Category: How to-Guide

Buying Health Insurance Policies Online

Posted on by Jagoinvestor

Finding a suitable health insurance policy is akin to finding a needle in a haystack. There are 21 health insurance companies in India and many offer more than one type of health insurance product. Joining the bandwagon are life insurance companies that are now offering health insurance policies as well! So how do you buy one? First, make sure you know what you need – whether it is individual health insurance or a family floater you are seeking; how much cover you need and when you need it.

How do I go about buying a health insurance policy?

Traditionally, health insurance policies have been bought either because they were sold or because of awareness among investors through advertisements. And a majority of us rely on the group health insurance cover provided by our employers anyway.

The simplest way to go about buying a policy is to get in touch with the insurers and ask for premium rates. But this has its own limitation – you could easily take a month to get all the details and the insurance agent could really be slow in his response – after all, it’s a health insurance policy he is selling and it fetches him less commission!

Go online: Another easy way is to use insurance comparison sites or aggregators as they are called. Aggregators provide a single window to compare quotes and features from multiple insurance companies and help a customer select the most suitable one. There is a whole lot that has mushroomed in India of late.
The best health insurance aggregator website in our opinion is Coverfox.com who gives you the results in a decent interface.

How do aggregator sites work?

Once online, all you need to do is provide your age, how much coverage you need and for how long – typically this is one year with most insurers today. The portal will collect personal information – email id, city and phone number to reach out to you later on – do provide this if you are a serious buyer.

Once you enter all relevant details, you are shown a plethora of policies and you can check each one out before selecting the one you want to buy. Most of the aggregator sites will collect payment from you upfront and liaise with the insurance company who will close the deal with you. Aggregators get a small marketing fee from the insurance companies for policies that they sell online. In response to this article, Deepak Yohannan, CEO, and co-founder of iGear Financial Services says “The process of buying online insurance has been made as simple as buying a flight or a movie ticket online. In the last year, there have been considerable improvements in the online buying process.”

Example

Suppose you are 30 years old and need health insurance for Rs 3, 00,000/- for a year. The following is a sample of the health insurance covers that are on offer. Let’s just talk about individual health insurance plans for now.
Health Insurance options in India
Imagine the time you would have spent on collecting this data and comparing it if you were to do this offline.

Filtering the unwanted

How do you select what you want to buy? Remember that the aggregator site provides you comprehensive information on each policy and even lets you compare them – some sites will allow you to compare two policies at a time while others will allow you to compare more. The comparison feature compares side by side almost everything an insured would want from a health policy – this way an aggregator site is very powerful to help you decide which policy scores better. After you have compared and selected your policies, all you need to do is apply the same filtering techniques one would use when buying a policy offline to select the best one that you will finally buy. There are a host of parameters that one could apply.

In the example above, with so many policies available with such a wide range of premiums, a best practice could be to pick a policy with the highest, lowest and midway premiums for comparison and then apply the filtering parameters. We apply two of the most important comparison parameters first. Firstly, start with the maximum renewal age as the first option – select the insurer which allows you to renew the policy till maximum age. If you want to change to a new insurer at an advancing age, this will be looked at as a new policy and will come with a higher premium. It’s best to stick to a policy that can be renewed till the maximum age. Secondly, check when all the insurers will allow pre-existing illnesses to be covered. The earlier they start covering all pre-existing illnesses, the better. Usually, there is a waiting period of a couple of years before which expense incurred on pre-existing illnesses starts getting covered.

The waiting period varies from company to company. Filter more by checking on what are the special features that are on offer and go through the exclusions with a comb. Exclusions are most important as far as a health policy is concerned – you don’t want to get a claim rejected because you did not know what was not included in the policy. Does the policy cover maternity expenses or ambulance expenses? Generally, there will be sub-limits for many of the expenses within the overall limit, for eg, room rent could be 1.5% of sum insured per day. So if you are staying in expensive cities like Mumbai or Delhi, for a cover of Rs 3,00,000/- the room rent charges come to Rs 4500/- per day. Think whether the hospital you want to go to will have a room that can be accommodated in this range. If not, you would be better of settling with a no sub-limit policy.

Its worth noting that most of the policies will cover expenses incurred a month before and 60 or 90 days after hospitalization; free annual health check claims and a 24 hour helpdesk among a host of other common services which generally should not be used as key comparison parameters.

Here is how the data looks like in our example for the highest, lowest and mid-way premium figures.

Health Insurance comparision at different premiums

Which one would you buy from the above? It’s clear that the first policy is better as pre-existing illness are covered from the third year onwards and there are no sub-limits on room rent and doctor fees – so if this meets your criteria, go for it irrespective of what the premium is.

Checkout

After having selected a policy that suits you best, all the aggregator sites are pretty friendly in terms of helping you check out to buy the policy online after you have registered with them. The insurance company will contact you for paperwork within a week of payment.

Issues buying online

  • Firstly, there are many aggregator sites available in India. Not each one will cover all the 21 insurers and you could lose out on some of them. The best way around this is to use maybe 2 or 3 of them and compare and buy from one that best suits your requirement.
  • Some aggregator sites might not have the correct data! It’s best to re-check the details of the policy you have finalized with the insurer, either on the insurer’s website or offline at a local office, before buying.
  • You still need to undergo medical tests if you are 45 years of age.

Advantages of buying online?

“For starters, buying online has now become a very simple process. You do not have to go through the hassle of going through an agent, who would have a tie-up with limited number of insurance companies and may not be able to get the product that you want. The agent may try pushing a product which they want you to buy. Also, there is complete transparency in the process when you buy online – everything is there in front of you and then you can make a decision. With an agent you really do not know if some facts are being hidden and only the good part of the policy is being highlighted to you. You realize the worst when the policy document comes to you or when you start the claim process. Having said that, if the agent is a completely trustworthy person, buying online and offline are the same,” says Deepak.

So, here are the advantages:

  • You save time – everything can be done at the click of a mouse.
  • It’s cheap, you save the costs for the insurer. This is passed onto you.
  • You don’t have to make a trip to the insurer’s offices and wait for time from the agents.
  • Most of the aggregator sites are easy to use and compare – it’s a one-stop-shop to buy policies.
  • Most of these sites are safe to operate and buy a policy using card details.
  • Most aggregators have an FAQ section and “ask an expert” section which helps you reach out on queries you might have.

Quick Bites

Keep the following points in mind when buying health insurance:

  • Ask insurers for premium rates or dig the figures out for yourself on aggregator sites.
  • Do not base your decision on the premium alone – remember, the policy with the cheapest premium might not be the best one for you. Also, there is no one policy that can be termed as best for everyone. Select one that meets your criteria, lifestyle and family requirements and buy it irrespective of what the premium is.
  • If you live in a metro, take a cover of 4-5 lakhs; in a smaller city, 2-3 lakhs of cover will do.
  • Check whether your policy will guarantee long term insurability.
  • Check whether a floater plan is more beneficial for you.
  • Most importantly, check the policy wordings on what the exclusions mean to you.
  • Opt for a cashless plan.
  • Take health insurance even if you have one from your employer.
  • Reveal all your family illness history; if you hide anything, it will only come back to hurt you.
  • Buy from a health insurance and not from a life insurance company.
  • Buy a critical illness policy separately than as a rider to your basic health insurance.

Disclaimer: The views and analysis expressed are those of the author and should not be construed in any way to be the sole reason of buying a policy online. Please do adequate research yourself before buying.

This is a guest post from TheWealthWisher, a personal finance blogger who writes on www.thewealthwisher.com

Tips while Buying House, Real life experiences

Posted on by Jagoinvestor

Are you thinking of buying your dream house? If yes , then you must be having a lot of questions and you must be looking some guidance from everyone you know, Why not utilize the knowledge of readers here.

Buying House in India

Over the last couple of days I was tying to catch up with readers who have bought flats or other real estate property and asked them 3-4 questions which could give you good understanding/points of what all you should take care while buying real estate.

You will also get to know some basic tips and tricks given by our readers here which they learnt or heard from others while making their purchase in Real estate. Overall see this article as a real life experience’s of readers on real estate and their learning out of it for others.

I hope you had a look at the debate on Buying vs Renting

Tips while buying house in India

Ankur Lakia Experience

Most important thing to take note of while buying the home :

Costs other than quoted per square feet rate. Few of costs like floor rise, parking, stamp duty and registration are fairly well-known. However, I was surprised when asked to pay for value added tax liability and service tax.

Since I bought under construction property and with all payments by cheque, I did not have much option but to pay for these costs. These are substantial costs and buyer needs to be aware of these additional costs while budgeting for the property purchase.

Biggest advice of caution will you give to new buyers :

While buying under construction property, buyer needs to do a thorough due diligence on builder’s track record on completion of property on time as well as quality of work. It is better to buy from a big name builder like Raheja, Hiranandani, Lokhandwala like (as far as Mumbai is concerned).

Even though one might need to pay a bit higher rate, it is worth it as it gives peace of mind when someone accepts all payments by cheques and abide by contractual terms. A good read from Subra on Mumbai vs Navi Mumbai Real estate .

One trick/idea which can help new buyers :

One thing which helps, is to buy little old / used property, may be 3-5 years old property. 3 to 5 years do not make much difference in usable life of property. However, usually one can get such property at much better rate than normal market price for new property.

More important though, buying little old property has several advantages:

1. One gets good idea of available infrastructure like nearby groceries, shops, availability of household help, situation regarding water supply etc which matters more to the lady of the house.

2. One can see whether building is being maintained or not. When I visited a building just two-year old, I was quite surprised to see its shabby look. It turned out that many members of society were quarreling and not paying their dues. One can easily skip such headache if buying slightly old property.

3. You can very well see the neighbours. It might be good idea to just meet them and greet them even if for only little time. It gives good idea on what standard of living is maintained by residents and whether one can easily fit-in.

For example:

my brother skipped a building which was really well maintained, with quite good location and flat available within budget. Surprised, I asked him the reasons. It turned out that almost every one of the residents was having more than one car in family and holiday trip abroad was fairly common.

My brother did not want to be part of such residency as he thought it would not be possible for him to fit in with people having such life styles since he could not afford such life style and, then, he would be odd man out.

4. There are some buildings where there is only one flat occupied on a floor, others being bought by “investors”. One can avoid possibility of living on a ghost floor by buying little old property..

Any other learning :

I am quite amazed by people stretching themselves on floating rate loans while buying property. I think people need to be aware that rates could be headed much higher, and higher enough to make material difference in their EMI obligations.

I think there are a lot of people who do not understand risks of floating rate loans or loans with first couple of years of very low-interest rates.

Meena Sivaram Experience

I will definitely give my inputs based on my experience. My advice will be more geared towards those who want to buy a house for the first time for self-occupancy and NOT those looking for immediate gains and make a killing in the real-estate market.

I am not the right person to advise those people as there are experts in that area. Here are my 2 cents:

Affordability – Do not go for over-priced properties which are beyond your means. Do not be impressed by those fringe attractions that builders dole out to impress the potential buyers like club, swimming pool, golf course, gyms, landscaping and what not…All these so-called benefits inflate the price of the property.

More important than these are the quality of construction and the basic facilities provided by the builder like earthquake-resistance (the richter scale it can withstand), the ratio of super area:built-in area, quality of material used within the apartment, 24 hr backup of electricity etc.

If you can manage your cash flow by reducing some other expenses, go for a size which is bigger than required i.e you need 2 BHK for now, go for 3 BHK and so on.

Location – This is important. I know most people cannot afford to buy a property on a prime locality like South Mumbai or South Delhi but when you are house-hunting in the suburbs, look for the development activities in the surrounding areas.

If there are metros, malls, highways, office or commercial and residential building being constructed in the vicinity, such properties have the potential. Choosing a right property in a right location is like picking up a good stock.

Buy when prices are low but has a potential to go up in the medium to long-term.

Words of Caution to New buyers

  1. The land on which the property is being constructed is not under any legal dispute and the papers are clean
  2. Make sure the builder has taken all the necessary approvals from the municipal and other bodies required for the construction of property. Any slack here will delay the possession.
  3. Previous track record of the builder on the completion of projects on time. Most builders do not adhere to the schedules. Of course such a risk is not there when you are buying an already constructed property but they are more expensive.

One last piece of wisdom: 

Go for your first property when you are around 30 years of age and do not DELAY it. Go for a 15 year loan tenure and aim to repay it within 10 to 11 years. So by the time you are 40-42 years, you are out of the loan liability. CAGR % for Meena house is around 12% and Tenure is 14 Years , She lives in Delhi-Ghaziabad Border

Wasim Sayyadd Experience

1. After identifying the property, look if the builder has constructed any apartment nearby/surrounding that is already occupied. Go..talk to people find out how genuine this builder is.This gives you a feedback how genuine and chalu the builder is.

That way be prepared based on your questionnaire.

2. Read Agreement carefully before signing it. Eventually, in the process of purchasing Flat we built mutual trust and the builder promised me to give parking, but this was not included in my agreement. He called me to sign at registration office without handing over a copy of agreement in advance.(I also didn’t question being a good relation)

I got the copy after a registration..same day I read carefully all the lines..and noticed parking is not included..called builder he assured to give parking. Am still waiting..as parking is not yet alloted to the Flat owners yet.

Ratio of parking available to the owners is less. And I am following it up..to get my part.

Manish Jagtap Experience

I am assuming the target audience to be the end-user who will stay in the house, and not a Real Estate speculator.
  • Put max possible down payment. Otherwise Bank interest over long tenure will eat up all price appreciation of the property.Also do not keep EMI more than 40% of husband’s salary. Ladies are most likely to take breaks for kids. Do not consider their income while planning for EMI. If wife continues her job, you can user her money to do partial pre-payments. (Compare different home loans)
  • Check Builder reputation. Also, if possible go for ready possession. These days builders show some garden, play area in brochure (you consider such things at the time of buying) and later on build something else on that land.  You don’t want to see a balcony of some other building that the builder pops up on such land, to stare right into your leaving room/bed room.
  • If possible go for group booking since it gives you a negotiating power. Lots of IT guys do these now a days. Mistake I did was to go for 95% loan even though I had money to pay for the flat. Price appreciation was eaten up by interest on the loan amount. Also, keep in mind the rising cost of children education, your retirement funds.

Robin’s Experience

I will start from the first step instead of the zeroth. A buyer has an option to choose from a ready-to-occupy apartment or an under-construction project. Ready to Occupy projects are priced much higher as the risk associated is far less.

The unit is all ready. An Under Construction on the other hand is cheaper but other than the risk you also have to wait for the unit to be complete. If one has enough fund for the Ready to Occupy option, people prefer it. In our case the Under Construction works better.

We did not have enough funds to actually buy a Ready to Occupy unit. A 2 BHK from a reputed builder was priced upward of 50 lakhs, It would have required a loan of more than 40 lakhs. An EMI of 45k per month was in the uncomfortable zone, plus it meant very little monthly savings.

Remember we had a car loan too.

Under Construction plan has a silent benefit which most people tend to neglect in their calculation. While the project is under construction, we are also drawing our salaries. Since the payments are construction linked, initial EMIs are quite low. This has an advantage.

By the time  we get the possession of the flat we would have easily saved more than 10 lacs (we are considering 3 yrs time frame), something which would have been difficult in the Ready to Occupy plan.Other than the financial aspect we also have the legal aspect to take care off.

The project should be clean and should have all the necessary permissions from various govt. bodies. SBI seems to have the most stringent legal policies. So if a project is rejected by SBI, one should show extra caution. If one is looking for a flat which is Ready to Occupy type, one should consider the second sale option also.

This should be used just before the registration in the original owner’s name. Most of the original buyers are investors, they would like to sell the property before the registration to avoid paying registration fee.

Check Your EMI

Check more Amazing Calculators

Vikram Experience

Most important thing to take note of while buying the house :

The location of the house is quite important. Are their schools nearby if there what are the standards of the school.What are the standards of my neighbors and so on are also. How far are the groceries or provisional stores and other amenities.

Biggest advice of caution for new buyers :

Look before you leap. Think a million times before you buy a house. Check the EMI and see if you have enough on your hand to survive.
If you are on rent and going to pay EMI for an unfinished house, check if whatever you are left with is sufficient for you to lead a decent life. People with kids especially should tirple check before they commit to a 30 or 40 lakh EMI options. The market never remains the same. Have a backup plan just incase you are not able to pay an EMI.

Any other learning you want to share :

If you are planning to buy a new house by selling an old house, ensure that you have the new house papers in place before you sell your old house. I personally was affected by this issue or risk or whatever you wanna call it. Dad had a house and it was planned that that house will be sold and we will buy two new flats for me and my sister.
The sale of the house happened but we never were able to buy a house because of market boom. It was the worst decision of my life agreeing with the sale but I am repenting for it and the things I have to do get some extra money to buy a house is making me die everyday.
With an 8 month old baby now I am really not sure how to make things happen. A single bad decision ruined a lot more than just my finances.

Ashutosh Tewari’s Experience

Most important thing to take note of while buying the home :

Connectivity and basic infrastructure (grocery stores, road/ rail connectivity, safety),  Consider re-sale property (less than 5 yrs old construction is the ideal bet) as there are several advantages of it :

  • More carpet area: In most of the new construction the super-buildup to carpet area ratio is barely 60-65%
  • Better Infra : Most of the older construction already have shops and amenities established around them
  • Lesser Maintenance : This is fixed monthly outflow that most people don’t take into consideration while decision-making. Newer constructions (especially the ones with exotic “themes”) can have a pretty high Maintenance outflow. There are some in Mumbai, where it’s as high as 10,000-12,000 per month.
  • Ready to move :  You can move into it right away, as against waiting for 2-3 yrs in case of newer construction. If you stay on rent then this can be an important consideration.

Biggest advice of caution for new buyers:

  • Before making the buying decision decide on the budget and strictly stick to it.Do not get tempted by up selling.
  • The net EMI outflow should not exceed 35% of your net monthly take home, this will help reduce the stress level substantially. Also set aside a contingency fund which can cover 6-8 months of EMI.
  • Do not get over excited and limit your spend on furnishing and interior designing. This is an emotional decision in which usually tend to go overboard very easily. Also for people living in metros there is a high possibility of their moving to a bigger apartment or a different city, in that case there are things which may not fetch returns while selling.

Sunil Jaiswani Experience

What is the most important thing to take note of while buying the home :

Keeping apart the finance / affordability aspect because it has already been discussed, one important aspect while buying a house is the maintenance expenses,basic amenities and cost of living in the area.Not all places have good water / electricity availability + distance from workplace.

Biggest advice of caution will you give to new buyers  :

To be very careful of the person you are dealing with in case of non branded flats/homes because a new buyer can easily be caught in the nexus of land mafia which are obviously gundas and if something or the other goes wrong you cannot do a thing about it.

In small towns we even have instances of some properties being sold multiple times and also illegal land grabs/kabjas. I was lucky enough to escape such a condition but only after facing a lot.

One trick/idea which if implemented properly can save some good money :

New to this process but if you plan to sell the investment flats or homes in some short time you can save the registration money by holding a POA ( power of attorney ) in your name and save the investment on registration.

Later when you sell you can directly transfer the registry to buyer saving you a good amount. + in case of small town purchases more u bargain ( and more the upfront money ) more the price reduces.

Other learning :

Other than flats /duplex which yield a return of 12-15% CAGR the land prices in tier 2 and tier 3 cities offer much higher and brisk return sometimes.Thus if you are looking to invest irrespective the location , small cities are a good option to consider.

Moreover having been to all major cities and small towns , trust me that living conditions and resources are still much better in small towns with respect to electricity , basic cost of living , proper water and food availability.

Raja Panda’s Experience

  1. Check out the individual flat plan and match it with the actual size of the flat. Take extra care to match(measure) the size of balconies. This is where most of the builder do plan violation by increasing the size of balconies to get extra money. That’s because the expenditure on the balcony for construction is the least but the customer pays the price as part of the Super Built Up Area.
  2. Again measure the exact size(carpet area) of the flat. Most of the customer take the word of builder as sacrosanct when it comes to stated size of flat, but on calculation one can many times find a 2-5% shortfall. Remember that can mean a difference of 80 k to 2 lac rupee difference in a 40 lac flat. Now you get it! right ?
  3. Check out your undivided share of land. Very simply put an unit of undivided share of land equals (total super built area of all flats in the complex)/(total size of land for the complex). So, to reach at the undivided share of land allotted for your flat it should be (your super built up area) * (the unit calculated above). Lot of times this is overstated by builder to attract customers. But remember, if there is a natural calamity like earthquake,fire etc and the building gets destroyed it’s only the undivided share of land which you really own. Don’t leave it for later. Builder which do not allot undivided share of land to buyers are a strict no-no (yes there are such builders).
  4. For under construction flats it’s very common for the builder to give possession of the flat once it’s occupation ready. But the amenities (if any) are given after long gap and hassles. My suggestion would be simply hold the money for the amenities part until it’s really completed.
  5. For ready to occupy building’s insist on occupancy letter which is issued by the authorities. This ensures the plan violations has been checked and regularized by authrities when the consturction got over and it’s really ready to occupy.

My Comments

First thing I would say is dont rush, learn about things, buying a house is one of the biggest decision (atleast financial) you will make in your life and you will commit your lifetime of cash flows in it. Planning things well in advance and doing your investigation will lead to smoother and successful execution.

Your chances of making wrong purchase or a bad purchase will be minimized if you take time and do your investigation well enough.

Just for an example :

You buy a house , you do your basic investigation and the house was available at very very attractive price, and gives you a hope of making 100% profit in 2-3 yrs and suppose later you come to know that everything was fine, however the construction quality is not that great and have been compromised.

You really don’t want to get into that situation because first point is that if its your first home , you probably be planning to get settled there and wont move out once you are in your comfort zone and once things settle down like your office is very near, your children schools are there and you feel good there.

Every decision you take is your decision. Just like Wasim Sayyadd (One of the above), we Indian’s are emotional, we shy away from talking direct and think too much about feelings, relations and how others will think?

We make oral promises and also rely on them many times. There is nothing wrong in asking straight questions and questioning each and every step when you buy anything, because Damn! , its my money and its me who will suffer if things go wrong . So make sure you go through a detailed checklist because you buy a house or any other real estate property .

Here are some from my side.

  1. Patta Verification
  2. Guideline Value
  3. Demand at least EC for minimum 15 years
  4. Check the Property Tax recipt till date & name
  5. if the Seller is a power Agent check weather he has all the rights to sell the property
  6. Check that the plot is approved by Panchayats/CMDA/DTCP/MMDA
  7. Check that the property belongs to which zone (Resi/Agri/Comm/Aquifier/Non-Resi/industrial/Special)
  8. Check that the property had undergone any heir purchase, mortgage, loan, if so NOC from the concern department
  9. Check that the plot can be approved for residential purpose in case of unapproved
  10. Verify the documents with a legal Advocate
  11. Check the documents with a Banker for Loan Possibility (without patta & Approval loan is not possible)
  12. Dont agree for any Oral Agreement , Never !
  13. Check that the Layout has been allotted OSR Area ( temple, school, park, shop ) or else the owner has to pay 10% of the land value to the Government for approval. Only if the layout exceeds 3000 sqm, 32258 sqft, 74 Cents .
  14. Insure that the Plot is minimum 500 meter away from National Highway, Sewage Canal, Sea Shore, River, Pond, Lakes, Dam, Airport, Bus stand, Railway station, Nuclear Power Station, industries.
  15. The Registration Stamp Duty charge will be 8% of land value and 1% as Registration fees and Misc Charge extra
  16. The Road Width defines the no of floor you can build, in case there is Airport near by you can get only G+1 permit
  17. The Zone type and the Road Width defines how much area you can build, in case Aquafier Recharge Zone you can get only 0.8 FSI wherels in residential Zone you get 1.5 FSI
  18. Check the frontage length of the plot.
  19. Check the type of ground soil.
  20. Check the type of ground water.
  21. In case of corner plot check the shortage area
  22. Check the road level height and rain water stagnating
  23. Check for Vastu (it will be better if it is east facing and rectangle in shape), if you believe in it.
  24. Check weather Drainage faculty is there.
  25. Have a detail conversation with the landowners near by and always have touch with them
  26. It is Mandatory to have the complete details of the property seller including his photograph.
  27. If the plot is near by Burial Ground the value will get low.
  28. Other Essential Facility Nearby & Need to Know are Schools , Collages , Bus stand , Railway Station , Ration shop etc. Understand that you need all these for next many decades , so are they 2-3 Km away or 10 Km away can become one of the biggest deciding factors 🙂
  29. Make sure you have address and phone numbers of all the relevant and concerned offices like Panchayats Office , V.O Office, R.I Office, Tahsildar office , Register Office, EB Office , Court , Police Station, Post Office
Source : Indianrealestateforum.com

Question: What was the biggest or most valuable learning you take out from this Article, If you also bought a home, please share your learning and we can add them in the post.

How to choose Medical Insurance Policy ?

Posted on by Jagoinvestor

Does the premium amount guide your decision on whether to buy a medical insurance policy? No. Premiums are not the only factor to consider when buying a medical insurance policy. These factors need to be taken into consideration before looking at the premiums.

medical insurance

1# TPA (Third Party Administrator)

These days, companies have an in-house settlement process and thus do not outsource their settlement processes to outside TPA’s. Why do we need to look at a company providing an in-house settlement process? This is very much needed in the case of cashless settlements. Settlement processes are easier when handled in-house. Also make sure, that the company’s in-house settlement process is in your own city or in your own state. (TPA list in India)

Some of the General Insurance Companies having In house TPA’s are :

  • Bajaj Allianz General Insurance Company (Basic)
  • Star Health And Allied Insurance Company
  • ICICI Lombard
  • Max Bupa Health Insurance

2# Network of Hospitals

The next really important factor is the network hospitals of the company. In the case of hospitalization, the hospital that you would visit should be there on the Insurance company’s network hospital list. Not only the number, but the quality of the hospitals should also be taken into consideration.

Eg:- If you fall ill and need to get admitted, which are the first few hospitals that you would go to in your locality? Check, if these hospitals are part of the Insurance company’s network hospital list.

3# Relation of the Insurance Company with the Network Hospitals

It’s important to note, how fast the Insurance company/TPA makes the settlement with the Hospital in case of cashless hospitalizations. This is a major factor, but only a few of us understand its importance. The Insurance company may provide us cashless hospitalization, but if the Insurance does not settle the Hospital claims on time or only has a partial payout, then there’s an increasingly likely that the hospital will increase your bill to claim the amount. If the company pays the claims on time and in full, then the Hospital would not try to increase the bills as they know, that particular insurance company is a prompt paymaster.

See how your Life + Health Can be covered for less than 5% of your salary

Family Floater or Individual Cover Policy?

For people who do not understand Individual and Family Floater Policies please read about it here. Most of the people think that Family floater’s are always the best choice compared to Individual health plans, which is totally wrong. Your requirement and your situation should guide your decision, on which kind of cover, you should choose. There are many problems that buyers do not have any idea of. They do not care to read fine prints and get nasty surprises after many years and at crucial junctures. (compare Health Insurance)

Features of Family Floater Policies

  • It turns out to be cheaper for younger families and less maintenance, as there is just one single policy for everyone.
  • Limited cover for other members in the family, if one person claims health insurance in any given year.
  • The Policy expires on the death of the oldest member of Family or if he/she reaches the maximum age of renewability, depending on the policy. So other family members will need to take a fresh policy, without having the benefit of their claim history and pre-existing disease coverage that comes from the continuous renewal of the policy.
  • Only immediate family members are included in the policy, not your parents or siblings. So it does not suit people with dependent parents or siblings in the family.
  • When children turn 25, then they are not part of the policy and will have to take a fresh policy. Apart from this, any pre-existing disease will not be covered at that time.

Features of Individual policies

  • Extra maintenance of each policy separately.
  • Turns out to be generally costlier than Family Floater plans
  • Lower coverage for each family member at the same cost of a Family floater in case of a single claim in any given year.
  • There are no age restrictions on the maximum age for the members for renewable.
  • You can avail of the benefits of Loading and Discounts until the policy lapses.

Hence, a Family Floater will not suit a Family where the oldest member is in his 40’s and they are more prone to health issues. However, younger families might want to consider Family floater plans as they are less prone to health ailments and can afford lesser premiums in the beginning. Look at Harsh Roongta talking about Family Floater Vs Individual Plan in the following Video



How much of Sum Insured would be sufficient?

Do you know, what disease you could be diagnosed with tomorrow? So you can never say that Rs.1,00,000 cover is sufficient 🙂 The basic rule here, is to take whatever you think you can afford. If a person can afford to say Rs.5,000/- as the premium per year, check as to how much of Sum Insured he would get, and take the amount of insurance offered. That would be sufficient to cover at least some risk. So never think, that you cannot afford any medical insurance policy. Take what you can afford so that at least you know that you can be rest assured, that you have covered some risk.

IMPORTANT: It’s never too early to take medical insurance and critical illness policy, because once you are diagnosed with any illness, then the insurance company will have the liberty, of not issuing you an insurance policy. So take it as early as possible and have your risks covered.

Comments? What are the other difficulty or doubts from an investor’s point of view to select a medical policy?

How to insure your Credit and Debit Cards ?

Posted on by Jagoinvestor

Last night I was having dinner with my friends and suddenly on of the friend realized that he has lost his wallet. The problem was not the cash in the wallet, or the cards. It was the misuse of the card and contacting card issuers to block the cards as soon as possible .

Have you found yourself in similar situation ever or have you lost your wallet which had many debit and credit card along with other important documents. Do you want solution for this problem ?

Here is the solution.

Lost credit or debit card

There is nothing like the shock of losing your wallet or purse with all the money and your Credit or Debit cards in it as these cards plays a significant role in our lives.

In India there are two service providers who provide this service of protecting your cards – Credit Protection Plan (CPP) and OneAssist.

If someone steals it by purpose or if you lost it and it goes in a wrong hand then there is a risk that the person may misuse your cards. To avoid this CPP is one of the good options.

What is CPP Card Protection ?

CPP Card Protection is India’s first comprehensive Card Protection service for use in the event of card loss, theft and related fraud.

lock your credit and debit card

If you lose your wallet or your handbag, simply make one free call to CPP. They will quickly notify the issuers of your cards to cancel your cards immediately, also they will provide emergency travel and hotel assistance to take care of you and help you get back home.

CPP Assistance Services is the part of CPP group which has already started services in other asian countries like Hong Kong, Singapore and Malaysia.

As per a report by Medianama, in January 2017 there are 28.8 Million credit cards and 818 Million debit cards in India

Every wallet on an average now a days contain one debit and credit card in cities . CPP has tied up with leading banks including Citibank, Standard Chartered, HSBC and Kotak Mahindra , Axis Bank , LIC and ICICI Bank to sell the CPP services. Read 5 tips for effectively using your Credit Card .

Features/Benefits of CPP:

  • Loss Reporting : Incase your cards are lost or whole wallet is lost you can call CPP on their helpline number and they will cancel all your cards immediately and will help you in replacing them after that
  • Fraud Protection : If your card has been misused then your get protection for it before or after the notification from your side . You are covered from 7 days prior to your loss report to CPP until your membership is valid.
  • Emergency Travel & Hotel Assistance : Incase you can’t pay your hotel bill or have lost the travel tickets or have money to buy travel ticket, CPP will arrange for your travel tickets for your return and will also help you pay your bills to the hotel . This applies to travel abroad as well. For Indian premium users they will also help you with Cash if you have lost cash in the wallet .
  • Document Registration : You can register important documents like passport, driving license, insurance policies with CPP which will ensure easy access if you should lose the originals.
  • Cash: For Indian premium users they will also help you with Cash of upto 20,000 if you have lost cash in the wallet.
  • PAN card & Driving License lost: In case you lost your PAN card with your wallet, CPP will also help you to get new PAN. There is no need to apply for that separately.

You can watch this video to know how CPP helps you..

Membership and Plans

They have three main plans and each plan have difference in the benefits they are providing. The plans are as follows:

  • Classic: single person membership
  • Premium: Additional membership to spouse only
  • Platinum: Additional membership to spouse and parents.

Besides membership they have differences in other benefits which they are providing and also their premium charges.

The membership plan is different as per the insurance companies or the banks from whom you are getting the CPP. The facilities provided by insurance companies are almost same.

You can pay the premium by master or visa card and the amount will be deducted from your account at the beginning of every year until you close for the plan.

There is a limit for ever benefit like Rs 1.5 Lac for Hotel Assistance and traveling and Rs.20,000 Cash in India only.

Procedure to apply for CPP services

Applying for the CPP service is a very simple procedure. Just follow the steps:

  • Fill the application form for the CPP service. These forms are available online on the website of the service providers or on the websites of the related banks.
  • Pay the premium fees as mentioned in the plan you have selected. Generally you need to pay full premium at the beginning.
  • Once you pay the premium fees the service providers will send you the welcome pack comprising the registration form, confirmation letter and a form of terms and conditions of your plan.
  • You need to fill the details of each card which you want to protect and come under the plan you have selected.
  • After filling the form completely, check it for the correction and send it back to CPP service providers.

Why Should you pay for CPP services ?

Incase you are using debit and credit cards heavily and carry bigger account balance than few thousands , It might make sense for you to protect your cards using their services .

It’s all about if you want to take risk or loss and fraud or not . The cost associated is not huge and can be considered, however I feel that card companies should have CPP built in with the card itself .

Things to remember before applying for CPP services

If you are paying for something then it’s your responsibility to check for every detail about that particular plan. Here are some important points you should check related to CPP:

  • Check for the benefits of each plan included in CPP before selecting any one of it.
  • Decide which plan you want to buy according to your needs.
  • Check for the premiums of the same plans at different service providers or banks.
  • Keep every detail of the payment of the premium.
  • Once you take the plan make sure you added each and every detail needed accurately.

Comments , Put your views on CPP and does it appeal you ? Do you think it will work with Indian Mindset ?

GFactor , A decision making tool for Financial products

Posted on by Jagoinvestor

How do you find out if a product suits your requirement ? What about a very simple calculation which can take into account most important requirements like lock in factor , complexity of a product , your requirement and its return and risk potential and tells you if it really suits your requirement. This Post will talk about a concept developed by me called GFactor , which is a score system for any Financial Product. You can input 4 factors and get a score for a product . So this GFactor score system will tell you about goodness/badness of a product.  Gfactor stands for Goodness Factor .

What is GFactor ?

GFactor is a very simple rating system for Financial products which gives a score on a scale of 0-1 . 1 represents excellent , 0 means worse . There are mainly 4 factors which we consider when we design this GFactor .

  • Trap Factor (Liquidity)
  • RR Factor (Risk/return Factor)
  • Complexity Factor
  • Need Factor

Trap Factor

Trap Factor is nothing but its score for the product on scale of 0 – 1 for the lock in period. The more trapped you have to be in product , the more will be the Trap factor score. One important point you should note here is that you should also consider how much loss you have to take even after you can freely come out of the product . For example : Endowment policies trap you for long periods like 15 to 20 yrs . Even though there is an option to close the policies you loose a lot of money. So the trap factor of Endowment Policies will be more like 0.9 or 1 , where as Mutual funds (non tax saving funds do not have any type of locking period) . So they can have trap factor of 0.1 or 0 . In ULIP you are stuck for at least 3-5 yrs , only after the 5th year. So it can have a trap factor of 0.6 or 0.7  you can get out without any penalties . For term insurance there is no trap factor , you can stop the policy any time .

Years of Trap

Trap Factor
No Trap 0
1-3 yrs 0.2
4-10 yrs 0.5
10-15 yrs 0.75
15+ yrs 1.0

 

 

Risk/Return Factor

Risk/Return Factor is a factor which will evaluate a single digit score for its risk/return potential . This score takes into consideration both risk and return . You can look it as risk adjusted return potential . so this factor will determine the return potential considering the risk potential. To calculate this you should know average return and average risk figures of a product in its total duration . Lets see the calculation first .

Risk Return Factor = (Average Return – Average Risk)/Average Return

Lets see an Example in case of ULIP : Robert wants to buy some mutual funds for next 5 yrs . In these 5 yrs , as per the historical data , we know that he can expect an absolute 100% return on average  (his money can double) , and if some thing bad has to happen hecan loose around 30% of value (the figures will differ for everybody) . So

Example for Mutual Funds (5 yrs)

  • Average Return = 100%
  • Average Risk = 30%

Risk Return Factor (Mutual funds) = (100 – 30)/100 = 0.7

Example for Fixed Deposits (2 yrs)

In this case suppose the returns from FD are @8% .

  • Average Return = 16%
  • Average Risk = 0%

Risk Return Factor (FD) = (16 – 0)/16 = 1.0

Note : For term insurance , the return will be the max amount you can get and Risk would be amount you can loose all , which is total premium over many years.

Complexity Factor

Complexity score is a number you assign to the product, depending on the how complex of easy it looks to you . For example Mutual funds can be easy to understand for me , so I can put 0.1% for it a complexity, whereas  NPS is more complicated to me , so I will put 0.5 . This means If it looks too complicated for you, then give a higher score, whereas if you understand it well, assign lower score .

For a normal person I would say ULIP is complicated , so we gave give a score of .7 or .8 or 1 ,depends on you, where as term insurance is extremely easy to understand, so it will get 0 or .1 , Mutual funds would be .2 or .3

Need Factor

Its a score given on the fact that how badly you need or require the product and will it be the best thing for you. One person may need it more than other, so the score will be different for different people. If you are not in a hurry, but your relative suggests you a policy , then it does not become a very high priority product for you, because you do not require it at that time, so you will assign a lower score to it .  For a person who is in his 26-27 age and just married and has some financial dependents , His score for term insurance will be around .9 or 1 because he badly needs it . Make sure you know difference between your needs and wants

A person who is 45 , for him/her NeedFactor for Health Insurance would be .8 or .9

A person who is Extremely High risk taker and understands equity investing well , his need factor for NSC or FD would be low , say a score of .2 or .3 because he really does not need it and it does not suit his requirement also .

Now Lets construct the formula

Variables are

TF : Trap Factor
RRF : Risk Return Factor
CF = Complexity Factor
NF = Need Factor

You should understand how the formula should be constructed. Out of the 4 variables, 2 scores shows strength of the product(Need Factor and Risk Return Factor), where as two scores are negative(Trap and Complexity Factor), so below formula should take care of this aspect .

GFactor Formula = (NF * RRF) – (CF*TF)

Lets take an example . Ajay is a 35 yrs old Indian working in a Software company, He has 2 kids and 1 wife 🙂 and 1 parent to support . His risk appetite is moderate and he cant take more than 20% downside in his investments at any given year . He has a home loan and a car loan at this moment and has just 10 lacs of overall savings . Below is the chart which calculates GFactor for some products considering Ajay’s situation. Understand that these numbers are for Ajay, it can change for you .

Products
 Trap Factor
 Return/Risk Factor
 Complexity Factor
 Need Factor
 GFactor
 Term Insurance
 0 0.95 0 1 0.95
 Health Insurance
 0 0.85 0.3 0.8 0.68
 ELSS
 .25 0.5 0.1 1 0.48
 ULIP
 .25 0.5 0.4 0.4 0.1
 Tax Saving FD
 .5 1 0 0.1 0.1
 Endowment Policy 1 1 0.5 0 -0.5

Rules

  • If GFactor value is more than .7 , you can consider that product as “Must buy. Go for it” .
  • If its more than .4 , you can consider it as “Average”
  • If its more than .2 , you can consider it as “Look for alternative product. Buy only if nothing else is available”
  • And if its less than .2 , then you must avoid it .

GFactor of a Portfolio

Just like we have Gfactor of a product , we can have GFactor of a Portfolio , which is average of GFactor’s of all the products in a Portfolio . Example

  • Term Insurance : 0.95
  • 4 ELSS : 0.43
  • 4-5 shares : 0.35
  • 10 gm of Gold ETF : .72
  • EPF contribution : 1
  • 3 months of Cash : 1

So average of all the GFactors = (.95 + .43 + .35 + .72 + 1 + 1)/6 = .742 . This  is a good Score for a Portfolio , But I can do better than this . Whats your Portfolio GFactor ?

 

Conclusion
There are 4 main factors which matter when taking the decision regarding a Financial product , The above concept is my own thinking and It may not fit everyone criteria , but I am sure it would be true for most of the people , If you have disagreements , its fine . We subconsciously understand how there 4 factors affects our decision making process , but the idea is to put it into formula and get a Score out of it , so that we can compare and know how good or bad a product can be for us .

Ques tion

  • Can you design a better formula for GFactor which makes more sense that what I have given .
  • Do you think GFactor can be useful to general investor to take decisions .
  • Please share with me GFactor of your overall Portfolio .

Note : This is an old post , I am republishing it with changes

Investing sensibly in the stock market

Posted on by Jagoinvestor

The common view of the stock market is that, it’s a place for gamblers and risk takers. Only if you have the capital, and the nerve to take risks, should you invest money in the stock market. Otherwise one is better off staying away from the stock market and putting money in safe fixed deposits. The truth is far removed from myth, if one looks at the stock market with a different perspective, and avoids the hype and hysteria associated with it. Let’s look at different aspects of investing in the stock market.

Let start with the basics – What is the stock market?

The stock market is a place, where buyers and sellers meet to buy and sell companies or rather small pieces of it. That’s all there is to it! Nothing more, nothing less! The small pieces are called shares and they represent a really small ownership of the company. Owning such a share, entitles the investor to his or her share of the profits, the business makes. This generally, is paid out to the investor, as a dividend. The management does not give out all the profits to the investor, of course. They retain some portion of the profits to re-invest and grow the business. Learn How to start in Stock Market

So how should one invest?

If you agree with the above definition of the stock market, the idea of investing in the stock market boils down to investing your money in a select group of companies. If the purpose of an investor, is to make a decent return on the money invested by him, then he should choose companies or businesses which are sound, consistently profitable for a long time and run by shareholder friendly management.

Finding a good company

investing in stock markets

Let’s explore the above statement a bit further. The long-term return for a shareholder, (where long-term is 5 years or more,) equals the underlying returns generated by the company. The returns for a shareholder can fluctuate from year to year based on the market moods and sentiment, but over the long run, investor returns always track the returns of the company. If the company can earn 20% on its capital, then the investor will make around the same returns over the long-term. Thus, we now arrive at the first criteria for successful long term investing, i.e., To make above average returns, one should invest in above average companies.

The above criteria is not a revelation to most people. However very few people want to follow the obvious as they think, that there’s some hidden magic in the stock market.

So how does one find the above average companies?

Look around you. Do you see products which have been around for quite some time and are used by a lot of people? Find out the companies behind them… That would be a good place to start. (Cue, the groans — I never said investing in the stock market does not require work. 🙂

Analyzing the company

Once you have identified a few names, the next step would be to get the annual report of the company and browse through it. The mention of reading an annual report sounds really daunting or off-putting to most people. However if you bring yourself to do it, it will place you ahead of 90% of the people in the stock market! The idea of browsing through the annual report is not to become an expert at it, but to get a feel for the nature of the company. One can focus on some of the following sections to see if the company is worth putting your money in,

Management discussion and analysis – This is the section where the management describes the business and lays out the plan for the company.

Profit and loss and balance sheet – This is the section which tells you, if the company is making a profit or not, how much debt is held by the company, the amount of dividend etc. If you come across a term you don’t understand – search for it on the internet or talk to a friend or someone with a background in finance.

A few important factors should be checked when analyzing the annual report. A short list of these factors can be

  • Is the company profitable and has it made profits consistently in the last 10 years?
  • Has the company paid dividends consistently in the last 10 years and has the dividend increased over the same period?
  • Has the company kept the debt equity ratio constant or better yet reduced the debt?
  • Has the company been able to introduce new successful products in the market?

An example

Let’s look at an example – Asian Paints. This is one of most well-known companies in India. This company has been the number one paint company for the last 20+ years. The company’s products like tractor distemper and emulsion, apcolite enamel, Apex exterior etc are well known and are widely available. The company has been in business for over 30 years and hence we can be confident that the company has done something right consistently to be the no.1 paint company in India.

The annual report shows good performance over a long period of time. The ‘ten year review’ in the annual reports shows an increasing profits and dividend over the years. The company has used these profits to reduce the debt, pay out an increasing amount of dividend and re-invested the balance in the business to grow it over the years.

The above performance has been reflected in the share price too. An investment of Rs 1000 in 1998-1999 would now be worth around 19000 which translates to an annual return of around 31%! And this doesn’t include annual dividends!

When to buy?

The immediate question which comes to mind is when should one buy the stock? There is an army of people out there, whose job is to advice investors the exact time to get in and out of stocks. I would personally say an investor would be far better off if he or she switched off the TV and ignored the advice of these so-called experts. If one is able to find a stock like the one above, the best approach is to invest in the company on a regular basis. If one can save Rs 2000 per month, then go ahead and invest 6000 Rs every quarter. A regular  program of investing in good companies on a regular basis, while ignoring the noise and chatter of the stock market pundits, will give you very good returns and also good sleep at night.

Conclusion

So… what’s the catch ? The catch is — us! A lot of investors like to get all excited and thrilled, when investing in the market. They want to chase the hottest stock, so that they can boast about it to their friends. At the same time, they ignore the gems lying right in front on them.

Investing is simple, but not easy. If one can find a few good and high quality companies and invest in them on a regular basis while ignoring the noise and chatter in the media, then that individual is likely to do well and have a really good amount of money secured for his or her retirement.

This is a guest article from Rohit Chauhan. He writes about his thoughts and analysis of various companies and industries and how to apply value investing principles, His blog is http://valueinvestorindia.blogspot.com

What are Different ways of Buying Mutual Funds

Posted on by Jagoinvestor

There was a time, when mutual fund investing was limited to calling an agent and investing through him. He filled a form for you, and only bothered you for signatures; This was called as “convenient service.”.  Things have changed now though. With entry loads abolished by SEBI and with so many technological advances, we have different ways of investing in mutual funds .This article explains the different ways of investing in mutual funds: through agents, AMC’s, demat, and web portals. Lets take a look-see…

Different ways of Investing in Mutual Funds

Through an Agent

This is the oldest and one of the most convenient ways of investing in mutual funds. You just call an agent and tell him you want to buy mutual funds. He comes right to your door, & fills in the various forms. All you need to do, is sign the forms. Since the abolition of entry loads, you now have to compensate the agent for his services, and pay him commission on the amount invested. Agents can charge anywhere from 1-2% of the amount to be invested. Make sure you don’t pay him more than 1%, which is a good enough amount of brokerage, for expediting the process (filling in forms, carrying them to the Mutual Fund offices, having them processed et al.) If he gives you sound advice on what mutual funds would suit you, and would help you achieve your financial goals, you could then, compensate him more. That makes sense. Be cautious though! Check the details of the form and what is filled. Ideally, you should fill the form.

You should go with this way of investing only if you want convenience and comfort takes more precedence. Click on this AMFI Agent Search Link to search for mutual funds agents in your city. You can submit the search with different parameters and get a list of all the agents with their name, address & phone numbers. There are many agents who are linked with many companies (like NJInvest or Prudent Advisory) who provide login facility, where you can login and see your mutual funds Performance anytime . Read : How many Mutual Funds you should have ?

Direct Investing through an AMC

You can now invest directly through an AMC (simply put – the Mutual Fund companies themselves.) There are many mutual funds who provide online facilities for investing. To do so though, you need to have a folio number, which you get only after investing in a particular mutual fund, which means that you have to go physically to the AMC office to invest for the first time. Next time onwards, you can invest in that mutual fund, online through their website. Using this method, makes sure that your entire amount, e.g. Rs 100/-  gets invested and there are no charges here. The only hiccup, is the manual work involved at the start of the process; you have to take the pain of personally going to the office and then filling in the form. Sometimes, it’s a bit of a headache. If you want to invest in funds from four different AMC’s, then you have to go to all of them.

It would make sense to use this method, if the amount of investment is going to be large-ish and your tenure is  long-term. In that case, using this way, will save you lot of money in commissions. Just imagine that if you invest 10,000 per month in mutual funds, then with a 1% commission structure, you save Rs 100 per month, which is Rs 3,600 for a 3 yr period. So 3,600 is what you lose when you go with an agent who charges a 1% commission . Note, that you do not require demat account for this .

Read : List of Best Equity Diversified Mutual Funds

Investing through a Demat Account

This is one of the most convenient methods of investing in mutual funds. If you have a demat account, you can browse through all the mutual funds on the site, and just with a few clicks of a mouse, you can invest in a fund of your choice. But then again, you have to pay commission here, since banks are also agents. Some charge a flat fee and some charge on percentage basis. For eg., ICICI Bank charges Rs 30 or 1.5% per SIP, whichever is lower and HDFC charges Rs 100 per quarter irrespective of the amount invested. The biggest advantage of buying and selling through a demat account, is that you control everything from one place. Some of the players in online mutual funds selling are :

  • 5 paisa
  • Geojit Securities
  • HDFC Securities
  • ICICI Direct
  • India Bulls
  • InvestSmart Online
  • Investmentz.com
  • Kotak Street
  • Motilal Oswal
  • Sharekhan

 

Investing through CAMS or Karvy

CAMS is the transaction processing company which services almost all the mutual funds in India. They process all the buying and sending the report etc to end customer . You can also invest directly through CAMS . All you have to do is Download the mutual fund form from the AMC website. Take a print out and fill the form . Then submit to your nearest CAMS or Karvy Investor centre along with copy of PAN card, SIP form(if needed) and cheque . For now , there is no way of investing online with them .

Here is the list of CAMS offices in different cities and Below is list of different AMC forms which you can download .

ABN AMRO Mutual Fund
AIG Global Investment Group Mutual Fund
Baroda Pioneer Mutual Fund
Benchmark Mutual Fund
Bharti AXA Mutual Fund
Birla Sun Life Mutual Fund
Canara Robeco Mutual Fund
DBS Chola Mutual Fund
DWS Mutual Fund
DSP Merrill Lynch Mutual Fund
Edelweiss Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Franklin Templeton Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ICICI Prudential Mutual Fund
IDFC Mutual Fund
ING Mutual Fund
JM Financial Mutual Fund
JPMorgan Mutual Fund
Kotak Mahindra Mutual Fund
LIC Mutual Fund
Lotus India Mutual Fund
Mirae Asset Mutual Fund
Morgan Stanley Mutual Fund
PRINCIPAL Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
SBI Mutual Fund
Sundaram BNP Paribas Mutual Fund
Tata Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund

Break Down of How investors invest in Mutual funds [POLL RESULTS]

Here is a poll results

How to users buy Mutual funds in India

Note : This Poll is from the users of this blog only , so this result should not be generalised for whole country , Its just for the net savvy community.

Conclusion

Before choosing the way you want to invest in mutual funds , you should consider cost and convenience . If you are investing for long-term , you should definitely go through a way where there are less commissions or no commissions.  Only exception can be through an advisor who gives you very sound advice and you are confident that paying him a commission would help you get a better knowledge and returns .

Comments please , how do you invest ? What are your experiences and learnings ? Is there any other way ? Any tips from your side ?

There was a time, when mutual fund investing was limited to calling an agent and investing through him. Things have changed now. With entry loads abolished by IRDA (please provide link or full-form) and with so many technological advances, we have different ways of investing in mutual funds.

5 Logical Tips about Credit Cards

Posted on by Jagoinvestor

Credit cards are becoming increasingly common in India, and while they come with a lot of convenience, the high interest rates and other charges mean that you have to be careful about how you use them.

In this post, we look at 5 tips on wise credit card usage, and how following them, can save you a whole lot of financial heartache. These 5 tips are pretty logical & self-evident; we have to understand that the free credit we get from a credit card is not really free. It’s actually a business for Credit card companies and hence somewhere in the whole process, they have to have a way to make money .

1. Pay your balance in full: This one is so basic, I was not going to point it out at all, but on second thought – I realized that this should really be the first point. Of all the loans you take, credit cards come with the highest interest rates. If you run a credit card balance every month, then the interest charges add up really quickly. If you have a balance on your credit card, pay it off in full before the next due date. This ensures that you don’t pay interest on your balance, which really is extra money you can keep to invest and build savings for yourself.

Curiously enough, I know of people who don’t pay off their credit card balance in full, but at the same time, put their money in low yield investments. This is really bad math. If you have a credit card balance that is charged at about 30% per annum and an investment that gives you just an 8% return – you are much better off paying the entire credit card balance before you even think of investing your money. The extra interest you pay on your outstanding balance offsets any interest income you receive from your investment. If you run a balance, realize, it normally is a strong indication that you are spending beyond your means.  This is a bad financial habit that you should get rid of as soon as possible.

2. Avoid credit cards with annual fee: Unless you have a specific benefit in mind, from the credit card, don’t get a card that has an annual fee. It is always good, to get a credit card with no annual fee, because then the only expense you have on it, is the interest payment; and if you pay off your balance in full every month – you don’t pay any interest and your credit card will, in effect, be free! Add to that, the fact, that even most free credit cards have some sort of a reward program, you can benefit from. Why pay for something when you can get it free?

The other thing to keep in mind, while evaluating the fee, is how likely you are to benefit on it, based on your usage. I reviewed the HDFC Value Plus Cash Back credit card a few months ago, which had an annual fee of Rs. 700 and up to 5% cash back. At a cursory glance, it seemed to me that Rs.700 may not be very high due to the cash back, but a deeper look at the terms and conditions told me, that the cash back will only be credited to your account if the monthly balance is over Rs.10,000. I realized the card was not meant for people like me, who aren’t likely to run up such a balance on their credit card every month.

Bottom-line: If you are going for a credit card that has an annual fee – make sure you go through the fine print and are certain it will be worth the cost to you.

Credit

3. Get a credit card that is easy to pay off: I used to have an ICICI credit card and a SBI credit card. Both of them had similar features, but the ICICI card was really easy for me to pay off, as I had an existing ICICI Bank account, and the credit card was linked to it online. All I had to do, was go online, and pay off the credit card balance, through my ICICI login. As a result, I ended up using the ICICI credit card a lot more than the SBI one. Ease of payment, means that I can pay off the balance very often, very easily, and rarely run the risk of late fees or interest charges. While thinking of which credit card to apply for – consider just how easy it is, to make a payment on it.

This might sound like a trivial thing now, but you’d kick yourself later, if you had to pay late fees just because you lost your cheque book, or were too busy with your work to go to the bank and deposit the cheque. In fact, I’d go on to suggest that you add payment reminders on your email, phone or even a little post it on your refrigerator. Life gets busy sometimes, and a little help can go a long way in saving you late fee and interest payments.


4. Keep a track of your statement: A few years ago I went through my credit card statement online and saw that there were some charges from an unknown merchant. I was pretty sure, I had not bought anything from them, and I called up customer care to know what the charges were all about. I was put on hold for a long time, and couldn’t get through. However, the next day, I noticed that the merchant had reversed the transaction, and I even had a small credit from them.

While I was lucky in this case, there is no guarantee that credit cards won’t get abused. Always keep track of your monthly statement. If you can go online and check your transactions – that is even better, because you don’t have to wait until the end of the billing period. I go online every week or so and check up on my credit card statement to make sure no unauthorized use is happening.

5. Don’t use your credit card as an ATM: By this, I don’t mean that you shouldn’t use your credit card at the ATM, (although you should really, really avoid it as far as possible). What I mean is, there’s a tendency to withdraw cash from your credit card (since it’s so convenient) and that’s pretty addictive. Treating your credit card as an easy, reliable, access to cash will not help you in the long run. For one, the interest rates on cash withdrawals are generally much higher, and if you get into this habit, – you will run up high outstanding balances pretty quickly.

The cash advance limit, is also generally, a lot less, than the overall credit limit, so it won’t get you very far, anyway. The interest will keep adding up and grow very quickly. Withdrawing cash from your credit card should really be the last option. Usually, cash withdrawals come with some sort of cash advance charges, and more than that if you regularly withdraw cash from your credit card – again, it indicates a tendency to overspend and go beyond your means. This really means, that your personal finances are going down-hill.

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Read a Customer review on Mouthshut

I have saved all my friends by sharing my horrible experiences with ICICI Credit Cards.The customer care people are polite only till the greetings other wise they behave and speak like a criminal and very sarcastically. I have been using it for 2 years. But the customer care behavior problem is consistent. Normally I have been paying them always on time and the bill is normally above RS 5000. But once (3 months back) I had to go outstation suddenly and missed the pay date for first time for a day or two. The amount this time was also very low (maybe 1500 or 1800) as compared to other months bills. I suddenly started getting calls from a HORRIBLY SPEAKING customer care lady. When I mentioned I am travelling and will not be able to pay for another 2 days as my journey is a 3 day journey she started abusing and threatening me. She even mentioned that by tomorrow morning if I will not arrange for the payment she will send some one to my home for payment, when I said this is rubbish and she should not speak like this she started shouting and said “I will send someone and can do anything if not payed by tomorrow and reminded me that if I will not pick this call after seeing her number further she will be worse”. Is this is the way a bank should treat a long time and good customer? I have stopped using the card from that day. [LINK]

Credit Card Mistakes [Video]

Conclusion

The overarching theme of these tips is, “Get the convenience of credit cards for free.” That’s what it really boils down to.

To me, credit cards make shopping convenient and that is a big benefit, but at the same time, they also tempt me to go beyond my means, and then pay extra by way of interest. The key is to get the benefit of convenience but not have to pay anything for it. The above tips will help you do both, or at the very least – strike a balance between the two. What do you think? Have I missed out any obvious tips or is there something you’d like to add, based on your experiences?

POLL

What is your Spouse’s level of Understanding and Interest in Personal Finance ?online surveys

Comments please ? Leave your comment to provide another tip 🙂 and let us know what you think about Credit cards .


This is a guest post written by Manshu from OneMint. If you liked this post, please consider subscribing to his site.

How to look beyond short term returns in Mutual Funds

Posted on by Jagoinvestor

Want to buy a mutual funds which has given 105% return in 2009? Go ahead… How do most of the people choose a mutual fund? Let us try it once! Go to Valueresearchonline.com and find Top 10 funds across all the equity funds with 1 yrs performance. Below is the example of the page I got. So all these funds have given more than 100% return over the last 1 yr. Now it’s pretty simple to choose them, right? Just pick any of them and you have done your “Investment Planning”!!…… Far from the truth! Most of the mutual funds starts advertising their mutual funds “great” performance just after a strong market. They will claim that their fund has 1st rank in some blah blah category and they have the unique way of investing and what not. Let us see in this article, how we should look at short-term performing mutual funds and evaluate them on different parameters.

How Mutual Funds are marketed

Let’s take a case of “JM Emerging Leaders” Mutual Fund. Try to look at the points which a Mutual funds company can use to attract customers and What is the reason for each of them.

Its one of the 10 funds on the return parameter out of thousands of Mutual funds in this planet. Its 1 yr return is 144%.

 

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True! But what are the reason for this? The fund is extremely risky, risky to the extent you can’t imagine! The fund portfolio looks like this:

Mid Cap: 56.18%

Small Cap: 43.82%

(as of Feb 7, 2010)

Now what else do you expect from a fund which has all 100% of its money in Either Mid cap or Small Cap companies which moves like crazy after a big bear market? If the fund is so great in 1 yr parameter, what is the reason its overall return since it came in existence is -5% (negative return in last 5 yrs)? The answer is simple, the fund is exposes to too much Risk. In order to get extremely high returns, it’s exposing itself largely to risk that the returns over long-term will be unstable and probably low.

The fund beats it’s benchmark and category average returns by huge margin

This happens for the same reasons we talked above. Benchmark is an Index and it’s returns are not based on some one’s judgement or decisions, but mutual fund returns are!! Fund manager decides how aggressively they want to invest, so if today the fund has beaten it’s benchmark or Category in positive side, tomorrow when there will be disaster, it will beat it’s benchmark by huge margin on the negative side and the performance will be much lower than the benchmark, it’s called Beta

Mutual funds high returns myth

NAV more than doubled in 1 year

Again an idiotic comment, it’s all about return, the fund has made 105% return in 2009, but what is NAV value? Ans: 7. something % . It’s 5 yrs in existence now, started from NAV of 10 and still its at 7.something. At one time in 2009 the NAV went down to Rs 2.9, this 144% year in last 1 yr has helped it come back to 7.something levels now and still the returns are the marketing factors. I am wondering how it manages to get so much of investment (Fund has 262 crores of Net Asset Value as of 31/01/2010). Who is putting all the money in this?

What are the Two important factors you can look at and make a quick opinion

Lets talk about two main things

  • Mean
  • Standard Deviation or Volatility

Mean: Mean is nothing but the average of returns over a particular time. It tells us how much can we expect over a period from the mutual fund. It’s important to look at Mean (average) of Mutual funds return so that we have an average expectation. For some period we can get 20% return, for some period we can get 10% and for some we can get -15% also. But we have to concentrate on the average. Look at average return from Equity in Long run from Indian Markets

Standard Deviation : Now this is some thing we never see, what is this? Looks like a scary term from our school maths, but dont worry, it’s very easy thing to understand. Its nothing, but how much deviation you can expect from the average. To clear the point, understand that (10,12) and (1,21), both have average of 11 but standard deviation of (1,21) is high because both the values are at much distance from their average of 11. In that same way if we have two mutual funds say Mutual fund A, which has given returns of 20% and 30% in 2 yrs and we have mutual fund B, which has given return of -10% and 60% in 2 yrs,  both of them have average of 25% (simple average), but the second mutual funds B has higher standard deviation compared to A. What it means is that its more risky, the return range of B is higher. This is directly related to risk/reward. It’s very risky and very rewarding compared to mutual fund A. So it does not suit general investors who need high and consistent returns.

Look at List of Best Equity mutual funds and Debt mutual Funds

What to look at in mutual funds

So over a long term, we have to choose funds which are higher in Return and Lesser in Risk . That mean is there are two Funds X and Y, we have to look which has higher Mean and lower Standard deviation in returns. This is not true for investors who have extremely high risk appetite and want to take extra risk, in that case this will not be very much recommended.

Make sure you dont calculate these things on just 2-3 data points, make sure you have enough (at least 10-12 numbers) so that its more accurate. In the Table Below I have taken two funds which I consider BAD  and 2 Funds which are GOOD and their quarterly returns from Q1 2006 – Q4 2009 (16 quarters) and finally calculated the Standard Deviation and Mean.

 

Fund Names BAD FUNDS Average of BAD FUNDS Average of GOOD FUNDS GOOD FUNDS
JM Emerging Leaders-G Magnum IT HDFC Top 200-G DSPBR Top 100 Eqt Reg-G
Quarters Return in % for 1 quarter

 

Return in % for 1 quarterQ1 200616.196.9911.5921.6720.3522.98Q2 2006-13.69-7.53-10.61-10.09-10.83-9.34Q3 2006-0.6618.438.8916.9317.516.35Q4 20061.1529.0215.0911.01913.01Q1 2007-8.981.63-3.68-4.27-4.93-3.61Q2 200722.266.4114.3416.5915.1518.03Q3 200723.4-10.046.6815.8716.7514.99Q4 200741.659.325.4823.4620.8626.06Q1 2008-40.36-26.34-33.35-23.78-22.53-25.03Q2 2008-13.84-2.24-8.04-11.04-12.25-9.83Q3 2008-25.45-20.02-22.740.892.89-1.12Q4 2008-48.73-37.83-43.28-20.2-21.86-18.53Q1 2009-16.26-10.24-13.250.52-0.271.31Q2 200981.5858.2769.9347.4155.3339.49Q3 200924.837.6131.2119.3819.4819.27Q4 20098.3915.7712.085.085.065.09Standard Deviation

32.2424.3827.0718.3919.5717.47Mean3.224.323.776.846.866.82

 

Interpretation of the numbers

So you can see the Standard deviation and mean of returns for 2 Bad Funds and 2 Good funds and their mean return and mean standard deviation in a single quarter. So you can see that Bad funds have given return of around 3.77% per quarter on average (simple average , not compounded one) and the standard deviation is 27.07%, which means that it can deviate up to 27.07% on the upside or downside with 68% chances. (forget the maths, you have to go into probability and normal distribution and all those things, interested people can look for this link to get more insight on this. Similarly the good funds would return on an average 6.84% every quarter with deviation of 18.39% on upside or downside with 68% probability.

Conclusion

So, the conclusion of this whole mind boggling exercise is that we should understand that short-term performance of mutual funds is not where we should aim! We should properly evaluate the fund performance with different parameters. We should also concentrate on volatility and risk exposed by the mutual fund.

POLL (please vote, It will help me write a new post)

Comments please. Please share your views on how do you feel about Mutual funds with short-term performance ?

How to Open a PPF account at SBI Bank

Posted on by Jagoinvestor

Most of us want to open a PPF account, but keep postponing it just because we don’t know the requirement of doing so? It seen that majority people open their PPF account with State Bank of India. Let us see 3 easy steps of opening a PPF account in SBI branch.  The whole process does not take more than 30-45 minutes if you prepared in advance and go with all the documents that are required and there are no road blocks in between. The biggest advantage of opening the PPF account with SBI is the online transaction facility you can use to deposit in your PPF account online and dont have to rush to the branch every now and then. Read why you should open a PPF account in SBI even if you dont need it right now.

3 Steps of Opening a PPF Account in SBI Bank

PPF account in SBI

1) Choose a SBI branch which is authorized to go government business.

Usually any ‘large’ branch with lots of customers should be able to this! Usually newer and smaller branches may not have this clearance facility. One doesn’t need to have a Saving Bank  account in that branch. Locate your nearest SBI Branch using this

2) Procure and submit PPF account opening form and Identity/address Proofs

It would only 3 minutes to fill. Choose a nominee and get a witness signature. Now you have to submit anyone of following Proofs.

  • Passport
  • Pan card
  • Driving license
  • Voter id
  • Ration card
  • Two Passport Size Photographs

Any government issued identity card or address proof should work. Keep originals for proof in hand to simplify the verification if needed. That’s it. The bank should now be able to open the account. Usually it may take about 20 minutes or so.

3) Get PPF Passbook

A pay-in slip needs to be filled and the initial subscription needs to be credited into your account. A passbook similar to a Saving Book passbook will be issued with your photo affixed and the nominee’s name stated.  PPF rules can be found on the back. This is all, your PPF account in SBI is opened now.

How to Link your Online SBI Account to SBI PPF account for Online Transaction

If you have an online SBI account, you can add the PPF account as a third party account for transferring money directly. As mentioned above the PPF account can be in any SBI branch. There are no processing charges for doing this transfer. When you do this online for the first time, go to the bank and update your PPF passbook and check if the transaction has occurred correctly. This has to be done since you cannot look at the amount in the PPF account as yet in SBI. This is a major drawback of SBI-PPF (and post office) accounts.

A standing instruction maybe issued from your online account for auto-credit to PPF. However there are two disadvantages

  • Rarely there maybe system failures and the standing instruction may not get honoured. So you need to check if it has occurred.
  • You cannot subscribe a lower amount if you need the cash for emergency use (this situation wont arise if you had an emergency fund )
  • You need to go to the bank to cancel the standing instruction .

There are only 12 credit transaction allowed per year. So take care of this before issuing a standing instruction.

How to Transfer your PPF account from One Bank to Another

  • Go to the branch where you want to transfer your PPF account and deposit an application with your PPF passbook
  • takes 10-15 minutes

How to Submit Proof for Tax

Take xerox of the PPF passbook updated with all transactions and get it attested in the branch. (not sure if the attestation is really required) [ Update 5th Feb, thanks for Mithilesh ]

Other points to Consider

Subscriptions must be made before the 5th of every month for the amount to taken into account for interest calculation for that month. If you want to open a PPF accoun in the name of a minor in addition to yours, the total PPF investment limit is Rs. 1,00,000. The total tax benefit is also the same. This is a new rule and is not yet printed in the PPF passbooks! See Here, Here and Here for more detail

Comments please. Are you going to Open a PPF accoun this year? Do you feel one should open a PPF account at Post Office?