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

Gold : For Wealth Creator or Beating Inflation ?

Gold : For return generation or beating inflation ?

After discussing about equity and debt asset class, we are now going to talk about gold. From ancient time gold has a prominent position in our country. Gold is a precious metal. Almost every Indian has stored it no matter of the quantity. In India, we are gold obsessed people and the largest gold consumption country in the world. It is the reason after global decline in prices of gold its price has not gone down in India. The demand is still high after many efforts done by the government to curb the demand of it. 

Uncertain global economic market has also increased the demand of gold. Many of wealth managers now took it as a part of their portfolio. In my opinion gold as an asset class is hedge against the inflation.  One can take a limited exposure of gold in their portfolio. When equity and debt market not generate the return and even not beat the inflation then it comes to rescue for portfolio value. 

After 2007, the steep rise in gold prices has lured many investors and many of the investor has purchase significant quantity in their portfolio. I have repeatedly said to the investors and through my blogs for limited exposure of gold in the portfolio. Equity derives their value from companies, real estate derives their value from rental income but gold has no commercial use and produce nothing except gold ornament. There is nothing to evaluate the value of gold. Its price only depends on demand and supply. A very famous line about gold has said someone that the value of gold is in the eye of buyers. We cannot evaluate its true value.

Uses of Gold:

• Worldwide central banks and governments hold gold as a reserve currency in uncertain economic condition. Gold can help hedge such risk of devaluation of money, inflation and deflation.
• Many companies and banks are providing loan against gold. People pledge their gold and get loan instant. 
• In India gold mostly uses in ornament form. People in India have special emotion for gold. The buy gold for many auspicious occasions like marriages, functions, festivals and etc.
• Many fund managers buy it for portfolio diversification purpose.

Traditionally, in our country gold are purchased in the form of jewellery, coins and gold bar. It has many disadvantages like storage cost, making charges, quality issue, purchase at a premium and resell below market price. Due to these disadvantages people now adopt unconventional way to purchase gold like Gold ETF, Gold Mutual Fund, It offers lower storage cost, no quality issues, and better pricing.

If you want more information regarding investment realted or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

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

Inflation Index Bond

Deutsche Mutual Fund was the first fund house to launch Inflation Indexed Bond Fund in January. After Deutsche, Axis and SBI are also planning to launch Inflation Indexed Bond Funds. Both Axis and SBI have filed offer documents with SEBI to launch Inflation Index Funds. Distributors feel that more fund houses may join the race to launch such funds. Benchmarked against CRISIL Liquid Fund Index, these funds aim to provide investors inflation adjusted returns. These funds invest a minimum of 70% of assets in Inflation Index instruments and a maximum of 30% in debt and money market instruments. Investors can invest in a minimum of Rs. 5000 in these funds. Deutsche was the first fund house to launch Inflation Indexed Bond Fund in January 2014. The fund collected Rs. 27 crore during its NFO.  As the name suggests, the scheme invests a minimum of 70% of its corpus in Inflation Indexed Bonds (IIB) issued by the government. IIB have their coupon and principal linked to inflation as measured by Wholesale Price Index (WPI) and a tenor of 10 years. Such instruments are being issued every month since June 2013. We spoke to some experts to find out if these funds make good investment opportunity. Suresh Sadagopan of Ladder7 Financial Advisories feels that Inflation Index Bond Funds are more tax efficient. “If you hold it more than one year then the returns will be treated as capital gains through the mutual fund route. If you invest directly in Inflation bonds then then you have to pay tax as per your income tax slab. So investing through mutual fund route is more tax efficient. You also get liquidity.” Nikhil Kothari of Etica Wealth Management says that investors who are purely looking to hedge against inflation can invest in these bonds. “Inflation Index bonds are available at discount - Rs. 82 currently. So there is room for getting capital gains. If more fund houses come up with such funds then there is a possibility that the demand for these bonds will go up which will lead to increase in the price of the bond. Investors falling in the 30% tax bracket with a 3-4 year time horizon can consider investing in these funds. If you compare these bonds to tax-free bonds, tax-free bonds can provide capital appreciation when interest rates fall which is not the case with Inflation Index Bond funds. The returns in tax-free bonds are fixed whereas the returns from these funds can vary depending on the rate of inflation.” Hemant Rustagi of Wise Invest Advisors says “Inflation Index funds have not caught the fancy of investors yet. The funds may beat inflation at a gross level but after paying expense ratio and tax the returns would be less. The returns could go down as inflation falls. Investing through mutual fund route is better because you don’t have to lock in money for ten years. Tax free bonds may look attractive but there is no compounding benefit.  Vishal Dhawan of Plan Ahead Wealth Advisors feels that inflation index funds can offer better returns as compared to tax-free bonds if interest rates continue to go up. “These funds are being ignored because of the high yield offered by tax-free bonds. Inflation Index Fund is a much more tax efficient way of investing in these bonds than investing directly. 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 (The above article from cafemutual website)