Retirement Planning

Have you planned for your retirement ?

Retirement planning is very important part of the one’s financial planning. We should not ignore it. In our country joint family system was very much popular and due to this system most of people often did not made any proper retirement planning and was totally depend upon their family member. In last two decades due to massive urbanization, social norms are changing very rapidly and nuclear family system is spreading day by day. People are settling in big cities from villages. So there are very big question is who will take care of the people in their old age and from where they will get  financial support for daily living.

Now it has become very clear that retirement planning is very essential for all of us. Most of financial advisors suggest that you need less money for post retirement expenses. According to these advisors, you need only 70%-80% of your pre retirement expenses in your post retirement period. When you are preparing your financial plan don’t forget to factor inflation.

But there are one different opinion also exist that we may actually need 135% to 140% of our pre retirement expenses. Instead of asking expert first ask to yourself “How much do you need for retirement,” or “How do you want to live in retirement?” and “What activities do you want to engage in?” There are significant difference between need and desire. If your keep your need less than 70-80% of pre retirement expense figure is right but if you want to enjoy retirement to the fullest in style without  thinking of any financial constraint then you need more money for expenses than pre retirement expenses.

There are no fix formula of your needs, only estimate what your wants are. So how much you plan to save should be a factor of what kind of lifestyle you would like to live post retirement. It is not necessary that you would be requiring only 135% or 70% of pre requirement expenses. The whole idea of retirement planning to plan to create a corpus that would make you live a life that you want to.

For example if your wish is long world tour or any other activities to fill free time during retirement then you need bigger retirement corpus. To accomplish these wishes you would need a plan. Make out list of activities you would like to take up post retirement, check current cost and factor in inflation to find out how much it would be cost you after your retirement. Try to establish a fine balance between need and desire and do realistic assessment.

Now a days many retirement calculator available online. You can use it at free of cost. It is essential that estimate conservative projection of your returns for retirement corpus. If you don’t adopt conservative projection then you may not achieve your target corpus.

A safe and in smart way is that begin saving from today as much as you can, as soon as you can for your older days. Start early & save as much as you can is the best strategy for retirement planning.

Regards,

Arvind Trivedi

Certified Financial Planner

Declining Gold and Rupee

Current state of gold and Indian Rupee

From last few days, Indian rupee and gold prices are in limelight. Yesterday, the rupee had made record low of 59.9850 to the dollar. The sliding of rupee reflects the stress state of Indian domestic economy. The currency has lost 11% since May. Our economy is facing challenges like high current account deficit and lower capital flows. The major impact of this sliding of rupee to dollar can affect the credit rating of India. At present, S&P has already maintains negative outlook whereas Fitch and Moody has maintain stable outlook for India.

Sliding rupee will impact on our industry significantly. Software and pharma industries will boost their profit as their major revenue depend on export. Automobile, capital goods and telecom sectors will feel some pinch on their profit margin.

Gold has also gone low 5 % yesterday after US Federal Reserve signalling of possible scale back in stimulus. I always consider gold as a hedge instrument against inflation. It is non yield bearing asset.  In US 10 year treasuries bond is in 2 year’s high so investor have attractive option of invest in bond. With bond yield rising we are beginning to see liquidation out of gold. Spot gold has also touched the lower level since October 2010.

Demand of gold in India has slowed in this week due to government’s curb on import of gold. According to many technical analyst it may be fall below 1200$ an ounce. In this year, it has already come down 23%. We will witness the huge volatility due to trading community in gold. Today morning, many of buyers of gold is attracting for purchase due to its fallen price. This sentiment may give some support to its price.

The overall impact of weak rupee will be seen as hike in fuel prices, expensive foreign education, costly vehicles and electronic items. The attraction for gold of Indians will be continued as it is well known fact.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Common mistake during tax planning

Common Mistakes during Tax Planning

All of us want to save tax more and more or in fact no one want to pay tax happily. Most of us don’t plan in the beginning of financial year. We awake for it when our office accountant remind us or our CA. The main reason behind wrong tax planning is to wait last moment of financial year (Feb-March) closing. In the hurry of tax planning in last moment we often ignore the essential element of financial planning like our financial goal, risk appetite, income and investment product.

If you have ever felt that during Jan to March we will get so many telephone calls from insurance company for ULIP (Unit Linked insurance Plan). ULIPs are insurance cum investment product and have many charges which are not mostly disclosed by an agent. In fact you should not mix your insurance with investment, one of the golden rules of financial planning. In these products, you don’t get adequate risk cover so your insurance planning spoil and you get raw deal in the hurry of tax saving.

We often do not optimize all tax saving options. Many of us only stuck with Section 80(C). There are also so many other options exist which you should explore with the tax expert. There are many other relaxation of tax like medical treatment of dependant handicapped, loan for higher study, suffering from specified diseases and many more.

If your age, income and risk appetite allow you to some degree risk you must invest in ELSS mutual fund. These funds come with 3 year lock in period and worth for invest. It is the good option for tax saving. If we keep in mind the mentioned things in this article, we can make optimal financial planning.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Beware…!!! Stop and think again before any investment

It is my 100^th blog. Thanks to all of you for your great support. Without you it was not possible to reach this figure. A lot of readers has given valuable suggestion and compliment. I have got lot of energy and material for thought during this journey. This journey is not only mine, in fact it is a “revolution of investor awareness” with the help of your participation.

Often, we rely on our friends and relatives for our investment decision. In most cases, these are bank agent, CAs, insurance agent, or so called advisors. For investment decision you don’t need only information, you should understand it better. You should plan for your financial plan yourself with the help of expert. Keep in mind, there is no investment product in the market which can guarantee for high return and zero risk. There is reciprocal relationship between in risk and return.

At the moment when you expect high return, you should also the analyze risk. If any product promises you for high return, then definitely there would be high risk. I request to all of you that never invest with close eye on the basis of trust. For sales agent commissions and targets are more important than you investment return. We often, trust our bank relationship manager and purchase the product on the basis of trust and brand name. After mis-sell the product which you had not required really, they earn huge commission and as the result your return get reduce.

I would like to share with you recent example. One of my clients have HDFC bank account. Client did not want any type of risk and wanted  to fix deposit for 1-2 year. Bank representative suggested him HDFC classic assurance plan for 20 year with insurance and promised 3% of sum assured bonus every year and after maturity there would be terminal bonus. According to the bank representative it was guaranteed benefit but when I had personally met the bank person and senior persons they were not able to show me any brochure about this promised guaranteed benefit. They were only showing me excel sheet on computer and only false oral promise.

Finally, client has also realized and refused the suggested product by the bank. As he was in the higher tax bracket so I suggested him some bond mutual fund it would be beneficial him as a tax point of view as compare with bank fix deposit. At the end, bank representative have also agreed with me that debt fund is better than FD.

I had also mentioned in my past blogs that do not trust any oral promise by any agent, friend or relatives. They will first care their own incentive and not your investment return. It would be better to prepare a financial plan with the help of professional financial planner and then invest accordingly.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Weakening rupee against dollar

Rupee at all time low against the dollar

Today’s very important news on all business channels are that rupee has trading all time low against dollar. Every analyst wants to know that what is the reason behind this weakness of rupee and how would it impact on overall economy. The rupee has been falling for five straight weeks. Right now it is at 57.92.

According to analysts, there may be many reasons for this weakness. According to my view, the widening trade deficit of our economy is the prime reason for this slide. However, government is struggling to control it but has not got succeed till now.

There is overall consensus among the masses that the UPA government is not likely to implement the reform programme. It is unlikely for this government to generate heavy capital inflows for reform the economy. Oil and gold imports bill are still worry factor for deficit.

Foreign Institutional Investors are selling index future for hedging their stock position. It is again expectation of weakness in the stock market in near term. The main reasons behind this slide of rupee are weak economic fundamental and widening trade deficit.

Exporters like IT firms will gain from this rupee weakness as these firms earn majority of revenue in dollar term. This weakness would also give some support to falling gold prices. The gold prices has been down in rupee term 15% during 2013.

It is bad for the student who wants to go abroad for higher education. It will increase India’s current account deficit as oil companies will pay in dollar term. As of now, the global prices of oil are falling so not near term threat for price hike. The companies who import the raw material would be affected by this weakness of rupee.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Confused between interest rate and effective yield..?

Confused between interest rate and effective yield..?

We often see the advertisement in daily newspaper, magazine about the fix deposit offered by financial institution like bank, NBFC or corporate. They all offer the attractive return on fix deposit and often used a famous term “annualized effective yield”. There are difference between interest rate of fix deposit and annualized effective yield. The investors often don’t able to differentiate these two terms. Effective yield always look attractive than rate of interest on FD. We will understand it through an example.

Let us say, one financial institution offer an interest rate of 10% quarterly compounded for 1 to 10 year. So if one invest Rs 1,00,000 in this fix deposit for 4 year. In the first year at 10% quarterly compounded interest, he will get total interest Rs 10,381. After 4 year he will get total maturity amount of Rs 1,48,450. It means he has earned total interest Rs 48,450. To know the annualized effective yield we will divide it by no. of year deposit.

                 48450/4 = 12112.5

Annualized Effective Yield = (12112.5/100000)*100 = 12.11%

 Now you can easily understand the difference between these two types of rate. It means interest earned is same but companies can show it in different style. To attract the clients and to edge over the competitor, often some financial institution emphasis on a higher yield figure than normal rate.

So next time, when you go for fix deposit , please ask your representative for both rates and according to that comparision with other available fix deposits in the market.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com