Incomes typically grow till your retirement. Your monthly income might support your groceries and other bills but it is inadequate for large expenses. This is what necessitates investments for your future.

One big and certain investment needed is retirement planning. To know how much pension you would require, you should look up an online retirement fund calculator. This simple tool asks for a few details and gives you a solution to your pension problems. It will ask you for:

● Current Age
● Age when you will retire
● How long you’d want a pension
● Current monthly expenses
● Expected Inflation
● Saving done for Retirement till date

Once you answer these, the online retirement fund calculator lets you know the total sum you require as well as the monthly expenses on retirement. It also tells you how much monthly savings are required to reach there.

But apart from pension, what if you simply want to know the maturity amount of any of your investments? That can be easily found by using the Maturity Amount Calculator.

Feed in the following:

● Principal invested
● Rate of interest
● Period of investment
● Compounding frequency

With the click of a button, it calculates the maturity amount for you.

It’s always good to know the figures that you’re working for, and the figures that your investments will lead to. It works as a great motivation to know all that you can do with that money.

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The best military strategies win because they were pre-planned. No General can maintain a winning record by impulsively taking decisions that could have a long-term impact. The same analogy applies to any sport you practice, and any human achievement that you admire. Planning is necessary for long-term success. And you can define the success of your life with Financial Planning.

But before you plan, you must have a good idea of the current scenario as well as your long-term objectives. Therefore, the first step to attaining your life’s goals is Financial Assessment, which is, How much of your income needs to go into fixed expenditures as well as variable ones, resulting in how much money you can actually save. Once you have these figures, you move on to Financial Planning.

Briefly, there are a lot of financial products that you can invest in. But you must choose only those that deliver your long-term financial goals, such as a vehicle, a home, old-age security and so on. Approach a financial services company, who have experienced professionals to assist you in selecting the right plan for your life.

Once you have figured out the plan --- how much of your savings go into insurance, mutual funds, pension plans and so on --  you can be worry-free for the rest of your life. Not only is your present covered, your future is secure too. Whatever happens next won’t bother you, because it’s all covered under your plan. Get ready to savour your successes, one after another!

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Question: The market is down. Shall I stop the SIP?

Answer: To stop your SIP when the equity market has fallen is the worst possible mistake you can commit. To benefit from an SIP investment, you need to stay invested across market cycles. If you continue with your SIP, you will be able to purchase more units of the Mutual Fund during the downturn. Your long-term returns will benefit from those low-cost purchases. When you stop your SIP, you also flout the principle of asset allocation, which requires that you maintain your allocation to different asset classes at a predetermined level, irrespective of market conditions. By stopping your SIP, you tilt the asset allocation of your portfolio away from equities and towards cash, a decision that will harm your portfolio returns. Going by the logic of asset allocation, you should, in fact, invest more in the equity market when it is down.

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Question: At age 35, my monthly income is Rs. 80,000. My monthly expenses are Rs. 40,000. How do I build a retirement corpus of Rs. 5-8 crore & also buy a health insurance plan for me & my wife?

Answer: To create wealth for a long period is important. Apart from that, you also need to plan your retirement as well as other financial goals for the coming years. Long-term planning requires regular savings, which then results in compounding. The process of compounding  begins when the interest starts earning interest. Its effectiveness increases with the length of the investment period.

For example, a person saving Rs. 40,000 per month for 20 years will earn a principal saving of Rs. 96 lakh. If we assume an average return of 10%, the corpus may become Rs. 3.06 crore  during the same period. The corpus will reach Rs. 4 crore if we assume the average return to be 12% and will touch Rs. 6.06 crore at an average return of 15%. All these figures are obtained without considering any increment in savings. If you assume a savings rate of 5% per year or increase the savings in the same proportion as the hike in your salary, the corpus will cross Rs. 4 crore, assuming an interest rate of 10%. 

This sounds easy but the reality is different. You may earn the targeted interest rate over a long period. However, in between, there would be periods when the earning rate is below the inflation rate, managing which are hard.

The allocation of assets should be done as per the targeted earning as it is higher than the inflation. Select from the asset classes that outperform inflation over a long duration. You can opt for Mutual Funds for long-term investments, but they being a volatile asset class need to be held for a long time. The best way to bring discipline and consistency in regular savings is to choose Systematic Investment Plans (SIPs).

Ensure to have adequate life insurances in order. The insurance amount should be 7-8 times of the annual income of the earning members of the family and this needs to be periodically reviewed. The next in the line is medical insurance. Check all details related to the services covered, immediate coverage, waiting period, network hospitals, sub-limits, co-payment, pre- and post-hospitalisation expenses, no claim discounts, cover ceasing age, and option to upgrade the sum insured before you choose the insurance company.

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Creative: I want to save taxes on Rs. 50,000. Should I invest in NPS or equity MFs?

Answer: NPS is one of the better products available in market in order to plan for your Golden Years. It is usually compared with provident fund. Employees’ Provident Fund (EPF) and Public Provident Fund are considered to be debt-oriented products with fixed returns. As compared to them NPS gives higher returns over the long term due to the provision of allocating 50% to equity in its portfolio. NPS is taken superior to many insurance-linked retirement products too being less expensive and by investment product in nature.

NPS, in comparison to Mutual Funds-oriented retirement solutions has its own merits. The long-term lock-in that NPS has protects an investor from premature withdrawals and the fixed nature of its index-based equity exposure rescues him from selecting between various funds and maintaining a portfolio through the years. Thus, it becomes beneficial for an investor who wants a low-cost, low-maintenance and pure investment retirement product. Mutual Funds offer high returns for disciplined investors and for those who can, either by themselves or with the help of an adviser, manage a retirement portfolio. 

However, investing in NPS or such instruments purely for tax deductions will do no good. The right approach is to first analyse if NPS fulfills your retirement needs or not and if so, use tax incentive as a fillip.

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If you want insurance go to an insurance provider, for mutual funds go to a mutual fund house, for stock markets go to a stock broker. Then there are loans. Too many offices and hassle, isn’t it?

Now what if we told you there is a one-stop shop for all your financial needs? It is true, and the best part is, it is cheaper in the long run to work with a financial services company than all the agencies mentioned earlier.

What do they offer?

• Insurance: They can offer products from a wide variety of insurers, both in life and general insurance categories.

• Mutual funds: You will be suggested the best mutual funds suited specifically to your financial requirements.

• Stock broking: You can operate your trading and demat accounts and get related services from a single point.

• Portfolio management: Let professionals decide where best to invest your capital across different asset classes.

• Loan management: You don’t need to meet different lenders for the best loan. Through the loan providers associated with them they offer what you need- student loan,    housing loan, vehicle loan, personal loan etc.

• Debt servicing: You are guided on how to allocate regular payments to service your debt and track your credit score.

• Investment Advisory: If you’d like to be actively involved with your finances but need expert opinion, they guide you.

All the financial services under one roof provided by professionals- get rich easy.

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If you are the scion of an Arab Sheikh, you won’t be reading this. But you are not. Which means that you don’t have a seemingly endless supply of money to your bank account. Therefore, you must be very careful with what you do with that money.

Spend it on a holiday, sure. Buy luxury items, why not?

And what happens to your medical bills? What about your retirement?

Well, now that you’ve come back to earth, how should you be investing in your future needs?

First off, you need to approach a Financial Services Company. There, you will be financially assessed, based on your income potential and likely expenses. Once you visit a Financial Services Company, nearly all your financial needs and goals will be met; they do offer those many options.

In broad headings, this is what you get under the umbrella of Financial Services in India:

● Investment Advisory --  They do the thinking about what is the best investment for you
● Insurance -- Life or general insurance, pick from offerings of multiple insurers
● Mutual funds -- High-returns or safe investments, you get to choose the mutual fund that suits your style

Apart from these, you can also trade in the stock markets, have your entire investment portfolio managed, finance your loans or service your debt. Just a small fee and your money woes are forgotten. Not a Sheikh, but you’ll be rich enough, soon.

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Financial assessment in India is generally perceived as something that only the wealthy need. That’s a big mistake, though.

How do you generally travel to your destination? You figure out the route, the means of transport, and carry the required luggage. Likewise, you can reach your financial goals through proper planning.

So, you need financial assessment to tell you what liabilities are in your baggage, which investment vehicle would get you to your goal, and what should be your investment pattern along the route.

For instance, when you are young and have a high risk appetite, it could be recommended that you invest a lot in equities. This is so that even if the markets don’t perform as anticipated, you can sustain for a longer duration, by which time the historic averages of return will come through.

But when you are older, your financial assessment would advise you to go for the National Pension Scheme India, so that there’s a regular pension available to you from a very low-risk investment option.

This is just a general example. Actually, financial assessment in India is as comprehensive as abroad. You get investment options customized just for you based on:

● Your income and expenses

● Your financial goals

● Your risk appetite

And that is not all. You get to select from a variety of financial products offered by multiple public and private enterprises. So, get your financial assessment done today.

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By making two simple calculations today, you can ensure that you look forward to a secure future for yourself and your family.

Your calculations will be based on two future events:

1.    If you live to a very ripe old age.

2.    If you pass away when your family still needs you.

Nobody can predict with absolute certainty how life will turn out. But if you are well-prepared for all outcomes, you won’t have a reason to worry.

Let’s consider what happens if you live to a ripe old age. Do you want to depend on someone for your medical bills? Do you want to request someone to take care of your daily needs? You won’t have to do it if you use an EPF Calculator India that websites provide. Know your required EPF contributions today and be vigilant in scaling those up, as per the Provident Fund you require on retirement.

The second event means you won’t be around to take care of your family. Therefore, you must buy life insurance. Use a Human Life Value (HLV) Calculator that helps you determine the value of your life in terms of financial output. It will assist you in finding out how much income your dependents require if you were gone. Your loved ones will lead the same lifestyle that you gave them.

Once you have these two figures, religiously match up your monetary contribution. It’s for the future of your loved ones, after all.

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There’s always some money you can save each month, if you scrimp on your expenses a bit. Like, taking public transport instead of the cab, eating out less, not buying that dress you aren’t likely to wear more than twice. Think about it. There are so many avoidable expenses which can turn into savings. And once you invest in mutual funds, you’ll shock yourself with the sizable returns.

It’s an easy 1-2-3 decision-making process

1. SIP or Systematic Investment Plans allow you to invest small savings on a regular basis. This mode of investment has historically given greater returns than lump sum investments in Mutual Fund Investment Plans. It’s easy on the pocket too.

2. Always look at the taxes when you invest in mutual funds. Because a very sizable chunk of your bounty could simply go to the taxman. There are a variety of Mutual Fund Investment Plans that not only give good returns but are exempt from Income Tax under some sections. Look for them.

3.Don’t overlook the Mutual Fund charges because under one heading

 or another, you’ll be gifting away your income from the investment to the mutual fund. Now why should your money enrich someone else? Therefore, clarify all fees and applicable charges.

A little diligence and you can be comfortably rich, without much inconvenience. Call that mutual fund agent right away!

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Creative: I’m looking to invest in MFs. Please suggest what are the different types of plans & which one to choose?

Answer: It completely depends on the strategy of the concerned scheme, but broadly speaking, there are 3 different categories: one is a dividend plan that gives a regular payment of dividend to the investors. Another one is a re-investment plan where these dividend are reinvested in the scheme itself. One more kind is growth plan where no dividends are declared and the investor only gains through capital appreciation in the NAV of the fund. For you to buy for yourself, it completely depends on your investment objective, which are again dependent on your age, income, your risk taking capability and your financial expenses as well as tax status. It depends on your needs like, a retired government employee will definitely look for monthly income plan while a youngster like you can go for growth plan. Have more queries? Feel free to write to us.

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Creative: Since, I am planning to start investing, can you please tell me, what is better, PPF or ELSS?

Answer: Public provident Fund (PPF) is a popular scheme with long term investment option available backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from tax & ELSS is Equity Linked Savings Scheme offers you an opportunity to gain from the potential of Indian equity markets and at the same time provides you tax benefits too. ELSS comes with more benefits like being a diversified equity  Mutual Fund (MF), it offers tax-exemption under section 80C of the Income Tax Act and rate of return is generally 14-16%. There are benefits of capital appreciation along with tax benefits that can be availed by any investor. Other than this, the lock-in period of ELSS is of 3 years where PPF matures in 15 years. Have more queries? Feel free to write to us.

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Everybody has a financial balance sheet neatly dividing up their assets, liabilities and income from various sources. When you add up the income and assets, and subtract the liabilities, you get the actual wealth of an individual. If properly managed, this amount can prosper effectively with time. If not, the person could end up wasting the precious financial resources. This is exactly why you need to avail of the wealth management services in India.

What is wealth management?

You do plan out some budgeting for your monthly groceries, your eating out expenses, your mobile bills etc., don’t you? That is wealth management too, but on a smaller scale, over a shorter period of time. When we talk about wealth management, we clearly mean  long-term financial planning that manages and amplifies your savings.

What wealth management services in India do is give you a customized assortment to manage your financial goals¬ – short-term and long-term. Their fees will be negligible, considering the kind of returns generated through multiple investment avenues, keeping your costs down.

What services do they provide?

• Financial Risk Profile Assessment: It assesses your personality, what your assets & liabilities are, and what are your long-term goals.

• Investment Portfolio Analysis: It analyses where all have you invested, how much it can cost you, and what are the rates of return from various investments.

• Portfolio Adjustment: Your investments are juggled to reach your short, medium and long-term goals with minimum pain.

Through the above services, there’s constant re-evaluation and decision-making process that wealth management services do for you for a fee. The worries are off your head now. So sit back, relax and plan a king size lifestyle.

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There are four kinds of Budget personalities: The Go(al)- getter; The Automater; The Busy Bee; The Avoider. Find out which one are you.

Everyone plans their monthly budget differently, but you probably fall into one of these four ‘budget personality’ categories. Find out which one describes you best:

The Go(al)- getter: You set all your short-term and long-term goals, chart out a good financial plan and then make it happen. Being focused and disciplined, you achieve all that you have planned for the life, now and later.

Tip: Awesome, you manage your finances so well. But we hope you are not forgetting to keep aside money amounting to 3-6 months’ expenses aside as an Emergency Fund. After all, there will be a time your car will break down or someone in family will fall ill. 

The Automater: You’re the kind who fills up your life with friends, family and work. Life’s on an auto mode and money management is one topic that doesn’t bother you. Your bills are paid automatically from your account, your subscriptions are automatically updated, insurance premiums are paid on time, and EMIs are met with directly from the savings account.

Tip: Great that you’ve taken care of all the expenses and it’s all sorted. But take a look back at your expenses and a keen look into your account. Are there expenses you can do away with? Are there financial opportunities you are missing out on? You may be failing to create additional wealth!

The Busy Bee: You’re the one who is always on the go. Your life’s commanded by the calendar alerts on your phone. Every hour is marked with a different colour on the work calendar that’s synced well with your smart phone. Every pop-up and notification decided what you’re doing next. There’s of course no time to plan or execute a financial plan, or even to take a look back at the savings account.

Tip: With the advent of numerous Mobile Apps, life’s sure become simpler. You pay your bills and premiums there, buy movie tickets in a jiffy, even shop for most expensive gadgets on the go. But stop right there! You must wait and think where you want to be in next 5, 10 or 20 years! Have you made a financial plan for your future? Even though you don’t have time to think what may happen in next week, but it’s important to make time to plan for a similar lifestyle when you retire.

The Avoider: For you, money is a worry, so much so that you’d rather avoid thinking about it. You miss out paying off bills on time and taking financial decisions until they become late notices or missed opportunities! Your budget is an ‘approximation’, instead of exact ‘math’ of what’s coming in and what’s going out.

Tip: Start small and create a budget. Keep a track of your expenses and start saving. The next step of course is looking for investment opportunities to create wealth.

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When you want to make money, your approach to your finances has to be disciplined. If you run after get-rich-quick schemes, then the odds are that you will get poorer than if you hadn’t bothered to invest at all. So, is there a process to fiscal discipline? Yes, there is. Wealth Management Services in India can help you imbibe this easily.

Just answer these three questions before you think of investing:

• How much can you invest: What is the extra cash in hand once all your needs and liabilities are met? How much risk can you afford to take on this sum?

• Where should you invest: What are your financial goals? What kind of assets would you invest in? There are multiple product categories of each asset. Then, there are choices of different investment options. Figure out the choice that suits you the most.

• What are the taxes and exemptions: What use is a good investment if the gains are all given away in taxes? Read the documents carefully to see what exemptions you can avail of by investing in that product.

Fiscal Discipline is nothing but this three-step process, followed by constant monitoring and review of the performance of your investments. However, if you are too busy to devote time to this process then contact any of the companies that offer wealth management services in India. They will follow the process to ensure that your finances are always in good shape. They do the investing; you do the money-counting.

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There are two kinds of people in this world: Those who have dreams, and those who have goals. Dreams seldom come true. Goals, if properly planned for, are always attainable. You are working not just for your present welfare, but to secure your future too. If you do not measure your expenditure and savings today, you will be forced to live an austere life in old age. So, be sensible in how much you save and how you invest.

But is there a method to calculate the necessary savings and find the best investments? Yes, there is. It’s called Financial Assessment.

Financial Assessment in India is carried out by Financial Services companies, mostly. But, any qualified finance professional can easily chart up your financial history, your future goals and give you the options of financial decisions that you need to make.

Technically speaking, what financial assessment entails is:

• Cash Flow Management: Managing your cash requirements for your fixed and variable expenses in such a way that you   save regularly.

• Investment Analysis: Discovering the investment avenues which maximize your returns while minimizing tax outgo.

• Future Planning: Your savings, investments and expenditures shall be rationalized according to your future goals - house, vehicle, retirement plans etc.

Remember the story of the grasshopper that did not plan for winters, making merry in summers while the ant toiled? Be the ant. You’ll be happier in old age. Get a financial assessment done.

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Retirement plans in India usually have only 3 objectives: House, vehicle and a regular pension. Once these are met, you believe you won’t need more in your retirement. But you are so wrong!

What about your medical bills? What if you wanted to travel somewhere? What if you were to entertain guests? What if your near and dear ones required financial help? You never thought about allocating money for all these, did you?

But now when you begin thinking along these lines, does your retirement plan generate enough to meet all these possible future expenses? Take out your calculator and follow these steps, noting down the figures in a notepad:

• Whether as regular investments, or a lump sum, what is the total amount that you would have deposited before you start withdrawing pension?
• What is the rate of interest your investment will be earning?

• What are the total taxes and charges you will be liable to pay when you begin withdrawing pension? Also check whether there are any obligations - how much you can withdraw, where you must reinvest, and so on.

Now calculate the actual return on your investment. Are you happy with the figure? Compare the pension plan with investing for the same duration in other financial products such as mutual funds, PPF, gold, real estate etc.

Unless the investment takes care of all your retirement needs, you won’t be happy in old age. So calculate well, and choose wisely.

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Do terms like Mutual Funds leave you confused? Does it seem it’s going to be too much of an effort to understand Mutual Funds? Many would see this as a hefty financial scoop to lay their hands on, making this topic a dreaded zone to venture in. However, the reality is that Mutual Funds are not just easy to understand but are also a great mode of investment!

How to invest in mutual funds?

• Be clear about the time period of your investment.
• Choose a fund based on your risk appetite. Greater the risk, greater would be the rewards or losses. Always inquire about the risk profile before investing.
• If you invest through an agent, you will be paying Entry Load up to Rs. 150. However, a direct application to the Mutual Fund doesn’t require any additional payment.
• Go through the list of charges - Expense ratio, Exit Load, Demat & Brokerage Charges etc. Calculate how much you will be paying in total.
• Verify what exemptions under IT Act you can avail, if any.

With the help of the above checklist, once you shortlist the Mutual Funds that suit your needs, go through their historical performance graph. Also, see the history of returns generated by the fund manager who would manage your portfolio. By now, you know where and how your investment will generate the maximum returns.
See, it wasn’t that hard. So, without any further ado, just dive in!

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You’ve heard from your friends and colleagues about the benefits of the Systematic Investment Plan. You were shocked when they mentioned the rates of return. And now you are roaring to invest in Mutual Funds. What’s the first question you ask: What can you tell me about Mutual Fund Investment Plans?

However, in effect, it’s a wrong question to ask!

Firstly, you need to understand how to shortlist a Mutual Fund as per your individual requirements. There’s no guarantee that investing in the same MF, as your colleagues, will generate the same amount of profits for you.

Follow these 4 steps:

1. Match your asset allocation to the Mutual Fund: How much risk can you take? What is your investment horizon? Don’t overstretch your finances in greed.

2. Check the consistency of past performance: Understand how good is the fund, or the fund manager with making profits over a long period of time. You don’t want some fund that makes great profits one year, and great losses in the next.

3. Calculate all costs of investment: While the rate of return may be attractive, fund costs might eat up most of your profit. Go through them carefully. Compare those with other funds in the same category.

4. Don’t put your eggs in one basket: If you diversify your investment in multiple funds, you can minimise the risk of your losses somewhat.
Now you can easily pick the mutual fund that fits your needs best.

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There is a system to how you make money. There are responsibilities at workplace that you take care of, and are rewarded for.

There is also a system to how you spend that money. You divide it in personal and domestic expenses, liabilities and savings.

If there’s a system to how you make money, and there is a system to how you spend it, why is there no system for how you invest it for your future?

The most common excuse is: “I don’t have a large enough amounts saved each month, to invest it somewhere.” But who said that small amounts can’t be invested? Haven’t you heard that you can start investing as much as Rs. 500 per month with Systematic Investment Planning (SIP)?

A Systematic Investment Plan is a planned, regular investment in Mutual Funds. You could invest a fixed amount every month, or every quarter, even annually. If you activate the auto-debit feature, then the small pre-determined sum will be withdrawn periodically from your bank account, without you having the hassle of remembering the date and issuing cheques.

For your investment, you are allotted units of the Mutual Fund, based on the prevailing Net Asset Value (NAV). You can track online, the total number of units accumulated in your account. On a daily basis, you can check the worth of your Mutual Fund investment based on current market rate, i.e. NAV.

Systematic Investment Planning is a proven mode to get maximum returns from a MF investment. Get on this system to brighten your financial future.

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Question: I am 45, I am overweight, I smoke and drink, work in a high-stress job and keep irregular hours, and do not have either a life or a health cover. Is it too late to buy them?

Answer: Life insurance companies categorize individuals under low and high risk category. Being overweight or a chain-smoker and a heavy drinker certainly puts you on a high-risk category as far as your life insurance in concerned. However, that does not mean, that you cannot acquire a life or a health cover.

Apart from the financial underwriting that largely decided how much of life cover can be given to an individual, all insurance companies have their own medical underwriting guidelines that help them to decide on the health profile of the individual. Some of the factors considered for placing a life on high or low risk health profile are height, weight, state of health, history of disease, amount of cover and the occupation. The insurer also carries out a series of medical tests to determine the health risks.

For all lives falling under the normal health category, the insurers cover the risk and the life protection is provided to the individual. However, the moment the risk appears to be high as per the insurer’s standards, the insurer resorts to asking higher premium from the individuals. This is called the ‘loading’, ‘rating’ or ‘extra-premium’, which the individual has to pay over and above the premium, which is paid by healthy-class of individuals.

In certain cases, the life protection is totally declined to the individual and the entire premium, is paid back to the individual. According to the defined benchmarks, the life of the individual is considered too risky and the insurer is reluctant to offer any level of protection to the individual.

However, that might not be the case always. The perceived medical factors like overweight should not be the reason for one to stay away from applying for life cover. Even a normal looking and healthy individual may be declined a protection if negative factors surface after the medical tests. Buying insurance when one is in the best of health is the right approach.

Disclose all material information about your health and let the insurer decide. Even if there is a ‘loading’ within manageable amount, go ahead and be insured. In case, the ‘loading’ is too high, lowering of the amount of life cover or even the term of the plan can be sought. In case of of health insurance, the insurer might as well ask you to undergo medical tests and submit reports. Also, the pre-existing diseases are never covered for the initial 2-4 years. Hence, company’s risk is reduced to that extent. It is certainly not too late for cutting down on weight and stop the use of tobacco for a better health, for you and your family.

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Wealth management services in India are generally thought to be the preserve of the rich. It is assumed that the middle-class hardly has any wealth to be managed, what with the monthly expenses of household and lifestyle leaving a gaping hole in your pocket. And that is where you are wrong. Everybody can benefit from wealth management services. It helps define financial objectives in line with your incomes and expenditures.

How it works

• Your Financial Risk profile is gauged with reference to your personality, earnings, assets, liabilities and life goals. If you are able to take bigger risks, there is a likelihood of bigger returns.

• Your investment portfolio is analyzed. It is an assessment of all your assets over the quality of returns they generate against the cost of acquisition.

• Then, your investment portfolio is re-jigged or fine-tuned, as necessary. Thus, your portfolio matches your needs and expectations at different points of time in your life.

• You pay for wealth management services because they employ their experts to do a customized research to find the best investment options only for you. And that’s how you get to manage your finances better.

Now you don’t need to worry about your short-term, medium-term or long-term financial objectives. The right time and the right product to invest in, is no longer your care. You hired wealth management services to do all the worrying for you. Now you just count how profitable are your returns.

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Question: I am 27 and working in Government sector. My annual income is 4.5 lakh. I want to invest in MFs and want a return of 6 lakh in 4-5 years. What fund is suitable for me and how much money to invest? Also, is that safe to invest in ULIP?

Answer: With a time horizon of 5 years or more, you should invest in diversified equity Mutual Funds through Systematic Investment Planning (SIP). To accumulate Rs. 6 lakh over next 5 years, you should invest about Rs. 6,000 per month for which you may start three SIPs of Rs. 2,000 each, in funds which have been performing well consistently.

Firstly, ensure you have a life cover of at least 10 times of your annual income. This is best met through a term plan. Both Mutual Funds and ULIPs are market-linked investments, hence returns would be subject to volatility. Therefore, invest through ULIPs for your long-term needs and short-medium term goals.

Regarding tax savings, do not invest merely to save tax. Choosing the right tax saving investments depends on which goal you are looking to meet through tax saver. Investments in ELSS Mutual Funds and ULIPs and, even, term plan give you tax benefits.

Ideally, spread your investments across medium term and long term plans. Choose to invest in equity-oriented investments like equity-oriented investments like equity MF and ULIPs for long-term investments.

For more queries, write to us at grow@bajajcapital.com

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Ever considered what could be your life worth, in terms of money? Your productivity, your income levels, your assets, they all have a monetary value. Then why cannot their sum total, that is your life, also have a value attached to it? To calculate the Human Life Value for a person to be insured, an HLV calculator is required.

For a secure life for your family, you need to calculate this figure. When you get the life insurance based upon the calculations regarding your income, expenses, assets as well as liabilities, you are assigning the correct value for your life.

What needs to be entered in an HLV Calculator

•    Annual household expenses

•    Annual income

•    The number of years your family should have this annual income

•    Expected rate of inflation

•    Expected return from the investment

•    Outstanding loans and liabilities

•    Current investments and assets

•    Current value of insurance

After you enter these values, you get the figures telling your Human Life Value.

What the HLV Calculator tells you

•    How much income do your dependents require

•    Your net worth by deducting outstanding liabilities from extant investments

•    How much insurance you must have

By knowing your HLV, you can buy the correct amount of life insurance. In the unfortunate circumstance of your passing away, your family will be financially secure. They would live the lifestyle that you have worked hard for, even after you are gone.

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From 1st January 2004, the Government of India launched the National Pension Scheme. Barring the Armed Forces, all new employees of the Central Government had to contribute to it. The objective was to inculcate the habit of saving for retirement.From 1st May 2009, NPS is available to all Indian citizens, including the unorganized sector, on a voluntary basis.

To develop and regulate the pension market, the government set up the Pension Fund Regulatory and Development Authority. The PFRDA has authorised some banks, private financial institutions and the Department of Posts for opening NPS accounts for citizens.

How it works
 
•    Each subscriber is allotted a unique PRAN (Permanent Retirement Account Number), which won’t change, and can be used throughout the country.

•    PRAN gives access to two Accounts:

    Tier-I: You can check the accumulated sum but cannot withdraw from it.

    Tier-II: It is a voluntary savings account. The subscriber can withdraw at will. However, there are no tax benefits in this account.


Tier-I Account benefits

Investments in a Tier-I Account are exempt under Section 80 C, although the withdrawal of pension would be taxable. All charges of a Tier-I Account are paid by the employer.

Service Tax and other levies would be charged as applicable.

NPS benefits

•    Know the value of investment on a daily basis.

•    PRAN stays the same even if you are transferred.

•    PFRDA regularly monitors the performance of the fund managers.

Start your pension savings today.

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You want a dream car, you want a dream vacation, you want a dream home and you want a dream life. But then you wake up. You look at your pocket and you wonder if your dreams will ever come true.

Don’t lose hope! Dreams are attainable once you set your mind to it. A little bit of saving, and some patience, that is all you need to make all your dreams come true. And of course, you also need to do a thorough financial assessment of your earnings and their distance from your dreams. Financial Assessment in India is a relatively new term.

Financial Assessment Includes:

• Cash Flow management- how much cash you really need for your fixed and variable expenses, and how much you can save.
• Investment decisions- how to get maximum returns from your capital. This also includes minimizing your tax liability.
• Future planning- for you and your family’s requirements - in the short, medium as well as the long-term.

Remember how you used to save in your piggy bank for that one special toy?

Financial assessment is a grown up version of that kind of planning. It takes into account the various life events, foreseeable and unforeseen. What it does is realistically analyze your income, adjusts it to expenditure and inflation, and then tells you how you can save to fulfill your dreams, one step at a time. Take this ladder to your dreams.

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Property is an attractive investment option for long term gains. But you must pay the taxes.

If you’re selling property less than three years after acquisition, you are liable for short-term Capital Gains Tax. Selling after three years of acquisition, you’ll be liable for Long-term Capital Gains Tax. However, the Income Tax Act provides the following exemptions for LTCG Tax:

• Capital Gain Bonds in India:

You can invest a total of Rs. 50 lakh in the bonds of NHAI and REC to claim exemption under Section 54 EC. Investing in these gets you a 6% return. And, instead of your gains, only the interest earned on them is taxable at maturity.

•Investing in another property from the gains of the sale:

1.You must invest the gains from the property sale in a residential property within 2 years from sale.

2. Or, you can construct another house within a 3-year period, counting from 1 year before sale, and the gains should be invested in it.

The point to remember is that you should not own any house other than the one you are investing in to claim exemption under Section 54/54F.

•Capital Gain Account Scheme:

If you wouldn’t invest in Capital Gain Bonds or property, then you can temporarily put your funds in a CGAS account for up to 3 years and withdraw only for the purpose of property investment.

So, no more worrying about the taxman when you sell your property henceforth.

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Direct participation in the equity markets is very risky. However, it requires considerable caution. Chances are that if you go in without thinking, nothing can stop your ship from sinking. Yet it requires constant dedication and vigilance, and who has that kind of time, right? In such a scenario, invest in Mutual Funds; because the fund managers will do the thinking for you, and they’ve got all the time and expertise to do it well. Like they say, choose the manager, not the fund.

But before you decide to invest in Mutual Funds, take note of these 5 points:

1.    SIP is best: Systematic Investment Plans, where small monthly investments are made on your behalf in the Mutual Fund of your choice, have proven to generate better returns over a long-term.

2.    Diversification: For a smaller investment amount, you get invested in various sectors and different stocks.

3.    Timing not relevant: With Mutual Funds, you get more units when NAV is down. In the long run, whether the markets are down or up, you profit.

4.    Fees & Charges: Carefully check whether your profits aren’t being squandered in entry & exit loads, switching charges, annual expenses, service costs etc.

5.    Tax benefits: Taxes might gobble up all your gains, or even increase your liabilities. So carefully go through which sections of the IT Act apply when you invest in Mutual Funds.

Think long-term, think better returns, think Mutual Funds.

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Creative: I am a 25-year-old woman and just started working. How should I plan my financials?

Answer: Early on in career, identify your immediate and long-term priorities. Pay-checks in the initial months of your career should go towards creating and bolstering an emergency fund which should be at least 6 months of household expense. This would be to avoid financial mishaps in career jolts and meeting exigencies. Keep 3 months amount in savings account and rest in short-term or liquid Mutual Funds. Once you have set up your contingency fund, it is time to cover risks, primarily to life and health, including parent’s health if they are dependant on you. Have more queries? Feel free to write to us.

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Question: At age 35, my annual salary package is Rs. 5 lakh. I have prior investment of nearly Rs. 80,000 in MFs. But I want to make fresh investments in the form of pension plans. Which type of pension plan is right for me?

Answer: Pension plans can be bought from MFs or life insurance companies. There are 3 pension focused plans from MFs – 2 are balanced funds & other one is equity-oriented. In MF pension plans (PPs), there is only the growth phase & after certain years, they would give you a lumpsum amount, not the regular pension. Life insurance companies offer PPs with varied asset allocation. You may keep even 100% in equity or debt. It’s always better to diversify. For your retirement needs, create a separate portfolio & spread among the variants. Keep tax benefits in perspective & create wealth for your retirement. Have more queries? Feel free to write to us.

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To insure your life for fixed time duration, you need to buy yourself a Term Insurance Policy.

But what will be the premium that you must pay? That is the problem which will leave you scratching your head. There are many insurance providers out there, and numerous schemes that each of them offers. How to compare all those products?

Let’s not tackle this problem from the wrong end. Rather than look at a large variety of products and confuse yourself, try to figure out what your needs are. This is where a Term Insurance Premium Calculator comes in handy. It helps you to define what you want, and then tells you how much you will have to pay for your Term Insurance Premium. Now you don’t need to search for an Accountant or Maths Professor to help you out.

Term Insurance Premium Calculator is a simple online form. It asks you a series of easy questions. Your answers to them are used to calculate the premium that you will have to pay.

Firstly, it asks for your age and sex. The older you are, the higher your premium. And the premium value also changes depending upon whether you are male or female. Then it asks for your Annual income. This helps it decide how much premium you can afford. Smokers have to pay a higher premium than non-smokers. You fill this column, and enter your personal details. Viola! Your Term Insurance Premium is calculated in the blink of an eye.

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Which vehicle are you planning to board for your golden years, deferred annuity or retirement plan? The question takes you to the land of confusion.  The common impression is that Retirement plans are being offered by only life insurance companies. But National Pension Scheme India came to our rescue on May 1, 2009 inviting all citizens of India between the age of 18 and 55 on voluntary basis. Government employees are not the only beneficiary of this scheme but individuals too can enjoy its benefit.

Pension Fund Regulatory and Development Authority (PFRDA) has taken the charge to make it more attractive by reviewing and reforming (if needed) investment guidelines and introducing more schemes and plans for the individuals.

How to invest in National Pension Scheme India?

Investing in the National Pension Scheme is not a tedious task. All it takes is to approach an approved Point of Presence (POP) service provider. The PFRDA has authorized many banks, financial organizations and the Department of Posts to act as POP. A subscriber is required to make his/her contribution with just Rs. 500 (for Tier I) and Rs. 1,000 (for Tier II). The highly transparent and cost effective schemes and simple to operate rules make National Pension Scheme India more alluring for the man on the street.

What are you waiting for? Your route to golden years can be easily initiated by just making a walk in to the nearest POP of National Pension Scheme.

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If you are already a 30-year-old non-smoker, and still do not hold a life insurance policy, then log on to a Human Life value Calculator immediately. The online tool will help you provide financial security to your family in your absence with the right amount. You can cover your life for Rs. 1 cr. for 30 years for less than Rs. 11,000 per annul (excluding Service tax).

The thumb rule is ineffective

A Human Life value Calculator finds out the exact life cover required by you. The thumb rule says that you should have an insurance cover of around 5-10 times of your annual income. Most of the Human Life Value Calculators are based on age, number of dependents, annual income and expenses, outstanding liabilities like home loan, car loan, investments/savings and lifestyle expenses, but forget to mark game changers -- rate of inflation and increasing rate of life expectancy. An HLV calculator needs to incorporate income from other sources, present values of investments and years you need to support your family and inflation rate too along with all the basic requirements.

Ride it away

No one plans to get sick or hurt, but in case of medical emergencies, nobody wants to impair their ability to earn by paying medical bills. You can maximize the benefits from a term insurance cover by adding riders (additional benefits) for covering you against critical illness or a serious accident? It’s a long term insurance policy where you will get tax-free ‘lump sum’- a one-off payment in case you are diagnosed with serious illness.

Riders are also available to cover your financial loss against partial/total disability and to cover your hospital stay (fixed amount per day of hospital stay).

So, what are you waiting for? Get on the task and get yourself some life even when you are not there. Live forever!

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Buying or selling land, house, commercial property etc. makes you liable for Capital Gains Tax.

You are exempt from this tax when you invest all your capital gains into a Capital Gain Bond. This exemption comes under Section 54 EC of the Income Tax Act.

Keep in mind though that you must invest in Capital Gain Bonds (India) within 6 months of your transaction, in order to be eligible for tax exemption.

The interest from Capital Gain Bonds India is taxable.

The interest that would come from the Capital Gain Tax Bond, that is taxable only, and not the entire transaction that caused the Capital Gain in the first place. This means that you saved substantially on Capital Gains Tax when you re-invested the gains in Capital Gain Bonds.

Capital Gain Bonds eligible under Section 54 EC are:

•    Rural Electrification Corporation Ltd. (RECL)

•    National Highways Authority of India (NHAI)

You can invest a maximum of Rs. 50 Lakhs in one or both of them in a financial year.

Each of these has the same features:

1.    Rate of Interest 6%, which is payable annually.

2.    Minimum Investment is Rs. 10,000/-.

3.    They are non-transferable Bonds.

4.    They are locked-in for 3 years. They are automatically redeemed after this lock-in period.

5.    They can be held in Demat or Physical form.

Good luck gaining on your capital with Capital Gain Bonds.

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I am investing in LICJeevanSaralPolicy since December 2008 with a purpose of insurance, while expecting a return of about 8% after 10 years.It has been about 5.5 years.I recently discovered that this policy is returning a low interest of about 6% as in form of loyalty addition, which depends on company performance.Also,its addition starts after the completion of 10 years, thus,there is no return or addition in the portfolio till then. What should I do?

I want to exit from the policy while incurring least money loss or at a stage when there is proper return, but not more than 10 years. I think I should exit because there can be no loyalty addition till the completion of 10 years,thus, there shall be no returns.If I transfer it into an FD then also it will give good return.I can go for a life cover of any term plan. I started investing Rs. 5,104 per month since I was 22 years old.Please guide me if I should continue.

Life insurance is meant for accumulation of corpus for a long-term goal and it is not appropriate to compare it with liquid instruments like FD.Apart from getting loyalty additions at 10th year, the maturity proceeds are tax free; however, maturity proceeds of FD are taxable. Disciplined savings ensure accumulation of corpus for the desired goal without the fear of being utilized before your goal. Also, it ensures that the money is not churned and used elsewhere but for the desired goal, builds an asset right from day one and protects your dreams from an untoward event.

Death Benefit:

In case of death of the Life Insured, the nominee receives

- Sum Assured (i.e. 250 times the Monthly Premium)

- Return of premiums excluding extra/rider premium and first year premium

- Loyalty Addition(if any)

Maturity benefits of LIC Jeevan Saral:
- At the maturity of the Jeevan Saral policy, the insured will get the Maturity Sum Assured (depending on the age of entry and policy term) + loyalty additions (if any)

- Even if you stop paying the Jeevan Saral premium, 100% of the Maturity Sum Assured,given that 5 or more years' premiums have been paid.

- LIC Jeevan Saral guarantees surrender value

Thus, you should continue with this policy.

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I am Praveen Mishra from Pune. I am 41-year-old. I am living in my own house. I need Rs. 50 lakh after 5 years for my children’s higher education and Rs. 1 crore after 12 years for my retirement. I have made a few investments:

- Axis Equity Mutual Fund: Rs. 5,000 per month, since last 4 years

- PPF: Rs. 8,000 per month, investing since last 3 years

- RD: Rs. 17,000 per month, just started for 1-2-3 years gradually (5k-7k-5k)

- A Term Plan: Rs. 1,000 per month for Rs. 30 lakh

- Mediclaim: Rs. 1,500 per month for Rs. 5 lakh family floater plan + I have Rs. 3 lakh cover

- LIC (JeevanSaral): Rs. 3,500 per month (Sum Assured Rs. 10 lakh after 10 years)

- ICICI Prudential Smart Kid: Rs. 1,100 per month from last 10 years

After all investments and routine home expenses I have spare Rs. 30,000 per month. After 1 year, the spare amount will be Rs. 50,000 per month.

Now my question is following:

How can I achieve my goal? Where more can I invest? How much I have to invest at what place to achieve my goal? I am interested in investing in SIP (Systematic Investment Plan) Mutual Funds. Can I invest my spare amount in share market? Can I purchase one more property? Please guide me what is best for me?

Dear Praveen, congratulations for making regular investments and taking the steps towards preparation of a financial plan for you.

First, continue maintaining your existing savings (SIPs and insurance policies).

Second, as the education goal of the kids is due for 5 years and you require a huge amount of savings (approx. Rs. 55,000 per month) to accumulate that amount. You can direct your Axis MF SIP (Rs. 5,000 per month) and the RD savings (Rs. 17,000 per month) for this goal. These savings would help to accumulate half the amount needed (Rs. 26 lakh approx.). Also, assuming that your ICICI Prudential Smart Kid Plan will stop when the education goal start (year 2019), you would be having an accumulated amount of around Rs. 3.40 lakh from this policy.

For the remaining amount (approx. Rs. 20 lakh), you need to save in around Rs. 17,000 monthly. We recommend that you save this amount into Balanced Fund of a reputed AMC.

Third, as stated that you need Rs. 1 crore at retirement, you would be required to save Rs. 33,000 per month. Given your cash flow after saving for the kid’s education goal, you would be having Rs. 13,000 remaining every month. You can save this amount into a Pension Fund. After 1 year, you would have additional Rs. 20,000 available every month. We recommend that you start SIPs into Equity and Balanced Funds. You will be able to achieve your goal.

In regards to your query for stock market investments, we advise you to go through Mutual Funds channel, as both of your goals – retirement and education are responsibility goals. Mutual Funds are better managed as they have an expert team to do the research, stock picks, etc.

Also, for property purchase, concentrate on kid’s education goal for now. Once they are accomplished, you can look into an attractive location within your budget and specifications.

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I'm 29-year-old salaried professional from Pune, earning Rs. 60,000 per month. My wife is self-employed and we have a 1.5-year-old daughter. I need some advice on investment planning.

I stay in a rented apartment in Pune, which costs me Rs. 10,000 per month. My priority is tax-saving followed by contingency fund accumulation and wealth creation. I currently invest in Bank FD, PPF and NSC. I also have a LIC Policy with a premium of Rs. 1,021 per month. I invest approx. Rs. 3,350 (for self, spouse and mother) in Post Office Savings (No Tax Benefit), which will end in 2017.

I want to add ELSS/MF to my portfolio for higher returns. Could you please guide me how should I go about it and which funds should I choose and their allocation/tenure? Also please suggest if my current portfolio needs any restructuring or additions?

- Devendra  D. Gundecha

You are thinking in the right direction by choosing the mutual fund route to create your wealth. We firmly believe that equity as an asset class has a potential to beat inflation over a course. Therefore, investments in equity mutual funds give you a better chance at beating inflation. It is also nice to note that you are investing in Bank FDs, NSC&PPF. However, you must invest more in equity compared with debt instruments given your age, so that you generate inflation-beating returns over the long term.

In the Union Budget 2014, the Finance Minister, Mr.ArunJaitley, hiked the Investment limit u/S 80C from Rs. 1.00 lakh to Rs. 1.50 Lacs. It means you can now save more tax by investing additional Rs. 50,000 in ELSS schemes.

Your investment in ELSS schemes will offer you twin benefits. First, it allows you to save your tax up to Rs 1.5 lakh under Section 80C. Second, it helps investors to build their desired corpus over the period of time. You can consider investing in Reliance Tax Saver (returned 21.03% p.a. in the last 3 years) and Axis Long Term Equity Fund (gave 22.05% p.a. in the last 3 years) through a SIP route.

Allocation: A thumb rule of 100 suggests that one should subtract the investor's age from 100, and the difference amount would be allocated to equities. For a person of your age, the rule suggests that 71% of your portfolio should expose to equities and the rest 29% should be invested in debt. You can alter this ratio with age, with reduction in equity, and additions in debt. By following this rule, you can restructure your portfolio. My only suggestion is that you need to increase exposure to equities and invest 71% of your monthly savings in equities and the rest 29% in debt instruments. You can split your investment equally between aforementioned funds.

Tenure: An investment in ELSS comes with a lock-in-period of 3 years from the date of investment. Hence, your investment remains invested in them for at least 3 years. I would also like to inform you that in case of SIPs, each SIP tranche is considered as a fresh investment in ELSS Fund and each instalment must complete 3 year compulsory lock-in-period. Until each tranche completes mandatory 3 years of lock-in-period, you can't redeem it.

You also need to decide your investment horizon. For this, you have to identify the purpose of your investment first. Set your goals accordingly. You have to decide the investment horizon till what time you can hold these investments and corpus size that you are looking to build in that particular time.

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