New Year resolutions in 2016

Nifty delivered   5% negative in 2015. Expectations gone but hope remains! Real estate prices are moving southward in many cities. Gold prices correcting two year in a row. Deposit rates going down. Banks deducting TDS on interest of all deposits. Current challenge is to earn interest to beat  the inflation rate. With volatility in equity market, aim should be to generate returns above the benchmarks in equity. However for long term investor, equity is the best asset class.

We must educate our children well and help them to settle in their career. We must accumulate adequate retirement corpus to last our life time. Stick to your financial goals.  We suggest visiting the following resolutions in the New Year.

 1. Create an Emergency Fund

Future is uncertain. One may lose job, income may decline or any family member may have to undergo major medical treatment etc. It is advisable to keep sufficient cash either in  Liquid Mutual Fund or Bank to meet three to six months of expenses.


Misselling by Banks

The notion of ‘Bank’ in the mind of general public implies the image of a trustworthy and secure institution. We generally do not scrutinize the bank statements. We take for granted all the entries in the statement presuming it to be genuine and do not raise any sort of doubt. But the recent survey by ET Wealth has revealed that three out of five bank customers are not satisfied with bank and its practices. We discuss some of the reasons for their dissatisfaction.

Mis selling : It is the experience of many customers that the Bank relationship managers’ are making strong sales pitches for  endowment life insurance plans. The sales pitches are influenced by the commission rates of financial products irrespective of the suitability of the products .Endowment life insurance policies offers commission of 35-40% on the first year premium.

Learning from Chennai Flood

Recent flood in Chennai was totally unexpected and people living in Chennai were taken unawares. Water rushed into homes, lives were lost and properties damaged. Millions of personal documents of people have been lost or damaged. In panic, fleeing people have abandoned them. Important papers like Property titles, Insurance policies and Medical records etc were not to be found now. We offer three solutions on digitizing and e storing them.

Firstly, we had  blogged  on 12th June 2013 on digitizing and  e- storing the documents, which has since been visited more than 46,000 times. It has been found useful by many. 

Direct Mutual Funds

When we fall sick, we go to a Doctor who does the diagnosis and prescribes medicines. Thereafter we go to the medicine shop to buy the medicine. We bait on the professional competence of the Doctor for cure of the disease. In case of financial products, be it insurance or mutual funds, most of us   buy the child plan or pension plan or do a SIP in Mutual Fund through an agent or a bank relationship manager. By the time we realise that products bought by us are not suitable for achieving our goals, it is too late.

We should visit a financial doctor to get the right advice, who can analyse our cash flow, investments, insurance policies, loans etc and recommend suitable products to achieve our financial goals. The products should be suitable to our needs. SEBI has now come out with regulation to register SEBI Registered Advisers who are like financial doctors and have a fiduciary duty to act in client’s interest. There are more than 100 such individual advisers in India today.


Are you prepared for your Children’s higher education?

More than 1,30,000 Indian students have gone to USA this year to pursue  higher education. This is the highest number of Indian students in a single year and the second highest of foreign students in USA. Many parents desire  to send their children for higher education abroad for quality education and the trend is increasing every year. As per a study reported in Business Standard on 20th Nov 2015, parents are saving 30-40% of their income for children’s higher education. The destination countries are USA, UK, Australia, Singapore and other EU countries. The major challenge is affordability of the rising cost. The fees of universities are rising every year and it is much higher than the normal inflation. It is estimated that the minimum increase is more than 15% per year. The maximum bank loan for higher education abroad provided by Banks in India  is Rs20 lakhs which is not sufficient for meeting the cost. Besides the university fees, there are living cost which comes to Rs10 -12 lakhs per year.

Gold Bond and Gold Deposit Scheme 2015

Recently Govt. of India has announced the three gold schemes; two for consumers and one for manufacturers i.e  Jewellers. We will discuss here the features of the first two.

Sovereign Gold Bond Scheme (SGBs)

It is a government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India. The bonds are held in the books of the RBI  or in demat form eliminating risk of loss of scrip. The application form will be provided by the issuing banks/designated Post Offices. It can also be downloaded from the RBI’s website. Banks may also provide online application facility.

Financial Life Planning is a branch of Financial Planning which deals with peace and happiness in life. It aims at creating yogic wealth. As per Maslow’s hierarchy of needs, there are five levels of human needs; Physiological (Food and Water),Safety(Home), Love and belongingness (Family), Self esteem(Professional achievements) and Self actualisation (Passions in life).We need money for fulfilling the  needs for the first two stages i.e physiological and safety but do not need money for the last three stages. We always worry about money and fear for not having enough of it.Fear gives rise to insecurity which again leads to anxiety. This again is the root cause of our greed. In fact most of us  have these emotions and we should not feel bad or guilty about it. Rather we should recognise these emotions before  we aspire for peace and happiness in life.

Your life being made easy

Start ups revolution is happening in India. Many start-ups have come to solve your day to day problems of accessibility and availability various services in the different fields. Many of them have apps those can be downloaded in the smart phones. The following are the some of the online services;

Practo(Doctors) :  This site gives detailed information about  doctors within your locality along with their   experience, clinic timings and fees. 

Behavioral Biases in Investments

Creating and managing a portfolio by the investor requires investment decisions to be made on which asset classes to invest in, how to invest, timing of entry & exits and review & rebalancing the portfolio. These decisions have to be based on the analysis of available information so that they reflect the expected performance and risks associated with the investment. Very often the decisions are influenced by behavioral biases, which lead to less than optimal choices being made. Some of the well documented biases that are observed in decision making are;

 Greed and Fear

These are the most common biases impacting the retail investors. Investors enter the market when prices are already high and sell when the market bottoms out; thereby losing in both the scenarios and finally concluding “equity is the worst investment class”. Few who exercise patience overcomes these biases and emerges as winners.

Things you should know about - Gold Deposit Scheme

Govt. of India has announced Gold Deposit Scheme recently. India is the largest consumer of the gold and Major part of that is imported. A huge amount of India’s wealth is lying idle in form of gold and it is not productively contributing to the India’s growth story. To tackle this, Government of India has come out with the two new schemes primarily targeted at tapping   the idle gold with Indian households and institutions and further giving an alternative   for actually buying the physical gold. The two schemes are Gold Deposit Scheme and Gold Bond Scheme. Gold Bonds will be issued by RBI and Gold Deposits will be implemented through Banks.

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