- Wealth PMS (50L+)
Firstly, there has been a tragedy of enormous proportions in Japan, and our hearts go out to the folks impacted. We have had a tsunami in 2004, and seen the devastation in India then, where most of the area affected was not very densely populated. In Japan, it’s a huge magnitude more, and the need is to help them in their time of grief and fear. Japan, stay strong.
It’s the month of the year that everyone’s looking to save tax, and we have a lot of requests for this piece. Long, and hopefully useful! And as usual, all else at MarketVision.
The Indian financial year ends March 31, It’s time for the desperate tax saving that we must do. What can we do to save tax? We investigate.
You can buy Infra bonds upto Rs. 20K and not pay taxes on that much. This is a separate tax section so you simply have to buy these bonds, directly from the issuer. You can’t redeem them for about five years.
]The interest is taxable, though, even if you buy a “cumulative” option – that is, even if the interest is reinvested. To find out how much interest you’ve been paid, contact the issuer. If you’re mathematically inclined, the interest calculation is simple – if Rs. 100 has 8% interest compounded, the first year’s interest is Rs. 8 and so 108 is the new principal for next year, which at 8% gives you Rs. 8.64 and so on.
But some of you are not mathematically inclined, and I totally understand that. Life has more meaning when you don’t have to add things up.
There are some such infra-bonds currently available.
I won’t go into details, but they’re all fairly good. Call your broker or your banker, they can help you invest. You can even buy online from sites like FundsIndia.
First, a note about “section 80C”. This is an often mentioned section of the Income tax act which allows you a deduction for certain investments or expenses upto Rs. 100,000 per year. That means, if you add all these expenses or investments together, you can only claim Rs. 100,000 off your taxable income.
You can buy tax-saving funds for saving as well. There are a number of tax- saving funds in the market; usually denoted as “tax-saver” funds – compare them here.
The downside: These funds seem to have underperformed other broad market funds by a few percentage points each year. Take 5-year performance. The best performing broad market mutual funds:
And the best ELSS funds over 5 years:
(Source: Value Research Online)
Or, using certain other funds, and in a nutshell.
(The pain in VRO is that funds are only easily comparable as "Large Cap" or "Large and Mid Cap" etc. Who cares, honestly, if they are large cap or large AND midcap; all we should care about is that they’re diversified. Still, VRO is the best source out there.)
Prem Watsa’s Annual Report: 25% p.a. over 25 years!
Prem Watsa’s Fairfax Financial Holdings has published its annual report, and it makes for great reading. (Thanks Lovesh Vashist)
A set of external links chosen from our daily updated Editor’s Picks section.
An excellent set of examples of rational behaviour, in an irrational environment.
If any of these examples of rational behaviour seem queer to you, remember John Kenneth’s observation: "In a world of minor lunacy, the behaviour of both the utterly rational and the totally insane seems equally odd."
Warren Buffett discussed corporate cash in his latest letter to Berkshire Hathaway shareholders. Specifically, he focused on both the creation and use of cash. His commentary contained lessons that are applicable to all investors.
Property is widely seen as a safe asset. It is arguably the most dangerous of all, says Andrew Palmer.
“According to Andrew Lawrence of Barclays Capital, the construction of exceptionally tall buildings is a reliable indicator of economic crises in the making. From the time the first skyscraper went up—the Equitable Life Building in New York, in 1870—to the completion of the Empire State Building (1931) and the World Trade Centre (1972) in the same city and the Petronas Towers in Kuala Lumpur (1998), great height has usually coincided with big trouble.”
A new video is up, about Open and Closed Ended Mutual Funds.
Past Short Takes:
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Deepak and Shyam
The MarketVision Team