Speak Asia Online – too good to be true

Hemant Beniwal
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103
Speak Asia Online – too good to be true

Speak Asia Online – too good to be trueWho will not like to earn a lot of money & the easier you can earn it – the better it is. What about paying Rs 10-12000 in a year & getting Rs 52000 back? Let’s sweeten the deal – also get huge passive income. Yes this is the plan that is shared by Speak Asia – an online survey company (they claim). You just have to play some tic-tac-toe in survey form & earning starts. But my mind is not allowing me to think beyond that they are just another multilevel marketing company (MLM).

For more details how it works – check this mouthwatering presentation.

 

Speak asia from The Financial Literates

Wow – life is so easy. But the whole episode reconfirms one thing – nothing in this world is more seductive than the dose of money.

 Read – Club Mahindra Financial Blunder

Why I am writing it today on Speak Asia Online

My uncle is speak asian – no it’s not taken from speak asia ad that flashes regularly at the time of IPL.  Yesterday one of my friends called me asking “Who is Mr ABC Beniwal” – I said “He is my uncle – not real but very close. What happened”. He said “He is part of speak asia & doing some wonderful job.” He shared some login password of his ID & I checked how he is minting money. Almost Rs 5-6 lakh in last 1 month on his investment (in my friends language – he thinks it’s investment for new venture) of Rs 12000. I checked with my cousins & the figures are correct – even they are making lakhs every month. (Even their new Skoda Laura is shouting this) Check screen shot of earning report.


I feel that “when something is too good to be true – avoid” be it investments or something like speak asia online.

Read – Costly Credit Card Mistakes

Few interesting facts about speak asia & it’s panelists:

I just want to share few things which I feel one should know about them.

  1. They are registered in Singapore but not in India. Registering a company is not a big deal but no one is going to do a case in Singapore court for his Rs 12000.
Speak Asia Online – too good to be true Click to Tweet
  1. They are selling subscription of online newsletter (Ezine) – so in case if surveys stop coming; you can’t take them in court because you will still be getting Ezines.
  2. Their so called E-zines are just copy paste from some other sources & most of the time Wikipedia. (check this on insurance link 1 & link 2)
  3. Why they are charging – why not give a chance to start as free.
  4. They even don’t mention that people should be proficient in English or know internet. (only above 18 is the criteria)
  5. Right now they have added 7.5 lakh panelists (read agents – ok.. members) & they want to take this to 1 Cr by year end. When company do survey they do it with sample but not the whole market.
  6. So once they reach a mark of 1 Cr – every year the panelist will be sharing a revenue of Rs 52000 Crore (1Cr members * 52 Weeks * Rs 1000 per week) & who is going to pay this amount.
  7. Why one member is allowed extra panels at some fees. Don’t you think it will impact quality of survey?
  8. Interesting nos.: 3 lakh of their members are from Utter Pradesh – I don’t want comment but do all of them really understand English. Amar ujala newspaper quotes people who are not able to fill surveys due to lack of English or how to use internet give Rs 50 to others to do the same.
  9. This Singaporean company has changed their name 3-4 times in last couple of years. And their registered address show details of 4-5 companies.

I can write n no. of logics & members or prospective members of speak asia can give n no. of arguments. We both are biased with our thoughts.

Read – Why we make mistakes

My Views:

There are no shortcuts for long term goals/dreams. I don’t see this more than a ponzi scheme – where you make a pyramid & bottom of the pyramid takes the pain. As warren buffet said “you only find out who is swimming naked when the tide goes out”. Right now music is loud & party is going – let’s see when music stops but I think it should happen soon. (and some time it even runs long – hope you remember Madoff Scam)

Speak asia ads remind me of days when Shahrukh, Tendulkar & Hrithik were doing ads for Home Trade. And couples of months later promoters were behind the bars for committing a big fraud.

And one sad part is even insurance agents & mutual fund advisor are introducing this scheme to their clients – Amar Uzala Utter Pradesh edition.

What Indian Media Have to Say:

Times of India: Another company goes to town with easy money scheme

Money Life Magazine: Another MLM scam in the happening, this time under the pretext of an online survey

What’s common in above 2 titles “ANOTHER” because these type of things keep happening – few are big enough that comes to everyone’s notice including speak asia.

These are my personal views & I don’t want to force them on you. Only one suggestion always keep your head cool while taking decisions.

Will love to see your views & if you agree with my views must share it with your friends.

8 Most Important Mutual Fund Questions – Sahi hai ya Nahin

Hemant Beniwal
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365
8 Most Important Mutual Fund Questions – Sahi hai ya Nahin

Mutual Fund is a new baby for most Indians – I keep getting lots of mutual fund questions through Comments on posts, Ask Us, or Business newspapers where I regularly write query sections. I have selected the most important & most frequently asked questions (faq) out of that. You can also ask questions in the comment section.

You can also get a “Secret Investment Guide” from the end of this post.

Mutual Fund Questions8 Most Important Mutual Fund Questions - Sahi hai ya Nahin

  • Is a mutual fund with a low NAV better?
  • The difference in the performance of a Dividend or Growth Plan?
  • What are the tax benefits in mutual funds?
  • What are the charges in mutual funds?
  • Is it a good time to invest in mutual funds?
  • Should I invest in Infrastructure funds?
  • Equity Vs Real Estate – which one is better?
  • Mutual Funds or Direct Equity – who is the winner?

Low NAV Vs High NAV Mutual Funds

Question: Is it worth to go for a SIP in a fund where the NAV price is very high. Say HDFC Equity where NAV is around Rs 200?

Answer: You should not consider NAV as a deciding factor while investing in Mutual Funds. It is a myth that it’s good to invest in Mutual Fund with low NAV mutual funds because you will get more units and that means more returns. Let me clarify high or low has nothing to do with the future performance of the fund – NAV keeps changing due to the performance of the fund and that depends on markets & fund manager performance.

The only good thing with a higher NAV fund is that it is having some past track record to show. Low NAV is a gimmick used by agents to introduce you to new funds where their commission is higher. Say NO to NFO.

Must Check – Insurance for Diabetics

Check calculation of high an

Dividend or Growth

Question: I want to invest in Reliance Mutual Fund, but as I am seeing the NAV, there is a huge gap in Growth and Dividend NAV. Which is better to invest in?

Answer: Most mutual fund schemes come in three options – dividend, dividend reinvestment, and growth. Undergrowth option, you get the units at the time of buying and you have a same number of units till the end. The NAV keeps changing according to performance. The fact that under the dividend option the fund keeps on declaring regular dividends so NAV reduces with such dividends. In dividend reinvestment, you get additional units on ex-dividend NAV. However, the truth is that it does not make a dime of difference which option you choose, from the pure investment yield point of view. There is a caveat, though – Investors should opt for that option that minimizes their tax liability.

Let’s take an example to understand this. Suppose an investor decides to invest INR 1000 in both, Dividend Re-invest and Growth option of the fund.

Must Check –Benefits of long-term orientation in Life & Investing

Check the calculation of dividend & growth plans.

Tax benefits in Mutual Funds

Question: What are the tax benefits I can get while investing through mutual funds? Are there any special funds where I can invest to avail tax benefits?

Answer: Tax benefits in Mutual Funds keep changing from time to time. According to current laws, a few of the tax benefits are No long term gain tax on the sale of equity mutual fund(the long term here means 1 year plus), Tax-free dividend, No dividend distribution tax in case of equity mutual fund, Benefit of indexation in case of debt mutual fund & Lower long term gain tax in comparison to any other interest-bearing product. You can also invest in Equity Linked Tax Saving Schemes of mutual fund to take benefit under section 80 C. ELSS schemes have a locking period of 3 years & as the name suggest it invest in equity shares.

Must Read –Economic Bubble

Mutual Fund Charges

Question: How the mutual fund charges its annual maintenance fee from the investor? Does it reflect in the NAV we get against the amount investor pays? How can an investor calculate it from the statement it receives? Other than this any other charges?

Answer: You are lucky that you are asking me this question in the No Entry Load era so there are only annual charges that you have to pay. Mutual Funds deduct Annual Maintenance Charges from the fund that you are investing in. Charges depend on the type of fund & the size of fund you are investing into. Charges are higher in the case of equity funds if compared to debt funds – if the size of the fund is big charges are comparatively low. Charges are levied in the guidance of SEBI & the maximum charges that are allowed in the case of Equity fund are 2.5% & in the case of debt are 2.25% in a year. These charges are used for asset management, distribution cost, custodian charge, registrar charge, etc. These charges are automatically deducted from your NAV on daily basis. So the NAV you see is after adjusting these charges. It can’t be calculated through a statement but you can check these expenses in the monthly factsheet.

8 Most Important Mutual Fund Questions - Sahi hai ya Nahin Click to Tweet

Good time to invest in Mutual Funds

Question: I would like to invest Rs 2 Lakh for Long Term. Will you suggest investing it right now or should I wait for correction.

Answer: Far more money has been lost by investors in preparing for corrections, or anticipating corrections than has been lost in the corrections themselves. You should understand that timing of the market is not possible even by experts. In the long term, equity has consistently outperformed all other asset classes and works well against rising inflation. Equities are volatile in the short run but have the potential to create immense and stable wealth in long run. In the last 30 years, if one has invested for any 20 year period, the worst returns are 13.35% which is double what you get in an Endowment policy & the average return of equity in the same period is 16.72% which is double than any other debt investment. But if you don’t feel that you have such patience better invest through 1 year Systematic Transfer Plan.

Read – Secret of High return Investment

One more on timing the market

Question: I was running a SIP of Reliance Vision for Rs. 1500/- per month it ended the last September…I invested Rs. 36000/-in 2 years… the present value is Rs. 49,000/-. It touched Rs. 54,000/- a few months back also but I didn’t withdraw the money. But now as the markets are going down, I think I have taken a wrong move by not taking the money out.
Answer: Equity gives you two types of return, one is speculative and another is fundamental growth. 95% of the investors in shares or mutual funds are here for speculative gain that is gain from the short-term price movement. They start TIMING THE MARKET rather than giving TIME IN THE MARKET. This approach for short-term gains is the real cause of loss. Investment, in the long run, is not only rewarding but also beats inflation by a good margin and creates wealth. If you keep such a close track on your investment it is going to be very tough for you to achieve your goals through equity investment.

Infrastructure Funds

Question: Should I invest in Infrastructure Funds – as it is believed that India needs good infrastructure & that will be reflected in the performance of the stocks.

Answer: Infrastructure funds as a theme was started in 2003-04 at that time exposure of infrastructure-based sector was not more than 25% in diversified equity funds. But now compare the portfolio of diversified equity fund with any infrastructure funds and you will find that exposure in infrastructure-related stocks has gone up to 60-70% of the overall portfolio. So now investing in infra funds means increasing the risk of your mutual fund portfolio. Infrastructure covers a lot of things like banking, power, energy, engineering, construction, cement, metal, etc. One more thing people need to realize that any diversified equity fund can buy into any sector or theme if the fund manager sees potential. Buying theme funds should be decided only when the theme has something unique to offer, which other funds are either not offering or offering in a limited way.

Equity Vs Real Estate

Question: Which will give better returns in the long term – equity or real estate?

Answer: Both equity & real estate are growth asset classes and will always beat inflation in long term by a substantial margin. Both real estate & equity markets are driven by the growth of the economy & businesses. In the long term, equities give a better return than real estate but investors have earned better returns in real estate. The reason is in real estate people invest for long term maybe 10-20 years so it saves there undue expenses, tax & bring out greed & fear emotions from investment. But inequity we do it the other way & that’s the reason investors feel properties give better returns. Also remember there are many shortcomings with real estate as well like the size of the investment, leveraging, black money, title problem, encroachment, liquidity issue, maintenance charges, etc.

Mutual Funds Vs Direct Equity

Question: I want to invest 2 lakh in the share market for 10 years please suggest to me the best shares in infra, power, bank, FMCG?

Answer: There is one good thing & one bad thing about your question. The good thing is you want to invest for the long term in equity but the bad thing is you want to invest directly in equity rather than going through Mutual Fund Route. The biggest problem with direct equity is that a very small number of people can do it right. And people who can do it right don’t ask for suggestions or tips – they just research & make their investments. But most of the people just feel they’re right, till they get really screwed big time when the market makes a turn. I am having a big confusion that why people think they can beat mutual fund managers? Direct equity demands too much attention & at times it’s too addictive. And when you can’t control yourself, it can ruin your portfolio and wipe out your savings.

Bonus Question – Suggest Low Rish High Return Mutual Funds

Answer – Hmmm

Hope you learned something from this post. In case if you have any mutual fund questions – feel free to add them in the comment section.

You can also check these pages:

7 Tips to Rent Perfect House

Hemant Beniwal
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7
7 Tips to Rent Perfect House

There are more tenants than the landlords. And if you have had an experience of living on rent, the itch must have occurred. You must have had an exchange of words with your landlord over maintenance, or some other issue. That is the very reason people are always on the lookout for a new roof, even though they are financially not prepared. Through this article, we will help you take the measures before finalizing a flat or a house for rent for yourself.
Finding a house is a herculean task and we are trying to share some fundamentals, which will help you while searching for accommodation on rent. I have only once stayed in a rented house when I got an assignment with HDFC Mutual Fund outside my hometown. So I am sharing my practical experience which you probably can relate to.

Tips to Rent Perfect House

Read – Debt Mutual Fund Risk 

Tips for Rent House

Tip 1 – Make a budget & stick to it: Every extra facility in a house has a cost attached to it. When you search for new premises with an extra balcony or a terrace, it probably would increase the rent. Stick to your budget. An increase in the budget should be justified and need-based.

Tip 2 – Finalize the location: The location is a very important parameter. My friend recently rented a flat in a posh locality and shifted there with his family including aged parents. When I went to his house, aunty complained that the temple is so far away from their home that now they go there only on weekends. Although my friend is paying more than he can afford to live in a posh area, his own family is not happy. The best thing is to draw up a priority list of your locality requirements. Having a grocery store for your daily needs in the neighborhood would help reduce fuel costs and save you time.

Tip 3 – Know what you actually need: This is an extension of the previous point. The goals that you wish to derive from the new premises should be realistic. Sit with your family members and come to a conclusion over the requirements. Important things to consider are the distance from the workplace, the location of the school for the kids, and the proximity to the medical facilities.

Tips to Rent Perfect House Click to Tweet

Tip 4 – Start your search: You may now start the search on your own, through your friend circle, ads in newspapers or a broker, or through websites. The last two media have a cost attached to them and hence should be used when necessary.

Must Read – Benefits of Mutual funds 

Tip 5 – Schedule viewing: Now you will get calls, to view the property. Schedule the sessions. The best-looking deals should be viewed first. During the visit stay organized. Take notes, as people tend to forget the details afterward. Ask a lot of questions. See the condition and supply of utilities. With the main premises, also check the common areas like a terrace, parking, etc.

Rent houseTip 6 – Don’t get discouraged or frustrated: Looking for a rented house is a time-consuming activity. Do not get frustrated if you are not getting the desired premises. Keep on looking and revisiting your requirement list. The house might not meet all your requirements but go for the one which gets you closest to the entire list. Once you finalize any property, do a double-check on it. Show it to our family and get their approval as they will also spend equal time at this new house, if not more.

Tip 7 – Sign the agreement: Before you sign, discuss all the payments terms, and payments other than the rent. Ask for a copy of the rent agreement and study it. If you are not well-versed with the legal language, take the help of someone who is. Finally, see what is needed before your shift. Apart from the usual repair and painting see if there are major changes required and ask the landlord to facilitate these requirements. After all, this, sign the contract and shift with a peaceful mind.

I wrote the article for The Financial Planners’ Guild, India where I am a member. This article also got published in Indian Express.

Would you like to share your experience?

Get FREE Personal Finance Software from PERFIOS

Hemant Beniwal
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52
Get FREE Personal Finance Software from PERFIOS

It is just the twentieth day of the month and you are wondering where all the money has disappeared? Thinking back you can count maybe two or three major expenses, but it still doesn’t sum up to the large hole in your wallet??!! Doesn’t this sound familiar? How many times have we all felt this, however how many of us really keep track of how we are managing our hard earned money.

Get FREE Personal Finance Software from PERFIOSWe have gradually transformed from a generation of great savers to a generation of great spenders. Over the years the country has witnessed a sea change in the income patterns and subsequently a change in lifestyles and spending patterns too. Our parents followed the age old tradition of starting their careers and retiring from the same organization. Living their lives by the ‘save for the future’ mantra, most luxuries would be attained late in life. For example, most would build a house after crossing the ‘mature’ 50+ age bar. Today’s double income couples however, start paying their EMIs for a car, house etc. much earlier. Better incomes, frequent job changes and keeping one ‘happening’ in the social circle with material achievements are the benchmarks of success. The more complex money matters become, the need for managing it prudently becomes obligatory.

This is true for everyone from students managing limited pocket money to newlyweds learning to run a household to businessmen handling multiple bank accounts or retired persons utilizing their old-age pension optimally. Personal Finance management is required to primarily understand your own money. It could be anything from buying a car, house , gadget in installments or  starting a family, planning a vacation ,and saving up for rainy days when there’s a recession in the market. Whatever the case may be you need to know how and where your money comes from and where all it goes. This analysis is necessary for the users to prioritize their expenditure heads, be it necessities or luxuries.

Get FREE Personal Finance Software from PERFIOS Click to Tweet

Such examination of personal finance is required even more with the current rise in prices for every commodity or service. Modern day parents might gift credit cards to their kids; still it is mandatory to keep a tab on how the child actually spends the money. You may consider this example an extravagance, but consider this. Even basic requirements like education have become a costly affair. We may laugh at a parent lamenting the College Entrance fee of her child being more than her total expenses in three years of college education. But soon we shall be paying for our child’s kinder garden school entrance fee which will be more than the sum total  spend  on our entire education!

Grim as this seems, sweat not, because this is where the angels of web based tools and services for personal finance management come in to relieve us from our predicament. Even if you are a disciplined individual keeping track of all your money matters, regular manual tracking has its own limitations. PERFIOS being user friendly for people even from a non-finance background, managing personal finance online seems a cakewalk. Devoid of confusing technical jargon, this online service aids you in taking control of your own money, just the way you want it.

Salient features of Perfios (Personal Finance One Stop)

  1. First and foremost feature – it’s FREE for all and the best part – it ask for only one email id to register. Yes that’s right, no other personal Information asked for – not even your name.
  2. It has an Auto Update facility for almost every Bank! Be it your Bank account, Credit Cards, Mutual Funds accounts, Demat accounts or for that matter even ULIP (Insurance) accounts can be auto updated at Perfios. Meaning, you need to login to Perfios ONLY to see the transactions of all your financial accounts.
  3. Now comes the questions of security – Perfios is certified by the world leaders Trust Guard and VeriSign. Over and above that Perfios never stores any passwords/ID on their servers. The credentials gets encrypted and stored in YOUR machine only.
  4. Other than Automatic updates of your accounts, Perfios has a unique feature of Statements upload and emails. This feature enables a user  to simply upload any E-statement which he would be received from any Bank, AMC, broker and Perfios would automatically convert that file (could be any kind of file – pdf, excel, html, zip) into a Perfios format and update your respective account!
  5. You can use Perfios to generate multiple reports – more than 20 ways in which you can slice and dice your data. Tells you how much you have been spending on fuel, grocery etc. Calculates your Capital Gains etc automatically.
  6. Perfios is all about automatic updates – it even categorizes your banks and credit card transactions automatically, like – telephone, grocery, gift, electronics etc.
  7. With all the accounts set up, Perfios also computes Income Tax automatically.

Much more to explore at Perfios Website

This tool shows a true picture of expenditure trends of an individual or family across months/years or across various heads thus providing useful insights into unnecessary wastage’s which can be cut down or streamlined. Keeping the above in mind, just go ahead and make friends with this online tool and let it manage all your finance in one place without any loose ends, smartly and securely. And before long, you shall discover that your dream vacation is not unaffordable any more. In fact, your judicious money management is already yielding some golden eggs and it’s time to just sit back and enjoy them! This is sure to make you independent in the true sense of the word i.e. ‘financially independent.’

Hemant Beniwal: This post is written by PERFIOS team. Other than superb FREE for life version they also have premium versions with additional features like SMS Alerts, perfios mobile, income tax wizard & few other useful tools.

Get a FREE Platinum plan from Perfios (Worth Rs 1499)

PERFIOS has generously agreed to gift 5 Platinum plans worth Rs 1499 each to The Financial Literates (TFL) readers:

How to win it?

Simply fulfill these 2 criteria

1. You have to subscribe to TFL Weekly Newsletter OR Like the Facebook Page of The Financial Literates – most of you are already fulfilling this criteria.

And

2. You have to share this post on your Facebook Wall or Tweet it. If you don’t use Facebook or Twitter you can just send this post to your 10 friends through mail.

Few more points:

  • Leave a comment on this post that you have shared it – which is important for me to add your name to list.
  • I will close this contest at 5 PM IST on 5th May 2011.  I will keep updating the list on regular basis and select winners through random.org. We will announce 5 lucky winners on 6th May.
  • If you don’t see value in the newsletter or Facebook update then you can always unsubscribe later.
  • Premium Plan charges are Rs 1499/year.
  • Winners can be asked for screenshots of what they have shared.

In case if you have some query regarding Perfios or this offer please ask.

This is our first giveaway on TFL – if we will see good response we will try to bring few more here. All the best.

How Investors react in different market situations

Hemant Beniwal
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16
How Investors react in different market situations

We all are born with some instincts. Some of them can be changed and some can’t. Investment attitude is reflection of our basic instincts. It would be better if we could know our own investment attitude, behavior and style. There is nothing wrong in diagnosing ourselves. Knowing the category we fall into, we may devise a strategy to have maximum benefit of it.

People say market moves in cycles – yes, but it is cycle full of emotions. This cycle combined with the response that you get on your emotions decide the losers & winners.

How Investors react in different market situations

Now let’s attempt to know how behavior was responsible in the last three years. The data in study is the BSE Sensex movement from September 2007 to September 2010. These 3 years were a good ride for sentiments but the bigger question is, has investor and particularly the equity investor has learned something or not? If we would have taken this graph from 2000 this would have been almost same in many ways. To simplify things we have sorted out the 4 main emotions or the situations.

  • Thrill & Euphoria
  • Anxiety & Denial
  • Fear & Panic
  • Relief & Optimism
How Investors react in different market situations Click to Tweet

There can be many more emotions but we have not touched them – similarly as we can’t find the tops & bottom. We have shown that how different type of investors react in different situation – you can check is it you.

How different investor reacts

Before Going Further quickly check: Type of Investors

We start with best time of market – but were it really the best time – depends on what type of investor you are.

Thrill & euphoria (cycle starts where optimism converts in excitement)

1st Sep 2007 to 14th Jan 2008 – in 4 months Sensex jumped from 15300 to 21000 – almost a 40% rally in these 4 months.

  1. Window Shoppers: Finally again the cheating has started…. No worries it will fall to 6000 levels… then see….He is actually saying this thing from 2005
  2. Seasonal Traders: Hmmm…RNRL & RPL looks good – instead of getting into cash market I will trade in futures… let Reliance Power get listed, my stocks will double. TV channel says Parsvnath is good with an upswing of 40% plus… let me add a lot of this one too…. Midcaps also look mouthwatering…
  3. Scapegoat: My agent had said that equity will give returns…. He was right…. Good analyst…. Again this time he is saying it will cross 25000 levels…. And asking me to invest in NFO of an Infrastructure fund… ok done, let’s invest…
  4. Hi-tech Lalaji: This is great time… I have made smart investments – but now, I don’t have surplus money… why not get leveraged….. Let me earn on somebody else money …smart…. Let me get a funding in Reliance Power IPO. These pink papers and journalist are all crap other wise why would they come to office so early and tell me where the returns are? Market is operator driven game….. I get tips from horse’s mouth ie from Mumbai…
  5. Mr. Cool: Equities are not good or bad it’s the price you pay that makes the difference. Indian story is good but the way things are moving are not good. PE ratio doesn’t justify the present level. Read in news paper that 1000 stocks are in upper circuit from last 7 days – fundamentals have not changed much. News from global is not good. Let me sell those stocks which are way ahead of fundamentals.

Anxiety & Denial (euphoria ended & markets started drifting down)

On 22nd Jan Sensex touched bottom of 15300 (same where it was on 1st September) – but this comes as a falling knife, almost 30% down in 10 days. On 4th February Sensex touched 18900. But midcaps/small caps were butchered.

  1. Window Shoppers: …. I told you……see…. and mind you this is the BEGINNING…
  2. Seasonal Traders: What is this …..? Broker axed my lots… he auctioned my investments without informing me…. But market will have to rise…. So I got money from my friend circle and invested…. Will repay when I recover my investments.
  3. Scapegoat : Agent is saying that the correction phase is over… lets invest more to average the losses….so investing in lump sum as this is the best time…. He is the mutual fund expert and can’t go wrong.
  4. Hi-tech Lalaji: Portfolio is down but Mumbai wale said to accumulate as recovery is round the corner…. Let me do one more thing…. Let me also get funding over the mutual fund investments too…. Earning on somebody else money has different feeling all together.
  5. Mr. Cool: I was right but still valuations seem higher. Let me get some positive cues and till then I should wait & watch before participating.

Fear & Panic (Market started drifting down)

In starting of August 2007 Sensex was still hanging at 15600 levels – but worst was still to come which very few anticipated. In one and a half month markets tanked – On 27th October 2008 Sensex touched a low of 7697. From highs of 21000 it was down by 66%. Midcaps & small caps were down almost 80-90%.

  1. Window Shoppers: That’s the reason I don’t invest much in equity (sour grapes)…that’s why I withdrew my investments at 21000. Wait sensex to go 3000 levels.
  2. Seasonal Traders: Oops I made a small silly mistake…. I should have short sold instead…. On TV they are saying it will go down more… so if I short sell now I would regain losses….. Let’s do it.
  3. Scapegoat: Oh my God…. What sin did I do…? Papa was right that equity is gambling. …. My mutual fund agent has disappeared as he is not even picking phone…. Let me call somebody else and withdraw. Also I am stopping all SIPs….. Will open a post office RD instead…. Now I swear to God, I will not invest in stock market.
  4. Hi-tech Lalaji : This time Mumbaiwala went wrong… but that’s ok… my turn will come again than I will recover all in one go… also he lost more money than I did… do you have a capital protection fund that protects capital but participates in upside?? Just got a call from a PMS Manager… he made 100% return in bear phase…. Let it settle than will invest some here…
  5. Mr. Cool: It’s a great time to invest in good companies. Whether the company is bad or good but the prices have come down for all…. This is the time for value buying.

Relief & optimism – Investor had seen the worst he could have seen. Still the pain was left and many investors had already made up their minds not to look at stock markets again.

Market started rising slowly but investors were redeeming money at every rise – The rise was slow but consistent. Then come THE DAY – Parliamentary Election results were out. Against the general perception of a hung parliament, Congress came with majority. 18th may 2009 turned one of the best days for the equity markets (may be not so good for short sellers) – market hit the upper circuit & trading was suspended.

  1. Window Shoppers: I have purchased whatever I wanted to (sourest grapes)… I never cared the market direction… I always buy cheap as this gives the best returns.
  2. Seasonal Traders: This time market taught a good lesson… next time I will not repeat what I did this time…. By the way which is the next IPO…? Should I invest in gold…? This is safe… let me buy a one lot of it.
  3. Scapegoat: Mutual fund is risky…. The agent’s son has taken a life insurance agency…. And he was talking about highest NAV guaranteed plan…. Concept looks good… will invest a bit here.
  4. Hi-tech Lalaji: Do you have some product exclusively for HNI’s like me… Just heard from Mumbaiwala friend that there is of lost money in Private Equity and Venture Capital funding…. Mutual fund are slow in rising… do you have a product where I can cash on returns of property market in Dubai.
  5. Smart investor: No reactions… it was a normal warm shiny day for him. Enjoying his life with family and planning for a holiday.

A mentally relaxed person generally opts for long term investment, waits patiently for investment opportunities, and doesn’t take investment decisions in a hurry. Contrary to this, an overconfident person takes investment decisions in a fraction of a second, assuming that he is the only person  privy to secret details about that investment avenue, changes his own decisions a moment later, incurs loss and feels confident to recover the loss the very next moment. So keep your head cool & think wise.

This article is part of “What Investors Really Want” E-book Download & read the full Behavioral Finance Guide from here and be a sensible investor.

Hope you learned something from this article – Must share your views.

Ask Readers: Why life insurance claim gets rejected?

Hemant Beniwal
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66
Ask Readers: Why life insurance claim gets rejected?

Ask Readers: Why life insurance claim gets rejected?Time & again I have written on importance of life insurance & why you should buy term insurance for that. But one question that haunts everyone – what will happen if my life insurance claim will be rejected?? Go through the article & share your experience.

Recently one reader raised these questions on Ask Us. He wrote – I am your regular reader. I am little confused in below points

1. Why one should Buy Life Insurance? Please provide the list of major reasons.

Read – Thank God You were not there.

2. Your article says that One Should Buy Term Insurance, That is OK but from which company one should buy or how one should choose the Insurance Company for Insuring himself.

Read – How to choose term plan.

3. I have planned to buy Term Insurance from HDFC but after reading the attached letter. I am confused. Please help me.

This is bit shocking read this letter:

Ask Readers: Why life insurance claim gets rejected? Click to Tweet

So the whole purpose of taking insurance goes waste. Just a sympathy letter & they are done.

We all have seen impressive ads from Religare Aigon KILB (Kam Insurance leni ki bemari) – these touching ads shows the real importance of life insurance.

But it seems that Kam Insurance is a contagious disease & now Religare is also down with that. Money Life Magazine recently mentioned – Aegon Religare: ‘Kum’ insurance ‘dene ki bimari’.

“According to figures released by insurance regulator IRDA’s (the Insurance Regulatory and Development Authority) report for 2009-2010, the ‘claims settled ratio’ (the number of claims settled with respect to claims received) for Aegon Religare is a measly 48%, and the claims repudiated ratio (the number of claims rejected with respect to claims received) is as high as 44%.

For the 2008-09, Aegon Religare had not settled any of the claims that had been submitted to it. On top of that, the insurer repudiated 71% of the claims that had been submitted to it in the above period. “

What are IRDA guidelines pertaining to Claim processing? (normal process)

As per IRDA (Insurance Regulatory Development Authority), the insurance company is required to settle a claim within 30 days of receipt of all requirements. However, if the claim warrants further verification, the company should complete its procedures within 6 months from the receipt of the written intimation of the claim. If the company settles the claim beyond 1 month of receiving all request the interest is payable by the company on the claim amount. The interest is payable only where the claimant has submitted all the requirements. Further the rate and period of interest are decided as per IRDA guidelines.

But Why Rejections?? – Extracts from Religare Aegon website

As a policy holder, what should I do to ensure that my claim, whenever it arises in future, does not get rejected?

In the claims findings, if it is established that there had been a material suppression of facts pertaining to the proposal information, which would have impacted the assessment of risk, if disclosed at the proposal stage, then it may lead to repudiation of the claim.
If documents submitted at the Proposal / Claims stage are not genuine, it would also lead to claim repudiation. Comparing term Insurance claim rejections by Onemint.

When and Why Claim Repudiation/ Rejection happens?

It is very important to read through the Proposal form and submit factual details at the proposal stage and provide genuine documents at the time of buying a policy. In order to ensure that your claim does not get rejected, please ensure the following:

A) At the time of buying the policy:

  1. Ensure that you read and answer all the questions correctly and accurately to the best of your knowledge.
  2. Ensure that you have disclosed all material facts to the Company. In case of any doubt as to whether a fact is material or not, the fact should always be disclosed
  3. Ensure that all the documents submitted by you (E.g. Age Proof, Income Proof etc) along with the proposal form are genuine

B) Upon receipt of your policy document, please perform the following checks:

  1. Go through the copy of your signed proposal form enclosed along with the policy document
  2. Review and ensure that all the questions have been answered correctly and accurately to your best of knowledge
  3. In case you come across any discrepancy, please contact us immediately

On lighter note – one of my friends who is also a Certified Financial Planner wrote on his Facebook wall:

Just back from a rather irritated meeting with a client who decided to write to IRDA for allowing ‘bakwaas’ policies called ‘Term Plans’. He was upset that I had given his daughter a Term Plan since Term Plans don’t give any money back whereas only LIC policies always give you money back…”LIC bujhaye insurance ki pyaas, baaki sab policies bakwaas!!!”

I would like every TFL reader to share his experience on claims – in your family; friend’s family or you have learned something from discussion at some other forum. “Thousands of candles can be lit from a single candle, and the life of the candle will not be shortened.” So add your comment – this will really be helpful for others.

Franklin Templeton Family Solutions – Goal Based Mutual Fund Investment

Hemant Beniwal
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34
Franklin Templeton Family Solutions – Goal Based Mutual Fund Investment

A new innovation has arrived in the Indian Mutual Fund Industry – Franklin Templeton Family Solutions. Some time I tell people that “mutual funds are not investments but investment tool/vehicle to achieve once goals.” And now Franklin Templeton Family Solutions plan fits better in this definition.

Let’s understand it in detail – Franklin Templeton Family Solutions features, benefits, process, and limitations. Also check the plan that I have created from it & compared it with my solution. You can also download the Family Solutions Planner (software) from end of this post.

What is Franklin Templeton Family Solution?

Franklin Templeton Family Solutions – Goal Based Mutual Fund InvestmentNew age thinking is – when people buy something they don’t buy a product or service but they buy a solution. And when you seek a solution means you are looking at a problem which is already there or may be visible in future. So when you buy mutual fund or any other investment for that matter you are actually looking to achieve your financial goals. So Franklin Templeton Mutual Fund has taken a clue from this need of every investor and designed Franklin Templeton Family Solutions. Family solutions can help you to plan for your retirement, child’s future & other accumulation goal like buying a dream house of a foreign trip.

Must Check- Returns cannot be your Goals

Process of investing through Franklin Templeton Family Solutions

  1. With help of your financial/mutual fund advisor create a goal plan through Family Solutions Planner (software).
  2. Based on the solution fill a specially designed form; attach your goal sheet & a single cheque.
  3. Franklin Templeton mutual funds will register your goals in their system & will create a special account. Will send you a welcome letter & customized statement.
  4. Periodically review your progress with online account of your advisor.

Must Read – Setting SMART Financial Goals – Complete Guide

Benefits of investing through Franklin Templeton Family Solutions

  • Through Family Solution Software you can build your customized goal plan.
  • You can invest in Franklin Templeton Mutual Fund trough single form & single cheque.
  • You can monitor your plan through customized statements & your advisor.
  • You can design the plan but there is no compulsion that you should invest the whole amount or only in suggested funds.
  • Biggest benefit what I feel is when you link your investments to goals you stay longer in that particular investment solution. You are away from the sometime erupting greed during good market phase or temptation to do an impulse purchase. And this avoids unnecessary churning & keep you focused on your goals. That’s the reason people who invest according to financial plan have higher probability of achieving their goals.

First let’s check a plan that I have prepared using this software & then check few big limitations of Franklin Templeton Family Solutions.

Read – Magic of Mutual Fund Systematic Investment Plan (SIP)

Franklin Templeton Family Solution Plan

Try to understand plan which is self explanatory. I have assumed simple figures so that you can easily understand the plan & calculation.

Franklin templeton family solutions plan

Franklin Templeton Family Solutions Limitations

  1. It doesn’t consider growth in savings but actually when you will earn more you can save more. So if you are in private job you can expect 8-12% growth in your salary & you can also increase your saving by 4-6% every year. If we will consider saving growth your starting monthly saving figures will be substantially low.
  2. It doesn’t consider that when I will achieve my 1st goal – I can divert my fixed saving to other goals. For ex in above goal I would like to buy a car in 8 years & I need to save Rs 9483/month for that. But what will happen to this saving once I buy car. Either I will reduce my saving or divert it to some other goal. So figures shown by Franklin Templeton Family Solutions not look practical.
  3. You have to fill single form & cheque but minimum investment amount for fresh and additional purchase in each scheme shall be as specified in the respective scheme.
  4. Biggest problem is Franklin Templeton Family Solution or any other such solution will talk about investing in single mutual fund company. But very basic rule of mutual fund portfolio construction says that you should not invest in more than 1 fund in single fund house. This is same as sticking with an insurance company in case of ULIP.
Franklin Templeton Family Solutions – Goal Based Mutual Fund Investment Click to Tweet

My Solution after removing first 2 limitations

If you have checked the plan constructed through Franklin Templeton Family Solutions it shows that I should save Rs 35000 per month to achieve all my goals. But I tried some different calculations – according to that I can start with monthly saving of Rs 22000 – assuming 5% increase in savings every year.

Emotional side of Franklin Templeton Family Solution

We all know goal based or emotional based sales are successful in Insurance. Is Templeton MF doing something good or it is just another emotional way to sell.

Livemint newspaper quoted “Lifestage (plans) has to come. You have to touch emotional chord of people. That is how they will invest,” said an industry official, who also holds office at the Association of Mutual Funds in India, the industry lobby. He declined to be named.

Clearly hinting if this goes through well others will line up with their solutions. Anyway time will tell the real picture.

Download Franklin Templeton Family Solutions Planner (software)

Removed after getting message on bugs.

Share your views on Franklin Templeton Family Solution and what else you would like to see in such solutions.

Cost of Delaying Financial Decisions

Hemant Beniwal
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51
Cost of Delaying Financial Decisions

We have grown up listening to Sant Kabir’s word of wisdom about where he emphasizes that we must not procrastinate today’s work, as you will have no time tomorrow since there will be more work for tomorrow. But now, we are grown-ups and the world has changed & no one is there to correct us at every step. Not following Kabir’s rule of time will impact our financial life. Here’s how…

If we look at the financial life pyramid it can be divided broadly into 3 parts. The foundation is protection or risk management, in middle it is wealth accumulation & at the top of it is wealth distribution. (This article also got published in Business Standard)

Protection or in simple words Insurance:

There are things which are beyond our control and we should be prepared for such untoward incidents and always have a PLAN B with us. By the way, most of the people don’t even have Plan A. But let me explain both:

Plan A: Everything goes well and one is able to fulfill his financial goals out of his regular income and investment.

Plan B: If something goes wrong which we can’t foresee today, Insurance takes care of our Plan A.

So Insurance builds the foundation of any family. 3 of the most important policies that anyone should have is Term Plan, Health Insurance & Accidental Policy.

Term Plan: Term policy is insurance at its purest and simplest form. You pay premiums because there is a guarantee that if something happens to you, your family will be paid out the pre-decided amount, hence you have peace of mind that even if you are not there, those loved ones you leave behind will not have to bear a financial loss. Term Insurance is protection against risk of life.

  • Premium rises with age so if you delay it for few years your premium will be substantially higher.
  • In case if you are diagnosed some critical illness – either you will be denied insurance or your premium rate will be higher by 25-50%. This called loading of extra premium.
  • In case if something happens to the bread winner in this period – I think the consequences are beyond any explanation.

Health Insurance: Today one of the world’s biggest problem is health care. This is getting expensive, by the day.  Even Indian doctors want to use latest available technology and the downside of that is the huge associated cost. So health insurance policy can be really helpful.

Cost of Delaying Financial Decisions Click to Tweet
  • Biggest problem is if you developed a disease in this period & then reach an insurance company – either you would be denied a policy or that disease will be excluded or include only after 3-4 years. So you will have to keep praying to god that the disease does not reoccur.
  • Ask any of your friends whose family member was recently admitted in hospital – “What was the total billed amount?” . There is high probability that you will get heart attack – if you survive, next day you will buy a health insurance.

Accidental Policy: Sometime life plays strange games – You will be reading about Aruna’s case that she is subconscious from last 37 years & now family is asking for ‘euthanasia’.  Think of someone who is in 30’s & lose either his legs or hands in an accident. From being biggest asset of the family he suddenly becomes a liability (certainly on economic grounds only). Comprehensive accidental policy can be really helpful in such circumstances.

Now Check this Video

Wealth Accumulation or what people call Investment:

Now let’s come at the second level, which everyone appreciates is the most important part of their life but still, neglect and do anything.

Let me take my own example and explain you. Assume I am 30 and I have decided to plan for my retirement at 60 and would like to invest monthly. I did some calculations with 15% return that I expect from my Equity Mutual Funds and came up with some astonishing facts and figures.

I have three options – invest Rs 5000 starting now or Rs 10000 when I turn 40 or I can easily save Rs 30000 in last 10 years of my working life & total investment in final option will be double of first one. You know what will be my retirement corpus? In first case it will be Rs 2.82 crore, in second case it will be Rs 1.33 Crore & in last case my accumulation will be just Rs 79 Lakh.

If I put it the other way: What if I need Rs.2 crore at the time of my retirement and I again have 3 options starting at 30, 40 or 50. The monthly investment when I started at 30 will be Rs.3551/- and total investment will be Rs.12.7 Lakhs, in second case it will be, Rs.15071/- and total investment will be Rs.36.26 Lakhs and when I started at 50 figures were shocking – monthly investment will be Rs.76,040/- and total investment will be Rs.91.2 Lakhs.

You can clearly see cost of delay is huge. Due to Power of Compounding Investments Done in Initial years are the main chunk of your Final Corpus. The amounts required to compensate time delays are huge.

Wealth Distribution or Estate Planning:

Division of assets is a sensitive matter & people keep delaying it but there is again a huge cost of delay. People fail to write a will or even check the basic things like nomination etc., in investments. Sudden demise makes the lives of their families miserable. Smooth succession planning is very important part of one’s life.

So don’t delay important financial decisions & consult a good financial advisor now. Being casual about it spells trouble. You need to act. Like the NIKE’s slogan says, “JUST DO IT”.

It may be a good idea to get a competent professional financial adviser

who will work with you to help you reach your financial GOALS.

Comprehensive Financial Planning Solution

Hope this article will be helpful for you – please share your views. 🙂 Must Share this article with your friends & well-wishers.

Are you a Financial Literate?

Hemant Beniwal
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10
Are you a Financial Literate?

The financial Literacy level is at a very low level but the latest survey shows India’s Financial Literacy Level is much better than others. This survey from ING shows that India Ranks at no. 2 out of 10 leading nations.

Are you a Financial Literate?

But my question is what your target is:

  • Being just better than others? If yes then enjoy you are already in the top 10% of Indians. (As 90% don’t even know what is Financial Literacy)
  • Achieve your goals & be financially free? If yes then learn – still there is a long way to go.

Some time back financial portal Myiris interviewed me. When the interviewer asked, “Is there anything else you would like to share with our readers?” I was not able to stop myself to share the poor financial literacy state of our country.

I said “Financial Literacy is the key to Financial Freedom. We wish to say that Financial Literacy is very important as we miss this in our education system. We dream for a day when an investor will be financial educated before he reaches his financial advisor. Being financially aware means the client will understand his questions and will definitely understand the solutions. It is really painful to see when a client is mis-sold for penny benefits. And best way to avoid mis-selling is to get armored with Financial Literacy.”

Are you a Financial Literate? Click to Tweet

Few Important Facts from Financial Literacy Survey:

  • Indians turn out to be the second out of 10 leading nations in the world to have a basic financial literacy level(55%), just behind Japan.
  • The survey was carried out among 5,000 consumers across ten major nations, including India, the USA, Mexico, The Netherlands, Romania, Poland, Belgium, Spain, Korea, and Japan.
  • The survey shows that a whopping 84% of Indians prefer buying life insurance products as compared to 54% globally.
  • 87% of Indian households have an emergency fund compared to 33% globally.
  • Indians borrow money only in case they have to buy a house (50 percent) or a car (43 percent).
  • Indians do tend to get lost in sourcing good advice to become better at money.
  • The more people are financially literate, the more they experience feelings of happiness,
  • Overall, the survey revealed that Asians are by far the most financially literate and also eager to learn more. They actively follow their budgets and develop habits of acquiring knowledge before taking financial decisions.
  • 89% of respondents — from 10 different countries — want to do a better job managing their money; 94% of Americans want to do a better job.

Financial Literacy surveyExtracts from Financial Literacy survey.

87% of Indians had an emergency corpus of more than two months. Nothing new for us is that most Indians have a “CASH FANCY” and they keep the cash in saving accounts, suitcases, almirahs, goolaks, and even in pillow covers.

Globally, the problem is only 27% of people admit that they do not know where to start. Others keep on postponing, do not find it interesting, do not have time or badly need help.

Financial LiteracyAsian countries are found to be most literate followed by the developed nations.

Are you a Financial LiterateAge-wise younger people are more financially literate. This may be due to the fact that they have access to better primary education, the internet, and other resources.

Important Facts from Financial LiteracyIf the income goes down, people tend to show the following behavior.

meaning of financial literacyGlobally when asked about saving for Retirement Planning, 59% said they are doing it. The good thing is 79% of Indians are doing it in this survey.

what is financial literacy

I would like to share a quote from Alvin Toffler “The illiterates of the 21st century will not be those who cannot read and write but those who cannot LEARN, UNLEARN and RELEARN”. Similarly, Financial Literate will not be those who know how to save but those who can achieve their financial goals & achieve financial freedom.

Do you agree with the findings of this survey?? Do you feel you still have to learn?

5 Important Charts that you must understand to make WEALTH

Hemant Beniwal
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5 Important Charts that you must understand to make WEALTH

A Picture is worth thousand words. So today I thought to share few charts that are really important for you to understand. Let me share one more thing that most of the charts that you find on TFL are out of my own research. And sometime it not takes hours but few days to make them. Hope you will appreciate them by giving your few minutes.

Long term investment chart – this is 30 years data of various investments & it compares them with few expenses. We can clearly see that in long term equity is a clear winner – difference is so huge that it can’t be ignored.

Related Article: What is Equity? Understand its right meaning to reap the benefit

Negative Debt Returns Chart: Debt creates an illusion of safety but in long term safety is preservation of purchasing power. But here debt products fail. Most of the time debt products give negative return – if we consider inflation & tax.

    Related Article: Why Fixed Deposits & Debt Returns will always give negative returns

Chart why people lose money in equity – I always keep saying that Investing is not a number game but a mind game. There will always be a big gap between Investor returns & Investment Returns. And this graph clearly shows how greed & fear rule our mind. It shows that when market start rising people pore more money & vice versa.

5 Important Charts that you must understand to make WEALTH Click to Tweet

                             Related Article: Behave Yourself… Financially

Chart Magic of SIP – Systematic Investment Plan(SIP) has become a buzz word now a days but I am sure people still don’t understand it in a real sense. SIP is a great tool which can help you in achieving your financial goals. For some, last 3 years were the worst part of their investment life but for SIP investors it was not less a dream that came true. Chart Shows market moved in a semi circle & investor made 27% CAGR return.

           Related Articles: Systematic Investment Plan(SIP) – Complete Guide
India Growth Story Chart – You will never have a faith in equity if you will not try to understand relation between stock markets & growth of economy. Stock Market is barometer of economic growth. If you don’t believe that India will grow & become a bigger economy in coming years, better you should not invest in equity markets. This graph is part of famous BRIC report by Goldman sach that says India will be 3rd largest economy around 2030.

                               Related Article: India will rule the world

Invest in Equity and you will reap the benefits of Indian growth story. In the last 30 years, India’s GDP has grown close to 6% and now we are nearing 9-10% GDP growth target.

Also Check: 5 Funny Investment & Insurance Cartoons

Mandhupam added a comment – which gives better direction to this article. 🙂

Simplest explanation to the 5 basic questions, which bother an investor. And these are:
1) Where to invest? (India)
2) Which asset to invest? (Equity)
3) How to invest? (SIP)
4) What minimum return to aim? (Alteast above inflation)
5) When to invest? (Always, with no timing)

Must share your views & ideas on charts – I may try to build few out of them.

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