Investments

STP – investing in the volatile time

STP Transfer

STP stands for “Systematic Transfer Plan”, which means, one doesn’t want to invest in one GO, but in Parts, over a Period of time. For instance, you have 10 lacs in hand and seeking investment avenues for the entire 10 lacs. Easiest way is to shortlist a fund & invest fully (i.e. entire 10 lacs). But in the current market scenario, where market is swinging every second month (since last one year);is it a wise decision to invest fully?

STP comes as a rescue, where one can make this volatility work for your own benefit. First & foremost, let’s understand, one cannot ever time the market, therefore no point acting like a cowboy, or getting ideas based on celebrity talk-shows/ articles.

Since no one can time the market and the volatility, therefore the first rule is to park the entire funds in some conservative debt fund, where one can earn the base level returns. Next rule, based on your understanding, or with guidance with your advisor (highly recommended), one should now plan monthly transfers, from the debt fund to the preferred funds. Idea is to benefit from all levels of markets, i.e. market ups & downs, and average-out the cost of purchase.

STP is similar to SIP (Systematic Investment Plan), only difference is the source of funds at the time of investment; where SIP comes out of Income (or savings), and STP comes out from Lumpsum invested, usually in a conservative debt fund.

Reducing FD rates, a concern for retired

Reducing-Fd-Rates

Mr. Joshi, a senior citizen is worried man today. His income from FD has been getting less by the day and on other hand monthly expenses have been rising. To add to the worries are the rising medical expenses. For the generation that has retired in last few decades, retirement pension or interest income from FD was the income support in old days.

Changing times call for different approach. A good mix of fixed income and market linked products is the answer to ensure optimal investment returns. Investing Rs 15 lakh in Pradhan Mantri Vayu Vandana Yojana provides assured return of 8% with monthly income of Rs 10,000.

Investments in debt and balanced funds schemes can give higher returns and better protection of capital. These investments are tax efficient if invested over three years. A small exposure to equity mutual funds over 3-5 year horizon can provide for capital appreciation. The increased returns should also be used for having adequate insurance cover to meet medical expenses. A small sum in liquid fund for emergency needs can take care of any contingency.

Are your bank FD safe with PSU banks?

Are-your-PSU-banks-FD-safe

The recent news of Bank scams and huge losses incurred by banks are making the common man jittery over the safety of one’s hard earned savings. Bank FD is the most natural option used by salaried class to park their savings to provide for the future needs. One, because the nationalised banks are owned by the government and its was indirectly a guarantee that your funds are in safe hands. Whenever there has been a doubt about the viability of a Bank, RBI has stepped in and ensured safety of investor deposit by merging of weaker banks with the stronger ones. Let’s have a look at the regulatory provisions to know how safe your deposits are.

Bank deposits in value terms are insured by the Deposit Insurance and Credit Guarantee Corporation of India (DICGC), a wholly owned subsidiary of the RBI. The deposit insurance covers all commercial banks, local area banks, regional rural banks and cooperative banks. You should be aware that only Rs 1 lakh of your savings is insured. This limit has not been revised since long. As an investor you should also know the worst-case scenario in case something untoward happens.

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Demonetisation effect

demonetisation-effect

With demonetisation almost nearing its completion & 80% of the old notes back with the banks, most of us are questioning, what next?

Well, to start with, we are moving in the phase where quite a lot of individuals & families have either declared or will start operating with white money now. In short, we have more people having white money in hand going forward, which will soon start demanding white investments.

Real estate & gold, which used to be the main source for black-money, now will (more…)

Black or White – what do I do?

black-money-tax-scan

Our dear Prime Minister is known for surprise, and the biggest was on 8th evening, when he announced to demonetize INR 500 & 1000 currency notes. It’s a known fact, that in India we have a parallel economy running on black money, also known as shadow economy. Whatever measures & schemes offered by government, still they were not able to control or stop the flow of black money. Finally, the masterstroke!!!

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The Best Gift Ever Received

best-gift-ever

We have heard stories, where kids from their pocket money savings, have purchased an expensive music system or gifted an expensive wrist watch to their parents. If it’s my generation, i.e. 80’s, we were saving this in our piggy banks, whereas today same gets parked in a real bank savings account (kids).

I have not come across any parents till date, who would have started a culture of kids saving same in equity mutual funds. Why?

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Investments – too much clutter in the marketplace!

cluttered marketplace

On one hand, we have Investment product sellers; like banks, brokers & individual consultants, who sell investment products, claiming to offer the best solution with detailed research reports.

On the other hand, we have manufacturers, like mutual funds & insurance companies, offering mouth-watering deals with smart TV & print commercials.

Who do we believe & trust?

As once a product is sold, one gets to know or understand the actual value of the product only after few years or later, that too when one meets a new advisor or spends some time on knowing the product 😉

Now if one tries to correct the mistake, by calling the seller or the manufacturer, customer is shown the “terms & condition agreement” or various “disclaimers”, one would have signed at the time of purchase. Which in most likely scenario, one would have not checked or read, and simply gone ahead based on the sweet talk or the projection shown based on the positive market trend.

Who to blame?

Without getting into pros & cons, based on my understanding, its “us” or the customer, who needs to draw a line & have to spend some quality time on what he wants, how he wants & where he wants? before getting into any investments.

Step 1: What one wants? means, as a first step, what are your goals, for which you want to make investment, like retirement, kid’s education, buying a house, business venture etc. or portfolio management. One has to define same with clear future value or expected value & time.

Step 2: How one wants? means, as a second step, what kind of risk is one ready to take or preference & understanding one has towards various category of investment products available in the marketplace. Which in turn will give an idea on the products availability (or shortlist) in those categories.

Step 3: Where one wants? means, as a final step, the platform or the execution of products which is shortlisted, based on above two steps. And off course the review mechanism/ platform as well.

Now comes the bigger challenge; how do we get all three at one place?

Again, we have a clutter here, with many new & old companies now offering these services. But the catch is, at what depth or how do we differentiate? My evaluation process is simple:

First, is it free or do they charge fees/ disclose charges? if the answer is free or nominal sum, my suggestion, don’t go further. Nothing comes free and in case you want good advice or service, it will cost.

Second, how detailed or comprehensive they are? Which can be gauged from the website, teams background, blogs, FAQ’s & best, an interaction with the team. I guess, I don’t have to explain same.

One such platform, which follows above practice is www.moneyfrog.in, where customers are guided based on their data & analytics, and investment products comes out only as an output, on their goals & various other data points.

Power of Small Savings – Investment series 1

In my last article, I wrote on two key challenges, we as Robo-advisors face; i.e. “Customer mind-set” towards investments, where it comes as last priority and “Meaning of investments”, where quality is not understood.

To sum it up… how do you motivate customers?

Unlike e-commerce portals, based on current theme, it’s the deep discount that attracts. We have cases (many); where customer go to malls or retail outlet on look & feel, and finally will swap on their smart phone to check on availability & discount, and punch the order… which is obvious, where?

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