Pension Plans - Are they worth investing in?

I shall get straight to the point - I have not bought a pension plan. (Yes, I don't have one in spite of the ad which screams 'Get 1.5 crore pension on your 55th birthday'). And why do I not have a pension plan? It is not that I think that I can invest better than a pension fund manager (though honestly I can show you later why it isn't too difficult to beat the returns of a pension fund). The simple reason is that you have got a large number of options which could beat any pension fund hands down any day.

The Broken Window Prosperity Myth

I was watching the television last week, watching the extensive damage caused by hurricane 'Sandy' but what really caught my attention was a prominent financial analyst who was happily 'forecasting' all the building, renovation, and infrastructure repairs that would follow Hurricane Sandy. He went on to say that this event would provide the much needed 'boost' to the economy in the region and went on and on with some fancy statistics and numbers to prove the same. Before I go further, just to make something clear right at the onset - Hurricane Sandy destroyed wealth. Perfectly good houses were ruined. Passable roads were wrecked. Decent boats were sunk. 

But this is just another way that some economists give you the wrong idea. They tell you that the GDP will go up as people rebuild and that jobs will increase in the construction sector. "Damage is good because it 'puts people to work' or it 'increases demand'" - say some economists and stock speculators.

Reforms and QE3 - What you need to know

I haven't seen so much of economic decisions being taken in 2 days as I saw last Friday (14 Sept, 2012). In fact it took me a day or two to just digest all the facts. QE3 from the US Feds and the biggest surprise of all, the UPA government in India after years of policy paralysis, finally pushed through some reforms! The government increased the price of diesel (diesel is a subsidized fuel in India), allowed liberal FDI in multi-brand retail, aviation and broadcasting and allowed divestment in four public sector companies. Just as a columnist mentioned in today's paper - Friday's announcements have all the key words that usually have foreign investors reaching for their wallets - fiscal reform, FDI, multi-brand retail and divestment. Together with QE3, the markets are in a jubilant mood! I expect the sensex to surge in the coming weeks but it is in times like this that an investor needs to take the highest degree of care.

Want to stay a Millionaire?

"If you want to be a millionaire, start with a billion dollars and launch a new airline" - Richard Branson (Virgin carrier CEO)

Richard Branson's famous joke may seem prophetic to Vijay Mallya of Kingfisher Airlines, who is more or less facing the same situation and the heat of bad economics of owning an airline. However the objective of this article is not to poke fun at the airline industry or discuss its bad economics. I read an interesting piece in another blog which showed another method to lose your money fast - lock it up in your locker and sit tight! Yes, if you do nothing about your money, you can ensure that you would experience a steady decline in your living standards. To illustrate this, just check out this table which was published by Daily Mail,a London newspaper.

Income Tax Returns Filing: Why You Must Do It

This is the time of the year when your employer starts sending out your form 16 and emails about filing your income tax. The question a lot of people ask is 'My tax is deducted at source by my employer. Why should I go through this process of filing income tax return?'. Other common excuses which come up are:

1. Government has stated that individuals who earn below Rs 5 lakh income need not file income tax returns

2. The deadline for filing tax returns is far away, why bother now

3. My employer has already paid my tax and I have no other income, why should I file for income tax returns

4. I have anyway missed the deadline for filing tax returns (July 31), so now it does not matter whether I file the returns or not.

Though these are common perceptions, nothing could be further away from the truth.

Financial Planning for the Young Professional - Part 2

As I start to write Part 2 of this 2 part series - Financial Planning for the Young Professional, the equity markets around the world are bleeding red and in India, the market seems to going lower everyday. The rupee is at an all time low, growth seems to be faltering, inflation refuses to go down and with the fiscal condition worsening, the finance minister is even talking of 'austerity measures'! This is also the week when Facebook went public with a record 100 million shares being traded in the first 4 minutes of its opening. But even this highly hyped IPO lost its sheen and investors saw it losing over 11% in the week that followed the IPO. With the people around the world losing faith in equity, even Facebook seems unable to hold its ground. People seem to be talking of a 'new normal' of a world of high energy prices, low growth and stagnant wages. In spite of this doom and gloom scenario, the golden rules of investing have not changed.

Financial Planning for the Young Professional - Part 1

You have just completed college and have landed this new job that you have always wanted. And now you are all set to enjoy your new found financial independence. It is only natural that when you receive your first pay check, you want to buy all those cool gadgets and go on a shopping spree buying all that you have always wanted. It is only when the financial year is about to close and when you have to submit documents related to your tax planning & tax saving investments, that most young people seriously think about investing. And from what I have seen, young people google the top mutual funds or invest their money in to some ULIP (Unit Linked Insurance Plan) which their relative/friend or the salesman from their bank 'suggests' to them. This last minute investment rarely works out well since you don't have the time to research and the objective of your investment was to save some money as tax!

Fixed Deposits Which Give Over 14% Return

A couple of weeks back, I spoke to a relative who had invested his entire savings in a fixed deposit by an NBFC  (Non Banking Financial Company) which was giving an interest of 14.5% per annum on his deposit. He was a middle aged person who did not want to invest in equities and shopped around for a fixed income instruments which would give him the highest possible return and he came across this NBFC which gave him a pretty high return. This article is not about how he found a high interest paying 'Company Deposit' but rather what happened after he invested his savings.

Budget 2012 - What it means for the common man

By the time the finance minister had completed his budget speech, the Sensex had crashed over 200 points. This pretty much set the tone for what the budget offered - 'Nothing much'. There are some cosmetic 'tax breaks' offered which really doesn't help any one much. But there are some ways you could use this budget to your advantage:

Are you looking at your bonus properly?

This is the time of the year when a lot of companies are giving away annual bonuses. Festival and annual bonuses are things which people look forward to. The reason most of us do that is because bonus is like a 'windfall gain', where you receive a lot of money in hand in addition to your regular income. So bonus money is spent primarily on a lot of 'discretionary' purchases.

If you rationally look at your bonus, it is nothing but money you ought to have received with your salary every month. Would you have treated the money the same way had it been divided equally and given as part of your salary every month? Most of us would not have treated it the same. The reason for this is a phenomenon in behavioral finance called 'Mental Accounting'.Instead of looking at the big picture, people tend to mentally compartmentalize their assets into different "buckets," which they manage independently, and treat differently.As a result, it's easy to lose sight of the fact that each category of money (regardless of source) contributes to overall wealth.

Investing in India: What NRIs need to know

You have landed the plum overseas assignment/ job that you wanted and you are now working out of a foreign location. However once you start working/residing abroad, there are a few things you need to be aware of regarding your finances.

Markets on a Roll: Time to Invest?

'Nifty to touch 5800!', 'Nifty holding strong: Time to raise equity allocations!' - These are two headlines that appeared a day back in a couple of leading financial dailies. All of a sudden, everyone is upbeat again! And there is good reason to be so. The Sensex and Nifty has been on a dream run after posting 7 straight weeks of gains! Once again it seems as though people are becoming bullish on equities. I must be honest, this rally has done me good and my stocks have gained quite a lot after being hammered a few months back. However this rally has me uneasy as well.

Dynamic Currency Conversion - What a Credit Card Holder needs to know

Dynamic Currency Conversion (DCC) is something I came across when I tried paying a bill overseas using my Indian Credit Card . When I was first offered this option, (in spite of the really cool name - Dynamic Currency Conversion), I did not choose to pay using that option as I was not really sure of what it was. But I see that DCC is becoming pretty popular and couple of my friends use this option to pay when they purchase something overseas. In this blog article I will briefly throw some light upon Dynamic Currency Conversion viz. something that all Credit Card holders need to know.

Why This Might be the Right Time to Invest in FDs and Debt Instruments

The Reserve Bank of India has been in the news for continuously raising interest rates - as much as 13 times in 19 months, trying hard to control inflation which seemed to be unaffected by  these interest hikes! People who had taken loans had to face a hike in their EMIs almost every 2 months & groaned at every instance of rate hike. High interest rates coupled with global uncertainties, put brakes on the high growth rates that India was exhibiting and all industries were up in arms against the rate hikes that RBI was bringing about. However last week RBI announced a cut in the CRR  which is a signal that RBI has now decided to soften its stand. Though it has left interest rates unchanged, the CRR cut would infuse more liquidity in to the economy which came as a welcome relief to the industries & the stock market.

But what does this mean for a retail investor?

Is this the January Effect?

At the close of 2011, most financial markets closed on a pessimistic note. The stock market had suffered during the year, and the rupee had tumbled over the last few months. Two weeks into the New Year, the mood and sentiment have changed for the better. Internationally, the markets have fared well. The S&P 500 is up 3% for the year, the Eurozone debt crisis has yet to make new headlines. Commodities have also performed well. Back home, the Sensex is up 4% this year, and the rupee is up by 3% against the dollar. 

The reason could be attributed to a well-documented phenomenon in financial markets is what is known as the January effect.(No, I'm not making this up!).

4 Facts your Broker or Adviser won't tell you

You and your broker (or financial consultant or insurance agent) have different interests. They have to sell things to make a living. The more they sell, and the more expensive the products, the better off they'll be. Irrespective of what they claim, like any other salesperson - for shoes, cameras, advertising or high-tech medical devices - moving products is their job. Your job, as a customer, is to look skeptically at those products, ask yourself if you need them, compare them with other options and consider the cost.

Here are 4 facts your broker/adviser will not tell you but you really need to know:

Choosing Between Dividend & Growth Option

When buying a Mutual Fund, the question which several investors are faced with is 'Should I take the dividend payout option or should I select the growth option?' There are varying views to this question with different mutual fund agents giving various arguments in favour of one of these depending on their fund house marketing objectives. Here is a look at which one would make sense for a retail investor looking at investing money in a mutual fund.