Author: hirannya

15 Things Your Financial Advisor can do for You – Part 3

[Continued from previous post]

(11) Keep you informed

In good times and bad, your financial advisor will keep you informed of how market moves are affecting you and your portfolio and strategy. He or she will also let you know about important events that may affect your investments – including elections, global unrest, changes in tax rules etc. You have more important things to worry about than the state of your portfolio at any given time, but your financial advisor does not.

(12) Teach your family basic concepts

You can't do it alone. If your family is not on board with the plan – it will be more difficult for you to reach your goals. Your advisor should be able to explain basic concepts to your children so that they understand how to manage their money and your money. Good habits are best when begun early. And bad habits should never be allowed time to take hold.

(13) Plan for your future

As your circumstances change you will need to update the way your finances are planned. Your financial advisor should do this for you – make sure you are in the best shape to take the next step on your financial journey – from single to married to parents to new jobs, no jobs and even grandparents and retirement.

(14) Offer you special investment opportunities

Sometimes a financial advisor can offer investment opportunities which are not available to the general public. Those will be opportunities that you know will be appropriate to you and your circumstances. And you can rest easy that the offer will be made in your best interests. As a registered advisor – the code of ethics – bind your advisor to make sure that your interests are served before his own.

(15) Connect you with experts

Your advisor is a professional and is connected to a range of other professionals and specialists to refer you to for your various requirements. This might include a lawyer, an accountant or other. The advisor can also work with your existing professional relationships if you already have an accountant or a lawyer. The idea is they all work together and make sound decisions that will make your financial strategy more seamless to manage.

[Inspired and in part taken from JAS Wealth’s eBook of the same name]

February 17, 2016
Retirement Planning should be your Most Important Financial Goal

We all need to and want to plan for our retirement. But, are we ready? Are we going on the right path and investing wisely? Well, these questions are sometimes very daunting and to top it all, we do get a lot of advice from various sources which can be taxing! Retirement plans are very crucial and should begin right from the moment one starts earning. Well, if it is delayed, never mind, there are still ways that can help you save and have a good retired life. But, are you ready for planning or are you still contemplating? One definitely needs to have a defined picture about it as to how and when and then figure out the right plan.

Why retirement planning is important goal

The times are difficult as we all know, and they are going to be difficult once you stop earning that is when you retire. Your expenses are not going to reduce just because you are retired, or nobody is going to give you that kind of salary due to your age. There is the inflation, the interest rate, health issues, medicines, and the lifestyle that influence the expenses. The life span has increased and with it, there are several issues that need to be tackled. Are you retiring by choice or is it by force? That is if you are a government employee, you will definitely retire when you are around 60 or even less. Maybe you might take up another job, but, of course, the salary will be much less. Is there anyone who can provide you with finances if you truly need them? Do you own a house or live with your children? There are some questions like these that will help you get a clear picture. But, I must say, you must be realistic and think practically. You need a good retirement planning before you retire so that you are ready to retire and have a peaceful life without depending on others for your basic needs.

Points to consider for retirement planning

What is your income?

Whether you are in business or an employee, you still have an income and also expenditure at the age when you cannot work anymore. So calculate and consider if you can save anything from it. How much do you spend? Calculate all this and check how much you can save today and how much you will be spending after retirement and what your expenses will be. Try projecting for around 5-20 years and more which can be impossible to track how much you will need in the future. Taking your present income and the expenses, the savings should be enough to suffice your lifestyle. But, when there is no income, things can be difficult. A plan that includes your income as well as expenses should be chalked out. Think of other expenses that you might need like a vacation, children’s marriage, education, house, car, other expenses like domestic and unknown.

Best retirement planning

The best retirement plan should be a mixed asset plan. Your portfolio should be based on the age of retirement and your income. It varies according to different income scales, and that is why there is no single plan. Every retirement plan is different based on the lifestyle and needs. There are various considerations and investment assets that can help you benefit right from the present day till you retire. The best way is to approach a professional financial planner who can prepare financial plan for you according to your income, expenses, liabilities and also how many years you will be working till you retire.

February 17, 2016
15 Things Your Financial Advisor can do for You – Part 2

[Continued from previous post]

(6) Keep you on track

Think of your financial advisor as your Gym Instructor or Personal Trainer. He does not only create a diet chart and exercise plan for you, he also makes sure that you stick to it – day after day. So in other words your financial advisor is also your financial coach. Making a wonderful financial plan is futile, if it is not followed. Your financial advisor is supposed to guide you at every step here. Overspending, leveraging, easy credit, get-rich-quick schemes – traps are many. Contact you advisor at any such moment when your decision is going to impact your financial life directly or indirectly.

(7) Take care of your retirement

Retirement is often considered as the single most important financial goal in your life. This goal is unique because accumulating required retirement corpus is just not enough. Equally important is to generate inflation adjusted income from that corpus – year after year. This requires prudent financial planning decisions coupled with efficient portfolio management skill. When you know that you are in safe hands, it always means a lot, even more after retirement.

(8) Protect your lot

Building your assets is vitally important for your future, but protecting your assets is equally important. How much protection is enough? Ask your adviser. If something happens to you – or your partner – how will you continue the life you are used to – how much will it cost to maintain your lifestyle for the present and the future? If you don’t have enough insurance, your life may face drastic and unpleasant changes just at a time when this would compound other difficulties facing you. It is good to know that whatever happens, your life – or the life of your family – can continue as well as possible in changed circumstances.

(9) Look after your Estate

Families are at the heart of financial planning. Making sure that everyone is looked after when one member dies is something that can make a huge difference to the financial position of the rest of the family. A financial adviser can ensure that your estate is structured effectively so that when something does happen to you or a loved one – it will upset you but not your financial plans. This is even more important when a small business is involved.

(10) Explain how things work

If finance isn’t your specialty you can rely on your financial adviser to assist you through the jargon and explain simply financial terms and concepts and make sure you understand how it all works – Family Budgeting, Retirement Corpus, Laddered Annuities, Income Laddering, Asset Restructuring, Mortgaging, Expense Replacement, Debt Restructuring … the list goes on.

To be continued…

[Inspired and in part taken from JAS Wealth’s eBook of the same name]

April 27, 2015
15 Things Your Financial Advisor can do for You – Part 1

[Inspired and in part taken from JAS Wealth’s eBook of the same name]

(1) Do you have a budget? Do you stick to it?

It’s a simple statement which can be made using a pen and paper, an Excel worksheet, an App or anything similar you can imagine. The idea is to bring a pattern to a chaos named family budgeting. After checking out lots of tools – online and offline – we found one simple Excel sheet that you can use to maintain an account of your income and expenditure. Make a request using comment section below; we will mail that to you. Your adviser can and should work with you to develop a budget, one that suits you and your lifestyle and will set you on the right path to live the life you want now and in the future.

(2) Put your debt to work

There are different types of debt – good and bad. Your financial advisor can explain the difference and make sure that – where possible – your debt is working for you and your future. Sometimes at start of your career, when you do not have much of savings, you have to take a home loan to buy your house. But it is not as simple as that. Do you really need to buy one? If you are the only child of your parents and have a spacious house to live in; you may not need to buy a home just to satisfy your ego, or just because your friend has bought one. If you have moved to a different city for work and are planning to buy a house there – think. What if, you may again change your job and move to a different place? Is rent an option? If buying a home makes sense, then what should be the budget? If you get a higher loan amount sanctioned – does that mean that you should take a higher loan? Your financial advisor should guide you here.

(3) Assist you with a savings plan

The benefits of a good, regular savings plan cannot be stressed enough. How do you start? How much can you afford? What will your short-term, medium-term and long-term goals be? What will your savings milestones look like? As your financial coach, your adviser can help you develop a plan that will work for you and will also help you meet the goals you set together.

(4) Invest your money

Saving is one thing and without the discipline of putting something aside it won’t be possible to invest. Investing is something else – investing is making sure your money is working as hard as possible. Where to invest is difficult to know. Your adviser is qualified and has the experience to help you navigate the myriad opportunities available to give you the best options available for you.

(5) Help you realize your goals

There is a way to achieving your goals. First is to talk through and understand your goals. Next is to make a plan – the plan should be clear in showing how you are intending to reach these goals. The plan may change over time as your priorities change and goals need to adapt to changes of mind or circumstances. Your financial adviser will be able to work with you in adapting and reshaping your plan to meet these new goals. But without a plan in place reaching your goals will be much more difficult.

To be continued…

April 20, 2015
How to write a Will in India
Writing a Will is very important. Below are 12 important points to take care of while writing a Will:
1. A Will can be made by anyone above 21 years of age in India. You can make the Will on plain paper in India. It’s not legally necessary to make the will on stamp paper.
1. If you die without preparing a WILL in India, your wealth will then be distributed as per Hindu Succession Act, 1956 (for Hindus, Jain, Sikhs and Buddhists) or through Indian Succession Act, 1925 (Indians Christians and other religions).
1. When you are dead, there is someone called an “Executor” who will be responsible for dividing your wealth amongst the beneficiaries and he will make sure the whole process is smooth.
1. You can change your Will any time you want to. However, make sure that when you make a new Will, you mention that this Will is the latest and supersedes all earlier Wills.
1. A “Codicil” is a document that amends, rather than replaces, a previously executed Will. Amendments made by a codicil may add or revoke small provisions (e.g., changing executors), or may completely change the majority, or all, of the gifts under the Will.
1. Although registration of Will is not compulsory, it Is highly advisable to do so! Registration of any indenture creates a presumption in its favour. After the death of the person who made the Will, the beneficiaries don't get the property automatically. They have to go to the court and get a “Probate”. Only after the court grants you probate can you become the owners of the property.
1. A “Probate” is nothing but a copy of Will, certified under the seal of court. The executor (someone who is responsible to execute the Will) has to file a probate petition in the court of law and if all goes well, the probate takes six months to a year. No right as executor or legatee can be established unless a court has granted the probate of the Will. Probate can be granted only to the executor appointed by the Will. The cost of getting a probate includes legal fees as well as stamp duty on the value of the property being willed. The stamp duty varies from state to state. Probate is very important in case of Real Estate.
1. If possible, have the two witnesses be a doctor and a lawyer. A doctor signing a Will, won’t raise any question of you, being of unsound mind. The lawyer, will vet the will and make sure you don’t make stupid mistakes at the time of writing and signing it.
1. The attesting witness and his or her spouse should not be a beneficiary under the terms of your Will. This might create vested interests and sometimes make your Will invalid. Also, make sure the witnesses are younger than you and not very old as your will might be in effect for several years.
1. In case of Hindus, it should be clearly stated if the property is inherited or not, because it makes a huge difference, as no ancestral property can be assigned to any person through a Will. All rights on inherited property are acquired by birth. So if you inherited a property from your Father, you cannot say in a Will, that you want to assign it to person X only! It will go to all your legal heirs as it is “Inherited”.
1. A Will must always be dated and if more than one Will is made, the one with the latest date will nullify all the previous ones. In fact, there should be a statement in your Will, nullifying all other previous Wills. The pages should be numbered to avoid fraud.
1. The value of assets often fluctuates, so it is better to mention how much each beneficiary will receive, in percentage terms rather than absolute numbers. Unless it is pure cash.
How should a Sample Will Template look like? Below are two images, which you can follow:
April 13, 2015
NPS – 10 Point Guide

Off late, lot of inquiries are coming in relation to NPS (National Pension System). We would be happy to answer them individually. But here is a quick 10 point guide in regards to the same. This may answer few of your doubts. But if the below guide does not answer your query, please mention the same using comment section below this article. We will surely get back. Here you go –

1) NPS Contribution can be made by all of us voluntarily or can be made as part of your salary structure i.e. by restructuring your CTC (Cost to Company) involving your employer. Please note that NPS contribution is mandatory for govt. employees joining service on or after 1st January 2004.

2) Contribution, when part of salary structure, is capped till 10% of your (Basic +DA).

3) Voluntary contribution or employee’s contribution of amount up to Rs. 1.50 lakhs is available for tax deduction U/S 80CCD(1), which is part of overall 80C limit of Rs. 1.50 lakhs.

4) From 1st April, 2015, an additional amount of Rs. 50,000 investment in NPS can be claimed for tax deduction U/S 80CCD(1B). This is over and above 80C limit of Rs. 1.50 lakhs.

5) The employer’s contribution (this is basically part of your CTC only. After restructuring your CTC gets reduced by the same amount.) falls U/S 80CCD(2) and this amount can also be claimed beyond 80C limit.

6) Under NPS two investment choices are available – Active choice and Auto choice. Under Active choice, three options are there – E, C and G. Under asset class E, investments are predominantly in equities (maximum up to 50%). Under asset class C, investments are into fixed income instruments other than GOI securities. Under asset class G, investments are in GOI securities. Under Auto choice, investments will be made in a life cycle fund in a pre-defined portfolio based on your age.

7) Maturity amount is taxable – not only gain, but the entire maturity amount.

8) Maturity of Tier-I a/c of NPS will happen at the age of 60 only. At least 40% of the maturity amount has to be used to buy annuity. If amount are withdrawn before age 60, then 80% of the maturity amount is to be compulsorily used to buy annuity only.

9) E, C and G asset class portfolios are now being manged by ICICI, Reliance, Kotak, HDFC, UTI, LIC and SBI Pension Funds. Switch between scheme and fund manager is possible.

10) NPS is administered and regulated by PFRDA (Pension Fund Regulatory and Development Authority)

March 10, 2015
Risk – What is Important?

In its “Investment Advisers Regulation” SEBI has mentioned the following –

Investment Adviser shall ensure that, it obtains from the client, such information as is necessary for the purpose of giving advice, including Risk Appetite / Tolerance.

We are following the above guideline strictly.

But at the same time we strongly believe that there are more to it. As far as Risk Appetite / Tolerance is concerned investors are mostly classified in three broad groups – Conservative – Moderate – Aggressive. But such ‘One size fits all’ strategy rarely works. Let us consider a few case studies –

(1) When ‘Risk Profiling Questionnaire’ is given to Mr. Sumit, aged 35, employed in an IT MNC, his answers revealed that he is a conservative risk taker. He wants to avoid equity, direct or indirect, as an asset class from his portfolio. His preferred assets are fixed return products. Now when his retirement goal is being planned it is found out that to achieve the goal following scenarios are there –

Current Age – 35; Retirement Age – 60; Life Expectancy – 85; Household & Lifestyle Expenses – Rs. 30,000; Inflation – 7%;

(a) Monthly savings or SIP required is Rs. 11,023 when expected return from investments is 15%.

(b) Monthly savings or SIP required is Rs. 19,030 when expected return from investments is 12%.

(c) Monthly savings or SIP required is Rs. 26,947 when expected return from investments is 10%.

(d) Monthly savings or SIP required is Rs. 37,596 when expected return from investments is 8%.

(e) Monthly savings or SIP required is Rs. 51,594 when expected return from investments is 6%.

Now, current monthly investible surplus in Mr. Sumit’s case is Rs. 20,000. The goal is also 25 years away from now. Should we recommend him to invest only in fixed return products?

(2) When ‘Risk Profiling Questionnaire’ is given to Mr. Amit, aged 35, employed in an IT MNC, his answers revealed that he is an aggressive risk taker. He prefers to invest in equities mostly. Now when his vacation goal, which is due in next 2 years, is being planned – should we recommend him to invest in his preferred asset class i.e. equity?

The logical as well as right answer, according to us, would be a ‘No’ in both the above cases.

So in practice, recommended asset allocation does not (only) depend on someone’s Risk Tolerance Level but mostly on the following two factors –

(1) Time Horizon along with cash-flow situation – When a financial goal is long term i.e. more than 10 years away from now, and cash-flow situation does not allow investments in low yield generating instruments – one has to go for equities. If invested with caution, and review is done at regular interval – equity as an asset class is capable of beating inflation rate with a good margin.

But when a financial goal is due in short term i.e. within 5 years, recommending investment in equities is not right, though investor’s risk profile may be aggressive.

(2) Knowledge – When you spend time in understanding an investment product i.e. how it works, what could be the best and worst case scenario etc. – risk reduces considerably. There is hardly any risk when a car is driven by an experienced driver, but there is a HUGE risk when that same car is driven by a 6 year old kid who does not know anything about driving. That is why over a period of time, when your knowledge increases of a particular product – your comfort level increases, risk reduces.

What do you think? Let us know your opinion in the comment section.

March 7, 2015
Budget – How does it matter?

Just for a moment think that you have been always a prudent investor and you understood very well the power of compounding and impact of inflation on return. Now suppose you always schedule your yearly vacation during budget time. So this means you go to some place far away may be in North-East India or in Galapagos or in Timbuktu island just few days before the budget day. You do not get any internet there, no newspaper, no TV channel. And you come back almost after 7 days since annual budget is presented every year. Do you really think that your overall portfolio would get seriously suffered due this untimely(!) holiday of yours? Time proves – it would not. Chances are it would instead benefit you! As long as you save and invest regularly and your portfolio is designed to beat inflation over long term – you are safe and destined to succeed.

Budget is of utmost importance for country’s economy and for functioning of government. Yes it mentions changes in tax slabs sometime and sometime also changes in product basket that qualifies for tax exemption. It increases or reduces your post tax income. Budget also mentions that some items will get dearer and some will get cheaper. This also may increase or reduce your expenses. So the changes in tax slab alone cannot decide your cash-flow situation. So many other factors are also there. Hence it can be safely said that your overall family budgeting and discipline will finally matter. Nothing else actually.

Some of the indirect tax rules may also see changes in this budget. Some industry may get tax sops, some may have to face more tax burden. Changes in excise or customs duty may adversely or favorably impact some industries. There will be surely some knee-jerk reaction for sure and effect can be seen in stock prices of such companies in short run. But again in long run, a company’s stock price is most likely to reflect only how well a company’s management manages cash-flow, generates return on equities, creates value for shareholders. Hence if in your portfolio there is a stock which is well bought i.e. you bought an above average company at a below average price, you are safe and did a commendable job. Stay assured that such buys will always create lot of real wealth for you in long run.

So the basics remain unchanged. You can skip this budget if you are already on right path. And how the ‘right path’ looks like? See below:

1) Focus on your family budget. Along with your household and lifestyle expenses also allocate fund for leisure, entertainment, travel but stay within limit. Do not overspend.

2) Write down your financial goals. Set your targets. Look at the possible scenarios. Check your surplus. Start investing accordingly, and remain rock steady.

3) Keep emergency fund ready in liquid instruments.

4) Calculate and then take right amount of life cover.

5) Depending on the city you live, likely expenses in nearby hospitals – take right amount of health cover (popularly known as medi-claim).

6) Saving tax is definitely a good idea but not by compromising on life goals’ strategy. If some tax saving investments get fit into your recommended portfolio to achieve financial goals in time, then fine, go for it (early in the financial year) and save tax.

7) Monitor your investments and review your financial plan at regular interval.

Phew! You are almost done! So pack your bag and go for a vacation. Will see you post budget. Happy journey! 🙂

February 26, 2015
Children’s Education & Marriage Planning

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Most of us have the goal of accumulating enough corpus to meet the funding need for our children’s higher education and marriage expenses and rightly so..

February 10, 2015
Retirement Planning

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The goal to plan for retirement is common to all of us. We all are looking forward to a happy, secured and satisfying retired life. This goal is unique in many ways.

February 10, 2015