Question

-Should you worry about how market ups/downs? What is your philosophy when it comes to advising your clients?

-What is the role of taxes in general economy? How does taxes impact your client's portfolio?

-What is your strategy when it comes to taxes? Avoidance or minimization?

Answer 1

The behavioural readiness, which an adviser creates in an investor is immense. It is often not valued enough or appreciated adequately. But Prasad did not bother much about that and went about his work with missionary zeal. He genuinely believed in what he told investors and wanted them to be personally convinced. He had kept his investors invested through tough times during the previous bear market, helped them scale up investments during difficult times, and had seen their portfolios swell to touch new highs.

In these difficult times, counselors need to know how to cope with themselves. We need to rediscover their strengths, gently tell consumers the truth, and turn them around to listen to good advice. Today, the most important thing is to take tough decisions and walk away from recent errors. A time is coming when it can be decided as to whose error it was - the shareholder or the advisor.

Bad advisor interaction can lead to poor client behavior, such as buying or selling at the wrong time, and can make them feel like the advisor is "sleeping on the wheel." It is important for advisors to connect with their clients, even though many advise and risk losing their customers in the process.

Tax can be defined as "a mandatory contribution to government revenue, imposed on personal income and business profits by the government, or added to the cost of certain products, services and transactions. Tax regimes vary from country to country but are an integral part of most developed countries governments. There are two specific tax classifications, which are:-Income Tax:–collect government spending income.
Corrective tax:-these are meant explicitly to encourage or discourage those behaviors

Behavior Discouragement: – Also referred to as social engineering, the purpose of this is to discourage people from antisocial behavior and is often done heavily taxing commodities there by increasing their price Reducing Inequality: Tax money is used to serve the weaker sections of society through resource redistribution welfare programs: Can be used to transfer resources in one form.

First of all, taxes lower your investment income, that is, how much money you can spend. You have less capital to invest in the stock market and other investments if you pay taxes before you invest. You don't earn as high a return if you have less money to invest. It's so easy. The good news is that there are ways to reduce the tax impact on your investment income. You can use tax-advantaged accounts if you save for retirement.

Short-term capital gains are taxed at the marginal tax rate, and you end up paying the tax bracket at whatever rate it is. Long-term capital gains applied to securities kept over a year also come at lower rates. You are taxed at a predetermined rate rather than being taxed at a marginal rate. If you hold on to your investments for longer, you can save a little bit more.

This group's tactical investment decisions were motivated by the strong need not to report profits or do anything appropriate to reduce the tax burden. Thus capital is lavishly invested so that it is not paid for or investment is made in a vast number of assets, from gold to land to a host of business enterprises. Businesses are set up with fragile and weak structures. Not always ending well with these practices. While some of the money and assets are eligible for use, much more is wasted and spent with little concern for the family's or expected beneficiaries ' long-term strategic interest.

Keeping good records and paying taxes as due will also make it easier for you to get loans and additional capital when you plan to expand. It also helps if you invest surpluses into your business strategically rather than stash it in assets that you won’t use. Don’t clutter your income records with inflows you cannot account for. The taxman only cares for the sources of your income, and whether your assets are commensurate with your known sources of income. Pay taxes on incomes, including investment income. If we are only goaded by tax saving, we will end up with investments and assets we don’t need or won’t use.