FINANCIAL PLANNING

QUESTIONS & ANSWERS TO GET THE RIGHT INCOME TAX RETURN.

2008-07-15T18:36:00.000+05:30

Q 1. Heard of New Year. What are financial year, previous year and assessment year?

Ans. A financial year (FY) is a period of 12 months commencing on 1 April of a year and ending on 31 march the next year. An assessment year is the year immediately following an FY. For the purpose of calculating income tax. FY is the period during which the income has been earned. The income earned in a FY is assessed in the following year, that is, the assessment year. For example, income earned in FY 2007-08 ( 1 April 2007 to 31 March 2008) will be assessed for tax in the year 2008-09. The year preceding the assessment year is the previous year.

Q2. What if I have not received my Form 16?

Ans. Employers are supposed to hand over Form 16 by 30 April. Ask your employer to issue Form 16 immediately so that you don’t miss the 31 july deadline for filing return for salaried employees. If you think that your employer might not issue the form in time, you can write a registered letter to him on the issue and send a copy of this to your assessing officer in time. If no tax was deducted at source, you can ask your employer for a salary certificate on his letterhead stating your salary during the financial year. This certificate can be used to file a return.

Q3. can I use my investment in ELSS this year to reduce last year’s tax liability?

Ans. No. But if you had not claimed any deductions in your previous year’s return, you may file a revised return to claim a refund, if eligible. However, fresh investment would not be eligible for deductions from last year’s income.

Q4 Taxes get deducted from my salary every month. Do I need to file income tax return?

Ans. Yes. Filing of tax is compulsory for every person whose gross total income, that is, the income under the five heads before allowing for any deduction such as insurance premium, exceeds the basis exemption limit. For financial year 2007-08 ( assessment year 2008-09), this exemption limit was 1.45 lakh for women below the age of 65 , Rs 1.95 lakh for person above 65, and Rs 1.10 lakh for any other individual. Every person failing in the tax bracket should file a return, even if his tax liabilities have been taken care of by the employer through tax deducted at source (TDS). Persons whose salaries have been subjected to TDS are also required to file return because they may have earned from sources other than salary.

Q5. I have earned under two heads-salary and capital gains. Which form should I use to file my return? How will my tax be assessed?

Ans. As an individual assessee, if you have earned income from capital gains in addition to your salary, you will have to file your return in form ITR-2. for taxation, you will have to first segregate capital gains into short-term (STCG) and long-term (LTCG). Any gain from selling shares held for more than a year is termed long-term. Gain from sale of shares held for a year or less is called short-term. If you have paid the securities transaction tax on all share trading, LTCG will be exempt from tax and STCG will be taxed at 10 per cent for FY 2007-2008. your gross tax outlay will depend on your salary income, income from capital gains, income from other sources like interest on bank deposits, and the deductions you are entitled to.

Q6. I was in two jobs. How should I file return?

Ans. The aggregated income from both your employers will be considered while calculating your tax. Ideally, both companies should give you Form 16 for
Salary earned during the relevant period. Try to get a salary certificate from your previous employer if u cannot get from him. Submit this estimate and a declaration in Form 12B to your current employer who will then incorporate these details in the Form 16 that the issues.

Q7. What if I miss the deadline of July July 31?

Ans. If there are no balance taxes to be paid, no interest or penalty will be levied if you file your return before 31 March 2009. However, there is a penalty of Rs 5,000 if you fail to file by that date. In case there are tax arrears, a penalty of 1 percent per month will be charged as interest on the taxes due.

Q8. I took up a job in Bengaluru recently. My IT return was filed in Delhi till now. Where should I file in now?

Ans. You can file your IT return either in the city you are residing in at present, or in the city where your office is located. Since you have joined a company based in Bengaluru and also shifted your residence there, you will be required to file your return at Benguluru. You should write a letter about the change of your address to your current assessing officer the change of your address to your current assessing officer and mark a copy of the same to your assessing officer in Delhi. You should also write to the IT Department to get your address a copy of your previous year’s return while filing your return at Bengaluru. This will serve as a ready reference for your current assessing officer.
Q9. Last minute planning can hurt. How do I prepare myself for next year?

Ans. This financial year (2008-09) would be better than the previous one as Budget 2008 has already brought a minimum of Rs 4,000 as tax saving for all the taxpayers. There is a gamut of instruments that can be used to avail deductions under Section 80C. The mix taken term of the various instruments. However, most taxpayers generally forget to factor in whether the income generated by the instrument is subject to tax. It is at the fag end of the wade up to the need to save taxes through investments. An in this last minute commotion and confusion, a lot investment happens in assets that are low on return, high on risk, or unsuited to the long-term financial objectives of the investor. As in life, it is always better to be an early riser in tax planning too and begin right at the dawn of a financial year, in April.

A deduction of up to Rs. 1 lakh is allowed from income every year on specified investments, expenses or payments. Among these are bank deposits with a minimum period of five years, life insurance premiums, Employees’ provident Fund. Public Provident Fund, repayment of the principal amount on housing loans, tuitions fees, National Savings Certificate and equity-linked saving schemes. Link tax saving investments to long-term goals. Gauge Section 80C instruments as tax savers and wealth creators by looking at their post-tax return.

Q10. I have misplaced my insurance receipt. Is it necessary to attach it and other relevant documents with the tax return?

Ans. No attachments are needed with the current ITR forms as the forms themselves capture most of the required information. You don’t even need to attach the computation sheet with the form. After you submit the form, the IT department cross-references the TDS details using Oltas ( Online Tax Accounting System). However, make sure to carry the photocopies of all the relevant documents to the income tax office.

Q11. Where do I file my returns?

Ans. The filing process has been centralized, so you can file your return anywhere in the country, at IT offices and even post offices. If a person has relocated, he just needs to intimate the change of address and file his return at the new location. Filing can also be done through the Internet. The help of authorized intermediaries can be taken.

Q12. TDS is nil on my income. Do I have to file return?

Ans. You may skip filing return if your taxable income was below the exempted limit. However, if your gross total income exceed the basic exemption limit, then you have to file a tax return even if no tax was deducted as source.

Q13. I do not have enough money to pay off my tax dues. What is the best way out? Should I sell off some of my equity investments?

Ans. A tax amount may be due to the government after you factor in the income from various sources like salary and capital gains. To settle this due, you may see a loan from friends or relatives or raise a personal loan from a bank. If that does not work our, you may sell some of your low – yielding shares or mutual funds. if that does not suffice, you can use your credit card to raise funds. arrange for the funds in the quickest possible time and try to pay of any debt you run while raising the funds as soon as possible.

Q14. I bought shares worth Rs. 1.25 lakh last year. Do I have to disclose that and other transactions?

Ans. Certain disclosures are mandatory while filing an income tax return. Among these are investments above a specified amount in bank deposits, mutual funds, shares and property in the financial year for which the return is being filed, 2007-08 in this case. The cut-off amount of investment from where disclosure should be made is Rs. 1 lakh, or more for shares, Rs 2 lakh for credit card payments, up to Rs. 10 lakh for deposits in one bank during the year, Rs. 2 lakh for mutual funds. Rs. 5 lakh or more for bonds or debentures issued by a company, Rs. 5 Lakh or more for RBI bonds and Rs 30 lakh or more for the purchase or from the sale of immovable property.

Q15. My wife earns Rs 10,000 per month from part time coaching classes at an institute. Is she required to declare her income and file tax return?

Ans. For FY 2007-08, the basic exemption limit for not filing return for females is Rs. 1.45 lakh per annum. Your wife is earning Rs. 1.2 lakh per annum, which is below the taxble limit. Therefore, it is not mandatory for her to file her income tax Rs. 1.8 lakh per year from FY 2008-09. Filling of return will be required once her income crosses this limit. Also, she will need a PAN card to file returns then.

Q16.Incurred losses last year while trading in shares. Can gains from other sources set these off?

Ans. Short-term capital losses can be set off against long-term (LTCG) or short-term capital gains can only be set off against LTCG. Loss from trading in shares cannot, however, be set off against gains from ‘other incomes’. A loss that is not wholly set off in the financial year in which it is incurred can be carried forward to eight succeeding assessment years.

Q17. I don’t have a PAN card. How do I file may return?

Ans. The Permanent Account Number (PAN) is compulsory entry in the tax return form. If you have lost the card and forgotten the number too, get your PAN number and also a new copy of your card by giving your personal information to the Income Tax Department. The tax return form needs only the number, so you can file return if you get that in time. If you have not obtained a PAN card till now, you should apply for one. Act fast as the last date for filing returns is very close.

Q18. My minor child Is earning an income. Should I file a separate return on her behalf?

Ans. It depends on the source of income. In case the child has earned income using her talent, it will be assessed in her hands and you will have to file return as the guardian of the child. However, if the resources from where income has arisen belong to you, it will be clubbed with your income.

Q19. I am a salaried employee. I don’t know whether I am liable to pay advance tax. If I am, is there a penalty if I don’t pay?

Ans.Payment of tax in advance on the income of the current financial year is compulsory for every person liable to pay tax in India. However, there isno need to pay advance tax if the total tax payable for the year is less than Rs. 5,000 or if the employer has deducted tax from the salary as TDS. Non payment or short payment of advance tax will attract penal interest.

Q20. My brother is abroad and will return after 31 July. How can he file his return?

Ans. If your brother had left India without signing on the ITR form, offline of return is not possible. The only way for him to file his return in that case is to log on to a computer and let technology work for him. He can do this from any where in the world. He will need to use his digital signature.

LOAN AGAINST PROPERTY SIMPLIFIED

2008-04-26T12:12:00.001+05:30

Built up an asset? Here’s how you can make it work in an emergency?

The road towards owing a houses of your own is usually paved by scarifies and financial discipline. The sacrifices could have involved rising the down payment by breaking investments or taking a loan from your provident fund, which, if left untouched, would have yielded higher returns on maturity. The discipline would have come in through rigorous financial planning; possibly from the day you stated earning.

So what do you do in an emergency? By their very nature, emergencies come without warning. How would you raise money then? A loan against your property is you best bet.

1 WHAT IS A LOAN AGAINS PROPERTY (LAP)?

It is a loan given against the mortgage of your existing property. Lending institutions will typically give you anywhere between 10-60 per cent of the market value of the property as a loan subject to your repayment capacity. Certain instructions give even up to Rs. 3 crore as loan against property.

2 WHY TAKE LOAN AGAINST PROPERTY?

Although personal loans are unsecured loans and no mortgages are necessary, they come at a cost – an interest rate of 16-25 per cent per annum. The maximum tenure of personal loans is not more than 5 years with a flat rate of interest. On the other hand, loans against property come at a 12-14 per cent reducing rate of interest. The tenure for a loan against property is up to 15 years. The reason for the lower cost is that the property serves as security for the leading institution.

There is also the “There Is No Alternative (TINA)” factor: Buying a house is a substantial financial investment. Chances are that in various asset classes, to buy your house. So, now if u need money the loan against property is your only option for affordable credit.

MEASURING RISK- MUTUAL FUNDS

2008-04-10T16:22:00.000+05:30

Risk associated with mutual funds’ returns can be measured through two methods. Standard Deviation and Sharpe ratio.

Fluctuation in a mutual fund’s (MF) returns point to the risk. This may be caused by factors that are specific to the securities included in the portfolio or the risks by macro factors that affect all securities as well as portfolios and cannot be eliminated. The total risk in a MF, caused by these factors, is measured by Standard Deviation.

STANDARD DEVIATION (SD). This is a measure of how the MF’s actual performance strays from the average returns over a period. In other words, it is a measure of the consistency of an MF’s returns. A higher SD number indicates that the net asset value (NAV) of the MF is more volatile and, hence, it is riskier than a fund with a lower SD.

There are certain caveats in using the SD number to evaluate an MF as it gives an estimation of risk only when it is seen in conjunction with its peer group. A SD of 24 for an MF gives no information of its risk unless the investor knows that other MFs in the category have standard deviations of only 20. The investor would then consider the MF with the higher SD as being riskier. The other issue is that it rewards consistency irrespective of whether gains have been made or losses. So, an MF that gives negative returns consistently will have a lower SD as compared to a one that gives positive but fluctuation returns.

SHARPE RATIO (SR)

This is a measure of the risk adjusted return of a MF. It evaluates the return that it has generated relative to the risk taken. An MF with a higher SR is better simply because it implies that it has generated higher returns for every unit of risk that was actually taken by it. Calculation of SR is taken as the free rate of return such as the 90-day Treasury bill. Risk here is measured by SD.

As with SD, SR suffers from the drawback of being a relative measure. It gives no meaningful information on its own, but it is useful to rank and compare MFs that are being evaluated for investment. The use of SD may distort the ratio. An MF with low or negative, but consistent, returns will have a low SD and a high SR.

The evaluation, however, is complete only if qualitative factors such as portfolio composition, consistency in investment objectives and strategy are also considered.

How to meet unexpected expenses in short time?

2008-03-26T11:24:00.000+05:30

Hi everybody! I am coming with new article for you. In this article we come to know how to meet our unexpected expenses in short time. Hence every month we have budget and allocate our income to various expenses. So we are in track to go smoothly. Suddenly your friend come and put a invitation letter in you hand and says his marriage held next month. So you need extra money. Then you receive one phone call from your brother regards he needs some money for pay school fee with due date tomorrow. Again you are in deep obligation.

In this type of situation what you think. How you arrange money for your immediate needs. I have solution for you problem. Just go for Payday Loans . This is only way to survive immediate needs. Because, the lender will credit the loan amount the same day in your account. Repayment also easy and they use your debit card and debit directly.

For vacation holidays, marriage gifts, birthday presentations Cash Advances are very useful options when we are in needy. Because online application process, no processing time and easy payment options are main features for Payday Loans .

I believe, this article helps you to get easy for Payday Loans & Cash Advances with in one day.

FIXED INCOME INSTRUMENTS

2008-03-19T16:28:00.000+05:30

If you like the safety of a steady predictable income, every month, quarter or year, then there are a number of tax-saving instruments available for you. In fact, most of the tax saving paper you could buy earlier was in this category. For those who are uncomfortable with fluctuation incomes that market-linked instruments give, these are the products for you.

Admittedly, returns from fixed income instruments averaging about 8 per cent a year, do not even compare with those from equity-related products that have returned over 40 per cent in the last few years. But then, the return you get is also market risk-free. At the end of every designated period, you know you will get a certain amount. And that imparts stability to a portfolio . They are suitable for investors who need to cut down on the risk, such as people nearing retirement. For them these could even from the mainstay of their portfolio . The choice you have is fairly wide.

VANTAGE POINTS

Three important things that one needs to look at before investing in any of the mentioned fixed income instruments are taxability of interest income, frequency of income and tenure of investment. Even if the interest rate on the Senior Citizens’ Savings Scheme ( SCSS) is 9 per cent per annum, the income is fully taxable. This means that for someone in the highest tax-bracket, the actual return after-tax will be only 6.22 per cent.

Similarly, if your need is a regular monthly income, the instrument with the highest post-tax return, public provident fund, may not be the right choice. Only three of the fixed income instruments that qualify for relief under section 80C given a regular stream of income. The SCSS pays interest quarterly, 5-year notified bank deposits half-yearly, and time deposits annually.

So, it appears that there is nothing for anyone who is looking for steady monthly income. But that is not quite correct, although you would have to get a little active about your investments in that case. Rather than putting in a lump sum when the taxman is almost knocking on your door at the end of the financial year, you can invest throughout the year. That, defector, will give you steady monthly or quarterly returns as the instruments mature in a phased manner.

So, you can invest and rest assured that your money is safe, although inflation can eat away at it quietly. To prevent that, you need to look at equity.

NEW YORK FASHION SCHOOLS – A SITE FOR FASHION SCHOOLS

2008-03-07T21:29:00.001+05:30

Fashion , , the word land mark of creativity, Fashion is for innovation. Fashion is the way of life we are living. It is art and relates our culture. Its also have systematic instructions. So it needs institution to learn.

The http://fashion-school-finder.com/New-York-Fas is the one of the best fashion school information provider. To know about the site please read it.

New York streets are birthplace of many fashion trends. It makes sense to attend school where you can witness first-hand, fashion being experimented upon, accepted, rejected, and everything that comes in between.

In New York fashion schools making best designers and markets of world fashion. The most known schools are Katharine Gibbs School, The Art Institute of Pittsburgh, West wood College Online developing trends and new designers and create markets.

Who want to become a great designer, they can choose New York schools as their destination. The way of teaching and learning is different from others.

Do you watch the Oscars and other award shows just to comment on what the stars are wearing? Maybe you have a certain talent, or an eye for picking up new trends before anyone else does. If so, you're going to find a fabulous career as a fashion Designer .

Brooks College - Long Beach, CA, International Academy of Design and Technology - Chicago, IL International Academy of Design and Technology - Tampa, FL, American Intercontinental University - Buck head, GA, American Intercontinental University - Los Angeles, CA , International Academy of Design and Technology - Detroit, MI, International Academy of Design and Technology - Las Vegas, NV, International Academy of Design and Technology - Seattle, WA are also best schools for fashion designing in US.

Wherever you decide to go to study fashion Design, it's a good idea to do some research. Is it important to you to live near fashion capitals like New York, Los Angeles, or even Milan or Paris? The fashion industry is so large today that there are many different kinds of fashion writers out there. Besides the more obvious "couture" culture to report about, fashion Designers may stake out their own identity by writing on new trends like "wearable technology," focusing on celebrity fashions, or researching consumer trends. While it is not necessary to choose your niche before entering a fashion degree program, it's always good to keep your eye on where you're headed!

THE OLDEST SLOT SITE – EASY WAY TO PLAY SLOTS

2008-02-29T14:54:00.000+05:30

Online casinos are more famous in the online gaming world. The www.sloterix.com is the oldest site of online casinos . Gambling is the easiest way to earn money the even slot game are more famous among the casino games . Online slots are managed by slot machines. Slots online is safest way in casino games .

You just drop in your money, press a button and wait for the result. Secondly, casinos get most of their profits (over 60%) from ' electronic gambling machines' such as Slots . This is called the 'Hold'. Land-based casinos average a 7% to 10% hold, while online casinos average a 3% to 5% hold. This generous house advantage is why you see slot machines everywhere.

The basic game, as mentioned above is very simply. You just drop in your money, press a button, wait for the dials to line up and see if you win. Your strategy involves knowing what the pay line is and how much money you need to insert into the machine. Many casinos have 'static' slots, where there is a preset jackpot which does not change.

You can bet any amount ranging from 25 cents up to $100. However you should take care how you spend your betting money. If your total bankroll is $50, then playing $5 a shot will consume your money in 10 goes. Instead, play the 25 cent slots and work your way up as you become more confident.
Slot machines have a 'payback cycle', where they pay out relative to the amount of money paid in. This is why one person can spend two hours on a machine and get nothing while another person can get the jackpot on the first or second try.

ENJOY WITH GAMMON WORLD

2008-02-29T14:27:00.000+05:30

Now a days online gamming is significantly increased. We enjoy the online game good amount of fund and joy. Here I want to discuss about http://www.gammon-world.com/ . This backgammon site is well designed and attractive.

Lucrative colors, understandable content and easy navigation system main features of this online backgammon . The backgammon online have 250000 registered members and established in 1999.

Gammon-World provides you with the ultimate Internet backgammon excitement. If you are looking to play online backgammon, learn more about backgammon, or just want to keep up with exciting , learn more about backgammon updates and events, Gammon-World the Internet backgammon site for you.
Gammon-World is a unique concept in online backgammon games, and its free, that's right no charge to play. Play for free, and it's simple. Gammon-World is backgammon at the touch of your fingertips, whenever and wherever you decide to play backgammon online . Just go to Gammon-World and select your opponent from thousands of human opponents. Players don't even have to be logged on at the same time.
I feel it’s a attractive to play.

WHAT FORMS AN MUTUAL FUND?

2008-02-29T14:06:00.000+05:30

Fund managers and distributors are just the face of a mutual fund. There are other entities in the background that make up and manage a fund

The main constituents of a mutual fund are its sponsor, trust, asset Management Company, custodian, and registrar agent. All of these must be registered with the market regulator, Securities and Exchange Board of India ( Sebi).

SPONSOR

The promoter of a mutual fund is called a sponsor. Sebi’s mutual fund regulations of 1996 required a sponsor to have experience of a at least five years in the financial services business, three years of which shold have been profitable. The sponsor is responsible for getting the MF registered with Sebi. It creates the asset management company and the trustee company, contributes towards their capital and appoints the boards of both these companies with the approval of Sebi.

TRUST

The trust holds the investors’ money in fiduciary capacity. The investors are the beneficial owners of the assets. The trustees ensure that the fund is managed according to the investment objective of the scheme and that investors’ interests are protected. Trustees are paid a fee for their service. At least two-thirds of the directors on the board of trustees are required to be independent trustees.

ASSET MANAGEMENT COMPANY

The AMC creates and markets the products, collects and manages the funds held in the trust according to the investment mandate of a scheme. It is responsible for all operation-related activities. AMCs have to have a net worth of at least Rs 10 crore. Half of the directors on the a fee for its services. One AMC can work for only one fund and cannot do any other business.

CUSTODIAN

The securities and assets of a fund are in the custody of a custodian. It is independent of the sponsor and is appointed by the board of trustees to receive and deliver securities either directly or through a depository company. They charge a fee, which is included in the recurring expenses of a fund. Unlike an AMC, a custodian can function for many companies at the same time.

MISTER GAMMON – AN ONLINE BACKGAMMON SITE

2008-02-29T13:58:00.000+05:30

Today I am discussing about online backgammon site . Here we can find about online playing, online backgammon tournaments . In tournaments all players can play online and have great fun as well as money. It is very easy root to gain maximum money from this site.

Just play backgammon then you come to know how it real and prompt in payments. Because their payment system is very fast and accurate.

To start play in this game site you should register with this site and its also free. Then start earning money.

I feel that it is the best way to earn money in online.

And the support system of this site is also attractive. The site design is good and well designed to understand everyone.

PLAY ONLINE BILLIARDS AND FEEL GREAT

2008-02-27T13:00:00.000+05:30

In this competitive world, every thing is target oriented. We always undergo stress and tense. We must need some refreshment and relief. Online games like online billiards is one of the best in industry.

Billiards is good game to play. It have variety of options like 8ball game , like 9 ball game , snooker , pool .

8 ball pool is played by 2 people, with 15 coloured balls and a white cue ball. Half of the ballas are solids (1-7) and half are stripes (9-15). The 8-ball is black and is in neither group, serving as the last ball to pocket and win the game. To start the game, the players 'rack up' - put all the balls in a triangle formation at a designated place on the table (this is done for you in online pool) - and one person 'breaks' (takes the first shot). When the first ball is pocketed, this decides which player plays solids and which plays stripes. So if one player breaks, and pockets the 4 ball, she will go on to play solids. If she breaks and pockets both the 4 and the 12 balls, she can choose which group she wants to play. Players then take it in turn to take shots, aiming to pocket only balls from their group (solids or stripes). After a successful shot, the player can continue to play. After an unsuccessful shot, play moves to the other player. When one player has potted all of his balls, he may take a shot at the 8-ball, to win the game. He must designate which pocket he is aiming for. If he succeeds, he wins the game.

In 9-ball pool , the aim of the game is to pocket all nine balls in order, from the lowest number to the highest. The winner is the player who pockets the 9-ball after all the other balls have already been sunk. Snooker is a rather different game, played on a larger table with 15 red balls, and 6 other coloured balls, plus the white cue ball. Each coloured ball has a different value, as follows: red (1), yellow (2), green (3), brown (4), blue (5), pink (6), black (7). The goal of this game is to score as many points as possible.

Online pool is much like real-life pool . It is important to focus on the game in hand. And of course, it’s all about angles. Use the mouse to direct the cue and take your shot. Vary the speed with which you move the mouse towards the ball to create stronger or weaker shots. It will take a few goes to get the hang of this, but in no time, you’ll find you’re playing online pool like a natural. Our top-of-the-range software means that you get an authentic pool experience, with accurate physics backing it all up.

The support of the site is good and useful.

KNOW HOW TO CLOSE YOUR DEMAT ACCOUNT!

2008-02-27T11:19:00.000+05:30

Shares are kept in the dematerialized or electronic form in two depositors- Central Depository Services Limited and National Securities Depository Limited. Depositories receive shares though depository participants (DP) and not directly from investors. DPs are registered with the Securities and Exchange Board of India ( SEBI) and act as agents for depositories. To trade in shares. You need to have two accounts a trading account with a share brokers and a demat account with a DP. Keeping the trading and depository accounts with the same entity “ to avoid settlement hassles”. Your can change your DP if your current one is not prompt with settlement of shares you buy or sell. For that, you will have to open a new depository account and then close the old one.

STEPS TO CLOSE A DEPOSITORY ACCOUNT

1. APPLCATION : Submit it in a the prescribed format, annexure Q, to your DP. You can download the application form the DP website, for example http://www.nsdl.co.in/ . Submit all unused delivery instruction slips, which are issued y DPs and are used by investors for transferring the shares., with the request from. All the stocks would be transferred to your new depository account, which would be mentioned in the application form. A demat account can be closed only if there are not shares in it.

2. NEGATIVE CASH BALANCE: If your account has none, settle it before submitting the request for its closure. Negative cash balances arise on account of charges related to the account, like the annual maintenance charge. If you request closure without settling the negative balance, the DP can either reject your application or accept it with a waiver of the charges.

3. DEAD ISIN: The international Securities Identification Number is a n ID number that is unique for all the shares of a company. The account cannot be closed if it contains ISINs. There is no problem in transferring live ISINs, which belong to companies whose shares are being traded on stock exchanges, but what do you do with dead ISINs, which are of companies whose shares are no longer being traded? In this case, apply for dematerialization of the dead ISINs (conversion of electronic holdings into share certificates, the opposite of dematerialization) to your DP before placing your account closure request. The DP passes on the request to the concerned depository, which the intimates the registrar , which finally issues the share certificates to you. If you don’t get share certificates from the registrar and are unable to get your account closed due to pending remat requests, you should get it frozen.

4. HOW TO FREEZE AN ACCOUNT: Open a new account and request your current DP to transfer only dead ISINs in the old account. Apply for freezing, or suspension of this account in the prescribed format, annexure P. To revive the frozen account again apply to the old DP in annexure P.

DRIVEWIRE AUTO PARTS & ACCESSORIES.

2008-02-22T21:36:00.000+05:30

Car, it is most important part in our daily life. Now days without car we can’t imagine in our daily life. So, we must care about our car and always be keep in good conditions.

While making car services, some time we feel about the service bill. Because of costly of Car Parts. It may cost more than the original cost. Then we think what the correct price of the Car Parts? , Dodge Parts?, aftermarket car parts?

To know the correct answer for all above questions, there is one solution. That is http://www.drivewire.com/ . It provides all necessary information relating to Car Parts, car accessories . The site features are below

1. REPLACEMENT PARTS

Here we can find all car parts , sub parts, its value and compare the value with competitors.

2. ACCESSORIES

Here we can find all brand accessories year wise and brand wise with price wise details. The provider offers since 1949 model.

3. VEHICLE GUIDE

Here we can find all vehicle brands, its important parts, its images. It covers all over world car parts and its important sub parts with images also.

4. PARTS GUIDE

Here we can find all car parts guide, and how its better with other car parts with good detailed information.

My strong advice to all that you can get good information and get lowest prices through online.
Thanks for spend your valuable time for reading this article.

ONLINE CASINO, AN EASY WAY TO EARN MONEY!

2008-02-19T15:47:00.000+05:30

Now internet based online casino are very popular and most off all being done well. This is easiest way to earn extra money in leisure time. There are lot of web sites for playing online casion, some one only providing better services and trust.
Here another player “joyland”, http://www.joylandcasino.com also providing good services, variety of games like blackjack, roulette, slots and so on.

Not like most of the sites, the site navigation is good and easy to operate. The web site design is attractive and impressive.

Another important in this casino web site is start up bonus. Here you can get $808 in starting bonus.

The download process is very simple and good explanation given by the web site. First you should deposit $20 for membership fee and you can start earnings. Here our earnings laid in the form of “comp points”. Once we acquired some reasonable amount of camp points, we can convert into cash in our account.

The below games are being offered by joyland.

Video Poker
Blackjack
Progressive Slot Jackpots
Video Slots
Multi-line slots
Single-line slots
Caribbean Poker
Craps
Roulette
Baccarat
Keno
Arcade Games
And many moreâ€¦

Joyland offers auto-spin, Auto-Spin allows you to set the slot machine to spin automatically for you. Now you can win while you drop the kids off at school or make yourself a cup of coffee.
You can find the Auto-Spin feature in the "Menu" tab located in the lower right hand side of the slot machine screen. Click "Menu" then click "Auto-spin" and then choose the amount of spins you wish to make automatically. Now you can sit back relax and watch your winnings pile up.

And finally, Joyland offers most security and privacy also.

THE BEST “DEBT CONSOLIDATION” ADVISOR!?

2008-02-12T08:46:00.000+05:30

Hi, everybody! To day my topic is “DEBT CONSOLIDATION” and How can we solve the Debt Consolitation?

At first you have a doubt about What is Debt Consolidation?

Here the answer is,

Debt Consolidation is the technique of gathering several credit card debt, loans and other liabilities and combining them into one. A debt consolidator thus consolidates all of his debt by taking out a single loan to pay off the debt as a whole. Debt consolidation allows you to combine all of your loans into one loan, usually at a lower negotiated interest rate.

Facts about Debt Consolidation in America

According to the Federal Reserve Board, debt in American households has reached the $2 trillion mark, excluding mortgage debt.

US households with at least 1 credit card had $9000 debt per each credit card owned. So if a typical household owned 3 credit cards, they would be in $9000 x 3 = $27000 in debt.
According to the Bank of England, the consumer debt in UK has topped the £1-trillion mark.

Example of Debt Consolidation

Assume you have $35000 worth of unsecured debt. One debt is a 2 year $15,000 loan @ 10% APR while the other debt is a 4 year loan of $20,000 @ 12% APR. This means you have to make debt payments of $750 on the first loan while making payments of $617 on the 2nd loan. This means your total monthly payment on these debts is:

Debt Consolidation Loan # 1 ($15,000 Principal @ 10% APR for 2 years)

Outstanding Debt: $15,000APR: 10%
Annual Interest = $15,000 x 10% = $1500
Monthly Interest = $1500 / 12 = $125
Monthly Premium = $15,000 / 2 / 12 = $625
Total Monthly Payments = $625 + $125 = $750

Pitfalls of Debt Consolidation

While there will be some people who use debt consolidation to really pay off their debt, most people won't. For example, immediately after consolidating all of their debts into one, most people will go on a shopping spree and max out their credit cards. What happens next? They're in debt again!

Actually, it is estimated that 78% of debt consolidators see their debts grow back to original levels after the original consolidation. This is because these consumers have less savings, bad spending habits and no real determination to get out of debt.

Now I am introducing the Debt Consolidator - http://www.3debtconsolidation.com/ the site features are………

Debt Consolidation

Creditor's Database, Contacts & Debt Settlement Policies

Payday Loans Consumer Information for Each US State

Debt Calculators

Sample Letters

Free Consultation

so, now you can reduce your payments up to 60%, and u never receive collection calls, no new loans & importantly eliminate interest rates.

My advise is just prepare your debt settlement , ready to go for debt consolidation loan. For these things just contact here 877-884-0880 all with new loans!!

NINE VALUABLE INCOME TAX DEDUCTIONS (U/S 80)

2008-02-11T16:52:00.000+05:30
Look beyond section 80c to cut your tax burden further. Remember, you will have to spend under a specific head to claim these sweet little tax breaks. Charity, Education Loans and Medical Bills; All qualify for a tax break.

Section 80C

Qualifying products: NSC, notified bank deposits and post office time deposits, EPF and PPF, ELSS, life insurance plans, deferred pension plans.

Mandatory requirements: payment has to be made before 31 March 2008.

Who can avail the deduction: individuals and HUF( Hindu Undivided Family) both resident and non-resident.

How much: Cannot exceed Rs 1 lakh.

Section 80CCC

Qualifying products: Pension plans of life insurers.

Mandatory requirements: Payment has to be made before 31 March 2008.

Who can avail the deduction: Individuals.

How much: Within the overall limit of Section 80C (up to Rs one lakh.

Section 80D

Qualifying products: Medical insurance policies taken for self, spouse, dependent parents or children, or any member of HUF.

Mandatory requirements: Premium should be paid through a cheque out of income chargeable to tax.

Who can avail the deduction: Individuals, HUF

How much: Up to Rs. 15,000; senior citizens can claim up to Rs. 20,000

Section 80DD

Qualifying products: Expenses on the medical treatment of a dependent who is a person with a disability of a dependent who is a person with a disability.

Mandatory requirements: Certification by a medical authority.

Who can avail the deduction: Resident individual or HUF

How much: Up to Rs. 50,000 or up to Rs. 75,000 if the dependant is a person with severe disability.

Section 80DDB

Qualifying products: Expenses on the medical treatment of a specified disease ( cancer, AIDS, neurological diseases, chronic renal failure and more)

Mandatory requirements: Certificate in Form No. 10-I to be submitted along with the income tax return form. Deduction is available if the amount is actually paid for treatment.

Who can avail the deduction: Resident individuals or HUF

How much: Rs 40,000 ( if the person treated upon is less than 65 years of age), or Rs 60,000 ( if the age of the person treated is 65 years or more)

Section 80E

Qualifying products: Payment of interest on loan taken for higher studies.

Mandatory requirements: Deduction is available in the year in which repayment stats and only for eight immediately succeeding assessment years.

Who can avail the deduction: Individuals.

How much: Deduction available on the total interest portion of education loan, the principal repayment gets no tax advantage.

Section 80G

Qualifying products: Donations to certain funds and charitable institutions.

Mandatory requirements: Not applicable.

Who can avail the deduction: Resident individuals or HUF

How much: 50 or 100 percent deduction on the entire donated amount, or 50 or 100 percent deduction subjet to 10 per cent of gross total income.

Section 80GG

Qualifying products: Rent paid for residential purpose.

Mandatory requirements: Should not be getting house rent allowance. Actual rent paid is in excess of 10% of the total income.

Who can avail the deduction: Self-employed or salaried.

How much: Excess of actual rent paid over 10% of GTI, or 25% of GTI(Gross Total Income), or Rs 2,000 per month, whichever is the lowest.

Section 80U

Qualifying products: Expenses incurred on self, if disabled.

Mandatory requirements: Certification by a medical authority to be furnished along with the income tax return form.

Who can avail the deduction: Resident individuals.

How much: Rs 50,000 for a person with disability, Rs 75,000 for a person with severe disability( disability of over 80 %)

FINANCE FOR SMALL BUSINESS OWNERS

2008-02-11T11:27:00.000+05:30
Here I have found one web site http://ezunsecured.com/ for easy & quick credit facility for small business owners.

This Small Business Credit Lines offers below credit facilities.

TO EXPAND OUR BUSINESS

TO GET REGULAR WORKING CAPITAL

TO START NEW BUSINESS

TO CONSOLIDATE DEBT

TO ESTABLISH A FUND

TO INVOICE FACTORING

TO UN SECURED BUSINESS LINE OF CREDIT

TO NEW PROJECT FINANCING

TO BUSINESS CREDIT CARDS

The above lines of credit have below features like No collateral, No Tax returns, No Business Plans, No UCC Filings are not required.

And also offers 6%+APR and Easy Process, Fast Funding, Excellent Service.

Once visit this site http://www.ezunsecured.com/index.php & enjoy its
Small Business Credit Lines

WHAT IS DIFFERENT BETWEEN INVESTMENT AND SAVINGS?

2008-02-11T07:23:00.000+05:30

Investment is an activity that is entered into by those who have savings. Savings can be defined as the excess of Income over expenditure. But all savers need not be investors.

For example, an individual who sets aside some money is a box for a nice birthday present is a saver, but cannot be considered as an investor on the other hand, an individual who opens a savings bank account and deposits a part of the money regularly for a nice birthday presents would be called an Investor.

The motive of a savings does not distinguish a saver as an investor. However, the expectations of the saver distinguish the investor from a saver. The saver who puts aside money in a box cannot have an expectation of excess returns attached to it.

However, the saver who opens a bank deposit account expects a return from the bank and hence is differentiated as an investor. Expectation of return is hence an essential characteristic of Investment.

ONLINE CASION - www.32vegas.com

2008-02-10T18:53:00.000+05:30
To day I am introducing on of the best online casino site http://www.32vegas.com/ , in my first look I observed that the site design is attractive colors and tabs are placed to understand even for fresh visitors also.

Here we can find all casino games like black jack, roulette etc.

I believe that it is 100% genuine site for online casino and gamblers can feel fashionable environment with the feel of stepping into a real Las Vegas Strip casino.

Here the big offer is 320% welcome bonus. More over 32Vegas holds a gaming license from the government of Kahnawake.

Moreover, 32Vegas guarantees its commitment to fair gaming. Its professional, supportive, and secure environment allows for a winning experience.

The "Dealer" is powered by a hi-tech computer at 32Vegas. To ensure that the performance of this computer is truly random, a sophisticated RNG (Random Number Generator) is utilized.

The Random number generator has been tested by leading international accounting and auditing firms on 32Vegas software, By running millions of game rounds and analyzing their outcomes, the system is being periodically tested to ensure its ongoing accuracy.

In addition to that, the 32Vegas average payout percentage, which is the percentage of total winnings to total wagered amounts, is reviewed on a monthly basis to ensure the systems ongoing randomness and fairness.

32Vegas aims to put you in a glamorous and fashionable environment with the feel of stepping into a real Las Vegas Strip gambling casino online. On top of that, your odds of being a winner are likely a lot better than in any live online gambling casinoline. The casino uses a custom version of the immensely popular PlayTech software, with more than 130 different games of the highest quality to suit all tastes. Of course you can play all of the old-fashioned casino classics at 32Vegas, like blackjack, roulette and craps, some of them even with live dealers, but perhaps even more intriguing are the huge progressive jackpots

In my opinion gambling casino online. Site http://www.32vegas.com/ is one of the best for glamorous

WHAT TO KNOW BEFORE SIGNING ON THE DOTTED FILE(HOUSING LOAN)

2008-01-22T13:46:00.000+05:30
Have you recently decided to apply for a home loan? Be sure to consider the following frequently asked questions before signing on the dotted line?

1. WHAT IS RATE OF INTEREST?

This is the cost that the bank/home finance company charges you for the money it lends to you. It is one of the most important factor to evaluate as the rate of interest will determine the equated monthly installment (EMI) that you will be expected to pay. There are two types of interest calculation for a home loan fixed and floating rates. Under the fixed rate, your rate or interest ( ROI) will be fixed for a particular period as mentioned in the home loan agreement. Under the floating rate, your ROI may change depending upon the cost of funds for the lending institution and measures adopted by the Reserve Bank of India (RBI)

2. HOW DO I GET THE BEST RATE?

First, you should ideally check the prevailing rates across home lending institutions/banks. Next, compare and contrast the various benefits that each institution provides to ensure it meets with your needs. Keep in mind, the lending institution/bank offering the lowest rate will not necessarily offer the best speaking with a representative at a bank with which you have an existing relationship. If your credit is in good standing, you can use it to get a better rate and facilities from the institution with which you have a banking relationship.

3. WHAT OTHER COSTS SHOULD I CONSIDER?

Always enquire about processing and administration costs. As the names suggest, these are the costs that the lending institution charges for processing your loan proposal. These costs typically vary between 0.35 per cent and 1.5 percent of the loan amount, and have an upper limit as well.

Also remember to factor in the cost of registering your new property! You will have to pay the applicable stamp duty rate in the State to get the property registered in your name. While stamp duty rates have come down, they can vary between 4 and 10 per cent across states.

4. WHAT IS MAXIMUM TENURE OFFERED?

Depending on a customer’s profile, age and financial strength, loan tenure may be offered even up to 25 years by a lending institution.

5. WHAT ARE THE PAYMENT OPTIONS?

You can pay your Equated Monthly Installment ( EMI) either thought post-dated cheques ( PDC) or through the Electronic Clearing System(ECS)

6. CAN I PRE-PAY?

This depends on terms and conditions on your loan. Some lending institutions do not allow you to prepay for a specific period. Also, you should inquire with the lending institution’s representative about any charges incurred for partially per-paying or foreclosing your loan.

7. WHAT IF I DEFAULT?

If you foresee a situation where you may default towards servicing your loan, be upfront with the lending institution and clearly explain the reasons/situation. Lending institutions will look into such matters and could take measures to help you. if you do not inform the lending institution, you may be placing your credit standing at risk.

8. HOW SOON WILL THE PROPOSAL BE APPROVED?

Once you have submitted all of the required paperwork for your loan, the lending institution/bank will verify whether or not falls under their list of approved projects/area. Therefore, when you are selecting a property, it is important to choose a builder who has a good track record and an independent house constructed as per an approved sanction plan. Then, the loan process can normally be completed with in seven working days. Be aware, if any of the documentation is out of place or missing, it could take longer.

NOTE: REMEMBER, THE MONTHLY INSTALMENT IS LOWER FOR LONGER-TENURE LOANS, AND YOUR LOAN ELIGIBILITY IS GREATER WHEN YOUR LOAN TENURE INCREASES.

CASH ADVANCE & PAY DAY LOANS

2008-01-17T14:18:00.000+05:30
Everybody has own income from their profession or business , as well as savings also. Every one has their own budgets and calculations to manager their money successfully.

But, there is uncertainty or deviation in our budgets in each month. For example your friend invites you for his marriage, so you attend the marriage and give some gift to him, so u need extra money, this is deviation to your budget or your calculation of your monthly income.

Another one, you want to enjoy the holidays with a tour, so you need extra money.

Or you want to do shopping with your friends or relatives accidental invitation from them.

For all above reasons, you need extra money, for it there is opportunity that is payday loan! cash advance! are available in http://www.trustsource.org/.

In this site loan seekers can find

Additional Earnings
If you have a job but need some extra money between paychecks, this is the right site for you. Additonal earnings.net specializes in finding payday advances that supplement your monthly income when needed.

Womens PayDay
This is the perfect site for women who are in need of quick cash assistance. Whether money is needed for paying bills, shopping or just going out with the girls, this site seems to understand women’s cash advance needs and how to meet them quickly.

Maximum Wages Cash Advance!

This site finds you lenders that will lend you up to $1,500 in cash assuming you meet certain criteria. The key focus of maximum wages.net is to maximize the amount of cash available to you through lenders. This is a great site if you are looking for a cash advance.

Silent Cash Loan Cash Advance!
If you want your cash advance to be totally CONFIDENTIAL, this is the site for you. This site ensures that lenders securely and confidentially process your payday advance, so that no one other than you knows about the money you are receiving.

Urgent Cash Relief Pay Day Advance!

This is a good site if you have immediate cash needs. If you need money for car problems, medical emergencies, past due bills or just a quick grocery run, Urgent Cash Relief.net can help. This site specializes in finding quick, small amount loans to assist
This site is one of the good advisor for payday loan! cash advance!.

KOTAK MF OFFERS SIP WITH A CHEAP LIFE COVER

2008-01-12T14:10:00.000+05:30

Building your insurance and investment needs into one is an expensive proposition. For example, unit-linked insurance policies charge a first-year commission as high as 30 percent.

But , now you have a mutual fund (MF) that will meet both these needs at a much lower cost.

Kotak MF has launched Kotak Star Kid (KSK), which merges investment and insurance needs at a lower cost, All your need to do is start a frest systematic investment plan (SIP) in either the Kotak 30 scheme or the Kotak Tax Saver fund over a tenure of either 5, 10, 15, or 20 years. You can then appoint your child as the nominee.

KSK offers you a life cover provided by Kotak Life Insurance – at an entry load of 3.25 % , 1 percentage point more than what SIPs typically charge(2.25%)

Your choice is not unlimited though; the mutual fund has laid out the options for you depending on your age. Since KSK is aimed at fulfilling the needs of your child and also insuring them, it is open for ages 23 to 45 years.

YOUR OPTIONS
AGE ________TENURE (YEARS)
23-30 ------------5, 10, 15, 20
31-35 ------------5, 10, 15
36-40 ------------5, 10
41-45 ------------5
HOW MUCH COVER

At any time after the 13th month, your cover is the sum total of the remaining SIP installments. For instance, if a unit holder opts for a 5 year SIP at a monthly sum of Rs. 5000/-, and dies in the 13th month, the amount that the nominee gets will work out to be Rs. 2.40 laksh ( 60 months less 12 month, the cover is 10 times the monthly SIP value, Under both cases, the nominee will also receive the prevailing value of all the installments already made. No medical tests are required up to a maximum cover of Rs. 10 lakh; between Rs. 10 lakh and a maximum cover limit of Rs. 1 crore, tests are mandatory. KSK does not cover existing SIPs; you will need to start a fresh one if you wish to opt for this facility.

KSK is akin to the Super SIP facility that DSP ML MF had launched in 2005, but is different in bits. Despite being a good initiative, the product found few takers as many investors refused to commit money for the long term. Sandesh Kirkire, chief executive officer, Kotak MF, however is confident that KSK Will work because he says the product is similar to understand than Super SIP. “Also, KSK is an on-going facility and is open throughout. Unlike SSIP, we do not intend to keep it open for a limited time period.

SHOULD YOU OPT FOR IT?

At present, KSK is available only in Kotak 30 and Kotak Tax Saver. It is not yet available in Kotak Opportunities fund (KOF) the MF’s most successful fund in the past three years. Kirkire assures that KOF and a host of other Kotak schemes will soon get included in KSK. By turning the tables in insurance companies on the back of sweating systematic investing with a cheap insurance cover, here’s one effort that ought to give a boost to the MF industry caught on the wrong side on account of aggressive mis-selling of Ulips on the back of higher commission. Opt for KSK in Kotak 30 or wait til the MF includes KOF in the plan.

TWO POST OFFICE SCHEMES WILL GET TAX BENEFIT

2008-01-12T13:54:00.000+05:30
Good news for those investing in post office schemes. Two of the schemes will fetch tax benefit, and another one will fetch a 5 % bonus.

Those investing in 5-year Post Office Time Deposit Account ( POTDA) and the Senior Citizen’s Savings Scheme (SCSS) would now be eligible for tax exemption under section 80C. This comes into effect from 1 April 2007.

Deposits in a POTDA can vary over 1-5 years. The exemption would be available only for 5-year deposits, which offers 7.5 % interest. This is in line with 5-year bank fixed deposits, which also get tax benefit. However, the interest earned from both these schemes would be taxable.

Also, a bonus of 5% will be given on the Post Office Monthly Income Account. It will be applicable to accounts opened on or after 8 December 2007. the effective yield from the account will now be 8.9 % against the earlier 8.3 %.

ARE YOU GOING TO TAKE PERSONAL LOAN?

2007-12-22T13:42:00.000+05:30
Most of us factor in emergencies while planning our finances. However, sometimes, eve our best efforts fail to foresee certain contingencies. Perhaps we need to raise cash at short notice and our accessible investments are in inadequate. Or perhaps we don’t want to dig into our savings to meet a sudden demand.

It is precisely in the situations that personal loans offered by banks and financial institutions come in handy.

WHY PERSONAL LOANS?

Unlike a home loan, a personal loan would generally not require any collateral to be provided by the customer to any bank or financial institution. It is basically an unsecured loan and carries a slightly higher rate of interest from 16 to 30 percent than a secured loan.

HOW DO I GET A PERSONAL LOAN?

Although the paperwork for a personal loan is less than that for a secured loan, the eligibility criteria are much stricter. The criteria, however, varies across banks. Typically, to sigh up for a personal loan, you should have a net take-home salary of at least Rs. 8,000 per month and have completed 21 years of age.

Before you apply for a loan, check the eligibility criteria on the bank’s website. Most banks provide this information. In some cases, they also provide an EMI calculator, which will give you an idea of the quantum of loan that you can afford. Bear in mid, though, that not more than 40 per cent of your net take-home salary should be directed towards servicing all your loans.

As with any other loan, you will need to apply with the bank/financial institution. Some banks/financial institutions along give you the option of applying online. In case you apply online and provide the necessary details, an executive of the bank will approach you for the necessary documentation.

If you are a salaried professional, you will need to attach papers like your salary slip, income tax return forms for the past two years, recent bank statements that show the salary being credited, proof of identity and residence and proof of educational qualification along with the application form. A self-employed person will need to furnish proof of his business continuity and business continuity and business turnover.

Once the bank/financial institution verifies the authenticity of the papers, the loan application may take around four working days for approval. The amount sanctioned, however, will depend on factors like your net monthly income, occupation, years in service, your education, etc.

HOW MUCH CAN I BORROW?

Typically, you can borrow up to 12 times your monthly take-home salary. The maximum amount of loan that can be sanctioned varies across lenders. In India, the upper limit is usually Rs. 15 lakh. The repayment tenure can vary from 12-72 months. The repayment of the loan can be done through post-dated cheques for the loan tenure. Some banks may also offer electronic clearing system (ECS) facility to repay the loan.

However before you approach a bank/financial institution for a personal loan you should always check the details on the company website. Most of the information about the product is already available online. Once you have done your background study, you can list down your specific queries that you can take up with the concerned official at the bank/financial institution and get them answered.

4 STEPS TO BUILDING A FINANCIAL TRACK RECORD

2007-12-21T14:15:00.000+05:30

Why is it important to maintain your credit profile? As you apply for loans in future, having a solid repayment track record may have benefits with the potential lending institution. For example, you may be able to get your loan faster, you may be eligible for higher loan amounts, or you may even be able to obtain a better price on your loan. A common mistake such as a missed or late payment may impact your credit profile, making it harder for you to obtain loans, credit cards or other financial products. To ensure that you are on the right track, know the following:

1. KNOW YOUR OUTSTANDING BALANCE – DO YOU HAVE DETAILED RECORDS OF EACH EMI?

It is wise to keep track of each payment that you make to wards a loan. This will help you monitor your payments, know your balance and, most of all, assist you with your budgeting. If you have opted for Electronic clearing Service, then your equated monthly installment ( EMI) is automatically deducted from the designated bank account on the specified dated. Make sure you know the date funds are transferred and confirm that each payment transaction is accurate and on time. If you have chosen to provide post-dated cheques, then it helps to request confirmation from your bank each month to ensure that the correct payment is make to the lending institution. If your account is low on funds, replenish it before the due date. You don’t want to risk incurring a later loan payment.

2. KNOW THE CHARGES AND PENALTIES – ARE YOU CAUGHT UP IN THE DEBATE OF REPAYMENT VS. PREPAYMENT?

Just do a quick calculation on the remaining balance to see if it is worthwhile to pay off your loan in advance. One way to evaluate this is to find out if the interest on your outstanding balance due is significantly higher than the penalty for the foreclosure.

3. KNOW HOW TO PLAN FOR YOUR FUTURE – ARE YOUR PLANNING ON TAKING ANOTHER LOAN SOON?

Check your loan options. You may be able to use your existing financial relationships ( insurance policy, car loan, home loan, current account/savings account, etc.) to obtain a loan. Your track record from this financial relationship may help you obtain a no-hassle loan with a lower interest rate with your current provider. You will need to check with your lending representative for the details.

4. KNOW HOW TO MANAGE YOUR FINANCE – DO YOU HAVE DIFFICULTY REMEMBRING PAYMENT DATES?

Don’t put your credit profile at risk by defaulting on any of your monthly payments. If you have multiple loans such as a car loan, a home loan, personal loans or even credit card balances, you may want to consider debt consolidation. This option will allow you to combine some or all of your loans at a lower interest rate while helping you to organize your finances.

HOW TO TAKE A PERSONAL LOAN?

2007-12-21T08:08:00.000+05:30
Personal Loans can be used for emergencies, business ventures, household improvements, marriages or even taking that well-deserved vacation. When you decide to take a loan, it is a good idea to dig deeper and evaluate factors such as interest rates, processing fees and any other charges like pre-payment penalties.

KNOW YOUR RATE OF INTEREST

The interest rate is the cost of the loan that you need to pay to the lending institution. There are two way of interest calculation that you should be aware of a flat rate and a reducing balance rate.

If a flat rate is quoted, then your rate should not change irrespective of the payments that you make to the lending institution. For example, if you take a loan of Rs 1 lakh with a flat interest rate of 20%, then you will have to pay the lending institution Rs 20,000 as interest per year.

If a reducing balance rate is quoted, then the interest will be applicable only on the outstanding principal and not on the original loan amount. Therefore, with each repayment that you make to the lending institution, the outstanding principal amount gets reduced, which may be more cost effective for you. As a rule of thumb, the reducing rate is almost 2 times the flat rate. However, this will vary with varying tenure- which is why it is important to confirm if the rate is applied on a monthly or annual basis.

Understanding these rates will help you figure out how the loan has been structured for you. Furthermore, when discussing your loan details with the lending representative, it is important that you are upfront and clear. Disclosing the full details of your financials will help the bank or financial institution determines the appropriate lending rate for you.

IDENTIFY ALL THE COSTS

Apart from the interest rate, you need to factor in processing fees, charges, and penalties. Lending institutions typically levy a processing fee. This is a one-time fee that is charges for processing your application and is a percentage of the loan amount. This could vary from 2 to 5 percent of the loan amount and can be negotiated. You should also be aware of other charges like late payment, cheque bouncing, cheque swapping, etc. in case of any ambiguity do not hesitate to seek clarifications from the lending institution.

Some institutions may also offer payment protection covers or loan insurance. These services are optional and may be levied as parts of your monthly payments. However, make sure that you understand the terms and conditions of these services as well and any charges associated with canceling the service.

It is wise to account for every penny when calculating the total cost incurred for the loan. This will also help you prepare for your discussion with the lending representative and compare various loan options.

AVOID PRE-PAYMENT PENALTIES

The duration of a personal loan is typically from 2 to 5 years. So what do you do if you are suddenly flooded with cash and want to use it to prepay the loan? First, ensure that you clearly understand the prepayment terms and conditions as mentioned in the loan document. Then, confirm any pre-payment penalties or foreclosure fees. Typically, lending institutions levy a pre-payment penalty based on your outstanding amount and remaining loan tenure.

As a customer, repaying your loans on time or even earlier will help you build a solid financial track record. Or ganizations like CIBIL are tacking these records and a solid track record will also help you get the best deals when you apply for future loans!

CASH ADVANCE & PAY DAY LOANS UP $1500 THROUGH ONLINE!?

2007-12-20T14:50:00.000+05:30
Yes!

Its true, here the web site(http://www.cashadvance1500.com/ ) for cash advance & pay day loans, who needs money instantly.

This web site gives more advantages to their customers. In this we can find more lenders which unique and purposive loans.

Here it is very easy to get loan and require below simple requirements.

· Being employed for at least 3 consecutive months
· Earnings at least $ 1,000 per month income
· Having valid checking amount open for at least 3 months.

In this site we can find below feature lenders

· For $ 1500 cash advance loans
· Women’s Pay Day Advance for paying bills, shopping or just going with the girls
· Additional earnings.net offering pay day advance for supplement monthly income.
· Cash loans of America lend up to $ 1500
· First Eagle Cash loans is also offers cash advance with easy methods.
· Check Cash Central Advance also giving same features.

This is my opinion that it is the one of the best online lending sites. Money needed persons can get easy loans for the month end requirements , check payments, holiday spending, shopping, and giving gifts.

http://www.cashadvance1500.com/

BE VIGILANT WHEN INVESTING IN INSURANCE

2007-12-19T19:58:00.000+05:30
The life insurance industry in India has grown phenomenally since the market opened in 2000. insurance penetration has increased from 1.39 percent in 1999 to 1.1 per cent in 2006. These figures clearly highlight the growth rate and the opportunity that the Indian market presents.

Today, there are more than 16 companies in the life insurance industry with may more waiting to enter the market and tap the 400 million insurable population.

Initiatives by the industry and the regulator.

With a large number of players in the market and with the rapid growth that the market has experienced, the Insurance Regulatory and Development Authority (Irda) and the insurance companies have taken it upon themselves to self-regulate in the interest of the customer.

One such joint initiative was the model code of conduct on illustrations ( projections of returns on investment) that the industry adopted in 2004 wherein all sales illustrations can be shown at 6% and 10% investment returns only

In 2006, Irda issued guidelines for unit-linked insurance plans (Ulips) again keeping the interest of customers in mind. Despite these and many other initiatives, there are a few examples of mis-selling in the it is critical that the customers are aware of what to look for while buying insurance.

Need for vigilance.

The Indian customers is spoilt for choice as he has many products from different companies to choose from. Keeping this in mind, the customer today needs to make an effort to learn more about insurance products to ensure that his hard-earned money is invested in the right plan.

Before deciding on any specific insurance plan, one should undergo a detailed financial analysis. Every individual has a unique financial portfolio with different needs. A Financial Health Check will help one determine their long-term savings and insurance needs to choose the right investment plan. A new policyholder should run a few checks.

1. Read terms and conditions carefully before signing. Policies can be called within 15-day free look period.

2. Ask for illustrations and keep a copy

3. Seek clarifications on guarantees on investment, partial withdrawal and surrender penalty, implications in case of a lapse in premium payment flexibility of policy to change as per your needs, and charges on policy to change as per your needs, and charges on policy.

4. Look company’s past fund performance and the history of its operations in India as well as other countries.

5. Check if returns shown are net of charges or not

Issues customers face.

For existing customers, these are usually related to post-sale customer services and claims. It is also advisable that regular contact is maintained with the company and the customer may approach the company directly for any clarifications. Now days, every company has a customer services cell and a dedicated call centre. Some customers may also face an issue of claims getting rejected or delayed. Claim dispute cases within the jurisdiction of the insurance ombudsmen can be represented to him.

Irda clearly articulates that insurance companies should pay claims within 30 days from the date of receipt. In case the claim warrants an investigation, the insurer has to complete it not later than six months from the time of lodging the claim. However, the customer needs to be completely honest when filing in the Declaration of Good Health. It has been seen that most claims are rejected as incorrect information had been communicated to the insurance company.

ICICI Personal Loan Interest rates brought down

2007-12-19T19:15:00.000+05:30
Following the recent judgement by the Delhi state commission fining ICICI Bank Rs. 55 lakh for using goons to recover a vehicle loan, the bank has decided to cut down on small-ticket loans. The bank cut donw loans ranging between Rs. 25000 and Rs. 35000. The risk is certainly high in the segment.

The bank had entered the small loan market a year ago, the bank feels that the market is till not mature enough to understand the issues related to the process of collection.

The bank will tighten the process of filtering small-ticket loans. “ Also, we have brought down the intrest rate on these loans from 48 per cent to 36 percent.
Citi Financial has also recently tightend its lending policies

SBI READY TO SELL GOLD TOO

2007-12-19T18:38:00.000+05:30
The State Bank of India (SBI) has jumped into the gold bandwagon. This Diwali, the bank began retailing gold coins to retail customers through its branches. At present, 100 SBI branches retail gold. The number is expected to go up significantly in the next two years. By then, branches at all large caters would offer this product, he said.

SBI will sell gold of 999.9 halmark purity(99.99 per cent pure gold) in the form of coins. Their weights would range from 2g to 10g. Gold weighing 20 g and 50 g will be available in the form of ingots. The gold coins will be supplied by PAMP( Products Artisques Meataux Percieux), a Swiss gold refinery linked with the London bullion market. All these would come with the Assay Certificate of purity. The daily retail rates will be displayed at all branches that sell these coins.

SBI is not the first bank to retail gold. ICICI bank, HDFC bank, and Kotak Mahindra Bank also retail gold. However, given SBI’s wide reach in the country, gold retailing by banks would be made accessible to a larger number of customers.

Just like other banks, SBI also will not buy back gold from you. A Reserve Bank of India stipulation forbids it.

Personal Loans

2007-12-19T16:05:00.000+05:30
Personal Finance: Introducing a site ( http://www.americaoneunsecured.com ) for my readers.

Introducing a site ( http://www.americaoneunsecured.com ) for my readers.

2007-12-18T13:35:00.000+05:30
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Do you know how to saving & investing for wedding?

2007-11-22T18:02:00.000+05:30
According to one school of thought, marriage is one of the three key events of one’s life, the other two being birth and death. So, amount other things, it will change how you invest. The right investments can, if nothing else, take care of the quality of your material life.

Marriage is when most couples begin the longest stage of their lives. Consequently, you must keep an eye on the bigger picture when saving and investing because the value of what you save today will keep decreasing, thanks to inflation. It’s a race you have to win. After all, going through your wedding album at a ripe old age shouldn’t mean being reminded of financially carefree days that have passed.

Historically, the only financial instrument that has consistently allowed people to stay ahead of inflation is equity. The problem is that young investors are as unfamiliar with it as they are with marriage. Even if someone decides to invest in equity he has to figure what stocks to buy, and when, especially in a volatile market like now. So, play it safe, as young couples are prone to falling into the tax-saving, low-return investment trap.

The Mutual fund route.

Mutual funds (MF) are the best way to start investing in equity markets. A professional fund manager would track the markets and make informed decisions on what to buy and sell, while you sit up home and begin your new life. But, which fund to buy is as confusing as the stock buying decision. What you need is a simple product that gives exposure to equity instruments without overexposing you to risk. You can do this by investing in the index, which will expose you to the blue chips.

Why invest in an index.

Look at the evidence on the progress of the BSE Sensex, Data shows that the Sensex is a zero-risk investment if you hold it for a period of at least 12 years. So, not only are you likely to be hedged against a fall, you would be almost assured of a gain. Second, the Sensex has beaten inflation. Over 20 years, it has given an average return of 17 per cent, year-on-year. Third, in the last five years, the Sensex has beaten returns from any other financial savings instrument, except some stocks and property.

This is what index investing can do for you, and exchange-traded funds(ETFs) are the best way to get this gain.

What are ETFs?

These are funds that are listed and traded on stock exchange like a stock. You can buy and sell units at real-time prices in the market. ETFs are passively-managed funds, that’s, there is low interference from the fund manager. These are suitable for a newly married, first-time investors. Here, the funds are invested in the stocks that constitute an index( like the sensex or nifty) and in the same proportion as the stocks are represented in the index. It will track the performance of a benchmark index.

Why ETFs?

An index fund also tracks an index, but ETFs are more cost effective and also give an investor a diversified stock portfolio at low cost. These are liquid and widely tracked. They are also researched and risk associated with them is also less.

As ETFs are passively managed, their management cost is low. The other cost to the investor is at the time of buying the units in an index fund entry load is in the range of 1-1.25%. To buy an ETF, you pay only the brokerage to the broker usually less than 1% and often as low as 0.25%. You are also liable to pay security transaction tax (STT) on trades done on the stock exchange. Unlike an MF where you buy or redeem at the closing net asset value(NAV) of a day, with an ETF you have the flexibility to enter and exit at real-time prices of the stock exchange.

The other advantage is the extent of information dissemination that an ETF structure permits. Prices of ETF units are continuously available during trading hours. The stocks in the portfolio of an ETF that track an index and weight age of such stocks in the portfolio or public information. Moreover, since the ETF as well as the stocks included in its portfolio or listed entities, they have to comply with disclosure requirements of the stock exchanges. All the information that you require to make and informed investment decision is readily available.

How to buy?

To buy an ETF, you need to having trading and depository account as ETFs are brought through a stock broker. Contact a broker who deals in ETFs.

What else?

ETFs are the best way for a new investor to be introduced to equity investing. The Nifty, BeEs is an ETF that tracks the Nifty. ICICI Prudential Spice tracks the BSE Sensex. As comfort with the asset class increases, you can explore more of the markets using ETFs. If your risk and investment horizon are conducive, you can include ETFS such as Junior BeEs, which give some exposure to mid-caps, and Banking BeSe, which give a sectoral element to the portfolio. Gold ETFs, which were launched in Feb2007, are an effective way to hedge and re balance the portfolio, especially in times of uncertainty in the financial market.

As you become more familiar, you can use ETFs to gain from intra-day market movements since ETF units can be traded through the day at real-time prices. However, you need to keep the transaction and STT in mind while doing this, Like all they are held for the long term instead of using them to make short-term moves in the market.

An actively-managed fund is chosen, usually, based on its past performance. But top performers change every year. So, you could lose by being in the wrong fund at the wrong time. The way out is to have exposure to indices that mirror market movement. And, this is what ETFs do.

As your marriage and your stock market know-how progresses, you can begin to build complete portfolios with ETFs market and assets classes.

Once you become an ETF expert, you can move on to other way of buying equity. Keep reading our fund picks to know which funds are worthy of your money. This, perhaps, is what they meant when they wished you a “happy and prosperous” married life.

TIP FOR CHILD EDUCATION.

2007-11-22T12:24:00.000+05:30
The Children Education Allowance Act encourages children’s education by granting exemption of Rs 100 per month per child in income tax( limited to two children).

If we assume that a child is schooled for 14 years and Rs 1200 is saved per year for one child, we can invest this for 14 years at 20 per cent per annum in any diversified equity mutual fund which will give Rs 1 lakh in the worst case scenario. This way, you can prepare for the more expensive education that your child may need in the last years.

TIP FOR STOCK PICK

2007-11-22T11:17:00.000+05:30
While deciding which stocks to buy, look around and see what products and services you use, what are the things commonly being used by people, and which industries will benefit from this use. For example, I though ICICI Bank gave good service, so I bought its stock, Again, I liked Big Bazaar and bought into Pantaloon Retail. Both stocks have risen a lot since I bought them.

YOU SHOULD PLAN…………….!

2007-11-22T11:09:00.000+05:30
It is better to do tax planning at the beginning of the financial year than in the last few months as most people do. This way, the amount invested brings in more returns every year. The difference is substantial in the long run.

NO-LOAD OPTIONS SOON

2007-10-16T21:09:00.000+05:30
Isn’t it ironical that though mutual funds (mf) were originally conceived as a vehicle to canalize the small investor’s savings, large investors usually get a preferential treatment? For instance, entry loads are waived for investment above Rs. 5 crore. On the contrary, the small investor has to pay an entry load every time he invests, and even when he avoids agents’ service and approaches the MF directly. MFs argue that, in the first case, large investments bring economies of scale. But when agents don’t serve you, why should they earn from your investments?

The Securities and Exchange Board of India (sebi) seems to agree. In what is considered to be one of the most investors-friendly moves for the MF investor, no-load options may soon become a reality for investors who approach MFs directly. On 18 August, Sebi proposed introducing of a no-load option and invited public comments the deadline expired on 12 September 2007.

WHY COST MATTERS

Most equity schemes charge on entry load of 2.25 per cent at the time of investment, which they typically pass on to the agent, even if the investor avoids the agent’s services. When compounded over the long run, entry load bite off a chunk from your investment.

For instance, Rs 1 lakh invested equity fund that grows at a rate of 15 per cent over a period of 20 yields Rs. 15,99,829 that load fund would give. That’s a difference of Rs 36,825.

An insider source at Sebi told that consitent reminders to the mutual fund industry about the small investor’s cause have fallen on deaf ears.

“The market give relief to investors who do not avail distributor’s services,” says the source. Although distributors are up in arms against this proposal, we hear that the proposal will be finalized in month.

ALL ABOUT EXPENSES

2007-09-28T19:33:00.000+05:30
Mutual fund houses manage our fund for us, but at a price. The entry load eats into your investment, but don’t make it a criterion for choosing a fund.

Investing in mutual funds (MFs) is better than going directly to the stock market as your money is professionally manager, your portfolio is diversified and your portfolio is diversified and you don’t have to go through the hassle of choosing the right stock or bond to invest in. there are experts to do the job for you. But all this comes for a price.

In the first of our two-part series on expenses, we take you through two key front-end charges that you pay while buying MF schemes.

ENTRY LOAD

When you invest in a ongoing MF scheme, you are required to pay a one-time, front-end charge- percentage of the applicable net asset value (NAV) over and above your scheme’s NAV. Called the entry load, this sum is typically passed on to the agent as his commission. Assume you invest in a scheme whose NAV is Rs 50 and entry load 2.25 percent. The price at which you will buy ( sales price ) its units will be 51.13. While Rs 1.13 will be passed on to the agent, the balance Rs. 50 will be deployed in the markets. Your investment will start growing from Rs 50 and not Rs. 51.13 the price you paid. The formula used to calculate sales price for a fund with entry load is: sales price = applicable NAV x (1+ entry load in fractions).

Remember that if you enroll for a systematic investment plan(SIP), entry loads imposed all your investments.

HOW MUCH

The Securities and Exchange Board of India (Sebi) stipulates the MFs cannot charge an entry load of more than 7 per cent of their prevalent NAV. Entry loads are typically decided by competition if one MF raises its entry load, others usually follow. For instance, before 2005, MF did not charge entry loads for SIPs. But, after a few fund houses imposed entry loads of 1.25 percent in 2005 and raised them to 2.25 per cent in 2006, others did the same. Almost all equity MFs now impose an entry load of 2.25 percent on one-time as well as SIP investments.

WHAT ABOUT NO –LOAD FUNDS?

Only one MF- quantum MF does not impose an entry load. It’s maiden and only equity fund till date. Quantum Equity Fund is India’s first no-load fund. Quantum MF does not impose an entry load as it avoids distributors to sell its funds. All you need to do is download the forms from its website, fill it and send it along with your cheque to the fund house. No-load funds are not yet popular in India, though it can save costs. You invest Rs 3 lakh in a scheme with 2.25 per cent entry load. Growing at a compounded annualized return of 15 per cent, your returns after 10 years would be 11.86 laksh. But had you invested the same amount in a no-load fund, you would have got Rs. 12.13 lakh back after 10 years.

NEW FUND OFFER (NFO) EXPENSES

The expenses incurred during the launch of a scheme are initial issue expenses or NFO expenses. Sebi regulations mandate the closed-end funds can charge up to 6 per cent as NFO expenses. These expenses are then amortized over the closed-end period of an MF. For instance, if the tenure of a closed-end period of an MF scheme is five years, it will amortise its entire NFO expense over five year, closed-end equity fund that charges 6 percent NFO expenses, Rs 6 will go towards meeting the fund expenses incurred during the launch campaign. The remaining RS 94 will be deployed in the markets. Your money will grow from Rs 94, and not from Rs. 100 that you had invested.

Thanks to Sebi’s April 2006 directive, open-ended NFOs are banned from charging NFO expenses; they have to meet their NFO expenses through entry loads. Closed-end NFOs cannot charge entry load.

LIC LAUNCHES TWO ULIPS

2007-09-28T17:11:00.000+05:30
The Life Insurance Corporation of India has launched two unit-linked insurance policies(Ulips) Fortune Plus and Profit Plus. Both the plans aer unit-linked plans.

FORTUNE PLUS.

Under this policy, the premiums are payable only up to 5 years. Also, the first year premium is fifty per cent of the total premium payable under the policy. The minimum first year premium will be Rs. 20,000/-. From second year on words, each years premium would be 25% of the first year premium.

The policy holder has 4 investment options to choose from – Bond Fund, Secured Fund, Balanced & Growth Fund. The bond fund is mean for risk averse and has now equity exposure. Secured fund is classified under the lower- to-medium risk investment too. The funds invested here are a combination of government securities and listed shares. Balance funds are considered medium risk-30% exposure in govt. securities & the rest in listed equity shares. The growth fund has 80% exposure to equity and the remaining in govt. securities.

PROFIT PLUS

The premiums under this policy are payable in a lump sum or over three, four or five years in equal installments. This fund, too invests in four types of funds-bond fund, secured fund, balanced fund & growth fund. The insured can choose to invest in the any of the above mentioned funds depending on their risk appetite. The minimum term of the policy is 5 years and the maximum 20. If the premium is being paid in a lump sum, the minimum amount is 20,000/-. For other options, the minimum Rs. 10,000/-. This cover comes with the accident benefit option or critical illness benefit rider.

HOW TO BECOME A CFP(CERTIFIED FINANCIAL PLANNER)

2007-09-26T15:46:00.000+05:30
Introduction

Getting into financial planning could be a smart career move for you, and an excellent way to start with a solid, career-level training that leads to the Certified Financial Planner Certification. It is regarded as the most prestigious qualification in the Financial Planning industry creating excellent career openings in the financial services sector.

FAQs

What is Financial Planning?

Financial Planning is the process of meeting life goals through proper management of finances. The Financial Planning process consists of various steps that helps take a good look at finance and make prudent plans to reach desired goals.

How to become a Certified Financial Planner (CFP )?

CFP Certification is the highest qualification conferred in the financial planning industry and is offered in India by Financial Planning Standards Board (FPSB) India, an affiliate of International Certified Financial Planning Council, USA. To become a Certified Financial PlannerCM, one has to complete the CFPCM education program through authorized education providers of FPSB India, like IIFPM and must fulfill the four initial certificate requirements known as 4Es
• Education
• Examination
• Experience
• Ethics

What is the Certified Financial Planner education program ?

The CFP professional education program consists of six modules and covers areas such as professionalism, ethics and compliance, advanced financial planning and practice. The modules are:
Module 1: Introduction to Financial Planning
Module 2: Risk Management and Insurance Planning
Module 3: Retirement Planning & Employee Benefits
Module 4: Investment Planning Module
5: Tax Planning and Estate PlanningModule
6: Financial Plan Construction

What is the duration of Certified Financial Planner education program ?

The entire program can be completed in two years on a normal track and in a year on the fast track.

When is the examination of Certified Financial Planner program conducted ?

Examinations are conducted four times in a year (Jan, April, July & October). The examinations are conducted online and are held at centers designated by Financial Planning Standards Board, FPSB India.

How to become Associate Financial Planner ?

A person who successfully completes two modules (i.e. Module 1 along with any one module from Module 2 to 5) will be certified as an “Associate Financial Planner”. For example: if you successfully complete Module 1 & 2, you will be certified as an Associate Financial Planner (Insurance) and likewise in Investment, Retirement & Taxation.

What is the eligibility criteria of CFP/AFP program?

Certified Financial Planner: All Graduates, MBAs, CAs, CSs, CAIIBs are eligible. Associate Financial Planner: XII Std./ PUC are eligible

Qs. What is the role of IIFPM?

Ans,. IIFPM (Indian Institute of Financial Planning & Management is an authorized education provider for imparting CFP education in India. It is affliated to FPSB,India located at Mumbai, the Indian Chapter of Financial Planning Standards Board, Denver, USA. It is a link between the student enrolling for AFP/CFP program and the parent body - FPSB, India. IIFPM ensures the delivery of the said program as per the present guidelines from FPSB, India. New student registration for the AFP/CFP program, class room delivery, exam registration for each modules of the program are all administered at IIFPM as per the FPSB academic calendar.

Qs. How does a student benefit at IIFPM ?

Ans. A student at IIFPM is given classroom sessions for all modules apart from the academic material ( notes, faculty presentations, mock question papers etc. ) Apart from this with the launch of IIFPM LIVE, an IIFPMian will be able to post a query on his relevant subject module to the concerned faculty and the same would be addressed to at the earliest. For this the student would be given a Log In Identification number. The entire student-faculty interface would be administered exclusively by the IIFPM team.

Qs. How can one avail of the placement service ?
Ans. On posting of the individual student resume with IIFPM, the employers are forwarded the respective data base and they absorb the students as per the individual requirements.

What are the employment opportunities for a CFP ?

The CFP certification is internationally recognized and a qualified CFPCM certificant may either have his/her own practice of Financial Planning or be employed in any one of the financial sectors like Banks and Credit unions, Public Institutions, Corporations, Financial Consulting firms, Accounting firms, Insurance companies, Securities, Brokerages and Mutual Fund companies.

What is Course Methodology at IIFPM?

The program sessions are conducted on weekends (Saturdays/Sundays) for the convenience of working professionals as well as students pursuing other educational programs.

How can one enroll at IIFPM?

For Certified Financial Planner( CFP) program For all six modules: ---Rs 26,000/-( The above fee is inclusive of the AFP Membership fee of Rs5000/-, tuition and the study material. The AFP membership is valid for three years.) Full fees for all six module can also be paid in installment i.e., Rs.6,000/-(initial payment) and balance payment through 10 post dated cheques (PDC's) of Rs. 2,200/- x 10 months. For Associate Financial Planner*For only two modules :---Rs 14,000/-( The above fee is inclusive of the AFP Membership fee of Rs5000/-,tuition and the study material. The AFP membership is valid for three years.) Full fees for all two module can also be paid in installment i.e., Rs.6,000/-(initial payment) and balance payment through 4 post dated cheques(PDC's) of Rs. 2,500/- x 4 months.
Note:
1. *Subsequent Modules of the CFP program on completion of AFP modules),the course fee would be Rs 3000/- per module.

2. The above fee is inclusive of the AFP Membership fee of Rs5000/-, tuition and the study material. The AFP membership is valid for three years.

3. Exam fee: A student of the CFP /AFP program has to pay an addition Rs1500 per module towards the exam fee. However for center other NSE a higher fee to be charged on actual as prescribe.

4. In case of students opting for installment plan, Post dated cheques should given along with the initial payment.

5. Exam fee: A student of the AFP/CFPtm program has to pay an additional Rs.1500 per module towards the exam fee if the examination center is any one of the NSEs. However, for centers other than NSEs, a higher fee will be charged on actual as prescribed by FPSB India.

6. In case of students opting for instalment fee plan, post-dated cheques should be given along with the initial payment at the time of admission to the AFP/CFPTM program.

5. Students are required to submit at the time of admission the following:

• Duly completed IIFPM/FPSB India registration forms

• A copy of Std XII/ equivalent Pass Certificate attested by Gazetted Officer or by HRD Department of current employer.

• Three passport-sized photographs and one stamp-sized photograph.

• The course fee should be paid in favour of Indian Institute of Financial Planning & Management through cheque/demand draft payable at Bangalore.

NEW PLICY FOR DENTAL EXPENSES ALSO

2007-09-19T14:49:00.000+05:30
Here’s another additional to the health insurance industry. But this one’s different. ICICI Lombard’s new health insurance policy. Health Advantage, is the first to cover dental treatment expenses, over-the-counter purchase of medicines and orthopedic treatment. It also covers surgeries, accidents and sudden illnesses that usual health insurance products cover. But all this at a cost. The premiums for ordinary health policies.

TAX ADVANTAGE

The policy is specially designed to give the customer tax benefit of Rs 15000/- (Rs. 20,000 for senior citizens) under Section 80D. this policy would be suitable for people who fall under the higher tax slab of 30 percent.

COVER

Health Advantage covers preexisting diseases if the policy is renewed for he second consecutive year. In contrast, most health care policies cover pre-existing disease only after the fourth or fifth continuous renewal.

Unlike other policies, this one covers surgery of aliments that require less than 24 hours of hospitalization. The aliments include cataract, kidney stone removal, dilatation and curettage, chemotherapy, radiotherapy, coronary, angiography, cardiac catheterization, dialysis, eye surgery and tonsillectomy.

The policy also offers the flexibility of insuring a couple. Suppose a couple takes a Rs. 3 lakh cover and Rs. 1.9 lakh is used for a surgery and hospitalization bill on one of the spouses. The remaining Rs. 1.1 lakh can be claimed by either of the spouses again. The policy does not require a health check-up till 55 years of age. The maximum entry age for the policy is 65 years.

PREMIUM ADVANTAGE

The premium is fixed at Rs. 15,000 for ages 5 to 60, and Rs. 20,000 for ages 61 to 70. The same premiums are charged for a sum assured of Rs. 2 lakh or Rs. 3 lakh with different sets of benefits.

There are tow types of benefits that the policy extends: hospitalization expenses and outpatient treatment expenses. In a Rs. 3 lakh cover, the hospitalization expenses get increased by another Rs. 1 lakh, but the outpatient expenses are reduced by Rs. 500.

DO YOU KNOW?

2007-09-19T14:21:00.000+05:30
Now, you can find and compare the features of various health policies at the click o f a mouse. Health insurance portal http://www.healthinsuranceindia.org/ was recently launched by Insurance Regulatory and Development Authority(IRDA) chairman C.S.Rao.

The website has been created by Suresh K. Sethi, CEO of broking company RIA Insurance Brokers. The site compares premiums offered by different companies for various age groups.

THE GLITCH.

However, information has not been fed on some sections like comparison of rate and bonus structures of various policies. Portal officials claim the gap is because the site has just been launched.

ADDITIONAL INFORMATION

The site also aims at spreading awareness about the need and importance of health insurance. It explains the various policies. Portal officials claim the gap is because the site has just been launched.

REGISTERING COMPLAINTS.

You can also find contacts of insurance ombudsmen for all major cities on the portal. You can use its blog to voice any grouse that you may have

AVIVA LANUCHES TRADITIONAL PLAN WITH GUARANTEES

2007-09-14T11:23:00.000+05:30
In the ear of high interest rates and virtual monopoly of Life Insurance Corporation of India (LIC), the traditional endowment and money-back plans were the only insurance products available in the market. However, advent of private sector firms saw a deluge of market-linked plans, and today there is no insurer that does not offer a unit –linked insurance plan (Ulip). Now the insurance industry appears to be coming full circle.

What’s in store?

Aviva Life Insurance, which has about 11 Ulips, has now launched a traditional plan-Dhan Vriddhi. The plan addresses not only the savings and protection angle but also ensures liquidity at regular intervals, making it a money-back plan by nature. Another striking feature of the plan is regular’ guaranteed additions’.

In these times of falling returns, when even LIC is unable to maintain its bonus rates, plans with guaranteed additions may be tempting for many. In fact, LIC lowered its bonus rate from Rs.45 in 2004-05 to Rs.42 in2005-06 for every Rs. 1,000 sum assured.

The Aviva policy is available for people from 13-55 years for a term of 10-25 years. The maximum age at maturity can be 70. also, premium will not be charges in the last five years of the term. The customer will get the guaranteed addition of Rs 70 per Rs. 1,000 sum assured for every completed year even during this period.

The real picture

However, the actual return from a life insurance policy is estimated by its internal rate of return (IRR),which gives the present value of future income from an insurance policy. For example, if a 30-year-old takes a plan, for Rs. 5 lakh sum assured for a 20-year term, he will have to pay an annual premium of Rs. 49,835 for 15 years. Twenty per cent of the sum assured is paid every five years.

The guaranteed additions are paid together when the policy matures. So, the total amount received on maturity comes to Rs. 9 lakh, delivering an IRR of about 1.86 per cent. This lags behind 8 per cent returns from a tax free 15-year PPF investment.

HOW TO MAKE A CLAIM FOR INSURANCE

2007-09-13T19:12:00.000+05:30

Claming insurance compensation can sometimes claim your peace of mind. The territory is agog with complaints like that of Madurai-based jeweler Vijay, 35. His insurer did not pay him to get his car back on the road after an accident. But, then, the fault was his: he had not followed the correct procedure for making the claim. The lesson from his case is that we should never give the insurer an excuse to refuse a rightful claim.

Remember, an insurance company is not a charity. Profligacy can make it go belly up. So, it scrutinizes every claim before making the payment. Since you have agreed to the insurer’s terms, you should stick to the and not provide it an escape route when you make a claim. It is not enough to buy the right covers, you should also know what to do in case something goes wrong and the need for making a claim arises. To save money, effort, time and, most important, headaches, always do the following:

1. Ask your agent what the claim procedure is, or at least, read the policy document and get him to explain what you cannot understand.

2. Keep the insurer’s toll-free number in your mobile phone or wallets so that you can call it when the need arises.

3. Keep a copy of all the documents, bills and letters you send to the insurance company.

Apart from these steps, which apply to all kinds of insurance, measures specific to different kinds of cover need to taken?

1. HEALTH INSURANCE

It is broadly of two types: the standard mediclaim and the critical illness cover.

Mediclaim

It reimburses hospitalization and surgery bills after you have spent the money,. In a cash less policy, the insurer takes care of the bills through a third-party administrator (TPA) if you undergo treatment in an empanelled hospital. These policies cover surgeries for hernia, piles, sinusitis, and gall bladder stones only from the second year; knee replacement surgery, prolapsed disc and joint replacement surgery are covered from the third year.

The following is the procedure for cashless mediclaim:

1. First send the duly filled pre-authorization form more than a week before a planned surgery and keep track ofit by being in touch with the TPA.

2. In case of accidents, the doctor has to fill in fields such as the time of accident and evidence of alcohol abuse. TPAs will have no option but to return incomplete or illegible forms to the hospital asking for clarifications. And that will delay the process.

3. if you are accompanying the patient, mention your cell phone number in the pre-authorization request. This will enable the TPA to get in touch with you.

4. Check which of the network hospitals are nearest to your home or workplace. This will come in handy in an emergency.

Critical illness:

This cover is paid on the diagnosis of an illness in the list and often takes care of hefty treatment costs. Policy holder must know whether the claim is payable on diagnosis or after the survival period, which is usually 30 days after diagnosis. If the person dies in the period, the claim will not be honored. Some private insurers like ICICI Lombard pay on diagnosis of critical illnesses.

5. Clarify with your agent which illness are covered before buying a policy.

6. Call the toll-free number of the insurance company and ask for guidance.

7. Keep all bill and photocopy them.

2. PERSONAL ACCIDENT COVER

This insurance is usually bundled with life cover policies for a small premium or given free with credit cards, some general insurance companies also give personal accident covers on a yearly basis. In most instances family members of persons who have personal accident cover are unaware of it. In such cases, there is chance that the policy may go unclaimed if the policyholder dies in an accident.

If an accident lead to the death of the policyholder, it is essential to intimate the insurance company at the earliest.

Here are the steps your need to take:

1. Submit the First Information Report (FIR) and the policyholder’s death certificate.

2. Retain a copy of the documents sent to the insurance company.

If the accident results in an injury, the insurance company needs to be intimated about it soon. It will seek an explanation if there is a long gap between the time of the accident and when it is informed about it.

3. Most insurance expect and intimation with in seven days of the accident.

4. They also expect copy of the FIR of the accident.

5. Submit medical certificate in case of partial or full disability and hospital bills.

6. Follow-up your case with the insurance company a fortnight after sending all the relevant document do it. If efforts to get a response from it draw the blank for a month, send a letter to insurance ombudsman

3. CAR INSURANCE

It is mandatory for a car owner to have at least third party cover but it is advisable to have full car insurance. There are three cases when their can be a claim.

Road accident

The bulk of the claims cum under this head. The insurance holders are more aware about claims procedure for motor insurance than other insurances.

1. Inform the insurer immediately.

2. Get the FIR from the traffic police.

3. If the car is movable, take it to the nearest garage of your preference.

4. If you have cashless insurance, you don’t need to pay a penny to the garage. If the vehicle hits your car:

5. Give the registration number of the vehicle that has hit your car to the insurance company

6. File an FIR if you or your co-passengers are seriously injured.

7. Report the theft to the neighborhood police station.

8. Inform the insurance company.

9. Get a ‘not-traceable Certificate’ from the police station after 30 to 60 days if the police cannot find your car.

10. The insurer will process your claim only after getting this certificate.

11. Call the insurer’s toll-free number to register your claim and look out for special terms sent by it.

4.TRAVEL INSURANCE

This cover is compulsory for those traveling to the US. The travel insurance claims procedures are generally quite simple and are mentioned in the policy document. However, people face problems if they do not carry the policy details, helpline numbers and other necessary information with them during travel. They also face problems when they are not aware of the claims procedure.

1. in case of hospitalization, inform the Third Party Administrator(TPA) at the time of admission or immediately after admission to the hospital. If you want to go for cashless transactions, ask the TPA for it quoting the details of your policy.

2. Whether you opt for the cashless mode or not, the TPA will need proof of travel document and medical payment made.

3. The attending physician will need to fill the medical form. Get this faxed to the TPA along with the requisite medical record.

4. Report the loss of passport or visa to the police within 24 hours of becoming aware of the loss. A police report will be required for making claims.

5. if baggage is lost, the following will have to be furnished: boarding pass and bag to be furnished: boarding pass and baggage coupons of the insured person, list of articles lost and their value if they are valued over $100, and proof of ownership.

5.HOME INSURANCE

This covers all the valuables in your home. Like in the case of other covers, often policyholders don’t know how to claim compensation under this insurance. Here’s how to go about it:

1. Call the insurer’s call centre or your agent immediately when the need for a claim arises. Keep their phone numbers in your emergency list.

2. Report burglaries to the police. Keep the purchas receipts of your jewelers carefully since the insurance company will verify whether you owned it before handing you the compensation.

3. Incase of rainwater flooding, take photographs of the damage before cleaning up and salvaging what is left.

4. If a fire destroys your policy document too along with other belongings, inform the insurance company about it.

5. After the insurance company’s survey or examines and estimates the loss, send a letter to the insurance company stating all the damages in detail. Keep a copy of this letter.

WHO IS THE BEST ONLINE BROKER

2007-09-12T13:35:00.000+05:30

To say that online investing has grown extraordinarily fast over the past couple of years is akin to describing Marilyn Monroe as reasonably attractive. While it may be easy to trade on the Net., finding the right online broker takes some doing.

Given that online trading is still at a nascent stage, online brokers are willing to offer many options—brokerages that offer many options—brokerages that decline as volumes soar, waiver of account opening charges, access to research reports, and the facility of transacting in financial instruments through the trading website. So who should you choose? The answer depends on a host of variables both qualitative and quantitative.

Qualitative factors are usually a little hard to asses and largely pertain to expectations of service standards. It helps to talk to acquaintances who trade online about the website’s reliability. Ease of fund transfer and transaction, and the customer service quality of the e-brokers.

Brokerage.

It’s a recurring cost and can potentially draw down returns. Every player claims that his brokerage is the lowest or a t least promises to charges the minimum once a investor opens an account and starts trading. But this promise is contingent on the trading volumes of the investor. The brokerage differs from company to company. To give an indicative figure, ICICIDirect.com charges 0.75 percent for a quarterly volume of less than Rs. 10 lakh and 0.25 per cent for an amount in excess of Rs. 5 crore.

The brokerage for the quarter that follows the opening of an online trading account is determined by the opening amount of investment, irrespective of the subsequent investments in that quarter. Any amount due to either the broker or investor over and above the brokerage paid is settled every quarter and the opening amount of the next quarter determines the brokerage that will be paid in the quarter. While 5paise.com has the lowest brokerage 0.25 per cent on delivery. Angel Broking offers the lowes0.02 percent on intraday trading.

Position traders investors who buy and hold securities for the long haul typically opt for low brokerages. Daily traders, who trade in large volumes, usually settle for what brokers call zero percent brokerage. This does not mean that they are not charged brokerage, but alludes to a fixed brokerage fee irrespective of turnover or up to a certain turnover for a period of time: higher the investment, lower the brokerage. For instance, Reliance Money charges Rs.500 for delivery-based volumes up to Rs. 10 lakh for tow months. If one trades with 5paisa.com for the same volume, the brokerage amount will be Rs.2500( at the rate of 0.25 per cent brokerage). So, at this volume, Reliance Money is higher than 5paisa.com’s brokerage for investments less than Rs. 2 lakh.

Account opening and maintenance costs. In order to trade, an investor needs to open two accounts with the brokerage firm a demat account to keep the shares and a trading account to trade.

If cost is an issue, you may select Almondz, for instance, since it charges only Rs. 400 for opening an account , but do not hold a demat account with one company and trading account with another since it delays the settlement of shares and cash.

Another fixed cost is the annual maintenance charge. While some companies such as Kotak Securities have a high maintenance charge, Amondz, Religare, Reliance Money, 5paisa.com and IndiaBulls charge nothing at all.

Minimum trade requirements, some online brokers insist on a minimum transaction volume for which they charge their lowest brokerage. For instance, ICICIDirect.com has set its minimum transaction at Rs. 500 and charges a brokerage of Rs 500 and charges a brokerage of Rs. 25 on it. Geojit Financial Services has not fixed a minimum transaction amount, but the minimum brokerage is Rs. 20.

Margin trading.

This is available on the online domain and involves paying only proportion of the trade value upfront. Such trades could attract higher brokerage than the regular transactions. Mostly traders, who go for intraday transactions, go for this from of trading. Investors typically invest for longer periods and margin trading is not suitable for them as brokers charge huge interest on the value of the trade that is not paid upfront.

Access to research.

Online brokers provide regular updates on market favorites stocks to buy stock to buy, hold or sell thought the Net as well as SMS.
Apart from this, a relationship manager appointed who works and an intermediary between the investor and the broker, and plays the helpful tipper. Investors need to remember amidst the daily onslaught of tips that too much trading does not necessarily translate into big bucks.

Tie-ups with banks

To trade with a broking company, you need to have an account with one of its collaborating banks. Typically, brokering firms have fewer collaborations with public sector banks. Almondz scores above others here since it has tie-ups with numerous private sector banks and 19 public sector ones.

Apart from the charges mentioned above, an investor is required to pay the security transaction tax (STT) and service tax (including education cess 3 per cent) which amount, respectively, to 0.125 percent of the transaction value and 12.36 per cent of the brokerage amount. These also raise the cost of the trade.

The speed and reliability of the broking website are also crucial in the choice of a Net broker. Brokers who score low on these counts may have slightly lower brokerages, but an infrastructure that is not able to handle copious trade volumes is a liability. Like in the old west, the slow die first in online trading. So make sure you’re quick on the draw.

YOU MUST KNOW

1. Brokerage is a recurring cost. Higher trading volume slabs attract lower brokerage. You’ll also have to pay an annual maintenance charge.

2. Some brokers insist on a minimum transaction volume and charge their lowest brokerage for it.

3. Opt for the same depository and trading body to avoid delays in settlement of shares and cash.

4. Margin trading could attract higher brokerage than regular transactions.

5. Online brokers provide regular updates on market favorites.

6. Pick the online broker with the maximum number of collaborating banks
Check out the website’s speed and reliability, ease of fund transfer, and the e-broker’s customer service quality.

7. The broker’s infrastructure should be able handle large trade volumes.

THE FASTEST WAY TO KNOW YOUR MUTUAL FUND SCHEME

2007-09-11T15:41:00.000+05:30

Every mutual fund (MF) advertisement on radio to television signs off with the hastily said:” Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. “It is good advice that is rarely taken.

An offer document is a mutual fund’s “Geeta”. Not only does it contain every little detail about a scheme, but also the investment objective and philosophy of the fund house. It lays down the scheme’s load structure, minimum investment and other such important features. It is a legal document that describes in ways necessary and possible the intangible product that you may be thinking of buying. The problem is that all this makes it a voluminous piece of work. And like the Geeta, people rarely have the patience to read the whole thing.

To overcome this problem, MFs and distributors have come up with the key information memorandum, or KIM. It is an abridged version of the offer document containing, well, “key information” about the scheme, as an application form. In terms of sheer volume, it is easier to tackle than an offer document, and also gives you a good idea about the product. While an average offer document will be 70-80 pages thick, the KIM can manage in about eight, including the form.

Although it is undoubtedly better to read an offer document since it gives a scheme’s complete picture, a KIM is a good alternative if you are pressed for time. However, even in a KIM, not everything is equally relevant to the investor. Some of the important bits are related to investment objective, asset allocate, performance, load structure and minimum investment.

INVESTMENT OBJECTIVE

Your journey through a KIM must begin here. Investment objective talks about the scheme’s goal and investing rationale. It specifies where the funds will be invested, in equity, debt, or both. For example, reliance Banking Fund says its primary investment objective is to generate continuous returns by investing in equity Or equity related fixed income securities of banks.

It is important to read this section as it helps you match your goals as well as
Risk profile with that of the scheme. A KIM will, however, not have details of the investment process. If you want to know more about your fund investment objective, read the offer document. In an offer document keep a lookout for claims that your scheme makes and how it aims to justify them. For example, if your fund aims to protect your capital, or give a regular stream of income, this portion will tell you how it plans to achieve its goal. For thematic or sartorial funds, the investment objective will tell you which sectors it will be investing in. this helps you decide how realistic its goals are.

Every mutual fund (MF) advertisement on radio to television signs off with the hastily said:” Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. “It is good advice that is rarely taken.

An offer document is a mutual fund’s “Geeta”. Not only does it contain every little detail about a scheme, but also the investment objective and philosophy of the fund house. It lays down the scheme’s load structure, minimum investment and other such important features. It is a legal document that describes in ways necessary and possible the intangible product that you may be thinking of buying. The problem is that all this makes it a voluminous piece of work. And like the Geeta, people rarely have the patience to read the whole thing.

To overcome this problem, MFs and distributors have come up with the key information memorandum, or KIM. It is an abridged version of the offer document containing, well, “key information” about the scheme, as an application form. In terms of sheer volume, it is easier to tackle than an offer document, and also gives you a good idea about the product. While an average offer document will be 70-80 pages thick, the KIM can manage in about eight, including the form.

Although it is undoubtedly better to read an offer document since it gives a scheme’s complete picture, a KIM is a good alternative if you are pressed for time. However, even in a KIM, not everything is equally relevant to the investor. Some of the important bits are related to investment objective, asset allocate, performance, load structure and minimum investment.

INVESTMENT OBJECTIVE

Your journey through a KIM must begin here. Investment objective talks about the scheme’s goal and investing rationale. It specifies where the funds will be invested, in equity, debt, or both. For example, reliance Banking Fund says its primary investment objective is to generate continuous returns by investing in equity Or equity related fixed income securities of banks.

It is important to read this section as it helps you match your goals as well as
Risk profile with that of the scheme. A KIM will, however, not have details of the investment process. If you want to know more about your fund investment objective, read the offer document. In an offer document keep a lookout for claims that your scheme makes and how it aims to justify them. For example, if your fund aims to protect your capital, or give a regular stream of income, this portion will tell you how it plans to achieve its goal. For thematic or sartorial funds, the investment objective will tell you which sectors it will be investing in. this helps you decide how realistic its goals are.

ASSET ALLOCATION

Under the investment objective header, look out for your scheme’s asset allocation. This information is given in a tabular form. It tells you the percentage of your scheme’s allocation in various assets, like equity and debt. Ensure that your fund investment categories.

If your fund is targeting more than one sub-class of assets, here’s where the details will be mentioned. For instance, HSBC Liquid plus Fund (HLPF) aims to invest in debt securities that mature, both before and after one year. Under its asset allocation table, HLPF has mentioned the break-up of its corpus towards risk profile of each type of security (low and low-to-medium).

PERFORMANCE

If you are investing in an existing fund, check its performance across various tenures to get an overall picture. Although past performance does not guarantee future returns, it gives you a fair indication of how the fund is likely to perform. Also, check the scheme’s performance vis-à-vis its benchmark index. Avoid investing in schemes that have consistently underperformed their benchmark indices.

If it is a new scheme, pa performance would be absent. As an alternative refer to the track record of the fund house in that segment. For instance, if you are investing in a new equity scheme, check out the pas performances of the fund house’s existing equity schemes. This will give you a good idea about its historical performance in the segment in which your new fund is in.

LOAD STRUCTURE

When you invest in a MF scheme, not all your investments get deployed in the markets. MFs charge a certain percentage of your initial investment, up front. This is called the entry load. Similarly, MFs may also impose a charge at redemption, called the exit load. The securities and Exchange Board of India (sebi) guidelines for mutual funds mandate that MFs can charge a maximum cumulative load (entry as well as exit) of up to 7 per cent. For instance, HDFC Equity fund entry load is 2.25 percent. This means, that if you invest Rs. 10,000 in the scheme, you end up paying Rs 225 as entry load. The balance Rs. 9,775, gets deployed in the markets.

keep an eye on the exit load too. Usually, MFs charge variable exit loads depending on how long you stay invested. For instance, Quantum Long-Term Equity Fund(QLTF) imposes an exit load of 4 percent if you withdraw before six months, 3 percent before 18 months and 1 percent before two years. QLTF does not impose an exit load if you withdraw after two years.

Entry load and exit loads are not fixed. At present, most equity funds charge an entry load, while most debt funds charge exit loads. This is not sacrosanct. It is possible that you end up paying both, entry and exit loads, under the same scheme. Your scheme may have an entry load and no exit load at the time you invest and impose an exit load at the time you decide to withdraw your investment.

While MFs usually pass the entry load to the distributor, exit load are imposed to discourage investors from exiting early. Although it helps to go for a fund that does not impose loads, do not select a fund based on its load structure. Look at the fund’s past performance and its pedigree.

MINIMUM INVESTMENT

The amount you have set aside for investing in the mutual fund may be less than what the fund may allow. Find out the scheme’s minimum investment limit. Different schemes of the same fund may have different minimum investment limits. A KIM will explain with figures what is the minimum initial application amount, minimum additional application amount and at redemption. It also provides the minimum investment for each installment that you pay under a systematic investment plan(SIP) initial application amount.

INSTRUCTIONS

Carefully read the instructions to fill the form. It will guide you about how to fill your application form. List of documents required, mode of payment, and other such details. It also provides information about how you would get the account statement (by email or post) and in case you have quires, how to approach the authorities concerned. It also tells you how to make and cancel nominations.

Whether you are a first-time investor or have been through the process of selecting or applying for an MF scheme before, a KIM is the key to use to open the doors to get inside a scheme.

Under the investment objective header, look out for your scheme’s asset allocation. This information is given in a tabular form. It tells you the percentage of your scheme’s allocation in various assets, like equity and debt. Ensure that your fund investment categories.

If your fund is targeting more than one sub-class of assets, here’s where the details will be mentioned. For instance, HSBC Liquid plus Fund (HLPF) aims to invest in debt securities that mature, both before and after one year. Under its asset allocation table, HLPF has mentioned the break-up of its corpus towards risk profile of each type of security (low and low-to-medium).

PERFORMANCE

If you are investing in an existing fund, check its performance across various tenures to get an overall picture. Although past performance does not guarantee future returns, it gives you a fair indication of how the fund is likely to perform. Also, check the scheme’s performance vis-à-vis its benchmark index. Avoid investing in schemes that have consistently underperformed their benchmark indices.

If it is a new scheme, pa performance would be absent. As an alternative refer to the track record of the fund house in that segment. For instance, if you are investing in a new equity scheme, check out the pas performances of the fund house’s existing equity schemes. This will give you a good idea about its historical performance in the segment in which your new fund is in.

LOAD STRUCTURE

When you invest in a MF scheme, not all your investments get deployed in the markets. MFs charge a certain percentage of your initial investment, up front. This is called the entry load. Similarly, MFs may also impose a charge at redemption, called the exit load. The securities and Exchange Board of India (sebi) guidelines for mutual funds mandate that MFs can charge a maximum cumulative load (entry as well as exit) of up to 7 per cent. For instance, HDFC Equity fund entry load is 2.25 percent. This means, that if you invest Rs. 10,000 in the scheme, you end up paying Rs 225 as entry load. The balance Rs. 9,775, gets deployed in the markets.
.
keep an eye on the exit load too. Usually, MFs charge variable exit loads depending on how long you stay invested. For instance, Quantum Long-Term Equity Fund(QLTF) imposes an exit load of 4 percent if you withdraw before six months, 3 percent before 18 months and 1 percent before two years. QLTF does not impose an exit load if you withdraw after two years.

Entry load and exit loads are not fixed. At present, most equity funds charge an entry load, while most debt funds charge exit loads. This is not sacrosanct. It is possible that you end up paying both, entry and exit loads, under the same scheme. Your scheme may have an entry load and no exit load at the time you invest and impose an exit load at the time you decide to withdraw your investment.

While MFs usually pass the entry load to the distributor, exit load are imposed to discourage investors from exiting early. Although it helps to go for a fund that does not impose loads, do not select a fund based on its load structure. Look at the fund’s past performance and its pedigree.

MINIMUM INVESTMENT

The amount you have set aside for investing in the mutual fund may be less than what the fund may allow. Find out the scheme’s minimum investment limit. Different schemes of the same fund may have different minimum investment limits. A KIM will explain with figures what is the minimum initial application amount, minimum additional application amount and at redemption. It also provides the minimum investment for each installment that you pay under a systematic investment plan(SIP) initial application amount.

INSTRUCTIONS

Carefully read the instructions to fill the form. It will guide you about how to fill your application form. List of documents required, mode of payment, and other such details. It also provides information about how you would get the account statement (by email or post) and in case you have quires, how to approach the authorities concerned. It also tells you how to make and cancel nominations.

Whether you are a first-time investor or have been through the process of selecting or applying for an MF scheme before, a KIM is the key to use to open the doors to get inside a scheme.

Explaining Debt Funds

2007-09-10T19:35:00.000+05:30
Debt funds may offer modest returns, but they do so with lower volatility. They may not give the highs of equity funds, but they save you from abysmal low too.

PROS

Less volatility. As debt funds invest in fixed income instruments, they are less volatile and their net asset values(NAV) don’t swing like those of equity funds. Expect moderate returns here with greater consistency and limited capital donside.

Consistent income, There are two components of debt fund income—interest and capital appreciation. As their underlying investment aim to pay a fixed income at fixed intervals by way of interest, debt funds aim to give consistent returns to investors.

Taxation benefits, Debt funds come with a tax advantage. While units of debt funds withdrawn before a holding period of one year is completed attract taxes as per your income tax slab(11.33, 22.66 or 33.99 per cent; inclusive of surcharges and cess), units withdrawn after a holding period of one year attract 11.33 percent tax.

CONS

Credit risk. Most debt instruments in the market are rate by credit rationg agencies, Ratings are denoted by letters--- ‘AAA’ rating is considered to be the highest and ‘D’ the lowest. A debt instrument’s credit rating reflects its capacity to earn intrest and provide timely principal payment. The higher the percentage of high-rated instruments in your debt fund, the safer it is.
Interest rate volatility. Intrest rates and bond prices are inversely related and change in rates can affect your returns. When interest ratesrise, prices of debt securities fall, and vice-versa, and thus, your debt fund’s nav.

Illiquidity. Corporte bonds are generally illiquid, unlike government securities. Also, lower the credit rating of a scrip, lower will be its liquidity. The performance of a debt fund with a larger allocation of lower-rated bonds gets impacted whtnit wants to exit them and can’t find enough buyers in the market.

There are two broad categories of debt funds: if the average maturity is more than a year, the debt fund is called long-term, and if it’s less than a year, short term.

LONG-TERM FUNDS

Bond funds. These invest in bonds or fixed income instruments issued by companies. Typically, their maturities ae beyond an year and provide steady income with little volatility. Debt funds are a good companion to retirees and senior citizens during a high interest rate scenario.

Gilt funds. These funds invest in G-seces-government securities issued by the Government of India. While long-term gilt funds invest in government securities maturing after a year, short-term ones invest in government securities maturing before a year, typically called treasury bills or T-bills.

Dynamic debt funds. These can alter their average maturity depending on their fund manager’s perception of the interest rate scenario. If the fund manager feels that interest rates will rise, he can raise the cash allocation up to 100 per cent, making these the riskiest of all debt funds.

SHORT TERM FUNDS

Short –term plans(STP). Also referred to as short-term bond funds, these are just like bond funds, but have an average maturity of less than a year, STPs have comparatively lower credit and interest rate volatility risk.

Liquid funds. These funds invest in debt instruments with maturities ranging from one day to three months. Liquid plus schemes, on the other hand, invest around half of their corpus in bonds maturing after a year.

FINDING THE RIGHT PARTNER

2007-09-08T14:55:00.000+05:30
It was quite simple in the past when you bought life insurance policies from the uncle in the neighborhood or from a family friend or even from his son. He made suggestions and you bought what he thought was right for you. He helped fill the forms and reminded your when premiums were due. But, things have changed since private players entered the arena.

Both the number of life insurance options, as well as agents have gone up. While life insurance policies are sold through banks, brokers and online, the agents are the ones who still account for around 90 per cent of all life insurance policies sold in India. They are often the only face of the insurance company that the customer gets to see.

Black sheep. Thanks to intense completion among private players to notch up sales of polices, customers have been at insurance policies. Srikrishna Parab, a career LIC agent with 22 years of experience, admits, “There are some bad apples in the agent fraternity. People after entrust their agents with the money meant to be paid towards premiums. And they come to know they have been duped only when the insurance company informs them that the policy has lapsed.”

At other times, agents have also been known to ‘vanish’ (either quit the profession or changed his or her address), leaving the policyholder wondering what to do.

The best pick. Since the relationship between the policy holders and the agent is a long-term one, it pays to choose an agent with care. If you are considering getting a policy and are scouting for an agent, first check with your friends, relatives and co-workers. Someone who comes highly recommended might be a better bet than an’ agent’ you bumped into on a train or found on the internet.

Corporate agents (organized business concerns set up to sell policies) are also good choice. Their accountability and professionalism may be greater, and your interests will be taken care of since there is no risk of your agent disappearing without a trace.

SELECTING AN AGENT

Here are some tips that will stand you in good stead when looking for a life insurance agent:

1. Ask about qualifications and background. Also ask how else is he qualified, apart from the mandatory training of 100 hours at an insurance Regulatory and Development Authority (IRDA)-complaint institution. You should also ask about the number of clients the agent is working with at present and how many policies he has sold so far.
2. Try and analyze if the agent trying to sell you a policy is in a hurry. If you get the feeling that you are being pressurized into buying a policy you are not satisfied with, say so. Try and gauge if the agent is actually trying to understand your concerns and striving to find you the best solution there is.

3. An important step that most people miss out on is self-education. Be aware of your options and don’t get swayed by promises of very high returns. Go for whatever choice you are comfortable with.

4. More important than getting the right agent is shopping for a good insurance company. Find out the insurance company’s track record of claim disbursement.

5. An agent is bound by law to render service until the policy end, whenever it may be. If you think he has failed in this respect, you can complain to the insurance company at any point.

6. Talk friends and relatives for recommendations.

7. Ask the agent how long he has been practicing and how many claims he has handled.

8. See multiple agents, and select the one who seems the most knowledgeable and experienced. Also ask if he is a part-time of full-time agent.

9. A part timer may change his mind and quit the profession later.

10. Gauge whether the agent only cares about selling or if he is genuinely interested in solving your financial problem.

11. Ask for comparisons with other companies’ policies, and lay down your requirement and preferences clearly.

12. Stay in touch with the agent, ask him to update you incase of any new developments or change in his co-ordinates.

What steps do I take if my car is stolen?

2007-09-08T14:27:00.000+05:30
If your car gets stolen, you should immediately file an FIR at the nearest police station and take all possible steps to trace your car. The next step is to inform the insurance company enclosing a copy of the FIR. The insurance company will investigate the circumstances of loss. As per the investigation report, if the cause of loss falls within the coverage extended under the policy, the insurance company will pay the claim. Before releasing the cheque they will require a certificate from the concerned police station stating that the vehicle is still untraced. The basis of compensation will be the insured value, which is the same as the insured’s Declared Value. The insurers may deduct a nominal amount as depreciation for use from the date of insurance to the date of theft.

MANAGING MONEY WAS NEVER SO EASY

2007-09-08T11:29:00.000+05:30

Are you finding 9it difficult to track your fixed deposit maturity dates, insurance premiums and EMI payment? Are you lost in the maze of various bank accounts, credit cards and investment? You may be keeping records of your transactions in your notebook. If you are tech savvy, you would have Excel as your money manager and friend. Time to take a step forwards personal finance software may be the way to stay on top of your money.

If the softwareis linked to all the financial inssitution syou would be dealing with, as is possible abroad, it can be a one-stop shop for all your financial needs.

WHY DO YOU NEED IT?

Personal finance software is neither magic solution to all your money management problems, nor is it meant just for those who are completely clueless about their finances. RAthe, it’s an assistant that will help you in the task. Even if you think you are managing your money well, you can use one to have a greater grip on your finances. It can help save time spent in worryng about missing a payment.

WHAT CAN YOU DO WITH IT?

From basis bookkeeping to more advanced tasks, these software will help you manage your money at different levels.

Track your portfolio.

Be in complete control of your investments in stocks and mutual funds. If appropriately liked, you do not have to enter stock and mutual fund quotes manually; the software will download it for you from respective sources and keep your portfolio updated. The software will also provide capital gains statements.

Manage your budget.

Set up spending limits for each transaction and see how well you stick to your budget. This way, you will know that you need to cut down on eating out or that you can afford to spend more on shopping.

Know your tax liability.

If you update all your tax related transactions, year end tax computation would be a piece of cake.

No missed deadlines.

You will be told well in advance that your National Savings Certificate (NSC) is maturing, or when you have to make a payment. This mean fewer worries and no late charges, besides the fact that your money never lies anywhere without accruing interest.

Generate reports.

Such software allows you t generate reports in the form of graphs, charges and statements about your net worth, cash flow, balancesheet, asset aloocation and all other transactions. When you log in, you know exactly where you stant and what you should be doing if something is not in place.

Automatic updates.

Apart from stock quotes and mutual fund NAVs, all transations you make using plastic money ( say, with a credit card}, can be automatically updated. Similarly, all your bank transactions will get posted on your PC.

Online payments.

If your software is adequately linked, you can make all your payments online, for example, your child”s school feeswill be paid automatically on a certain date if you have scheduled it and the operation will be entered in the appropriate section of your expenses.

E-filing tax returns.

As the software will integrate all your money transactins, it will not only compute your taxes, but also ‘file’ the returns.

WHAT OPTIONS DO YOU WANT?

Though various foreign software are available , it is better to use India-specific ones as they are more suited to Indian needs.

Foreign software.

The most popular and feature-rich foreign software is Quicken Mac and Microsoft Money. These have several versions to choose from –Microsoft Money Essentials and Quicken Starter for basic budgeting, and Microsoft Money Plus Premium and Quicken Premier for advanced functions. Acemoney, Rich or Poor and Moneydance are also well known.

The problem is most of these are not suited to the Indian individual as they do not cater to all the investment options available in India. For example, they wouldn’t have a separate section to make an entry for post office savings and Public provident Fund. They may not even automatically update investments in Indian stock and mutual funds. Also, if you areinvesting in shares of, say, Reliance Petroleum, you will have to make a manual entry Science they won’t have Indian companies in their list. Other functions like computing tax returns will also not work, as the software will not understand Sandipan Reddy, who uses Easy Life to manager his own and his clients’ finances, recommends the software to his clients, “Normally I need 4-5 sitting with my client. But if if he is using such a software, I can get his entire financial picture at one go. For people who are not well-versed with Excel, or have little time to spare, it is very useful,” he says.

THE DRAWBACKS

Since the legal framework does not exist and all branches of government-owned banks are not computerized, online payments and downloading of bank statements is not possible at present, says Jaidip Parikh, product manager, audit Microsys. “However, we may intouduce therse features in future since technology is not a problem,” he adds.

Roy, who got statements from HSBC and HDFC bank when he used Microsoft Money, is looking forward to the day when he wouldn’t have to make entries of his bank statements manually. Reddy feels that the software should automatically update SIP investments in mutual funds. The company has promised to include this feature in its next version.

SOFTWARE VS ONLINE PORTFOLIO MANAGEMENT SITES

There are various websites that help manage your portfolio online, but they do not provide a complete solution. You can’t do much if you don’t have access to the secure on the Net as on the software in your personal computer.

I invested in a personal finance software as it helped him capture all his finances, not just his investments in stocks and mutual funds. Also, easy life under different family heads, without him having to create separate folios for each.

WHAT TO BUY

Most of these software allow a free trail. Download the software and operate it before you put your money into one. Always look for a software that is more comprehensive and integrates most of the money transactions you make.

To reiterate, a software can only serve as an aid in managing your finances. To get the best out of these, you have to be disciplined. As Roy says, “Regular entries are a must.” There is no substitute for hard work, but getting organized helps.

LIST OF THE SOFTWARE PRODUCTS

PRODUCT NAME WEBSITE PRICE

Quicken starter Edition* www.quicken.intuit.com $25.00

Money dance www.moneydance.com $29.99

Microsoft Money Essentials* www.microsoft.com/money $19.99

Acemoney(2-5 users) www.mechcad.net/products/acemoney
$25.00

RichOrPoor www.shortcutssoft.com $19.95

Easy Life Pro Edition www.easylife.in Rs.4,950.00

Fund manager or Fund house - Who do you invest with?

2007-09-07T19:38:00.000+05:30
Recently the Securities and Exchange Board of India (SEBI), the ever watchful regulator of the mutual fund industry voiced its concern that it is paradoxical that in the Indian context, one needed qualifications to distribute funds, but there were none needed to manage them. While distributing funds is indeed a responsible task, managing the distributed funds is more so. Therefore, it’s surprising that currently anyone can be a fund manager regardless of his or her qualifications or lack thereof.

This indeed throws up a very interesting issue - How important is the role of the fund manager in the overall scheme of things? Are qualifications and credentials of an individual more critical or the systems, processes and risk management strategies that are put into place by the organization that employs him? In other words, does the fund manager’s investment style take precedence over the fund’s investment processes or is it the other way around?
Unfortunately there is no plain yes or no answer to this question and it depends upon the fund and its philosophy. When you invest in a fund, you are implicitly reposing a certain amount of trust into the fund manager's expertise and capability. You are essentially hiring a professional to manage your money and pick your stocks but because of the cost sharing with thousands of others, the professional expertise comes at an economical price.

Now, conventional logic would dictate that it is the ability and the skill of this professional i.e. the fund manager that should generate the returns in his funds. However is it always so? Investing thousands of crore belonging to lakhs of investors is clearly not a one-man job. And what’s more, now even the international markets are being opened up for domestic mutual funds.

Therefore, typically mutual funds are managed usually by a team of fund managers backed up by analysts and researchers. Without this support, no matter how skilled a fund manager is, he will not be able to deliver optimally. That being said, it is role of the marketing and publicity departments to identify a fund’s success with its fund manager thereby turning him into a star and in the process perhaps over emphasizing his role in the entire process.

Secondly, it also depends upon the type of fund under management. A passive fund, such as an index fund that mirrors a certain benchmark does not require the active intervention of a fund manager. Similarly, a dividend yield fund or an arbitrage scheme where the mandate of the fund is mechanical and pre-defined and not dependent upon individual calls requires more of systems and IT support rather than fund management expertise.

The other factor that one has to consider is the management philosophy of the fund house - whether it is a process driven one or one that provides fund managers latitude and flexibility. Some fund houses give a fair amount of autonomy to the fund manager in terms of taking large sectoral calls, churning the portfolio or even investing in small caps or unlisted companies, of course subject to SEBI regulations. On the other hand there are fund houses that follow a strong, process-driven investment style and the fund manager’s role is to perform within the parameters defined by the fund house. The ones following an individualistic approach could suffer from underperformance of an individual or a high profile exit while those who follow a strict process and back ups, will be more immune.

In fact it is consistency in the fund’s performance that is the litmus test to decide if it is a process driven mutual fund or not. Examined over time, it would be evident how the mutual fund has performed across bull and bear phases. Moreover, chances are that there have been fund manager changes over such a long period. Take SBI MF for example. Its been over a year and a half since the departure of their star fund manager, Sandeep Sabharwal, however, the performance of schemes such as Magnum Contra or Magnum Global hasn’t been adversely affected. However, the same cannot be said about Templeton or Sundaram. In the case of the latter two, fund manager movements seem to have directly affected the performance of their schemes.

However, all said, at the end of the day, successful fund management would in all probability be a combination of both styles. Yes, processes need to be in place, but one has to admit that the very activity of stock selection is a matter of experience, perspective and instinct. These are human qualities that cannot be completely reduced to a process. To put it differently, the buck stops with the fund manager. After all, there is a reason why a ship has one master, a team has one captain and an army has one commander. The person at the helm is the one who provides the vision, guidance and leadership.

Towards this end, SEBI guidelines (whenever they come out) will ensure a uniformity and homogeneity in the credentials of a fund manager. The argument of the process versus an individual may still continue, but if a common certified qualification means an assurance to the investor that his money is in good hands, the effort will be worth all the trouble.

Wow! No more paying the Load on MFs

2007-09-07T19:32:00.000+05:30
As most of you must be aware, MFs usually charge an entry load of 2.25% when we invest in any of their equity schemes. This load is primarily used to pay the distributor’s commissions.
However, this has certain drawbacks, such as

1. The load is levied even if someone were to invest directly without going through a distributor.

2. An investor has to pay a fixed cost, irrespective of the quality of the service offered by the distributor.

Therefore, the SEBI is now thinking of doing away with this load in case someone invests directly [say through the internet or submitting the application at the MF’s office/ service center/collection center] without routing it through any distributor. This would save them 2.25% cost that they have been paying so far. Thus, for every Rs.100 invested, now the entire Rs.100 would become part of their corpus and earn returns as against Rs.97.75 earlier.
Predictably enough, there have been voices both ‘for’ and ‘against’ the proposal.

Cheers

· Investors, of course, are quite happy with the proposal as they would save some costs.
· Those distributors, who have focused on giving the right advice and good service, also welcome this proposal.

Concerns

· Distributors, who are likely to be worst affected by this, have voiced their concern especially those who merely focused on form-filling.

· Even some AMCs feel that now they would have to open more no. of offices/collection centres. This will increase their establishment costs as both manpower and office space is scarce and expensive. Thus large MF companies may benefit at the cost of the small MF companies.
· The growth of the MF industry may be affected as fewer players would be interested in marketing/distributing MF products.

· This will encourage rebating or pass back of the commission.

Any change in policy, especially an important one like this, is bound to change the way the business is done. So what’s going to be the likely impact?

Prima facie the idea appears to be good for the investors.

· Now the quality of advice and service would become important.

· Different investors have different needs. Distributors will now be able to offer a range of transparent fee-based/commission-based services to their clients. Thus, the investors could now choose the type of services they desire and pay the fees accordingly.

· Fee-based advisory, where usually no personal interest of the advisor is involved in recommending any schemes, would gain prominence.

· Some smart investors may take advice from the distributor and then go ahead and invest on their own. So now the distributors will be at the mercy of the investors. Well, for a long time the investors have been taken for a ride. So I guess now they get the chance to make the distributors taste their own medicine. (It is a fact that certain unscrupulous distributors have, in the past, looked at their own interest rather than the investor’s and done some amount of mis-selling.)

However, there is a need for some caution too.

A vast majority of the investors still don’t understand the MFs quite well. Hence, a lot of misconceptions continue to plague the industry even after more than a decade since the MFs made a debut in India. For example Rs.10 NAV fund is assumed to be cheaper; investing just before dividend declaration; frequent churning of portfolio; blindly investing in the day’s top-performing funds; not sure of which option to choose – growth or dividend payout or dividend reinvestment; assuming that profit booking in MFs is same as that in shares; etc.
Also, as the number of MF companies and the schemes multiply, it is becoming increasingly difficult for an investor to choose the right funds.

Moreover, if the investment horizon is long (as is generally recommended for equity investments), this load actually works out to be a very nominal cost. Therefore, if in the process of saving this small amount, an investor invested in a poor scheme, he would stand to lose much more than what he is trying to save. Isn’t that being ‘Penny Wise Pound Foolish’!
To learn something from the experience in US - both no-load and load funds have co-existed there (despite the earlier apprehension that load funds will become extinct with the introduction of no-load funds) and performed their role quite well in meeting the needs of the diverse kind of investors.

Concluding, therefore, one can say that the one-suit-made-to-fit-all-investors would soon be history. Now, broadly speaking,

· those who understand MFs and the markets very well so as to be able to take informed decisions and can conveniently make the investments, can take the direct route;

· those who are looking for the right advice can opt for the fee-based advisory services;
· while those who need advice, assistance in filling-up/depositing the forms, portfolio
monitoring etc. can opt for the normal commission-based services.

Some people prefer guided tours, while others love to explore the world by themselves. Now at least, even the MF investors will be able to make a similar choice.

Top 10 Reasons Why Investing is Like Sex

2007-08-27T14:35:00.000+05:30
Top 10 Reasons Why Investing is Like Sex

Investing humor, ten reasons why investing is like having sex.
Do you enjoy David Letterman's top 10 list? Well, here is my investing-oriented letterman-like list:

Top 10 Reasons Investing is Like Sex

10) Some like it long, some like it short.

9) You can study the market as much as you like, but it all comes down to luck.

8) Those who talk about it the most, have the least experience.

7) One simple mistake could lead to 18 unprofitable years.

6) Some prefer to sit back and watch it grow.

5) Terms include swing trading, asset turnover, naked call, after hours, insider trading, silent
partner, blind entries, 30-day wash rule, straddle, triangles, descending tops, ascending bottoms, pump and dump, partial surrender, stop order, position limit, voluntary liquidation, and explicit interest.
zSB(3,3)

4) Low confidence can keep you out of the market
.
3) Everyone tends to focus on performance.

2) Some do it alone, others do it with a group, and some hire professionals.
and the number one reason....

1) Some positions are better than others and the best position is always up for debate!
And remember, past performance is not necessarily indicative of future results.

2007-08-27T14:34:00.000+05:30
The Power of Compounding Interest

Discover the 8th Wonder of the World

There are many decent examples of the impact of compounding interest on the Web, but they seem to fail at providing an example that is easy to relate to. I have created a scenario that will help you truly understand what Einstein calls the "8th wonder of the world."

Two students, each 18 years of age, graduate from High School. For their graduation gifts, Matt's father offers to put $20,000 into a savings account and Chuck's father offers to put $20,000 into a mutual fund. In both cases the graduates can not touch their graduation gift until they are retired.

Matt's father goes a step further and says that he will automatically add $20,000 into the savings account every year until Matt is retired. After Matt and Chuck discuss their graduation gifts, Chuck feels cheated.

For simplicity, we will assume that inflation is equal to 3%, Matt's savings account earns exactly enough to cover inflation and Chuck's mutual fund account earns 10% on top of inflation.
10 Year Reunion: At their 10 year reunion, Matt and Chuck compare notes. Chuck's graduation gift turned into $51,875. Matt's gift is now worth $200,000. Chuck feels cheated.
20 Year Reunion: Once again, Matt and Chuck compare notes. Chuck's graduation gift grew to $134,550. Matt's account balance was $400,000. Chuck feels cheated.

3 0 Year Reunion: Although it seemed unnecessary, Matt and Chuck compared notes. Chuck's graduation gift turned into $348,988. Matt's gift is now worth $600,000. Chuck feels cheated.
Don't worry, there was not a 40 year reunion. However, when it was time for retirement at age 65 Chuck did give Matt a call and they ended up talking about their graduation gifts. After 47 years, Matt had accumulated $940,000, all out of his fathers pocket year after year. After a one-time investment of $20,000, Chuck's graduation gift grew to a whopping $1,763,950! It was now Matt and Matt's father who felt cheated.

The chart shown in the upper right-hand corner of this page shows the growth of the two investments over time (you can also view the full table here).

In what seemed an unfair comparison, compounding interest was powerful enough to overcome a much smaller investment. If we put the two investment on even ground by adding in $20,000 each year to Chuck's account, the resulting balance would have been $17,599,856.

The name of the game is to invest early and to invest often. To further gain an understanding of this concept, try doing your own experiments with this simple compounding calculator.

The Mutual Fund Advantage

2007-08-27T14:32:00.000+05:30
The Mutual Fund Advantage

Mutual Fund Investing vs. Stock Investing

It seems strange to compare mutual funds to stocks since mutual funds are primarily composed of stocks, but it is important to distinguish the two because there are some notable advantages to using mutual funds.

Get Focused

I will admit that investing in individual stocks can be fun because each company has a unique story. However, it is important for people to focus on making money. Investing isn't a game. Your financial future depends on where you put you hard earned dollars and it shouldn't be taken lightly.

Diversification

There is no greater advantage to using mutual funds than diversification. Do you honestly believe wealthy investors purchase just a couple of stocks? Of course not! If they are not using mutual funds (many do), than they are purchasing a large number of stocks.

Smart investors diversify because it greatly reduces risk without sacrificing returns. If the idea of diversification is new to you, I recommend this article.
Professional Management

By purchasing mutual funds, you are essentially hiring a professional manager at an especially inexpensive price. It would be a bit cocky to think that you know more than mutual fund manager. These managers have been around the industry for a long time and have the academic credentials to back it up. Saying you could outperform a mutual fund manager is similar to a football fan sitting on their couch saying "I could have made that catch" -possible, but not likely.
Even if some of us are better at picking stocks than a professional and their support staff, most of us would not want to spend the amount of time it takes to watch, research and trade the market on a daily basis.

Efficiency

By pooling investors' monies together, mutual fund companies can take advantage of economies of scale. With large sums of money to invest, they often trade commission-free and have personal contacts at the brokerage firms.

Ease of Use

Can you imagine keeping track of a portfolio consisting of hundreds of stocks? The bookkeeping duties involved with stocks are much more complicated than owning a mutual fund. If you are doing your own taxes, or are short on time, this can be a big deal.

Liquidity

If you find yourself in need of money in a short amount of time, mutual funds are highly liquid. Simply put in your order during the day and when the market closes a check will be sent to you or you can have it wired to a bank account. Stocks can be much more difficult depending on what kinds of stocks you are invested in. CD's offer no liquidity (not without a hefty fee) and bonds can be difficult, too. Some mutual funds also carry check writing privileges, which means you can actually write checks from the account, similar to your checking account at the bank.

Cost

Mutual funds are excellent for the new investors because you can invest small amounts of money and you can invest at regular intervals with no trading costs. Stock investing, however, carries high transaction fees making it difficult for the small investor to make money. If an investor wanted to put in $100 a month into stocks and the broker charged $15 per transaction, their investment is automatically down 15 percent every time they invest. That is not a good way to start off!

Wealthy stock investors get special treatment from brokers and wealthy bank account holders get special treatment from the banks, but mutual funds are non-discriminatory. It doesn't matter whether you have $50 or $500,000, you are getting the exact same manager, the same account access and the same investment.

Risk

In general, mutual funds carry much lower risk than stocks. This is primarily due to diversification (as mentioned above). Certain mutual funds can be riskier than individual stocks, but you have to go out of your way to find them.

With stocks, one worry is that the company you are investing in goes bankrupt. With mutual funds, that chance is next to nil. Since mutual funds typically hold anywhere from 25-5000 companies, all of the companies that it holds would have to go bankrupt.
I won't argue that you shouldn't ever invest in individual stocks, but I do hope you see the advantages of using mutual funds and make the right choice for the money that you really care about.

The Ground rules of Mutual Fund Investing

2007-08-27T14:30:00.000+05:30
The Ground rules of Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be followed till eternity. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken.

1. Assess yourself: Self-assessment of one’s needs; expectations and risk profile is of prime importance failing which, one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments. Irrational expectations will only bring pain.

2. Try to understand where the money is going: It is important to identify the nature of investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds.

3. Don't rush in picking funds, think first: one first has to decide what he wants the money for and it is this investment goal that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look at the portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio. Mutual funds invest with a certain ideology such as the "Value Principle" or "Growth Philosophy". Both have their share of critics but both philosophies work for investors of different kinds. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future.

4. Invest. Don’t speculate: A common investor is limited in the degree of risk that he is willing to take. It is thus of key importance that there is thought given to the process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit.

5. Don’t put all the eggs in one basket: This old age adage is of utmost importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting one’s money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task, it is good to place money in the hands of several fund managers. This might reduce the maximum return possible, but will also reduce the risks.

6. Be regular: Investing should be a habit and not an exercise undertaken at one’s wishes, if one has to really benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic. The basic philosophy of Rupee cost averaging would suggest that if one invests regularly through the ups and downs of the market, he would stand a better chance of generating more returns than the market for the entire duration. The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All that one needs to do is to give post-dated cheques to the fund and thereafter one will not be harried later. The Automatic investment Plans offered by some funds goes a step further, as the amount can be directly/electronically transferred from the account of the investor.

7. Do your homework:

It is important for all investors to research the avenues available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.

8. Find the right funds

Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes from the pocket of the investor. This is even more important for debt funds as the returns from these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the right funds is important and one should also use these funds for tax efficiency. Investors of equity should keep in mind that all dividends are currently tax-free in India and so their tax liabilities can be reduced if the dividend payout option is used. Investors of debt will be charged a tax on dividend distribution and so can easily avoid the payout options.

9. Keep track of your investments

Finding the right fund is important but even more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy.

10. Know when to sell your mutual funds: Knowing when to exit a fund too is of utmost importance. One should book profits immediately when enough has been earned i.e. the initial expectation from the fund has been met with. Other factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to exit. For more on it, read "When to say goodbye to your mutual fund."

Investments in mutual funds too are not risk-free and so investments warrant some caution and careful attention of the investor. Investing in mutual funds can be a dicey business for people who do not remember to follow these rules diligently, as people are likely to commit mistakes by being ignorant or adventurous enough to take risks more than what they can absorb. This is the reason why people would do well to remember these rules before they set out to invest their hard-earned money.

SIP

2007-08-27T14:29:00.000+05:30
True benefit of SIP will follow by investing at low levels

‘No one can time the market’. It is time spent in the market, which is important than the timing.

The last 2-3 weeks in the stock market has been a nightmare. In a severe correction, the Sensex has fallen from around 12700 levels to about 9300 in a matter of few trading sessions.

It is true that the market valuations had become stretched and a correction was both desirable and long overdue. The problem, however, has been ‘the extent of fall’ and ‘the speed of fall’. The loss to the investors, therefore, has been unimaginable.

This has shaken the confidence of the investors. Given the secular bull run over the last 2-3 years; the booming Indian Economy; excellent growth in jobs & salaries; systemic improvements at BSE/NSE; etc. had encouraged many small investors to look at equity as an asset class to build long term wealth.

Mutual Funds, offering benefits such as diversification, professional management, and convenience, had emerged as an alternative route for small investors to invest in equity vis-à-vis taking a direct exposure. Systematic Investment Planning was one strategy which was being actively encouraged by the mutual funds.

With the carnage continuing at the stock markets and no bottom in sight, does it make sense to continue investing in equity today? Should one continue with the SIPs one had committed to? Can one begin fresh SIPs now? Or should one sell and just get out of this manic market?

There is a need to objectively assess the situation. Panic reaction will not help. In fact a part of the problem was our greed which made us jump into the market at a time when the valuations were stretched. And so were our expectations – we were looking to double the money in a matter of months, if not days.

Broadly speaking, we need to try and understand
a. Is the market investment worthy?
b. If so, is this the right time to invest?

Is the market investment worthy?
We all know that in the long run stock markets are ultimately a reflection of the performance of the companies listed on the exchange. In short term there could be many factors such as liquidity, Govt. changes, monsoon, global factors, etc. which could make the markets volatile. But if the long term fundamentals of the economy are intact, the markets will finally achieve the levels which are line with the economic growth.

As things stand today, the fundamentals of Indian economy still remain strong. India is still predominantly a closed economy, with its’ own demand dynamics. The young demographic profile looks promising. A lot of fresh investment is happening in all the three sectors of economy viz. agriculture, services & manufacturing, not to mention the infrastructure. There is as yet nothing to suggest that the GDP growth of 6.5-8% will not be consistently achieved over the next 2-3 years.

Of course, there are concerns on the oil prices, the interest rates, infrastructure bottlenecks, strength of the dollar, performance of global economies etc., which could affect growth in India too.

But looking at the pros and the cons, the balance still seems to be in the favour of decent and consistent growth.

Is it the right time to invest?
How do we make money in the market? Simple, by Buying Low and Selling High. But do we really do so? No, we don’t. Our emotions are much stronger than our reason. So generally we will buy when the markets are rising and sell when the markets are falling.

The second important lesson we need to learn from the long history of the stock market is that ‘No one can time the market’. It is TIME spent in the market, which is important than the TIMING.

And the purpose of SIP is precisely that. It does away with our fruitlessly trying to predict the tops and the bottoms. And it removes emotions from our buying decisions. We buy more units when the markets are down and less units when the markets are high. So, we un-emotionally go on investing. And that is the secret of success of a long-term investor at the stock markets.

The markets will be volatile. That is the inherent nature of the market. It is the truth you can’t wish away. However, there is one more truth. Consistent, long term investing in equity has delivered superior returns. SIPs iron out the volatility risk, associated with one-time investing.

In fact, the true benefit of SIP will follow by investing when the markets are down. We will now get more units. Our average cost of acquisition will go down and as markets recover, our recovery would also be faster.

Though, of course, SIPs will not deliver profits if the long-term economic performance looks shaky and markets are consistently going down.

Therefore, the question whether SIPs make sense in falling market is inherently flawed. As long as one is confident of the economic growth going forward, SIP makes sense in any market – falling, rising or steady. Also, we need to be realistic about our expectations. No grand delusions of doubling money in a jiffy. The author is an investment advisor and can be reached at ramesh007hero@yahoo.co.in

ETFs

2007-08-27T14:25:00.000+05:30
What are Exchange Traded Funds (ETFs)?

ETFs - Similar to Index Mutual Funds, but Not.

What is an ETF? In short, they are similar to index mutual funds, but are traded more like a stock. As their name implies, Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an exchange. As with all investment products, exchange traded funds have their share of advantages and disadvantages.

Advantages of Exchange Traded Funds

Being similar to stocks, exchange traded funds offer more flexibility than your typical mutual fund.

ETFs can be bought and sold throughout the trading day, allowing for intraday trading - which is rare with mutual funds.

Traders have the ability to short or buy ETFs on margin.

Low annual expenses rival the cheapest mutual funds.

Tax efficiency - due to SEC regulations, ETF tend to beat out mutual funds when it comes to tax efficiency (if it is a non-taxable account then they are equal).
Disadvantages of ETFs

Unfortunately, exchange traded funds do have some negatives:
Commissions - like stocks, trading exchange traded funds will cost you.

Only institutions and the extremely wealthy can deal directly with the ETF companies (must buy through a broker).

Unlike mutual funds, ETFs don't necessarily trade at the net asset values of their underlying holdings, meaning an ETF could potentially trade above or below the value of the underlying portfolios.

Slippage - as with stocks, there is a bid-ask spread, meaning you might buy the ETF for 15 1/8 but can only sell it for 15 (which is basically a hidden charge).
The Bottom Line

After comparing the advantages and disadvantages to using ETFs, you might conclude that they are a better deal than mutual funds - not true. Commissions make ETFs unattractive. If your portfolio is a tax deferred investment, like a 401(k) or an IRA, then you can avoid paying commissions by investing directly with a mutual fund company. Even in a taxable account, commissions make exchange traded funds look bad.

Morningstar provides a great example: a lump-sum investment of $10,000 in the iShares S&P 500 Index, with a very low trading cost of $8, would need to be held for two years to beat out the Vanguard 500 Index's costs. If you are investing less than $10,000 and are paying more than $8 commissions, or you are investing more than once, this example would make ETFs look much worse.

Investing directly with a mutual fund company generally beats out ETFs, especially in these situations:

Non-taxable accounts

Small investments - if you invest a certain amount each month or are on some sort of automatic investment plan (ETF commissions would kill your investment).

Active traders - although ETFs are primarily geared towards active traders, an active trader might be better off with mutual funds which don't charge commissions (most mutual funds discourage active trading, but some, like Rydex, Profunds and Potomac Funds encourage it).
Index Funds Outperform

Over the long term, the S&P 500 beats the returns of 80% of actively managed funds (and that isn't even taking into account tax efficiency).

2007-08-27T14:24:00.001+05:30
What are Index Funds?

Discover Index Fund Investing

Index funds are perfect for the buy-and-hold investor - the kind of person who likes to sit back and let their investment grow, rather than moving in and out of the market in an effort to beat the market.

What is an Index Fund?

Index funds are mutual funds that attempt to copy the performance of a stock market index. The most common index fund tries to track the S&P 500 by purchasing all 500 stocks using the same percentages as the index. Other indices that mutual funds try to copy include: Russell 2000, Wilshire 5000, MCSI-EAFE, Lehman-Brothers Aggregate Bond, and NASDAQ 100.
Index Funds Have Lower Fees

Index funds can be managed by a much smaller staff than an actively managed fund. Computers do most of the work, so there is no need to hire an expensive fund manager or research analysts.

Index funds can have expense ratios as low as 0.18%, while actively managed funds can have an expense ratios over 3.0%.

Index Funds Are Tax Efficient

One problem with mutual funds is that they are required by law to pay out capital gains each year ( See Capital Gains or Capital Punishment). Funds that trade more often don't have the tax advantages that index funds have. Index funds delay capital gains taxes because they hold on to the stock much longer, which means the money that would have been paid out in taxes can keep producing investment returns.

Index Funds Outperform

Over the long term, the S&P 500 beats the returns of 80% of actively managed funds (and that isn't even taking into account tax efficiency).

What to Look for in a Fund Manager

2007-08-27T14:17:00.000+05:30
What Makes a Fund Manager Special
What to Look for in a Fund Manager
One of the great advantages of buying a mutual fund is that a professional, or a group of professionals, will pick stocks for you. Because you are sharing the costs of the mutual fund manager with thousands or millions of other shareholders, the fund manager comes at a really cheap price. Find out what you should look for in a fund manager.
Fund Manager for Hire
Finding the right mutual fund manager is kind of like finding the right employee. You should study their experience and their accomplishments, and you should always do a background check before you hire them.
As with job applicants, fund managers come in all varieties, but unlike a job applicant, a fund manager can be more than one person. Mutual funds usually use either a fund team (more than one decision maker), a fund manager (who might work with a team, but calls the shots), or the funds assets are split up between a group of fund managers who work independent of each other.
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Experience
Journalists always talk about a fund manager’s tenure. “How long has he been running the fund?” they might ask. “Don’t buy a fund with a fund manager who has spent less than five years running the mutual fund” they might advise. Despite the focus on fund manage tenure there’s no clear evidence that tenure matters. Wonderful managers have left a fund only to be replaced by even better managers. Decorated managers have also stayed with their fund and ended up on the worst performing lists for years. The Journal of Financial Planning found no relationship between manager tenure and performance in this study. Other studies have said differently, but it is safe to say that tenure may not be as important as often preached.
Needless to say, a fund manager with experience is preferred. How long has this person been in the fund business? Does this person have a strong academic background? Does this person carry any investment designations. Do you feel your fund manager is wise? Just because your fund manager might be battle-tested, it doesn’t mean they are battle-wise – in fact, a fund manager that has been burned in the past by the market might be too hesitant to act when the time is right.

If you’re looking at a new fund or a fund that just changed managers, study the fund manager’s bio. Has he/she been at it for a while? If they ran a different fund before heading the current one, take a look at their track record versus their peers in the old fund. Some fund companies, like Fidelity and American are known for their star benchwarmers just waiting to head a fund.
Accomplishments

How did your fund manager perform during both bull and bear markets? How does your fund manager’s track record compare to his peers? Does the fund manager have a positive or negative alpha (you want positive as it means they are adding something to performance).
Like the music industry, we don’t want just a one-hit wonder. If this fund manager topped the lists one year, it doesn’t mean it will happen again next year. Be cautious of the fund managers that are talking heads and don’t underestimate the silent or not as well spoken fund managers. Luck is a big part of the success of many fund managers – don’t mistake luck for skill. Often the fund’s category is more responsible for performance results than the fund manager’s stock selection. That’s why it is important to compare fund performance to category peers.
True Style

Is your fund manager passionate about their investing strategy? Is your fund manager true to the style of the fund? You don’t want a value fund buying growth stocks or a large cap fund buying small stocks. Asset allocation is important to building a fund portfolio that is in-line with your risk tolerance and financial situation. The last thing you want is the fund manager to violate what the fund states it is all about.

Another thing to look out for is a closet indexer. We always hear that 80% of funds are beat by the S&P 500 each year, so it only makes sense that some sneaky fund managers might mimic the S&P 500 without telling us. If the fund claims it isn’t an index fund, but the r-squared measure for the fund is 97 or higher, you probably have a closet indexer on your hands. If that is the case, you might as well use an index fund instead.

What’s at Stake?

In a wonderful move in late 2004, the SEC ruled that fund managers must disclose their ownership in the fund they are running. You want a fund manager that has a financial interest in how he does and a strong ownership in the fund shows that the fund manager believes in him or herself.

Unfortunately, the SEC only required dollar ranges of ownership to be disclosed: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over $1,000,000. What we don’t know is how much of their overall portfolio this money represents. For example, a young fund manager that just bought his first house might only have $50,000 in his own fund, but it represents 80% of his non-home investments, but an older fund manager with $500,000 in their own fund might have ten million dollars invested in other funds.

Background Check

How can you learn more about your fund manager? The fund prospectus is one spot. The fund’s Web site is another (use my list of ).
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A good place to look up alpha, r-squared, and performance is Morningstar and Yahoo Finance. You can also find documentation on some fund managers at the SEC or NASD Web sites.
When the Fund Manager Doesn’t Make a Difference

The type of fund often determines how important a role the fund manager plays. Funds with latitude rely on the fund manager, but others may not. Index funds don’t need star fund managers because they simply mimic an index. Mechanically-driven fund managers aren’t given any latitude because they rely on the computer timing systems rather than their own judgement. Funds with modest return ranges, like short-term bond funds won’t be affected by a fund manager that much.

Depending on your feelings on index vs. managed mutual funds and on what type of funds you are investing in, the Fund Manager can make a big difference. Now that you know what to look for, hire the fund manager(s) that is right for you!

When to say goodbye to your Mutual Fund

2007-08-27T14:13:00.000+05:30
When to say goodbye to your Mutual Fund

While there are many investment consultants, some by profession, some self-professed, who suggest on when to invest in a particular avenue, there is a certain paucity of people who talk of when to exit. People looking to invest get in many options and mutual funds happen to be one such preferred destination for people who want more returns than their fixed deposits would earn them. It’s also a preferred option for the people who are circumspect about investing into stocks directly and believe that mutual funds can manage risks and funds better than they could.

The recent crash will have several lessons for the investor but will not drive them away from the mutual funds in the wake of falling returns because they still are among the best investment avenues available to them. The primary of the lessons learnt is, not to chase returns. One of the biggest flaws in the process of investing is to chase the performance of funds alone. While they do give an indication to how well a fund can perform, they remain just indicative, for all good reasons. Take for example, the case of several equity funds that were riding sky-high between October 99 and March 2000. Alliance Equity Fund posted absolute returns of 168 percent between October 1, 99 and March 7, 2000. Birla Advantage posted 125 gains and ING Growth Fund posted mind-boggling returns of 193 percent during the same period. The recommendation by the consultants still remained "buy". However, investors who chased the returns of these schemes have learnt the bitter and eternal truth that "what goes up must come down", the hard way. These funds have posted negative returns of 64 percent, 61 percent and 82 percent respectively since peaking on the same day, March 7, 2000. And so, while chasing hot funds might be a good idea in a market that has started to rise, it certainly is a sure recipe to doom in a peaking market. The only people to have gained from investing in these schemes were the ones who exited while it was still profitable.

The others did not know when to exit and so we are just trying to put forward some situations when the investor should consider withdrawing their investments from the funds.
Fund is not performingThis reason for selling, although valid in certain conditions, is where most investors make a mistake. When calculating performance one shouldn’t look at too short a period and make a mistake by comparing apples to oranges.

It is important to base the decision on relative performance and not absolute performance. When one fund is down 5% while other funds or the market in general are up 10%, it is very tempting to switch over to what is "hot." Chasing Performance is the best way to shoot oneself in the foot as we just discussed above.

When studying relative performance, one should look at his fund and compare it to its peers. However, comparisons should be drawn between parallels and so equity funds can not and should not be compared with debt funds. When choosing a benchmark, one must select funds in the same category. If one’s fund was down 2% and the average equity fund was down 4%, then there is no good enough reason to sell it. One should compare the returns posted by his fund with that of the peers across various horizons such as 1-year, 3-year and above. A short-term view can often lead to committing hara-kiri, as it doesn’t present the full picture. If it has underperformed the average of its peers in all cases, then it sure is one of the better reasons to exit from the fund.

A change in life stageInvestments are done with a certain objective in mind and life stages are often a determining factor of what a person needs. A young man can afford to take more risks than a person nearing his retirement can. In such cases, it pays to withdraw money from the equity investments made earlier and put them in safer, more conservative debt funds that offer stable returns without compromising on risk. So a change in life stages would be one such reason to consider switching into a fund that matches with one’s needs. As one nears retirement, one might want to consider more conservative funds. If one gets married, one might need to compromise one’s risk tolerance and desired returns with that of the spouse. This could trigger off the need to exit.

A major change in any basic attribute of the fundWhen the fund changes any basic attribute as mentioned by it in its offer documents, the investors have a choice of getting out of it. Even SEBI has provided for an exit route being made available to the investors. Changes like a change in Asset Management Company or in investment style of fund or change of structure say from closed-end to open-end etc. are good enough reasons for an investor to consider switching or exiting from it as they are certainly likely to affect the fund in a major way.
Fund doesn’t comply with its objectiveOne of the important parameters in the selection of the fund is alignment of the risk profiles of the investor and fund. The objective of the fund says a lot about how the fund plans to invest. If the objective is not being complied with, it is one of the exit points worth considering. For example, the three funds discussed above, Alliance Equity, Birla Advantage and ING Growth all claim to be diversified equity funds yet they had huge exposures to select ICE sector scrips that not only added volatility than is expected out of diversified funds but also in a way, went against their stated objective.

The Fund's Expense Ratio RisesA small rise in an expense ratio is not a big deal, however a significant rise can result in substantial reduction of yields and so it would be better to exit the fund. In the case of bond funds or money market funds, it is highly unlikely that the fund can increase its returns enough to justify an increase in the fund's expenses.

The Fund Manager Has ChangedA simple change of fund managers, in itself, is not enough reason to sell a fund on a short-term basis. If it is a passively managed fund (index fund), then one has little to no reason to worry. However, if it is an actively managed fund, then has to keep the eyes open on the new manager. Observing the styles, stock picking and risks undertaken by the new manager is important for it discloses a lot about how the fund might fare in the future. If satisfied, one will have no reason to complain later but the process needs time and so an investor has to observe the fund manager for some time before one takes a decision.

Enough has been earnedHowever, nothing is as important as to rein the horses in time. The primary principle behind safety of investment is to take risks that can be tolerated. The principle also is specific on the expectations that the investor must have from any investment. Just as it is important to set realistic targets that one hopes to achieve from the investment, it is also important to exit when target as expected has been achieved irrespective of the fact that it might be generating better returns in a short-term. Waiting longer might not prove beneficial, as one need not be lucky all the time. Equity investments are volatile and it doesn’t take long for the moods in the markets to swing either way. So, it would only be wise to move out when the going is still good. Otherwise, the investors sanguine of generating even higher returns than what the fund generated in its peak days, would be cursing themselves for not exiting.
The above list is certainly not exhaustive and individuals will have other better reasons to quit as well. It’s just that most don’t know when to apply thought and so these would come in handy.
Source: Mutualfundsindia Research Team

Say 'No' to Loaded Mutual Funds

2007-08-25T20:08:00.000+05:30
Always Use No-load Mutual Funds.

Guide Rating -
Stock brokers and insurance salesmen might try to convince you otherwise, but there really is no reason to ever buy a loaded mutual fund. Learn why you should stay away from loaded funds and how to spot them.

What are Loaded Mutual Funds?

When I use the term "loaded mutual fund," I mean a mutual fund that carries a sales load. A sales load is a mutual fund commission paid to brokers (or a person who goes by a different, creative title). Sales loads do not benefit investors. Load fees typically range from four to eight percent and the way they are paid varies:

Front-end load (usually class A shares) - you pay the sales fee up front.
Back-end load or deferred load (usually class B shares) - you pay the sales fee on your way out.
Constant load fund (usually class C shares) - you pay the sales fees every year and might even have to pay a full load when you sell.

Some writers will advise people that it is usually best to buy the front-end load if you are going to buy a loaded fund, but I won't do that because I believe you should never buy a loaded fund.
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Starting Two Steps Behind

By investing in a loaded fund, you automatically start off in a bad position.
A good way to think about load vs. no-load mutual fund investing is to imagine a race track.
The no-load mutual fund gets to start on the regular start line (see the race track image on the right). The loaded mutual fund must start a number of strides back. Assuming both these funds travel at equal speeds, which fund will cross the finish line first?

The answer is obvious - the no-load fund! When you pay a commission for the purchase of your fund, you automatically start off with a loss. For example, if you start off by investing $10,000, but you put it into a loaded fund with a 5% front-end load, you are really only investing $9,500. What do you get for your $500? Absolutely nothing. A salesperson might try to convince you otherwise, but I have never - I repeat NEVER - heard one good reason why you should ever purchase a loaded fund. The commission is not going towards the management of the fund. The commission doesn't buy you special privileges. For every type of loaded fund, there are many no-load alternatives that perform as well or better.

Use No-load Mutual Funds
By using no-load mutual funds, you avoid paying unnecessary fees. The one exception is 12b-1 fees which you should also avoid. There are thousands of no load mutual funds available to investors. You can buy them directly from the fund family or through a broker.

EXTRA SAVINGS

2007-08-25T20:06:00.000+05:30
The first step to finding a little extra savings each month is to find out exactly where your money is going. To do this:
1. Track your purchases and put together a spending plan.
2. Make sure your spending is less than or equal to your income.
3. If your spending is more, make adjustments to your spending plan by reviewing your spending categories.
Once you know where your money is going, it's easy to find ways to make small adjustments that really add up. Look at discretionary areas of spending first. Spending for items such as eating out, lunches, entertainment, clothing, personal items etc can often be reduced. If you cut a little in each area, you likely won't feel the pinch and still make a difference in the big picture.
In order to find additional savings, review all your spending categories and see where you can cut costs. The following are a few options:
Shop around for lower premiums on all your insurance
Shop around for a less expensive cable or satellite package
Find lower rates for long distance or Internet access
Switch to a lower cost cellular phone plan
Other cost savings options for every day living, may include:
Brown bag your lunch to the office, at least a few times each week (have the kids do the same thing for school a couple days a week)
Use coupons for things you frequently buy; keep them in your car so that they are handy for the store, fast food or restaurants
Rent a movie instead of taking the whole family out to a theater
Carpool or consolidate errands to cut down on extra gasoline expenses; when you do buy gas, do it in the middle of the week and at a gas station that has competition close by
Stock up at holiday and back-to-school sales for things you know your kids and family will need
Use email for long distance communication instead of the phone
Swap babysitting nights with family or friends
Use a shopping list when at the store; do not deviate from your list whenever possible
Keep your eye on the register when checking out at stores, purchases can easily be rung up wrong

How to Spot a Loaded Mutual Fund

2007-08-25T20:03:00.000+05:30
Make sure you are buying a no-load fund.

Now that you know that buying loaded funds is bad, I'm here to help you determine if a fund carries a load or not.

Classy Funds Mutual funds that have a class - have no class. Stay away from mutual funds that have "Class A", "Class B" or "Class C" in their title. There are other classes you should look out for as well, but these are the most common. As mentioned before, loaded mutual funds try to charge you in a variety of ways (front-end, back end and constant loads)
Always Research the Fund

Find a good quoting service like Morningstar or Yahoo Finance and type in the fund's ticker symbol. Pay close attention to the sections that talk about the fund expenses.
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Look for anything referring to a load and make sure it says zero or none. Common areas to look for are:
Actual Fees

12b-1 Fees

Deferred Load

Front End Load

Front End Sales Charge

Deferred Sales Charge

You can ignore expense ratios and management fees for now - those are a separate more
complicated topic (all mutual funds carry some sort of of management fee to run the funds). If any of the above fees or charges say anything other than "none" or "0", then you are most likely dealing with a loaded mutual fund. Most quoting services will allow you to screen out funds that charge a load. If you discover you own a loaded mutual fund, you may want to find a no load alternative using this tool: Explode Loads.

Signs That You are Being Sold a Loaded Fund

Salespeople are very good at steering people in the wrong direction for their own benefit. If you see any of these arguments, you can be sure that they are lying and trying to sell you a loaded mutual fund:

"Loaded funds make up for their fees by outperforming no-load mutual funds." This is simply not true.
"Loaded fund companies provide better customer service." Wrong again.

"You can't buy these funds without going through us." Translation: "Only people that bought our sales pitch are in this fund."

"Load funds have better managers - you get what you pay for." Not true: no-load funds have been proven to out produce loaded funds when the sales charge is taken into account.

"Don't worry, you don't pay me a dime in commission - it comes from the fund company" Finally a true statement. However, where do you think the fund company got that money? They took it from you to pay the salesperson.

"If you hold the fund for five years, you won't pay a load." Many load funds are set up like this. It's a great way to keep you from selling their poor mutual fund. "I'll give you free investment advice, a no-load fund company won't do that for you." I'd rather have no advice than advice from a biased salesperson.

Chasing Investment Returns

2007-08-25T20:01:00.000+05:30
Chasing Investment Returns

Don't make the costly mistake of chasing investment returns (or performance).
When deciding where to put your money, what often seems "hot" is certainly not. The year 2000 is a prime example.

One of the biggest mistakes that investors make is to chase performance. Whether it be changing investment advisors, switching newsletters, transferring between funds, or purchasing a new fund, the common goal for the investor is to be in the hottest fund. Unfortunately, they're often in the wrong place at the wrong time.

To obtain a better understanding of how painful it can be to chase returns, let's turn back the clock to January 1st, 2000. Imagine that you are sitting at home analyzing 1999 returns (yes, grateful you have power and the world did not blow up due to Y2K). The biggest winners in 1999 were Japan funds and Technology funds. After screening for the top performing funds, you decide to go with these five:

Warburg Pincus Japan Small Company (WPJPX) Up 328.7% in 1999
MAS Small Cap Growth (MSCGX) Up 313.9% in 1999
Credit Suisse Inst.
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Japan Growth (WPIJX) Up 279.9% in 1999

Monument Internet (MFITX) Up 273.1% in 1999

Amerindo Technology (ATCHX) Up 248.9% in 1999

The mere thought of returns like these is mesmerizing! If you could even get a small fraction of these returns on a consistent basis, you could retire early!

Fast forward to Jan 1st, 2001. The old saying, "What goes up, must come down" is a painful reality for you. Here is what happened:

Warburg Pincus Japan Small Company was down 71.8%
MAS Small Cap Growth dropped 23.1%

Credit Suisse Inst. Japan Growth shut down and returned assets to investors, but not before it lost almost 60% of its value

Monument Internet tumbled 56.4%

Amerindo Technology fell 63.9%

It may have been easier to stomach these losses if you were lucky enough to have enjoyed the gains in 1999, but you didn't. That's the point.

Does this mean that you should invest in what is out of favor? No. It is simply a display of what could happen to you if you let your desires for huge returns get in the way of rational thinking. Just because an investment did well last year, does not mean it will do well this year.

2007-08-25T19:57:00.000+05:30
Before You Buy Mutual Funds

Congratulations, you found a mutual fund you want to invest in! Buying a mutual fund may be the smartest financial decision of your life. But with over 10,000 mutual funds to choose from, you can be sure that there are a decent number of sour apples out there. To be safe, take a look at the items mentioned on this list before you invest in any mutual fund.
Prospectus
By law, you should receive a prospectus from the fund company before you invest in it. Many investors ignore the prospectus, but this is a must read. The mutual fund's objectives are displayed in the prospectus. It tells you the goals of the fund and how it intends to achieve them. You will also find information about the fund's past performance and fees.

• Mutual Fund Families

• Mutual Fund Glossary

Mutual Fund Fees

The fees are displayed in the prospectus as well as on many mutual fund research sites. Try to buy funds with low expense ratios and certainly avoid 12b-fees. I have yet to hear a valid argument on why you should ever buy a loaded fund. A loaded fund is a fund that carries front-end loads, back-end loads or deferred loads. These loads are basically sales charges. There are plenty of no-load funds to meet your objectives.
• More on Mutual Fund Fees

• 12b-1 Fee Warning

• Say "NO" to Loaded Mutual Funds

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Objectives

Why are you buying this fund? Is it because you read about it in the paper or a neighbor told you about it? Don't get caught in the trap of chasing performance. Buy a fund because it meets an objective in your portfolio, not because it has done well recently. Asset allocation is the key to successful investing.

• Psychology of Investing
• Investment Psychology Books
• When to Sell a Mutual Fund
Returns or Performance
Don't focus too much on returns. Any track record under 5 years is noise. Try to take a look at how a fund has done over longer periods of time and try to compare it to it peers or an index that represents the type of asset class the fund is in. It is not fair to compare a government bond fund to the NASDAQ.

• Chasing Investment Returns
• Mutual Fund History
Risk

Take a look at the standard deviation of a fund. If Fund A did slightly better than Fund B, but took twice as much risk as Fund A, then Fund B would be the better choice. Other measures of risk include the Ulcer Index and the worst periods (ex. 1-month, 3-month, one year). Don't take any risk that you are not comfortable with and never take unnecessary risks.
• Risk Tolerance Quiz

• Risk Capacity Quiz

• Index Funds

Management

What firm serves as the fund's adviser and who manages the fund? It might not be a bad idea to do some background checking to make sure it is a decent entity. The SEC is the official watchdog for mutual funds and has information about each fund and it's manager. Also look out for recent manager changes. Though a new fund manager may be just as good or better, it is important to realize that all the fund statistics from before may not be relevant, especially in an actively managed fund.

managing your investments

2007-08-25T19:56:00.000+05:30

Have you ever stopped to think, whether it is more paying for you to put in more hours to your job or to managing your investments?
The answer lies in your size of investible funds and your stage of career.
Let's look at the picture in a little more details below.
Case 1: Annual earnings- Rs 4 lacs p.a., Investible funds- Rs 40,000.
In order for your investment income to equal your potential pay rise when you put in more hours, your investments must give 10 times better returns compared to your job. Even if you go for equity investing, your returns on a sustainable basis may not exceed 20% per annum on an average. To equal this return you need only an additional 2% annual pay rise from your increased efforts.
Case 2: Annual earnings-Rs 6 lacs, Investible funds- Rs 3,00,000
Now to equal equity returns of 20% you may need an additional 10% annual pay rise from the same efforts.
Case 3: Annual earnings-Rs 15 lacs, Investible funds- Rs 15,00,000
When your investible funds equal your annual earnings, you would need an additional 20% pay rise from the same efforts, which may be difficult.
Case 4: Annual earnings-Rs 10 lacs, Investible funds- Rs 15,00,000
When your investible funds exceed your annual earnings, it is common sense that increased earnings from extra pay rise cannot match additional investment earnings.
It is therefore clear that till you have substantial investible funds, it is not prudent to give disproportionately high attention to your investment management. However, when you build up a sizable amount, the story is entirely different.
However, by the time you have built up resources in excess of 50% of your annual earnings, you are either sufficiently senior in your job or you are a reasonably valuable professional.In either case, your contribution at the workplace will have to be ever significant.In such a situation, therefore, it may be more beneficial to manage your investments through a professional agency and maintain your own focus on your professional advancement

How should you act to provide the best care for this bundle?

2007-08-25T19:54:00.001+05:30
Money in hand or your savings represent your hard work that went into making them and the pains that you might have taken to avoid spending them. How should you act to provide the best care for this bundle?When is the quantum of money minor, not to spend sleep over it? And at what point should you certainly worry over the quality of your money management?How much are you able to set aside every month? How much is it worth in a year's time, 2 years from now and say 5 years from now?Let's take an example.
If you were able to save Rs 5000 a month, then after one year this savings would become Rs 60000 plus Rs 1625 of interest at 5% interest per annum, i.e. a total of Rs 61,625.Two year later this sum would become Rs 61625x2 plus Rs 3082, i.e. Rs 126,332.Five years from now, this regular stream of saving will amount to Rs 340,517 if your interest rate remains 5% for the period.
So, even Rs 5000 per month is not an insignificant amount after all.
Now let us understand one very important aspect. The rate of returns can go up and that too substantially. But the most important aspect to consider is: when would you need this money in normal course?
Now the most crucial timeline is 2 years from now. Are you able to see beyond that? Consider your milestones like going for a house purchase or starting a family, etc when you may need to draw from your savings. If at this point in time, you are confident that your savings need to work for more than 2 years, you will have to give more serious attention to managing your investments.
There are two approaches to the whole thing.
Where do I park my money? Or, which financial product should I buy? These belong to a transaction oriented thinking akin to buying any other product that you do in other areas of your life.The other approach is to take a more complete view of your finances and concentrate on a more healthy financial position and to develop effective financial planning strategies taking into account fundamental rules of risk and rewards and which will give more emphasis to your personal unique needs over a very long period. Financial products or individual transactions will have to fit into this broad framework.
If you are saving money to use most of it within the next two years you will not lose much by adopting a transactional or product centered approach. Because in the shorter time span attempts to hike your returns through more aggressive steps will entail courting unacceptable levels of investment risks.However, you need more thorough considerations and care for a longer period. Risks and time periods are related to each other. And risks tend to come down as time periods become longer.
Time period is the most important parameter in personal financial matters and you will lose significant opportunities to grow your savings if you do not take good care of your long run savings.
So ask yourself the carefully considered answer to this key question.

How should you act to provide the best care for this bundle?

2007-08-25T19:54:00.000+05:30
Money in hand or your savings represent your hard work that went into making them and the pains that you might have taken to avoid spending them. How should you act to provide the best care for this bundle?When is the quantum of money minor, not to spend sleep over it? And at what point should you certainly worry over the quality of your money management?How much are you able to set aside every month? How much is it worth in a year's time, 2 years from now and say 5 years from now?Let's take an example.
If you were able to save Rs 5000 a month, then after one year this savings would become Rs 60000 plus Rs 1625 of interest at 5% interest per annum, i.e. a total of Rs 61,625.Two year later this sum would become Rs 61625x2 plus Rs 3082, i.e. Rs 126,332.Five years from now, this regular stream of saving will amount to Rs 340,517 if your interest rate remains 5% for the period.
So, even Rs 5000 per month is not an insignificant amount after all.
Now let us understand one very important aspect. The rate of returns can go up and that too substantially. But the most important aspect to consider is: when would you need this money in normal course?
Now the most crucial timeline is 2 years from now. Are you able to see beyond that? Consider your milestones like going for a house purchase or starting a family, etc when you may need to draw from your savings. If at this point in time, you are confident that your savings need to work for more than 2 years, you will have to give more serious attention to managing your investments.
There are two approaches to the whole thing.
Where do I park my money? Or, which financial product should I buy? These belong to a transaction oriented thinking akin to buying any other product that you do in other areas of your life.The other approach is to take a more complete view of your finances and concentrate on a more healthy financial position and to develop effective financial planning strategies taking into account fundamental rules of risk and rewards and which will give more emphasis to your personal unique needs over a very long period. Financial products or individual transactions will have to fit into this broad framework.
If you are saving money to use most of it within the next two years you will not lose much by adopting a transactional or product centered approach. Because in the shorter time span attempts to hike your returns through more aggressive steps will entail courting unacceptable levels of investment risks.However, you need more thorough considerations and care for a longer period. Risks and time periods are related to each other. And risks tend to come down as time periods become longer.
Time period is the most important parameter in personal financial matters and you will lose significant opportunities to grow your savings if you do not take good care of your long run savings.
So ask yourself the carefully considered answer to this key question.

Set up Budget Categories, Calculate Budget Amounts

2007-08-25T19:53:00.001+05:30
Set up Budget Categories, Calculate Budget Amounts

Without a budget, many of us just muddle through, trying to stay one step ahead of our bills. If the word "budget" makes you cringe, think of the process as (1) summarizing how you spend your income and (2) creating guidelines for your spending. No blame, no shame, no deprivation, and no guilt. Thinking of a budget as a financial diet is a sure way to set yourself up for failure. A budget is simply (1) a tool to increase your consciousness of how and where you spend your money, and (2) a guideline to help you spend your money on the things that are most important to you.
Step One: Set Up Categories
The first step is setting up income and expense categories to track. A common mistake is to try to fit your spending into somebody else's categories. While basic categories such as housing, utilities, insurance, and food apply to all of us, we each have expenses that are unique to our personal situation.
A successful budget will include categories that reflect the way YOU actually spend money. For example, if you regularly eat lunch out at work, you'll want a subcategory under "Food" for "Lunches Out." Think about your hobbies (golfing, crafts, gardening) and your habits (smoking, drinking, buying a cup of coffee every day) to identify other spending categories. The idea is to become more aware of where your money goes so you can make conscious decisions about spending.
If it helps to start with a canned budget worksheet, there are many available in books and online, but be sure to add and delete categories to customize the worksheet to your needs.
Step Two: Calculate Budget Amounts
To get started, collect as many of your pay stubs, bills, and receipts as possible. Calculate your average monthly gross pay (before taxes) by adding the gross pay on four pay stubs if you're paid weekly, or two pay stubs if you're paid twice a month. If your pay varies substantially from pay period to pay period, try to come up with as accurate a monthly average as possible. Now do the same for any interest income, dividends, bonuses, or other miscellaneous income.
Next, start going through your bills for at least the last three months and listing monthly expenses on a budget worksheet (see "Basic Budget Worksheet"). Make your categories detailed enough to provide you with useful information about your spending habits, but not so detailed that you become bogged down in trivial details. Remember, this has to be something you'll stick with for the long term, so you don't want it to be too much of a chore.
To come up with your monthly budgeted amounts for each category, it's important to walk a fine line between realistically reflecting your actual expenses and setting targeted spending levels that will enable you to save money. Even seemingly fixed costs such as housing or utilities can often be reduced. Start out by reviewing your bills from the last several months, and entering monthly budgeted amounts for each category. Later, when you have a better grasp on your spending, you'll look for ways to reduce many of these expenses.
Record Your Expenses, Set Goals, and Make Adjustments
Page One discussed setting up categories and calculating budget amounts. This page discusses recording your expenses, setting goals, and making adjustments.
Step Three: Record Your Expenses
When you've identified and listed monthly estimates for your budgeted amounts, use your checkbook to record your expenses for the month in the appropriate categories. Don't forget to record your cash expenditures. Jot them down them in a little notebook as you spend the cash, or scribble them on a piece of paper and stick it in a file to be categorized and totaled at the end of the month. You may be shocked at where your cash goes, especially if you make frequent ATM withdrawals from your bank accounts.
Subtotal the income and expense categories and (drum roll, please!) subtract the total expenses from the total income to arrive at your net income.
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If you've recorded all of your income and expenditures for the month, this will be the amount of money you have left over for savings, emergency funds, etc.
If the number is negative, your expenses are greater than your income. Don't be discouraged. Chances are, your situation can be greatly improved by changing your spending habits.
If you're fortunate enough to have a positive net income, be sure to transfer most of it to a savings or investment account at the end of each month. Extra cash left in a regular checking account has a way of getting spent.
Step Four: Set Goals and Make Adjustments
After you've tracked your actual spending for a month or two, you'll be better able to identify where you can comfortably make cuts and adjustments to start saving money. Consider this a process of self-discovery. Many people don't have a clear idea of where their money goes until they start tracking their spending, and then they are usually very surprised at how much they spend in certain categories over a month's or several months' time. You can't control your money until you know how much you have and where it goes.
Once you've got the budgeting process in place, take an in-depth look at your largest spending categories, brainstorm about ways to reduce spending in specific categories, and set realistic goals. Don't overlook the smaller spending categories, either. Sometimes these are the easiest to make cuts in because the spending may be more discretionary, and small amounts can add up quickly.
If you stick with the budgeting process past the first month or two, you'll begin to see a pattern in your spending, and you'll be able to identify areas where you can painlessly save money that you can use to build an emergency fund or save for an important purchase or goal. Cutting costs becomes a challenge that can be very rewarding, especially as you see your savings grow. Following a budget can set you free from the burden of debt and the constant worry that you won't be able to obtain your financial goals.

Investing in stock markets to be costly

2007-08-25T14:45:00.000+05:30
ISTInvesting in the stock market would become simple but a costly affair, with Finance Minister P Chidambaram proposing measures to tax ESOPs and raise dividend distribution levy.

In a major setback for the market, Chidambaram on Wednesday proposed raising the rate of DDT from 12.5 per cent to 15 per cent on dividends by companies and bringing Employees' Stock Option Plan (ESOP) under Fringe Benefit Tax regime.However, the Minister sought to soothe investors with proposals like allowing delivery-based short selling by institutional investors and making permanent account number (PAN) as the sole identification number for all participants in securities market.

In the Budget for 2007-08, the Minister also proposed to permit individuals to invest in overseas securities through domestic mutual funds.

"In line with measures announced every year to strengthen the market, I propose to make PAN the sole identification number for all participants in the securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account," he said.

The minister also called for promoting the flow of investment to the infrastructure sector by permitting mutual funds to launch and operate dedicated infrastructure funds.

In another major proposal, the FM proposed to put in place an enabling mechanism to permit Indian companies to unlock a part of their holdings in group companies for meeting their financing requirements by issue of Exchangeable Bonds.

However, the market had virtually no good news on the taxation front.
"I propose to raise the rate of dividend distribution tax from 12.5 per cent to 15 per cent on dividends distributed by companies," Chidambaram said.

Dividends distributed by money market mutual funds and liquid mutual funds enjoy concessional tax rates giving rise to huge arbitrage opportunities, he said, adding, "I propose to address this distortion by raising dividend distribution tax... to 25 per cent for all investors."
In another proposal, which was termed as a major dampener for investors participating in the market through ESOPs given by their employees, he said that these would be brought under FBT net.

Analysts said this proposal would discourage small investors from coming to the market through this route as companies might avoid passing on benefits to employees through ESOPs.

MILLIONARIES IN THE MAKING

2007-08-25T14:35:00.002+05:30
Aris and Maria Magtibay

Ages: Aris 38, Maria 36Occupations: Pricing manager and bank managerSalary: $115,000 combined401(k): $180,000IRA: $23,000529 plan: $14,000Home equity: $81,000Emergency Fund: $3,000
Money isn’t just a means for Aris Magtibay of San Antonio, Texas – it’s a full-time obsession.
Since getting his degree in finance in 1991 from Old Dominion University in Norfolk, Va., he’s putting abstract concepts from his education - like asset allocation and the importance of compounding money - to work in the real world.

Aris has documented all of his spending in Microsoft Money since graduation. If he buys a $3.99 value meal on his debit card at McDonald’s, it goes into the books. He says he takes no offense to the teasing he gets from coworkers and friends about his obsession.
“Although I must admit: if I spent as much time trying to make money as tracking the money I have, I’d be a rich man,” he jokes.

Aris’s big indulgence is the lottery - $7 in tickets each week. He calls it his investment that hasn’t paid off just yet.

He and his wife, Maria, were both born in the Philippines, although his family moved to Virginia when he was 3 years old. Maria spent most of her life in the island nation before the couple married in 1993. Aris met Maria while vacationing there, and she moved to the U.S. just three weeks before their marriage.

They have a son, Jared, who’s 13. The couple has built up $14,000 in a 529 college savings plan. They’re adding $100 a month, hoping to reach $20,000 by the time Jared is ready for school.
Aris and Maria earn a combined $115,000 a year before taxes. He works as a pricing manager for a telecom company, and she’s a manager at a bank. They each sock away 10 percent of their salaries in 401(k)s, putting in a total of $1,150 a month. Their employers match add an additional $500. They also put $50 per month into their Roth IRA.

The Magtibays bought a new home in San Antonio early this year for $315,000 with 20 percent down, spending some of their emergency savings to make the down payment. They pay $1,500 a month towards a 30-year fixed-rate mortgage at 6.25 percent, and expect to pay it off in 21 years.
“The goal is to pay the mortgage off before we begin dipping into our 401(k)s and IRAs,” said Aris.
After buying the house, their emergency savings are down to $3,000 in cash. They also have $1,200 in a bond exchange traded fund (ETF).

Aris handles his own investments wherever possible and says he prefers ETFs and individual stocks over mutual funds. Maria’s Roth IRA is also in the aggressive growth Janus Orion Fund.
Aris is trying learn more about investing and has recently started to trade options. They can take years to learn and can be risky.

The couple owns a 2006 Nissan Pathfinder and a 2006 Nissan Altima, both of which they lease for a total of $850 a month.

“I think that’s our Achilles heel,” said Aris. “We’re the type who wants to drive something brand new every five years.”
Each month, they spend $600 on food, $500 on utilities, and $700 on taxes. They’re also paying $700 a month on $11,000 in credit-card debt.

For security, they have two term life insurance policies for $500,000 each, plus homeowner’s insurance for 120 percent replacement value.

The couple’s goal is to have $1 million in assets, including home equity, by the time that Aris reaches age 50. After their retirement, they’d like to have $100,000 a year in income to live on.
Our Expert’s Take: The Magtibays are in pretty good shape, and on track to be millionaires by age 50 - but they could do better, said Greg Gardner, Certified Financial Planner with Gardner Group wealth management.
“They need to really beef up their savings account so they have six months worth of emergency liquid savings,” he said.

In addition, Gardner estimated that they are currently saving enough to withdraw only $93,000 annually in retirement - short of their $100,000 goal - assuming they live to 95.
In order to make up the budget gap in retirement, he listed three options. “They can buckle down and work one year beyond the typical retirement age of 65, or they could choose to save $850 more per month now, or adjust their spending down at retirement,” he said.
“But they’re definitely going to be able to save a lot more money once Jared leaves the house,” said Gardner.

For their emergency fund, they should have $20,000 to $30,000 – essentially six months worth of expenses – at the minimum. It should be completely liquid, in an interest-earning account like a money-market fund, says Gardner.
Finally, they should purchase larger life insurance packages, he said. “They’re a little bit underinsured at the moment,” said Gardner. “If one gets laid off, there’s not enough money in the emergency savings or the taxable investment accounts to draw on. If you were forced to liquidate money from the 401(k)s and IRAs, you’re talking taxes and penalties to get to those funds.”

Amy and Jesse Dickinson
Ages: Amy 38, Jesse 41Occupations: Technical Writer and Crossing GuardSalary: $86,000 combined
401(k): $100,000IRA: $50,000Home equity: $143,000
Fixed rate home equity loan: $41,000 owed
Amy and Jesse Dickinson love their games. At their San Leandro, Calif. home, they challenge friends to Warhammer, a fantasy role-playing contest of knights and warlocks. But when it comes to financial planning, Amy doesn’t play around.
Amy, a technical writer, began investing during the dot-com bubble, putting her money in hot stocks. But she found the market too volatile, and decided to shift her savings over to mutual funds.
“I got the need to gamble out of my life early on,” said Amy, who still enjoys penny-ante poker games with Jesse and friends.
Her work provides the couple $71,000 a year, and Jesse’s part-time job as a crossing guard brings in around $15,000. The couple also gets $600 in monthly rental income from a boarder.
Amy uses auto-deductions, which do a lot of the heavy lifting in her weekly budget and savings. She puts $10,000 into her 401(k) every year, and her company puts in another $3,000. She deposits $230 a month into a bond fund that’s intended for emergencies and puts $2,150 a month into a money market fund to earn interest on the money she pays toward her mortgage.
Much of her savings are in stock funds. Amy says she prefers an aggressive investing strategy. “I know I have a good 20 or 30 years to recoup losses,” she says. The only individual stock she owns is that of her employer, Integrated Device Technology.
When the couple found their home in April 2002, she sold some mutual funds in order to put a $54,000 down payment on the $360,000 home. They now make payments of $2,150 per month toward their mortgage and home equity loan and expect to pay off the home in 13 years. The house was recently appraised at $490,000.
“I feel very, very fortunate,” said Amy. “Any stock can crash, any market can have a problem - but you can always live in the house.”
The couple keeps their budget balanced with real dedication to thriftiness – Amy has declared Jesse “a professional scrounger.” He’s learned to make his own shirts after buying the fabric, and she says the couple tries to prolong the life of all their belongings.
Amy budgets $400 a month for food and saves money by shopping at Costco and taking advantage of sales at grocery stores. The couple’s gaming hobby is a moderate expense. The miniature battles that incorporate tiny painted figurines are games of “fantasy as opposed to recreation.” House payments aside, their expenses total roughly $1600 a month.
As far as insurance goes, Amy has taken out a $300,000 life insurance policy in addition to the $120,000 policy she has through work. Jesse also has a small life insurance policy.
Looking ahead, Amy says she’d like to retire a little later than most people and be sure to have the house completely paid off.
Down the line when they’re close to paying off their mortgage, the Dickinsons would like to add solar panels and an additional room for gaming to their home.
They’re considering adopting a child in the future, but aren’t making the decision just yet.
“I don’t consider my budget strict, but others would,” she said. “I think of money as a tool to help you get everything else you need.”
Our Expert’s Take: The Dickinsons have gotten a good start on retirement savings but need to take further steps to protect themselves against possible outcomes, said Lee Pence, a Certified Financial Planner at Pence Financial Advisors.
“Protect yourself first, and then invest in further opportunities,” he said. “I’m concerned that because so much of their wealth is in their home, they’re underdiversified. All it would take is for the real estate market to go south, and they’d be in a difficult situation.”
Also, based on their monthly expenditures, said Pence, they’re spending over 50 percent of their monthly income on their daily expenses, mortgage and home equity loan combined – above the recommended level.
“Banks recommend that you spend less than 36 percent of your monthly income on expenses,” he said. If they need to take out a bank loan, they’re going to face higher rates because of that. They should work to either increase income or cut down further on expenses, he said.
They need to come up with a specific estimate of what they’ll need each year when they retire, he said. He projected that, with an average 8 percent growth in the stock market, the Dickinsons’ savings will reach $4.2 million in 26 years, when they are at retirement age.
He emphasized that they need to consider the potential costs of long-term care, which average over $75,000 a year.

“People are retiring earlier and living longer. What happens if they live to be 100? The house will be paid off, but you can’t eat a house,” he said.

He also said they should have an umbrella insurance policy of at least $2 million in order to supplement their other policies.

He said they need to keep their emergency money in a bank, not a bond fund.
“Bond funds can kill you if interest rates rise,” he wrote in an email. “The cash emergency fund is critical. I have seen people lose their homes because of unforeseen medical expenses.”
They need a minimum of six months’ worth of income in a secure cash account, he said.

Note:
A number of changes needed to be made to this story:
Amy Dickinson does have a life insurance policy outside of work. It’s for $300,000.
The Dickinsons have a fixed rate home equity loan, not a home equity line of credit as previously stated.
The couple makes a total of $2,150 in mortgage and fixed rate home equity loan payments, not mortgage payments of $2,100 per month and home equity line of credit payments of $400 per month as previously stated.
The Dickinsons do not have a cash emergency fund of $7,000. They do have $7,000 in a bond fund.
The couple plans to hold off on installing solar panels or adding a gaming room until after they pay their mortgage.
The Dickinsons’ monthly expenses total $1,600, not $1,200 as previously stated

Do you have the right stock and bond mix?

2007-08-25T14:35:00.001+05:30
Do you have the right stock and bond mix?
Once you've given up the notion that you can pick the next hot mutual fund, you can focus on the real key to investing for retirement. And that's creating a blend of stocks and bonds aggressive enough to generate the returns you need but not so risky that your retirement savings will be decimated by market meltdowns. When you're younger and have more time to recover from short-term setbacks, you can afford to tilt your mix toward stocks. As you age and become more vulnerable to losses, gradually shift toward bonds. It's pretty simple. If you don't have the time or inclination to do this yourself, go with an increasingly popular option known as a target-date retirement fund. You simply choose a fund with a date that roughly corresponds to the year you plan to retire - say, the 2035 fund if you're in your early forties - and you get a fully diversified portfolio suitable for someone your age. Many large fund firms, including Fidelity, T. Rowe Price and Vanguard, offer these options, while 85% of 401(k)s at larg

Tax benefits on a housing loan

2007-08-25T14:30:00.000+05:30
Tax benefits on a housing loan

Repaying a housing loan? There is a lot to look forward to by way of deductions and rebate. Interest paid on capital borrowed for the acquisition or construction of property is entitled to a deduction. Initially, the maximum amount eligible for deduction was Rs 15,000 (1997) and then got doubled to Rs 30,000. Later, the amount got further enhanced to Rs 75,000 and is now Rs 1 lakh.

So as the rules go, if you borrow money to acquire or construct property on or after April 1, 1999, then you can get an income tax exemption on the interest paid on a housing loan up to a limit of Rs 1 lakh. You also get a 20% rebate on repayment of principal of the housing loan. While this was earlier subject to a maximum of Rs 10,000, it is now Rs 20,000.

Conditions
You should be residing in the home for which the loan is taken. If you are residing in a city but buying property in your home town to prepare for retirement, this will not be applicable. The property has to be acquired or constructed before April 1, 2003. The money should have been borrowed to construct or acquire property on or after April 1, 1999. If it was prior to this date, the deduction is only valid up to Rs 30,000.

Points to note
You may find it more convenient and cheaper to finance the property out of your own resources. But do remember, you would be losing the tax shelter on account of the deduction available as well as the tax rebate. You can claim a rebate for housing loan only on producing the interest certificate from the lending institution. Taking a loan from a family member or a friend may get a you a cheaper rate of interest, or no interest at all, but will not qualify for such deductions. Only loans taken and interest paid thereon, to specified financial institutions which offer housing loans, qualify for deduction under the Income Tax Act, 1961.

If the loan is jointly taken by you and your spouse, you both are entitled to tax benefits. Since both will be claiming the deductions and rebate, you will have to approach the financial institution and ask for a certificate. This certificate will state how much of the loan is your responsibility and how much you are contributing towards the repayment. Your tax deduction and rebate can be calculated based on this amount.

TAX

2007-08-25T14:29:00.000+05:30
Tax benefits of a housing loan

Repaying a housing loan? There is a lot to look forward to by way of deductions and rebate.Interest paid on capital borrowed for the acquisition or construction of property is entitled to a deduction. The maximum amount eligible for deduction is Rs 150,000. You also get a 20% rebate on repayment of principal of the housing loan. While this was earlier subject to a maximum of Rs 20,000.
Conditions
You should be residing in the home for which the loan is taken. If you are residing in a city but buying property in your home town to prepare for retirement, this will not be applicable.
Points to note
You may find it more convenient and cheaper to finance the property out of your own resources. But do remember, you would be losing the tax shelter on account of the deduction available as well as the tax rebate. You can claim a rebate for housing loan only on producing the interest certificate from the lending institution. Taking a loan from a family member or a friend may get a you a cheaper rate of interest, or no interest at all, but will not qualify for such deductions. Only loans taken and interest paid thereon, to specified financial institutions which offer housing loans, qualify for deduction under the Income Tax Act, 1961.
If the loan is jointly taken by you and your spouse, you both are entitled to tax benefits. Since both will be claiming the deductions and rebate, you will have to approach the financial institution and ask for a certificate. This certificate will state how much of the loan is your responsibility and how much you are contributing towards the repayment. Your tax deduction and rebate can be calculated based on this amount.

mutual funds

2007-08-25T14:27:00.000+05:30
Getting started in mutual funds

Mutual fund is the best investment tool for the retail investor as it offers the twin benefits of good returns and safety as compared with other avenues such as bank deposits or stock investing. Having looked at the various types of mutual funds, one has to now go about selecting a fund suiting your requirements. Choose the wrong fund and you would have been better off keeping money in a bank fixed deposit. Keep in mind the points listed below and you could at least marginalise your investment risk.

Past performance
While past performance is not an indicator of the future it does throw some light on the investment philosophies of the fund, how it has performed in the past and the kind of returns it is offering to the investor over a period of time. Also check out the two-year and one-year returns for consistency. How did these funds perform in the bull and bear markets of the immediate past? Tracking the performance in the bear market is particularly important because the true test of a portfolio is often revealed in how little it falls in a bad market.

Know your fund manager
The success of a fund to a great extent depends on the fund manager. The same fund managers manage most successful funds. Ask before investing, has the fund manager or strategy changed recently? For instance, the portfolio manager who generated the fund's successful performance may no longer be managing the fund.

Does it suit your risk profile?
Certain sector-specific schemes come with a high-risk high-return tag. Such plans are suspect to crashes in case the industry loses the marketmen's fancy. If the investor is totally risk averse he can opt for pure debt schemes with little or no risk. Most prefer the balanced schemes which invest in the equity and debt markets. Growth and pure equity plans give greater returns than pure debt plans but their risk is higher.

Read the prospectus
The prospectus says a lot about the fund. A reading of the fund's prospectus is a must to learn about its investment strategy and the risk that it will expose you to. Funds with higher rates of return may take risks that are beyond your comfort level and are inconsistent with your financial goals. But remember that all funds carry some level of risk. Just because a fund invests in government or corporate bonds does not mean it does not have significant risk. Thinking about your long-term investment strategies and tolerance for risk can help you decide what type of fund is best suited for you.

How will the fund affect the diversification of your portfolio?
When choosing a mutual fund, you should consider how your interest in that fund affects the overall diversification of your investment portfolio. Maintaining a diversified and balanced portfolio is key to maintaining an acceptable level of risk.

What it costs you?
A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time. Finally, don't pick a fund simply because it has shown a spurt in value in the current rally. Ferret out information of a fund for atleast three years. The one thing to remember while investing in equity funds is that it makes no sense to get in and out of a fund with each turn of the market. Like stocks, the right equity mutual fund will pay off big -- if you have the patience. Similarly, it makes little sense to hold on to a fund that lags behind the total market year after year

retirement planning

2007-08-25T14:25:00.000+05:30
The essence of retirement planning

Retirement planning is an essential element of any financial plan. Retirement planning is a comprehensive process for determining how much money you will need when you retire. Retirement planning also helps you identify the best ways to save for retirement given your financial situation.

If you are like most people, you probably think retirement planning is only important when you retire. However, proper planning requires a much longer period of time -- from the day you start working until well beyond your actual retirement date. In fact, it's never too early to start planning for your retirement.

At age 65, the average man will live almost 19 more years, while the average woman will live another 22 years. We will probably spend 25 per cent to 30 per cent of your life in retirement, requiring vast sums of money to support yourself.

In India, many of us put off retirement planning because we are too busy trying to meet our immediate financial needs to think about what will happen 20 or 30 years hence.

It's easy to understand why meeting your monthly bills seem more important, especially if your retirement is still far off. But here's something to think about: As you move through your life, you will experience many life events that will affect your future financial security -- such as getting married, starting a family, purchasing a home, and sending your children to college. Each of these events will affect your ability to plan for your future financial security. If you develop a flexible long-term plan, you will can overcome these obstacles and ensure financial independence in your retirement years.

Identify personal goals

When defining your retirement goals, your description should be specific and measurable. For example, a goal to "retire at age 60 with resources to sustain current living expenses of Rs 1,00,000 per year" is a goal, which is both specific and measurable.

If you have several goals, you should prioritize them so that your resources will be allocated to the most important goal first. By assigning a priority to each goal, you also ensure that secondary goals won't take precedence over primary goals.

In this process, it is important to understand your needs. To determine the appropriate percentage for your retirement, you need to determine if any of your current expenses will change when you retire. Will your travel and leisure expenditures increase? Will your job-related expenses for commuting and clothing change? Will you have to pay more for medical costs? It's generally accepted that many of your routine annual expenses will change during your retirement years. The trick is determining whether those expenses will increase or decrease, and by how much.

Both living expenses and inflation are important in understanding your retirement needs because you are planning for a period of time, not a point in time.

Review progress

Once you develop your plan, the process is dynamic. As you revise and prioritize your projected goals, you may see changes in your estimated income needs, projected resources, and other assumptions. It's a good idea to review your action plan regularly and if necessary, make changes to make sure it still meets your needs.

Finally, a successful retirement plan requires your active involvement and long-term commitment

investment planning

2007-08-25T14:23:00.000+05:30
Introduction to investment planning - I

Investment planning is an alien concept for the Indian populace. For a country which till now was worried about making ends meet this emerging trend is definitely a new experience. But, the truth is that if only they would have been introduced to the Art of Managing Money, life could have been so much easier. Most of us spend more than half of our lives working and saving because money is important, in fact crucial. However, most of us spend almost no time planning to make that hard-earned money work more effectively for us. So, how do you plan your financial life?

In a series of articles ICICIdirect's Investment Planning Desk will discuss concepts, ideas and methods of planning, goals, return, risk and various investment options. Concepts such as inflation, power of compounding, stock market jargon etc will be explained in a phased manner.

What is investment planning?
Financial planning is nothing but an assessment of your goals and the steps you must take to help make them a reality.

What you first need to figure out..........

What is it that you want?
Is your wish to retire with a sound lumpsum amount or do you want a steady monthly income. Is your son's education or daughters' marriage worrying you? The key is to figure out your goals.

Where is your money going?
The most important thing is that you should where your money is going. Zero on your monthly and annual expenses.

Why should you invest?
You should invest so that your money grows and shields you against rising inflation. If prices rise by four per cent annually it would not be sufficient if your savings only give you a return of three per cent. It leaves you with a deficit of one per cent. The idea is that your rate of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a period of time.

Whether your money is invested in stocks, bonds, mutual funds or certificates of deposit (CD), the end result is to create wealth for retirement, marriage, college fees, vacations, better standard of living or to just pass on the money to the next generation. Also, it's exciting to review your investment returns and to see how they are accumulating at a faster rate than your salary.

When to Invest?
The sooner the better. By investing into the market right away you allow your investments more time to grow, whereby the concept of compounding interest swells your income by accumulating your earnings and dividends. Considering the unpredictability of the markets, research and history indicates these three golden rules for all investors

1. Invest early2. Invest regularly3. Invest for long term and not short term

There is always a first time for everything so also for investing. To invest you need capital free of any obligation. If you are not in the habit of saving sufficient amount every month, then you are not ready for investing. Our advice is :-

Avoid unnecessary or lavish expenses as they add up to your savings. A dinner at Copper Chimney can always be avoided, the pleasures of avoiding it will be far greater if the amount is saved and invested.

Clear all your high interest debts first out of the savings that you make. Credit card debts (revolving credits) and loans from pawnbrokers typically carry interest rates of between 24-36% annually. It is foolish to pay off debt by trying to first make money for that cause out of gambling or investing in stocks with whatever little money you hold. Infact its prudent to clear a portion of the debt with whatever amounts you have.

In the second part of the article we shall discuss on the preliminary work that needs to be done before investing.

POWER OF SAVINGS

2007-08-25T13:55:00.000+05:30
FINANCIAL PLANNING - POWER OF SAVINGS

A salary is most often associated with making your ends meet. Viewed as such, it may appear to be a contradiction. But stop to take a look at what is the worth of your salary stream over your remaining working life.
Consider a monthly salary of Rs 10,000 per month just for the ease of dealing with a round number. Over a 30-year period this salary will mean a total earning of Rs.36 lacs.
Right?
Now, if the entire salary could be invested at 10% per annum rate of return at the end of every month during this period, this would mean Rs 2 Crores 23 Lacs 70 thousands at the end of 30 years. This is hypothetical. Nobody can save his entire earning. But this is a fact.
Now, refer to the following table to find out results for different periods and at different rates of return, so that you can consider the results closest to your own case:
(Amounts in Rs Lacs)

Rs10,000 p.m. At 10% At 9% At 8% At 7%
Will Become PA PA P.A P.A
After :
30 Years 223.7 182.58 149.73 123.42
25 Years 131.77 112.12 95.74 82.07
20 Years 75.67 66.96 59.41 52.85
15 Years 41.43 38.03 34.96 32.2

NOTE: p.m = Per month, PA = Per annum

Surely, there are interest rate uncertainties over a long period. However, the above data give us an idea about the SIZE OF YOUR SALARY CAKE for the rest of your working life.
Creating a fortune would, therefore, have to begin with just holding on to the BIGGEST POSSIBLE SLICE out of this SALARY CAKE.
For example, a person, holding on to only 10% of his salary of Rs 10,000 per month for 25 years, will have managed to create Rs 11.21 lacs at 9% per annum, a sum relatively immense at today's prices for somebody earning only Rs 1.20 lacs per annum.
This is incredible! But this is true at every salary level and at any rate of return.
Salary earners get known amount of earning at known dates. House and consumer durable purchases are financed through EMIs (equated monthly instalments) of loans by utilising this known income stream to make these purchases affordable. How we miss the logic that if the same power of salary is used to build wealth and there is no interest to pay for, the result cannot be short of a miracle.
As the definition of FORTUNE is very personal, so will the amount, that can be set aside month-to-month, vary from person to person. But the basic principle remains intact. That holding on to the biggest slice out of your earnings cake will be the first and most important step to creating a fortune for you.
Regular savings are widely known to be an important creator of your wealth. What these numbers underline is that in order to hold on to the biggest slice over the long run, we must keep an eagle’s eye on various ways in which we lose or ignore apparently small sums of money from time to time, which may add up to large erosions over a lifetime.
Creating a fortune is, however, an active process. It involves, among others, a precise understanding of the dynamics of a number of variables, a disciplined approach, being aware of psychological pitfalls in your decision-making when related to your money, sustained implementation of well thought-out plans, and regular periodic reviews.
However, keeping a hawk eye on your regular savings and various small leaks can be the most rewarding beginning.