Excuses to avoid making investments are common
Seven Financial Resolutions for 2021
The wait is finally over and it is 2021. The year brings with it a new dawn to our lives after what has been a very uncertain, challenging year. New hopes, new beginnings and new opportunities beckon us this year. The past year taught us many valuable lessons and this is why this new year is different. We start stronger, with greater wisdom and more importantly, with a new perspective and value for the things that truly matter.
The year 2020 made us all rethink our lifestyle and question our financial behaviour. Never was our financial situation evaluated and understood as closely as we did in the recent past. The year 2021 brings an opportunity to start afresh, to practice good habits and follow the financial behaviour we all want to. What better way to do that than by having financial resolutions set for the new year.
A lot of people are today saving more, except for those who have been adversely impacted by the pandemic. Those who have managed to continue with their employment and business are the lucky ones. This is a lesson hard learned. No doubt, in the new year, the first resolution would be to save more, as much as possible. The minimum recommended target savings would be 30% of your net cash income. The first thing you should do is to restart all the mutual fund SIPs you may have closed /stopped last year, if any. Increase your SIP savings meaningfully as soon as possible and while starting a new SIP, chose the option for ‘Top-Up’ SIP which will automatically increase your SIP savings going forward.
Nothing hurts you more financially than debt, especially on a depreciating asset. In times of difficulty, it is also the cause of your greatest challenge and worry. Take a wow to cut through and write off all debt this year. Start with the ones that carry the highest costs and are on depreciating assets. Begin with the smaller and costlier loans like a credit car loan, personal loan, consumer loan, car loan, etc and repay them one by one. Did you know that cash withdrawals from Credit Cards are charged up to 3.5% monthly, which is like 42% annualised! Such loans can hurt you badly. Regular part repayments on huge home loans can greatly shorten the burden over time.
A lot of people are not aware that your investments are also one source of short-term credit /loan. So if you are short of money or need funds for the short-term, better to go for Loan Against Securities (LAS) against your mutual funds /shares which is available at a much lower interest rate than a personal loan that can cost upwards of 14%. The LAS will be very quick, convenient to apply and also manage on an ongoing basis. Keep this option as your first preference this year.
Financial discipline requires one to stay on course with your financial plans and not give into spending impulses. Spending wisely, within means requires great self-control and awareness of your financial situation. A good thing to aim for this new year.
Another important element of discipline is to honour timely repayment of all bills and dues. Over time, this helps one not just keep a very good credit score but also to cut unnecessary late payment charges and interest costs. EMIs and credit card bills should ideally always be paid in full by the due date. Resolve to let financial discipline be one of your virtues this year.
Lastly, having a proper understanding of different asset classes and their behaviour can also help improve your financial discipline. With knowledge and the right risk appetite, you should ride through the market volatility with confidence and take smart decisions. If you have invested for the long-term, there is no point in checking your portfolio daily. Realise that all the gains/losses which you see daily are only on paper, till you react and make it real. If your investment horizon is for say 10 years, your portfolio today hardly matters.
The greatly pandemic helped raise the awareness levels of insurance and its criticality in our lives. Needless to say, adequate life insurance is very crucial. Do not fall for policies giving you up to 10 times insurance cover. They are all expensive investment products in the garb of insurance. The focus should only be on the ‘sum assured’ amount whenever you buy an insurance policy. Hence, experts recommend term plans where the likely premium of an Rs.1 crore policy for a 30-year-old may well be below Rs.10,000. Further, many of us are still stuck with old health insurance policies where we haven't increased the cover for many years. Go for minimum health insurance coverage of Rs.10 lakhs and ensure coverage for all family members. The cost may be on the higher side for old parents, but that's where the claim probability is also high. Always look at your insurance premium as a 10-year investment which will bear fruits even if there is a single emergency in future.
Do you know, post your death what will happen to your bank accounts, investments, who will get the insurance amount? If you have not filled up a simple nomination form, your family will be running from pillar to post to get the paperwork completed just to prove that they are your legal heirs. To avoid all the hassles, just ensure that all your bank accounts, investments, bank deposits, insurance etc have proper nomination done. Also document everything in one place with relevant details and contact persons. Imagine the of such a document in case of an emergency!
We all understand the importance of a Will document. In the absence of this, all your 'estate' will be distributed as per law and not as per your wishes. Further, the family will also be saved from a lot of paperwork and legal hassles in your absence. Even a simple Will written on plain paper is a valid document, even though a proper registered Will document is always recommended. To begin with, just take a plain paper, write down details of all your assets and liabilities and how you want it distributed amongst your dependents /relatives. Share this with your spouse/parents or any other trusted family member /friend or lawyer. Always remember that a WILL is not something which we make only when we grow old. If you have life insurance, why not have a Will? Both are two sides of the same coin.
2020 made us realise what is important in life. Good health, having loved ones by your side, creating and sharing memories, is what matters the most. Your financial well-being can of course sweeten a lot of things, but still, it can do only as much as to remove challenges and hurdles in life. Inner satisfaction, peace, happiness and love cannot be bought. This new year, resolve to change things a bit and have more time and energy for things that really matter. If you have dreamt of or to do doing something, now is the best time to start. Just do it. Let us not wait for another year to pass by.
Simplicity in finance
Exiting Your Equity Portfolio? Do it for the right reasons.
After the volatile experience last year, the equity markets have considerably recovered as on the eve of the new year. A lot of investors would be seeing attractive returns on their equity portfolios. Some of you may be even wondering whether should you partly exit your equity portfolio, switch to debt or book profits. While it may be entirely misplaced to think like this, you should do it for the right reason. Unfortunately for many, redemption is an emotional decision and not a purely rational one.
In this write-up, we will explore the various aspects of exiting equity and the right reasons to do so. Here are the justified reasons why one may exit from equity.
No one can predict the markets and accurately timing markets is impossible. However, practising the strategy of asset allocation is the best and the closest we can get to it. There are two broad ways in which asset allocation strategy can be followed as given below.
1. Fixed Asset Allocation:
where the proportion between equity and debt is fixed
2. Dynamic Asset Allocation:
where the proportion between equity and debt is dynamic within a range decided as per market situation /valuation.
The portfolio rebalancing would mean that you balance the portfolio by shifting the assets which have increased in value to assets with a lower value. As equity markets outperform, one would thus exit equity, but the total portfolio value would remain intact. The portion of debt would always come in handy when equity markets see a sharp fall. Over time, the asset allocation strategy will give you superior returns as you are taking advantage of both the asset classes. Needless to say, this is the best approach /strategy we recommend managing a portfolio.
It has been said that money is nothing but the means to an end. The best way to make use of money would be to use to fulfil your life goals and financial objectives. Your asset allocation will be dictated by your goal horizon and your required target amount. The longer the investment horizon and the higher the requirement of returns, the larger will be the proportion of equity in your portfolio. Ideally, equity should only be a part of your portfolio if the goal maturity is over 5 years. As the goal approaches near, you may start shifting from equity to debt to avoid any last-minute volatility in equity at the time of goal maturity. Exiting from your portfolio at goal maturity was the purpose of investment.
This is a sort of temporary exit only to re-enter when the purpose is served. Investing in equity funds one makes capital gains which are taxable depending on how long you have stayed invested. Tax-loss harvesting is used to reduce tax liability on investments. At the end of the day, your portfolio continues to stay intact however only the notional capital gains changes.
In tax-loss harvesting, one would sell your stocks/fund units at a loss to reduce your tax liability on capital gains. It is a method to offset the capital gains made on equity against the capital loss suffered to pay a lesser amount of tax. It is also used to book profits when they are small and re-enter at a higher price to reduce capital gains. Please note that implementing tax-loss harvesting as a strategy requires some sort of expertise and is not recommended for everyone. One should consult your distributor or your tax expert on the need for the same and how best to do so.
A person’s risk profile should dictate the asset allocation he should follow. Over time, the risk profile changes according to your appetite, knowledge and financial situation. It would also change when there is an important life event. Changing your exposure to equity to match your risk profile may require exit from equity. However, here too, your portfolio value should stay intact.
Many investors redeem their investments without any clear plan or reason. Just redeeming your portfolio and taking cash home because you have seen attractive returns is not a sensible reason to exit from equity. One reason why this is a stupid thing to do is that you are exiting from growth assets which are likely to compound for many years. Real wealth would be created only when these assets are allowed to grow and compound for many years. Imagine yourself buying a share like Wipro or Reliance Industries a couple of decades back. Would you consider yourself wise if you booked profits when the share prices doubled? Such shares are worth over a hundred times more than the original investment. You get the point.
Diversifying or rebalancing your portfolio into performing funds or stocks is another common reason why people sell. However, we do not really know if the new choices will always work for us. It has been seen that people who shift their portfolio to the top-performing funds every year, will likely have a below-average performing portfolio. Thus, this may not be a wise strategy to follow, especially in the case of mutual funds. It is always better to stick to funds for the longer horizon and give them time to perform.
This is again a very common phenomenon where investors panic and book the notional losses on their portfolio in fear of further falls. Obviously, nothing can be worse than booking losses when potentially the markets are at their best for new /fresh investments.
While a financial goal is preplanned, one can be faced with an emergency. Redeeming your portfolio would be wise in such a case. However, we would recommend sitting down with your distributor and appropriately decide which asset class and funds to liquidate instead of randomly exiting the portfolio. Further, you may even explore Loan Against Securities (LAS) in case you need funds.
Nothing can beat the pleasure of having cash in hand /bank. There is no denying that gives us a sense of mental comfort. We are sure that the value of money in the bank will not depreciate soon and will not fluctuate. Many people redeem a part of their portfolio to enjoy this comfort. Not a valid excuse, but then it is your money at the end of the day. What we would recommend here is that have an emergency fund ready equal to say 3 to 6 months of all your expenses in cash or liquid funds. Do not let excessive cash sit idle for long periods as you would miss out on the fun happening in the markets.
NJ-EWealth A/c Opening
how much Life insurance cover do you need?
Critical Illness Policies: Why we all need it?

A lot has changed in the past couple of generations. The way we live, work and go about our everyday lives. We all must have observed that our grand-parents led a much healthier life, and we fear that we wouldn’t be as healthy as they are when we reach their age.

Over the last several decades our food habits and diets have become irregular, unhealthy, and we now lead a sedentary lifestyle. Today’s competitive work culture and pressure to outperform, acquire wealth have also led to increased stress and anxiety. Worse, many of us have even accepted tobacco and alcohol as part of our lives, especially in nuclear families. Technology, development, economic progress and financial well-being have come at a cost to us. Combined, these factors have resulted in an ever-increasing prevalence of lifestyle diseases.

Let us look at some research. According to a national health report released by CSE India in 2017, over 61% of all deaths in India are attributed to lifestyle or non-communicable diseases (NCDs). More than 2.7 million people in India die of heart diseases every year - 52% of them below the age of 70. 26% of all deaths in India happen due to cardiovascular diseases. Men and young are at a higher risk. India had an estimated 57 million patients with chronic respiratory diseases. More than 1.5 million new cancer cases are recorded each year in India. Recently WHO also estimated that one in every 10 Indians will develop cancer in their lifetime!

Further, according to the recent study - GOQii India Fit Report 2020, 62% of all participants fell under either high risk or borderline on the high-risk assessment spectrum of lifestyle diseases. A staggering 71% of women fell in the unhealthy category and young adults in the 19-30 age group were found to have the unhealthiest habits and demonstrate a high propensity to be afflicted by lifestyle diseases. India is already called as the "diabetes capital of the world" with nearly 51 million cases according to WHO.

These are unpleasant facts we must ponder upon. According to the WHO, Indians face a high risk of cardiovascular diseases, cancer, stroke, and chronic obstructive pulmonary diseases among other health ailments. Needless to say, we must be prepared for it.

Read More...
Critical illness (CI) insurance is a product where the insurer promises to make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy. A CI plan works differently from a mediclaim /traditional health plan and is a defined-benefit plan as the payout is defined and fixed. It does not matter if one holds more than one CI cover as every policy will pay the fixed amount. A mediclaim /traditional health plan on the other hand is an indemnity plan which reimburses the actual expenses incurred.
The number of critical illnesses covered varies between insurers. However, most policies offered cover at least 8 to 20 major critical illnesses or even more. Some of the most common critical illness covered are cancer, coronary artery bypass surgery, heart attack, stroke, kidney failure, aorta surgery, multiple sclerosis, heart valve replacement, major organ transplant and paralysis.
The idea of having one health insurance plan to match all medical requirements may not be a great idea. A traditional health policy will only pay for treatment /hospitalization costs when incurred. The scope of coverage of such a policy is broader compared to a CI Policy which will cover only critical illnesses. However, a CI policy comes into picture when most needed - when you are diagnosed by a dreaded disease /ailment covered in the policy. The CI will pay you a lump sum, even if you are yet to spend a rupee on treatment. Imagine the kind of comfort and confidence it can give you to fight the ailment.
One real problem commonly seen is that the sum assured in a mediclaim policy is often inadequate for a life-threatening critical illness. Since the traditional health policies cover a wider scope, the premiums are also higher. Critical illness on the other hand cover only predetermined limited list and are cheaper which allows you to take a higher cover. It is important to note that your indemnity based, traditional health plans allow you to make multiple claims and continue with the policy. However, in a CI policy, once you are diagnosed with any covered critical illness and make your claim, you will be paid your sum assured only once and then, in most cases, the policy will get closed and discontinued.
Both health plans and critical illness policies are important and the benefits, inclusions, and exclusions under both these types of insurance plans are different. We strongly recommend that a combination of both options should be opted for to avoid any financial distress in the future.
Any adult, aged between 18-65 years generally, male or female, can buy a critical illness cover. The critical illness insurance policies are available as standalone products as well as offered as optional covers /riders on the base life insurance policies. Standalone policies may offer better coverage but this is something you should explore before buying one. To many, it may also make more sense to have an alternate standalone policy as it will not be linked to the fate of any other policy. Opting for a CI rider on a life insurance policy though may be cost-effective as the premium is fixed while in a standalone policy it keeps growing with age. As can be seen, both options/routes of CI come with their own set of advantages. If affordable, there is no harm in choosing both the options as well. Better to consult your insurance advisor and decide the right policy for you and your loved ones.
A CI insurance policy is your perfect partner during critical times. It comes with the promise to take away all your financial worries and let you focus on health and recovery. Lower premiums and bigger coverage make it a must-have policy in your kitty. Enough said.
Good health is the road to happiness and prosperity and prevention is always better than cure. We must all realise the health risks we face. Adopting a physically active, healthy lifestyle, with a good, pesticide-free /organic diet, away from pollution, avoiding alcohol and tobacco abuse, is what we should all aim for. Many studies have also indicated that those who are happy and satisfied in life are more likely to enjoy a longer life span with good health and fewer health concerns. If 2020 has taught us anything, it is the true value of these things. Let us truly pursue these things in life and but also do what is necessary, just in case.
FUND MANAGER INTERVIEWS
Partner Image
Mr. Shridatta Bhandwaldar Head Equities - Canara Robeco MF
Mr. Shridatta Bhandwaldar is a Fund Manager at Canara Robeco Asset Management Company, Robeco’s joint venture in India. He comes with over 13 years of experience and is actively involved in managing the Canara Rebeco Equity Diversified fund, Canara Rebeco Bluechip Equity Fund, Canara Robeco Infrastructure , and Canara Rebeco Equity Hybrid Fund.
Prior to joining Canara Robeco, Shridatta was Head of Research and Senior Equity Analyst with SBI Pension Fund Pvt. Ltd. He has also worked with other reputable names which include Heritage India Advisory Pvt. Ltd., Motilal Oswal Securities Ltd. and MF Global-Sify Securities Ltd.
Shridatta has successfully completed his MMS in Finance from University of Mumbai and B.E. (Mech) from Aurangabad University.
Answer : Market is a forward discounting mechanism. It’s not discounting what is happening today but is trying to access factors that will define FY22/23 corporate profits. There are few factors which have clearly been positive surprises over last few weeks and months viz. 1) Corporate profits and demand recovery has been far better than estimated, 2) Bank slippages have been much lower than what market was estimating, 3) COVID daily cases have been falling for 3 weeks now and potential Vaccine news flow, 4) US election uncertainty is out and 5) Indian Govt is focusing on reforms and PLI schemes to drive manufacturing when it is short on capability to expand balance sheet. Also, 8 months have passed in this event, so we are having rollover to next year’s earnings gradually. Valuation although seems fair at 20xFY22, lower interest globally and capital flows towards EM can keep them elevated unless earnings disappoint meaningfully.
Answer : We have made few changes into the event like addition of Auto, IT, Chemicals and Pharma during April – August’20 given lack of visibility in largest domestic sector financials, Investments and other discretionary. However, given that we were less worried about the NPAs, we have been adding financials, Cement and select consumer discretionary over last 3 months and have gone EW or OW across our portfolios.
Answer : This event has clearly benefitted organised players in each sector given they are gaining market share and ability to save, or control costs is huge in this environment.
Answer : I think investors should stay put in mid and small caps given the economy is still at cyclical low points and these segments of markets are still undervalued if you look at it from whole economic cycle perspective.
Answer : We intend to retain the ability to move across market cap spectrum in this portfolio by moving the fund in newly created Flexi Cap category.
Answer : We have been in cyclically lows of corporate profits in India over last 2-3 years. We would advise investors to stay put through the cycle to get compounding effect of underlying corporate profit growth, when it plays out over next 2-3 years. Expect a return of 5-7% over and above inflation in India through cycle on CAGR basis.

Disclaimer : “Mutual Fund investments are subject to market risks, read all scheme related documents carefully.”

Read More

Kotak Deepak Amrutlal (ARN-127784)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Deepak A Kotak
  • Retirement Assessment
  • Child Future Assessment
  • Portfolio Review
  • Mutual Fund:Debt / Equity / ELSS

"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

This Page is Best Viewed with Chrome Browsers

If you don't find a way to make money while you sleep, you will work until you die.

Start investing Now
For better investment contact
9924298976
0281 2992850