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.
This is an interesting question asked by Deepak Shenoy on his blog. I wrote a post on similar lines almost two years back (surviving layoffs), although I could not complete the post. Interestingly cutting expenses is not the advise he wants to give. Here is the quote from his blog
Why aren't you telling me to cut expenses?
I could, and this is advice you will get all over the internet. Cut your expenses, hunker down, don't eat out, sell the car and take public transport, change clothes only every other day and so on. Yes, you can do this. But this is easy preaching. It's not practical because you will do it anyhow, if you have to……
Cutting expenses is temporary and defeating. Sometimes doing so gives you a false sense of security - such as: if I cut this and that, I can survive two years! Yes, but like the joke goes:
Preacher: If you stop drinking, the women, the eating out, sweets, salty and fried things , you'll live to be a hundred!
Patient: But what's the point if I can't do any of them? ("Toh jee ke karunga kya?")
Don't do it unless you absolutely have to.
I dis-agree to some extent. Here are my comments to his post on this. I know that advise on cutting expenses is spread all over internet. The point is not to cut down everything and live like a sage. It will not be practical, but reducing expenses by certain amount will, not only help financially but also help mentally. I know of folks who go out dinning almost 3-4 times a week, which can be reduced to 1-2 times a week. One of my friend goes out for shopping every weekend. It has become a ritual to him. With a job loss you can skip 1-2 weeks in a month or you can reduce the amount that you used to buy every week. It is all about striking a balance and keeping a certain check on your expenses.
I would rather suggest to act pro-actively instead of re-actively to a job-loss. It is well known that job-loss is going to be very common in coming years. So isn’t it wise to prepare for it pro-actively during the time you have a job rather than to react after a job-loss? Here are some tips to prepare pro-actively while you have a job:
- Keep an emergency fund, but do not dig into it unless it is an emergency.
- Get a good job-loss insurance if available
- Have a personal family health insurance, since with job-loss your corporate insurance also goes away too
- Do not dig into your PF (question was asked on Deepak’s post), It is necessary to understand the importance of PF, which is for building corpus for post-retirement rather than emptying it for a temporary situation of job-loss
- Continue to develop your professional skills (even if you have 20-30 years of experience)
- Develop some hobby and get deep into it. You will hear numerous examples where hobby gets converted to a business or earn extra income
- Nurture a good network of friends (more specifically in your industry)
- Try to have a work-life balance and spend time on maintaining good health. Illness during job-loss is not going to help you
- Everyone understands the importance of diversifying investments, so for those who are not married it may not be bad idea to think of a similar diversification when you get married. Choose a spouse working in a different industry rather than your own. If you are a software engineer, diversify by marrying a fashion designer or an architect. It will spread the risk of both of you loosing job at the same time.
All of these tips are just common sense. But I will accept that it is easy to preach than to follow them.
Do you have any more suggestions?
[Photo by : Casey Cripe]
U.S President Obama made the Plain Writing Act of 2010 as a law on October 13, 2010. India needs a similar law as well. I looked at a random sample of policy wording document [PDF] from Reliance General Insurance for a HealthWise Policy. Here is the “pre-amble” part:
WHEREAS the Insured designated in the Schedule to this Reliance HealthWise Policy having by a proposal and declaration together with any statement, report or other document which shall be the basis of the contract and shall be deemed to be incorporated herein, has applied to Reliance General Insurance Company Limited (hereinafter called “the Company”) for the insurance hereinafter set forth and paid appropriate premium for the period as specified in the Schedule.
NOW THIS POLICY WITNESSETH that subject to the terms, conditions, exclusions and definitions contained herein or endorsed or otherwise expressed hereon the Company, undertakes, that if during the period as specified in the Schedule to this Policy, the Insured/Insured Person shall contract any disease, illness or injury and if such disease, illness or injury shall upon the advice of a duly qualified Medical Practitioner require any such Insured/Insured Person, …blah blah.
It is simply a lot of gobbledygook text making it very difficult for average person to understand, and more so with English not being our primary language. This is prevalent in every government document as well as financial document. The content is not written in the form that an average person would understand. It seems that such language usage is often meant to confuse and divert the reader’s attention.
As an example, the above text can be made much simpler in following manner without loosing any of the context or the meaning:
The insurance contract between insured Mr X and Company is formed based on the proposal and declaration submitted. The insurance contract is based on the appropriate premium paid during the period as mentioned in this document.
The company promises to pay amount Rs Y if the insured person Mr X acquire any disease, illness or injury during the policy period. This amount paid is subject to terms, conditions, exclusion as defined in this document. The company requires that the advice of a duly qualified Medical Practitioner.. blah blah…
Jyoti Sanyal in his book Indlish provides an interesting historical reason behind such officialese language in our official documents. As per him, this type of language originated from babus working for East India Company. Unfortunately Indians adopted this not only in English but also in many regional languages.
The advantages are obvious for having a law for plain writing. It will
- Make it easy for customers to understand what they are signing
- Bring transparency in the process and deals
- Reduce any mis-selling of products
- Reduce legal actions arising out of confusion between consumers and service providers.
I strongly believe that majority of mis-selling happens due to lack of understanding of the terms and conditions while signing up for any service. Hence such a law will be an important step in protecting consumers from fraudulent service providers. What do you think?
[Photo by Mr. eNil] So you must have heard that Akshay Tritiya (or Aakha Teez) is falling on 6th May and it is an auspicious day for buying gold jewellery. It is said that buying gold on this day will bring prosperity and increase in wealth. This belief is so rampant that everyone plans and buys (even if token) gold coins/jewellery on that day which increases the demand and pushes the gold prices to exorbitant levels.
But very few really go and check out the true significance of this belief. Here is some history about Akshay Tritiya and why buying gold is not the true essence of this holy day as per Hindu mythology.
If you remember the Mahabharata, where Pandavas had to be exile in the forests. The eldest Yudhishtra was not happy since he was unable to feed the holy sages that he met during his exile in the forest, so he prayed to Lord Surya. The Akshay Patra (inexhaustible vessel) was given to Pandavas by Lord Surya on the day of Akshay Tritiya. The idea is that the vessel will always be filled with food until the Pandava’s wife Draupadi will eat for the day. Another related mythology story is when Rishi Durvasa visited Pandavas and by that time Draupadi had already eaten the food from Akshay Patra and hence no food remained for the great Rishi Durvasa. Hence Draupadi prayed to Lord Krishna, who came and ate the single grain of rice from the Akshay Patra and announced that He is satisfied with the food. This caused the Durvasa Rishi and his disciples to also feel full-stomach.
So this indicated absolutely no connected with the belief that buying gold on the auspicious day of Akshay Tritiya will make you prosperous. The people twisted the mythological story to indicate that anything you acquire on this day will be inexhaustible similar to Akshay Patra and since the most precious thing to buy is gold, which then will remain inexhaustible. It is exactly the turning the table on its head, since as per my understanding the idea of Akshay Patra is to use it to donate the food to the needy and it still does not exhaust (rather than keeping it to yourself). The idea should be that anything you donate on this day will be inexhaustible, but that is now long forgotten.
This twisted interpretation is especially great for people in the gold business since the demand for gold shoots up artificially. The gold prices in India this Akshay Tritiya is expected to shoot up to Rs 25000 per 10 gram. The only people who are going to gain are the people who do business in gold.
There are lot of interesting gimmicks launched by jewellers to attract the customers during this year. As an example their is a “double protection” scheme which allows customers to book jewellery at a desired gold rate and does not impact your cost if the prices go up. In the event of gold prices going down compared to booking rate, the difference will be paid back. This is good for business but not so good for customers. The problem is the confusion created by the various advertisements on such scheme. Can a customer keep the booking rate lower than that day’s price? Will the labour charges be returned back along with cost of gold if the gold prices go down? What if the particular seller where you booked the gold prices, manipulates the gold price on Akshay Tritiya to ensure that it is higher than what most buyers have booked at? Can a customer cancel the booking without loss if some other jeweller is giving gold price much lower than the shop where customer booked the rate?
My advise for everyone is to not go after such schemes without knowing full details and the risks involved. The gold buying should be just one part of your investment portfolio and should be done in staggered manner to meet investment objectives.
The bank's debit cards holders will register on the lender's website. This site is in turn linked to the National Securities Depositories Ltd which will help validate the permanent account number (PAN) of individuals and the Tax Deduction Account Number (TAN) provided to taxpayers.After the registration, a customer can go to a Union Bank ATM and can surf the income tax menu which will display his PAN number and ask for the tax amount that is to be paid along with item-wise details of any other amount the assessee may want to include in the tax payment.On confirmation, the tax amount will be debited from the customer's account and the ATM will generate a receipt with a special number. After 24 hours, customers can log on to the bank's website, submit the special number and print a challan.
TOI reports that India will soon have it’s own payment processing firm called Rupay competing with Visa and Mastercard payment processing firms.
After almost two years of planning, the National Payments Corporation has at last finalised the proposed unique India Card which once commercially launched would be an domestic alternative to the global real-time payment processing firms like Visa andMasterCard.
"We have finalised name of the proposed card as Rupay at our board meeting here today. We have also finalised the logo for the same," a senior official of the RBI-set up National Payments Corporation of India (NPCI), told PTI this evening. The official sought not to be named.
NPCI is an umbrella institution for all the retail payment systems in India. I could not find any information about Rupay on the NPCI website, but given the statistics of the transactions that it handles is pretty impressive. It also gives a list of Payment systems worldwide, which is interesting to know.
The advantages of Rupay should be really good especially in lowering the transaction charges for using debit/credit card at merchant sites. As of now, all the banks which issue credit or debit cards to the end-user for transactions at various merchants in India or abroad has to tie up with Visa or Mastercard. The transaction is routed through the infrastructure owned by Visa/Mastercard not situated within the country. This implies substantial cost to the banks as well as merchants which are passed on to the end customer. Rupay will eliminate majority of this cost.
The interchange cost for transaction settlement paid by Indian banks to Visa/Mastercard is close to Rs 500 crore in one year and most of these transactions are purely domestic transactions. Rupay would reduce this cost substantially and can still connect to the Visa/Mastercard for international transactions.
The plan is great, but it needs solid execution, since any Rupay based system has to develop the necessary infrastructure to handle the millions of transactions that happen in India. Also security is a big concern and Rupay need to scale up quickly to the level of Visa/Mastercard to ensure transactions in secure manner with less chances of fraud. In case of Visa/Mastercard they push the security solutions based on their standard up-gradation worldwide. So Rupay system need to match that as be as agile in upgrading to latest security infrastructure as happens globally. It is also a challenge to incentivise the already existing merchants to sign up for the Rupay system. Ofcourse cost advantage will help but security will be the key. NCPI has loads of work to do on that front.
The NCPI is also working on utilizing the Aadhaar developed by UIDAI (headed by Nandan Nilekani) and will be developing a proof of concepts through a MicroATM. This is interesting since it brings the lowest strata of society into high-technology banking transactions.