best investment plan in india - Why exiting gold might not be the best investment move

Investors fear that after a decade long bull run, the bear run in gold may be equally prolonged. Gupta doesn't think so. "Today markets have turned dynamic, so you can't rely on historical patterns," she says. She believes that while gold may decline or move sideways for a couple of years, it should do well thereafter. Gold's production cost of $1,050-1,100 per ounce sets a floor below which it can't decline.

What you should do: Exiting gold at this stage when its price has come down significantly would be a mistake. In fact, some see this as an opportunity. According to Tanwir Alam, CEO, Fincart, "If your gold purchases are tied to a goal, such as your daughter's marriage, then declining prices work to your advantage." best investment plan in india But most experts are also not very bullish about the prospects in the near term. Stagger your purchases to gain from further declines.

Avoid buying jewellery when you wish to invest in gold. "When you go to sell jewellery, you will immediately lose 30 per cent of its value — about 20 per cent to making charges and another 10-12 per cent on account of purity issues," says Gupta. Gold ETFs are a more cost-effective option. They are liquid and have no security or purity issues.

best investment plan in india - Why exiting gold might not be the best investment move

The past two years have been black swans in the history of gold. The metal gave negative returns in 2013 and this year is not expected to be any different (see graphic). Investors who binged on the yellow metal when prices were making new highs on a weekly basis in 2012 have been badly bruised.

What you should do: Experts advise that investors should not allocate more than 5-10 per cent of their portfolio to gold. They also say that one should rebalance the portfolio to maintain this allocation best investment plan in india. Says Priti Gupta, executive director-commodities and currencies, Anand Rathi Commodities: "Whenever there is a change in value in any part of your portfolio, you should rebalance. When prices (of any asset) are falling, you should buy."

Investment and Insurance Plan-Why you should invest in Ulips now

Another way to reduce the impact of mortality charges is to buy the policy in the name of your spouse or child. Income from investments made in the name of a spouse or a child are subject to clubbing provisions, but since the maturity proceeds from Ulips are tax-free, you don't have to worry about that. You can also go for single premium Ulips, with an Insurance Planning Services in India cover of only 1.25 times the premium. However, the maturity proceeds of such a plan will not be covered under Section 10 (10D) and will be taxable in your hand.

Money due to the doublespeak of distributors and the failure (or unwillingness) of insurance companies to redress their grievances. Policyholders lost money even though the markets were shooting up. Buyers didn't realise that even though their funds went up by 15-20% in a year, they were suffering losses because only 40-50% of their money was actually invested in the first 2-3 years. "The new Ulips are facing the baggage of old Ulips," says Yashish Dahiya, CEO and co-founder Policybazaar.com.

While the low charges of new Ulips make them attractive, the main advantage is the seamless and tax-efficient transfer from debt to equity, and vice versa. This switching may be for varied reasons, including rebalancing the portfolio or even timing the markets by savvy investors.

Investment and Insurance Plan-Why you should invest in Ulips now

Shed your aversion to Ulips

This transformation of Ulips from a costly bundled product to a low-cost option has led to a change of heart among financial planners as well. For long, they have advised clients to keep insurance and financial investment planning in Delhi separate. Says S Sridharan, head of financial planning, FundsIndia. com. "Low-cost products like this will be suitable for investors who want to combine insurance with investments," he adds.

He's not alone. With more low-cost Ulips on the anvil (at least two companies are awaiting Irda's approval for their low-cost Ulips), many financial planners are changing their tune. "The Click2Invest plan from HDFC Life is a good product. We are recommending it to our clients," says Jaya Nagarmat from Investor Shoppe. Tanvir Alam, founder & CEO of Fincart goes a step further. "This Ulip will give the mutual fund industry a run for its money," he says.

Indeed, it is time to get rid of the historical aversion to Ulips and look at them through the prism of lower charges. This will not be easy because a lot of investors have been scarred by their experience with Ulips. Many have lost ously, the mortality charges are higher when it comes to such plans.

Though Ulips offer a cover to policyholders, the benefit may be a drag for those who are interested purely in investment. The low-cost Ulips are, therefore, Type I plans that will pay either the fund value or the sum assured. Here's how it will work. Suppose a person buys a Ulip with a Rs 1 lakh premium for 20 years. The plan will give him a cover of Rs 10 lakh (10 times the annual premium), but the insurance company will charge mortality premium for only Rs 9 lakh since the total risk for the company is Rs 9 lakh. With every annual payment of the premium, the risk of the company will come down, reducing the mortality charge. When the fund value of the Ulip exceeds the sum assured, the plan will stop deducting mortality charges and the entire premium will go into investment. 

Investment and Insurance Plan-Why you should invest in Ulips now

The Insurance Regulatory and Development Authority (Irda) clamped down in 2010, capping the annualised charges of Ulips at 2.25% for the first 10 years of holding. The charges were fixed at this rate because it was the average cost charged by competing products such as mutual funds. With no incentive left for distributors, Ulip sales plunged.

In recent months, insurance companies have sweetened the deal for investors by reducing the charges even further. The Bajaj Allianz Future Gain plan does not levy premium allocation charges if the annual financial investment planning in Delhi  is Rs 2 lakh and above. The Edelweiss Tokio Wealth Accumulation Plan doesn't have policy administration charges. Some Ulips, such as Aviva i-Growth and ICICI Prudential Elite Life II, don't have lower charges but compensate long-term investors with 'loyalty additions'.

But the Click2Invest plan from HDFC Life is a game changer. The only charge it levies is an annual fund management fee of 1.35% of the corpus value. There is also a mortality charge but that is for the life cover offered to the policyholder. The low charges make the Click2invest plan cheaper than even the direct plan of a diversified equity fund. For instance, the direct plan of the largest equity scheme, HDFC Equity Fund, charges an expense ratio of 1.5% per year.

Some readers may pooh-pooh the idea of saving a sliver on costs. After all, a 0.15% saving on costs makes a difference of only `150 on an investment of Rs 1 lakh. While this may seem small, the difference in the cost can balloon into substantial savings in the long term.

Investment and Insurance Plan-Why you should invest in Ulips now

Recently launched Ulips have very low charges. Find out why you should buy these insurance-cum-investment plans now

They were once the most bought financial product. Then Ulips became the most reviled investment, forcing a string of reformatory measures. Now these investment-cum-insurance plans have changed once again to become a low-cost investment option. In fact, some of the Ulips introduced in recent months are cheaper than the direct plans of mutual funds.

We won't be surprised if this evokes an angry response from readers. Ulip became a four-letter word due to the high charges levied by insurance companies and rampant mis-selling by distributors. In some cases, the charges were as high as 80% of the first year's premium. Distributors lured gullible investors by not revealing the high charges and showcasing only the returns offered by the market-linked product.

Financial Planning - How disciplined savings can help Chandras meet their financial goals

amount of Rs 6,576 from their existing mutual fund investment. Similarly, for Meghana's marriage in 13 years, they will need a sum of Rs 40.79 lakh. For this too, they can allocate an existing SIP amount of Rs 7,042 a month to arrive at the desired corpus. If, however, they decide to use the existing gold fund SIP of Rs 3,000, they will have to allocate an SIP of Rs 4,042 in an equity fund to meet the goal.

Next, the Chandras require a sum of Rs 9.4 crore in 16 years to fund their retirement. It is not advisable for Ramesh to retire at the age of 56 years if he wants to build a corpus comfortably, but he can consider the decision later when he approaches the goal. To build this corpus, he will have to deploy several of his existing resources, including the EPF/PPF funds, stocks, mutual funds as well as property. Together, these will amount to Rs 2.67 crore, and to make up for the shortfall, he will have to start an SIP of Rs 50,089 in an equity fund. He can do this once he has built the emergency corpus in five months.

Finally, Ramesh wants a corpus of Rs 10 lakh for his parents' medical needs. To achieve this objective, he is advised to allocate his existing recurring deposit, mutual funds and the value of his surrendered insurance policies. These funds should be parked in a liquid option that is easily accessible.

(Financial planning by Fincart)

http://fincart.blogspot.in/2014/10/financial-planning-how-disciplined_16.html

Besides this, Ramesh gets a salary of Rs 1.3 lakh, which brings their monthly income to Rs 1.44 lakh.

s for their financial outgo, the Chandras spend Rs 35,000 on household expenses and Rs 14,500 on house rent, while Rs 16,500 goes as home loan EMI, Rs 20,080 as insurance premium and Rs 4,500 for Meghana's education Financial Planning. They invest Rs 49,000 in various avenues and are left with a surplus of Rs 4,420 a month.

The current goals of Chandras include building funds for Meghana's education and marriage, their own retirement, creating a contingency corpus and having a buffer for Ramesh's parents' medical needs. Fincart suggests a realignment of investments and a revamp of insurance portfolio to be able to meet all the goals.

Insurance coverage

Though Ramesh has a seemingly impressive collection of insurance policies, these are all costly, traditional plans which will be unable to beat inflation and offer a low cover at a high premium of Rs 2.35 lakh a year. While he does have a term plan, it is expensive. Ramesh needs a cover of Rs 2.5 crore given his income, expenses and home loan, and the Fincart team suggests buying an online cover of this amount, which will cost him Rs 38,742 a year. Since Meenakshi is not working, she doesn't require any life insurance.

Financial Planning - How disciplined savings can help Chandras meet their financial goals

Despite a high net worth of Rs 96 lakh, he has 75% of his portfolio in real estate, has bought expensive, traditional insurance policies with a low risk coverage, and has an unmanageable equity portfolio of 14 funds and 11 stocks. More importantly, he is not sure he will be able to fulfill his important goals. To find out, the financial planning team at Fincart analyses Chandras' portfolio and helps them realise their objectives.

Existing financial status

Ramesh is a software professional, who is married to 38-year-old Meenakshi, a homemaker, and the couple has a 10-yearold daughter, Meghana. They stay in a rented house in Hyderabad, but own two houses worth Rs 80 lakh, which helps them earn a rental income of Rs 14,000 a month

Financial Planning - How disciplined savings can help Chandras meet their financial goals

The ability to see the big picture is critical for the success of any strategy. This is also true of financial planning. Most investors find their best-laid plans going awry because they are focusing on parts instead of the whole. This is the reason they binge on one asset at the expense of others, or have a bloated portfolio without considering if the investments will help them achieve their goals. This is why financial planners insist on aligning one's investments with the financial goals. Forty-year-old Ramesh Chandra has taken the right step in approaching a financial planner at this stage because he needs to streamline his finances as he approaches retirement.

financial planning-Win big by using all asset classes

Target score: Irrespective of the team batting first or second, each team keeps a target score in mind. Similarly, investors must ask some questions before they start their investment journey. These can include: What are they saving for? How much will they need for their children's education? How much should be the retirement kitty to live a comfortable retired live? etc.h Game format: The strategy for a 20-20 game is different from a one-day match which, again, is very different from that of a test match.Likewise, short-term goals must be funded by fixed-income products, whereas growth assets such as equity or equity funds must fund only long-term goals. h The team: A winning team comprises few good batsmen, few good bowlers and good fielders. Similarly , not always all asset classes perform simultaneously. It is seen that each asset class performs under a certain situation and economic environment financial planning. So, an investor's winning team must comprise of investments across all assets classes, such as fixed income, equity, gold and real estate.h Optimize player's potential: Investor's risk tolerance and time horizon of the goal plays a critical role in deciding the winning combination of assets. The winning team must try to optimize returns within each asset class. For example, if someone is conservative and has a higher debt allocation, then FMP and debt funds for over 3-year period, or tax-free bonds could be a better alternative to FDs.h Focus & hold your nerves: The mindset of players always plays a crucial role in winning. The winning team's body language gets reflected on the field. Players are also trained about the external environment which they can control, so all they should do is to control their own self. Investment is no different. No one can ever predict or control the market, so one has to keep their goals in mind and have to ensure that the products selected will enable them to reach their goals by re-balancing their asset allocation periodically .h Keep faith in your team: Holding one's nerves becomes easier if there is conviction in the products one is invested in. Ask yourself simple questions like: Is it going to help meet any of the goals?

financial planning-Win big by using all asset classes

There is a need to understand the difference between a financial plan and financial planning. A cricket team’s plan is like a financial plan, decided much before the players take the field. It includes studying the field, the environment, selecting the winning team, analyzing opponent’s strengths, weaknesses, etc. However, when the actual match starts, a lot of the plan quickly gets adapted based on the situation that the team exists in. The plan acts as the guideline but it is certainly more important to navigate the plan, which is what financial planning is all about. A financial plan is based on assumptions and it is quite certain that those assumptions may or may not come out as envisaged. Hence, there is a need to review the progress and navigate them to the goal.

financial planning-Win big by using all asset classes

To a large extent, the fear of losing money prompts people to take such safe routes.But being aware of the real demon is extremely important. Consider this: Over a 34-year period, the sensex has delivered a compounded annual return of 17.85%. So, an investment of Rs 1 lakh 34 years ago is now worth Rs 2.68 crore. And such a phenomenal return has come despite some major events, crises, scams and disasters during these years.

However, very few investors have made such returns.That's because people who have overcome the fear of investing may still get caught in the behavioural biases of overconfidence, thereby at tempting to time the market to beat it and in the process losing money.

Creating wealth lies in simplicity. Let me explain this in cricketing lingo: The financial planning: ‘Failing to plan is planning to fail’. Most people do ad-hoc investments.

financial planning-Win big by using all asset classes

In India, most people look at one or two financial products as the solution for all their financial worries.This is because in India, for years, the transaction-based approach has existed as a proxy to financial planning and investment advisory services. However, it's about time this practice changes.

T raditional products worked well during our fathers' time when rate of interest on fixed deposits was 12% per annum and inflation was below 4%. Currently, however, FD rates hover around 9% compared to the overall consumer inflation rate of about 8%, and inflation on higher education and medical costs are even more.Yet, most people prefer FDs and conventional insurance plans that deliver poor posttax returns.

Best Investment Planning in India-Learn From Market Gurus To Create Wealth

TAKE TIME & EFFORT

“ An investment in knowledge pays the best interest

BENJAMIN FRANKLIN |

US STATES MAN & SCIENTIST

All the time and effort that you put in to understand things would rarely go waste and, in most cases, they pay you multi baggers. You may attend some conference which is free, but you obviously put in time and effort for the same Best Investment Planning in India. Investing such time and efforts will surely pay you in the long run. And this is not only true for financial markets and investments, but also in every area of life. -Gajendra Kothar Tanwir Alam is the founder & CEO, http:www.fincart.com Mukund Seshadri is a co-founder, MSVentures Financial Planners. Gajendra Kothari is MD & CEO Etica Wealth Management NEXT WEEK

In our next edition, we will deal with the basics of capital protectionoriented funds and their importance to investors.

Best Investment Planning in India-Learn From Market Gurus To Create Wealth

RESEARCH BEYOND GADGETS

“The investor's chief problem, and even his worst enemy, is likely to be himself

BENJAMIN GRAHAM |

GURU OF ACE INVESTOR WARREN BUFFETT As investors, we mostly try to blame everyone else -brokers, financial advisers, agents, financial planners, friends who had given any investment advice, etc -for an investment gone wrong. Rarely we take the blame for any bad decision. Often, we buy a long-term ULIP policy without looking into the pros and cons of such buys, the suitability factors associated with such a decision, etc. We also sign so many blank forms for important investment decisions. On the other hand, we do a thorough research while buying an LCD TV, look for deals on websites or at shops before finally paying for one. As investors, we should put in serious efforts for choosing the right financial product too. If we don't do that, chances are high that such investments may turn bad. -Gajendra Kothari

ALLOW INVESTMENTS TO GROW

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't, pays it

ALBERT EINSTEIN

| CELEBRATED THEORETICAL PHYSICIST There are two key secrets to successful wealth creation: Compound interest and time Best Investment Planning in India. There is a story about a king being challenged by his neighbouring king. The reluctance on the part of the first king over loss of life and wealth in case of a war led the two to decide the winner through a game of chess. After the first king won the game, his wise adviser suggested the win ning king to ask for one grain of rice on the first square of the chess board, and double the amount in every subsequent square till the 64th square was reached. Without realizing the veracity of the reward in its en tirety, the losing king thought it a small price to pay for his loss.

When he started counting, he realized that the rice on the 64th square was equal to 18 million trill lion rice grains -good enough to cover the entire surface of earth this is the power of compound in. Now if you allow time for your investments to grow, the com pounding effect can work won ders. Investments by Buffett over the last 50 years compounded just under 21% annually, resulting in a multiplier of 7,448 times. This means an investment of Rs 10,000 fifty years ago is worth Rs 7.45 crore now. -Tanwir Alam

Best Investment Planning in India-Learn From Market Gurus To Create Wealth

GO FOR MARGIN OF SAFETY

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price

WARREN BUFFETT |

CHAIRMAN, BERKSHIRE HATHAWAY Benjamin Graham, whom Buf fett considers his guru, coined the phrase `Margin of Safety', which became the guiding principle and worked as a safety net for a lot of his followers. This puts a very important perspective about valuing a company and buying below its intrinsic value, providing the margin of safety Best Investment Planning in India. The phrase means that a company's liquid assets depicted on the balance sheet (net of all debts) must be more than the company's market capitalization.

Markets work on a phenomenon called reversion to mean: In euphoric situations, companies get valued much above their intrinsic value, and in a bad market it is typically under-valued. However, the belief is that during such a transition, it reverses to its fair price sometime before it diverges again. This strategy has a dual advantage: The downside risk is very limited or muted even if the market were to go down further and, more importantly, the return potential of the stock becomes much higher if the market were to go up and arrive at its fair value. -Tanwir Alam.

Best Investment Planning in India-Learn From Market Gurus To Create Wealth

FOCUS ON RESPONSIBILITIES

“If you buy things you don't need, soon you will have to sell things you need

WARREN BUFFETT |

CHAIRMAN, BERKSHIRE HATHAWAY In today's world, lifestyle infla tion is the biggest issue and it is difficult to measure in percentage terms. Most of today's consumers cannot distinguish between their needs and wantsaspirationsdesires. As financial planners, we usually ask our prospective clients, through a detailed questionnaire, about their responsibilities and dreams. After they answer the questions relating to these two things, their own replies often work as an eye-opener for them.This also helps them focus more on their responsibilities -which ones are necessities at the cost of their dreams, which mostly are not necessities Best Investment Planning in India. As responsible investors, you should not end up buying something that you don't need. -Mukund Seshadri.

Best Investment Planning in India-Learn From Market Gurus To Create Wealth

WHY DOES THE CO EXIST?

“Never invest in a company that you can't illustrate with a crayon

PETER LYNCH |

FORMER FUND MANAGER WITH FIDELITY This is perhaps the starting point for any Best Investment Planning in India, which means understanding what you are buying. Lynch only invested in businesses that he either knew very well or could understand very easily. This was the first key criteria of investing in any company that he ever invested. All successful investors do rigorous stock research and duediligence on the company before deciding whether they will invest in the company or not. There search mainly focused on fundamental analysis, and they do not get carried away by the euphoria of existing market noises. Most investing greats, once they have zeroed in on any stock, would commit to it for the long term, while regularly evaluating the company's progress and growth.

When studying a company, investors must look at the scalability of the business starting with one very important question: Why do they exist? For example, legendary investor and one of the richest people on earth, Warren Buffett, did not invest in technology companies because he did not understand them very well. Did he perform badly? Certainly not! It is very important to decide what you will buy, it is also extremely important to decide what you will not buy. -Tanwir Alam.