Author: admin

Date : 05 May 2017

Young adults are perhaps the richest among all of us. They have something more – “time”, an age when the possibilities are unlimited. In case you are a young adult in 20s or 30s or a parent / guardian with children approaching or are in their 20s, this article is for you. The article guides us to do a few things which perhaps no one has ever told us to do. These things will introduce you to the world of finance and when taken, will be your first steps to the world of finance…

Why Take These Steps?

There is one common thing which most people after the age of 35 regret. That common regret is about not knowing about investments and saving at a young age. To be financially successful, being skilled and knowledgeable is not enough. You need to have the right wealth management skills to be rich. It can amplify or magnify your income many times over. Hence, while you should focus on learning and pursuing your career dreams, you should also focus on increasing your ‘wealth quotient’. The earlier you take the jump, the chances of becoming wealthier soon, increases. Being in your teens or in your 20’s is the best time to take the steps listed here…

The First Steps:

1. Learn about Personal Finance & Investing

Knowledge about personal finance topics and investing at an early age is a great asset. Young adults must know about different asset classes, investment products, insurance, loans & credit, time value of money, inflation, savings, taxation, financial planning, etc. Such knowledge, especially during early years of career can really help someone take great decisions for future. If you are a guardian, be sure to involve the young adults in your own investment decisions. There are many ways in which young adults can gain financial knowledge. Some of them are…

• Read books, finance magazines and watch TV shows on investments
• Interact with financial advisors, accountants, experienced family members
• Attend investment seminars/camps by regulators, participants in financial services industry
• Enroll for any certification from the many offered by NSE/BSE on the subject matter

2. Get Engaged:

Your parents must already be investing and interacting with their accountants and financial advisors. We encourage you too to participate in learning and understanding the decisions, your parents are making. You may ask them about what financial savings are being done for your future. You may also enquire about insurance coverages, etc. taken for all family members and whether those are accurate. As savvy internet users, you may also share your feedback and suggestions to your parents in their wealth management activities. We are confident that with the kind of access to information you have, you can surely start adding great value to family financial matters.

3. Control your spendings

Young adults are perhaps the most valued consumers hunted by every big brand ranging from cars to shoes to laptops to even holiday packages. With the newly gained earning power and lack of big responsibilities, it is natural that spendings on entertainment, gadgets, accessories, hanging out / parties, etc. form a big chunk of the spendings. Surely it is the time to enjoy life but young adults are advised to control their urge to splurge and not make impulsive decisions. It would be great if one can budget such spendings and avoid taking big decisions like buying motorbikes, cars, laptops, etc. without adequate thinking and research.

4. Start investing immediately:

We have often spoken on this topic. The benefit of saving early can never be under estimated. Even if the savings is small, with the power of compounding, the wealth created by you can be enormous, as seen from the following matrix.

In the above e.g., Mr. Delay would have to invest thrice the amount, or R 3,000 monthly, saved by Mr. Smart if he wants to match the wealth created by him at age 35.

5. Get PAN & start filing tax returns:

PAN card can be issued to any person, irrespective of whether there is any earning or not. And, if you have started earning, it is best to start preparing & filing income tax returns (ITR), unless exempted. Filling of ITR has many advantages as it is considered as a standard income proof globally and can help you while applying for loans, visa applications for jobs abroad, requesting tax refunds, etc. The PAN issued by IT authority is a prerequisite for filing ITR and is also mandatory for all financial transactions. So it makes sense to get yourself one, even if you don’t have much income.

6. Get health & life cover

Getting adequate protection at a young age, where people tend to be more adventurous, is highly advised, even if there aren’t any dependants on you. Buying health or life cover at a younger age is also considerably cheaper than buying the same later. Such protection can really help one, in case there is any unforeseen emergency and financial burden on parents will be avoided.

7. Start thinking about home

The average age of home & car buyers has decreased dramatically in the last 20 years. Powered by easy availability of loans, fat pay packages & growing aspirations, the first time home buyer today is often around the age of 30. The first time car buyers are even younger. It would thus be best advised that young adults keep these goals in mind and start saving as much as possible for home & car goals, if any, from now onwards. It would really benefit you a lot when the time comes for purchase in near future. Often young adults delay saving for the goal and end up paying lesser down-payments and taking higher amount of loans which should be avoided. Lastly, even if you have a house of your own, it is advisable to think of buying a house as an investment for future and also enjoy tax benefits on same.

Conclusion:

Having time on your side is a great advantage and never to be missed. It is also the time that you can afford to make mistakes while learning – this is a luxury which most people cannot afford at the later years of their lives. Experience has shown that wise decisions, actions and discipline in these formative years go a long way in securing a better financial future down the line. Simple actions taken today can help you avoid taking tough decisions at times when you have a family to support and lot of responsibilities to be taken care of. So go ahead and make the best of this time.

Ashish went to a nice restaurant for dinner with his 4 colleagues six months back. They had a fun evening and the bill for the dinner came to Rs 12,000, which was split between 5 of them. Manish paid the bill and the others had to transfer their share to Manish’s account. Everyone paid, excepting Rakesh, he forgot to transfer the money.

Today, Rakesh walks up to Ashish’s desk and says, “Hey, I just realized I forgot to bring my wallet, can you lend me 1,000 rupees?” And suddenly Ashish goes into a flashback and recollects that dinner and Rakesh not paying his share. Ashish, with a fake smile, unwantingly stretches his hand to reach his wallet kept in his trouser pocket. He opens the wallet, with the unbroken fake smile, he sees that he has around Rs 5000 cash, but decides to lie to his friend and says, “Sorry Manish, I just have a 100 rupee note in my wallet”. Rakesh to Ashish, “No problem Ashish, I’ll ask someone else” and he left.

Why did Ashish choose to not help his friend?

Because of lack of credibility

You would not want to risk your money by lending it to someone who is not credible, because there is a likelihood of him defaulting again.

This was an everyday scenario. However, when it comes to the organised sector and if you want a loan, you must make sure you don’t have a credibility issue. Because you might not even get a fake smile here, and the bankers won’t even pretend to stretch their hands to reach their lockers.

Banks will decide whether to give you a loan or not, on the basis of your ability to pay. And they gauge your ability to pay through your CIBIL score.

What is a CIBIL score?
TransUnion CIBIL Limited, collects and maintains credit records of individuals on the basis of their loans and credit cards holding and repayment history. These records are used to create credit scores, which are provided to banks and other credit institutions in order to help them evaluate and approve loan applications.

The CIBIL score ranges from 300 to 900. Higher the score, the better. Ideally you should have a CIBIL score of above 750 to increase the chances of your loan application getting approved.

If a person is in urgent need of money, the worst thing that can happen to him is a bad CIBIL score. It is mandatory for banks to review a loan applicant’s CIBIL score among other checks.

Having a good CIBIL score will not only help you get loans easily, but also you’ll be eligible for higher loan amounts, lower interest rates on loans, longer duration of loans, etc. To avail these benefits, you must maintain a good CIBIL score.

How do I maintain a good CIBIL score?
Check your Credit report. The first step is checking if you have a low CIBIL score or not. If you have a low score, then you have to get it right. You shall:

• Pay off your credit card debt and any unpaid loans.
• Pay your EMIs on time.
• Reduce the number of loans and credit cards you apply for.
• If your credit card or loan application is rejected, do not apply for it again immediately.
• If you notice any errors in your report, you must appeal for its rectification on the CIBIL website.
• You must not exhaust your credit card limits. Ideally, you shall use 30-40% of your credit limit each month.
• Use the oldest credit card, the one which you have been managing well and have a timely repayment history. Get rid of others.
• Do not be card hungry. If there are 6 different banks offering you credit cards. Do not take all of them as you do not need them.
• Maintain an optimum balance between your secured loans (Eg. A home loan) and unsecured loans (Eg. car loan).

The above points will help you increase and maintain your CIBIL score. Even if today you have a good CIBIL score, keep the above points in mind as a small mistake can bring bring your score down. A high CIBIL score will help you get those loans easily and on better terms and conditions.

Stay On Track: Key To Achieving Your Goals in Life

How would you consider your life to be meaningful and successful? I am sure that many would not prefer or will not be able to put a monetary figure here. Success for many of us would mean achieving our dreams in life or helping others achieve their dreams in life. Truth be told, we all have our own dreams in life, like owning a house, our kids foreign education, going on long vacations, comfortable retirement with respect and the likes. The question really is, do we know what exactly are our dreams, how much will they cost and most importantly, whether we are on track to achieve them?

Why Define Goals in life?

Unless you don’t define your goals with proper details, you are unlikely to achieve the same. Same is the case with your life dreams. Most of us often invest for our future goals so that we have the money to fulfill them when they arrive. The problem is that most of these investments are generalized, the exact time available for every goal is not known, target amount needed is also unknown and lastly, there is no link between our investments and our goals. How can we be sure that our goals will be achieved if we do not know these important aspects? How can we know if we are on track or there is a gap in our investments? How can we best plan goals to make them feasible and practical? These are important questions needed to be answered.

Enter, your financial advisor or the preciouswealth Wealth Partner. The person who can help you identify and define proper financial needs or goals in life. He/she would also help map /earmark your existing mutual fund investments towards these goals. These are the important activities which will unravel the future plan you will need to adopt to achieve your goals.

How To Track My Financial Goals?

To make your life easier and to help you get organized with your goals and your investments, preciouswealth has brought to you the ‘Family Needs Progress Report’ on your Client Desk. Firstly, you have to sit with your advisor and do proper estimation and defining work for your goals. Thereafter, the advisor will enter goals and map existing mutual fund investments into the system.

And there you go! you will have your Family Needs Progress Report ready – simple, meaningful and actionable for use! Here is a quick snapshot of what it will look like…

Following is the important information available in the report:

1. List of all your Life Goals + Maturity Date & Time left

2. Target Amount required at a future date for goal achievement + Gap in the same as per current investments done

3. Projected Need for investments: SIP or Lumpsum to ensure goals are on track.

4. Graphical representation for easy understanding and knowing if you are on Track!

Lets’ take an example to understand better, the above image shows the Family Needs Progress Report of an investor .

This investor is approaching his retirement. On the top, he has his retirement goal, for which he needs Rs 7.50 Cr in 2 years and five months. He is running an SIP of Rs. 10,000 per month dedicated to his retirement and the current value of his investment is Rs 3.15 Cr. This investment is expected to yield 12% return p.a. and hence when he approaches his retirement, this investment will yield him Rs 4.14 Cr, as against Rs 7.50 Cr required, so there is a gap of Rs. 3.36 Cr.

Now the tool has shown him the Gap in Progress towards his Retirement Goal, and has given him two options to fulfill this gap: (i) he needs to do an SIP of Rs 10,03045. His current SIP is of Rs 10,000, so he needs to do an additional SIP of Rs 9,93,045 or (ii) he has to do a lumpsum investment of Rs 2,55,65,393.

Thus, the investor is very clear where he stands today, where he will reach in the future and what he needs to do to achieve the destination he wants to reach. At the bottom of the report, is a simple consolidation of all the above data along with the amount of mutual fund investments already mapped and yet to be mapped to goals.

Benefits of knowing your progress…

So, hopefully this sample has imparted clarity on how this report can help you manage your family needs. The Family Needs Progress Report helps you in the following ways:

1. Organized: You don’t need papers or excel workbooks to mange your family needs. This report has a very simple to understand interface and will have detailed information of all your family needs as shown above. So, it saves you from all the clutter and your universe is just a few clicks away.

2. In Control: This report will show you the Gap in your Progress, and the Plan of Action you need, to ensure that you are always on the right track and at the right speed, so that you reach your target in time.

3. Discipline in investment behavior: This report will help you focus on your goals instead on short term needs or market fluctuations / noise. It will also help you stay on course of your investment planning and remove any short term anxieties. Needless to say, it will bring more maturity, direction and discipline in your investment behavior along with a commitment to achieve your long term dreams.

So the crux is, we can achieve our life goals, if we plan for them and manage them effectively. preciouswealth’s Family Needs Progress Report is a tool designed to help you in carrying out your job of goal management conveniently.

You can view this report as: Home page of Client Desk as Family Need Progress Report and in detail format under Consolidated > Family Need Valuation

We hope that this report will contribute to enhancing your financial planning and investing experience.

Managing expenses is a tough task if you have not budgeted for it. But what about unknown expenses that hit us out of the blue. At times, even expert investors find it difficult to manage such expenses

. A quick review of such mistakes may help us to manage them better:

SELECTION OF CHILD’S COLLEGE
As mentioned in the previous article, as parents we aspire to provide the best education to our children. However, this best education may come at a cost which may not be justifiable. While shortlisting the colleges for higher education, we need to inquire for scholarship and financial aid options being offered. A lot of colleges offer scholarships to deserving students or students who score high marks in their exams. Secondly, many high profile colleges are located in large cities where the cost of living may blow a big blow in your overall education plan. This may result in you taking an education loan for the child or the child taking up a part time job to part fund his education expenses. It is important to take decisions with your head rather than your heart.

TAKING A HOME LOAN
Once we have a stable job and family, we desire to have a home in our name rather than staying on rent. While this may sound good on paper, it is important to analyze our income sources. Banks and financial institutions are more than willing to give home loans as it is the safest loan to give due to the collateral of the house. But the catch is the payment of the monthly EMI which can go on for as long as 30 years. You need to have a backup plan in place in case you need to change your job to another city, face a medical emergency or require money for child’s education. It is important to think about all of these unforseen events before taking a home loan.

RETIREMENT PLANNING
As mentioned in one of our earlier articles, retirement planning is the most overlooked and avoided subject in any conversation among young salaried employees. Nevertheless, the implications of failing to plan for retirement can be disastrous for you and your family. Therefore, you need to take the following steps: Save 12% of your monthly income if your are a salaried employee Invest your salary hikes towards creating a comfortable retirement for yourself and family At every stage of your life, ensure that you have balanced mix of equity and debt in your portfolio. Do not go overboard on any asset class. Periodically, rebalance your portfolio to maintain your asset allocation.

Key Takeaway:
Always prepare for unexpected. Have a backup plan in place. Be Patient and wise while investing your money.

There are changes happening in every aspect in our lives. One change that has affected our lives is the growth in financial needs and products available. The result is that today there is a large number of advisors / distributors or consultants that we are associated with. Though this may not be necessarily a bad development, questions do arise on practicality and need to deal with so many different people. In this article, we try to look from the investors perspective and answer upon some unspoken questions.

Choosing advisors:
The first question that arises is now many advisors should we deal with. Historically, the onus has really been on the client to make the holistic decisions on his/her overall financial well being, and then engaging with traditional advisors for specific products or services. Typically, it would not be surprising to know that most of us would be dealing with at least 3 to 5 traditional advisors, from the following list, at the same time…

Assessing our financial advisory needs:
The right approach would be to not directly hunt for product advisors/distributors but to first look at our needs holistically. By looking at the needs with this purview, we bring greater simplicity and purpose. It is likely that following 4 broad needs would be identified

1. Taxation / Accounting services
2. Risk protection / insurance
3. Wealth creation / investment
4. Banking services

We now attempt to take a closer look at the traditional advisors within the framework of our identified needs…

• Taxation / Accounting services: The CA, as an expert for accounting services, is indispensable. However, if inexperienced or not engaged in financial advisory, he/she may not be in the right position to offer pure investment, portfolio or insurance related advice
• Risk protection / insurance: The next need of insurance and the choice of the advisor would be subjective upon you. You may engage with a life insurance agent and a general insurance agent or preferably with someone who does both. The limitation is that a pure insurance advisor/distributor will not be an investments expert and would instead recommend insurance products for pure investment needs too
• Wealth creation / investment: Ideally a wealth advisor should be approached for investment related needs. Typically he would have products for long term wealth creation in his basket. The products of mutual funds, fixed income products and PMS offer acceptable risk-return trade-off and can be looked positively by small & retail investors. The limitation is that he may not be experienced in insurance to provide advice on same.
• Banking services: The bank relationship, should ideally be best treated as a continuous, service related relationship. The Bank RM, armed with bank info, may offer investment products. However, for small / retail investors it is likely that any product advice is made without proper portfolio / financial planning and is transactional in nature there is inadequate attention & service facilities provided

Financial Advisors / Planners:
With the existence of a plethora of financial needs & products, there is a growing need felt for single window approach to financial decisions. Thus, many traditional advisors are now offering multiple products and comprehensive advice. You may ask your advisor and it is likely that he/she would have multiple products/ services in the advisory basket. Such comprehensive Financial Advisors / Planners offering single window advisory on multiple products are at the top of ladder.

Engaging with Advisors
By principle, it is recommended to deal with advisors that have requisite skills in multiple domains. Clients should engage with advisors offering comprehensive financial planning services. There may be a possibility that your CA also offers Investments / Insurance advisory or your Investments advisor may also have Insurance advisory services and vice versa. The benefits of engaging with single financial advisor / planner for multiple needs / financial planning is as follows:

• Comprehensive view of your entire financial situation & goals
• Optimum utilisation of our resources / capital for right reasons
• Unbiased / product neutral advice
• Best of different worlds available

Exception to the principle can possible in cases where you are not confident about the advisor’s knowledge, skills, quality or limitations on product / service offering.

The following matrix summarises the advisors we would be likely to deal with and the services and products expected from them.

To start with, you may approach all your existing advisors and seek information about the different products and services advised and offered. You should specially ask for financial planning services, if any offered.

In brief:
In would be better that we deal with a minimum number of good advisors who are in position to offer the optimal combination of important services and products. Taking the financial planning approach is the best way to deal with a large majority of financial decisions in a holistic manner. This is much better than choosing products first ourselves and then approaching distributors. Also, a person who has knowledge and access to multiple products is likely to be more unbiased and would provide advice which is product neutral, presenting you with the options / products across the board.

Taking about the relationship with your financial advisor, it is indeed a special one. A good relationship is something that has to be treasured by us and at the same time we should also be fair and open regarding our needs & expectations. We should also be ready to share information and pay for quality, unbiased services expected from the financial advisor. The relationship is that where mutual trust, respect and understanding is paramount and so is the ability and intend of the financial advisor to work in your interest.

Date : 12 May 2017

What happens when you go into your bank to deposit a large sum of money or if you have a huge balance in your savings bank account. Probably someone from the bank staff would approach you with an excellent investment option for your cash or your bank balance. This person is your Relationship Manager. You’ll be told to divert your money into a product as the money that is lying in your account is generating very low return while their investment product will deliver way better returns.

So, shall you do as he says? Since he’s your banker and there exists a relationship of trust between the bank and the customer, and you entrust your hard earned money with the bank, because you trust the bank.

The answer to this is simple, “No”

We often hear about instances wherein individuals were fooled by their Relationship Managers, and were made to invest in a product which were far from suitable for them.

A 60 year old man approached his RM, he wanted to invest a part of his retirement corpus in a product which could give him a better rate of return than his saving account. He wanted to keep this money as his emergency fund, so there should be safety of principal and flexibility of withdrawal.

The RM sold him a long term single premium endowment plan.

Now what will the poor old guy do with this policy. He has to dedicate a huge amount today which will be locked in for a long period of time, probably until he dies. Moreover, it didn’t serve the purpose of an Emergency Fund. And the worst part is, he didn’t even know that he bought an insurance policy.

In another instance, a 32 year old man who was on the lookout for a good tax saving option, asked his Relationship Manager for advice. The RM suggested him a product which had the following features:

1. The investment is eligible for deduction u/s 80C and 10D

2. He would get a life insurance cover of Rs 15 Lacs

3. He will get a fixed return of 12% p.a.

What else could he ask for? The RM was a Messiah for him.

Was he really?

Probably Not.

The reality was, the first two points were true. The third point had a small glitch, and that was Fixed Return, it was actually a return of upto 12%. It could be 4%, 5%, anything below 12%. And another very important point that the RM forgot to mention was, this product had a lock-in of 22 years.

The investor was quite confident about the product, but then he decided to consult his wise uncle before investing. This decision helped him from being screwed up big time. The Uncle could sense there’s something fishy because of the over enticing features of the product. So, he researched and revealed the truth to this investor, that this product was not just meant for him.

There is no end to such mis-selling stories. Your bank RM should be the last person to seek investment advice from. The advice can cost you dearly.

But why do the Relationship Managers sell the wrong product to the investors?

So, they mis-sell because of the following three factors:

1. The Relationship Managers get Commissions on the investments that you do through them. And each investment product has a different commission percentage attached to it. And generally, the commission paid on a product and the quality of the product are inversely related. This means an investment product which bears a high risk and offers low return will offer a higher commission, compared to a product which bears a lower risk and offers high returns. So it goes unsaid, that the RM will pitch that product which will bring him the highest Commission.

2. The Relationship Managers get sales Targets. They get overall targets as well as targets to sell specific products. So, in order to achieve their targets, the RM would make you as their target, and will try to sell those products to you, where they are falling behind.

3. The Relationship Manager will offer those products to you which are lying on his shelf. The bank will have a tie – up with limited number of companies, so they have only those products to offer which are offered by those companies. For Eg. You want to buy a Term Plan. Now you ask your bank RM to suggest the best Term Plan for you. Since your bank has a tie up with let’s say two Insurance Companies, so your RM will give you options from those two companies only. Whereas, there are so many Term Plans available in the market which are way better than the ones suggested by him. But because he has only two options to offer, so he would advise you to go for either one of them.

So to conclude, your investment is a product of the RM’s Commission, his targets and the products available with him.

The only way to avoid falling prey to the trap is be updated, and take a well researched and informed decision. The idea is you should not blindly trust anyone when it is about your hard earned money and not that after reading this article, you look at your Relationship Manager with an eye of suspicion and run away whenever he comes towards you. It is because not everyone mis-sells, he might have something good for you. You should rather research, consult your financial advisor whenever you get investment advisory from someone else.

So, the crux is banks are a good place for taking loans, for depositing money, but not for seeking investment advice.

Following are some tips which can help you in building and managing your Emergency Fund:

Ask your advisor: Your emergency fund must be sufficient to meet emergencies. Contact your financial advisor and give him the details of your fixed and variable monthly incomes and expenses, including EMIs, leisure, medical expenses, credit card payments, etc. He will help you in determining the amount you need to keep aside for emergencies. He will also guide you with respect to the assets you should invest in, as an emergency fund will serve its purpose only if can be liquidated easily in case of an emergency.

Keep it separate: You must always keep your emergency fund isolated from your normal savings account. This will help you curb the temptation to withdraw your emergency fund for your usual or recreational expenses. An emergency fund is supposed to meet emergencies only, it should not be used on new clothes, vacations, casinos, etc. Because if you use it now, you will not be left with anything then.

Cut down the unnecessary expenses: If you feel you are not left with enough money after your monthly expenses and other investment commitments, and hence you cannot start investing for an emergency fund.

Think again! Yes you can, there are many things you spend on every month, time and again, which you don’t even require. The expensive shoes and clothes you buy, which you seldom wear, the gold and silver you buy only to stack in your locker, and the like can be exchanged with bringing in mental peace and stability into your life.

Use unusual income: Most people plan to buy the latest gadget or go for a vacation when they are expecting their annual bonus, or a sudden gain, or sale proceeds from old furniture or other household

items. But you as an investor must set priorities, and providing for emergencies would definitely occupy a higher position than purchasing the latest 55 inch LED TV. So, use your next bonus in contributing to your emergency fund.

Invest Regularly: Like your other monthly installments of expenses and investments, make it a habit to invest for your contingency fund regularly. You must keep aside a fixed sum from your monthly income dedicated towards emergency. This is a good approach as you may not be getting big surprise money any soon or you may not have lump sum money to invest plus it builds discipline in saving and investing.

So, the bottomline is reach your advisor and build an emergency fund. Remember it is an ‘Emergency’ Fund and shouldn’t be touched unless an emergency happens. Follow the above, with discipline, perseverance and a little extra commitment, you can protect yourself and your family from the unlooked-for emergencies. The emergency might not happen in the next twenty years, but when it does, you’ll be happy to look back that you took this decision this day. Remember your family’s future is dependant on you.

People are very particular about the financial advisor they choose, we consider and evaluate alternatives, we take months to select the right financial advisor, we even change advisors if we are not satisfied. And we are right, we should care, because we are entrusting him with our hard earned money, our personal information, we are actually entrusting with him our lives, as he will be guiding us, he will be setting our investment path, so that we can actualize our life’s goals.

So, we need an advisor who is honest, ethical, knowledgeable and who keeps our interests at the center. So, a good financial advisor has to fulfill a number of prerequisites before getting onboard.

But then, the success of our investment plan not only depends on how good the advisor is, we as investors also have a very crucial role to play here. If the advisor has responsibilities, if he can be held accountable, then we too share certain responsibilities.

Apparently some investors do not reveal the complete list of facts and figures about their personal or financial life. This is a major financial mistake, and can sabotage your entire financial plan. The advice of the advisor is based on the facts provided by the investor, if the facts are false or incomplete, then the advice may not be the perfect path towards towards your goals. To get the best from the advisor, the investor should be honest with him. The investor should take care of the following things during the making of his financial plan:

We have a number of people who advise us for our finances, CAs, lawyers, bankers, insurance agents, and financial advisors. On your CA’s advise you invest money in a PPF, on your Uncle’s advise you have invested in a property in the suburbs, you bought a medical insurance policy on the insurance advisor’s advice and likewise. All these existing investments have an important role to play while devising your comprehensive financial plan, and they should be included as a part of your overall asset Portfolio. Consider an example, Arun is in his late 40’s and he decides to have a financial plan. So he sits with his advisor and discusses his requirements, and even on the advisor’s questioning, he does not reveal about a Rs 10 Lakh FD that he has and a house worth Rs 2 crores that he is expecting to inherit from his parents. This information makes his financial standing pretty sound, but because the advisor lacks this info, he lays down more of an aggressive financial plan for Arun. The Advisor presumes that Arun doesn’t have a strong financial standing, and he needs to create wealth to meet his goals in the next one or two decades. But considering his age and the fact that he has decent wealth, an aggressive plan is not ideal for him, rather he should have had a conservative plan which would have protected his wealth along providing with some growth. Had the advisor known the complete facts and figures, he would have deleted the risk element from his plan. Misrepresentation of wealth resulted in creation of a bad financial plan for Arun. When you hide some investments from your advisor, your financial plan will not reflect the true picture.

Communicate your priorities: Let’s say you want to buy a house in the next five years. So, you sit with your financial advisor and both of you lay down a plan of how will you be investing to achieve your goal, and you start following the investment plan. Now one year later, you tell your advisor that you need money from the home fund for a vacation to Europe with your wife as it is your 10^th wedding anniversary, and you can’t postpone it because you promised this trip to your wife 5 years back. This vacation will disrupt your entire home plan, since the investment was created with a five year horizon and secondly withdrawing money now will result in a significant deficiency in the corpus at the time of buying the house. So, you should have communicated your vacation plans to your advisor when you were devising the plan. The advisor would have either provided for both goals in the plan or he would have asked you to postpone one of your goals. Therefore, the investor should communicate his priorities, his attitude towards risk, his nature, because all these characteristics exercise a significant influence on the investor’s financial plan.

Personal Information: The investor may feel that certain details are embarrassing or are not relevant, and he skips narrating that information to the advisor, but such information may be vital and should have been accounted for in the financial plan. For eg. If an investor does not have a very pleasant relationship with his wife and he is expecting a split in the future and he hides this fact from his financial advisor, then this concealment will have a negative impact on his finances. The advisor will not account for this upcoming financial emergency and may direct his money towards his long term goals, leading the investor into a difficult situation in the future. Or if the investor or any of his family members is suffering from a serious health issue, the investor may omit telling about it to his advisor because according to him it isn’t a material fact. But here too, providing for a health condition either in the form of insurance or an emergency fund is necessary to avoid pitfalls later.

There is a chance that you may want to entrust some part of your financial plan to some other service provider even though your financial advisor provides those services as well. Like you may want to buy an insurance policy from your insurance cousin, or you may want to plan for your taxes as per your CA only. So, you should be honest and should tell about it to your advisor point blank, because ultimately it is for your benefit. If there is a space for a particular insurance policy in your ideal Portfolio, the space should be utilized irrespective of the platform used. It will also give you a more holistic view of your finances and will depict deviations, if any.

So, the bottomline is your financial advisor is your best financial friend, who ought to know all about your finances, so that he can have your your back always.

The investors and advisors who believe in Mutual Funds, who have time tested the quality of the product in terms of its returns and dependability, also affirm that the best approach to investing in Mutual Funds is through SIP. SIP is a tool which lets you invest a predefined amount at regular intervals in Mutual Fund Schemes. An SIP enables you to actualize your goals in a smooth and systematic manner. The step by step model of investing imparts discipline and offers convenience in investing, while the goodness of Rupee Cost Averaging and Power of Compounding render generous returns.

Mutual Funds and investment houses have been propagating that SIP’s can help an investor in achieving all his life goals. This article concentrates on how an SIP can help you achieve your goals and eradicate stress from your life by filling in the gaps where necessary.

All of us have our own set of dreams and goals. Many of us invest for our goals, while others are still living in a la la land. For the former set of people too, who do invest for their goals, there are some goals and there are some investments. However, the goals are not penned down, and the time when these goals will arrive is also not identified. The goals are hovering in the investor’s mind and there is no proper alignment between the investments and the goals, people invest in random instruments and for random number of years. So, the end result is when the goal arrives, sometimes your investments are not enough, or they aren’t yet ready to be liquidated.

SIP is an excellent tool to overcome the chaos. What you need to do is sit with your financial advisor, define your goals, along with the distance you need to travel to achieve them, in terms of time. Your advisor will help you determine the approx amount that you would need for each goal. The advisor will do the math and let you know which funds you should invest in, and how much you need to invest at regular intervals, so that when your goal arrives, you have the money to fulfill it. There will be one SIP for one goal and this monthly (or quarterly, or bi-annually) amount is your SIP installment.

This SIP installment is a small amount that you need to carve out from your monthly income, and before you realize this small amount starts contributing big to your life. An SIP is your financial life partner and it’s there for you for all kinds of goals, be it short, medium or long term goals or whether it’s worth Rs. 20,000 or Rs 2 crores.

Let’s see how an SIP is a foolproof mechanism to provide a solution to all your life goals.

Let’s say you saw a Rado in a mall a few months back, and it was love at first sight. You saw the price tag Rs 38,000 and sighed, you are too expensive to be curled up around my wrist! Now whenever you pass by that store, you ogle through the glass wall, just to steal a look at the jewel. Did you know? You can gift yourself your fantasy on your next birthday, with the help of an SIP. Assuming the Rado will cost Rs 40,000 after a year and you will get a 10% return on your investment, you need to do an SIP of just Rs. 3,164 a month and own your desire.

Similarly, SIP’s builds the path for all other life goals, be it a near term small goal like a Manali vacation in a year, or funding for your kids’ education in 10 years or saving for a peaceful retirement after 20 years, SIP is the key to all the riddles of your life, and it won’t let the goal pinch your pocket when it arrives. The best thing you can do to sort your life is start one SIP for one Goal.

An SIP not just caters to your dreams, but also acts a fulcrum in your everyday life.

> Save Taxes: In order to avoid the last minute hassle and to avoid worrying about accumulating a huge sum in the last moment, you can simply start an SIP in an ELSS mutual fund. So if you need to save Rs 150,000 for tax purposes, you can break it down into 12 SIP installments of Rs 12,500 each. This way, you’ll be able to meet your tax goal comfortably, as well as benefit from high and tax free returns by investing in equity and having a minimum lock in period of three years.

> Emergencies: You can start accumulating for uncalculated surprises through SIP. You can start with a nominal sum, like Rs 2,000 a month, so that whenever an emergency arises you have a back up plan ready.

> Gold: With an SIP in a Gold Fund, you can gradually accumulate enormous gold.

An SIP can support you for all your life goals, and more effectively if you increase the SIP amount as your income increases.

Consider another example, a very important life goal, you have a 10 year old daughter, and you want to invest for her wedding. You want to have a lavish wedding and the estimated cost of the wedding 15 years hence is Rs 50 Lakhs. So, you need to start an SIP of Rs. 5,740 and increase it by 10% every year, and you’ll have Rs 50 Lakhs for your daughter’s wedding 15 years hence. (Assuming 12% CAGR)

So, you see how simple it is to witness the big moments in your life materializing in the manner you have always dreamt of. All you need to do is squirrel out a small amount each month for your goal, and see the magic that your SIP does for you!