Categories: Financial Cocktail Samosas


Will Your Planning Be Good Enough to Let Your Child Study in a Good College?

Every parent wants to provide the best education for their children. However, the high cost of education in private institutions and the higher rate of inflation in the educational sector make it difficult for many parents to do it comfortably.

According to the Ministry of Statistics and Programme Implementation, the education inflation rate in India was 0.63 percent in April 2021 and 1 percent in May 2021, but has increased to 4.12 percent and 4.09 percent (provisional) in the corresponding months of 2022, respectively, making the education inflation more than 10% per year compounded. To ensure that the available money doesn’t fall short of the requirement, parents need to look at the following issues carefully if they have to meet this important goal in their life:-

  • Start saving early to counter education inflation: For compounding of wealth to work its magic, it needs time. Starting the saving when the child is young gives us (the parents) advantage of time. Regular investment in a higher-yielding asset like equity for a long term provides the required returns to achieve such a goal.
  • Student Loan: Loans help to fill the gap between the finances available and the finances required. Such loans generally provide flexibility in repayment and also tax benefits on interest paid. Interest on an education loan is eligible for tax rebate under Section 80E of the Income Tax Act 1961 without any limit.
  • After-education pay: Many loaning agencies allow EMIs to start after students complete their study programme so that one doesn’t have to worry about repaying immediately.
  • Easy repayment terms: Certain banks offer very reasonable interest rates on education loans and even give preferential rates for top-ranked universities and institutes. A good research is required by the parents to get the best bargain.
  • Building financial prudence: Taking on an education loan is a great opportunity for your child. It creates a sense of worthiness when they pay for their own education, without the need to depend on family. Besides this, they also start building their credit history. A good credit profile will help them get cheaper loans in the future.

(Contributed by Kritika Saini, Relationship Manager, Team Arjun)

How Good an Investment Portfolio Are You Creating?

An investor’s journey is always interesting. However, it is a long and testing path that one has to travel alone by keeping the emotions under control. Now the question arises: how can we make sure that this journey is successful? The answer is to create a good investment portfolio.

An ideal investment portfolio is the one that we can continue year after year without much changes and churning. Let’s discuss what an investment portfolio should look like and how to build it.

Leading with purpose

The disciplined approach to investing begins by focusing on certain factors that will serve as pillars for your investment decisions. Identify your future financial goals, investment horizon and risk-taking capacity before anything else.

The next step is to divide the portfolio into two asset classes: equity and debt. By equity, we mean equity mutual funds and maybe stocks.
As an investor, market trends and euphoria will never stop chasing you (or is it the other way round!). So, within stocks, we have two categories: Core Portfolio for stable stocks and Satellite Portfolio for trendy sectors. To reduce your burden of choosing stocks and following active management by the fund managers, there are active and passive mutual funds that help you keep your goals intact.

Last but not the least, we never know when a tough time is ahead. Therefore, keep your debt investments in place and get a risk-free fixed return. In the debt class, it is always recommended to invest in tax-efficient debt mutual funds, supplemented with corporate FDs and bonds, rather than choose tax-inefficient traditional avenues.

Build an ideal investment mindset to build an ideal investment portfolio.

(Contributed by Ayushi Gupta, Associate Financial Planner, Team Arjun)

Want a qualified planner for your portfolio review? Let’s connect.

Don’t Let Lack of Discipline Ruin Your Wealth Creation Process

Everyone has certain goals and desires in life, and it is a well-known fact that achieving success requires proper discipline and determination. Even your child needs discipline and constant monitoring to achieve his/her goal of being a good student. Hence, as a grown-up individual, you definitely need to invest regularly and wisely to meet your financial goals. Everyone should follow discipline in their investments just as Armed forces officers follow certain rules and regulations in their everyday routine.

When it comes to investing, discipline means taking the steps that will move you closer to your objectives. In a volatile market, one should maintain control of their actions and avoid being swayed by the short-term ups and downs of the market.

For example, many people start their SIPs for 20 years with the intention of building wealth, but after seeing negative portfolio returns over a period of a few months or a couple of years, they quit their SIPs that was intended to be for 20 years. In this case, when the equity markets remain volatile and follow a bear trend, then you should not look at your portfolio and let the SIP go in a disciplined manner according to your risk profile. You should even infuse some more amount into your portfolio because a bear trend in the short term gives you golden days of investment opportunity in the equity market.

Investment discipline means you have a strategy to meet your goals, minimize risk and minimize the costs. Don’t be tempted to make emotional decisions then.

(Contributed by Shaheen Akhtar Associate Financial Planner, Team Prithvi)

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Also Visit at: Financial Cocktail Samosas Bitesized Money Morsels For You, 15/06/2022

June 23rd, 2022

Should You Choose Physical Gold or Digital Gold for Investment?

Gold has traditionally been a favourite investment option among Indians. Once upon a time, the only way to buy gold was to get it in its physical form, but as time has passed, better venues have emerged. Physically holding gold presents certain challenges, such as loss by theft, purity concerns, ornament making charges, storage and maintenance costs, among others. Digital Gold eliminates these issues. You can now purchase gold while sitting comfortably at home by investing in Digital Gold.

What exactly is Digital Gold?

As the name suggests, when you buy gold in digital form, it is added to your digital account, typically in your demat account. When you sell it, its current cost in money terms is handed over to you. There is no threat of the gold being stolen or even loss of gold in processing. There are certain variations to this simple digital transaction like getting full or part of the amount converted to physical gold on sale.

What are the common forms of digital gold available?

  1. Sovereign Gold Bonds (SGBs): These bonds are issued by the RBI and are therefore fully guaranteed by the Government of India. Investors are assured of the then market value of gold at the time of maturity along with getting semi-annual interest of 2.5% p.a while the bonds were held with you.
  2. Gold ETFs & Gold Mutual Funds: Investors can buy digital gold in the form of gold ETFs and gold mutual funds. They are backed by actual physical gold that is stored with a gold custodian bank, making them extremely safe to hold. These can be bought by lumpsum money or through monthly small amounts in form of SIP

From an investment perspective, digital gold is indeed emerging as a better and more viable alternative. However, physical gold will continue to be in demand due to its use extensively as ornaments, though from investment perspective it is a costly preposition.

Also, remember not to have more than 5–10% of your total financial investments in Gold at any time.

(Contributed By Yogesh Gola, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

How to Create Good Money Habits?

Addiction to anything is unhealthy – smoking, drinking, eating, even excessive exercising. Bad financial habits also would rank somewhere at the top in this infamous list. Fear and greed, excessive emotions attached to money management, impulsive behaviour and wanting to get rich quick generally are the primary causes of bad financial behaviour. Let’s see what we can do about correcting them.

Don’t Mix Emotions and Investments: We hear one-sided stories of people making it rich with direct stock investing, Futures and Options, Cryptocurrency trading, penny stocks etc and we try to emulate them without knowing the other part of the story or developing knowledge and expertise for it. On the other hand, tendency to be overly safe and investing only in bank FDs and post office schemes, without caring for their overall negative returns after counting in the inflation and taxes makes our money lose out hugely. Remain balanced, focus on your future financial goals, work out carefully how you need to invest for the long and short term and then don’t let emotions derail the cart. If required, approach a competent financial advisory company for help.

Invest Salary hikes and bonus wisely: Most people eagerly wait for the bonus and salary hikes to increase their expenses or buy white goods. Short term gratification is sacrificed at the altar of long term financial fulfilments. While some part of such largesse can be used to increase the lifestyle, the major part should go for your future goals – invest the bonus or increase your SIP by at least 10% on a yearly basis in your existing portfolio to see your future dreams come through more easily.

Resist Discount purchases: With shopping just a click away and huge online easily discounts available, to get lured into buying things which actually one doesn’t need but feels good buying is all too easy. Resist this temptation of buying that larger screen TV or changing the car when current one is perfectly fine or competing your neighbour on latest gadgets is a sure recipe for financial doom. Control your shopping desires and stick to the list of what you actually need.

Finally, it is your self-control, detailed planning and resisting emotional financial outbursts that will save the day and lead you to financial freedom. Remember, More money can never fix bad spending habits.

(Contributed By Nidhi Dogra, Associate Financial Planner, Team Arjun, Hum Fauji Initiatives)

Fix the Leaks in Your Portfolio

If you spot a leak in the plumbing systems in your home, even though it is small, it is important to fix it immediately lest it led to greater inconvenience later. The same applies to your investments where similar vigilance needs to be exercised. Look closely at your portfolio, and you may spot some leaks and gaps that you need to plug in. Given below are the three plugs to protect the leaks and gaps that may be hurting your portfolio.

Investing in tax-inefficient products: People often go with tax-inefficient investments like bank FDs and Govt investments which seem safe but offer low post-tax yields and result in negative real yields after accounting for inflation. Here debt mutual funds score – they could give you similar safety with no tax till you sell, and if you sell after 3 years, you could save 60-80% of the tax for you. Couples can minimize overall tax liability by dividing investments between the two but do take care in it to not invite the clubbing provision. Another way is to adjust the capital gains by setting them off against the losses from other investments.

Don’t miss out on the gains: The best time to invest comes during the correction phase in the stock markets and not when they are riding high. So, when the markets are down, unless you need the money, it is best to remain invested and even buy more to poise your portfolio to capture the upside. Also, dividends in mutual funds could prove to be the leak in your profits by continuous withdrawal from the market without caring about the market conditions.

Plug the gaps in liquidity: Keep your exposure to illiquid investments in check. A reasonable amount of liquidity should always be a part of your portfolio so that emergencies and unforeseen expenses do not force you to sell your profitable investments rather than riding them to better gains.

High-Cost Possibilities: While products will have their basic intrinsic cost, avoid high-cost investments like endowment insurance policies and Unit Linked Insurance Plans (ULIPs) which will drain out your portfolio without giving you any commensurate benefits.

(Contributed By Priya Goel, Associate Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

Also Visit at: Financial Cocktail Samosas Bitesized Money Morsels For You, 09/06/2022
June 17th, 2022

Should We Exit from International Funds?

International funds, ie the mutual funds which invest in the stock markets of other countries, are negative in most of the portfolios. In some cases, this negative downside is quite significant. Should you exit then, so as to limit your losses? Before taking such a decision, let us look at a couple of points as below.

What’s happening in International Markets: Currently, most of the stock markets are very volatile due to various economic factors – the Russia-Ukraine War, rising inflation, oil on the boil and US Federal Reserve (US’ central bank) actions. But please remember that all these are nothing but short-term occurrences. Compare it to March 2020 when markets crashed hugely due to Covid and most portfolios went hugely negative. A large number of people panicked and redeemed their portfolios fearing nothing will survive now. Those who took our advice and in fact bought instead of selling, have got the returns of their lifetime within a year or so. The current scenario is also on similar lines, though not so extreme. Thus, whether it is the Indian equity market or international markets, patience is the only strategy to generate wealth.

Investment Horizon: While investing in international funds, the investment horizon should be long-term only, typically 4-5years if not more. For those quoting last six months’ scenario to justify an exit now, using a short term lens on one’s long term investments would only lead to you paying exit loads, taxes and more importantly regrets when the scenario changes.

Performance of a Particular International Fund: When there is no problem with the fund management and the fund’s under-performance is only due to general economic scenario, there is no point in taking a hasty decision.

A long-term investment does not need a day-to-day monitoring action. Let it breathe and grow with a long-term management as was originally planned.

(Contributed by Shaheen Akhtar, Associate Financial Planner, Team Prithvi)

Invest Like a Billionaire!

Warren Buffet has famously said, “When we own portions of outstanding businesses (companies) with outstanding management, our favourite holding period is forever.”

Let’s discuss this in brief. The buy and hold strategy is a passive investment style where you attempt to buy the securities and forget about them for the time frame that they were invested. Of course, while investing, huge amount of due diligence has to go in to select the investment avenue along with their syncing with your goals, time frame, and risk appetite. For instance, if you are investing for the retirement, then hold it until you retire with zero to negligible churning in your portfolio and only monitoring once in 6 months to a year to check that your chosen investment avenue is doing fine.

An active investor can never be more effective than a buy-and-hold investor, but the biggest challenge is riding the ups and downs of the investments you own rather than attempting to swing trade the price movement, which is nobody has ever been able to do with any consistency.

Always remember that time in the market is far more important than timing the market. That’s how the billionaires have created their wealth and that’s how you need to think think, to be one.

(Contributed by Ayushi Gupta, Associate Financial Planner, Team Arjun)

Tackling EMIs of loans in a Rising Interest Rates Scenario

In May 2022, RBI hiked the repo rate by 40bps, a move that directly impacts loan borrowers’ pockets in terms of monthly equated outflow (EMI). The following are certain ways that can lower your EMI burden:

Opting for the Home Saver option: The borrower can deposit his excess savings in a current account linked to his home loan account. While calculating the interest component, the bank deducts the balance in the current account from the borrower’s outstanding principal. The money so parked is easily available for withdrawal in case of any emergency. The money in the linked current account helps reduce your interest burden while remaining easily accessible. But remember that since your interest goes down, you may have lesser tax benefit available on this account.

Tenure Extension with the Same Lender: To reduce your interest burden, you have two options: either continue with the ongoing repayment schedule with a higher EMI or switch to a long tenure with the same EMI amount, latter being banks’ default option. Please take a conscious call based on whether you can afford a higher EMI.

Check If You Are under the Old Interest Rate Regime: If one has taken a home loan before October 2019, then it is likely that the interest rate regime of the loan will be MCLR or Base Rate based. While all new loans were shifted to the external benchmark rate after October 2019, the old loans were allowed to run under the existing system till the time borrowers applied for a change to the new regime. If your loan is old, then you must check its regime and the interest rate that you are paying with the lender. If the existing is higher than the new regime, then it’s the right time to switch to the existing regime by paying a nominal fee.

(Contributed by Kritika Saini, Relationship Manager, Team Arjun)

TATA IPL 2022 Twists and Investment Lessons

The recently concluded popular cricketing extravaganza has plenty of investing lessons too for us. Let’s have a look at them.

1) The Mumbai Indians, the five-time champions, ended last. The Champions continue to rotate. You can’t rely blindly on the same champion again and again. Proper analysis should be the basis of decisions.

2) Chennai Super Kings, a four-time champion and led by one of the greatest Indian Captains, MS Dhoni (Maahi), ended second last on the table:

  • It’s not just about your fund manager but the whole team. Many-a times, we just go by the big fund manager’s name and invest. See the whole team rather than just one person.
  • Conflict between the top management can’t go unnoticed and impacts the results. Transitions should always be smooth in every organization to maintain productivity. Ravindra Jadeja, who was named as the captain at the start of the tournament, stepped down in the middle of the tournament and handed over the captaincy again to Maahi.
  • Always look for stable top management.

3) Gujarat Titans, a debutant team, led by a young and first-time captain, Hardik (Kung Fu) Pandya, lifted the 2022 title.

  • New names or faces bring new energy to the team. They can’t always be neglected by forever considering them as novices or freshers.
  • The role of coach was thrust back into the spotlight. Gary Kirsten, who helped India win the 2011 World Cup title, proved his worth again.

4) Rajasthan Royals produced a purple cap holder (Highest Wicket Taker of the Tournament) – Yuzvendra Chahal and an orange cap holder (Highest Run Maker of the Tournament) – Jos Buttler but still ended as a runner up.
One or two great stocks can’t make a great portfolio.
Both the finalists (Gujarat and Rajasthan) won the fair play awards too, which is more important than the title. For your investment management, take the assistance of an advisor who is fair, ethical and whom you can trust.

5) Hit-man (Rohit Sharma) and Run Machine (Virat Kohli) didn’t perform as per the expectations. One bad market cycle or tournament doesn’t make a fundamentally good stock a bad option. It will come back sooner than later as a setback can convert into a comeback if the basic quality is good. Stick to your choices that are supported by good fundamentals.

(Contributed by Jatin Uppal, Deputy Manager, Humfauji Initiatives)

Also Visit at: Financial Cocktail Samosas Bitesized Money Morsels For You, 01/06/2022

June 14th, 2022

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