Many people start thinking about tax planning only after the New Year. With barely three months to go for the last date of completing the process, they would weigh their options and their tax implications . However, according to financial advisors, some people seem to be wary of equity linked tax saving scheme (ELSS) or tax saving schemes from the mutual fund houses.
The reasons are many. One, the latest Satyam fiasco has shaken their confidence in the stock market. Two, the ensuing financial turmoil in the global arena and also in India is also making them nervous. Lastly, the performance of these schemes is also nothing to write about. (See table: to 5 tax planning schemes). You can't blame poor investors if they want to let go off tax saving schemes this year. "I have been investing in tax saving mutual fund schemes for the last three years. All these schemes have given me negative returns. Considering the current status of the market, I don't want to invest in them this year," says an employee in a courier company.
But is it a wise move? "It is a natural psychological reaction . People wanted to get into the market when it was at 18,000 or 20,000, but when it is actually hovering around 9,000 to 10,000 they don't want to invest ," says Sajag Sanghvi, a certified financial planner. "But avoiding ELSS because of the bad performance of a year or two could be a huge mistake. If you have invested in ELSS as part of your asset allocation plan to take exposure to equity, you should continue with it," he adds.
"Investors shouldn't let short-term trends cloud their judgement. They should understand that among investment options under section 80 C, apart from ELSS all other instruments offer only fixed rate of returns," says a tax consultant. "They can get only 8-9 % from schemes like national savings certificate, public provident fund, 5-year fixed deposits. But they stand a chance to earn better returns of, say, 12-15 % from tax saving schemes. This is provided they have the stomach for risk and are prepared to wait for three to five years," he adds.
True, you should invest in stocks only because you are ready to take the risk and wait for at least three years.
The reasons are many. One, the latest Satyam fiasco has shaken their confidence in the stock market. Two, the ensuing financial turmoil in the global arena and also in India is also making them nervous. Lastly, the performance of these schemes is also nothing to write about. (See table: to 5 tax planning schemes). You can't blame poor investors if they want to let go off tax saving schemes this year. "I have been investing in tax saving mutual fund schemes for the last three years. All these schemes have given me negative returns. Considering the current status of the market, I don't want to invest in them this year," says an employee in a courier company.
But is it a wise move? "It is a natural psychological reaction . People wanted to get into the market when it was at 18,000 or 20,000, but when it is actually hovering around 9,000 to 10,000 they don't want to invest ," says Sajag Sanghvi, a certified financial planner. "But avoiding ELSS because of the bad performance of a year or two could be a huge mistake. If you have invested in ELSS as part of your asset allocation plan to take exposure to equity, you should continue with it," he adds.
"Investors shouldn't let short-term trends cloud their judgement. They should understand that among investment options under section 80 C, apart from ELSS all other instruments offer only fixed rate of returns," says a tax consultant. "They can get only 8-9 % from schemes like national savings certificate, public provident fund, 5-year fixed deposits. But they stand a chance to earn better returns of, say, 12-15 % from tax saving schemes. This is provided they have the stomach for risk and are prepared to wait for three to five years," he adds.
True, you should invest in stocks only because you are ready to take the risk and wait for at least three years.
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