What is Systematic Invetment Plan - SIP

Systematic Investment Plan (SIP) is not an asset class in itself, it is an option that will help you to accumulate money. In simpler terms you may say it is an recurring deposit in mutual fund.

What is a Systematic Investment Plan?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

How does it work?

A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.

Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

Rupee-Cost Averaging

With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor,your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.

Power of Compounding

Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.

Example

If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later!

Other Benefits of Systematic Investment Plans

· Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.

· Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.

· Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.

· Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments. Specially in equity funds as investors tend to stop fresh investment during bearish phase but SIP helps you to overcome that emotion as it is getting deducted every month directly from your account irrespective of market conditions.

So keep SIPing it will create a big wealth for you in long term.

Let's Understand Greece Crisis

We all are aware that Greece is in deep trouble after defaulting on its debt to the International Monetary Fund.

The Greek economy is shrinking.At such time one of the tool available government is to tinker with the currency. Unfortunately Greeks cannot do so because they share their currency with other nations of the Euro Region.

To Understand their predicament one needs to imagine Euro Zone as a train.

Now imagine various countries as the bogies (compartments) of the train and let's say train is trudging along smoothly and all seems well.

Suddenly, few of the passengers in the "Greece" bogie fall sick, so they send a request to the engine driver, via a telecommunication system fitted in the bogie, to speed up. They need to reach their destination fast as they are feeling unwell.

The engine driver sends a message to all other bogies that they have received a "speed up" request from the Greeks due to an emergency.

On hearing this announcement. the German passengers seated in the German bogie take serious objection. They want to enjoy journey at leisurely pace and vehemently object to "speed up" suggestion. 

Their contention being that they had paid a premium for enjoying this leisurely journey and were not prepared to get short changed.

They caution the engine driver that if he were to "speed up". then they would demand a refund.

The engine driver find him in an "impossible" situation is left with no choice but to maintain status quo . The Greeks are left with no choice but to suffer their ordeal.

One of the Greeks regrets his decision to travel by train. He feels has they travel by their own car, the decision of speeding up would have been theirs. But now since they are a part of the train, they can do little to influence its speed. 

 The situation in the Europe is similar to the story of the Euro train. The common currency "Euro" is like the train. Some countries like Greece, Italy, Spain, Portugal, and Ireland are not comfortable with the valuation of the Euro (it is exactly how the Greeks were not comfortable with the speed up of the Euro train).

These countries are facing a slowdown and need to revive their economy. One of the best ways to do that is to sell more products to the world and reduce debt. And in order to do that, it is vital do devalue currency like we did in 1991.

But since the currency (Euro) is common for all the countries, just a handful countries cannot  decide about changing the valuation of the EURO all be themselves.

This is just like how the Greeks in the Euro train failed to "Speed up" the train. For countries like Germany and France who are not in a "debt" problems like the Greeks, a reduction in the value of the Euro works against their interest because it unnecessarily makes their imports more expensive and prices of commodities in general increases.

Basically tinkering of the currency works on the opposite way for two sets of countries. Had Greece own their currency, they would have easily devalued their currency to make exports more attractive.

This would have boosted their economy by creating demand and thereby jobs. This would be like having to travel in their own car instead of being part of a larger train.

Courtesy : TATA AMC

Digital India - What is Digital Locker

Inside India's Digital Locker: What Is DIGILocker and How Does It Work?

Between your wallet and that locker in your house where you keep things safe (in theory; in practice you forget to put things in there safely, and then have a panic attack as you desperately search everywhere for your missing passport), how many government documents do you think you have? A quick check shows that there are several at hand - an Aadhaar card, a driver's license, voter ID, PAN card, all in the wallet, and a passport at home. Then there's old income tax returns, property tax receipts, and educational certificates from school and college, all kept "safely" archived for when they're needed.

That's a huge number of documents to keep and manage, and the government also seems to have taken notice. As part of Digital India week on Wednesday, Prime Minister Narendra Modi officially launched a digital locker service called DIGILocker, though the service was soft-launched sometime back.

So what exactly is DIGILocker? Very simply, it's a website where you can store your various government issued documents, using your Aadhaar card as your identification. While it hasn't been stated as such, to us, it also looks like a good way of bringing data from different government agencies together under the aegis of the Aadhaar card, potentially making the document more useful to people carrying it.

To sign up, you need only enter your Aadhaar number, and an SMS is set out to the mobile phone number you registered at the enrolment camp. This one-time-password is the only way to get inside your DIGILocker for the first time, but afterwards, you can set your own password or link the DIGILocker to your Google or Facebook login.

After you've signed up, you can upload your government documents to the DIGILocker - there's only 10MB of storage at present - but you can also save the Uniform Resource Identifiers (URIs) of government documents using DIGILocker.

The idea is that this should minimise the need for physical documents; if your birth and education certificates are online, and you apply for a passport, then the Passport Office could use your Aadhaar number to request the DIGILocker for your details, without needing you to carry a large file of documents for the application.

Or, the RTO could issue your Driver's License directly to your DIGILocker, based on your Aadhaar information alone; this way, if you need to send your new license to any agency as verification, you'll have an online, authenticated version available whenever you need it.

There's also a planned e-Signature facility with DIGILocker, though that will be launched later; between digital signatures and government documents in the cloud, it is clear that the government wants to make it easier for people to use government services online. Today, getting almost anything done with the government requires you to produce ID documents, which requires a visit to the government offices. Few, if any, government branches allow you to mail a copy of your documents - which actually makes sense for security reasons - but DIGILocker will be a way to authentically curate your documents, and make it easy to share them to different departments.

There's also the question of external threats. While the DIGILocker website looks to have the basics in place by using HTTPS (the same protocol that your bank uses to secure communication between your computer and their servers) for the main part of the website, you have to wonder how secure the backend is. You can be pretty sure that a place where everyone is keeping their official documents will be a target for hackers foreign and local.

Right now, there's not too many ways in which DIGILocker is useful, but it's a clear signpost to the direction we're moving in. Some people worry that this much centralised data could lead to misuse, and also warn of the potential of small mistakes in documents now creating much bigger problems than before, but there's no denying that the convenience of having all our documents digitally accessible and easily shared to different government departments when needed is very appealing.

To access your digital locker, visit DIGILocker and you can sign up now for free with your Aadhaar details.

Learn how RBI stabilizes Price, Economic Growth and Market

The Reserve Bank of India (RBI) is the monetary authority of the country. RBI sets the monetary policy with the objectives of price stability, economic growth and financial market stability. RBI uses its monetary tools for effective pass through of monetary policy. RBI sets its annual monetary policy for a fiscal year in April and then subjects the policy to reviews every quarter with mid quarter reviews held a month before the quarterly review.

RBI Policy tools 

The tools used by the RBI for its monetary policy are:

1. Repo Rate

2. CRR (Cash Reserve Ratio)

3. SLR (Statutory Liquidity Ratio)

4. OMO (Open Market Operations)

5. MSS (Market Stabilization Scheme)

1. Repo (7.25% as of June 2015)

The repo rate is the benchmark policy rate. The repo rate is the rate at which the RBI lends money to banks. The lending operation is done through an auction called the LAF (Liquidity Adjustment Facility) auction. This auction is done on a daily basis and banks wanting to borrow funds from the RBI at the repo rate have to bid for funds in the auction. RBI lends successful bidders funds at the repo rate. The LAF is a collateralized lending platform where banks have to pledge government bonds or treasury bills with the RBI for borrowing money.

A rise in repo rate increases cost of funds for banks while a fall in repo rate reduces cost of funds for banks.

Rates linked to repo rates are the Reverse Repo rate and the Marginal Standing Facility (MSF). The reverse repo rate is the rate at which RBI borrows money from banks in the LAF auction. Banks with excess liquidity lends funds to RBI by bidding for reverse repo in the LAF auction. RBI gives government bonds or treasury bills as collateral to the banks.

The reverse repo rate is set at 1% below the repo rate.

The MSF is an emergency window for funds for banks. The MSF is set at 1% above the repo rate and banks in need of emergency funds borrow from the MSF window by bidding for funds at the MSF rate. Banks pledge government securities or treasury bills to borrow funds under MSF window. Under the Marginal Standing Facility (MSF), banks avail funds from the RBI on overnight basis against their excess SLR holdings. They can also avail funds on overnight basis below the stipulated SLR up to two per cent of their respective Net Demand and Time Liabilities (NDTL) outstanding at the end of second preceding fortnight.

2. CRR (4% as of June 2015)

Banks have to keep a percentage of their NDTL (Net Demand and Time Liabilities) as CRR with the RBI. RBI sets the CRR rate to reflect its monetary stance. The CRR rate is set higher if RBI wants banks to keep more money as CRR and lower if RBI wants banks to keep less money as CRR. The more money kept as CRR the less money banks have to lend and less money kept as CRR the more money banks have to lend

3. SLR (21.5% as of June 2015)

SLR is the percentage of NDTL that banks have to invest in government bonds. RBI sets the SLR rate to reflect its monetary stance. The higher the SLR rate the more money the banks should invest in government bonds and the less money they have to lend. The lower the SLR the less money banks should invest in government bonds and the more money they have to lend.

4. OMO (Open Market Operations)

RBI buys and sells government bonds directly in the bond market or through bond purchase and sale auctions. RBI buying government bonds adds liquidity into the system while RBI selling government bonds sucks out liquidity from the system. The higher the liquidity the more money banks have to lend and the lower the liquidity the less money banks have to lend.

5. MSS 

MSS securities are special government securities and treasury bills that are used to suck out liquidity from the system. RBI sells MSS bonds through auctions to banks and other investors. The money paid for buying the MSS bonds by investors are then held by the RBI in a special account and does not come into the system. The act of issuing MSS securities is an act of sterilization of excess liquidity, when the liquidity is generated by excessive capital flows into the country.

How does MSS work? Take for example RBI buying USD 1 billion. RBI USD purchase would add around Rs 630 billion of liquidity into the system. RBI does not want this liquidity staying in the system and wants to take it away. RBI will ask the government to issue MSS bonds, which can either be treasury bills or dated government securities. Government will auction MSS bonds and the money collected from auctioning the MSS bonds will be kept in a separate MSS cash account, as the government cannot spend this money. Hence liquidity goes out of the system and stays out of the system until the MSS bonds mature or until the MSS cash balances are released through de-sequestering of the cash balances.

Ensure chicken is not pecking up your investments...

There were Two grains lying side by side on the fertile soil. 

The first grain said: “I want to grow up! I want to put down roots deep into the ground and sprout from the ground. I dream to blossom in delicate buds and proclaim the coming of spring. I want to feel the warm rays of sun and the dew drops on my petals!”.

This grain grew up and became a beautiful flower.

The second grain said: “I’m afraid. If I put down my roots into the ground, I don’t know what they will face there. If I grow tender stems, they can be damaged by wind. If I grow flowers, they may be disrupted. So I’d rather wait for the safer time.

Thus the second grain was waiting, until the chicken that passed by did not peck it.

I found similar is the situation of Indian investor they are always fearful about their investments in equity. What would happen if market will go down, what if GDP growth would not be as expected, what if inflation rises, what if I would loose my hard earned money, why should I pay fees to advisor, why should invest in Mutual funds.

Now we are having almost 22 years of history of mutual fund investment, not a single fund has not given return lesser then market, inspite of seeing all the worst a economy can face in this 22 years. We have seen a government for 13 days, a communist supported 3rd front government, Asian Financial crisis,Kargil war, Sanctions imposed on us due to nuclear test, Tech Bubble,9/11 attack, Ketan Parekh scam, terrorist attacks of parliament and of Mumbai, Corruption/scams, Sub prime crisis and lot more.

Inspite, of that there are funds which has given annualised returns to the tune of 24%, which even god of investment Warren Buffet have not been able to generate consistently for such a long period. 

Which means if someone would have invested Rs.100000 in the fund 20 years back that would have been worth 80.00 Lakhs, i.e multiplied his money 80 times or have made an SIP of Rs.5000 (Total Investment Rs.11.80 Lakhs) per month would have transformed into Rs.2.51 Crores.

So let us try to reap the benefit of equity investments and not become like other seed waiting for inflation and taxes in the form of chicken to peck it.

How much reliable EPF/PPF for Retirement Funding???

I have come across lot of investors who lives in an fool's paradise as far as there retirement planning is concerned. They purely rely on EPF or PPF assuming that they would have a happy and comfortable retirement.

I did the same for one of my investor Mr.Nikhilesh, who is just 28 years of age and works with a IT company. He assumes a salary growth rate of 10% every year. On the basis of it, his EPF corpus works out as follows :

Nikhilesh is married and blessed with a daughter. Let's find out what would be his retirement expenses and his corpus requirement his present monthly expense is Rs.18000.00. We have not considered any of his intermediate goals considering that it will be taken care by his savings or some extra ordinary jump in the salary during his most productive phase.

So his EPF corpus at the time of retirement would be Rs.3.15 Crore and whereas his required corpus to maintain similar lifestyle would be Rs.5.22 Crore. So there would be a gap of Rs.2.07 Crore. Remember we have not considered any medical expense and emergencies.

To accumulate the above amount he would be required to contribute additional Rs.1.50 Lacs per annum (@8.7% for 30 Years). 

The PPF investors are worst as in above case Nikhilesh would be investing 24% of his basic salary (12% own contribution and 12% employer's contribution) whereas in PPF maximu limit you can invest is Rs.1.50 Lacs which will work out to be 2.10 Crore that too if entire limit is exhausted from day 1 of Rs.1.50 lacs. So his shortfall would be Rs.3.12 Crore.

I know Salary, EPF corpus, Expenses  and Salary growth rate would vary from individual to individual, but purpose is to demonstrate and make investor aware that only EPF or PPF corpus will not suffice their retirement needs.So plan your retirement much before you hit it to make it the best period of your life.

It is always advisable to calculate the retirement corpus required either yourself or may be through a professional financial planner and try achieving that instead of playing blind. If

Is it time to overboard Real Estate

Returns from real estate (residential)

Real returns from real estate (city-wise residential)

(Source: http://www.wealthforumezine.net/AMCSpeakTATAMF100415.html#.VTRo-1KlTIX. Thanks tohttps://twitter.com/alphaideas )

Prime Minsiter tries to secure your retirement by pushing NPS

One more admirable initiative of Modi governemt is providing a Philip to New Pension Scheme or National Pension System. Additional tax rebate is proposed in budget'15 under section 80CCD for investment upto Rs.50000.00. 

I don’t think it will transform into a big corpus which will take care of retirement,but will help to create awareness for retirement planning.

The generation of whats app, flipkart, and pizza hut needs to understand that we are not provided by any assured retired benefit and have to accumulate our retirement fund on our own. So if you have not yet seriously given a thought to Retirement planning start atleast with NPS now..

Let’s understand some of the aspects of the schemes : 

• What is the New Pension Scheme? 
• How it works? 
• What are Tier I and Tier II accounts in the NPS? 
• What are the three categories in the NPS? 
• Fees and Expenses related to the NPS? 
• What is the minimum amount needed to invest in the NPS? 
• What are the tax implications of NPS? 
• How can I open a NPS account? 
• Guarantee of returns under NPS?
• Who will pay the pension?

What is the New Pension Scheme?

The NPS was introduced by the government to give people a way to get a pension during their old age. Employees of the government sector already get a pension, so this scheme was introduced as a social security measure that enables people from the unorganized sector to draw a pension as well.

The working mechanism is quite simple – you contribute a certain sum every month during your working years, which is then invested according to your preference. You can then withdraw the money when you retire i.e.60 years of age.

How it Works ?

You can enroll in the NPS at any time if you are a citizen of India and at least 18 years of age; no entry is, however, allowed after 60 years of age. You should take advantage of compounding of your wealth by starting right away.

The earlier you start, the greater will be the growth of your pension wealth.

Under NPS, how your money is invested will depend upon your own choice. NPS offers you a number of fund managers (six) and multiple investment options (three) to choose from. In case you do not want to exercise a choice as regards asset allocation, your money will be invested as per the “Auto Choice” option.

You can open an NPS account with authorized branches of service providers called ‘Points of Presence’ (POPs).

You have the option to shift from one branch to another branch of a POP at your convenience.

What are Tier I and Tier II accounts in the NPS?

Like any other pension NPS is meant to be a pension scheme, so the basic purpose of it is to give you a steady stream of income on your retirement.

Tier I and Tier II are two options under the scheme where you can invest your money, the primary difference between them is how they differ in allowing you to withdraw your money before retirement.

NPS Tier I

There is severe restriction on withdrawing your money before the age of 60, because it is necessary to invest 80% of your money in an annuity with Insurance Regulatory Development Authority (IRDA) if you withdraw before 60. You can keep the remaining 20% with you.

When you attain the age of 60, you have to invest at least 40% in an annuity with IRDA regd. Insurance co., the remaining can be withdrawn in lump-sum or in a phased manner.

Here are the details of how your money can be withdrawn in a NPS Tier I account.

When can a subscriber withdraw the amount

NPS Tier II Account

You need to have a Tier I account in order to open a Tier II account.

The Tier II account makes it easy for you to withdraw your money before retirement because there is no limit on the withdrawals you can make from the Tier II account.

You need to maintain a minimum balance of Rs. 2,000, and you can transfer money from the Tier II account to Tier I account, but not the other way around.

There is a Rs. 350 CRA (Credit Record Keeping Agency) charge which is not present in the Tier II account, but the rest of the fees remain the same.

Asset Allocation and Categories in the NPS

There is an Active Choice option, and an Auto Choice option. 

Active choice - In the Active Choice you can select how much of your money will be invested in the different classes with a cap of 50% in Class E (Equity).

Auto choice - Your money is invested in a certain percentage in the various classes based on your age. 

At the lowest age of entry (18years), 50% - E Class, 30% - C Class and 20% - G Class.These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in “E” and“C” asset class will decrease annually and the weight in “G” class willincrease annually till it reaches 10% in “E”, 10% in “C” and 80% in “G”class at age 55.

Here are the three investment classes:

In either of these options you have to select the fund manager who will manage your fund. Choice of fund manages available is as follows:

ICICI Prudential Pension Funds Management Company Limited

IDFC Pension Fund Management Company Limited

Kotak Mahindra Pension Fund Limited

Reliance Capital Pension Fund Limited

SBI Pension Funds Private Limited

UTI Retirement Solutions Limited

Fees and Costs related to the NPS

There are some expenses associated with NPS list of which is as follows :

*Service tax and other levies, as applicable, will be levied as per the existing tax laws.

What is the minimum amount needed to invest in the NPS?

For a Tier I NPS account you need to contribute a minimum of Rs. 6,000 per year, and make at least 4 contributions in a year. The minimum amount per contribution can be Rs. 500.

Minimum amount for opening Tier II account is Rs. 1,000, minimum balance at the end of a year is Rs. 2,000, and you need to make at least 4 contributions in a year.

What are the tax implications of NPS?

Although you get tax rebate as per proposed tax laws, but withdrawals and pension would be taxed at marginal tax rate.

How can I open a NPS account?

You can open a NPS account by going to the bank branches of the banks that are authorized to sell this.

No Guarantee of returns under NPS?

It doesn’t guarantee you any assured returns , but as expenses are very low and due to professional management you can expect optimal returns.

Who will pay the pension?

Remember NPS will not pay you pension directly, but would offer you to choose and transfer your accumulated wealth to any of the insurance co. Registered with IRDA and offering immediate annuity products.

ABM View-

Keep in mind that NPS won’t pay you a pension directly, the rate of return is not fixed and a withdrawal as well as pension is taxable. But as expenses are very low it has capacity of generating good returns as per the class you are invested in. If you are a conservative investor falling in top tax bracket and have not planned for any other investments for retirement apart from EPF or PPF then should go for it.

More reason to cheer for Proud Parents of a girl Child

Lakshmi is the Goddess of wealth, and it is believed that a girl child will bring prosperity and wealth to the family she is born in. 

Prime Minister Shri Narendra Modi also adds one reason to prove it. To show his commitment towards girl child and for the campaign “Beti Bachao, Beti Padhao” he has launched a scheme exclusively for a girl child named “Sukanya Samriddhi Yojana”.

I do not know the social outcome of the scheme, but for sure financially it is one of the best schemes for proud parents of a daughter.

Appending below Features of the scheme :

Salient Features of Sukanya Samriddhi Yojana

Who can open this account? - Parents or a legal guardian of a girl child who is 10 years of age or younger than that, can open this account in the name of the child. For initial operations of the scheme, one year grace period has been provided to make it 11 years of age. With this one year grace period in age, which is valid up to December 1, 2015, you can get this account opened for a girl child who is born between December 2, 2003 and December 1, 2004.

9.1% Tax-Free Rate of Interest - This scheme has been flagged off with a 9.1% rate of interest, higher than that of PPF which stands at 8.7%. But, this rate is not fixed at 9.1% for the whole tenure and is subject to a revision every financial year like all other small savings schemes, including PPF.

Prior to the budget announcement, 9.1% annual return seemed unattractive, but not anymore, as it has been made tax exempt now. Interest amount gets added to your balance amount in the account and compounded either monthly or annually, as per your choice. Monthly interest compounding will be done only on your balance amount on completed thousands.

Duration of the Scheme - The scheme will mature on completion of 21 years from the date of opening of the account. If the account is not closed on maturity after 21 years, the balance amount will continue to earn interest as specified for the scheme every year. In case the marriage of your daughter takes place before the maturity date i.e. completion of 21 years, the operation of this account will not be permitted beyond the date of her marriage and no interest will be payable beyond the date of marriage.

Deposit for 14 years only – Though the scheme has duration of 21 years, you are required to make contributions only for the first 14 years, after which you need not deposit any further amount and your account will keep earning the interest rate applicable for the remaining 7 years. 

Premature Closure - The account can also be closed prematurely as your daughter completes 18 years of age provided she gets married before the withdrawal. As the maximum permissible age of the girl child is set as 10 years, the scheme effectively carries a minimum duration of 8 years i.e. 18 years of exit age – 10 years of entry age.

Partial Withdrawal - It is also allowed to withdraw 50% of the balance standing at the end of the preceding financial year, but only after your daughter attains the age of 18 years. So, effectively it has a complete lock-in period of at least 8 years, before which you cannot take out any money for any purposes.

Minimum/Maximum Investment - You need to deposit a minimum of Rs. 1,000 in a financial year to keep your account active. Failure to do so will make your account inactive and it could be revived only after paying a penalty of Rs. 50 along with the minimum amount required to be deposited for that year, which currently stands at Rs. 1,000.

Also, you can invest a maximum of up to Rs. 1,50,000 in a financial year. You can make your contribution to this account in as many number of times as you like.

How many accounts can be opened? - You can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, you can open three accounts if you are blessed with twin girls on the second occasion or if the first birth itself results into three girl children.

Nomination Facility - Nomination facility is not available in this scheme. In an unfortunate event of the death of the girl child, the account will be closed immediately and the balance will be paid to the guardian of the account holder.

Documents Required - Birth Certificate of the girl child, along with the identity proof and residence proof of the guardian, are the mandatory documents required to open an account under this scheme. You can approach any post office or authorised branches of some of the commercial banks to get this account opened.

Sukanya Samriddhi Yojana vs. Public Provident Fund (PPF)

Budget 2015 has made this scheme quite attractive for the investors. If you are an investor who exhausts entire PPF limit by depositing Rs.150000 and want to save for your girl child’s marriage or higher education. Would recommend to first investing in this scheme and then to PPF, as this scheme provides you safe investment with much higher returns.

Real Life case study on Retirement Planning of one of my client in Times Dtd.13/01/2015

https://www.dropbox.com/s/r4tg9lm91z68phy/TOI%20-Jan%2013%2C2015-%20Retirement%20PlanningDB.pdf?dl=0

My Times of India Article Dated 30/12/2014 on "Time to take New Year Resolution"

"Time to make some New Year Resolution"

My Times of India Article of 30/09/2014 on "Benefits of Diversification"

"Benefits of Diversification"

My Times of India Article 23/9/14 on "Goals and Risk Tolerance"

"First Figure out your Goals, Risk Tolerance"

Time to make some NEW YEAR Resolutions

New Year is the time for celebration, gifts, drink and dance. But it also reminds you to take some resolutions, so that New Year can be better than the one just passed by. So this year let’s make some of the following resolutions to make a better managed financial life. It will help you to reach your financial goals.

1) Contingency Planning: First thing you should do is plan a contingency fund may be 3-6 months of your expenses, depending on kind of a job or business you are in. Always create and maintain an emergency fund. This is the only source which you can access in case of emergency may be medical or job loss.

2) Prioritise your Debts: Understand not all debt is same. Make list of all your debt and try to get rid of the ones against which you are paying highest rate of interest. It doesn’t make sense to invest your money in an Fd or Mutual fund when you are paying 30% interest on your credit card due.

3) Budgeting: If you haven’t make a budget then it is the time you should start making one. Budgeting help you to plan your bigger expenses and help you avoid impulsive buying.

4) Know your goals: Our tagline is “Aao Sapno Ko TARIKH De” which means first list down your dreams and then put a date by when or in which year I want to achieve it. To start any planning we need to list down what all we want to achieve. So this new year just make a list of financial goals you wish to achieve. Then break it into 2 parts i.e need and want. Needs are the one which in any circumstances you have to achieve e.g. your child’s education, Daughter’s marriage or your retirement. The balance left out will be your wants e.g. owning a vacation home, foreign trip every year etc. From the definition it is clear your needs will be given first priority and wants after that.

5) Clean up: Every investor investment bucket is filled up with the products advised by a friend, neighbor or a relative. Just review them whether they still holds some value. There are lot of better alternative products are available especially in mutual fund space. Which are transparent as well as cost and tax efficient. So close down all such products and switch it to better alternative. May be you need to pay some penalty today but in long term it can add multiples of such penalties to your wealth.

6) Know where you money goes: Gaining control of your financial situation and using money to help you reach your goals is possible, but first you must recognize where your money goes. Evaluate your habits. Start by jotting down everything you think you spend money on during a one-month period. Within the expenses differentiate between discretionary (e.g Eating our, Watching movies, replacing gadgets more frequently etc) and non discretionary (e.g. Electricity bill, Rent, Grocery etc). Start cutting down on discretionary expenses.

7) Avoid tips or offers giving assured, fixed and high returns: Remember every extra % of return offered over and above market return comes with that extra % of risk, so try to shy away from the schemes which doubles your money in very short span. Also check investments products you are investing in are regulated by govt. Appointed regulator and avoid ponzy or tip based investment. Your friend or relative might have recommended that but it is you who loses money when it bursts.

8) Consult a Financial Advisor: It is always beneficial in long run to seek professional help. In short run it might look like a cost but over a period of time, it would help you to avoid unnecessary investments. He will guide and a hand holds you during your financial journey and helps you reach your goals comfortably.

9) Do some Charity : Lastly do not forget to do some charity, help the people who are less fortunate. Remember we are lucky that we have access to the things which atleast 50% of the population don’t have.

So let’s create a bright future for ourselves and for the country. Wish you a very Happy and Prosperous New Year.

How to restraint from being a member of CLUB 99

​Once upon a time, there lived a King who, despite his luxurious lifestyle, was neither happy nor content.

One day, the King came upon a servant who was singing happily while he worked. This fascinated the King; why was he, the Supreme Ruler of the Land, unhappy and gloomy, while a lowly servant had so much joy.

The King asked the servant, 'Why are you so happy?'

The man replied, 'Your Majesty, I am nothing but a servant, but my family and I don't need too much - just a roof over our heads and warm food to fill our tummies.'

The king was not satisfied with that reply. Later in the day, he sought the advice of his most trusted advisor. After hearing the King's woes and the servant's story, the advisor said, 'Your Majesty, I believe that the servant Has not been made part of The 99 Club.'

'The 99 Club? And what exactly is that?' the King inquired.

The advisor replied, 'Your Majesty, to truly know what The 99 Club is, place 99 Gold coins in a bag and leave it at this servant's doorstep.'

When the servant saw the bag, he took it into his house. When he opened the bag, he let out a great shout of joy... So many gold coins!

He began to count them. After several counts, he was at last convinced that there were 99 coins. He wondered, 'What could've happened to that last gold coin? Surely, no one would leave 99 coins!'

He looked everywhere he could, but that final coin was elusive. Finally, exhausted he decided that he was going to have to work harder than ever to earn that gold coin and complete his collection.

From that day, the servant's life was changed. He was overworked, horribly grumpy, and castigated his family for not helping him make that 100th gold coin. He stopped singing while he worked.

Witnessing this drastic transformation, the King was puzzled. When he sought his advisor's help, the advisor said, 'Your Majesty, the servant has now officially joined The 99 Club.'

He continued, 'The 99 Club is a name given to those people who have enough to be happy but are never contented, because they're always yearning and Striving for that extra 1, saying to themselves: 'Let me get that one final thing and then I will be happy for life.' We can be happy, even with very little in our lives, but the minute we're given something bigger and better, we want even more! We lose our sleep, our happiness, we hurt the people around us; all these as a price for our growing needs and desires.

Same is the situation with most of the investors, they are also engaged in converting 99 to hundred, without knowing they might need much lesser then that.

Financial planning is a big eye opener and will help you to avoid being an member of CLUB 99 and help you to live your life happily.

Union Budget - Far cry for common man

Again entering to see one of the biggest event of the year i.e budget season. Just pick up any news paper or news channel you would find the discussion forums, expectations, reality and news related to Union Budget.

Budgeting is the first step and most important part of any Financial Planning. This is the time when we estimate income and expenses for the year and plan our Purchases, Investments, Vacation and Tax planning. Union budget is also the process by which government plans its income and expenses for the coming year.

Being a financial planner, I feel most of the household no more continue to have this process in place.This is the best time to realign our family budget date with that of union budget , so that we don't need to set any reminder and there are lot of sources available to remind us to do that.

It's better to give our time in preparing our own budget instead of watching what government is doing. 

Budgeting helps us in avoiding haphazard expenses in the months when our monthly exps. are less then  income and to avoid borrowing on credit card or opting for consumer loan in the months when outflow is higher then income. Would suggest to ear mark certain expenses which comes at intervals viz; childrens school/college fees, Insurance premiums, Tax outgo expected in last quarter of Financial year, Festival period exps , B'days, Anniversary, marriages etc., Distribute it to every month to avoid making unnecessary exps. in the months of surplus.

In any way we should concentrate more on the act which is in our control, whatever govt. does we do not have any control (upto a greater extent) and have to adjust whatever they decide. So it better to allocate our time in preparing our own family budget first and then enjoy fights on discussion forum of news channel.

Increase your Happiness index together with wealth

Had opportunity to watch a fantastic movie this weekend named "Lunch Box" there were lot of good things about the movie. But I would like to share just one of the term they referred to i.e Gross National Happiness.

Every country in the world is running towards improving their Gross National product. But what if we get together and concentrate on improving Gross National Happiness. Interesting to know there is a country seating in our neighbor having population half of my city i.e Vadodara has done that. I am talking of Bhutan. YES Bhutan.

Gross national happiness resides in the belief  that the key to happiness is to be found, once basic material needs have been met, in emotional and spiritual growth. The concept of Gross National Happiness accordingly rejects the nation that there is a direct and unambiguous relationship between wealth and happiness. If such a relationship existed, it would follow that those in the richest countries should be the happiest in the world. We know that this is not the case. This marginal increase has also been accompanied by the growth of many social problems as well as such phenomena as stress-related diseases as well as suicides, surely the very antithesis of happiness. 

Bhutan seeks to establish a happy society, where people are safe, where everyone is guaranteed a decent livelihood, and where people enjoy universal access to good education and health care. It is a society where there is no pollution or violation of the environment, where there is no aggression and war, where inequalities do not exist, and where cultural values get strengthened everyday. A happy society is not a fatalistic society, but is built on hope and aspirations. It is also a more equal and compassionate society, where sharing and contentment come out of a positive sense of community feeling. A happy society is one where people enjoy freedoms, where there is no oppression, where art, music, dance, drama, and culture flourish.

We all are running without knowing where we need to reach. Specially our leaders they have never set and looked at how much money they would require to lead a most luxurious life which includes inheriting big chunk for their next generation. If they would do that exercise corruption figure will get down to some hundred crores from lakhs of crores.

Financial planner can contribute a lot to increase your level of happiness by making you aware about your future needs and goals. They lay down a plan to achieve your goals according to your risk profile, they secure your family's future. A clear vision, backed by definite plan, gives you a tremendous feeling of confidence and personal power. When you are confident about future financially, you become more happier and less greedy, which helps in giving quality time to family. I am of the belief that if we are happy and satisfied we make people around us more happier and a reason for happier society. We avoid doing unethical work.

Just think of the day when you got good bonus or an excellent salary hike. What is the first thing you do its share that happiness with your family you wont mind giving a raise to your housemaid or your sweeper after that. A chain of happiness starts. Why we need to have reasons like bonus and raise to be happy. They are temporary, start looking for permanent reasons.

Just a advise to raise your happiness index and together with that of countries Gross happiness index consult your financial planner and plan you future.

Very relevant speech forwarded to me by one of my client of  Mr.Ratan Tata at Symbiosis.

Quote

"Don't just have career or academic goals.Set goals to give you a balanced,successful life.Balanced means ensuring your health, relationship,mental peace are all in good order. 

There is no point of getting a promotion on the day of breakup,

There is no fun in driving a car if your back hurts,

Shopping is not enjoyable if your mind is full of tensions.

Don't take life seriously, Life is not meant to be taken seriously, as we are temporary here.

We are like prepaid card with limited validity. If we are lucky, we may last for another 50 years and 50 years is just 2500 weekends. Do we really need to get so worked up?...it's OK, Bunk few classes, score low couple of papers, take leave from work, fall in love. fight a little with your spouse....it's ok... 

We are people not programmed devices...! "Don't be serious enjoy life as it comes" Unquote.     

To remain happy is in our hand and don't allow external factors to affect it. Be happy and try to make people happier around you. Donate generously to less privileged, help others, take good care of environment.

ABM Investment Views published in "TIMES OF INDIA", Mumbai edition June 10,2014

To view click on link below :

https://docs.google.com/file/d/0B5Vaf3Lc5zYgbUdRTzQxYUdaVFZtYWlMTFd3el8xelBKRjg0/edit

True example of WEALTH Creation

We are optimistic about "ACCHE DIN AANE WAALE HAIN.".

If last 20 years were not good then going by above phrase next 10 years are going to be extraordinary.Last almost 20 years have been the best days an investor can wish for but the problem is we ourselves are not confident of our economy and power of Young India.

Investors confidently invest in Gold, Corporate Fixed Deposit, FD of Co-operative bank and above all real estate.But when it comes to equity they shy away from it.

Demonstrating herewith how equity mutual funds in real life can create wealth for the investors.

"Reliance Growth Fund is an Equity Diversified fund launched 19 years back wherein its NAV has moved from Rs.10 to Rs.615.59 that means investor has multiplied his money 62 times.

It is evident that there is no other asset class which can beat performance of Equity and specially investments made through Mutual fund route. Many a times investor do compare returns of equity with real estate. 

Let's see the comparison - 

If one had invested Rs.10 lacs in this fund 19 years back it would have grown to 6.2 crores that too TAX FREE and to add some other benefit is liquidity, daily valuation,transparency, diversification, part redeemable, no legal cost or hurdles, well regulated etc etc...

I leave it to the real estate investor to evaluate that how much of them can confidently claim similar returns for their real estate portfolio as a whole.

Disclaimer : Performance of fund taken only for demonstration purpose, should not be considered as our recommendation. Please consult you adviser before investing.

Undoubtedly investor should allocate funds to different assets  according to time horizon and goals.But, Investors are very comfortable with investment in FD, Gold and Real estate but when it comes to Equities every one thinks that it is a speculative asset class. History has proved that you can speculate anything for a short period, but in long term fundamental works.

Many a times the excuse given for not investing in equity is of lower risk profile, but we forget that risk profile is evaluated on 3 aspect i.e Willingness,Ability and Need. The most important aspect with most of the individuals is Need, may be they are not willing to take risk and might not have ability as well. But in today's high inflationary scenario everyone's NEED should make them a equity investor. For today's investor equity is not an option but a necessity.

So evaluate your future needs, make equity mutual funds your friend for wealth creation,but in consultation with your financial advisor.