Financial Advisor

Monday, May 12, 2014

Pre Election Result Market Rally

Pre pool result market rally….!!!

I was travelling since last 12 days that is why I was not available on my blog in these days. I was travelling across 3 states UP, MP & Maharashtra. I have observed that people are very keen to change in our political system. Markets are at new high as Nifty above 7,000 and sensex above 23,600 with the hope of strong and stable government after 16 May result announcement. The last 10 year our country had witnessed slow decision process, languishing growth and high inflation.

The market expectations are very high and at present no one know the exact direction of the market. Many stocks are still trading from its fair value in spite of all time market high. What should do an investor or trader at this time? It is the common question asked by many of my friends and investors.

In my opinion, election result is an event like other events. For long term and SIP investors I would like to say that the short term moment in the market may be sharp but when we invest in stock market our view should be long term and focus on macro level. We should not put much emphasis on the election result. Investor should stay invested in the market and should take the decision of exit from current investments or change in asset allocation with the help of qualified financial planner and according to your financial goal.

For trader I would urge with folding hands they must put stop loss when they do make any position specially future and option trader. As market my goes towards any direction after election result outcome so be cautious if you are short term trader and want to participate in this event.

Only election result in not the only crucial factor for financial market there are many other factors like inflation rate, IIP data, GDP data, Fiscal deficit, trade deficit, capital inflow, global market and many many others factors. Your sole focus should not only on a particular event. In short term market react very sharp on the events but in long run market reflect the real economy.

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

Monday, April 14, 2014

Impact of general election on equity market

Impact of general election on our market

We are one of the largest democratic country in the world. The general election is the important event of our country. The financial market is keenly waiting the outcome of the election result. Our share market has also performed and made a new high as per positive outcome from this election. Any unexpected or below from the expectation would impact badly on the market in short term. The election result would be come out on 16 May, 2014.

In my view, the outcome of election event is only important for short term. In last few trading days the volatility index has gone up significantly. Let see the market’s 2 days return after the election result:

Election Year	2 days return after election result
1999	6.05%
2004	-16.56%
2009	17.34%
2014	???

If we analyze the election result from 1991 to 2004, the sensex has given 20% return after 1 year. Although it is very difficult to predict the outcome of result but we can easily understand that business cycles will continue irrespective of any government. The long term fundamental is intact for our economy. The last few months has given a good hint for economy like CAD has come down, inflation has also cooled down, the future interest rate till October look stable and afterwards it should also soften which is good sign for our economy.

No doubt, election play important role in driving fundamental and push to the economy. I hope after election the elected government push the investment in system and growth would be on track. The delayed project will get green signal and some important decision would be take in speedy manner.

If anyone who has not invested in the equity market still, it is the right time to reap the benefit of the economy and start investing in the time horizon of 3-5 year. In the next 3-5 year, I expect the good return from the equity market. For retail investor it is the good time to enter the market for 5 year time horizon.

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

Friday, April 4, 2014

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

Friday, March 14, 2014

Public Provident Fund : A summarized view

Public provident fund (PPF) is one of the best tax saving investment option under section 80C in the point of view safety. However, it does not guarantee to build a great wealth but it offer a great sense of safety with capital appreciation. Many of investors often confused between EPF(Employee Provident Fund) and PPF. Today, we will understand about PPF investment. The main feature of PPF as given below:

· Only Indian citizen can open PPF account. No NRI and foreigners are allowed to open this account. If anyone get NRI status after opening the PPF account then he/she can be continue with it.

· It can be opened in the name of single name. Joint names are not allowed. Parent can open this account in the name of minor but the total tax exempt limit would be Rs 1 lakh only including parent’s investment.
· The minimum amount needed Rs 500 every year to maintain it. The investor can deposit maximum 12 times in a financial year.

· The return is flexible but sure and it decided by RBI every year. For 2013-14 the rate of return is 8.7% per annum. It is the safest investment backed by government of India. It cannot be attached under any court order for debt recovery.

· You get tax benefit under section 80C on invested amount subject to upper limit Rs 1 lakh. The return is also tax free.
· It has 15 year lock-in period. After completion of 15 year one can extend it by 5 year block period. It allowed partial withdrawal facility after completion of 5 year after opening the account. The loan facility is also available in PPF.

· The PPF account can be opened in post office, SBI branches. Now some private banks like ICICI bank are also offering such services. If you move your residence from one place to another, in that case you can easily shift it to nearest bank or post office.

It is great tool to accumulate wealth in long term with higher degree of safety. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

Monday, December 23, 2013

Newly Launched Inflation Indexed Bonds by RBI

Inflation Index Bonds (IINS-C)

As per promised in the Union Budget 2013-14, RBI has launched Inflation Indexed National Securities – Cumulative (IINS-C) in this month.. The total return on this fund would be depends on fixed rate (1.5%) and inflation rate based on Consumer Price Index (CPI). Interest rate will be compounded half yearly and only paid at the time of maturity.

The maturity period of this fund is 10 year. The minimum investment allowed in this fund is Rs 5,000 and the maximum investment allowed up to Rs 5 Lakh. The prime mandate of these type of bond are to provide the assurance to the investor to beat the inflation.

Most of investors want to know that which is much better option between bank fixed deposit and inflation indexed bond. To understand it better, here we are going to compare tax liability and penalty if we withdraw fund premature.

Premature Withdrawal:

In case of bank fixed deposit, if you redeem before the maturity, there is penalty of 1% on whole accrued interest amount, it means you will get 1% less interest rate from the rate whatever bank offer you at the time of deposit.

In case of inflation index bond (IINS-C), there would be deduction of 50% of last coupon (interest) rate as penalty, if withdraw it premature. During the time of high inflation, IINS-C will give substantially high return than bank fixed deposit. The return on these bonds would be volatile compare with bank FD which gives fix rate of return.

Inflation index bond allow early withdrawal after one year for senior citizen (above 65 year age) and three year for others.

Comparison for Taxation:

Tax will be levied on interest as per tax slab in both cases. In case of bank fix deposit, you pay tax on each financial year on the accrued interest which is only available at the time of maturity.

In case of IINS-C, investor can pay tax in each financial year or pay once at the time of maturity. Income tax department provide both options in accrual products but it should be uniform, not financial instrument wise.

If you do not need interval income and want to beat inflation in the long run without taking any risk then these bonds may prove for you good investment option.

It is the vast subjective subject. For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

Monday, November 18, 2013

Equity Investment : When should be start?

Equity Investment : Is it the right time to invest ?

I have seen the equity market has become more volatile in these days. On 31^st October it was on all time high. But honestly saying, most of the investor has missed all this share market all time high rally. I am getting so many calls from the investor about it and the very common query is that is it the right time to enter the equity market. With my experiences and studies, I can say with very confidence that anytime is good for invest in equity market. You only need discipline, long term view, good research and passion. If you have these mentioned things, share market is your cup of tea.

Most of time, I find the investor and all of those has many reservation about the equity market. They have so many reasons to not invest in equity market. Some of reason like that I had invested some money in ABC mutual fund but not got return, I have bought some shares and lost money, Now market will be go down more after that I will think about equity investment and so more reason.

What I have seen all of those person’s argument that they all have missed something before equity investment. They did not know the time horizon, investment risk and product characteristic. They have trusted blindly someone and hoped that their money would be grow many times fold in very short time span like a gamble and smuggling. I request to all of the investors please keep in your mind that investment in equity is not gambling.

Ask yourself first before any investment whether you are trader or investor. The reality is that most of us enter in the market like trader and want to make some quick money. Somewhere I have read a very interesting fact about the sensex. If you have invested in the sensex on every October over the 22 year period 1991 to 2012. You have invested Rs 2.20 lakh total investment over 22 years and the value of this investment was Rs 8,67,310 on 1^st October. I think it is handsome tax free return of 11.30% for anyone without much burden on pocket stress.

The outcome of this study that long term view, regular investment is the key of equity investment. One more interesting fact that we have witnessed all negative event like global recession, asian financial crisis. Harshad Mehta scam, dotcom bust, Ketan Parekh scam, India Pak Kargil war, 9/11 world trade center attack in US, war in Iraq, 2008 global financial crisis, European debt problem and many more. In spite of these events share market has given above mentioned return.

Right now I don’t know honestly where will be the market go ahead in short or medium term exactly but I know this is the right time to start invest if you have not invested in equity market till date. Many people have negative view on India and many people are very optimistic about the Indian market after 2014 general election. Many big broking house like India Infoline has stopped the retail broking and HSBS has also stopped the equity market operation. In my sense, all of these news are making a good ground for strong bull market but when the time will tell you only..!!!

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

Warm regards,

Arvind Trivedi

Certified Financial Planner

Tuesday, July 30, 2013

Traditional Plans V/S ULIP Pension Plans

Traditional Plans V/S ULIP Pension Plans

I have read very useful and interesting article on insurance in Business Standard daily and I want to share it with all of my reader. It is very useful for all of you.

Pension plans of insurance companies should carry a warning---when it comes to retirement planning, these are more expensive and don't offer the tax benefit of instruments such as Public Provident Fund (PPF) and National Pension System (NPS). PPF is exempt from tax at the investment, accrual of interest and withdrawal stages, while NPS is cheaper (the commission paid to fund managers is just 0.25 per cent).

In the case of pension plans from insurance companies, the annuity paid is taxed at the hands of the policyholder. And, the commissions and charges are higher than NPS. But if you have invested in PPF and NPS and still want to save for retirement, you could consider pension plans. These help you accumulate savings and build a retirement corpus. A third of this corpus is commuted, meaning it is paid to you on maturity. This amount is tax-free. The rest is used to give you regular income through an annuity plan; this income is taxed.

By providing a tool to accumulate and invest your savings, these plans give you a lump sum on retirement, then used to get regular income through an annuity plan. Given the high cost of living and rising inflation, employer pensions alone aren't sufficient.

Within pension plans, there are unit-linked and traditional ones. The basic difference between the two is the kind of instruments these invest in. So, how does one decide which is best for him/her?

Traditional plans are more oriented towards investment in debt funds, as these have a certain guaranteed sum assured for policyholders at the end of the tenure. "A major part of their investment, about 60 per cent, is in government securities. That is why it may not be possible for a traditional plan to give returns that beat inflation," says Prakash Praharaj, founder and chief financial planner of Max Secure Financial Planners.

In the case of a unit-linked or market-linked pension plan, a policyholder can choose the investment limit he/she wants for equity investment. But market risks are involved, as the investment is linked to equity markets. "If you are starting your retirement planning early, you could go for Ulip (unit-linked insurance plan) pension plans, as these would give better returns. Traditional plans wouldn't give very high returns because of the cap on investments prescribed by the regulator," Praharaj says.

According to Anuj Bhagia, chief marketing officer, Policybazaar.com, Ulip pension plans are preferred. "They allow the policyholder a choice of funds, along with investment in equities, which helps in faster accumulation of funds with growing markets," he says.

Ulips also give the policyholder an option to switch between the investments (debt and equity) three to four times a year. But this would help only if a policyholder understands the market risks and is able to switch at the right time.

According to Insurance Regulatory and Development Authority guidelines, both traditional and Ulip pension plans have to provide minimum guaranteed returns, as these are aimed at building retirement corpuses. Traditional plans guarantee a minimum sum assured, along with bonuses, if any, while Ulips provide a minimum guarantee of about 4.5 per cent.

"Ulip plans go through the vagaries of the stock market. So, the returns may not be as high as expected, while traditional plans, with their debt outlook, are a more trusted partner, though these have slow wealth accumulation. Therefore, as an investor, I need to know what product I would want to purchase, according to my appetite," says Bhagia.

As bonus is discretionary, not mandatory, customers choosing a traditional plan should look at the past record of companies in paying bonuses, says Sanjay Tiwari, vice-president (strategy and product), HDFC Life. The company offers both Ulips and traditional pension plans; there are sets of customers for both.

Another advantage of Ulip plans is the option to top-up or increase your investment. This could help inflate the investible amount, which, for a pension plan, is beneficial to build the overall corpus through the long term, Tiwari adds. For a traditional plan, there is no such option.

Amitabh Tapadar, chief marketing officer, Tata AIA Life Insurance, says while equity gives better returns through the long term, according to the new regulations, insurers have to give a non-zero guarantee, even on Ulip pension plans.

Therefore, there are chances companies offering Ulip pension plans would also invest substantially in debt market, as the equity exposure is limited. Hence, their returns might be less than in the case of pure equity investments.

In terms of costs, Ulip plans score over traditional ones, owing to transparency. Traditional plans are cost-heavy and opaque, unlike Ulip plans, for which all charges are confirmed to the consumer upfront. But a few insurers charge a guarantee fee for Ulip plans.

One should check these before purchasing a plan, Bhagia says. Customers should also look at the history of the insurance company, in providing annuity service, as it is now mandatory to buy the annuity from the same company one buys the pension plan from.

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

Warm regards,

Arvind Trivedi

Certified Financial Planner