Invest Befikar with Bajaj Allianz Future Wealth Gain

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Invest Befikar with Bajaj Allianz Future Wealth Gain

Rarely do we come across anybody who gets excited about watching a show or reading an article that reminds them to invest systematically or to insure their lives. Long term investments sound like a smack of wisdom and insurance makes a rather uninteresting proposition. On the other hand, the news about a trader who traded in stocks with borrowed money and became a millionaire makes thrilling headlines.

Best Investment advice is often boring

We tend to forget that what is exciting now can be terrifying later and the best advice is often boring. Perhaps Bajaj Allianz Life Insurance realizes this psychological barrier very well, so when the company launched its Future Wealth Gain plan last month, they tried to make the event as interesting and creative as possible.

I was invited to the event and had gone with the idea of hearing some serious talks. Instead, I found that the team had organized peppy talk show and games centred on the theme of saving money, to engage the audience while educating about the concept of the product. I will also try to keep this post as simple as possible.

Bajaj Alliance Future Wealth Gain launch

As you have rightly guessed, this post is about: 

Future Wealth Gain: a Unit Linked Endowment Life Insurance Plan

In an earlier post, I had elaborated on why preserving and growing money are two key investment objectives. Our other investment goals could be to create income from the capital base, to save tax, or to save for big expenses like buying a house, planning vacations abroad, or discharging financial responsibilities like funding children’s education or marriage.

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Plan your finances in your 30s to enjoy financial freedom later

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Plan your finances in your 30s to enjoy financial freedom later

I would rather enjoy with my money now than save it to enjoy at a later date,” professed Anuj Arora (name changed to protect identity), a few days back.

A young man in his mid-twenties, Anuj has shifted to Mumbai from Delhi after taking up a job. He had approached me for some guidance on admission in B-Schools. Among other things he shared with me how his expenses had increased after he had taken up the job and shifted base. He also told me that whenever he called up his parents, they would invariably advise him to start investing.

I said it was a very sound advice and suggested that he should take it seriously. That is when he told me that he would rather enjoy with his money now than save it for later, and added that most people of his age group think in a similar way. When I further probed on how he would fund for his MBA expense, he retorted with an air of nonchalance that his parents would sponsor him.

For many young people like Anuj, investing may seem like a very uninteresting proposition; so they defer it. But in doing so they tend to miss out on the opportunity to have financial freedom later in life when they would need to incur bigger expenses.

What I said to him goes as follows, and this generally holds good for all young people.

Relationship between Income and Expenses

When you are in your teens or even in your earlier twenties managing expenses is quite simple. All you do is to call up your dad or mom and ask them to send you money. But as you grow up the degree of difficulty in managing expenses also goes up. Your paycheck may get fatter each year, yet your expenses will also somehow always seem to shoot up.  You will need to pay off your bills, rent, etc. EMIs will start from the time you take a loan to purchase a car.

As you take another loan to purchase your house, more EMI gets deducted from your salary. When you get married, your expenses increase further, and when you have children your expenses hit the roof. You first want to send your children to the best school, then to the best college and you want to ensure that your family in good health. You aspire for a bigger house, a bigger car, trendy dressing, vacations, fine dining etc. All of these cost money. And yes, prices also go up each year!

Overall, as your income increases so do your expenses, as you tend to spend more towards improving your standard of living, and you may also have financial contingencies to deal with.

Must Read:  Are you saving enough for your child’s education?

Benefits of Investing Early

Invest Early

A rupee saved is worth more than a rupee spent. When you invest your money, you are making your money work for you. The earlier you start investing, the greater are the potential gains due to compounding.

By the time you are in your 30s, you are settled to a career choice. You should then consider investing in a long-term investment plan to achieve the financial flexibility to fulfil your dreams like travelling or purchasing your house, or a car etc.

If you have made up the mind to invest but are not sure where to invest, you can make use of a Guided Portfolio.

A Guided Portfolio is an advised portfolio by Edelweiss that helps you to decide on an investment strategy based on your age and risk profile. By allocating your investment amount in an optimal manner across asset classes (Equity and Debt). It selects suitable mutual funds for you. Once schemes are selected, you can execute the transaction in one click. You can monitor your portfolio performance on a regular basis.

Remember that the benefits of starting to invest early are enormous. Time proves to be your biggest ally as you have 2- 3 decades to take advantage of market opportunities and you also have the time to recover if something were to go wrong. By taking advantage of time, you can get a head start on saving for your future and take the steps forward towards an improved quality of life in the long run.

 

 

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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.

ChildEducation

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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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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Savor fine dining experience at these five places

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Savor fine dining experience at these five places

Fine dining is an occasional treat for most people. ~ Rene Redzepi

Having great food in an exceptional restaurant in the company of our loved ones is an experience that most of us cherish. Last month, I had met up with my college classmates for our silver jubilee alumni meet. It was an out and out fun experience sitting out in sunshine and dining with old classmates at a club resort in Delhi, while recalling the memories of our college days.

 

DLFCityClub

We decided to meet up once each year thereafter in a different city, and so we zeroed in on a few of the finest dining places. Friends, who are now settled in different places suggested their local favourites. So, the list that emerged included some of the finest restaurants in different parts of the world. The top 5 names that came up are as follows.

Woodpecker at Aamby Valley in Maharashtra : Being from Mumbai, I had put forth the name of this stylishly designed world cuisine restaurant, which overlooks a water body, and serves breakfast, lunch, dinner and weekend brunch.

Cloud 9, at Grand Hyatt, Shanghai: This was suggested by a batch mate who had flown in all the way from Shanghai for the alumni meet. The restaurant, located on the 87th floor of the magnificent Jinmao Tower in Shanghai offers a great collection of champagnes and sparkling wines, sweet and savory snacks, and a 360 degree view of the city.

The third name that came up was Aqua Shard, near Tower Bridge in central London. While dining you can enjoy the view of London’s riverside cityscape stretching from Tower Bridge to the London Eye.

The other two in the list included Tresind at Dubai,  famous for its “chaat” platter and “dhokla”,  and Pan Asian at ITC Grand Chola in Chennai , known for its spread of Asian, Chinese, Japanese, Korean, and  Thai delicacies

Sometimes such indulgences may seem redundant, particularly at times when one is financially stretched. But there’s no reason to constrain yourself if you manage your finances well in a way that allows you for such fine experiences.

One such smart investment method is to opt for a SIP investment plan, which requires you to invest a certain sum of money every month in a mutual fund over a period of time, thus inducing a disciplined approach to investment. Furthermore, if you increase your SIP amount by 5% – 10 % every year, you can amass a substantially higher corpus after 10 years.  Needless to say that one should look at some of the top SIP plans to choose from. Sabse Important Plan by Birla Sun Life is one such SIP mutual fund which can be counted among the best mutual funds for SIP.

By investing regularly, not only do you keep up with the rising inflation, but you also do not have to compromise on your choice of lifestyle and can celebrate happy occasions in the best of the places, with your loved ones.

Dreaming after all is a form of planning.” Gloria Steinem

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.

 

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