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  *The usual Rabbit & Tortoise story*. We looked at this video many times (in slow motion too) as it gave us many insights on investing. Pls look at the video with the * Tortoise as the disciplined investor focused on his own personal financial goals & Rabbit as the impatient investor, in a hurry to make big returns only *.   Right from the beginning, the rabbit is impatient – he wants to get into investing & make some quick money. He starts so fast (intensity is huge), perhaps betting on high return funds seeing the recent returns. But he gets distracted in between seeing it cannot continue for long & changes the lane (keep fiddling with the investments). He shrugs it off too, anxious if he has made the right choice. He sees his friend coming up very slowly (does not realize that it is steady), compares himself with him, once again gets distracted (perhaps by another You Tube video promising high returns). Soon after, he stops to eat too (withdrawing fro...

 Health Insurance premiums increase over a period due to the following reasons: 1)        Change in Age Band: (Personal level) . Typically, premiums keep changing in a band of 5 years of age. Till 35 years, the premiums remain the same. At 36 years of age, it changes; at 41 years of age, it changes & so on. The age considered is the age of the eldest member of the family insured.  2)        Medical Costs Inflation (Industry level) : the cost of treatments keeps increasing every year. The same treatment which costed 50,000/- a few years ago would be 1 lakh now. So even if the number of claims remain the same, the insurance company may have to settle more amount now, owing to inflation of costs. Hence the premiums also keep increasing to keep up with this rise in treatment costs / claims. Typically all insurance companies raise the premiums (one-by-one) once in a period of 5-7 years.  3)    ...

Please make a note on the below points w.r.t S.I.P debits in Mutual Funds:   1) The S.I.P amount will be debited on the registered SIP date only - if it happens to be a banking / public holiday, then it will be debited on the immediate next working day . You will be receiving a SMS too regarding the debit. The exact time of debit on any day will be unknown (but typically it will happen in the morning session itself), as it is centralized system in stock exchange / bank / RBI .  2) If there is NO sufficient bank balance on that day, then units will NOT be purchased & it will NOT be triggered again for that month. If need be, we can initiate the debit manually for this month alone.  3) There will be NO CHARGES from Mutual Funds if the SIP bounces due to insufficient balance - Your bank may levy charges for the same.  4) If there is bounce for 3 consecutive months, then the SIP will be automatically terminated.  5) Units are allotted once the amount is c...

Income Tax Slabs  Standard Deduction increased from 50,000/- to 75,000/- (for Salaried) under New Tax Regime.   Tweak in Tax slab rates under New Tax Regime. Tax savings of 17,500/- p.a. @ 30% slab rate.   Taxation Aspects Mutual Funds & Equity Shares, where Equity exposure is at least 65% .  Within 1 year of purchase : Gains will be taxed at 20% (Previously 15%). More than 1 year of purchase : Till 1.25 lakhs gains - NIL tax. Above that, gains will be taxed at 12.50% (Previously till 1 lakh gain tax-free & 10% tax beyond that).   Despite this increase, it is negligible in the long-term. Also Equities continue to provide better returns over inflation v/s others.   Ex. S.I.P of 25,000/- for 15 years @ 12% CAGR gives 1.26 crore maturity .   # Capital Gains - 81.14 lakhs # Tax as per old slab: 8.14 lakhs (11.33% net return) # Tax as per new slab: 9.98 lakhs (11.15% net return) - Difference of only 0.18% in net return .     ...

Disclaimer: This blog contains information that is more for internal circulation & reference purposes only.  Please do not use this blog for taking decisions on your financial aspects.  Always consult your financial advisor to get more details & decide as per their advice.

 Should I add up Riders in pure term plan (or) take up stand-alone policies from Health Insurers?  Keeping the term plan simple to its only objective of providing guaranteed amount to the nominee in case of any unfortunate death (by any means & across the globe) is the simplest & cost-effective way to protect our life.    There are lot of riders available in a term plan like Accidental death benefit, Disability benefit, Critical Illness benefit, etc. Though the premiums are almost the same in comparison to stand-alone personal accident plans & critical illness plans offered by health insurance companies, the benefits-wise, health insurance companies score better. The stand-alone policies from health insurers offers more comprehensive coverage & more flexibility.

Should I Invest in New Fund Offer (NFOs)? Simple Answer  -  “99% AVOID” Detailed Answer : Anything NEW catches the buyer’s attention & hence NFOs are not an exception. But it is a avoid in almost 99% of the cases. Reasons being:     ·        Myth of 10/- cheap NAV – NFOs are not cheaper as they are launched at 10/- NAV. Neither are 100/- NAV funds costlier. They are both investing in stocks & based on the returns they get, the NAV increases. A 10% increase of 10 NAV will make it 11 & the same in 100 NAV will make it 110. Click this link to understand this better .   ·        Nothing New to Offer : Most of the cases, the fund will just be a duplicate of the funds already available in the market. We would have been invested already in them, but NEW always catches our attention in the fear that we are not missing out something great.   ·        No...

Should I Invest in Sectoral / Thematic Funds?  Simple Answer  -  “AVOID” Detailed Answer : Sectoral funds invest only in stocks belonging to a particular sector, say Housing, Infrastructure, Defense, Pharma, etc. or themes like rural consumption. While they may give huge returns, they also tend to be riskier due to the below reasons : ·        Impossible to time the entry / exit - Returns from a sector would be cyclical in nature. No one can time the entry at the correct inflection point from Worst to Good & time the exit again at the correct inflection point from Best to Bad. The sector may remain dull due to many factors for many years too . ·        We tend to buy at higher prices : Typically, a sector fund will gain our attention only after the sector had already given huge return in the last 1 year or so. Since many investors will now chase the sector, the fund houses too will launch NFOs (N...

Till what age should I opt for term plan - Till Active earning period (or) till the max. term allowed?   Simple Answer  -  “Till the active earning period” Detailed Answer : Many of us prefer taking up a term plan till the maximum permissible age (currently 85 years). Reason being, there is more probability to die after 60+ years & hence the amount will surely be given to the nominee & the premium paid is not going as a waste! But it is preferable to take it either: 1) Up to the active earning period (Planned Retirement Age) as by then you should (must) have accumulated enough corpus for retiring comfortably & hence the corpus itself will serve as insurance for the family (or) 2) Till the liabilities are present – be it physical liabilities in the form of loans or emotional liabilities in the form of children getting settled. Reasons to suggest this way are as below: 1) Premiums increase in term plans as the policy term increases : # Pre...

 Should I opt for Return of Premiums in a pure term plan?   Simple Answer - “NO” Detailed Answer : A pure term plan doesn’t provide any return if one survives the end of the policy term. So many of us think it is a waste of money & hence prefer at least the total premiums paid to be refunded back (ROP – return of premiums option). We will look at the reasons with an example of 40-year-old purchasing a 1 crore term policy for 25 years term & pays the premium for just 10 years only. 1) Premiums are too costly, if we opt for ROP #   Premium for pure term plan: 43,100/- for 10 yrs. # Premium with ROP option: 62,400/- for 10 yrs. # Premium Difference: 19,300/- more p.a. for 10 yrs. 2) You don’t get the GST paid back which is included in the premium payable. 3) Value of money received at the end of the term is too low . # Return of premiums after 25 years: 6.10 lakhs # Value of 6.10 lakhs @ 6% after 25 years: 1.40 lakhs. But we would argue that at least...

Should I invest in individual stocks? YES – by all means.  But before that, please ensure you tick these 5 items : Your monthly S.I.P in Mutual Funds must be greater than your monthly EMIs. Your Mutual Funds portfolio is at least 3 times your annual income. You have min. 12 months of monthly expenses as emergency fund safely in bank FDs. You have min. 5-10 times of your annual income as your life insurance cover. You have min. 5 – 10 lakhs health insurance cover apart from company's cover & your parents are adequately covered too.  These 5 items would ensure that you won’t be miserable in case things don’t work out in direct stock investments. Otherwise, even after how-much-ever you gain in direct stocks, it will not have any major meaningful impact in your financial status / freedom.     * LOOK AT LOSERS TOO *:  We get carried away by only those stocks which gave stellar returns - No one talks about the losers! Last 5 years return of famous Top 50 s...

Equity Markets have been volatile in the last 1-2 weeks & naturally anxiety creeps in ( especially for new investors, who have entered in the last 1-2 years, with an ( unreasonable ) expectation of 20% returns from mutual funds ).  But is this a new phenomenon in equity markets? Let's check out the performance of Nifty 50 in the last 25 calendar years:  Negative Returns       : 5 years out of 25 Single-Digit Return    : 5 years out of 25 Double-Digit Return   : 15 years out of 25 Compounded Return in last 25 years: 14% p.a.  Markets ups & downs are part of the investing journey and it is the volatility that provides return in the long-term . Hence, if you are in no need of money within next 1 - 2 years - just relax & enjoy the ride. In the end, we will be rewarded handsomely good return - thanks to our growing economy.  Have reasonable expectation of 10-15% compounded annual return over long-term (5-7+ years) from M...

We see the market index (Ex. Sensex / Nifty) reach its all-time high & we become anxious if there will be a fall soon. Though, we cannot predict market ups / downs, one thing we can say from the past data:   In the last 10 years (since 2014), except for 2016, every year Sensex / Nifty has made an all-time high.   In the last 33 years, markets reached all-time highs in 22 years.   If we had sold each year, we would have missed out on wealth creation today, because we would not have known when to get in again. It is impossible to time the market . Please understand, Sensex / Nifty is just an index – it is a number. Market movements are based on the underlying factors – though many, but in the long-term it is dependent on the profitability & growth of the companies / economy. India is a growing economy & a fastest growing one too – the next decade & two may be the best years for our country. So, keep that trust & stay invested / keep investing. ...

  Har Har Mahadev - Everybody is a Mahadev! Can you be the Mahadev of Investing? Let us see this with a story of Lord Shiva. In the great churning ( buying & selling ) of ocean ( Markets ), search for nectar ( Returns ) was carried out by both Devas & Asuras ( Buyers & Sellers ). Vishnu ( SEBI / Govt. ) provided the base in the form of tortoise to Mother Earth. Mount Mandara ( Stock Exchanges ) was used as a shaft for churning the ocean both by Devas & Asuras, both wanting returns. But before the nectar ( Returns ) came the poison ( Volatility ). Everyone wanted returns, but without volatility! Only Lord Shiva had the capacity to hold the poison in his throat. You can become the Mahadev of Investing When you can hold the poison (Holding the portfolio when it is showing negative / low returns, without gulping it (Selling it), you will get nectar (Returns) & you are also a Mahadev. Happy Maha Shivaratri & Peaceful Investing! Content Courtesy:...

  “In your control” – How much you can invest p.m.? “Not in your control” – How much return you will get out of investing?     1)      Even after 10 years & at 12% return, the invested amount (your own capital) is more than the amount generated out of returns. Increasing investment amount is the prudent way (especially in the earlier stages of investment) & it is also the best way, because it is purely under our control.         Learning – Do not chase high returns alone! 2)    The longer you stay invested (more than 15 years), money makes more money. This is the time of actual wealth creation & the compounding effect comes into play.                      Learning – Start investing early & stay invested for long-term!

A scenario where we take decisions based on the recent events , without considering the fundamental aspects & expecting that those events will continue in the future too.  Examples in Investing :  1) Looking at the recent very high returns of a particular asset class, say Equities, & believing that it will continue to perform higher in the future too – we want to invest only in Equities now. 2) Similarly, when the recent equity performance is bad, believing that it is the end of stock market & avoiding it completely now. 3) Looking at recent past performance (high returns) of a particular Mutual Fund & we invest our money in that fund now.  How to Avoid Recency Bias? 1) Avoid FOMO (Fear of Missing Out) & Embrace JOMO (Joy of missing out). FOMO is the off-spring of Recency Bias & results in making wrong decisions, esp. when we see high recent returns. 2) Diversify your investments – don’t get stuck to a particular asset class looking at just recen...