Considering the way diesel and petrol prices are converging, the recovery period for a first-hand diesel car will be close to the higher end of the typical holding -- or ownership -- period of between four and six years if it is driven 10,000 kms per annum.
In connection with the guarantors, banks have raised queries regarding inclusion of names of guarantors who are either individuals (not being directors of the company) or non-group corporates in the list of wilful defaulters. It is advised that in terms of Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Therefore, when a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor. As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter. It is clarified that this would apply only prospectively and not to cases where guarantees were taken prior to this circular. Banks/FIs may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees
- Tag the guarantor as a wilful defaulter thus reducing credit-worthiness of guarantor to be zero
- Start recovery process of the loan from the guarantor in parallel with the original debtor.
- Buying house and then forced to significantly cut-down their living standard
- Getting cheated by even reputed builders (delayed projects, poor quality, document frauds etc )
- Not really getting huge ROI (which is often the primary motive)
Created in the 1960s, Iron Man was far from being a mainstream superhero when compared to characters like Batman, Superman, Captain America, Spider-man and the X-Men. In the late 2000s, however, when Marvel Comics had decided to launch a series of full length, live action movies featuring the superheroes that comprise the Avengers with Iron Man as it’s central character, the armored Avenger, and more importantly the man underneath, easily became the favourite superhero of almost every movie fan.
You may have seen hundreds of books on personal finance, but very few can really cover the entire breadth of personal finance topics, that are useful to common investor. Here is a book by Shalini Amarnani, that attempts to do the same and which provides good coverage on all personal finance related topics. (You can buy this book at flipkart or amazon)
In this book, Amarnani, starts with providing a new perspective to investing by encouraging the reader to explore their boundaries. This, I felt, is really an important but often ignored aspect of a personal finance book. The book is not going to make you rich quickly, but provides a definitive guide for financial success. Amarnani takes you through various financial instruments like equities, MFs, ULIPs, F&Os and provides a guiding line for making winning choices.
There is an entire chapter devoted to tax planning. It definitely is a good read for young people joining their first company. It also has many nuggets for experienced folks. For example, here is a paragraph from the book
If you are planning to invest in property, it makes better sense to invest in a commercial property rather than a residential one. Not only does a commercial property earn better returns but also, you do not end up paying any wealth tax on it. Ownership of a commercial property enjoys the same eligibilities in tax deduction as that of residential properties.
Wealth tax typically targets unproductive, non-essential and idle assets, hence commercial property does not comes under its ambit. A very useful tip for the property hungry Indians.
Amarnani, has also covered the equity investment space very nicely, explaining the basic concepts involved in fundamental and technical analysis. This is a good introduction for a common investor. A small chapter on Futures & Options, in an easy to understand language, gives a quick introduction to these difficult investment instrument.
The author has also covered all the debt instruments like FD, Bonds or PF in a simplistic manner including useful tables for a comparative study. Did you knew that there are four kinds of provident funds? Amarnani provides a really nice table on the tax implications of various PF schemes.
The section “consolidating” provides a quick summary of all financial instruments related to loan and insurance, which is extremely useful for an average investor. The concluding chapter is also crisp and pragmatic, with a very interesting table called “life stage analysis”. It provides a quick investment strategy, across various life stages, that you go through.
One of the key learning come from the last page of the book,
Everyone lives his/her life differently and hence investment decisions are highly personal and unique. Four basic rules that apply to everyone
- Keep emergency cash
- Invest in equity
- Schedule annual review of your investments
- Align investments with tax structure
How true these wise words are!!
My Personal take on the book
While I enjoyed the book and it is really an excellent read for anyone trying to de-mystify the personal finance world, but be aware that this is not a book that will give you tips on where to invest. It just shows you the various instruments available and their pros/cons, but what really will help you depends on your own personal situation. One key financial instrument, that I found missing is the NPS pension scheme. NPS is a low-cost equity based pension scheme existing today. I recommend that you keep a copy of this book as a ready-reference whenever you are scouting for a financial instruments be it equity or debt based. Overall a very good book for young folks!!
About the Author
Shalini Amarnani is contributor to various financial websites and blogs like http://investmentsbook.wordpress.com/ and a highly sought-after speaker.
Knowing how to manage money is one of the most beneficial life skills for people at every age. She is committed to simplifying money matters and increasing financial literacy both for the present and the future. Utilizing a clear and straight-forward approach, she provides advice for integrated, holistic financial life planning and investment management.
Shalini holds a masters degree in Financial Management and has several years of experience starting from 1994. She lives in the financial heart of India, Mumbai with her husband and a son.
Shalini can be reached on shaliniamarnani @ gmail . com
SIP or Systematic Investment Plan has long been touted as a silver bullet for retail investors, especially for those who want to start investing in equities. This investment vehicle is promoted by all the mutual fund houses, distributors and financial planners. It has been marketed as the safest mechanism of equity investment that will outperform the markets and creates wealth over a long term. It is really hard (even for Google) to find articles that talk about problems or disadvantages of SIP.
Almost all the marketing around SIP indicates the following advantages:
Rupee Cost Averaging: The basic idea to make money is to buy at lower level. SIP allows you to buy more units when markets are less, thus reducing your average cost of buying units. But it is never mentioned that this method will work only in specific market conditions where the markets are in median range, then markets goes downwards and ultimately moves up. The intermediate downturns will cause SIP to buy more units and when the markets finally moves up, it gives better returns due to lower average cost of buying. The other market conditions are not favourable for SIP investment and some conditions are even detrimental as well.
Disciplined Investing: The basic idea is that a investor is 'forced' to invest regularly since the SIP amount is automatically debited from the saving account. But I believe that disciplined investment is really a habit rather than an advantage of any investment vehicle. It just forces an automatic deduction of SIP amount from your bank account, which is also true of other simple investments like recurring deposits.
The only one who gets benefit out of MF SIP is the mutual fund house and their distributors, since they get a regular committed revenue stream without spending any time or effort. SIP is just an investment vehicle to put your money into the underlying assets (which could be equities, bonds or gold etc.). So common sense tells us that if the underlying asset is doing badly, there is no way SIP is going to make money. The last 5 years (2007-2012) has not been particularly good for equities and hence it is no surprise that investments made into this asset class (be it via SIP or lump sum) are not doing very well.
It is a myth that SIP can give positive returns during any market condition. SIP will only perform when the timing (start/stop of SIP) and duration is right, as it is true with the underlying asset. A quick chart of SIP Vs. Lump sum investment might provide some insight:
Systematic Investment Plan
Lump Sum Investment
As the market rises, your average cost will keep on increasing.
Your investment made is at the lowest price and hence the gain is superior
Lump Sum Wins
As the market is going down, even if your average cost of purchase is reducing, but so is your final NAV and you are losing money
Your investment is at the highest price and hence the you will suffer losses
You lose in both cases
Markets with intermediate
downtrends but ultimately rising
The intermediate downtrends will cause SIP to buy more units and hence reduce average cost of buying. The ultimate NAV will be higher giving handsome gain.
The investment will not use the intermediate downtrends, so any gains will be marginal
Markets with intermediate
uptrends but ultimately falling
The intermediate uptrends will cause SIP to buy less units and hence increase average cost of buying. The ultimate NAV may be higher but gains are less due to rising average cost.
The investment will not be impacted by intermediate uptrends
Lump Sum wins by a slight margin since it did not get affected by higher cost during uptrends
So the returns of a SIP will definitely depend on the
· Timing - Start and Stop of the SIP
· Duration – The duration for which the SIP was operational
As far as the disciplined investment goes, it is useful to note that there are other investment vehicles which can be combined with lump sum equity investments to ensure some discipline. As an example, instead of a SIP, an investor can choose to open a recurring deposit for six months and invest the lump sum received directly into mutual fund at the end of six months. It is also beneficial in terms of cost overheads, here is the comparison:
SIP investment in Mutual Fund of Rs 2000 for six months
Recurring Deposit of Rs 2000 for six months + lump sum investment in same MF after six months
(Rs 30 + Rs 3.71) X 12 = 74.52 Rs commission to mutual fund house (ICICI Direct charges)
(Rs 33.71 - Interest earned on RD @ 6.5% pre-tax)
(ICICI Bank Interest**)
So the cost of Mutual Fund SIP is higher due to recurring nature of commission. Also which of the option will give higher returns will depend on timing of the investment.
**Another point to keep in mind is the pre-mature withdrawal penalty on RD (0.5% in ICICI) compared to exit load (1-3% before one year).
So SIP is not a magic wand which can give you positive returns irrespective of market conditions. It is rather a “Systematic Investor Plunder” and benefits the MFs and distributors most of the time. The only sip that will give you pleasure is sipping your tea!
This is a guest post by Robert McCafferty promoted by Guest Post U. The content and ideas belong to the author and post is only edited for visual aspects
This is a guest post by Taryn Beckham promoted by Guest Post U. The content and ideas belong to the author and post is only edited for visual aspects
Guest Post U
A must read article by Deepak Shenoy!! Some snippets
Insurance products are incredibly complex, despite their heavy regulation. Financial products are typically of two types —high-risk, where the returns cannot be predicted in any reasonable manner, and low-risk, where the return is either guaranteed or specified (the risk is in whether the seller will go bust). Equity is a high-risk proposition, while fixed deposit and other debt options are the second. Insurance products provide a mix-and-match,
Most people give up before they reach the "real return" calculation — which is why insurers can easily stuff charges into such policies, knowing that if someone is silly enough to invest with a 5% real return, he won't even know that they can take a significant chunk of money as commissions.
- As per the lady at the counter, you need to apply for minimum three copies and maximum five copies of the certificate.
- I did not had to go through any additional process (like going to court etc) even after one month. I think same applies for application within one year of birth.
- One person in front of my queue faced the issue that his details were not available with BBMP, so may need to cross-check with hospital.
- There is no need of going to a middle-man for birth certificate, since the process is simple, except the need to visit the BBMP office.
- A birth certificate is needed to obtain a passport, a marriage or a driver’s license. It may be required to open a bank account, to apply for and secure formal employment and to inherit property
- A birth certificate may also be needed obtain family allowances, ration card, insurance, and a pension.
- A birth certificate proving identity and age is the gateway to democratic participation in civil society, enabling a person not only to vote in electoral
processes, but to contest for Public office.
- A streamlined birth registration system, with a unique identifier for each child can pave the way for a sophisticated citizen’s multi-purpose identity card.
Update: I got the certificate.
Update2: As requested by anonymous comment, here is the map location of Upparpet Police Station
View Upparpet Police Station in a larger map
Personal Finance is no longer an esoteric topic that is confined only to “experts”. This can be seen by the ever increasing number of Indian bloggers in this very important space. Some of the bloggers have a mass-following due their awesome content, and others (like me) are trying to learn from these amazing folks. Here is a review cum list of some India based blogs in personal finance space [Alphabetic Order]:
Mr. Deepak Shenoy mostly writes on trades in Indian markets but sometime publishes gem of posts on personal finance. He is founder of the company MarketVision which offers consulting and training services in finance and technology. His blog might be intimidating for a novice at first, since the posts contains lot of facts, figures and charts. His blogging frequency is amazing (sometimes as high as 4-5 posts in a day). The blog template is simple and easy to navigate with good placement of advertisements. Some of his interesting posts are:
Mr. Ankit Agarwal writes topics focussed on providing money saving tips and frugal living ways. The ideas posted are good but I think that the blog has too many advertisements (including one before the post) which distracts the reader from the content. The blog also has some toolbar popping up at the top and bottom which is irritating. Also the language is slightly preachy and hence difficult to follow. Some of his interesting posts are:
Mr. Srinivas Raghavan is the CEO of HappyMentor.com and is a CA by profession. The company provides training and consultancy services in the field of financial planning and organizational development. The blog layout is good and easy to navigate. The interesting aspect is the uploaded videos on the site, in which he talks about various aspects of financial life. In the videos he comes out as a happy person sharing his vast knowledge with the world. He also brings philosophical angle to the process of getting rich. But unfortunately he does not seem to update the blog very frequently. Some of his interesting posts are :
Mr. Anshul Dixit aims to spread awareness among people by presenting facts and concepts about many areas, one of which is personal finance. The website name is interesting and the layout is like a collage of various articles written on the blog. I found the front page crowded but surprisingly easy to navigate. Unfortunately 2/3rd of the space for any blog post is taken by side columns and advertisements which makes it difficult to focus on the real content. The writing is simple and informative and he provides simplified explanation of various concepts. The website also provides services like providing articles for other blogs or information for campus placements. Some of his interesting posts are:
The blogger goes by the name JigVishu, a software engineer by profession but writes about personal finance. The blog layout is simple with very few advertisement and very navigation friendly. The content is good but the blogging frequency is very less. The blogger has a nice way of explaining concepts using tables and examples, which makes it readable. Some of the interesting posts are:
This blog has multiple writers Mr. Tushar Mathur, Ms. Malvika Sampat and Mr. Ziaulla Namani. The blog layout is decent but some of the advertisements (e.g. at the top) are very distracting. The layout has very small fonts. The latest news and other columns on the right does not seem relevant at all. Also despite multiple writers the blogging frequency is very less. Another distraction is the number of tags attached to any post, which are greater than 10 in most cases. The advertisement image at each post is irritating. The content is very diverse and good but the writing style is slightly preachy with less examples making it difficult to read the blog. Some interesting posts are:
Mr. Sherin Dev blogs for http://www.moneywithmoney.net/ as well. The blog layout is really good with some awesome blog content. The frequency of writing is also amazing with more than an average one post per day in 2011. The unique aspect with this blog is the number of guest writers that have written blog posts on it, providing a varied content with diverse thought process. But I feel that the disadvantage of having so many guest bloggers is that you won’t see a single person’s though process. The articles are written in a simple and easy to understand language. Interestingly Sherin makes his blog “Un-Copyright” status. Another interesting aspect is that most of the blog revenue goes to charity, although I could not see any yearly/monthly statistics on how much goes to charity. Some interesting articles are:
Mr. Manish Chauhan and his team is behind this most successful blog on personal finance. Manish has now launched some personal finance services as well. The blog name itself is unique and attractive. The blog layout is decent but the front page top image “Warren Buffet Vs Sensex” is really distracting. The pop-up survey that comes up is very irritating as well. But the USP is the quality of content which makes this site simply the best. The articles are in-depth and aims at solving real consumer problems. The impressive aspect is the detail that are put by Manish and his team in each blog article. A simple article such as opening a PPF account comes out with clarity. Another great aspect is the immediate response to any comment or email sent to Manish. Recently Manish launched the personal finance forum, that I believe it is first in India (lot of forums related to stocks and investing but not specific to personal finance). Also despite so much popularity of the blog, the number of advertisements is very minimal. The blog is also enriched by the amount of comments and discussion seen on the posts and forums.
Mr. Pankaj Batra is a software professional and the blog is a personal account of his hobbies. He recently modified his blog layout and this one seems easy on the eye with advertisements blending smoothly in the background. He writes with decent frequency and the quality of his blog posts are good. His site has lot of download material which is great. Some of his interesting articles are:
Ms. Shweta Mishra, Mr. Manish Mishra and Mr. Madhur Batra are the authors of this blog. The layout and the name of the blog comes out as very professional. But the content of the blog seems very similar to so many others on the internet and there seems to be a lack of many good quality posts. Although some of the posts are really detailed in nature. Advertisements inside the posts are distracting. The language is easy to follow but the frequency of blogging is not very high given the number of writers. Some of the interesting articles are:
Mr. Ranjan Verma is also the author of personalfinance201 and developer of a personal finance desktop application called RupeeManager. He has more than a decade of experience in LIC and now he is the founder of RupeeManager. His blog layout is superb and especially the image icon that he has created for his blog is awesome. He also runs RupeeCamp which is a structured program for learning about personal finance. I have been following his blog for very long time and I love it. The way he writes the posts with simplicity and conciseness makes a reader compel to interact/comment on the post. He writes on many other topics including current news. Some of his interesting posts are:
Mr. Adheesh Sharma (CFA) is currently pursuing his MBA from Insead. The awesome part of his blog is the funky sardar icon. The blog is filled with many cartoons to explain the concept or show-case some conversation. The layout is very attractive and compels readers to navigate and look around the blog for various articles. The frequency of blogging has been reduced now probably due to his MBA, and he has acknowledged this in his post. The content quality is awesome due to the fact that Adheesh spends a lot of time in simplifying his posts and writing creatively. As an example, check out this post on “Disciplined Saving’ where he indicates that “The money you spend on buying a car today, could fund your child’s way to Harvard”. He very smartly puts his point across with lot of details and conviction in the posts. The blog is very impressive and contains lot of gems. A must read!!
Vinaya HS is a product manager by profession and writes on personal finance based on his own experience. The unique aspect of his blog is the give-away he does. He sometimes raises some contest or asks readers to put comments and then gives away some book or coupons to the winner. He shares tips on Tuesdays (calls Tip Tuesdays) and has written articles for techdirt.com. Another interesting aspect is the post he does based on reader questions. He is a big fan of ERE and provides a monthly update on his ERE plan with a nice graph. Some of his posts are thought provoking. Few interesting posts are:
Did I miss any other interesting blog? Please share in comments!!
Note: I have intentionally avoided blogs which are either corporate blogs or blogs specific to only stock investments. Although this implies skipping some of the best blogs like valueinvestor, TipBlog or FundooProfessor. But I wanted to focus on blogs which provides a generic thought process on personal finance for individuals rather than specific investment areas like stocks or mutual funds. This review is my personal opinion and if anyone feels offended, please drop me an email. Appropriate action will be taken.
It seems that many of salaried employees think of Provident Fund (PF) as a black hole that sucks up their hard-earned money. Economic Times reported that 4000 Crore Rs is lying with EPFO in its unclaimed deposit accounts with no takers.
One of the deterrent for claiming the PF account money (withdrawal or transfer) is the complicated process and bureaucracy involved. Also frequent job changes (sometimes 3-4 times a year) by employees also contributes to unclaimed deposit accounts. On top of that the PF rules are not very customer-friendly.
The introduction of on-line PF Balance inquiry is a positive step in making the process easy. The process involves visiting the following web-site to know your PF balance :
http://www.epfindia.com/MembBal.html [You will need the PF Account Number]
And thankfully this service is free of charge. The catch is that the data is available only for certain cities and that too up-to certain date only. So for example in case of Bangalore the data is available till 08.11.11 but say for Agra the data is till 06.09.11. The complete list can be found here. Also very few cities are included as of now. As an example in Karnataka, data is available only for the following cities:
In most cases the PF number is something like KN/XXXXX/YYYYYY, so when you visit the webpage you will find that it asks you for Establishment Code (Max 7 digits), Extension (Max 3 characters) and Account Number (Max 7 Digits). In most cases you need to keep the middle box [Extension] empty. So fill the “XXXXX” in the first box, keep second box empty and fill the “YYYYYY” in the last box. You need to fill up the Name, Mobile number and accept before submitting. You will then receive an SMS on your mobile number with you balance.
Note that sometimes if you do this process in non-working hours, you may not receive the SMS immediately, so try during working hours. The SMS contains the details of PF balance as EE and ER amount. The EE = Employee Contribution while the ER = Employer Contribution. The SMS will also indicate the date up to which the balance is shown.
Another good service is the Claim Status. If you have applied for PF Withdrawal or Transfer you can check the application status on this website":
http://www.epfindia.com/ClaimStatus_New.html [You will need the PF Account Number]
But if your company runs its own PF Trust – [my company does], then you may not find this data on the EPFO web-site yet. The current data is mostly for the Regional PF accounts.
I would actually like to see following services on the EPFO website:
- Consolidated Statement for every individual across India
- Service to apply for any correction in details
- Online PF Transfer Application Process [Select Input PF Number, Output PF Number and an identification]
- Online PF Withdrawal Process with money getting credited to bank account
What services you would like to see online for Provident Fund?
If you ask this question to Indians, the answer is an emphatic yes. It is a prevalent notion that buying a house is akin to building an asset. The desire and need to own a home is hard-wired into the Indian psyche. It might be a good idea to pause and think over this question again, Is your house an asset? To answer this question, you need to define what is the meaning of an asset!! But defining asset is not easy since there are numerous definitions - two interesting ones are :
1) An asset is something that you own, where as a liability is something you owe.
2) An asset is something that generates money for you, where as a liability is something that takes away money from you.
The second definition sounds very logical and if you go by this definition, almost anything you own is NOT an asset. This controversial definition was given by Robert Kiyosaki of Rich Dad Poor Dad fame. This definition leads him to conclude that a self-occupied house is not an asset. Watch this interesting video on Youtube :
I don’t exactly agree with Mr. Kiyosaki even though I am inclined towards not buying a house. I believe that calling house a liability does not change anything apart from turning the traditional thought process on its head. The ultimate goal for buying an house is a) Personal satisfaction of owning a house b) Increase social status.
Indians think of the house purchase as a form of investment, which is incorrect. Let us step back and think about why anyone wants to invest their money? The whole purpose of investment ( be it in stocks, mutual funds, FDs, house or gold etc. ) is to beat the inflation and grow the money. The intention is to increase the financial net-worth so that a person can enjoy life and be mentally peaceful during any emergencies.
So is buying a house an investment? Yes and No. Let me explain this.
You may know of your friends & family who bought a house very cheaply few years back and the current price of the house is quoting much higher. But are they enjoying their current life or are they financially stretched owing to a huge chunk of earning going as EMIs? Is this sacrifice of constraint in present living state worth the investment for future self-owned house? If you are stretched too much today, then your house is definitely a liability.
Another question to ask is, when someone sells a house what happens to the money earned? Assume one of your friend bought a house for 30 Lakhs say five years ago and now it is quoting at 70 Lakhs. If he sells the house today earning a cool profit of 35 Lakhs (minus bank and other miscellaneous expenses). What happens to this 35 Lakhs? The most probable answer is that it is spent on buying another house. Did you know of anyone who sold his house pocketing a huge profit and then spent that money on a foreign trip or paid for medical emergency? In majority of cases once you buy a house, the money invested just remains as a house, you sell this to buy a bigger/better house.
If you think about any other investment, the same does not hold true. Any money earned through stocks or mutual fund immediately goes into some expenses be it for children’s education or buying that big car. But a house remains a house even across generations and the money is locked in that house. So any house bought on a huge loan only turns out to be an asset for the next generation (since they got it for free) and not for the person who bought it. I strongly believe that with nuclear family being the trend and with more globalized world, children will not care about the ancestral house and may not be living in it.
As a fact, most people who buy houses/apartments on huge loans are taking significant risk compared to the returns given by that house during their lifetime. Thus to me it implies that house is a liability.
A rough indication below will indicate that a house bought on loan cost much more than it seems :
- Down payment in cash [the cash gets locked up even before you are living in that house]
- Monthly EMI [Major portion of EMI is interest in initial years]
- Intermediary Fees [if bought through a broker]
- Miscellaneous Fees [e.g. lawyer fees, society fees, loan processing fees for banks]
- Government dues [registration fees, electricity charges, house taxes, VAT/service tax]
- Premium paid for Insurance of house
- Maintenance/upkeep for the house
An important point to note here is that typically the amount of money (interest) you pay during loan tenure to the bank, for taking home loan is approximately same as the principal (~purchase price of house). The worst part is that EMI usually follow the upward trend, as the cost of fund increases for the bank, making the house much more costly to the end-customer.
Hence buying a house may become a liability rather than an asset due to the inability of buyer to identify and understand the risks involved. This is actually true for any investments but for house purchase the stakes are much higher and risks runs much deeper.
Here are some tips to make your house an asset rather than a liability:
- Try to purchase a house which is priced a little less than what you can afford. Keep some buffer rather than stretch your finances.
- Keep a target of 100% ownership in next five years
- Buy a house which is 2-3 years old or new but fully completed. An under-constructed property is certainly more risky & hence inherently costly but it may seem cheaper upfront
- Buy a house when you can afford to pay 30% or more down-payment and plan to pre-pay the loan within 5 years
- Better to buy a house in tier-II city and rent-out the house rather than make it self-occupied in tier-I city. You can save on tax that way and also avail HRA.
- Stay on rent in good locality to enjoy your present life. The rent from your house in Tier-II city should compensate for the expenses incurred on that house.