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

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

PPF or ELSS ...Which one is good ?

PPF or ELSS…. Which one is good?

The best tax saving investment (80C): Should you invest in PPF or ELSS…………….

PPF does not give fixed returns

Though the Government changed the PPF interest rate from time to time, for a long period of time it had been fixed at 8%. Traditionally investors expected a yield of around 8% from their PPF deposits. However, from 2011 onwards, PPF interest rate has been made market linked and pegged with the 10 year Government bond yield. The chart below shows the historical PPF interest rates.

The benchmark 10 year government bond yield is at 8.8%, which is nearly at its 5 years historical high. Debt market experts consider 9% as the inflection point, since rates usually soften from this point. Interest rate in India has been high for a long period of time now and many experts believe that interest rates will start softening from next year. While a benign interest rate regime is good news for equity investors, since PPF interest rate is linked with the 10 year bond yield, we may see lower PPF interest rates in the future.

Mutual Fund ELSS as a tax saving Investment:

For investors with risk appetite, Equity Linked Saving Schemes (ELSS) is one of the most popular investments allowed under Section 80C. Investors can avail triple benefits of tax savings, capital appreciation and tax free returns in ELSS. An ELSS is essentially a diversified equity fund with a lock in period of three years from the date of the investment. From a taxability of returns perspective, both capital gains and dividends from ELSS are tax free. Over a long time horizon equities give much higher returns compared to other asset classes. However, since ELSS funds are market linked investments, they are subject to market risk and volatilities. Historically, good ELSS funds have given excellent returns. In the last ten years ELSS funds on average have given more than 19% trailing annualized returns. Find the below ELSS Scheme Performances:-

Scheme Name	NAV	1 Year Return	2 Year Return	3 Year Return	5 Year Return	Since Inception	AUM (Crore)
Axis LT Equity Fund	29.29	69.10%	40.37%	36.42%	23.95%	23.74%	3594.86
Reliance Tax Saver (ELSS) Fund	47.59	93.70%	38.94	37.85%	20.84%	18.22%	3796.37
Franklin India Tax Shield Fund	407.85	60.32%	29.20%	28.13%	17.54%	26.50%	1788.99
ICICI Pru Tax Plan	263.83	52.47%	27.83%	28.84%	16.31%	23.66%	2411.75
Canara Robeco Equity Tax Saver Fund	45.68	46.55%	23.65%	24.85%	15.52%	28.21%	871
DSP BR Tax Saver Fund	31.27	54.58%	27.83%	30.40%	15.20%	15.33%	1059.70
HDFC Long Term Advantage Fund	235.02	43.75%	23.59%	25.77%	14.85%	25.22%	1186.49

(All returns in above table in CAGR)
Comparison of PPF and ELSS returns

In the strict sense, it is not fair to compare PPF and ELSS. PPF is a risk free investment, whereas as ELSS is subject to market risks. For the sake of illustration we have shown the comparison of returns of Rs 50,000 annual investment in PPF and a good ELSS fund, over a long investment.

If you started an Rs 50,000 annual PPF deposit in 2002, your PPF corpus as on September 1 2014 will be Rs 11.4 lacs, with a cumulative investment of Rs 6.5 lacs.

If you had started an Rs 50,000 annual investment in a top ELSS fund like the ICICI Prudential Tax Plan in 2002, your corpus will be Rs 37.5 lacs.

Should you invest in PPF or ELSS:

Both PPF and ELSS have their merits and demerits. Your investment choice should be informed by your investment objectives and your risk tolerance level. Age and financial situation are certainly two important factors that determine risk tolerance of an investor.
Investors with high risk tolerance should invest in ELSS, while investors with low risk tolerance should invest in PPF. Over a long time frame wealth creation potential is much higher with ELSS, as we saw in the charts above.
Young investors should opt for ELSS, since they usually have high risk tolerance and a sufficiently long time horizon to ride out the volatilities associated with equity investments.

Conclusion:

Both PPF and ELSS are wonderful tax saving investment options. However, their suitability depends on the financial objectives and the risk profiles of the individual 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 seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Beware of Ponzi Schemes

Beware of Ponzi Schemes..!!!!

I was travelling in the train from Mumbai to Ujjain. In the train compartment, I was happily travelling with the fellow traveler. Although we never met before but got very close to each other during conversation. We all were 4 persons including me. All were between 30-40 year age group. One person was businessman and other 2 were doing job in MNC. When they knew about my profession about financial adviser then the subject of our discussion turned towards investment and I was told that all of them had recently invested in PACL (Pearls Agrotech Corporation Ltd), s deposit scheme. They were very happy after investing in this scheme as the scheme were promising very high return than bank FD or a plot subject to availability. One of very close friends of that businessman had advised and forcibly done the investment. MNC employee had invested as their boss had invested in that scheme.

I cautioned them to invest in such type of schemes but they were very confident. After all scheme was suggested by their very close friends. They all were very happy and carefree about investment and told me that many people had invested in this scheme and even you should also participate in this scheme. I have refused their advice and warned them about these types of schemes in future. After reaching destination we had exchange mobile no. and said goodbye to each other.

Before few days I have received a call one of them and he had told me that you were saying right the PACL was banned by court to collect further deposit from the investors. Many times we all get trapped in such type of schemes after emotional advice from our relative, neighbor, co-worker or companies agents.  

Ponzi schemes are schemes that makes the tall promises of high return which is many time more than bank FD return on your investments and invest in opaque and unregulated instruments. Often these types of scheme are not on the regulatory radar.

I again advise all of you please do not invest in any scheme only on the basis of anyone’s advice, do your own homework before investing after all it is your hard earned money and you have to decide where it should be parked. If anyone offers you an assured high return product that offers more than simple bank fix deposits, be alert.

Never trust on oral promises read all term and condition and know about instrument where your money would be invested and how the return would be generated. Check the schemes rating and do not follow the herd mentality. Herd mentality means many times you invest in the same investment of your best friends. Often they told you their friends got great return and forced you to invest. Listen to all advice but invest if it makes sense. Do not fall for those schemes that seem too good to be true.

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 not ignore debt mutual fund..!!!

Are you ignoring debt mutual fund at this moment…??

In these days most of the market expert and economist are very bullish on equity for investment. We are reading the news paper and watching business channel and the majority of people (including expert and common person) express the hope of rosy days. Everyone hope for better days (Achhe Din). I am also not against it. After all UPA govt mess, we the citizen of India have chosen the full majority government and hope for some good action in each front including economy, internal security, defense, foreign policy, social sector etc.

If we analyze, we will find that UPA-2 was worst than UPA-1. Increasing inflation, increasing fiscal deficit, higher interest rate has translated into the poor manufacturing growth, unemployment, and bad shape of economy. The slow decision making on many key issue has added the problem more and our GDP has reduced to almost 4.5% at the end of UPA-2 government.

After September, 2013 the announcement of PM candidate Mr. Narendra Modi from BJP, equity market has shown spectacular performance and it has been continued throughout election campaign till the budget which has presented by the newly elected government. Now the big question is whether this rally would be continued till the next couple of the year in the same manner or not. Mutual fund house, stock broker and equity market participants are still very bullish and positive about the share market performance in the next one or two year.

After analyzing  all the above past events, I have come with some key points for the investors which every investor should keep in mind before investment at the present scenario.

Do not expect or hope and magic from the new government in near term. This government has good intention and capacity to bring the economy on the right track but for this you will have to wait. Keep in your mind, there are no magic stick for economic reform. The government will take time like 2-3 years to repair the economy after that there may be come positive results.

I always say and write in my previous articles that equity investment is the best option for long term investment but for short term it will always volatile. So please do not enter in this market for some short term gain. There is always risk in the market in short term performance.

Do not try to time the equity market, you will lose the money in majority of the time. According to AMFI data, last year in June 2013 there was huge inflow in debt market and the inflow was very poor in equity market. Everyone can see the performances from last June to this June, equity asset class has outperformed to every available asset class. It means majority of speculator and market timer was wrong at the time of last June 2013.

We are seeing the same trend at this moment after the big market rally, now the inflow of fund has increased many folds in equity segment in compare with the inflow of last year at the same period and inflow has reduced surprisingly in the debt mutual funds. Here, you can see the very clear trend that majority of investor only try to time the market and want to make money in the short term.

In my suggestion, stick with your financial plan and keep investing in both assets equity and debt accordingly. Equity will always outperform to all the asset class in the long term. Do not ignore debt asset class at the present scenario. Do your proper asset allocation and avoid overweight towards any asset class particularly equity.

It seems, I should stop at this moment as the article has become lengthy already. We will discuss more in next articles.

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

SHRIRAM CITI UNION FINANCE LIMITED: NCD Offer

SHRIRAM CITI UNION FINANCE LIMITED: NCD Offer

If you willing earn more than bank fix deposit then this NCD for you. Obviously you would have to take more risk for that. Shriram Citi Union Finance Ltd is an NBFC and part of the reputed Shriram group of companies. It offers loan to the small enterprise, provides  loan against gold, financing for two wheeler and other commercial goods segment. It is the market leader of small loan segment in financial year 2013 with the estimated market share of 41.6%.

The company has come with public offer secured NCD of face value of Rs 1,000 each. The total size of issue is Rs 20,000 lakh. The 40% of issue is reserve for retail investor category. The retail category investment limit is up to Rs 5 lakh. The minimum application size is Rs 10,000 (10 NCD). The NCD would be listed on BSE. It would be available in both mode physical and demat form.

If you have invested Rs 10,000 in this NCD, you will get the below mentioned amount at the end of the term.

24 Month	36 Month	60 Month
Rs 12,321	Rs 13,862	Rs 17,427.60

It means the effective yield per annum would be 11% for 24 months, 11.50% for 36 months and 11.75% for 60 months.

Taxation:

A listed debenture is treated as a long term capital asset if you hold it more than 1 year from the date of allotment. The long term capital gain would be 10% if calculate without indexation and would be 20% if use indexation method.

Rating agency CARE has given it AA rating. Investor may choose this to allocate some part of their investment portfolio. 

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

Beware of your bank representative

Beware of your bank representatives..!!!

It is seen, we Indian have very much trust with our banks. Fixed deposit in bank gives us peace of mind and a sense of greater safety. We give much importance to safety of our capital than real return. As we enter in bank branch, we totally surrender ourselves to the bank representative. A bank representative with skilled communication push to the other financial products like insurance, ULIP, endowment, money back policy and many more other products for complete their monthly target.  

I tell you here, a true event which happened today inside the bank branch which is very famous brand in banking industry. Although it is very common in our country but I still want to share it with you. I was in Axis Bank branch in the morning to make a demand draft. I have submitted the request for the same and waiting for collecting my DD. The process to make DD takes 10 - 15 minutes usually. A 25-26 year approximate age girl in the banking counter was explaining a fix deposit plan to a client. She was promising 24% fix return from a mutual fund scheme if he deposit money for 3 years and repeated it thrice with very confidant and smiling face. The surprising thing was that customer had got convinced from that girl who was representing the bank for invest in that scheme within 30 seconds. I was shocked that the customer had not asked any question about the risk associated with that scheme. When customer asked about the tax benefit in that scheme, she had smiled with moving her head and said “No, Mutual Funds me koi tax benefit nahi milta hai” (There are no tax benefit in mutual fund at all).

I was very shocked and surprised for that the witty communication by that bank representative. It was a clear example of mis-selling by that bank employee. In realty, a bank customer was cheated by that bank employee. A thousands and millions bank customer was cheated by such representatives of the banks. I am not against any bank or and bank representative but yea I am against their faulty communication with the bank customer. Anyway, I am giving you below some points which every investor should always keep in mind when they make an investment decision.

• In mutual fund, there is no assured and fixed return. The return is totally depends on many factors like market movement, interest rate, inflation rate GDP growth and many more.

• The promise of 24% is unrealistic return in such current economic condition when govt bond offer around 8%. I am not saying it is impossible but you cannot commit it to anyone.

• There are tax benefit exist in mutual funds scheme which I have written in my past articles. When you promise such a high return, you should also talk about risk associated with such schemes whether mutual fund or any other asset class.

• As an investor, it is also your responsibility before making any investment decision understand the risk and return properly.

• Do not believe on any agents, bank representative do your own research from many other sources. The agents are not your friends. They also have some sales target. So next time, beware from such agents and representatives.

 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