Investing also has its emotional side, and this is called loss psychology. This the negative sentiment associated with recognizing a loss and the psychological effects of such to the investor. 

Humans tend to have loss aversion bias, which is one of the many biases that behavioral finance studies. According to research, the pain of losing in a certain investment is psychologically about double the power as the joy investors experience when winning an investment. 

This fear of losing in investing can be too overwhelming that it makes an investor behave irrationally, thus leading to poor investment decisions. 

Breaking Down Loss Psychology 

Of course, nobody likes losing. That’s particularly true in the case of money. The fear of incurring a loss can derail an investor’s career. What happens is that he holds on to a losing investment long after he should have sold or offload it. This is a bias known as disposition effect. 

Newbie investors usually make the mistake of hoping a stock to bounce back, even if all the evidence point to the opposite result. That’s because realizing and admitting losses cause more emotional effects that gains. 

Loss psychology may be result to the asymmetric volatility phenomenon in the stock markets. In this event, the equity market volatility is higher in declining markets than in rising ones. 

According to the prospect theory, people more strongly want to avoid losses than acquire gains.

This feeling of loss aversion can be very overwhelming that it can result in negativity bias. In such events, investors put more emphasis on the negative or bad news than the better or good news. The usual result is that they miss out on bull markets, because they fear that they will reverse course. Then they panic when the markets sell off. 

To avoid these psychological traps, the investor can follow a strategic asset allocation strategy.  They can also use formula investing and diversification. Buy and hold strategies are also very effective. 

Benefits of Behavioral Finance and Loss Psychology 

Behavioral finance offers some scientific insights into the investor’s cognitive reasoning and investment decisions. 

Using behavioral finance, we can understand why market bubbles and market panics take place. Investors need to understand behavioral finance not only to be at an advantageous position on stock and bond market fluctuations but also to be more conscious of their own decision-making processes. 

Incurring losses can be helpful to you if you choose to learn from them. The investor needs to look at things objectively and strategically.

After all, losses are inevitable, and this is the reason why successful investors use “loss psychology” in their investment strategies and use coping strategies.

In order to break free from the crippling fear of financial losses and defeat cognitive biases, the investor learns to handle negative events. Afterward, they avoid making panic-driven and emotion-based decisions. 

Professional and smart investors focus their attention on rational and careful trading strategies.  This prevents them from falling into the common mishaps that happen when psychology and emotions take control of them. 

The interest rate parity or IRP is the fundamental equation that governs the relationship between interest rates and currency exchange rates. Also, the basic premise of interest rate parity is that hedged returns from investing in a variety of currencies must be the same, regardless of the level of their interest rates.

Then, there are two types of interest rate parity – the covered interest rate parity and uncovered interest rate parity.

Calculation of Forward Rates

Currencies’ forward exchange rates are exchange that expects the rate at a future point in time. Opposing the spot exchange rates, these are current rates. Further understanding of forward rates is fundamental to interest rate parity. And this is because it pertains to arbitrage – the simultaneous buy and sell of an asset to gain from a difference in the price.

There is a basic equation in calculating forward rates with U.S. dollars as the base currency.

Forward Rate = Spot Rate x 1+ IRO/1+IRD

Here, the IRO is the interest rate of an overseas country. And IRD is the interest rate of a domestic country.

The Availability of Forward Rates

Now, forward rates are available from banks and currency dealers for periods ranging from less than a week to as long as five years and beyond. And with spot currency quotations, they quote forwards with a bid-ask spread.

In addition to that, a currency with lower interest rates will trade at a forward premium linked to a currency with a higher interest rate. For example, the U.S. dollar trades at a forward premium against the Canadian dollar. Contrarily, the Canadian dollar trades at a forward discount versus the U.S. dollar.

Also, some might ask if forward rates can be used in predicting future spot rates or interest rates. Clearly, the answer here, on both counts, is no. Several studies have cleared out that forward rates are notoriously poor predictors of future spot rates. Knowing that forward rates are merely rates adjusted for interest rate differentials, they, too, have a slight predictive power in terms of forecasting future interest rates.

Now, the difference between the forward rate and spot rate is what they call the swap points. Then, if the difference – forward rate minus spot rate – is positive, it is called the forward premium. On the other hand, a negative difference is dubbed as a forward discount.

A mortgage loan or a loan against property is a loan available for both salaried and self-employed individuals. You can get a mortgage loan by pledging your property for a tenure up to 10 years. Presently, the lowest rate of interest for a mortgage loan is 8.70%, and banks generally ask for a processing fee of 1% of the loan amount for availing a loan.

Documents for availing a mortgage loan: To avail a mortgage loan you would require to submit the following documents:

1. Proof of identity
2. Address Proof
3. Application Proof
4. Income Proof documents

Income proof documents for availing a mortgage loan: Along with the property papers which serves a collateral or security banks also needs the following income proof:

1. Latest six months salary slips in case of salaried individuals
2. Latest six months bank statements
3. Last two-year Income tax returns

Why is income proof an essential document for a mortgage loan: The primary reason why banks need an income proof for providing the mortgage loan is that banks want to prevent themselves from selling the house in case the borrowers fail to make the payment. As the process of selling the mortgaged property takes a lot of time and the value of the property may depreciate in the future depending on the market prices, banks thus prefer that the borrowers have a good income source. Having regular sources of income ensures the bank that you would pay the EMI’s on time and banks would not have to suffer any loss.

Consider this example to understand better the significance of income proof for a mortgage loan:

If a borrower has a monthly income of Rs. 60, 000 and consider that about 50% of her salary is utilised for paying the EMI’s. Thus, 40% of salary is remaining with the borrower.

Income eligibility for the borrower would be as follows:

Monthly EMI she would pay= Rs. 30,000

Annual amount towards paying EMI= Rs 30,000*12= 3,60,000

Loan tenure= 10 years

Loan amount=36 Lakhs

Thus, the borrower can get a loan amount worth Rs.36 lakhs as per the income eligibility.

Property wise eligibility for the borrower would be as follows:

If the value of the property is Rs 60 Lakhs and 60% of the value of the property is sanctioned as a mortgage loan, then property wise eligibility for the borrower would be: 60%*60,00000= Rs. 36 Lakhs.

Thus, the borrower’s monthly income is sufficient to get a mortgage loan worth Rs. 36 Lakhs.

Calculating your income proof eligibility using mortgage Loan Calculator

To know about the income eligibility of getting a loan, you can use a mortgage loan calculator. A mortgage loan calculator is a financial tool which helps you to calculate the monthly instalments of the loan based on the various factors. The various factors on which your monthly instalments depend are as follows:

1. Loan amount of a mortgage loan: If the loan amounts are high, then the monthly payments of the loan that you need to pay would be high.
2. Rate of interest of a mortgage loan: The rate of interest for a mortgage loan also directly proportional to the EMI’s. Higher the rate of interest and higher the EMIs.
3. Loan tenure of a mortgage loan: The tenure of a loan is inversely proportional to the monthly instalment of the loan. Longer the mandate, the less EMI you would have to pay.

Thus, before availing a mortgage loan, you can calculate the monthly instalments you would need to pay for the loan. If you have required regular sources of income in proportion to the EMI’s you can easily avail a mortgage loan without any hurdle. In case you don’t have an expected monthly income, you can opt to take a joint loan with spouse, mother, father, brother, son or unmarried daughter who has a regular source of income.

Read More :- Reverse Mortgage Loan

Summary: Why Income Proof is Necessary for Mortgage loan

A mortgage loan or a loan against property is a loan available for both salaried and self-employed individuals. You can get a mortgage loan by pledging your property for a tenure up to 10 years. Presently, the lowest rate of interest for a mortgage loan is 8.70%,

Why is income proof an essential document for a mortgage loan: The primary reason why banks need an income proof for providing the mortgage loan is that banks want to prevent themselves from selling the house in case the borrowers fail to make the payment. As the process of selling the mortgaged property takes a lot of time and the value of the property may depreciate in the future depending on the market prices, banks thus prefer that the borrowers have a good income source. Having regular sources of income ensures the bank that you would pay the EMI’s on time and banks would not have to suffer any loss.

However, before availing a mortgage loan, you can calculate the monthly instalments you would need to pay for the loan. If you have required regular sources of income in proportion to the EMI’s you can easily avail a mortgage loan without any hurdle. 

Commodity investing, just like other forms of investing, revolves around the assessment of market indicators. There are many key indicators that you should pay attention to if you want to become successful in investing in commodities. 

The Gross Domestic Product or GDP 

The gross domestic product is arguably the most important economic indicator in the world. And even if this indicator can sometimes be sporting flaws, it still offers more information than any other indicator. 

This is the reason why commodities markets also focus on this figure. Fortunately, it’s easy to understand the connection between commodities and the GDP data. 

A higher GDP figure means even higher anticipation for better GDP. In countries like China and India, the GDP is influenced by growth projects. These infrastructure projects need huge amounts of commodities like iron and steel. 

Thus, the forecast of higher GDP means higher demand for commodities. The opposite is true when the GDP forecast is low. 

Energy Information Administration (EIA) Reports 

The Energy Information Administration reports are published by the United States’ Department of Energy. The US is the biggest consumer of energy in the whole world. That means that these reports have big implications on energy prices across the globe. That’s true even if these numbers are not as often published in the media. 

The EIA reports serve as an estimate of the incoming week’s energy supply (crude oil) production, refinery usage, and the transfer of energy. 

As a trader, your analysis of these numbers enables traders to predict the abundance or shortfall of energy in individual states, countries, towns, and cities. Bear in mind that the world energy market also follows the trends that the United States set.

West Texas Intermediate (WTI) Index and Brent Crude

The West Texas Intermediate is a type of crude oil traded on the Chicago Mercantile Exchange. This is usually referred to as the NYMEX. Along with the WTI index, there is also the Brent Crude benchmark. These two indexes are the most widely quoted metrics of crude oil worldwide. 

The US Dollar 

Nearly all of the major commodities in the world are priced or denominated in the US dollar.  The reason behind this is because the US dollar is the world’s reserve currency. The countries that have reserves of dollars are typically stronger and can later redeem more goods and service in exchange of the currency. 

And because the values of the commodities are denominated in the dollar, the value of the greenback is understandably very crucial. When the value of the dollar drops, there would be a bull run in all the commodities. This is usually the case every time quantitative easing is announced. On the flipside, when the US central bank, the Federal Reserve, hints at raising interest rates, the commodities markets usually collapse. 

For commodity investors, it is very crucial to monitor the changes in the US dollars. Any kind of movement will almost certainly affect the movements in the commodities markets. 

The user interface is designed similar to a paper form, so that the work is easier for the user. It is further facilitated by all the hints we come across when we hover our mouse pointer over any field or area. Everything is explained simply, which can greatly help tax and accounting inexperienced users, and more advanced users can of course rule out this possibility.

How You Would Use it

• The program does not have a built-in computer, but uses the one from the Windows environment, which is not the best solution. However, this is also the only shortcoming of the DZS solution, apart from the advertising banner at the bottom of the program, which is only visible on some tabs.
• This year, for the first time in Slovenia, it will be possible to submit an income tax return electronically – unless something goes wrong again. So far, the most modern form available has been the use of some programs or tables with functions for calculation purposes only.

For the Programs

The programs, of course, help to calculate, and in addition, they help citizens who have little idea of ​​tax law – and the vast majority of them – to fill in the personal income tax return form correctly with explanations, help and advice. Despite the importance of these programs in recent years, when their use has increased, it seems that this year will be one of the last for them, as this year, for the first time, the Tax Administration will enable the submission of personal income tax returns via the Internet. We also took a look at the e-income tax solution when it was still being tested, and we expect it to actually start working on March 1st. The tax calculator  holds a very important matter.

This year’s reading of the solution for calculating personal income tax is the same as last year, so we have three dedicated programs like DZS, Miha Remec, Peter Malovrh), two spreadsheets program are not completely known to us, as the authors were unable to confirm whether they intend to include this year’s income tax scales in their solution, which had not yet been determined at the time of writing. 

Conclusion

Given that these are well-functioning products, we conclude that the new versions will be available before March, but before downloading the program from the web, still check which version it is. Be even more precise because of the differences in the naming of the programs although most of the new programs are marked 2004, you still meet the income tax return for 2003, so, for example, we recommend to view the last date of the correction of the website and of course the date of the last version of the program.

When you are young with lesser responsibilities, you may assume higher risks while investing. However, as you age and retire, you would like to invest in safe instruments like fixed deposits (FDs).  

Customized FDs are an excellent option that can help you earn guaranteed returns at minimal risks. Most non-banking financial companies (NBFCs) offer these deposits for senior citizens aged over 60.

Senior citizen FDs are available for a pre-determined period and offer a guaranteed rate of interest; they have a fixed maturity date. Here are five advantages of FDs for senior citizens:

• Higher interest

One of the biggest benefits of these FDs is the higher fixed deposit interest rates. Generally, issuers offer 0.25% more as interest for seniors as compared to regular investors. This allows you to earn more from your investment.

• Flexibility 

With a non-cumulative FD, you may choose to receive the interest either quarterly, half-yearly, or annually as per your financial situation. This enables you to meet household expenses and various other costs. Alternatively, you may opt for the cumulative scheme that adds the interest to the principal, providing higher returns on investments. You may use this money to pay for your grandchildren’s education or other financial goals.

• Security 

Compared to market-related investments like equities, mutual funds, and money market products, FDs are low-risk products. As the FD rates are not linked to market movements, these investments offer a steady source of income during your senior years.

• Small corpus

Most issuers give you the opportunity to open an FD with a small corpus. You may start an FD with a minimum amount ranging from INR 5,000 to INR 50,000 as per your financial situation.

• Quick and simple procedure

The online process to open an FD is fast and easy. The fixed deposit eligibility criteria are simple; you only need to submit an age proof while starting a senior citizen FD. Additionally, you may avail of a loan against the FD without any hassles to meet any emergency fund requirements.

Now that you have understood the plus points of senior citizen FDs, check out the corporate fixed deposits offered by Mahindra Finance on the company’s website, and make a wise investment today. 

A higher VAT rate on foodstuffs may lead to more income inequality when people with lower incomes spend relatively more on foodstuffs than higher incomes. However, income inequality need not increase if the decline in purchasing power of the lower incomes is offset by lowering wage taxes for the lowest incomes. In a good tax system, the socio-economic objectives are therefore achieved by always seeing individual taxes in conjunction with each other. The bracket calculator is there for the best choice.

An analysis of individual taxes

Tax revenues by type

In most countries, government revenues are made up of a few tax types: income tax, consumption tax (VAT and excise), wealth tax and corporate tax. The literature shows that these taxes differ in the degree to which they reduce economic growth. 

Payroll tax: lowering taxes on labor is good for economic growth and employment

Burdens on labor economically disruptive

In most countries, income tax is the main source of income for the government. Income tax usually consists of taxes on labor and benefit income and national insurance contributions paid by employees and employers. These taxes and contributions lead to a tax wedge: the difference between what an employer pays in labor costs and what an employee is left net. Most countries within the OECD have a relatively high wedge. You can also ask what is my tax bracket and get the information there.

Tax wedge

The economic literature shows that there is a high tax wedge disruptive. Labor participation in particular appears to be very sensitive to the level of income tax. The effect of a lower net wage due to higher income tax on individuals’ decision whether to work or not is twofold: on the one hand, it leads to more labor participation because people have to work more to achieve a certain net income on the other hand, it makes work less rewarding which can reduce labor force participation. The literature shows that the latter effect is generally stronger than the former: higher taxes lead to a lower labor participation. Especially for women, the number of hours worked strongly depends on the level of income tax. In addition, higher labor costs arise for employers if higher taxes are not fully passed on in the negotiated wages of employees. As a result, the demand for labor and thus employment is falling.

Various options for lowering income tax

If the government decides to lower the tax rates, this can be done in two ways: by reducing the employee’s share of the wedge (mainly consisting of wage tax) or by reducing the employer’s share (mainly consisting of social contributions). According to classical economic theory, in the long term it should not matter which of the two is reduced: higher employer costs will eventually be passed on in the contractual wages of employees in an efficient labor market.

Modern living is stressful; you go through a lot of mental and physical exertion to achieve your goals and provide the best for your loved ones. However, you end up compromising on your health due to stress.

To deal with this hectic lifestyle, you need a facility that takes care of your health and ensures financial security in case of a medical emergency. Such an offering will make you feel happy and confident. It will help you focus on your wellbeing. 

Some insurance companies provide you with a unique chronic management program. However, before getting into the features and benefits of the program, you must understand the meaning of chronic illnesses (critical illnesses).

About critical illnesses

These ailments are medical conditions that pose severe risks to your health. If you do not seek appropriate treatment for the illness in time, it may result in an unfortunate event. Often, the treatment for such ailments is expensive and requires long-term management. Some critical illnesses include cancer, heart conditions, liver disorders, diabetes, hypertension, and many more.

Chronic management programs

Managing chronic ailments is quite challenging and requires a systematic approach.These programs provide coverage for ailments like diabetes, high cholesterol, asthma, and hypertension. They are a part ofcertain cashless health coverage plans and cover diagnostic tests, hospitalization, medical consultations, and pharmacy expenses.

Features and benefits

• Provides coverage from day one
• Has the facility of a wellness coach for guiding you to a healthier lifestyle
• Accumulates Health Returns, which helps you earn back up to 30% of the premiumon your medical insuranceplan
• Allows you to carry forward the unutilized out-patient department (OPD) expenses to the next year
• Enables automatic upgrade for the program at no additional premium if you are diagnosed with a critical condition after purchasing the policy

Most critical illness health insurance policies cover treatment expenses; however, such programs encourage you to take control of your health and offer rewards for following an active style of living.

Life is unpredictable, and the stressful lifestyle puts you at a higher risk of suffering from a chronic illness. A mediclaim policy, which includes such programs, gives you the capability to face any adverse condition with self-confidence. Moreover, you can improve your mental and physical wellness and lead a healthy life. 

Health insurance for high cholesterol ensures you do not have any financial difficulties in case of a critical illness. If a chronic management program is a part of any health cover, it will motivate you to adopt a healthier lifestyle to handle your condition.

In May 2020, the Finance Minister, Ms. Nirmala Sitharaman, offered an economic stimulus under the ‘Aatmanirbhar Bharat’ initiative. Ms. Sitharaman spoke about INR 5.94 lakh crore liquidity support package for multiple sectors with a focus on the micro, small, and medium enterprises (MSMEs).

Six measures for MSMEs

• Automatic loans for businesses

It offers an emergency credit line to MSMEs for an amount up to 20% of outstanding MSME loan as of February 29, 2020. Borrowers with a turnover of up to INR 100 crore and outstanding loan of up to INR 25 crore are eligible.

These loans will have a four-year tenure and a 12-month moratorium on principal repayment. The loan will be offered without additional collateral and guarantee fee with a cap on the interest.

• Subordinate debt

The Government of India will offer INR 20,000 crore as subordinate debt to stressed MSMEs. Enterprises that are classified as Non-Performing Assets(NPAs) will be eligible for this scheme. The promoters will be provided loans, which will be infused as equity into the company.

• Equity infusion via fund of funds (FoF)

Another measure of SME financing (small and medium enterprises) aims to help businesses overcome equity shortage. AnFoF with a corpus of INR 10,000 crore will offer equity funding to enterprises that are viable and show potential for growth. 

• Revised MSME definition

The lower threshold of investment and turnover restricted the growth of such businesses due to the fear of being unable to meet the MSME loan eligibility criteria. The revised definition will enhance the investment limits as well as include turnover criterion while eliminating the distinction between service and manufacturing companies.

• Disallowing global tenders

Often, MSMEs faced competition from global players while bidding for a project. Under this measure, global companies will be prohibited to bid for any tender up to INR 200 crore.This aims to offer support to the Make in India and Aatmanirbhar Bharat initiatives of the Narendra Modi Government.

• Other measures

The COVID-19 pandemic has hampered liquidity and marketing. To replace trade exhibitions and fairs, e-market linkage will be offered to MSMEs. Additionally, fintech to enhance transaction-based lending via information generated on the e-marketplace. MSMEs will receive funds from the Central Public Sector Enterprises (CPSEs) and the Indian Government within 45 days.

How to take benefit of the COVID-19 relief measures

The automatic business loan scheme will be available until October 31, 2020, to all eligible businesses. The eligibility criteria for this MSME/SME loan include:

• Total outstanding debt from all member lending institutions (MLIs) to not exceed INR 25 crore
• Annual turnover for FY 2019-20 should be less than INR 100 crore
• Available only for existing borrowers as reported in the books of MLIs
• Loan account should be regular, SMA-0, or SMA-1, as on February 29, 2020
• MSMEs should be registered for Goods and Service Tax (GST)

Procedure to apply for the loan

The process to avail of the benefits of the COVID-19 relief package is as follows:

• If the borrower has existing loans from multiple MLIs, he or she may avail of funding from one institution or proportionately from each lender, as per the agreed terms and conditions
• In case a borrower wants to seek finance for an amount exceeding the proportionate limit from one lender, he or she may require a No Objection Certificate (NOC) from other MLIs 

These loans are available from banks as well as other financial institutions like Mahindra Finance. Get ready to revive your business activities by seeking monetary assistance today!

The cost of living is going up. Keeping up with it, though cumbersome, is essential so that we don’t have to compromise on the plans we have for ourselves in the future. One such inevitable future that we often seem to forget, while we are busy focusing on our bucket list, is retirement. Planning for your retirement, early in your life, can save you the unnecessary hassles and provide you the opportunity to enjoy the fruits of your hard work without compromising on your standard of living.

How do you do plan for your retirement?

The simple answer is to save money. The smart answer is to save money in a way so that it can grow.

With the average retirement age between 55 to 66 years of age, starting early is imperative in order to save more. Using a retirement calculator, you can get an idea about the amount of money you would need to save today so as to ensure that you have a worry-free retired life. You would then need to invest in a suitable pension plan that can earn you the best returns. Some of the popular pension plans are listed below.

NPS- The National Pension System is a potable, tax-efficient pension plan. It is prudently regulated by the PFRDA, which practices transparent investment with regular performance review and monitoring of fund buy the Pension fund manager. The asset allocation can be viewed on the manager’s website, and the cost of operation is minimal. On attaining the retirement age, 40 per cent of the amount Is required to be used to purchase a life annuity from a life insurance company regulated by the IRDA. The remaining amount can be withdrawn as a lump sum or in a phased manner.

SCSS- Senior Citizen Saving Scheme or SCSS is a pension plan for senior citizen that comes with a tenure of five years which is further expandable after maturity for a period of three years. The interest rate, however, remains same throughout the entire tenure and is payable quarterly. There is also room for premature withdrawals. The interest rate you earn for SCSS is taxable, but you can get tax benefits for the capital invested under Section 80C.

Mutual Funds- It is important to take into account the inflation costs so that the income earned after retirement is sufficient to accommodate your lifestyle. Equity-backed products can be a good place to invest in to earn higher inflation-adjusted returns. Based on your risk, you can diversify between small-cap, mid-cap, and large-cap funds, to ensure regular returns. The taxation of profits is less, and the tax benefits are better than FDs when it comes to investors who fall in the highest tax bracket.

ULPP- Unit Linked Pension Plans or ULPPs are specially designed market-linked products suited for retirement needs. 35 years is the minimum age limit for investing in ULPPs. The payment term and the policy term are the same and is in multiples of five, varying from 5 to 30 years. Depending on the risk profile, investors can decide on the per cent allocation of the fund. It can either be 100 per cent equity, or 100 per cent debt, or a mix of the two. With life cycle changes, you can switch the asset allocation too, to earn the best returns post-retirement. By starting early, you can leverage your capacity to invest in high-risk plans for accumulating a robust retirement corpus at the end of your pension plan.

Annuity- Annuity is a type of pension plan in which the lump sum you invest with the insurance company is reinvested, and the returns earned from it are paid back to you. This gives you access to regular income past your retirement age.

So which one should you choose?

While each of the options mentioned above have their pros and cons, pension plans by insurance companies, such as Unit Linked Pension Plans or annuities, can be your go-to options when it comes to planning for life after retirement. Insurance companies ensure effective management of your funds both at the time of fund accumulation as well as after retirement. Also, with the significant yields generated on the investments, you can enjoy uninterrupted financial support through all the years after retirement.

Working tirelessly through all the rough days, you look forward to your retirement when you will finally get to enjoy the peace without a worry in mind. However, without proper retirement planning, you could fall into unnecessary chaos owing to lack of sufficient retirement funds to sail you through your old age. So be smart and plan out your retirement goals and invest in a suitable pension plan that will help you live life on your own terms.