Are you saving enough for your child’s education?

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Are you saving enough for your child’s education?

My son has got a rank of 2400 in JEE advance. He’ll get into one of the IITs. We are now deciding on the branch for Engineering,” read a WhatsApp message that I received from a friend last month.

I called up my friend to congratulate her on her son’s result. As she spoke, I could make out the sense of deep satisfaction in her tone. I could easily relate to her feeling as I myself had felt so relieved when my daughter got admission into an engineering college.  For a parent, it is a big respite when your child gets into a good college – a coveted one at that.

One of the goals that most Indian parents have for their children is that they build successful careers in their adult life. Since education is the first step towards a successful career, so when it comes to education, there are no cutting corners.

The struggle for good education begins with securing the child’s admission in a good school of choice. This is followed by the struggle to get into a good college for an undergraduate course. Engineering, medical and law aspirants start preparing for the entrance exam while they are still in school.

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Coaching institutes that prepare students for these entrance exam charge between Rs 80,000 – Rs 1 Lakh a year. Cracking these entrance exams is tough and getting admission into a premier university becomes a bigger challenge. If the child manages to get into a college of repute, one has to be ready with the finances.

Education is an area that is highly affected by inflation. Between 2007 and 2017, the average annual education cost (from primary level to post graduation and above) has shot up heavily.

Higher education costs have the highest inflation rates

The decade from 2007 – 2017 has seen an eight-fold increase in the tuition fee in the IITs (India Institute of Technology). Whereas in 2007, the total tuition fee for doing a graduate course in Engineering from an IIT amounted to Rs 1 Lakh, today the same course costs a fee of Rs 8 Lakhs. With the hostel rent, mess charges etc. added, the total cost works out to be around Rs 10L or more for an Engineering course in a government college. The cost of doing engineering from a private engineering college works out to a minimum of Rs 15 – 16 Lakhs.

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Be a Smart Investor – March consistently towards prosperity

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Be a Smart Investor – March consistently towards prosperity

I can calculate the motion of heavenly bodies, but not the madness of people.”

These words were said by none other than Sir Isaac Newton after he lost a fortune in the stock market.

The story goes back to 1720. Ebullient after making a huge profit of £7000 by selling the shares of South Sea Company that he owned, Sir Isaac Newton decided to re-enter the market, when the market was closer to the peak. Thinking that the uptrend would continue, Newton kept holding the stock, only to sell it at a loss of £20,000. The brilliant scientist that he was, Newton got swept away by the frenzy of the market and lost a fortune in a stock bubble. The story goes on to prove that it is almost impossible to time the market and make gains consistently.

Three centuries later, the above statement still holds good.

The question that arises is how to be a smart investor. Here’s a simple rule of thumb that can help you to invest wisely:

Resist the impulse to Time the Market

Most of us are tempted to time the market in order to make big gains. While trying to time the market, we often tend to be overconfident of our judgement and overlook the fact that the chances of losing our money also increases as we time the market.

Some of the most successful investors agree that when it comes to investing, discipline beats intelligence. Studies have shown that a regular investor makes more money than one who times the market.

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ICICI Pru Heart/Cancer Protect: Review of the Health Insurance Plan

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ICICI Pru Heart/Cancer Protect: Review of the Health Insurance Plan

Lifestyle diseases are on the rise in India!

Increased screen time, a sedentary lifestyle, lack of fitness, unhealthy food habits, high-stress levels, and increased levels of pollution have increased the risk of lifestyle-related diseases. We must make conscious changes to our habits to prevent the occurrence of health-related problems arising due to our lifestyle. At the same time, we should be financially prepared to deal with medical expenses that come with the diagnosis of any of these lifestyle diseases.

Cancer and Heart ailments are two such deadly lifestyle diseases that can affect young and old, and rich and poor, alike. It thus becomes imperative to be adequately insured to deal with the expenses incurred.

Here, I present a review of ICICI Pru Heart/Cancer Protect, a specific plan that covers both, heart diseases and cancer, starting from early stage cancer and heart conditions to severe stages.

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Are you making your money work for you?

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Are you making your money work for you?

It’s not how much money you make, but how much money you keep, how hard it works for you. ~Robert Kiyosaki

Just as you work hard to make money, you must ensure that your money also works for you. Merely saving money is not enough, it should be invested properly so that it grows in value and helps you to realise your financial goals.

 

Why do you need to grow your money?

Nobody needs to be told how unpleasant inflation is! It erodes the value of your money. As prices go up due to inflation, the same money will fetch you lesser goods. You cannot control inflation but you can beat the inflation by protecting yourself against it. That is possible when your money also grows in value at least equal to or more than the increase in the cost of living.

Your investment should help you at least to preserve the purchasing power of your money.

 

Lifestyle Inflation

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Wealth Ultima – A New Age ULIP

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Wealth Ultima – A New Age ULIP

 By Somali K Chakrabarti

In life, as in chess, forethought wins. ~ Charles Buxton

The birth of a healthy daughter was a happy occasion for Rakesh Prasad and his wife Ravina.  Along with the couple, their respective parents were also ecstatic with joy at the arrival of the little one. By the time the child was barely 3 days old, the grandparents were already talking about what the little girl would be when she grows up. Rakesh’s parents wanted their granddaughter to be a doctor, Ravina’s father wanted her to be a lawyer, while her mother wanted the child to be a fashion designer.

Rakesh was getting a little weary of all these discussions. Several thoughts began to play in his mind. In a time span of 20 years, his daughter will be ready for college. They would need to plan adequately for her future. He shared his thoughts with his wife, who was already thinking of putting aside some money into fixed deposits. Rakesh was more inclined towards mutual funds. Like any other well-settled young man, he wanted to gain from the uptrend in the market. Though he was financially savvy, the couple had a busy life, which left them very little time or interest to manage their investments.

At 32 years of age, Rakesh was working as a mid-level manager in one of the Indian companies. His wife was a teacher in school. The family’s income was sufficient to support their lifestyle. Nonetheless, he would need to plan ahead to provide for their child’s future aspirations, while also planning for any contingency. The question that arose before them was what would be an appropriate solution to address their financial needs in the long future, say after 20 – 25 years.

With a steady income in hand, Rakesh can afford to invest regularly, and though he wants his money to grow, but he does not have the time to track or move his investments on a regular basis. He plans to stay invested for a long term (say 20 years or more). Keeping in view, his needs and his long term investment, Rakesh deliberated over some plans and finally decided to go for Edelweiss Tokio Life – Wealth Ultima.

Let’s look briefly at the product, and then understand his reasons for selecting the plan over other instruments.

Edelweiss Tokio Life – Wealth Ultima

Edelweiss Tokio Life – Wealth Ultima is a New-age ULIP designed to help people accumulate, preserve and utilise their wealth as per their needs. It is a systematic ULIP plan that enables people to protect themselves against the uncertainties of life and create long-term wealth.

In the case of unfortunate demise of the Policyholder, the beneficiary receives a lump sum amount. On survival of life insured, fund value is payable at the end of policy term. The policyholder can receive the maturity proceeds in a lump sum or in instalments. Please note that the investment return is linked to market performance.

Why should I invest in a ULIP?

Investment discipline

A Systematic Monthly Investment plan not only safeguards from erratic market movements but also induces investment discipline. Though Mutual funds also offer Systematic Investment Plan (SIP) that require you to habitually invest at regular intervals, but if you do not pay there are no penalties involved. Rakesh knew that in order to avoid the policy from getting lapsed, he would have to pay the premium by the due date.

Flexibility with Systematic transfer and systematic withdrawal option

By transferring the money from equity to debt, Wealth Ultima allows for preserving the gains. Rakesh could also opt for systematic withdrawal that would allow him to receive a certain amount each month to take care of regular expenses at a later stage.    

Tax savings on returns

Though the Unit Linked Insurance Product has a lock-in period of 5 years in which he would not be able to withdraw, the final amount at maturity is tax-free, which would be a big saving for him as well as for the nominee. On the other hand, for Long term/ short term capital gain taxes are applicable for mutual funds.

Cost and transparency

The cost in Wealth Ultima is lesser than most other leading investment avenues. For a policy term of 20 years, the total cost (including mortality charges and service tax) works out to be 1.07%, assuming an annual premium is Rs 1L for a person aged 35 years.  

Besides, the plan has Loyalty, Booster and Guaranteed additions, which reward the insurer for continuously paying premiums, staying invested, enhance the fund value and reduce the total cost.

All the charges, options and benefits are clearly mentioned on the site https://www.edelweisstokio.in/product/planned-future/wealth-ultima.

 

Higher Returns in the Long Term

In the long term (around 20 years or more), ULIPs have the potential to outdo Mutual funds in terms of return. So, for a person like Rakesh, with a long-term horizon, ULIP may be more suited as compared to mutual funds.

Life is like a game of chess. To win you have to make a move. Knowing which move to make comes with insight and knowledge. ~ Allan Rufus

 

This post is written in collaboration with Edelweiss Tokio Life and Blogmint.


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The insurance covers that you should opt for when you start your career

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By Somali K Chakrabarti

Landing with a first full-time job is an exciting and memorable occasion, no matter who you are or where you live. You’re perhaps in your twenties, recently graduated or maybe you’ve done your masters, and now you have embarked upon the professional journey. The thrill of getting disposable income in your hand makes you want to spend it lavishly. You’re in an upbeat mood, and do not you may not want to be weighed down by serious issues. Things like insurance may not interest you at the moment, rather it may seem like something that can surely be put off for a later date. But should it be?

Here are three reasons that tell you why you should buy insurance right at the onset of your career.QuoteonInsurance

  1. Life and health insurance get increasingly more expensive with age. Insuring early in your life also means that you save money by locking in a lower premium amount for the rest of your life.
  2. In your twenties, your liabilities are comparatively less, and so it is easier to develop the discipline of setting aside a part of your income for the insurance premium.
  3. Insuring early in life makes you financially savvy, and protects your and your family’s financial interests from risks and uncertainties.


To know what covers you should opt for, kindly click the link below, and read the rest of the post.

http://life11.org/2017/02/22/what-insurance-covers-should-you-opt-for-when-you-start-your-first-job/

 

To know about different Health covers that one needs at different stages of life,  you may refer to the following article:

Health Insurance cover you must get at different stages of life

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What insurance covers should you opt for when you start your first job

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What insurance covers should you opt for when you start your first job

 

Landing with a first full-time job is an exciting and memorable occasion, no matter who you are or where you live. You’re perhaps in your twenties, recently graduated or maybe you’ve done your masters, and now you have embarked upon the professional journey. The thrill of getting disposable income in your hand makes you want to spend it lavishly. You’re in an upbeat mood, and do not you may not want to be weighed down by serious issues. Things like insurance may not interest you at the moment, rather it may seem like something that can surely be put off for a later date. But should it be?

Here are three reasons that tell you why you should buy insurance right at the onset of your career.  

  1. Life and health insurance get increasingly more expensive with age. Insuring early in your life also means that you save money by locking in a lower premium amount for the rest of your life.
  2. In your twenties, your liabilities are comparatively less, and so it is easier to develop the discipline of setting aside a part of your income for the insurance premium.
  3. Insuring early in life makes you financially savvy, and protects your and your family’s financial interests from risks and uncertainties.

 

Now, the question that arises is what covers you should opt for.

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Dynamic Asset Allocation Funds – strive for growth, limit loss

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Dynamic Asset Allocation Funds – strive for growth, limit loss

 Buy Low, Sell High

Though, we all know that for generating reasonable returns, any investor should ‘Buy Low and Sell High’, yet, for an individual investor this is easier said than done.  It is not only difficult to track the market on a continual basis, while diversifying the risk, but it is also difficult to have the heart to buy beaten down stocks when market has fallen substantially and sentiments are running low.

Besides, with increase in losses, the gain needed to break-even also increases. Moreover, for an investor, the pain of selling a stock at a loss far exceeds the pleasure of selling the stock at an equal amount of gain. Hence, the importance of containing the downside to the portfolio cannot be emphasized enough.

BuyLowSellHigh

That is where the expertise and knowledge of a fund manager comes into play – in selection of appropriate asset class at any given time while lessening the psychological pain of investors.

Dynamic Asset Allocation Strategy

Balancing exuberance with caution, a dynamic asset allocation strategy uses the market volatility as an opportunity for switching between asset classes to benefit from growth of equity market while reducing the volatility of returns.

With the example of ICICI Prudential Balanced Advantage Fund, I proceed to explain how a dynamic asset allocation strategy allows for capital appreciation, while limiting the impact of loses on your portfolio.

 

ICICI Prudential Balanced Advantage Fund (BAF)

BAF is based on the wisdom of buying low and selling high.

EquityValuationIndex

Source: https://www.icicipruamc.com/icici-prudential-balanced-advantage-fund

Using an in-house Price –to-Book Value (P/BV) Model, the fund allocates higher in equity when the Equity Market Valuation is low and reduces its equity exposure when the Equity Market Valuation is high. The equity exposure of the fund, which is a blend of large and midcap stocks, varies from 30% – 80%. A core debt portfolio is used for rebalancing.

This minimizes the role of emotions in investment decisions and helps to remove the psychological barriers (greed and fear) for its investors. The investor, thus, stands to gain more in a rising market and lose comparatively lesser when the market falls.

 

Alternative to Fixed Deposits

Asset allocation by individuals is driven by their risk appetite, market opportunities, and the liquidity requirement from their investment at any given time.  The most common instrument into which most retail investors in India put their money are fixed deposits (FDs).

BAF is a great alternative to FD for parking cash. The returns have been consistently higher in comparison to FDs. The fund also offers an Automatic Withdrawal Plan to manage your monthly cash requirements. Additionally, BAF generates tax savings for investors. The returns from BAF become tax free after one year while the returns from FDs continue to be taxed. 

 

Derivative Strategy

To qualify for such equity-like tax treatment, it is mandatory that the funds’ exposure to equity must remain at 65%. But, as mentioned above, the BAF equity exposure varies from 30% – 80%. In order to maintain the equity exposure at 65%, in rising market conditions, whenever the fund’s allocation to equities is reduced below 65%, portfolio re-balancing is done by investing the remaining amount (short of 65%) in derivatives, and the rest in fixed income securities. 

 

Returns in All Types of Market Conditions

ICICI Prudential BAF Returns

Source: https://www.icicipruamc.com/icici-prudential-balanced-advantage-fund

Though past performance may not necessarily be indicative of performance in future, it is reasonable to point out that as per MFI data in % CAGR terms, the fund has consistently outperformed both standard benchmarks Sensex and Nifty since March 01, 2013 to Sep 30, 2016, thus creating wealth for the investors.  The fund has a consistent dividend history as well.

The ability to generate good returns in all types of market conditions makes BAF suitable for investors with a moderate risk appetite, seeking long term wealth creation while limiting the downside. 

 

A dynamic asset allocation fund could be a most suitable investment option when the equity market valuations are not very attractive. #TarakkiTalks

Also, it helps to remember that an investment horizon of 3 – 5 years is needed to reap the full advantage of such a fund. 

This post is written in collaboration with Blogmint and ICICIPrudential.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Investors should consult financial advisors, when in doubt about the suitability of a product for them.

 

Five small changes can secure your family’s future

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 By Somali K Chakrabarti

Festive times are full of fun and frolic. These are the times when we cherish togetherness with our family, the most, and if we happen to be away from our family, we miss them the most. Just like festive celebrations, life too is incomplete without our family. From time to time, we realize that we must do everything in our capacity to secure our family’s future. Yet, we often tend to procrastinate in buying the insurance.

If we start early, with a saving as little as Rs 535 / month (18/ day), we can secure our family’s future with an Rs 1 crore life insurance cover.

Further, small lifestyle changes can help us to easily save to secure the future of our loved ones.

If you want to find out more, please read the post FIVE THINGS YOU CAN GIVE UP TO SECURE YOUR FAMILY’S FUTURE on Life11.

 

Image credit#Yehbhionline

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Five things you can give up to secure your family’s future

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Five things you can give up to secure your family’s future


family

Festive times are the times when we cherish togetherness with our family, the most. If we happen to be away from our family during these times, we miss them the most. Just like festive celebrations, life too is incomplete without our family.

From time to time, we realize that we must do everything in our capacity to keep our family happy and to secure their future. We plan for our children’s education, their career, we plan for our vacations, yet sometimes, we miss out on planning for a constant source of income for our immediate family in our absence. We know that we need to be prepared for such an eventuality, but we often tend to underplay its importance till something drastic happens that shakes us up.

Then, we go for life insurance!

The reasons to procrastinate are many – sometimes, we are not sure which insurance plan would suit us the best, at others we are not sure if we can afford to pay the premium for the policy or how much money do we need to set aside each month for it. But, believe me, it is not at all difficult.

You can buy insurance online.

Using the online insurance calculator, you can calculate the insurance premium for your chosen plan. When you click to insure, an E-Agent can assist you in the process, or you can even arrange for a call back.

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The question that pops up next is that with ever increasing expenses, how you would manage to pay the premium. That, too should not be difficult provided you are willing to make small changes to your lifestyle. Here are a few such things you can cut down on to save Rs 30 – 50 per day.  

  1. Reducing your coffee at cafe – A cup of coffee at a café costs more than Rs 100. You may consider going for a walk in a park with your friends instead of catching up with your friends at a café over cups of coffee.
  2. Using public transport or a car pool – If you drive alone to office, you may instead consider opting for a car pool or for a bus or train, on some of the days. Not only will you save up a whole lot of expenditure on petrol but you’ll also have company while travelling to work.
  3. Going for morning movie shows – When you go to a theatre to watch movies, the ticket costs are comparatively much cheaper if you go for morning shows. Watching movies online is yet another option.
  4. Avoiding promotional offers – Nowadays we are flooded daily with directed promotional offers and discounts. These offers, almost like fast food, are at times very enticing and tempt people to buy things that they do not really need. A good way to avoid such impulsive purchase is not to open all emails with promotional offers that come your way.
  5. Saving electricity costs – The age old wisdom of switching off lights, turning off electronic devices that aren’t in use, using energy saving light bulbs and unplugging chargers for laptop and mobile phone help to reduce the wastage of power, and considerably reduce the electricity bill too.  

 

If you start early, with a saving as little as Rs 535 / month (18/ day), you can secure your family’s future with an Rs 1 crore life insurance cover.  

Sounds too good to be true? Well, then check out for yourself on HDFC Life website.

Insurance is crucial – buy it online, conveniently with HDFC Life #YehBhiOnline

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