Year 2016 – Financial Resolution

Dear readers,

Wish you very happy new year 2016. I pray that this year bring more and more happiness in your life. All of you should achieve financial freedom. I have seen that many person makes many type resolution like quitting alcohol, joining gym, healthy diet etc. Let us talk about financial resolution for this year.

• Set your financial goal on long and short term basis and also set their priority.

• Do not idle your cash in your saving bank account. 4% interest rate don’t beat even inflation and your saving actually shrunk.

• Know your financial product very well before investing in anyone. You should know about risk and return both about the product in which you want to invest.

• Do not ignore your insurance needs. Buy any term insurance plan and disclose all your material fact. It will make claim process easy if and bad event happen. You should have a proper mediclaim policy.

• Make an emergency funds by investing in liquid fund. The amount should be equal to six month salary at least.

• Make your tax planning well ahead. Do not postpone it for last rush. At the time of last date you often make wrong decision in hurry.

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

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

Mediclaim Policy: Have you got your claimed?

Whenever you or your family member suffer with any decease or hospitalized then health insurance gives you a big relief. The wholesole purpose of health insurance is to cover your medical bills and other health related expenses. Most of people assume that purchasing the mediclaim policy and paying premium is very easy but to get claim is very difficult. They feel the process of claim is very tedious and very complex. So you need to understand the fact about the health insurance claim.

In general, when insured person admit more than 24 hours in hospital then we claim our medical bill. However some day care treatment like eye surgery, chemotherapy, ligament repair process etc. are also listed in today’s health policies. Please read very carefully that health care treatment list at the time of purchase of policy. Mediclaim policy also cover those all charges like hospital room charges, medical test, expenses before the admitting in the hospital within specified limit.

It is very important to read very carefully policy documents what is included or what is included not. Some policies also cover ambulance charges and expenses of attendant of patient.

Many hospitals has tie up with health insurance companies for cashless facility. Under this facility hospital receive the healthcare expenses of insured person from health insurance companies directly and patient do not pay anything to hospital within amount specified in mediclaim policy. To avail benefit of cashless facility you have to inform hospital before 24 hours from admitting day.

If you do not avail cashless facility then you have to contact your insurance company before 24 hours from admitting day. After relieving from hospital you will have submit all the medical expenses bill to insurance company or TPA with all diagnostic report and discharge summary. After assess the insurance company team you will get your claim amount.

Many people have doubt whether company pass their claim or not. If you have not hide any health related problem or hobbies and habits at the time of purchasing the policy, there should not be any problem at the time of claim. Before purchase any insurance policy you should have read and understand the policy document and mention all the facts about you with honesty on proposal form.

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

Are you feeling "Panic" ?

Are you feeling "Panic" ?

Yesterday, Indian market witnessed a shocking wave in share market. The Asia’s oldest market benchmark was down by 1624 point down. The investor’s Rs 7 lakh crore wealth wiped out in single day fall. Many investors feel panic and many see this is a good opportunity for investment. It is always good idea to buy in panic. At least you can find good company in fair value or below fair value.

Is the yesterday’s market fall just the beginning of a global recession or it is temporary blip with great pick opportunity? In my view, it is opportunities for those who have not plunged in the market till now. For those who have already invested in the market, need not to be panic. The India growing story is still intact and stay focused on. Savvy investors are investing millions of dollars into Indian companies. Indian Market is going to be huge, growing and world leading market. For traders, market always risky if their bet goes wrong so for them that does not matter whether market up or down. They totally play a gamble.

China have an economic problem so some impact is obvious on Indian market. Our CAD (Current Account Deficit) remains around 1.5% of GDP in comfort zone. We can convert worldwide crisis into an opportunity. Global development cannot impact India after beyond a point. Except for currency and stock market all other parameters are in right direction.

For investors who is looking good opportunity for investing in direct companies or in mutual fund can send mail for help. Please feel free to ask if you have any query.

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

Falling Gold Prices!!!

Look at Gold Prices

Dear investor look at gold prices, you can read in my old blogs. I have many times suggested that gold is not good investment avenue for wealth creation. Gold plunged 4 percent on Monday to its lowest level in more than 5 year.

It was sudden, massive drop for gold as they breached critical support levels as on growing expectation that the US Federal Reserve will hike interest rate this year. I am again saying here please do your asset allocation according to your need and investment period. Gold is very good for hedging but it is not very good investment option in long run.

In India, people are mad about gold purchase regardless price and return. So I advise to my Indian investor that they should keep gold as much they need for holy occasion and events and do not buy it for investment purpose.

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

Direct Equity v/s Equity Mutual Fund

Direct Equity v/s Equity Mutual Fund

I have seen many investors have often not sure whether they should invest in direct equity or invest in equity mutual fund. According to me, both are good instrument to create wealth in long term but both have different type of risk. We will discuss here about these instrument today.

Direct Equity:

Investing in direct equity is suited for those investors who have plenty of time and understanding of finances of companies. It is very good for those who have time to track the financial health of the company. Such investors invest in good companies at very beginning and earn multifold return in long term. You should have large sum to invest in such companies at the starting.

Equity Mutual Fund:

Investing in equity mutual fund is very good instrument for wealth creating in long term. It is very suited to those people who have no time to track the market and companies and also not understanding of finances. One can easily invest in equity mutual fund in lump sum or in step by step in the form of SIP (Systematic Investment Plan). There is no need to have large sum at initial stage of investing like in direct equity. It also give the multifold return in long run on your investment. One can start investing a very small amount like Rs 500 also and gradually increase this as per their income.

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

Do you know about Gift Tax?

Have you gifted money in relative’s bank account?

Although I am not much expert in tax matters but I can give you fair idea on this issue. In general, many tax payer gift to their relatives like parents, spouse and children to save the tax. It is not so simple as the people understand. Many people just transfer the money into their relative or friend’s account and assume that it will help them to save tax because they have gifted away that money and because their relative come under tax exemption limit income so they don’t have to pay any tax.

So today we will understand the tax implication if you transfer some amount to your relatives account. What is the tax implication on involving each party in this transaction? Let us assume you transfer Rs 2 lakh to your wife’s bank account and your income is Rs 15 lakh per annum. Your wife invests this Rs 2 lakh in a bank fix deposit at the rate of 9% and earn Rs 18,000 interest income in a financial year. There are 3 types of tax liability arise in this case.

Tax liability on husband or donor for the amount gifted:

In this case, husband can never claim any type of tax deduction or exemption on that gifted amount (Rs 2 lakh). You have to pay tax on your entire income Rs 15 lakh after deducting eligible available exemption or deduction section 80C etc. After paying tax, he can gift any amount to any relative.

Tax liability on wife or receiver for the amount received:

In this case the wife has no tax liability because she has received the gifted amount from her husband, who comes under specified list of relatives. She can receive any amount from these types of specified list of relatives and still will not be any tax liability. If she receive gifted amount from any other individuals that amount would be taxable on her hand.

Tax liability on income earned from invested gifted money:

In this case wife has earned interest income Rs 18,000 by investing gifted amount Re 2 lakh in bank FD. Although the interest income comes in wife’s account but in this case she has no tax liability and the same interest income clubbed with husband’s income and her husband pay the tax on her interest income.

The interesting point is that if she further invests this interest income Rs 18,000 in bank FD again and earns income on invested amount then she will be liable to pay tax on the interest income earned by investing Rs 18,000 in bank FD.

If you gift the money your parents name and major child then the income earned on that gifted amount will not be clubbed in your taxable income. There are lots of ways to save income tax by restructuring investments in relative’s names. In general, people do not have much time to plan all this and for years they pay higher income tax and never optimize it. You should consult from a good CA for these types of tax saving strategy.

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

Are you Mutual Fund Investor?

Are you Mutual fund Investor?

You may be think that this question is as simple or silly but in really it is very important question for your economic freedom and wealth creation. First of all if your answer is YES then I want to congratulate to all of you for participating in mutual fund schemes. Most of you are investing in XYZ amount in a particular scheme suggested by a friend or an agent without any target amount and also knowing without risk which is associated with your schemes.

In general, I have observed many investors consider mutual fund as share market investment only but this is not true. It also invests in debt instrument and fixed term deposit investment also. Unfortunately in India most of investor are not getting benefit from debt mutual fund also. People even do not know in which schemes they should invest either in equity schemes or debt schemes or hybrid schemes. They even do not bother to know about this and in some cases agent have not much knowledge about mutual fund schemes.

Many investors often lament that they had lost a lot of money in mutual fund which is suggested by someone else or randomly picked by themselves. It is due to lack of awareness and lack of understanding about mutual fund as a product.

In my view, mutual fund is the best investment option available in the financial market for any investment time frame. Before start investing in mutual fund you should decide your investment time horizon and target amount at the end of investment period. There are different types of schemes available in the market for different needs and investment horizon. You have to decide your investment time frame first. Your investment period may be from 1 week 20 years or even more years and accordingly you should invest in suitable schemes.

If you are not able to choose the right schemes or you don’t have time please contact an IFA (Independent Financial Adviser). We also help to the investor to choose the right mutual fund schemes. Believe me If you invest in disciplined manner after knowing the product you will definitely create a lot of wealth. There are many equity schemes which have generated multiple times return in 10 year or 15 year time period.

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

Sector Update: Insurance

Sector Update: Insurance

After 7 years wait, Indian parliament has approved long pending insurance bill. According to insurance bill, now FDI has been raised to 49% from 26% with Indian ownership control. Penalty for non compliance raised to 25 crore. It is Modi govt’s first major reform sign. Industry expert hopes that this insurance bill help bring in over Rs 50,000 crore in fresh capital which will stimulate the insurance sector.

From 1st April 2015, the premium rates for third party motor insurance cover has been raised after issuing new draft by IRDA. IRDA is also planning new investment norms for general insurance companies. According to new norms, investment limit in securities other than those approved would be now 10% earlier it was 25% of total premium collected in a fiscal. It may reduce the earning of general insurance companies.

The Bombay High Court has asked to IRDA to ensure that insurance companies should not involve TPA in the claim settlement. As per ruling of health insurance, allowing or rejecting claim should decide by insurance companies not by the TPA.

According to British Medical Journal, India’s private healthcare sector treating patients as revenue generators. Doctors get Rs 30,000 to 40,000 to refer patients for angioplasty. Unnecessary tests are being carried out and fabricated reports were generated. Large sums were paid for the same only to fill the pockets of referring doctors and pathologists. There is serious need for stringent, transparent and mandatory regulation.

IRDA said that insurance companies can appoint individual agents on their own from 1st April 2015. As per current practice, IRDA grants license to a person to become an agent of insurance company. After the new norms, whole licensing systems will go.

To bring more transparency, IRDA is planning to treat health insurance as a stand alone segment. As per current rule health insurance come under non life insurance category. Now, separate regulation will be made by IRDA for medical insurance.

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

SUKANYA SAMRIDDHI YOJNA

SUKANYA SAMRIDDHI YOJNA

Modi government has launched campaign ‘Beti Bachao Beti Padao’. Under this scheme the government has launched Sukanya Samriddhi Yojna Account. It is a small saving deposit scheme for the girl child to support her education and marriage. This account can be opened in the name of girl child from the time she is born till she becomes 10 year old. It can be opened in a post office or any public sector bank.

It can be opened with a minimum amount of Rs 1000 and maximum of Rs 1.5 lakh. The money can be deposited till 14 year from the date of account opening by parents or guardians. The interest rate will be decided by government every year. For FY 2014-15, the interest rate is 9.1% and it is compounded annually. The interest will be tax free. You can avail section 80C tax benefit, the amount deposit in this account till Rs 1.5 lakh in each financial year.

The account will mature after 21 years from the date of account opening. 50% fund can be withdrawn after the girl turns 18 year old. The premature closure of account is allowed in the case of death of girl child. If you do not deposit any amount in a whole year, a penalty of Rs 50 charged. One family can open only 2 accounts even if there are more than 2 girl child in family. Only 1 account per girl child is allowed. You cannot operate account online.

This scheme is better than post office schemes and fix deposit schemes or RD schemes. It will give the same tax benefit as PPF. It is good plan for your child because at least the government will try to meet the inflation rate at least. Interest rate will be announced every year. It is illiquid investment so invest in planned manner. Birth certificate of girl child, address proof and photo identity proof of girl child and parents/ guardian are required documents for opening the account.

It is less risky investment option and it will not give return like mutual funds or share market. As an asset allocation plan for debt investment, one can consider it. In my personal opinion, if you invest for 21 year then it is not much good option. A good mutual fund will give much better return if you compare between mutual fund and this scheme. I have still not opened this account for my daughter as I already invest in mutual fund.

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

Union Budget 2015-16: An Overview

Union Budget 2015-16: An Overview and Analysis

An Overview on Budget 2015-16:

1.     GDP growth estimated between 8.0 – 8.5%.

2.   Fiscal deficit target relaxed to 3.9% of GDP in FY 2015-16      with increased focused on public investment in infrastructure  and also proposed to fiscal deficit target 3% within 3 financial  years.

3.    Net market borrowing  to be Rs 4.56 lakh crores.

4.  No change in personal income tax slab and rate of tax for companies in respect of income earned in the financial year 2015-16.

5.  Proposal to reduce corporate tax from 30% to 25% over next 4 years, starting from next financial year

6. Wealth tax abolished, additional surcharge 2% imposed on individuals having income more than Rs 1 crores.

7.  Excise duty on cigarettes is being increased by 15% to 25%.

8.  Service tax is being increased from 12% plus education cess  to 14%.

9. Online and mobile advertising, radio taxis or radio cabs, services provided byair-conditioned contract carriages are now under service tax.

10.Total subsidies limited at 1.7% of GDP in FY16 against 2.1% of GDP in FY15 due to fall in fuel subsidies.

Banking and Financial services:

Announcement of autonomous bank Board Bureau and Holding company structure for PSU banks in 2015-16 is positive for PSU banks in long term. Reduce in corporate tax is positive for banking and financial services companies as most of them pay full tax rates. Overall budget impact is positive.

Oil & Gas Sector:

The impact of budget on this sector is neutral. The subsidy for FY16 is 30,000 crore marginally negative for oil companies. Focus on DBT (Direct Benefit Transfer) to curb subsidy leakages is positive for entire sector.

Infrastructure / Capital Goods Sector:

Road development allocation has been increased to 85,565 Cr(this budget) from 37,845 Cr(last budget) in this budget. NHAI target has to complete 8,500 KM road development. It is positive for all road developers. Infra investment trusts to be set up to securitizes infra project assets. Announcement of  National Investment and Infrastructure Fund (NIIF) and infuse Rs 20,000 Cr every year in this fund has been positive for all infra companies.

Power Sector:

Announcement of 5 new Ultra Mega Power Projects of 4000 MW, in the plug and pay mode is positive for new investments in this sector. Focus on renewable energy by increasing the capacity is positive for long term.

FMCG Sector:

Increase in service tax and from 12.36% to 14% can hit the consumer demand and will impact negative for this sector.

Retail Sector:

Excise duty on leather footwear having more than Rs 1000 is being reduced to 6% from 12%. It is positive for footwear companies. Gold Monetisation Scheme is positive for jewellers and consumer both.

Travel Sector:

Facility of Visa on arrival to be extended from 43 countries to 150 countries is positive for tourism economy. Development in heritage sites in India is also positive for this sector.

The budget has been positive for agriculture sector, logistic sector, real estate. Housing for all is big positive for housing development companies. For cement and metal sector this budget has been neutral. 

While the budget cleared most of the issues related to FII, it failed to meet general expectations about reduction of MAT in SEZ, reduction in STT and CTT and reduction of custom duty on gold. Increase in service tax may discourage the consumption. The revival of investment in near term is limited but the good result will come in next 3-4 years not in immediate future.

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

Have you done your tax planning?

I am sure most of you have done your investment to save the taxes but still some people will wait for the last moment and will make fatal decision in hurry as the result of last rush. Many insurance advisors are very active in these days to trap the investors in the name of insurance with the false promise of sky rocketing return. Poor investors also do not care of investment as they want only trust not return. I wonder sometime when I meet such investors who are very happy to invest in endowment, money back or ULIP and still don’t know about their insurance cover and expected return.

They easily ignore the biggest threat of their investment. Do you know what is the biggest threat return your investment? It is Inflation. Due to this inflation most of time your real return become negative also. Please before any investment be very clear about the inflation concept. You should ask some question to yourself. How inflation and taxes eats your return? What will be real rate of return after adjust inflation and taxes?

Section 80C is very popular section among investors and for the financial year 2014-15 the investment limit has also increased till 1.5 lakh under section 80C. First calculate your other investment under section 80C like PF, PPF, home loan repayment, insurance premium etc. After consider all other available provision under this section determine your shortfall to complete 1.5 lakh limit.

During January to March there are many companies come with attractive and catchy advertisement. They show the high possible numerical figure in the name of save tax. In most of cases, these companies assume that investor is in 30% tax bracket and will investment full available amount 1.5 lakh available under section 80C. Due to this confusing advertisement people who are in 10% or 20% or nil tax bracket get misguided and make the wrong decision.

According to me if your investment horizon more than 8 year then ELSS is the best option to create wealth and beat the inflation. If you do not have time to plan your finances then you should contact certified financial planner.

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