My goal is to have 5 million baht in cash in five years. My income is 500,000 baht a year. Is it possible? And how?
ANSWER BY... Dr Chartchai Meesukkho, TFPA It may be difficult for you to reach 5 million baht in five years considering your current earnings. However, your task would be helped by trying to increase your income. Although investing in financial instruments such as stocks can only be expected to bring a 10-15% return annually, investing in yourself by acquiring new abilities and getting a new job or a higher position with a better salary could give you a much greater return. You would have more savings to invest in other assets. Great goals always require great dedication. Good luck!
nnnI invested in long-term equity funds (LTFs) for tax benefits five years ago. The first lot gained about 300%. Should I sell them and reinvest in something else? What are the suggestions for investment now? The stock market seems hot, but I'm not sure whether it is a good time to get in there.
ANSWER BY... Teera Phutrakul, CFP, Chairman, TFPA: With 300% under your belt, it's understandable that you want to take the money off the table, but you need to ask yourself whether you need to use the money now. If not, I would remain invested for the long term. The letter "L" in LTF stands for "long", and in my book five years is considered short. Ten years is a medium term, and 20 years is long.
I would also look to your retirement age as another indicative milestone. You may want to hold onto your LTFs until retirement age or when you no longer need to use tax deductions.
The Stock Exchange of Thailand (SET) may be overbought, with a gain of nearly 36% last year when it was the fifth-best performing market in the world. As a long-term investor, you can always use dollar-cost averaging to take advantage of any short-term market swings. Besides, I cannot think of any better alternatives right now. With an inflation rate of 3% in 2012, medium-term bonds and bank deposits are not yielding positive net returns.
We have to file tax payments in March. Could you please share any tips for filing tax? How can I save as much money as possible?
ANSWER BY... Teera Phutrakul, CFP, Chairman, TFPA: You can now file personal income tax online at www.rd.go.th. It's convenient and quite straightforward. If you are trying to get a tax refund from the Revenue Department and the amount is large, make sure you have all the necessary documents ready, as it is more than likely that you will be asked to show them.
January is not a good time for filing, as the people at the Revenue Department have lots of time on their hands and out of boredom may decide to dig into your documents to see if everything is in order.
The best time to file is in late March, especially during the last week, when staff are very busy and won't have time to do the extra poking around. However, if you are filing online, I would not do it on the last day, as it is really slow due to heavy web traffic.
As for simple principles of tax planning, you can accomplish this by adhering to the 4Ds of taxation: deduct, defer, diminish and divide.
- Deduct: Take advantage of all possible tax deductions and credits.
- Defer: Put off paying tax as long as possible. Instead of booking your income in December, you may want to defer it to January so that it falls in the next fiscal year.
- Diminish: Position investments in vehicles that attract the least amount of tax, having full regard for your risk tolerance and asset allocation strategy.
- Divide: Split income among family members or business partners to the maximum degree possible while considering other personal objectives.
Last, of course, is the fifth D: don't declare. Quite a few people do this and are willing to risk getting caught by the Revenue Department. But in your case, I suggest you stick to the 4Ds.
The change in the rule for married couples filing tax returns should benefit my family, but I have no clue how it works or how to file tax that can make sure we get the full benefit.
ANSWER BY... Teera Phutrakul, CFP, Chairman, TFPA: This is quite a complex question, and I don't think I can do it justice by trying to answer it in 300 words. The Thai Financial Planners Association is organising a special seminar on this topic on Jan 30 at the SET building. For further details, please go to www.tfpa.or.th.
The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted to them through email@example.com or posted at TFPA's webboard at www.tfpa.or.th
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Writer: Thai Financial Planners Association