Impact of Land Acquisition Act Ordinance Dec 2014

Impact of Land Acquisition Act Ordinance Dec 2014

On 29th Dec 2014 the government of India has amended the last land acquisition bill 2013 passed by UPA-2 govt. There is no change in compensation, rehabilitation and resettlement. It is an attempt to balance the interest of land owner and industry. Two important implications are of the amendments are: A) It shortens the land acquisition cycle time for certain kinds of projects. B) Increases the cost of land acquisition for projects in sectors that were earlier exempted from paying market linked compensation.

·         Our preliminary reading of the changes indicates that the impact is likely to be mixed with the amendments giving relief only to select five sectors. For the others, problems continue to be the same as before and for some others they increase.

·         Private manufacturing sector (based on our reading) seems to have been by and large bypassed by the amendments. Incrementally, there is no relief. We are, therefore, unclear if the amendments are good enough to vigorously push the ‘Make in India’ initiative and push up the share of manufacturing sector in the economy.

·         At this stage it is unclear as to what role state governments will play in easing the problems connected with land acquisition by private industry. State governments have been given the leeway to enhance the compensation and R&R benefits beyond those in the Central Act. Our understanding is that state governments have also been given the leeway to determine as to what size of projects this Act will be applicable on.

·         Pushing the ordinance in Parliament is the next big hurdle considering that the National Democratic Alliance (NDA) government is in a minority in Rajya Sabha. It remains to be seen if incremental investments (even in the five favoured sectors) flow through in case the amendments are not ratified by Parliament.

·         The IRR (internal rate of return) on projects in those sectors that have not been exempted and those which have been newly brought under the purview like coal mining, metro railways, etc  is likely to fall because of onerous compensation and R&R clauses.

·         With greenfield projects in the private manufacturing space as difficult to set up as before (based on our current reading), the valuation of land-intensive sectors is likely to rise in the coming days as capacity addition becomes a constraint.

·         We believe the benefits of the amendments (when they are legislated and even in their current limited scope) could have positive impact on multiple parts of the economy – consumption (from more money in the hands of the land sellers), investment (in the five areas that have been designated for better terms), banking (from lower NPAs and better credit growth), etc.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

What should FD investors do in falling interest rate time?

What should  FD investors do in falling interest rate time?

Decreasing inflation rate and demand of growth are putting some pressure on RBI to decrease the interest rate. Calls for lower interest rate getting louder day by day as the industry and government both are seemed determined towards high growth. The big question what should the fix deposit investor in current environment who do not want risk of the share market’s ups and downs.

Many banks are offering 8.5% to 9.5% interest on fix deposit till tenure 5 years. If you want to take a little bit risk, you can earn more from companies fix deposit. There is much possibility of rate cut in 2015 by RBI. It is the right time to lock your money in these instruments.

The largest public sector bank SBI is offering 8.5% on its fix deposit. Of course you should go with high rated NBFC or companies fix deposit with a little bit of risk. For 3 year fix deposit, HDFC is offering 9.0%, Mahindra Finance is offering 9.75%, Shriram Transport FD offering 10.5%, Bajaj Finance is 9.65% offering and GATI is offering 12 % according to their credit rating.

Now a days many manufacturing companies are popular among investors. JK paper, Kores India, JK Tyres are offering between 9.5 to 12% return which is much higher than bank fix deposit. Many companies are offering monthly income option. Companies pay the interest every month or quarterly or half yearly as per your choice. Retired individuals and senior citizen often look for these options which give them fix monthly income.

Since fixed deposits are unsecured instruments, investor should go with high rated and well managed companies. AAA or AA ratings are consider very safe among investors in fix deposit.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Sector Update: Insurance

Sector Update: Insurance

Government of India is trying the best to pass the insurance reform bill in Rajya Sabha but the govt have no majority in Rajya Sabha and important bills in this session has stuck.

Impact on insurance industry of new insurance bill:

In new insurance bill, IRDA has to decide on the commission of insurance agents. Health Insurance entry capital for new player will remain same at Rs 100 crore. According to this bill, IRDA will free to formulate acts and rules and allowed to fix penalties.

One more important and lesser known provision in this new insurance bill which can increase the no. of rejected claim. Under the current rule, an insurance policy cannot be called into question after 2 years of policy issued. Under the new amendment in this bill this period would be 3 years now. The discrepancy in the new bill is that it holds insured responsible for any fraud conduct by the insurance agent whereas according to insurance regulation, which deems agent to be representative of the company.

Life insurance council has recommended for reduction in service tax to the government. At present at the time of getting policy mature proceed service tax levied on PAN card holder is 2% and non PAN card holder is 20% of the maturity amount whereas other financial products like mutual funds and fixed deposit do not attract service tax on maturity.

Now onwards, group health insurance cover will become more expensive for companies where hospitalization claims from employees exceed the premium paid. The IRDA will penalize such insurance companies as due to these losses individual policy holder pay more premium. The regulator has also asked insurance companies to come up with saving-linked insurance plan so that individual buyers do not need to pay more as the age grows.

More group health insurance policies are now offering OPD (outpatient department) expenses. With the growing competition, most of insurance companies have begun to cover day-care procedures in hospitals instead of the mandatory overnight stays.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

The Magic of Early Investment

Have you started saving in early age?

Whenever I meet around 25-35 age of group and ask about saving and investment, they often don’t have clear view on this subject. For investment they totally depend on family, friends and relatives and friends. Most of them invest in traditional asset class like fix deposit, gold and real estate. Apart of this they even not bother about to know any other asset class. Every asset class has some virtue and drawback and not all asset class always suitable to all person anytime. Before and investment decision you should have proper knowledge about all available options.

I have discussed about many financial products in my earlier posts but today I want to discuss about the advantages of early saving. However, most people start investment after marriage or kids without realizing that they have started late. Here I share one example for understand the early saving concept. 

Two friends - Sachin and Mohit are of same age group of 35 and working in good reputed companies. One day they meet and discuss about family, future and finances. After discussion they were not able to arrive on a definite saving figure which was needed to save for their future. They had contacted their common friend Arvind, a financial planner and met him in his house on one Sunday. Sachin had started SIP of Rs 5,000 every month in a good equity scheme 9 year back when he was 26. Mohit had done the same thing but he has done it 5 year back when he was 30. Now the present value Sachin’s investment is 10.16 lakh whereas Mohit’s current investment value is now 4.19 lakh only. Both had invested same amount in same scheme but the only difference is time. Mohit had started after 4 year from Sachin’s investment and the difference in front of you.

Now they are planning for retirement at the age of 55 after 20 year. If they continue the same amount every month in the same scheme, at the time of retirement Sachin will get from scheme 1.91 (approx 2 Crore) and Mohit will get only 1.12 Crore. The difference in their amount is due to the delay cost of investment mere 4 year only. If Mohit could start with Sachin then he would also get the same amount 1.91 crore.

Now you people will think either these figure is wrong or there are some mistake. It is due to the power of compounding. Regarding ‘power of compounding’ renowned scientist Albert Einstein once said “Compound interest is the eighth wonder of the world. He, who understands it, earns it. He, who does not, pays it.”

Always remember my friends, time is the most important element in any investment. The investment amount does not matter whether it is small or huge. Starting investment in early age make different from those who start invest late.

If you have doubt about the numerical value in this post and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Mutual Fund Unit Claim

Claim documents for MF Units

One of my friends Mr Gupta passed away last month. He has left one daughter and wife behind him. He had purchased some mutual fund units for investment purpose. His family does not know the procedure how to claim the mutual fund units after the death of mutual fund unit holder. It is the common problem which may be faced by anyone from the unit holder’s family. Today I will mention here what documents needed for claim the mutual fund unit in case of unit holder’s death.

·         Request letter for transmission of the units from the nominee.

·         Death certificate in original or photocopy duly notarized or attested by gazette officer or bank manager.

·         Bank account details of nominee with attestation by a branch bank manager or cancelled cheque or bank statement bearing the account details with account holder name.

·         KYC of the nominee

·         Indemnity signed and executed by the nominee in the specified format, if the value of units are equal or more than threshold limit as determined by the mutual fund AMCs. ( At present the threshold limit is Rs 5 lakh per investor).

·         PAN card id is compulsory for mutual fund KYC.

Some cases where PAN card is not compulsory for KYC. It is as given below:

·         Investor resides in the state of Sikkim.

·         SIP where aggregator of installments in a rolling 12 month period or in a financial year does not exceed Rs 50,000.

·         In case of transaction undertaken on behalf of central or state government and official appointed by courts.

·         UN entities/ multilateral agencies exempt from paying taxes/ filing tax returns in India.

If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Financial Adviser Fee: A true story

Financial Adviser Fee : A true story

Today, I am not going to talk about any financial plan or financial and investment product. It is about financial planning fee. In our country, investors are not used to pay any fee to advisor. I other country there are many fee model for financial planning according to the advise and investor satisfaction level.

Now the scene has been changing slowly and now the investor are willing to pay for right advice. Before going in deep, I would like to share one true story. That story honestly reflects the investor’s need. One of my close friends named Mr. Alok sachan had come to me 5 year back and asked me some suitable financial product for investment. Please mind he has asked me only financial products not financial planning.

As he is my close friend so I have made a small financial plan and discussed it with him and his wife. In beginning they were not much convinced but they had done investment as I had told them in that time with some doubt. I had not charged any fee for financial planning that time but during the conversation I had shared about financial planning fee with them.

According to my investment plan they have started monthly SIP in 3 equity mutual fund schemes. These schemes have generated around 19% CAGR return till date. Yesterday, I was with him his home for dinner and he has paid me financial planning fee Rs 5000. I had never expected this and was not expecting any fee from him. It was surprise event for me but the more important thing is his remark on financial planner advice. He told me that this amount is nothing if I compare your valuable advice with financial planning fee. With the help of your advice I have saved many lakhs and able to fulfill my future plan successfully. It is more dangerous to invest in wrong product without financial planning. Investing without proper financial plan may not fulfill your future plan.

He further said that it is more prudent to pay some fee for right advice before any investment. It can save your money in future and your future goal will be also fulfilled and the more important you will enjoy life more without any stress and tension.

It is true event and if anyone wants to meet the investor and verify the facts then you are most welcome. If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Health Insurance : Myths and Facts

Health Insurance: Myths & Facts

All of us know very well about the importance of health insurance. Today, everyone realize the benefit and need of having health insurance. For sales points of view it is very easy product which can be offer to the clients by the non life insurer. I have also written many blogs about it. Yesterday, I came across very useful information in the news paper which I want to share with all of you. A very well known insurer called ICICI Lombard has conducted the survey about health insurance. According to this survey that people have many misconceptions about health insurance which we will be discuss in today’s blog.

Myth1:

52% people believe that health insurance policies settle the claim only in case of hospitalization.

Reality:

9 out of 22 non life insurance companies offer OPD benefits, including dental treatment, diagnostic test expenses, vaccinations, hearing aid, eye check up, spectacles and preventive health care services.

Myth2:

27% people said I don’t need health insurance if I am fit.

Reality:

Many illnesses like dengue, malaria, food poising and critical illness can happen in healthy people due to hectic life style and pollution. Health insurance also covers injuries due to accident or violence.

Myth3:

29% people said that they have group health cover. So they don’t need a separate health insurance policy.

Reality:

Due to increasing medical cost day by day, group cover may not be enough in case of medical treatment. In case of job loss, you will need the cover. The group health insurance policies have some defined limits and constraint.

Myth4:

49% people was not sure in survey whether they can get health cover or not as they smoke or consume alcohol.

Reality:

Insurance companies offer health insurance to these types of people. In these cases loading increase the premium can be higher due to high risky habits.

Myth5:

26% people do not intend to cover their family as they think that only earning member need the health insurance cover.

Reality:

Unlike life insurance, health insurance should cover the entire family including children and parents of the customer.

Myth6:

Pre- existing diseases will be covered after waiting period so no need to declare in the proposal form.

Reality:

As per IRDA guidelines, any ailment not declared by a customer is considered an un-disclosed pre existing disease and it leads to claim rejection.

If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Desire V/s Need and the role of financial planning

Desire V/s Need and the role of financial planning

I have been in financial planning since last 5 year and I have noticed one thing that the average investors are not able to differentiate desire and need. In this world, every human being have some needs and responsibilities. Everyone has to fulfill basic need like bread and butter, clothes and residence. After fulfilling these basic needs, there are some other responsibilities like take care of family members and social responsibilities towards relatives and society. Here from family members means include mother and father also. As many people in India are also adopting the western lifestyle and planning only their wife and kids.

In the above paragraph, I have discussed about only human needs. These needs may be different for person to person. I have seen many person who have immense wealth but not happy as they have not separated their need and desire. When the word “Desire” comes in picture, then the peace of mind and happiness go away from human life. As there are no limit of desire and for fulfill your all desire one human life is not enough. You have to take birth many many times to fulfill your desire but it does not complete and it is the main cause of sadness and the common person are not able to enjoy the life in today’s world. As long as desire increase in your life, the other very dangerous and new element comes in your life that is called “Greed”. Once greed enters in your life you cannot be live happy life and satisfied life.

Now you are realizing that the main cause of our sadness in life is greed factor and we should completely avoid it but it is not possible. Every human being is in within influence of some amount of greed. We cannot avoid it but we can control. How it should be control? The answer of this question will give you by your financial planner. In this article I will not discuss about how to make financial plan but tell you only why and how important is it for you.

By making financial plan you will be able to draw a line between your need and desire. You will set your future goal and priorities. To fulfill your future commitment where should you have to invest that will be take care by your financial planner. Financial plan is nothing but some pieces of paper where you have described your priorities and goals and it also have the strategies how to achieve your future goal successfully. By fulfilling your commitment and goals I think most of us can live peacefully and filled with joy life with control of greed and desire.

How to make plan and what other factor play important role in financial planning, we will discuss in our other blogs and articles.

If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Review of LIC Jeevan Shagun Policy

Review of LIC Jeevan Shagun Policy

On 1st Sept, 2014 LIC has launced LIC Jeevan Shagun Policy for 90 days. Many of my friends and investors has inquired about this whether should they buy it or not. Today we will discuss about its features in detail for review. It is non linked, single premium, money back insurance plan with profit.

Features of LIC Jeevan Shagun Money Back Plan:

·         The minimum entry age is 18 and the maximum entry age is 45 for this plan

·   It is single premium policy. It means you have to pay premium only in starting. The policy tenure is 12 year.

·       It offer sum assured 10 times of single premium which you pay in start. It will be paid only in the case of death. The minimum sum assured is Rs 60,000 in this plan and for maximum there is no limit.

·         Loan facility also available in this plan. Loan amount is linked to surrender value. From 2^nd to 3^rd year of policy the eligible loan amount would be 50% of surrender value. From 4^th to 6^th year the loan amount would be 60% of surrender value. For 7^th to 9^th year it would be 70% of surrender value and from 10^th to 12^th year it would be 90% of the surrender value

Death Benefit:

In case death happen within 5 year from the beginning of policy your nominee will get paid basic sum assured means 10 time of your single premium and if it happen after 5 year then nominee will get basic sum assured with loyality addition.

Survival Benefit:

On survival of life insured, the insured will get 15% of the maturity sum assured at the end of 10th year, 20% of maturity sum assured at the end of 11^th policy year and 65% of maturity sum assured will get at the end of 12^th year of policy.

Surrender Value:

If you not satisfied with your policy, you have option to surrender it. If you surrender within 1 year from date of policy then you will get 75% of single premium and if you surrender policy after 1 year from the date of policy then you will get 90% of the single premium.

An example for understanding:

If a 40 year age person take Rs 1 lakh maturity sum assured, he/she need to pay Rs 59,500 ((1,00,000 / 1,000)*595) as single premium for 12 year policy cover. In case of death he/she will get 10 times of single premium, It means in this case 5.95 lakh.

In case of survival the payout he/she will get at the end of 10^th year is Rs15,000 (15% of maturity sum assured). At the end of 11^th year you will get Rs 20,000 (20% of maturity sum assured) and at the end of 12^th year Rs 65,000 (65% of maturity sum assured) and loyalty addition or bonus if any.

Should you go for this plan?

I have many times mentioned in my blog. Generally LIC policies provide returns between 5% to 7%. Low risk appetite investors who want to stay away from high risk and high return products stocks, mutual funds, etc. can opt for such policies. One should consider term insurance plans for risk coverage purpose and balance, invest in bank FD schemes or mutual funds and stocks according to their risk appetite which can provide better returns.

If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com