Different Financial Goals

Different Financial Goals

What are financial goals? When an individual make financial plan for self then he/she try to find out what responsibilities in future he/she has to fulfilled. To set the financial goal is very important process of one’s financial planning. It should be practical and achievable.

Although, Indians are good savers but not so smart in investment. Only 4% of household saving comes into stocks and mutual fund. It is because of lack of awareness. Systematic Investment Plan (SIP) route is the best way to achieve your future financial goal. For example if you invest Rs 33,000 per month in equity SIP till 20 years, it would be Rs 5 crore with 15% CAGR. It is a good retirement corpus at the time of you will get retirement. The important factor is time. If you delay 5 year to start a SIP for your retirement, then you have to invest Rs 66,000 (just double from above mentioned Rs 33,000) per month till 15 year to achieve the same Rs 5 crore retirement corpus.

Another important financial goal is child education which is equally important for every person. I will give you a simple example to achieve your child’s education goal. Please start Rs 5,000 every month till 15 year you will get around Rs 30 lakh with 15% CAGR return and if you invest the same amount 5 more years means total 20 year then you get around Rs 66 lakh with the same rate of return.

In general, parents spend more than half of their income on their children’s education and it prove significant burden on their family budget. According to a survey, majority of parents spend on average more than 18-20 lakh for raising a child from 10^th standard to graduation.  

So it would be better if you plan for the same before the time in prudent manner.

There may be many financial goal for a person so make investment separate for each financial goal with the help of financial expert.

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 conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Investor's Investment Knowledge

Investor’s Investment Knowledge

I still see in our country that people do not have financial literacy. They do not know the proper process for investment. They still believe in fix deposit, purchasing land or LIC policies etc without any knowledge of any investment objective. The worst thing is that they still believe LIC endowment policies are the best option for long term investment. There are need for each investor to know about the investment product in detail in which they are going to invest.

For example in most of cases people who have LIC policies do not know about their risk cover and expected return at the end of tenure. It is my personal experience that 90% of policy holders do not know about their sum assured and expected return. Only they know about that premium amount which they are paying every year. They even do not serious about to know about inflation and real rate of return. Many investor invest in land for short term period like 6 months or 1 year without any idea of capital gain tax and liquidity.

The proper way for investment is that first, you should clear about your investment horizon after that check whether your investment will beat the inflation. After deduction taxes and adjusting inflation what will be your real rate of return? These type of question should be answered by your financial adviser or company agent.

Please keep in mind there is huge difference between company agent and financial adviser. Financial adviser will help you plan to your investment and future goal in realistic and prudent way. Other side the agent will be more interested for their commission only. The agent has not much concern about your hard earned investment or your future goal. Their main objective is to take your sign on the form, collect the investment amount cheque and get the commission in their pocket.

The agent, only advise you about the product for a one particular company. In other side the financial adviser will suggest you the best option available in the market. The reason for this that the adviser do not work for any one particular company.

My suggestion for all of you is that when you plan for your investment, please never go after emotional advertisement and you should have fair idea about liquidity, time frame, inflation, real rate of return and your future goal of investment. It is responsibility of all advisers and agents that they should give the proper detail of financial product to the investors.

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 conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

SIP return beating other instrument..?

SIP return beating other instrument ?

Yes, as I always say that SIP (Systematic Investment Plan) is always good option for investment and create the wealth. You can read today’s Time of India, Mumbai edition on page no. 11 for your belief. Even worst of SIPs would have given you more than your PPF (Public Provident Funds) returns.

Regular investments in mutual fund equity schemes have been rewarding for investors in the last 15 years. Investments in equity schemes done through SIPs have outperformed traditional products such as Tax-saving fixed deposit and PPF.

Tax saving fixed deposits and PPF have returned a little over 9% every year in the last 20 years. Meanwhile, average returns in equity schemes through SIPs- an equivalent of recurring fixed deposits of banks over a 15 years period have been 21.54% every year with the worst performer giving 13.71%.

So I still advise to all of you start a some amount of SIP in equity mutual fund for your 15 -20 years goal like retirement, child education etc. It would be your most prudent investment decision. For more information you can touch with me also.

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 conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Bank Fix Deposit: How much safe?

Bank Fix Deposit: How much safe…?

Whenever I met my investors and friends, I have seen a lust for fix deposit in all of them almost all time. Many times I have experienced that people do the fix deposit in banks with very confidence. In our country, people have high degree faith in banks. They consider it very much safe. In the view of safety, they may be right but there are also other important aspects associated with your investment which you ignore many times. I am not saying that you should agree with my views but at least try to understand what I want to say here. In this article we will discuss all aspects associated with bank fix deposit.

Safety: Till now you know or understand that all money deposited in banks are safe. Please update and correct yourself only amount Rs 1 lakh insured by the banks regardless whatever money you have deposited in banks. It means if you deposit Rs 10 lakh fix deposit in your banks and in case of any bad events occur with bank will be liable to pay only Rs 1 lakh.

Now you will argue that the bank will never bankrupt in India. Please remember 2008 events in US, even more than 100 years old banks had got bankrupt in that year so nothing is impossible in financial world.

Return: We Indian always much concern about safety not return. When we say return then your focus should be on net return after deducting tax and inflation effect. We many times ignore inflation and taxes and blindly do the fix deposit at the published rate by banks or corporate.

Here I take example of one of my friend for much understanding about net return. My friend Ashutosh has done fix deposit of 10 lakh with bank for 1 year at 9% return offered by the banks. My friend comes in 30% tax bracket. After 1 year when his fix deposit became mature he had got Rs 10.90 lakh. Now he has to pay 30% tax (ignore other taxes for calculation) on return so after deducting tax Rs 27,000 now the amount in his hand remain 10.63 lakh. After deducting tax his return was 6.3%. If inflation in that year average remains 8% then his net return become negative -1.7%. It is the real picture of your fix deposit whether you believe or not. Inflation is real culprit which eats your significant part of your return.

Goal: Always associate your each investment with a specific goal and make plan according to your near and long term plan. If your investment does not generate net positive return then it cannot fulfill your goal. Investment without planning ultimately will not give you a satisfaction and you will always confused about investment and will do some mistake during investment.

There are many other options available to fulfill your goal in the market. Keep in mind that at least your investment should generate positive return after considering tax and inflation.

If you want more information regarding investment or you need investment services, feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

SIP Role in Financial Planning

SIP Role in Financial Planning

When we make our financial plan, we set some future financial goals and to reach those goals we also make some investment strategy. Systematic Investment Plans (SIP) is the best way to invest for your goals. In SIP investment we invest a fix amount in predefined regular time frame. The amount would be deducted from your bank account on the fix date of your choice. You can choose any mode of payment like monthly, quarterly or your specified mode. Here we will discuss some SIP related points which will be beneficial for you.

Assign your financial goal:

As we have discussed about in earlier post that every investment should have some purpose. Link your each SIP to a particular financial goal like children’s marriage and education, your retirement corpus, purchase new vehicle or house, foreign holiday tour etc. Your asset mix should have according to your investment time frame like if your goal is more than 10 year far from now then your asset allocation more tilted towards equity.

SIP Timing:

Many investors want to time the share market, however it does not make any sense in the view of return. If you invest in 4 different funds then divide your SIP date in different weeks in a month. Doing this you will take benefit of the volatility of the market. Monthly SIP is the best mode for salaried person. There are many modes available in the schemes like fortnight, daily quarterly and half yearly etc.

Increase your SIP Amount:

Every year when your salary increase, your SIP amount also should increase in line with increment. Most of the investor miss it and stay invested as per earlier mandated amount. With each increment in your salary you should increase your SIP amount also. It is called step up SIP. If you do not have a particular amount for SIP in current situation for a particular future goal the go with step up SIP and increase SIP amount every year to achieve your goal.

Portfolio Revision:

Every year you should review your portfolio. It does not means that the changes in investment strategy. It means if you are approaching near to your goal then decrease your equity portfolio and transfer it towards debt to avoid market volatility. If a particular asset class has performed very well then you can rebalance your portfolio according to your time, age and goal.

Invest in SIP is the best strategy to achieve your financial freedom. If you have any query or doubt, feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Why Investment?

Investment : Why ?

We often all listen and read about investment. Many experts share their view and advice on investment through various media like TV, news letter, blog etc. A lthough a lot of information is available on internet and many other media but common investor still has no clear idea about investment. The investor awareness is very low about investment. I am trying to go from very basic like what is investment? What is asset class? What risk associated with each asset classes etc.?

Why need investment ?

We all have some future goals or responsibilities like children education, their marriage, retirement planning, abroad trip, purchasing big home and many more. To achieve those goals we need money at various stages in life. The value of money badly affected from inflation. By passing the time the purchasing power of money decreases. If we do not our money invest in anywhere and keep in our locker or keep idle in bank account, we cannot fulfill our future goal due to the non availability of appropriate money for the particular goal. Inflation eats our saving during the long period. There are difference between saving and investment. We Indians are great saver but poor investor. To fulfill our future goals successfully we need investment successfully.

“Investment is an act of deploying your money in an asset class with an expectation of return after paying taxes higher than inflation to preserve purchasing power of money.”

Assets are broadly classified in two categories:

• Physical Assets
• Financial Assets

Physical Assets:  A physical asset is an asset which has value and can be touched, felt and used. A piece of land, home, gold coins etc are the example of physical assets. These assets carry storage cost and maintenance cost. A owner of these assets feel very safe and confident.

Financial Assets:  These assts cannot be touched or felt and bought in the form of certificates. Equity shares, bonds, debentures, fix deposits, mutual funds, provident funds etc. are the example of financial assets.

In India, people have been more comfortable with physical assets, which have drawn a large portion of their wealth. As physical assets held by an investor do not benefit the economy, they are termed as unproductive assets. In order to help the economy grow and in turn benefit from the growth of the economy, people need to deploy a portion of their investments towards financial assets.

We will discuss more about financial assets in next articles. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Financial Planning : Is it for you ?

Financial Planning : Is it relevant for you..?

Whenever I conduct workshop on financial planning or meet the client. It is very common doubt inside the client’s mind whether the financial planning is so important for them or not. In our country, we plan everything but not our finance. We are the largest saver country in the world. In fact we have  great saver mindset but most of us don’t understand or underestimate the need of financial planning. A common myth exist among the investor that it is only useful for only rich and elite class person. Today we will try to find out for whom the financial planning is important.

• If you don’t know where is your income going every month and always wonder about your expenses then you definitely need to make a budget for your income and expenditure. It is very basic and vital setp towards making a financial plan. Impulsive buying and lack of budget planning may be proved very costly for your long term future goal.

• If you are in the trap of debt and your liability is increasing due to loan interest amount you pay then seriously you should make a proper plan to get out from various liabilities. For the blind race to lead much comfort life style, you often use the facility of credit card, personal loan and bank overdraft facility. These all loans lead you towards a serious financial mess. A financial plan will help you to come out from financial mess.

• If your investments are scattered and you are not sure that whether it is right investment or wrong then financial planning for you. Many times we do investment on the recommendations from agents, relatives and friends without knowing the product’s risk and return ratio. Keep in mind each investments have always some degree of risk. A financial plan provides you consolidated investment statement and you can analyze it time to time in very easy manner.

• If you have a multiple life insurance policies and you are paying a hefty premium for those policies without knowing the expected return and sum assured then you must need of financial plan. Most of the people are underinsured in our country and people must know the about adequate insurance amount what they need. It is very important to know that how much life and medical cover you need. A financial planner help you to determine all these need based on your provided information. Insurance also is the vital part of any financial plan.

• If your major investment in the particular asset class and you are not sure whether it can help you to achieve your particular goal then you need a financial planner who help you to achieve your future financial goal through diversified investment portfolio with proper asset allocation. Asset allocation may be differ for person to person and you need to know which type of asset allocation you required to achieve your financial goal.

• If you don’t have habit to regular investing then you must need a financial plan. In every success goal achieving story discipline and determination is the key element. By create a financial plan with the help of expert and follow that plan religiously is very crucial to achieve your long, medium and short term goals.

Now after reading the above mentioned pointes it has become clear that financial plan is like a road map to achieve your dreams and desires to lead a happy and prosperous life. However, many of you have not any idea how to invest and where to invest or you may not have sufficient time to make financial plan and track your investment portfolio then you should must hire a expert planner lead to stress free life.

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

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Basic rules for investing

New Year, New Hopes and revisit some basic investment rules

First of all Very Happy and prosperous year 2013 to all of you. New year has already begun with new hope and optimisim in equity market. Yesterday, Nifty and Sensex were closed at 2 year high and now the market sentiments appear quiet positive in near term. Today I will not write lengthy article. At the beginning  of year, it is important to make some financial resolution and don’t repeat past mistakes.

There are few basic investment rules of investing and I am sure many of those rules you already know. I am attempting here to those rule revisit in very compact manner.

1)   Before make any investment decision, first know your networth.

2)   Be clear about your financial goal and honestly asses your needsand income

3)   Don’t investment in hurry and never investment in those products which you don’t understand

4)   If you have not properly insured then calculate your actually needed insurance cover and purchase term insurance online if possible

5)   Purchase mediclaim policy and personal accident policy also as it is very important

6)   Understand your risk appetite. If you cannot see 25% value erosion of your portfolio then stock market is not right place for you.

7)   If you are near about retirement please keep away from ULIP and insurance like product and reduce your equity investment and increase debt portfolio.

8)   Track your portfolio time to time and change your asset allocation according to time frame of your goal and market condition.

9)   Always pay your credit card bill on time as it has very high interest charges.

10)                If you feel any problem to understand or you have not enough time to take care of your investment find one financial planner and discuss with him about your financial planning and doubt.

There are much more basic rules and we will discuss about them this entire year in detail. Once again I wish for all of you a very happy, Healthy and prosperous year.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com