What if God goes against you

Investoshashtra !!!📜📜📜
इनवेस्टोशास्त्र !!!📜📜📜

*What if God is against you*

We recently witnessed the worst flood in nearly a century in God's own country - Kerala.Hundreds of people died, more then 33000 people rescued and estimated 13 lakh people took shelter in camps.

This is not the first instance of such natural disaster. Every year India's one or other part is divastated by either flood, landslide, tsunami, cyclone or earthquake.

It keep reminding us that in the race of development or growth *we are killing our own mother earth.* That might be the reason God is annoyed of his own kids.

Can anyone in this world save us from god's fury anwer is obviously "no",One need to handle hardship and physical losses himself.

*But to be precise "Yes" there is something which can save us from it's effects.*

For financial losses we as a mankind have created a wonderful tool which can even challenge God and the *weapon is Insurance.*

Many a times we ignore most important aspect of finance rather foundation of financial planning i.e. *Insurance.*

Most of the people see it as a  cost, but fact is *Insurance is financial guardian of our future and dreams. _It ensures and provides financial security at a nominal cost._*

_So, this weekend just check whether your financial guardian is capable enough to cover your assets and dreams._

*Happy Onam and prayers for people of Kerala. I can assure that whole of India stands with you. We will re create a Kerala which even god will be envious of.*

Regards,
Raj Talati
www.rajtalati-abminvestment.blogspot.com

Financial Mathematics -Calculating rate of returns before investment - Let's learn how

It's a common practice in financial industry that products are sold by projecting maturity value. Reason is human mind always looks at maturity value in today's term, but forget to measure impact of inflation and rise in expenses due to standard of living. We just get obsessed with the higher absolute value and forget the actual return it generates. Instead of focusing on maturity value if we start concentrating on returns we can take much better decision. Illustrating how just looking at maturity value can make our plans a haywire and that too when we actually in need of it.

One of my friend Vivek bought an Life Insurance policy for his son's education in the year 1999 for an 18 year term on becoming a proud father. The TOTAL cost for a good engineering course was almost Rs.40000 at that time.Let me remind you during late 90's a person at senior executive level used to get salary in range of Rs.20000 to 40000 pm. Household exps. for a family of 4 for an average middle class person was in the range of Rs.4000 to Rs.5000 pm. 

With an intention that his son should not compromise during his engineering studies he planned for an maturity of Rs.1 Lac, for which was required to pay premium of Rs.3000 equal to his one month Exp. or 75% of his monthly salary.

Inspite of planning for double the amount required. When his son will reach in STD 12th i.e in the year 2017, I doubt whether he would be able to pay even the tuition and entrance examination fees for engineering courses with maturity of above policy.

Biggest reason was he thought everything in 1999's context and he thought by paying Rs.3000 which was a big amount for him at that point in time he has secured his child's education.  As against that if he would have calculated the returns he might have understood its meager 7% per annum.

Let's learn how to calculate returns so that we do not face such problems.

Open an excel sheet and go on "Insert" select 'Function' under category select "Financial" and in window search for function type "Rate". The following box will appear after clicking OK.

Inputs ;

NPER is no. of period - In Vivek's case NPER is 18 years i.e tenure of payment. In case frequency of payment is Monthly multiply it by 12,in case of Quarterly by 4 and for Half yearly by 2.

PMT Payment - periodic payments or regular payment e.g Insurance Premium, EMI Installment, Monthly Post recurring Amt. etc.In case of an FD (Its Only 1 time Payment) so leave this filed blank.
In case of Vivek it is Rs.-3000.00. In case we are making payment that should be shown as (-) and receiving money should be shown as (+) or nothing.

PV - This field should be used in case of single or one time payment like for FD,Bonds, MF investment etc.In our case as it is periodic investment we will keep it blank.

FV - This is the desired corpus or the maturity amount product offers or required.As funds are flowing in we need not put any sign before it. 

Type - Applicable only in case of periodic or regular payment. In case you are paying in advance then you should put 1 and in case of end put 0.In our example it is 1 as we pay premium in advance.

Guess - It is not visible in above picture but in excel sheet when you will scroll down you will find it, no need to put anything in it. But in case any error comes then you should put approx. return which you think it would give. Most of the time you do not require to provide anything in this field.

Let's put above data and find the result which would be as follows :

You can see the Formula result as 7% at the bottom. In case frequency is taken as Half Yearly you need to multiply result with 2, for Quarterly by 4 and in case of Monthly by 12.

In this way you can calculate Interest on EMI and returns on FD, SIP, Insurance Policy etc...

While planning do not forget to consider effect of inflation and rise in exps. due to standard of leaving.

Owning a house or business "OH MY GOD"

After a long time got opportunity to watch a fantastic movie "OH MY GOD". There are certain movies like Munnabhai MBBS, 3idiots, Rang De Basanti, Tare Zameen Par , can shake you inside. It has power to bring in the change required.

Huge success of above movies confirmed that Indian society is ready to appraise the libertarian attitude and the Indian  youth is daring enough to raise the issues of collectivistic problems and is ready to denounce them, to fight against them.

I know this is not a movie review blog, but together with certain other facts shown in the movie "OH MY GOD" a very relevant point related to your financial planning is also been highlighted and that is insuring your HOUSE as well as your BUSINESS.

The biggest asset an individual builds during his life is his own house and business. A small accident can wipe out your earnings of life. How many of us have overlooked at insuring these investments? The requirement of home insurance is overlooked and understated in India.

While owning a house today, what youngsters forget is the protection of their property. The financial institutions providing housing loans ensure that the individual gets himself a home loan protection policy but no one ever bothers to insure the house that is being bought. There are many convenient options available in the market that helps one not only insure the property but also the belongings.

Let's know home insurance

Home insurance plans allow you to protect your house and household items against fire and other perils, such as theft, burglary, accidental breakdowns and so on. If you intend to buy house holders' insurance, you should buy a policy that provides cover for your house as well as contents in it.

Points to remember before buying home insurance

Make sure that you read and understand the policy coverage, exceptions, exclusions in the plan. So that you don't end up like Kanjibhai in the movie. Your cover therefore, should include your house, belongings, liability to others if some mishap occurs and your living exps., if you are forced to stay in rented house. Basically, if a disaster occurs, your policy should help you to rebuild your home and replace its contents.

Take an inventory of your possessions. If you have to file a claim, two things need to be done - prove you own certain items and verify their value. Some insurance companies advise clients to go through their homes with a video camera, walk through each room, and ensure that you have everything you own, recorded.

Always make sure that you update your policy value to cover various assets that you might add to your house as well as taking care of rate of inflation.

Eligibility

Any resident Indian who is owner and/or occupant of the property can purchase a home insurance policy.

Coverage

The covers provided are :

Fire and Allied Perils - Building and Contents , Burglary (optional), Unlike shown in movie you can also take a cover for earthquake by paying additional nominal premium.

Key features

An individual with an independent house or a flat can opt for this benefit and applicable to any residential building.It covers building against risks like Fire,Lightning,Storm, Riots, Strike and Malicious damage.

In city like vadodara an house with construction area of 2500 sq.ft considering construction cost be Rs1000/sq.ft , Total cost Rs.2500000.00 you need to pay an annual premium in the range of 1300 to 1400.

Remember to cover your house for construction cost and not for the value at which you bought, as it also includes cost of land.

So, put your house insurance to be on top priority.