Money For Investment

We all heard the rumours about ICICI Bank going bust couple of times in the past.That rumour had created a panic among the account holders of ICICI Bank and serpentine queues were seen outside the bank and its ATM. It was very similar to the dreaded "run on bank" for ICICI.This had even forced RBI and Finance minister to come out in the open declaring ICICI Bank as a "safe" bank. So what was the fuss about? Can Indian Banks go bust and can you loose your money? The answer to this is yes. Indian banks ,like any other bank in the world are exposed to certain risks and theoretically can go bust like some of the bigger banks (Wachovia Bank in US)in other parts of the world have.And in that situation you may loose part of your money. No one in India will loose 100% of his money kept in the bank because Reserve Bank Of India insures deposits upto Rs 100000 for every customer in every bank. Any amount beyond Rs 100000 is only exposed to that risk.This scheme is called depo...

Till a couple of years back,credit rating agencies were an unknown entity in India.They were predominantly a western country phenomenon where the financial markets are much more developed.But,now things are changing in India as well,and changing pretty fast at that. In India we now have well established credit rating agencies which provide credit related data of individuals to the member banks and financial institutions. These credit rating agencies are now playing an increasingly important role in deciding whether your loan gets approved or rejected by the banks/FIs in India. Hence it makes sense,to know bit more about them. What are these Credit Rating Agencies? These are agencies which collate information regarding the credit history of an individual having loan/credit card accounts with member banks and financial institutions. They then make available this information to other banks and FIs, in exchange of fee , on request.The other banks /FIS use this information to decide on you...

With the cost of servicing customers going up for banks, the minimum balance amount to be held in savings account is being increased by banks these days.Most of the Indian Private banks now ask customers to maintain an average quarterly balance of Rs 10000 in their accounts ,up from Rs 5000 not so long ago.The foreign banks have much higher minimum balance criteria for all its savings account holders. What does this increase mean to you and how does this affect you ? Lets try and understand this and will also see how best can we deal with this problem. How does this minimum balance criteria work? The minimum balance criteria stipulates that for every day of the quarter, your savings account should have an average balance of Rs 10000 (in case of banks where the minimum balance is RS 10000,likewise it will change with the minimum balance amount). So for example, if you have an account with ICICI Bank or HDFC Bank, where the bank asks you to maintain Rs 10000 average quarterly balance in...

I meet lot of people who have bought insurance plans but have no clue if that plan is best suited for them.Most of them tell me that they bought it because the insurance agent recommended them this product as the best one for them.Well insurance agents are trained people on the subject matter of insurance and are supposed to sell you insurance based on your need analysis.Need analysis entails analysing the financial needs and goals of the client and based on that the agent should recommend a product. While there are few good agents out there who do that, the truth is there are plenty more who are out there to sell a product based on their OWN need analysis.and their need is to maximise the commission that they get out of the sale. The result is that lot of unsuspecting and naive clients end up with products/policies which may not be right for them.They keep on paying premiums year after year hoping that they are putting money in the right place and will help them reach the ultimate goa...

When you do a search on google insight on the term credit card complaint, you will see that there are mainly only 3 countries where this term is searched by net users, US, UK and India. And I was surprised to see that the maximum number of searches were from India, more than 4 times of searches in US and UK put together. This is a mere reflection of the bigger problem of mis-selling of credit cards by the companies/agents to the unsuspecting customers. Almost all of us either have had bad at least one bad experience with credit card companies or at least know someone who has gone through that nightmare. Most of the time there are disputes regarding late payment,bundling of insurance along with the main credit card which the customer never asked for or disbursing loan on credit card to customers by luring him with some marketing gimmicks etc. We all realise of this when we receive our monthly bills.When we see that bill is loaded with unnecessary charges we all get worried and baffled....

Crisil recently came out with a study which said that NPAs(Non Performing Assets ) of banks in India might see 200% growth in next 12-18 months. The delinquency levels across the banking industry is expected to treble as per Crisil. This coupled with continued job losses and depressing economic activity has led to fear among banks of rising defaults among the retail customers. As a result they are looking to restrict their exposure to retail customers especially in the unsecured loan segment like credit cards. ICICI Bank has sent out letters informing its credit card customers about their new limit which is lower than the earlier one. In most cases the cash limit is lowered to 0. This means they cant withdraw cash from their cards while the credit limit will stay at a much lower level. ICICI Bank is not alone in this. Others banks like HDFC Bank, Axis Bank, Citibank, Deutsche Bank, Standard Chartered Bank, HSBC Bank have also reduced credit limits of their customers , which also inclu...

The dramatic fall of over 50% in Indian stock markets since January 2008 has left many retail investors in bad shape. This is true for people who have invested in equities through mutual funds which are supposed to be less risky. But, the market collapse has led to many retail investors seeing their corpus down by a large percentage. Many are now regretting that they did not en cash some of their gains when the market was doing well.But since mutual fund investors could not have booked profits without selling their units, the option of en -cashing some of the gains was mostly untenable for mutual fund investors. But now ICICI Prudential has launched a mutual fund which aims to address this issue. Their Target Returns Fund is a fund which aims to provide all its investor an option to remove gains from the fund to a stable debt fund at a predetermined trigger,thereby protecting the gains made. How does this fund work? The fund seeks to generate capital appreciation by investing predomin...

Of late there have been numerous incidents of fraud reported involving the misuse of cheque books. The miscreants use the cheque leaf of someone else and then forge the signature of the customer and siphon off the money. In some cases, the cheque leaves are stolen from the drop boxes and then a bogus account is opened in some bank to en cash this cheque thereby defrauding the customer. The point I am making is that cheque books are as good as currency and needs to be guarded like we guard our cash .Besides being careful of the physical security of the cheque book what else can you do to ensure that its not misused against you ? There are certain precautions that you can take in this regard:- 1. A cheque is a written instruction you give to your banker to make payment by debit to your account on demand. Always cross the cheque making it account payee. This will limit the chances of it being misused. 2. Cheque is a valid payment instrument from the date shown on the face of it. By bankin...

We all invest in mutual funds and get the returns either in the form of dividends or get capital appreciation benefits under growth option. But do we know how is this income taxed in India? What are the tax implications on the income arising out of mutual fund investments? Will try and answer this today.We will look at how income arising from mutual funds are taxed for an individual investor. The income from mutual funds can arise out of dividend received from the fund or from the capital gains (short term or long term). Let us understand how is the income arising out of dividend and capital gains taxed as per Income Tax Act in India. 1. DIVIDEND a.On units of equity oriented funds (funds having more than 65% investments in Indian equity instruments) Income in the form of dividend is tax free in the hands of the investor. Moreover such a fund house is exempt from paying Dividend Distribution Tax also. b.On units of funds other than equity oriented funds Income in the form of dividen...

Reserve Bank Of India (RBI) somehow loves the date of 1st April. On this year April 1st 2009, it gave all the customers having ATM cards a unique gift of no transaction fee on cash withdrawals from non member banks ATM. So virtually ATM withdrawals from any ATM became free for the user , irrespective of his principal or mother bank. Come April 1st 2010, RBI has mandated that all the banks will have to calculate the interest on the savings account on a "daily product basis". This means that you will get interest even if you keep money in the account just for one day in a month.Currently banks give you interest on savings accounts depending on the lowest balance held between the 10th and the last day of the month. If you keep money in your savings account from 1st to the 9th of the month and withdraw it on 10th , then you will not any interest on your deposits even though the bak had your money for 9 days. This helps the bank enormously as most account holders get their salary ...

One of the classic dilemmas haunting lot of people is the issue of buying versus renting the house for accommodation purposes. Some experts feel that buying a house is the better option as it helps you create an asset in the long run, while some believe that renting is better option considering the prohibitive rates realty commands these days. And by renting one can save money by paying rent which will be lower than the home loan EMI and these savings can be invested for long term wealth creation. So both arguments have their own merits and none can be dismissed easily. Both of them have their own benefits and shortcomings. So, before we decide on which way to go ,we need to fully understand the pros and cons of each of these options. BUYING HOUSE PROS OF BUYING - It creates an asset for you in the long run. - You don't have to pay for your accommodation after you pay off your loan, which is maximum of 20 years, unlike,in renting where you have to pay monthly rent for every month ...

After having completed almost over 6 years in corporate world earning paychecks and living off it, I decided to do a bit of introspection last week and found out that in last 6 years , I have made some grave financial mistakes.I thought of sharing these mistakes with all my readers so that they can learn from them and don't end up making these mistakes themselves. MISTAKE 1 - Opting for "No PF Deduction" After I joined my first company ,I was thrilled at the thought of earning a handsome amount of Rs 12000 p.m.(Struggled to get anything better than that in those days after dot com burst). But I was taken aback when the first pay check that I got was for Rs 9800. I was baffled . I wanted to know what happened to the rest. A quick call to the HR and I was told about the various deductions that had eaten up the rest of my money. Eaten up? Yes that's what I felt then, and hence wanted to reclaim my money. So, I found out that there is an option wherein one can choose not...

Anand Chokkavelu from Fool.com wrote a very interesting article where he has discussed 10 numbers that have a deep impact on the person's wallet. He has talked about things like the minimum contribution in 401k account by Americans, America's saving rates etc.Some of the numbers mentioned there are unique to America and has little relevance for Indians, So I thought of listing down my own list of 10 numbers that affect the financial health of an average Indian. 9 This is the total charge under New Pension Plan in paisa terms. The total charges that an investor needs to bear in New Pension Plan will be just 9 paisa for every Rs 100. This is the lowest that any investment tool charges in India as on today. The second best cost effective options available in India is mutual funds which charges Rs 2.25 for every Rs 100. This difference in the charges over a period of 25-30 years result in huge difference in savings. NPS is expected to be launched for everyone (till now it was fo...

WE all know the importance of having a retirement fund which will take care of our expenses after we retire. Most of us are advised to start early at retirement fund so that with time it gains weight and becomes substantial by the time we retire. But what if someone hasn't been so prudent to start early . What if someone is due to retire soon and does not have any retirement fund so to speak. What are his options.Well I must admit that its a terrible situation to be in. However, there is a ray of hope for all such people ,if, they have a house in their own name. For all those senior citizens , who own a house , reverse mortgage is the solution to their post retirement worries. What is reverse mortgage ?- Reverse mortgage is the concept of pledging your self owned house to a financial institution who then makes you a loan basis the house value.This is just opposite of mortgage. In mortgage, the lender receives money every month in the form of EMI, whereas under reverse mortgage its...

Today , I thought of touching upon the taxation aspect of some of lesser known investments/payments like severance pay,EPF etc. We will examine the taxation aspect of EPF (Employee Pension Fund) VRS (Voluntary Retirement Scheme), Separation pay and Retrenchment proceeds. These days there are lot of people in the workforce who are facing the axe and are either laid off or are retrenched. Most of them do get a lump sum amount as fair compensation towards this. Since this is a one off event , most are unsure about the tax aspect of the money thus received. Lets try and see how money received under these options are treated by the taxman under Indian laws. 1. EPF - The tax treatment meted out to the proceeds from EPF depends on the tenure of contribution by the concerned person. If the person has contributed for less than 5 years in the fund, then the tax treatment is different , and if its more than 5 years then its different. Lets see both. A. Withdrawal before 5 years of contribution ...

Bankrate.com has come up with details of the money made by all the hollywood stars last year. Along with their incomes , it also compares the spending of the stars vis a vis a common man making just $30000 p.a. For example , its states that Brad Pitt Makes $25,000,000 a year and for him to buy a house of $275,000 it will feel like spending just $330. Now imagine,if for you and me buying a house meant just spending $330 (Rs 16500 approx) how many of us would have thought twice before buying house opposite Mannat ( Shahrukh's palace ,for the uninitiated). This explains why celebrities splurge on mansions. Similarly, extending this to purchase of laptops, for a common man in US, laptops cost $2000 , but, if Brad Pitt were to buy the laptop , he would feel like he paid just $2.4. Now if we get laptops for that much , I will buy 5 at least. This is the beauty of being rich. It does wonderful things to your spending power.Looking at this , I am reminded of the saying that rich get riche...

Have you ever wondered what happens to all the money in savings account, mutual funds , shares, bonds etc in a person's account , after his demise , in absence of a will? You would assume that it goes to the legal heir. Well it does technically,but not in practical sense. That's because I read somewhere that most of the money in such cases is not passed on immediately to the deceased's wife,children etc due to the legal cases filed from other family members. Everyone wants to claim a piece of the money left behind by the deceased and hence it gets stuck in legal wrangle. In effect , the basic reason of providing for his dependents by the person after his demise is defeated.Certainly, you would not want this to happen to your dependents. So what should you do? Well the answer is simple:Nominate the person whom you want to inherit your investments and savings in all your investments and savings documents. What is Nomination facility? Nomination facility is an option availabl...

Mr. Rakesh Kumar is a senior executive with a private firm drawing salary of Rs 25000 per month. He has been working since last 3 years ,but ,hasn't been able to invest much in last 3 years . He says he never had enough money saved which he could invest. There are quite a lot like Rakesh Kumar out there. Almost all of us have felt that our savings are inconsequential and hence investing such a small amount wont make much of a difference. The result is we never invest only. So what is the solution? How can someone with modest income and saving start investing ? The answer to this is Systematic Investment Plan or SIP. What is SIP? SIP is a method of investing a fixed sum of money every month in a scheme. It is similar to a recurring deposit where a fixed amount is deposited every month in the bank account. Under SIP, fixed money is invested by the investor which in turn is used by the AMC ( Asset Management Company ) to buy units form the same money for the investor. How does it wor...

Yesterday I went to meet few of my ex colleagues over lunch at a city restaurant.There I got to know of something which I thought I must share with all of you. There among others, I met Anil Surve. While talking to him , he told us that he had recently bought a house for himself. Everyone congratulated him , but, I was pleasantly surprised.He was asked by someone as to how did he manage it considering that he had started working only 4 years back. While 4 year is a good time to save money , it certainly wasn't enough for most of us. Most of us were still struggling to save anything which could be called sizable by any stretch of imagination.Here he had bought a house for himself. Just buying a house in itself was such a big deal, on top of that what really was most impressive was the fact that he had paid 11 lakhs as down payment out of his own savings for a flat of Rs 30 lakhs. That was quite a sum for most of us. So how did he do it ? He could do so because of a unique habit or w...

These days one of the most widely discussed topics in business media is the threat of the economy plunging in deflation.Various agencies are forecasting that India will slide into deflation somewhere in April end or May 09 and this has created lot of anxiety among the policymakers. Deflation by definition means lowering of prices of goods and services. Isn't this what we all always dream of ? So then why is everyone scared? Well there are reasons for that and will try and understand all the aspects of deflation and its effect on the broader economy and the common man. What causes Deflation? Deflation is caused by general slump in prices of goods and services in the economy. The price destruction happens due to overall demand destruction for goods and services in the economy. Lower demand forces the producers of goods and services to lower their prices in a bid to push sales. The consumer on the other hand seeing price cut waits and expects further price cuts. This starts a cycle w...

Yesterday, the inflation numbers came in at 0.26 as against 0.31 a week ago. This is the lowest rate of inflation in India in last 30 years.Is this a reason to rejoice or regret?What exactly does low inflation mean to a layman. How does this impact our lives and should we really be worried about it? We will try and find out answers to some of these questions here. What exactly is inflation? As per wikipedia ,inflation is a rise in the general level of prices of goods and services in an economy over a period of time.Simply put it is the rate at which the general prices of goods and services are increasing over the last year prices of the same goods and services. Higher inflation denotes increase in the prices at higher rate while lower inflation means that the prices are rising at a much lower pace. Low inflation does not mean that the prices are decreasing. Does it represent all the goods and services? Inflation numbers represent the fall in wholesale prices of goods and services comp...

Imagine Alladin (From Arabian Nights) being alive today with his magic lamp. Imagine him being a equity investor. What would have happened with him having the magic lamp willing to fulfill all his wishes? He would have never made a loss , always bought winning stocks and made ton and tons of money, dwarfing the likes Warren Buffett etc. But, alas that happens only in fairytale and not in reality. In reality, there is no magic lamp. But, there are still ways and means of finding winning stocks . There is a definite science to finding a great stock with great earning and capital appreciation potential. Following are the qualities that you must look at before zeroing on any stock: 1. Bargain price on Offer? - The first thing any value investor looks at in a stock is its price. This is because to be able to make money on stock exchanges, one has to buy at low levels and sell at high levels. Hence, one must always look for stocks which are being sold at bargain prices on the exchange. How ...

While planning for our insurance needs, the importance of term insurance can never be overstated,however,there is another aspect of our lives which though equally important, does not receive enough attention. That is the threat to one's livelihood due to disability.A disability can be physical (such as paralysis, loss of limb, deafness), mental (such as depression or post-traumatic stress disorder) or intellectual (such as a learning disability). Some people are born disabled; others become disabled as a result of an accident or disease. Consider some statistics from World Bank Report : - 750 million people in the world are disabled, according to the World Health Organization (WHO) - 80% of disabled people live in developing countries -10% of the population in poor countries is disabled - 1 in every 10 children around the world copes with a disability - Only 2–3% of disabled children in poor countries go to school Disability can be a major cause of financial distress , especially i...

One of the biggest drawbacks of stock trading or investing is the short term loss that one may have out of this. This causes lot of grief and pain to all of us. But, do you know that there are provisions in the accounting principles which allow us to convert these short term losses into profits? Sounds impossible ? Read on .. According to provisions, you are allowed to offset short-term capital losses against short term or long-term capital gains not just for this financial year, but for up to eight consecutive years. This means that if you book short-term capital losses before March 31, you can not only reduce tax incidence for the year on capital gains income but also save on capital gains, if any, you acquire over the next eight financial years. For starters, short-term capital assets is one which is held for not more than 36 months immediately prior to the date of transfer. There are, however, exceptions. In case of shares, securities units of UTI, specified mutual funds and zero c...