Intelligent Investment Learnings in Stock Market by Madhusudan Kela

About Madhusudan Kela:

Madhusudan Kela is an Indian businessman and investor from Kurud, Chhattisgarh. He was chief investment strategist at Reliance Capital until 2017. He is currently the promoter of MK Ventures and a member on Board of various companies. Madhusudan Kela frequently comments on Capital Markets

He graduated in 1991 from K. J. Somaiya Institute of Management Studies and Research (SIMSR), Mumbai with a Masters in Management Studies. Thereafter he did equity research at CIFCO and Sharekhan. In 1994, he joined Motilal Oswal to start its institutional desk before moving to UBS in 1996. In 2001, he joined Reliance Mutual Fund.

During this tenure, Reliance Mutual Fund`s assets grew from nearly Rs 200 Crore in 2002 to more than Rs 1 Lakh Crore in 2011. Under his leadership, Reliance Mutual Fund received many awards and was rated the most trusted Mutual Fund House for three consecutive years by The Economic Times. He is also one of the investors in the Healthcare startup Sukino Healthcare Solutions Pvt. Ltd.

Kela was awarded the Business Standard Equity Fund Manager of the Year (2004) by Manmohan Singh, the Prime Minister of India.

Intelligent Investment Learnings in Stock Market by Madhusudan Kela

A. Investment Learnings - Portfolio Allocation/Stock Selection:

1. There is always a bull market somewhere - One of the keys to successful investing is to understand the macro direction, and get your thematic calls right. There is always an investment opportunity to be found in every market condition. Why swim against the tide, when you can swim right with it.

2. Prudent capital allocation - Getting our Asset Allocation right drives majority of the total long-term return of an investment portfolio.

3. Choosing the right Horse - Look out for businesses or companies (horse) with scalability potential and capability to generate hard cash, maintain consistently good ROEs. However, in some cases, we also seek out investments where there can be frenzy in a particular sector e.g. IT, Pharma etc.

4. Selecting the right Jockey - Always look out for promoters with passion/hunger and integrity towards the business. Only a passionate jockey can drive the horse to the winning line!

5. If you have 3 aces, bet big! - The most important rule to creating significant wealth, is to get it big. We only need a few big ideas to work. Companies like Amazon, Google, Apple, are anyways not created everyday. Hence, when you have all the right ingredients for the investment and are confident on top of the business, bet sizing is what will differentiate your portfolio!

B. Investment Learning – Portfolio Monitoring 

1. Tracking of Portfolio - While longer term convection is very important, close monitoring is very important, so you are in sync in with reality. A lot of investors end up chasing the next multi bagger, when their earlier investment bets would have done the tricks! Being convicted with what you have and constantly evaluating that conviction is critical to successful investment monetization. 

2. Play for the Bull Run and not for the Bounce - Differentiate between tactical trades and investment. Cut your losses whenever you realize that a particular investment was a bad one.

3. Making Money vs Being Right - The market does not acknowledge being right. It only acknowledges making money. So, focus on the investments that will make you the money, rather than trying to be right on every investment. Concentrated bets are the key.

4. The Art of Selling - Selling is an art; most people do not appreciate it enough. Only if you know how to sell and when to sell, will your paper profits ever materialize into something concrete. 

5. Well defined investment process with clear exit strategies - Have high conviction in your process and adhere to it with discipline. Only this will allow you to hold on to your winners better, and let go of the bad investments. 

C. Investment Philosophy – Behavioral

1. Patience and Long-term mind set - In long term Wealth creation “Time” becomes the most determinant of returns. We prefer staying invested over longer periods on our conviction bets. Divi’s Lab, to quote an example. We have invested for over than 14 years, through thick and thin.

2. Perception Gaps - Sometimes, great business can remain under appreciated by markets for long. When this gap corrects, it leads to a huge opportunity for wealth creation. Indiabulls Group is an excellent example – one of the biggest wealth creators in India.

3. Digest the right information and ignore the noise – This is biggest Challenge in the present world. 

4. Keep it Simple - Stay focused and have a disciplined approach.

5. Investing can not be modelled for disruptions - Companies like Google, Amazon, Tesla, Facebook, Netflix etc. have to bought early, with a strong belief the underlying opportunity and a disregard for the near-term numbers. This, is also an art few understand.

6. Finally - Do it yourself only if you have the required understanding. Else there are lot of good people doing this for a nominal fee. Rarely on experts to do their jobs. Devote time, learn and look for opportunities.

Reference and Source:
https://en.wikipedia.org/wiki/Madhusudan_Kela
https://www.youtube.com/watch?v=aEHBzfzlDV8
Nation Next YouTube Channel

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“Rome cant be built in a day”

“Rome cant be built in a day”

Same thing applies to your wealth too. In this fast changing world, everyone expects everything to happen quickly and reacts quickly.

One thing which cannot change is “Slow and steady wins the race”.

In  your childhood, you would have heard the race between Tortoise and Rabbit.

Rabbit will move ahead and sleep as it covered large distance. Tortoise will slowly and steadily marches ahead and wins the race.

SIP in mutual fund is like Tortoise winning the race. You can start a SIP and just forget it. In the sense, don’t react to market movements very often. Monitor once every 3 months or 6 months to gauge the performance.

As some of your goals like kids education, kids marriage, retirement are all for long term, you need to wait till your goal of final planned amount is reached.

If investing and making money is easy, everybody would have jumped in this SIP mode and achieved the results. You need patience to create wealth and hence the challenge of less participation.

Do you have patience ?

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7 Tips to Improve your Financial Health during this Corona Lockdown

The world is reeling under the Corona Virus Pandemic. Many people are experiencing job losses as companies across globe shut production. Markets have also shown huge fluctuation wiping our crores of investor's wealth. Needless to say, people are concerned about their finances due to COVID-19 pandemic. With so much uncertainty around, it’s important now more than ever to focus on saving and reduce spending. During this Corona lockdown, follow some essential financial tips to improve your financial health.

1. Keep Emergency Fund

Emergency is unpredictable and difficult to manage. The old saying that holds always. Save as much as possible. Maintain a budget. Avoid expenses that you can. In short, keep an emergency fund.

2. Insurance Cover

Situation and instances like COVID-19 can happen anytime. Do check that you have proper health and term insurance cover. Check your health coverage benefits and know how much it will cost you during any critical illness. If needed, increase the premium amount by taking more coverage. This will benefit you during a health emergency. Take proper health coverage for your family. Do an honest assessment. 

3. Continue with SIPs

Keep your SIPs. Don't do panic withdrawal. You never know what is in store for you in future. To keep you financially strong, keep saving your money by continuing your SIPs and long-term investments. Don’t panic and redeem all your investments due to the huge volatility in the markets. Rather, if possible, continue your SIPs, it will help you in creating bigger corpus when the market’s rebound. Top up your existing investment in equity using asset allocation strategy.

4. Check your EMI/Instalments

If you have not opted for the banks EMI moratorium, and not paid your EMIs instalments yet, your credit score might get impacted. Either you opt for a moratorium or pay your dues on time. Good credit score will help you in the future loan if needed. Don’t ignore your CIBIL score. 

5. Relook Investment Portfolio

It is advisable to relook at your investment portfolio and just sell the equity or any holdings which are not giving you benefit since long. One can sell and buy some good stocks and invest in strong margins coupled with low debt companies for the long term. Invest for the long term.

6. Go Digital

As per Government health guidelines we need to keep social distancing to avoid COVID-19. So, it is better to use a digital wallet as much as you can. Completely avoid going to your Banks or ATMs for any financial need and use. Use online banking, cards, UPI or wallets for payments and managing investments. Avoid using cash, keep ATM visits minimum.

7. Refrain from Panic Buying

Don’t spend your money buying food items, groceries, medicines just to stock up things due to fear of lockdown. Essential supplies will continue. Only buy those items which are very much important apart from daily use items. Panic buying will put a strain on your finances.

Source: https://www.indiatvnews.com/business/news-coronavirus-crisis-tips-to-keep-financial-safety-during-covid-19-lockdown-605896

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10 Golden Rules of Investing

Investing does not have to be complicated and it should not be exciting either. Putting your hard-earned money to work in the financial markets is all about helping you get what you want from life while making sure you can sleep easily at night. It is not about riding roller-coasters.

To invest, you need to draw up a clear plan, do your own research, build in a margin of safety by always thinking about the valuation and, ultimately, be patient. By all means include some speculative picks if you wish, but ensure they are only a small part of your portfolio. Looking for an oil explorer whose shares double, treble and double again is exciting but such firms are very rare. There are a lot more which have a consistent record of paying out the dividends which really make the markets work for you, once they are reinvested.

The trick is how to select the picks which best suit your investment goal, target returns, appetite for risk and time horizon. These 10 golden rules summarise entire guide and they should help everyone spot profitable portfolio picks and also escape likely failures.

1. Have a plan

The financial plan of every investment is the tool that maximizes your potential profit and minimizes risk. Depending on how fast you need make a decision and how complex your investment is, you can elaborate a detailed and accurate plan or simple plan. Before you put any cash to work, you must know what you are investing for. This will condition your target return, time horizon and appetite for risk and therefore the asset classes best suited for your aims.

2. Never invest in something you do not understand

Peter Lynch of Fidelity was one of the most successful fund managers ever, and he said he never touched anything he could not describe on one sheet of paper with a crayon. You will be angry with yourself if you lose money on something and cannot explain why. Stick to what you know and always do your own research. You can’t manage or improve something that you don’t fully understand. So before you start, gain knowledge about the subject of your investment.

3. Diversify your portfolio

“Never put all your eggs in one basket”, if the basket falls, you have no eggs left for breakfast. Same applies to investments. Diversify between debt and equity and even further within those. Invest in Mutual Funds and some direct equity if you are inclined towards equity. For debt too, choose bank FDs, Debt Mutual Funds, balanced funds, FMPs etc. Diversify. Also you can look at Gold, Silver, Real Estate, if you have the funds. If one investment class doesn’t work, the other will support it.

4. Respect the market

Stunning rises and huge crashes show that markets are not efficient, but you must respect their views. When you buy or sell something you are saying the market is wrong, so you need to have a good reason why.

5. Start with something small

There is one great strategy to start with. Start with a simple investment. Treat it as a testing ground. See how your rules work. Draw conclusions. Make adjustments. Improve. And then prepare for bigger profits. The earlier you start, the faster you will be reaping the benefits.

6. Go against the herd

Punters go skint backing favourites on the horses, and although it may work in the short-term, purely following hyped, momentum names can be dangerous. To get the best long-term returns you will eventually need to sell what everyone is talking about and buy what is being ignored – providing the valuation is right and growth, risk and quality checks are met.

7. Cash is king

Profit is a matter of opinion; cash flow is a matter of fact. Some unscrupulous managers will try and dress up their profits but they cannot fiddle cash. Accidents happen when companies look profitable but generate little cash so focus your research here when looking at individual stocks.

8. Dividend reinvestment is vital

Patient portfolio builders should focus on firms with a strong competitive advantage and a good reason why clients want to pay for their goods or services. This confers the pricing power that enables companies to generate cash and pay the dividends that really get your savings to tot up over time. There are many funds dedicated to such firms, too.

9. Never invest money that you can’t afford to lose

This parameter of your investment protects your business against losses too big to handle. Your business should run smoothly and be managed evenly and rationally. Investment business is certainly not about gambling. It is about gradually multiplying your assets.

10. Focus on value, not price

Prices are temporary, but values are eternal. Prices usually depend on values. If you are able to recognize the real value of your investment, then you will never pay too much or too less. Prices are often a matter of speculation, while values are built on passion and dreams to make a difference. Most of the time it’s good to ignore facades, diligently prepared by PR agencies and know what goes on backstage. e.g. you would not enter a restaurant and buy a pizza regardless of whether it cost Rs. 50, Rs. 100, Rs. 200 or more. You would use your judgement to decide what is good value, and the same discipline must apply to financial investments. Several simple metrics, in the context of growth, risk and quality, will help you decide whether a valuation is cheap, expensive or about right.

Do you have any specific principle of investment that your follow? It will be interesting to share your views, leave your thoughts in the comments below.

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What should be your investment strategy when you are in debt?

While managing your personal finance, you may face a dilemma of giving appropriate weightage to either investment or debt since both are important aspects of your personal finance. If you ignore debt repayment, then compounding interest will quickly spiral out and you may easily get into financial distress. If you ignore investment, then you may fail to accomplish many of your financial objectives. So, it is important to maintain the right balance between debt and investment.

Now, when you are already in debt, should you still invest money or wait till your existing debt becomes zero?

To invest or avoid while in debt

Certain important factors like interest rate can help you decide on whether to invest or pay the debt first. If the existing and expected interest rate on debt is substantially lower as compared to the interest or return you expect to earn from an investment, then you should prefer to invest over prepaying. For example, prevailing interest rate on a home loan is around 8.5 percent p.a. and you have earned extra income through annual bonus. You have the option to prepay the loan or to invest the bonus in a balanced fund, which is expected to give a return of 12 percent p.a. (assumed) after tax. In this case you, should continue to pay home loan EMI and use the fund for investing in a balanced fund to earn a better return, considering a risk while investing money in a mutual fund. If the interest rate on loan is close to or higher than the expected return from investment, then use your extra income to first clear the outstanding debt and thereafter use the remaining fund, if any, for investment in appropriate instrument.

Assessment of existing liquidity

Another important factor that you must check before using the income to pay debt or invest is to assess your prevailing liquidity situation. If you find it difficult to manage your regular monthly expenses after paying the EMI, then using the surplus income for repaying such debt could help you to reduce the financial burden.

Repaying the debt on time is very crucial for maintaining a good credit score. If you have surplus fund and you invest it, then do assess whether you will be able to liquidate it at the time of emergency without any capital loss. If yes, then you can think of investing money over prepaying the loan amount. For example, if you face financial emergency, such as job loss or an accident, and you don’t have enough money to repay existing debt EMI, then you can use this investment for emergency cash flow. However, if you are not sure about retaining the value of investing funds and its liquidity factor, then it is better to avoid such investment.

Invest surplus in appropriate instrument

If you are planning to take a loan for other big ticket purchases, then instead of using the surplus income to repay your existing loan, you can use it to invest in appropriate instrument and later on use it to pay for your buying. For example, you are planning to buy a car after three months and you got a surplus income of Rs. 5 lakh. You have an existing home loan with Rs. 20 lakh outstanding and remaining tenure of 15 years, with an interest rate at 8.8 percent per year. Instead of using the surplus income to repay your home loan and taking a car loan to buy a new vehicle, you should invest it in a liquid fund for three months. The invested money can come handy later on for your car buying.

It's important to maintain a balance between risk and reward

To make a correct decision you should focus on maintaining a fine balance between risk and reward while selecting one of the options. You must analyze the impact of your decision on your retirement goal and your other financial objectives. Try to cut down the risk associated with your debt by utilizing the reward you expect to get by investing the fund.

Team WealthyMantra

Source: Moneycontrol

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20 Important Lessons from Rich Dad, Poor Dad

Many people work very hard in their life, few work 10+ hours a day but eventually do not save much and never get rich. Robert Kiyosaki, author of the book explains smart ways to escape this “Rat Race”.

Important Lessons from the Book (Summary):

1.    For most people, their profession is their income and they live through their work to survive. For rich people, assets they maintain, invest is their income.

2.    If, I want to buy something, I must first generate enough cash flow from my assets to cover these expenses. Buy luxuries last, not first.

3.    Excess cash flow generated by my assets should be invested again into other assets.

4.    Do not simply aim for more income, aim for more valuable assets, repeat the circle.

5.    Reduce your expenses low and reduce your liabilities.

6.    Create a corporation to protect your assets and reduce tax expenses. An employee earns, gets taxed, and then spends what is left.

7.    Know a little about a lot. Learn something about accounting, investing, markets, the law, sales, marketing, leadership, writing, speaking, and communication. Know little about everything you can. Also See Bill Gates talking about the same point.

8.    Work to learn, don’t work to earn. Find a job where you can learn one or more of the above mentioned skills. Alibaba’s Jack Ma also emphasized on this particular point here.

9.    Do not simply buy investments. first learn how to invest as no one else can do it better than you.

10.  You become what you study, so choose your study materials carefully and do read a lot.

11.  Every rich person has lost money at some point, but many poor people have never lost a dime. Playing not to lose money means you will never make money. “Winning means being unafraid to lose.

12.  “Failure inspires winners and defeats losers. Do not be afraid of losing and be bold enough to admit and learn from the failure. No one is born perfect.

13.  Be in control over your emotions. Do not let fear or opinions of the general public dictate your actions.

14.  Most sellers ask too much. It is rare that the asking price is lower than something is worth.

15.  Surround yourself with winners. Sit with people who are smarter than you and you can learn from them.

16.  Saying “I can’t afford it” shuts down your brain. Asking “How can I afford it?” opens up your brain.

17.  Pay yourself first. Each month, first invest a certain amount of money into income generating assets before you pay your bills. Short of money, use this pressure to keep yourself on your toes.

18.  Dream big, have a clear game plan in your mind. Always seek answers to important questions such as Why do you want to earn more passive income? For me, because I do not want to work all my life. I want to have control over how I decide to spend my time. Also, I want to support my parents financially because they helped me all my life.

19.  Develop a skill to listen. Listening is more important than talking. Do not constantly argue and think with your mouth. Ask questions, grab as much knowledge as you can from others.

20. On the market: do not follow the crowd, and do not try to time the market. Profits are made when you buy, not when you sell.

Source: Web

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10 Small Money Moves That Can Have a Big Impact

When it comes to money, small changes may work better than big ones. It's because smaller bite-size changes are more likely to grow into new habits that stick. These changes may seem minor, but they can have a major impact. 

Try these 10 small money moves to build habits that can have a major impact on your financial success.

1. Save a Little

Sure, saving a lot would be great. But saving what you can is even better. Maybe that’s Rs. 10 a month into the piggy bank on the kitchen counter, putting an extra Rs. 100 a month into your bank savings account, or beginning a 1 percent contribution to your provident fund. Small moves like this have a big impact over time.

2. Make an Extra Payment

What if you made one extra mortgage payment a year? Or rounded your car payment up to the nearest hundred dollars? A little extra here and there can mean your mortgage is paid off years in advance or your car is paid off months in advance.

One word of caution — with mortgages you may have to make the entire extra payment at once rather than paying a little more each month. If you add a little extra each month the lender may not apply the extra payment to principal. Contact your lender to find out how to pay extra in a way that the excess payment reduces your principal balance.

3. Learn Your Bracket

Taxes matter. If you pay them, you should learn how they work. Start by studying the tax brackets. When you look at the bracket you’ll see that after your taxable income exceeds certain limits, the tax rate goes up. Once you understand this you can see the benefit of contributing higher income amounts to a retirement/provident funds or traditional PPF - the deductible contributions save you money at the higher rate.

4. Switch to an Index Fund

Just because you can’t see the fee being deducted doesn’t mean it doesn’t matter. Mutual funds deduct fees before they give your share of the investment returns. It’s been proven that one of the best ways to find the best performing mutual funds is to switch to lower fee funds — which usually means using an index fund. As your account balances grow this simple change can save you thousands year after year.

5. Project

It would be hard to find your way through a thick forest if there was no trail. It can also be hard to save for retirement without a sense of where your actions will take you. Online retirement calculators project your path - they help you see how your savings will grow over time and what kind of income might be available to you later. If you’ve never run a projection - get online and give it a go.

6. Read One Finance Book

A single book can impart knowledge that will serve you for a lifetime. Even if you don’t like reading, surely you can get through one book? The one I would recommend is Behavior Gap, by Carl Richards. It’s a great book on how our behaviors cause us to unknowingly make dumb decisions with our money.

7. Organize

Financial stuff can feel overwhelming. A simple step you can use to make it more manageable is to get your financial information organized. I was buried in debt at one point in my life. I didn’t want to see how bad it was - but it was only after I forced myself to organize all my credit card statements and tally up the totals that I began to make significant progress toward paying things off.

8. Buy Used

Cars, furniture, clothing… you can almost always find what you want and pay less for it by buying used. If you get in the habit of looking for used items first you can save hundreds, sometimes thousands, every transaction.

9. Cancel Something

Too many of you have some type of recurring charge that is coming out of your bank account or being charged to your credit card — and it is for something you don’t even use. It might be a magazine subscription, annual membership renewal fee, or something you signed up for accidentally. Scour your statements and set aside the time it will take to cancel those things you don’t use.

10. Turn off Financial TV

One client told me that one of the things he really liked about working with a financial advisor was that he didn’t watch financial TV anymore. He found life to be far more relaxing once he tuned that stuff out. Everyone can benefit from turning off the financial stock tip shows. Put a solid long-term plan in place and watch stuff that will make you laugh - not stuff that will only stress you out.

https://www.thebalance.com/small-money-moves-with-big-impact-2388361

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Asset Allocation: 5 Things You Should Know

The general saying – “Don’t put all eggs in one basket” – in itself explains the concept of asset allocation. Asset allocation is the process of deciding how to divide your investment across several asset categories like stocks, bonds/fixed deposits real estate, gold and cash. The general goal is to minimize volatility while maximizing return. The process involves dividing your investment among asset categories that do not all respond to the same market forces in the same way at the same time. Diversifying your funds in different asset classes helps you to gain from volatile market conditions in the long run. Asset allocation is a key to become wealthy in a life.

Asset allocation is defined as an investment strategy that aims to balance risk and reward by allocating a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

• Individual's goals —  Individual investment goal like short term, medium term or long term
• Risk tolerance — how willing you are to experience the market’s ups and downs in exchange for more growth potential over the long term 
• Time horizon — how long you expect you’ll need your assets to last 

Here are five things you must know before doing asset allocation:

1.       Know asset classes

Investment options are broadly classified into equity, debt, hybrid and cash. The exposure of investment to funds should be according to the timeline of financial goals decided by investors. Howsoever, the market’s up and down requires certain asset allocation strategy from time to time.

2.       Understand your strength

Asset classes are chosen according to the risk appetite of investors. Basically, it is the tolerance power that an investor can take over the market. An aggressive investor is some who can take 70% to 80% of exposure in equity while a moderate investor can go for 50%-50% or 60%-40% and a conservative investor whose main goal is to protect its core value can take an exposure of 20% to 30% in equity. As a thumb rule, we can say that if your life expectancy is 100 years, so whatever your age is today the same amount of debt exposure you can take and the remaining can be taken into equity as per the time horizon.

3.       Evaluate your portfolio

It is necessary to observe the performance of your portfolio which can be reviewed by checking which funds are able to beat their respective benchmarks (Nifty and Sensex). Strategic asset allocation plays an important role between investors to investors on the basis of their risk tolerance and appetite. Investors should understand the critical sides of the portfolio. Therefore, it is advisable to consult a financial advisor in every review process.

4.       Diversification

To make your investment portfolio less risky, it is necessary to diversify your investment component. It means that diversification itself requires a concern over market trend and moreover to optimize the risk properly you need to review over funds category from time to time and apply asset allocation strategy as per the required need.

5.       Structure and re-balance your portfolio

At times it becomes necessary to understand the market movement and accordingly you need to release and buy investment asset. Investment vehicles like mutual funds require a level of understanding among investors. In fact, it is one of the best investment options which enjoys the power of economies to scale in which pooling of funds in a single scheme is done by a number of investors which in turn is much higher than getting a single stock. A single stock can have its own cons related to market fluctuations. Keeping a regular watch on your portfolio taking suggestions from your advisor is the basics which each and every investor should follow and regularize their asset at every interval of time.

The Bottom Line

Asset allocation can be an active process to varying degrees or strictly passive in nature. Whether an investor chooses a precise asset allocation strategy or a combination of different strategies depends on that investor's goals, age, market expectations and risk tolerance. The right asset allocation can help you maintain your confidence through economic ups and downs and may even increase your potential for better returns over time.

#WealthyMantra

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Dos and Don’ts of Financial Planning

Good money habits are the key to financial independence. When you deal with money, you would not want to take any chances. You might do everything right with your money. Yet, you run out of luck when the financial need arrives. These basic dos and don’ts of financial planning could set you on the path to financial success.

Do’s

Identify Your Goals: 

Successful financial planning is dependent on the financial goals you set. It is necessary for you to know why you want to draw out a plan. Begin by asking yourself some straightforward questions. Why do you want to save money? What are your short-term and long-term responsibilities? What are your expectations from a retired life? Answers to these could give you a heads-up on your purpose for planning your finances.

Stick to Your Budget: 

Understand your current and future financial requirements. This will help you create a budget. However, sticking to the budget is important too! Cheating on a budget is as good as not having one. Know the difference between what you want and what you wish for.  Though you could treat yourself to little surprises once in a while, remember to spend less than what you earn.

Make The Right Investments: 

Investments are a favorable way to wealth creation. With a little caution, look at the ways to invest your money. Your investments could reap rewards if you choose where to place them. Try and identify what kind of investment suits your needs the best. Ask yourself how much and how often can you set aside money to invest. Can you afford a long-term investment? This could help you make right investments that suit your purpose.

Purchase Insurance: 

Money saved is equal to money earned. You can multiply your wealth, or save enough for the lean periods. Buying an insurance plan provides both savings and protection. If you do not have one, you could lose a substantial amount to uncertainty. In an emergency, the funds will have to come out of your savings. Some policies offer added benefits such as tax savings. Some could serve your financial goals along with adding to your wealth. These include retirement or pension plans that give you annuity benefits.

Don’ts

Procrastinate: 

Starting early has advantages. You must start financial planning as soon as you can. Delaying this decision will lead to lost opportunities. Starting early also prepares you to prioritize your responsibilities. In the long run, you will have more time by your side to save or to invest. Even if you make wrong decisions, you have time to rectify them. Additionally, you can handle risks better.

Refuse Financial Help:

Financial help does not mean accepting monetary help. That is debt. Financial help is taking financial assistance from a professional to plan better. If your planning efforts have not yielded results, it is alright to look for guidance. A finance advisor or a wealth manager is an expert who will analyze your goals. They could devise a robust plan for you to get to your financial goals.

Go On Credit:

It is easy to have a good time when someone else pays. However, this philosophy is not convenient if you want financial independence. Borrowing money on credit could force you to pay out of your savings later. You could start keeping a check on the number of times you swipe your card. You could also restrict borrowing to fund your passion. A debt can eat into your savings faster than you think.

Mishandle Your Money: 

Don’t abuse your money; respect it. You might want to stick to a few thumb rules. Do not leave extravagant amounts as tips. Avoid lending money. Remember to recover any money that you lend. Any money saved under the carpet does not earn interest. Have faith in the power of compounding and invest early. Every penny counts. Therefore, you should be careful in handling your money.

There isn’t a perfect list of dos and don’ts that work. When it comes to financial planning, different approaches work for different individuals. Yet, a more practical approach is likely to make financial planning a success.

#WealthyMantra

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10 Essentials to Stay Wealthy in 2017

Come New Year and its celebration time. It’s generally a happy time spent with near and dear ones. In the same spirit, it’s good to take stock of one’s financial well-being as well and chart a set of resolutions that could help you stay wealthy in the year 2017.

Here’s a list of ten resolutions which could help you with this:

Resolution 1: Go digital. With online banking, wallets and UPI seeing a significant penetration and surge, a large portion of transactions can be done digitally. What’s more, one can earn some good karma by introducing these facilities to one’s maid, cook or driver!

Resolution 2: Move excess money in the bank to an FD or a liquid fund. Too much money in the bank is not going to help. What with most banks offering 4% on saving accounts.

Resolution 3: Stick to the asset allocation that has been decided for the portfolio. Reams of data have been published outlining the virtues of asset allocation. The trick is to stay the course and not get swayed by short term volatility.

Resolution 4: Continue the SIP even if that near-term data looks shaky. In the short run, SIPs may not appear great, but for a great majority of investors, regular disciplined savings is a tool that can build a nice corpus over time. Caveat here is that one should ensure there aren’t too many or too few schemes in the list. If you are a new investor, it’s always a good time to start an SIP.

Resolution 5: MF scheme selection should be based on long term trends in performance and consistency of fund mandates and managers. Most investors and their wealth managers tend to highlight near term performance over long term consistency. It’s important to allow some time for the portfolio picks to play out. Similarly, while stock picks are great conversation items at parties, selection of the stock needs to be after careful research. Remember, one’s financial well-being is more important than idle party chatter. If an investor does not have the time or inclination to conduct this study, its best to allocate monies to a set of well rated mutual funds.

Resolution 6: The Indian mindset considers Bank FDs to be safe and comfortable. Of course, they are. But, with falling rates along with tax on the income, these are not great long term investment options. Its critical to measure the after-tax returns on any investment. An investor can diversify into Debt MFs and FDs of well rated and safe Institutions (for someone in the low tax bracket).

Resolution 7: A trend that is emerging of late is for wealth managers to offer portfolio management schemes and close ended private equity fund and real estate funds. These sound sophisticated and exotic, which in turn, drives investors to believe that these are superior vehicles to simpler instruments such as mutual funds etc. However, one needs to assess the level of risk, cost and historic performance (if any) before committing to these options. Most have steep exit costs or lock-ins. Hence, exiting may be expensive or not possible at all. If the investment thesis does not play out as expected, there may be no flexibility to exit and reallocate. A detailed study and careful examination is a must, before signing up.

Resolution 8: It is imperative to monitor an existing portfolio at regular intervals. MF schemes may have outlived their utility or may have changed the mandate. Stocks may not have turned out as expected. A clean up ensures robustness of the portfolio. Even better, if there’s a quarterly or a half yearly review built in.

Resolution 9: Current lifestyles have forced us to take stock of insurance needs. While a decent health cover is always helpful, sufficient term life cover is an absolute must. Unit linked plans need to be viewed as investment products and measured accordingly, whereas most investors blissfully, ignore this aspect. Pure term cover works as the best form of life insurance. Period.

Resolution 10: A house keeping exercise will do a world of good in keeping one’s portfolio ship shape. Important documents and bank accounts need to be up to date to reflect the current details. Unused bank accounts need to be shut, as there is no point in retaining too many accounts. An aspect a significant percentage of Indians tend to overlook due to sentimental reasons, is to ensure a will is written. Age is not a consideration here as human life is dynamic and uncertain. Large households and families with special needs, would be well advised to look at setting up Trusts to ensure continuity and smooth transition of wealth.

The 10 commandments outlined above are timeless and thus, it’s always a good time to revisit them. The motto for the year ahead should be simplification and consolidation.

30 minutes a week can go a long way in ensuring a robust financial portfolio.

Cheers to a wonderful 2017!!!

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