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Journey of an imaginary investor!

Posted on by Jagoinvestor

What’s the worst that can happen? A lot of my friends and readers ask me this question. What if I’m not disciplined? What if I buy a house beyond my means? Or invest money based on what my trusted family & friends tell me (even if I don’t have a clue)? What’s the worst that can happen?

Well, rather than sitting here and crunching numbers and showing you my results with incomprehensible tables and then trying to convince you, let me tell you a story. Remember Arush? Akshay Kumar’s ‘panauti’ character from Housefull? Let’s play God with Arush’s life.

No more strokes of good luck for him, unlike the movie, no good/rich friends or acquaintances. No exotic locations or countries either. Instead, let’s put him into our shoes, – our average, Indian, everyday-joe, shoes. And let his panauti streak run its course.

Let’s see what happens when life becomes brutal and how he pays for his ignorance and bad luck.

Imaginary Investor journey

The year 2011

Arush is a happy-go-lucky 28-year-old. Perfect education, close-knit family and a great job, with a salary that’s better than 95% of other people in our country take home. Newly married to Sandy! Great job! DINKy income! Life’s great! The sky’s the limit!

He has just taken a home loan for a spanking new 3 BHK in a cushy, lifestyle complex! A house is obviously needed! He needs to keep up with his cousin Ajay’s lifestyle too! Ajay has a duplex, dammit! And to think, his old friend and classmate Manish, suggested he rent a smaller house… Damn you, Chauhan! What do you know?

“Renting is so beneath me! And it’s not the done thing either! Such a cheap idea! What would people think? Forget people, what would Sandy think? Forget Sandy, what would her Anna think?! I’d be a laughing-stock, I tell you, laughing-stock! Nothing wrong with a big house. Nothing has gone wrong yet! Nothing can go wrong! Everybody does it!”

Harish mama’s sold him a few money-back policies. OK, a lot!

Arush doesn’t quite want to invest. He doesn’t understand the fundas. But, his pappa made sure Arush bought them & helped his mama out in his bad times. Akhir Apne hi Apno ke Kaam Aate Hain! and come on man, everyone has invested in money back plans.

They are “safe”. They provide the “best returns” (Agent mama’s words obviously). Pappa’s bought it, Pappa’s pappa bought it, Kaka bought it, heck even Nana has it as a part of his portfolio! All of them, obviously cannot be wrong! And Mama obviously won’t charge commissions on it, will he? It’s a gift for Arush, he’s family after all!

Is his Insurance Cover enough?

Arush feels his jaw drop, when Manish tells him, his insurance cover should be worth 1.5 crores because his family expenses are 40k/month. (It can be reduced to 30,000/month if he really tries, but who cares? The salary is going to increase yearly & he is the top performer of the team).

It hurts sometimes, that he hasn’t built a good corpus yet, but that’s fine! Anyways he is going to “invest systematically” next year onwards. It’s his New Year resolution! (This incidentally was last years resolution too).

Listening to Manish for once, Arush goes inquiring about the term life insurance plans. Guess what he finds… He has to pay only Rs. 20,000/year as premium for Rs.1.5 crores!, find your premium here

“Wow! & Double Wow! My family will not have a single worry! So much security! But wait! What if, God blesses me with a long life and doesn’t kill me before the tenure ends? What happens to all my hard-earned money, I paid as premiums at the end of tenure? I don’t get the money in the end if I don’t die? Ridiculous!

What’s the use of the product then? Total waste! (read more on this). Better save 100% of my money then! Best ROI”. Suddenly his probability of dying has come down, I am not sure HOW!  Arush doesn’t want to lose 6 lacs in these 30 years. But he doesn’t realize that 6 lacs won’t amount to anything at all by 2040!

What about health insurance?

“Health Insurance? What’s that? My company already provides cover to me and my family! 2 lacs for everyone! Combined! OK, I know its not much, but I am so healthy, I go to gym and I drive safely, almost no chances of accident”

What about other people’s driving skills? Arush will feel smug & smart as long as nothing untoward happens. All it takes, is one minor illness, one small accident… to turn the whole thing upside–down! What if the expenses run to 6 or 8 lacs? (It very easily could!) Every one of Arush’s ‘plans’ for his family & himself will be really messed up.

And guess what? To top these hijinks, he goes out and buys the “Best Mutual funds” How does he know? He did a lot of ‘research!’. Research consisted of looking at bright shiny ads on billboards & on TV & in the paper, googling it, and checking out its performance over 6 months. (56%!) Arush is so happy! He’s already making vacation plans!

But wait? What about actual, boneheaded mistakes?

He recently bought Reliance shares a couple of days back at Rs. 2000… & now it’s at Rs. 1959. “Oh man! I feel so bad! I’m such a loser! Darn, all this tension has made me skip lunch! Think I should sell them tomorrow itself!”.

Arush doesn’t need the money tomorrow. He knows that equity gives good returns in the long run. Yet, he will still sell his shares tomorrow, because he doesn’t want to be a loser. “Ugh! Still feel so bad! How could I have bought something like this? I’ve been a winner all my life!

In studies, job interviews, work… I have always won! I cannot make mistakes. So this is how Arush is! Confused, yet unable to listen to good advice, unable to ask for help, a little too lazy when it comes to his own future, too impulsive, always wanting to be instantly gratified, a little too proud. Let’s leave Arush now, & play catch up with him at some time in the future…

The year 2014

Booya! The markets are zooming… The Sensex has crossed 40000+!!!. “I always knew this ‘Sensex’ company would rock! Just look at it! See its performance! Wow! I’m so good. I’d like to see the look on Manish’s face now! Calling my decisions, ‘unplanned!’, ‘with no understanding!’, ‘random!’ & what not! There! I showed you, Chauhan!

Investments have tripled. Just one more week now, and I will sell everything, and cash out!”. Oops! Something bad has happened! Markets are crashing!

15% down in a day. “It’s just ‘profit booking’”, Arush justifies to himself. “India is bound to shine in the long run!”. 1% up next day! , “See! I told you!” , 10% down again the next day! , “Chinese real estate markets are the reason! Our markets are de-coupled! It’s FII!” (that’s Arush talking through his hat, trying to show off!) . He tries to justify to himself and others around, that things will soon be better! But, his investments are now down 50%! Arush wakes up and scrambles wildly. Arush is in a blue funk!

Denial Mode

“I can’t sell right now, dammit, but I want my money back!” (Your money?) “It was 10 lacs some months back and today its just 5.1 lacs! Manish says even now, my investments are have given more than 25% return on a CAGR basis… But, I won’t take it! I am a ‘winner’! I won’t take less than what it has touched previously!”. Markets tank another 5% after that.

“Oops! I should have taken that 4.9 lac loss earlier, now its 5.1 lacs down the hole! Anyway, what’s the use of selling now? Whatever could have happened, has already happened!

Let it run its course. I know it will come back to it’s earlier level! And anyway, I am a long-term investor! Manish also says I should invest for the long term! (feels so nice somewhere in my heart, when I said that)”

A few months down the road… Arush suddenly needs the money for some reason in the next month or two. He decides to surrender get his endowment/moneyback plan money back now, since the matter’s urgent. Finding the agent is like tracking a lost animal in the forest… in the dark!

He finds Agent Akhiri Pasta after nearly a week of persistent hunting and calling…

Arush : Hi Pasta, remember me, Arush here, where are you man?

Pasta : (Obviously, I remember you, you dolt! You were my 1000th policy buyer which helped me win the bahamas trip)

Of course Saar! How can I forget you saar?

Arush : Hey Pasta, I need a favor yaar, I have a financial crunch right now, so I’m wondering If I can surrender my policy and get my money back .

Pasta : Oh, why not saar? We are always there to help you saar! You can take your money back… Come to my office in a week and lets surrender your policies (the initial years of high commissions have already passed, so I’ve already made my money! Hehe!)

Arush : Wow! You guys rock! Uh, how much will I get back?

Pasta : 60,000 saar!

Arush : No no no, hehehe! I am not taking about the interest part yaar. What is the total amount I get?

Pasta : (Sigh… Yes you idiot!) Its 60,000 only saar, Total amount saar!You are aware of surrender value before maturity, right saar?

Arush : Hey man! But, but, I paid 1.5 lacs in premium in last 5 yrs, what are you talking about ?

Pasta : Saar, didn’t you sign on those documents where we clearly mentioned that surrender charges will be blah blah blah… Have a look at your Documents saar. We are not doing anything against our rules. It is as per our policy saar, which we believe that you have cleared read and then took the policy ! .

Arush : Hmm, let me go look at those documents! (while wondering which part of the world are those documents in now)

Let’s just hope Arush copes with this panauti and catch him 10 years down the road

The year 2024

Arush’s life is going on, as usual, chal Raha hai, lots of expenses now! Children have grown up, a career that was “awesome” around joining and then “great” after a few years have turned “ok ok” right now.

After about 4 yrs into his ‘awesome job’, he finally realized that he was at the wrong place and couldn’t truly excel, but then it was too late. Can’t take any risk now, can’t rock the boat! Who will pay the Home EMI, the Car EMI, the jeans EMI and the EMI for the vacation they took last year?

So… chal Raha hai, chalne do! He drags year after year in the same job, which is now drab and uninteresting.

His home loan interest has gone to its highest level (which he never thought about, while taking the loan) and hence EMI’s have crossed their budget (the one he had originally planned.) While all these issues are haunting him, with all that tension, another serious incident happens!

An auto hits him while coming home. He’s critical! Arush is rushed to the hospital, there’s a month of Rona dhona, 9 lakhs of expenses, (come on guys, we are in 2024 now, not 2011). The company pays 2 lacs (doesn’t seem like a lot now, does it?), and Sandy organizes 7 lacs from his own wealth by breaking a Fixed deposit and selling some mutual funds.

But hey, look at the brighter side too! He saved 1.5 Lacs in Health Insurance premiums all these years… Did he not? (17 most asked questions in Health Insurance)

The year 2034

Life is really cruel to Arush, He never returns to home one day, He dies in another accident, a victim of a mishap. His insurance policies come to rescue. The company settles the claim of 10 lacs very fast. His family is in a deep problem though, Sandy cannot work, 1 Child is in 7th class and the other one is ready to go to college!

There are 20 lacs fixed bank deposits, but wait, the home loan still runs for 10 more years! All the money in Fixed deposit goes towards paying off that debt. There are other investments, worth 30 lacs. Let’s use that money now! The family life-style has sky-rocketed like anything in the last decade, & monthly expenses are around 80k per month. How will they manage?

Bad Financial Life signals

I personally see just one solution. Lets them eat once a day and stop the kid’s education, if they want to survive with that leftover money!.

30 lacs in the Bank generating a monthly income of 25k per month (Only if interest rates offered on FD’s are 8% in year 2034!, which is very rare !), all they just have to lower their standard of living, such an easy thing to do! . But hey, look at the brighter side too!

Arush did a very good thing, He saved so much in his premiums by not taking Term Insurance! Smart Husband, I wish every woman gets a husband like this and every child should get a Father like Arush.

Its called being mean, who will suffer now, Arush? NO!

The year 2044 (an alternative scenario)

Imagine if Arush didn’t die! That panauti didn’t happen and he just grew old like the rest. Its Retirement time, the time to reap benefits of one’s investments throughout life! Arush hasn’t actually accumulated a lot of wealth for his retirement! He didn’t take it seriously all his life.

Overall investments in mutual funds were never left to rest so that they could compound well, major investments in Insurance Policies and Fixed Income instruments never actually gave a better return than inflation. Even though his wealth has grown to close to 1 crore, it’s actually peanuts now, in 2045!

His expenses are Rs. 2 lacs/month! How did he forget about Purchasing Power? Even though this 1 crore looks big enough all those years ago, this will not give him more than 80k per month. Even if he lower’s his standard of living, he can’t live comfortably! He is retired now. Too late worry about these things!

Everybody wants to enjoy their life after their working years!

But for poor Arush, there are few choices! None of them, good! He can be dependent on his children, or he could lower his standard of living or cut off a big part of his desires after retirement or worst case, convince himself that he is interested in some part-time job which he can do comfortably. God forbid if there’s an unforseen medical problem which he didn’t account for, at this stage in life!

Conclusion

With this article, I have tried to show you how things can go wrong at each point in life and what your financial life can look like if you mess up with your money. It’s the time to take care of your finances and plan for it well! . Yes!

Situations are exaggerated in this article. It was just to show you the worst that could happen. Beware! Be Prepared! Be Wise!

Share your comments on what do you think about the story?

My Second Book – “How to be your own Financial Planner in 10 Steps”

Posted on by Jagoinvestor

I am happy to share this news with you all, that my 2nd book is going to release in next few weeks, whose title is “How to be Your Own Financial Planner in 10 Steps” . The book is published by CNBC 18. The book is now ready for pre-order, so you can order it now, it will be delivered to you as soon as it hits the stores which will happen in just few more days.

How to be your own Financial Planner in 10 - Financial Planning Book in India
Pre order Book

About the Book

By the time you complete this book, your financial life will have taken new shape!. You will have worked on 10 different areas of your financial life, in the same way a certified financial planner works with you. The book has the ability to guide you on how to plan the 10 most important areas of your financial life. There are two types of investors in India, those who plan their financial life and those who plan nothing and just let their financial live move with the flow. The second group is extremely large, and this book is targeted at this group.

Many investors who are DIY (Do It Yourself) investors can use this book to plan their financial life and be their own financial planners at some basic level. The book has the 3 elements of education, planning and action items all packed into one. Written for the common person, in simple language, the book deals with the most important financial worries and questions.

What are you waiting for ?

Anyone who feels that he can do his own financial planning and with a little support and direction he/she can plan his financial life, then one should buy this book. There are 10 chapters which cover 10 different areas of your financial life and helps you understand those areas, what you need to do about it, how you should mess it up and guides you to plan it out in simple and easy language. Each chapter has action oriented exercise at the end of each chapter, so while you go through each chapter, you will keep on making your action item list and finally complete things. I would say grab the book today, because this is the best it can be. If you need external support, you can always go for our online financial advisory services.

UPDATE – First Book Name is Changed

I have one more news to share. My first book “Jagoinvestor – Change your relationship with money” was a great success. However we are changing its name to “16 personal finance principles every investor should know” to make sure that the name of the book reflects what the book is all about. The book content is exactly same, just the name is changed now. So its now in new avatar.

16 personal finance principles every investor should know Financial Planning Book in India - Personal Finance Book in India
Pre order Book

Thanks for your love and support, because of this awesome community, it was possible to give shape to these 2 books. While the first book is more on the principles of personal finance which every investor should know, the second book is all about planning and taking action. I would be waiting for your reviews about the book.

Why Women dont ask for their Share in Inherited Property and Wealth ?

Posted on by Jagoinvestor

Let’s talk about Women and Inheritance today. Our Indian culture, has for thousands of years treated men as someone who lead families and be the heads of next generation and women as someone who will go to some other family after marriage and start a new life. This has been deeply rooted in all our minds for years and years. This is one big reason why women in India are not aware about inheritance laws and their rights in property.

Women and Inheritance in India

Some families, where there are sons and daughters both, do not even raise the point of dividing the property equally among all of them equally. Daughters who are married are not even in picture at the times, the wealth is divided and it’s considered  natural and something that makes sense. Women on the other hand also do not take any lead or don’t bother asking for their fair share in the family wealth.

Brothers do not share wealth with Sisters

You must have seen cases like these and might be experiencing them in your family as well.

Case 1 : I know a family which had 1 brother and 3 sisters and who had a huge property in Mumbai at a central location, lots of shares, mutual funds and bank accounts, When the father died, people cried and after a month every body was back at home, all 3 daughters who are married didn’t even think for a second that they have a huge 25% share in the wealth, which is a decent amount by today’s standards. All 3 daughters are not so well off  and struggling day in and day out, but they are just not considering the option to ask for their share. Legally if they want, it would be just a matter of a  few months or years and some bitter experiences, but they might reach their financial freedom if they go to court. But they are too emotional to take that step and worry about relationships and the problems which arise out of it.

Case 2 : In another case, there are 2 brothers and 2 sisters (all married), and after the father’s death, the brothers are fighting with each other for property “Father spend so much on your education, my career was affected because of that, So I should logically get more now.” Fair point logically, but from legal point of view, it does not matter much how father treated whom . The sad part of this story is that brothers are fighting for their share and also sharing their plight with their sisters, but not for a second do they think that even sisters are legal heirs and should also get their share. (Incase you didnt knew – Hindu Succession Law is applied when a WILL is not written)

It’s not Fair!

Just because now they are part of another family, they are not seen as valid heirs. I am raising this point today because this is wrong practice. Women now have to raise their voices and ask for their share from their parents and brothers. If required, ask for it legally. Just because father has spend lot of money on wedding of sister and given her gold does not mean she can be cut off from the family wealth sharing.

If father writes a WILL saying that he wants to give his wealth in some specific proportion, then it’s fine, it’s your father wish. But if a WILL is not present, then you are a valid legal heir, you should ask for your share and you will get it.

Look at it as part of your Financial Plan

If you are a man, your wife might be entitled for her share of wealth from her parents’. In today’s world where money has become so important, see if you can convince her to ask for her share. It might get her valid share of money and can help you in leading a better financial life. I am not saying this because you should be money minded, but because its a fair thing to ask for.

We have created a 2 part video program for Women and Money for our wealth club members. If you are a member there, please show this video series to your spouse.

Do you have any personal experience like this? Can you share?

Wife gets 50% share in husband’s property after divorce – India Law

Posted on by Jagoinvestor

Do you love your wife? You better do!

There were few changes proposed weeks back in the marriage laws in India, which everybody should be aware about. A bill called “Marriage Law’s (Amendment) Bill 2010” was passed by the cabinet, which is pending for discussion in Rajya Sabha and some major changes in the women’s rights are suggested, on how the properties would be divided after divorce.

Women Rights in husband property after divorce - India Law

The biggest change says – “As per new Divorce law, Wife share in property would be 50% in all her husband’s residential properties, no matter what and in other properties, her share will be decided as per the court decision.”

Wife share in property owned by the husband would be 50%

Earlier, before this change – a woman was entitled to a share in husband’s properties, but there was no quantum defined as per law, it would be any percentage depending on the case, but now with this suggested change, a women will enjoy equal sharing without any condition in all the residential properties owned by husband. But in this case, women will have to specifically apply for her share, she should be aware of this law about “50% share”.

A major change in this amendment is that this rule is applicable to all the properties of the husband acquired before and after the marriage, whereas the earlier law made sure that the wife gets share only in those properties which are acquired by her husband only after marriage. Now men stand to lose on this front, in-case things are so sour with the wife.

Husband & Wife joint holder’s in a residential property

You should be clear by now, what will happen in the case where a property is registered in the joint names of husband and wife. A lot of couples register a house in joint names, a lot of times both pay’s from their respective salaries, and in some cases, only one party pays (generally husband). Imagine divorce happens – Who will get how much? Women will keep her 50% part and she will also get half of her husband share in the house, so 75% wife and 25% husband.

Rights of women after divorce on other properties in India?

Apart from the mandatory 50% share in husband’s residential properties, the wife will also be entitled to get a share in another kind of properties, but the quantum is not set, as per the Bill, it will depend on “living standard of the wife”

Waiver of six months cooling period possible

As per the old Indian law which governed the division of assets for women after divorce, it was mandatory for husband and wife to spend at least 6 months together before applying for divorce, but with this new amendment bill, there are provisions of waiving off the 6 months cool off period or lessen it, but only if both husband and wife want it. This means if one of the spouses wants to get divorce on an “urgent basis” , but other does not, it will not be possible. This is one of the major change in the bill and will help those couples who do not want to serve that “6 months” cool off period of living together.

Is this an anti-male law?

A lot of groups have termed this change as anti-marriage and anti-male law and critically oppose it, they have termed it as a bill totally against males and illogical. The major issues with the amendment are as follows

  • The bill talks about only the division of Husband Properties, but not wife’s properties. So in-case women are at fault, still, she will get a 50% share in husband property, but her share of the property will not be divided.
  • A major disappointment for men in this bill is that even the “person at fault” can apply for getting the share of property, and the other party will have to respond to it. Generally as per old law’s when mutual consent was not there, the victim applies for the property share and the person who is the “bad person” has to respond to it. Now with his law change, his wife can seek a divorce and ask for a share in the property.
  • There are concerns raised like this law will encourage more divorces are women can get hold of property easily for sure.

Now there are some serious concerns due to these changes. If a husband has one residential property, old parents who are financially dependent on him and there is a divorce between husband and wife, the wife could take 50% share, in which case the men will be left with 50% property, this seems very unjustified. What is the woman already owned 2 more properties on her name? She has nothing to worry about!

One serious drawback of this law is that some men, who are undergoing a bad phase of marriage, may convert their residential properties into immovable assets, or just transfer it on other names to save themselves from parting away with 50% share in the worst case.

Conclusion

While there are cases where women are deprived of their share in wealth at the time of divorce in India and there was a requirement of strong laws which focuses on rights of women in case of divorce in India, this amendment seems to have gone beyond what it wanted and has loopholes which can be exploited by women. With due respect to each gender, it would be great if there would have been some balanced law, and some thought should have gone for the worst cases.

To summarize things, here are the take away’s from the changes made in marriage laws.

  • In the case of divorce, Woman will have 50% share in the residential property of a man
  •  The wife will have to take the initiative of seeking her share in such cases.
  •  Women and children will also have rights in the other assets of man, which will be decided by court
  •  It does not matter if the property was acquired by before or after the marriage

What do you think about this amendment? Do you also feel its too anti-male but only designed keeping women in mind? Do you feel its correct to keep a 50% share for wife in husband’s property in case of divorce as per law in India? Note that the bill still needs to be passed and right now only the cabinet has passed the changes. It is yet to become a law after getting passed in both houses.

Note: The information provided in this article is based on various media articles and the exact circular could not be found out. Also, the bill still needs to be passed, only then it will become an act finally and will be implemented.

Which Model of Financial Advice do you like ?

Posted on by Jagoinvestor

There are many different ways financial advisory runs in India (and worldwide). You must have encountered one of them for sure at some point of time. I have been able to pick 5 financial advisory models and wanted to highlight them and want you to tell me which advisory model you like and which one you hate? & why?

1. Financial adviser earning commissions out of products sold to you

This is the most common advisory model. Also, due to the widespread know how of this model, majority of Indian’s are stuck with bad and unwanted products. In this model the advisor/agent/planner comes to you, pitches the product, makes it look amazing through graphs/projections/emotional-blackmailing and then you buy it. In this model, the commissions are the main source of compensation for the seller. There is no fees paid by you directly to him and you feel like a KING.

2. Financial Advisor with fixed yearly charges

This model is not much widespread, but some people do it. In this model, the advisor/planner (whatever you call), will be available for you throughout the year, whether you need him/her or not. Its kind of yearly contract where he advises you on anything you ask him on your financial life. If in some year you ask more, that’s fine, you pay same fixed cost and in some years if you don’t “consume” his services much, still you pay him the same money. With this model, you are clear about the fixed cost you will incur on your financial advisor and even advisor knows that his cash flows are fixed. This model as per me is one of the best, but sadly this does not work much in Indian environment.

3. Financial Advisor on demand (pay when you want advice)

This model is very much like the above one, but in this you pay your advisor “on the go”. So whenever you take his advice or use his time for asking anything, you pay only for that much time, nothing less and nothing more. Again this model is not that much widespread, but some courageous advisors take this route. This model from one angle is really “american” style, where each thing is paid on “hourly” basis. So if you take 20 hours of your advisor in some year, pay for 20 hours. And if in some year you take only 5 hours, just pay for 5 hours. For advisor it makes his life easy as he spends his time only for what he is paid for and is really committed to produce the value for that time. Indian’s laugh on this model as of now.

4. Financial Advisor on One time payment basis

A lot of advisors work on one time basis, you approach an advisor, you take the service/advice and he works with you till you get what you need and then tata-bye-bye-see you. Financial advisors really try to make sure that there are yearly relationships, but most of the times clients don’t come back after a year as they feel it’s a waste doing it again and again. But some advisors just run on this model. So it really ends up like – “Come, pay the fees, take what you want, and that’s all”.

5. Fees charged as percentage of Portfolio Worth

Call it wealth management or Financial Planning + Wealth Management, in this model a fixed percentage of your net-worth is charged. The yearly fixed fees can be present or missing, but a percentage of your AUM (total worth) are taken by the advisor/planner/wealth-manager. A lot of people feel comfortable with this model as this is linked to their net worth. If there is no increase in their net worth, then no fees to be paid, but if the net worth increases, you give away a part of it in fees.

Which model do you like and why?

Now the question is which model do you like and why? What is the reason you like a particular model and why do you think it should really be encouraged? A plain brainstorming! let’s do it. Leave your comments and express yourself!



13 important points from Budget 2012

Posted on by Jagoinvestor

Budget 2012 was out yesterday and within minutes, it was clear that almost all the people were disappointed, but then Sachin’s century made sure that every one was back in mood and were able to sleep happily by the end of the day. I looked at various articles on budget which were flooding every minute. I didn’t hurry to post this article, because I wanted the dust to settle down and then come up with only those major points which you can consume, understand and which really matters to you. So I read this budget memorandum for some points which had confusion and came up with 13 points which really concerns most of you.

Union Budget 2012

The budget did not live upto the expectations of many people because rising inflation had created an expectation among people that this time they will get some major relief from taxation and were expecting exemptions upto 3 lacs income and big raise in 80C limit. But Congress made sure that they lose and waste this last change which they had to give people a small reason to like them. What a waste of this golden opportunity they had. Anyways, lets keep aside things and get to the top most points I extracted for you from the budget 2012.

1. Change in Tax Slabs

The minimum taxable income on which tax has to be paid was increased from 1.8 lacs to 2 lacs, so the new slab is as follows – Nil tax between 0-2 lacs income, 10% tax between 2-5 lacs, 20% tax between 5-10 lacs and 30% tax above 10 lacs income. The taxable limit for men and women is same, which is 2 lacs, but the limit for senior citizens (above 60 yrs) is 2.5 lacs and for very senior citizen (above 80 yrs) is 5 lacs. No change in that. This means that most of the people will save additional Rs 2,000 on tax outgo , thats all . Not a big deal ! .

2. DTC not coming this year, hence ELSS gets one more year

DTC (Direct tax code) will not be implemented this year, which was very obvious – thanks to Anna Hazare, Food security bill and other issues which made sure govt has no time for DTC . What this means is that Tax Saving Mutual funds (ELSS) are still a tax saving option for 2012-2013 and you can invest in them and claim tax benefit next year also.

3. EPF (Provided Fund) Interest cut from 9.5% to 8.25%  

EPF interest rate cut was not part of this Budget 2012, but it happened just one day before Budget, and as this is an important update, you better know that EPF interest rate is reduced from 9.5% to 8.25% now and it will be applicable from next year. Last year itself the EPF interest rate was increased to 9.5% .  This is a very steep cut and really wont make any salaried person happy. Not sure what is the reason to keep it below PPF interest rates. Anyways – you cant do anything about it – Bite the bullet ! .

4. Income tax exemption for health check-ups upto Rs 5,000 under section 80D

A new kind of deduction called “preventive health checkup” is included under section 80D . Till now you were able to claim Rs 15,000 for the medical insurance premium paid for self, spouse and dependent children, but now you can also include health checkup cost upto Rs 5,000. But note that this is included in Rs 15,000 limit and not additional one. You can make cash payments for these checkup’s.

5. Tax exemption for Direct Equity Investments if income is less than 10 lacs

Just like the above point a new tax deduction is introduced for direct equity investments, Its called as “Rajiv Gandhi Equity Saving Scheme” – under which a new equity investor will be able to claim 50% of his investments in direct equity upto the maximum investment limit of 50,000. This investment would be subject to 3 yrs lock in period (just like ELSS) . However this will be available to only those whose taxable income is below 10 lacs. There are 3 questions which I am not clear about and I want to know. a) Is it only for direct stocks or even equity mutual funds ? b) Is it only for those who will invest for the first time in equity because the rule mentions “new retail investor” . c) How will they make sure that a person does not sell his shares before 3 yrs, will this limit be from demat provider ? Will get more clarity on this in coming days ! . Read more on Rajiv Gandhi Equity Saving Scheme from Subra ! 

6. Tax exemptions on Saving bank interest upto Rs 10,000 

Till now all the interest income earned from your saving bank was taxable. However now saving bank interest income upto Rs 10,000 will not be taxed. Not that it is applicable for Saving bank account, Post Office Saving account and all co-operative bank accounts. But I doubt how many people will really be able to take full benefit of it, because to earn 10,000 interest in saving bank, you need to keep anywhere close to 2 lacs or 2.5 lacs, which does not happen with most of the people. A lot of people anyways never paid any tax on the interest from saving bank and might be fearful if some one catches them, now law itself asks them now to pay upto 10,000 , I can see some witty smiling faces 🙂 . Also dont confuse this with interest earned on your Fixed Deposit, that is still taxable!

7. Life Insurance deduction available only if premiums are below 10% of Sum Assured

This is a little hidden clause and not highlighted by media, but as per the budget 2012, any life insurance policy issued on or after 1st Apr 2012, will be eligible for “tax exemption each year [80C] and “no tax on maturity [section 10(10D) ]” only if the yearly premium in all the years are below 10% of Sum Assured. Currently this percentage is 20%. So for example if you buy a life insurance policy with premium of Rs 20,000 for a Sum Assured of Rs 1,00,000, then it will not qualify for tax exemptions because here premium is 20% of sum assured. However existing policy holders dont have to worry about this, their policies wont be affected.

8. Securities Transaction Tax (STT) reduced from 0.125% to 0.1% 

Whenever an equity transaction is done, STT transaction tax is applicable and you have to pay it. It was 1.25% earliar, but now its reduced to 1%. So it means you will have to pay less for your equity transactions. Good for those who buy/sell stocks/mutual funds frequently or in big quantities.

9. Service Tax increased from 10% to 12% 

This move should worry you, because with increase in service tax, your bills for telephone, internet, hotel stay, eating out at restaurants, flying by air and several other kind of services will cost a little more, because we all pay service tax on all these things. So as service tax is increased from 10% to 12%, we will pay 2% more on the bill amount. This will add up to a good enough amount in whole year even though it does not bite you in small installments. Surprise! – Be ready to pay more for your Life Insurance and Health insurance premiums also, because we pay service tax on the premiums too. As per a rough estimate for most of the urban class people like you and me, the additional service tax we will pay due to this will cancel out that Rs 2,000 additional tax saving which happened due to increase in tax limit.

10. TDS @1% at the time of real estate sale above 50 lacs

A lot of people will cry hearing this one and will not appreciate this move by govt, but it’s for good. As per this budget 2012, now whenever you sell your residential flat/house/plot (any kind of real estate) and the selling price is more than 50 lacs, you will have to compulsorily pay TDS @1% . This is actually a big problem, because it might happen that even though the sale value is above 50 lacs, but after indexation and your decision to use the funds in next house purchase, your overall tax out of the transaction might be Zero, but still you will have to pay 1% TDS. So in worst case you will have to claim that tax amount back by filing a return. Note that property registration will not be permitted without proof of deduction and payment of this TDS , so you cant escape it, incase you thought you thought you will escape somehow. All the registration offices across the country will be following this one.

11. Increase in Excise Duty from 10% to 12% 

Excise duty is the tax paid by manufacturers on production of any kind of goods. So now that is increased from 10% to 12%. So it means that manufacturers pay more tax and recover that same additional burden from consumers, which in turn means that a lot of goods will get costlier, it would include daily use items and what we consume in day-to-day life. Anyways – you never realise this as consumer 🙂 because instead of increasing the price, they reduce the weight of the product, I hope you know that the Maggi packs which used to be 100 gms , are now 90 gm from many years and still costs Rs 10 and you were so happy all these days! .

12. For Medical Insurance – Senior citizen age reduced from 65 yrs to 60 yrs

In the last budget the age for senior citizen was reduced from 65 yrs to 60 yrs, but it was not applicable for sec 80D and 80DDB.  Till now people above 65 yrs old were considered as senior citizens in case of medical insurance deduction, but in this budget, that rule is amended and anyone above 60 yrs will be considered as senior citizen. Infact now for all the taxation purposes, senior citizen age is above 60 yrs. In case of Sec 80DDB , the deduction up to Rs. 40,000/- for the medical treatment of a specified disease or ailment is allowed.

13. Tax Benefit on Infrastructure bonds removed

2 yrs back Tax Saving Infrastructure bonds were introduced and apart from 80C (1,00,000), additional 20,000 was eligible for tax exemption. However this year this benefit is not extended and now there is no tax exemption on Infrastructure bonds. However companies are allowed to issue 60,000 crore worth of bonds compared to 30,000 crore worth bond last year. However I doubt if the excitement this time will be very high as it was last year. (source)

Some Other Changes in Budget 2012

  • No Advance Tax for Senior Citizens if no income under head “Income from Business” .
  • The amount of goods you can bring from outside India increased to Rs. 35,000 from the earlier Rs. 25,000 .
  • Tax filing compulsory for any resident who holds a property outside India even if the taxable income in India is below the limit.
  • Under Section 80G, any donation made above 10,000 has to be done by any mode other than cash. Till now you could donate through cash by cash, but now that limit is there.

How do you rate this budget 2012 and are you happy with it ? What as per you was that one thing which budget should have this year ?

Income is not Wealth

Posted on by Jagoinvestor

Let me ask you a question. Ajay earns Rs 1 lac per month, and his friend Robert earns Rs 40,000 per month. Who is more rich and in better position ?

In all probabilities most of the people would say Ajay because he earns more than Robert and that too 2.5 times of Robert’s salary. However you can’t give the judgement so fast, because we have not mentioned how much are their expenses, or in other words how much money they burn at the end of the month and what is amount is actually saved. What if Ajay’s expenses are Rs 90,000 and Robert’s expenses are Rs 20,000? In that case Robert would be saving 20,000 per month and his rich friend Ajay would be saving just Rs 10,000 per month. Right ?

High Income or Saving

What matters is Savings, not Income

So you can see that the real thing that matters is the money saved!, not earned. However more income helps in more savings at the end, but its not true always!. The real wealth gets created by your savings and not just by earning big!. So, if you are earning a lot and saving a lot of it parallely each month then you are in a good position. But if you are earning a lot, but spending a LOT too, then in reality you are no better than someone who is earning less and saving less. In that case, from the future aspect, wealth creation will either be too low or it just won’t happen.

Lots of people who have big incomes are actually not very good at saving money – they’re used to having plenty of money coming in, so they don’t pay enough attention to the money going out.

For example – If you and your friend both are saving Rs 20,000 per month and in long run, it’s going to continue that way, it really make no difference for how much you both really earn, because in the long-term, your wealth creation is the function of how much you save and how much of it you actually invest properly.

So this boils down to one big question – “Are you just rich by your Income or are you really rich by savings?”.

A lot of people earn very high salaries, but they end up spending most of it. You can blame this to high standard of life style, high status symbol and all sort of expenses, but your real worth is what you save at the end. I know one friend personally who is a bachelor and he makes around 1 lac per month, but spends 70,000 per month and I know one more friend who earns 70,000 and spends 20,000 per month. Though the first one earns more than the later one, the wealth creation is happening pretty fast for the second guy, even though he is earning lower than the other friend.

Now the question is – How much of your income do you save?. By Saving, I mean any kind of savings which is left with you at the end of the month after expenses + the investments you do in different places (because even that’s part of saving only).

Whats your Saving Ratio?

A good indicator to know is finding a simple ratio called “Savings Ratio”. Just divide your savings at the end of the month by your income and that’s your saving ratio? How much is it? Is it 20%, is it 30% or is it 75%. How much is it?

Lets see an example . Say Ajay makes Rs 50,000 a month and he pays rent of Rs 10,000 , pays another 12,000 in home related expenses, spends another 6,000 in entertainment and outings and at the end of the month is left with Rs 22,000 , thats Rs 22,000 saved with income of Rs 50,000 – which is 44% saving ratio . You can do it on monthly or yearly basis , but put some numbers on table and do this important calculation.

I would personally say that a saving ratio of more than 40% is a good enough number. But if its below 20%, you should really do something about it. So what are your plans about increasing your saving ratio from this point onward? What are your thoughts about this concept of Income Rich and Savings Rich ?

The biggest financial advice – Saying NO

Posted on by Jagoinvestor

“No” is one of the non-complicated word – Simply two letters. Yet saying “No” out loud is hard for most people. Welcome to the world of personal finance where saying NO is tough and 90% of the people reading this blog might have a messed up financial life because of a single reason that they didn’t say NO to a lot of things. Let’s start with my favourite ‘Life Insurance’. Almost everyone I have interacted with, had/have a sad story of some uncle selling him (wait wait …. the correct word is ‘forced him’) to buy a life insurance plan because he had to complete his target or his job was at danger or because he was trying to sell life time product. Saying ‘NO’ was not an option because ‘it won’t look good’ (I am sure it looks amazing right now).

“Yaar – Can you help my brother as he needs a car loan. Can you guarantee his loan, they want someone from the city itself and could you just give your PAN Card to my brother? As it is part of the procedure, kuch hota wota nahi hai ” . You can’t say NO. Months and years pass on … Friend’s brother loses job, can’t pay the EMI and obviously you are the defaulter now! Your home loan, car loan, credit card all kind of applications are getting Rejected. Either live with this situation or pay the balance Rs 4 lacs. This is the cost of avoiding a NO.

Saying No in Personal Finance

Are equity markets risky for you? And you want a equity + insurance product bundled which gives tax benefit and also gives benefit of rebalancing on its own, but you want guaranteed returns? Welcome to the world of “Highest NAV products“. Now you get highest NAV (but we will decide how the highest NAV is controlled… he ha he).

Wait… but it would be amazing if I can buy at the lowest NAV product. Arre no problem sir, jaan bhi haazir hai. Just close your eyes give me 10 min… zoom! Lowest NAV ULIP is here! Anything else? Now please don’t say NO. We did whatever you wanted, please be kind and don’t be so rude, please write a cheque. What? I can’t invest lot of money in one go… Ok then, we have a monthly investment option available. We can try every weekly too if you want.

Inventions in SIP and Insurance

There are “inventions” in SIP … SIP in Stocks (It does not work, think why) , weekly SIPs, daily SIPs, minute SIPs… we will extract the rupee cost averaging concept… Normal SIP, Flexible SIP, increasing SIP, decreasing SIP – They can read your mind.

People were scared of ‘Term Insurance plan’ about it not giving back the money paid as premiums – so let’s introduce Return of Premium Term insurance plan, now no one can say ‘NO’! We are giving insurance money if you die and your premiums back incase you live for the term of the insurance… what else you will want to say YES? Please be human and take it. I hope you are getting what I am trying to say – The more options we have, the more we believe that we need it. You need to learn to control your decisions and say ‘NO’ to most of the things. There are minimal options which you need and keep things extremely simple.

There is no reason in this whole world to have 10 insurance policies. There is no reason to have 15+ mutual funds in your portfolio. There is no reason to have try to beat the markets with direct stocks if you don’t know the rules of the game in equity markets or you are trying to learn the game of equities or have a past record of beating mutual funds or even index returns. There is no reason to have different kind of policies. There is absolutely no reason to own more than 2 credit cards.

There is no reason to have more than 2-3 Health Insurance products & overall there is no need to have savings account in so many banks unless you have extra cash to pay for the bank charges. However almost every portfolio we come across, we how there are many area’s where investors went shopping with craze at some point of their financial life . I have seen 45 insurance policies (yes , LIC policies) , 100 Mutual Funds in a portfolio (I really suspect the guy thought they are SHARES) , 12 health insurance plans , 8 credit cards with a close friend, and one of my relative with 7-10 bank accounts (with that attitude of “arre Rs 500 pada hai account me , rehne do, ja hi kya raha hai)

So what you need to do?

If you want a fairly simple financial life, all you need to have is:

  • 4-5 good equity diversified mutual funds or balanced funds
  • 1-2 term plan
  • 1 health insurance product
  • 1 credit card
  • 1-2 bank accounts
  • Financial Discipline to say ‘NO’ to what you don’t need

We said No at wrong places

Now just like we didn’t say No at wrong places, we have said NO many times at right places. When we met an agent who was not ready to share his commissions in exchange of authentic and right advice, we said NO, we don’t want you. When we meet an advisor who didn’t give us discount on his fees but was a high quality advisor, we said NO, we won’t need people like you. When we wanted to go to a workshop or seminar on finance & money and we came to know that its PAID seminar, we said – Kya faaida – NO we don’t want to come. 

I want to take this message very strongly in 2012 start and follow it though out your life – You don’t need to do a lot of advanced things in your financial life, provided you do not make a lot of mistakes and are ready to keep things simple and an attitude to say NO to fancy and complicated things in life . Thais the conclusion of this article. Also I am going to break a very good and big news to all readers in few days. Any guess ?

 

Review of Portfolio management softwares in India – MProfit, Perfios, Intuit

Posted on by Jagoinvestor

Which Portfolio Management Softwares do you use ? Some of the Portfolio Management Softwares in India are MProfit, Perfios, Intuit and Investplus and we will see a detailed review of these portfolio trackers in detail. Portfolio Management & monitoring is an important part of managing a good financial life and if your financial life has different components like Real Estate, Loans, Life Insurance Policies, Mutual funds, stocks and ULIP’s. You can also track your portfolio using Excel and there are lot of templates also, but it can be a tedious task to monitor which part of your financial life is doing well and how much worth do you have at each level using an excel template for Portfolio management. Hence, you can use portfolio management software which suits your needs. There are tons of Free portfolio management softwares which you can start with

Best Portfolio Management Softwares in India

There are many paid as well as free portfolio trackers available in the market which you can use to track and manage your financial data. I really recommend using one of these so that you have all the data at one place and you don’t need to struggle every time to find out your own information. Once we put all the information at one place, we get a clearer and a complete picture, which we don’t get otherwise… We are amazed to see our clients find out that they are worth so much or worth so less once we start discussing with them their financial life data.

Some important features of Portfolio management softwares

Now we will discuss some of the most important aspects of portfolio management softwares in India . These points are top level concerns of customers.

Data Security of Portfolio Management Softwares

A very big concern which most of the people have is where will their financial data be (example) ? Will it be on their local computer or will it is at third-party server and this becomes a big blocking point for them to go for those products which stores their data at their end itself. Here I am not talking about the login & password, but the actual numbers of their financial details. A lot of people don’t want their info to reside on other servers. I personally don’t buy that argument, but that’s a big concern for a lot of people. In a survey done by JagoInvestor last month, the number one concern which people had was data security, ahead of pricing and features.

Regarding the security of login credentials, with the advancement in technology and strong security advancements, it has become virtually 99.999% secure if not 100%. A lot of solutions also give an option for users to link their bank accounts, credit card and other online accounts by providing the passwords. A lot of people do not know how it works internally…

An online money manager will work well only if you provide online access to banking accounts for a one-time setup. This raises security concerns, but here is how it works. The login username and password for individual online banking accounts is used to retrieve read-only data. The ‘transaction password’ for online banking should be different from the ‘login password’ for greater security. You don’t have to reveal your ‘transaction password’. Customers do not have to give any personally identifiable information, making the process safer. Moreover, the account is completely anonymous and requires only a username and password. All the banking accounts are linked to provide consolidated data. In the consolidation process, vendors will have access to your financial records on a read-only basis, but privacy policies of these entities should prevent abuse of information. – source : moneylife

Features provided

I was surprised to see that in our survey, most of the people voted for high features and less on simple features. I personally thought that most of the people will love to have something which provides them less, but rich data. But actually people look for lot of features giving them number of reports and graphs. It’s very important for someone using the software getting more analysis and suggestions on what one should do in their financial life rather than just getting some plain info which they would have done on their own. Most of the software providers give good analysis along with different type of reports and charts which you can download in excel formats.

Easy to use

It’s extremely important that the softwares are easy to use because no one would put a lot of time to feed the data at the start and on ongoing basis. A lot of players provide statement upload facility where you can just upload your Bank Statement, Credit card statement or other demat statements and the software will put out the information and feed it automatically, thus reducing your work. Some softwares like Perfios allow you to link your accounts with them so that they can pull your information and feed it themselves (read only).

Below is a comparison of 4 major Portfolio management software’s in India market and used by thousands of people (you can read their reviews on their website). They are Perfios, mProfit, Investplus and Intuit MoneyManager

Portfolio management softwares in India

Look at the above video done by me and Manish Jain from Mprofit .

Free and Trial versions

I would say you should take advantage of Free and Trial versions of softwares, Like Mprofit gives away a full functional 30 days trial, where as Perfios and Investplus have free versions which are good enough. If you don’t want to use any software, you can manage your finances at very basic level in an excel sheet, but you will have keep updating the values etc from time to time as the situation changes, which is not the case with softwares, as they auto-update the values.

Free tools for Portfolio management

A lot of people don’t go for advanced tools and use free tools available in market which does a good enough job. Tools like money-control tracker and Valueresearchonline tracker are used by lacs of people to track their mutual funds and stock holdings. But they do not give you all the functionalities which fully fledged software’s give to you. Below is the chart explaining Arthamoney, Moneycontrol , Valueresearch and Moneysights portfolio trackers. I hope liked this review of Portfolio management softwares !

Free portfolio management softwares

I would say you should definitely try out some softwares which provide a free version and also explore the free options, there is lot they provide free of cost and all you need is to put your data there. Some other tools which you can use are rediff money (only for stocks and mutual funds, but I like the UI), myirisplus, yodlee and rupeex.com. Please share what more do you look from these softwares and what do you think about the value you get out of these management softwares?

6 Free Portfolio Management Software Licence from Perfios

Update 12 Aug : The 6 winners are selected and this giveaway is not valid now

Perfios is willing to give away 6 free Platinum licences to Jagoinvestor readers for the first year (worth 1499). The first 10 commentators who share this article on their Facebook profile will get those licences (just cc manish at jagoinvestor dot com) (to share it on Facebook, just “like” this article below and put your comment in the box which opens). 

Review of moneysights.com – Invest online in Mutual funds

Posted on by Jagoinvestor

What is the equity and debt exposure of your portfolio? How many different companies have you invested in through mutual funds? And do you know of any tool with great UI and simple features that can help you analyse your mutual funds and stocks in detail? If you wondered that there is no such website which can do such analysis and that too for FREE, I am happy to introduce you to moneysights.com. It does it all that for you and much more…

moneysights review

From a few months, I am in touch with moneysight’s team. At that time they were still building their product and were trying to solve some key issues which investors face today and I knew from beginning that users will like their product when it goes live. Just a month or so back when their product was in beta mode, all the Jagoinvestor readers on email (see sidebar for subscription link) received the beta invitation from moneysights and they got a chance to use their tool exclusively and in advance than others.

The reason why I want to know about moneysights is because they aim to solve 3 key problems that is faced by common investors in India. These problems have played a crucial role in ensuring that Mutual Funds & Direct Equity investments remain under-penetrated as fas as mass market retail investors are concerned. I have described these problems below from Mutual Funds point of view –

Problem 1 : Choice & Suitability

There are 4,000+ of Mutual Fund schemes in the India today. If one includes the variations & scheme options like Growth, Dividend, etc. These schemes are broadly classified in 10+ types like Equity, Debt, Balanced, MIPs, ELSS etc. Most of the average retail investors don’t understand or demand so much of choice and option. A large number of schemes not only adds confusion to the decision-making process but also often results in postponing our investment decisions (i.e. taking actions).

If the quantity of schemes in the market is the first problem, then knowing the suitability of the scheme to an individual is another problem to be cleared? Not every scheme is suitable to every type of investor. An ICICI Prudential Discovery or IDFC Premier Equity may have given great returns & hence they command a 5-STAR return rating but how many of us know that both of them primarily invest in stocks which most often may not be Large-cap stable businesses. And hence they may not be suitable for someone who is risk-averse or someone who is just beginning to invest. Wouldn’t investing purely on return ratings may bring-in a surprise to the investor when the markets go into a downward trend?

Problem 2 : Construction of Mutual funds portfolio

Reading my previous posts on how to create a Mutual Fund Portfolio or How many funds are ideal to have in a Portfolio, you would have realized that diversification in the Portfolio is very important. But then, why how does one construct a diversified portfolio of 4-5 different Mutual Fund schemes. There is so much information needed to construct a diversified portfolio that it’s definitely a cumbersome task to construct one manually.

For example having a HDFC Top 200 & a Birla Sun Life Frontline Equity isn’t diversification but duplication. They are 2 similar funds & having both of them doesn’t make sense in a diversified portfolio. Look at this jagoinvestor forum question of mutual funds portfolio review and moneysights helping him.

Problem 3 : Tracking of Mutual funds portfolio

After someone invests in a set of Mutual Funds, is there a way to track, monitor & manage the Portfolio in a seamless manner? Most websites do offer tracking services. But then, again people like Venshu had asked about  how to get annualized returns so as to compare portfolio performance, sector allocation, etc. so that one can get actionable insights to manage the Portfolio on an ongoing basis that minimizes portfolio risks & optimizes returns. I have used their tracking tool myself and it looks simple and good to me.

Some more good features

Some of you who would have registered on moneysights.com may be able to relate to what i’m talking here. However, if you have not tried it yet, let me summarize quickly on what stood out for me –

1. Fund’s Performance Report Card

moneysights review

Moneysights allows you to get more information about a specific mutual fund scheme in a quick & simple way. Just go to the Find Mutual Funds section where you can search or browse for specific Mutual Fund schemes. Opening the detail page of a Mutual Fund scheme like HDFC Equity Fund would allow you to see –

  1. A unique way of portraying Fund’s Performance through Fund’s Performance Report Card – also notice the no-use of financial jargon
  2. Performance Comparison with fund’s benchmark, SENSEX or NIFTY – notice the lack of importance to NAV & prominence to performance chart w.r.t. various benchmarks
  3. Return Comparison with SENSEX, NIFTY, Category Average, etc. in tabular format during different time periods
  4. How much your money would have grown had you chosen to invest in this scheme – notice the actual amount of dividend you would have earned
  5. Mutual Fund Category Performance comparison within different time-frames
  6. Portfolio composition of the scheme in terms of asset class, market capitalization, sector exposure & underlying stocks

So, all the information you require for knowing how good or bad a Mutual Fund scheme is available within a single-page interface.

2. Portfolio Health

Now this is another valuable feature. Many a times, readers have posted questions on forum about specific funds that they have invested in. Questions like shall I stay invested in (say) a Reliance Vision Fund or Sundaram SMILE Fund which probably used to be good performers at some point in time but are not the best ones today. Does it make sense to redeem & divert the investment in some other fund in similar category? Portfolio Health answers this.

Moneysights review

The way I understand moneysights is doing is they find a scheme which belongs to same category as you have & check if there is a scheme which has performed better – i.e. taken lesser risk but has offered more returns. If they are able to find a better option, they show these options. Let me know what you feel about this in comments section.

3. Get a Portfolio

This is going to be useful for readers who want to start their investments from a scratch all over again or re-align their portfolio to their risk appetite. All you have to do is select a risk profile you can identify with & moneysights displays a portfolio of Mutual Funds which is appropriate to the risk profile selected along with how much exposure you should take in a specific scheme. I personally spoke to moneysight’s team & they mentioned that they give more importance to downside protection capability while choosing the funds & portfolio is constructed following best practices of portfolio management that control portfolio concentration risks. They also recommend funds which have proven history of performance & have a minimum AUM under their belt.

Moneysights review
If you play around with this engine you would notice that higher your risk score more is the allocation to Equity. You would also notice that the resulting portfolio is always diversified across schemes, fund houses, sectors & stocks. They also show portfolio’s break-up & its past performance against SENSEX & NIFTY that help you understand why the portfolio is being recommended to you & how it’s good.

Other Small but Significant Features that you may like –

While the above 3 stood out for me, you may also like the many things they do differently like –

  • Letting you enter the amount of Investment & SIP day for accurately tracking your SIP investments.
  • Annualized returns of the schemes you invest in as well as the Portfolio when your investments are more than 1 year old – a very handy feature for readers who have been looking for XIRR returns.
  • Dividends that you may have received for your investments.
  • Updating missed SIP details – You can also update if you missed investing in a specific month for one of your SIPs. Doesn’t it happen sometimes intentionally or unintentionally with us?
  • By allowing you to redeem Mutual Funds partially or fully, they also let you build history of your booked past profits/losses.

Wishlists for moneysights

There are some of the things which I would personally like to see in future releases . They are

  1. An advanced comparision tool which can show the past performance of the current portfolio
  2. Comparision of two or more mutual funds/indexes in much more detail.
  3. I wish if a user can create his own strategies and run it over the portfolio and see how the strategy would preform over long term.
  4. I also wish if there was a download your Portfolio report in xls and PDF format which I can download and keep it for my record from time to time or just offline viewing . That report can give the overall Report in nice format which is just awesome to look at and worth showoff .

Area’s of Improvement

  1. For most of the return analysis and comparision , it can be done only for the last 5 yrs , I hope if it can be maximum possible .
  2. Their UI is great and neat , but I still feel there are much more things on UI than required and some of them can be displayed on demand (on a click) . What do others think ?

Conclusion

To conclude, if you have feel that you can relate to even 1 of the above problems that I mentioned at the beginning of the post, you would agree after using moneysights that it’s an answer to those problems. I would love to know your opinion on this. Please share it in comments section.