Saturday, 27 April 2013

Family: Financial Planning for Aging Parents

I have found an interesting article on Financial Planning for Aging Parents which I thought will be useful for the followers of this blog.  You may click this link for downloading the free booklet.

Friday, 26 April 2013

Financial and Retirement Planning for Singles

I have come across an interesting article published by Money Mantra on the topic of financial and retirement planning for singles. You may go through the article clicking here.

Saturday, 20 April 2013

Take advantage of Liquid Funds / Cash Management Funds

Most of the mutual funds are offering Liquid Funds or Cash management funds which are great venue for parking your surplus in current account or excess savings that you have.  You need to have only six months' expenses in your contingency funds and savings bank account.  The rest you can park in mutual funds which earns almost 8 - 9 % appreciation fast.  This is a very good gateway for finance and retirement planning.

Read more or watch slides on liquid cash management

Tuesday, 16 April 2013

Investment in Gold ETF

My wife has the habit of following gold prices especially in view of the ensuing Akshaya Trithiya day  (usually falling  in May every year) considered to be auspicious to buy Gold in some form.  Though BSE showed only 3% annual return during last 3 years,  God has shown more than 25% annualized returns during the period. But Gold price has fallen drastically after last year as can be seen from the monthly chart of Gold prices shown below:

Actually it is right time to buy gold in view of drastic fall in the recent time, especially in the form of Gold ETF (Exchange Traded Funds) such as Reliance Gold, SBI Gets or Goldman Sachs GOLD ETF etc.  It is like buying stock one unit of ETF roughly represents the market price of GOLD at the time of purchase.

Advantages of GOLD ETF over any other forms are:

  • No making charges or wear and tear charges as prevalent in the case jewelry while buying ETF.
  • Storage, protection, insurance costs can be avoided.
  • Exchange traded funds are easily traded and there liquidity connected expenses for transfer is lower than any other form.
  • You can start investing small surpluses in ETFs just like SIPs regularly so that you can achieve rupee cost averaging and long term appreciation.
  • Wealth tax is not applicable .
  • Regarded as Mutual Fund units, the minimum holding period for such assets to qualify as long-term assets is a year. As these are not equity oriented mutual funds, long-term capital gains (LTCG) on the sale of gold ETFs does not qualify for tax exemption. Short-term capital gains (STCG) would also not be eligible for concessional rate of taxation. However, these are eligible for the concessional LTCG tax rate at a minimum of 10 per cent of the gains without indexation or 20 per cent of the gains with indexation.The long-term gains on sale of such ETFs are taxed at a maximum of 10 per cent of the gains. STCGs are taxed at normal rates.Gold has to be held for three years to be termed as long-term capital assets, while gold ETF need to wait for just a year to get the status.

    You may visit NSE site or BSE Site  for further details on GOLD ETFs.

Planning Finance and Retirement through professionals

The following presentation may highlight the importance of proper personal financial planning through professionals. You may click here

Sunday, 14 April 2013

Financial Planning for Married Couple

My friend Dr Shah has written a nice article.

It is as to how to draw a Financial Plan for newly wed couple.  Major points are  reproduced below.
1. Identify  Your Financial Goals

2. Plan and devise a Budget

3. Reduce Debt

4. Go for a ‘Contingency Savings Account’

5. Update Financial Documents with spouse's name included.

6. Insurance Planning

7. Plan your Investments

8. Plan for Retirement

9. Preparing for Parenthood

10. Decide on Record Keeping System

You can read the full article here.

Saturday, 13 April 2013

Small droplets make a river utlimately.

In the last blog we were discussing about SIP or systematic investment planning through mutual funds.   Balanced mutual funds with a mix of debt funds and equity or slightly riskier large cap funds earn on an average 12 to 15%  interest in the long term.  If you start systematically investing in these type of instruments, definitely we may be able to beat the inflation and have a sizable corpus at retirement or after 20-25 years.
  • Start small but early in your life.
  • Let the savings be steady without break
  • Don't draw on it frequently but for emergencies in which case replenish at the earliest.       
If you follow a disciplined approach, then a savings of Rs.10000/- can become a Rs. One crore  by 22 years. You may calculate and see for yourself how investment grows and feel the power of compounding  in this spreadsheet link by clicking here.

You may also see the applet in mobile devices.
Contact for your planning advice:  Mukundan SN, CFA, CFP mail:
Mob:  9789098720

Sunday, 7 April 2013

Wealth Creation through Mutual Funds

I was thinking once it would be better to invest directly in equities than invest through Mutual Funds because of their expensive loads. But one cannot time the entry and exit and closely follow all the scrips that we have selected endearingly once. 

To know more you may watch the slides entitled Advantages of Mutual Funds

We generally buy and hold blindly and blissfully unaware of what is actually going on the value of our portfolio we have created.  One day we wake up to find our portfolio having lost its value considerably following the trend in global markets. 

 Then I came to know about as to how a Systematic Investment Plan is the best way to invest into Mutual funds.

Though it is advisable to buy any investment low and sell high, it is almost impossible to time the markets on a regular basis. The only way you can overcome this is to follow the Systematic Investment Plans (SIPs) route. 

An SIP does not offer assured  profit or protection against a loss but the chances of making a loss through an SIP over a longer period of time is almost negligible. In general, systematic investment plans have been identified as an apt method for wealth accumulation. 

Under the SIP the investment is spread over a period of time. A pre-determined amount is periodically invested into a mutual fund scheme. The number of units that accrue to you on each periodic investment are a function of the then prevailing net asset value (NAV) of the scheme you have opted for. By using this technique, SIPs make  the volatility in the market work in your favour. 

More units are purchased when a scheme's NAV is low and fewer units when the NAV is high. As a result, even if the market is falling or rising, the average per unit cost price in a SIP will always be less than the average per unit sale price. Therefore, the average unit cost is lower than average unit price irrespective of market rising or fluctuating. This happens because you get the advantage of buying more units when the market is low and averaging out the purchase price. 

Following points are to be kept in mind:  

  1. Ascertain your investment horizon. 
  2. Decide on the periodicity of investment. 
  3. Determine the amount you can comfortably invest in a SIP periodically. 
  4. Pick a scheme according to your risk profile. Invest for long term.
  5. Keep free balance in your account to the extent of SIP amount. However absence of balance may lead to rejection that particular instalment.  But subsequent instalments can continue.
  6. You may modify or cancel the SIP at any point of time.  

Mukundan SN, CFA, CFP --  Personal Finance and Retirement Planner.  Mututal fund advisor
Mob:  9789098720.   email: