Some days stock market goes up and some days stock market comes down. Some days it closes on green and some days it closes on red. Should all these stock market movements play a crucial role for an individual investor in making his investment decisions?
I have some money to invest.

If I see that market is coming down, then I have two choices to make. Either I can decide to invest today or not to invest. IF I HAVE INVESTED TODAY and the market go up tomorrow, then I will be happy because I have bought it at lower rate. Suppose if the market comes down further, then I will feel bad because if I could have delayed my investment by a day, then I could have bought it at much lower rate. IF I HAVE NOT INVESTED TODAY and the market goes up tomorrow, then I will be worried because I missed an opportunity to buy it at a lower rate. Suppose if the market comes down further, then I will be happy because I can buy it at a still lower rate.

Similarly, if I see the markets are going up, I can invest or postpone. If I invest and market comes down next day, if I postpone and the market goes up the next day……?

The point I am trying to make here is by simply watching today’s market movement and making an investment decision will not help. One needs to forecast the movement of the next day. Not only next day, the next to next day, the next week, the next month and so on. Also by watching the market movements to make investment decision, we allow our emotions –fear and greed- to creep in. When emotions come into play, the possibility of making a wrong decision is more.

So what should we do? Divide and rule. Predicting the market is not possible. The market is out of our control and we can’t do anything about it. It is worthwhile to focus our efforts and energy on the things we can do something about. But what is in our control is the money which we are going to invest. We can do something here. We can choose to invest the money in a staggered manner.

What would be the correct practice? Studying only during exams or studying regularly? Exercising only when we become overweight or exercising regularly? Investing only when the market comes down or investing regularly? I need not tell you the answer because you all know it. By investing regularly our investment will be spread across the ups and downs of the market. Our investment cost will be averaged out. We will not become emotional and we will become a more disciplined investor in this process

The mindset of today’s young professionals is changing radically. They would like to have a semi-retired life in their late forties or early fifties by taking up a hobby instead of a regular job.

Somewhere within all of us, there is a dream to reach a point in life where we have enough wealth to be able to choose the work we would like to do and the pace at which we would like to work, if at all we feel like working; a point also referred to as financial freedom. Financial Freedom is also interpreted as being able to spend whatever amount you like, on whatever things you like, month after month.

Here is a step by step guide to Retire Early.


How long you expect to live?

First of all, you need to decide on “How long you expect to live?” This is going to be the starting point for your retirement plan. This you can decide by your health history and your family health history.

Will you run out of money?

You need to accumulate enough money required to live up to that age. You need to calculate the corpus amount required for retirement based on when do you want to retire?, how much you need to spend every month after retiring?, Inflation, tax, investment returns and the like.

There are two things which can make you run out of money in between. One is inflation and the other one is medical expenses at the old age. So you need to be very careful in assuming inflation when planning for retirement. Also you need to be adequately covered with right health insurance policies.



Retirement corpus Break up:

You need to divide your retirement corpus into two portions. One portion of it is the corpus required to retire at the regular age. It could be 58 or 60. The other portion is the corpus required to live between the early retirement and the regular retirement. Say if you want to retire at 50, what would be the corpus required to live between the age of 50 and the regular retirement age of 58 or 60.

First you need to accumulate money for your regular retirement. Then you need to proceed to accumulate for your early retirement. This way you break your targets and it psychologically gives you a lot of comfort in achieving early retirement.

Don't fall for get-rich-quick schemes

To retire early, definitely you need a sizable corpus. Don’t look for any short cuts and get-rich-quick schemes. Only with the increased risk comes the increased return. If any scheme assures low risk and high return, then it is going to be another scam. So stay away from those schemes.

Don't fear stocks

You need to consider investing in a well diversified portfolio for long-term. Diversified Equity mutual fund schemes are better. By investing in a diversified equity portfolio you will be taking calculated risk and not blind risk. Equities will beat all other asset classes in the long run. So it is an important option for those who want to retire early.
Reduce your annual cash requirements for when you retire by working out a careful budget
The monthly income required after retirement is going to be an important criteria for deciding the retirement corpus. If you are comfortable with lesser income you can retire sooner. So you need to be careful in drawing a budget for cash requirement post retirement.


Investigate a better return on your savings
Better return on your investment portfolio will help you retiring early. So maximize the return on your portfolio as far as possible.

Cut your current spending so you can save more
Money spent is money saved. Spend less; save more; invest smarter and retire sooner. There are more number of ways to spend smarter to save more. (Link this article here http://getahead.rediff.com/slide-show/2010/oct/14/slide-show-1-money-control-emotions-spend-smarter-and-save-more.htm)
Earn more now
Time is money. Don’t waste your time. Invest your time in revenue generating activities. Apart from your regular income source, there are other opportunities which you can exploit. You can create blogs; you can be a freelance writer; you can do internet marketing. There will be numerous opportunities based on your knowledge and skills if you take time to think and implement.
Take advantage of tax-deferred opportunities

Tax deferment is an important tool for early retirement. Tax deferment means less tax now. If you pay less tax and you will have more money to save. You need to pay tax on FDs on maturity even if you renew them. Income funds and MIPs could be a better alternative to this. You need to pay tax only when you actually redeem.

Find out some ways to have an income

Even after retirement you can have an income by way of a hobby or interest. You need not work on a regular schedule. Say you can be a trainer, you can be a blogger, you can be a consultant, or you can be an advisor in your chosen field. It generates money as well as it keeps you engaged after retirement. One of my clients has written a book and he is able to generate income from the copyright of that book year on year. If you are able to generate this kind of income, then you can retire early.

Retiring early is possible for each and everybody. You need to start planning for it little earlier. Professional assistance from financial planners will be of definitely useful to you, if you desire to retire sooner and retire richer.

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

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.


Get Rid of All Your Debts

If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund

Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget

You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

Examine Your Cash Flow

Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

Grow Your Retirement Corpus
Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

Develop a withdrawal strategy

How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

Minimize taxes

Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

Get Sufficient Mediclaim coverage

The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.
Consider Inflation adjusted annuities
The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.
Oversee estate planning
How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

The 80-20 Rule of Investing

I think the readers must have heard of the Pareto Principle,which is also known as the 80/20 Rule. This principle states that 80 percent of your results will come from 20 percent of your efforts. And this applies to investment in stocks also.

Whenever I ask any investor about how he started off investing. He would normally reply. I have invested 5 Lakhs in Fixed Deposits. Another one says, he has invested 5 lakhs in Mutual funds. In recent times, because the markets were not volatile, people tend to forget about assest allocation of funds.

Assest Allocation of funds means percentage of your assests in Equity, Debt & other assest classes like Gold, Fixed Deposits. If we talk about the risk & return matrix, Mutual funds which invest in equities had given 18% returns in the past whereas Fixed Deposits give 8-9% return. Equity markets are volatile & risk, and there is no guaranteed returns. In Debt funds, you may get guaranteed 8-9% returns. So what should be the assest allocation for any investor. I would say as a rule of investor. Invest in Mutual funds 100 minus your age. It means if your age is 35, you should invest 100 minus 35, 65% of your total investment in mutual funds & remaining in debt funds.

Similarly for a investor above 50, he should invest 50% of his investments in equities, remaining in debt.

The conclusion should be , one must be active while investing & must use assest allocation tool to plan his/her investments or hire a wealth manager. This would help him in getting returns in line with his expectations. SIP in Mutual Funds is the best route for retail investors to put their money in stocks indirectly & leave the decision of which stocks to buy in the hands of fund manager

This article is written by Mr. Mayank Gupta, financial planner, who is into Portfolio Advisory & wealth management

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.


Get Rid of All Your Debts

If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund

Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget

You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

Examine Your Cash Flow

Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

Grow Your Retirement Corpus
Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

Develop a withdrawal strategy

How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

Minimize taxes

Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

Get Sufficient Mediclaim coverage

The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.
Consider Inflation adjusted annuities
The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.
Oversee estate planning
How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

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

Most of us have our own perception of investment based on our experiences, but also tend to be confused with the opinions given by others. Knowing the do’s and don’ts of the stock market would help us turn really as a smart investor.

The do’s and don’ts in the stock market are:

Slow, steady, and boring wins the race:

It is best not to panic over information about stocks on the media. Being slow and steady with looking at the activities that your money is to be used for would ensure that you invest in ventures that are good, useful and profitable.

Reading good books on personal finance will help you in taking right financial and investment decision. In addition, finding good financial advisors would help you get advice regarding stocks and mutual funds, along with entrusting the custody and management of your funds to them.

All this may seem too boring and time consuming, but it is better to be cautious than bitten too hard.

Don’t give any weight to market forecasts. All opinion pro and con is already built into the price of equities today:

Market forecasts on the media has got good entertainment value but doesn’t have any investment value. It is just enough for long-term investors to invest in good stocks, and mutual funds that would appreciate in the long run.

It is best to understand that market forecasts only show you the expected direction in which the market is heading based on the available information. This forecast is only a forecast and need not become reality.

In addition, market fluctuations are the very nature of share markets and should mean nothing to long tem investors. Making accurate market forecasts is tough, as they are influenced by various factors like the outcome of political elections, the direction of the economy, interest rates and world events. It is also wise to know that these fluctuations are incorporated in the price of the share, stock or mutual fund.

Do make your own analysis of the stocks, shares and mutual funds:

It is unadvisable to place your full faith on analysis of others regarding stock, shares and mutual funds. No wise man would always tell you all about his market beating strategy. Making ones own analysis keeping your financial goals in view and framing a strategy would help.

This involves studying the performance of top performing stocks and mutual funds over 5 years and existing mutual funds over a period of 3 months to decide on which stock to maintain and which to dispose off. All this would ensure that you are investment smart.

Don’t think you can successfully engage in short-term market timing:

As a long- term investor you should never contemplate taking advantage of short-term market dealings and speculations. Playing with shares and mutual funds in the short-term market may give you a profit in a few transactions but will not give you profits forever. So you can’t have an investment strategy which gives profit inconsistently. We need a strategy which can bring profits consistently so as to be a successful investor in the long run.

It is true that playing in the share market is neither entertainment nor fun. It is also futile to borrow or work on short-term margins to make money.

Don’t assume that if anyone were genius enough to devise a market-beating strategy he would be stupid enough to share it with anyone:

Stock tips are good to learn, but not to act on for speculations. It could prove dangerous to act on speculation tips given by one and all, as they may not be correct. In addition, everyone has his or her own perception of investment, with other not having full knowledge or skills.

You need to take time to think over each tip and analyze if it contributes to your long-term objective of capital appreciation. Similarly it is not advisable to subject your money to risk with investing in investment fads that may or may not earn you huge profits.

The final advice:

You need to make a calculated decision considering the pros and cons whenever you make an investment. In addition abstain from trading often in the stock and mutual funds market. Always think in terms of long term investing.

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

Some days stock market goes up and some days stock market comes down. Some days it closes on green and some days it closes on red. Should all these stock market movements play a crucial role for an individual investor in making his investment decisions?
I have some money to invest.

If I see that market is coming down, then I have two choices to make. Either I can decide to invest today or not to invest. IF I HAVE INVESTED TODAY and the market go up tomorrow, then I will be happy because I have bought it at lower rate. Suppose if the market comes down further, then I will feel bad because if I could have delayed my investment by a day, then I could have bought it at much lower rate. IF I HAVE NOT INVESTED TODAY and the market goes up tomorrow, then I will be worried because I missed an opportunity to buy it at a lower rate. Suppose if the market comes down further, then I will be happy because I can buy it at a still lower rate.

Similarly, if I see the markets are going up, I can invest or postpone. If I invest and market comes down next day, if I postpone and the market goes up the next day……?

The point I am trying to make here is by simply watching today’s market movement and making an investment decision will not help. One needs to forecast the movement of the next day. Not only next day, the next to next day, the next week, the next month and so on. Also by watching the market movements to make investment decision, we allow our emotions –fear and greed- to creep in. When emotions come into play, the possibility of making a wrong decision is more.

So what should we do? Divide and rule. Predicting the market is not possible. The market is out of our control and we can’t do anything about it. It is worthwhile to focus our efforts and energy on the things we can do something about. But what is in our control is the money which we are going to invest. We can do something here. We can choose to invest the money in a staggered manner.

What would be the correct practice? Studying only during exams or studying regularly? Exercising only when we become overweight or exercising regularly? Investing only when the market comes down or investing regularly? I need not tell you the answer because you all know it. By investing regularly our investment will be spread across the ups and downs of the market. Our investment cost will be averaged out. We will not become emotional and we will become a more disciplined investor in this process.

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

Start up your SIP as early as possible

SIP stands for Systematic Investment Plan. As the name suggests, it is one of the basic step for investing systematically & creating wealth for your retirement needs

Even if the markets are up or down, they are moving slow or even if there is a bubble like 2008, SIP helps you to invest systematically and helps you to make a average price of your investments. As a investor, one can even start up a SIP in Mutual funds with amount as low as Rs 100 per month & can create wealth in a long run. A investor should analyze the Mutual funds on the basis of following factors

· CAGR Returns of past 3 years & 5 years

· Age of the fund

· Experience of the fund manager

· Beta, R squared

Helps in Rupee Cost Averaging

Rupee Cost Averaging means you start a systematic investment plan (SIP) with a mutual fund house and you assign a fixed amount towards purchasing the units every month & it helps you to avoid the timing of the markets. Because a lot of people who have done lump sum investments in 2008 are still waiting to get their money recovered. But if you have invested systematically in 2008, you could have gained 50% from 2008 highs.

TOP Mutual Funds

The top mutual funds for 2011 are

1. Relaince Equity Opportunities Fund

2. HDFC Top 200 Fund

3. Reliance Pharma Fund

Among the balanced funds, HDFC Balanced fund can be a good bet for a investor who is looking for 15% annualised returns. So start up a SIP in Mutual funds as early as possible so that you don’t out on creating wealth. A financial planner may help you in monitoring your investing year after year as he may help you in getting better returns

This article is given by Mr. Mayank Gupta, MBA Finance, who is a founder at wealth management company www.wealthbazaar.in

The start:

As I grow older, the number of people I meet who are near, or close to retirement continues to grow. Certainly they’re all mentally prepared for leisurely rounds of golf, time spent watching the grandkids, and languid walks on the beach, BUT very few of them are financially prepared to realize their cherished dreams.
I also have many younger friends, people still in their prime and just starting their careers. They’re many decades away from retirement, and they’ve fallen victim to the mindset of those with whose career horizon stretches out far into the distance. Although they “Talk” about investing for the long term, their actions…lavish spending…living paycheque to paycheque, ignores the future that will soon become their reality.

Here are “5 what not to dos” on retirement planning that could seriously damage your retired life.

The 5 bad choices that I have observed are:

1) I can start saving later:

The decision to postpone savings and investment can’t be a good decision as time will not wait for you to start saving to become a millionaire and have a comfortable retired life.

Savings and investments should start when young, giving you enough time to reach the goal you have set for yourself. It is interesting to note that the value of money saved in earlier years appreciates much more than what is saved in later years just before retirement due to accumulation of interest and the compounding effect. In addition, starting to save bigger amounts in middle age poses problems with other family responsibilities.

2) I am too old to save and plan retirement goals:

I do not agree with you. It is never late to start saving and plan your retirement. “It is too late and I can’t do my retirement plan now. I will try to face my retirement as and when it comes” is not the right attitude.

Anyway you need to face your retirement. You can’t skip or escape. So why don’t you prepare yourself now itself. However just procrastinating only further complicates your retired life and you may need to meet a lot of disappointments.
Professional Financial Planners will be of immense help to you in this regard with financial computations for the amount of money required for retirement and how you can cut on unnecessary expenses to build the retirement corpus.

3) Need for medical aid after retirement overlooked:

This could be an overlooked fact, as old age meant more medical expenses and expenses on annual check-ups. In addition, there could be a need for long term care in hospitals and homes that could drain off a huge sum from your retirement corpus. A family history of disorders like diabetes, hypertension and cancer could increase your risk for these disorders further.

Your employer may not provide medical aid after retirement. So instead of relying only on your employer provided mediclaim policy, it is advisable to take an independent mediclaim policy when you are young and healthy.

4) Lack of balance in spending after retirement:

I would always consider extremes in spending habits as unadvisable; being neither frugal in expenses after retirement nor too lavish to deplete all your savings within the first few years is advised. You have a right to enjoy a relaxed and comfortable time after retirement, but spending lavishly would only upset the amount of retirement corpus making you give up on even necessities in later years. It seems sensible thinking that old age could deter ones health to enjoy in later years and so enjoying in the first few years is sensible. Careful financial planning with projected living expenses and other considerations like savings, other social security benefits and pension would help.

5) Missing on opportunities to save on taxes and other benefits:

Your retirement corpus and retirement income need to be tax efficient. Suppose of you are choosing Fixed deposit as an investment vehicle for accumulating your retirement corpus, then, you need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay tax only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the accumulation phase as well as during your retired life.

Be careful to avail of all these opportunities and invest the saved amount to build up your retirement corpus.

The final note:

I am sure you have already started giving a deep thought to avoid the 5 bad choices that can ruin meeting your retirement corpus and having a relaxed retirement.

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