Most individuals are confused as to how to plan their finances. Especially when it comes to investment, one is torn between investing in real estate, Gold, Stocks, Mutual Funds or go traditional by opting for fixed deposits. We normally go by the advice of our friends, relatives or any acquaintance. Now predicting your returns on these investments are purely speculative and your success in each of these depends on how well you understand the industry, market and potential.

For the sake of argument, let us look at Mutual Fund investments in the long term, assuming that the return on investment is going to be 15%..  Ideally you should start investing from your first job itself to take advantage of the power of compounding. A small investment of Rs.1000/month over 10 years can get you 2.75 Lakhs, over 15 – 6.7 Lakhs, over 20 – 15 Lakhs and so on and so forth. So you can see that the longer you stay invested, the better your returns are. This is possible due to the power of compounding.

Let’s say a certain Mr. Singh lands his first job at 20 years and starts a SIP of Rs. 2,000 for 5 years. This would potentially earn him 1.75 Lakhs at maturity, which can easily fund the down payment for his first car. Similarly if he continues to invest a systematically throughout his professional life, he will be able to retire into a financially independent life.

Looking at the chart below listing the investment plan and expected return, you can see how much a small investment of Rs, 5,000/month can get you over a 25 year period. A whopping Rs. 1.6 Crore.   

Life Stage

Age

Purpose

SIP Amount

Period (Yrs)

Expected ROI

Total Investment

Maturity Amount

Job

20

Car

2,000

5

15

120,000

175,000

Settled

25

House

5,000

10

15

600,000

1,375,000

Family

30

Graduation

3,000

15

15

540,000

2,000,000

30

Higher Education

3,000

20

15

720,000

4,500,000

30

Child's Marriage

2,000

25

15

600,000

6,500,000

35

Pension Corpus

5,000

25

15

1,500,000

16,000,000

 

Total

 

4,080,000

30,550,000

You can see that by calibrating your investments at each of your life stage can go a long way in meeting your financial goals. Let’s take a look at his returns and what life event it was used for.

@ 25 Years – Rs. 1.75 Lakhs as down payment for Car

@ 35 Years – Rs. 13.75 Lakhs as down payment for House

@ 45 Years – Rs. 20 Lakhs for child’s Graduation

@ 50 Years – Rs. 45 Lakhs for child’s higher studies

@55 Years – Rs. 65 Lakhs for child’s Marriage

@ 60 Years – Rs. 1.6 Crore Retirement Corpus

And how much did he invest in all – little more than Rs. 40 Lakhs over a 40 year period.

So contact your financial advisor today and sign up for a SIP. A small investment today can set you on the path towards a fulfilling and financially free retired life.

Disclaimer: Mutual Fund Investments are subject to market risks. Read the offer document carefully before investing.

 

Leading Indian stock broking firms Karvy and Kedia Securities feels Sensex will hit 100,000 by 2020 which is a jump of 3-4 times from the current level. This may sound a little farfetched, but let us look at the logic behind this prediction?

 

Ever since the Modi government took office in 2014, there has been talk of reducing red tapes and faster clearance for projects. Even though this is still a work in progress, there is a definite improvement in the ease of doing business. Now if the center goes ahead with the infrastructure projects as announced in the last budget, it would give a significant push to the economy improve overall business profitability.

 

It is a known fact that when profitability of companies go up, so does the share prices. Brokerage firms estimate a 20-25% surge in profit for companies year on year, which could fuel a 25% growth per annum in the Sensex value.

 

The 'Make in India' initiative is another initiative that can push up the economy significantly. With optimal resource allocation, India can be a manufacturing hub  in sectors like Automobiles & auto components, pharmaceutical, textiles, gems & jewelry, leather goods, IT hardware and solar power. The recent depreciation of rupee will also aid India in this quest.

Many people fall into a trap by taking a new loan to pay off other loans without considering the long  term impact. If you are struggling to make payments towards your existing loans, it's advisable to approach a firm providing Debt Consolidation services. Combining a number of unsecured loans into a single new loan that is more favorable is called Debt Consolidation.

The new loan may result in a lower interest rate, lower monthly payment or both. It can be used as a  tool to make it easier to get out of student loan debt, credit card debt and other types of debt that aren’t tied to an asset.

Points to Note

There are a couple of things consumers need to be careful about while opting for Debt Consolidation.

o   Interest Payments - By extending the loan term you can reduce your EMI, but you will end up paying more interest over the course of the loan because of the longer tenure.

o   Going for a Secured Loan - Though Mortgage or Home Equity Loans come at lower interest rates, you need to be cognizant of the fact that it will put your home at risk. Exercise caution before going this route.

o   Spending Habits - You are struggling to pay your EMIs, still your expenses remains the same. This is sure recipe for disaster. Cut down on the spending and start saving.

o   Professional Help - Rather than trying to consolidate debts yourself, take the help of an expert. They can guide you properly and help in negotiating a better rate as well as control the impact on your CIBIL score. 

Balance Transfer

Balance Transfer(BT) is a facility where in you transfer the balance outstanding on a loan or credit card to another bank at a lower interest rate. If used judiciously, it provides great savings. But the hard fact is that very few avail of it as not many are aware of the benefits.

Ideally doing BT during the initial stages of your repayment tenure is much more beneficial as you can take advantage of the lower interest rate for a longer period. Also individuals with bad credit ( low CIBIL scores) can save more by opting for BT once their CIBIL scores have improved. For e.g.: if you took a personal loan at 20% interest rate a year back and your CIBIL score has improved during this period, you may qualify for a BT at 14%; which is a cool 6% lower.

Some banks charge a foreclosure fee as a % of your outstanding principal balance, if you pre-pay your loan. The BT might entail some processing fee too. So this is an additional cost that you may incur while availing BT. So understand the exact cost of the BT and the total amount you will end up repaying; compare this against the total amount you will pay if you continue with the same loan.

The following are the typical steps in a Balance Transfer. Each lender's actual steps might vary depending upon their internal processes.

#1 Seek a foreclosure letter, statement of account and list of property documents from your current home finance company
  #2  Compare and choose a home finance company
  #3 Loan application, income and identity documents to be submitted to the new home finance company
  #4 Credit appraisal by the new lender, including field investigation and loan sanction 
  #5 Offer letter from new lender
  #6 Submission of legal documents and legal check
  #7 Technical and valuation check of the property
  #8 Signing of agreements and submission of post-dated cheques to new lender
  #9 Disbursement of loan favoring old lender

Here are some tips to help you while opting for Balance Transfer.

#1. Calculate whether it still makes economic sense to refinance; considering the fees and charges you might be forced to pay.

#2. Confirm with the new lender that the low rate is not a teaser rate that will be contractually raised after say 6 months or pre-determined minimum period. Read the fine print.

#3. Ensure that your paperwork is in order for the new lender, especially the property ownership papers, otherwise the disbursement can get delayed.

 

Financial Planning for Life Stages

 

Finance is generally considered a boring subject even though it plays a very important role in our life. Today with more and more families going nuclear, planning for your future has become all the more vital.

In the olden days, you must have seen our parents and grandparents toiling all their life to earn enough to buy a house. Now people who have been working for only a couple of years are buying homes. Your affordability have increased, but along with it comes the long term commitment to repay the loan. Spiraling prices and low job security means you can be in deep financial crisis unless you plan your finances astutely.

How to go about it?

As you traverse life, you go through various stages, events and you realize your priorities change too.  Similarly with Finance Planning. During the early stages of your career, your risk appetite will be higher and your investment goals can be aggressive. As responsibilities and/or liabilities increase, you become more conservative. Towards the end of your career your aim will be to fund your retired life and hence on Capital Protection.

Let us take a look at what to concentrate on across various life stages from a finance planning standpoint.

 

Needs

Life Stages

 

Single

Recently Married

Married with kids

Kids going to school

Higher studies for child, marriage

Golden years

Physical Asset Creation

High

High

High

Medium

Medium

Low

Wealth Creation

High

High

Medium

High

Medium

Low

Savings & Liquid Cash Needs

Low

Low

Medium

High

High

High

Short & Long Term Loans

Medium

High

High

High

High

Low

Life Insurance

Low

Medium

High

High

High

Low

Health Protection

Low

Medium

High

High

High

High

Personal Accident

Medium

Medium

High

High

High

Low

Critical illness

Low

Medium

High

High

High

Low

Retirement Planning

Low

Low

High

High

Medium

Low

Investment / GOALS Planning

Low

Medium

High

High

High

Low

Insurance Planning

Low

Medium

High

High

High

Low

WILL Writing & Estate Planning

Low

Low

Medium

High

High

High

 

 

#1. Earning Individual

Young, healthy, Low Liability with disposable Income. You can opt for Investments aimed at Physical Asset and Wealth Creation.

#2. Married

Recently married; might need to go for loans for housing, interiors etc... Time to think about securing Health, Life and Finances.

#3. Parenthood

Responsibilities are increasing;  seriously work towards a financially secure future.

#4. Kids' Schooling

Expenses are increasing; but don't forget to stick to your Investment Goals.

#5. Kid's Higher Education, Marriage

Biggest responsibility; lot of expenses. Will start seeing benefits of wise financial planning.

#6. Retired Life

No regular income; but your meticulous planning and structured finance management will let you enjoy your golden years in Peace.

 

 

So  what are you waiting for? Put this Mantra into practice and start planning towards a life of financial freedom.

 

It is the Tax season again and it is the time most of us would be looking for tax saving investments. It is ironic that every year we go through the same cycle, but still don't plan for our Taxes at the start of the financial year.

Anyways that is a theme for a different day; today let us look whether we are really taking advantage of the tax saving options that we have. Most of us normally avail only the tax saving options provided by our company like Home Loan Interest/Principal, HRA, Medical Insurance, Medical Reimbursement, LTA etc.. There is a lot more to it and you will be surprised to know that there are at least 10 more sections under which one can save tax.

Let us take a look at the sections for Tax Rebate for the Financial year 2015 - 2016.

 

Section

Limit

Description

24

Upto Rs. 2,00,000

Home Loan Interest Portion

80 C

Upto Rs.1,50,000

Life Insurance Premium

Mutual Fund ELSS Schemes

PF, PPF, NSCs

Home Loan Principal Portion

5 Yr Tax Saving FDs

80 CCD 1(B)

Upto Rs. 50,000

NPS

80 CCG

Upto Rs. 50,000

Investment under Rajiv Gandhi Equity Savings Scheme (RGESS)

80 D

Upto Rs. 25,000

Medical Insurance for Family

Upto Rs. 30,000

Medical Insurance for Parents

80 DD

Upto Rs. 1,25,000

Expenditure towards Medical Treatment/Training/Rehabilitation of Disabled dependants

80 DDB

Upto Rs. 40,000

Expense Incurred on Specific Disease

80 E

No Limit

Education Loan Interest Portion

80 G

50% - 100% of Amount Donated

Donations to Charitable Institutions

80 GG

Least of the following:
1) Rs. 2000 per month
2)  25% of total income
3)  Rent paid less 10% of total income

Rent Paid - Applicable to individuals who don't get HRA

80 GGC

All Contributions made to Political Parties

All assessee other than Indian Companies

80 TTA

Upto Rs. 10,000

Interest from Savings Accounts

80 RRB

Upto Rs. 3,00,000

Expendses towards Royalty on Patents

80 U

Upto Rs. 1,50,000

Allowed in case of Personal Disability

 

And you thought 80 C is all there is to it; isn't it? So go ahead and treat your family to a nice Dinner with the additional Tax savings you make. And please don't delay Tax planning to the last hour next year.

 

 

 

 

Today more and more customers are opting to buy financial products online. As per a recent study by Google, 18% of financial products in India are sold online. So why are people preferring to buy online? Here are the top 5 Reasons.

 

Transparency

 

Most Financial companies have great sources of information on their websites. This helps you understand the Product, Claims procedure as well as Terms and Conditions better. This also insures against information getting lost in translation when you pick a product based on an intermediary's advice. So basically you know what you are getting when you buy a product.

 

Economy

 

When you buy products online, the financial company saves money as they don't need to pay any intermediary. For Insurance products, this will also mean you get Higher Sum Assured. As more and more people start buying online, the products get cheaper and the customers benefit more.

 

Aggregators

 

Before deciding on a product, compare features, prices, fees across multiple products and providers. This helps you understand what is out there in the market and helps you choose the best product that suits your need. To save time, visit one of the websites that provide Aggregator services. They help you compare similar products from different financial institutions.

 

Faster TAT

 

Online purchase is much faster compared to traditional offline model. You understand the product, choose the best one and pay online. Few Aggregator websites also lets you upload documents/proofs so that you can manage your financial portfolio from the comforts of your home. No need to run to the Xerox shop or submit documents physically.

Balance Transfer is a facility offering the customer a choice to transfer the outstanding balance of the loan availed for better terms & conditions. Balance Transfer helps to move from higher rate of interest to lower rate of interest or increase in loan component as Top up. 

Why Transfer?

·         Are you paying more EMI/interest than others?

·         Do you need additional loan on the existing?

·         You want to alter your EMI amount or Loan Tenure?

·         Are you not satisfied with your existing bank for any other reason?   

If the answer to any of the above questions is Yes, then you may want to go for a Balance Transfer.

How much loan amount is borrowed?

Generally total balance transfer is sanctioned. The maximum loan that can be sanctioned varies among banks and housing finance companies. 

What is the fixed rate of interest?

Some HFC's have fixed rate of interest which means that the interest rates remain unchanged for the entire duration the loan. This basically means that you do not benefit, even if the rates of interest drop in the market. 

What is a floating rate of interest?

This is the rate of interest that fluctuates according to the market lending rate. 

What is the repayment tenure?

Repayment period options range generally from 5 to 20 years. 

How to select the cheapest home loan?

Keep the loan period constant and calculate the total amount paid for the home through the different loan options available.

Loan against Property (LAP) is more generally known as 'Home Equity Loan'. LAP is a secured loan. If you own residential or commercial property you could utilize the value of the same by opting for an equitable mortgage loan. 

LAP is opted for when the amount required is considerably more and cannot be raised by the means of unsecured loans and the repayment period is comparatively longer. In spite of the fact that the interest rate is higher than a conventional home loan, it’s typically cheaper than a loan against security or a personal loan. 

What is the difference between a Home Loan and LAP?

Home loan is taken only for the reason of buying a housing property while a LAP can be taken for any reason. This loan can be availed against Residential, Commercial or Industrial properties. 

What factors are considered for eligibility?

The universal factors taken into account to check the eligibility for LAP are: Income, Age(minimum 21 years), Property assessment, accessible liabilities(if any), Current work experience, monetary Documents, Number of dependants. 

How much amount can I take in LAP?                   

The bank provides around 70-80% value of your registered property. The bank takes into consideration other factors such as property type and value.

Can I avail an Overdraft against my Property?

A LAP can be availed as a Term Loan with EMI repayments or as a Drop line Overdraft Facility.

Does the property have to be insured?

Yes, the property has to be insured against flames, flood, earthquakes and other suitable hazards through the tenor of the loan. 

What are the interest rates? 

Interest rates on LAP range from 12 per cent to 16 per cent. 

What happens if the loan is not repaid? 

The Property can be repossessed by the lender to recover its outstanding loan amount. To allow recovery of the loan amount, courts can order foreclosure (sale in the open market to recover dues) of the property.

Mutual funds are a vehicle to mobilize money from investors, to invest in different markets and securities, in line with the investment objectives agreed upon, between the mutual fund and the investors.

Mutual fund investments are considered safe due to professional management, diversification, variety, liquidity, affordability, convenience, and ease of recordkeeping—as well as strict RBI regulation and full disclosure.

Popular Types of Mutual Funds in the Market are;

Diversified Funds: It is a category of funds that invest in a diverse mix of stocks/securities across sectors.

Equity Linked Savings Schemes (ELSS): Lock period of 3 years, tax benefits applicable.

Index Funds: To replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions.

Small, Mid & Large Cap Funds: Funds invested in different sized companies. Steady growth, capital appreciation is the key.

Sector Funds: Invested in sector-wise, less broad-based compared to diversification.

Balanced Funds: Invest & provide exposure in both equity and debt with the allocation based on the market views.

 

Here are 5 tips to help you invest in MFs smartly;

 

Why are you Investing?  - How much risk you can afford and stand? How much you need to invest initially and subsequently on a periodic basis (SIP) to meet your goals assuming a target rate of return that is consistent with your level of risk tolerance and a specific investment horizon?

Investment Scope & Evaluation - Decide on the set of assets that you will allocate your money to; consider all of the investing styles within each of the asset classes. Do a comparative analysis for the select MF list methodically. You can use some statistical evaluations, like risk-to-return, mean-variance, coefficient of variation based on the market cap and investing style.

Plan your budget - Investing whole-sum/part or incremental. Decide with the help of your financial advisor.

Buying Mutual Funds  - An investor can subscribe to the New Fund Offer (NFO) through ASBA facility. You have the options of buying from issuer, broker or online. The Fund may introduce other newer methods of application which will be notified as and when introduced.

Rebalancing and Portfolio Maintenance - Monitor Mutual funds are a vehicle to mobilize money from investors, to invest in different markets and securities, in line with the investment objectives agreed upon, between the mutual fund and the investors.

 

Mutual fund investments are considered safe due to professional management, diversification, variety, liquidity, affordability, convenience, and ease of recordkeeping—as well as strict RBI regulation and full disclosure.

 

Popular Types of Mutual Funds in the Market are;

 

Diversified Funds: It is a category of funds that invest in a diverse mix of stocks/securities across sectors.

Equity Linked Savings Schemes (ELSS): Lock period of 3 years, tax benefits applicable.

Index Funds: To replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions.

Small, Mid & Large Cap Funds: Funds invested in different sized companies. Steady growth, capital appreciation is the key.

Sector Funds: Invested in sector-wise, less broad-based compared to diversification.

Balanced Funds: Invest & provide exposure in both equity and debt with the allocation based on the the market views.

 

Here are 5 tips to help you invest in MFs smartly;

 

Why are you Investing?  - How much risk you can afford and stand? How much you need to invest initially and subsequently on a periodic basis (SIP) to meet your goals assuming a target rate of return that is consistent with your level of risk tolerance and a specific investment horizon?

Investment Scope & Evaluation - Decide on the set of assets that you will allocate your money to; consider all of the investing styles within each of the asset classes. Do a comparative analysis for the select MF list methodically. You can use some statistical evaluations, like risk-to-return, mean-variance, coefficient of variation based on the market cap and investing style.

Plan your budget - Investing whole-sum/part or incremental. Decide with the help of your financial advisor.

Buying Mutual Funds  - An investor can subscribe to the New Fund Offer (NFO) through ASBA facility. You have the options of buying from issuer, broker or online. The Fund may introduce other newer methods of application which will be notified as and when introduced.

Rebalancing and Portfolio Maintenance - Monitor performance using NAV, ensure they aren't off course and rebalance unfailingly. using NAV, ensure they aren't off course and rebalance unfailingly.

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