Financial Cocktail Samosas

The Art of Doing Nothing: How Not Reacting Can Boost Your Wealth?

You’re stuck in a traffic jam, everyone’s honking, and you’re constantly changing lanes hoping to get ahead. Sounds familiar, right? Well, believe it or not, this scenario mirrors how we sometimes approach investing – always moving, always doing something, but not always getting where we want to be.

Let’s break it down. There’s this concept called ‘bias for action’ in investing. It implies an investor always feeling the need to do something, anything, because Action is equated to Success. But here’s the catch: sometimes, especially when markets are volatile, doing nothing is the best move. Yep, you heard that right – doing nothing can be a winning strategy too.

Now, let’s talk more on this. Instead of constantly tinkering with your investments, sometimes it’s best to just let them be and give them time to grow; something like planting seeds in a garden – you don’t keep digging them up to check if they’re growing, right? You give them time, water, and sunlight, and eventually, they flourish.

A study in 2007 on 286 football penalty kicks in top events showed the downside of action bias. It showed that penalty takers’ kicks went 32% to the left, 38% to right, and 29% in the centre. Surprisingly, goalkeepers’ dive direction is highly skewed towards left and right, while only 6% stayed in the centre – possible reason is ‘Action Bias’. In fact, the study suggests that staying in the centre more often could have lead to better outcomes for the goalkeepers. This example demonstrates the power of stillness as a strategic approach.

Source: Action Bias among Elite Soccer Goalkeepers: The Case of Penalty Kicks, Michael Bar-Eli and Ilana Ritov (2007)

In investing, the potency of stillness lies in granting investments time to mature, rather than constantly tinkering with them. This historical approach has consistently yielded superior long-term returns. While action is often lauded, the power of stillness can be equally formidable.

So, next time you feel the urge to make a move with your investments, take a moment to pause and consider the power of stillness. Remember, sometimes the best action is NO ACTION AT ALL.

Or better still, contact a trusted and unbiased financial advisor like us.

(Contributed by Ujjwal Dubey, Financial Planner, Advisory Prithvi, Hum Fauji Initiatives)

How Married Women Property (MWP) Act Protects the Rights of Women

As the head of the household, you naturally want the best for your wife and children, whether it’s providing love, care, or financial security. When you buy life insurance, it’s to ensure they’re taken care of, if something happens to you.

However, if you have outstanding loans and you pass away before settling them, your life insurance money payable to your family may be used to pay them off, even against your wishes. However, Married Women’s Property (MWP) Act can protect your family’s financial future even in such circumstances.

The hustle and bustle of the financial world can often feel disconnected from the natural world. But what if the secrets to sound financial practices lie beneath the rustling leaves? Surprisingly, nature offers insightful lessons that can guide us towards financial stability and responsible stewardship of our resources.

Here’s why buying insurance under the MWP Act can be a smart move:

• Protecting Your Assets: The MWP Act shields assets from potential legal threats and creditors by allocating insurance benefits exclusively to named beneficiaries. This ensures financial security for the insured and their family members, particularly in the absence of the husband.
• Avoiding Family Disputes: Insurance policies under the MWP Act provide a clear title to the beneficiary, typically the wife and children, which helps in resolving any family disputes over inheritance or the deceased husband’s estate. These policies operate as a separate trust and cannot be included in the policyholder’s will or claimed by anyone other than the designated beneficiary, even if they are legal heirs or there’s a dispute.
• Empowering Women: By allowing married women’s control over insurance benefits, the MWP Act promotes their financial independence. This empowers them to manage policy proceeds directly, without dependence on their husband or others.
• Estate planning: The MWP Act facilitates the active participation of women in estate planning, enabling them to secure assets for their future and that of their children. This contributes to long-term financial stability within the family.

How to buy term insurance under the MWP Act?

When filling out insurance forms, choose ‘Yes’ for purchasing term insurance under the MWP Act. Do note that an insurance policy under the MWP Act only allows your wife and any children to be your nominees.

The Married Women’s Property Act is a wise option for safeguarding family finances with insurance, particularly beneficial for married individuals concerned about their spouse and children in unforeseen circumstances.

(Contributed by Yogesh Gola, Relationship Manager, Advisory Desk, Hum Fauji Initiatives)

ESG Investing: Opportunities in Sustainable Mutual Funds

In recent years, a notable shift has occurred in the investment landscape, with more investors prioritizing Environmental, Social, and Governance (ESG) factors when making investment decisions. This trend has driven the rise of sustainable and ESG investing within mutual funds too, offering investors the opportunity to align their financial goals with their values. Let’s delve into this trend, exploring what ESG investing involves, why it matters, and how we can evaluate ESG funds effectively.

Why ESG Investing Matters:

Think beyond just making money. ESG investing acknowledges how a company’s actions impact the environment, society, and even its own governance. Imagine if your investments could not only bring you financial gains but also contribute to a better world.

By choosing companies that ace these areas, investors can create positive change while still aiming for those sweet financial returns. Generally, companies with strong ESG practices tend to be more resilient, innovative, and competitive – talk about a win-win!

How to Choose the Right ESG Funds:

When evaluating ESG funds, investors should consider several key criteria to assess the fund’s alignment with their investment objectives and values:

• ESG Integration: Make sure the fund walks the talk by fully integrating ESG factors into its investment process.
• Portfolio Holdings: Review the fund’s portfolio holdings to understand the types of companies and industries it invests in. Consider whether the portfolio aligns with the sustainability goals and risk tolerance.
• Expense Ratio and Fees: Nobody likes surprises, especially when it comes to fees. Check that the fund’s fees are fair and square compared to others out there.

The Future Looks Bright:

And here’s the cherry on top – governments worldwide are pushing for greener economies and less climate risk. This means more opportunities for social causes and a cleaner, greener future for all. By investing in ESG funds, you’re not just securing your financial future – you’re shaping a better tomorrow!

So, next time you’re thinking about where to put your money, consider ESG investing. It’s not just about profits – it’s about making a positive impact on the world.

And hey, who says responsible investing can’t be exciting? 🌱📈

(Contributed by Neeraj Kumar, Financial Planner, Advisory Arjun, Hum Fauji Initiatives)

What Did Our Clients Ask Us in the Last 7 Days?

Question – What are the tax implications of receiving gifts, particularly from relatives, unrelated persons, and during weddings?

Our Reply – Ah, the joy of receiving gifts! But be careful about the tax man who can come knocking!

Gift from Relatives: Good news first! Gifts from relatives are like little bundles of joy exempt from the taxman’s reach. So, whether it’s your spouse, siblings, or even those cool close aunts and uncles, you can breathe easy. The Income Tax Act generously exempts gifts from these dear ones from any tax obligations. In case of HUF, gift received in HUF from any of its members is exempt from Income Tax.

Gift from Unrelated Persons: Now, here’s where it gets a bit trickier. If you’re receiving gifts from someone unrelated and the total value of such gifts in a financial year exceeds Rs 50,000, you have gotten into  Uncle Tax’s gaze. These gifts are considered taxable income and will be subjected to regular tax rates under the head ‘Income from other sources’. So, remember to keep an eye on those big-ticket presents!

Gifts Received at Own Wedding: Well, good news again for newlyweds! The gifts you receive on the auspicious occasion of your marriage are like little tokens of affection, exempt from the clutches of taxation. So go ahead, dance, celebrate, and cherish those heartfelt gifts without worrying about tax implications! Remember, while gifts are indeed wonderful gestures, understanding their tax implications can save you from any unwelcome surprises. So, whether it’s from dear relatives, distant friends, or in the midst of matrimonial bliss, know your tax game to enjoy those gifts to the fullest!

Happy gifting! 🎉

(Contributed by Team Vikrant, Hum Fauji Initiatives)

From Small Coins to College Funds

• Turn playtime into a learning zone. Board games like Monopoly become financial literacy tools in disguise. Explain the concept of buying and selling, and maybe even let them “invest” a portion of their play money in a “high-risk, high-reward” venture (like building a hotel on Monopoly!).
• Embrace technology. There are fantastic budgeting apps designed specifically for kids. These apps allow them to track their allowance, categorize their spending (got to differentiate between needs and wants!), and even set saving goals. Imagine the excitement of watching their virtual piggy bank grow!
• Lead by example. Talk openly about your own budget and financial decisions (age-appropriately, of course). Let them see the value of comparison shopping, the importance of setting aside money for emergencies, and the power of long-term saving.
• Remember, it’s a journey, not a destination. There will be slip-ups (that forgotten candy purchase!), but use those moments as teaching opportunities. The goal is to foster a healthy relationship with money, and that takes time and patience.

The data paints a clear picture: India has a gap to bridge when it comes to financial literacy. While other countries equip their young citizens with financial knowledge from a young age, we’re missing a crucial step. Let’s join the movement and empower future generations to make informed financial decisions!

So, ditch the lecture and embrace the play! By incorporating the above tips, you’ll be well on your way to raising financially savvy kids who understand the true value (not just the candy kind) of a rupee.

(Contributed by Gautam Arora, Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

Don’t Make These Tax Savings Mistakes

The financial year 2023-2024 has concluded, and we trust all have managed their taxes prudently. Many individuals rushed to invest in ELSS and NPS for last-minute deductions. Let’s steer clear of such hurried decisions and optimize your deduThe financial year 2023-2024 has concluded, and we trust all have managed their taxes prudently. Many individuals rushed to invest in ELSS and NPS for last-minute deductions. Let’s steer clear of such hurried decisions and optimize your deductions and credits, thereby retaining more of your earnings. Here are some common tax savings mistakes to avoid:

1. Choose your tax regime wisely: With the recent changes in the tax regime, new tax regime has become the ‘default’ one. So, first calculate which tax regime suits your profile. Analyse your various sources of income and deductions. If you’re our client, just contact her/him and you’ll get the answer.
2. Think Twice Before You Invest: Don’t just invest in any scheme to save tax. Choose options that suit your financial goals, risk appetite and diversify well.
3. Maximize Your Deductions: Many tax-saving instruments offer deductions up to a certain limit. You can claim the deductions under various sections of income tax i.e. 80C (ELSS, PPF, DSOPF, etc), 80E (Education Loan), 80D (Health Insurance), 24B (Home Loan Interest), etc in old regime. In new regime you can claim a very few – standard deduction of Rs 50,000 and employer’s contribution to NPS majorly among others.
4. Last Minute Rush: Waiting until the last minute can lead to wrong decisions and missed opportunities. Start planning early to avoid last-minute stress and unlock a wider range of tax-saving options. We got many calls on 29th for 80C investments this year when it was a Good Friday and rest two days were also closed on Sat and Sunday!
5. Assess your tax liabilities at regular intervals: Regularly monitor your estimated tax amount and adjust savings accordingly based on actual income and expenses, also keep a tab on advance tax liability in each quarter, pay it on time to avoid late payment fees.

Level up your financial game this new financial year!  Remember, tax planning isn’t just about saving money today; it’s also very much about building a secure financial plan for tomorrow.

(Contributed by Anjali Tomar, Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Are Small Cap Funds in a Bubble?

The Indian small-cap sector has been a star performer in the past year, attracting significant investor interest. However, concerns are rising about a potential bubble.

What is considered as a bubble in small cap funds? 

When the valuations are so high that even after a 20 -25% correction, it would still remain expensive, that’s a Bubble in simple terms.

From valuations perspective, it is historically seen that whenever the market cap of small cap in overall market cap crosses 15%, it warrants caution. Currently the share of small caps is at 17.2% which shows that small caps in general are overvalued.

In the past few months, small-cap mutual fund schemes have witnessed a massive inflow which has led to inflated valuations which is beyond a compIn the past few months, small-cap mutual fund schemes have witnessed a massive inflow which has led to inflated valuations which is beyond a company’s true potential. The below graph shows how much inflow has come to small cap funds over the past few years.

What should you do in this situation?

• Cautious Approach: While small-caps offer high potential returns, it’s crucial to be cautious in the current scenario. Diversify across asset classes and a focus on quality companies with strong fundamentals remain key.
• Continue with SIPs: Systematic investments through SIPs allows you to average out your cost and potentially benefit from any market corrections.
• Have a Long-Term View: Small-cap funds are inherently volatile, if you can ride out market volatility then Small-cap funds can provide you good returns in a long-term horizon of 7-10 years.

The possibility of a bubble in small-cap funds cannot be ignored. However, stay informed, maintain a diversified portfolio, and focus on long-term goals. It can help you to navigate these uncertain times. Remember, even if a correction occurs, small-caps have the potential for significant growth in the long run.

(Contributed by Abhilash Rana, Relationship Manager, Team Dhruv, Hum Fauji Initiatives)

What Did Our Clients Ask Us in the Last 7 Days?

Question- As I am a serving officer, should I also consider purchasing health insurance?

• Private hospitals are profit-driven as they are after-all businesses, raising concerns about whether prescribed treatments are genuinely necessary or driven by financial motives. Nobody would like to have their bodies tinkered with, if there is no such need only because that hospital wants more revenues.
• Claims paid by medical insurance companies reduce their profits, potentially affecting the quality or coverage of treatments. So, many a times, claims may get fully or partially rejected because of technical points and you sitting on huge bills to pay.
• Premiums for private medical insurance are reviewed every year and are not fixed unlike life insurance policies. They also increase significantly with age.
• Almost all the private medical insurances come into play only on hospitalisation and do not cover OPDs. So, consider your medical state – how many times are you likely to be hospitalised or have been hospitalised in the past?
• The ECHS has robust systems and procedures, often underutilized by many due to lack of knowledge about correct procedure, offering quality healthcare options for veterans.

• Military hospital facilities are far-off from you or your family’s selected place of residence.
• You have an ailment or genetic history of an ailment whose facilities are inadequate in military hospitals. But also remember, premiums rise due to claims taken.
• Parents or children are not dependent on them and thus they require health insurance.

Be it Farming or investing, Patience Eventually Pays Off

1. Don’t Shout at the Corpus: Just as a farmer can’t rush the growth of crops by shouting at them, investors must recognize that the market moves at its own pace. Patience and trust in long-term strategies are key to success.

2. Don’t Blame the Crop for Not Growing Fast Enough: Blaming the market for slow growth won’t hasten returns. Blaming slow growth won’t accelerate it, nor will blaming the market for lacking quick returns. Focus on what’s controllable: your investment strategy and response to market shifts.

3. Don’t Uproot Crops before They’ve Had a Chance to Grow: Avoid prematurely uprooting investments in response to adversity. Like plants, investments require time to mature and yield results. Resist impulsive actions based on short-term fluctuations; let investments grow and flourish.

4. Irrigate and Fertilize, Do It Regularly: Similar to farmers’ regular irrigation and fertilization, investors must consistently nurture their portfolios. Regular contributions and adjustments ensure investment health and growth over time.

5. Remember You Have Good Seasons and Bad Seasons: You Can’t Control the Weather, Only Be Prepared for It:-

Every farmer knows that some years will bring bumper crops, while others will be lean. Investors face similar uncertainty in the market. Instead of trying to predict the future, diversify your investments, maintain a long-term perspective, and have a strategy in place for both bull and bear markets. By being prepared for all seasons, you can navigate the unpredictable financial landscape with confidence and resilience.

6. So Focus on Wealth Creation Rather Than Market Noise: Amidst market noise and fluctuations, prioritize long-term wealth creation over reactionary responses. Like a focused farmer growing crops amidst background chatter, stick to your investment plan and keep sight of building lasting wealth.

By embracing these farming-inspired principles, investors cultivate a resilient investment strategy capable of withstanding time’s tests and reaping bountiful financial harvests.

(Contributed by Abhinandan Singh, Relationship Manager, Team Arjun, Hum Fauji Initiatives)

Cryptos: The new dazzling star?

In the expansive galaxy of finance, a brilliant new star has been steadily ascending: Cryptocurrency. Once a niche interest, it has exploded into a dazzling phenomenon, capturing the attention of investors and innovators alike. From the genesis of Bitcoin to the proliferation of thousands of altcoins, the crypto universe has expanded beyond the wildest dreams of its early pioneers.

Recent Trends: A Bearish Hibernation and Resilient Innovations

The early months of 2024 have seen the crypto market endure a bearish phase, often referred to as the ‘crypto winter’. Despite this, certain cryptocurrencies have shown remarkable resilience, with significant price changes. This resilience is indicative of the market’s underlying strength and the potential for recovery. The current cryptocurrency market is a reflection of dynamic change and adaptation. The last few months were an exceptionally strong month for crypto, witnessing a 40% increase in total market capitalization. The launch of US spot BTC ETFs in January has been a huge success thus far, continuing to attract constant capital inflows.

Investment Opportunities: Navigating the Digital Frontier – Investing in cryptocurrency is akin to exploring uncharted territories. Direct purchase remains the most common investment method, with platforms like Coinbase facilitating such transactions. For those seeking exposure without direct ownership, cryptocurrency-focused funds and companies offer a viable alternative.

Future Outlook: The Dawn of Regulation and Mainstream Adoption – As we gaze into the future, the crypto market shows signs of a bullish momentum, with Bitcoin and Ethereum reaching new multi-year highs. The increasing regulation of cryptocurrencies and the anticipated approval of the first spot Ethereum ETFs suggest a maturing market poised for mainstream adoption.

The Star May Continues to Shine – Cryptocurrency remains a volatile yet enticing asset class, with a trajectory that continues to captivate and inspire. Its journey mirrors the celestial dance of stars—unpredictable but awe-inspiring. As we continue to witness its evolution, one thing is certain: Cryptocurrency is a star worth watching in the investment universe. Its path, while dotted with huge uncertainties, promises a vista of opportunities for those willing to explore the digital frontier.

Explore the thrilling realm of cryptocurrency investment with confidence! If you’re located outside India, look no further than our expert guidance. Our OWAS portfolios are expertly managed to suit the unique needs of international investors like you.

(Contributed by Devanshu Anand, Relationship Manager, Team Prithvi, Hum Fauji Initiatives)

Mindful Spending: Aligning Your Purchases with Your Values and Goals

In the world of advisement, it’s simple to get carried away with careless buying. Frequently, we find ourselves buying purchases without thinking how they will affect our lives, money, and the environment in the long run. On the other hand, developing a habit of thoughtful spending can result in increased financial security, and alignment with our objectives and beliefs.

What is Mindful Spending?

Mindful spending is the practice of consciously evaluating our purchases to ensure they align with our values, goals, and priorities. It involves being aware of our spending habits, understanding the motivations behind our purchases, and making intentional decisions that reflect our true desires and aspirations.

How to Practice Mindful Spending?

1. Identify Your Objectives and Values: Take the time to identify your core values and long-term objectives. What is most important to you? Clarifying your values and goals provides a framework for making purchasing decisions that are in line with what truly matters to you.
2. Create a Budget: Allocate funds to different categories based on your priorities, such as necessities, savings, investments, and discretionary spending. Having a budget help prevent impulsive purchases and ensures that your money is allocated towards your values and goals.
3. Research and Compare: Spend some time researching goods or services before deciding to buy them. Examine elements including cost, value, sustainability, moral behaviour, and societal effect.

Benefits of Mindful Spending:

1. Financial Freedom: By prioritizing your spending based on your values and goals, you can allocate resources more effectively, leading to greater financial stability and freedom.
2. Reduced Stress: Mindful spending reduces the stress and anxiety associated with financial insecurity and excessive consumption.

What Did Our Clients Ask Us in the Last 7 Days?

Query – I retired from the armed forces and my father was a Government Employee. We have the ECHS and CGHS facilities available to us. Should we take our own private health Insurances too?