How policy rates hikes impact you - DNA (29th Sep 2011)

Interpreting your Bankers Advice

This is the plain truth about the Banking Industry. There are many instances where clients have come to us saying that Banks have compelled them either to go for unattractive FD's or expensive Insurance Products, at the time to allotting Lockers, which are not suited to the clients needs.
http://in.finance.yahoo.com/news/Interpreting-banker-advise-yahoofinancein-3752453008.html

Cover your home against natural disasters - ET Wealth (26th Sep 2011)

As the recent earthquake in Sikkim shows, no one is immune to natural calamities. Insuring your house will not only protect this costly asset but, more importantly, assure peace of mind, says Neelesh Garg.

    Ahouse is often the most expensive asset that is owned by an individual. The average Indian spends a good part of his life’s savings on buying and furnishing his house. Unfortunately, he does not pay too much attention to protecting it against natural or man-made disasters. He will insure his car, which costs 3 lakh, but his 30 lakh house and its contents are usually not covered. 
    While it’s true that the probability of damage to a car is greater than that to the house, but as the recent earthquake in Sikkim has shown, nature is unpredictable and a calamity can strike anywhere. It could be a flood in Mumbai, a tsunami hitting the coast of Tamil Nadu, or an earthquake in Latur. 
    While you can’t avert natural calamities, you can certainly protect yourself against the financial implications of rebuilding your damaged property. For a small premium of less than 1,800 a year, a home insurance policy offers a cover of 24 lakh to secure the structure of the house against damage by natural disasters and man-made perils (see table). Here are a few things you should keep in mind while buying home insurance. 
Cost of structure, not property Your property may be worth 60-70 lakh, but you don’t need such a big cover. The insurance is only meant to cover the cost of rebuilding or repairing the damage to the building, not the market value of the property. The cost of rebuilding the structure is 1,500-2,000 per sq ft depending on the quality of construction. A 1,500 sq ft house built with the best material should be covered for at least 30 lakh (1,500 ft x 2,000 = 30 lakh). It is beneficial to opt for a multi-year policy, which offers peace of mind along with with attractive discounts. Remember, however, that the cost of construction keeps rising, so it may be wise to review the home insurance cover every few years. 
Cover the contents Besides the structure, you also need to insure the contents of the house against damage. Not doing so can prove expensive as the total value of the contents could be greater than imagined. A rough calculation shows that the contents of an urban middle-class house are worth almost 12-15 lakh. This would usually include furniture ( 3-4 lakh), gadgets ( 2-3 lakh), appliances ( 1 lakh), furnishings ( 2 lakh), clothes ( 2 lakh), utensils ( 50,000) and ornaments ( 2-3 lakh). 
    Besides natural disasters such as storms, floods, or earthquake, the contents also face the risk of burglary or damage due to fire and short circuiting. Therefore, it is important to include the contents while picking a home insurance policy. The best option is to go for a package deal. If you take a comprehensive householder’s policy, companies offer additional covers along with the home insurance. The personal accident cover is especially useful as it provides compensation if an injury sustained in an accident results in temporary or permanent disability and affects the livelihood. In case of death due to accident, the nominee is given a lump sum as compensation.months after the disaster. 
    As far as man-made threats are concerned, the two major risks are terrorism and riots. Any damage rendered to the house by these can also be 
    covered under the home insurance policy. 
    How does one make a claim? After the calamity, inform the insurance agent about the destruction. The surveyor will undertake the process of estimating the damage. As it is difficult to list out everything you own after it is lost, especially at the time of a crisis, it is important to prepare an inventory of the contents beforehand and 
Additional covers Besides this basic protection, insurance companies offer add-on covers, such as the cost of living in a rented accommodation while your house is being repaired. If the house is rented out, the owner can take cover against the loss of rent if a natural calamity renders it unfit for occupation. However, these covers are for a limited period of up to 12 keep it in a safe place. This will make it easy both for the policyholder and the surveyor. 
    Home insurance protects your house at a low cost. In fact, the daily cost of covering it for 25 lakh is not more than the price of a cup of tea. Even so, the benefits far outweigh the cost. 
The author is the executive director of ICICI Lombard Insurance.

Even a bad SIP is a good bet - ET Wealth (17th January 2011)

Long-term SIP returns of equity funds show that you can never go wrong if your mode of investment is correct.

PRASHANT MAHESH 

    Wouldn’t you pity someone who invested in the Taurus Discovery Fund 10 years ago? It has been the worstperforming equity fund since January 2001, moving lethargically when other equity funds have whizzed past and created wealth for investors. Well, save your pity for those who chose not to invest in equities 10 years ago. Despite being the worst-performing equity fund in the past 10 years, Taurus Discovery has churned out 8.99% returns, which is higher than what a debt instrument would have earned during the same period. 
    The difference becomes stark when we look at SIP returns. The 10-year SIP returns of Taurus Discovery are over 15% (see table), much higher than what a debt instrument can offer. We looked at 10-year SIP returns of equity funds during different time frames and found that except for one instance, even the worst-performing equity fund had given significantly higher returns than monthly investments in debt options (fixed deposits, NSCs, PPF).
    Most investors already know that in the long term, equities have the potential to churn out the best returns among all asset classes. But many don’t realise that in the long run, SIP investments work best for them. “SIPs are an excellent tool for investors starting off in the age group 21-35 years as that is a wealth creation period,” says Partha Iyengar, founder, Accretus Solutions. During the early phase, individuals do not have too much to invest. For them, SIP is the best way to build an equity portfolio. Reliance Growth has given the highest SIP returns in the past 10 years. A monthly investment of 1,000 started in January 2001 is now worth 13.15 lakh, an annualised return of 38.17%.
    To see how SIPs work over different market cycles, we also looked at 10-year SIP returns at the end of 2008 and 2009. The results were not surprising. SIPs do work across market cycles as well, which means that a systematic investor need not worry about missing the bus or catching the tide. “SIP is an all-time product. It scores over a lump-sum investment since you invest irrespective of the market condition,” says Sankaran Naren, Chief Investment Officer, Equities, ICICI Prudential Mutual Fund. 
    In other words, you can never go wrong while investing in equities if the method you choose is right. As our research shows, long-term SIP returns of equity funds have always been higher than those of debt instruments. This may not have been possible if the investments were made in lump sum. 
    What is important, however, is to keep an SIP running over the long term and especially during downturns. There is no point in running an SIP for only a year or stopping it when the market tanks. “We recommend investors to do SIPs in diversified equity funds for long periods of time, typically more than five years,” says Vishal Dhawan, founder, Plan Ahead Wealth Advisors. Another mistake which most small investors make is close their SIPs when markets fall. “Stopping SIPs in bad market conditions defeats the very purpose of systematic investing,” says Anup Bhaiya, MD and CEO, Money Honey Financial Services.
    SIPs have evolved significantly since they were first introduced by mutual fund houses more than a decade ago. Now you can have SIPs in different intervals (daily, monthly, fortnightly or quarterly). The minimum amount of the SIP has also come down to 500. But one basic feature of the SIP remains unchanged: For the small investor, it remains the best way to invest in equities for the long term.

Which Health cover suits you? - ET Wealth (27th Dec 2010)

When health claims can be rejected - ET Wealth (20th Dec 2010)

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=pastissues2&BaseHref=ETM%2F2010%2F12%2F20&ViewMode=HTML&PageLabel=42&EntityId=Ar04200&AppName=2

Are you a "buy & forget" investor - ET Wealth (20th Dec 2010)

We believe that all good things come to an end. This article supports our view that it is definitely beneficial to take timely profits than simply hold your investments forever.

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=pastissues2&BaseHref=ETM%2F2010%2F12%2F20&ViewMode=HTML&PageLabel=33&EntityId=Ar03200&DataChunk=Ar03300&AppName=2

Buy Insurance only from a Professional Agent

This article helps you understand how does a Professional Agent defers from a person dealing with a Part timer.

Health insurance Portability - DNA (17th Sep 2011)

In the article below there are some essential points which one should consider at the time of porting their Health Insurance Policies from one company to another. 

Know What Makes a Financial Plan Succeed - ET (15th SeP 2011)

Financial plan just lays roadmap to your goals. The key is in ensuring extraneous factors don’t affect it.

NIKHIL WALAVALKAR 

Most people consult their family physician when they have health problems. The physician diagnoses the problem and writes the prescription. The patient follows the medical prescription and regains health. 
The scenario is almost similar when individuals approach financial planners. A financial planner prepares a financial plan to help clients achieve their financial goals. 
A financial plan takes into account all possible cash flows, possible contingencies and needs of an individual. But is that enough to ensure that the clients realise their dreams? Not really. Clients must keep in mind some factors that can reduce the possibility of success. 
BEHAVIOURAL ISSUES “The client himself is the biggest factor coming in the way of the success of a financial plan,” says Ranjit Dani, a financial planner with Think Consultants. Individuals get swayed by environmental factors such as information flow, peer pressure, emotions, etc. 
“It has been observed that investors take irrational investment decisions based on emotions, which then become an obstacle in achieving their financial goals,” says Pankaj Mathpal, managing director, Optima Money Managers. 
A financial planner takes efforts to come out with a long-term financial plan, but the individual client need not have the longterm orientation. 
“There are instances where an investor tries to take advantage of some short-term movements in certain asset market and that leads to disastrous results,” says Ranjit Dani. 
In some cases, the financial plan goes for a toss. For example, in 2007, a financial plan made only 60% allocation to equity. But the individual for whom the plan was made was keen on taking advantage of the rising equity markets. He overshot the percentage of equity investments recommended by the financial planner. He made fresh investments in equities, and did not bother to rebalance the portfolio at the end of the year. He saw a short-term appreciation of his portfolio, but the subsequent fall in the stock markets drastically reduced the value of his investments. As the markets continued the downward journey in the first quarter of CY2009, fear took over and the client opted out of equities totally, thus missing the dream run till mid CY2010. Had the investor stuck to the original plan, he would not have suffered much. It, therefore, pays to control one's emotions. It pays to go with one strategy and one plan rather than changing it often. Secondguessing a well-made financial plan only adds to confusion and not to wealth. 
CONTINGENCIES Contingencies in real life may turn out to be much bigger than what was accounted for in a financial plan. Consider a situation. Most financial plans offer hospitalisation covers for the entire family. Some times, due to limited resources, one is forced to opt for a family floater or a lower sum assured for non-earning family members under individual policies. 
“In case of an accident where the entire family is hospitalised for a prolonged period of time, the provisions may not be adequate. It is better to maintain extra funds to take care of contingencies,” says Abhishek Gupta, chief executive officer and founder of Moat Wealth Advisors. 
It may not possible to assess exactly how much needs to be set, but the effort is worth taking. 
Consider the case of a young executive whose father will be retiring from service soon. Now, while he assesses his insurance requirements, he must take into account his father's medical insurance needs since his (father’s) company will stop taking care of them once he retires. 
“If you have a senior citizen in your house who may need hospitalisation, it is better to keep extra liquid investments such as fixed deposits in addition to normal emergency funds,” says Abhishek Gupta. 
Of course, you are walking a thin rope here. Too much provisions for contingencies and too much of liquid investments can affect a portfolio's returns. 
EXECUTION & REVIEW This is where many financial plans fail. Due to various behavioural issues, like those mentioned earlier, there may be a slip between the plan and its execution. Then there are issues associated with execution of transactions. 
Investments can be made online, but it is not the case with all investments. And not all investors may be comfortable investing online. 
There are also those, especially of the younger generation, who find it difficult to make ‘offline’ transactions, even something as basic as completing the ‘knowyour-client’ guidelines. If the financial planner does not follow up, it may never happen. 
The risk of non-execution is very high when the individual asks for a financial plan and does not involve the financial planner in executing it. 
“As financial planning is based on many assumptions, it is very important to monitor the plan and review the performance of your investment regularly,” says Mathpal. 
A lack of review at timely intervals, say at least once a year, can make the financial plan a paper tiger that does not deliver much. 
CHANGE IN LIFESTYLE AND 
SAVINGS All financial plans use assumptions about cash flows and future trends in asset classes. There is little control one can exercise over macro economic variables in the world. But one's own lifestyle can be controlled and modified. In a situation where individuals upgrade their lifestyles due to a short-term increase in income, it is difficult to go back to the old lifestyle as income falls back to original level. In that case, savings go down and the financial plan may get hit. 
“Stick to your budget. In case there is a change in your cash flow due to a change in your lifestyle or any other reason, you must re-work your financial plan and re-design the strategy to achieve your financial goals,” says Mathpal. 
STRUCTURAL CHANGES These include core changes in environment. Changes in taxation rules can change the post-tax returns of a product and that can lead to a gap between goals and reality in the long term. It is the duty of the financial planner to inform clients about such changes and rework the plan. But, in the case of such changes, clients themselves should approach their financial planner to serve their own interests. 
In case of a job change, the status of the individual for tax assessment may change. For example, the rules applicable to resident individuals and non-resident individuals are not the same. 
If you are taking a job overseas and are likely to get the status of a non-resident individual, you will be better off informing your financial planner about it. 
nikhil.walavalkar@timesgroup.com 

What Teenagers really want - DNA (14th Sep 2011)

This a very interesting article for investors to identify companies for the long term.

HAVE SURPLUS, WILL PREPAY? BS Smart Investor (14th Sep 2011)

http://epaper.business-standard.com/bsepaper/svww_zoomart.php?Artname=20110914b_005101001&ileft=1&itop=55&zoomRatio=130&AN=20110914b_005101001

Now, you can buy physical Gold on EMIs - Mint 13th Sep 2011

How to Claim Health Insurance - ET Wealth (13th Sep 2011)

When to prepay a home loan - ET Wealth 13th Sep 2011

To avoid shelling out 2-3% penalty, make sure you scan the terms and conditions of prepayment.

KHYATI DHARAMSI 

    A good way to reduce your home loan burden, especially when rising interest rates are bloating your EMIs, is to prepay it. However, most borrowers are wary of taking this route as prepayment charges can be hefty at 2-3% of the prepaid amount. So, when the RBI announced last week that banks should not levy such penalty if floating rate loans are prepaid, it brought cheer to thousands of borrowers. Not for long, though. The directive, as they soon realised, is not binding on banks, at least not yet. Besides, it’s not applicable to housing finance companies, such as HDFC, LIC Housing Finance, Dewan Housing Finance, which come under the purview of the National Housing Board (NHB), not the RBI. 
    S Govindan, general manager, personal banking and operations, Union Bank of India, says, “It is not a directive yet and is purely in the form of desired action, not a guideline.” This will become legally binding only after the banks discuss it with their respective board members as well as at the Indian Banks’ Association. RK Bansal, executive director at IDBI Bank, says, “The prepayment charge waiver was discussed at the meeting of the banking ombudsmen. It is not a decision and the RBI is yet to come out with detailed guidelines.” 
    So, it’s advisable to wait if you are planning to prepay your home loan. However, there are some things you need to keep in mind when, and if, you choose to prepay. 
Prepayment limits If you have recently taken a home loan, you may not be eligible for prepayment. Most lenders have a time frame, usually six months after taking the loan, within which you cannot prepay. IDBI Bank levies a 2-3% charge on prepayment of loans if it’s done within six months. 
    If you are not faced with this restriction, check whether the penalty is applicable for complete or partial prepayment. HSBC does not levy a penalty if you prepay up to 25% of the sanctioned loan amount, but will be charged 3% if you cross this limit. In the case of HDFC, the 25% limit is calculated on the opening balance (that is, the remaining loan) in a financial year. Some lenders, such as Axis Bank, do not levy any prepayment charge. 
    Some banks do not levy a penalty on partial prepayments, but this will depend on when you foreclose the loan. If the loan is partially paid within one year of it being completely prepaid, you may have to pay a penalty on the earlier amount. So, if you prepay 2 lakh on 2 May 2011 and close the loan in October 2011, you will have to pay penalty on 2 lakh. In the case of ICICI Bank and Kotak Mahindra Bank, a 2% charge is applicable on the outstanding loan as well as the amount prepaid during the previous year, while HDFC charges this on the amount prepaid during the same financial year when the loan is foreclosed. 
ource of funds Both the RBI and NHB have been persuading lenders not to levy a prepayment penalty. Most of them have agreed that borrowers will not be charged if they prepay from their own funds, as opposed to using borrowed money. However, this facility is very stringent and lenders are fussy about defining ‘own funds.’ So, loans taken from other banks, employers, against an asset, or even help taken from a relative or children who are not co-borrowers, are considered ‘outside funds’. Bhopal-based Sukumar Chatterjee, discovered this when the interest rates shot up and he borrowed money from his son to pay 5.78 lakh of his outstanding loan. The 62-year-old was asked by the bank to pay a penalty as the funds were not his own. For proof, the bank referred to his account, which did not have the money for the previous six months. If Chatterjee had received a retirement bonus, sold his stocks or redeemed his investment, the money would have been considered as his funds and he would have been able to avoid the charges. 
    Banks ask for proof to substantiate the source of funds. “The borrower has to prove the availability of funds when he prepays the loan. Usually, they ask for bank account statement for the previous six months to verify the source of funds,” says an HDFC spokesperson. Even if you cancel the booking and the builder returns your money, you will have to pay the penalty when you return the loan to the bank. However, some nationalised banks offer a little more leeway. “If the 
    builder has cancelled the project, there is no charge. The customer can’t be penalised in such a case,” says Bansal. Also, most public sector banks are not fussy about the funds. Some non-PSU banks do not make any such distinction and levy the charges irrespective of the source of funds. “HSBC doesn’t distinguish between the source of funds while accepting prepayment requests. Standard prepayment charges are applicable,” says an HSBC official. 
Refinancing “If the loan is being paid by another institution or bank, you are considered to have ‘not paid using own funds’,” says Bansal. Banks are unforgiving if you prepay by taking a loan from another bank. “As a norm, many PSU banks don’t levy prepayment charges. However, there is no waiver if you refinance it,” adds Govindan. Axis Bank is one of the few lenders that does not levy a charge if a customer shifts his loan to another bank to take advantage of a lower interest rate. “The facility of zero prepayment charge on home loans on floating rate offered by Axis Bank is unconditional,” says Jairam Sridharan, senior vice-president (consumer lending & payments), Axis Bank. 
    Experts suggest that if you have had a long relationship with a bank and a good payment track record, you could negotiate with the bank. You may be lucky and save on steep charges until the RBI makes it binding on banks not to levy a prepayment penalty under any circumstance.

Now Pre-pay Your Home and Car Loans Without Penalty - ET (7th Sep 2011)

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2011/09/07&PageLabel=1&EntityId=Ar00102&ViewMode=HTML

Health Insurance Rating - ET Wealth (5th Sep 2011)

Throwing bad investments is good strategy

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2011/09/05&PageLabel=51&EntityId=Ar05000&ViewMode=HTML

Asset Allocation taken from ET Wealth (5th Sep 2011)

Use SIPs to fight volatility

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2011/09/05&PageLabel=32&EntityId=Ar03200&ViewMode=HTML

STILL SINGLE? SET SHORT-TERM GOALS FOR YOURSELF - Business Standard

MASOOM GUPTE

Chinmay Athle has been investing over 50 per cent of his salary in stock markets and the public provident fund (PPF). The 25year-old software engineer’s latest goal is to purchase a house.

Financial planner Malhar Majumdaris, however, not too convinced about Athle buying a house at this age. He feels that as Athle is still single, making a long-term commitment towards property may not be the wisest thing to do. Especially, when things (read his requirements) could change after marriage.

Setting goals is, perhaps, an important part of financial planning. Goals define the way you should invest and, more important, the instruments you should use to achieve these.

For example, if you want to purchase a house after five years, investing in equity would help. On the other hand, if you plan to travel abroad next year, a more conservative approach such as investing in debt instruments would be appropriate.

But, goal-setting is also a function of your age and means. Often, those who are single aim for the impossible–the latest carina year, a flat in a prime area in two years and the latest gadgets–all at the same time. Financial planners have a simple advice for such people: Keep goals reasonable.

Explains Ramalingam K, director, Holistic Investment Planners, a Chennai-based financial planning firm, “The state of your finances can change drastically after marriage. Therefore, single people must be careful with their financialgoalsandinvestmentdecisionstoensureaseamlesstransitionaftermarriage.” Athle,forinstance,hasbeen saving ` 15,000 for a year (his take home salary is `28,000).Of this, almost `10,000 is in equity, the rest being in PPF. He now wants to invest in property and discounting for home loans. While he intends borrowing the amount for down-payment from his father, he plans to stop his investments, atleast partly, for repaying his loan.

However, Majumder does not think it to be the correct goal for Athle. He feels as most home purchases are made on loans, the ability to finance a loan after marriage may not be known at this point. Also, the plans of single people tend to be uncertain, he says. For example, there may be sudden plans for higher education or shifting cities and such a liability may be difficult to shoulder.

Majumder says it is too early for Athle to take on such a huge commitment. Instead, it makes more sense to continue with the equity investments. The corpus created can be utilized for multiple goals in future, including the down payment of a house, he adds.

Besides a house, many going for an expensive car on loan too soon. As of now, Athle should concentrate on creating a corpus that will help make these purchases in the future with as little loan as possible.

If he invests `10,000 through a systematic investment plan(SIP) for the next four years, he would have accumulated as much as

`7.81 lakh (assuming annual return of 10 percent). The amount can be used for the initial down payment for a residence or car.

Typically, young people should be aggressive on equity, as their risk-taking ability and time horizon is much higher than senior citizens. But, having an emergency corpus — at least six months’ salary—in debt instruments will help in troubled times. Such investments can be parked in fixed deposits or liquid debt funds.

Creating a strong corpus through equity will reduce later need for debt to make big purchases

Goal setting is also a function of your age and means. Often, those who are single aim for the impossible–the latest car, a flat in a prime area and the latest gadgets–all at the same time. Financial planners have a simple a vice for such people: Keep goals reasonable.

Who is eligible for filing forms 15G, 15H and how to save TDS

http://epaper.dnaindia.com/newsview.aspx?eddate=9/1/2011&pageno=10&edition=9&prntid=148522&bxid=30568256&pgno=10