Tuesday, December 30, 2008

Steps of Financial Planning !

1) Gathering Data, including Goals:
The first and foremost task of Financial planner is to gather information about clients financial situation. He should have all the information about the income of the clients and the expenses of the client including big ticket expenses like marriage or sending children for higher education and the time frame of each of the big events.

2) Analyzing and evaluating clients Financial Status:
Financial planner should analyze clients information to assess his current situation and determine his long term and short term goals. Determine the clients risk taking capacity as well as understand how much financial risk cover he has regarding his life, bussines, health cover and other such risk management tools.

3) Developing and presenting Financial Planning recommendations:
Financial planner should offer financial planning recommendations based on clients situation and his financial goals. FP should also explain properly each and every decision and the return and risk involved and also about the flexibility of that plan. so the client can always make informed decision

4) Implement Financial Planning recommendations:
The FP and client should agree on how the recommendations would be implemented. The client can implent on his own if he has the expertise and the FP can act as an coach. or FP can also do the implementation part as well.

5) Monitoring the financial Planning recommendations:
The plan and the financial goals should be monitored periodicaly atleast once in a quarter to maintain the status quo both the client and FP should revied and if need be change the plan depending on the clients current financial situation or as per the change in his goals.

Financial planning is not one time event. Its a continous monitoring phase.

I recommend everybody to plan and Lets plan to get Rich !

Monday, December 29, 2008

Investment Planning Fundamentals

Most of the people in India believe in savings. Right from the rich people to the kids who save via piggy bank to even the beggars who have bank accounts. Saving is very important habits period.

Majority of this saving is either lying with some care taker or in savings account or in piggy bank or simply lying in your godrej cupboard meaning its lying idle. Its sleeping

The important lessons to be learned is that its very good to save but the money which is saved should also be invested in right asset class. Your money should also work as hard as you work to earn that money. Money should keep growing keep multiplying.

anything not used today and saved for the future use can be considered savings.

The most important and common fundamentals of investment planning are
1) Start saving and investing early
2) Invest Regularly
3) Ensure higher returns with calculated risk management

(Investment of Rs 1000 per month invested in assets which gives 8% , 12%, 15% for 25 years will become 9.5 lacs, 18.78 lacs and 32.43 lacs respectively)
so two person with same amount of savings for 25 years one will end up with Rs 9.5 lacs and the other may end up with Rs 32 lacs. so one can be richer by (32.5 - 9.5 = 23 lacs) by simply changing your decision in right selection of asset class and risk management.

Mr Antulay investing Rs 5000 per month in PPF for a return of 8% compounded and Mr Bhanusali investing same amount Rs 5000 per month in ELSS which has given average return of 15% .
After 30 years
Mr Antulay had = 74.5 lacs
Mr Bhanusali had = 3.46 crores
While safety of capital is important but also taking risk in calculated and planned manner can give you huge returns.

Saturday, December 20, 2008

Bank Customers BE AWARE of online Fraud !!!! Simple steps to prevent online theft

Today I received an email in my mail box, It looks very normal but this is a MODERN DAY LIGHT robbery. If the customer's of AXIS bank who transact online fall for it and give there login and password and even more there credit card and debit card details they will be robbed of there money.

1) Do NOT ever click on a link you receive in your email.
2) NO bank will ever ask for your password online
3) If by mistake if you open a link in the email you can verify with the webaddress displayed there will point to some other server address
4) In case you use online banking account EVEN on official site always type in the web address and you should only enter your login and password when it is secured meaning on the top you see https://www.xyz.com. http:// is your regular web address and https:// The 's' signifies that its secured web address

I strongly beleive that authorities should take strong action against such people and the they should make heavy penalties to the server which host such daylight robbing website.

==following is the copy of the spam email i received==

Please Confirm Your Online Banking Profile

Saturday, December 20, 2008 10:36 PM


Dear Reliable Customer,

Your online account security is important to
AXIS BANK. We confirmed a change on your banking details and if you did not authorize this change, please verify your details immediately at the secure server webform by clicking the link below...


This alert relates to your Online Banking Profile only.


Monday, December 15, 2008

How to reduce the Home loan rates ?

One of my client Mr Arvin, who has taken a home loan. He was very upset and angry at the banks. He has taken a Home loan couple of years back when interest rate was around 8% since his was a floating loan, every time benchmark interest rates went up, his interest rate also went and they went such high in early 2008 that it almost reached 12%.

The banks are so smart that as soon the benchmark is declared they hike there rates with immediate effect. Now the reverse has started to happen.
The interest rates have started to come down and for banks to follow them it takes a long time. now the old customer is stuck up. and the existing ones will not get the benefit of lower rates.

The options existing customer has are as follows
1) Move the loan from the current bank to another bank but this will incur him a PREPAYMENT penalty
2) Renegotiate with the existing bank to reduce the rates but this is tough cookie to crack but still most practicable.
3) Pre - pay as much as possible in order to reduce the impact of EMI.
4) I think there has to be some ombudsman like mechanism were in customer can complaint about the banks not reducing the interest rates when benchmark indices are reduced

Kindly do share your experience if you have faced similar problems.

Saturday, December 13, 2008

Jeevan Aastha is a SINGLE premium assurance plan from LIC

LIC has recently come up with a One time single premium assurance policy in this market volatility. details of the policy are as follows according to the LIC's website.

LIC’s Jeevan Aastha is a single premium assurance plan which offers guaranteed benefits on death and maturity. The Plan is close ended and would be available for a maximum period of 45 days from the date of its launch i.e. 08.12.2008 .

Eligibility conditions and othe restrictions
a) Minimum Entry Age : 13 years (completed)
b) Maximum Entry Age : 60 years (nearest birthday)
c) Minimum Basic Sum Assured: Rs.150,000
d) Maximum Basic Sum Assured: No Limit
The basic sum assured shall be available in multiples of Rs. 30,000.
e) Policy Term : 5 or 10 years
f) Premium payment mode : Single premium only

Loan facility will be available to you under this plan , after completion of one policy year.

Surrender value

The policy can be surrendered for cash after the policy has run for at least one year. The minimum Guaranteed Surrendered Value allowable is equal to 90% of the Single premium paid excluding all extra premiums.


A)Death Benefit:
On death during the first policy year: Basic Sum Assured with Guaranteed Addition.

On death during the policy term after first policy year, excluding last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition.

On death during last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition along with loyalty addition, if any

B)Maturity Benefit:
On maturity, the maturity Sum Assured along with Guaranteed Addition and Loyalty Addition, if any, shall be payable.
Maturity Sum Assured shall be 1/6th of Basic Sum Assured.

C)Guaranteed Addition:
The policy provides for Guaranteed Addition at the following rates:

  • Rs. 100 per thousand Maturity Sum Assured per year for a policy of 10 years term.

  • Rs. 90 per thousand Maturity Sum Assured per year for a policy of 5 years term.

D)Loyalty Addition:
Depending upon the Corporation’s experience the policy will be eligible for Loyalty Addition on death during the last policy year or on the Life Assured surviving the stipulated date of maturity at such rate and on such terms as may be declared by the Corporation

A 35 year person taking 10 year plan
Single premium : 48975
Guaranteed Addition :Rs 100 per Thousand sum assured
Death Benefit : from 2nd year is 1 lakh and keeps increasing by Rs 5000 every year till the 10th year were it is Rs 1,50,000
Maturity / survival benefit : Is anywhere between Rs 1,00,000 to 1,10,000 at the end of 10 year period.

According to the LIC brochure, one will get Rs 100 per Rs 1,000 maturity sum assured per year for a policy of 10 years and Rs 90 per Rs 1,000 maturity sum assured per year for a policy for five years. This where people make mistake of doing the simple calculation and assume that the rate of return is 9% for fiveyear plan and 10% for 10-year .

A 13-year-old (minimum entry age) who opts for a cover of Rs 1.5 lakh by paying a premium of Rs 24,668 would get around 7.32%, whereas a 60-year-old (maximum age) who pays Rs 29,145 as premium would get around 5.55%.

NOTE: People who want to park there money in debt product for 10 year expecting an assured return of between 5% to 9% along with some insurance can go for it.

Friday, December 12, 2008

Sixth Pay Commission is amongts the top search term on Internet !

Look at the recent top search term by google reveals that Sixth pay commission was amongst the top searched term on internet.

Recently in November 2008 Uttar Pradesh government has approved to implement the recommendations of 6th pay commission. This scheme will benefit nearly more then 18 lakh state employees and will be applicable from first of December.

The state will have to shell out more then 4000 crore to meet the requirement of pay scale hike including Dearness allowance and
The pay scale will come in force with retrospective effect from January 1, 2006. The arrears of salary, DA and pension will be paid in three instalments in the next three years. The total burden on account of the arrears is over Rs 13,000 crore.

Part of the arrear will be paid in cash during the current fiscal 2008-09. The remaining amount will be deposited in the provident fund account of the employees in two parts in 2009-10 and 2010-11. House rent allowance will also be paid on the basis of 6th pay commission recommendation. No wonder for so many state employee would be searching the term online to find out how much more money they have made !

Good Luck to all the state employees for this long overdue bonus !