ATM :: How to become rich fast at a young age in India: 5 amazing investment strategies to follow before you turn 30

Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express

ATM

All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:

1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.

2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.

3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.

4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.

5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.

Source: https://goo.gl/Abf7TR

Advertisements

ATM :: The quick and safe way to build a credit score

There are many easy ways to quickly improve your credit history and score. But if you are not careful, these measures may even jeopardise your financial security
Shaikh Zoaib Saleem | First Published: Mon, Nov 27 2017. 12 37 AM IST | Livemint.com

ATM

If you need a loan to buy something you cannot fund immediately, you approach a financial institution—typically a bank or a non-banking financial company (NBFC). When you do that, the financial institution runs a background check on you, from its own database (if you are an existing customer) and also from a credit information bureau. The credit information bureau is authorized by the Reserve Bank of India (RBI) to gather information on loans and borrowers from banks and analyse it to arrive at a score of creditworthiness of an individual. If your creditworthiness is good, you would get a loan relatively easily and at better terms. If not, either the loan will be rejected or you will be charged a higher interest rate. This is especially true in case of personal loans. The institutions’ decision to lend is based in large measure on the credit score and the credit report.

What is a credit score?

It is a number based on your credit report, which is a summary of your past and current borrowing and repayment history. If you were regular with repaying loans, including your credit card bills, your credit score is likely to be higher. This score helps banks assess your loan repayment capacity and your chances of defaulting on it. “Credit score is derived from the credit history of an individual. A consumer needs to have a minimum of 6 months of repayment track record on a loan or credit card or closed credit accounts less than 2 years old before a credit bureau can generate a credit score,” said Hrushikesh Mehta, vice-president and head of direct-to-consumer business, TransUnion CIBIL. A credit score is created as your lending and repayment relationship with financial institutions evolves. However, if you are new to credit, here are some ways you can quickly start to build a credit score.

Credit cards or personal loans

If you are new in the workforce, you can start by getting a low-limit credit card from the bank where you have a salary account, said Sumit Bali, senior executive vice president and head-personal assets, Kotak Mahindra Bank Ltd. “Based on their income, banks can give them a card with low limit. Use that card sensibly and build a credit history,” he said.

In the past, people considered taking personal loans to build their credit score. However, with a personal loan you will necessarily have to spend your money in paying the interest, whereas with credit card repayments within the stipulated time, you do not have to shell out extra money. For slightly older professionals, about 35 years old, credit history is not much of a worry if their bank account status and average balance are good, and investments and tax returns are in place. They “don’t really need a credit card to prove credit worthiness. Any bank would sensibly look at it and take a call,” Bali said.

Peer-to-peer (P2P) lending platforms are an emerging option for creating and enhancing your credit history. The RBI has recognized these platforms as special category NBFCs and has mandated them to share lending data with credit information bureaus. “Once the P2P lenders receive their licence, they will be able to begin data submission. Once that happens, P2P lending will become a viable option in helping one build a credit score,” said Mehta. However, in this case too, you will have to pay an interest on the borrowed amount.

In some cases, especially where customers have a long relationship with their bank, the banks may also look at own data to determine creditworthiness, Bali added. “Credit score by and large is a good indicator but it may not be the only indicator,” he said.

Alternative credit scoring

Evaluating someone who has never taken a loan can be difficult. This is where alternative credit scoring comes in. Here, instead of relying on a credit score, lenders consider your transactions and behavioural data like bill payments, online buying behaviour and information from your social media platforms to understand your repayment capacity.

“Often people are refused big-ticket loans like a home loan for the lack of credit history, even if their finances are in order,” said Abhishek Agarwal, chief executive officer and co-founder, CreditVidya, a credit advisory that also works on alternative credit scores.

While the RBI-regulated credit bureaus are currently not allowed to use alternative data for credit scoring; in other developed markets parameters like utility bill payments, insurance premium payments have been used for credit scoring (read more on it here.

However, financial institutions including top public and private sector banks and NBFCs in India, have started using alternative data in multiple verifications and validations across the credit value chain, Agarwal said. “Innovative offerings like pre-approved offers or instant loans are leveraging alternative data from multiple sources to provide seamless customer experience,” he said, adding that leveraging alternative data for credit risk assessment of secured loans is still distant. Banks use the alternative scores “in conjunction with other things, like data that you have about the customer. This is happening for personal consumption products like credit cards and salaried personal loans. We are putting it to use but what is the outcome from that, it is too early to say,” Bali said.

While credit cards and loans help to build a credit history and score, caution needs to be exercised. If used carelessly, these can put you in a debt trap, and ruin your credit history too.

Not just that, you should also keep your digital and transactional behaviour in check, as going forward more and more data could be used to assign you a credit score.

Source : https://goo.gl/m7Ns7g

Interviews :: Home loans slowdown driven by RERA will reverse in 8 months: ICICI Bank honcho Ravi Narayanan

Interview: Ravi Narayanan, senior general manager and head – retail secured assets, ICICI Bank.
By: Shritama Bose | Updated: November 28, 2017 12:20 PM | Financial Express

The home-loan market seems to have slowed down, first because of some postponement of demand with demonetisation, and then with the implementation of RERA. Where do you see things going from here?
The supply in the system had anyway started reducing in the last two years. Between September 2016 and September 2017, supply has dropped by over 10-12% in residential real estate in the top 40-45 cities. Till a year back, the inventory overhang used to be about 18-20 quarters in the industry. Along with supply, absorption of units was also coming down because of various reasons, one of which could be demonetisation. People expected a price correction. With RERA coming in, my estimate is that the supplies will go down still further because the act has put in various guardrails as to how the builder must manage the finances available for the project. This augurs well because inventory overhang should not be so much. The second outcome of RERA will be a rise in customer confidence. So once this whole dust settles, we will see pick-ups rising. So there will be a decrease in inventory and an increase in sales and that should be good for the industry.

Won’t that also cause asset prices to rise?
It will follow a pattern. There is an oversupply right now. If the demand-and-supply gap comes down drastically, then the prices will go up. In the next six to eight months, a lot of consolidation might happen in projects underway, which may not be amenable for prices to go up. Prices will remain, more or less, at the same level or there may be some fall in prices. Also, in the last six-seven years, real estate has seen a slight downturn. Typically, the industry follows an eight-to nine-year cycle. So in my opinion, 2018 will again see a rise in sales.

A development that followed demonetisation was the expansion of the credit-linked subsidy scheme (CLSS) for housing. Are you seeing supply and offtake picking up in that category?
Over 60% of new home launches in the industry in the first half of FY18 had ticket sizes under Rs 25 lakh. Because of this scheme under the Pradhan Mantri Awas Yojana, a lot of projects have started coming up in this category. Builders are also entitled to certain benefits if a part of their projects are of sizes below a certain threshold.

So is the phenomenon of builders allocating more space to smaller units a countrywide one?
This is happening primarily in Mumbai and Pune. Some of it is happening in Chennai and Bangalore. But, it is not happening across the country as yet. That’s partly because you have to keep operating costs and land cost under control to be in affordable housing. It is a very price-sensitive market. However, given the focus on this sector from this government, there’s bound to be more players flocking to it.

In mortgages, banks have continuously been losing market share to housing finance companies (HFCs). Have they actually weaned away bank customers for their growth?
No, because the mortgage industry is really big. The mortgage book of the country is now at Rs 15 lakh crore; over the next few years, at a CAGR (compound annual growth rate) of 20%, it should go up to Rs 50 lakh crore. When the pie is so large, everyone will have a share. It’s just a question of how each player orients themselves. Today, most banks are focused on the metros, while HFCs are operating in the peripheries (of cities). So we are not meeting each other much. But very soon, it will all become one playground. Banks venturing into the peripheries will be much faster because we anyway have branches.

ATM :: How to choose Mutual Funds or Stocks for your investments

By pooling a lot of stocks or bonds, mutual funds reduce the risk of investing.
By ZeeBiz WebTeam | Updated: Wed, Nov 29, 2017 12:59 pm | ZeeBiz.com

ATM

Both stocks and mutual funds market are booming in India, but as an investor, we are often confused to choose between the two for our investment plans.

Investment in equity, bonds or funds comes with higher risk and higher reward, therefore, it is always better to first study about the scheme we plan to invest.

Mutual funds:

Mutual fund scheme is a pool of savings contributed by multiple investors. The term ‘mutual’ fund means that all risks, rewards, gains or losses pertaining to, or arising from the investments made out of this savings pool are shared by all investors in proportion to their contributions.

There are wide-range of mutual funds in India like – equity, debt, money market, hybrid or balanced, sector-related, index funds, tax-savings fund and lastly fund of funds.

Stock Market

Stock market are usually interesting source of income for both companies and share holders. Under the stock market, anyone can buy stakes of a company in whom they have faith.

Companies which have received better ratings by agencies are generally preferred the most. No matter what may be the circumstances, an investor holds on to the company’s stake for their regular source of income.

Which one is better for investment?

According to Motilal Oswal, if you are typically in your 20s to 30s belt, you can start building your investment portfolio with the help of mutual funds. You need to start off with a very minimum capital and you can find that your investment keeps growing at a gradual space.

The agency believes that for first-time investors, the mutual funds offer a tremendous scope for growth as your funds are invested in diversified forms of revenue generating sources.

On the other hand, Motilal believes that if an investor belongs to late 40s up until 70s of their age and are also seasoned investors, then investing in stocks is a good idea.

It further said that decades of exposure to the financial market helps you gauge the right type of equities, shares or stocks, you need to invest your money in.

Among many advantages of investing in mutual funds is that you can appoint fund managers to select funds, track performance, make appropriate asset allocations and cash-in your profits for you.

These managers try to ensure that an investor’s portfolio consists of well-performing funds, rather than those that might drag down the overall investment returns.

In case, you are stock market investor, and sell your holding within a period of one year, then you have to pay 15% as short-term capital gains tax.

As for mutual funds, there are no gains tax levied on the stocks that are sold by the fund. But one needs to remember that an investor must hold equity funds for a minimum of one year (the longer, the better, really) if they want to avoid paying capital gains tax on the investments.

If you venture into stock investments on your own, brokerage costs of 0.5-1% will be a common expense. Apart from this, you will also have to pay for demat charges.

BankBazaar stated that mutual funds pay only a fraction of the brokerage costs compared to what is charged to individual investors. Investors in Mutual Funds do not need demat accounts.

A well-diversified investment portfolio ideally has around 25-30 stocks, and this kind of portfolio is only achievable with a sizable corpus.

With investment in mutual funds, an investors can buy a certain number of funds which can be invested in various stocks.

Source: https://goo.gl/8BtHrp

NTH :: Will 2018 be a good time to invest in real estate?

From the past few quarters, the real estate markets in India have been going through a phase of massive change.
Kanika Gupta Shori | Retrived on 1st Dec 2017 | Moneycontrol.com

NTH

How do you time your entry in any investment channel — whether it is equities or real estate? Is it the juncture when the markets are booming and everyone is joining the fray? Does that make for a sound investment decision? Probably, not!

Most retail investors and homebuyers make this mistake. They buy when the prices are peaking. Naturally the returns are not as expected. Am I right?

Well, I am citing the basic principle of investing here. If you are on board, I would further explain why 2018 should be the year you should enter the real estate market.

From the past few quarters, the real estate market in India has been going through a phase of massive change. The regulatory reforms implemented through frameworks defined under the Real Estate Regulatory Act (RERA), and Goods & Services Tax (GST) to an extent, have led the sector in a certain direction.

It is mandatory for all the real estate projects to be in compliance with the provisions of RERA, which attempts to make sure that projects are delivered in time and the money paid by buyers for certain projects is not squandered for other purposes.

In short, RERA protects consumers’ interests. It will be impossible for fly-by-night operators to be in the market and only the most-committed players will be able to navigate the roadmap. This will benefit both buyers and sellers, in the long term.

It is a buyers’ market

The combination of excess supply, high prices and low consumption has translated into huge inventories across the country. The consumption side has also been impacted by demonetization. Clearly, it is a buyers’ market for now – and for the next few quarters. But not for long!

With RERA in place, developers are now focusing on completing their existing projects. The new home launches, across top eight cities in India, have gone down by more than 75 percent in the third quarter of the current fiscal, as per industry research reports. The overall number of project launches has gone down by more than 40 percent in the first nine months of the current calendar year. These trends imply that the supply side will gradually find some equilibrium with demand, and prices will subsequently start picking up pace.

However, in the present environment, there is a situation of excess supply and property buyers are in a better position to negotiate, and grab a great deal.

As per industry reports, the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) have around 2 lakh and 1.8 lakh unsold units respectively.

Home loan interest rates are at all-time low

The excess liquidity in the banking system have led the RBI rejig the key lending rates. Resultantly, the home loan interest rates that were recorded at around 9.5 percent a year in 2016 have now been floating in the range between 8.3-8.4 percent.

That makes for considerable savings in the EMI costs; enabling people to avail of low-cost home finance, and become a home owner. It is expected that the home loan rates will remain low for the next several quarters and may even come down further.

Considering the average annual rental yields at 5-6 percent, there is not much difference between the costs of rent and owning a home.

Steady revival of interest from global investor fraternity

The implementation of overarching regulatory mechanisms has instilled a much higher level of confidence in the global investor fraternity. The real estate sector is projected to receive Private Equity (PE) investments to the tune of US$4 billion during this fiscal year, as per industry reports.

Not just the PE funds from the US, Canada and Singapore are interested in infusing capital in the sector, but countries such as Japan, China, Qatar, Hong Kong and the Netherlands are also poised to invest in the sector.

At the same time, global sovereign wealth funds—that are otherwise known for their risk-averse, conservative approach—have been increasing their exposure to the market and it proves that the sector is headed in the right direction.

As for property buyers, it is a sign of revival on the cards.

In overall, the current environment presents an opportunity to buy property and make the best out of the coming year.

(The author is COO of Square Yards)

Source: https://goo.gl/4Vgxoe

NTH :: Home loan growth down, shows RBI data

Growth in mortgages in the banking sector slipped to 11.4% year-on-year (y-o-y) in October from 12.8% in September, data released by the Reserve Bank of India (RBI) on Thursday showed.
By: FE Bureau | Mumbai | Published: December 1, 2017 4:51 AM | Financial Express

NTH

Growth in mortgages in the banking sector slipped to 11.4% year-on-year (y-o-y) in October from 12.8% in September, data released by the Reserve Bank of India (RBI) on Thursday showed. Home-loan outstandings at banks had grown 16.6% y-o-y in October 2016. The total outstanding on mortgages in the banking system stood at Rs 9.03 lakh crore as on October 27 this year. Retail loans as a category grew 16% y-o-y in October, a shade slower than 17% in October 2016. Outstanding retail loans as on October 27 stood at Rs 17.45 lakh crore. Loans to individuals had been clocking growth figures in the mid-to-late teens since May 2015, before signs of a slowdown began to surface in November 2016.

In September, outstandings on credit cards grew the most, at 37.7%, among all categories of loans to individuals. Vehicle loans grew 7.4%, significantly slower than 23.5% in September 2016, while consumer-durable loans dropped 9.4%, as compared to a year-ago growth figure of 20.3%. Credit to industry contracted on a y-o-y basis for the thirteenth straight month in October, falling 0.2% y-o-y to Rs 26 lakh crore. In October 2016, the corresponding figure stood at Rs 26.05 lakh crore, 1.7% lower than the October 2015 level.

Industrial credit has been falling almost consistently since August 2016, with September 2016 being the only month of positive growth ever since. Credit deployment in industry fell 13.5% y-o-y in the medium industry segment. However, loans to large industry and micro-and-small industry recorded positive growth, rising 0.2% and 1.2%, respectively, over the year-ago period. Bank credit to industry has been muted for the past couple of years as lenders turned cautious amid worsening asset quality and well-rated corporates chose to raise money from the bond market.

Loan growth has been suffering partly due to capital-starved public sector banks. Analysts expect the recapitalisation of state-owned banks to fuel credit growth in the months ahead. In a recent note, Kotak Institutional Equities wrote that lenders like Bank of Baroda, Canara Bank and Union Bank of India should see loan growth improving. “Loan growth for PSU banks is also partly supported by loan buy-outs from NBFCs and private banks. Retail cycle continues to hold up well, prompting many banks to pursue this segment more aggressively,” Kotak said. Trends in the corporate loan growth appear anaemic, according to the brokerage, with few signs of a turn in the capex cycle.

Source: https://goo.gl/jbmLdS

ATM :: 5 smart ways to get the best deal on home loan

Updated: Nov 03, 2017 | 11:07 IST | ET Now Digital

ATM

Good news for State Bank of India (SBI) customers and for those willing to take a home loan in the near future. SBI, the country’s top lender by assets, has made its home loans cheaper. The bank has reduced home loan interest rates by 5 basis points to 8.30 per cent per annum. With this reduction, SBI’s offering in the home loan segment has become the lowest in the market, as the bank claims.

The new rates are effective November 01.

The effective interest rate for all eligible salaried people will be 8.30 per cent per annum for loans up to Rs 30 lakh. Rates have been reduced by 5 bps point in all the brackets. Over and above of 8.30 per cent rate, an eligible home loan customer can also avail an interest subsidy of Rs 2.67 lakh under the Pradhan Mantri Awas Yojana scheme.

At present, for a new customer there’s now the possibility of taking bigger loans or incurring lower interest costs in making their dream home purchase a reality.

Before you finalise the loan ask these five key questions to get a good deal on your home loan

1. Negotiate rate of interest
Lenders mostly define the interest rate in a minimum and maximum range, the actual rate charged depends on your eligibility criterion. As a borrower you have the ability to negotiate a better interest rate.

Financial advisers say you can do this not just by comparing your loan options, but also by improving your eligibility by adding a co-borrower and combining the co-borrower’s income with your own.

2. Buy a home loan only after comparing
Before you zero in on a loan, compare between the different loan products available in the market.

Look at the equated monthly installments (EMIs), the interest rates, the processing fee and other related charges to choose the perfect loan. These days home loans offered online, you can always explore with a few clicks.

Look at the base rate, the margin offered, what is the maximum tenure offered, and how is the eligibility calculated and most importantly whether a property similar to yours has been funded by this lender earlier.

3. Fixed rate or floating?
Home loans can be extended either on fixed or on floating rates. If a home loan is taken on fixed rate then the interest rate will not change during the entire loan period and the borrower continues to pay the same EMI throughout the loan term.

All new floating rate bank loans today are linked to the MCLR, whose interest rate automatically resets at fixed intervals. This is beneficial for customers since interest rates have been trending downwards of late.

If the interest is expected to fall then opt for a floating rate and if it is expected to rise then opt for a fixed rate loan.

One can pre-close the loan ahead of its original tenure. If you are on a floating interest rate, no charge will be applicable. If you are on a fixed rate, there may a charge applicable.

4. Understand your borrowing capacity
People often decide to pay high EMIs thinking the loan load would come down with time due to annual increases in their income. However, their incomes may or may not rise with time. Therefore, they must borrow to the limit where paying EMIs would not stretch their finances.

5. Additional costs
When you take a home loan remember that interest is not the only cost you have to bear; there are certain additional costs too.

Every time you apply for a loan with a bank or non-banking financial institution, you are charged a percentage of your loan amount as processing fee. The amount may vary from 0.5 per cent to 1 per cent of your loan amount.

Legal fees are charged by banks or NBFCs to ascertain the legal status of any property. Usually, legal fees are applicable for home loans or loan against property.

Depending on your loan type, you may be charged an amount for prepayment of your loan. If you do not repay your loan EMIs on time, you will be charged a late payment fee. The late payment fee will depend on your lending bank or NBFC and the type of loan.

Source: https://goo.gl/Gd2mUR