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Earning is always associated with paying taxes. And the general calculation is one who earns more have to pay higher taxes. The approach of maximizing one and minimizing the other When we talk about saving every single penny, the best is to analyze the greater benefits at lower risk and lesser loss. It seems to be little difficult because people get caught up in the trap of “tax brackets”, but, when studied thoroughly there always seems to be a possibility and a way out. If you really want to get the maximum of you earning not only now but in future also, then you will have to adopt smart ways which will increase your investment by reducing your taxes. Making the comparison between “after tax” and “before tax” When you choose the path of investment, sit back and analyze critically about the taxes you would be paying now and the taxes you will have to pay on the returns years later. • Stocks and Bonds Most of the times people prefer investing in bonds because the “present taxes” are lesser in compared to what they would have had to pay for making the investment in a stock. However, if you keep inflation in mind and look at the “taxes on return” you will surely understand that it is going to be the other way round. Also, the returns on stocks will be much higher in compared to the bonds against which the taxes you would be paying at that point of time will be less. • ETF and Mutual funds Though people seem to prefer mutual funds over ETF but, due to low fee index fund, ETF turn out to be more productive and display more efficiency in terms of taxes, than mutual funds. The demand and the supply Many a times, the financial planners and consultants find themselves to get stuck with the restrictions coming from the investors’ end. This means, that there is a demand of a plan which prefers to reduce the taxes in the beginning and there is rarely an emphasis on the “low amount of tax” after the benefits are reaped. In the process, consultants would certainly not like to lose upon their clients and make compromises on their own income. Therefore, they land up suggesting a plan which shows fewer taxes to be paid in the beginning. The client too feels happy because he is more worried about the present rather than future. Summary Investors need to have a broader spectrum when it comes to saving taxes and maximizing investment. They need to be open to greater risks and more than that they need to have a wider approach wherein they can allow the consultant to come up with a plan which will be beneficial more in the future rather than yielding short term benefits. Consultants too would feel happy to get an investor who has better acceptance towards investment plans. Justin is an experienced content writer provides finance management tips to solve all your financial problems in business. Read more articles related with personal investments and best rules for investment.
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