Power of Simplicity

Moved my blog to http://mysimplemoneylife.wordpress.com/

2011-07-03T08:09:00.001-07:00

My new blogging address http://mysimplemoneylife.wordpress.com/

How must you plan your Investing

2011-04-13T05:55:00.000-07:00

You could be investing, keeping in mind the different goals that you have . Your goals could be Short,Medium or Long term in nature depending on the time you have in hand to finally reach your goal

But, no matter what kind of goals you may have , your investment must be spread across different investments type or very simplistically must be spread across at least Debt and Equity.

Short Term Investment Horizon ( 1 year )

Debt : Bank Fixed Deposits and FMP and Balanced Funds

Equity : Large cap Focused Diversified Equity Funds

Medium Term Investment Horizon ( 3-5 year )

Debt : Bank FDs, Corporate FDs , Debt Mutual Fund

Equity : Large Cap and Mid Cap Focused Diversified Equity Funds

Long Term Investment Horizon ( > 5 year )

Debt : Bank/Corporate FDs,PPF/PF,Long Tenure Bonds

Equity : Large Cap Focused Diversified Equity Funds ,

Mid/Small Cap Focused Diversified Equity Funds

Direct Exposure to Equity.

You can add Gold to all of these for stability .

As the saying goes, "Failing to Plan is Planning to Fail" , so lets be prudent and plan

Image: renjith krishnan / FreeDigitalPhotos.net

Why is Investing important

2011-04-13T04:46:00.000-07:00

If you have been able to save money and have been able to spend less than what you earn, that is great, you have taken a tiny step towards wealth creation, since you could never have hoped to create wealth by spending more than you earn.

The question that now begs to be answered is, is just saving enough.

Let me explain

I usually have Idlies for breakfast, about two years back my breakfast costed me Rs.10 and today the same breakfast costs me Rs.14.

Now If,

· I had saved Rs.10 as cash, I would have found after two years that my Rs.10 would no more be able to buy me the breakfast.

· I had kept this Rs.10 in a savings bank account that which gives me a interest of 3.5 % a year, I would have got Rs.0.35 the first year and another Rs.0.35 the next, so ideally I would have ended up having Rs.10.70, which would still not buy me my normal breakfast.

Which just shows that, saving thought extremely important is just not sufficient, it must be backed by a push to invest, else rise in Prices (Inflation) eats into our purchasing power, reducing the value of money.

If you see all great wealth creators, the one consistent thing you find is that, they have learnt to make their money work harder, they have learnt, left on its own money would start loosing value hence it is a far better proposition to convert money into Stocks, Bonds, Real Estate, Businesses, Gold, etc.

Do work hard , but also learn to make your money work harder .

Indexation ... Double Indexation

2011-03-28T04:05:00.000-07:00

As per the Indian Taxation law , whenever an asset has been held for the long term, "Indexation Benefit" can be availed by the investor when the investor finally sells the asset.

The term "Long Term" is different for different instruments.

Stocks and Mutual funds,a period of one(1) year is considered long term
House, Property a period of three (3) years is considered long term

When an asset is sold after the above mentioned period , the profits/losses that are made are called "Long Term Capital Gains/Losses"

In case of Equity there is no Long Term Capital Gains Tax (LTCGT). But in case of other assets like Debt Mutual Funds, Property there is a Long Term Capital Gains Tax to be paid .

Long Term Capital Gains Tax (LTCGT) is computed as

20% of Long Term Capital Gains with Indexation
10% of Long Term Capital Gains without Indexation

What is Indexation ?
Capital gains would be usually calculated as

Capital Gain = Selling Price – Purchase Price

But fortunately government realised this is not a fair assumption because , rise in inflation usually eats into your profits . So in order to compensate for inflation , governments lets you increase your purchase price.

But arbitrary increase of purchase price cannot be allowed , so every year CBDT (Central Board of Direct Taxes ) comes out with a Index value for Cost Inflation Index (CII). using this Index to reduce the cost of purchase is called Indexation

How is this index to be used
Capital Gain = Selling Price – Cost Inflation Indexed Purchase Price

How is "Cost Inflation Indexed Purchase Price" calculated
Cost Inflation Indexed Purchase Price = Purchase Price X (CII for current year / CII for year of purchase )

Suppose you bought a 370 day FMP on 28th March 2009 (Financial Year 2008-2009) for Rs. 50,000 and then it was redeemed on 3rd April 2010 ( Financial Year 2010-2011 ) for say Rs.70,000

Then the Cost Price = Rs. 50,000
Cost Inflation Indexed Purchase Price = 50,000 x ( 721/582 ) = 61,941

Please note: Financial year is considered not the calender year . so thought it was only for a year ( 370 days ) that this money was invested, since this crossed two Financial year ( 2008-2009 to 2010-2011) , we are doing a "Double Indexation" here

So Capital Gain

With Indexation = 70,000 - 61,941 = Rs.8,059
Without Indexation = 70,000 - 50,000 = Rs.20,000

Capital Gain Tax would be :

20% with Indexation = 20% of 8,058.5 = Rs. 1,611
10 % without Indexation = 10 % of 20,000 = Rs, 2,000

The Income tax payer can choose any of the two options , based on his option to pay less amount of tax.

So, the month of March each year see a heavy offerings of 370 days FMP by mutual funds to let investors take advantage of "Double Indexation".

Bonus Debentures

2011-03-25T02:22:00.000-07:00

Dr. Reddy's Laboratories the pharma major has decided to issue "Bonus Debentures" , below is the gist of their corporate announcement.

"Dr. Reddy's Laboratories Limited has informed the Exchange that the Management Committee of the Board of Directors of the Company at its meeting held on March 24, 2011, has approved the allotment of 1,015,516,392 Unsecured Redeemable Non-Convertible Debentures of Rs. 5/- each carrying a coupon of 9.25% per annum, ("Bonus Debentures") amounting to an aggregate value of Rs. 5,077,581,960/- from the General Reserve by way of distribution as bonus, to the Members, based on their equity holding on the Record Date i.e. March 18, 2011, in the ratio of 6 (six) Bonus Debentures of Rs. 5/- each for every equity share of Rs. 5/- each held."

Corporate Announcement PDF

What does this mean:
If Instead of Bonus Debentures , if they had declared dividends , then it would have meant that each (1)share would have been eligible for 6 x Rs.5 ( 6 Bonus Debentures of Rs. 5/- each ) = Rs.30 as dividend

Now, instead of giving cash to the share holders , the company would issue FD ( Company FDs ,which are also called Debentures ) , so each share would now receive 6 (Six) Debentures of Rs. 5/- each with a interest rate of 9.25% payable annually .Which means every year you would get Rs.2.775 as interest and these Debentures (Company FDs ) would mature , that is you would get your Rs.30 back in 2014.

These are called Bonus Debentures , because you did not pay that original Rs.30 , it was something the company invested in the Debentures , but in your name.

How does the company benefit :
The company would have needed money to expand their business or for some other business expense , so they normally would have , had to borrow from a bank , which could have charged them higher rate of interest . But with "Bonus Debentures" , they would get money at a lower rate of interest.

And it is also a way of treating/rewarding their share holders and hence enhancing their corporate image .

How does the share holder benefit :
The share holder finds that , company has invested in his name some money which fetches him 9.25% interest each year for 3 years , at the end of which he gets the Principal Amount too

The record date for this "Bonus Debentures" was 18th March 2011.

SBI Lower Tier II Bonds

2011-03-24T07:52:00.000-07:00

SBI Bonds have listed on the Bombay Stock Exchange ( BSE ) and they are all trading at a premium. If the premium were to reduce , would be a good chance to buy, especially the "Series 4 Lower Tier II Bonds - Retail"

These are the BSE code of the listed bonds

SBI Bonds Listing Date: March 23, 2011 - Wednesday

Face Value of NCD: Rs.10,000/-

Series 3 Lower Tier II Bonds :9.75% Per Annum

Scrip Code: 961701

Scrip ID: SBIBIIIR

Series 3 Lower Tier II Bonds :9.30% Per Annum

Scrip Code: 961702

Scrip ID: SBIBIIINR

Series 4 Lower Tier II Bonds :9.95% Per Annum

Scrip Code: 961703

Scrip ID: SBIBIVR

Series 4 Lower Tier II Bonds :9.45% Per Annum

Scrip Code: 961704

Scrip ID: SBIBIVNR

Source : BSEIndia

Rupay

2011-03-23T04:56:00.000-07:00

I had written in my article Indirect lesson from Wiki Leaks about the risks involved on our over dependence on VISA and Master Card , to process our card transactions .

If you like to know more about, how VISA and Master Card work , please read this

National Payments Corporation of India , has finally woken up to this risk and has come out with a India specific card transaction gateway and has named it "RUPAY"

This is a good move, once formally launched , hope all our Nationalised and Private banks would enthusiastically adopt this , especially for the Debit Cards and Non international Credit Cards

This must see significant revenue saving for the banks , if NPCI , prices this service very conservatively .

Only risk involved is, will NPCI be able to stand up to the arm twisting that most of these MNCs resort to , using their government , when they find their dominance challenged in a foreign market .

So in this customer driven market . If we as customer demand that the Banks Issues us cards based on "RUPAY" , we may then give "RUPAY" a fighting chance to survive and thrive .

So watch out for the formal lauch of "RUPAY" .

Image: worradmu / FreeDigitalPhotos.net

SPARKLINES

2011-03-22T05:07:00.000-07:00

Picture speaks a thousand words .

In Stock investing ,especially in technical analysis of stocks, plotting how a stock or an Index has moved over the last year , may be Month or may be all though the day is a good indicator of the investor sentiment about a stock.

You would not have to look far for such data , there could be lot of different websites that may provide you this information , but none as elegantly as the NSE website

NSE ( National Stock Exchange ) has a feature called "SPARKLINES", where not only are Indexes plotted but , every constituent stocks are plotted over a Intraday, 30 days , 365 days period . the different indices covered are ( click on the Index to see the chart )

You even find the ETFs listed on NSE plotted here. You can even click on the small "Post-Its" on the charts to see any corporate actions like dividend/split/bonus information.

Image: winnond / FreeDigitalPhotos.net

My learnings from Ramit

2011-03-21T04:08:00.000-07:00

I follow a blog that is run by Ramit Sethi "Iwillteachyoutoberich.com" and two of his teaching that have profoundly influenced me are

Automate your Finance
Ask your Seniors

Automate Your Finance:
This aims at removing all the "Human Element" from the act of investing and tries to make it as mechanical a process as you can possibly think of . In my limited investment experience i have see that Human Elements like fear,greed,procrastination,laziness are the biggest stumbling blocks to disciplined investing and Automating your Finances focuses on removing these stumbling blocks.

Are you desirous of Automating your Finances , you can automate in these ways click here

Ask your Seniors:
This is about , learning from mistakes , more importantly, from mistakes of others .
Ramit suggests that you approach a person about 5 years your senior , may be a colleague or a friend or may be somebody in your family and ask them , if they had the chance to re-live last five years of their financial life again, what would they have done differently . how would their priorities be different , what investment they would have avoided , what investments would they have maximised .

Think about these two points , see how simple and yet how drastically can these alter your investment style.

Thank you Ramit for these insights.

Do they practice what they preach

2011-03-20T10:34:00.000-07:00

This is a interesting discussion with some of the most respected Mutual Fund managers and we find that not all the Fund Managers practice what they preach .

Many of the Fund Managers , have not invested their own money in the funds that they them self manager . If such is the mindset , how would you expect the general public to invest their hard earned money in the Equity Markets

Interesting conversation , please do watch

Warren Buffett in India

2011-03-17T03:03:00.000-07:00

Warren Buffett the legendary Investor, one of the richest individuals on earth , philanthropist, the "Demi God" of value investing will be in India .

Having picked up a stake in Bajaj Insurance and the shrewd businessman that he is and knowing fully well that Indians buy a Insurance policy for all the wrong reasons , he has made an irresistible offer

"Buy a policy on BerkshireInsurance.com and get invited to meet Warren Buffett"

Want to meet this legend , go right ahead and buy a insurance policy at BerkshireInsurance.com

Did You Know

2011-03-16T09:51:00.000-07:00

It has been quite sometime now that Mutual Funds have enabled their own website for Online Transactions , Initially the Mutual Funds wanted

You to be a existing investor with a Valid Folio Number
You to have a online transaction PIN ( which the investor would have received from the MF after filling in a Online Transaction Form and mailing it to them )

Now all this is changing , MF now allow you to Invest and even start a SIP ( Systematic Investment Plan ) , even if you do not have a PIN . All that you would need now would be

Your Valid Folio Number ( which means you would still need to be a existing investor )
Your PAN number
Your Bank Account Number ,that is registered with the Folio

KYC is mandatory , this goes without saying .

Which means , if you have a online transaction enabled bank account , you are all set to start investing .One less excuse for you not to invest

Currently i find these fund houses allowing investor to invest without a PIN
HDFC Mutual Fund
DSP Blackrock Mutual Fund

But remember , without a PIN you can only Invest/Buy , but you can never sell , this is a safety feature , So do remember to apply for a PIN , you would need that , the day you want to redeem your MF investments online.

So, go ahead and start investing from the comfort of your couch .

Image: Idea go / FreeDigitalPhotos.net

Global Index based ETFs

2011-03-15T07:16:00.000-07:00

Motilal Oswal is launching an ETF based on the Index, NASDAQ 100 .

Those of you, who do not know what an ETF is, ETF is exactly like a Mutual Funds , but the units of a ETF ( Exchange Traded Funds ) can be bought on the stock market during the trading hours.

Want to know more about ETF , please check here

About a year back Benchmark Mutual Fund had launched an ETF based of the Hang Seng Index.As far as i know, these are the only two ETFs , that an Indian investor can use to invest in stocks that are listed outside India

The current offering from Motilal Oswal , would invest in the NASDAQ 100 companies in the same proportion as in the Index

NASDAQ 100
NASDAQ stands for "National Association of Securities Dealers Automated Quotations". Details here

NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. More details here .

There are arguments both in favour and against , Indian investors investing in foreign companies .

Arguments in favour :

The Investor would be able to diversify his investment in non Indian companies and markets
The Investor gets a chance to invest in some true blue multinational giants

Arguments NOT in favour

The Indian investor has better growth opportunity in India itself
The Investor may suffer from currency fluctuations

I would wait and see how this ETF would perform ,before i even think of investing
Image: scottchan / FreeDigitalPhotos.net

MF Statement

2011-03-10T01:10:00.000-08:00

When you start investing in Mutual Funds ( MFs) you are suppose to receive a Mutual Fund statement every quarter , especially , if you are investing through SIP.

Watch out for these details on your MF statement

Scheme Name and Option :
Make sure your money is being invested in the correct Mutual Fund scheme of your choice and also make sure the Option of the scheme which could be Growth, Dividend - Payout , Dividend - Reinvest , is as per your choice

Name and Address :
Make sure your Name is spelt right and also check your contact address ( Postal Address in case you received the statement by Email and Email address, in case you are getting your statement by Post ).

Email Address and Mobile Number:
Make sure your email address is proper as, then you can get a statement from CamsOnline.com ,anytime you like using your registered email Id. Check you mobile number too , so that you can be sent SMS alerts by the MF when your SIP is due and when a purchase has been made

KYC Status :
Make sure your KYC status is OK/Validated on your statement .if your are not KYC compliant , you will not be allowed to make any new investments nor will you be allowed to sell your current holdings

Bank Details :
Make sure proper Bank Account details are mentioned , along with the IFSC code ,
If IFSC code is mentioned then MF can directly credit the dividends as well as redemption money into your bank account saving you time and effort of depositing cheques into your bank account and also avoid getting into the agony of losing/misplacing cheques.

SIP Amount/Lumpsum Amount:
Make sure the amount that has been invested is correct .

Broker Details:
If you were helped by a broker to invest , you would then see the Broker's name here, else you are suppose to see "Direct". This must not affect your investment directly , but brokers are usually paid a trail commission by the Mutual Funds , which is paid from charges deducted from you . So, in case you have invested directly/Online without any broker's help make sure it is "Direct"

Image: renjith krishnan / FreeDigitalPhotos.net

Business Magazines on the net

2011-03-08T08:26:00.000-08:00

Reading is a inseparable part of investing .It is impossible that we can be good investors without reading. Reading may help us to spot investing opportunities , help us to learn from other investor's mistakes and help us to learn about new financial products like say ETF/DVR which did not exist may be about 5 years back .

Here is list of Business Magazines ,which focus of Personal Finance and Business and which are Online too

Forbes : http://business.in.com/

Outlook Money : http://money.outlookindia.com/

Money Life : http://www.moneylife.in/

Money Today : http://businesstoday.intoday.in

Outlook Profit : http://www.outlookprofit.com/

ET Wealth : http://economictimes.indiatimes.com/etwealth.cms

Business World : http://www.businessworld.in/

IFSC ( Indian Financial System Code )

2011-03-07T02:43:00.000-08:00

RBI statistics show that Investors are increasing using NEFT and RTGS for funds transfers .

Even companies and Mutual Funds have made it mandatory to provide bank details along with IFSC ( Indian Financial System Code ) and MICR ( Magnetic Ink Character Recognition ) codes

Only pain point would be that , you may not be knowing these code for your branch , here is a website that can help you find this piece of information without any hassle

This website provides you the MIRC code and the bank branch address too :
Find IFSC CODE here

Why are Sectoral Funds not good

2011-03-07T02:14:00.000-08:00

DSP BlackRock Technology Fund
HDFC Infrastructure Fund
Reliance Pharma Fund

Are a few examples of Sectoral or Thematic funds , as the names suggests , they are allowed to invest in specific themes only . for example a Reliance Pharma Fund , can invest in only pharma companies and cannot venture out to invest in say a Cement or a IT company

The problem with thematic funds is that , If in case the sector is going through a bad phase , even in that condition the Fund cannot invest in other sectors or even if the fund manager realises some other sector is going to perform better , he still cannot invest in that sector .

Suppose the "Pharma Fund" manager realises that "Banking Sector" is going to do better than pharma , still he will not be allowed to invest in "Banking"

By investing in a sectoral funds , you are restricting your money from getting invested in different better performing sectors

You can invest in a sectoral fund if you

Know for sure , with deep working knowledge of a particular sector , that for next year or two or more a particular sector would return phenomenal returns
You are a very active investor , who will be tracking your investments very very regularly and have the foresight to exit a sectoral fund when you either spot other better sectors or see problems with the current sector

But these are quite tough to achieve for a retail small investor.

In contrast a Diversified Equity Fund , has no such restrictions and can invest in any sectors they like and take advantage of growth in any or all of the sectors.

So i would suggest , avoid sectoral funds and stick with the Diversified Equity Fund , like the three i had suggest in my earlier post .

This is just a suggestion, as investing heavily in a Sectoral Fund could be akin to putting all your eggs in one basket

Image : FreeDigitalPhotos.net,Photographer: Ashley Cox

Are these your reasons too

2011-03-05T08:54:00.000-08:00

I keeping speaking to lot of my friends and colleagues , about investing and i see a whole set of reasons for NOT investing , let me list a few

I have no idea how to go about Investing. may be i will learn to invest and then start
I would start investing , when my financial situation gets better
I would start investing after i have saved , some X amount
I have no time , work and family takes up all my time

I would say all these are flimsy reason not to start investing .

Yes, you would need to know what you are investing in, you would need to be knowledgeable , but then it is something that you ought to do along your investment journey.

There would never a point in your life , when you would feel that i know enough , nor would you ever feel that i have enough money now and let me start investing .

So start off investing how little it may be , make adjustments and more knowledgeable investments as you go , it is important to build the momentum for investment and let it help you build knowledge and the mindset

Best of both worlds

2011-03-04T01:57:00.000-08:00

For a conservative investor who is taking baby steps towards investing in equity , here is combination that must work really well and help build confidence

Investor can try a combination of Post Office Monthly Income Scheme ( MIS ) - with a SIP in a Equity Mutual Fund

Let me explain :
Suppose you have Rs.3 Lakh rupees that you want to invest , open a Post Office Monthly Income Scheme. MIS provides you with a interest rate of 8% and at the end of 6 years, the term of an MIS account, you will be get a additional bonus of Rs.15,000 ( 5% of 3 Lakh )

So at 8% interest you would be getting an annual interest of Rs.24,000. Which means an amount of Rs.2,000 would be paid to you every month . MIS pays out the interest every month

Investor could channel this Rs.2,000 into a monthly SIP of a good diversified Equity Mutual Fund like the HDFC Top 200 or DSP Blackrock Top 100 or may be a Fidelity Equity Fund.

This mode of investment is very similar to what is called STP or Systematic Transfer Plan , where a lump sum amount is invested in a Debt Mutual Fund and every month a fixed amount would be taken out of the Debt Fund and invested in a Equity Mutual Fund .

Know more about MIS here

The advantage with this approach could be that , the Rs.3 Lakh would have continuously earned about 8% interest and the equity investment would add a additional kicker to the returns earned with the original lump sum of Rs. 3Lakhs protected.

This combination of Debt and Equity may prove to be your best friend for a long time to come

Also read my previous blog Investing ? -- Make it boring

Image : FreeDigitalPhotos.net,Photographer: Ashley Cox

Random Thoughts

2011-03-03T01:40:00.000-08:00

KYC :

Three of my friends who wanted to invest in Mutual Funds , found that they cannot invest , because they are not KYC compliant . Since Jan 01 ,2011 , being KYC complaint is mandatory

KYC , is Know Your Customer guidelines for Mutual Funds to know who their customers are and to make sure that no ill gotten money is being invested in MFs

So,even if you have no plans of investing in MFs in near future , Please make sure you get your KYC compliance letter ready , so that you would not have to run around when you really need it .

You would need this letter to make fresh investments in MFs and also to sell/redeem your old investments in MFs

How to get your compliance letter , click here

Online Investing :

Most of the Mutual Funds , now provide an Online option for investing , If you are an existing investor in a mutual fund , all that you would need to do , is to fill their Online Investment authorisation form and post it to them and the MF would mail you back the Online PIN , which can be used to transact Online

So in case you have not yet enabled online transaction for your MF Folio number, go ahead and do that , Investing becomes so much simpler when you can invest online .

Life is about seizing opportunities and you can seize opportunities only if you are prepared

Fixed Maturity Plans

2011-03-03T00:58:00.000-08:00

When we think of Mutual Funds , we usually only think of Equity Mutual Fund Schemes , but we forget to take notice that , there are other kind of funds too that invest in debt , which are comparatively less risky and would normally given lower returns.

In both these kind of Mutual Funds schemes, Equity and Debt , after you buy the units , you would then need to decide when to sell them and I find that, this decision of when to sell is not so easy to take especially for a small investor .

Apart from these normal Mutual Fund schemes , there is another product called FMP , that Mutual Funds offer and this is a good product to invest in

Features of a FMP

Duration :As the name suggests , they are of a Fixed duration , when you are buying a 90 day FMP , you would know that at the end of 90 days , your invested amount would be returned back to you , along with the profits or dividends . Currently there are FMPs available in the range of 35 days to 365 days
Investment :The FMPs invest only in debt instruments . usually banks and other corporates , when they need large amount of money for small duration , may be less then a year , they come out with corporate FDs or short duration FDs which are available only for large institutions like MFs as they can then invest hundreds of crores . FMPs usually invest in these FDs.
Rate of return :As per SEBI guide lines MFs are not permitted to disclose the interest rate they can return . So unlike a normal FD , you will not be able to know the rate of return , but it has been usually found that FMP returns are better than a comparable duration FD
Premature Withdrawal: FMP are listed on the stock market in Demat form hence if you need your money back before the maturity of your FMP you would need to sell your FMP on the stock market.Please note demat is not mandatory to invest in FMP
Tax : FMP of less a year can be invested with Dividend option , in which case the MF company will pay the dividend distribution Tax , hence any dividend that the investor receives would be Tax free.And for FMP which are for more than a year , Investors can choose the growth option and this would be tax efficient using Indexation ( Watch out for a post on Indexation and how it saves tax )
Offer Period: Unlike a normal MF scheme , which can be bought at any time , FMP have fixed offer period , usually a of couple days and investors can buy the FMP only during those days.

FMP currently on offer :

Image : FreeDigitalPhotos.net,Photographer: Nutdanai Apikhomboonwaroot

Very Senior Citizens

2011-03-02T07:49:00.000-08:00

This time around the Annual Budget had a interesting thing to offer , the Finance Minister (FM) has created a new category of citizens called "Very Senior Citizens" and the age limit for this, has been set as 80 years

In a country like ours where there are so few facilities provided by the government for the senior citizens,this is a welcome move by the FM

The FM has made sure that this category of citizens do not have to pay taxes for taxable income upto Rs.5 Lakhs , this limit was earlier half this figure at around Rs.2.5 Lakhs .

I'm not sure how many people really benefit from this , as the percentage of population above the age of 80 must be very small and a miniscule percentage of that, may probably be earning above Rs. 5 Lakhs a year but none the less a good move by the FM

The FM also reduced the qualifying age for senior citizens from 65 to 60 , so someday hope he will also reduce the qualifying age for Very Senior Citizens from 80 to 75 ,which may be a more appropriate qualifying age

In these times of high prices and uncertain interest rates , any change that helps our Senior Citizens is a welcome move

Buying a Life Insurance Policy

2011-03-01T21:26:00.000-08:00

This is a very appropriate commercial from Religare Life Insurance . I have spoken to lot of my friends and i find that in most cases , they have no idea what kind of Insurance policy they have and they also have very weird reasons for buying, like

The Insurance agent was a family friend and so i bought this policy
I was spending too much , so thought of buying this Insurance policy as a saving
I had to save taxes and did not know any other way to save taxes

Let me ask you a very simple question "Lets say , if tomorrow, you ( earning member ) are no more , would your family ( Spouse, Kids, Parents ) who survive you , be able to make a living based on your today's savings and Insurance claim amount of your insurance policy"

If your answer to this is "Yes" , then you do not have to read further , if your answer is "No" then do read further.

How can a Insurance for say 2,5 or 6 lakhs really help your family that you leave behind, to survive , as these are too small a amount for them to spend a life time on .

Let me take the analogy of a vehicle insurance , when we buy a vehicle insurance , we do so as something that would help us in an emergency and not as a saving tool and i would be glad at the end of the year , if i did not have to use it , but i make sure that i renew it for the next year.

We would have to take a Life Insurance with the same mindset . Only kind of Life insurance policy that would be useful is a Term Insurance Plan or Pure Insurance Plan . These type of Insurance Plan do not give you any returns , but for a small premium per year would give you huge life insurance cover.

No Insurance agent would ever recommend a Term Insurance Plan or Pure Insurance Plan to you as the commission on these type of plans are the least .

So remember that it very important to have Big Life Cover or Sum Insured , as that is what would help your loved family in case of a unexpected event and help your family not only to make a decent living but also see to it that your kids get uncompromised good education they deserve

If you would like to know more about different kind of Life Insurance Policies , click here

You can even buy couple these term plans online

you could probably buy a insurance cover of 1 crore for a yearly premium of Rs.15,000 for a person in his mid thirties., that is how cheap term plans are .

Mutual Fund Investing

2011-03-01T02:10:00.000-08:00

For an investor who wants to invest in the Equity Market or Stock Market , but who may not have the time and knowledge to pick stocks ,Mutual Funds are an idea way to go about.

If you would like to learn more about Mutual Fund , watch this video about Introduction to Mutual Funds

Now that you have understood what MFs are, and would now like to choose a few good Mutual Funds to invest in, I would recommend that you visit Valueresearch , this is wonderful website that help you select a MF . They also have a rating system , that has already rated MFs based on their past performance

Click here to visit ValueResearchOnline

Investor must have the patience to stay invested for a period of 2-3 years and must choose the SIP method to invest

SIP: Is where you invest a fixed amount every month , on a fixed day of the month in Mutual Fund .This help you build discpline to invest and also help you buy at lower prices , in case the market is falling , thus helping you to lower your average price of purchase

For the current market conditions my recomendations would be these three Equity Mutual Funds .

DSP Blackrock Top 100 - Growth( This is Large Cap fund , which mean it invest in biggest 100 companies only )
HDFC Top 200 - Growth ( This is Large Cap - Mid Cap fund , which means it invests in top 200 companies which are big as well as averagely big companies )
Fidelity Equity Fund - Growth ( This conservatively managed fund , which has consistently performed well for last 5 years )

You can download the application form for these funds here HDFC , DSP Blackrock , Fidelity

KYC is mandatory for mutual fund investing , see here to know more

When filling the forms for the Mutual Fund , please use these TIPs

Rs. 150 Coins Will Be Here

2011-02-28T03:51:00.000-08:00

On the occasion of taxation in India being 150 years old , the finance ministry would be releasing a Rs.150 rupees coin .

This would be the first time that Rs.150 denominated coin would be released and only about 200 of such coins would be released

So in case you happen to lay your hands on one , make sure you do not spend it and hold on to it , as someday it may be worth a lot lot more.

As a tax payer not really sure if this is a occasion to celebrate , it could be, if i could get hold of one of these new coins