Saturday, April 28, 2018
Tuesday, April 24, 2018
Ensure this fund doesn't imbalance your Retirement
Mutual fund is witnessing historical inflow for last few years courtesy TINA effect (There Is No Alternative for Investment) and Demonetization.
The biggest inflow came in category named "Balanced Fund" which is a quasi Equity category having minimum equity allocation of 65%, actually most of the time funds are having equity exposure of more than 70-75% in equity in it. This category grown the more than 9 times in last 4 year's.
The reason for big inflow was not for some genuine reason but was for the reason that many fund houses adopted a strategy of declaring monthly dividend ranging from 9% to 12% per annum.
Most of the FD investors and senior citizen tapped this category looking at high dividend payout and decreasing FD rates "without understanding risk involved."
Untill now all such investors who switched to this fund from their traditional conservative investment are having a ball of a time..but remember every party needs to end... today or tomorrow even this party will end.
My worry is for the investors who are dependent on this income. If market falls these funds will also fall in proportion to it and dividend will make it more worse.
Just to illustrate if you had invested Rs.100000 in one of the biggest and famous balanced fund and have taken a dividend option with payout @12% per annum since 01/01/2008 with all the ups and downs it's value as on 01/04/2018 would have been 23752. It's CAGR return comes to 7.12% worst then bank FD.
Above scenerio we are discussing during a bull period where for last four years market has given us double digit returns.Think of a longer bear cycle.
Second important aspect is dividend is taxable from this April@10%, effective rate for investors actually work out to be 12.942% for investors.
So, if you have made such Investments in last 2 years in any such fund on advise of your banker or a MF advisor friend and you don't want your retirement to be at Mercy of a pity advise or markets, it's the best time to review such Investments.
Don't allow balance fund to imbalance your retirement.
Saturday, April 21, 2018
According to a Chinese proverb there are 4 categories of people :
1)He who *knows*, and *knows* he knows, he is *a wise man*
2)He who *knows*, and *knows not* he knows, he is *asleep*
3)He who *knows not*, and *knows* he doesn't know, he is *a child*
4)He who *knows not*, and *knows not* that he doesn't know, he is *a fool*
The problem is percentage of people doubles as you move up the hierarchy and more than 80% fall in final 2 categories.
In financial world, most of the time initial investment success makes investor's overconfident and tends to believe that they belong to category 1😊😊. But by the time they realize that actually they belonged to category 4, it's too late.😪😪
Frankly most of so called _*"Experts"*_ also don't fall in category 1 as it requires regular upscaling of knowledge and skills to maintain that spot.
Investors in category 2 or 3 are at lesser risk, as good professional advisor can help and ensure that their financial goals are met.
Irony is majority of investors fall in category 4 and they are ignorant about it. I pray to God to watchover and protect them.
Have a wonderful weekend...
Saturday, April 14, 2018
When we born we were like tender flower.But in zest of living life unknowingly we accumulate so much of trash (for others) which becomes difficult to manage for next generation.
Recently, I come across couple of cases where children's have settled down abroad and parents are no more.
Parents had bank account with multiple banks, investments in all possible instruments like LIC, Bank FD, Postal Schemes,MF,Shares, SCSS etc etc.. and cherry on the top had several real estate.
Misery is now kids themselves doesn't know about what they have inherited whether it is a wealth or mess.
More than grief of losing parents they are worried about sorting out this mess in little time they have.
In Gujarat this is the story of most of the families and will grow bigger as migration of next generation is increasing more and more.
So if you are one of such parents try consolidating holdings and limit it to financial assets as you grow older, which will ease transmission.
Most important - Create will. If you fail to do so you become a reason for dispute amongst your own children's who had harmonious relationship when you were alive.
Try and *inherit memories, values together with wealth, but not the mess.*
Saturday, April 7, 2018
Whether it's government or entrepreneur, a shopkeeper or an employee, chartered accountant or insurance agent, everyone takes a breather as soon as March is over..
Someway or other everyone manages to take over with March financial blues.
But have you ever thought how will you take over month of ''March of your life...(Final stage of Retirement)'' the biggest problem with life is we do know when Jan or Feb (Retirement) will arrive but no clue of when will March arrive and specially the D-day i.e. 31st March.
It might not be a big problem if you don't meet 31st target professionally, but you can't afford to lose March target of your life.
One thing I can guarantee, if not planned properly in advance it could be a worst nightmare which will become reality.
So, if you have not given a serious thought to your retirement planning, take sometime this weekend and do plan and review it.
Remember sooner the better.