Saturday, December 19, 2009
Sunday, November 29, 2009
Eight-step guide to financial planning
When you start earning, there is this rush of power you get by seeing money accumulate in your account month-on-month. And this can be quite addictive. More often than not, most people, especially those in their early twenties on their first jobs don't do much with the salary credited to their account, besides spending it.
If any money is left after the splurging, it usually lies in the account idle. This happens for two reasons: One, you don't know how to go about investing and two, you haven't really thought about investing any money as you have no need for it at the moment.
Life, Health and Medical: That investments are a must is a given, All you have to do now is to work out how you intend to invest your money, i.e. what are your priorities, where you will invest money and how much. Now, this needn't be compulsory, but for those unsure of where to start from, insuring life and health (mediclaims) is usually a good idea. This is the most basic investment. It's one way of ensuring you don't make your family liable in case something happens to you. A mediclaim even offers cover for family, so it's security during troubled times.
Save judiciously: This is a matter of discipline. Each month, there has to be a set amount of money from your salary that is saved. It could be any amount, Rs 1,000, Rs 5,000 or Rs 10,000. The point is, each month, this amount has to be saved no matter how many birthdays or anniversaries happen. As the saying goes, A penny saved is a penny earned – so start saving!
What's your goal? You need to indentify this early. Each person has a financial goal. For some it is a three bedroom apartment in the suburbs, some others it's a car, or child's education or marriage, etc. The goals vary but these need to be identified quickly. First time earners may not really have an immediate goal, but this is where some thought is required. It's important as soon as you start earning to have some sort of an idea of what you intend to achieve with the money you make. This helps plan your finances immensely.
Prepare to invest: Once you know your financial goals, it helps to draw a basic sketch of the amount of money you will need to invest/save in order to achieve it. The investment options one chooses has a lot to do with a person's risk appetite. You need to gauge your risk-taking abilities. Some people prefer playing it safe, yet others like a bit of a gamble, if it means they can earn some quick bucks. The ideal approach is of course a balance of the two. But either way, investments are crucial. So be it, sedate and secure debt funds or aggressive and unpredictable equity funds, it's never too early to put in some money on these.
Repaying loans: It's unavoidable! At some point or the other, everyone finds themselves in some sort of debt. It could be your house, car, education or even your credit card. Whatever it is, your financial plan must include provision for paying off these debts. If you have more than one, then naturally, the priority will be the high-cost followed by the rest in that order. However, an early understanding of never spending more than you earn should ensure that you don't have to pay off bills and EMIs after the due date.
SOS provision: Emergencies don't call in before knocking on your doorstep. And while there's no guarantee of the degree of damage it brings, it is nevertheless important to have some provision for the same. Say an FD kept safe in the bank or shares of a popular stock or gold in the locker or any other investment that you can dig into if the situation calls for it. The important thing is to identify the funds you will use during emergencies.
Allocating assets: When you are making an investment plan, it's necessary to understand your money needs. Say, you will need money on hand in two years time to pay for your daughter's MBA, or money for down-payment of a car loan the next year. Identifying these needs will help you allocate your assets accordingly, such that you have liquid funds at the appropriate time. So, planning is not just about the end financial destination, it is also about accounting for the little stop-overs on the way. Your dream may be a duplex apartment, but on the way to getting there, you'll find yourself wanting a car, a vacation every year and perhaps some retirement provision as well. And your financial planning has to accordingly have assets distributed such that you can achieve those goals
So, do save, make a plan and start investing now!
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Monday, November 23, 2009
Launch of Birla Sunlife Platinum Plus IV
Key Features:
Policy Term | 10 years |
Min/Max Age at Entry | 18 – 70 yrs |
Max Age at Maturity | 80 years |
Minimum SA | 5* Annual Premium |
Minimum Annual Premium | Rs 50,000 for Annual Mode, Rs 25,000 for Half – Yearly Mode, Rs 15,000 for Quarterly Mode, Rs 10,000 for Monthly Mode. |
Fund Options | 100% in Platinum Plus Fund IV |
Premium Payment Terms | 3 yrs with Annual/Semi-annual/Quarterly/Monthly Mode |
Tax Benefits | Avail Benefits under Sec 80C and Sec 10(10D) |
Read more...
Sunday, November 8, 2009
Beware of insurance mis-selling at banks
Beware of insurance mis-selling at banks | |||||||||||||||||||||||||||
These days, you may walk into a bank for a fixed deposit and leave with an insurance product as well. But what if the policy turns out to be not what you had bargained for? According to a senior banking ombudsman official, mis-selling of insurance products is known to occur at branches of some private sector banks. Consumers must know that mis-selling is not restricted to anonymous tele-banking executives , mentioned earlier in these columns. Even regular executives at a bank branch could sell a product that may fall short of promises. Aggressive marketing is a reality in bancassurance the official term for selling of insurance products by banks.
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Demystifying insurance policies
But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.
The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.
HOW TO REVIEW YOUR COVER
Today single-income families are making way for more double-income families. But that doesn't reduce the financial responsibility for either of the spouses.
"The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children's education, retirement, health and savings. These change with the changing life stages and are driven by the individual's specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment," Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.
This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.
This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children's education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.
INSURE YOUR HOME LOAN
If you have a large home loan, it's a wise option to cover the liability. A borrower wouldn't want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.
"Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.
Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year," Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.
BUY EARLY, BUY BIG
You can opt for a step-up option which increases the value of the sum assured over a period of time. This comes at a higher premium as it proves to be more cost-effective than buying multiple policies. For example, SBI Life offers a term product called Shield in three variants.
The first one is called a level cover, which is a fixed sum assured throughout the term of the policy. In the second and third options, a customer can increase the sum assured by 5% every year and 50% every five years. If 30-year old Mr Sinha opts for a 20-year level term policy, he would have paid an annual premium of Rs 2,504.
The 5% step-up option will cost Rs 3,552 and for the 50% step-up option the premium will be around Rs 4,189. But if Mr Sinha is planning to enhance the life insurance coverage to Rs 50 lakh (even half of his requirement), he would be better off investing in the 50% step-up option.
Even if Mr Sinha invests the difference amount (between level term policy and 50% step up option premium) in a fixed deposit at 6% even then he will have to dip into other reserves/savings to fund the premium of another policy after 42 years of age. The interest saving alone will not suffice.
For more details, please visit
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Sunday, November 1, 2009
ICICI Pru Pinnacle: Guaranteed Highest NAV
Guaranteed NAV With ICICI Pru Pinnacle, we guarantee the highest Net Asset Value (NAV) recorded on a daily basis, in the first 7 years of the fund, subject to a minimum of Rs.10. The guarantee will be applicable only at maturity. The period of 7 years starts from the date of launch of Pinnacle Fund and will end on the completion of 7 years (from 24/10/09 to 24/10/16). At maturity, the higher of Fund Value (Units X NAV) and Guaranteed Value (Units X Guaranteed NAV) as on the maturity date shall be payable. Scenario 1 Scenario 2 50,000 50,000 Rs.20 Rs.20 Rs.15 Rs.25 Rs 10.0 lacs Rs 10.0 lacs Rs 7.5 lacs Rs.12.5 lacs Rs. 10.0 lacs Rs. 12.5 lacs Not only this, ICICI Pru Pinnacle gives a boost of additional allocation amounting to 3% of Fund Value on the day of maturity (Guaranteed NAV will not be applicable to additional allocation) Premium Payment Term 3 years Minimum Premium Rs.50,000 per annum Modes of Premium Payment Half yearly/Yearly Minimum/Maximum Entry Age 8/ 65 years Policy Term 10 years Maximum Maturity Age 75 years Minimum Sum Assured 5 x Annual Premium Tax Benefit Premium and any benefit amount received under this policy will be eligible for the tax benefit as per the prevailing Income Tax laws. ICICI Pru Pinnacle: UIN 105L095V01
ICICI Pru Pinnacle
ICICI Pru Pinnacle is a unit linked insurance policy that offers the advantage of varying exposure to equities along with downside protection, so that your investments are protected in financially volatile times. It also offers a limited premium payment term while allowing you to enjoy insurance protection for a longer period.ICICI Pru Pinnacle is similar to SBI Life's Smart ULIP, BSLI Platinum Plus and TATA AIG's Invest Assure apex.
All three plans guarantee the highest NAV on the maturity during the fixed term.
ICICI Pru Pinnacle guarantees highest NAV recorded on daily basis for the first seven years (from
This policy has two distinct features.Addition of amount equal to 3% of fund value (not highest but prevailing NAV on maturity). This will enhance the return further.
Unlike other two plans (Smart ULIP and Invest Apex Assure), highest NAV is recorded on daily basis.
Features and benefits of ICICI Pru Pinnacle
Number of Units at maturity
(A) Guaranteed NAV
(B) NAV on maturity date
(C) Guaranteed Value
(A x B) Fund Value
(A x C) Higher of (Guaranteed Value, Fund Value)
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Wednesday, October 28, 2009
RBI hikes SLR by 1%, leaves key rates unchanged
Repo and reverse repo are rates at which the RBI lends to banks and vice versa while SLR is the minimum amount of cash, gold or bonds banks need to maintain with themselves.
By hiking the SLR, the RBI may be signalling its leaning towards tightening the accommodative monetary policy.
Late last year and during early 2009, the RBI and the government of
Inflation target upped
While the excess liquidity in the system may have succeeded in turning the economy back on the recovery track, it could be meet its first after-effect in the form of rising inflation soon. In fact, in the mid-term review, the RBI increased its March-end wholesale price index (WPI) inflation estimate to 6.5% with an upward bias, revised from its earlier target of 5%.
The estimate for FY10 gross domestic product (GDP) growth was left unchanged at 6.0% with an upward bias.
Also, the central bank cut its FY10 credit growth target to 18% from 20% that it had set in the July monetary policy review.
Stricter NPA norms
The RBI also asked banks to ensure that their total provisioning coverage ratio is not less than 70% and imposed a timeframe of September 2010 to achieve this target. The coverage ratio is a measure of the bank's ability to absorb potential losses for non-performing assets (NPAs) and is arrived at by calculating the loan loss reserve balance with the total non-performing loans.
Most banks will thus to significantly raise the coverage ratio.
Realty loans tighter
Among one of the discernible decisions that the RBI took in its review, it increased the provisioning requirement for advances to the commercial real estate sector classified as 'standard assets' from the present level of 0.40% to 1%, a move that makes lending to the sector tougher. "In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets," the RBI said.
RBI view
"There has been a discernible improvement in the global economic outlook since the First Quarter Review in July 2009," RBI Governor Duvvuri Subbarao said, in his review statement. "In
Subbarao admitted that
The governor said that, around the world, timing an exit from the stimulus packages was leading to an "active and animated" debate. "The 'exit' is a central issue in our policy matrix too. As the Reserve Bank has indicated in several public statements, our current monetary stance is not the steady state and we need to reverse the expansionary stance," he noted as he made cases for both beginning and deferring the monetary tightening.
Experts react
"We are very happy that the governor and the RBI have kept the main parameters of the policy intact. This is what we had hoped for," Finance Secretary Ashok Chawla said. "The composite number of inflation is expected to be about 6% by the end of March 2010. That is something, which will be kept in mind by the policymakers both here as well as the RBI as they have mentioned in their policy statement."
Reacting to the monetary policy, HDFC Bank's Chief Economist Abheek Barua said the hike in SLR would support the large borrowing programme of the Centre and states. "I see the RBI hiking the CRR in December 2009 or January 2010," he said.
The RBI upping the provision for lending to real estate will affect affordable housing, realty projects, HDIL said. "We will have to up prices to nullify the RBI hike," a clearly distraught HDIL said.
With inputs from CNBC-TV18 and agencies
Published on Tue, Oct 27, 2009 at 11:23 , Updated at Tue, Oct 27, 2009 at 20:15
Source : Moneycontrol.com
http://www.moneycontrol.com/news/economy/rbi-hikes-slr-by-1-leaves-key-rates-unchanged_421041-0.html
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Sunday, October 25, 2009
Sunday Newsletter 25-10-2009
Sunday Newsletter for 25
Weekly Change
Index | 17-Oct-09 | 23-Oct-09 | Change(Pts) | Average Daily Volume (Rs.Crores) | Change in Volume (% over previous week) |
Sensex | 17,326.01 | 16,810.81 | -515.20 | 5574 | 4.30 |
Nifty | 5141.8 | 4997.05 | -144.75 | 17294 | 9.61 |
Volatility Watch
Date 11-07-07 (Base Value) 19-10-09 20-10-09 21-10-09 22-10-09 23-10-09 SENSEX 14910.62 0.00 17223.01 17009.17 16789.74 16810.81 Raghav's Picks Sensex Volatility Indicator 100.00 0.00 76.18 73.00 72.27 71.27
Indices Watch 23
Index Previous Close Open High Low Close % Change Sensex 16789.74 16795.66 17006.77 16765.20 16810.81 0.13 BSE - Midcap 6444.27 6506.33 6575.46 6488.06 6510.89 1.03 S&P CNX Nifty 4988.60 4986.55 5054.95 4983.25 4997.05 0.17 CNX Nifty Junior 9661.05 9695.85 9850.85 9695.85 9739.95 0.82 CNX IT 5033.60 5054.30 5163.90 5054.30 5126.15 1.84 CNX Bank Nifty 9090.10 9189.10 9261.60 9131.05 9188.40 1.08 S&P CNX 500 4089.80 4140.80 4149.65 4095.70 4104.75 0.37
Date | Rs/$ | 6.90% 2019 Bond % | Sensex Earnings Yield % |
22-10-2009 | 46.66 | 7.38 | 4.64 |
23-10-2009 | 46.45 | 7.47 | 4.65 |
Week ending | Inflation (%) |
03-10-2009 | 0.92% |
10-10-2009 | 1.21% |
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