Anytime is the right time to buy real estate

Many of us want to buy real estate some for self-occupation and some for investment. If it is for self-occupation, do not wait, this is the right time. But if it is for investment, then wait for another year or two. You must be saying that prices will fall, but are they really falling? The inventory levels are high and the demand is low, developers are looking for new ways to con the customers into buying at the current prices. Buyers are excited, with interest rates falling, but for reality to sink in i.e. for prices to fall, will depend on the holding capacity of the developers. The other issue is getting all clearances. With the government changing, the well-oiled machinery also started finding problems and now you have buildings ready but no permissions to stay.

The government is working hard or hardly to bring the real estate regulation act. This should act as a booster and give us more surety with getting what is promised in the agreement. But if you still want to buy for self-occupation, please do the following, verify that the various permissions have been received, and check the track record for timely delivery with all permissions and facilities. But better still is go for a ready to move property, the hassles will be lesser, ultimately you would still go for the same amount of loan and you could benefit from the falling interest rates. Saying all this, remember that by nature real estate market is full of risks, you put in your hard earned money, so if you would want to reduce some risk wait for a year or two. Till then safely park your money in some good debt oriented mutual funds for good low tax returns than in fixed deposits where interest is taxable.

Are you an emotional investor?

We make goals and prepare plans to achieve them and we are very emotional when it comes to meeting them. We face many hurdles, even the best of plans have problems, not because we did not do our best, but because of external factors. But there are many cases of internal factors which we find difficult to acknowledge or accept. One of them is our lack of knowledge with regards to investing. We all believe that with so much information available on the net as well as through personal contacts, we believe that we cannot go wrong and because of this we tend to take wrong decisions. We are emotionally involved. You do not believe it, lets take an example, review your portfolio and check how many stocks you have in it which are loss making, but you are reluctant to sell, all the information in the market says it is not worth the stock, but you are still hanging on to it. The reason is you believe you did the right thing and are still hopeful you will at least get the cost back.

Now look at the portfolio and check the number of cases where you have made money by selling good stocks, you would be telling all your friends and relatives how you made money on these stocks by selling, but really, did you make money or a loss. Because currently the value of those stocks which you sold is much more. So end to end you have lost money, but are not ready to accept. If you were not emotional, then you would just get rid of these loss making stocks and put your money to better use. Most of the emotional investors tend to put in their money in the market just on hearsay. If by now you have realized that you are an emotional investor, go for SIP’s in mutual funds, this way the emotional bias is taken care of, because of discipline.

Another problem with emotional investors, is they are so determined to make money that they are not ready to spend for good advice. Though you could start an SIP, it should be based on one’s risk profile and goal. Again periodic review is important, even the best of plans need to be tweaked as circumstances change with time. Not only own, but also environmental. The biggest problem with emotional investors is greed, they would like to make money fast, so they just concentrate on returns. Returns should also be matched with risks and your time horizon. It should not happen that when you actually require the money, the market is down and you do not actually get what you require for your goal or it would so happen that you withdrew your earnings early, just on seeing some profits.

One thing to remember is any asset class will give you a certain average return. When we say, average, there would be times when the returns are high and other times when they are low. The problem with emotional investors is they tend to go by only the recent news and ignore the average and they end up entering the market when it is high. Remember that investing is not gambling, so not get emotional. If you find it difficult, consult a financial advisor.

Short of money? Borrow

How easy it sounds, at some time in our life we have always felt the need to borrow, but then when it comes to repayment, we get stuck. One of the golden rules for borrowing is, borrow only if you are going to create a long term asset or the asset is going to increase your earning capacity. This sounds good, but then banks make some good offers for borrowing, some give low interest rates, some give loans with less paper work others pass the loan in a jiffy, all this is very tempting. We are bombarded with phone calls, SMS’s and emails from banks. Now we also have loan aggregators, who would allow you to compare loans for different purposes with interest rates and give you the best offers. HDFC Bank offers loan through net banking. Whatever the options, ultimately you have to repay. So take care and follow the following rules

Borrow only as much as you can repay. Ensure that your monthly outgo towards loan repayments (all loans taken into account) does not exceed 50% of your net income. Keep the repayment schedule as short as possible. The sooner you repay your loan, you will have surplus available to build other assets. If the loan period is longer, you end up paying interest for this longer period. We know it is tempting to increase the loan period, as the EMI would be lower. Remember that interest rates keep varying, today it might be low, but rates will go up as well and when they go up your tenure would go up. Ensure that you repay your debts on time, all lenders charge a penalty for delayed payment and add to it compound interest i.e. interest on the interest due and this is calculated monthly. If you delay, it also affects your credit profile. Making it difficult to get loans later when you would need it again.

Buy a term insurance equivalent to the amount of loan, so that if anything happens to you, your family members are not burdened with the loan repayment. Usually lenders would try to sell you a reducing loan insurance plan, but it is better to take a term plan and let it continue till your earning life. Whenever interest rates fall, search for better interest rates, because lenders do not offer better rates to existing borrowers. Last but not the least, read through every paragraph before signing the dotted line. Banks might say they are standard terms, but if you are not comfortable, do not sign.

Angel Investing

What is Angel Investing? It is basically investing in start-up's or companies which require funding but have no track record. The person giving this money is called an Angel or god sent. We keep hearing that many people have made money by Angel Investing. But not many tell how much they have lost. I am not sure if you are aware, but 70% of all start-up’s fail. Then why do people still invest? People invest because the return is so high that it covers up the loss incurred. So if you are interested, you should have a lot of money to take such risks. You just can’t invest in one venture and hope it gives you returns. If you are ready to take a risk, you really have to be strong hearted knowing fully well that there are 70% chances that you will lose money.

Remember that your returns could give you assured returns of around 16% if invested in good large cap mutual fund over a ten year period compared to Angel Investing over the same period where the return is not assured and chances of losing this money is high. Sometimes the returns could be good, but the waiting period could be long. So if you require money, there are chances you might not be able to get it back, even if the value has grown. But then if you still would like to gamble or take a bet, you need to do a thorough study before investing. Given the efforts required to do the research, many people find it better to invest in mutual funds. You need to research the idea, business plan, marketing plan and of course the management and if you are so good at this research, then you might as well as start the business yourself. 

There are sites which do this type of research for you for a fee. There are many sites which have become a meeting place for Angel Investors and startups for a fee. The cost of research is high, so many people just register on meeting places, which can give you an investment opportunity. But at the end of the day, Angel investing is not for the light hearted.

Care to be taken while investing

All of like to do investments in equity, but we are not sure where to invest, the reason is not that we do not want to put the efforts, but the lack of time and expertise to do it. Avoid some of these regular mistakes

• Invest on tips – When we buy electronics, we usually do some research, speak to some friends or relatives who have purchased same or similar items. The reason is simple, we do not want to lose money. But when it comes to investing in equity, we do not do this. For us research is usually limited to tips given in the newspapers or heard on television or even found through a search engine on the net. We do not usually do our own research.
• Investing for the short term – Whenever we buy equity we say we want to make money and we want to make it fast. Ask yourself, what is the timeframe by which you want to have this money, what is your goal? Most of the tips received is based on short term movements, but if you look at how big market players have made their money, it is over long periods and not short term. If long term is the way to make money they why do you track price movements daily?
• Booking profits – This is the most common mistake most of us do, i.e. sell as soon as we see a profit. If you have invested for a long term, wait for that period, do not book profits early. You end up missing a bigger opportunity.
• Following the crowd – As I had said earlier, just because some market expert says that a particular equity share is good, you have purchased. So if there are many people like us who run after the same equity share, the price of that equity share is bound to rise. Then you start rationalizing. But if you do a bit of research, you should be able to separate the wheat from the chaff.
• Tax – Some people just hold the equity shares for more than a year, so that they do not have to pay capital gains tax. Equity Shares should be purchased and sold based on valuations and not on tax considerations. If the equity share is in profit, but the market outlook for that particular share does not look good, get out of it, it is better to pay taxes than to end up with a loss. Also when the equity share is not doing well and the outlook is also not good, cut your losses. Do not keep holding it for eternity hoping one day it will go up.

If you find all the above a bit difficult, then just let some experts handle it. It is much safer paying some money for advice than hoping to make money based on free advice.

Success formula for equity investing

Most of us want to invest in equity to make fast money. The reason is simple, all data shows that equity has given very good returns over a period of time. But then all good returns have their share of risk. It’s looks too easy, whom do you trust on the advice to invest. One of the best things to do is invest in a portfolio of equity shares and review them on a regular basis. Get rid of the ones not doing well, this is the most difficult part for most investors, they tend to hold on to them. You do not review your equity shares daily, it will be futile. If you had the time, then you and the rest of the world would have been doing only this. If you look at the list of wealthy people, you would have noticed that their wealth is in the form of equity shares. They invest their money in shares of a company, which they believe will grow, the company might be their own or of someone else.

So if they can get rich by holding shares, why not you and me. The challenge is picking the right shares. These wealthy people, believe in making money by participating in the growth story of the company, you and me can also do the same. But then we are lazy and want tips. What tips do you want? Look around, what do you and your neighbor’s use daily? Buy shares of those companies. If you trust those products to use daily, then the company would be growing for sure, so you should participate in the growth. There are many persons who give tips or follow tips given by many, but only a few make money. This is because only those who stuck with the shares made money. Daily trading does not make money in the long run, unless that is your full time job.

So what should one do? The easiest way would be to go for a well-diversified mutual fund scheme, where the fund manager does the job of stock selection. Best would be a index fund, here the fund manager does not need to do much, the index is managed by the stock exchange, all he has to do is ensure that his scheme is in tune with the index.

Transfer and invest funds legally

Many persons who have not filed returns are getting intimations from Income Tax department. The main reason is to identify and find out if the amount invested by that person has escaped tax. Many of them transfer money to senior citizens to gain the extra percentage in bank fixed deposits. Why do all that and put the senior citizen through all the pain and pressure in their old age because of income tax intimations, when there are easier ways to save tax and better ways to increase your tax free income. Here are some options

• Whenever you transfer amounts to your relatives invest in tax free investments, first benefit is amounts transferred to relatives is free of gift tax and the second would be that since it is invested in tax free investments the income would be tax free. The income received can be reinvested anywhere after that and would not be clubbed with the income of the person giving gift.
• You can invest in your minor child’s name for tax free income up to Rs.1,500/- per child (max 2 children), so taxable income generated in minor child’s name is tax free to the extend of Rs. 1,500/- per child. Also once the child becomes an adult, the income generated would not be clubbed with your income.
• Invest your money in equity, either in the form of direct shares or units of Equity Mutual Funds, any investment kept for more than a year is free of capital gains tax. Any dividend received is also tax free.
• In case you are investing in your parents name ensure that the income generated does not exceed the taxable income slab.

Just do the above and become tension free, your family will also be happy.

Steps to achieve financial security

All of us want financial security, but are we disciplined enough to achieve this goal? If we are ready, then financial security can be achieved in a jiffy. First thing to do is save at least 10% of your income, it would be best to save around 40%, but first start with 10%, that is easy, right? Set goals and amounts to which this saving would be allocated and keep increasing this amount every year, with the same percentage as your income increases. These savings are to be used only for the purpose for which they are saved. So in case you want to go for a holiday and you had not saved enough for it, increase your savings for this purpose, but do not use the money from other goals unless it is an emergency.

Next for Emergencies create an emergency fund. Also buy a health insurance cover for yourself and your family, in addition to a term plan. This will take care of your emergencies, so that your savings for your goals remain intact. Next book profits regularly, one of the ways to do this is asset allocation and rebalancing, with every rebalancing of your asset allocation you would be booking profits and buying cheap the asset which has dipped. Ensure that the investment is in line with your goal horizon. Do not take extra risks, because if the markets fall as in the last few days, your goal will be difficult to reach.

Loans should be used to tide over temporary requirements and to build an asset only. Do not use loans for every small thing. If the loan does not create value in terms of increased income in future or an asset which will increase in value, do not take it. Every want is not a need, so stay away from loans. Even if you do take loans (for the purpose mentioned earlier) ensure that you repay them on time as per the schedule. Last, do not invest in instruments which promise extra ordinary returns, many persons (some your friends) would give testimony, but do not fall for this. Follow these steps and you should be on your way to financial security.

Learn from Martial Arts

Whenever we see martial arts students train, you would have noticed that they keep doing the same step time after time. The reason is practice, perseverance and repetition makes you a master. Just practicing the step time after time makes a person an expert in that step. Later the person starts becoming an expert in another step and this goes on, till he masters as many steps as he can. Same way when it comes to investing, one must do one thing over and over till the investment grows. The best way to do it is SIP. Now you will ask which fund. Just like martial arts, students just don’t go and start practicing without a teacher guiding them, in the same way, you should look for a good financial guide and follow the steps shown by him.

People talk about diversification, diversification is just doing different steps, which will help you reach your goal, just like martial arts, where the goal is to become the best fighter. You too could reach your goals, by just investing right in SIP and proper diversification. There is no need to keep investing in any and every thing you hear is good and giving good returns. You just need to do your SIP with perseverance and you would become a successful investor.

Planning for your child’s future

Now a days every person concentrates on their career and while concentrating on one’s career, marriage takes a back seat. So what happens is marriages are late and therefore by the time the child is born, the couple is already in their late 30’s or early 40’s. What happens is late 30’s or early 40’s is the time when one starts having major expenses of one’s life and as one was concentrating on his or her career, investments had taken a back seat. Now with a child on the way, pressure starts building. Instead of being in a happy state of mind, you start getting tense, as expenses will start putting more pressure on you. This is why financial planning becomes important at any stage of one’s life. If you are one of these parents who married late, start planning now.

Education expenses are rising and will keep rising all in the name of better education and giving your child a better future. Giving your child a better future comes at a cost and this cost should not cost you your health. So start now, first thing is make a list of your expenses and see which expenses can be dispensed with. Now save this amount. Cutting down costs will increase your savings, which you can invest. Plan your investments as per your goals. What I mean here is, plan when you would have major expenses on your child’s education e.g. after 12^th standard i.e. at the child’s age of around 18. So if you have enough time go for SIP in long term equity mutual fund, but if the period is small, go for safe returns, as you would not want to lose money. As the returns would be low, your savings would have to increase to reach your short term goals.

Take a term plan to cover your child’s future aspirations. So if anything happens to you, your child will be taken care of. Now comes the tricky part, since you married late, your expenditure for child education would be there even when you retire, so you need to plan for a second career, even after retirement. This will make a big economical difference to your life, after spending so much time on your career in the early stage of your life. Last but not the least make nominations or write a will, since your child will still be very young if something happens to you, even after retirement. You would not like your child to spend his/her life being conned or fighting a legal battle, when he/she should be concentrating for his/her career.

You brought your child into this world, now it’s time for you to make him/her happy. Plan now.

Secrets to making money

If you are interested in making money, you need time on your hand. The longer you invest your money, the better your chances of making money. One of the most important things we keep hearing is the power of compounding, by compounding we mean, making money on the earnings which get invested. So to gain from the power of compounding, you need to have a longer time horizon. Historically, the stock market has always gone up, there would be short term volatility as it is now, but long term it would always go up, so go for equity. If you are not sure where to invest, go for a good equity mutual fund with a good track record. If you find that investing in stocks is risky, go for asset allocation. Asset allocation means spreading your money over different classes of assets.

Remember, when you spread your investments over different classes, your returns would come down, so do your asset allocation according to your goals and risk appetite. Liquidity should also be considered, when we do asset allocation or for that matter any investment. You should keep aside some amount which will be risk free and available at any point of time. As we said earlier, in stocks there could be short term volatility, so if you require money soon and the market is down, you could end up losing some of your investment amount as well. When you keep your investment in risk free investments, the returns would be lower as compared to stocks. The best way to invest in a stock market is through a SIP i.e. systematic investment plan, this helps in cost averaging. This is the main reason why most of the financial advisors advise you to go for SIP.

If you have been reading my posts regularly, I had mentioned about buying and holding a stock. By buying and holding, I had mentioned that in such cases, keep reviewing on a regular basis. Buying and holding, did not mean buying and forgetting. Market conditions keep changing and if the stock you had purchased has no value in the current market, you need to get rid of it or else you can forget your money as well. Follow the above rules and move ahead to making money and as you reach closer to your goal, move your money to risk free investments and enjoy yourself after that. All the best.

Clean your Portfolio

Prime Minister had started the Clean India Campaign with a lot of fanfare. We are coming to close to a year of this campaign, some things changed, but most of it remained the same. At that time I had mentioned about cleaning of Portfolio. For those who did not do it then, this is the time. Rains is a time when our pressure is a bit less, as appointments are reduced. Weekends, which are usually packed are a bit relaxed and if its raining, then you get some free time. Use this time to clean your portfolio.

First look at what are the typical investments one has in his / her portfolio. Life Insurance Policies, ULIP’s, FD’s, MIS, RD’s and NSC/KVP. Then there would be some Company FD’s or NCD’s. Some enterprising persons would have some investments in a few equity shares, which were purchased on tips from friends, neighbours, newspapers or TV. Some had invested through IPO’s. Some made money, some lost, but all of us have held on to our investments. This is our hard earned money, so what if it is losing money. A few of us would have invested in NFO’s of Mutual funds, here again, some schemes are doing well, and others are not. Now a days I meet a lot of people who do not know what to do as companies are not returning the money they had invested in Fixed Deposits.

This shows that we just kept investing without a purpose. The only aim was to invest and make your money grow fast and in the bargain lose money. Now that you have time do a clean you do the following:

-       Make a list of all your investments, so that you have a snapshot of your portfolio, include investment date, maturity date, and maturity value.

-       If shares are in physical form, demat them immediately.

-       Check if nominations are in place for all your investments.

-       Now review and see if these investments are really helping you make money.

If you are not sure how to review, get in touch with a financial planner. Now is the time Clean your portfolio.

Learning from the Chinese Bamboo Tree

Not sure if you have heard of this particular species of bamboo tree in China, which takes around 5 years for the shoots to show up, but in the next 3 months it grows to a height of around 80 feet. So what the farmer does is for 5 years he just keeps watering and waiting and then in the next 3 months he just reaps the benefits. This is very similar to the stock market. Sometimes the market just keeps fluctuating for years with no major movements and then all of a sudden, the markets just keep going up and that is the time to reap the benefits. This happened last year, when the markets just went up, those who waited, just reaped the benefits. Going by this does it mean that this is not the right time to invest in the stock market. In fact, if you do systematic investments any time is the best time.

Many persons just quit watering just because they do not see the shoots, but then you have to be patient and fruits you will bear. Many of them selected the right stocks, but only walked out, just because they were tired of waiting. Investing in stocks involves waiting time, nothing happens overnight, but then nobody is ready to wait. Even though you have heard of so many success stories, you are not ready to wait. It’s not that you need the money immediately, but it’s the impatience. If I tell you invest Rs. 100/- and I’ll give you Rs. 200/- after two years, you will not accept as the waiting period is long. But if I tell you after one year you will get Rs.130/- but if you keep the money for 2 years you will get Rs.200/- you might accept. The only reason is for the additional waiting period of 1 year you could double your money. If you actually look at it, your waiting period in both the cases is 2 years, but our mind tricks us. We look for immediate results. Our mind thinks it’s just one year. If in the same way we work with a plan that you will get double only after 5 years, you just keep waiting and you will bear the fruits, but if you invest with that horizon and expect returns faster, you will not reach your target.

There are many persons who put their money in stock and wait, after the first year, the returns are small, lesser than the fixed deposit rate. They start complaining. Next year the returns are almost equal to the fixed deposit rate and they start wondering if they had taken the right decision. In the third year the markets fall and their stock are in red. Now they are on the verge of removing their money. They wait have waiting for 3 years. In the fourth year, the market moves up marginally and your investments are now at cost. This time they are frustrated and think luck is not on their side. They decide to go one more year and again the markets move up just marginally. Now the person decides to quit and market gives a small leap. This is when the shoots start showing and in a few month’s time the markets start soaring and gives you a return much better than any other investment option. You could take the parallel of the Indian stock market from 2007/8 to 2013/4 almost same number of years and those who waited made the money.

There would have been many who quit on the way. But those who waited made the money. So just like the Chinese bamboo tree, in equity investments one should wait till the money grows.

How good are you at planning?

Failing to plan is planning to fail. This saying we have heard so many times, yet most of do not even put the little effort required to plan. We are ready to plan for everything, but when it comes to our financial future we leave it to fate. We plan for buying a house, but have we worked on a plan for it, think…. Most of us just work on the minimum sum required and then depend on a bank loan and then only keep hoping you have your job intact so that you would be able to keep paying. Even for your children’s education, you will start collecting all your certificates to pledge or break to collect the money or go for the loan and then keep hoping things fall in place. Why don’t we start planning in advance? We plan for everything, so why not some long term financial planning.

When we have to go for a holiday, we plan months in advance, foreign exchange, visa, tickets, hotels, places to visit etc. but for basic things like home, child education or even marriage we do not plan our finances. We plan everything around it. I know of a few friends of mine, who on meeting me or even over phone, say good article, we have to start planning, but let some money come first. I know these persons find planning a drudgery, so they keep procrastinating. A little effort and everything would look simple. This happens with most things. How many of us plan to start doing exercises daily. Almost all of us, but only a few do it, since it requires effort. Same is the case with financial planning. If we plan in advance, the amount you need to keep aside a month would be very small.

You could start a SIP in a good mutual fund and watch your money do the work for you month after month, but you need to start. All it needs is a change in attitude. We just follow the advertisements, almost all banks advertise easy money and we start believing. But do you realize that after the loan, you are under so much stress, month after month. All this is just because of lack of planning. Most of us have gone through this phase and how relieved we were when the loan was repaid. The relief was not because you repaid the loan, but because you were able to get away from the forced commitment, which you had walked into because of lack of planning.

I think its high time you took financial planning a bit more seriously.

Should one trade frequently?

One of my friends called me asking for a tip, so that he could make some money in the stock market in the short run. The next question I asked him is, how much does he plan to invest and he proudly said Rs.20,000/- to 30,000/- to really make big money, you actually need to invest big and your bets should always go right. There are many more costs involved, which most of us do not consider when we talk of trading frequently in the stock market. Let us look at some of them. For every purchase and sale of a stock you have to pay brokerage costs. Why do you think brokers happily keep giving you tips? The tips are so that you trade and with every trade they make money. Remember that whatever profit you make from that a certain portion has to be paid as brokerage costs, both at the time of purchase and sale. So this brings down your profit. In addition to this brokerage fee, you also have to pay a transaction fee to stock exchange and depository charges, add to this the service tax. Now look at your profit. It would be quite miniscule.

The next thing to consider is taxation. Frequent trading means capital gains. Short term capital gains is taxed at 15%. So from whatever you made after paying the broker, stock exchange and government, the Income tax department would be standing at your doors for their share of 15%. Short term capital gains has to be paid for any stock sold before one year from the date of purchase. But if you had held it for at least a year, there is no capital gains tax. From the tax angle, frequent traders are sometimes treated as doing business of buying and selling of shares, in such a case, if you are in a higher tax bracket, you might not get the benefit of capital gains tax.

You might make some money in the short run by doing frequent trading, but with so much volatility, it is better to be careful. In the past few days you would have seen the sharp volatility in the prices of stocks. So go stop looking for short term gains and make money by investing in good stocks for the long haul.

Asset Allocation of a portfolio

Everyone says that Equity investment is the best option for long term capital appreciation, but as we have seen it is difficult for us to decide on which stocks to buy or sell at any point of time. So the next best option is Mutual Funds. It sounds so easy, but when we go to invest in mutual funds, you have so many choices. One of the easiest things to do is first invest in ELSS schemes, this is the best because you do not have to think too much and it will save you tax. The maximum tax deduction under section 80C is Rs.1.5 Lakhs per year. This has a lock-in period of three years.

Now that the easy part is done, which schemes should we invest in? Your portfolio should be made up of Large Cap, Mid Cap and Small Cap funds. The Large cap funds are usually passively managed funds, there are actively managed funds as well, look at the track record over a long period of time and choose the fund. Then there are Mid Cap funds, these funds are a bit riskier, but they offer better returns then large cap funds. Then there are small cap funds, these are the riskiest, but here again the long term returns are the best. If you have 3 good funds one each in Large, medium and Small Cap, you would have covered most of the market, then you do not need to go for multi-cap, thematic or sectorial funds.

As regards debt, you could have some savings in Provident Funds or you could go for some debt funds. Then there are balanced funds, these are for people who are closer to their retirement, and looking for regular returns. These funds invest in Equity as well as debt. Depending on your stage in life, you could decide on going for debt oriented or Equity oriented balanced funds. The good part of balanced funds is the gains made in equity are protected by debt component. The risk of these funds is usually moderate. Asset Allocation depends on your stage in life or the purpose of investment, so choose wisely, it should not happen that you invest for a particular purpose and when you need the money, the market is down, so sit with your financial advisor, before deciding on your asset allocation.

Easy ways to make money

We regularly hear from people how they brought a stock and held on to it and today the value is so high. Well that is true for many stocks. If that was so easy, I think all of us would have been millionaires by now. Yes, in equities, holding for a long period helps generate high returns. But then not all stock will continue to give good returns for years together. Way back there was a stock called Century Mills or till recently there was Satyam, both of these were giving good returns, now where are they? Therefore if someone says buy a stock which is on the Sensex and hold on to it for life and it will give you good returns does not make sense. As both these stocks were part of the Sensex, today they are not. So is the strategy that as soon as it is removed from the Sensex sell it good? Well by the time it is removed from the sensex, that particular stock would have already lost steam.

So what should one do? One of the things would be to review the stocks you have in your portfolio on a regular basis. Daily is also regular, but at least once a year would be good enough. While reviewing if you notice that a particular stock is losing steam, get rid of it and look for some other stock which would be a good bet to replace in your portfolio. I keep telling people that the sensex has given an average ten year return of 16%, if a person had kept investing systematically. But then as I told you earlier, the sensex stock have always kept changing. So you too should keep changing the stocks in your portfolio, you would like to have such return. The easiest way to do it is invest in a mutual fund, where the fund manager would do the managing for a small fee.

Since making money in the stock market over long period of time is easy, but it needs some discipline in investing, for a fund manager, he is governed by rules, so he will follow the rules, set for the fund. This helps in disciplined investing. You keep hearing that many people made money by investing in midcap or small cap stocks, but for lay investors, it will be too much of research, stick to sensex or nifty stock and stick to them, this way the chances of losses will also be limited. Remember money is there to be made by investing and letting it appreciate, but regular review is a must. Write down your rules of investing and follow them. You might make some bad decisions, but if the rules are followed, the percentage of good decisions will always be more than the bad decisions. Isn’t this the best way to make money? Make the rules and follow them and watch your money grow.  

Steps to wealth creation

All of us want to have wealth, but we find it very difficult to create wealth. It’s not that difficult if you just follow some rules. First of all, when we speak of wealth, we should know what it means. Wealth is the amount of assets in surplus. What we earn is not wealth, but the amount we set aside, is wealth. This wealth might be small when we start, but as we invest it properly, it starts growing. Whatever we intend doing with this wealth, it should grow big enough to make a difference. Now that we know what wealth is, let us try creating an asset out of it, so that it grows. We are no magicians to know which class of asset would give us good returns, in such a situation it is best to spread our wealth over all class of assets. This way there will be growth. You could start with equity, gold or real estate and then build them. Ensure that all your money is not in only one asset class.

As I said earlier, amount kept aside is wealth, but if you do not keep anything aside, wealth will never be created. So make it a point to keep aside some amount. Wealth creation takes time, so do not expect the money to grow overnight. Give it time, longer you keep the money invested, the faster it will grow. Now that we know we have to diversify, and be invested for a long time, the next step would be to take care of contingencies. Keep money aside for contingencies and also get yourself insured for health and home insurance. So that in case of an contingency, your wealth is not touched. Last but not the least, do a financial review on a yearly basis. Check if you are being paid as per the market, check if your investments are giving the expected returns, check if your expenses are in line with your income.

As your wealth is growing, ensure your health is intact to help you create your wealth. As they always say Health is wealth. Do your yearly medical checkup, prevention is better than cure. Follow the steps above and grow your wealth.

Investing for your child's future

The birth of a child is a cause of joy for the whole family, especially for the parents. However along with this joy comes responsibility. For the joy, we have celebrations, but for responsibility we let things happen. When it came to a celebration, we sat down and planned, whom to call, where to call, what is our budget etc. But for the responsibility, we say we have time. Yes, you have the time, so utilize it. Plan for your child’s education, marriage and secure future. If you have planned well, not only your child’s future, but even your future would be smooth. So what do we need to do? First create a fund or an account and contribute to it, in such a way that there is not too much pressure on the family. Next plan for uncertainties i.e. in case something happens to the bread winner or to the house you stay in or to someone in the family. In such circumstances, your child’s future should not be jeopardized.

For the first part estimate the costs, inflation and expected returns after tax and start contributing to the fund. For the second part, you would need a good term policy, home insurance and a health insurance. With this most of your major risks would be taken care of.  So do not waste time, start early and see the power of compounding work for you, while creating a corpus and good insurance policies would ensure financial security in for your family and child’s future.

Income from Safe Investments

RBI did not reduce interest rates this month, during its review, but warned banks that they would have to reduce and reduce they did. If you notice every bank has started advertising that they have reduced the interest rates on loans. If the banks have reduced interest rates on the loans they are giving, they would also reduce interest rates on fixed deposits they are taking. This is natural, as the banks make money on the spread between interest rate given and taken. At the same time Corporates feel even with the reduced rates being given by the bank, the banks are charging higher interest rates. So they are coming directly to us, with interest rates higher that what banks give us, but lesser than what they would pay the banks.

This gives us an opportunity to make higher income. But are all corporates safe? We need to be careful before investing in corporate bonds or Fixed Deposits. It is mandatory for all corporates to get their fixed deposits or bonds rated. If there is no credit rating do not invest. So if the rating is good, then you have safe fixed deposits as good as banks. Go for AAA or AA rated fixed deposits. Yes, there would be a risk, but that would be marginal. We should lock in on the high interest rates being offered by these corporates as these too would keep coming down, but slowly. Do not invest just based on interest rates. If you find this a bit difficult, then just invest in a good debt mutual fund which invests in long term bonds as these too will appreciate as the interest rates come down.

Persons behind a good cricket team

IPL has just started and half of us are just waiting to home and watch the cricket match. You must be wondering why a financial planner is talking about cricket. Both cricket and Money has a lots on common. Yes, you can see it, most of the players are paid handsomely for it. But how did they reach that stage, it is not only because of their individual performance but also because of the team performance. If a player plays well but the team does not, the player hardly gets recognized.

The team just does not win by the players going and playing, they have a full-fledged coaching staff. The coaching staff works with the team to get the best out of the team to ensure the team wins. To win with money too, you have to have the right people around you to get the best for you and caution you when your money is not performing.

Let us look at each of the coaches and see how they help the team.

Head Coach – You are the head coach, it is your money and you need to call the shots. You have to take the decisions, so if you make the money you get credit, but if you lose you have nobody else but yourself to blame. All games are first played on the drawing board in the dressing room first. Therefore you need to have a good game plan for your money.

Batting Coach – He would be your financial planner, who helps you decide when, what and where to invest. If you have a weakness, i.e. debt, how to take care of debt. Whatever the situation or goal, saving for a contingency or investing for retirement, he helps you to handle your finances.

Bowling Coach – Here insurance agent would be helping you, to take care of all your risks, i.e. health, car, home and life. Once you have a strong bowling coach, half your worries would be over. As all your eventualities would be taken care of.

Fielding Coach – These are the same players who do either bowling or batting, but then they need to field well as well and they need to be trained. This person should be more like a counsellor or priest, who would help you get through emotionally. As money is more of an emotional subject for a lot of people, there are problems when you have it and even when you don’t have it. Markets keep going up and down, in such circumstances you would either feel high or low, talk to your financial advisor.

Fitness Coach – This person’s job is to ensure that you are fit to get your job done. In finance, this person is more of the financial product distributor. He does all your investments as per the plan.

If you notice that in some teams one person takes care of all the above jobs with the help of assistance, in other cases, you need multiple specialist. So depending on what you want and what if your aim, choose the right persons to achieve your financial goals.

Choose your coaches properly, just as you spend time choosing players (just as you choose your job or business) and ensure financial success. Enjoy IPL.

Investment habits to avoid while investing in Mutual Funds

Many persons have made money or have been able to achieve their goals by investing in mutual funds. These have been savvy investors or have got good financial advisors. There are others who also invest in mutual funds because others say they have achieved goals by investing in mutual funds, so they also go about investing in mutual funds. Their way of looking at mutual funds is like investing in the stock market directly without understanding the working. I hear many of them saying invest in the mutual fund when the NAV is low. NAV being low does not mean anything, at that point they argue that they get more units, because they believe that having more at a low price will give them more benefits when the NAV goes up.

In reality it does not matter. Any movement in the NAV depends on the portfolio in which the fund is invested and the number of units. So having more units or less units does not matter. Let me give you an example, if the cost of the portfolio is Rs.10,000/- and there are 100 units the NAV will be Rs.100. So if you buy 10 units at Rs.100 your cost would be Rs.1,000/- Now say there are only 10 units, then the NAV would be Rs.1000/- So you would buy only 1 unit at Rs.1,000/- After a year the Market Value of the portfolio become Rs.11,000/- i.e. an appreciation of 10% in this case in the first scenario the NAV would become Rs.110/- and in the second case it would become Rs.1100/- and your return would be the same i.e. Rs.1100/- so if you see, buying at lower NAV is just a sales pitch. Do not fall for it.

There are others who buy because a scheme is giving dividends, again dividends do not mean anything. You should go for dividend option only if you need the money. Remember that when a dividend is paid out, a portion of the dividend has to pay to the government as Dividend Distribution Tax, so in effect, you get less money in hand. If you let the money remain, the fund manager will be able to generate more income out of this and when you remove the money when you need it, you end up with more money in hand. When Dividend is paid the NAV also comes down. This is one more reason why Dividend reinvestment option is also not good. As what gets reinvested is after some money is paid to government.

You do not need to open a demat account to invest in Mutual funds, this is some mis-selling being done by some banks. There is an ease in investing that is all. There are many more platforms not available where you can still have the ease of investing without having a demat account. As I had mentioned earlier, the NAV depends on the portfolio. Here portfolio does not mean just equities, it means any investment in financial assets viz. Bonds, NCD’s, FD’s etc. So mutual funds are an alternative to investing in stock markets or even banks or Company FD’s, NCD’s etc. When is the right time to invest in mutual funds, actually it should be anytime, all depends on your goal, if it is long term go for equities.

Here you should go for Systematic investment option. By this you average out your investment costs and end up with superior returns than a lump sum investment. How do you choose your mutual fund, go by the long term performance of the fund, and just don’t go by the returns over the last year. Last year almost all funds did well. We have to see how the fund did during both the bull and the bear run. Avoid the above habits and make money by investing in Mutual Funds.

Invest in Equities

Everyone makes money in equities, but wherever I put my money, I don’t make money. Does this ring a bell? Historically the equity market has given a return of around 17%, but this return has always been over long periods of time. If you take yearly rolling returns, they would mostly be positive only if you have invested for 7 years or more. That does not mean you do not make money if you invest for a shorter period. Just like Real Estate, equities also go through their cycles, the longer you stay invested, the more the chances you make money. But we are human beings, we are not ready to stay invested and the reason for this is, it is easy to exit. You would not have done the same with real estate, this is because of the amount of hassles involved with registration and taxation, whereas in equities, it is easy, so you try to make a quick buck or track on a daily basis.

Over the last 3 decades, equities have outperformed gold, bank deposit and real estate by a handsome margin. Post tax the returns are even better. Now that we have seen that equities give better returns and you want to make the money, how do you go about? Yes, you have your work to be done and you do not have the time to do research. One way out is to invest in a good mutual fund scheme. The returns would be a little lower that what you would have got, if done directly in equity, but the risk would also be lower. Go for two or three schemes, one large cap, one mid cap and a small cap fund. This way you would diversify your risks as well as participate in the growth of small and midcap equities. The fund managers will be doing all the research for a very small fee.

If your risk taking capacity is low go for a balanced fund. In addition to investing is equities, these funds also invest in fixed income securities, to give stability to the portfolio. The returns in this case would be a little lower compared to equity funds. If you do not have any risk taking capacity, then go for a pure debt fund. The benchmark should be as follows, investment horizon, 7 years or more, go for equity, 3 to 7 years, balanced funds and less than 3 years debt funds.

Investment habits to avoid

We save money from time to time but we fail as investors, as we do not invest properly. I have noted some points which we should avoid if we want to move from savers to investors.

-    Too young to plan for retirement – A person is never too young to plan for retirement. In fact the earlier you start the lesser you would need to save and you would have more money in hand both at the time of retirement as well as when your income starts increasing. You might reach a stage where you would be able to pursue your dreams and not run after money lifelong.

-    FD’s are the best – This is one of the greatest myths I have ever heard. But if you look around, 90% of the people invest in FD’s only. FD’s give you fixed returns, but they never beat inflation. They are safe but not the best.

-     Equity is for savvy investors – If you feel so, you are not entirely wrong, but you have options. You can get knowledgeable persons to do the investment for you, this is achieved using the mutual funds route or take the help of financial planners.

-     Equity can give quick returns – Many persons whom I try to ask to invest in mutual funds, ask me for tips to invest in Equity market. They all feel that Equity market is there to make a quick buck. Equity market is not a gambling den, when you purchase a stock you indirectly become a part owner of a company. This was the basic we learnt when we went to college, but we have all forgotten this basic, In the Equity market there is money to be made, but not quick money.

-     Timing is the only way to make money – If all of us were able to predict when the market would go up or down, there would not have been poverty. For investment there is never a high or a low. If you think the company would do well for the next 5 years, invest. Do not wait to time the market. If you are still sceptical, invest small amounts on a regular basis, this will help average the costs. But here again stay invested for the long run.

-     Invest in sectors which are good today – This is a good strategy, but what would happen a few years down the line. Therefore it is better to diversify and invest in 3 to 5 different sectors. Returns might come down a bit, but you would not lose too much if the market falls.

-     Tax saving is the best investment – The best option is to invest in such a way that even after you save taxes, your goals would be met.

Just avoid the above habits and rest assured, you would be on your way to successful investment.

Are we saving tax and making money?

Last year the government had increased the deduction under section 80C to Rs. 1,50,000/-. This year there has been no change, but an addition has been made in section 80CCD for investments in NPS. Let us look at our options with the changed scenario.

ELSS Funds – By far this is the most rewarding of all investment options. With a lock-in period of just three years and tax free returns with regards to both dividend and capital gains. To get the best returns, invest using the SIP option.

ULIPS – With management charges reduced, this is also a good option, which is given by ELSS funds as well. There are a bit expensive as compared to ELSS with regards to charges. The lock-in period is longer, you need to stay locked-in for minimum of 15 years and premium would need to be paid for 15 years. Don’t go by what the Insurance advisor would say, as you would benefit only if you keep paying the premium for the full term. Another advantage is there are free shifts allowed from debt to equity and vice versa, check the number of free shifts allowed.

PPF – Though the interest rate is 8.7%, this would be changed on a regular basis by the government depending on the interest rate scenario, which is likely to come down. You need to put in a minimum of Rs.500/- per year and there is a lock-in of 15 years.

Sr. Citizens Saving scheme – Interest rate is 9.2%, is ideal for people above 60 years with a lock-in of 5 years. Interest is paid quarterly which is taxable.

NPS – A good option for those looking to gain from the additional Rs.50,000 investment option, in addition to section 80C. The amount would be locked-in till retirement and then you would start getting pension from then. Pension would be taxable. The maximum deduction is limited to 10% of your salary for own contribution, but there is no limit on employers contribution. This is only for Tier I accounts.

Bank FD – Should be invested for 5 years, interest is taxable.

NSC - There are 2 types available 5 years and 10 years. Any investment is eligible for deduction. Interest amount received is taxable and also can be claimed under section 80C as investment, as interest is treated as reinvested.

Pension Plans – These are issued by insurance companies, at the end of the period, you have to buy an annuity, which would be taxable on receipt.

Insurance plans - Any premium paid for insuring your own life or that of your child or spouse is allowed as deduction. You have to ensure that the premium paid does not exceed 10% of the assured amount.

In addition to the above there is a deduction available for Principal repayment of Home Loan and Tuition fees.

If you have a housing loan, interest paid on housing loan to the extend of Rs. 2,50,000/- is allowed as deduction, under income from house property for self-occupied property.

Premium for health insurance is has been increased to Rs. 25,000under section 80D for self and family and Rs. 30,000/- for Sr. Citizens.

Make use of the options given to you and save tax. Tax saved is money earned. Invest right and make money.

Goal planning for people in their 40's

This is the age when you have done with most of your struggling, you are married, have children, have a career (should I say finalized what you think is what you want to do) and a house. Now you want to make the most of your life. Of course, before you start with that, these are the things you need to take care before spending all your money. Children’s education, retirement and health, you could also think of early retirement, second home or start a new business venture. How to achieve all this, meet a financial planner and work with him. At this age, you would have achieved most of what you wanted if not all, but there could be chances that because of your ambitions and added responsibilities, there could be pressure to achieve more.

Is all this bothering you? If yes, you are not alone, all of us go through such situations. In are quest to achieve what we want, we do not usually have an overall plan. We have individual plans, but our financial plan is left to the end or in most cases there is no plan at all. This is the time to consolidate, sit back a bit and have a relook at your financial situation. Your family needs your time, you now start looking at work-life balance. This is easier said than done. You need to take a call and it is now, children would be growing and would soon reach the time for their higher education. Would you like to be caught on the wrong foot? Running around to arrange for finances and retirement would not be far away. Company is taking care of your medical expenses and insurance and you would retire soon. What happens then? Most of the insurance companies do not give insurance at that age or have a lot of restrictions.

You are not getting any younger and illness would definitely start catching up. Exercise, diet do what you want, nature will catch up, so be prepared, take a health insurance now. It is an investment for your old age. Do what is right, don’t go by what others are doing, as everyone’s situation is different. The longer the time horizon for investment, the lesser the amount needed to be kept aside, this will help you enjoy your life and not struggling throughout your life. So what are you thinking about? Start now.

Retirement planning when is the right time

I have many people telling me, I’ll discuss when I have the money, but as you keep accumulating the money, you have lost time and the key to making money multiply is time.  Life expectancy is going up regularly, because of better healthcare and increased knowledge of personal care. In addition to this our standard of living is also improving on a daily. All this is leading to longer life, but our working life remains the same. We have time till the age of 60 or 65 to earn, but life expectancy is increasing. As per the statistics they say average life expectancy is 66 in India. Look around you, is it actually so, it is much higher. Though healthcare and personal care has gone up, there is a silent killer which few of us keep track of and that is inflation. This disease Inflation just reduces our purchasing power, petrol which was Rs.9 per litre in 1990 costs Rs.70 today, we don’t know what it would cost some years hence, but are sure it would increase.

Prices of everything has gone up and keeps increasing. As we are on the topic of prices, even healthcare prices are going up. If we continue to invest in our normal style of investing, soon there would be a day, where all your money would be gone. So we need to find a cure for inflation. Since we want to earn better we put in more efforts towards education, which again is an investment as well as a cost. As we study longer our working life reduces, remember, retirement age is not going to change very soon. So the time to make money is shortened. We might live a good life when we are working, but would end up with old age poverty. Everyone expects returns, but for insurance returns is only if you get sick, which comes to you only in your old age and this will lead you to poverty faster, if you do not invest in a medical insurance policy early.

Most of the insurance companies refuse to give insurance to old people or they give it with a lot of restrictions. Just planning for having enough money to take care of your necessities after retirement is not enough, you also need to take care of your medical needs. Medical needs keep increasing with age. So start investing in medical insurance now. Fixed returns are safe, but the returns never beat inflation, hence you need to start investing in high risk securities at a younger age to build the corpus for retirement. You go to any financial planner at the age of 60 and tell him to help you in planning his funds and most would put the money in debt schemes with a visibility of returns as your risk taking capacity is reduced or should I say Nil. Don’t think of retirement planning then, start planning now, however small it might be, let the power of compounding will help you.

Asset allocation is the key to retirement planning, when you are younger, equities is the way to go as you start aging, slowly reduce the quantum in equities and increase your investments in debt, so that by the time you retire a major portion would be in debt, but you would have enough to take you through. You would have noticed that all the time we just did not talk about money, but we also spoke about time. So do not waste time, let us work towards taking precautions against the silent killer and ensure a safe retired life.

Invest to create wealth

Wealth creation is putting money aside or investing today to get more tomorrow. When we mean more we mean more than our cost of living at that point of time. We usually put aside this money over a period of time, just like SIP but it is not Systematic, but periodic. I would say 90% of us invest in Fixed Deposits as we know they are safe, but inflation eats into the corpus over a period of time. Wealth creation is also possible through Real Estate investment, but this requires a large chunk of money. Also this investment is not very liquid and there is long term capital gains tax. Gold is another investment which most of us do. Then there is the equity market. These also give good returns as good or better than real estate, depending on the period invested. The best part is liquidity and no long term capital gains tax.

Now when we talk of equity, there are 2 ways, trading and investing. For regular trading you need to have market knowledge and research on a regular basis. In addition to that you have keep watching the stock movement, to make profit or reduce loss. In trading concentration is usually only on price movement of the stock. The other option is investing, here it is always long term. Here you invest after some research only. Once you have done your research, let equity work to create wealth. Never sell the equity, just because the market is down and the equity price is fallen because of that. If your research is through, the equity price will come up. As I said earlier, let the equity work for you. Some tips on research. Check the last 5 years results, they should have always been positive and have been growing. If you don’t have the time or temperament to do the research, invest in mutual funds and let them do the work for you. The price paid in not much.

Remember there is only one way to create wealth, buy smart. Whether it is real estate or equity, you have to research on the growth potential and stay invested over a long period of time. Always review the results of the company every year to see that there are profits and there is growth, if not why. In case of real estate, check if the growth is better than inflation. Companies always give yearly guidance, read it. So invest right and create wealth.

Moving from savers to investors

Every time the market goes up all of us start investing into the market. Last quarter saw some very heavy investments. Now the market is down, with uncertainty about who would for the government in Delhi. Let me know frankly, how does it matter? It would matter in the short run, but in the long run, the markets would be up. So if you are investing for the long run this is the time. In every market cycle most of the retail investors invest when the market is up and actual investors invest in every market cycle, depending on the stock and not the market. This is the reason in the last article I had asked if one needs a financial advisor. A financial advisor would advise investing in the market based on the client’s goals and not the market cycle. What is actually happening is Mutual funds come with more schemes when the markets are up, as they are sure to get enough collections. Distributors sell these schemes saying you are getting the fund at a low NAV, price is good etc. The retail investor looks at the market and says yes currently the market is giving good returns for this type of investment and the investment looks safe or they look at past performance.

But the actual way for investing should be why am I investing? What is my risk tolerance and what is my return expectation. This is usually taken care by a financial advisor, who does Investor profiling, what are the investor’s goals or needs and then matches the product with the investor’s needs, goals and risk profile. The Market would continue to perform as always. The Mutual funds companies would then start concentrating on giving better returns and not on new products. SEBI has come with direct plans which help the investor save, but then this is only for an educated, well read and well informed customer. It is not everyone’s cup of tea to decide on where to invest. Some of their decisions might work in the short run.

Let us look at what happened in 2008, there was a meltdown in the US, nothing in India. But our markets fell, why? Just because the FII’s sold and took their money to the US. What did we do at that time? We also sold and are still scared to return to the stock markets. The FII’s returned and invested much more than they actually withdrew and are making money and we are still waiting. If during the melt down we had continued with our investment strategy based on our goals and risk profiles, we would have made much more money. But today the FII’s are making money.  The reason for us not making money is we do not believe in our stocks, but we are the same people who are buying the products made by the very same companies in whom we say we do not trust to buy the stock. We are contributing to the company’s profit by increasing its sales then why should we not participate in its growth and make money? Why sell a stock just because the FII’s have sold?

The other problem with us is we like to buy low and sell high. Remember good stocks will always be priced high. Their prices will be low only when there is distress in the market and when there is distress we just refuse to buy, even when we are getting a stock at a low price. Always remember, everyone buys a stock which is good, so the price will be high. Low price means low quality or the company is not proven. This is the reason why you will see that the FII holdings in good quality stock is high. Why do we refuse to buy into such stocks? You take any stock and check the price along with the dividends paid over 10 year period and you would have noticed that a good stock would have always gone up, irrespective of the market cycle. Take any 10 years period.

We are a nation of savers and not investors. Savings does not beat inflation. So let us slowly start upgrading ourselves to investors and make the money which is there to be made.

Does one need a financial advisor

In the past few post, I have always kept saying buy into equity. It’s easier said than done. There are a few challenges one of them is getting returns. There are many strategies followed by analyst to make money. Some follow the P/E route where they track the P/E of the NIFTY or SENSEX and decide if this is the right time purchase a stock. Some follow the Price to book value method. Some methods are good for some industries, but you just blindly follow the same method for all industries. P/E would be good for IT industry and Price to book value for banking, but these are just indicators. These indicators along with a bit of research should help you get a good price. Frankly there is no one best way by which you could decide if a stock is good. You should research and buy only if you trust the company. Just as you would do for any other purchase.

We keep saying invest in equity, but do not go by reports. That means sit and do research. If I have to sit and do research, then why am I working I would have been buying and selling stocks as a full time occupation. This is where financial advisors and mutual funds come in. They are in a specialized field, just as you are. Everyone has different skill sets, you make your money using those skills and the financial advisors help you make money using theirs. So when you make money for your skills, why should they not for their skills? We are ready to pay a doctor, why? Because we believe he has the skills, but we are not ready to pay a financial advisor.

This is because we have got into the habit of getting things free, but nothing actually comes free. It is a risk a person takes, this risk is a gamble. The problem started because many insurance agents or mutual fund distributors started mascaraing as financial advisors. They were and are more interested in your investment, so they give you free advice, which in most cases is in their interests. Some of them are good, because of their experience in the financial industry. You would have made money, where you could have made more if you had invested with proper advice. But the point is have you made enough to secure your goals?

Goals are something which should drive your investments and not just invest and hope you have enough at the end to meet your goal. Goal based planning gives meaning, purpose and focus to your investments. Some people have money falling on their laps, whereas for others they have to struggle for it. Why not meet a financial advisor and work with him to meet your goals and ensure a secure and peaceful life. Like they always say, Money is the cause of all problems, those who have it don’t know what to do of it, and those who don’t have it know what it means.