Friday, December 9, 2011

Retirement planning through dividends - By

Dividend is tax free in individual’s hands but it is not regular. If you have surplus funds, you should invest them in equity mutual funds and get tax-free income from dividends. For emergency funds requirement you can sell a part of your portfolio, money gets credited in your account within 2 days. The risk of investment in equity versus keeping in fixed deposit can be minimized by regular investments for long term only. In the long term, equity has given the best return among all the assets including real estate. In 2008, the recession that started from America was a result of default in home mortgage and prices of houses came down very sharply. Hence, keeping all your money in real estate is also risky. Diversify into other assets like equities and mutual funds.

How to plan retirement through dividends:

You should start a Systematic Investment Plan or SIP in equities if you know the markets and have an appetite for higher risk otherwise mutual fund is the best option. Mutual funds reduce the risk by investing in number of companies, sector and asset class like bonds etc. Moreover, mutual funds have the professional expertise for investing in equities and offer a lot of flexibility to customize as per your required funds flow and risk profile.

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