E-Gold is recommended over Gold ETF- My recommendation

E-Gold is recommended over Gold ETF- My recommendation

The reasons for opting e-gold over Gold ETF are good enough, to choose between the two. Investors can invest in gold through ETFs as well through e-gold of national spot exchange.There are some minor differences in ETF and e-gold.

1.Fund managers track gold prices through Net Asset Value (NAV).NAV of Gold ETF is net of liabilities so NAV and returns of different ETFs are different.

2.While in NSEL e-gold investors directly tracks gold prices.

3.NAV of ETFs are inclusive of custodian charges.while NSEL do not charge any holding charges.

4.In e-gold ,investors are directly holding the gold units ,,,while in Gold ETFs gold is actually owned by mutual fund AMCs.

5.Physical delivery in small denominations is possible in e-gold.while in gold ETFs physical delivery depends on  sole discretion of ETFs.

6.ETFs may offer delivery for investors holding Gold of  higher amount.

7.We can invest in gold ETF only up to 3:30 PM IST as market get closed.while spot market is open till midnight and we can invest in e-gold series till 11:30 PM.Suppose if gold ETF closed  with NAV of 2300 (Time : 3:30 pm) and get closed at e-gold at 2330(At 11:30 pm).Then there is a difference of Rs.30 per gram in both the prices.Gold ETF will try to cover up this difference on opening itself.Investors will not get opportunity to get the price in between.

8.In both cases,buy-sell intraday/delivery brokerages are payable which are in general in the range of 0.3 to 1%.

9.E-gold will be taxed like a Physical gold while Gold ETFs are taxed as Non equity mutual fund

From above, we can observe that E-gold has got edge over Gold  ETF.

 So, it is recommended to to invest in gold via E-gold.

Financial Ratios, a rough skeleton on which a Client's Financial well being can be projected

Financial Ratios, a rough skeleton on which a Client's Financial well being can be projected

Financial planners usually on their way to create a path of financial freedom for their clients, start with the analysis of the current set of investments and the plans which the client has taken. The current financial situation is judged basis their net income and expenses, their debt, their liquid assets, liquidity, solvency, net worth, savings rate etc.Financial ratios are decision making tools which tell you how good or bad your financial health is.
For any financial plan to be made all the above ratios have to be taken into consideration. Let us have a quick look to what they actually mean:

1.Net worth ratio, simply means what is the difference between the total assets you possess and the total liabilities which stand against your name.

Net worth is not only that starting step that directs you to set a financial plan to reach your goals, but helps you to protect your assets via insurance coverage by determining the worth of your assets.

Formula: Net Worth = Total of all your assets – Total of all your liabilities

Thumb rule: Net Worth thumb rule = (Your Age x Gross Annual Income from all sources except inheritances)/10*;

   

Example: If you're 30 and earn Rs 5 lakhs a year, ideally you should have a net worth equal to or more than Rs 15 lakhs.

2.Savings ratio

The Savings ratio simply tells you how much are you saving monthly. It is not only the proportion of income which is saved, but also a measure of one's risk profile­ whether you are proactive with investments or not.

Formula: Savings Ratio = Monthly savings / Total monthly Income

Rule of thumb: There is no general rule of thumb as the amount of savings to be made depends upon an individual’s lifecycle stage. As a guideline, it can be taken as 15%-20% of monthly salary. However, the more the better.

         

Note: A single month savings ratio does not reveal much but taking an average of several monthly savings ratios will be a better indicator of how good or bad you are at saving.

   

3) Debt to income ratio

This ratio indicates the total monthly income that goes towards paying all your monthly debts (home loan, car loan, personal loan, credit card, consumer durable, gold loan etc) - all outflows towards servicing debt are taken into account here.

Formula: Debt to Income Ratio = Monthly debt payments / Total monthly Income

But just about everyone has debt. The real question how much is too much? That will again depend upon the lifecycle stage of the individual. For example, a man in his early 30s usually would be servicing more debt payments (on account of home loan, auto loan, consumer durable etc) than a person in his 50s who is nearing retirement.

    

Rule of Thumb: The lower the ratio, the better. The lower this ratio the lesser burden there is on the individual to make payments on his/her debts. High debt to income ratio also means having a low savings rates. It also threatens one’s ability to retire with the desired retirement corpus.  General guideline is a ratio of less than 40%.

      

2 more Debt ratios:

(i) Housing loan outflow Ratio – This is a parallel version of debt-income ratio used by home loan underwriters to scrutinize the creditworthiness of borrowers. You can apply this to assess your monthly housing loan liability against monthly total income.

Formula: (Home loan EMI + loan insurance + property taxes + other relevant payments) / by Total Monthly Income

Rule of Thumb: Housing loan expenses should not exceed 30% of gross monthly income.

    

(ii) Credit card debt Ratio – On similar lines of housing loan outflow ratio is credit card debt ratio. It is useful to assess credit card debt payments vis a vis total monthly income.

Formula: Monthly credit card debt payments/ Total monthly income

Rule of Thumb: This ratio should be less than 20%. A high ratio could point to excessive use of credit cards.

  

4) Debt assets to Total assets ratio

This ratio compares total debt assets to total assets to gain a general idea as to the amount of borrowed money being used by you.

Formula: Total debt assets/Total assets

Rule of thumb: A lower ratio is desirable. A low ratio means that you are less dependent on borrowed money.

Why consult your Financial Doctor aka Financial Planner?

Why consult your Financial Doctor aka Financial Planner?

Authored by: Ajit Panicker
Financial planning is not only about investment planning. Investment planning is a part which comes under the umbrella of a comprehensive financial planning. People make some common mistakes when taking crucial financial decisions related to their asset building or investment with "return" as the biggest parameter to judge.
Doctors are specialists in their fields of medicine and surgery, so also are other professionals. Similar to them, Financial planners are professionals certified by FPSB Board in India ( FPSB India is a part of FPSB Ltd, USA). They are certified to do financial planning internationally.

Usually, the decisions in a family are taken by the eldest most but in many families it could be liberal to an extent that , opinions are asked. The purpose of taking opinion from elders or those who are experienced is basically because we expect them to have knowledge about those aspects  But is it prudent to say that, every eldest member of the family, knows about all the things in this world. No , it is not.

Financial Planners are specialists in their field , who know their job and do comprehensive financial planning.
Therefore you should consult your financial planners , not only before taking any financial decision but to plan you finances , so that your life can be planned.
Few WHY's to consult your Financial Planner:
1. Financial Planner is a super specialist in managing and planning your finances.
2. He is a certified professional, registered under an internationally acclaimed board and examination.
3. He is focused in helping you set your goals and achieve the same on time.
4. He is knowledgeable and recommends you the best plans.
5. He has great interest in the field of financial planning and so keeps himself abreast with the latest in the financial world.
6.He is your Financial doctor, who treats your diseased financial portfolio and wrong decisions.
7. He is unbiased and gives genuine recommendation which are highly useful and advantageous in long term.
8. He is empathetic and understands the "returns" sentiments attached to each asset or investment being made in an asset.
9. He constantly endeavors to keep you happy and free from all financial turmoils or tensions.

Lesson of Sincere Sales Pitch

Lesson of Sincere Sales Pitch

Authored By: Ajit Panicker


Lesson of Sincere Sales Pitch:
Yesterday, in a coffee shop waiting for my client to arrive, i met a real estate executive. He must be around 25 years old. seeing me wait for my client and scribbling some notes in my diary, he called up an invitation to sit with him and chat. During our talks i realized that this 25 year old has a path to follow to reach his destination. Focused sincerely on his work was carrying two mobiles, a usual phenomenon in metros, to show that you are a busy guy. I asked him why does he need two mobiles, his answer was "sir, i make appointments by calling people, and the day the charge of both my mobiles do not finish during the day, i consider the day , that my work is unfinished.
Impressive", i thought. While talking he understood that i am a financial planner, but he did not make any effort to make link up with me for future business prospecting. it was a soft call on me while i was leaving the table, when he said "why don't you book an apartment, for yourself, when you are doing for others".
I said, we have planned and would soon take up a flat. He was just not pushy and kept a decent sales pitch throughout the conversation, showing interests and knowledge on varied topics.
What i want to share with my fellow financial planners, advisors, working in banks or self employed, to make sincere efforts to reach to your customer.

"Plan your day and the day will unfold according to you" 


As you design your presentation, develop both a strong opening and a powerful closing. After your opening, preview your main points and then provide enough specific information to support your message. 

The following S-S-S formula helps your listeners retain important information and prompts them to act: 

State State your main points clearly and concisely. 
Support Provide enough supporting information to address your listeners' needs adequately. 
Summarize Summarize each main point of your message.

CHITTI, the Financial ROBOT , answers you " What is Foreign Direct Investment"

CHITTI, the Financial ROBOT , answers you " What is Foreign Direct Investment"

Authored By: Ajit Panicker

Foreign Direct Investment is an investment which is made in a country by company or a group from some other country either by buying out the company from the target country completely or by buying a percentage of it or by expanding its operations into the target country in the line of existing business.
Foreign Direct Investment or FDI, is done in either of the ways:

·                     By incorporating a wholly owned subsidiary or company

·                     by buying out shares of the company

·                     by mergers or acquisitions

·                     through an equity joint venture

According to the Ernst & Young (E&Y)'s 2012 India Attractiveness Survey, investors view India as an attractive investment destination. India stands as the fourth most attractive destination for FDI in the survey's global ranking. Domestic market's high potential driven by an emerging middle class, cost competitiveness and access to a highly qualified workforce are the major factors that has been the magnet force to attract global investors.

But of late, in past few months due to delayed political and economic decisions by the Indian government, there has been an outflow of the foreign investment and together with other  factors the investment picture is looking bleak as of now. It is just a passing phase , wherein a number of external, global and internal factors have impacted the country, but there would soon be a turnaround and in next 2 years , the growth story would be right back on the track.

Invest while you are in debt

Invest while you are in debt

Authored By: Ajit Panicker

"When you are in debt, why should you invest, there is no need". This is what we say to ourselves when we are in debt, with the loans taken from banks to purchase our own house or cars we buy or consumer durable items we purchase.
Most of us think like this, and this is even logical. Why should you pay unnecessary interests when you are already in debts?
 Let us take a situation where a family of four with husband , wife and their two kids stay together. Both husband and wife are working and the children are going to school. They have recently taken a home loan and a car which they purchased three years back. many household items are also financed by various financing companies.
Both husband and wife earn handsomely, but still this kind of debts are still there, the reason being , that they want to live a better life and banks and financial institutions being there to provide such credit facilities.
Now what i think, are they not investing for their retirement or for their children's future, they must be.
What i need to understand is that are they DOING INVESTMENTS while being in DEBT.?
Yes they are, and this is what almost all of us do, barring a few.
In this situation what should be done is , the individual should analyze what is the total debt, which he has taken, and what is the interest he is paying on them. He should at the same time calculate what is the total investments he is making and what would be the interest he would earn over a period of time, he has taken that investment for.
After doing both the calculations, present value of money  for all the corpus (from the investments made)which would be created after the tenure should be calculated. Then with the debt he has and the interest he is paying on the assets, or items he has purchased and would be paying till the tenure ends, he should calculate the benefit of assset he is having and the appreciation of the assets which would happen over a period of time.
If there is a positive outcome , in the present value of future money and present outflows, then investments should be made regularly.
But if there is a negative outcome, then still, investments in systematic way should be made so as to maintain the discipline of saving and thus not allowing all the earnings either outflowing as interest to banks or debt repayment or expenses for the household.

Why you should not compare insurance with mutual funds when planning for your child?

Why you should not compare insurance with mutual funds when planning for your child?

Authored By: Ajit Panicker

Everyone likes to see their hard earned money grow quickly. But there are no quick gains. An investment has to be long term in order to be really beneficial. As you make up your mind to invest, make sure you are ready to keep patience. Besides, risk factor is always there to escort your investment. So, you should be absolutely clear in your mind, what you want. Whether it’s life insurance Policy, National Savings Certificate or Mutual funds, all the investment plans have their merits and demerits that you need to consider before you proceed. Unit Linked Insurance Plans are also gaining popularity these days for their investor-friendly profile.

When planning, the objective should be clear. If the objective is that of child's future planning, ons should consider the following things before zeroing on a particular product?

1. Is the product allowing you a regular flow of investment or is it asking for a lumpsum investment?

This can both be provided by a mutual fund and a child insurance plan. In case of mutual fund a lumpsum investment one time or on SIP mode , and in case of insurance plan it can be a single premium plan or a regular premium paying plan.

2.Is the product giving you decent returns which is beating the inflation? Mutual funds or a child insurance plan both over a period of more than 10 years would provide a return around10-12%. But in mutual funds, till this financial year only tax saving mutual funds allow tax rebate, and all other mutual funds would attract tax, but in case of all life insurance plans under section 80C the principal amount and the returns or maturity amount under sec10(10)d are tax free.

3.Is the product liquid  or it allows you to adhere to a discipline of regular investing and does not give you an easy chance to exit. If the planning is for the child's future, it is always better to get into a plan where you have less chances to exit, so that even emergencies do not force you to exit. And the child's plan continues.

4.Is the product giving a rsk cover in case of any risk happenning to the person who has bought the product for the child. This can only happen in an insurance plan.

So the point in consideration is that all products available in the market with due respect to the risk, return and liquidity involved them, should be considered by keeping the financial planning objective in mind.

All product have their own individual importance and work accordingly.

Consult your Financial Planner