start investing young

1

“S T A R T -

I N V E S T I N G -

Y O U N G”.

2

Benefits Of Investing at Young Age

3

1) Better Position than Other – This is the most straight forward of all the benefits, but yet it may be the most important of them all. Quite frankly if you begin investing at a young age history tells us that you will end up with far more than those who invest later in life. Having time on your side means having a longer time period of being able to save money to invest and a longer time period of being able to find investments that can increase in value quite nicely.

2) Compounding returns – Compounding returns are extremely powerful over the long run, and the earlier you get started the greater your chance is to take advantage of this. Put more simply this is the power of the time value of money. Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits.

3) Improves spending habits –This benefit is generally overlooked by many, but investing early on definitely helps develop positive spending habits. Those who invest early on are much less likely to have issues with overstepping their boundaries in spending over the long run. Investing teaches important lessons and the earlier you are able to learn those lessons the more you can benefit.

4

4) Helps to Tackle that Tight Situations –If you are a young investor you are putting yourself ahead in the world of personal finance as a whole. By growing your investments over time you will be able to afford things that others can’t. Your personal finances are bound to get tight at times throughout your life, and investing at a young age can help in those tight times.

It is important to note that saving money to invest at a young age isn’t easy, but you simply can’t afford to wait to invest when it is convenient. Don’t shy away from investing because you don’t have enough, simply start with making small investments and give them time to mature. Investing while you are young is one of the best decisions one can ever make.

5

Mistake#1 Mistake#2 Mistake#3

Mistake#4

6

1) Not Investing: -To many, investing seems like a challenging process. It requires focus and discipline. In order to avoid it, many young investors convince themselves that they can invest "later" and everything will be OK. What many people don't realize is that the earlier you start putting money away, the less you'll have to contribute. By investing consistently when you are young, you will allow the process of compounding to work to your advantage. The amount that you invest will grow substantially over time as you earn interest, receive dividends and share values appreciate. The longer your money is at work, the wealthier you will be in the future and at the lowest possible cost to you.2) Being Unrealistic: -When you are investing at a young age, you can afford to take some calculated risks. That said, it is important to have realistic expectations of your investments. Don't expect every investment to immediately start delivering a 50% return. When the markets and economy are doing well, there are stocks that do have returns like this, but these stocks are generally very volatile and can have huge price swings at any time. By expecting paper losses in bad years and an average return of 8 to 12% per year over the long run, you can avoid the trap of abandoning your investments out of frustration.

7

3) Not Diversifying: - Diversification is a strategy that will reduce your overall risk by having investments in a variety of different areas. This allows you not be too exposed to an investment that might not be doing so well and helps keep your money growing at a consistent, steady rate every year. Investing in index funds is a great way to diversify with minimal effort.

4) Letting Your Emotions Drive Your Investments: -Another mistake that many investors make is becoming emotional about their investments. In some cases, this means believing that an investment that has done well in the past, like a high-performing stock, will continue to do well in the future. Buying an investment that has a high price because of its past success can make it difficult to profit from that investment. Conversely, many people will sell their investments, or stop making their investment contributions when the markets are down or the economy isn't doing well. This behaviour will lock in your losses, hurt your compounding and take you nowhere.

8

Investment Product

Small Saving Instrument.

Gold Monetisation Scheme

Kisan Vikas Patra

Sukanya Samriddhi Account

PPF Senior Citizens Saving SchemesN.S.C Post Office Scheme

& Deposits

Sovereign Gold Bonds

Fixed Income Instrument.

Govt. Securities.

Corporate Bonds

Company Deposits

10

(I) Public Provident Fund(PPF): -Instituted in 1968 the objective of PPF is to provide a long term retirement planning option to those individuals who may not be covered by the provident funds of theirs employers or may be self employed. PPF is 15 years deposit account that an be opened with a designated bank or a post office. Some key takeaways: - A person can hold only one PPF account in their name except an account in the

name of a minor child to whom he or she is a guardian. HUF & NRIs are not allowed to open PPF accounts. If a resident subsequently becomes an NRI during the prescribed term, he/she may

continue to subscribe to the fund till its maturity on a repatriation basis. Joint account cannot be opened, however nomination facility is available. Minimum amount that needs to be deposited in this account is Rs 500 & the

maximum limit is Rs 1,50000. Subscription should be in multiples of Rs 5 and can be paid in one lump sum or in

instalment not exceeding 12 in a financial year. Penalties apply if the minimum deposit is not made in a financial year. The account matures after expiry of 15 years fro the end of the financial year in

which the account was opened.

11

Withdrawal From PPF

One withdrawal in a financial year is permissible from seventh financial year. Maximum can be 50% of balance at the end of the fourth year or the immediate

preceding year, whichever is lower. On completion of the term, the account can be closed or continued with or

without additional subscription, for further blocks of 5 years. Once an account is continued without contribution for more than a year, the

option cannot be changed. Account holder can avail the loan facility in the 4th to 6th year out of the amount

standing to the credit in the account between the third financial year to the fifth financial year.

In the event of death of the account holder during the term of the scheme, the balance in the account shall be paid to the nominee or to the legal heir if the account doesn’t have a nomination.

12

Benefits Of Public Provident Fund(PPF)

13

Contribution to PPF is eligible for deduction under section 80C of Income tax act 1961. Interest is completely tax free and the applicable rate of interest for 2015-16 is 8.7%. Unlike other instruments which are eligible for tax deductions under 80 C, PPF enjoys

an exempt-exempt-exempt (EEE) status, where withdrawal is on maturity is also not taxed.

An PPF account is not subject to attachment(seizure of the account by court order) under any order or decree of a court.

Public Provident Fund – Eligibility A Public Provident Fund (PPF) Account can be opened by resident Indian Individuals

and individuals on behalf of minors. Only one Public Provident Fund Account can be maintained by an Individual, except

an account that is opened on behalf of a minor. A Public Provident Fund Account can be opened either by the Mother or Father on

behalf of their minor Son or Daughter; however the Mother and Father both cannot open Public Provident Fund accounts on behalf of the same minor.

Grand-parents cannot open a Public Provident Fund (PPF) account on behalf of minor grand-child; however, in case of death of both the Father and Mother, Grand-parents can open a Public Provident Fund (PPF) account as guardians of the Grand-child.

15

The Union Finance Minister has proposed to launch 3 Social Security Schemes in Budget 2015-16. The three Schemes are;1. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)2. Pradhan Mantri Suraksha Bima Yojana (PMSBY) and3. Atal Pension Yojana

The Union Finance Minister, Shri Arun Jaitley presenting the Union Budget 2015-16, said that a large proportion of India’s population is without insurance of any kind – health, accidental or life worryingly, as our young population ages, it is also going to be pension-less..About PMJJBU: - It is a Life Insurance coverage plan. This plan covers both natural and accidental death risk. The maximum sum

assured offered under this Govt. Scheme is Rs 2 Lakhs. The premium will be Rs. 330 per year, or less than one rupee per day, for the age

group 18-50. The scheme will be offered by Life Insurance Corporation (LIC of India). Government is also encouraging the other life insurance companies to offer this scheme.

16

Features of Govt’s Pradhan Mantri Jeevan Jyoti Bima Yojana

Qs 1: - Who is eligible to take PMJJBY? Ans: - This life insurance plan is available to people (all citizens) in the age group of 18 to 50 years and having a bank account. People who join the scheme before completing 50 years can, however, continue to have the risk of life cover up to the age of 55 years subject to payment of premium.Qs 2: - When will this Scheme start / open?Ans: - Pradhan Mantri Jeevan Jyoti Bima Yojana Scheme is now open for subscription for the insurance period (1st June 2015 to 31st May 2016). The last date to apply to this scheme for this insurance period is 31st May 2015 (Govt has extended this deadline till 31st August 2015).Qs 3: - What is the Premium amount?Ans: - You have to pay Rs.330 per year. It will be auto-debited in one instalment.Qs 4: - What is the Premium Payment Mode?Ans: -The payment of premium will be directly auto-debited by the bank from the subscribers (policyholder’s) account.Qs 5: - What is the total Risk Coverage offered?Ans: - Rs 2 Lakh will be paid, in case of death for any reason (natural or accidental death).

17

Qs 6: -Terms of Risk Coverage?Ans: - A person has to opt for the scheme every year (1st June to 31st May). He can also prefer to give a long-term option of continuing, in which case his account will be auto-debited every year by the bank.Qs 7: - Is Nomination facility available?Ans: - Yes, nomination facility available. In-case of unfortunate event of death of the policyholder, the nominee will get the death benefit.Qs 8: - What are required documents?Ans: - As per government, a copy of your Aadhar card alone is enough to subscribe to this scheme.Qs 9: - Who will implement this Scheme?Ans: - Jeevan Jyoti Bima scheme will be offered by Life Insurance Corporation and all other life insurers who are willing to join the scheme and tie-up with banks for this purpose.Qs 10: - Will Government contribute to this scheme?Ans: - Various other Ministries can co-contribute premium for various categories of their beneficiaries out of their budget or out of Public Welfare Fund created in this budget out of unclaimed money. This will be decided separately during the year. An individual is eligible to join this scheme through one savings bank account only.

19

Pradhan Mantri Suraksha Bima Yojana

Highlights of the Pradhan Mantri Suraksha Bima Yojana (PMSBY – Scheme 1 – for Accidental Death Insurance) are:Eligibility:ICICI Bank Savings Bank (SB) Account holders between 18 years (completed) and 70 years (age nearer birthday) who give their consent to join / enable auto-debit, as per the modality, will be enrolled into the scheme.Policy period:The cover shall be for one year period starting from June 1, 2015 to May 31, 2016 for which option to join / pay by auto-debit from the designated Savings Bank account on the prescribed forms will be required to be given by May 31, 2015 - extendable up to May 31, 2016. For the saving A/c holder joining after May 31, 2015 the cover shall end on May 31, 2016.Premium: Rs. 12 per annum.Payment Mode:The premium will be directly auto-debited by the bank from the subscribers account. This is the only mode available.Risk Coverage:Total coverage (sum-insured) under the scheme is Rs. 2 Lakh.

20

Exclusions:Major Exclusions:

1. Intentional self injury,2. Suicide or attempted suicide whilst under the influence of intoxication liqour or drugs, Any loss arising from an act

made in breach of law with or without criminal intent.” For more details, please refer the Master Policy wordings. Terms and conditions:3. Customer should not be insured under Pradhan Mantri Suraksha Bima Yojana under any other Savings Bank

Account. In case the same is found to exist, premium shall stand forfeited and no claims would be paid.4. The cover shall commence from the 1st of the month, subsequent to the date of enrolment in the scheme.5. Customer will have to pay full annual premium even if he/she joins the Scheme after the commencement of the

Group Policy.6. The membership in the scheme will remain in force as long as all premium due are paid until attaining age of 70

years as on Annual Renewal Date.

S.no Table of Benefits Sum Insured1. Death Rs 2 Lakhs

2. Total and irrecoverable loss of both eyes or loss of use of both hands or feet or loss of sight of one eye and loss of use of one hand or one foot.

Rs 2 Lakhs

3. Total and irrecoverable loss of sight of one eye or loss of use of one hand or one foot

Rs 1 Lakhs

21

5. Policy shall not be issued if nominee details are not provided in SMS / available in SB account. No separate intimation shall be provided for the same. To have a different nomination, please enrol for the scheme at the branch.

Note: - Any information provided by the customer if found to be untrue, the membership to the scheme shall be treated as cancelled from the date of joining the scheme and all premium paid in respect thereof shall stand forfeited.

23

The Atal Pension Yojana will be effective from 1 June 2015. The scheme intends to bring pension benefits to allow people of the unorganised

sector to enjoy social security with minimum contribution per month. People who work in the private sector or employed in occupations that do not give

them the benefit of pension can apply for the scheme. They can opt for a fixed pension of INR 1,000 or 2,000 or 3,000 or 4,000 or 5,000 on attaining the age of 60.

The amount of contribution and the individual’s age will determine the pension. Upon the contributor’s death, the spouse of the contributor can claim the pension and after the spouse’s death the nominee will be returned the corpus accrued.

The amount collected under the scheme is to be managed by Pension Funds as per the investment pattern specified by the Government. Individual applicants will have no choice of pension funds or investment allocation.

Benefits of Atal Pension Yojana The government of India has decided to contribute 50 percent of the user’s

contribution or INR 1,000 a year (whichever is lower) for a period of five years. This contribution will, however, be enjoyed only by those who are not income tax payers and those who join the scheme before 31 December 2015.

24

Eligibility The Atal Pension Yojana (APY) is open to all Indians between the age of 18 and

40. This allows an individual to contribute for at least 20 years before reaping the benefits of the scheme.

Any bank account holder who is not a member of any statutory social security scheme can avail of the scheme.

All existing members of the government’s ‘Swavalamban Yojana NPS Lite’ will automatically be migrated to the Atal Pension Yojana. It will now replace the Swavalamban scheme, which did not gain much popularity across the country.

For those who does not have a bank accountA person needs to open a bank account first by submitting the KYC document and Aadhaar card. He/she is also required to submit the APY proposal form.

Exiting the schemeUnder ordinary circumstances, an account holder who has enrolled for the Atal Pension Yojana will not be able to exit the scheme before the age of 60. Exiting the scheme is only possible in special circumstance such as in the event of the death of the beneficiary.

26

III Post Office Monthly Income Schemes and Deposits(a). Post Office Monthly Income Scheme Post office monthly income scheme provides a regular monthly income to the

depositors. This scheme has a term of 5 years. Minimum amount of investment in the scheme is Rs 1500, and the maximum

amount is Rs 4.5 lakhs for singly handled account and Rs 9 lakhs of the account is held jointly.

A depositors can have multiple accounts but the aggregate amount held in the scheme across all post offices cannot exceed the maximum permissible limits. The deposits can be made in cash, cheque or demand drafts. For 2015-16 the applicable interest rate is 8.4% p.a payable monthly. Nomination facility is available at the time of opening or subsequently at any time before maturity.

Premature Withdrawal: - It is allowed after One Year of opening of account. If the account is closed

between 1 and 3 years of opening, 2% of the deposited amount is deducted as penalty. If it is closed after 3 years of opening, 1% of the deposited amount is charge as penalty.

27

(b). Post Office Time Deposits Post Office time deposits are similar to fixed deposits of commercial banks. The

post office deposits with terms of one year, two years, three years and five years. The account can be held singly in individual capacity or jointly by a maximum of two holders.

The minimum deposit amount is Rs 200. There is no maximum limit. The interest rate on these accounts are reset annually. The applicable interest rate ranges from 8.4% to 8.5% between one to five years term.

Interest rate are compounded quarterly and are subject to tax. The five year term deposits is eligible for tax benefits under Section 80 C of the

Income Tax Act 1961. (c). Post Office Recurring Deposits(RD) The account can be opened by a resident individuals and a maximum of two people

can hold a account jointly or on either or survivor basis. An individual can hold any number of RDs account, singly or jointly. Minimum deposit can be made of Rs 10 per month and in multiple of Rs 5

thereafter for every calendar month. There is no maximum limits. Interest is payable on quarterly compounded basis.

28

Maturity amount with interest is paid at the end of the term. Interest is taxable. Deposit have to made regularly on a monthly basis and penalty applies for non payment of instalment.

An account can be discontinued by post office, if the payments are not made for four months.

The account can be closed after 3 years, and in case of such pre-mature closures only the saving banks interest is payable.

30

IV Kisan Vikas Patra(KVP): -What does It mean?The “Kisan” in Kisan Vikas Patra does not mean that only farmers can buy these saving certificates but means that the revenue mobilized by this scheme will be used by the Government of India in welfare schemes for farmers. Any individual can safely invest and save their money in the form of Kisan Vikas Patra. The KVP can be purchased by an adult for self or by two adults for a minor

investor. It can be purchased from any departmental post office or bank through cash, local

cheques or DD. KVP is available in denomination of Rs 1000, Rs 5000, Rs 10000 and Rs 50000. The Minimum investment is Rs 1000 and there is no maximum investment. The amount invested doubles in 8 years and 4 months. The effective rate of interest

is 8.7%. The facility for nomination and joint holding is available in KVP and the certificate

can be transferred from one person to another by delivery. It can be pre- Maturely encashed 2 1/2 years from the date of issue. No tax incentive for the investment made and interest earned is taxed on accrual

basis.

32

V Sukanya Samriddhi Account SchemeIt is a scheme launched for the benefit of girl children. The account can be opened in the name of a girl child by a natural or ;legal guardian. The account is opened with an authorized list of banks including SBI, Axis bank, ICICI bank, Canara Bank and others.A bird eye view of the benefits attached with the scheme: - Only one account can be opened in the name of a child and a guardian can open a

maximum of two accounts in the name of two different girl children. The age of the child cannot be more than 10 years at the time of opening of the

account. The minimum investment in the account is Rs 1000 in a financial year and a maximum of Rs 1,50000.

Investment can be made in lump-sum or in trenches. The account will earn interest at the rate of 9.2% compounded annually for the year 2015-16.The account can be transferred to any place in India.

The account will mature on the completion of 21 years from the date of opening of account.

If the girl child gets married before the age of 21 years of age then the account is closed.

Partial withdrawal is allowed after the holder attains 18 year of age, to the extent of 50% of the amount in balance at the end of preceding financial year.

Eligible for deductions under section 80C.

34

VI Sovereign Gold Bond SchemeGlimpse of SGBs is presented below: - This scheme was launched in 2015 to provide an alternative way for investors to

take exposure to gold as an investment. SGBs are government securities denominated in grams of gold. The bonds are

issued in denomination of one grams of gold and in denominations thereof. The tenor of the bonds is 8 years. On maturity the value of the bond may be

higher or lower depending upon the prevailing price of the gold. The bonds bear an interest rate of 2.75% p.a on the initial investment and will be

paid semi annually. To the account of the bond holder. RBI will provide the information about the issue price based on the previous weeks

price of the gold. The bonds are available for investment by resident individuals, HUFs, Trusts ,

Universities and others.How to Apply?Investor can apply for the bonds online through the website of listed scheduled commercial banks or physically through the designated bank or post offices. The bond can be held in physical form or dematerialized form.

35

Early redemption is allowed only after fifth year from the date of issue. Minimum investment is 2 grams and the maximum is 500 grams per eligible

investor for each fiscal year. Joint holding, nomination and the facility of marking lien is available on these

bonds.

37

II National Saving Certificate(NSC): -

NSC are issued by the government and available for purchase at post office. Scheme specially designed for Government employees, Businessmen and other

salaried classes who are Income Tax assesses. These are issued for a tenors of 5 years and 10 years. The interest on these

instruments for 2015-16 is 8.5% for the 5 year bond and 8.8% for the 10 year bond. Interest is compounded half yearly and accumulated and paid on maturity.

The certificate can be bought by individual on their own account or on behalf of minors. NRI, HUF, Companies, trusts, societies, or other institutions are not allowed to

purchase the NSCs. If a resident holder becomes an NRI subsequent to the purchase, the certificate can be

held till maturity. Joint holding is allowed and the certificate can be held jointly by up to two joint holders

on joint basis or either or survivor basis. Certificates are available in denominations of Rs 100, 500, 1000, 5000,10000. Minimum

investment is Rs 500 without any maximum limit. The certificate can be brought by cash or through cheques or demand draft.

38

Potential Benefits Of National Saving Certificates.

39

Investment made in NSC VIII issue and IX issue enjoys tax benefits under section 80C of Income Tax Act 1961.

Accrued interest is taxable but it is deemed to be reinvested and therefore the interest becomes eligible for section 80C benefits.

There is no TDS on redeeming the certificate value. NSCs can be transferred from one person to another with the consent of designated

officials of the post office under situations such as court order, to near relative such as wife, transfer to bank, housing company , or other institutions as security.

Premature Encashment: - It is allowed only in case of death of the holder, or under order of court. If the encashment happens within a period of one year from the date of certificate,

only the face value is paid. If the encashment happens after one year but before three years, simple interest is

paid at the rate applicable to post office. After three years the certificate will be encashed at a discounted value specified in

the rules.

40

Few Other Benefit Of NSC Nominations is allowed in the certificates which can be done at the time of

purchase or subsequently. There shall be no nomination allowed on the certificate held on behalf of a minor. A nomination can be cancelled or changed by making an application to this effect

at the post office where the certificates stands registered. The certificates are also accepted as collateral for taking a loan. Recently

government has enabled holding NSCs in demat form.

41

Fixed Income Securities

42

I Corporate Bonds: -

These are the debt instruments issued by private and public sector companies. They are issued for tenors ranging from two years to 15 years.

The more popular tenors are 5-year and 7-year bonds. Most corporate bonds are issued to institutional investors such as mutual funds,

Insurance companies, and provident funds through a private placement of securities.

Companies may also raise funds from the public by making a public issue of bonds where retail investors are called upon to invest.

Bonds of all non-government issuers come under the regulatory purview of SEBI. They have to be compulsorily credit rated and issued in the demat form.

The coupon interest depends upon the tenor and credit rating of the bond. Bonds with the highest credit rating of AAA, for example are considered to have the highest level of safety with respect to repayment of principal and periodic interest.

43

Infrastructure Bonds

44

II Infrastructure Bonds: - The government announces from time to time, a list of infrastructure bonds,

investment in which eligible for deduction u/s 80C of income tax act. Bonds issued by financial institution like industrial development bank of India(IDBI),

India Infrastructure Finance company limited(IIFCL) and National bank for agriculture and ruler development(NABARD) are eligible for such deduction.

Who Can Apply? Hindu undivided families and any Indian resident who is not a minor can invest in

these bonds. A person should ideally submit only one application. Multiple applications will be

aggregated based on the permanent account number or PAN. The tax benefit will be allowed only on investment up to Rs 20,000. The bonds can

be held both in demat and physical forms.

CAP/Lock In Period: - The minimum investment is Rs 5,000. There is no cap. However, income tax deduction is available only up to Rs 20,000.

The bonds have a long maturity period of 10-15 years.

45

However, companies offer a buyback option, wherein the investor can surrender the bonds after five years without sacrificing his interest income. The bonds are listed on stock exchanges and can be traded after the five-year lock-in period.

InterestThe issuers cannot pay more than the yield on government securities of same maturity. At present, 10-year government bonds are offering 8.5-9%. The interest is paid either annually or cumulatively.

start investing young

Documents