Tagged: Financial Plan

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


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


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.


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.


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 rishabhparakh@moneyplantconsulting.net.

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


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


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


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