Planning financial goals

When we talk about goals we talk about achieving a target. The target can be the crossing the finish line for an athlete or passing out with flying colours for a student or achieving the top medical college for an aspiring doctor. Every individual has a different approach to achieve these goals. All goals are different and all people have different goals. Today let us talk about a few financial goals.

So what are financial goals? Any goal that needs to be achieved financially viz. goals to be achieved by paying out money, in short or long term are known as a financial goals. Let us take a few examples and discuss these financial goals.

Short term goals: Goals to be achieved in less than a year are short term goals. An emergency like a family member undergoing an operation can be termed as a short term goal, as this goal requires appropriate cash in a very short period. Purchasing a motor vehicle now or marriage fixed at the end of the year or a small trip to native place can also be defined as a short term goal. To meet a short term goals you need to invest in liquid instruments like short term fixed deposits with the bank, or liquid mutual funds, or have ideal cash in your savings account.

Medium term goals: Goals to be achieved after a year but before 5 years can be termed as medium term goals. Goals like purchase of a house or house renovation after 2-3 years can be termed as a medium term goal. For a self employed person, expansion of business after two years can also be considered a medium term goal. In case of purchasing a car, you can make full payment instead of opting for a loan and making payments via easy monthly instalments. This helps in minimising liabilities and over-burdening yourself with a fixed outflow each month. Medium term goals generally require a disciplined investment plan in a mix of equity and debt investments (Read asset allocation for different equity and debt investment options) that can be liquidated when required.

Long term goals: Goals that are recurring in nature can be considered as long term goals. For a newly married couple, planning for child’s education and marriage expenses or for a family in their early thirties, planning for retirement living expenses can be considered as long term goals. You can invest predominantly in equity investments to achieve long term goals as equity as an asset class provides best returns over a long term horizon of 10 to 15 years.

Many of us don’t realise these financial goals and fail to plan for the same. A systematic and a disciplined approach towards investing helps in achieving all financial goals.

Income Tax Planning

Most of us lack behind in the Tax planning. We always do it at the endof Feb or Mar, because of which we end up into wrong decisions. Here wewill help you to identify Tax saving investments as per yourrequirement. In India we can save Tax under sec 80cc up to Rs.1, 00,000 and apartfrom that we can also claim income tax exemption for interest on housingloan up to Rs.1, 50, 000, Mediclaim up to Rs.20, 000 for dependentsenior citizen parents. In India we have many instruments to invest fortax saving so therefore we should not invest in which comes first to us.

One should always do a proper and careful Tax planning. One should alsolook Tax planning as protection planning (Life insurance, mediclaim) oras wealth creation (ELSS, FD). First of all you need to find out howmuch Provident Fund is deducted from your salary. Because that amountwill be considered under your One Lakh rupees limit. For ex.: if Rs.25,000 yearly has been deducted from your salary then you have to thinkabout only remaining Rs.75, 000.

ELSS Fund or Tax saving Fund = this means the Equity Linked savingscheme. This helps you to indirectly invest in the equity market. But ithas three year lock in period. So you should invest amount which youwill need after three years only. ELSS provides you the benefit of Taxsaving as well as Wealth creation. Some Tax funds also provide you themedical benefits. Ask your agent about all the features of your Taxsaving fund. If you feel your agent is only interested in sellingproducts then you can always contact us for your queries.

Life Insurance Plan = It is always said that one should not look at theLife insurance plan as tax saving. We also suggest you the same thing.All life insurance plans gives you the tax benefit so you should alwaysgo for plan which is suitable to your life and your financial planning.You need not buy every year new policy. If you think that you havealready invested enough in life insurance plan but want to invest againthen you should go for ULIP plans. Payout from life insurance policy istax free.

Fixed Deposit = Mostly people who don't want to take risk invest inFixed deposit. Currently there is 5 year fixed deposit which providesyou the tax benefit. Currently the maturity amount is tax free. Thisinstrument provides you the benefit of tax saving and guaranteed return.FD is not preferable by financial planner due to less return compare toELSS and long maturity term. But if still one wants to invest in FD thenhe should invest spare amount which will not require in near future.

Loans = Currently in India there are two loans Home loans and Educationloan have Tax exemption. Many people invest in house so that they canclaim exemption. One should understand that under section 80cc onlyprinciple repayment can be exempt. Tax deduction on the interestcomponent comes under section 24 and will depend upon whether home isrented or self occupied. You should keep in mind that over a period of time the principle paymentincrease and the interest payment decrease. We should also analyzewhether interest payment is not more than the benefit of tax exemption.Under education loans, the interest that you pay will be tax deductable.

PPF and NSC= People who don't want to take risk they can invest theirsmall savings in PPF. It gives you guaranteed return but it has lock inperiod of 15 years. You can withdraw some part after 6 years. One canlook at this option as their Pension planning. PPF normally gives youthe 7.5% to 8% (subject to change) return but don't forget that it givesyou the benefit of compounding rate. If you have withdrawn yourProvident fund while changing a job then you can invest that amount inPPF. It will be saved as Provident fund and you will get the benefit oftax also.NSC stands for National Saving certificate. This one also assures youthe guaranteed return. You can also invest into post office.Most of us are not aware of the Volunteer Providend fund. Normally 12.5%of your basic salary is invested into your PF and same contribution isdone by the employer. As a concept of VPF you can invest up to 100% ofyour basic salary in your PF but your employee contribution will remainthe same. You just need to inform your employer to invest as a VPF fromyour salary. You will get the exemption up to 100% of your basic salaryif invested in PF or VPF. This is suitable for those who are risk averseand who don't want to get into the planning.

Mediclaim = Mediclaim policies taken for yourself or your parents willallow you to get a tax exemption under section 80 D up to a Rs.20,000limit for your parents and Rs.15,000 for yourself.

Insurance- Basics

Insurance is a promise of compensation for specific potential future loss in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.
We all know about insurance but many times we ignore some basic features of insurance policy.
Here we will try to explain some of the words which your agent normally use while explaining any insurance policy.
By explaining the below terms we want to make you familiar with your insurance policy.

Sum assured (also known as Cover) - This refers to the amount paid out on a policy if you die within the Term of insurance plan. In case of an endowment policy Sum Assured can be paid out on maturity along with the bonus and in case of Money back policies a part of Sum Assured is paid out on regular intervals and on maturity along with the bonus.on regular intervals. Endowment policy It is the guaranteed amount to be paid out at maturity with or without Bonus (Depend upon the policy).

Premium - The owner usually pays a fixed premium amount in exchange for the insurance company's guarantee to cover any economic losses incurred under the scope of the agreement of insurance.
Bonus - It is the amount added to the basic sum assured under a with-profit life insurance policy.
Surrender value - The amount payable by the insurer to the owner of an investment-based plan in case he opts to terminate the policy after three years (the mandatory lock-in period) but before its maturity date. The surrender value will be the premium paid till date minus surrender charges and any outstanding loans due.
Endowment Policy – In this plan the amount is paid to a policyholder if he lives survives the term even after the tenure of the insurance contract or to the beneficiary if the insured person dies before the date on which the policy matures.

Term Insurance - Term life insurance is a life insurance plan in which person can get the huge insurance coverage with fewer lower premium. In this plan beneficiary will get the cover amount only if the insured person dies within the policy term. Unlike Endowment policy policyholder don’t get any amount if insured person lives even after the policy expires. One should have atleast one Term Insurance policy. One can consult a financial planner for the best possible insurance solution.

Whole Life Insurance - A life insurance policy where benefits are payable to a beneficiary on death of the insured, whenever that occurs. The premium payment can happen for a specified number of years or throughout life.

ULIP - It is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. Some part of the amount invested in ULIP is used to provide the insurance cover and the remaining is invested in equity and debt investments and denoted as units.
Money Back Plan - A plan in which part of the sum assured is paid back to the policyholder at regular intervals and a part of sum assured is paid at maturity along with bonuses
Rider - An add-on benefit available at the option of the policyholders that may alter certain features of a policy by increasing or restricting benefits.
Survival benefits - The amount payable to a policyholder under an investment-based plan if he survives the policy term. Typically, it is the sum assured plus returns (guaranteed additions / bonus) accrued.


We have tried to explain some of the terms of insurance but if you want to know about any other terms then please contact us.

Why retirement planning?

In today’s fast pace life everyone is busy working hard to earn a living for their family. With an enhanced lifestyle everyone wishes to own a flat, and live a secured and peaceful life ever after. But little do they realize that they need to plan for their future retirement. About two decades ago everyone was happy earning 3 to 10k each month and investing a part of it for their retirement days. They always thought that their PF contribution will be able to suffice them post retirement. Things have gone worse since them. They were not able to judge the rate of inflation in consumer goods and till date feel that they could have invested more in their salaried age.

Present scenario is a little different. Everyone wants to lead an enhanced lifestyle and is not happy with the basic food, clothing and shelter. They require an air conditioned car, an LCD television, a centralized ac flat and so on. Wants keep on increasing with increased salaries, residential complexes, Iphones and shopping malls.

So what is it that one should realize. It is of utmost importance to know what you should be saving year on year to build an appropriate retirement corpus. One needs to take advice from a financial planner to ascertain the actual retirement corpus required and a proper asset allocation to achieve this amount on time. A retirement corpus can be built by a disciplined investment approach in varied investment avenues of equity and debt. Following are the reasons important for building up a retirement corpus:-

Fulfill other goals: Every individual goes through various life stages. A married couple has goals to own a house & a car, education and marriage of their children and so on. People tend to forget that they have to retire some day and live on their own, when there would be very minimal or no income flow at all. People work hard and save harder for their children and ignore building a corpus for their retirement.
Inflation: A minimum bus ticket that used to cost me 25 paise 15 years ago is costing Rs. 3 now. An increase of 18% p.a Did you realize that? Similarly there has been an increase in all commodity prices. We can’t imagine what would be the cost of these commodities post our retirement. Hence our expenses would increase making it difficult for us to provide for monthly expenses post retirement.
Increase in life expectancy: Not only inflation but due to advancement of science and technology the life expectancy of an individual is increasing year on year basis. This comes with additional pressure to provide a regular income for years after retirement.
Nuclear families: People have started living in nuclear families. They do not wish to stay with their parents, instead prefer a house with wife and kids. Hence, overall burden of the house rests on parent’s shoulders, even when they do not earn any income.
Medical expenses: As age progresses, expenses borne toward maintaining a healthy life increases. There are huge expenses to be borne on account of medical emergencies and towards the cost of regular medicines. Even mediclaim insurance reduces or provides no cover as age progresses. People have to create sufficient emergency fund to cater to these expenses.

A word of advice: Do not forget that you need to accumulate wealth for your life post retirement. Your PF contribution alone won’t suffice. Start early to plan for retirement, follow a disciplined and systematic approach towards investing and invest in a proper asset allocation to gain maximum returns.

Buying a Home

Selecting a Home – Buying a home is like a dream come true. So be careful while selecting it. The first few things you should look at are locality, age of building, area of flat, school, market, transportation, and neighborhood.
One should also look at the possibility of resale because never think that this is your last home. You will always get a better one. Try to buy a house in a ready possession. If possible then avoid the top floor flat because there are chances of leakages from terrace. If you think that you are going to stay for temporary period then better go for rented one.
Keep an eye on economic condition; you might get better rates. If you are looking for some expansion in future then go for raw house or Bungalows.


Verification- One should always verify that the flat or plot he is purchasing is legal and the person who is selling is authorized to sell the same. Always involve the society in the same. Hire a lawyer to verify the documents. One face more problem in the Mhada flats. Take assistance of experience lawyer for the same. Normally if you are taking a housing loan then bank always verify the documents, but even before paying down payment to the owner its our responsibility to check them.

Arrange Mortgage Payments - Home loan can result into disaster if not planned properly. One should always try to pay more amount as a down payment so the installment amount can be reduced. According to our understanding, the monthly installment payment should be approx 30% to 35%. For ex. If your net take home salary is 40,000 per month then your installment payment should be approx 12,000rs to 15,000. If you get some lump sum amount as a Bonus or from any investment then you should use the same to pay your principle amount of loan unless you have any other requirement. It might possible that bank continues the same installment amount but the interest part and duration will be reduced. Make sure that your accounts have enough balance to pay the Installment.

Choosing a Bank – You need to do thorough study of interest rates charged by different banks. Most of the time it is same but you might get 1% or 2% less. Also ask your friends if they have any experience of any Bank. Some banks provide very good services so you can choose any of them. Also keep in mind of any future event. It might be possible that in next month the interest rates may be going down or may go up so take decision accordingly.


Maintenance Charges play important role in the decision of buying home. Sometimes we can afford the installment amount but we might face problem in paying maintenance charges. We already have Installment amount as a increase in expense now and if the maintenance charges also include then it can ruin our planning. We might not need the facility of swimming pool or gym then why to pay for the same.


We will also keep on updating our site to help you more on the same. If you have you can contact us.

Pension plans

Aegon Religare’s new aggressive ad campaign about their pension plans have become quite a success. The advertisement itself shows that we need to plan for our retirement as soon as we can. The example of a Rs. 50 bus ticket reminds me of the days when I used to travel by bus with a minimum ticket of 0.25 paise. Today the same is costing Rs. 3. Hence there has been an increase of 13% p.a in bus ticket prices. Every item on your grocery list, real estate, medicines and consumer durables have become expensive and inflation will keep on rising. One has to create a huge corpus to survive post retirement. One of the options is to invest in pension plans. A pension is an income post retirement throughout your life. For creating an income post retirement you have to start saving into a pension scheme, as early as possible and as frequently as possible. It is similar to the Provident fund scheme that every company provides, on which an individual earns an income post retirement throughout his life. Almost all insurance companies in India provide pension plans which have a few distinct features:-

1. One can invest a fixed amount monthly, quarterly, semi-annually or annually.
2. Amount saved in a pension plan is invested at the applicable Net Asset Value (N.A.V) and denoted in units.
3. Every month a certain amount goes towards charges like the fund management charge or premium allocation charge and so on.
4. You can also opt for an insurance cover on your pension policy. The cover provided is generally 5 to 10 times of annual premium.
5. The investor has to choose from a range of sub-options or plans provided by the pension plan. For example a risk averse person can opt for a Protector type fund where 90 to 100 % of the investment is made in Gilts and Treasury bills which are risk free. Similarly an investor with a greater risk appetite can invest in Aggressive fund where 60 to 100% will be invested in equity and equity related instruments.
6. One has to define their retirement or the vesting age when they wish to stop investing and start receiving a regular income. The vesting age can be anywhere between 45 to 75 years as per policy terms.
7. A reversionary bonus is declared annually and a terminal bonus is paid out at the vesting age from the With profits fund. Even this differs from company to company.
8. You can opt for a single premium or regular premium pension plan.
9. In case of death of the investor during the term the company pays out the fund value + bonuses (if applicable) or the Sum Assured (cover) or both. This too differs from policy to policy.
10. At the vesting age the investor can opt for an annuity plan from the same or a different pension provider.
11. Tax benefit u/s 80C upto Rs. 1 lakh p.a. On retirement one take withdraw a lump sum of 33.33% of the fund value tax free as on the vesting date.
12. One can surrender the policy after three years of policy existence and can redeem the fund value as on that date.
13. Pension received post retirement is treated as an annuity and is taxable as income under the head of salaries.

Tax laws keep on changing from time to time. Different pension plans have different features. It is always advisable to read the prospectus. Also one needs to consult a financial planner to ascertain the fund required at the time of retirement and then follow a disciplined investment approach to build this fund.

Investment options for retirement

If you have understood by now, the importance of generating a retirement corpus here are the few options that where you can look at investing your hard earned money.Equity: If you have more than 15 years to go for retirement, look at investing in equity shares as this could give you the best returns.
Fixed deposits: Safe and secure, but does not provide great returns. Good for risk averse people.
Insurance: Should be purely used to cover risk, and should not be used as an investment tool. If you are adequately insured and have additional corpus, can invest in ULIP’s with a long term view. Provident Fund: Employer and employees contribution towards this fund generates a good corpus. Best option for government employees as returns are non-taxable for them.
Public Provident Fund: Best feature is the lock-in period of 15 years with the power of compounding.
Mutual funds: If you do not have knowledge about equities, consider this option. Expertise of the fund manager help you maximize your returns.Property: Appreciating asset in the long run. Expensive options to invest in prime cities. Not for all.
So what do you prefer?

Housing Loan

Housing Loan is a very important factor in buying a home. We all get tensed if we have to go for housing loan. Here we will try to release some of your tension by telling you things which you need to keep in mind while going for a home loan.

Amount for home loan. – Normally Bank provides 75% to 80% of the contract value. People think that we should take the maximum loan provided by the bank. But it’s a myth. The more loan you take more interest you pay. People keep amount in FD and ask for more amount of loan. Think this way your FD gives you 8% to 9% interest but on home loan you pay around 10% to 11% that means you are loosing on the interest part. Unless and until you need the cash for future requirement you should use the same to pay down payment. If your down payment is more then you have more chance of loan getting approved.

Appropriate Bank – Different bank provides different services and to some extent different rates. One should carefully analyze the same. Also some banks provide the some personal services, so try to take the benefit of the same. Make sure that you always have the sufficient balance in the account from which your EMI is going.

Repayment and Investments– Before approving loan bank sometimes check the credibility of the person. Make sure that you make your credit card bills and the EMI of any other loans (if any) on time. It gives the confidence to the bank. Bank also looks if the person has done any investments or not. It shows that person is smart enough to save some part of his income. Sometimes banks also ask to keep the investment as mortgage. This will help in fast approval. Be more careful on paying returns. It shows that person is responsible citizen. Believe me all this will help you to great extent.

Joint Home Loan – If required then you can also go for joint home loan with your wife (some banks allow brothers also). It will help you to get more eligibility and as well as more confidence to bank. This will also helps you to get tax gain on principle and interest payment. Both Husband and wife can claim the Tax benefits under section 80c ( for principle) and under section 24 (for interest component).

Different banks have different requirements. To get loan fast try to fulfill all requirements ASAP.

We are always ready for any questions. Please contact us for the same.

Financial Planner, Who?

I remember my friends Amit once telling me that he gets confused with the number of investment options available in the market today. Moreover, he also complained that he was mis-sold a ULIP without an explanation of all the charges. He didn’t know whom to trust and rely upon, who could actually give him unbiased advice. Hence, I referred him to my financial planner who could give him the best possible advice. He was not sure who is a financial planner and what does he do. So I started my verbal journey to explain him who is a financial planner?
He is your financial doctor: He analyses your current financial situation , your past and present finances, salary and other incomes, expenses, your risk profile, personal assets and liabilities, family and dependants health status etc and accordingly makes a plan for you to achieve your financial goals in a systematic manner.
Makes you realize your financial goals: Every individual wants to provide great education for kids and live a happy retired life but less do they understand about other financial goals like a foreign trip, emergency medical expenses, a car purchase etc. A financial planner makes us realise such goals and help us in accumulating funds to achieve such goals on time.
Qualified to handle personal finances: A financial planner has the relevant expertise required to manage finances of an individual. He is regularly updated with market trends, does a lot of research about different investment options in the market, different polices and at last advices the policy that best suits you.
Reviews risk profile: A financial planner ascertains your risk profile and suggests a proper asset allocation. He educates you about how to manage the risk of loss of your life. Plans for an easy flow of future finances required to meet your long term goals.
Unbiased advice: Unlike an insurance agent who sells the products of one company, a financial planner has no such limitations. A financial planner understands a customers requirements/needs, researches about different products in the market and accordingly suggests the product the best suites his requirement.
Ongoing relationship: He does not discontinue his services after submitting your financial plan. He reviews your financial plan on a timely basis and rebalances your portfolio as per prevailing market conditions, change in your family etc.

By now Amit was quite confident that he would surely meet my financial planner and check it out for himself, the difference, it makes on his future financial profile.

Credit card – Blessing or curse

Credit Card – It is also known as Plastic money. The use of credit card has been increased immensely. It is very good invention but still people don’t know the proper use of it. Nothing comes free in the world. Many people while spending through credit card thinks that it is not going from their pocket and get shock while seeing credit card bill.
Here we will explain you the benefits of the credit card and things to keep in mind while using it.
Normally credit card gives you up to 40 to 50 days credit days, which mean you can buy something and pay after 40 days. This is useful if you don’t want to carry cash or you are expecting income in future but want to spend in present. If you lost your purse then you might not get your money back but you can stop your credit card use by calling the customer support. Most of the shops or hotels have the facility of payment through credit card. It is useful in the online shopping also. Nowadays online shopping has become very convenient way for the shoppers and credit cards plays important role in it. I would like to call credit card as convenient card.
Getting a credit card for the salaried person is easy. Normally Credit Card Company calls you for promotion and the documents are also less. Credit limit is normally depend up on your eligibility. As your earning capacity increase and if you are making your payment regularly then credit card companies would be more then happy to increase your credit limit. They provide add on card for your family members also.
Reward points help you to earn from your spending. Whenever you spend through your credit card you earn the reward points. After accumulating good amount of reward point you can redeem it against some gifts provided by the company. Credit card companies also provide the option of balance transfer. If you have more than one credit card then you can transfer the balance of one card to another card and pay after some months either for free or for low interest rates. They charge some processing fee for the same. Credit card also gives you cash limit, which means you can withdraw money from ATM through your credit card in case of emergencies. Make sure that you pay the withdrawn amount ASAP, because the interest charged by companies is very high. If you make your credit card bills regularly then it will help you in getting home loans, as it shows good repayment capacity of cardholders. Companies also provide insurance on the card. Please get all the information from the company itself. Ask your friends and relatives about their experiences of customer support of their cards.
One should never forget the deadline of payment of credit card bill. You will be charged some fixed late payment fee charges and interest on the amount till the time you make payment. Some companies use very bad methods of recovery. If you get harassed by the company then you can complain about them. One needs to be careful while handling credit card. There are chances of theft and misuse also. Don’t make habit of paying through credit card. You might end up buying things which you don’t want.
All I want to say is that if you use your card properly then it’s a blessing otherwise it’s a curse.

Asset Allocation

So what’s asset allocation?

People generally feel uncomfortable discussing their personal investment portfolio with others. They fear that their investment portfolio will be discussed by one and all. Some feel that they are experts in the field of finance and they can manage their investments better than anyone else. Others want proper advice but don’t know where to go.

Today an individual has lots of options for investment in equity and debt. People can choose from a wide range of products but lack knowledge about the same. An improper asset allocation results in huge losses or minimal gains. Example, a risk averse person investing only in debt markets won’t earn as much as a risk taker from equity markets. On the other hand the aggressive investor who only or predominantly invests in equity markets will loose huge some of money when market crashes. A proper mix of both these asset classes (equity and debt) results in a balanced portfolio that provides great returns.

Hence asset allocation is nothing but proper allocation of investments in various asset classes with consideration of one’s risk profile, family dependants, liabilities, financial goals etc. A proper asset allocation strategy helps an individual in attaining a right mix of investment products that helps him to take minimal risk and generate maximum returns.

Insurance: One needs to understand the need of insurance in their portfolio. Medical insurance and a life cover are the two most important policies that one should have. Life cover needs to be realistic as per the age, dependants and financial goals to be achieved.

Equity: In equity one can opt for individual shares if they have knowledge or can opt the indirect way of investing through mutual funds. Real estate can be considered by those you want a personal possession and are confident enough to repay the EMI’s on time. Real estate provides a good investment option in the long term of almost 10 to 15 years.

Debt: Gold is assumed to be a good investment option during a bear market phase. One can invest in a mix of debt mutual funds, fixed deposits, PPF, NSC etc that comprise of the debt investments.

It is quite difficult is ascertain a perfect allocation. You can take advice from a financial planner, get a proper asset allocation done and then have a disciplined approach towards investing and you will surely achieve financial success.

ETF's

Exchange Traded Funds (ETF)
ETF or Exchange Traded Funds are securities that are traded as stocks on the stock exchange. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets. Most ETFs track an index.

They offer the advantages of mutual funds while being traded as stocks in the secondary market and can be bought and sold like any other stock. Individual investors having a demat account can trade in such funds.

ETF funds are available in different forms and can be selected as per the requirements. These include ETF bond funds, ETF Gold funds and many more forms.

The prices at which they trade are roughly in line with the net asset values of their underlying portfolios. Eg. Benchmark Goldbees fund replicates the NAV as 1 gram of Gold, hence you can purchase one gram of gold in demat form by buying 1 unit of this fund and paying the brokerage like any other equity purchase. This charge would be much lesser than the packing and bill charges that you pay to a goldsmith for purchase of a 1 gram gold coin.ETF funds are low-cost securities flexible than mutual funds as they charge lower annual expenses than index mutual funds. They first came into existence in the USA in 1993.
ETF in India listings include gold, silver and currencies. ETF funds are a new alternative to investing in mutual funds as they also minimize the risk involved in the investment in other finance solutions. Exchange traded fund lists have been increasing in India since their inception.

Ulip's

The expensive cover policy.

A few decades back, only money back and endowment policies used to be sold by LIC agents. The enterance of new private insurers marked the regime of new unique policies that suited individual needs. Now-a-days, except for LIC all other companies are busy selling ULIP’s. Unit Linked Insurance plans as provide you with a cover along with the benefit of enhanced returns on the principal. Lets have a look at the features of this policy:-

1. One can invest a fixed amount monthly, quarterly, semi-annually or annually.
2. Amount saved in a ULIP plan (net of charges) is invested at the applicable Net Asset Value (N.A.V) and denoted in units.
3. Every month a certain amount goes towards charges like the fund management charge or premium allocation charge and so on.
4. The cover provided is generally 5 to 10 times of annual premium.
5. The investor has to choose from a range of sub-options or plans provided by the company. For example a risk averse person can opt for a Protector type fund where 90 to 100 % of the investment is made in Gilts and Money market instruments which are risk free. Similarly an investor with a greater risk appetite can invest in Aggressive fund where 60 to 100% will be invested in equity and equity related instruments.
6. The term of the policy can be between 3 to 60 years with minimum and maximum age at entry and exit differing from policy to policy.
7. Different types of bonuses are declared during the term and on maturity of the policy that either increases the fund value or additional units are added to the policy.
8. You can opt for a single premium or regular premium ULIP plans.
9. In case of death of the investor during the term the company pays out the fund value + bonuses (if applicable) or the Sum Assured (cover) or both. This too differs from policy to policy.
10. Tax benefit u/s 80C for premiums paid upto Rs. 1 lakh p.a. Also surrender value or maturity benefit is exempt from taxes.
11. One can surrender the policy after three years of policy existence and can redeem the fund value as on that date.

About Mutual Fund - Basic

What is mutual fund?

A mutual fund is a company which allows a group of individual to pool their money for some objective. The objective is mainly to invest in a stock, bonds and other securities. Each investor gets their part in the form of unit in that mutual fund. In simple terms Mutual fund companies take fund from many investors and invest it in the securities on behalf of them. They transfer the profits made from the investments to the investors. They charge fees for their services.

Why to invest in the mutual fund? (Advantages) –

1) The main advantage of investing in mutual fund is professional service. Many individuals do not have necessary knowledge to invest in the market or they don’t have time to analyze the market situation. Mutual fund companies hire qualified professionals to manage the fund. They have required knowledge and the skill.

2) Mutual fund buys and sells securities in bulk which saves the transaction cost. IF individual do lots of trade then all his profit will go in paying commissions.

3) Mutual funds invest in many securities which diversify the risk. For exam. Some Mutual fund maintains the balance between Equity and Fixed Income. So even if equity market is not doing well then they at least have income from fixed income securities.

4) Mutual fund is subject to government regulation which protects the safeguard of the investors.

5) Liquidity is another benefit of mutual fund. You can easily redeem the same.

6) Some mutual funds have tax benefits under sec 80cc.


Why to think before investing in Mutual fund? (Disadvantages)–

1) Mutual funds are costly affair. Fund management fees may be unreasonable for the services rendered. There are many costs involved in it that some investors don’t even understand what they are charged for. One should always find the cost before investing in it.

2) The main feature of mutual fund is diversification. But again due to excessive diversification investors don’t earn good amount of profit. Its like low risk low return.

3) Though some mutual funds offer tax benefits, when fund manager sells the securities they have to pay the capital gain tax. Individual can avoid the capital gain tax liability.

4) Share in profit, share in loss. Mutual fund doesn’t come with a guarantee of a return. You loose money in mutual fund also.

Retirement Think first:

Everyone thinks of a relaxed life post retirement. Some even think of a part time job, or social work, or scrolling round the park near the house. It’s all upto you how you want to enjoy your post retirement life. It can be the best stage of your life, if planned well in advance. Here are some points to help you plan your retirement.
Plan a fund: Arrange for a defined sum of money to be invested each month for your retirement only. Be disciplined in your approach, start early and increase the investible amount on every rise in your salary. Remember, your PF contribution won’t be enough to suffice you post retirement.

Discipline: Be committed; don’t ever stop your investment towards retirement to achieve a different goal. Arrange for emergency expenses upfront, so that you don’t have to redeem your retirement fund in case of an emergency. No matter what your expenses, there should be a regular outflow towards your retirement goal till you retire.

Adjustment: The effect of inflation diminishes the value of rupee. No one is able to judge how expensive life would be post our retirement. Hence, account for inflation because it will affect you as long as live. Even, your standard of living might change with an increase in salary and other factors. Try to ascertain the retirement corpus with a financial planner that you need to acquire to lead a happy retirement life. Also account for expenses that are currently borne by your company or medical expenses that would increase with your increasing age.

Investible options: It is not only important to start early but you also need to invest in a proper mix of equity and debt instruments to generate great returns on retirement. Depending on your age, dependants and risk profile, invest in a mix of investment products available in the market. On retirement if you are opting to purchase a pension plan, remember only 33% that you will receive as lump sum would be tax free and remaining annuity amount will be taxable. (Check out pension plans article) for details.

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