum of 2 children per taxpayer, which means that an individual taxpayer is eligible for  tax exemption of Rs 200 per month. This amount can be claimed as an exemption only in the financial year in which the fee was paid.

In addition to this exemption, one can also claim an exemption on hostel costs on his/her children. This hostel allowance is capped at Rs 300 per month per child, subject to a maximum of 2 children.

Tuition Fees Eligibility for Tax Deduction under Section 10(14)

The eligibility criteria for claiming a deduction in the tuition fees under Section 10(14) of the Income Tax Act, 1961, are as follows:

• The deduction is available to individuals employed in India.

• The educational expenses must be incurred within the territory of India to qualify for the deduction.

• There is no specific minimum age requirement for claiming the Children's Education Allowance.

• The maximum age for reimbursement eligibility is 20 years for typically developing children and 22 years for specially-abled children.

• The educational institution where the tuition fees are paid must be recognized by either the Central, State, Union Territory, or any other authorized educational authority.

• The deduction in the tuition fee is applicable for up to two children.

• If both spouses are individual taxpayers, they can collectively claim the income tax benefit for a maximum of four school-going children, provided all these children attend schools within India.

• The deduction can also be claimed by any taxpayer who is the legal guardian of school-going children, either due to adoption or in cases of parental absence. 

• Single parents of school-going children and unmarried guardians of school-going children can avail of the tuition fee deduction for income tax purposes when they are sending their children to accredited schools situated in India.

Types of Fees Reimbursable under Section 10(14)

Section 10(14) of the Income Tax Act 1961 allows for the reimbursement of the following types of fees:

• Tuition fees

• Examination fees

• Fees for specialized courses in fields like agriculture, electronics, music, and more.

• Other fees that are essential for a child's education.

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