Let us understand the features and benefits of this account.
Minimum Balance and Eligibility requirement
Any salaried or self-employed individual can apply for these accounts as per eligibility criteria. It’s not applicable for companies, Hindu Undivided Family or any other corporate body.
There are two variants to this account called Magnum and Titanium. Below are the balance requirement and more details.
Benefits of this account –
There are a various lifestyle, financial and banking benefits of this account. They are as follows –
Zomato gold subscription of 1 year
Big basket discounts
Amazon prime subscription of 1 year and many more. Below are the complete details of the benefits of this account.
Conclusion
Note that you need to keep a high account base in your saving bank account to be eligible for these benefits, so in a way you are also loosing on the interest part which you could have potentially earned. So keep that in mind, and then take the decision if you want to go for this or not!
EPF is a long term retirement saving scheme. Therefore, it can be withdrawn fully(100%) only after retirement. And early retirement is not considered until the person reaches 55 years of age. However, if you get unemployed for a period of not less than 2 months, then as per the old rule of section 69(2) of the EPF act, you can withdraw 100% of EPF balance outstanding in your account.
A new clause, 68HH has been inserted after para 68H in the 1952 EPF act
As per this, If a person has been unemployed for a period of not less 1 month can withdraw upto 75% of EPF balance outstanding in his account as on date. The section says that, even after such withdrawal is made, the person shall remain part of the EPF and eligible for pension benefits. However, the advance cannot be remitted back into the EPF i.e. it will be non-refundable.
In addition to this, the circular clearly states that para 69(2) (old rule) is still continuing. That means, after two months of continuous unemployment, 100% of EPF withdrawal is allowed. However, the waiting period of 2 months does not apply in cases of woman retiring from services for the purpose of getting married. The snapshot of circular is given below,
Do you think this small change in the rule of EFP withdrawal, would be beneficial on a larger scale?? Let us know your views in the comment section.
Buying a house isn’t easy today if you are living in a metro city like Mumbai, Pune, or Delhi. It’s nearly impossible to pay the full price of a house unless you have massive savings or an existing real estate that you can resell. This is the reason why most people take home loans, or rather joint home loans.
What is a Joint Home Loan?
As the name implies, a joint home loan is a home loan that you take with another person, who is usually your spouse or a sibling. There are many reasons why people avail of joint home loans instead of standard home loans, one of which is bad credit.
Let’s understand why.
No matter what kind of loan you apply for, the lenders always check your credit report to assess your creditworthiness. This a standard practice to reduce the risk of non-performing assets. So, if your credit report looks fine which means that you don’t have a history of late payments, loan defaults, etc. and your credit score is high, then you can avail a loan easily.
However, if that’s not the case, not all hope is lost as an alternative option exists! That’s when you can get a co-borrower to take a home loan with you. If their credit score is good, then it can balance yours and make it easier to get your loan approved.
People also take joint home loans when they aren’t capable of repaying the full amount on their own. By dividing the loan’s burden with their spouse or a family member through a joint home loan, the debt can be repaid easily. Now that you know what a joint home loan is, let’s take a look at some of the major pros and cons of the same.
Pros of Joint Home Loan
The chances of getting a home loan at attractive interest rates are much higher in a joint home loan compared to the regular home loan.
As per the income tax regulations, joint home loans allow both co-borrowers to claim tax benefits under Section 80C. They each can deduct up to 2 lakh INR from the interest amount and 1.5 lakh INR from the principal amount from their taxable incomes.
If you are unable to get a home loan due to poor credit score, then a joint home loan can be your best bet.
Cons of Joint Home Loan
If your co-borrower in unable or simply refuses to pay the EMIs, then your credit report apart from theirs is affected.
Joint home loans can raise all kinds of legal problems if the co-borrowers are married to each other and get separated by divorce even as home loan remains to be repaid. If the property is registered in the name of one co-borrower, then after the loan has been fully repaid, he/she will become the rightful owner even if the other co-borrower has also paid their share of the EMIs.
Common Myths About Joint Home Loans
A joint home loan is a massive financial obligation. Apart from the huge EMIs that are particular to these loans, the tenures are not lesser than 15 to 20 years which means you pay the EMIs for a large portion of your life. Thus, it’s a good idea to do extensive research before you finally start submitting applications for a joint loan.
It would help if you also were wary of some of the most common myths about joint home loans that mislead borrowers:
Myth #1: A Co-Applicant is Required Just for “Formality.”
A co-applicant is as much responsible for a loan’s repayment as the primary borrower. In other words, signing on the dotted line imposes legal and financial obligations which is why it’s strongly recommended that both co-applicants read the fine print and ask as many questions as they need until they have a good understanding of the agreement they are about to enter into.
Myth #2: Only One Co-Borrower Can Receive Tax Benefits
People think that in joint loans, only one of the co-borrowers can receive tax benefits. However, this is further from the truth as both co-borrowers are equally entitled to these benefits. This means that you and your co-borrower both get to enjoy lower individual taxable incomes. That said, you must know about Section 24 of the Income Tax Act which sheds light on taxation in joint loans.
As per Income Tax guidelines, a co-borrower can claim tax benefits only if he/she is also a joint owner of the property. This clarification is important because many times, people take joint loans to increase the loan amount and make the process easier. However, merely being a co-borrower doesn’t make you eligible for the tax benefits. You must have ownership rights over the property as well.
Myth #3: Roping in a Co-Applicant is a Sure Shot Way of Getting a Home Loan
It’s true that it’s easier to get a home loan with a co-applicant compared to when you apply just by yourself. However, there is no guarantee that you will get approved for a loan. This is because home loans are highly risky for the lenders, even if they are secured against the homes they are availed for.
So, a co-applicant can’t help with the application if they don’t contribute to your “creditworthiness”. In other words, a co-applicant can make it easier to get a home loan only if their credit score is high and their income big enough to cover the EMIs.
Failing to Prepare is Preparing to Fail!
Joint home loans have their pros and cons as explained above. However, there are many other factors that you must consider including the interest rates, income, financial projections for the future, and buying a new home vs. an old home. After all, once you borrow money from a bank, there is no turning back. So, take your time and pick the right loan at the right time. Good luck!
In the article, there are no tips and tricks on how to make 1,000 crores overnight. The article is about engaging with some powerful questions and not trying to find an immediate answer to create wealth.
The article is not about creating crores, it is about shifting your focus from markets to learning from the master investors- All I want is a shift in your mindset. Markets will continue to rock, your only job is to work on your mindset to create massive wealth.
How Investors should think when markets correct?
Right now a lot of investors, advisors and mutual fund companies are focusing only on the market volatility, Fall in NAV, portfolio return, some think markets are like a bloodbath, some are in the mood of stopping their SIP, some are in the mood of redeeming money, sharp corrections, on the other side mutual fund companies and advisors are asking investors to stay patient with their investments and encouraging them to invest more.
In short, some are positive and some are extremely negative about the situation we are into.
But……
There is very little focus on how master investors think when markets correct. There is very little focus on inspiring the wealth creation journey of master investors. There is very little focus on how successful or master investors behave and act during market turbulence. We all start from zero and it is important to think and observe winning or master investors as we continue to walk on our journey of wealth creation.
Wealth Creation Journey of Mr. Ramdeo Agarwal
In the personal finance world, I have many teachers, there are many master investors from whom I continue to learn and get inspiration from. I am always like Eklavya, who keeps learning from different teachers from a distance and I will always continue to learn and absorb the maximum I can.
Mr. Ramdeo Agarwal is the Co-founder of Motilal Oswal group of companies, his journey of wealth creation transformed after meeting his mentor Warren Buffet. I never miss to read his wealth creation studies and there is not a single YouTube video I have missed in which he has featured.
I got an opportunity to be in the same room with Mr. Ramdeo Agarwal Ji in the US, my friends took a picture with him but I did not. I was having thoughts like, let me first do something amazing in life, let me create immense wealth using equity as a vehicle, let me help others to get wealthy by educating them on equity investments.
I should perform as a student first and earn the privilege of sharing a photo with him.
The POWER Questions I engage with about my teacher ( Mr. Ramdeo Agarwal Ji) are?
How does he (Mr. Ramdeo Agarwal) create wealth?
How does he maintain his conviction in the equity market?
How he stays on the court, no matter where the markets are?
How does he build his business empire around equities?
How does he stay so consistent with his investments?
How does he deal with losses in his portfolio?
How does he feel when he makes huge profits?
How does he stay committed to the process of wealth creation?
How does he practice the power of compounding in his day to day life?
Initially, I was busy to get answers to the above questions but after hearing and reading about Mr. Ramdeo Agarwal and his style of investing I came to know that the real secret is not in getting the answers, the real secret is in staying engaged with the questions, it is about staying engaged with the journey of wealth creation. It is about having your own investment philosophy, it is about allowing the power of compounding to do its work.
It is about finding your own process of wealth creation and keep refining it. It is about doing something over and over and over and over again and if something does not work for you, you make changes in your process and continue to move forward in your journey of wealth creation.
Most newbie investors feel and think that master investors have something SPECIAL in them, they do something special to create wealth, they have some special knowledge or special skills. In reality, the only thing special about them is they do not look for ANYTHING special. They master consistency, repetition and stay focused on their path. They won’t allow any kind of outside noise to deviate them from their journey of wealth creation.
I invite you to read the pdf if you have read it before I invite you to read it once again. The PDF is old by now his personal net worth must have crossed a few more thousand crores. While you read to keep the above questions in front of you, do not look for special qualities or some special information from the pdf. From time to time we will continue to share other master investors from whom we can learn and inspire from.
Teacher and His Meditation Student:
Lastly, I want to leave you with a conversation, a student had with his meditation teacher.
A student went to his meditation teacher and said, “My meditation is horrible! I feel so distracted, or my legs ache, or I’m constantly falling asleep. It’s just horrible!”
“It will pass,” the teacher said matter-of-factly.
A week later, the student came back to his teacher. “My meditation is wonderful! I feel so aware, so peaceful, and so alive! It’s just wonderful!’
“It will pass,” the teacher replied matter-of-factly.
The market correction will pass away!
You have the power to create massive wealth
You really have the power to create massive wealth, almost everyone starts from zero or from a scratch and on one fine day they become an inspiration for others. Choose to be an inspiration to others, the article is not about Mr. Ramdeo Agarwal Ji, or how much money he has made.
It is about learning from the master investors and taking your financial journey to the next level. Create your financial journey more meaningful, stick to your mission of wealth creation and if that’s the game you will never bother where the markets are going. You will see every situation as an opportunity to create wealth.
(Check if you are capable to build Rs.1000 crore net-worth or not?)
Invitation to Check your Financial Health Score: During Diwali everyone gets HIT by the euphoria of shopping and buying new stuff, we invite you to check your financial Health score this Diwali, all you need to do is leave your details in the below link and my team will help you to check your financial Health score out of 100. After checking the score you will gain clarity on areas which are not working and areas which call for your immediate attention.
Have you ever heard about Shariah-compliant mutual funds?
We get a lot of Muslim leads who want to invest in mutual funds and a lot of them mention that they would like to invest in mutual funds which are shariah compliant.
So lets look at the subject!
Examples of Shariah-based Mutual Funds
Shariah-based mutual funds are just like other mutual funds which are structured according to the shariah rules. The restrictions or prohibitions mentioned above are considered to screen and select the funds and ensure that they are Shariah-compliant.
There are three funds in India which are shariah compliant –
1. Goldman Sachs CNX Nifty Shariah BeES Fund
2. Taurus Ethical Fund
3. Tata Ethical Fund
Let us look at some of the restrictions as per Shariah law.
1. Prohibition of interest
Payment of interest on your investment is considered as unjust or morally unfair. It prohibits the interest paid on all the loans.
Islamic finances rely on sharing the ownership of assets instead of borrowing or lending and thus along with the ownership of the business (buying shares of that business), it tends to share the profit as well as losses of the company also.
2. Restricted businesses
One of the important segments of this investment is that the companies which are involved in the business activities which are prohibited as per the shariah law cannot be part of shariah investment. It includes the businesses of Alcohol, drugs, gambling, and other immoral trades.
3. High risk
The main motive of Islamic investment is to avoid excessive risk because Islam forbids gambling. And this is the reason why derivatives are ruled out of it.
FAQ’s related to Shariah Mutual Funds
Q1. Who can invest in Shariah Mutual funds or Shariah investment?
Though this fund is based on Shariah Islamic law, it is not restricted for any investor. Which means anyone including individuals, NRI’s, HUF, companies or any other institute can invest in Shariah Mutual fund.
Q2. Is there any tax benefit on this investment in Shariah mutual funds?
Till now there is no tax benefit on the investment of Shariah Mutual funds.
Q3. Can an investor from other religion invest in Shariah ethical Fund?
Yes, any investor can invest in Shariah Mutual Funds irrespective of their religion.
Q4. What is the minimum amount for these funds?
You can start this investment with minimum of Rs.500. If you want to start your investments, we can help you. Just share your details with us and our team will call you
So this is all about Shariah investment, I hope you have got answers to all your queries. Still, if you have any doubts please share your query in the comment section.
A few days back, I was sitting with financial planning in our Pune Office and we did a very detailed discussion on his financial life. We looked at various parameters and did basic number-crunching which gave a deeper understanding to this client about financial status.
The first step was to record all his financial details in one place and that exercise alone took more than 40 min because it’s a task in itself to just bring all the financial details in one place.
For the next 2 hours, the husband and wife were totally into discussing some of the aspects of their financial life which they had never thought of or never dealt in detail. It was a wonderful experience in itself.
2000+ Families have gone through the process
My team has done this same exercise with more than 2,000 families to date across the world (Indian residents and NRI’s). Most of these discussions have happened online and few of them have happened face to face. But overall, what matters is the interest and dedication of the client and not the medium of communication.
While we were doing this exercise with the client, I thought that there are many things which are so common among the clients we deal with. I can see a lot of things which get repeated all the time and there is a pattern with the majority of the cases.
So I thought why not share some of common observations and I made a list of 10 points which is true for almost 80-90% of the clients we have dealt till now.
These 10 points will give you a good idea of how a typical financial planning case looks like and you can also check if these points are true for you or not.
Let me put these points now one by one.
1. No idea of their exact expenses
One thing which is most common is that most of the people do not have much idea of their own expenses and how much they are spending in different categories. Now you will feel – “How is it possible, that a person does not know their own expenses?”
The point is that most of the people have a very vague idea of how much they are spending on various categories because most of the people do not note down and follow a stringent budget. People have a high-level idea for everything, but once they put down all the numbers – They get surprised on their own expenses and feel like – “Ohh .. I spend so much!!, Never realized that”
2. The legacy of LIC policies
Almost everyone who comes to us for financial planning always has 2-3 LIC policies which were taken long back for tax saving purpose. If not for tax saving purposes, it was bought by their parents and they are now continuing it and paying the premium.
They have a high-level idea of the Sum Assured and when it’s maturing and hardly a few people recall the exact policy name.
3. People are Surprised
When we do the detailed analysis and show where they stand in their financial life (backed by data and proper reasoning), most of the people are surprised on how bad or how good they are doing.
Mostly we all are so consumed in our life that we never realize the status of our finances. We have a very fuzzy understanding if things are going bad or good.
Some of the people realize that they are worrying too much, where as they are well placed and are on right track (very few people are like that) and majority of people realize after meeting us that they have underestimated how bad they are in their financial life and its HIGH time they need to quickly take action.
4. Confused on how much they would need to retire today
When we discuss their retirement planning, almost everyone fails to reach a number which will be enough for them to retire today.
Just think about it.
If I ask you today that assume you retire today and you have to spend another 30-40 yrs of your life without any debt or EMI burden and no commitment like children related expenses. Assume you are 60 yr old today, and now need a big amount to live your life till you die, how much money would you need?
Just think about this for yourself and you will realize that it’s a tough question to answer. Will it be Rs 2 crore? 5 crore? 10 crore?
5. No clear Financial Goals in life
Most of the investors we see are mostly living in present and dealing with financial goals as and when they arrive. They know they would need “lots of money” in the future. But almost no one has properly planned for their financial goals.
One of the couples we met recently wanted to plan for their kid’s related goals. The wife was clear that the education was the biggest goal, but the husband was confused if they should also plan for the Marriage goal or not.
6. Decisions are taken based on “Instant Gratification”
We see that almost everyone has taken lots of decision-based on “instant gratification” or “the short term benefit” . Someone called from the bank and said they will save tax on a product, and they buy it.
The gold prices were rising and it “felt” right decision at that moment, so they bought lots of gold and not from the last 4 yrs gold has given a 0% return.
Like this, we see that decision is not carefully thought of with all pros and cons, but rather a very narrow approach.
7. “I could have done much much better” – The feeling of Regret
Every 1 out of 2 people we dealt with told us that they regret what they have done with their finances in the past and they wish if they could have done things differently.
More than doing “right things” , these people have done many “wrong things” and that has a higher impact (in a negative sense) in their financial lives.
8. The biggest part of Net worth is the House on loan
Almost always the house was the biggest part of the net worth, not the mutual funds, or stocks or fixed deposits .. I think it’s because we mostly deal with middle class or upper-middle-class salaried investors and the house is generally there in the portfolio.
Almost everyone had a big home loan.
9. Too many financial products
Another common issue which we see in most of the cases is that they have too many financial products. Many Fixed Deposits, many LIC policies, too many mutual funds (if any), various policies.
These people are more of product collectors who have added something new in their financial life each year when the tax season comes or whenever they had surplus money.
This is one reason that their financial lives get very complex.
10. Unable to meet Financial goals with current resources
When we check if these investors will be able to achieve their financial goals or not. We find that most of the people are not going to reach their goals easily .. and in some cases, they are seriously short of money and are in very bad shape.
It’s like a disaster waiting to happen. Investors are already in the age range of 40-45 yrs. They have some portfolio, but looking at their financial goals, it feels like they will be able to reach just 30-40% of it ..
Once you become an NRI, what happens to your PPF account? Can you continue it or do you need to close it?
The one-line answer is – NO, You do not have to close it, and you can continue it till its maturity.
But there are more details to this.
Last year on 2nd Oct 2017, govt-issued a notification that once a person becomes NRI, his PPF account will be closed on the same day he becomes the NRI and all his money will earn only 4% interest thereafter.
New PPF Notification cancels the older notification
So yes, in Oct last year the rule had changed regarding PPF for NRI. You had to close it once you become the NRI, but recently on Feb 23rd, 2018, there was another notification issued that the old notification is on hold now and canceled till further notice.
This means that the same old rule will be applicable now onwards for NRI investors. An NRI cannot open a fresh new PPF account but can hold an existing PPF account till maturity.
Let’s see a few frequently asked questions related to the PPF accounts of NRIs.
NRI PPF FAQ
Q.1 Can NRI open a fresh PPF account?
As per the change in the amendment of the public provident fund, a person cannot open a PPF account once his status changes to NRI.
Q.2 What will happen if I’m an NRI and still open a fresh PPF account?
It is possible to open a PPF account for NRI because of the inefficiencies in the system, but before doing that you must be aware that legal actions can be taken by the authority in such cases. You will not get any interest on your PPF account if they find out.
Q.3 What should I do if I have a PPF account when I was Indian residential and later become NRI?
You do not have to do anything here. You can continue your PPF account till its maturity, but you cant extend it after 15 yrs.
Q.4 Can I contribute to my existing PPF account once I become NRI?
Yes, you can invest in your existing PPF account even after becoming NRI through your NRE or NRO account. You can only contribute till your PPF account matures.
Q.5 How to close my PPF account after it matures?
The steps for this process are as given below:
Step 1: Fill the application form for PPF withdrawal (Form C) and send it to your parents, relatives or friends in India, with an authority letter in which mention it clearly that you are giving that person the authority to withdraw your PPF.
This is how FORM C looks like:
Step 2: That person then will go to the bank where you have your NRE/NRO account and get he documents attached by the the manager and then submits the documents. Bank will accept only the attested documents.
We hope you got a fair idea on the PPF rules related to NRI. In case you have any queries, let us know in the comments section below.
Do you want to read the story of an investor who has tripled his net worth in just 8 yrs and learn about his great skills in financial planning?
We bring you the money story of one of our readers from Pune, who agreed to share about his life journey and his achievements. Over to him …
—
Hi Manish
First, let me start by thanking you and Jagoinvestor team for running this great learning portal (Jagoinvestor) and giving me an opportunity to tell my money story which may help some of the readers.
A little bit about my family
To give you some quick background on myself, I live in Pune and I am an IT architect by profession working with Wipro. I come from an upper-middle-class background with my father (passed away last year) been a banker and mother being a housewife.
I also have a younger sister who has been married and well-settled. I have been married with a 4- year old kid now and my wife takes care of the home.
My childhood experience with money
My introduction to money management started at a very early age. My father and mother were always advising us both kids to spend it right and all genuine/reasonable demands were met. However, we didn’t get any pocket money any time as we had been asked to ask for our needs and no money was just given to spend as we like.
Even during my teens, we had a simple practice of giving complete account to mother/father for the money that was given to buy any items. So, I have always valued money to be spent and would continue to do that with my kid.
My father was also a good investor in his time even with no internet and mobile phones available. He had invested in some stocks, some land/flat, FDs and PPF during my growing up days. As a kid, when I used to see him receive cheques for shares dividends for paltry sums, I used to ask him what is this that you keep receiving. He used to tell me that you will understand more with time.
So, curiosity started very early.
I got a job in Bangalore
My hands-on work in personal finance and financial planning space began when I started working in Bangalore at a very low salary (~10K in hand) and was always trying to see the best I could make out of it in terms of savings. To me, money saved was always money earned.
So, I looked upon all possible legal ways of reducing income tax to start with and then investments in other avenues. It also gave me a great boost that all friends used to ask me on how best to save taxes. Later, I did the same even when I was outside India by understanding the IT laws of that country and ensuring I only paid required taxes.
Expanding the horizon
As my interest grew in financial planning, I started covering all bases including insurance policies, PPF investments. Interest in investments led to Stocks, MF, real estate and eventually Portfolio Management Services (PMS).
For fixed-income instruments, I keep some investments in Sukanya Samruddhi, NPS, Fixed Deposits and of course PF. I had created cash inflow/outflow projections for the next 20 years and my estimated expenses at various stages considering inflation.
This has led to investing as per goals at various stages like buying flat, child’s education expense at age of 15, 18, 21 and then marriage, retirement corpus, etc.
My Financial Achievements
From where I started (10K per month salary with zero bank balance) 15 years back to today with well-over 6 figures take-home salary, of course, the salary has grown many folds but then expenses have too. My net worth has tripled in the last 7-8 years (my salary went up by 50% in that time), Stocks/MF/PMS portfolio stands over 1 cr, 2 flats owned.
Money attracts money and so, more investments I made, more returns I got. I bought a flat with no home loan a few years back because of the investments made and that gave me great satisfaction.
My Equation with money
In one sentence, my equation with money is to maximize my potential. Be it earning through all legal means or maximizing returns on my investments. Money has and will always be important to me just like others. Having enough money to me means all needs (and not necessarily all wishes) at different stages are met with ease.
Spending money to me means that every rupee spent is worth the object to be bought. When I meet either of these, I am a happy and content man. If I fail on either one, it’s not losing money which troubles me but it’s the standard/process that I couldn’t follow which led to the loss of money.
How my perspective towards money changed
My primary experience with money is that you need to be diligent with money management. When I was not diligent enough with a couple of investments, I made bad calls and lost money. Similarly, informed decisions in investments have given me substantial returns. Like other aspects of life, Wealth creation takes time and knowledge.
You have to be alert and keep reading to understand views from experts. Blogs like Jagoinvestor help a lot when you start on this journey.
Money is not everything as they say but not having enough money brings everyday problems, I believe.
People crib about not earning enough but they don’t know how to manage and invest what they are earning which leads to higher dissatisfaction. Then come compromises on various needs that have a butterfly effect on other aspects of life.
I have seen someone in my family who has retired from a very high post in Income Tax department, still doesn’t even own a single house and not enough retirement kitty which shows not being diligent enough with money management. He lost money in bad investments with no tracking and his family simply loved spending on shopping time and again.
Then came excuses and defensive attitude. That’s the worst case of lack of money management that I have seen around.
Summary of learning
While I am still learning, there are some experiences/habits/ which have helped me and would like to share –
Cover your bases – Before you invest, make sure you insure yourself/family with the right policies for Life, Medical, Critical diseases, House and Car (in that order).
Start Early – It’s been said multiple times that when you start early, the magic of compounding works big time. Make sure you start the habit of saving and investments early even for small amounts. Remember it is a habit and with time, you can increase investments. I started at the age of 23 with saving not more than Rs 1000 in taxes but the habit was developed.
Ask/Look for help – Solid financial planning is not everyone’s cup of tea. Leave it to experts (check with Jagoinvestor team) where required and don’t hesitate in paying small fees for that work. You also get paid for the job that you do because of your skillsets.
Track your net worth – It is critical to track your net worth i.e. difference of assets and liabilities. Similarly, track your cash (FD/Savings Acc, Liquid Funds), fixed (real estate, PF/PPF, NPS) and variable assets (Stocks/MF/PMS/Gold). I try to maintain a healthy cash balance too.
Return on Investments – Your investments should grow when you sleep. Make sure there are no dead investments. A lot of bank balance in savings account looks good but it is detrimental to wealth creation and leads to “money erosion”. Ideally, Your investments should take care of at least your regular payouts i.e. Loan EMI, Credit Cards, Policies premium.
Track your monthly expenses – I have created a simple excel sheet to track all expenses in a month. I then bucket them in real expenses, Liabilities payout (Loan EMI/Insurance premiums etc) and investments (SIP, Endowment Policies, NPS, Sukanya Samruddhi etc). The idea is to capture % of your income from getting allocated to these sections and avoid unnecessary expenses. Typically, I average 35% in expenses, 35% in liabilities, 25-26% in investments and remaining as just savings.
Share with spouse – Share with spouse details of your bank accounts with passwords, complete details of assets and liabilities. You never know when would they need it suddenly and you may not be around. Trust me, it becomes impossible for someone new to find all your investments. I have created simple excel sheets, keep updating them and share them with my wife. I store all physical documents in one place.
Diligence in money management – As there are no shortcuts, make sure you read enough and then make informed decisions. Respect your hard-earned money.
Wealth Creation – The key is to create wealth over a period and increase your net worth. We are not born millionaires.
Aspire, not greed– When you see someone successful/failure in money matters, try to learn. Aspire to be successful but don’t envy or have greed. Don’t lose night’s sleep because everyone makes mistakes. There’s always a chance to make a comeback but with patience and again, no short cuts. I learned this from my father who made all right investments but was still very detached emotionally from those investments.
Follow the right processes and money will follow – Wealth creation is a result or even a by-product (if you may). Following right processes of money management will lead you on the right path.
So, that’s it, folks. I hope my story helps some of you and you can benefit from learnings/best practices I shared. I would like your views on areas that you think I might be able to do better in money management.
Are you looking for selling your old used car? Are you wondering how to get the best deal for your 2nd hand car?
Today I will share with you 4 different ways you can sell your second-hand car and also share the pros and cons of each option.
But before we move ahead, it’s important to point out that when you sell an old car, there are few things which matter and should be taken into consideration. It’s not always the money you get by selling the old car which is to be maximized. It’s not the top priority of all the people.
Yes, price matters. But then a few more things matter.
Sale Price
Convenience
Documentation and RC transfer
Safety and Security
How fast you can get money in your account
Speed of Transaction
So these are 6 things which you look at when you sell your old car. Sometimes you need money fast, sometimes your preference is the convenience it takes to sell the car.
Sometimes you are not in hurry and can run around and you want to maximize your sale price and for some people, it matters that the whole transaction should be safe and they should not get into any trouble.
There is no “best way to sell your old car”
One important point to note is that there is no single best way to sell your car. In some situations, you can get a great deal when you sell your car directly to the end-user. But in situation, it can be the dealer who can offer you the best price. Sometimes, it can be online and some times it can be in the exchange offer.
If you want to watch a video on this topic, below is a detailed step by step process I have created.
Let’s start our discussion.
Option # 1: Selling a car in Exchange Offer
When you buy a new car, you can sell your old car in an exchange offer. They buy your old car for a price and deduct that amount from your new car price. You have to just pay the balance.
However, this is not so simple. Let’s dive deeper into this
There is something called “Exchange Bonus” which most of the showrooms give you which makes the whole thing very interesting.
So apart from the old car price, you also get an exchange bonus which increases your net price of the old car. However, the exchange is not always available and depends on the new car which you are buying.
So to sum it up,
Total discount you get = Old Car Valuation + Exchange Bonus
Here is how it works
When you want to buy a new car, the car showroom will do your old car valuation first. They will screen it various parameters and then tell you how much they can offer you for your used car.
On top of this, they may have an exchange bonus also in offer. It’s mostly available for cars which are already established as brands or towards the year-end when its time to clear the old stock (the old year model) or when some new version of the existing car is going to be launched (like New Swift)
But there is a problem, the thing is that the valuation you get in exchange is generally the lowest you can get. You can get much better pricing generally if you try to sell an old car in the open market. But let’s talk about it later.
Also, know that a discount is usually available most of the time, so even if you do not sell your old car, some discount you can get just by negotiating, hence the “Exchange bonus” is not something extra you get. It’s more of a marketing gimmick or a trick to give you a special feeling.
Here is a snapshot of a car seller confirming this point on Team-BHP thread (one of the best places to discuss and learn about cars)
When you sell your car in n exchange, you get high convenience and it saves you a lot of time, and that’s the reason you get lower valuation almost all the time. But if there is a good exchange bonus available, then the final deal might be ok (if not the best)
However when an exchange bonus is not available, its almost the worst pricing you get in exchange.
For example, suppose you want to buy a new car which is worth Rs 7 lacs and you want to exchange your old car. The showroom person tells you that your used car will fetch Rs 2 lacs and there is also a Rs 20,000 exchange bonus. So your total discount is Rs 2.2 lacs and you need to pay just Rs 4.8 lacs (7 – 2.2)
Pros of selling car in Exchange offer
It’s an extremely convenient way to get rid of your used car. All the formalities are taken care of by the showroom
You need less money to buy a new car. The amount you get in exchange is automatically deducted from your final price
It’s a safe way to sell your car, no worries of getting it misused or RC transfer
You get discard old car as soon as you get the delivery of your new car
It’s a good choice if your car is very old and not very famous
If good exchange bonus is available, then it can give you a very good deal overall
Cons of selling car in Exchange Offer
You get the lowest price for your second-hand car when you sell it in the exchange offer, especially when there is no exchange bonus
Not a great option if your car is not very old and is quite popular (swift, i10, Alto)
You can get manipulated in buying a bad option (some car which is going to get discontinued soon) by offering you a good exchange bonus which might look great.
Things to Remember
If your car is not very old (below 5 yrs) and it’s a popular brand, then do not sell it in the exchange offer, because you will not get a very good deal
You will not get any exchange bonus for newly launched cars or some car which has heavy waiting list. Do not try much
Do visit more than one showrooms of the same car brand to check what is the price they are offering for your old car along with the exchange bonus.
Do also visit a few other brands showroom just to check what valuation they are providing for your car.
While using this option, always make sure you are clear about the new car which you want to buy. Do not get influenced by the salesman talks about other cars and awesome deals you can get on them
Option # 2: Selling used car to local Dealers
The next option is to sell your old car to local dealers in your city. Dealer is someone who buys your old car, makes all the minor repairs, cleans it properly and sells it to another potential buyer who is looking to buy a second-hand car.
So instead of selling your car to the end person, you sell it to an intermediary who makes some money out of the whole process. Its a business and the intention is to maximize the cut from the deal.
There are two kinds of dealerships. First is the organized dealers which are quite big brands like Maruti True value and Mahindra First Choice and second is the unorganized dealers which are small local setups.
Just watch carefully and you will be able to see tons of cars lined up in a ground with a board which might say .. XYZ car dealer.
You can sell your car to any dealer, the price you get from a dealer is generally much better compared to the exchange offer, but you do not get any exchange bonus here. However, still, you can get a decent price.
My personal example
I recently sold my old car (I was the second owner) for Rs 91,000 to a local dealer. I had tried selling it to showroom in the exchange offer, but I was getting the valuation of only Rs 65,000 along with the exchange bonus of Rs 10,000. So in total they were offering Rs 75,000 only (this was TATA showroom)
It looks me close to 1 hour in selling the car and the local dealer went with me to his bank and did the NEFT transaction and I got the money in my account in the next 15 min only. So overall I sold my car in 90 min and got the money in my account. I got the proof of sale, and the RC transfer to a new owner is in the process now (looks like they have sold the car to someone)
I also went to Cars24 but got the pricing of Rs 85,000 only, which I declined as I had the offer of 91,000 already with a local dealer.
When to sell your car to the dealer?
So coming back to the discussion, you can some times get a very good deal with the dealer itself. Yes, its a business for them and they will not give you the real worth of the car, but your time is also important and if you are looking for a speedy fast transaction, dealers can be a good option.
This also turns out to be a great option, especially if your old car is technically working great, but from outside it seems too bad. Like if there are too many dents, scratches, etc. If your car is making too much sound etc. In this case, dealers can paint it, service it well and make it look like a new car and then sell it off at a good price and make money.
Pros of selling the old car to Dealer
Better pricing than exchange offer (without considering exchange bonus)
Very Convenient – Just take your car to them, they will inspect it and give you the quote. If everything is fine, you can sell your cars to them within hours
Its a great option if your car is quite popular because it’s very easy for dealers to sell them to new buyers
Some big dealers give you option of both cash payment or direct bank transfer.
Some room for negotiation (make sure you quote your expected price 50% higher than what you really need)
Cons of selling used car to dealers
If the dealer is not professional, it can turn out to be a bad experience
Often the small dealers will offer you only cash and there is no proof of sale
Important points to note
Do not rush when dealing with the dealer. Take your time and enquire at 2-3 dealers.
Do mention to them that you are looking at other dealers
Always take the sale invoice and enquire with them about the RC transfer and when you will be informed about it.
Note that you can not fool the dealers. They are the masters of the game and they do this day in and out. It’s their full-time job. Don’t try to be smart with them. You can negotiate with them (you should), but don’t try to give them wrong information about cars and how great your car is. They can’t figure out things just by looking at the car.
Option # 3: Sell your car to CARS24 or SPINNY
In the last few years, some startups (now full-grown business model) are bringing innovation in the used car buying and selling markets. The biggest player in this market is CARS24 and a new entrant is Spinny. I have strictly chosen these two options because these websites directly buy your car from you and give you the money, without you waiting for a third buyer.
Spinny is a website where you can choose to get your car evaluated. They will come to your doorstep, inspect your car and offer you a price. If you accept it, the payment will be made instantly and they can take away the car. They sell the car to the end buyers (people who are going to use it for their own purpose)
However Cars24 is a little different. with Cars24, you need to take your car to them. They will inspect your car (takes around 1 hour) and then they will make a report which will have all the details of the car, its issues, its good points etc and they will upload that report online.
They have a network of dealers who are registered with them. These dealers can bid for the price and the highest bidder gets the car. Then cars24 delivers the car to that dealer and after that dealer can sell the car to the end party. Many businesses are also registered with cars24 who use the car for taxi purposes for as cabs.
Best part about CARS24
The best part about CARS24 is that its a fast and safe way to sell your car. The payment is instant (within few minutes but Rs 1,000 less) or 2 days (NEFT , but full payment)
The prices you get from Cars24 can be a good price (but not always). As I said, I got a quote of Rs 85,000 from Cars24, but I sold it to a dealer for Rs 91,000 one the same day
However, I suggest you can go with Cars24 if you are looking for a speedy and hassle-free transaction with a “not so bad” price. There are lots of people who are ready to settle for 10% less money if it comes without any issues and risk. You need to decide for yourself.
Real-life experience with CARS24
Here is one real-life experience by Mr. Atul who sold his car in Pune branch. He had some RC transfer issue which you should know about before you want to go to CARS24
I recently sold my car via cars24 Pune Kharadi branch. Let me share my experience.
I booked the appointment, got the reminder message before the appointment. I reached cars24 office on time for inspection. They did the inspection & offered me 2.05 lack. He said is the final max price.I simply said NO to that price because I know my should be around 2.15L to 2.30L.
Then the negotiation started. He came to 2.10 then followed by 2.15 then finally 2.17 L. I still said NO & came back to home. Next day I got the call from the same person he offered me 2.25L. I said yes handed over the keys on the same day. I got amount next day.
Lesson learnt – Although Cars24 executive says its the final highest price but there is certainly scope for negotiation, In fact I would recommend all cars24 customer to negotiate. You can expect 5-10% more after negotiation. They pretend that it’s the final price but it’s not true.
I sold the car in Nov 17. It’s been more than 3 months now. I have been told that RC transfer would take max 90 days. but it’s not yet transferred. Everytime I call customer care they say car is with the inventory partner only it means car is not yet sold to the end user. This is simple pathetic. I keep on calling those guys(1800112233) & send mail to [email protected] but no concrete response. Everytime I get following generic response.
“Thank you for writing to Cars24
We would like to express our deepest regret for the inconvenience caused due to delay in response. We would require some more time in order to resolve your case.
We have also sent your concern/query to the concerned department. We hope this experience will not dilute our relationship and that you will allow us to rebuild your confidence in us.
Please contact us via phone at 1800 11 22 33 or write back to us for any further assistance.
Happy to help,
Team Cars24”
I already got the money, the only concern is RC transfer. Who would be liable till RC is not yet transferred? When I asked the same question to them they say cars24 would be liable but on paper & in govt records car is on my name. Please suggest how to solve this problem.
Overall I would not recommend cars24 to anybody because of RC transfer issue. There is no timeline when car would be actually sold to the user & RC transfer would be done. customer care is really bad. No SLA or escalation matrix defined which can help customer to resolve the issue.
Pros of selling your car to Cars24
Very professional attitude
Speedy transaction (expect 2X time, which is fair)
Instant Payment
FREE and Assured RC transfer .. it’s safe
A good way to inspect your car even if you just want to get a valuation
Cons of selling your car to Cars24
Not the best price (they need to make money too …), but still better than exchange offer
No time to time and wait (if you agree on price, you need to sell instantly .. or at best within 24 hours)
Important points to consider when selling your car to Cars24
Always go to cars24 with 1-2 more offers in hand, so that you know if you want to accept their offer or not
Its suggest to fix small issues in car before you go to them
Always carry various documents which can increase your car worth like extended warranty, servicing invoices for past few months, insurance documents, warranty cards, etc.
It’s better to have 2-3 hours in hand when you go to Cars24. Do not go expecting that process will compete in 1 hour (especially if you are going on weekends)
Always negotiate. They offered me a little higher pricing (only a little).
Option #4 – Directly to end buyer by listing on various website
Another option to sell your car is directly to the end-user – someone who is going to buy the car for their own use.
If you can get an end buyer directly through your network of friends and family circle, its a great option. You can trust the person and the transaction is smooth most of the time. But most of the times it does not work that way.
So the next best option is to list your second-hand car on various online portals. You will have to get your car details, pictures etc and then the prospective buyers will contact you and then you can negotiate with them and take the conversation forward.
While there are tons of portals for selling a used cars these days, and I will list all of them here. But I will mainly talk about OLX in this section, because I have used it personally.
The best part about this way of selling your car is you can get really good price if you come across a genuine and reasonable buyer. There is no intermediary and there is no cut for anyone. It’s good for you and its good for the buyer also. You get better pricing compared to what the dealer gives you and the buyer also gets better pricing than what he would have bought it for from the dealer.
The biggest disadvantage of selling directly to the buyer
The biggest issue with this approach is that you will get a lot of junk inquiries and broken promises and conversations which will frustrate you. Lots of people will contact you and offer you lower prices. Then lots of people will start conversation and look genuine, but they will never come back.
Then there will be people who will come and look at the car, but not move ahead. So the point is that selling directly to buyer is easy, but only when you come across a nice and genuine buyer. But if you through OLX/QUIKR route, be ready to get a lot of non-serious enquires
I got 50 enquires on OLX
I had listed my car on OLX and within 24 hours, I got around 50 enquires. People were offering prices which was 50% of what I quoted (1.4 lacs). Some people called to get more information. Some people offered to bring cash (50%) and take away my car instantly. Some of them were from nearby towns (as far as 200 km). One guy came to have a look (it was a genuine buyer), but we could not agree on the price.
I am just sharing my experience here and not declaring that you always get junk leads. I have sold some other things from OLX and overall the experience was great. But some category of items like automobiles is different because there is a big market for it and risks are involved.
Apart from OLX / QUICKR, there are many other famous options and let me give you the list of these portals along with their links
When you are selling to the end buyer, the biggest problem is the PRICE. Your price should be realistic and fair. It should be a price which makes you (seller) and buyer both happy.
Note that when you sell your car to dealer, he is going to make some profits (around 10-15%) on that and sell it to the end buyer. So you are also not getting the best price and the buyer is also not getting the best price.
If you quote your car at a price that is somewhere between what you are getting to the dealer and what the buyer is paying to dealer, then its a win-win situation and you both benefit.
So the best way to find the realistic price of your old car is as follows
Go to meet 2 dealers with your car and check the valuation of your car
Negotiate with them the best price they are ready to offer and take an average of that
Inflate the amount by 15%. This is roughly the price at which the dealer is going to sell your car to someone else
So if you get an average price of 4 lacs from the dealer, you can assume that he sell this car to another prospective buyer at 4.6 lacs (15% margin). He will quote the car at 4.8 lacs, and then sell it at 4.6 lacs finally
So now you know that the reasonable price at which you should sell the car is anywhere from 4.3 lacs – 4.5 lacs.
This way, you also get higher price and the buyer also gets it at cheaper price compared to a dealer.
You can also visit few dealers (without your car) and show interest to buy the car (your model, KM driven), you will get a rough idea of what is the selling price going on for a car similar to yours.
Bonus Tip : Always quote your expected car price 20% higher than your expected price (the price at which you will be ready to sell). On OLX, people always bargain, no matter what. So if you quote it your expected price, you will get mad looking at how people bargain.
Make sure you complete the documentation
One headache when you deal with the direct buyer is that you need to make sure that the car is transferred to the new owner. The RTO related works are to be completed. Never sell the car without making sure that the documentation is complete. Else in case of any accidents or criminal cases where a car is involved, you will be considered as the owner because the RC book has your name on it.
I think if you are getting a good price (not the highest) and you come across a genuine nice buyer, it’s better to close the deal rather than trying to maximize the deal and lose the good buyer in process.
It also makes sense to tell the buyer that you will help in RTO work. It helps in selling the car faster and also you can be convinced that the documentation work will happen properly.
Pros of selling your car directly to end buyer
Possibility of fetching the best value for your car
If your car is great and popular, you will close the deal faster
Minor issues with a car may go unnoticed as buyers don’t have full knowledge sometimes
Cons of selling your car directly to end buyer
Can take too much time as lots of junk inquiries come
Too many followups may be required
Takes too much time and effort
Important points to remember while selling the car to direct buyer
Always ask the buyer to carry their ID proofs like Adhaar card or PAN card with them.
Do not hand over your car (or 2 wheeler) for a test drive without taking their ID Proofs. Always accompany them when they do the test drive
It’s better to enquire on phone with the candidate if they are end buyer or a dealer. There are too many dealers on olx and quikr now a days
Do not handover the car unless the full payment is done and you see the amount credited by logging into your bank account (not by looking at the SMS .. there are frauds going on where you receive fake SMS of amount credited)
It’s better to take a small token from the potential buyer to lock the deal (even a small amount like Rs 500 is ok to test his genuineness)
Which is the best way to sell the used car?
By now, you must have understood that it depends from case to case and there is no single way that every car owner can follow. To summarize things, here is a table which will guide you on which option you should follow and how these options are different one various parameters
[su_table url=”” responsive=”no” class=””]
Criteria
Exchange Offer
To Dealer
Direct to Buyer
Cars24/Spinny
Sale Price
Convenience
Ease of RC transfer
Safety and Security
How quick you get money
Speed of Transaction
[/su_table]
Documents checklist for selling your car
Make sure you take extra care of the documentation part when selling your car to someone. While it’s not an exhaustive list, here are some most important documents required to sell the car
Mandatory Documents
RC (registration certificate)
PUC
Insurance Invoice
3 copies Form 28 (with 3 imprints of chassis)
2 copies of Form 29
2 copies of Form 30
Pan Card and Address Proof
2 Photographs
There may be many more documents required if its the case of interstate sale, and insurance transfer and things like that.
7 steps to follow when you want to sell your old car
We have discussed different ways to sell your car and what are the important points to consider. But now let’s look at some of the steps you can take and process you should follow to sell your car the best price and without any hassles
Do all the minor fixes – If your car has some minor issues like some dents, scratches, paints coming off, make sound, or things like these. It makes sense to get them fixed first. You can choose to get things fixed at a local service station if you do not want to spend a lot
Clean the car before selling – It strongly suggested that you clean the car properly and make it look very good. These things matter a lot. The first impression which the potential buyer gets by looking at the car changes the way they feel about the other aspects of the car. Always remember, a clean car makes less sound, and drives move smoothly. It’s totally worth to go for a professional clean up if your car is a little expensive one. However, if your car is too old and in bad shape, no amount of fixes and cleanup will help in increasing the price.
Post good photos online if you are listing it – If you are listing your car at some portal, make sure you click good pictures from all angles and give all the required information along with details
Have 3-4 offers in hand – Make sure you find out the valuation of your car in exchange offer (if you are planning to buy a new car), with dealers (one branded dealer like true value and 1-2 local dealer). It’s suggested that you take a day off for this. Start from the morning.. Go to a showroom and then dealers .. and finally go to Cars24 to find out their pricing
Give higher expected price – If you are ready to sell your car for 2 lacs, then start from 3 lacs expected price. Don’t worry about embarrassment. Its a game of maximizing the price, everyone plays it. Quote 3 lacs, show surprise if the other party offer 2.1 lacs, negotiate it for 2.4 lacs at least and then finally accept what you get (if it’s fair)
Carry your documents – Carry a copy of your PAN, Adhaar card or another address proof and photos (just in case)
Make sure the documentation is complete – Whatever channel you sell your car, always make sure that the documentation is complete in next 30-40 days. Prefer the payment to be done online so that the payment can be tracked back if required and always take SALE proof. If you are selling it to direct buyer, its worth to get it done on a Rs 100 stamp paper.
Some Real-Life Experience (and Tips)
This section is empty right now. When you add your experience in the comments section below, I will add your experience here in this section.
Do please contribute here in the comments section to enrich this article for others benefit
The year 2017 is coming to an end and I would like to share some of the common mistakes which I have witnessed in some investors financial life.
You can never have a perfect financial life but you can always live a regret-free financial life. I take this opportunity to thank those who opened up their heart while I was helping them in designing their financial life.
While you are reading the article look into your own financial life and keep your own financial life under a scanner.
The person works in a bank and at that time he was least interested in having his own health coverage. In 2017 he calls me and says, “I have got a serious health issue, cancer detected in my kidney and doctors have suggested me to cut a portion of my kidney”.
He said, the Bank is ready to give only 3 Lakh and the actual expense is of 8-10 Lakh. He requested, can something be done to buy a backdated health policy to which I said NO.
There are many people who rely heavily on their company health cover and sometimes end up paying a huge cost. One illness and it has the power to eat away all your savings. See that you are having health cover of your own.
Mistake #2 – Addiction to credit money or loans
You see so many advertisements these days talking about buying things on EMI and low-interest rates offered on personal and credit card loan. One of our clients tried to learn the craft of shuffling money using different credit cards.
He will take a loan from Credit Card A and then use Credit card B to pay the outstanding. Initially, he got some success but eventually, he got into a debt trap. He was already having a home loan and car loan while discussing his plan we suggested him not to add any more liability and to stay away from credit card and personal loans.
He did not listen and eventually, he had to stop his SIP, his savings got NIL and is now regretting.
Mistake #3 – Overspending because of Social Pressure
One of our clients kept aside 30 Lakh for his daughter’s marriage but eventually ended spending 70 lakh. All the extra spending took place in the name of “trying to look good”.
Under the pressure of relatives and on the name of customs, he ended up spending heavy money. The extra money spent took almost 10 years to accumulate and it was part of his retirement corpus.
I see many buying a bigger house, a bigger car etc to show they are successful. It’s time to get rid of such social pressure, as no one is going to come to fund your retirement or future goals.
Mistake #4 – Heavy Spending Habits
A lot of people like to spend on gadgets and things which they really do not need. As Warren Buffet once said, “If you buy things you don’t need, very soon you will have to sell things which you actually need”.
The words and advice by him are precious and everyone should check their spending habits. What are you spending your money on? And what value is it creating in tangible form? Stay away from instant gratification and impulsive buying habits.
It can be buying an expensive gadget, Treadmill or some fancy home equipment.
Mistake #5 – Over relying on Robo Advisory
There are many Robo advisory companies in the market. Now, using technology is not a bad thing but one has to check the quality and not the price of using some platform.
A few months back I accidentally happen to get on call with a person called Shubham Kapoor (his actual name), he said he has got some advice from robo advisory firm and he is not confident about his Mutual Fund investments. He shared his portfolio with me and the funds suggested were all shit. I immediately asked him to take corrective actions.
His current portfolio is designed by me and the funds are doing excellent. As I was writing this article I asked him to share his experience and he immediately shared his experience with me. I have not edited a single word, we do not hold any grudge against any robo advisory firm but at the same time it has to deliver quality advice.
Hey Nandish,
Hope you are doing good, my experience with Robo advisory is underlined…..feel free to edit
” After Reading through numerous blogs mentioning the benefits of fee only financial planners I came across a Robo advisory firm (Let’s call it ABC ) which guaranteed Advice free from any Bias and manual intervention. I agreed to the concept and after paying the fee plugged in my input details in their software tool.
The financial advisor from the firm fixed up a meeting with me via skype and the suggested portfolio to me(Auto generated) carried out 8 MF’s(SIP in total was 20K/month).I was not comfortable with the cluttered portfolio and also with the choice of funds.
after deliberating for couple of months, I went ahead with the suggested MF’s as it was Robo advisory which hopefully knew better than me!
the review was six monthly and every time my question on choice of funds(as they were performing very poorly compared to benchmark) were unanswered, the responses were vague and confusing.
I was not expecting immediate gains but after 3 such reviews in a period of 18 months i was still not getting the comfort and trust level, this is when I decided to stop my investments via them.
I am still baffled whether suggestions made through Robo Advisory were free from any bias or whether they were for their own commissions, your call!!”
Now, if you are investing your money with help of a robo advisor or a real human advisor, you have to make sure that there some quality advice delivered to you and some alpha is generated (extra performance, which you can’t bring on your own)
Mistake #6 – Getting attracted with FREE advice
This one is my personal favorite, many people get tempted to free advice.
It comes from the person known to you, your relative, your friend or some uncle who calls himself or herself your well wisher. One of my relative sends a pdf to me on whats app to check whether he should continue with his ULIP policy or not? The ULIP was sold as free advice.
I and my team did some working at our end and sent below email to him.
Hi XXXXX,
The return given by Reliance ULIP policy is only 6.75%. ( Extremely bad performance). You have accumulated only Rs. 354591/- after investing 3 Lakh
The policy has no loyalty benefits nor any extra benefits. If you complete whole policy period, the return will be equivalent to FD.
If you would have done SIP of 5500 per month for 57 months you could have accumulated Rs. 392000/- at the rate of 12%.
SA is only 15 lakh ( It is not giving you any higher cover)
Coming to charges:
Upfront charge is 6 % as premium allocation charge. You paid 3 Lakh and they have charged upfront Rs. 18300/-
Fund Management charges, mortality charges is around 4 % annually. These charges gets deducted from the amount accumulated at the yearend.
Better to come out of this policy as it has completed 5 years ( in this December) and there is no lock-in
Nandish
Guys, there are no free lunch in this world, go to a professional and look for authentic advice (if you cant take it on your own). Sometimes we also go wrong with a few suggestions/advice but the intention is never wrong. If you are taking free advice from some website, Facebook group, whats app free group stop the same immediately.
Mistake #7 – Thinking that DIY is for everyone
There was this one person who was on our client list and on one fine day he decided he will start managing his money on his own. I was happy with his decision but somewhere I was not sure about his money management skills.
I had many plans for him on how I can help him to grow his money but he concluded things very fast. He read a few books, did some seminars and is also active on various blogs and forums.
His portfolio grew from 0 to around 75 Lakh in a span of 7-8 years. I do not have his current numbers but if the portfolio is not taken care of his profits will get eaten away by the market.
I have seen people losing huge chunks of money because they focused on buying 5 star rated funds but somewhere forgot to control the risk on their portfolio. You don’t just need to learn the craft of money management but you also need to master it.
In India every Indian is a teacher, preacher, financial advisor and a doctor. Just ask any 5 colleagues about , “How to reduce weight? and you will get different answer from all sides” .
There is no athlete in this world without a coach. If performances matters you can’t do it with DIY model. You can take a few decisions on your own but cant paint the entire picture on your own. DIY is for a set of people who have high understanding of subject, great control over their decisions making, and a lot of passion and time.
Mistake #8 – Start-up ka bhoot
I remember when I and Manish started our business.
I asked Manish to continue with his job till we are not 100% confident about our venture. In Jan 2011 finally he decided to leave his job and got full time into blogging and writing. I have worked with a few entrepreneurs who jumped into business without any homework on personal finance front.
I always feel business is about taking risk, it is always like a free fall. My only request is, do not get overwhelmed by your business idea and do not mix your personal finance with your business journey. It’s not always compulsory to leave your well paying job and start a business because its “Cool”.
Final words
The year is coming to an end and it’s time to embrace your financial mistakes. In just a few moments the page will turn and we will step into the year 2018. Don’t be afraid of making mistakes but at the same time have courage to accept your mistakes and work on them.
Wealth creation is all about becoming honest with your own self in the area of money. If you wish you can share some of your mistakes of 2017 and fresh commitments you are ready to make in 2018.
Thank you, each one of you for being our partner in spreading financial awareness. There is a lot more coming up in the coming year and we look forward to your same love and partnership.
