Financial Planning

Since both VPF (as part of EPF) and PPF have long-term maturity periods, these are best-suited to act as retirement planning tools If you choose to invest additional sums in debt instruments, how do you choose between the VPF (Voluntary Provident Fund) and PPF (Public Provident Fund)? So, even though all of us (or most of us) know that having exposure to equity via mutual funds is advisable for long-term investments, this article simply focuses on the debt side and tries to help pick between PPF and VPF for the long term. The VPF currently offers 8.65 per cent annually, while the PPF offers 7.9 per cent. So, on an as-is basis, the VPF wins over PPF. But would the VPF offers more than the PPF always? An analysis of the historical interest rates shows that the VPF almost always gives higher returns than the PPF. When it comes to returns, VPF is the clear winner. Putting returns in perspective But we should never focus on returns alone. It’s always advisable to asse

                        The SSY is a very illiquid product and should be chosen only if it suits the investor’s actual objective of accumulating savings for the girl child’s future. As a parent, saving for your children’s future is a big responsibility. And many times, and understandably, people are willing to sacrifice retirement savings for their children’s future. If you have a young daughter, then you would have come across the Sukanya Samriddhi Yojana (SSY) many times. But is it a good option? And does it make sense for everyone who has a daughter to invest in the SSY? Small savings, higher returns Being part of government’s small savings schemes, the SSY often gets compared with products such as the PPF (public provident fund). The SSY does give higher returns, of 8.4 per cent, than PPF (7.9 per cent).But ‘higher returns’ alone shouldn’t sway your investment decision.The SSY has certain in-built restrictions that make it a very illiquid product and should be cho

Financial planning should really be a couple’s priority as soon as they come home from their honeymoon. Marriage does not only change a couple’s financial situation but as well as their outlook on all things money-related. There will be new financial considerations to attend to such as buying property like a new house, planning for children, spending habits, saving and investments and more. It is very important for newly married couples to be on the same page so as not to make their marriage suffer when financial matters get out of hand. Here are five effective tips on financial planning that newly married couples can use: 1. DISCUSS YOUR CURRENT FINANCIAL SITUATION You cannot just assume that your spouse will take care of everything or that s/he will assist you on your existing loan (the one that you got while you were still single). It is important to sit down and discuss where you are in your finances currently. The discussion should include your collectiv

                                              What’s your retirement Plan? Let’s play a small game. Pick the odd one out: Home Vacation Car Retirement Education Dream Wedding Could you figure the odd one out? It is retirement.  You can take a loan for everything else but retirement. Hence, planning for retirement should be on everyone’s top of mind. Starting to plan for retirement as early as possible is the best way as you don’t have to stress about investing a considerable sum of the money in the later part your life.   Everyone’s retirement plan and needs are different. The size of the retirement corpus will not just depend on how much you save and invest, but also how you want to spend after retirement. If you’re going to live a frugal life, you may need to accumulate less than someone who wants to pursue expensive hobbies or go on world tours after retirement. As retirement is a long-term goal, knowing how much to invest in the different p

In the Kurukshetra, the battlefield of the epic war of Mahabharat, Lord Krishna was the charioteer of Arjun. Krishna, a great warrior himself, and a king of a very large state had decided not to pick up any weapon, and hence he chose to control the chariot of Arjun. This role of a  sarathi , a charioteer, is a very important one. He reins in the horses – a potent force (aren’t machines known by their horsepower, after all?), and in our scriptures, our senses have been compared to wild horses. A  sarathi  is needed to rein in our senses, the wild horses. Just before the battle, when Arjun develops cold feet, he is overwhelmed by the emotions, the  sarathi  plays his role. Lord Krishna delivers the most powerful message in the form of the Bhagwad Geeta, to explain Arjun what his duty is and the rest, as they say, is history. This is arguably the most profound explanation about the role of a guide. Even Arjun, the best warrior of his times, needed a  sarathi . Without one

Are you chasing returns? Focus on goals instead Tell anyone that you invested in mutual funds, and the first question they are most likely to ask is how they are performing, i.e. what are the returns. Returns are the first and probably the last thing on many investor’s minds. Chasing Mutual Funds Return But chasing returns is not a healthy option. Investing in a fund because it tops the charts of one-year returns is a wrong way to look at investing in general. It is seen that many investors keep jumping from one fund to another based on one year’s returns. While they may presume that it will help them to build greater wealth, but in reality, it is detrimental to their financial health. Investors forget to take into account the cost and taxation associated with exiting from one fund and investing in another. Also, the ranking of top-performing funds keeps on changing regularly. Chasing Top-Performing Asset Class The scenario is not just limited to mutual fun

ELSS Vs PPF which Tax saving instrument is Better  “….. But in this world, nothing can be said certain, except death & taxes.” said by Benjamin   Franklin.  While we can’t be clever with death, we can be smart with taxes & save our hard-earned   money. One can save tax by investing in various instruments such as Equity linked saving   schemes (ELSS), Public Provident Fund (PPF), National Pension Schemes (NPS), Tax   saving Fixed Deposit etc.  Out of this tax saving options, ELSS & PPF are most popular. Investment of up to Rs. 1.5   lakhs in a financial year in these two options among others qualify for tax deductions under   Section 80C of Income Tax Act 1961.  Have you invested in PPF or ELSS? In this article, we will compare these two tax saving   instruments which will help you to figure out the right one for you. ·       Lock in Period: Both ELSS and PPF come with a lock in period. ELSS funds have a lock in period of three years while PPF comes with

It is widely recognized that Asset Allocation contributes to over 90% of investment results. From experience, we realize that Asset Allocation needs to be approached from two angles. First and foremost, the investor’s personal or  family situation  will decide what mix of assets they should achieve. The key deciding factor here is being able to divide their financial needs into Short Term, Medium Term and Long Term. One helpful analogy is that water needs can be satisfied by a bucket, a water tank or a dam.  On the same lines, investments in Liquid assets, Bonds and Stocks should be visualized. Stocks are volatile in the short run, but in periods above five years, their returns are substantially better. It is well understood that money set aside for short-term needs must not be invested in stocks. If the market is down when they need the money, a permanent capital loss is quite inevitable. Many investors, however, do not appreciate putting long-term money into short-term asse

A volatile market can be defined as the tendency to rise or fall within a short period of time – in other words it is caused by the ups and downs of the individual investments within the market. When it comes to volatility, the general advice is to keep calm! Volatility in the market is not necessarily a bad thing. Volatility is one of the main reasons why investors sell at the wrong time and often fail to benefit from any potential recovery over the longer-term.  Whilst it can be a natural instinct to want to sell in times of uncertainty to avoid the risk of further loss, don’t forget that as the market falls this reduces the cost of additional purchases you may make.  Here are five potential options: - 1. Accumulate Cash A range bound market is not a time to panic sell. But it may be an ideal time to cut back, especially if you’re an index investor. True, the market may produce an average annual return of around 10%. It doesn’t happen every year, and there have

Today's young generation is completely hypnotized by the latest gadgets, new clothes and accessories to maintain their fancy lifestyle amongst their group. Thanks to the improving Indian economy which is helping the youth to fetch decent salaries which they usually spend for their status war with peers. Well, this could be the reason, the majority of today's generation is paying more EMI's as compared to their monthly savings.  In addition to the above, personal loans, home loans, car loans and consumer durable loans are adding a burden to their pockets.  Let us take an example, Mr. A & Mr. B wishes to buy dream house & opted for identical loans for their houses, but Mr. B simultaneously started with a SIP in Equity Mutual Fund.  Mr. A & Mr. B (Loan EMI) Loan Amount (Principal) Rs.30,00,000/- Tenure of the loan 30 years Monthly EMI 23,600/- Total Interest Paid 55,00,000/-