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Suresh K Narula
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We all trust our bankers blindly and always ride on bankers’ trust, apathy and ignorance.  It is a common practice that banks access the financial information from their customer’s bank balances, fixed deposits etc. to target very specific customers who have large amounts of money at saving account or bank fixed deposits. They offer a wide spectrum of flawed financial products that they would gain from by way of commissions or other incentives. Many gullible people, especially pensioners which are the most likely senior citizens have a terrible habit of asking, “Where should I invest?” and “which is the best product?” Banks generally target those lazy customers who are seeking quick solutions and sell their third party products like insurance and mutual funds which may not be suitable them. They are bound to sell their products under severe pressure from their superiors. They are not spared even gold loan borrowers, personal loan borrowers, and even retired people. After sale service, they have not been taking their any responsibility and hence, do not advise the customers accordingly. Actually the Banks have forgotten their real banking activities due to the pressure of selling these third party products. And this is also one of the reasons of today’s NPA menace that Banks are running after to recover. Worse, they are so persuasive to sell their ready-made products with the promise of several free frills and locking up the relationship through salary account, credit cards, loan installments, systematic investment plans and ECS for payment of dividends or utility bills.
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It is undoubtedly that modern consumer culture is full of traps that lure us buying so many things we don’t really need. But that’s we are only half of the problem. At some point, we stopped being Indian citizen and start being first and foremost, Indian consumers. If we want to take control of our finances, we also have to take responsibility for the many unnecessary purchases we have made and understand that nothing will change unless we change our behaviour. While everyone knows the benefit of daily exercise and walking, how many of us manage to follow it regularly? Similarly while taking control of your personal finances why you don’t track your regular spending?  It’s so called as budgeting. I know what you are thinking. Even if you don’t mind budgeting,  your spouse may hate it, or you may never have made a habit out  of it as a couple and so you find yourself doing it less and less and eventually not at all. Budgeting is the most important tool to see the gap between what we say is important to us and how we spend our money. It forces us to face the reality of how we spend. Budgeting is not just about numbers, it’s about awareness. I think anyone who takes the time to think about it would agree that spending money in a way that’s aligned with what we value will bring us more happiness. So why are not we doing it?
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Gone are those days when you called up your agent and told him you want to invest into mutual funds. He filled up the various forms of respective mutual funds companies and submitted with their respective AMCs. This is a classic way of investing in India since long time and still going on. This type investment is completely OFFLINE mode for you. But, in today technology’s era world, more and more people are going online to buy consumable goods, gadgets and even groceries, there is no reason why you cannot investing in mutual funds through online. And fortunately, several portals are now opened for the convenience of investing and transacting online on mutual funds to investors at the click of a button. Though there are multiple online portals available for investors where they can invest into mutual funds online, many gullible investors are left confused where they should adopt one of the best online platforms. Indeed yes, it is more challenging to select best one, if you are considering investing and managing your investment through online portals. Before ride on these portals, you should know about how these online platforms work, how they are routed your payment or how they are safe and what is their creditability? In this cobra post, you would know about how online portals work for your convenience and the facility to invest in mutual funds.
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Financial Planning cannot work without financial literacy. Financial literacy is not merely the knowledge of financial services and products; it is about your financial attitude and behavior so that you could have ability to make self-informed financial decisions regarding planning, saving, investing, protecting, borrowing and much more. Financial literacy is not rocket science and it does not even require you to understand complex financial concepts or make financial calculations. It just requires some alertness on your part and taking the initiative. These are simple strategies which you need to learn for any financial planning process. You would have to just understand the simple and basic financial concepts such as the power of compounding, the decision to start saving and invest early, spend less on transaction fees, getting rid of bigger debts etc. For instance, most cases people are leaving their savings account itself or converting it into fixed deposit and putting it back into the banks account. The issue is not of merely saving, the issue is of what your bank fixed deposit is doing for you. They do not understand that financial ignorance in terms of inflation element and post-tax yield. Here we are talking about creative financial strategies, how simple habits, taking advantage of existing rules and regulations, using the facilities offered by manufactures of financial products and services and the financial ecosystem, you can do it yourself some significant savings and create investible surplus. Meanwhile the potential benefits of financial literacy are manifold. People with strong financial skills do a better job planning and saving for retirement. Financial savvy investors are more likely to diversify risk by spreading funds across several ventures.
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There is another big round of much awaited event the Union Budget 2016-17 was announced where stock market is celebrating, aam tax payers are crawling and farmers are happy in some extent. This time, FM is tried to tinker with sensitive long-pending old tax provisions which caused chaos. Every year salaried class tend to have a lot of expectations from the budget but every FM is failed to cheer the middle class and could not meet their expectations. However, overall the budget is growth-oriented and focused on Agriculture and Farmers’ Welfare, Rural sector, Social sector including Health care, Education, Skills and Job creation, Financial sector reforms, Governance and Ease of doing own business, Fiscal discipline and Tax reforms.  Despite all hopes are shattered, there are many slew of measures which will affect on your personal finance, you will need rigorous personal financial planning so that no adverse budget could be hampered your financial decisions and financial commitments. Let’s have look that provisions in broader sense which will affect on your personal finance.
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Ramesh is worried about to make fresh investment as interest rates going southwards, which is bad news for many savers , including senior citizens. Being a conservative investor, he has never looked beyond fixed deposits for his savings. Ramesh keeps evaluating bank FD interest rates for locking his funds for more than five years. But it is difficult now for him to get more than 8% pa for long-term FDs from banks. He is earning more than Rs10 lakh annually and hence, he is in the highest tax bracket (30%) which leads his effective post-tax yield from FDs is left 5.6%p.a. only.  Now, he wants to explore the option where he could be able to get post-tax yield above 8% pa from fixed income instruments. It can be possible only through investing in that instruments which give a tax-free income. Like Ramesh, many conservative savers are always looking for risk free and tax free instruments to beat the return of bank fixed deposits. Today, NHAI Tax-Free-Bonds 2016 may be a lucrative option for those savers. NHAI Tax-Free-Bonds is carrying 7.69% tax-free interest for a locking the funds for a 15 year bond. Though, these bonds is offering net post effective tax yield beyond 9% pa, every conservative investor needs to understand pros and cons before investing in  tax-free bonds to assess whether they really suit them or not.  This post gives you an overview of Tax-Free-Bonds and hindsight of investing in these bonds.
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You used to go doctor who examines your health and comes up with a diagnosis of what the ailment is and what medicines you need and for how long. Would you turn around and say the doctor that you want the best set of medicines instead of the medicines advised are, therefore may not be suitable you. Obviously, this sounds silly; No one in his senses would do that… and yet it happens when it comes to people’s investment. People assume that they know well enough to dictate what they would want to take up for investments. They spend a lot of time and energy trying to find the “best” stocks, mutual funds, or other investment. All financial magazines devote covers to this approach, and authors write books about it. There are entire financial industries build around this wild goose chase. But let me clear this up right now, there is no such thing as the best investment and best financial product in the real world which could make you rich or enable to achieve your financial goal overnight.
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With the dismantling of the joint family system, rapid urbanization, the concept of nuclear families and children opting to stay separately, people have started recognizing of the need to prepare for their retirement kitty while they are still working and earning. Unfortunately, majority of people start thinking about their retirement planning only when they cross 40, by that stage they have been lost out of a plenty of time for their investment. In India, about half of those who save and invest agree that starting is the key to retirement. But they don’t know where to invest, they have been wasting a time to seek pension and other debt-oriented products which are totally flawed and tax inefficient, especially we are in a low interest rate regime. After retirement, many people would have to maintain same lifestyle with all luxuries that they are currently enjoying, which requires a big corpus of money as part of retirement benefits.  In retirement years, there should be a regular flow of income which could meet your regular expenses that will arise each month. If you retire at 60 and die at 65, you do not need to worry about cash flows for the future. But if you live to 80 and 90 and you are staying alone in house, where are your cash flows going to come from?
So, the biggest question mark about retirement is not the prospect of old age but how long you are going to live after retirement. If you want to live with lower corpus that has been accumulated, the higher will be ability to put current life style at your own risk. Therefore, a right frame of retirement kitty is to generate required the regular income flow over period of time and remain consistently to beat inflation without compromising the quality of life. Those who have the luxury of choosing where they want to invest, the theme of this post will address to all those people
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There are several reasons mutual fund investors tolerate a lot of flak for bad performance from their selected best mutual fund scheme. This can be an expensive mistake, especially if you are relatively young and have many years to put your money into fund through SIP. Perhaps the biggest complaint levied against mutual funds is that not performing as they should. But the criticism often dismisses some of the positive aspects of the asset allocation and its rebalancing mechanism that most financial planners and advisors still use to take control of your mutual fund performance and beat the market index.
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Everyone may know that investing in mutual funds is one of the most convenient and excellent investment vehicles to build wealth. We also understand that long-term equity SIPs are right financial product to achieve our financial dreams. Unfortunately, however, investors at the retail level by and large do not really trust mutual funds and avoid putting their money into the mutual fund. With the stock market being volatile like a tsunami hit ocean and weak equity market returns over the last several years have made the retail investor wary about mutual funds. A typical conservative retail investor entrusts his money to post office, fixed deposits, insurance policy etc. for short term as well as long term needs. He wants to get calculated return, because of safety and without too much volatility.  Beyond this, investors want a FD plus calculated return but industry sells them expectations of FD multiplied return. When they got FD divided return, they are now minus from the industry. Then, there comes wide gap between indicated investment return and actual investor return.  And this gap creates distrust about the mutual fund product and hence, investors start distrusting their financial advisor. If you believe that mutual funds should have a place in your overall portfolio, you have to first create an environment of trust and confidence in yourselves and then in the mutual fund product. This is what you should start thinking to boost your confidence in mutual funds. To develop your trust on mutual funds, you may follow this reoriented holistic approach to achieve your long-term financial goals through equity mutual fund SIPs.
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