Here is what 11000+ investors told us about their top financial goal?

Posted on October 17, 2016November 20, 2019 by Jagoinvestor

A few months back, I read an article that talked about the biggest financial goals of Indians. As per their survey, the biggest financial goal for 34% of the respondents was “Securing Child Future”. The only issue was that their survey size was just 150.

“Retirement” was the biggest goal for only 2% of the respondents, which means just 3 out of 150 people marked “Retirement Planning” was their biggest goal.

The biggest financial goal in India

What is your biggest financial goal in life?

I was somehow not very convinced with their survey size of 150 because it’s not a big enough sample size to decide what most of the people feel. So I thought of conducting my own survey with a big enough sample size, and I was able to get 11,324 survey responses.

The first thing I asked was “Which is your biggest financial goal in life?”

Think about it?

What if I posed this question to you directly and asked – “Which is your biggest financial goal in life?”, what would you say?

I gave 6 options to people to choose from, and below were the results.

Top most financial goals of urban Indians

Goal #1 – Accumulating enough wealth in life to enjoy

“Accumulating enough wealth to enjoy life” was the topmost goal picked by the maximum people. This was very surprising for me because it was not a small sample size.

We had more than 11,000 people taking this survey and 3553 people out of that (around 31%) chose this option, which shows that somewhere priorities of people are changing these days. Now people want to accumulate wealth not just for retirement, but even to enjoy life before retirement.

They want to travel, experience new things in life, explore new hobbies and spend on themselves. In short, they want to enjoy life before retirement itself and not keep all the money only for retirement.

Goal #2 – Giving the best education to children

The next goal which was voted by maximum people was “Give the best education to their children”. Around 21% marked it as the biggest goal of their life, which confirms that still “children education” is an important and most sought after goal for investors.

It’s a given fact that giving the best education to your children is the best way to care for them and their future. Their life foundation is set by the quality of education you provide for them. It’s surely one of the most satisfying goals for a person.

Goal #3 – Planning for my retirement

I was happy to note that a big percentage (around 19%) said that planning for their retirement was their biggest financial goals. I want to reinforce the point that this survey was taken by people who are net savvy and mostly belong to big cities and earning decent money each month.

This result shows that a good number of people have realized that retirement is something they need to take seriously.

If I talk about you – Are you retirement ready? Do you feel you are doing enough for your retirement goal? If you are not sure, You can explore our pro membership program

We all have 30 yrs of working life to save money for 30 yrs of retirement on an average. So look at each year of working life-saving as a fuel which will help you each year of retirement. So what you invest in the year 2016 will help you in the year 2046 (2016 + 30 yrs). This concept comes from my book – “How to be your own financial planner in 10 steps”

Goal #4 – Buying a House

15% of people said that buying a house was their biggest financial goal. Given the unaffordable housing prices and the social stigma attached to “owning a house”, I am sure a lot of people feel the “pressure” of owning a house. Only the people who still don’t own home can feel the pressure and the worry associated with it.

No matter how many articles claiming “Renting is better than buying a house in India” comes, still its an emotional decision for people. They feel pressure from family, spouse, and society to buy a house and that’s the reality.

Goal #5 – Becoming Debt-free in life

A big number of investors are getting into a debt trap and a big portion of their income goes into serving the loan or paying off some family debt. It’s surely not a very great feeling to know that a part of your income will just go away somewhere and never return back or form any capital.

A lot of people want to get rid of debt as soon as possible and the high expenses these days make it very tough for someone to close their loan by paying off the debt soon.

Goal #6 – Saving enough money for kids marriage

I am sure we all have this goal in life.

We all want to save some money (or a little) for our kid’s marriage, but 2% of people marked it as their biggest goal in life. I am not sure if they have achieved rest other goals already or not. I do not have much comment on this point, because I don’t want to say if this is wrong or right. Maybe you can share what you feel about it?

So what is your biggest financial goal?

We saw all these 6 goals and how people responded to them. Would like to know what is your biggest financial goal in life and what do you think about this?

How to withdraw your PPF account money anywhere in India? Here is the Process

Posted on September 26, 2016November 14, 2019 by Jagoinvestor

Today I am going to share very interesting and rare information related to PPF with you all.

Have you ever wondered how can one withdraw their PPF money without visiting the base branch (from where PPF was opened)? A lot of people open PPF account in one city and then move to another city. It’s really a headache to travel to another city just for the sake of closing the PPF account or withdrawing the money either at maturity or partially.

withdraw ppf from any branch

I tried to see if this is a problem that PPF holders face, and I found that a lot of people search for “Can I withdraw PPF from any SBI branch”? This means that this is widespread query and I decided to write on this.

There are many articles and people on internet who will tell you that you need to visit the base branch only to withdraw or close your PPF account, but recently I figured out that its not true and there is a process using which you can close or withdraw PPF money from any city without visiting the base branch where you opened the PPF account.

Here is one reference of a query like that on Yahoo answers

I want to share with you today that its a big myth and its actually POSSIBLE.

A few days back, I got in touch with Priyesh Sampat, Legacy & Succession Counsellor from Mumbai, who has handled hundreds of PPF related cases in the past. He shared with me how is it possible to withdraw money from the PPF account without visiting the original branch and he has seen it work in real life for his old clients.

He was very helpful and shared many insights and his experience on this topic. I thank him for that.

Steps to withdraw from your PPF account from a different city

Before I share the steps for PPF withdrawal from a different city, I want to mention that the steps below are applicable when you have your PPF account with SBI or some other public bank like PNB, Vijaya Bank, etc.

The steps below will not work in case you have PPF with Post office, in which case you first have to transfer your PPF from post office to SBI bank and then you can take the following steps.

Step #1 – Arrange your KYC documents

The first step is to make sure you arrange all your KYC documents like

Form C – For PPF withdrawal
Canceled Cheque – The account in which you want to money to be credited
Your Identity & Address Proof
Your PPF passbook (in case it is available with you)

Do not sign these documents at the moment, because these need to be signed in the presence of the bank officials. You can download PPF form C here

Step #2 – Go to a local branch of the bank

The next step is to visit the local bank branch of the city where you reside or are present and talk to the staff there. Tell them that you want to withdraw your PPF, but it’s base branch is in some other city, so you want them to attest the documents.

They will ask you to sign on the documents in your presence and might also put their signature or seal on the documents confirming that your attestation is complete. Also, request the attesting banker to mention his/her name and signature code issued by RBI. This makes the attestation complete in all regards.

Step #3 – Send documents to Main Branch using Speed/Registered post

Once the bank staff completes your verification and attestation, it might happen that they keep the documents and tell you that they will themselves send the documents to the main branch, in which case take an acknowledgement from them which has their signature and seal, so that you have the proof that you gave the documents to local branch.

Otherwise, you yourself will have to send the documents to the base branch where you opened your PPF account by speed post or registered post.

It’s important that you use a speed/registered post so that you have confirmation when the documents are delivered. Also as post office is a govt organization, you have all the records and you can also find out information using RTI later.

Step #4 – Get PPF money credited in your account by NEFT/RTGS

Once the original branch gets your documents, they will process them and credit back your PPF maturity amount by NEFT/RTGS.

In earlier days the banks used to hand over the Pay orders or DD which was supposed to be received by a person, but now with NEFT/RTGS facility the money is transferred electronically.

So the process for PPF withdrawal is very simple as explained above, but let us see some finer details or cases now

Can I use the same process mentioned above in case of partial withdrawal?

The answer is YES. The above process is not just for the PPF withdrawal at maturity, but even in case of partial PPF withdrawal after completion of 7 yrs.

I have PPF in Post office, how can I withdraw?

As I mentioned above, the above process will work only in case you have your PPF with a PSU bank, so the first step is to transfer your PPF account from Post office to the PSU bank. The steps are already mentioned in this article. Read the comments where many people have shared how they successfully transferred their PPF accounts to PSU banks.

I am an NRI, how can I withdraw my PPF account from outside India?

If you are an NRI, first thing you should know that that you cannot extend your PPF account after it matures in 15 yrs period. I am sure most of the NRI’s keep travelling to India every year or once in a while if not every year. So whenever you visit India next time, you can follow the same process which is given above.

However, if you still want to try withdrawing your PPF from abroad, let me share you the process which is not guaranteed to work always, but it’s already tried by Priyesh on one of her NRI clients and it worked for them.

The process for PPF withdrawal by NRI

Basically the PSU bank can only process your PPF withdrawal request if your signature is attested by an authority, which can be the PSU bank itself (which will need your presence) or some other authority.

If an NRI has an NRE/NRO account in a bank (a good bank balance or relationship with a bank will be a plus), then they can follow this process

Courier the documents to India in the city where you have the NRE/NRO account. Make sure you send these documents to a person (relative, parents, siblings etc or friends)
Give an authority letter mentioning that you are allowing the person to follow this process on your behalf
Ask the person to go to the bank where you have NRE/NRO account and ask them to attest these documents (mainly the signature part) . At this step you can expect the friction, because this is not a standard process.
Once the attestation is done, then you can ask your person to visit the PSU bank for PPF withdrawal and they might accept these documents which are attested by your bank.

Note that Priyesh has done the same steps for one of her NRI client and it worked because the NRI was giving a very good premium each year to the bank and bank was more than happy to “help” the client 🙂

Why can’t you withdraw PPF from any branch?

Truly speaking I have no answer for that.

I know that with the advancement of technology, the PPF withdrawal process should be smoother now and it should be possible with a button of click, but as of now, it’s not the reality.

A lot of people still wait to travel to their base branch city where they opened their PPF and follow the process. However many investors never withdraw their PPF because they are not clear if it’s possible or not.

It was my attempt to bring this process in notice of yours so that you can at least try this and see if it works. If someone has done something different and successfully withdrawn their PPF from a different city, please share that with us in comment section and we will add it in the main article.

We would like to know if you got any new insights or not and this article was helpful or not?

CIBIL introduces Subscription Services!. Get 4 quarterly reports at Rs 1,200

Posted on September 12, 2016November 14, 2019 by Jagoinvestor

CIBIL has now started subscription services for its customers. Now you can get bimonthly or quarterly CIBIL Reports if you want to track your credit score on an ongoing basis, then this service is for you.

cibil subscription services

How to apply for the CIBIL report on a subscription basis?

Earlier you only had an option to buy your CIBIL Credit Report on a one-time basis by paying fees. Now you can buy it on a subscription basis if you wish to.

You need to visit https://www.cibil.com/creditscore/. There you will see 3 options which have 1 report (one time), 2 reports (half-yearly) or 4 reports (quarterly). One can choose any one of these options and fill up other authentication-related details and then make the payment online. You will start getting your reports on email.
cibil subscription charges

Who should opt for the CIBIL subscription?

I think all those investors who are going to apply for loans in near future and want to keep a watch on their scores or those investors whose CIBIL Reports were bad earlier and they have taken steps to improve their scores, can apply for CIBIL subscription so that they get the periodic reports. However also note that from the coming year, CIBIL will provide one FREE report anyways

At this point of time, the one-time CIBIL Report + score costs Rs 550, if you apply for another report within the period of 12 months, then your total cost anyways will be Rs 1,100 , where as the quarterly subscription cost Rs 1,200. However if you are the first time applicant, I suggest only buy the one time report.

How to correct CIBIL report mistakes in next 30 days – A step by step Guide

Posted on August 16, 2016November 14, 2019 by Jagoinvestor

Today I am going to teach you some step by step process which will help you to correct your wrong CIBIL entries, which will, in turn, improve your CIBIL score. Most of the investors take some of the other kinds of loan and if they are not able to pay the EMI’s on time or default on the loan, their CIBIL report gets messed up and they don’t get further loans in future.

This is because once your credit history becomes bad, then lenders are not very excited to give you loans.

correct credit report mistakes

How to correct the CIBIL record?

I recently got a question from Mukesh Kumar, who saw a wrong entry in his CIBIL report. See what he says…

I have an error in my cibil report that I applied for loan in 2009.but it is wrong entry. How can it be corrected.

CIBIL report can contain mistakes either due to the investor’s mistake and their ignorance, but many a time the errors happen because of bank mistakes or manual issues.

Some reasons for mistakes in the Credit report

The lender did not update the correct remarks with CIBIL
The lender updated the wrong remark with CIBIL
CIBIL makes mistake in name, address, gender or date of birth while creating the report
The mistake happened while generating the CIBIL report
There was some fraud using your documents and hence the wrong entries

4 Step process of correcting the CIBIL mistakes

Let me help you with the step by step process if you want to fix the errors in your credit report. Here you go ..

Step #1 : Check your CIBIL report

You will not be able to move ahead unless you properly understand your current situation. So the first step is to apply for your CIBIL report and understand it properly.

You can go to CIBIL website and pay the fees to get your report. Once you pay the CIBIL charges, you will receive the PDF report in your mail almost instantly which will contain your credit score and the report. Below is a nice video tutorial by the CIBIL team which shows you how to read the CIBIL report.

Step #2 – Raise a Dispute Resolution with CIBIL

Once you have understood your report, you should make the list of all the errors and mistakes in the report.

After that, your first point of contact is CIBIL. You should raise something called a CIBIL Dispute Resolution at https://www.cibil.com/dispute/.

You need to fill up some details and mention the issues in your report which you think should be corrected. Once you do this, your dispute will get recorded and CIBIL will get in touch with the lenders one by one and ask them to relook at the issues if they would like to send a new update (the correct one).

Note that CIBIL will never make any changes in your report themselves. They will only do it once they get a go-ahead from the lender because at the end of the day, your CIBIL report is the collection of all the information CIBIL gets from various lenders.

How online dispute resolution with CIBIL works?

dispute resolution cibil process

It can take anywhere from few days to 30 days for your dispute resolution to get sorted out. But I suggest waiting for 45 days. If you have questions on this, I suggest you read the FAQ on dispute resolution here

This dispute resolution can be raised even if you have not bought the report yourself but got it from the lender while applying for some loan.

Now, in this case, it might happen that the lender refuses to correct some information because they think that they are correct and the investor is wrong. In which case the investor should take the 3rd step.

Step #3 – Contact lenders directly

If the dispute resolution works, then the changes will happen in the report. But at times some lenders might disagree to some point and refuse to make the changes.

At this point, CIBIL can’t do much and you will now have to follow-up with the lender yourself.

Let me give you an example.

Suppose there is a guy who checks his credit report and see that one of the loans which he paid off fully, is marked as “WRITTEN OFF”. In this case, he can raise a dispute resolution with CIBIL and let’s say the lender says that the loan was still not paid off and some amount was remaining and with interest and late payment charges, the loan becomes bigger and later they marked it as WRITTEN OFF.

In this case, the guy has to contact the lender himself and then sort things out.

He can ask for all the explanation proofs and loan statements and prove if there was any loan outstanding or not. In this case, it would have helped if the person had taken a NOC once he thought that the loan is complete and paid off.

Contact lender through email + phone

Coming back to this point, the first step is to send an email to the lender, stating your case with proper dates and the error in the report. If possible, also attach a snapshot of the CIBIL report. Then wait for a few days for their response, and if you don’t get any response, then you should visit their branch in the city.

Meet the manager there or whoever is the in-charge of the CIBIL loans section. If 30 days are over and you are not getting any proper response, it’s the time to raise an online complaint with banking ombudsman. This way you have at least raised one leg of investigation and waged a war against the lender.

To give you an example, see how lender did not update the correct status with CIBIL in this case below

I have taken loan from fullerton India long back and paid the same. they have also given me NOC. But the same is still not updated in CIBIL records. My financials status is now good and I can pay loan installments regularly. I am good salaried and paying IT also regularly. Can this improve my CIBIL Score and Can I get Loan ?

In case you face any issues, feel free to contact CIBIL team. Here are the CIBIL contact numbers on this link. Call their customer care number and mention your issues, at times this can bring faster results.

Step #4 – Close your Past Dues and Outstanding amounts, if any

Finally, once you contact the lender, it might happen that there was a genuine mistake from the lender’s end. If they agree, they will update the correct status with CIBIL and your issue will get resolved in 60-90 days. But if not, then mostly the issue is due to some past outstanding amount which did not pay.

Loan Settlements and not paying EMI on time.

In most of the cases I have seen, the issue is some past loan for which 100% outstanding was not paid off by investor and it was settled for a lower amount. For example, support you owe Rs 1 lacs in the loan, but are unable to pay it and you do the settlement for Rs 60,000.
Years later then you see a remark on your CIBIL Report which says “SETTLED” or “WRITTEN OFF”. At this point the situation is very bad because most of the investors don’t want to pay this surprising amount just to fix things.

Check out this real-life case

I took Durable loan with Capital-First in Feb 2014 with period of 9 months. I paid first 6 EMI’s on time but the last EMI I didn’t paid, one fine day I got call from Capital-First Legal team and they asked me to clear rest of amount. So I paid remaining amount in single shot using Capital first online portal in Aug 2015.

Recently in Feb 2016 I pull CIBIL Report and I found the above account marked as “WRITTEN-OFF” and Raised Dispute with CIBIL, I observed in latest (in May 2016) CIBIL report that the status changed “WRITTEN-OFF” to “POST(W/O) Settled”. I discussed with Capital First Customer care many times. They just gave reply like “you paid amount in stage of WRITTEN-OFF status. so it should be POST(W/O) Settled. it won’t change further”

Is that true? and How do I remove that status from My CIBIL?

In this case, it’s very difficult to improve your score, because that bad remark will be there for many years/decades, unless you clear off the loan.

Get in touch with lender

So if possible try to get in touch with the lender and speak to them about this. Ask them how you can get a “closed” remark for a loan. At times lenders are ready to take a lesser amount and update the entry as “Closed” with CIBIL.

Once you follow all these steps and correct your CIBIL mistakes, your CIBIL score will go up over time.

I hope you got a fair step by step process on correcting the mistakes in the CIBIL report? In case there are any questions, I will be happy to take them in the comments section.

10 steps to ensure safety of your ATM/Debit/Credit Card usage

Posted on August 10, 2016November 14, 2019 by Jagoinvestor

In the last 10-15 yrs, card usage has replaced cash transactions to a big level at least in urban India. We no longer go to banks to withdraw cash. Almost everyone prefers to pay by cards when we visit malls, grocery shops or when we fill petrol in our cars.

Increase in Card Frauds

While the ATM/Debit/Credit card usage has increased, so has the frauds related to the cards. Most of the time, card fraud happens due to negligence of the cardholder. In this post, I will talk about several things you should keep in mind which will safeguard you against fraud or any crime which can potentially happen. The things we talk about in this article will be for ATM cards, debit cards, credit cards, and even internet banking transactions.

atm safety tips

1. Destroy the CVV number on the back of the card

Once you have used your ATM card several times, it’s suggested to scratch the CVV number on the back of the card. Almost everyone will memorize the 3 digit CVV number once they have used it 5-10 times. You can also write down the CVV number in your mailbox and email it to yourself if you want to record it in someplace.

While this will not make you fully protected from fraud, but it will surely reduce the chances.

2. Change the PIN as soon as you receive the card

Once you receive your card for the first time, it’s suggested that you activate it asap and then change the PIN. Try to avoid keeping the PINs that resemble your birthday, Pincode or phone numbers. Make it a random number or some combination which you can relate to.

If you do not change your default PIN which the letter contains, it might happen that someone looks at it and misuses your card, given they have access to it. That’s the reason you should also destroy the old password document.

3. Activate SMS Alerts for any amount above ZERO

It’s suggested to activate the SMS and mail alerts for all transactions.

If you do not want any SMS for a specific amount like Rs 500 or Rs 1000, then you can set up the alerts above that amount, but make sure you do it. A lot of people who come from the old generation like our parents, uncles etc are new to these card payments and do not activate these features. Please do it for them

4. Keep the customer care number saved on the phone

It’s always a good idea to store your bank/card customer care numbers on your phone so that you can inform them about any fraud or issues as soon as they happen.

Imagine you lost your card and you are thinking – “Once I am back home, I will call customer care and share about this incident so that they can block my card”. This is not a great situation, because, within a few minutes, the who has the card can swipe it and use it (given he knows other details)

Better avoid being late in informing about the incident, because once the money gets debited from your account, then matter becomes complicated and you will spend lot of times in fixing the issue and following up

Prevention is better than cure …

5. Avoid using the ATM in night or places which are not safe

There have been instances where I wanted to withdraw cash from ATM around night-time, and my wife always tells me that we can always do it the next day in the morning because it’s better to avoid ATMs at night especially when it’s not an emergency.

I think that makes sense.

While, out of 100 times, 99 times nothing will happen. But then that one bad incident is what you want to avoid..

RIGHT?

I am not saying that never use the ATM in the night, but as far as possible, try to refrain using your cards at night at lonely places, because you never know who is keeping an eye on you.

Here is a video from Bangalore, where a 38 yrs old lady was attacked by a guy inside the ATM. Something like this is very much possible to happen if you take things lightly at night when it’s lonely.

Hence, if are going back home in midnight and thinking of withdrawing cash from an ATM which is located on a lonely road, I suggest that you avoid it unless it’s emergency. It’s always safer to come back in the morning and withdraw the money from ATM.

6. Don’t let any once enter the ATM while you are using it

If there is only one single ATM machine inside the room, then don’t allow anyone to enter the ATM when you are using it. You can directly tell the person to enter the room once you have used it.

At times, People are not civilized enough to understand that ATM usage is a very private activity and they should not enter or look at your screen.

stop atm fraud

(Image Source)

7. Never leave an incomplete transaction

There are many ATM frauds which have happened because the person left without completing their transaction. You should never leave the ATM screen unless the “welcome screen” appears back.

There are cases, where the computer hangs in between the transaction either because of a technical issue or because someone had done some trick to it. Always press the cancel button once you are finished or sense that there is some issue.

Below is an excerpt from a report from Indian express which shares more details about keypad jamming fraud in ATMs.

Keypad jamming fraud

The risk department of the banks have termed it so because the modus operandi of defrauder involves jamming both the ‘Enter’ and ‘Cancel’ buttons on the ATM machine by applying glue or by inserting a pin or blade at the edge of the button. So when the customer tries to press the ‘Enter/OK’ button after entering his ATM PIN, the key does not function and the customer can’t proceed with his transaction. At this juncture the customer thinks that the machine is not working and tries to cancel the transaction, which also does not go through as that button is also jammed. Thinking that the transaction is cancelled, he leaves the ATM machine.

As soon as the customer leaves or is prompted to visit the nearby ATM machine, the fraudster takes over the machine and since the transaction is active for around 30 seconds in most cases (some banks have reduced it to 20 seconds), he keeps the transaction active by pressing some functional buttons and in the meantime removes the glue or pin from the ‘Enter’ button to go ahead with the transaction. The fraudster then withdraws the cash from the customer’s account, leaving the customer unaware of the fraud till he checks the message from the bank.

If your ATM screen is hanged or incase of any issues, make sure you contact the security guard or at least call the customer care while you are inside the ATM.

All ATMs have a CCTV machine and it will record your activity which will help you later in case of any problem or dispute. Here is a real-life case of how ATM fraud can happen from a fellow blogger BasuNivesh.

8. Never share your debit card PIN when you shop

When you go to Petrol Pumps to fill your car or while you are dining at restaurants, try to avoid sharing the ATM PIN while making the payments. A lot of people let others enter their PIN because they don’t want to walk all the way to the swipe machine.

I prefer to walk down and enter the PIN myself or ask them to bring the swipe machine near me.

While it surely adds to convenience by sharing the PIN, but it also exposes you to the risk of debit/credit card fraud. No one is stopping the person who has your card to note down your card number, expiry date, CVV number (most of the people don’t scratch it) and write down the PIN you shared with them. In some extreme cases, your card can be swiped to the skimming machine to steal the information and duplicate the card.

how debit and credit card skimming work

A lot of people think that just because someone has their card details, they are still secured because the OTP comes to their mobile or the 6 digits extra password is asked while doing a transaction online. However, they are mistaken.

While one will surely fail while doing the transactions in Indian websites, they will succeed while using the card on international websites, because OTP is not sent there. Also, that extra layer of 6 digit password is not asked while doing transactions at many websites outside India.

9. Never share your PIN, OTP, CVV and other sensitive details

My father in law is a senior citizen and despite being a bank employee for many years – I can clearly tell you that even he might fall prey to many online frauds related to banks because he is very new to these card payments and internet banking. He belongs to that old era and his banking is very different than today’s banking.

Like him, your parents, and grandparents and in-laws will surely be from the generation who does not understand very well how these online things work.

When they get a call from someone who says – “I am calling from Bank and …”, for them it’s a genuine call and they can’t tell a difference between fake call and a genuine one. And they are always on the list of fraudsters.

There are various online frauds going on these days, where a person poses as a bank employee and then scares the person on other end saying things like

“This is a verification call from the bank, please share the OTP which has just come on your mobile”
“You will now get a new card because the old one is canceled, please share the 3 digits on the back of the card to approve this”
“We notice that a 20,000 transaction has happened just now, did you do it? Please share an OTP which has come to your mobile to verify that you are the cardholder”

Listen to this YouTube conversation, where a girl is posing as SBI staff and trying to get information. Imagine if your parents or some senior citizen gets this kind of call, how will they react?

Here is a good FAQ related to fraud protection related to cards from ICICI bank

10. Don’t expose the cash withdrawn from ATM

I have done it a few times, and I now understand that it was a mistake.

When you take out cash from ATM, if it’s a big amount – many times a few people come out of ATM holding the bundle of cash without realizing that someone might be watching them.

It’s always suggested to keep a bag with you and put the cash inside it or at least keep the cash in your wallet or pocket till you reach your car or home. There might be many bad elements nearby and they will keep an eye on you. They might be behind you and later they may attack you. What they show in CRIME PETROL actually happens in real life too 🙂

Don’t Get Paranoid

While it’s suggested that you should be alert and careful while using your cards or internet banking, but I would like to also add that you should not become paranoid and start behaving like a maniac :). You should judge the situation and use your presence of mind when someone is really being helpful and when someone is trying to trick you.

Please share any other tips or suggestions which I have not added above.

Top 8 financial regrets of Indian investors (Survey with 11k participants)

Posted on August 1, 2016November 14, 2019 by Jagoinvestor

We all make various kinds of financial mistakes, and then regret it later.

Don’t we?

I wanted to find out, what kind of regrets are widespread among Indians, so I ran a survey for many weeks & got an amazing 11,324 participants for the survey. The survey had many questions and various insights can be drawn out of the data, but today – I am just going to share one of those insights with you (more to come later in other articles)

Most common regrets investors have

When I created the survey, I was able to think of 8 mistakes & asked the participants to chose among those only (It was possible to chose more than one mistake) and here were the results

financial regrets India

Now we will look at each of these regrets and discuss them in detail

Regret #1 – Not working seriously on increasing the income

When I listed down 8 mistakes as the part of the survey, I was quite excited to know which mistake will be on the top and after I looked at these 11,324 results, it was clear that the biggest regret was – “Not working on increasing the income”

Think about it for some time…

The “income” one earns is one of the tops most important things in financial life. You will be able to build wealth over time, only if you invest the money.

The investment can only happen if you are saving a decent amount of money after your expenses happen. Which becomes possible only if you are earning good enough income.

Why earning good income is important

So if one has low income, then it’s not a great situation to be in, especially in today’s times. Because then your expenses itself will eat up all your income and you will not be left with enough surplus each month. You will not be able to save enough for your financial goals, for buying a house, and other necessities in life. If this continues for many years, you will be stressed most of the time thinking about the future and handling the short term demands which life keep throwing at you.

As per the Pew Research Center study, India primarily has poor or low-income families and even by world standard, we are not doing well. Not everyone in India works in Big IT parks or sophisticated jobs like you and me.

low income India

(Image source)

When most of people start earning money, they go into the comfort zone of life and don’t take enough measures to increase their income. Whatever pay-raise they get from their employer is taken silently for many many years assuming that they are getting what they deserve, only to realize years later, that they are underpaid.

As an investor, you should spend a lot of quality time on building your skills, and finding the right environment which values you and pays you good enough. You should find out various ways through which you can increase your income.

This article gives you some background on how to change your habits and mindset around money, in case you want to do something about it.

Regret #2 – Not making any investments till date

Even after many years of earning money, a lot of investors still don’t make any real investments. By real investments, I mean a considerable wealth. I am not talking about a few small Recurring deposits you did or your LIC investments which you did for tax saving. No!

Answer this …

“How much of your earnings to date, have you saved?”

There are many people who have been working for the last 10 yrs, but their savings/investments are just equal to their yearly income!.

1 in 3 investors wait for 5 yrs before they make the first investment

Here is a survey I did last year where I asked investors how late they were for making their investments. 29% of people said that they waited for 5 yrs before making their first investment and 8% of people had not invested even after working for 10 yrs.

If you add both the numbers, seems like 1 out of every 3 investor wait for at least 5 yrs before making any investment. That’s a scary number.

Here are the topmost reasons why people do not make investments for many years

They don’t save enough after their expenses
The amount of saving they do is very small and they feel it’s not worth saving that much
They are spendthrifts by heart and just spend the money
They just keep thinking – “I will invest once I have enough money”
They tried saving some money, but eventually used it for some purpose
They faced a bad experience and then decides to not invest
They just avoid investing because they feel it’s complicated and confusing

If you are a young investor and waiting for the right time to invest, trust me – it’s never going to come!

Start with whatever small amount you can, so that you at least teach yourself the habit of investing, see how it feels to see a few thousand in your bank account which was saved by you. That feeling will be great and the chances of that habit of saving getting stronger are high.

Regret #3 – Not focusing on a career or choosing the wrong career

Your career is a very important part of your life.

Your career will decide how much you will earn, which in turn will decide the quality of your financial life to a great extent. Your career will decide how will be your mood for 8-10 hours each day. It will decide your stress level and your health too.

Your career is like the center of your life if I am correct.

If you don’t love what you do to earn money, there will be issues in your life and many things will get affected due to that. I want you to read a few answers from quora where people have shared their views on the career mistakes people make.

career mistakes people make in India

I have often seen that a bad financial life is a result of a bad career or wrong career. Many a time, people get into a job which they don’t hate, but then they never work on making themselves skilled enough to reach the top positions.

Take an example of a software engineer, there are many people who don’t hate their job, but then they are stuck with a profile or skills which they have not upgraded and hence they are not fully satisfied with themselves.

Don’t be that person!

If I have to share from my personal life, My first and only job was at Yahoo as a systems engineer. I was recruited from the campus. I was an algorithm and problem-solving guy who was chosen for the server related work which involved everything I never enjoyed, nor I was confident enough.

Within a week of joining the job, I realized that I am in a mess.

I knew that I am stuck into something which I am going to hate like anything for the next coming years. I just survived for many years and side by side worked on this website and with a few thousand in my bank account, I told my manager that I am quitting my job.

Current Situation

I changed my career path totally. I am now satisfied with what I do for a living and to earn money. I have increased my skill levels in a totally new domain.

I know it’s not easy, but see what all actions you can do and improve things on your side.

Regret #4 – Spent too much mindlessly without thinking about future

This regret is somewhere closely related to #2 point – “Not investing anything till date”

After the first paycheck comes to one’s bank account, it’s a very special phase of life. Most of the people get into the spending spree. We all have done that and there is nothing wrong with it. After all, for so many years you wait for that day when you will have control over money and take decisions of spending without any restrictions from parents.

After all, there are so many unfulfilled wishes and desires we all have.

However, there is one problem

Many investors never stop their spending spree and continue it for many years, without looking back on how it’s affecting their financial life.

They are busy enjoying life, buying expensive gadgets, taking vacations they can’t afford, and eventually get into debt trap and keep paying a big portion of their income into EMI’s

No, we are not talking about spending money on needs and enjoyment. We are talking about people who go overboard and cross their limits. We are talking about that person, who earns Rs 5 lacs a year, but lives the lifestyle of a person who earns Rs 10 lacs/year.

If their financial status allows them to own a Maruti Wagon R, they buy Honda City.
If they can afford eating out twice a month, they do it twice a week
If they can afford to call 50 people for a family function, they call 500 so that they “look good”

And this continues for years and years … and once they get married or once they have kids, then they start wondering about the future.

That’s when they wake up and realize that they have messed up.

spending money

If you want to do mindless spending and never restrict yourself, then better earn like hell.

Make sure you take your income to a level, where “how much you spend?” does not matter. But most of the people earn a fixed income whose growth is going to be linear over time. Better control your spending beyond a level if you can’t earn enough.

Regret #5 – Lost a lot of money in bad financial product

Investors trust close relatives and friends while investing their hard-earned money and invest money based on relations, hearsay or recommendations and don’t think enough before writing that cheque.

So the family uncle becomes the insurance advisor and the tax-saving expert, and the friend in the next cubicle is your financial advisor at times.

In the name of the tax-saving rush, investors commit themselves for years of premium payment in a useless product which is packaged very well and then many years later, they realize that they invested in a dud product.

Check the poll results below were 920 investors have shared why they bought a financial product which they realized is a wrong one for them. People buy it because they trust others easily, or its pressure from family/relatives at times.

Reasons for misselling

The worst thing is the time lost and not exactly the money only.

If you invested Rs 50,000 each year for 10 yrs and finally realized that you only have Rs 4 lacs back out of 5 lacs paid, Your loss is not just 1 lac, its 5-6 lacs, because your 5 lacs could have become 10-12 lacs over these 10 yrs, think about the opportunity lost too.

Regret #6 – Trusted others too much and lost a lot of money

This is just a subpart of the point we just discussed.

A lot of people have lost a lot of money because they trusted someone. It can be a friend/relative or completely unknown person. There are various scams that happen in our country and worldwide. There are chit fund scams and get quick rich kinds of scams and people put their hard-earned money without thinking much.

Here is a recent case where a woman trusted a person and transferred 11 lacs to their account and later realized that she has been duped.

lost money phishing

I am not recommending that you become paranoid about your money security and just never trust anyone, but when you are investing your money, make sure you do the background check of the person you are dealing with, do your homework and understand what you are getting into.

Regret #7 – Didn’t buy a house even when it was possible to buy

13% of people from 11,324 people who took the survey said that they regret not buying the house when it was possible for them. I am not sure what percentage of these people don’t have a house at the moment, but I am speculating that many people had the money to commit for down payment and take a loan, but they didn’t do it and finally prices went up and they could not buy the house later due to rise in prices.

(Check this interesting article discussing software engineers and house ownership pattern)

My suggestion is that if one has the potential to make a down payment for the house and can afford to pay the EMI, then one can buy the house for consumption purposes (if not for investment purposes). Once you buy the house, a big pending task of life seems to be completed. But then this is a personal choice.

Regret #8 – Took too much loan in my life

Only 11% of people chose said that they regret taking too much loan.

It does not mean that people are not taking a lot of loans, just that they are ok with it or deal with it properly and don’t consider it as an issue. A lot of people prepay their loans before the original tenure.

My recommendation is to not take unnecessary loans for consumption purposes like vacations, alliances etc. The only two loans which to me make sense are Education loan and Home loan. At times car loan is fine, but then no other loans. Personal loans should only and only be taken in case of emergency and never otherwise.

What is your financial regret?

I would like to know from you what has been your biggest financial regret? Have you committed some mistake which you repented for years? If you had avoided that mistake, you would have a different financial life today?

Please share it in the comments section!

CIBIL to provide 1 free credit report a year – Says RBI Governor

Posted on July 20, 2016November 14, 2019 by Jagoinvestor

CIBIL will soon be providing 1 free credit report a year to every person starting Jan 1, 2017 as per RBI directions . This was said by RBI governor Raghuram rajan at a seminar on ‘Transforming Rural India through Financial Inclusion’.

This is great news for investors because right now one has to pay Rs 550 for getting a onetime credit score and report from CIBIL. While Rs 550 is not a very big amount for many people, for a majority it’s quite a good amount and most of the people are not in agreement to pay for a PDF report, as they think that it should be freely available.

free-credit-report-india

How the FREE credit report will help investors?

A lot of investors have till date not checked their credit report and hence they are not aware of any issues which might be present in their report. Not everyone is ready to pay Rs 550 for their report and even that’s the reason why many people are not aware of their credit score.

With this free credit report, I think a lot of people will start looking at their report and start working on improving their score and take measures to remove the bad remarks from their report. Investors will also be able to find out if there are any fraud loans on their name taken by others if any.

Seems like RBI has really pushed on this matter of free credit report. The reason why I say this is because around a month back in June, 2016 , there news channels had reported that RBI has suggested CIBIL and other credit bureau to provide a one free report. You can check out this youtube video.

What is Credit Report?

In case you are not aware, Credit report is a comprehensive report which is prepared by CIBIL or other credit bureau from the data they get from various banks and lending institutions. The report contains your credit history and all the details about our past loan payments (including credit card). Every lender uses this report to understand how trustworthy you are and if you should be given a loan or not.

In a lot countries consumers are entitled for one free credit report a year and now it’s going to be a reality in India too. I went to https://www.usa.gov/credit-reports to understand how it works in US and found out that Americans are entitled to get 1 free credit report from all the three credit bureau there. See the snapshot mentioning that below

In India apart from CIBIL, we have Experian and Equifax as other two credit bureau, but at this moment RBI governor has only announced that one will get a free report from CIBIL. He has not mentioned about the other two.

However, I think over time even they will start providing a free credit report to catch up with the rules.

What you think about this news? Do you think it’s fair for CIBIL to charge people for providing the credit report or it should always be FREE?

Closing your PPF after 5 yrs is possible now [NEW RULES]

Posted on July 11, 2016November 14, 2019 by Jagoinvestor

Recently the PPF closure rules got changed and now a PPF account can be closed prematurely after 5 yrs itself, but only in some conditions which we will see in this article.

Till now, as per the old rules, the PPF account had a lock-in period of 15 yrs, and in no case, it was possible to close the account other than the death of the subscriber itself.

So death was the only valid reason to close the PPF account before 15 yrs maturity period.

PPF premature closure rules

As per the recent rule change by the govt, PPF closure before 15 years is now possible. You can close a PPF account if it’s at least 5 yrs old, in following 3 cases

Case #1 – Death

If the PPF holder dies, then the account can be closed anytime (even before 5 yrs) and the nominee/legal heirs can claim the amount from Govt.

Case #2 – Life-Threatening illness

The PPF account can also be closed in case, the money is required for curing the serious ailment or life-threatening disease of the following people

PPF subscriber himself/herself
Spouse
Dependent Children
Dependent Parents

Note that one has to provide the documentary evidence from a competent medical authority. So you will need to share the proof that you need to undergo some big treatment/surgery etc and you will need money for that.

Case #3 – Higher Education

If money is required for the higher education for the PPF subscriber or the minor on whose name the account is opened, then one can pre-close the PPF account. However one has to produce the fee bills and the proof of admission or any other documentary evidence.

Here are the exact notification wordings

PPF pre-closure notification

Penalty of 1% when you close PPF account before maturity

This pre-close feature comes with a penalty of 1% of interest for each year. What it means is that for all the years since your PPF account is opened, you will get 1% less interest for each year. So if you earned 8.7% for a particular year, your calculation will be done @7.7% and this way for each period 1% will be reduced.

Govt has issued an example calculation for penalty of 1% . But the question now is does 1% penalty mean 1% less amount in final corpus after pre-closure?

No, the answer is 4.88 %!

Yes, You get 4.88% less corpus due to this pre-closure penalty of 1 %. But this is true for that example only which is given by govt in their notification. I went deeper and did the exact calculation and here are the results.

ppf pre-closure example

The reason why there is a good amount of difference is that there is the compounding of penalty in this example. If you check the balances in 3rd year, you will see there is difference of 2.1 %. And it keeps on increasing as the number of years increases.

Which means, Older the PPF account, the higher is the final penalty for you.

It does not make a lot of sense to close the PPF account before maturity once 10 yrs is passed, as the penalty will be higher than 4-5% if most of the cases.

PPF pre-closure rule will help investors

PPF is one of the widely popular financial products in India. Majority of families have at least one PPF account and given it’s a long term product, there is a good amount of money lying in it. Now with this new pre-closure rule, an investor gets the benefit of closing the PPF account if they want to do it.

But the only issue is that it’s not an emergency solution to the problem as the documentation requirement is there and being a govt product, you can expect a slow response while closing down the PPF account and using the money.

Please share what do you feel about this new change in PPF closure rules?

Register for Mega Jagoinvestor Workshop in Mumbai – 7th Aug (Sunday)

Posted on June 29, 2016November 20, 2019 by Jagoinvestor

Hello Mumbai Investors,

You have experienced your first rain and the weather is beautiful out there. It’s time to go on a date with YOUR financial life and to do so; we have an opportunity wrapped in this article for you.

Mark and block 7th of August (Sunday) on your calendar, our entire team will remain present in Mumbai to lead/organize an extraordinary one day workshop on personal finance. This time we are playing for a bigger event and for that we will need your support and full participation. (Watch Pune workshop Video & Testimonials from Participants)

If you are from Mumbai, Navi Mumbai, Thane, or other nearby areas (even Pune), then book your seat and then share quickly about this event with your loved ones.

Our PROMISE – It is going to be a GAME CHANGER

The workshop will be a game changer for YOU because it will add a lot of value to your financial life. So far we have seen and observed that our workshop helps investors to add new and different dimensions to their financial world.

In the whole process you learn to slow down so that you can examine what’s going on in your INNER financial world. With our help and support, YOU will also define and adopt a new set of actions and strategies to create an amazing financial life.

Why we conduct workshops?

We do offline workshops so that we can connect with some of our readers at a deeper level, round the year we write articles, reply to thousands of comments and work with a few hundred investors one-on-one and in that process we learn, grow and expand as professionals.

Our Workshop gives us an opportunity to share outrageously all the knowledge and experiences that we acquire round the year. The program is an opportunity to get our readers more and more action-oriented.

Why you should come for this workshop?

You will learn how to improve your financial life with your current set of resources and income.
You will learn how to plan for your financial life goals
You will interact and learn from other’s people’s financial life
You will dedicate one full day to get better with money management
You will learn to add new dimensions to your financial life
To understand that personal finance can also be fun
To give a whole new direction to your financial life

It’s time at add jagoinvestor workshop to your financial journey:

It has been a few years now conducting “Design your financial life” workshop and the experience has been amazing. It is a wonderful space to be in, in which the group learns and starts to fall in love with the process of wealth creation.

We do not teach tricks and tips to build wealth in fact we help you to discover your own personal process of creating wealth.

This time we want more couples to participate so that they can get on same page when it comes to personal finance. It is extremely important that husband and wife both take equal interest when it comes to money management.

We are offering special discounts to those who want to come with their partner. (You can even come with your parents, siblings or friends and can claim the discount)

The workshop we conduct is highly interactive, it has lots of activities and fun exercises that help you to discover your relationship with money. The sessions are interactive and very easy to grasp for any kind of, beginner or advanced investor. In short, there is something for everyone in this workshop.

What will you get as a participant?

You get a FREE Financial Health check-up Report worth Rs 499 on sign-up
One day workshop with some personal finance tools like a budget sheet, Mutual fund tracker, etc
Invitation to join our inner circle

Register for Mumbai workshop on 7th Aug, 2016 (SUNDAY)

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Valid for 1 person
Ideal for Bachelors

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Valid for 2 People
Ideal for Couples, Siblings, Friends

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Other Details

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Program Name – Design Your Financial Life (Check Program Flow)

Program Presenters – Manish Chauhan & Nandish Desai

Timings & Date – 8:30 am – 6:00 pm, 7th Aug, 2016

Venue – Motilal Oswal Tower, Gokhale Road North, Prabhadevi, Mumbai – 400025 (Maps)

Contact Person – Abhi Kumar (09979922535)

Important Information

The venue is 2 km from Dadar/Lower Parel Station
Lunch and Tea/Coffee is included in the program fees
Please don’t bring kids to the program
We reserve the right to admission in this program
This program is not for financial advisors/agents/CFP

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Invitation to join and participate

From the bottom of our heart, we invite you to join and participate in our Mumbai workshop. Come alone or with your spouse or parents, siblings or friends but see that you do not miss this opportunity. Do not let time and money to get in your way and book your seat at the earliest because we will be taking 70 participants this time and registration will close after some days.

This workshop is strictly for investors and not for advisors or finance professionals. This workshop is strictly for investors and not for advisors or finance professionals. In case we find some financial advisor/planner or anyone from personal finance background registering for the program, we will refund the fees. We hold the right to admission to this program

If you have never participated in any personal finance workshop let this be your first workshop. If you have any questions you can write in the comments section.

You can also visit our Workshop Page to Register and Get more details.

We would like to extend special thanks for Motilal Oswal Mutual Funds for allowing us to use their venue for this workshop and helping with the logistics.

5 Asset Classes Explained – A simple guide for beginner Investors

Posted on June 17, 2016November 20, 2019 by Jagoinvestor

Today I am going to teach you about “asset classes”, which is the most primary lesson every investor should go through. Understanding asset classes is very important for an investor because when you invest your money in any financial product, then in the background, it goes to a certain asset class only.

The world of personal finance has hundreds of financial products, which makes everything confusing for an investor, but if you understand which asset class it belongs to, then this whole world of personal finance will sound easy to you.

So if you are confused about whether to invest your money in a fixed deposit or a mutual fund? Or into gold ETF’s or PPF? How do you decide?

Just ask – “Which asset class does it belong to?”

Is a fixed deposit in the bank better or a PPF would be the right thing for you, this all questions might seem to be confusing to you if you do not understand which asset class they come from? So in this article, we will go deeper into the basics of investing and help you to get stronger into the primary level information.

What is the meaning of Asset Classes?

Asset classes can be seen as a big basket where all the financial products belonging to that asset class share common characteristics. Things like risk, returns, liquidity, and various other parameters are similar.

For example, a Fixed Deposit and PPF are different financial instruments, but at the deeper level they both are secure products, you do not lose money in these products, their returns are also predefined and there is predictability in their returns.

Can you see that both FD’s and PPF share some common characteristics? It’s because they both belong to the asset class “Fixed Income”.

Here is a video which gives an introduction to asset classes

In the same way, an equity mutual fund or direct stocks, both are different financial instruments from high level, but inside they both are high volatility instruments and have potential to multiply your investment amount many times in short period of time, this is because they both belong to same asset class called “Equity”.

Below is a snapshot from the Karvy website which shows you the wealth distribution of Indian investors in the year 2015.

There are 5 asset classes

While there is no standard list or category of asset classes, widely it’s accepted that there are 5 types of asset classes namely

Fixed Income
Equity
Real Estate
Commodities
Cash

Every financial product you come across will fall into any of these 5 asset classes only. Each of these asset classes has their own set of behavior and they represent something unique about them. The chart below shows you financial products belonging to these asset classes and what these asset classes denote

Asset Class #1 – FIXED INCOME

Let’s start with the most famous and favorite asset class in India, which is “Fixed Income”. Fixed Income asset class refers to the class of financial products where your investment amount is more or less protected and the returns are either fixed or predictable to a great extent. There is almost no/less risk in these products which are from the fixed income asset class.

Investing in fixed income asset class is like lending your money to someone with the assurance of return with predefined returns. So when you make a fixed deposit in a bank, you are not exactly “investing”, but lending your money to the bank with a promise that they will return back your principle amount along with a pre-defined interest.

Fixed Deposits do not beat inflation

Even if you are getting an 8-9% return on your fixed deposits, many people do not realize that it’s the pre-tax return. As Fixed deposits are taxable (and every other debt instrument), once you pay the tax on the returns, the post-tax returns are only in the range of 6-7% and if you adjust the inflation of 8-10%, you are actually getting a negative return on your fixed-income investments.

Livemint has done a story on this topic in a detailed manner which you should read.

Risk is less in Fixed Income Asset class

All those who want to get a fixed return and do not want to take any risk should choose this asset class. It’s a human nature to seek assurity, and given that fact, fixed income instruments are a big hit. No wonder Fixed Deposits rule the world of investments, It’s simple and easy to understand the financial product.

Same goes for PPF, NSC, recurring Deposits and various govt bonds or debt mutual funds. However note that this asset class does not beat inflation or nearly matches it, hence over the long term, while the amount of your investment will become bigger in number, the purchasing power will remain stagnant or might drop. So this asset class is to only protect your money, not grow it.

Asset Class #2 – Equity

The equity asset class is an interesting asset class and slowly getting more and more acceptance from the last 1-2 decades.

Equity means ownership

So when you invest in equity, it means that you have bought ownership into a business. For example, when you buy stocks of Infosys or Reliance, you become a small owner of that business.

Even the RSU and ESPP which you get from your company makes you a small investor in the company and that’s “equity investment”

Now obviously when you invest in the business, you get a % ownership. And if that company becomes big someday in the future, your overall worth also goes up. But there is a problem, the business grows only over time and in between, there are ups and downs and that reflects in the stock price of the business/company.

If you look at all the rich people today (really filthy rich), it all happened with equity investors. Someone either opened their own company or invested in some company which was growing and held it over the long term.

Equity Investing works in the long run

Below is the 10 yrs return chart for various years for Sensex. You can see that most of the time sensex has given more than 12% return (much more than that actually) every 4/5 times. This is since the time Sensex has been into existence.

Because the equity returns are very volatile, most of the people refrain from mutual funds investment or investing in direct stocks, but they are the real wealth builders for any investors. There are mutual funds from various Asset management companies that have a proven track record for building wealth for its investors.

Asset Class #3 – Real Estate

Real estate, as we all know refers to physical space, or physical structure like land, residential flats, commercial spaces, etc. These spaces are either used for living purpose or for doing the business and generate income. Should one invest in real estate or not is a topic of debate and I am not getting into that right now.

Over the last 2 decades, the real estate asset class has got tremendous interest from investors. Everyone wants to now own a home and real estate is very sought after asset class. As the country develops and expands, we see many upcoming areas in all cities and a location which was considered outskirt of the city becomes a very important location in the city and we see some amazing returns.

However, the fact is that we always hear the “good” stories and never the bad stories where one got bad returns from real estate or lost their money.

Returns from Real Estate

The real estate market has cycles of ups and downs and returns from real estate can be very volatile and can depend on various factors like city future, govt policies, political situations and many more. For example, if you look at Hyderabad, the returns in real estate have not moved anywhere in the last 7-8 years and we are talking about average returns here.

Bigdecisions.com has done a study based on NHB Residex to compute the real estate returns in various Indian cities from 2007-2014 and below were the results.

I am in on way saying if real estate is good or bad. All I am trying to do is make you aware of the characteristics of real estate as an asset class. You need a high ticket size for investment, the market is not regulated at all (only recently the regulation has been made) and it’s more or less one side market with a lot of opaqueness.

Asset Class #4 – Commodities

Commodities refer to various types of physical goods or products which we all can buy and sell for various uses. Gold, Silver, Copper, Rice, and Oil etc will be counted under this asset class. The price of these products depend on demand and supply in the market.

Commodities are for “Trading” and not investing

With my limited understanding, I came to the conclusion that commodities are not for investing for the long term, but mainly for trading, where you can benefit from the market cycles and predict demand and supply moves and get a profit or loss.

Returns from the commodities can be very volatile and each commodity has its own market and dynamics.

Only a handful of commodities like Gold or Silver can be invested in for a very long time because they can be stored without losing their usage. A common man can’t store other commodities in the same way, hence trading them for short term is a feasible option.

Asset Class #5 – Cash

When I say “cash”, I don’t just mean the hard cash bundles, but also the money lying in your saving bank account, or liquid mutual funds. I will refer all of these things as “Cash”.

The best thing about cash is that it gives you the freedom to “buy” anything you want instantly. You can buy a car, a house or a phone or invest your money in other asset classes.

The freedom you get with cash is very high and that’s one reason why most of the people prefer to hold a lot of cash. Also the cash cannot be tracked (unless it’s several multi-crore rupees) and many people keep their black money in form of cash.

(Image Source)

It’s not uncommon to see many lakhs lying in a savings bank account just because the investor thinks “What if something goes wrong?”

However cash has one problem, it does not fight inflation at all or very little. The money lying in saving bank account just earns 4% and that does not help you as an investor.

Which asset class you should invest into?

Where should you invest your money? This question can only be answered if you are clear about your requirements like how much risk can you take and how much return do you expect out of your investment?

Are you ok with locking your money for several years or not? I have made a simple table that compares all asset classes on various parameters.

I hope this article gave you a high-level understanding of all asset classes and cleared your basics. Please share which is your favorite asset class and why?