Tagged: Financial Plan

ATM :: How to save and invest for your child’s education

By Sanket Dhanorkar, ET Bureau | 25 Apr, 2016, 08.00AM IST | Economic Times

ATM

The class of 2018 of the Indian Institute of Management-Ahmedabad will pay Rs 19.5 lakh for the two-year course. This is 400% higher than what the premier B-school charged in 2007. If the fees of the two-year management course continues to rise by an average 20% every year, it will cost roughly Rs 95 lakh in 2025.

Even undergraduate courses have not been spared. The tuition fee for engineering courses in the Indian Institute of Technology (IIT) has been hiked from Rs 90,000 to Rs 2 lakh per annum. This is just the tuition fee—the total cost is much higher. At an average running inflation rate of 10%, a four-year engineering course that costs Rs 8 lakh today is likely to set you back by Rs 17 lakh in another eight years’ time.

By 2030, the same would cost more than Rs 30 lakh. If you have not planned well, you could get a rude shock, falling way short of the required corpus when your kid is ready for college. In fact, for engineering and medical aspirants, the costs start even while the student is in high school. Coaching institutes charge anywhere between Rs 80,000-1 lakh a year for preparing the student for the entrance exam.

This sharp spike in fees is a wakeup call for parents saving for the higher education of their children. “Higher education costs have the highest inflation rates in the country. Parents need to realise it is going to be an expensive affair,” asserts Nitin Vyakaranam, CEO, Arthayantra.

This week’s cover story is aimed at parents who are saving for their children’s education. The investment options before them will depend on the age of the child. If the child is 3-4 years old, the investment choices and strategy will be different than for a parent whose child is 15-16 years old. Our story lists the most appropriate investment options for three broad age groups and the strategies to be followed at each stage. Choose the one that fits your situation to achieve your dreams for your child’s higher education.

How to save and invest for your child's education

Higher education costs may be rising at a fast clip, but Delhi-based Balbir Kaur is not perturbed by the projections of future costs. Balbir and her husband Puneet are saving for their son Jivvraj’s higher education. They started small last year with SIPs totalling Rs 5,000 in three mid-cap equity funds.

If they continue with that amount and their funds earn 12% a year, the couple would have roughly Rs 20 lakh by the time 4-year-old Jivvraj is ready for college in 2029. But Balbir has a neat strategy in place. “From this year, I have increased my SIP amount to Rs 10,000 a month. We plan to keep increasing this every year as our income goes up,” she says. If they hike the SIP amount by 20% every year, they will accumulate over Rs 1 crore in 13 years.

How to save and invest for your child's education

The benefits of an early start cannot be stressed enough when you are saving for a long-term goal. If your child is 3-4 years old, you have a good 13-14 years to save. Starting early helps you amass larger sums that may not be possible later in life. Tanwir Alam, MD, Fincart, points out, “The multiplier effect in the power of compounding comes from the investing time horizon; longer time horizons have a higher multiplier effect.”

Starting early also put lesser burden on your finances because it requires a smaller outflow. For instance, if your target is Rs 25 lakh, you need to save only Rs 5,004 a month if you start now. But if you wait for six years, you will have to invest Rs 9,195 a month to reach the target. Wait for three more years and the required amount jumps to Rs 23,875. Worse, you may not be able to invest in certain assets if the time horizon is too short. “If you delay investing, not only do you have to invest a higher amount every month, but it also reduces your ability to take risks,” says Vidya Bala, Head-Mutual Fund Research, FundsIndia.

How to save and invest for your child's education

The investment strategy changes if your child is a little older. Since you have only 5-9 years to save, the risk will have to be lowered. The ideal asset mix at this stage is 50% in stocks and 50% in debt. Instead of equity funds that invest the entire corpus in stocks, go for balanced funds that invest in a mix of stocks and bonds.

If your risk appetite is lower, monthly income plans (MIPs) from mutual funds can be a good alternative. These funds put only 15-20% of their corpus in equities and are therefore less volatile than equity or balanced funds. However, the returns are also lower than those of equity funds. In the past five years, equity funds have delivered compounded annual returns of almost 12%, while balanced funds have given 10.5% and MIPs have given around 8.85%. Investors should also note that the returns from equity and balanced funds are tax free after a year, while the gains from MIPs are taxed at 20% after indexation benefit.

How to save and invest for your child's education

For the debt portion, start a recurring deposit that would mature around the time your child is scheduled to apply for college. If you are in the highest 30% tax bracket, avoid recurring deposits and start an SIP in a short-term debt fund. These funds will give nearly the same returns as fixed deposits but are more tax efficient if the holding period is over three years.

It is also important to review the progress of your investment plan. “You should check every year if you need to step up your contribution towards the higher education kitty,” says Bala. “At times, you may put in a lump sum investment even if you have a SIP running.” Keep monitoring the cost of education on a yearly basis and accordingly adjust your investment requirement.

How to save and invest for your child's education

For parents of teenaged children, the investment strategy should focus on capital protection. With the goal barely 1-4 years away, you cannot afford to take risks with the money accumulated for your child’s education. The equity exposure at this stage should not be more than 10-15%. Kolkata-based Sanat Bharadwaj started investing in a mix of mutual funds and bank deposits for his son Siddhant’s college education almost 12 years ago. But now that the goal is just one year away, he has shifted 75% of the corpus to the safety of a bank deposit.

This shift from growth to capital protection is critical. The 3-4 percentage points that equity investments can potentially give is not worth the risk. A sudden downturn in the equity markets can reduce your corpus by 5-6% and upset your plans. “As you come closer to your target, you should stop SIPs in equity funds and shift to a short-term debt fund,” says Kalpesh Ashar, CFP, Full Circle Financial Planners & Advisors.

How to save and invest for your child's education

As mentioned earlier, the cost of higher education is shooting up. Many parents who started late or chose the wrong investment vehicles may find themselves woefully short of the target. If you face a shortfall, don’t be tempted to dip into your retirement corpus to fill the gap. This is a mistake. “Your retirement should be given priority over your kids’ education,” says Rohit Shah, CEO of Getting You Rich. Instead, you should take an education loan with the child as a co-borrower.

Apart from keeping your retirement savings intact, it will inculcate a savings discipline in your child after she takes up a job. The repayment starts after a 6-12 month moratorium when she completes her education. Banks offer loans of up to Rs 20 lakh for courses in Indian institutes. If your child is keen on a foreign degree, it would require a larger corpus. While banks are willing to lend up to Rs 1.5 crore for foreign courses, they insist on part funding in the form of scholarship or assistance.

How to save and invest for your child's education

When saving for your child’s education, do remember that the whole fianncial plan depends on regular contributions by you. But what if something untoward happens to you? The entire plan can crash. The only way to guard against this is by taking adequate life insurance. A term plan does not cost too much. For a 30-35 year old person, a cover of Rs 1 crore will cost barely Rs 10,000-12,000 per year. That is too small a price for something that safeguards your biggest dream.

Source : http://goo.gl/uTf5qh

ATM :: MFs, advisors persuade investors to link equity investments to goals

Prashant Mahesh | ET Bureau Apr 20, 2016, 05.10AM IST | Economic Times

ATM

MUMBAI: Mutual funds and wealth managers have figured a way out to reduce shuffling of equity scheme portfolios by investors in response to short-term swings in the stock market. Financial advisors are asking their clients to link every investment in equity schemes to a goal such as holidays or child’s college education, while mutual funds are pushing products labelled as retirement or children’s fund. Such investment strategies are aimed at encouraging investors to stay put for a longer period.

“When you have defined goals, ability to choose which asset class to invest in and handle volatility in that asset class is better,” says Vishal Dhawan, chief financial planner at Plan Ahead Wealth Managers. Advisors recommend diversified equity or balanced funds with a consistent track record for long-term investments.

To strike a chord with investors, mutual funds have gone one step ahead with some smart branding like children’s education and retirement funds. Axis Children’s Gift Fund, HDFC Children’s Fund and Tata Young Citizens Fund are among the popular schemes in the child savings category, while HDFC Retirement Fund, Reliance Retirement Fund and Franklin India Pension Fund are popular among retirement planners.

“These funds invoke a sense of emotion. When you mark it for a goal, you are mentally prepared to hold it and not withdraw it,” says Harshvardhan Roongta, a Mumbai based financial planner.

Advisors usually suggest investors use the systematic investment plan ( SIP) route to meet their long-term goals. “It is very tough for investors to time the markets and hence systematic investments to help them meet their long-term goals is an option they should consider,” says Sridevi Ganesh, a Chennai-based financial planner.

For instance, for short-term goals like paying school fees for your child which is two months away, investors are asked to invest in debt as an asset class. Similarly, someone aged 35 year old who plans to retire 25 years hence, is recommended an equity fund.

Mutual funds and wealth managers also benefit when an investor stays invested for a longer period.

Source : http://goo.gl/rOyWIy

ATM :: Financial planning in new year: Start it now

Don’t tinker with your long-term investment plan. But it is always better to make some critical changes, based on new tax laws and instruments
Sanjay Kumar Singh | April 3, 2016 Last Updated at 22:10 IST | Business Standard

ATM

The start of a new financial year is a good time to review your financial plan and take stock of where you stand in relation to your goals. If new goals have emerged, this is the time to make fresh investments for these. While having a steady approach is a virtue here, make some adjustments in the light of developments that have occurred over the past year.

Equity funds
Large-cap funds have fared worse than mid-cap and small-cap ones over the past one year (see table). Over this period at least, the conventional wisdom that large-cap funds tend to be more resilient than mid-cap and small-cap ones in a declining market was overturned. Nilesh Shah, managing director, Kotak Mahindra AMC, offers three reasons. “For the bulk of the previous year, FIIs were sellers of large-cap stocks, whereas domestic institutional investors (DIIs) were buyers of mid- and small-caps. Large-cap stocks are also more linked to global sectors like metal and oil, whereas mid- and small-caps are linked to domestic sectors. The latter has done better than the former, leading to stronger performance by mid- and small-cap stocks. Large-cap stocks’ earning growth decelerated or remained subdued throughout last year while mid- and small-caps delivered better growth,” he says.

Despite last year’s anomalous performance, investors should continue to have the bulk of their core portfolio, 70-75 per cent, in large-cap funds for stability, and only 20-25 per cent in mid-cap and small-cap funds. Large-caps could also fare better in the near future. Says Ashish Shankar, head of investment advisory, Motilal Oswal Private Wealth Management: “IT, pharma and private banks, whose earnings have been growing, will continue to do so. Public sector banks and commodity companies, whose earnings have been bleeding, will not bleed as much. Many might even turn profitable. FII flows turned positive this month and FIIs prefer large-caps. With the US Fed saying it won’t hike interest rates aggressively, global liquidity should improve. If FII flows continue to be stable, large-caps should do better.” Valuations of large-caps are also more attractive.

Financial planning in new year: Start it now

Debt funds
Among debt funds, the category average return of income funds and dynamic bond funds was lower than that of short-term, ultra short-term and liquid funds (see table). Explains Shah: “Last year, while Reserve Bank of India (RBI) cut policy rates, market yields didn’t soften as much. The yield curve became steeper. The short end of the curve came down more than the long end, which is why shorter-term bonds did better than longer-term gilts.”

Stick to funds that invest in high-quality debt paper, in view of the worsening credit environment. Shankar suggests investing in triple ‘A’ corporate bond funds. “Today, you can build a triple ‘A’ corporate bond portfolio with an expected return of 8.5 per cent. Many of these have expense ratios of 40-50 basis points, so you can expect annual return of around eight per cent. If bond yields come down, you could end up with returns of 8.5-9 per cent. If you redeem in April 2019, you will get three indexation benefits, lowering the tax incidence considerably.” Investors who have invested in dynamic bond funds should hold on to these. “A rate cut is expected in April. Yields will drop and there may be a rally in the bond market,” says Arvind Rao, Certified Financial Planner (CFP), Arvind Rao Associates.

CHANGES YOU NEED TO MAKE
Investment

  • Fixed deposit rates from banks will be better than returns from the post office deposits in the new financial year
  • Choose your tenure first and then, do a comparison of bank fixed deposit rates before making the final choice
  • Invest in the yellow metal via gold bonds

Insurance

  • If your liabilities have increased, revise term cover upward
  • Revise health cover every three-five years to deal with medical and lifestyle inflation
  • Revise sum assured on home insurance if you have added to household assets

Tax planning

  • Conservative investors should invest in PPF at the earliest
  • Those who can take some risk should bet on ELSS funds via SIP
  • Invest Rs 50,000 in NPS

Traditional fixed income
The recent cut in small savings has jolted conservative investors. The rates on these have been linked to the average 10-year bond yield for the past three months. These will be revised every quarter now, make them more volatile. “People who want to invest in debt and want sovereign security should continue to invest in Public Provident Fund (PPF). No other instrument gives a tax-free return of 8.1 per cent with government security,” says Rao.

As for time deposits, financial planner Arnav Pandya suggests, “From April, fixed deposits of banks will give better returns than those of the post office. Decide on your investment tenure, see which bank is offering the best rate for that tenure, and invest in its deposit.” Lock into current rates fast, as even banks are expected to cut their deposit rates.

Tax-free bonds are another good option. Nabard’s recent issue carried a coupon of 7.29 per cent for 10 years and 7.64 per cent for 15 years. Beside getting tax-free income, investors stand to get the benefit of capital appreciation if interest rates are cut.

“People who have some risk appetite may also look at debt mutual funds and fixed deposits of stable companies,” adds Rao.

Gold
The sharp run-up in gold prices over three months, owing to the rise in risk aversion globally, took most people by surprise. The sudden spurt emphasises the need to stay diversified and have a 10 per cent allocation to the yellow metal in your portfolio. However, instead of using gold Exchange-traded funds (ETFs), which carry an expense ratio of 0.75-1 per cent, invest via gold bonds, which offer an annual interest rate of 2.75 per cent. The Budget made gold bonds more attractive by exempting these from capital gains tax at redemption.

Tax planning
Start investing in tax-saving instruments from the beginning of the year. “Don’t leave tax planning for the end of the year, otherwise you may have to scramble for funds,” says financial planner Ankur Kapur of ankurkapur.in. For those with the money, Pandya suggests: “Invest the entire amount you need to in PPF before the April 5. That will take care of tax planning for the year and you will also earn interest on your investment.”

Investors with a higher risk appetite could start a Systematic Investment Plan (SIP) in an Equity Linked Savings Schemes (ELSS) fund, which can give higher returns. “If you invest early in the year via an SIP, you will reap the benefit of rupee cost averaging,” says Dinesh Rohira, founder and Chief Executive Officer, 5nance.com. Pankaj Mathpal, MD, Optima Money Managers suggests linking all tax-related investments to financial goals.

If you live in your parents’ house and pay rent to them to claim House Rent Allowance benefits, which is perfectly legal, get a rent agreement prepared.

With 40 per cent of the National Pension System (NPS) corpus having been made tax-free at withdrawal in this Budget (the entire corpus was taxed earlier), this has become more attractive. “Open an NPS account if you have not done so already and enjoy the additional tax deduction of Rs 50,000,” says Anil Rego, CEO & founder, Right Horizons. In view of the low returns from annuities, into which 60 per cent of the final corpus must be compulsorily invested, don’t invest more than Rs 50,000.

Tax deduction under Section 24 is available on the interest repaid on a home loan. “Buying a property to avail of the benefit is not advisable if the family has a primary residence,” says Rego.

Insurance
While reviewing your financial plan, check if the term cover is adequate. A family’s insurance cover should be able to replace the breadwinner’s income stream. Financial planners take into account household expenses, goals like children’s education and marriage, and liabilities like home loans when deciding on a person’s insurance requirement. “If goals have changed or liabilities have increased, raise the amount of cover,” suggests Mathpal. Kapur says the premium rate is likely to be lower if you buy the term plan before your birthday.

Your health insurance cover might also need to be raised to take care of medical inflation. The same holds true for household insurance if you have reconstructed your house and the structure has become more expensive, or if you have added expensive assets. Rohira suggests buying add-on covers like accidental insurance and critical health insurance for comprehensive protection.

Source: http://goo.gl/iZ3KSx

ATM :: All you need to know about single premium life insurance

By Gargi Banerjee | May 21, 2015, 11.14 AM IST | Economic Times

ATM

Want to get over with buying an insurance policy at one go because you have some money lying idle? A single premium insurance policy is just the thing for you then. As compared to a traditional or a regular premium insurance policy where you pay insurance premiums at periodic intervals, this is a onetime payment solution for those who do not want to get into the hassle of periodic payments.

Once the premium payment has been made, you become the owner of a policy with a specific death benefit. It is literally a “fill it, shut it and forget it” kind of a policy, as you do not have to worry about paying any further payments or the lapse of your policy in case in forget to make any payments. All major insurers provide single premium life insurance policies for the benefit of their customers and you can use the help of a policy aggregator website to find out which one works best for you.

When should you buy a single premium policy?

Most people prefer to buy a single premium life insurance policy when they have a lump sum available with themselves. It may be a hefty tax fund, a cash gift from a relative an inheritance or some windfall gains in case of business owners. If you do not wish to spend this money right away and are wary of investing it in the markets, or you think there is some more insurance cover you could do with, you can certainly opt for a single premium life insurance policy.

Protect your wealth against taxation

A single premium life insurance policy provides you protection against the axe of taxes. You are given exemption of upto R 1.5 lakhs when you invest in a single premium life insurance policy. Further the sum assured is also tax free in the hands of the receiver. God forbid if something were to happen to you, your beneficiary would receive the money completely tax free. However do bear in mind, that on a single premium life insrance policy you will get the benfit of tax exemption only once, as you are investing in it for a single time only.

Forget about lapses

Since the policy is paid up in full upfront you never have to worry again about the policy getting lapsed in case you forget to pay the premium. It is valid till the entire term of the policy and renders the sum assured after the policy term comes to an end. Creates cash value.

When you make the payment of single premium on a policy you are creating an asset for yourself. In case you need to avail of a loan facility, this can come in handy and can be used as a collateral against your loan. Besides, the cash value of the investment you have made accumulates every year, without you having to invest year after year.

Thus as you can see, single premium life insurance policies, though usually not the preffered vehicle for securing one’s life, can certainly offer some benefits. But the largest factor you should keep in mind is the affordability part of it. So if you can think of sparing the lump sum and locking it away to take care of your insurance needs, go ahead and get yourself that single premium insurance policy.

Source: http://goo.gl/1nL5We

ATM :: Should we focus on financial planning or just tax planning?

By Vivek Law | Last Updated: February 20, 2016 | 16:13 IST | Business Today

ATM

The Budget may not have much for you. So, it’s best to plan your finances in such a way that this does not matter. India is perhaps the only country where the Union Budget is almost like a carnival. What is otherwise meant to be a statement of the government’s finances is a lot more in India. It is also a vision statement of the government’s policies. But that is hardly the reason why every Indian citizen looks forward to it and why it is covered in a high-decibel manner across the media. The reason is: Tax.

Unlike in most countries, the government tweaks tax rates, exemptions and deductions, almost every year. Consistency is not our forte. It is, therefore, not surprising that we all stay glued to the TV to listen to the Budget speech to figure out whether we need to pay more taxes, which product will be cheaper or expensive and, above all, which new products will we now be able to invest in for saving tax. In India, it is the government that does our financial planning. It decides which products we should put our money in by identifying products that qualify for tax deduction. It keeps changing the list every year. And most citizens merely follow the direction given by the government as product manufacturers line up one product after another with one simple hook: “Save Tax”.

Never mind if the product is suitable for us or not. As long as it provides a tax break, we must buy it, we are told. And most of us take the bait and buy it too. Should we save tax? Of course we must. But should we focus on financial planning or merely on tax planning? Tax planning is an integral part of financial planning. The focus should be first on drawing up our financial plan. On finding out our earnings and expenses. On figuring out our Tax rates, exemptions and deductions are tweaked by the govt almost every year By Vivek Law goals in life. On figuring out our need for money in the short term (one-two years) and the long term (more than five years). Once this is done, we must figure out how much to put in equity and how much in debt. How much to set aside for buying our home and how much to set aside for gold. But before all this, have a health insurance policy, and if you have a dependant, a term insurance as well.

After this comes the bit about picking products. The remarkable thing about our successive governments has been how they have clubbed together everything in the bracket of products that allow us tax deductions and exemptions. So, for example, your children’s school fees as well as your provident fund are eligible in the same category. So are your insurance and equity-linked savings scheme (ELSS) investments. There is a separate category for health insurance as also for the National Pension Scheme.

In other words, once you have figured out your financial plan, putting aside money to make the most of tax breaks is easy. What can be dangerous is doing it the other way around. For example, if you do not need a ULIP or an endowment policy, and buy one just because your agent tells you that it gets you a tax break, it is disastrous for your financial plan. Similarly, putting all your money in a PPF account may not be prudent either. Sound financial planning is about asset allocation. Not putting all your eggs in one basket.

Financial plans are also not made for one year. Yes, one must look at one’s financial plan periodically but not change it every year just because the government decides to make changes to the tax-saving products’ list in every Budget. In fact, the government needs to get out of the business of deciding where we invest. It needs to segregate expenditure and investment and not put them in one basket. We are a nation of savers and are laggards when it comes to investments. So, what would I expect from the finance minister this Budget? Given the rather stressed condition of the finances, it would hardly be prudent to expect any great tax breaks from the finance minister. Instead, what would be easy to do is to simplify the sections under which we get our tax breaks. Put expenditure—school fee, home loan etc—in one basket and put core investment products—ELSS, ULIPs, PPF etc—in one.

(In association with Mail Today Bureau)

Source : http://goo.gl/2HrmoK

ATM :: Seven ways to survive the stock market downturn

Sanjay Kumar Singh | New Delhi Feb 15, 2016 10:44 PM IST | Business Standard

ATM

With the Sensex down 20.64 per cent since the closing peak of January 29, 2015, investors, especially those who entered the equity markets for the first time in the post-election rally, are experiencing a lot of pain. But, panicking now would only hurt them further. Some tips on what they should do to survive this downturn.

Ignore volatility: Investors need to learn to ignore volatility – a part and parcel of equity investing. “If your investment horizon is long and you have made sound investments in a diversified portfolio, do nothing,” advises Amar Pandit, founder and CEO, My Financial Advisor.

According to Manoj Nagpal, CEO of Outlook Asia Capital, only tactical investors lose money in a downturn due to their short investment horizon. “Longer-term investors can just stay invested and ride out the downturn.”

This piece of statistic should reassure investors. “If you had invested in the Nifty on any day in the past 20 years and stayed invested for at least seven years, you would never have made losses,” says Kaustubh Belapurkar, director of manager research, Morningstar India. A long investment horizon is, thus, the best antidote to volatility.

Avoid market timing: Don’t exit the markets now, thinking you will get back in time for the next rally. It has been proven time and again that no one can time the markets to perfection consistently. The best course during a downturn is to stay invested. Nagpal says people try to time the market because they believe it is the smart thing to do. “Our experience says it is not smartness, but discipline that leads to wealth creation,” he adds.

Continue your Systematic Investment Plans (SIPs): Rupee-cost averaging (the purchase of more units at lower prices) boosts long-term returns; so stopping your SIPs during a downturn is the worst thing you can possibly do. “An SIP of one or two years won’t always fetch you positive returns; so you must run it for at least 5-10 years,” says Nagpal.

Rebalance portfolio: The weight of equities declines in your portfolio during a downturn. If you have the risk appetite, deploy more of your fresh money in equities and benefit from the lower entry prices. Do so gradually over the next three-to-six months. Only capital that will not be needed over the next five years should be deployed. Don’t invest borrowed money.

Reduce exposure to mid- and small-cap funds: Ideally, 50-70 per cent of your portfolio should be allocated to large-cap funds and 20-30 per cent to mid- and small-cap funds. Owing to the run-up in mid-caps over the past two years, the weight of these funds would have increased in your portfolio. Pare your allocation to these more volatile funds.

Don’t redeem now when net asset values have declined so much. “Allocate fresh money to large-cap funds to reduce exposure to mid-and small cap funds,” Belapurkar adds.

Invest across investment styles: Instead of investing only in growth funds, have some exposure to value and dividend yield funds, which invest in low-beta stocks and hence are more resilient during a downturn. “A 15-20 per cent allocation to these funds will help protect your capital to some extent,” suggests Belapurkar.

Diversify internationally: To reduce country-specific risk, invest at least 10-15 per cent of your equity portfolio in international funds. Do so via globally diversified international funds. US-focused funds, which invest in US-domiciled multi-national companies, are another good option.

Source : http://wap.business-standard.com/article/pf/seven-ways-to-survive-the-stock-market-downturn-116021500169_1.html

ATM :: How to make your first million before 30

by Sanjiv Singhal | ScripBox.com

ATM

Recently, a friend of mine called me – her voice brimming with excitement. She was only a lakh short of 10 Lakhs in her Scripbox account. She started investing very recently and could not get over the fact that in a fairly short time, she was able to accumulate that amount.

The word millionaire does have a nice ring to it. In the Indian context the big indicator of wealth used to be ‘lakhpati’ but with inflation eating away at the value of our earnings, a million or 10 lakhs is now a good goal to aim for.

But, for a lot of young earners starting out on their first job, it seems impossible to have that much money. This article will show you how you too can be a millionaire. All you need is a simple, easy to follow plan.

Let’s say you are a 22 year old making Rs 25,000 a month, and you can save Rs 5000 to begin with.

Here’s your plan:

Year 1: Save Rs 5000 per month and invest in liquid funds or a recurring deposit. We recommend a debt fund because it has no TDS.

Year 2: Increase your savings by 10% to 5500 per month (We’re sure you’ll get a salary hike!) and invest it in liquid funds.

Year 3-8: Again increase your savings by 10% every year but now start investing it into tax saving equity funds. So Rs 6100 in year 3, Rs 6700 in year 4 and so on.

By the time you are thirty, you can expect to have more than Rs 10 lakhs!

1st_million

*Equity growth is illustrative. It will never grow at a steady pace as shown. Markets tend to fluctuate and you will see large ups and downs.

On your way to becoming a millionaire, you would also have achieved the following 2 things:

1. By the end of year 2, you would have created an emergency fund of Rs 1.35 lakhs or approx. 4 times your salary. This is why we don’t recommend starting with equity in the first year itself.

2. You would not have needed to worry about tax saving investments every year.

Most important, you would have contributed only about Rs 7 lakhs to get to that 10 lakhs wealth. The rest would have come from earnings on your investments.

Tip: if your salary goes up by 20%, you should increase savings also by that amount – you will get to your goal faster.

What if you can only save half this amount?

The amazing part is that it won’t take you twice the number of years to get there. In only 3 more years (when you’re 33), you can get to your million!

And of course if you save more, you get there faster.

What after the first million?

Just keep saving 20-25% of your income each year in a combination of debt and equity funds and you shouldn’t have to worry about a thing. You could also adopt this simple financial plan. (refer link at bottom)

So, no more excuses. Take your first step towards your first million today.

Note: We’ve assume 8% return on your debt fund investments and 14% on equity funds. The historical returns for equity are higher but assuming a lower return is good for planning as the rates of return are not fixed.

Source : https://goo.gl/Rr7zOp

ATM :: Are Indians retiring poor?

Rajeshwari Adappa | Tuesday, 24 November 2015 – 6:50am IST | Agency: dna | From the print edition
Defensive investment strategy of choosing secure and safe investments over riskier ones give lesser returns in the long run. The allocation to FDs and gold is much higher in India when compared to developed countries and the ownership of equities is very low. To get more bang for their buck, investors need to change their investment strategy as a few decades back, there were not many alternatives and inflation was not a known devil

ATM

For the same corpus invested in retirement funds, Indians make lesser money than their western counterparts.

Yogitaa Dand, financial advisor (associated with DSP BlackRock’s Winvestor initiative for women) says, “Yes, I do agree that Indians are not earning as much as they should from their investments, and hence, they do retire poorer than their foreign counterparts.”

“The reasons are manifold. However, the two distinctive reasons are that till date Indians have always given least priority to their retirement corpus and the greatest priority to the education of their children,” says Yogitaa.

Thus, Indians end up dipping into their nest egg, reducing the corpus considerably.

“Secondly, they have been more conservative in their investments, choosing secure and safe investments over riskier ones, which would otherwise have given them better returns in the long run,” adds Yogitaa.

A leading fund manager blames the “limiting thought process” for the comparatively poorer returns on investments. Indians use a ‘defensive’ investment strategy that lays too much stress on the ‘safety’ aspect.

“While we Indians have been very smart savers, unfortunately, we have not been the best of investors with our focus being on secure and assured return vehicles, eventually giving us lower returns,” says Yogitaa.

According to Vaibhav Agrawal, VP & head of research, Angel Broking, the reason for the lower returns on investments is that “the allocation to fixed deposits and gold is much higher in India when compared to developed countries. Also, the ownership of equities is very low in India.”

“In the US, the amount invested in equity mutual funds is $8.3 trillion (approx. Rs 550 lakh crore) and the amount in bank deposits is $10.4 trillion (approx. Rs 690 lakh crore). In India, the amount invested in equity mutual funds is Rs 3.8 lakh crore while the amount invested in bank deposits is Rs 89 lakh crore,” points out Agrawal.

Over a long term period, it has been seen that equity investments have given higher returns than bank FDs. “The compounded return from the top 50 schemes of equity MFs is in the region of 14.5% while the post-tax return on FDs is 6.5%,” says Agrawal. Even if one were to invest in the Nifty stocks, the returns would be in the region of 12% without dividend, and with dividend, the returns would be 13.5%.

Certified financial planner (CFP) Gaurav Mashruwala explains the reason for the bias towards FDs and other ‘safe’ investments. “Indians have seen very high interest rates in the past. The PPF fetched a return of 12% while bank FDs earned about 15-16% and company deposits earned even more at 21-22%,” he says.

“We also need to understand that a few decades back, we did not have many alternatives and choices to investments. Also, inflation was not a known devil,” adds Yogitaa.

Another reason for the ‘safe and defensive’ strategy seems to be the lack of a social security system in India. “We can look at NPS as an alternative to the social security system. However, it cannot be a complete substitute to the same,” points out Yogitaa.

But the volatility and unpredictability of the stock markets is the main roadblock in the case of equity investments. “Equity investments need a different mindset, much like that of a businessman,” points out Mashruwala. Not all investors are comfortable with the rollercoaster-like ups and downs of the stock markets.

The good news is that the scenario is changing. “People have started investing more in equities. The psychology of the investor and the regulator too is changing. Even the provident fund money is now being invested in equities,” adds Mashruwala.

If Indians want to get more bang for their buck, they need to change their investment strategy. “A person with a low risk investment portfolio can earn anywhere between 5-8% while a person with medium risk investment portfolio would earn approximately 8-10%. A person with a high risk investment portfolio would earn anywhere between 12-18% on a CAGR basis over a period of time,” explains Yogitaa. After all, risks and rewards are but two sides of the same coin.

Incidentally, Mashruwala is not too concerned about the western counterpart getting higher returns. “Remember, in all probability, the western counterpart also has more debt compared to the average Indian. It is highly likely that the Indian probably owns the house unlike his western counterpart,” says Mashruwala.

Source : http://goo.gl/hHcZR3

ATM :: Five common myths about mutual fund investment

Nov 24, 2015, 03.09PM IST | Times of India

ATM

In our earlier article on investor awareness, we highlighted various advantages of investing in mutual funds like diversification, professional fund management and liquidity. However, there are certain myths associated with investing in mutual funds. In this article, we would like to clarify five of the most common myths associated with investing in mutual funds.

Myth 1: You need a large sum to invest in mutual funds.

This is an erroneous perception. You need not have a lot of money to start investing in funds. You can start with a sum as low as Rs 500 when investing in equity linked saving schemes (ELSS) or Rs 1,000 every month when investing in a mutual fund through systematic investment plans (SIPs).

Myth 2: Buying a top-rated MF scheme ensures better returns.

Mutual fund ratings are dynamic and based on performance of the fund over time. So, a fund that is rated highly today, may not necessarily maintain its rating a year later. While a highly rated fund is a good first step to short list a scheme to invest in, it does not guarantee better returns eternally. Investments in mutual funds need to be tracked with respect to its benchmark to evaluate its performance to stay invested or exit.

Myth 3: Investing in mutual funds is the same as investing in stock market.

Not all mutual funds invest only in stocks. In fact, even the most diversified equity funds have a mix of equity and debt. Also, the sheer variety of mutual funds means that there is a fund for every type of investor, spanning a risk spectrum of low to high and spreading investments that are significantly high in equities to those which have no exposure to equities.

Myth 4: A fund with lower NAV is better.

This is a popular misconception. A mutual fund’s NAV represents the market value of all its investments. Any capital appreciation will depend on the price movement of its underlying securities. Say, you invest Rs 10,000 each in fund A (whose NAV is Rs 20) and fund, B (whose NAV is Rs 100). You will get 500 units of fund A and 100 units of fund B. Let’s assume both schemes have invested their entire corpus in exactly same stocks in same proportions. If these stocks collectively appreciate by 10%, the NAV of the two schemes should also rise by 10%, to Rs 22 and Rs 110, respectively. In both cases, the value of your investment increases to Rs 11,000.

Therefore, always remember that existing NAV of a fund does not have any impact on the returns.

Myth 5: You need a demat account to invest in mutual funds.

You do not need a demat account when investing in mutual funds. You may just fill up an application form, attach a cheque of the desired amount and submit the form at the mutual fund office or to your financial adviser.

Now that you have more clarity on investing in mutual funds, we are sure you will make prudent investment decisions while panning your financial portfolio.

Source : http://goo.gl/9EZxuK

ATM :: Why gold purchases should not be part of financial planning?

Abhijit Gulanikar | Tuesday, 17 November 2015 – 8:30am IST | Agency: dna | From the print edition
The track record of gold, before adjusting for transaction costs, for giving returns is fair.

ATM

For Adwait and his family Diwali is festive time to be enjoyed with family and friends. It is also time to buy gold. Along with Diwali, he buys gold every year during Akshaya Tritiya. He buys gold during all important life events like birth of his daughter, wife’s 30th birthday. This gold has in most cases bought as ornaments for his wife, daughter or himself. He recons that large portion (around 30-35%) of his savings is in form of gold. Adwait is not alone and many Indians have similar habits making India the largest purchaser of gold.

This mindset of investing in gold is received wisdom we have learnt from our forefathers and has been a long tradition in India. But this tradition is from era when financial instruments were not well developed. Today investments that are safer than gold will provide returns equal to or higher than the return on gold. By safer I mean both physical security and price security (capital guarantee). Most financial instruments are in electronic form or physical receipts that can be encashed only after due authentication by the owner (signature/password-OTP). Gold is, on the other hand, subject to theft and robbery. One needs to protect it buy hiring safe deposits lockers or other similar arrangements. Gold is generally safe from point of price security but it is also subject to market fluctuations like other commodities. We have had period where the price of gold has not recovered to previous peak for 4-5 years. Like price of gold is currently around Rs 26,000 for 10 gram, lower than Rs 31,000 we had three years ago.

The track record of gold, before adjusting for transaction costs, for giving returns is fair. Analysis of gold prices over last 40 years reveals that average return for long-term holding (10 years or more) is slightly lower than 10%, whereas inflation during the same period averages around 8%. Gold thus does provide positive real returns, i.e returns higher than the rate of inflation.

Above analysis is purely theoretical based exchange traded prices of gold. In real life the return will be significantly lower on account of transactions costs. Adwait has paid making charges every time he has purchased the ornaments. Making charges vary considerably from jeweller to jeweller but are substantially higher than zero transaction charge for making a bank fixed deposits or buying national saving certificate. Adwait has remade old ornaments from time to time and has paid a deduction for old ornament, and at the same time making charges for the new ornament. Adjusting for these costs and cost of safe keeping the return on gold would not be higher than rate of inflation.

Adwait should go ahead with his tradition of purchase of gold during Diwali as it has a huge sentimental value. Display of ornaments during social occassions also has a huge social value. However it would be judicious to reduce the amount of gold that he purchases. For important life events like his daughters 10th birthday, instead of buying a gold chain, he could invest the same amount in a long-term fixed deposit or mutual fund. Gold purchases should be done purely for sentimental/social reasons and not as part of his financial planning.

The writer is chief officer-business strategy, SBI Life Insurance

Source : http://goo.gl/w3wKkv

ATM :: Four key financial planning tips for women

Rishabh Parakh | Saturday, 21 November 2015 – 10:00am IST | DNA india
It is important for women to start financial planning early on; it is also important to make these decisions wisely and not emotionally.

ATM

These days, financial education is imperative to acquire financial success. However, while some of us might be well-versed with financial theories, staying updated and accurate with the latest financial news is also important.

There are women who go the extra mile to provide for their family, both financially and emotionally — as a professional, mother, daughter wife, friend. However, women also tend to get fondled by emotions easily. It is important for her to focus and make decisions logically and not emotionally when it comes to matters of financial planning.

Here are some smart financial planning tips for women

Choosing best option to invest:

It is not only important to invest, but also to choose your investment plans wisely. This stands true for everyone, not only women, but it is especially important in the case of women because they tend to have a longer life span. It is very important to start planning for retirement or for financial stability in the event of a partner’s death.

Take charge and make a budget:

Many women in India still depend on their husbands for financial decisions. With growing complexities in life, it is advisible for a woman to take charge of her financial life as she may be in a better position to predict her needs going ahead. For this, make a budget that fits your requirement with ease and is flexible enough to accommodate needs with time. It is advisible to start as early as possible and select investment options which will also help you save in taxes.

Research & Plan: Take a financial advisor’s help if needed:

Since the financial world is full of technical jargons and complexities, a thorough research before buying into a financial product, including considering factors like inflation, return on investments, market sentiments, and taxes while planning your finances. Seek advice from an expert if needed, but eventually make the final decision on the basis of your judgement and thorough research. Plan, calculate and research before investing.

Review your income & savings on a regular basis:

After carefully planning and investing, the next, and constant, step is to review your finances on a regular basis. You need to be on the top of your game when it comes to managing finances with respect to the changes in your life — marriage, becoming a parent, career changes, moving abroad/shift, and so on. Then there are other changes that are beyond one’s control — changes in tax laws, interest rates, inflation rates, stock market volatility, recession — so make sure you plan ahead of time and are always ready to accommodate these changes.

Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at http://www.mangoinvestor.com. Readers are invited to send their feedback to .

Source: http://goo.gl/zpwyCZ

ATM :: How to arrange down-payment for buying your dream home

STEVEN FERNANDES, Proficient Financial Planners | Source: Moneycontrol.com
Take stock of your liquid investments and your monthly income. This will give you an idea of how much you have to arrange. Rely only on safe debt fund to save money for down payment

ATM

Life’s biggest financial decision is buying a house and therefore it requires lot of calculated planning in advance to avoid any regrets later on. Considering the escalated property prices, most houses or flats would necessarily have to be purchased with the help of a housing loan. Assuming that the preferred location is identified, the next thing to do is to decide on a budget which should include the price of the property and other charges like stamp duty, registration charges, Vat, etc. Let’s assume that Akash (34) and Avni (33) are presently staying on rent and they have planned to buy an apartment after 2 years in a desired locality costing Rs. 70 lakhs today. Considering a 10% increase in price, the estimated price of this apartment after 2 years will be Rs. 85 lakhs. The couple’s monthly income is Rs. 125000 and they have the following financial assets as of now.
Assets Value (Rs)
Savings account ==> 350000
Fixed Deposits ==> 1000000
Equity Mutual funds> 400000
Total==> 1750000

Monthly Income Rs. 125000
Monthly Expenses Rs. 55000
Monthly Surplus Rs. 70000

1. Deciding the amount of loan that needs to be taken.
While most banks provide loan up to 85% of property value, you need to first check the EMI that you would be most comfortable with rather than decide based on what the bank is offering. For example, in the above case, after taking care of the monthly expenses, the couple have a surplus of Rs. 70000 per month. They can comfortably opt for upto 45% of their net monthly take home salary as EMI which comes to Rs. 56250. This will enable a loan of approximately 52 lakhs for a tenure of 15 years at 10% interest. Now the couple is clear that they need to arrange the down-payment which is Rs. 33 lakhs in 2 years’ time.

In some cases, where people don’t have any substantial investments to make the down-payment, they go for a higher loan component thinking that the higher EMI will pinch in the firsts year but with salary increase expected going ahead, servicing the high EMI will become manageable. They need to be prepared to reduce their lifestyle and rework on their expenses as the salary increase might get delayed. In case you have a good amount of investments, then you could work vice versa and add up your investments to see how much is the gap and then decide on the loan amount.

2. Planning to arrange the down –payment
It is during this time that a list of all the available financial resources is made by most couples and accordingly all the liquid resources like savings account, fixed deposits, gold, mutual funds are considered to make the down-payment. Care should be taken to ensure that you maintain funds separately for at least six months of contingency and any short term goals. Rest of the funds can be considered for the down-payment. In our given example, the savings account balance is maintained for contingency and mutual funds are also maintained separately for interiors and other post possession expenses.

In the above case, fixed deposit can fetch Rs. 12.60 lakhs @ 7% post tax interest and the balance required now is Rs. 20 lakhs for which the couple will have to invest Rs. 78500 per month in liquid funds and recurring deposits (50% each). Budgeting becomes very important during such times and reducing expenses becomes crucial.

Whenever down-payment is to be made in less than three years time frame one should invest on a monthly basis in debt instruments only like liquid funds, ultra-short term funds or recurring deposits. Do not invest in equity funds or stocks thinking that you will get better returns in 2-3 years which will reduce your loan amount. One needs to play extremely safe when dealing with short term investment, especially for a home. Gold invokes a lot of sentiments but for such an important goal, one needs be prepared to use a part of it to shore up the down payment.

3. Borrowing from family/relatives
If you are falling short of down-payment amount by a few lakhs, do not hesitate to borrow from your close family members as most would not even charge any interest on that loan. Secondly you will get some time to pay off the loan as per your convenience. I have come across several people who explored this option and took a soft loan either from their in laws, siblings or close cousins. Take this as the last option.

4. Other things to consider
Since most people utilize their entire life’s savings for buying a house, they could be running low on liquidity in case any adverse event such as medical emergency were to take place. Therefore one should be adequately covered for health and life cover or review one’s existing covers when buying a house.

Steven is a member of The Financial Planners’ Guild , India ( FPGI ). FPGI is an association of Practicing Certified Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards.

Source : http://goo.gl/4YzFkL

NTH :: ‘54% employees spend more time on personal fin issues at work’

Press Trust of India | Mumbai | August 25, 2015 | Last Updated at 17:02 IST | Business Standard

NTH

More and more employees in India are worried over financial security of their family as 54 per cent employees admitted spending more time thinking about personal financial issues at work, according to a study.

“The biggest financial concern of employees in India is financial security of their family in case of premature death. About 54% of employees admitted spending more time thinking about personal financial issues at work than they should, impacting productivity and engagement in the workplace,” according to the PNB MetLife’s 2015, Employee Benefits Trend Study.

The study revealed that employees in are seeking benefits that will help provide protection coverage in order to help ease their financial concerns.

As per the survey, 73 per cent of the employees are seeking life insurance as a key protection product and 61 per cent would even buy life insurance without support from employers.

Employees, the study showed, are willing to take up additional coverage on health, life and accidents either jointly paid by employers and employees or pay from employees’ own purses.

“Globally, we are seeing employers increasingly challenged to find ways to attract and retain talent, as well as drive loyalty and commitment, while managing costs,” MetLife Executive Vice President Maria Morris, Global Employee Benefits, told reporters here.

She said employee benefits are becoming a valuable tool in helping employers win the war for talent.

“This is why we conduct our global employee benefit trends study in dynamic markets like India. It provides us with the opportunity to examine what’s on the minds of employees, and at the same time, provide employers with insights that will help better leverage benefits as a tool to address their talent challenges and rising costs,” she added.

According to the study, a majority of Indian employers (70 per cent) feel highly challenged to retain employees, highest compared to other markets including the US, Poland, China, Russia and the UAE.

The report found that only 51 per cent of employees are satisfied with their current job with 47 per cent saying they will look for another job within the next year.

“Since the rapid growth of India’s economy has put its employment market under stress, we conducted a study to gauge insights that will help employers better navigate these challenges. In India, our findings revealed employers need to address a broader employee value proposition that focuses on meeting the needs of Indian employees,” PNB MetLife Managing Director and CEO Tarun Chugh said.

Source : http://goo.gl/cr1kpk

ATM :: Unsure about financial planning: 10 questions to help understand why you need one

by Kalpesh Ashar | Jul 30, 2015 16:26 IST | Firstpost.com

ATM

In today’s world, each one of us is constantly trying to be updated with the latest in technology, gadgets, knowledge, lifestyle etc. Competition is fierce all around us and the urge to professionally outperform always remains within us.

Everything is changing and evolving very rapidly and we are always playing catch up. But have we changed our personal financial scenario or even seriously considered doing so?

Or, are we yet walking down the same old path where regardless of what things around us are, we are still committing the same financial mistakes and ignoring the right signals in the path of our financial well being. It’s about time every individual starts to create a personal finance plan, to not only live a stress-free financial life on day-to-day basis, but also for his future money life.

Here are ten questions to ponder on and if you find yourself ticking majority of the boxes affirmatively, it is imperative that you get yourself a personal financial plan in place without much delay as these are the potential alarm signals which could spell disaster for an individual if not addressed.
1. You are not sure whether your expenses exceed your monthly/annual income.
2. Do you face a cash crunch every other month ?
3. Do you find it difficult in repaying your personal debts and liabilities i.e. credit card dues, loan EMI’s or insurance premiums ?
4. In case of any urgent monetary requirement, do you look at selling your existing investments or consider taking a loan?
5. You have not been able to put your investment objectives/goals on paper.
6. You feel your family will not be able to maintain the current lifestyle or achieve your goals if some unforeseen, unfortunate event were to happen to you (The sole bread earner) ?
7. You do not understand the financial products in your portfolio?
8. You prefer investing in only one particular asset class.
9. Do you mostly invest with your friends and relatives selling financial products – who offer free advice and offer a “latest” product every time they meet you ?
10. Would you like to know what amount would be your retirement corpus (after considering inflation)?

The reason for listing these 10 questions is that these are the precise pain points which most of the people encounter on a daily basis in their personal finances.

It is a complex financial jungle out there and it is natural that individuals lose their way in taking the right steps for their own good. A personal financial plan done correctly and ethically would automatically rectify the above mentioned shortcomings and clear the myths or should we say ‘cobwebs’ from the mind of an individual and put him on the path of financial well being presently and for his future. If this is put in place in an earnest and methodical manner, rest assured all your other endeavors in various aspects of your life will be in perfect alignment. What is necessary is taking the first step and start moving in the right direction.

Kalpesh Ashar is a member of The Financial Planners’ Guild, India and Founder, Full Circle Financial Planners & Advisors (a Sebi-Registered Investment Adviser)

Source: http://goo.gl/MHQi4k

ATM :: How to do a financial clean up in 7 easy steps

Financial cleaning is one thing that has to be done proactively. Check out these seven tips to clean up your finances and become a pro at managing money:
By: CreditVidya | New Delhi | July 20, 2015 2:21 pm | The Financial Express

ATM

A routine weekly cleanup at home involves clearing the accumulated and scrubbing all surfaces squeaky clean! The mantra that most people swear by is, ‘if it looks messy, clean it up’. Unfortunately, this approach is not extended to financial cleaning by most. An approach to cleaning, in general, is reactive. But financial cleaning is one thing that has to be done proactively. Check out these seven tips to clean up your finances and become a pro at managing money:

#1. Get a financial planner!
Yes. You need an exclusive planner to organize your finances. Financial planning definitely cannot share space with grocery lists and birthday reminders in your day to day planner. Your hard earned money deserves special attention. Use this planner specifically for chalking out the details of your finances. Premium payments, outgoing bills, EMI dates, FD records, and more can be tracked by making notes. Organize well and set up a process to track dates and documents. Free you mind space by jotting it all down in the planner.

#2. Clear your debts!
List down all the debts and then calculate the interest you are currently paying on each one. Also, evaluate how long you may have to continue to do so. This can be an eye opening activity! You shall see that few debts are turning out far too expensive. Figure out if you can clear any of these in the near future and draw up an action plan. Re organizing your debt can be a game changer! Pay off those debts and dodge the money black hole called interest payment.

#3 The magical tool – Budget!
If you don’t have a budget planned yet then stop everything and do it now! Budgeting helps limit your expenses. It’s a good idea to have monthly budgets and a review session every quarter. During reviews, check if the budget is helping you save and is in sync with your short and long term financial plans. Riding on a good budget is essential to reach your financial goals.

#4 Is you retirement planning on autopilot?
If you answer is “yes”, congratulations! Because at least you have a retirement plan in place! In case you haven’t planned it yet, this is your red flag. Retirement planning is crucial because that’s when you will be reaping the benefits of all the years of hard work. Putting your retirement plan on autopilot is a good way of believing that you are on the right track. Well, hold on! Investments which are a part of the retirement planning need to be re visited and re-evaluated periodically. How else will you know if the funds are going to be sufficient to lead a comfortable life if not for a dream life? This is a long term plan and definitely calls for good planning and smart thinking.

#5 Investing time can double your money!
To invest smart and invest better one needs to be aware of the various options available. Hence, invest your time in educating yourself. Speak to experts, subscribe to good financial magazines, follow blogs and sign up for updates on finance websites. Knowledge about financial products can help you choose a better product while being aware of the risk involved. That way you will also feel more confident about your finances. As we know, knowledge is power. Investing time in gaining knowledge will definitely fetch rich dividends.

#6 Open new doors!
It’s easy to get into a rut while facing the daily grind. But do not let this block your thought process for coming up with new and creative ways to make more money! Think about what you are passionate about and find ways to monetize it. Work on your hobbies and take up classes to learn something new. In today’s world, where the work environment is so dynamic it important to have a plan B ready. And you never know, you may be one of the lucky few whose business is to do what they love and do it to the best of their ability. So have an open mind and develop new revenue streams.

#7. That important number!
Obviously we are referring to the CIBIL score!Regularly checking this score should top your list. However, this activity easily gets ignored unless we need to submit the score for evaluation. At that time it’s too late to take any corrective action if the score is not up to the mark. Checking your CIBIL score regularly gives you a fair idea about how institutions are going to perceive your financial health. In case, you have to apply for a loan in the near future, problems which may arise due to the CIBIL score can be resolved in advance. An action plan to improve the score can be drawn up and implemented if we track the score regularly.

Make regular financial clean ups your obsession and we promise you a heavier wallet and lighter mind. Delay no further and start today itself. After all financial management is all about smart planning and organizing. The points mentioned above will definitely help you in that. Good luck!

Source : http://goo.gl/ixxAyK

ATM :: Foreclosing a home loan? Here are the do’s and don’ts

Jun 5, 2015 00:04 IST | FirstPost.com

ATM

So your heart leapt when you read last year that the RBI had disallowed foreclosure penalties on home loans, but should you now scramble to have yours closed? Not so fast, here are a few check boxes to tick before you do.

1. What percentage of your income is your EMI – an EMI of over 40% of your monthly household income is definitely not desirable, it hampers smooth budgeting and your financial planning for a secure future. So if, for whatever reasons, your EMI is over 40% of inflows, do pay off your home loan as quickly as your capacity will allow – and do consult your loan officer for every charge associated with the repayment/s.

2. Weigh the impact of losing that tax benefit – you’re currently claiming certain deductions under say, Section 80C or 24B. Assess the impact of foregoing those benefits when you plan to foreclose a home loan. Maybe now is not the right time, a careful look at the increased tax outflow needs to factor in your decision.

3. How will foreclosure impact the rest of your financial planning – There are certain mandatories in financial planning, like retirement, children’s education, insurance, health care contingencies. Your foreclosure should not be at the cost of any of these. Any funds being considered for use in repayment should ideally be surplus after considering such essentials.

4. Better sooner than later – While it isn’t advisable to foreclose your loan within 6 months of taking it, you’d incur high processing fees; direct all surplus funds into early, rather than late, repayment of your home loan.

5. Measure the trade-off between Interest paid and returns on other investment options – Your surplus funds can be invested in numerous ways, some of these may offer better returns over a period of time than the loan-interest pay-out in that same time. An exception though would be a situation where you are nearing retirement and your salary income is due to cease- in such a case, foreclosure could be more attractive.

So yes, while it is a very tempting picture to see yourself rid of a large long-term responsibility like a home loan, rushing into foreclosure may not be the right answer. Take a long, hard look at the pointers above and ensure that your decision is made optimally. If all signs point to GO even after assessing them, then foreclose away, and congratulations to you!

Source : http://goo.gl/kR3zlK

ATM :: How does a falling rupee affect you?

Priya Nair | May 18, 2015 Last Updated at 00:10 IST | Business Standard
Be prepared to pay more if travelling abroad or if your child is studying there. Other impacts can be varied

ATM

Your family and you are flying to the US next week on holiday. Flight tickets and hotel bookings were done in advance. So, why should the rupee depreciation bother you? It should because all other expenses, such as sightseeing, local transfers and food will increase as a result of the fall in the rupee.

Similarly, if your child is studying in a foreign university, don’t be surprised if tuition fees increase substantially over last year.

There are also some advantages of a falling rupee. Those working abroad will gain, as the same amount they remit will translate into more rupees.

“It looks like the rupee will be in the 64-65 range (to the dollar). As the rupee tends to be overvalued and exports are not growing much, the Reserve Bank might be willing to let the rupee depreciate,” says Madan Sabnavis, chief economist, CARE Ratings.

The immediate impact will be on foreign travel and students studying abroad. The indirect impact will be on other expenses, too, as oil prices will go up and this could push up prices of other commodities. However, this time, as the price of crude oil in the international market is low, there might not be much of an impact on domestic oil prices, says Sabnavis.

Below is a look at some ways a weaker rupee will impact your life and what you can do about it.

Foreign travel
Europe tours are popular with Indians in the summer months of April to June. Most people book in October for departures starting in April. Those who have booked and paid earlier, including the forex component, will not feel much of an impact. However, travellers who don’t pay the forex component in advance might feel the pinch. Usually, travellers pay the deposit and for flight tickets in rupees, in advance. The forex component, which covers accommodation, meals, sight-seeing and excursions, can be paid later. “For trips in April, packages are booked as early as October. We pushed many of our customers to pay in advance. Those who did not pay then might feel the pinch now,” says Daniel D’Souza, head of sales, Tour Operating, Kuoni India.

One way to avoid last-minute heartburn is to pay for your entire package in advance and not only the rupee component. If booking last-minute, choosing a short-haul holiday to a destination closer to home rather than a long-haul holiday is also a way to save some costs.

Tips to save

  • Reduce the number of days from 10 to, say, eight
  • Reduce the number of excursions
  • Switching to a lower category hotel or staying in a bed and breakfast or home stay
  • Cut on shopping rather than sight-seeing, since it is the experience that matters
  • Opting for public transport such as trains, subway or buses, rather than renting a car
  • While sightseeing, choose days when tourists are allowed to go for free or given discounts. Most monuments abroad have such days
  • While shopping, buying from flea markets can work out cheaper than from stores
  • Take a decent amount of cash with you, as you might not get good rates while travelling
  • Pre-paid travel cards that allow you to load multiple currencies are a good option. In these cards, the value of the rupee is of the date the money is loaded to the card

Foreign education
Students studying abroad also suffer when the rupee falls. The US, Britain, Canada, Singapore and Australia are popular countries for Indian students. The university will not offer any leeway in tuition fees. Students will have to pay the entire amount. In most cases, you will have to pay before a term starts.

Given the high tuition fees in foreign universities and the cost of living, most students take some loan and pay for the rest by scholarships or taking a part-time job. “When the rupee falls, it becomes difficult for the entire family, not only the student. And, not many individuals know how to hedge themselves against currency fluctuations by using derivative products. What you can do is try and pay the entire fee upfront when the exchange rate is low. Most universities give a discount of one or two per cent if you do so,” says Naveen Chopra, of The Chopras, a foreign educational consultancy.

Neeraj Saxena, chief executive, Avanse, a non-banking financial company that gives education loans, says there is an option to enhance the loan amount during the course. “We don’t usually disburse the full loan amount at one go. We do as per the semester. So, if the fees increase in the third semester, we can increase the loan amount,” he advises.

Saxena suggest students going abroad should look for scholarships or part-time jobs like teaching assistantships. “We find of the Rs 30-35 lakh required for a foreign university course, students often are able to earn Rs 8-10 lakh through part-time jobs, which pay by the hour,” he says.

Tips to save:

  • Using discount coupons given by universities and accepted at all major stores
  • Using cards like the ISIC (a specialised card for students) for travelling, eating out, even shopping at some departmental stores
  • Going for free concerts, to movie halls which offer student discounts
  • Going to budget pubs, during happy hours, for leisure
  • Use special cards that offer discounts to students for eating out and shopping

Medical costs
The rupee’s weakness will push up medical costs, too. About 30-40 per cent of a hospital’s cost is on account of medical equipment and of these, 80 per cent is imported, says Vivek Desai, managing director, HOSMAC, a health care management consultancy. “Many common procedures in cardiology and cancer care use imported equipment. Even orthopaedic implants and consumables used in laboratories are imported. Any increase in their costs will be passed on to patients and there is nothing the latter can do about it. That is why medical insurance is a must. That, too, comes with a ceiling,” he says.

Other costs like air-conditioning and flooring in hospitals, also imported, will also see an increase and hospitals are likely to pass these on to patients by way of higher charges.

Patients going abroad for treatment will also see an increase in cost due to the rupee’s fall.

Tips to save:

  • Health insurance is one way you can deal with rising medical costs. Buy one early in life
  • Even if covered under your employer’s group medical insurance, take a separate family floater
  • Buy a top-up medical insurance to increase your sum assured without too much increase in premium

A weak rupee will benefit
Remittances
Non-resident Indians (NRIs) sending money home will benefit from the rupee’s weakness, as they will get more returns for what they send. Typically, NRIs with higher disposable incomes send more money to India when the rupee falls, says Sudesh Giriyan, chief operating officer, Xpress Money. “We will see an increase in remittances when the rupee crosses 64 to a dollar. In the case of cash remittances, we don’t see much increase because these are smaller ticket-size. But in direct remittances, which are bigger ticket-size, currency value has a bigger impact,”

Many NRIs also take loans from banks abroad, since the interest rates are lower, and remit money to India in order to invest, he adds.

There is usually an increase of seven to 10 per cent in remittances on account of rupee weakness, says K A Babu, head-retail and NRI banking, Federal Bank. Remittances from the Gulf countries tend to increase in such times than those from elsewhere.

With regard to investments, those from the lower income group prefer bank fixed deposits – NRE rupee deposits or FCNR deposits which are in foreign currency. The NRE deposits offer the same rates as domestic FDs and can be liquidated easily. The FCNR deposits will provide protection from exchange rate volatility, though the rates are lower.

“Ideally, investors should have a mix of both kinds of deposits. That way, they can earn high interest rates and also get a hedge from currency fluctuation,” Babu says.

For NRIs in the high income segment, banks and wealth management firms offer portfolio management services, through which they can invest in stocks, PMS schemes, mutual funds, fixed income products, real estate, etc. The preference is usually for land or residential property. Some NRIs might also look to expand their business in India and buy commercial property.

International funds
International equity funds that invest abroad will benefit from the fall in the rupee. Investors of such funds would have seen their portfolios rise in the past few months. According to data from Value Research, over the past three-month period, returns from international funds have been the highest at 6.19 per cent, while equity multi-cap funds have seen their returns fall 3.19 per cent.

But these gains are marginal and should not be the only reason for investing in international equity funds. For instance, over a one-year period, multi-cap funds have given returns of 34.84 per cent, while in the case of international funds, it is 7.78 per cent.

The US market is currently doing well and will definitely give better returns in the near term, as it will not be as volatile as the Indian equity market. But over a longer term, that is a five-year period, Indian equities will definitely give better returns. So, one can look at international funds provided they have sufficient exposure to Indian equities, say experts.

Anand Radhakrishnan, chief investment officer at Franklin Equity, Franklin Templeton Investments – India, also says investors should not look to time the markets, but invest on a regular basis and in a systematic manner. “Typically, the exposure would depend on the individual’s risk profile and investment objective, but as a thumb rule, one should have at least 20 per cent of their investment portfolio allocated to international assets. Equity investments warrant a longer investment horizon and we recommend investors come in with a three-to-five year horizon or more,” he says.

Source : http://goo.gl/SUyRgr

ATM :: Education loan or top-up loan: A toss-up

ADHIL SHETTY CEO, BankBazaar.com | May 15, 2015, 12.43 PM IST | Source: Moneycontrol.com
Education loans do offer tax benefits and easy repayment norms, however they come with some limitations where a top-up loan scores.

ATM

Your all-grown-up son or daughter is finishing school and is raring to fly abroad. After all, the foreign university where he or she had always dreamt of studying at has finally accepted his application. So, you have done your homework as parents and explored all the education loan products in the market. Or, have you?

Education loans certainly one time-tested option to fund your child’s dream education, but there are other equally viable options today. Like top-up loans.

What is a top-up loan?
A top-up loan is an add-on to a home loan, considering the appreciation of the property price over the time. If you already have a home loan with any bank, have paid a minimum of 6-12 EMIs, and have a healthy repayment track record, you can apply for a top-up loan. There are no additional documents required when applying for a top-up loan. All you need to do is to walk in to the bank where you have home loan, and hand over your latest payslip and bank statement to request for a top-up. The bank initiates a technical evaluation of the property already mortgaged with them, and the loan is disbursed to your account within 48 hours in most cases.

Education loan versus top-up loan
Education loans are specifically crafted loans for students, but borrowers are free to make their choices weighing the pros and cons of various loan types, to get the best for their individual needs. Here is how education loans stack up against top-up loans when they go toe-to-toe.

Interest rate: Education loans often come with interest rates ranging from 12% to 17% (on an average), while a top-up loan is just 0.5% to 1% above your home loan rate, that is, at around 11% to 14%. In case a top-up loan turns out to be cheaper, it can actually reduce the interest outgo on your child’s higher education.

Repayment: The tenure of a top-up loan can be the same as that of your home loan, which means you can combine its repayment along with the home loan equated monthly installment (EMI). So considering its stretchable tenure, the monthly outflow will tend to be less. For instance, if you need a loan of Rs 6 lakh and have been offered both top-up loan and education loan at 12% interest rate, the two options shape up differently when you consider your monthly outgo in each. Top-up loans of 6 lakhs for a period of 15 years come with anapproximate EMI of Rs.7,201. The maximum possible tenure for an education loan is 8 years. So, the same loan for 8 years tenure would require you to shell out Rs.9,752 per month – almost a third more than the top-up loan option.

Total cash outflow: Continuing with the above example, for an education loan, the total cash outflow including the interest will be Rs.9,36,163 (without considering Pre-EMI, as it depends on whether you opt for moratorium period or not). A top-up loan, on the other hand, would require an outflow of Rs. 12,96,182. But, assuming you can build a corpus over 8 years, if the top-up loan is pre-closed in the 8th year, you can save around 2.7 lakhs in interest outgo for the balance tenure. This way, the total outflow does not differ much between the two loan options, but a top-up loan can be easier on your wallet as it provides the flexibility of lower EMIs while allowing any accrued savings over time to be redirected towards a pre-closure.

Ease of applying: It is easy to apply for a top-up loan as compared to an education loan, as exhaustive paperwork is not involved unlike an education loan where, along with heavy paperwork, you may need to produce security and guarantors in some cases.

When should you consider an alternative to education loans?

You are not eligible for an education loan: Not all educational courses are approved by banks. For instance, you may not get a loan for an online course. A top-up loan comes to your rescue here.

You need better interest rates: The higher total outflow in case of a top-up loan can be preempted if you pre-close it sooner by building a corpus. Whereas, an education loan can be a costlyaffair considering its higher interest rates.

You need more money for the miscellaneous education-related expenses: Education loans cover only the course fee if you are pursuing education in India. But, other related expenses like capitation fees have to be borne out of your savings. Sometimes education loans come with a ceiling on the amount that can be sanctioned. However, with a top-up loan, you can apply for a higher amount considering your existing home loan, income and the property’s prevalent market value.

On the down side, top-up loans do not have tax benefits unlike home loans. Education loans, on the other hand, offer deduction under Section 80E for interest paid. In a top-up loan, the repayment begins immediately. With an education loan, you can wait for a certain period to start re-payment if you can sit easy with the accumulating interest.

Finally, education loan or top-up loan – the choice is yours. Ultimately, it is a toss-up between friendlier EMIs and higher loan amounts on the one hand, and repayment flexibility and tax rebates on the other, but what should matter is that you have given your child the future he or she deserves.

Source : http://goo.gl/aNQAyO

ATM :: For homebuyers, 5 top moves to consider

By: CreditVidya | New Delhi | May 6, 2015 10:16 am | Financial Express

ATM

The dream of owning a house if not planned well will remain a castle built in air. To ensure your dream turns into a brick and mortar reality, you will not only require time, effort and energy, but lots of money too, either yours or the banks, ideally both, to take you through the entire process of home building or owning.

The challenge of owning a home, whether bought or built, for the first time can be very overwhelming. It might tempt you to go back to your present place of stay or just go with the first house that falls in your price range or worse, just skip the idea altogether.

Here are 5 top things that you should consider:
1. Plan your finances: Buying a house is a big financial decision. But, before doing that you should determine where you stand today financially. Ideally you should plan a year in advance in order to organise your finances. You need to start saving and cutting down on costs. Another factor you need to consider is the price range you can afford to buy, which is in turn linked to the amount of loan you will be applying for as well as the EMI you would be paying every month after purchase. So, to start with, it’s a good idea to create a separate budget assigned for this purpose.
2. Keep your debts in check: If you are already paying a part of your income towards debts, then you may want to pull your sleeve up and speedup the process. Try and find alternate streams of work to generate more income. If not, start paying a little more from your current disposable income towards the repayment. While it may not be possible to be debt free, you might want to be in control of your debts, as the banks will assess your debt to income ratio, before agreeing to sanction your loan.
3. Score well: Your Cibil score should be the number, you should be falling in love with to get the best out of the housing loan. A good Cibil score of 700 or more on your Cibil report can definitely earn you that loan with best interest rates and terms. So, make sure you are consistent with your credit card payments, and pay it on time to boost your credit score.
4. Build a fund for down payment: 10% to 15% of the cost of the house will have to be paid upfront at the time of purchasing the house. So, it is imperative that you start building towards this fund.
5. Define your dream home: Defining the kind of home you are looking for, is another key factor you need to work on. This should be in terms of type of residence, its location, amenities and its surroundings. Clarity in the above factors will get you closer to your dream home.

Owning a house for most of is associated with a sense of pride, ownership and security. Planning to buy a house is the biggest investment decision one takes in life. Therefore, it is important to remove the emotionally tinted glasses and practically assess the pros and cons before purchasing a house. Otherwise, chances are that your dream house will remain just that, a dream!

Source : http://goo.gl/GxZXkB

ATM :: Five financial planning lessons from Sachin Tendulkar

By Nitin Vyakaranam | Apr 24, 2015, 01.05PM IST | Economic Times

ATM

If there is one thing that unites India, irrespective of state, language, religion, caste, color and creed, it has to be Sachin Ramesh Tendulkar. The name Sachin has reverberated in our ears and souls for more than 24 years and it has mysticism when we hear it even today, 2 long years after the great man hung up his playing boots. We feel he would come out to bat every time an Indian wicket falls and resurrect the innings like only he can, how he has always done.

If we closely look at his career and personality how he went about becoming himself, we would be amazed to note some stand-out points that teach us invaluable lessons in personal finance. Let us take a look at 5 fundamental financial planning lessons that we can learn from Sachin:

1. Starting Early Helps:

Sachin started playing when he could barely hold a bat. He played for the country when his classmates were yet to write their 10th standard exams. If we look at the length of his tenure at the top level of cricket, it can be attributed to the early beginning he received. It would be difficult to imagine any other contemporary cricketer to last 24 years.

Similarly, when it comes to financial planning, we keep hearing this all the time, to start saving early. Let us take an example of a 25-year-old professional who starts to invest Rs 4000 per month and he would continue investing the same amount till he is 60 years old, till his retirement. If we consider the rate of return as 10%, can you imagine what kind of corpus he would be left with when he retires? It is a whopping Rs 1.53 crore. Behaviorally, we postpone investing thinking that we would start to invest when we start earning more. Consider the same professional starts investing Rs 8000 per month when he is 35-year old and keeps investing till he retires at the age of 60 years. Now can you imagine what kind of corpus he would have earned? Even though he was saving double the amount, his corpus is only Rs 1.07 crore. This clearly illustrates the power of compounding.

2. Unflinching Focus on the Goal:

One thing that separated Sachin from other cricketers is his focus. He never had time to stare back at the fast bowler who beat him, or the unlucky few who tried in vain to sledge him, only to realize that he is just not cut out for that treatment. He would just look down, walk down a few paces, tap the pitch and take guard again, this time with double the concentration. Right from his childhood, he wanted to play for India and win matches for it. For him, that goal never faded, never became routine, nor stale even though he had done it a thousand times in all forms of cricket. It shows the measure of the character of Sachin who never flinched even when there were questions raised about his intentions. He stuck to his trade, his skills and let them do the talking.

Similarly, in financial planning it is important to stay focused on our financial goals all the time. There would be times when there would be multiple options in front of us. But it would be always prudent to stay focused and not lose sight of our financial goals. This would ensure that we would definitely reach our financial goals.

3. Discipline Definitely Pays:

If we have to choose one quality among the many he possesses, it would be his discipline. Even at the peak of his career, when he got out to a particular ball or a bowler more than once, you can see him working on his technique, ironing out the flaw that only he saw, because for others, he was flawless. That discipline, that commitment to his career and the cause is the single most important virtue that made him what he is today.

Similarly, in financial planning, it is always recommended to have discipline. There are no short cuts to become wealthy. It is only through discipline that we can accumulate wealth. Instead of expecting miracles when investing, it would be prudent to stick to the basics and be disciplined. For example, if you are doing a monthly investment for one of your goals, never stop it till the goal is achieved.

4. Choose Your Own Time to Quit:

Sachin chose the day he would hang up his playing boots. Only he knew the wear and tear his body was being subjected to in each match and how much more it could take. Also, more importantly, only he knew when he should pack his bags because the Indian cricket was going through a transition. His presence was needed by the youngsters in the dressing room and on the ground. His wisdom was cherished by them like many of them have acknowledged openly. Keeping this in mind, he chose his retirement at the most appropriate time, right after India won the World Cup, 2011.

Similarly, when it comes to financial planning for retirement, we should take into account our responsibilities and our contribution before taking a call on retiring before the age of 60. All aspects of personal finance should be taken into consideration and only then the decision should be taken. We have to remember that it is our decision.

5. Have a Post-Retirement Plan in Place:

Even during his playing days, Sachin followed his dream and being a foodie, opened a chain of fine-dine restaurants. Apart from this, Sachin has also invested in 7 different companies where he holds various percentages of stakes. This supplements his other income that he receives from endorsements. He had started to diversify and plan for his retirement even during his playing days. A rare quality that we need to learn a lot from.

Similarly, it is very important to plan for one’s retirement well in advance and not when we are just a few years away from it. It would be a wise to start planning for retirement at the peak of our career as this is when we can plan the best for our retirement.

Conclusion

“Chase your dreams, because dreams do come true.” Sachin retired from international cricket with these inspiring lines on November 16, 2013, leaving millions of fans in tears. Arguably the best batsman spanning two generations, this man has gone down in the annals of cricketing history not just as the player with the most records to his name, but also as the ambassador of the game, transcending boundaries that define countries, both that play cricket and the ones who don’t. He has inspired a whole generation of cricketers and taught us valuable lessons in financial planning which, if implemented with the same dedication and commitment that Sachin showed throughout his career, would be very beneficial to the common man as well to accumulate wealth.

(The author is Founder and CEO, ArthaYantra, an online financial planning firm)

Source : http://goo.gl/vVhmKX

ATM :: Don’t miss retirement goals for children’s higher education

It could mean having to prolong work life and putting money in risky investment options
Arvind Rao | April 25, 2015 Last Updated at 21:25 IST | Business Standard

ATM

It’s a dilemma several middle-aged parents grapple with. Two goals – retirement and saving for children’s higher education – but not enough funds to meet them. Parents would be tempted to compromise on the former to meet the latter. But with medical costs rising exponentially, this can’t be looked at as a viable solution. This could also mean extending their work life or taking greater investment risks closer to retirement.

The dilemma

Here’s a case study that shows how one can strike the right balance. Ajay and Varsha Sharma, aged 50 and 48 respectively, earn Rs 40 lakh annually, which is not enough to fund all of their major goals. They have to repay their existing home loan of about Rs 40 lakh in the next five years. The couple needs Rs 4.5 crore for retirement and Rs 70 lakh in the next 10 years to fund the higher education of their two children.

The family savings work out to about Rs 15 lakh a year. Their employment-linked retirement benefits and 1 BHK property investment is expected to fetch Rs 2.12 crore, or 45 per cent, of their retirement corpus. This leaves them with a gap of Rs 2.48 crore, or about 55 per cent of the total corpus.

To fund the gap, the Sharma’s can invest Rs 10 lakh per annum in a mix of diversified and mid-cap equity funds. Assuming annualised returns of 12 per cent, they should be able to garner Rs 2.48 crore over the next 12 years.

At the current EMI of Rs 54,000, their home loan outstanding at about Rs 40 lakh is projected to close at the end of 10 years. They aspire to accelerate the repayment and close the loan in four years. For this, they will have to accumulate at least Rs 6.50 lakh annually via monthly contributions in recurring deposits. At the end of every year, the accumulated amount should be used to prepay the loan.

The amount of Rs 70 lakh for higher education can be mopped up by investing about Rs 4.5 lakh per annum over the next 10 years in equity-oriented balanced funds, assuming annualised returns of 10 per cent.

With the current family savings, they are looking at a deficit of about Rs 6 lakh per annum, at least for the first five years.

Part-funding children’s education

The couple has decided to make a provision for up to 50 per cent of their children’s higher education budget by extending the period for their accelerated home loan. They can cut the savings rate for the repayment by 50 per cent to Rs 3.25 lakh a year, thereby extending the period for their home loan repayment to about six years. This way, their contribution for the education also comes down to about Rs 2 lakh and savings for all three goals fit within the family savings. The additional family savings at the end of the home loan period could be used to boost retirement savings or for their children’ marriages.

To accumulate the remaining 50 per cent of their education corpus, Sharma’s children can fall back on scholarships. They can also meet the expenses through education loan or loan against fixed deposits:

Education loan: Interest rates on these are 11-12.5 per cent, with tax benefits available under section 80E. A good retirement corpus, in the form of investments, will enable one of the parents to stand as guarantor/co-applicant for the loan. For loans above Rs 4 lakh, margin money, ranging between 15-20 per cent of the loan, may be required, which can be funded by the parents.

Loan against fixed deposits: Let’s assume the Sharma’s garner a corpus of about Rs 2.5 crore at the time of retirement, which they don’t fully need immediately. They could invest, say, Rs 25 lakh in a bank FD giving 8 per cent per annum and take an overdraft against the same for their children’s education. The rate of interest charged in case of overdraft will be 1-2 per cent higher than the FD interest rate. Even assuming a 10 per cent rate of interest, this option works out to be cheaper than an education loan, but the interest paid will be sans tax benefits under section 80E.

The parents can make the children responsible for repaying the overdraft with their earnings. This will enable them to get their fixed deposit back along with the accumulated interest, which can then be utilised for their retirement. The Sharma’s should avoid loans against property as the EMI would be calculated only for their balance working years, which could mean a bigger outgo per month, plus no tax benefits on the interest paid thereon.

Funding education completely

In case the Sharma’s decide to fund 100 per cent of their children’s education and continue with the six-year home-loan closure plan, they would need to set aside Rs 7.5 lakh per annum and work for two more years to fund their retirement corpus. The Sharma’s may have to invest more aggressively, allocating as much as 75 per cent of their savings in a mix of equity mid- and small-cap and sectoral funds, and the remaining 25 per cent in balanced funds to achieve an 18 per cent growth rate and retire within the next 12 years. This strategy, however, may expose the Sharma’s to a bigger risk of not achieving their target corpus within the available time frame if the equity market do not deliver good results. Considering these risks, it is definitely better for them to part-fund their children’s education needs and not compromise on their retirement goals.
The writer is a chartered accountant

Source : http://goo.gl/lNXl7d

ATM :: Living with parents? Best time to save

Gaurav Mashruwala, TNN | Apr 25, 2015, 07.08AM IST | Times of India

ATM

Mohit Khullar (31) lives with his wife Manika (28) in Haryana. He was born and brought up in Punjab. They have a two-year-old daughter, Ashwika. Mohit is an electrical engineer and currently works in the private sector while Manika is a homemaker.

What is the couple saving for?

They want to purchase a house worth Rs 45 lakh two years later as an investment. Rs 50,000 for Ashwika’s education two years from now. A corpus of Rs 15 Lakh after 24 years for Ashwika’s marriage. For their retirement, the couple wants Rs 1 core after 30 years. Apart from these goals, they also wish to own a luxury car worth Rs 10 lakh after four years and go on foreign travel.

The costs will be revised based on inflation.

Where are they today?

Cash flow: The gross annual inflow from all sources is Rs 12.48 lakh against an outflow of Rs 8.05 lakh. The outflow includes routine household expenses, taxes, insurance premium and contribution to provident fund

Net worth: The market value of all assets owned by the couple is Rs 21.31 lakh. Out of this, Rs 3 lakh is for personal consumption in the form of car. The rest are investments. They do not have any liability as of now. The house that they are living in is owned by Mohit’s parents.

Contingency fund: Against the mandatory monthly expenses of Rs 44,000, balance in savings bank and FD together amounts to Rs 2.80 lakh. This is equivalent to 6 months’ reserve.

Health & life insurance: There is a Rs 3 lakh health cover provided by employer for the entire family. Total life insurance of Mohit is Rs 40 lakh, out of which Rs 30-lakh cover is provided by the employer.

Savings & investment: Assets for savings and investment include Rs 2 lakh in savings bank, Rs 80,000 in bank FD, Rs 4 lakh in direct equity, Rs 50,000 in bonds, Rs 86,000 in a provident fund and Rs 15,000 in post-office schemes.

Fiscal analysis:

The couple’s rate of savings is good. The balance in savings bank should be reduced and they must enhance health and life cover. Most assets are investment-oriented because they are living in their parental house.

The way ahead

Contingency fund: Their three months’ mandatory expense reserve should be around Rs 1.30 lakh. Of this, they should keep about Rs 30,000 in form of cash at home and the rest in savings bank account linked to a fixed deposit.

Health & life cover: Mohit and Manika should have a health cover of Rs 5 lakh each and Rs 3 lakh for their daughter. Considering Mohit is single earning member of the family, he should opt for a life cover of Rs 1 crore for now and increase to another Rs 1 crore in next four to five. All these policies should be in form of term plans.

Planning for financial goals

Home buying: Since they do not need a house for staying, they should defer this goal for another decade. This is keeping in mind the fact that there is lack of funds currently and overall portfolio will get skewed in favour of illiquid, immovable, indivisible asset if they purchase a new house now.

Daughter’s education: They should invest Rs 2,500 every month in recurring deposit.

Daughter’s marriage: The should start an SIP of Rs 3,000 in and equity based mutual fund and another Rs 2,000 in a gold fund and increase the amount by 15% every year.

Retirement planning: Invest Rs 7,500 each in three equity mutual fund schemes: Large-cap fund, mid-small cap fund and an international equity fund every month — increase the amount by 10% every year.

Foreign travel: Set aside funds from regular income to fund the trip.

Luxury Car: Defer this goal for a few years.

Planners Eye

Young couples with clear goals, humble expenses, high savings rate and living with parents. For them these are golden wealth creation years. If they stay focused like this for another 5/7 years, they will be on massive wealth creation trajectory. Usually it just requires about a decade of frugality in entire career to create wealth. If that is done during initial period of life it is more beneficial.

Source : http://goo.gl/d3PWVT

ATM :: Yearly bonus can help create long-term wealth

TNN | Apr 7, 2015, 06.55AM IST | Times of India
ATM
It’s the start of the financial year 2015-16. This is also the time when every investor should put in place a plan for investing and saving on taxes using all the options that the government has given to them. However, according to financial planners and advisors, while putting in place a long-term financial plan, the main aim should not be tax savings. The main aim should be to build the required corpus for the goal for which you are investing. Here are some tricks that will help you build wealth in the long run without much thought…

Use your bonus wisely

This is the time lot of people get a bonus. According to top of ficials at mutual fund houses and financial advisors, rather than spending on things that may not be an absolute necessity, you can invest the whole or a major part of the bonus in an equity mutual fund. Let us assume that you get a bonus of Rs 3 lakh this year and you put the whole amount in an equity mutual fund.

Now let us also assume that every year your bonus increases by 10% while the equity fund you are investing in, over a 10 year period, gives you a return of 12% per annum.At the start of the second year, your bonus is Rs 3.3 lakh and at the start of the third year it is at about Rs 3.6 lakh. At this rate, at the start of the 10th year, your yearly bonus will be about Rs 5.7 lakh. But if you have invested your yearly bonus every year in the equity fund that gave an annual return of 12%, your total corpus at the end of the 10th year will be a little over Rs 80 lakh. This looks like a staggering amount, but there is no magic in it.

Make good use of ELSS

According to financial planners and advisers, equity-linked savings plans (ELSS) floated by mutual fund houses are one of the best tax saving options for investors. This is because in the long term they have the potential to generate an average annual return of 12%, saves on taxes under section 80C of Income Tax Act and has a lock-in of just three years.

The returns from all ELSS are also tax free while the costs are around 2.5% per annum, one of the lowest for similar products. In comparison, most of the other tax-saving options cannot generate as high a return, costs are higher and returns are taxed on redemption. A combination of some of these factors makes such products unattractive in comparison to ELSS. So suppose after taking care of your contributions to provident fund, home loans, etc, you are still left with about Rs 60,000 to invest to save taxes under section 80C, go for one or more SIPs aggregating Rs 5,000 per month so that your yearly contribution is Rs 60,000.At about 12% average annual return, in 10 years, this can grow to be a Rs 11.6 lakh corpus.

Use excess cash intelligently

If you keep your excess cash that you need at a short notice, you probably keep it in your savings bank account. However, a better alternative is to keep it in a liquid fund of a good mutual fund house. Compared to 4-6% annual return that you can get in your savings bank account, liquid funds on an average has given a return of over 7.5% in the last five years while some of the best liquid schemes have returned over 8.6%. This higher return comes at a slightly higher risk and slightly less liquidity , that is about 24 hours, compared to money at call in case of savings bank accounts. So, if you can manage your cash inflows and outflows well, you can put your extra money in liquid schemes and earn much higher returns. There’s alternative to FDs Fixed maturity plans (FMPs) are a good alternative to fixed deposits (FDs). If you are keeping your money in FDs for three years or more, FMPs of similar maturities can give you a much better return as FMPs enjoy long-term capital gains tax advantages if the money is kept for more than three years. FDs do not enjoy similar benefits.

Source : http://goo.gl/KowGgd

ATM :: 4 ways to use Credit card rewards for vacationing!

Rajiv Raj | Apr 7, 2015, 05.14 PM | Business Insider
ATM
The temperatures are soaring and mangoes have made an appearance in the market place. Summer is officially here. It’s time to pull out the large hat, put on those shades, pack that bag and head to some cooler place. If the hot summer sun isn’t an excuse enough, then well your credit card rewards definitely are! Make the most of summer and your reward points while planning your vacation this time around.

If you do not own a credit card currently, don’t worry. Reading this article will help you decide which one you need to apply for to avail maximum benefits as per your lifestyle. However, one must keep a track of the CIBIL score and work on maintaining a satisfactory score. The reason being, credit card companies do factor in the data in your CIBIL report and check your CIBIL score while issuing credit cards. Using a credit card regularly and smartly helps accumulate reward points which can be planned and used resulting in direct savings! Vacations are a great opportunity to reap the benefits of reward points as well accumulate further points. Let’s see how that works.

1. Signing up is a good idea sirji!
If you are indeed considering signing up for the credit card and availing benefits during this year’s summer vacation, it is a bit late. But, it is never too late to join the party. While it would have been ideal if reward points were accumulated by now, there are few credit cards which offer miles, points or hotel stays while signing up. For example, the Standard Chartered Emirates Platinum Credit Card offers 27,500 bonus skyward miles on enrollment. Air accident insurance is complimentary with this card, which is worth Rs 10 million. If you fancy airport lounges, then priority pass for over 600 lounges comes with this card. Benefits from some cards can actually translate in getting a ticket or two free! For example signing up for the Jet Privilege HDFC Bank World credit card can waive off the base fare for one domestic Jet Airways ticket. Also, they offer 10,000 bonus jpmiles as welcome benefit. The New American Express MakemyTrip credit card is offering welcome vouchers worth Rs 9,000 that can be redeemed on the travel website. What’s not to love? A joining fee may be charged while signing up for a credit card. However, many companies are now waiving that charge if customers sign up online. Do check on that while you sign up for a credit card.

2. Reward yourself wisely
Gaining reward points is not enough. One needs to plan wisely for spending the reward points to gain maximum benefits. After you have a vacation plan ready, decide which parts of the vacation you would like to cover using the reward points. Broadly it is divided into travel fare, hotel stays and dining out. Now assuming you decide to book the flights using your credit card. Check on how many miles would it take to avail the reward. While doing so, don’t ignore the airline service and other things which can potentially spoil your vacation mood. For booking stays, check on the properties around your vacation spot. Once shortlisted check on how many points would it take to book the stay reward. It is difficult to cover the entire vacation expense through reward benefits. But using it wisely will definitely help in saving a handsome sum of money.

3. Let the card pay for luxury
If you believe in travelling with style and living life king size, then there are a couple of credit cards that will interest you. For example, the Citi Prestige credit card gives away vouchers worth Rs 10,000 from the Taj group or ITC hotels every year. Complimentary stays at exquisite properties around the world and benefits from an elevated status on the loyalty programs of global partner’s opens doors to special treatment and additional luxury. Bonus airmiles and unlimited complimentary priority pass lounge access at over 700 airports are among the other benefits. Premium cards like these do come with an annual membership fee, which is slightly on the higher side. The Citi Prestige credit card annual fee is Rs 20,000. If luxury is on your mind, then the card member ship fee is comparatively a small price to pay.

4. Make your trip, make your choice
Rewards earned can be maximized by choosing the right credit card to pay for your travels. For example Air India SBI Signature card can enable you to earn up to 1,30,000 Air Miles every year. 20 Air Miles for every Rs 100 spent on Air India tickets. Whereas, HDFC Banks All Miles credit card offers 3 reward points per Rs 150. While the former charges an annual fee of Rs 5,000 plus taxes, the latter is life time free if applied through website. Foreign transaction charges are another factor to be considered before spending, if you are on a holiday abroad. Credit card companies charge anywhere between 2.5% to 3.5% of the total transaction amount as foreign transaction charges. Look out for credit cards, which do not impose these charges or go with the one with minimum charges.

While reward benefits definitely help you make a choice, other factors like travel insurance benefits, travel accident insurance, lost baggage insurance, etc. must also be considered. With so many credit card options available in the market to choose from, one must not ignore the importance of maintaining a credible CIBIL score so that availing the best credit card option becomes a cake walk. With so many benefits listed, using a credit card is a lucrative option. Needless to say spending wisely and repaying responsibly is very important to continue saving and availing amazing offers in the future as well. Happy vacations!

About the author: Rajiv Raj is the director and co-founder ofwww.creditvidya.com.

Source : http://goo.gl/J7aD31

ATM :: Warren Buffett’s Success: What You Can Learn From it

Creditvidya.com | Updated On: March 28, 2015 17:56 (IST) | NDTV Profit
ATM
Warren Buffett is undeniably the most successful investor in history. His success is attributed by some to his sharp acumen and understanding of business while others call it luck. Numerous books have been written in an attempt to analyse the factors behind his extraordinary success. However, replicating similar results is no cakewalk.

Success at Mr Buffett’s rate is not a result of following a set formula. It was a continuous process which was followed. Discipline, perseverance and effective execution play a pivotal role in his success story.

Here’s a list of key factors which led to Warren Buffett’s coveted success:

Chalk up a plan

While making an investment, it is important to set a goal. Invest in value and be patient. Quoting Buffett’s famous words, “The stock market is a device for transferring money from the impatient to the patient.” So once your homework is done and a choice is made, stick to your plan.

Invest in value

“Price is what you pay, value is what you get,” Mr Buffett has said. Whether it is going in for an investment or making any other purchase, these words ring true. Looking for value is the underlying principal to be followed.

‘Plough back’ to reap benefits

Retain the earnings and invest them back into the business. The idea is to make the business grow and sustain. If earnings are taken home as dividends from a flourishing business, it does not help the very business which helps your earn and grow. Dividends are popular but they shouldn’t be the only thing one must have an eye on. It is important to track the utilisation of funds back into the business to continue growing.

Strategize and execute

When it comes to investments, figure out the cash in hand and the fixed income sources you may invest in. The returns must be enough to sustain your current lifestyle. After this is sorted, money can be invested in other options which have a possibility of high returns against high risk. The strategy adopted must ensure that investment options are balanced. As Mr Buffett has said, do not put all your eggs in the same basket.

‘Time is money’ and has to be managed accordingly

Warren Buffett has said: “The rich invest in time and the poor invest in money.” Time indeed is one commodity equally distributed to everybody. Tasks which were not related to his investment process were either delegated or eliminated. Time and energy spent on trivial tasks can be channelised on the ones topping the priority list.

Develop managerial skills

A manager sets goals for the team and drives them to achieve the goals. Keeping the team motivated, providing appropriate financial incentives and addressing any other concerns to the team’s satisfaction are few things one’s where managerial skills are put to the test. Not everybody is born as a good manager, but these skills can definitely be developed.

Learn, read, think

Warren Buffett has said investing in self is the best thing one can do. Nobody can take away talent from a person. Irrespective of economic conditions, talent will always fetch proportionate returns. The value does not deteriorate. Hence, it is important to invest in developing one’s skills. Staying updated helps one make intelligent decisions. In Mr Buffett’s wise words: “You can’t reach success in investment if you do not think independently.”

Everyday advice

Create more than one source of income. Do not depend on your job alone. Make investments to create a second source of income. Think twice before buying anything. Retail therapy does not really help in the long run. If one continues to buy things that are not needed, there will be a stretch situation someday for making necessary purchases.

Investment advice

Diversify the portfolio. It is important to balance investments on basis of fixed income, returns and risks. Also, tread cautiously while taking risks. In Mr Buffett’s words: “Never test the depth of river with both feet.” This means you should only invest in the businesses you understand completely.

Be your own adviser

Many people make investment decisions based on other people’s opinions. This kind of an investment is the most risky investment irrespective of the option chosen here. The investment option chosen by a friend may be best suited for his/her lifestyle and future plans. But that does not necessarily make that option a good fit for you. So think for yourself, seek clarity on your goals and then make a wise investment choice. Like Mr Buffett has said, “A public-opinion poll is no substitute for thought.”

These rules inspired by Mr Buffett should help you in making your money-related choices. There are two golden rules quotes by Mr Buffett: “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”

Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.

Source : http://goo.gl/i9zdpt

ATM :: PPF Account Offers Loan Facility: 10 Things to Know

NDTV Profit | Updated On: March 30, 2015 17:18 (IST)
ATM
Public provident fund (PPF) is among the most popular investment options for long-term savings. Deposits made under PPF also qualify for tax benefits. PPF subscribers can also avail loan benefits against their deposits.

10 Things to Know About the Loan Facility

1) A PPF subscriber can avail loan between the third and sixth financial year of opening the account. For example, if the account was opened in the 2011-12, a subscriber can take a loan between 2014-15 and 2017-18. PPF accounts follow an April-March year cycle.

2) The amount is restricted to 25 per cent of the balance at the end of the second year preceding the year in which the loan is applied for. For example, if the loan was applied in 2015-16, 25 per cent of the account balance at the end of 2013-14 can be taken as loan.

3) However, no loan can be taken from the seventh year of opening the PPF account, as it qualifies for partial withdrawal.

4) The loan (principal) is repayable either in lump sum or in installments within 36 months.

5) The interest portion of the loan has to be repaid by two monthly installments after the principal is paid off.

6) Interest is charged at 2 per cent more than a subscriber receives on the PPF.

7) Meanwhile, the balance amount in the PPF account accumulates interest.

8) If the loan is not repaid within 36 months, interest at 6 per cent more than what subscribers receive on their deposits is charged.

9) The interest on outstanding loan which has not been paid before 36 months or paid partly will be debited from the subscriber’s account at the end of each financial year.

10) A second loan can be taken on full payment of first loan.

Disclaimer: “Investors are advised to make their own assessment before acting on the information.”

Source : http://goo.gl/CW18a2

ATM :: Use mutual funds to diversify with small amounts

TNN | Mar 23, 2015, 03.17PM IST | Times of India
ATM
Investors and even some of the financial advisers often talk of a mutual fund as an investment product, as if that is an asset class in itself. They hardly realize the fact that mutual fund schemes are actually tools to invest in several other asset classes. So on a standalone basis, a mutual fund scheme is never an asset class.

For example, shares are an asset class. So are bonds, gold, real estate, commodities, etc. Now if you want to invest in shares, you can directly invest in the market through a broker and after opening a demat account. An almost similar process is followed if you want to invest in bonds and commodities. And different approaches are taken when one wants to invest in gold or property.

While investing in stocks, rather than investing directly through a broker, you can also invest through the mutual fund route by buying units of equity mutual funds.

Similarly, to invest in bonds and other debt instruments, you can buy units of debt funds, and for gold you can buy into gold funds or gold exchange traded funds (ETFs). Even if you want the liquidity that cash offers, you can avail of the same by investing in liquid funds or ultra short-term funds. Although not yet available in India, but in most of the developed countries you can also invest in real estate and commodities through the mutual fund route.

So you can see that a mutual fund scheme can work as a bridge to investing in various asset classes. This is because such a scheme is more like a pass-through vehicle for your investment in an asset class, but that scheme itself is not an independent asset. This characteristic also brings in flexibility for investor to diversify even with a small amount of money. “Mutual funds offer simplicity, affordability, risk diversification along with professional management,” says Sanjay Mehta, associate financial planner, Sanjay Mehta Financial Services.

In short, according to Mehta, for cash you can use liquid and/or ultra short-term funds which are very close to bank deposits. For investing in debt, you can use medium- and long-term debt funds, income funds or fixed maturity plans. They give you a steady income and tax efficiency too. For investing in gold, you can go through a gold fund of funds or take the ETF route. And for investing in stocks, depending upon your risk-taking ability, you can invest in diversified equity funds, or large-, mid- or a small-cap fund and also in sectoral funds or index ETFs.

Financial planners and advisers also say that other than just being an investment vehicle, mutual funds also offer a variety and choice to investors. As an investor, one can choose to invest his/ her money in funds from over thousands of funds managed by about 40 fund houses. “When an investor chooses to go with equities, he/she can opt for a growth fund or a value fund or even a fund which combines both. For those who prefer dividends, he/she can select income funds. The opportunities are limitless,” says a financial planner.

One can also use mutual fund schemes for asset allocation. For example, allocation funds include equity funds and debt funds simultaneously by investing in equity and fixed income instruments in different proportions. And since Indian investors have a fascination for gold, fund houses have smartly tapped into this long-standing fascination by introducing funds that can simultaneously invest in equity, fixed income and gold (via the ETF route), the financial planner added. Although here the fund manager decides in what proportion the allocations would be made to various assets while remaining within the broad contours of the scheme, “in effect, such funds are a one-stop shop for asset allocation”, the financial planner says.

The last but not the least is the tax efficiency that mutual funds offer. If one invests in debt instruments directly, he/ she may not enjoy all the tax benefits that can (indirectly) come to him/her if he/she takes the mutual fund route. In equity funds, however, the scope for tax advantage is limited compared to direct investing.

Source : http://goo.gl/bzbkl3

ATM :: Best ways to invest for your child’s education

Sanjay Kumar Singh, TNN | Feb 2, 2015, 06.42AM IST | Times of India
ATM
Inflation may be down but a major expense of the average Indian household is growing at a fast clip. The cost of higher education is already high and rising at 10-12% a year. Children’s education is one of the biggest cash outflows that families must plan for. A four-year engineering course costs roughly `6 lakh right now.In six years, the cost is likely to touch `12 lakh. By 2027, it would cost `24 lakh to get an engineering degree.

Lifestyle inflation, too, has affected the cost of children’s education. “As your standard of living rises, it affects the decision about where you send your children for higher education,” says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

The question worrying Indian parents is: will they be able to fund their children’s higher education? They can, if they plan ahead and take the right steps. We look at the challenges parents face while saving for their child’s education and how they can be overcome.

Be an early bird

One obvious solution is to start saving early. The individual will not only be able to amass a larger sum, but the money will also gain from the power of compounding. A corpus of `1 crore may seem daunting, but it’s possible to save this amount with an SIP of `9,000 for 18 years in an equity fund that gives a 15% return. “Since the rate of education inflation is so high, you need compounding to work for you over a longer period,” says Vidya Bala, Head of Research at Fundsindia.com.

A delayed start not only yields a smaller corpus but can also jeopardise other financial goals. If you start investing for your child’s education in your 40s, you are likely to fall short of the required amount. Often, parents dip into their retirement savings to fill the gap, but this can be a risky move.

Choose the right option

Parents must also invest right to get optimum resturns. Equity mutual funds, for instance, have delivered average annualised returns of 16.5% in the past 10 years. However, equity investment is not everybody’s cup of tea. This year’s DSP BlackRock Investor Pulse survey shows that though Indians have a high propensity to save and invest, they still seek safety. Almost 52% of the 1,500 respondents said they wanted guaranteed returns from investments.

However, if you have 15-18 years left before your child starts college, equity funds should be the preferred invest ment for you. Over such a long period, the volatility in returns is flattened out.If you have the risk appetite, your allocation to equities can be as high as 75%. The balance 25-30% of the portfolio can be in safer options like the PPF, bank deposits and tax-free bonds.

Play it safe in the short term

If you have a time horizon of less than five years, you will have to rely primarily on fixed income instruments, which are likely to offer a lower rate of return. However, these offer guaranteed returns and safety of capital. In the short term, these factors become very important.

Investment Options Available
How much time you have will define your investments and asset allocation
Age of Child Time Available Instruments to choose from Cost of Education Investment Required
0 – 2 years Over 15 years 1. Diversified Equity Funds 2. Low cost ULIPS 3. Stocks MBA Degree to cost 75lacs in 2033 SIP of 9800 in equity fund will grow to 75lacs
3 – 6 years 12 – 15 years 1. Diversified Equity Funds 2. Low cost ULIPS 3. Stocks Medical course to cost 35lacs in 2030 SIP of 7550 in equity fund will grow to 38lacs
7 – 10 years 8 – 11 years 1. Diversified Equity Funds 2. Equity oriented balanced funds 3. Debt Oriented balanced funds Law degree to cost 9.3lacs in 2023 SIP of 6300 in balanced fund will grow to 9.3lacs
11 – 14 years 4 – 7 years 1. Debt Oriented balanced funds 2. Debt funds 3. Recurring Deposit Engineering course to cost 8.8lacs in 2020 Recurring Deposit of 11600 in balanced fund will grow to 8.8lacs
Over 15 years Less than 3 years 1. Recurring Deposits 2. Debt funds 3. MIP funds MBA Degree to cost 20lacs in 2018 SIP of 48500 in debt fund will grow to 9.3lacs

Review the portfolio

Once your portfolio is in place, you need to review it at least once a year.You should also check whether the amount required for meeting the goal has changed. “Education goal has two components: tuition fee and cost of living. Any of these could rise faster than anticipated. You need to find out whether the 12% inflation rate that you have assumed is realistic,” says Dhawan.

Next, check whether your portfolio is on track to meet the goal. Bala suggests using step-up SIPs. “Raise the amount invested in line with your salary increments,” she suggests.

If a fund is lagging, do not sell it immediately. Stop your SIP in that fund and start it in another better performing fund. Watch the performance of the laggard for 3-4 quarters and only then decide to sell it. Rebalance your portfolio at the end of each year. Rebalancing essentially entails selling an outperforming asset and investing the proceeds in one that is underperforming. By doing so, you curtail the risk that your portfolio could face due to over-exposure to a particular asset class.

Approaching the goal The investment process is never static.We have suggested equity funds for those with an investment horizon of over 12-15 years. However, five years before your goal, you should start shifting money out of equities to the safety of debt. Start a systematic transfer plan from your equity fund to a short-term debt fund (average maturity of 1-3 years).

Keep in mind that the date of your child’s admission to college is fixed.You can’t let a downturn in the stock markets jeopardize your child’s college education.

Source : http://goo.gl/RnnnlC

ATM :: Investing lessons from the Delhi poll results

By Babar Zaidi, ET Bureau | 14 Feb, 2015, 10.03AM IST | Economic Times
ATM
Electoral politics and personal finance may be poles apart, but Tuesday’s black swan events held out important lessons for investors. Here are six key takeways from the Delhi polls that could make you a better investor.

1. Past performance is not an indication of the future

The biggest lesson is that past performance is no indication how an investment (or political party) will do in future. The BJP did not gauge the mood of the people and firmly believed that its performance in the 2014 Lok Sabha and assembly polls will be repeated in Delhi in 2015. Similarly, don’t expect investments to do a replay of their past performance.

2. Knee-jerk changes in strategy can prove detrimental

The BJP has traditionally been a cadre based party. But by inducting Kiran Bedi just weeks before the elections and making her the chief ministerial candidate caused dissonance in the party. Don’t make fundamental changes in your investment portfolio on the basis of gut feel. Make a strategic shift only if there are solid reasons for doing so.

3. Ascertain cause of loss and take corrective action

For the BJP, the debacle in Delhi calls for a serious analysis and corrective action. The party needs to pin responsibility and rethink its strategy for the coming elections. Likewise, you need to review your investment portfolio and throw out the underperformers. Continuing with loss-making funds or poor quality stocks will only drag down your overall returns.

4. Start-ups are risky but can yield very high returns

Apple Inc, the world’s largest company by market capitalization, was born in a garage in 1976. Similarly, nobody outside the National Capital Region had heard of the Aam Aadmi Party (AAP) till two years ago. On Tuesday, it became world famous. Start-ups may be risky but they also have the greatest potential. Chose a good company and it can transform your portfolio. Pick a dud and your investment goes down the drain.

5. If you fail to plan, you plan to fail

The worst performance was that of the Congress. The party high command was clueless while the ranks were in a disarray. The election campaign was poorly planned. It’s almost as if nobody really wanted the party to win. Unplanned portfolios with random investments will yield the same results. When you make an investment, make sure that it is for a specific financial goal.

6. Don’t get carried away by unrealistic promises

Finally, a word of caution about promises. The AAP has promised cheap power and water, schools and hospitals to Delhiites but might not be able to keep many of these electoral promises. You should also not get carried away by the rosy picture painted by a salesman or agent. Read the offer document carefully before signing on the dotted line (or pressing the EVM button).

Source : http://goo.gl/uCQH00

ATM :: 4 Lessons Rahul Dravid Can Teach You About Investing

Sanjay Pranesh and Ambhareeson Udhayakumar | Scripbox.com
ATM
In early October of 2013, one of India’s go-to cricketer and last classic test match batsman – Rahul Dravid, played his last match in international cricket. As a classic test batsman with phenomenal technique, Dravid is one of the few batsmen who have been able to score over 10,000 runs. The aspect that drove Dravid’s performance and style was technical excellence coupled with his mental toughness and emotional restraint especially during troubled times.

There are many similarities between Dravid’s approach to cricket, and the approach taken by smart investors who build long term wealth.

#1: It pays to remain patient

During the 4th ODI of West Indies tour of India in the year 2002, Rahul Dravid chased down a high target of 325 set by West Indies by scoring an unbeaten century. A composed knock which included just 8 boundaries and no sixes and rarely a shot misplaced or a mishit which would have cost him his wicket.

Another element of Dravid’s skilful play was that of tiring out the opponent; several bowlers have remarked that Dravid frustrates the best of the bowlers by not doing anything entertaining and skilfully defending ball after ball after ball.

For investors, our opponents are largely volatility in the equity markets and time. Both of them put together are like a perfect mix of pace bowlers and spinners rarely giving loose balls in the beginning of the game. As the game progresses, we need to tire out their arms and let the heat of the pitch get to them. The only way to beat them is to use Dravid’s strategy of being patient and stomach the volatility over the longer term. With patience, Dravid was able to establish himself in the team as a ‘must-have’ in both formats of the game. Similarly, with patience, time becomes the friend of the investor and returns start kicking in.

#2: Be consistent

At the start of Dravid’s ODI career, his batting average did not cross single digits for quite a while. If the selectors had written him off from the shorter version of the game, India would have lost a world class middle order batsman.

Dravid took almost 10 matches to score his first half-century and 33 matches to score his first ever century. In fact Dravid has scored only 12 centuries in a career spanning over a decade in the ODIs but what mattered most was the consistency in which he scored his runs that saw him retire with a batting average of 39.16.

This teaches us investors the most important lesson in investing. Invest regularly no matter how small the amount. While a few bulk investments,like the 12 centuries of Dravid, will help you raise your numbers, it is the small, regular monthly investments that help you grow your money over the long term.

#3: When it comes to investments, think logical- not emotional

Throughout Dravid’s career, he has displayed immense emotional restraint and mental toughness which has aided him to bat well in tough situations.

Circa 2001, Calcutta. It is one thing to chase a total of 446 that the Aussies set and it is completely another thing to end up winning the match against the Aussies after being all-out for 171 in the first innings. Such was the adversity that VVS Laxman and Dravid faced on that day when the match would have been easily written off favouring the Australians after the first innings collapse. But it wasn’t over for Dravid and VVS; the resilience they displayed on the pitch for the next 2 days took us to a lead of 384 runs which was successfully defended with an excellent bowling performance by Harbhajan singh.

As investors we also see tough situations during which we would also need to display emotional restraint while keeping in mind the eventual goal of investing. For example, in between July and August 2013, we saw India’s benchmark equity index fall from just a shade over 6,000 points to nearly 5,400 points in one month.

While the fundamental story and growth outlook for India had not changed, much of the fall was on account of panic selling due to global factors. In the subsequent months the Nifty bounced back. If investors lacked emotional restraint during turbulent times, they would have participated in the panic selling and eventually lost out on the potential gains that could have been made.

#4: Future is unpredictable; but that’s OK

Back in 1996, when Dravid started his international playing career, no one, including Dravid himself, would have ever imagined that he would end up scoring more than 10,000 runs in both forms of Cricket. Thanks to his unbreakable resilience, patience and determination that Dravid not only passed the 5-digit mark in both Test and ODI cricket, he also gave us a lot of moments to cheer about as fans of Cricket.

Like Dravid, you would never know at the start of investing that how much you are going to make after a long spell of 7 years. But with patience and discipline by your side your investments might turn out into a hugely successful one like Dravid’s career.

Source : http://goo.gl/Zumdqi