Let’s open the manual:


Every gadget you buy in the market comes with an instruction manual or user’s manual. But your salary, savings...retirement don’t come with an instruction manual. So we don’t know how to handle these and we end up mishandling. The result is poor investment choices and unhappy retirement. This article is an effort to draft an instruction manual for our investments.

Investment forms an integral part of our work life, with many wanting to save and invest to meet our long-term financial needs. We would all agree that just living from paycheque to paycheque would leave us in a bad financial state making us incapable of meeting our family’s financial commitments and our expenses after retirement.


Don’t Fly Blind; Have a Financial Plan


It is vital to chalk out a financial plan at the very beginning of our career. This plan would tell us how much we should save and invest. This plan also ensures that our long-term financial needs are met. It may prove difficult and sometimes costly in the long run if we chalk out a financial plan on our own. So it is better to engage a professional financial planner, who would be in the right position to advice us on the investments to meet our long-term objectives in life.

Generally investment advisors or financial planners ensure that we invest in the right type of investments that are relatively safe and tax efficient. They ensure that our investments do not divert away from the set financial goal. The advisors or planners who charge a fee, can be expected to act in the best interest of us; their clients. But we will not be in a position to trust those who live out of the commissions earned from selling insurance policies or mutual funds or stock broking.

However, it is best for you also to be cautious and not allowed to be fooled by flattery. Since it is your money you need to be cautious and vigilant.


Do control what you can:

The first thing that we can control is unnecessary expense on investment. It is in our interest to try to minimize or avoid investment expenses like entry load, exit load, fund management fees, commissions for buying and selling stocks, account maintenance fees, allocation charges, administration charges, surrender charges, and other overheads. Small drops make a mighty ocean. Similarly these small amounts of cost cutting will definitely pay us in the long run.

The second control is over the diversification of your investment. You also need to ensure that at all times your investments are done over a wider variety of assets. This will ensure that you do not suffer large losses in one type of investment. The losses in one would then be offset by the gains in the other and you will be financially safe at all times.

The third control is the maintenance of our asset allocation to reach our financial goal. We need to keep a check over the asset allocation or ratio of equity to debt and to other things in your portfolio with the help of a professional financial planner. This will help us ensure that we are not taking more risk than what we want or can possibly handle.


Do pay as little attention as possible to the financial media.


It is best not to be influenced too much by the media to buy and sell investments. Investing is not a competitive sport. Buying and selling stock frantically by being influenced by the media is counter productive to your financial objectives.

It is best to understand that our conscious investment is for long-term wealth appreciation. So we should not be distracted by the investment shows that run 24 hrs a day, investment column they publish 365 days a year. Media doesn’t understand your requirements. So it is difficult to get a customized solution for your personal finance.


Don’t fall into “Invest and Ignore”

We have invested your precious savings, so do not be careless and sleep over it. Though our investment advisor would make sure that our investment grows, it is better that we too are vigilant and keep track of market conditions. It is our precious savings that we have invested. So if we lose it, we would be losing not only money but also our peace of mind.


Don’t fall into “HNI Trap”

Being a high net worth person exposes us to being influenced to invest in dubious projects that may bring down your financial status. This is true because the financial industry are on the look out for people that have a lot of money and are of a high status. They try to influence them to invest in dubious projects appealing to their status and vanity.

Being a HNI doesn’t mean that you need a completely different set of investments. They try to pack something and will say “This is a HNI product”, just to massage your ego and get business. Many HNIs would be lot richer, if they could have bypassed their private banking department and just invested in an index and a very few diversified equity funds.


A final thought:

The instructions in the user’s manual need to be used to get the maximum benefit and long life of the gadget. Similarly, having read the set of instructions to make wise investment decisions, it is up to you to follow them strictly or leave it and go back to your routine life.

If you decide to follow these instructions, you will definitely see a lot of positive changes and financial prosperity in the long run. So today is going to be the first day for rest of your life.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Let’s put on our thinking cap:

Depositing our pay cheques in bank and using the credit and ATM card for spending seems easy. However keeping the track of your income and expenses, to get full value for your money is possible only with budgeting. Budgeting helps most of us to keep track of our income and spending and not overspend.

In practice 10 budgeting myths retard the savings of a lifetime. They are:



1) I earn a lot and need not budget:

This requires a change of perspective. Michel Jackson lived like a king but died awash in $400 million debt. Budgeting by watching your spending pattern helps trace unnecessary expenses on clothes or eating out, and help you save for a future or for a much wanted dream holiday. So how much you earn has got less relevance. What is more important is budgeting. Proper budgeting can make a low income earner to retire richer and overspending can make a high income earner a pauper.


2) I hold a secure job and see no reason to save:

This does not hold well today with large corporations going in for labor layoff to save costs during recession. Small corporations also put you at a risk with the death of the owner or the company going into losses.

This insecurity demands caution to save for spending during such periods when you are caught unaware, with an emergency fund coming handy.


3) I am poor in calculations and cannot budget:

With useful tools like spreadsheet that help account for expenses and income earned make the budgeting much easier. A look at the spending helps avoid unnecessary expenses to budget and save in future. If you are interested one can easily learn budgeting. So if you say ‘I don’t know how to make a budget’, it shows your level of interest and willingness to save for a secured future.


4) I am lucky; I will never be short of money:

However your ability in meeting high bills and other unpredictable expensive events like life threatening accidents, or a major surgery without experiencing shortage of money may not be always true.

So better save and be prepared to face unpredicted contingencies and then use the savings for something else that you may consider desirable.


5) I pay my bills promptly and do not need budgeting:

Congratulations I appreciate your credit worthiness, but going into negative balance is also quite easy. You may be self disciplined. It doesn’t mean that you need not make a budget. Preparing a budget makes you much more disciplined and spend consciously. So budgeting with saving helps avoid going into negative balance or overdraft.


6) Budgeting could lead to deprivation:

Budgeting is not frugal living and foregoing all pleasures like a movie a month and an eat out once a week, but it just not allowing your earnings to be not overtaken by your expense. Everyone is planning to save, planning to invest, but do we have a well thought out plan for spending. A smart spending plan only can lead you to save more.

There is no need to feel deprived with budgeting; it just means saving a percentage of your income spent unnecessarily to have a secured future.


7) I have small wants and find no need to save:

This need not be a stable attitude in human nature, with you wanting to take advantage of certain financial trends in the market like buying house or land at cheaper rates, or investing at higher rates towards building a bigger retirement corpus. Hence budgeting helps to save when you do not want money for a time when you could profitably use it.

Your wants may be small but basic needs like food, shelter, and clothing are becoming costlier with inflation. Also you need to take into account your health care needs of the future.


8) I get rises, bonus and tax refunds and find no need to budget:

I think you have been lucky all these years, however these benefits are highly unpredictable and placing ones hopes fully on them is futile. It is better to budget and save than depend on unpredictable benefits like bonus, raise and tax refunds. The recent recession has taught us a lesson to all of us which we should not forget easily.


Budgeting and your future

Take charge of your future now. Budgeting is the first step towards controlling your financial destiny. Don’t let your unconscious spending habits decide your financial destiny.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Let’s begin on planning finance for retirement:

It is usual for many of us to aspire for a financially secure and happy retired life. However being financially prepared to meet the demands of retired life by saving and investing requires considering and following the 10 doctrines of wise retirement planning.

A look at the 10 doctrines to wise retirement planning:


1) Provide for contingencies:


Most of us tend to underestimate our retirement needs. Provision for medical emergencies with inadequacy of medical insurance in old age requires financial provision. Lack of government social security schemes and retirement benefits to self-employed and private sector employees creates requirement for more provision for contingencies after retirement.


2) Think that you will live long:


This is true with increased life expectancy. Now you will have more years of life after retirement. Thanks to medical advancements. So it is better to plan for the additional years and avoid living frugally in old age.


3) Plan that you will retire early:


It is wise to provide for contingencies arising that require you to retire early. You could suffer ill health, lose your job, or need to care for a sick or elderly member of the family. Women may have to opt voluntarily to look after the family needs. All this requires more savings for retirement needs.


4) Beat the inflation before it beats you:


Inflation affects the personal finance needs of the working class, but pay rises could help them resolve it to a certain extent. However the retired have to save more to reduce the impact of inflation. Investing in modes that give you extra returns could help greatly.

Investors come to me and say “I would like to accumulate 2 crores and retire”. But when we really work out the inflation adjusted retirement corpus, the 2 crores would not be sufficient for him to have comfortable retirement. 2 crores may feed you enough in the first year after your retirement. The returns from the same 2 crores will not be sufficient for you take care of all your needs on the 10th year after your retirement because of the skyrocketing inflation figures.


5) Provision for increased medical expenses after retirement:


Most of us underestimate medical expenses after retirement, with these expenses being inevitable in old age. Hence more provision for medical insurance helps. A consideration of your family’s general health, family history of certain genetic disorders, and the class of hospital you get treated would help in proper estimation for medical insurance.


6) Provide for your spouse and dependents who may outlive you:


It is inevitable that this need should not be overlooked. Your spouse and dependents need to live a secure financial life after your lifetime. Taking up insurance policies during your working life and well thought out retirement planning will take care of your dependents and spouse financially.


7) Realize you need to be vigilant about sources of retirement income:


Sometimes we may be ignorant of benefits on retirement like provident fund, gratuity and other benefits. In India the lack of social security schemes after retirement makes it necessary to invest more in good income generating sources for steady flow of retirement income. The advice of investment consultants, along with financial education and information contributes to good financial standing after retirement.


8) Educate yourself about retirement savings plan management:


When the majority is relying on the pension schemes in the form of ulips offered by various public and private insurance companies, as a smart investor you need to understand the hidden charges of these pension policies. These policies are all heavily front loaded.

So you need to evaluate various investment options available for retirement. You need to accumulate sufficient knowledge in this regard. In addition learning to keep track of them with professional help makes these saving plans work for you.


9) Plan for an income for life:


Your retirement plans need to be financial plans to make income last you a lifetime. Pensions or annuities providing best income need to be safeguarded, as withdrawing large sums from them could end you in financial insufficiency in the final years of your life.


10) Take professional investment advice that works:


Many do realize the importance of financial advice from professional financial advisors, but in practice seek it from family, friends and colleagues. A right financial advisor could give you good investment advice to have financially secured retirement ife.

A final note:

I am sure you want to emerge financially secure for your retired life and will follow these 10 financial tenets to wise retirement planning.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

You have got complete 365 days in your hands. It is up to you to do whatever you want. Why don’t you chalk out a plan to become richer in a year , that is exactly in the next 365 days. No one in this world is born with the knowledge on how to save or invest. Every successful investor begins with the basics explained in this article. Almost always, the simplest are the most profound. Some simple reorganization in your personal finance management could make you richer. To be financially successful, the following three steps are important.


1) Make a Financial Plan:


This is the first and foremost important step to become financially successful. It is not your income, but your wealth that counts. People with high income like Michel Jackson died with a lot of debts. So a careful personal finance management is more important than how much you earn. To have an effective personal finance management system in place for you, you need to have a personalized well written financial plan.

What are the things you want to save and invest for? It may be for buying a home, buying a car, children’s higher education, retirement planning. Decide how many years from now you need to achieve each and every goal. Because you need to take into consideration the inflation for all those years and also you need to choose investment options based on the timeframe for investments.

You need to create your own list of financial goals. If you don’t know where you are going, you may end up somewhere you don’t want to be. To end up where you want to be, you’ll need a roadmap, a financial plan.

So create a financial plan for you and your family. There is a lot of help available for you online to create a financial plan in various websites with financial calculators. But if you want to create a more workable financial plan, you may seek assistance from professional financial planners.


2) Pay off all high interest debts:


You need to create a plan to come out your high interest debts like personal loan, credit card outstanding, car loan and the like. Credit cards can make it seem easy to buy expensive things when you don’t have enough cash. But it is not free money. To come out of debt, you need to have specific strategies that can work in your own situation. There are 11 ways to get out of debt and stay out of debt. You can choose one or a few ways from this to become debt free.

If you are not giving enough attention to your debt, then it can sink your financial ship. So take some time on this to list down all your borrowings and make out a plan to come out.


3) Start Saving and Investing:


As soon as you have paid off all your high interest debts, you need to start saving and investing for your financial goals. To save more either you need to spend less or you need to earn more. So you check up what are all the ways and means available for you to spend less and earn more.

If you are spending more than your income or all your income and you don’t have any money left to save or invest, you need to look for ways to cut back on your expenses. When you check where you are spending your money, you will be surprised to know how everyday petty expenses that you can do without add up over a year. You need to understand what makes us spend more and strategies to have self control with money to spend smart and save more.

When you started saving money, you need to convert your savings into investments. When you are choosing your investment option you need to take into account, the timeframe for investments, risk you can afford to take, inflation and your financial goals. Also you need to be careful in avoiding the biggest investment mistake. That is to choose a scheme in sync with basic investment principle. Make sure that you are not violating any investment principle. Don’t fall for speculative gains, ponzi schemes and get rich quick schemes.

If you follow these simple but authentic steps, by next 365 days you will be richer than what you are today. Celebrate this year with much more confidence and peace of mind by following these simple steps for financial success.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Getting married is one of the most important events in your life. There is so much to consider—the flowers, the jewel, the dress, the venue, the photography—the list goes on. Once you are back from the honeymoon, the daily life of marriage begins and also begins the challenges of managing the finances of a new household with your spouse.

In recent studies, many couples ranked financial matters as one of the most essential factors when it comes to happiness in a marriage. It is one of the key factors causing marital stress.


Money Compatibility


First thing to do is to check how compatible you and your spouse in money management. You may be conservative and your spouse may be aggressive. You may think that the best place to invest is stock market and your spouse may think bank FDs.

You should communicate your money management style to your spouse as well as you need to understand the money management style of your spouse. Both of you need to analyse the merits and demerits of money management style of each other and their own. Then you need to create a mutually agreed combined money management style.

This will be vital to you both throughout your married life to help minimise stress from disagreements about money.


Update Your Records


• Change of Address: You could have shifted to your in law’s place or both of you could have shifted to a new place. So you need to make necessary change of address requests to your bank accounts, demat accounts, mutual fund accounts and so on.
• Change of Name: Generally the women change their initial or the last name after their marriage. This need to be updated in all the accounts.
• Change of Nominee/Beneficiary: You may like to change the nominee to your spouse for the investments, accounts, insurance policies which you have taken before marriage.
• Changes in Will: You also need to create a will if you have not created one so far. If you have already a will, then you need to revisit your will now.


Assign Financial Responsibilities

You need to decide, who is going to take care of day to day money management i.e. paying bills, monitoring investments and the like.


Develop a Family Budget

You need to create a workable budget for your family that gives extra money and life. This budget should take into account both of your income, the individual expenses and family expenses.


Create an Emergency Fund

You need to accrue savings for some surprise situations like loss of job, break in job or sudden expenses like a major repair to your car or house. Generally the emergency fund need to be in the range of 3 to 6 month of family expenses.


Insurance Coverage

So far, you may not be having any dependents or less number of dependents. You could not have considered life insurance or take for a less coverage. This is the time to look at life insurance seriously. When I say life insurance, I am talking about only term insurance and not the ULIPs. Ulips have been rejected by the market for its heavy front loaded charges.


Debt Payoff Plan

Suppose, if you are already on debt, you need to create a debt payoff plan. This plan will help you in getting out of debt and staying out of debt.


Spend Smarter and Save More

Spending habits will be different from individual to individual. Both of you need to align your spending pattern and learn how to spend smarter and save more.

When both are working and not having kids yet is the stage you have more income, especially more disposable income. Couples need to be careful and avoid overspending and save as much as possible during this stage. This will ease you out when you have more expenses at the later stage of your life.


Set Combined Financial Goals

Both of you need to spend some quality time discussing about the financial goals like buying a home, international vacation and the like. This is the right time to plan your retirement.


Chalk out a Financial Plan

Once you have set the combined financial goals, then you need to chalk out a financial plan to achieve these goals. You need to take into account growth rate of your income, inflation on your expenses, time set to achieve various goals, rate of return expected from various investment options.

This is slightly a complicated procedure and this plan need to be review periodically. That is why it is better to outsource it. You may seek assistance from a professional financial planner.

To financially succeed, it needs teamwork from both the partners. As a newly married couple, you have enough time and plenty of opportunity. I am sure that with this checklist and the guidance from financial planner, you will reach your life goals together.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

What is Portfolio Management Scheme?


Portfolio management scheme popularly known as PMS are specialized investment vehicle for lump sum investments. The portfolio manager invests the money in shares and other securities and manages the portfolio on behalf of the client.

One can invest fresh money in Portfolio Management Scheme and the portfolio manager will construct a portfolio by deploying that money. Also one can transfer his existing share portfolio to the Portfolio Management Scheme provider. In that case, the portfolio manager will revamp the portfolio in sync with his investment philosophy and strategy.

Once the Portfolio Management Scheme account is opened, the client will be given with a web access to his portfolio. The client can look at where the portfolio manager is investing client’s money. Also one will be able to generate reports like Investment Summary, Portfolio Transaction List, Performance Analysis, Portfolio Statement and Quarterly capital gain report.

As a result, Portfolio Management Scheme relieves investors from all the administrative hassles of investments.


Portfolio Management Scheme Vs Direct Stock Market investment:



One can directly invest in stock market. Then what is the advantage of investing in the stock market through a Portfolio Management Scheme. Investing in share market demands knowledge, right mindset, time, and continuous monitoring. It is difficult for an individual investor to meet all these demands. But a Portfolio Management Scheme meets these demands easily. The Portfolio Management Scheme will be managed by an experienced professional.

It saves the time and effort of the individual investors. Hence it is advisable to outsource the stock market investment to a sound Portfolio Management Scheme operator instead of managing it on our own.
Portfolio Management Scheme VS Mutual Funds:

Mutual fund is also a good investment vehicle. It should also form part of your total equity investment. But mutual funds are mass products. So they will be conservative by nature. As per SEBI regulation, mutual funds have some investment restrictions. There is a maximum limit on the percentage of amount invested in an individual stock. Also there is some maximum cap on the exposure in a particular sector.

Once the fund manager reaches the maximum limit prescribed by SEBI, he is forced to invest in some other stock or some other sector. That is why we see a large number of stocks in a mutual fund portfolio. Where as a Portfolio Management Scheme will invest in 15 to 20 stocks. This concentration makes it more attractive and aggressive. Managing a 25 lakhs Portfolio Management Scheme portfolio will be more flexible when compared to managing a 2000 crores mutual fund portfolio.

Portfolio Management Schemes relatively have more flexibility to move in and out of cash as and when required depending on the stock market outlook.
Basically the conservative portion of your equity investment can go into mutual funds. The aggressive portion can go into Portfolio Management Scheme.


How to choose a best Portfolio Management Scheme?



There are so many Portfolio Management Schemes in the industry. So it is really very difficult to choose a good Portfolio Management Scheme provider. Here are some factors to be considered before choosing a Portfolio Management Scheme.


1) Yardstick for Performance:


One should not just go by the past performance alone. Making an analysis on various Portfolio Management Schemes in the industry with their past performance along with the risk adjusted return and the consistency of performance will be useful in selecting the best Portfolio Management Scheme.


2) Minimum Investment Criteria:



Investors need to avoid Portfolio Management Schemes where the minimum investment is less than 25 lacs. Even there are Portfolio Management Scheme operators who keep minimum investment for their schemes as low as 5 lacs. But these kinds of Portfolio Management Scheme operators will have more number of PMS accounts. When the quantity (the number of PMS A\cs) goes up the quality (the performance) may relatively come down.

Therefore it is better to choose a Portfolio Management Scheme where the minimum investment is 25 lacs or more. So that our PMS A\c will be directly handled and managed by the top level portfolio manager and not managed by the juniors and analysts. If you are planning to invest less than 25 lacs, then the ideal investment product for you would be mutual funds.


3) Conflict of interest:



Portfolio Management Schemes have been run by some stock broking companies as well as investment management companies. There is a conflict of interest in Portfolio Management Schemes run by share broking companies. The main business of a share broking company is to earn commission income by facilitating the share market transactions.

Portfolio Management Scheme is an additional business for them. It is not their core business. Hence there may not be enough focus on the Portfolio Management Scheme business. Also they may indulge in doing undue and unnecessary churning of the clients’ portfolio to earn more commission income. This will cause additional expenses and short term capital gain tax to the client.

The core business of investment management companies is managing the investments of their clients to earn management fees. So, with the Portfolio Management Schemes run by investment management companies, there is no conflict of interest or vested interest. Therefore it is always advisable to choose a Portfolio Management Scheme offered by investment management companies.


4) Role of Professional Financial Planners:



A professional financial advisor or financial planner will study and analyse the Portfolio Management Schemes run by various stock broking companies as well as investment management companies. If we approach them, they will guide us in choosing the right Portfolio Management Scheme depending upon our requirements and other factors.

Also a professional financial advisor will continuously monitor the performance of various Portfolio Management Schemes and advice the client on a regular basis on the performance of the Portfolio Management Scheme where the client has invested vis a vis the other PMS schemes in the industry. After a certain period, if necessary he may advice you to move from one Portfolio Management Scheme operator to the other.


ESOPs and Portfolio Management Scheme:



ESOPs are provided by the companies to its employees based on their service. Most of the employees are of the opinion of keeping the ESOPs as it is forever because it is their company shares. But logically it is too riskier to invest in a company to whom you work for. Because, your employment income as well as investment income will depend on the performance of a single company.

So it is not advisable to keep your investments in a company where you actually work. So it is at all times advisable to transfer your ESOPs to a Portfolio Management Scheme. They will revamp it to construct a well diversified portfolio.

Portfolio Management Scheme is an aggressive investment product and really suitable for those investors

• Who have a share portfolio and find it difficult to manage.
• Who have enough exposure in Mutual funds and looking for a different and good investment option
• Who have sizable ESOPs.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

It may look very strange when everyone is advocating Mutual Fund Sip for long term, what is the necessity for this debate on ‘Is Mutual Fund SIP for Short term or long term?’.

Theoretically doing a Mutual fund SIP for long term will work for investors. But for practical reasons we need to commit a Mutual Fund SIP for short term. That is we need to break that long term into many 6 months or 1 year periods and commit your Mutual Fund SIP for first 6 month or 1 year.

Then at the end of 6 month or 1 year renew your SIP for another 6 month or 1 year. You need to renew like this till you complete your predetermined long term period.

You may think it is an unnecessary paperwork and waste of time. But you will be completely convinced when you have finished reading this article.

Contribution towards Mutual Fund SIP Changes:

How much you are contributing towards Mutual Fund SIP changes over a period of time.

 At the beginning of a career a person will be able to commit Mutual Fund SIP for small sum of amount. As he progresses in his career, he or she will be able to increase his contribution towards Mutual Fund SIP.
 Similarly, when someone reaches a stage where he need to spend more on kid’s higher education, daughter’s wedding, buying a house or meeting a major financial commitment, it is difficult for him to continue the same amount of Mutual Fund SIP contribution.
 So whenever you renew your Mutual Fund SIP at the end of 6 month or 1 year, you can look at your cash flow position and based on that you can renew the Mutual Fund SIP for the increased amount or the same amount or the reduced amount.

Portfolio Review:

Also it gives you a chance to review your portfolio with your advisor once in 6 months or 1 year.

 The scheme which you have chosen for Mutual Fund SIP is performing well when compared to its peers or not? You need to review this periodically. The scheme may turn out to be a laggard.
 The scheme may be performing well when you have chosen for doing SIP. But over a period of time, it could have derailed from its performance. This is something like our cricket players. They will be in a good form in the game for some period of time. Then they will lose their form after sometime. So you need to periodically check up whether the fund is performing NOW or not.
 If you are committing a Mutual Fund SIP for 10 years, then the advisor may not be coming back to you whenever you call him for reviewing your portfolio. If you commit for 6 months or 1 year he or she will be definitely coming to you for renewing the Mutual Fund SIP. You can have a review with him or her at that time.

When you commit Mutual fund SIP for long term, generally we ignore to review it. It may generate poor returns. You can avoid this by periodic review.

Equity Exposure in Overall Portfolio:

How much equity exposure you can give to your overall portfolio can change the amount of Mutual Fund SIP in equity and debt.

 As the age goes up, your ability to take risk comes down. So you need to change your equity mutual fund SIP contribution periodically.
 How close or distant you are to achieve your financial goals will also decide your equity exposure. If you have got long period to achieve your financial goal then you can have more equity exposure. When you have short period to achieve your financial goal, then you need to reduce your equity exposure.
 Rebalancing your portfolio based on your predetermined asset allocation will also decide your equity exposure.

All this can change your Mutual Fund SIP amount in equity funds.

So committing a Mutual Fund SIP for long term looks good on paper. For practical reasons we need to commit for short term and renew it at the end of every short term till achieving our financial goals.

In this regard, instead of committing a Mutual Fund SIP just like that, having a long term financial plan and committing Mutual Fund SIP based on that plan will be really fruitful. This will make a solid difference in achieving your financial goals.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Company Deposits are simply nothing but fixed deposits in companies that earn a fixed rate of return over a period of time. Company deposits are really down-to-earth products. The influential advantage of the company deposits is its plain simplicity. Company deposit is understood even by the most novices among the investors community. Have you ever wondered the logic behind why pure vanilla flavored ice cream sells more than any other flavor? Similar logic is just as true when it comes to the company deposits vis-a-vis many other modern investment options. With the meltdown of NBFCs almost a decade ago, company deposit market had a major slow down, but volumes still remain significant and there are loyal investors who prefer company deposits to other investment products.

Advantages of Company deposits:

Assured return. Higher interest when compared to bank deposits. Low risk when compared to stock market investments. Service at your doorstep. Lock in period in most of the cases is 6 months only. If the interest income is less than Rs.5000 in one financial year, then NO TDS.

Risk in Company Deposits:

Company deposits are basically unsecured. That is if the company defaults in repaying the interest or principal, the investor will not be able to recover his capital. As a company deposit holder, you don’t have any lien on any asset of the company, in case it goes into financial difficulties. This makes the company deposits a risky investment option.

Identifying Risky Company Deposits:

One of the important tasks in investment planning in company deposits is to identify the risky company deposits and avoiding them. If you find any of the below symptoms in any of the company deposit scheme, then it is better to avoid such company deposit schemes. Poor credit ratings like A or lesser ratings. Companies making losses. Companies that skip dividends. Companies that offer higher than 3% to 4% of bank deposit rates.

Checklist for choosing right company deposits:

There are some good investment options in company deposits. Also there are some bad investment options. If you know how to select the right company deposit then company deposits can be really an interesting investment option in your portfolio. You need to ignore all the unrated companies and need to choose companies with the rating of AA or higher. Choose the company with better reputation within a given rating grade. If you read business papers and magazines periodically, it is not difficult for you to check the credentials of the company. Take the help of the qualified financial advisor in choosing the right company deposit. But mind you, there are very few reputed and qualified financial advisors. Company deposits need to be spread over a large number of companies in different industries. By this, you can diversify your risk. Irrespective of the rating and reputation of the company, don’t invest all your investments in a single company deposit scheme. You need to check on the servicing level and standard of the company. You need to ignore companies that don’t care or care little about issues like sending interest warrants and principal cheques. After investing in a company deposit, you need to constantly track the company’s credit rating. The times are uncertain and downgrades are rampant. Check the company’s balance sheet for its asset back up, profitability, reserves, existing borrowings and loans. Every investment has its distinct features and benefits. Likewise each investor has specific risk taking ability and personal needs. Professional investment planning needs matching of the product benefits and features with the financial objectives of the investors. So one need to weigh the various alternative investment options like bank deposits, debt funds vis-a-vis company deposits before making a choice.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in/) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Health care costs are sky rocketing day by day. Therefore the need for having a mediclaim policy for you and your dependents has grown. Suppose you have to undergo some medical treatment or need to be hospitalized for certain reason, then a mediclaim policy will be of immense help to you in covering your health care expenses. The reason is Mediclaim offers protection in case of unexpected medical and health care emergencies.

Hospitalization expenses in case of illness, disease or accident will impose a heavy financial burden on individuals and families. This is where the mediclaim policy comes in handy. The mediclaim policy can reimburse the hospitalization expenses or can pay the hospital directly on behalf of you.

A mediclaim policy provides a health cover of certain amount of money. This amount depends on the amount that the insured person was insured for. The mediclaim policy can be taken for an individual or for an entire family. Some insurance companies allow a discount on the premium if the policy is taken for a family. Insurance companies have fixed some age limit for medical test. If the individual is below that age, then he or she need not undergo medical test for taking mediclaim policy.

If the individual is above that age limit then he needs to go for medical test. If any pre-existing disease has been found out in the medical test, then those diseases will not be covered under the mediclaim policy for a waiting period of a first few years. If you have a mediclaim policy from your employer, that may not be sufficient. Employer may cover the employee and not necessarily his entire family members. And moreover these policies are not portable and cannot be individualized if you leave the job.

Employer provided policies cannot be transferred to another employer in case you switch your job. Also employer provided policies will give you coverage as long as you are employed. Once you retire you may not be having coverage. It is really unfortunate that only after your retirement you need health insurance at the most.

If you plan to take a fresh policy after retirement, insurance company will not cover the pre-existing diseases at that point in time. Though your employer provides a health insurance policy it is better for you to take a separate health insurance policy at least with a small amount of coverage. The coverage amount of the health insurance policy need to be decided based on your health consciousness, your family health history, and the class of hospital you choose for treatments.

If you are not health conscious or you don’t do regular exercises or you don’t follow proper diet or you frequently take outside food or don’t go for annual health check-ups then it is advisable to go for more sum insured coverage in your mediclaim policy. If your family has got any adverse health history like heart disease, high blood pressure, stroke, diabetes, kidney disease, cancer, any form of paralysis, or any hereditary disorder then you need to choose higher coverage amount in your health insurance.

If you will be choosing high class hospitals for your treatment then you need to go for higher sum assured. If you will be choosing medium level or low level hospitals then you can choose the coverage amount accordingly. Also you need to revise your health insurance coverage amount based on the changes in the above factors and the changes in the medical cost. Also the increase in the age needs to be considered for deciding the coverage amount. The icing on the cake is you get tax benefit under section 80D for the mediclaim premium paid. For senior citizen the limit under this section is Rs.20000 and for others it is 15000.

Most people don’t think about health insurance very often. But it comes to mind first when a loved one is sick. Mediclaim policy is one of those things everyone knows he or she should take but usually puts off until a more opportune time. Living without a mediclaim policy is like going out on a rainy day without an umbrella or a raincoat. If you have not covered adequately yourself and your dependents with mediclaim policy so far, then now is the right time to take action. The fact that you are reading this article shows you have decided to stop procrastinating, delaying and have answered the ancient question, “If not now, when?” with “NOW!”.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (http://www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in