Investing in the Right Funds and Shares for Your Financial Planning
July 6th, 2010 | 
Author: Wise financial planning involves investing in the right funds and shares such that your money does not remain static. You need to set aside some amount for your expenditure and have some invested in your growth fund, Ulip funds, tax saver funds, Fixed deposits, Certificate of Deposits and mutual funds.
Different types of investments available are:
-stocks
-mutual funds
-growth fund
-Ulip funds
-tax saver funds
-Fixed deposists
-Certificate of Deposits
What is the purpose behind investing? Is it to gain higher returns on investment or is it primarily to save on income tax. If you are willing to lock your funds for a longer period you can enjoy tax exemptions. For instance fixed deposists which are locked for a period of five years will provide you tax benefits and some returns in terms of interest rate.
Soon after the maturity of your deposits, you can withdraw your deposits. Your interest rate accumulated for the deposists would be paid at the rate it was fixed when you opened the deposit. Current interest rate will not influence your fixed deposits. The other type of fixed deposits which will give you similar interest rate as the one which is locked for five years is the sweep in deposits. These sweep in deposits will provide you 6.5% for a year and 18 days duration and lesser for a lesser period. You are free to withdraw it when ever you want with out any penalty. However, these sweep in are not covered under tax exemption as you don’t have a longer lock in period. To enjoy tax benefits, you must opt for fixed deposit for 5 years.
Certificate of Deposits are invested for a period of 30 days to one year. You get your interest rate on the day your deposit matures. If you have opted for a period of one year you get your interest rate on that day. If you don’t wish to withdraw, you are free to renew your certificate of deposits on a new interest rate available on the day of renewal. Here the returns on investment are fixed!
Mutual funds are subject to market risks. They have a navigation figure which changes along with the share market. These are not covered under tax exemptions and the returns on this may be higher than your tax funds. You must withdraw your funds when the stock market scores a good figure.
