Money For Investment

Have you ever wondered who is the legal beneficiary of the insurance claim money? Most people feel that the insurance money will be passed on to their husband /wife and kids as the case may be . However, this is only partially true. As per law, every individual who is related /financially dependent to the insured person has legal claim over the insurance claim money. Lot of people nominate their wife/husband as their nominee in the insurance policy and then they believe that in case of their unfortunate death, the claim money will be passed on to their spouse. This also is only partially true. Nomination only means that the nominee has the right to claim the money only and not use it . The money is then supposed to be passed on to all other legal claimants of the money. So, in case you want your insurance money to go to a specific person only , then just nominating that person in your policy document is not enough. You also need to prepare a will making it amply clear that the mone...

If you want to invest in equities, there are only four things you need to remember. 1. Choose the right company Look for superior and profitable growth. The company should earn at least 20% return on its shareholders’ capital. Ideally a long-term investment perspective (more than five years) allows you to participate in the company’s growth. At the short end (3-6 months), share performance is driven more by market sentiment and less by company fundamentals. In the long run, the relevance of the right price diminishes. 2. Be disciplined Stock investing is a long, learning experience. You will make mistakes, but also learn from them. Here is what you can do to ensure a smooth ride. --Diversify your investments. Do not put more than 10 per cent of your corpus in one stock, even if it’s a gem. On the other hand, don’t have too many – they become difficult to monitor. For a passive long long-term investor, 15-20 is a healthy number. --Research and analyze your company's performance thro...

Companies , these days, increasingly position the loan benefits that they offer to their employees , as a major financial benefit to the employee. But, taking a loan from the employer is something I strongly recommend people to avoid . Here’s why I believe you should not opt for a loan from your employer: 1. Any loan from your employer ties you to your job. You can’t come out until the loan amount has been cleared in full. You might argue that you can always ask your new employer to bear the loan. But where does that take you? From one chain to the next? Plus, I’m not sure if any employer today would be willing to bear existing loans. It’s psychologically debilitating to see your take home salary cut by the EMI (Equated Monthly Installment) amount on the loan even before it’s credited into your salary account. 2.There’s a hidden cost. Though you do not actually pay any direct interest on the loan amount, the notional interest surfaces as a perquisite in your income tax calculations a...

SEBI is an institution which aims to act as watchdog to protect the interest of common investors in the equity markets. With this aim in mind, SEBI sometime back mandated that all AMCs do away with collecting entry fee to investors who wishes to invest in mutual funds. This is a revolutionary decision since it makes the mutual funds the best investment structure by a long distance. Now the investors will not be charged any entry fee and the entire money invested will be accounted for in the number of units. This will push up the effective returns that the investor will get. But, all is not well with this step. There are certain concerns as of now which needs to be addressed. 1. No entry fee means lesser people willing to sell- The abolition of the entry fee has led to a dramatic fall in the number of distributors who are willing to distribute or sell MFs. Many banks who earlier used to aggressively sell MFs to their clientele have completely stopped or have gone slow on it since selli...

One of the biggest risks associated with credit cards usage for online purchases was the possibility of misuse of the credit card by fraudsters. This was such a big demerit working against both credit card fraternity and net commerce that a solution to this threat was imminent. Till now , for anyone to make online payment, all one needed was the credit card number, the expiry month and year and the CVV number. All the 3 information required to transact on internet was the one which were mentioned on the credit card. So in case a person lays his hand on your credit card , he/she could have easily misused your card on the internet since all the information he needed was readily available on the credit card itself. This was a huge shortcoming and as such needed to be fixed. Come August 1st, Reserve Bank Of India, has mandated that the credit cards will have to have one more layer of security check before the payment transaction is approved. Now, all the credit card users will have to reg...

One of the most classic dilemma facing a retired or soon - to-be -retired person is whether he should use the retirement proceeds to start up some sort of business to keep himself busy while making good money out of it or should he just invest the money in a safe place like bank FD and live off the interest accrued? There are people who would argue in favor of starting up something on ones own using the money while there are equally good number of people who think otherwise. So, what is the right decision or rather which is the better option? Well , I think there are no right or wrong options here . Both the options have their own merits and demerits , but, I would stick my neck out in favor of one option. But before I do so , let us examine the pros and cons of both the options :- OPTION 1 - STARTING UP A SMALL BUSINESS PROS - The first and foremost benefit of starting a business after retirement will mean that the person will be able to productively employ himself or herself. This i...

These are good times for rich people. People who are affluent have many advantages and privileges in general life. An addition to their long list of privileges is the availability of term insurance at a much cheaper rate. The term insurance premiums have seen drastic reduction recently for life cover of RS 1 cr and above. Even term plans having life cover of Rs 25 lakhs and above also have seen quite a large reduction in the premiums. This large scale reduction in the premiums is attributed to the following reasons:- 1. Better mortality rates - The recent experience has shown that the mortality rate isn't as bad as is shown in the mortality chart currently being used. And as such the premiums have come down owing to this. 2. Access to better health care and lifestyle - Rich and HNIs have greater access to health care and quality lifestyle which also plays a role in increasing the life span of the person. This in turn means lesser claims on insurance companies pushing the overall pr...

The Union Budget presented by Mr. Finance Minister has left many people disappointed especially those who were expecting some"big bang" reforms from this budget. The budget did not lay out any such plan. But, this budget is being hailed by corporates on one account atleast ie. the removal of FBT or Fringe Benefit Tax which was introduced by erstwhile Finance Minister Mr. P. Chidambaram. This was a tax which was to be paid on all the perks enjoyed by an employee like car, company provided accommodation, ESOPs , conveyance etc. These perks were always taxed at the hands of the employee, but, FBT had transferred the onus of paying these tax to the employer. The employer,however, was free to collect this tax from the employee. FBT also meant that the effective rate of taxation was only little over 6 % as against the rate of tax charged to an employee based on his tax slab. FBT was opposed by the corporates tooth and nail and now they have finally managed to get this off their bac...

The Union Budget presented by the Finance Minister yesterday was one which aimed at doing "No harm"rather than "doing good" to the economy on the whole. There were no major big bang reform measures announced. Even the much anticipated and "taken for granted reform" of increasing the FDI limit in insurance sector didn't come through. Mr. Minister shied away from giving a target for disinvestment as well. This sent the capital markets into a tail spin. The FBT was removed which is a positive for the corporate sector , but, the MAT was increased to 15% taking away the sheen of FBT removal. As far as common man and his income tax is concerned, there was not much for him. The new budget proposes to increase the tax free income limit by Rs 10000 for women and men and Rs 15000 for senior citizens. So now the new tax free income slab would be Men- Rs 1.6 lakhs Women- Rs 1.9 Lakhs Senior Citizens (including women) - Rs 2.4 Lakhs The actual saving in terms of ta...

The Employee Provident Fund Organisation has decided to give an interest of 8.5% on the deposits made in EPF scheme for the current financial year as well. This interest rate of 8.5 % is same as the one applicable last year as well. With inflation and deposit rates up for most of the last year , there were expectations of an increase in this rate for this year atleast. But, with the inflation down to negative territory and deposits rates heading southwards, this expectation was tempered a bit in last few weeks and as such the decision to keep the rate unchanged is a no surprise really. The EPF interest rate has come down from the highs of 12 % earlier to 8.5% now. There were talks of bringing this even further down to 8% level last year. But, with the new government's focus on "AAM AADMI" and inclusive growth , the chances of these rates going down is remote. This will benefit the 4.2 crore depositors who have parked their money with the EPF. This makes it one of the best...

If you are looking to save income tax arising out of long term capital gains on the sale of your house,art or property etc then you have an excellent option in NHAI bonds.National Highways Authority of India (NHAI) is currently offering non-convertible bonds with benefits under Section 54 EC of the Income Tax Act. These bonds offer returns of 6.25% pa payable annually. The minimum amount that one can invest is Rs 50000 while maximum amount in Rs 50 lakhs. The whole amount on maturity is taxable in the hands of the investor. these bonds are among the most efficient tax saving instrument for tax on long term capital gains. The other option offcourse is to invest this money agin in a new property or house to evade taxes . But , this will again mean that your money is locked for a longer period. These bonds have a maturity period of 3 years and are AAA rated by Crisil, Fitch and CARE indicating high credit quality of these bonds. One can hold these bonds both in physical as well as demat f...

Mutual funds are one of the most efficient and popular investment options for people looking to invest for wealth creation.There are thousands of funds to choose from, yet most investors really don’t need more than four or five funds. Sifting through all of the choices can be rather daunting. There are thousands of funds to choose from, yet most investors really don’t need more than four or five funds. Sifting through all of the choices can be rather daunting. HOW DOES A MUTUAL FUND WORKS A mutual fund is a fund where money is collected from all the investors investing in that fund, and is invested by a qualified fund manager on behalf of all the investors. The fund manager manages the investment and aims to beat the benchmark returns like BSE 100, Nifty 50 etc. Each of the funds will have a investment goal and strategy and the fund manager is required to invest according to that mandate. There are 3 kinds of mutual funds basically on the nature of its investments 1. Equity based mu...

The global financial meltdown has led to various governments across the globe into pumping billions of dollars into the economy to revive demand and growth in the economy. Increased money supply does help in pushing the demand for goods and services up thereby helping the economy grow . There are green shoots of recovery already in some parts of the world. India and China are already growing at a healthy rate. One of the bad effects of de-growth and recession is the menace of deflation. India is already in deflation officially. Deflation is potentially very dangerous to the economy and can lead to serious damages on the demand side in the economy.But we need not worry too much about it because of 2 reasons . First reason is that in India even though the WPI is in negative the CPI is still at 9% , which is very high. So technically the demand for essential items like food articles etc is still on the rise. The second reason is the deflation is expected to be a short lived phenomenon. Th...

While deciding on the home loan ,personal loan or car loan we are all very sensitive to the rate of interest being charged on the loan by the bank. This is because rate of interest directly impacts the repayment amount of the loan. A higher rate of interest obviously means more interest payout and hence is that much less desirable. This is perfect. But, what most of the loan seekers do not focus on is the tenure of the loan. Tenure of the loan , like rate of interest, impacts the repayment amount directly. Tenure is very important factor that one needs to check and negotiate on while taking a loan. Let us understand in greater detail how tenure of the loan impacts us. 1. Longer Tenure Increases the repayment amount on the loan - Let us consider an example. Assume Mr. X takes a personal loan of Rs 100000 at an interest of 10% annually for a period of 3 years. Consider the rate of interest as flat for sake of simplicity and ease of understanding. Now, for a tenure of 3 years the total a...

It is not entirely uncommon to see people making payments of their home loan,personal loan EMI, credit card,mobile bill payments etc in cash to the collection executive who comes to collect the same at their office or at home. While there is nothing wrong in doing so, one needs to be little more careful and do some mandatory checks before making payments. The reason for this is that there are lot of cases of fraud reported , where the collector collects the money from the customer but never deposits it in the bank. At times, collectors collect the money from 5-10 customers at a time and run away with the money , while there also have been cases where the collection executive after being dismissed or after having quit the organisation, continues to collect the money from his regular customers . Obviously , this money is never deposited by him in the customer's account. These are the malpractices which have crept into a system which is meant for the customer's benefit. As a prude...

Banks and NBFCs use the credit scores from rating agencies like CIBIL to evaluate the loan or credit card application from its customers. Based on the credit scores , the banks/NBFCs take their credit underwriting call. For good customers having higher CIBIL Scores, the loans generally gets approved while for people having lower scores, the loan is denied. But, the problem is that these scores are never shared with the customer. Unlike, in West, where every customer has access to his/her credit score, in India, this was not possible till now. But, now there is something to cheer. Now, as per the regulations, all banks and NBFCs are directed to provide the details of the CIBIL score to all such customers/applicants whose loan or credit application has been declined by the bank on the grounds of bad or substandard credit score. The customer can demand his/her credit score details from the bank. The customer,however, will have to pay Rs 50 towards this service. This is small step in the r...

The banking and finance sector is structured in such a way that most of the banks and other NBFCs depend a lot on the channel partners for sale of their products. The channel partners like DSA and DSTs, even though are a different entity separate from the bank/NBFCs, have become an integral part of their distribution network. Bulk of the sales of bank's products like salary account, current account, home loan, personal loan, car loan etc happens through these channel partners. As such, sometimes they become the face of the bank to a customer and can yield great deal of influence over them. Using this influence , the DSA /DST executives sometimes charge a commission from the customer promising them that they will somehow "arrange" the loan from the bank for them. Customers fall for these claims because of various reasons. Firstly because they see these agents as part of the bank/NBFC and as such assume that they might be able to influence the credit approval process in the...

According to a recent survey conducted , it was found that Asians believe that indulging in small luxuries is the best way to beat the downturn stress. 82 percent of respondents also believe that indulgence was the best way to beat the stress of modern life, and that spending time with family, short holidays, spa sessions and small luxury items were among their favourite ways to relax.Nearly 70 percent of respondents said life should contain as many luxuries as possible. The survey also found that people from India, China and Vietnam were the most likely to shrug off the downturn, while respondents from the more developed Singapore, Hong Kong, Australia and Japan were the least positive about the future. For more on this survey log on to www.greeyeon.asia

New Fund offers or NFOs, as they are popularly know, are quite popular among lot of people for various reasons but the most important factor which is responsible for the popularity of NFOs is the notion among investors that NFOs offers units at a discount or at a cheap rate. They feel since NFOs offer units at NAV of 10 , they are better off investing in an NFO as against investing in other schemes where the NAV is higher than 10.The feel by investing an X amount in an NFO they will get more units and hence would be better off. This is completely wrong theory about NFOS and NFOs are in no way cheaper or better than other funds available in the market. Let us examine this in detail . Now, the question that we need to answer is this : Do we invest in a fund to make more money /return or to buy a unit at lower NAV? the answer is obvious. There are various drawbacks of a NFO , some of which are mentioned as under:- 1. NAV of 10 does not mean you are better off - Return on any investment...

Remember the story about a tortoise and a rabbit competing in a race? In that race ,the rabbit , being more agile and fast , expects himself to win the race hands down against a slow but steady tortoise. We all know who wins the race in the end. We have the same race run on stock markets every day. We have traders and investors both competing to make more and more profit. Traders are very similar to the rabbit who was fast and agile , while investors are more like the tortoise who made slow but steady progress. The end goal for both of them is same but the route that they take is different. TRADERS - Traders are those set of people who make transactions in the stock market with a definite exit strategy. They initiate trade for short term and look to exit from the stock on making small gains. Sometimes, they can buy and sell the same stock 3-4 times in a single trading session, making smaller gains every time. They do not believe in "buy and hold" strategy. INVESTORS - Inves...

India's largest life insurance company LIC , has unveiled a plan to make it possible for its policyholders to claim their LIC benefits like maturity amount, sum assured amount ,annuity etc from any branch , irrespective of the branch where he took his/her policy from.As of now , this is not possible since most of the branches are not interconnected. LIC already has started taking premiums from all its branches and its policyholder can pay their premiums at any branch . In next 2 years, they will be able to take the claims /benefits etc also from any branch. This will be huge step in meeting the customers expectation of seamless delivery of service from LIC. LIC has over 23 crore policy holders across the country . The digitization of record of these policy holders will ensure archival of physical records in electronic form and will eliminate risks of loss or damage to physical records due to natural and other disasters.

Health insurance is supposed to be one of the first and foremost things that one needs to plan for while planning for his/her financial future. It aims to provide cover against any untoward medical expenditure that might come up in future. Health insurance is a very important and useful product,something that is usually recommended for one and all. But, these health covers also tend to have an unintended bad effect on the overall cost of medical care. With the increase in penetration of health cover among vast majority of Indians, the hospitals have started to benefit greatly from this. The overall medical cost is on the rise . Let us examine in detail, as to how health insurance may be pushing the overall cost of medical care up ,especially in private hospitals/nursing homes. 1. People with medical insurance prefer deluxe rooms/hospitals - People having medical cover tend to go to hospitals which are expensive and are supposed to provide "deluxe amenities". The rationale ...

Loan or credit , in India was regarded as not such a good thing to have by our forefathers. They always believed in living within their means .Taking credit or loan for them was a bad thing , something ,which they resisted at all times. However, things have changed over last generation and today, credit is not considered such a bad thing , anymore. In fact, in America, credit is much sought after and most of the Americans live off on credit. The level of debt that Americans have on their head is unparalleled. Even in India, the penetration of debt is increasing. People are buying more and more on credit these days. But, the question that needs to be answered is whether or not credit is a good thing? Many argue that credit is vital for the economy at it creates demand for goods and services, thereby pushing growth in the economy. A growing economy in turn benefits everyone. The other school of thought is that debt is bad since it eats into your savings and your future earnings in a way ...

SEBI in a sweeping reform has done away with the practise of charging "Entry Load" on mutual fund investments , by the AMCs. Till now, the AMCs used to charge an entry load of 2.25%, on the money invested , from the investors. This fee was used to pay the sales commission to the dealers and sales agents involved in sales and distribution of mutual fund schemes. But, there was no transparency on the amount of commission being paid by the AMCs to the sales intermediaries out of this 2.25% entry load. Now, SEBI has removed this entry load and as such AMCs (Asset Management Companies) can not charge any fee to the investor when he invests in a fund. This will ensure that your entire money is invested in the fund without any deduction. As far as commission to the sales intermediaries is concerned , SEBI has made a provision where the investor directly can decide the amount of commission he wishes to pay the sales agent. The AMC will henceforth, be not involved in this. The commiss...

There is a good news for all those small investors who ,till now, could not invest in mutual funds because they did not have a PAN Card. Since PAN card details were necessary requirement for anyone wanting to invest in mutual funds, a vast majority of small investors were kept out of this . The idea behind PAN card details being asked from investors was to follow KYC (Know Your Customer ) norms . KYC norms intend to eliminate the chances of money laundering. But, now the regulation allows investment in mutual funds via SIP without PAN details as well. This is however permitted only till investment of Rs 50000. In banks too , the PAN details are asked only on deposit of Rs 50000 or more and in that respect this is consistent. What this change will do is that it will bring a whole bunch of small investors, who invest in small amounts , into mutual fund fold. They too can save for themselves and invest in mutual funds , thereby reaping its benefits. This will also increase the participat...

Banks have always placed lot of emphasis on trust factor in order to win over the customers confidence. People park their money with banks and as such would always prefer to deposit money in bank which they see as more stable ,trustworthy and fundamentally sound. As per the Brand Equity Survey conducted for most trusted brands in India, the results in banking space threw no major surprises. The top 2 slots were taken by government owned PSU banks viz. State Bank Of India and Bank Of India. The third place was taken by ICICI Bank, which to my mind is a bit of surprise considering the numerous incidents of near run on bank, fuelled by rumours of insolvency , in the past. LAst year too there was rumour afloat that ICICI bank was near bankruptcy due to its vast exposure in mortgage securities in the west. This had led to situation of uncertainty among the banks customers. Infact, the situation was rescued only after both RBI governor and Finance minister making a statement in favor of ICIC...

Generally the insurance companies pay upto 60-70% of the total repair cost of your car post an accident , under the car insurance cover. This is because the insurance companies pay based on the depreciated value of the car, do not pay for rubber,glass ,plastic ,fibre items etc. This results in significant monetary burden on the owner during car repair inspite of him having insurance cover. However, there are various add ons which are available in the market which will ensure that your cover on the car goes up and you are saved from the stress of paying for your repairs post any eventuality. Following are few of the options that one can look at 1. On Road Protector - Under this option, the insurance company pays for the assistance you might need in case of your vehicle getting immobilised post an accident. This will cost less than Rs 1000 per year. 2. Return to invoice - Biggest issue with vehicle insurance is that they tend to pay you the depreciated cost of the vehicle. So in case, ...

According to the data available with Chief Metropolitan Magistrate, the incident of bouncing a cheque has seen an increase of 129% in Mumbai alone. One of the chief reasons cited for this increase is the current economic downturn and increasing job losses. But, irrespective of the reasons , bouncing a cheque is deemed as a criminal activity and can have serious repercussions on the guilty party. Lets understand the full impact that bouncing a cheque can have on the person guilty of it. 1. Is a legal offence and can get you in jail - Dishonouring a cheque is a criminal offense under Negotiable Instruments Act , punishable by imprisonment of upto 6 months. The affected party can drag you to the court in case you bounce the cheque drawn by you in his favour. There have been numerous cases , where court has punished the guilty. 2. Loss of credibility - For any honourable man in general and businessman in particular, his credibility and integrity is very dear to him. An act of bouncing a ...