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

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

Important Things in Financial Planning Process

Important things in Financial Planning Process

I have always recommended to all my friends and clients that make a well financial plan and live a life filled with enjoy and peace. Financial plan consist from some process like recognizing the goal, make a income and expenditure statement, projection the needed amount of money in the future for fulfill the particular goal, deploy the money according to asset allocation and risk appetite with the investment timeframe etc.

During the process of financial planning the investor and planner discuss about some numbers like a rate of return of the different asset classes, expected inflation no. and monthly expenses after retirement. It is very important to agree on a particular numbers after discussing the plan. There are things like inflation and return of the assets you and planner may be have different opinion. There are also things where you or planner can predict no. very easy.

For example, if you discuss about current assets, a financial planner can tell you that whether it is good or bad based on their market knowledge and in majority cases there is no more room left for debate or discussion for the asset quality. In other side, to decide whether your monthly expenses Rs 50,000 or Rs 1 lakh per month, the investor can arrive to the final no. and there or no more room left to argue for the planner.

To decide the inflation no. for next 20-25 years there may be different opinion of investors and planner. Even 1% - 2% different in the no. makes a big difference due to compound effect. It is better to adopt conservative approach to decide the return of equity or debt asset. After all it depends on your knowledge and experience of the market. Financial plan review is also the important part of any financial plan. If any changes happen in income, expenses, market or financial goal then there should be a review of plan.

If you want more information regarding investment 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

Do you realize the power of Compounding?

Do you realize the power of Compounding?

In our school days, all of us learnt about compound interest in mathematics. After leaving colleges we have got busy in different professions. Many of us know and understand the power of compounding. But unfortunately many of us have forgotten or do not realize the power of compounding.

The great scientist Albert Einstein had said that the most powerful thing in the universe is power of compounding. Compound interest is the eighth wonder of the world.

Compound interest is same as simple interest, the only difference in it that the interest will be added to the principal amount at a certain amount. The formula of compound interest is

             A=P*(1+r/100)^n

Where A = Earned amount including interest, P= Principal Amount, r = rate of interest, n= time in years

Here I will take one example to understand the power of compounding.

If you have two below mentioned option:

(A) You will receive Rs 1,00,00,000 (One Crore) every day till one month (30 days)

(B) You will receive first day Rs 1 and the second day the just double than the previous day Rs 2 and the third day Rs 4 just double of second day. It means you will receive every day double money than previous day till one month. 1,2,4,8,16,32,64,128………..till one month (30 days).

Now tell me honestly without scroll below which option will you choose from the above mentioned options……?

If you choose option A you will get total Rs 30 crore after one month or 30 days. Seem cool deal…..But if you choose second option then you will get total Rs 1,07,37,41,823 at the end of one month or 30 days. I know you won’t believe this figure. How can a person earn so much money if you start getting only Rs 1 from the day one. In fact you had not thought about this figure. For your believing I would like to mention here the whole calculation.

Day	Amount
1	1
2	2
3	4
4	8
5	16
6	32
7	64
8	128
9	256
10	512
11	1024
12	2048
13	4096
14	8192
15	16384
16	32768
17	65536
18	131072
19	262144
20	524288
21	1048576
22	2097152
23	4194304
24	8388608
25	16777216
26	33554432
27	67108864
28	134217728
29	268435456
30	536870912
Total Amount	1,07,37,41,823

After viewing the above calculation I am now sure now that all of our reader realize the power of compounding. It is the very basic thing before start investing. In fact most of us never realize the power of compounding in the long term.

If you want more information regarding investment 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

Asset allocation : Importance in financial planning

Asset Allocation : How much Important..?

This word is very familiar in today’s investment world but often the investor or general public confuse or not very clear about it. The main purpose of asset allocation is to minimize the risk involved in achieving a target return or maximize returns with managing risk in prudent way. Asset allocation works on a very famous proverb “Don’t put all your eggs in one basket”. It also play very vital role in any comprehensive financial planning.

We have mainly these types of investment assets:

• Cash
• Equity
• Precious Metal
• Real Estate
• Bonds

Among many of the the asset classes, mutual fund provide the well diversification and professional management. Asset allocation through mutual funds gives you the opportunity to get maximum benefit through diversification and reduce overall portfolio risk. Mutual funds provide better asset allocation in cash, equity and bonds asset class.

Before making any strategy to achieve long term financial goals through asset allocation there are some important points given:

• Asset allocation helps you to make fine balance between return and potential risk. It provides also a disciplined investment plan.

• It also protects your portfolio against declining market through rebalancing and diversification.

• The most important thing is that your personal asset allocation strategy may not similar than others. The financial goal and risk appetite different for person to person. It based on mainly your age, risk tolerance level, liquidity needs and time horizon.

• Please remember that asset allocation does not guarantee the best return but it offers the balanced return with managing the risk which is good enough to take care of your all future financial needs.

• The main aim of asset allocation or financial planning is to achieve your future financial goal and peace of mind. It is not much important that gain a maximum return from the investment but to achieve a peace of mind with achieve a financial goal through risk management.

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

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

Few Points for Old Age Financial Freedom

Some Sutra for old age financial freedom

After a long 15 days vacation spending in my native place, I have came back to my daily routine life. My native place is Kanpur. I have also travelled many places in hinterland and met many people. There is some good news that the new or you can say younger generation is very serious about their financial future. The new generation now have hunger for knowledge and growth which is good sign for India. They understand better the difference between saver and investor. In typical saying we Indian are good saver but not good investor but I hope with all my positive energy this saying would change soon. India would be country of great investor. We will deliver more and more Warren Buffet.

In today’s short blog, we will discuss some important aspects for secure future. We often explore personal finance options at later stages of life when we have lost out on the opportunity to make the most of "power of compounding". Personal finance is one area which is almost ignored during our upbringing to become adult. There are few points which we should keep in our mind for secure future planning.

Buy Insurance at early age: Recognize your life and general insurance need. Keep in mind that insurance is not return generating asset, it is only a financial protection for yourself and your dependents against unfortunate emergencies. Be smart and get a good health insurance plan as early as possible.

Set realistic future goal: Apply SMART approach for your future goal. Simple, Measurable, Accurate, Realistic and Time-bound goals can be achieved easily. Don’t ignore inflation, interest rate movement and time horizon.

Start saving early. Make sure you could save upto 25% at your early earning stage as later it is very difficult to save. When you start save early, it make you more confident and happier. You can also gain from “power of compounding” through early saving.

Never blindly copy of others: You financial goals and condition may not be similar to that of your friends. Each person have different need, goal and risk appetite. Analyze your need, goal and risk appetite and invest accordingly

The conclusion of this article is that saving for future is essential part of everyone's life and all you need to do is start today and start small.

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

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com