Back to Basics - Must know Concepts!
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Transcript of Back to Basics - Must know Concepts!
Back2BasicsMust Know Concepts
Is SIP just like EMI ?
EMI Is paid for an asset you own on borrowed
funds. The sum total of all EMIs would be higher than the actual market value of asset
The asset for which EMI is paid depreciates during its life time
Interest is paid to a financer based on the outstanding loan
A default or delay to pay EMI leads to penal interest or recovery calls from financer
It is more of a Liability
SIP Is paid as a commitment to invest
regularly. The cumulative total of all SIPs broadly depends on market performance
The generated wealth at the end of the tenure* is a liquid asset
Returns are earned on the money invested every month
Even if you miss 1 or 2 instalments your investment stays intact and no penalty is levied
It is more of Asset creation
?
Why is SIP better than FD ?
FD interest rates are fixed for the entire period Interest earned from FD is Taxable income Lumpsum amount is held till maturity date Liquidating your FD before maturity date usually
attracts a penalty on the final amount
The possibility of returns are higher in the longer term Equity funds held for long term (more than 1 year) are
not taxable Small amounts are deposited at regular intervals Some schemes allow withdrawals at any given point
of time, without any exit load or extra charges
SIPFixed Deposits
ELSS is open-ended Diversified Equity Mutual Fund which is qualified for tax exemption under section 80C of the Income Tax Act. The dividend earned from ELSS funds are Tax-free too.
A Lock-in Period of three years is applicable on equity-linked savings schemes, which is least of all tax saving instrument.
BENEFITS- Gives you Exposure To Equity & helps you grow your money
when the stock market grows over a period of time. It holds the potential to generate massive returns
Offers Diversification as the scheme invests in shares of companies across various sectors
Twin-advantage of capital appreciation & Tax saving
Equity Linked Savings Scheme
(ELSS)
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