Here is the screenshot of how the screen looks after making changes according to the previous article:

I have added an input field to the view of component YTEST. Now I would like to access the PO description and display it in the input field. To achieve this we need to access the FPM instance inside the WDDOINIT method of YTEST component controller and access the attribute MO_APP_PARAMETER of interface IF_FPM. Once we have the reference to this attribute ( which is of type IF_FPM_PARAMETER) we can use GET_VALUE( ) method to read different parameter values. Below is the sample code on how to read the PO GUID

* Instantiate the FPM Manager
DATA: lo_fpm TYPE REF TO if_fpm,
lo_appdata type ref to IF_FPM_PARAMETER,
lv_value type string,
lv_guid type CRMD_ORDERADM_H-GUID,
ls_header type BBP_PDS_PO_HEADER_D.
*access the attribute containing different parameters
lo_fpm = cl_fpm_factory=>get_instance( ).
lo_appdata = lo_fpm->MO_APP_PARAMETER.
*get the po guid
CALL METHOD lo_appdata->get_value
EXPORTING
iv_key = 'SAPSRM_BOID'
IMPORTING
ev_value = lv_value.
lv_guid = lv_value.
*once we have the GUID we can access all the details of the PO
CALL FUNCTION 'BBP_PD_PO_GETDETAIL'
EXPORTING
I_GUID = lv_guid
IMPORTING
E_HEADER = ls_header.

After getting the PO header details in ls_header, set the context attribute which is binded to the input field to ls_header-description. See the code below ( this code can be generated by code wizard)

DATA lo_nd_node TYPE REF TO if_wd_context_node.
DATA lo_el_node TYPE REF TO if_wd_context_element.
DATA ls_node TYPE wd_this->element_node.
DATA lv_ponumber TYPE wd_this->element_node-ponumber.
* navigate from <CONTEXT> to <NODE> via lead selection
lo_nd_node = wd_context->get_child_node( name = wd_this->wdctx_node ).
* get element via lead selection
lo_el_node = lo_nd_node->get_element( ).
* set single attribute
lo_el_node->set_attribute(
name =  `PODESCR`
value = ls_header-description).

I have listed down below different application parameters that are available for us to access. Unfortunately there is no description available for each of the parameters. If you want to know the value that each parameter holds at runtime, you have to debug and see it. To do that put an external breakpoint at statement

‘lt_app_params = LO_APPLICATION_INFO->GET_APPLICATION_PARAMETERS( ). ‘

inside the method INITIALIZE_APP_PARAMETERS of class CL_FPM_FLOORPLAN_ASSIST

Here is the list of parameter names

If you are wondering how we are able to access FPM instance inside our custom component methods, here is a brief explanation.

*access the attribute containing different parameters

lo_fpm = cl_fpm_factory=>get_instance( ).

The above static method call enables us to get a reference to the FPM instance, even though we did not explicitly create an instance of class CL_FPM. So where did it get instantiated in the first place? To understand it we need to go inside componentcontroller WDDOINIT method of component FPM_OIF_COMPONENT ( This is the core component underlying all the FPM applications) . In this method, below code creates an object for CL_FPM

CREATE OBJECT wd_this->mr_fpm

EXPORTING

io_floorplan  = wd_this->mr_oif_api

io_controller = wd_this.

Initialization of IDR component and AppCC component is also done inside the WDDOINIT method.

The constructor method of the class CL_FPM stores the instance in global private static attribute GO_INSTANCE. FPM message manager is also instantiated inside the constructor method. The static method GET_INSTANCE   reads this attribute and returns it as returning parameter. So in short, the FPM instance is available to all the UIBB components.

I hope this tutorial brings in in-depth understanding of how to access business object details inside custom UIBBs. Thanks for taking time and reading my blog.

How to Access PO Details from Custom Component Embedded in Standard FPM in SRM7 is a post from riyaz.net.



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If you are not familiar with webdynpro go through the below links first to get a hang of ABAP webdynpro

1. Web Dynpro ABAP Part 1
2. Web Dynpro ABAP Part 2
3. Web Dynpro ABAP Part 3

If you are familiar with ABAP webdynpro but not with FPM go through the below docs and elearning material first.

• Getting started with Floor Plan Manager (Web Dynpro for ABAP)
• Building a Simple RoadMap Application using Floor Plan Manager GAF (Guided Activity Floorplan)

Go through the below excellent e learning material on SDN.

• eLearning Tutorials – Floorplan Manager for Web Dynpro ABAP

After the above tutorial download the developer guide from the link below

• FPM Application Developers’ Cookbook

Ok… enough of material.. let’s get into some action now »

Basically there are three ways of modifying the PO FPM elements depending on the requirement.

1. If you want to hide/remove  MAIN/SUBVIEWS or indivudual UIBBs contained in them and you want to make these changes visible across all roles then enhance the standard component configuration and make the necessary changes.

2. If you want hide/remove fields with in specific UIBB ( for example you want to hide PO number  field in ‘Overview* tab ) based on some logic.  you can use WD_BADI_DOMODIFYVIEW BADI, create an implementation with filters  component  ‘/SAPSRM/WDC_PO_DOFC_OV_HD ‘ and view  ‘V_PO_DOFC_OV_GN_HD ‘  and write the below code (to get the component and view name , right click on the field in web ui and go to ‘more field help’)

DATA : lo_ref TYPE REF TO cl_wd_transparent_container.
lo_ref ?= view->get_element( 'LEFT_CONTAINER' ).
IF lo_ref IS NOT INITIAL.
lo_ref->remove_child( id = 'PO_NUMBER_LABEL' ).
lo_ref->remove_child( id = 'PO_NUMBER' ).
ENDIF.

3. If you want to hide/remove/add  MAIN / SUBVIEWS based on some logic, then you have to follow the method I mentioned below.

First let’s look at the standard purchase order display screen and understand the difference components and configurations that it uses.

Login with the employee role and go to shopping area->My Pos POWL query where you will see bunch of POs. Open any of the PO by clicking on it. Right click on any of the tabs ( Overview, Header, Approval etc., ) and go the ‘More field help’ of the UI element. You will see below information

Now go to component FPM_OIF_COMPONENT from SE80 and locate the application /SAPSRM/WDA_L_FPM_OIF. This application will have different application configurations associated with it.  We need to figure out which application configuration is getting called at run time. To know this we need to go to PFCG and see the Employee role, go to ‘display purchase order’ webdynpro application and click on details button.

Now double click on application configuration /SAPSRM/WDAC_I_FPM_OIF_PO_PURCH and select ‘Start Configurator’, which will take you to application configuration browser window. Click on ‘Other funcitons’ dropdown button and select create enhancement. This will open up a pop up window asking for the name of new configuration, description and package. Enter a configuration name starting with Z or Y and click OK

Click on ‘Create’ button to go to the individual component configuration view. The component configuration that is currently used by application is displayed there.

We need to create an enhancement for this component configuration as well and use it in the apllication configuration enhancement. To create enhancement for component configuration /SAPSRM/WDCC_FPM_OIF_PO_PURCH, expand the component configuraiton section of FPM_OIF_COMPONENT and locate the configuration /SAPSRM/WDCC_FPM_OIF_PO_PURCH. start the configurator and select ‘create enhancemnet’ from the ‘other functions’ button dropdown. Enter any name starting with Z or Y and select OK. save the configuration. Now replace /SAPSRM/WDCC_FPM_OIF_PO_PURCH with the Z component configuration that we just created.

After this is done click on ‘go to compoent configuration’ and select ‘change’ -> ‘global settings’. you will see under ‘application specific parameters’ , webdynpro component and confguration used for AppCC.

we need to create our own custom AppCC component by copying the standard WD component /SAPSRM/WDC_FPM_OIF_CONF and component configuration /SAPSRM/WDCC_FPM_APPCC_PO_PURCH. Go to se80 and create both ( configuration can not be copied. so just look at the standard configration /SAPSRM/WDCC_FPM_APPCC_PO_PURCH and creata Z  configuration similar to it ).

Once we have created the custom AppCC component and configuration, replace the standard AppCC component and configuration with custom ones.

Ok… we are done with the enhancement part . As we have created a custom AppCC component, we can now add/remove main/subviews as we want. let’s look at a simple scenario.

The requirement is to change the name of the ‘Header’ mainview to ‘Header after change’ and remove the subview ‘Budget’ from the mainview ‘Header’ and also add a new subview with name ‘ FPM is Cool’ which holds a custom component ( YTEST ) as an UIBB.

The above requirement can be achived by just changing the custom component configurationZENH_SAPSRM_WDCC_PO_PURCH that we had created earlier. But what if we need to do that based on some logic, we need a place to write the code. This is where the interface method OVERRIDE_EVENT_OIF of AppCC component comes into picture. Go to the component controller of component  ‘ ZWDC_FPM_OIF_COMP ‘ and open the method OVERRIDE_EVENT_OIF’ and write the below code at the end.

TYPES:
BEGIN OF ty_s_uibb,
component            TYPE string,
interface_view       TYPE string,
config_id            TYPE wdy_config_id,
config_type          TYPE wdy_config_type,
config_var           TYPE wdy_config_var,
needs_stretching     TYPE fpm_needs_stretching,
location             TYPE fpm_location,
index                TYPE fpm_index,
END OF ty_s_uibb .
DATA: ls_uibb TYPE ty_s_uibb,
lt_uibb TYPE STANDARD TABLE OF ty_s_uibb .
ls_uibb-component = 'YTEST'.
ls_uibb-interface_view = 'YTEST'.
APPEND ls_uibb TO lt_uibb.
CASE io_oif->mo_event->mv_event_id.
WHEN 'FPM_START'.
TRY.
*rename the main view Header to Header after change
CALL METHOD io_oif->rename_mainview
EXPORTING
iv_variant_id  =  'PO_PUR'
iv_mainview_id =  'PO_HDR'
iv_new_name    =  'Header After Change'
*remove subview 'Budget' under main view Header            .
CALL METHOD io_oif->remove_subview
EXPORTING
iv_variant_id  = 'PO_PUR'
iv_mainview_id = 'PO_HDR'
iv_subview_id  = 'Budget'.
add subview FPM is coll in Header mainview
CALL METHOD io_oif->add_subview
EXPORTING
iv_variant_id   = 'PO_PUR'
iv_mainview_id  = 'PO_HDR'
iv_subview_id   = 'mysubview'
iv_subview_name = 'FPM is Cool'
it_uibb         = lt_uibb.
CATCH cx_fpm_floorplan .
ENDTRY.
ENDCASE.

This is how PO screen looks after the code change. Header description is changed, ‘Budget’ subview is removed and there is a new subview with name ‘ FPM is Cool’ added.

If you now click on subview ‘FPM is Cool’, you can see the custom component YTEST ( I had created a simple component YTEST with single button and some text)

I hope this tutorial will be of some help to ABAP webdynpro developers working in SRM 7.

Next in the series: How to Access PO Details from Custom Component Embedded in Standard FPM in SRM7

Floorplan Manager for WebDynpro ABAP: Dynamically Modifying Purchase Order FPM in SRM7 Using Custom AppCC is a post from riyaz.net.



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1. Aakash: $60

Aakash, the new, super-cheap (what else, at just a little over $50?!!) tablet from Datawind, India is touted as the world’s cheapest tablet. This tablet has a 7 inch display, with Android 2.2 OS and a 366 MHz processor. Originally released in 2011, the 2012 version contains a faster processor, the Ubislate 7, a 700 Mhz processor and battery life of 1.5 hours.

2. The Coby Kyros MID7012: $ 87.72

This is a 7 inch touchscreen Android 2.3 tablet with 4GB storage. It’s available on Amazon for $87.72. You can access thousands of games and applications from this tablet’s marketplace, along with productivity tools for social media. Video display is at 1080p, which is good if you want to do image editing or watch movies on this tablet. The Coby Kyros connects wirelessly to the internet.

3. Velocity Micro Cruz T301: $ 94.99

This tablet has Android 2.2 OS, a full 7-inch display and 1 GB storage. There’s no camera or other savvy features, but if you’re looking for an e-reader, video and music player, you’re all set. The battery comes 75% charged, so you’re ready to go on day one. You can buy this tablet on Amazon for the great price of $94.99. For this price, you don’t have to think too hard to buy this one.

4. CherryPad: $99

CherryPad is a 7 inch Android tablet, that comes with a 256 MB RAM, 2GB inbuilt flash storage, 800MHz processor, and a 800 by 480 pixel display. Though the display resolution doesn’t sound like much, you can play 1080p HD video comfortably on this tablet. It also comes with an SD card slot – you can expand up to 16GB on this tablet. That’s a great option to have in a tablet, if you’re the kind that accumulates a lot of stuff over time.

5. Lenovo IdeaPad A1: $189

This 7-inch tablet comes with inbuilt GPS that doesn’t require a data connection! The OS is Android 2.3 Gingerbread, not Honeycomb, which might come as a disappointment if you like customizing the stock Android apps and interface. There’s 2GB of internal storage, and a microSD card slot which allows expansion up to 32GB. Plus, you get a micro-USB port to connect to your PC. The processor is single-core 1GHz Cortex A8, which explains why Android Honeycomb OS hasn’t been used on this device.

6. Amazon Kindle Fire: $199

The 7 inch Kindle lacks savvier features such as 3G, camera and so on, but you have free access Amazon’s library of videos, books and other media content. The storage is only 8GB, with no expansion slot. However, the browser is great, Amazon’s own; plus, you get access to Amazon’s curated Android app store, which includes such gems as Netflix, Hulu and Pandora. The price, of course, is unbeatable.

7. Samsung Galaxy Tab: $199.99

This 7 inch tablet runs Android 2.2, has great scrolling functions and a fast processor. The homescreen doesn’t rotate quickly but you’ll get used to it. The device comes with HDMI support, but it works only with the higher-priced WI-FI version for now. The Wi-Fi connectivity is fast, even if the signal is distant, which is great for a tablet at this price range.

8. Barnes & Noble Nook Tablet (8GB): $199

If you compare the Amazon Kindle and the Barnes & Noble Nook Tablet, you’ll find there’s not much difference in the features. You do get a microSD slot for memory expansion in the Nook, unlike the Kindle. The storage is 8GB, the design is stylish, and the 7-inch screen has wide viewing angles with good reading features. It doesn’t support app side-loading, the speaker is not great and the selection of apps is small.

9. HP TouchPad: $239

This is a 10 inch tablet, priced excellently at $239. It has WebOS, which allows for card-based multitasking. The tablet itself is a little thick, when compared to the Samsung’s Galaxy Tab 10.1. However, for a 10 inch tablet, the price is absolutely fabulous.

10. Archos 70 Internet Tablet: $199.7

This tablet is a 7-incher, with a front-facing camera, Android 2.2 and 8 GB internal storage. No microSD expansion slot, of course, but the display is decent and you can play HD videos. For just 100 dollars more, you can get a 250 GB drive! Best option if you want to copy a bunch of movies to the hard disk, take the Archos 70 and head off to a picnic.

World’s 10 Cheapest Tablets is a post from riyaz.net.



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Favicon is the tiny little icon left on your web browser’s address bar, and therefore, is an element of your overall website branding. They show up in your browser, but additionally in feed, so it’s essential that you include one with your websites.

Step 1

To get going, simply open Photoshop and set your picture size right into the best square out of any even number, for example, 60×60 pixels, as working with a 16×16-pixel picture would be challenging.

Now, in order to begin creating your personal favicon, set your background color along with width, height and resolution. Make certain shades of color you use on your favicon are similar pair of colors you employ in your website.

Step 2

When it comes to information on your design, you can either build a straightforward image or use your typography talent in planning your preferred favicon. I personally advise you to design a customized square shape image. Don’t forget that the dimension of this favicon is just too small to contain all of the information you intend to the role in the image.

Wait a bit and just keep on it simple yet fascinating. You can also make use of graphic along with text or your logo. Since Favicon is very tiny, it is necessary to maintain the graphic as simple as possible.

Step 3

After you have created the ideal image, change the sizes of your graphic to firmly 16 pixels by 16 pixels. This is due to the standard size of the favicon is at 16×16 pixels. If you would like lower your existing image dimension to use the image as a favicon, go to the Image -> Image Size.

Thus, in Photoshop, this can be achieved using the ‘image size’ selection under ‘Image’ menu at the very top. Insert 16 pixels in height and width then press OK button. This will likely resize the reputation to the adjusted size. Now you should save your data with the name ‘favicon’. Therefore, it should be saved and protected as .ICO layout. This can be done by making a selection of ‘windows (.ICO)’ within the file type option inside the ‘Save As’ window.

Step 4

Lastly, make sure you upload your customized ‘favicon.ico’ icon you have just generated to the website server is hosted. To add your Favicon on your server, simply open your FTP and check out the root directory of your website and search for favicon.ico. In case your Favicon icon is available on the server, overwrite this along with your custom photo. That’s all. Whenever you view your website, you’ll definitely notice your customized icon presented next to the TITLE in the address-bar. At last, don’t forget to update the page to get the change.

Create a Favicon in Photoshop – A Step by Step Guide is a post from riyaz.net.



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“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing.. those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it”.

This meaningful quotation made me realize that we need to do regular financial check-up to ensure that we have enough to meet our financial goals in life. Planning for financial goals require taking into consideration the present rates of earnings on investments, future earnings and rate of inflation that would affect our lifestyle and financial goals. It is vital that we all realize that regular reviewing our finances according to our changing dreams, needs and aspirations and making necessary changes would help meet our financial goals.

Marriage and a Merger of Personal Finance

Marriage could be the first circumstance that calls for reviewing financial needs. Getting married means not just end of bachelorhood or spinsterhood, but additional expenses of managing household and financial needs of one’s spouse. Likewise two pay-packets call for necessity to review the fruitful investment of excess income. I would say that marriage brings along with it future goals like buying a house, planning for children and so on and additional expenses involved in this planning.

Kids and Their Future

The innocent face of kids brings joys to the couple’s life, with the added responsibility to plan for additional finances required for their upbringing, education, medical expenses and marriage. In addition, don’t we as parents feel that we have to leave behind an inheritance that our children would love to treasure?

Health is Wealth

Regular financial check-up is required not just after marriage and kids, but God forbid, death, long term sickness and accidents are eventualities that can change everything for a family; these unforeseen contingencies can lead to major turmoil and depletion in finances.

Switching Your Job or Transition to a Business

Regular financial check-up is also required considering the change of employment or business activity. Regular jobs bring regular income and regular investments, while increases would mean more of investments. Also irregular and cyclical income means saving and investing more in times of high income; as in surgeons, artists, consultants investment and insurance advisors for times of income crisis.

In addition, can anyone of us afford to miss on the effects that inflation plays on our financial planning? Periodic financial check-ups ensure we are self-sufficient in old age. Other factors like windfall gains could also make differences in our finances. So it is very true to say that regular financial check-ups or reviews would help make adjustments in financial plans in the most optimum way.

What Does Regular Financial Check-up Give Me?

Expecting the Unexpected

Deepak Chopra aptly said,

“Even when you think you have your life all mapped out, things happen that shape your destiny in ways you might never have imagined”

It is right that budgeting regularly would help all of us to pin-point where we are overspending and need to economize to fulfill goals. It is true that this would help increase savings for investments. It would be right to say here that regular financial check-ups help to review financial needs and also set up sufficient contingent or emergency fund that come in handy in emergencies; sickness, accident and unemployment. Ideally it should be 3 to 6 months of your family expenses. This would come in handy in case of emergency.

How very true it is that insurance forms an important part of financial planning as it provides for not just financial protection on death, but also for illness and future needs. Constant and regular financial check-ups is necessary here also to provide for increased insurance needs, with planning early in life helping reduce premium costs and refusal for insurance.

Net Worth Tracking

It has been well said by Noel Whittaker,

“Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do, it is a matter of managing your money properly”

We would be smart in preparing a balance sheet of our family finances. Like a business balance sheet, this could enlist assets like contingency fund, various investments, interest earnings, pension, provident fund, insurance and other immovable assets we have and also enlist the liabilities like expenditure on children’s education, marriage, medical expenses, retirement expenses and cost of inflation on financial reserves. Constant updating would not only give an idea of your exact financial standing, but would also help to make appropriate financial planning changes.

Financial Check-up Review Triggers

• A special mention needs to be made regarding regular financial check-up with regard to mutual funds; the change of fund manager and other changes in investment portfolio need to be considered.
• How very true it is that regular financial check-ups help in maintaining excellent financial health. Budgets need to be reviewed every month, with financial consultants advising their clients to review their investments every 3 months and make the necessary changes.
• There may however not be a need to make changes if the portfolio is as planned, though in certain cases like big change in financial goals or with new guidelines of investment necessary changes may have to be made in the investment plans.

To conclude how very true it is that uncertainty is an important ingredient of life, but managing your money properly with regular financial check-up could give you the stability and peace of mind to face your financial goals confidently.

Do You Do Your Regular Financial Check-up? is a post from riyaz.net.



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The existing pension plans/ retirement plans in India are from the insurance companies. They are available in the form of traditional products or in the form of ULIP schemes.

Indian Traditional Retirement Plan

The traditional pension plan/retirement plan schemes from Indian insurance companies are expected to deliver only 6% to 7% CAGR as they are allowed to invest only in conservative avenues. This 6% or 7% is not sufficient to beat inflation.

Indian ULIP Retirement Plan

The ULIP pension/retirement plans have huge front loaded charges. They also have higher regular running expenses and fund management expenses which pulls down the net return. That’s why market has rejected these products and they have become failures.

Customized Retirement Planner for India

As a prudent investor, you should not rely on a single product or scheme for your retirement planning. A comprehensive and customized Indian retirement plan should consist of a bundle of schemes and not a single scheme.

Also you need to avoid schemes which deliver lesser return and schemes with huge charges. You need to select a combination of schemes which as a combination can deliver a decent inflation adjusted returns with low charges.

Schemes for Pre-Retirement Planner in India

A combination of Term Insurance, Mutual Funds, and PPF will help you in creating a better pre-retirement planner in India.

Term Insurance

In case of any mishappening to you, your spouse’s retired life needs to be secured. This can be protected with adequate term insurance. Online term insurance policies are cheaper by 50% to 60%. So opt for online term insurance instead of an offline term insurance.

Mutual Funds

Equity mutual funds play a vital role in delivering positive inflation adjusted returns. Short term and Medium term debt funds are better alternatives to fixed deposits as they can deliver better post tax return.

PPF

PPF delivers 8.6% tax free return. It has got a lock in of 15 years. One can save upto Rs.1 lac p.a. Safety and its tax free status makes this product a compelling option for an Indian pre-retirement planner.

Schemes for Post-Retirement Planner in India

A combination of schemes like POMIS, Senior Citizen’s Savings Scheme, Bank FD, Mutual Fund MIPs and Debt funds could be considered for creating a post-retirement planner in India.

Creating an Indian Retirement Planner

We have discussed enough about why should we have a Customised Indian Retirement Planner in the place of a readymade pension/retirement plan. Let us think about how to create a comprehensive and customized retirement planner for India.

1. Lifestage

In this step, as an Indian retirement planner, you need to answer two questions. One is “How many years from now you are planning to retire?” and the other one is “ Your Estimation of Post-retirement years”. Studies reveal that the average life expectancy of an Indian is 75 years. But it is advisable to assume 85 years as your life expectancy so as to make sure that you will be covered enough during your post retirement.

2. Expected Retirement Expenses

Again in this step you need to have an answer or 2 questions. The first one is “what will be retirement expenses in today’s cost of living”. Research reports show that approximately 70% of your current expenses will be your retirement expenses. The second question is “what would be the expected rate of inflation on these expenses”.

3. Expected Retirement Income

The first question to be answered is “What is the expected amount to be received at the time of retirement from schemes like EPF, superannuation, pension commutation, gratuity?”. The second question to be answered would be is “What is the annual income you expect from the sources like pension schemes, rent, royalty?”.

4. Existing Investments

“What is the current value of the investments made towards retirement?” and “What is the expected return from these investments?” are the questions to be answered in this step.

5. Working out the Retirement Planner:

We are going to work out the retirement planner in this step with the answers from the earlier steps.

• a) You need to find out the future value of the retirement expenses with the present value of retirement expenses, number of years to retire, and the inflation assumed.
• b) The expected retirement income by way of rent, pension, royalty need to be deducted from the retirement expenses (calculated in the point (a)) to arrive at the net retirement income to be generated from the retirement corpus.
• c) Then the retirement corpus needs to be calculated by taking into account the net retirement income (calculated in the point above point), number of retirement years, inflation assumed post-retirement.
• d) The retirement benefits like pension commutation, gratuity, superannuation, EPF needs to be deducted from the retirement corpus (calculated in the point (c)) to arrive the net retirement corpus required.
• e) The monthly investment required to accumulate this net retirement corpus needs to be calculated taking into account the existing investments, and the rate of return from the investments.

The detailed approach for creating a comprehensive and customized Indian Retirement Planner is well explained in the above five steps.

Role of a Financial Planner in Creating an Indian Retirement Planner

• A professional financial planner will be able to take into account ‘the rate at which your income grows’ to decide the monthly investment towards the retirement corpus.
• Also the financial planner will be able to decide the asset allocation for your portfolio based on the required rate of income to accumulate the net retirement corpus.
• The financial planner will be suggesting you the right mix of schemes for your pre-retirement planner and post retirement planner.
• Also the professional financial planner will be able to tell you the required life insurance coverage and the health insurance coverage and when you need to opt for health insurance coverage.
• Periodical review on the retirement planner has been conducted by the financial planner so as to accommodate the changes and deviation from the original retirement planner.

You can be a “do it yourself” Indian retirement planner or “seeking professional assistance” Indian retirement planner, the above points will help you in having a happy and peaceful retired life.

Customized Retirement Planner for India is a post from riyaz.net.



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Many have a tendency to complain about inflation, taxes and EMI’s as deterrents to saving and investments. But the question is are we making a conscious effort to save and control spending? Do we have any financial leak and are we ignoring them?

My intention is not to confuse, but to emphasize that you need to fix these leaks. So that you can create and build wealth that can last for a lifetime.

Arun, a marketing professional earning Rs. 24lacs per annum post tax was surprised how his friend Girish who earned just Rs. 18lakh per annum and having similar family conditions could save and invest. Taking Girish into confidence he explained his problems. Girish gave him a patient and empathic hearing. Girish explained where Arun spent unnecessarily or created financial leaks and how these leaks could be plumbed. This could make Arun feel financiallt fulfilled in his life.

The Financial Leaks

In addition to his necessary expenses, Arun spent a lot on things that were unnecessary and unhealthy. Some of the financial leaks or avoidable expenses included his smoking and drinking expenses. Since he belonged to the upper status of society Arun believed that drinking and entertaining his friends and colleagues with foreign liquor at least once a month was essential. This even took up about Rs.1.5laks to 2lakhs of his annual income.

In addition Arun dined in star hotels at least once a month, with dining out in other restaurants at least twice a week. This took up about Rs.1.5laks annually. The family believed in shopping in expensive malls and watching movies in multiplex that cost him about Rs.300000 per annum. In addition there was the yearly recreation and other lifestyle expenses.

Method of Financial Plumbing

Girish emphasized to Arun to cut down on his cigarettes and alcohol to not only save money and invest, but also to care for his health. In addition Girish suggested that he find other healthy ways to relax like doing deep breathing, meditation and relaxation exercises daily. Next he suggested that he entertained his friends in more healthy ways and minimized his visits to star hotels and restaurants for a meal.

He told Arun that dining at home, experimenting on their new favorite recipes. Cooking together as a family provided the togetherness and helped to get the family’s cooperation in meeting the savings goals. Shopping just for essential needs, with entertainment in theaters or watching videos at home instead of visiting multiplex theaters saved money on tickets and in travelling to these theaters that were on the outskirts of the city.

I am sure we all could relate and find some that could identify with our spending habit patterns.

Your Excellent Life Balance Sheet

Just have a look at how fixing financial leaks could help:

• Your monthly unhealthy expenditure of Rs10000 on alcohol, if invested at 12% would give you a corpus of Rs. 23, 00, 386 in 10 years and Rs. 98,92,553, in 20 years.
• Next your unhealthy monthly expenditure of Rs.2000 on cigarettes will grow to Rs. 4, 60, 077 in 10years and Rs. 19, 78, 511 in 20 years at the same rate of growth!
• Similarly, your extra unwarranted expenditure of watching movies at multiplex and shopping in malls of Rs.5000 each month would grow to Rs. 11,50,193, in 10 years and to get Rs. 49,46,277 in 20 years at the same growth rate!
• Cutting on extra dining out expenses of just Rs.5000 per month could accumulate Rs. 11, 50,193 and Rs. 49, 46, 277 in 10 years and 20 years at the same interest rate!
• Aren’t you surprised this amounts to 50 lakhs in 10 years and 2.17 crores in 20 years with a mere cutting Rs. 22,000 a month? You are more healthy and financially sufficient all your life!
• Plumbing some other financial leaks switching off fans, heaters, air-conditioners and other electric and electronic appliances when not in use would help make savings and the energy crisis!
• Avoiding financial leaks with avoiding the use of credit card unless very necessary would help avoid payment of high interest. Detesting the idea of just making payment of minimum amount on credit card outstanding balances is one of the worst financial leaks. This applies also to giving priority to paying off low interest loans in favor of high interest loans.
• Next avoiding the financial leak of paying high interests paid on loans, with earning lower interests in savings accounts and fixed deposits is important.

Conclusion

Hope you are set ready to fix your financial leaks and to channellise the extra savings in a fruitful investment option. Here’s the road map to riches. Fix your financial leaks; get extra savings; invest the extra savings properly; become wealthier.

Leak Proofing Your Personal Finance to Build Wealth is a post from riyaz.net.



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A study revealed that only 47% of Indian households had bank account. In addition every 3 out of 4 households had a quarterly bank balance of only Rs. 5,000. With the recent savings bank account de-regulation many banks have raised their interest rate by 1%. But households would not benefit much, as banks could charge increased transaction fees to offset increased cost, and also the additional interest income from savings account is negligible.

A further study has revealed many other interesting facts. Most Indians prefer to be lenders and not owners that have enterprise.

We tend to play safe and prefer to be lenders by investing in fixed deposits and debentures of banks and companies. Investing in fixed deposit or debentures gives us a fixed interest. The bank in turn lends money to others for interest and makes a profit on the difference between the borrowing rate and lending rate.

Do you want to be an owner?

You can be a lender by investing in fixed deposits of SBI. Also you can be a part owner of SBI by investing in its shares.

As a part owner you would not get a fixed return in the form of interest. Since you own the company partly, you would share in profits or losses. You would get a part of the profits in proportion of the shares owned by you. Owning means risk-taking with the chance to get higher returns than lending to the bank or companies by making fixed deposit with them.

Suppose, Tomorrow Tata motors comes out with 12%interest paying debenture, what will be the response? There will be a huge response. It will definitely be oversubscribed. All investors will not get the allotment.

For a moment, just think. If TATA motors was to pay 12% interest to debenture holders, then it need make more than 12% with the borrowed money. Will you benefit more by being a lender (debentureholder) or part owner (Shareholder) of TATA Motors?

Lending or owning?

We as Indians should be proud to be a part of a developing country. Owning would give us an opportunity for long term capital appreciation and growth. However it is best to understand that the Sensex may fluctuate, but an increase is definite over a period of time.

In the last 10 years, sensex gas grown at 17.79% CAGR. That means, if someone could have invested Rs. 1 lac 10 years back, it could have grown to 5.14 lacs. In the last 10 years one third of diversified equity mutual funds have delivered a CAGR of more than 25%. That means if someone could have invested 10 years back in these mutual funds Rs. 1 Lac, it could have grown to Rs. 9.31 Lacs.

So the coming decade post 2011 is the golden period for owning. This period would help the so called middle-class people to build wealth. With the middleclass aspiring for quality education for children, quality healthcare for their family and a decent lifestyle after retirement, owning equity is the only time-tested means to get a decent inflation adjusted returns. So we need to get our long term perspective right and start owning equities.

Asset Allocation

Owning and investing in shares means creating wealth with a long term perspective. But balancing the way we invest matters.

First, we need to allocate some amount of money for risk coverage. This could include money set aside for insurance, medical insurance and critical illness coverage. Next we all need to set aside money in liquid sources as savings accounts / bank deposit / liquid funds that would come handy in contingencies like loss of job and sudden illness. Then money required for short and medium term needs has to be set aside in debt investments.

Once this is done you are free to buy equities and build wealth. Equities can beat out all other investment categories in the long run. Equity is one of the few investments which can give you a positive return after adjusting for inflation.

Last but most important, feeling motivated that you are an owner would make a significant impact on the way you multiply your wealth. It would also give you the positive spirit and affirmation to stand by your decisions during the downs of the economic market.

To Be or Not to Be In Equity is a post from riyaz.net.



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Who does not wish to live in a house of their own? Buying a new flat will take a long time, so some of us may wish to settle for buying a resale property. However buying a resale property could involve many legal and other procedural requirements. It is prudent to first understand the various procedures and safety measures for buying resale property to avoid hassles in future.

Buying Resale Property – A Guide

Consult Experts

It may be ideal to engage a good real estate agent to locate a resale property. He would be in a position to locate sellers as well as guide you regarding the price of such properties in different localities. They would also be in a position to tell you about the seller of the property. Most real estate agents charge a fee and also help with registration, payment of stamp duty and other paper work involved in the purchase of resale property. In addition, taking the help of a good lawyer would also help to make sure that things are clear legally also.

Title of the Property

It will help engaging experts like real estate agents and lawyers to help you, but it is always better to be well-informed yourself when entering into deals for buying resale property. The first step in this regard would be to establish the title of the seller; whether he is the real owner of the property or has been given the power of attorney to transact the deal. All the documents with regard to the property need to be clear. In addition you need to make sure that all the original documents with regard to the property that were given by the builder or original developer are in order.

Documents

Buying resale property seems great, but it could become a big problem if the documents regarding the original purchase and subsequent transfer of title are not properly stamped. Firstly it could pose great problems especially if you want to apply for a loan for purchase of the resale property. Subsequently it could prove to be unacceptable in case you wish to transact further on the property.

Existing Loan

It is also necessary to make sure that the property documents are not lying mortgaged in the bank’s custody against a loan taken by the seller. The bank will consider a loan only once the loan taken by the seller is repaid and the documents released.

Loan Eligibility

Buying a resale property would definitely provide you with a bigger space in case of older properties. However it is best to note that some banks may not lend money on buildings older than 10 years. This may be due to the reason that they may not want to take the risk of the price of the property going down. Banks also make sure to ensure that the bank’s outstanding loan should always be lower than the value of the property in the market.

Property Valuation

Next it is imperative to note that the loan amount is highly dependent on the cost of the property. Technical experts would evaluate the property. However it would be useful to yourself avail the services of a property valuator at a small fee before approaching the banks. The bank’s property valuator may valuate the property at a much lower rate. They would also like to safeguard their interests against the fall in the price of the property in future.

More Down Payment

Most banks wish to make sure that you be responsible for the maintenance and good upkeep of the resale property. So banks would expect you as the purchaser of the resale property to pay a certain percentage of the price as down payment. You may have to pay about 20% of the price as down payment; property of 50 lakhs requires 10 lakh as down payment.

Age of the Property

This down payment could be more in case of older properties. In addition, banks usually lend only on properties that are unto 50 years old. The tenure of the loan also decreases with the age of the property.

Flat Society

The bank may grant the loan and you may make the down payment, but there could be another problem. It arises out of the need for some Flat societies that require the payment of a heavy price for change of ownership. It is best to consider this cost also when coming to a conclusion while purchasing resale property in cooperative and other societies.

Conclusion

Buying resale property would give you a chance to settle in your own house fast and save you of high rents paid and the need to frequently shift your place of living. Taking a loan from the bank could give you tax deductions on the interest paid soon. You would not have to wait till the possession as in the case of new flats. It is always prudent to be well informed about the various details of the resale property.

A Step by Step Guide to Buying Resale Property is a post from riyaz.net.



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Today here prevails a similar confusion with who is an investment advisor and who is the financial planner. It is quite common to find these terms used interchangeably, but it is necessary to understand that an investment advisor and a financial planner have the similarities as well as differences as with sales and marketing.

Why is this confusion?

There is a real confusion among the investors regarding who a financial planner is and who is an investment advisor. These terms are used very loosely, so it is necessary that one understands the function of each of these professionals and approach the right people.

The main confusion in these terminologies arises out of a person’s own perception. This arises due to most professionals offering financial services like insurance advisors, mutual fund distributors and stock brokers calling themselves financial planners. This term has been used very loosely by many to suit their own convenience and image. This is more like a compounder professing to be a doctor, when he/she knows purely only about the medicine that one has to dispense. A compounder will not have the expertise to diagnose the disease that needs to be treated.

Who is the Financial Planner?

Financial planner is involved in planning all the finances of a person. His job includes drawing up an appropriate plan that covers all financial needs and goals in the short, medium and long run. Such a planner is like an architect of a building and helps to analyze and draw a complete map of how his or her client’s finances need to be planned. It includes considering the need for liquidity, cash management for various needs, goals planning and feasibility, long term cash flow, estate planning and risk management.

Who is an Investment Advisor?

In contrast an investment advisory/advisor is a person or group that helps his client to decide on the financial products that he or she should invest in. Such an advisor understands what his or her client actually wants after communicating with him or her and understanding the need. An investment advisor makes a thorough analysis of the various securities before doing so.

Hence investment advisory is just one of the ingredients of financial planning.

Goal Achievability

A financial planner will be able to tell you, is it possible to achieve all your financial dreams with your current and projected earning capacity. If it is not possible, then the financial planner will be able to tell you what could be achieved with your earning capacity and to achieve all your dreams what kind of earning capacity you should have.

Risk Management Plan

A financial Plan also covers creating a risk management plan. A risk management plan includes creating an emergency reserve, assessing the human life value and suggesting a term insurance; identifying medical insurance cover required and suggesting a health insurance plan; and also suggesting a general insurance policy to cover the natural perils like fire, flood, earthquake … against your properties.

Investment Plan

A financial plan that suggests investments comes only after all the aspects have been analyzed fully. The best investment advice can only flow out after a deep analysis of a client’s need and after the preparation of a financial plan. Financial Planning should precede the investment planning.

Existing Portfolio Revamp

It is also necessary to understand that a financial planner also looks at past investments. He then makes necessary changes to make them amicable to achieve a client’s financial goals over a period of time. Also he will assist you in restructuring your existing outstanding loans. If necessary he will create a debt pay-off plan also.

Tax Planning

A financial planner should assist you in creating a tax plan also. This tax plan will be in sync with your overall financial plan.

Review

A financial planner will do a periodic review on your financial plan and investment plan. If you are preponing or postponing one of your goal or if you have got a job promotion, then you may need a financial plan review. If direct tax code has got implemented or one of your investment schemes underperforming, then you may need an investment review.

In a nutshell a financial planner will not only give you an investment advice he assists you in managing your personal finance in a complete, comprehensive and a holistic way.

Investment Advisor Vs Financial Planner is a post from riyaz.net.



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Here’s the list of financial resolutions for 2012. You may pick and choose a few among these and implement to improvise your personal finance management system.

1. Would you like to prepare a workable budget for the year 2012?

You may choose to create a workable budget for 2012 by projecting your income and expenses. Also consider investments committed earlier like insurance premiums, SIPs and other commitments like EMIs. Is there any other financial goal you are going to meet this year like buying a car or buying a property? Have you made the provision for down payments?

2. Would you like to do a Portfolio Rebalance?

2010 ended with a sensex of 20509. This year it is trading around 16000 levels. So definitely there will be a requirement to balance your portfolio to restore your predetermined debt equity ratio. Probably you may need to increase your equity exposure. You can make this market fall as an opportunity.

3. Would you like to resist the temptation to make quick profits?

Temptation to make quick profits is the biggest enemy of wealth creation. This temptation leads to speculation and gambling which in turn will lead to a huge loss. If you could take a resolution to resist this temptation you will not fall prey for bogus schemes that seem to offer huge returns.

4. Would you like to repay your high cost loans?

Do you have credit card debt, personal loan, or car loan? These are all definitely high cost loans. Why don’t you chalk out a plan to repay these debts well in advance? This will reduce your debt burden. You can become debt free earlier. You will have more investible surplus if you are debt free.

5. Would you like to review your insurance?

You may decide to check the life insurance and health insurance already taken is sufficient or any additional coverage is required. If you have taken a term insurance policy through an agent, now compare the premium with an online term insurance plan. By changing to an online term insurance plan you will definitely save up to 60% of your offline premium.

6. Would you like to do an early tax plan?

If you have not done your tax saving investments for the current financial year, you may decide to do it now without any further delay. As soon as the budget session is over create a tax plan for the next financial year. Doing tax saving investments in the last minute may force you to think only on saving tax and not on your financial goals and choosing a best scheme in sync with your goals.

7. Would you like to prepare a retirement plan?

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life.

Have you started planning for your retirement? You may be saying ‘who me? I am too young to be thinking about retirement”. It is not so! Rethink. You should have started thinking about it yesterday. Because time flies quickly. If you were smart, and planned for retirement when you are young, your retirement years will be really those “Golden years”. If not you need to compromise and you need to work longer and retire later than others.

8. Would you like to avoid resolution pollution?

You need to be very cautious about setting too many financial resolutions and also need to avoid setting unrealistic financial goals. You need to set resolution which is workable. You need to keep realistic expectation on the outcome of the resolution. Over expectation may demotivate you. New Year resolution is not a magic. You will be able to progress it only over a period of time with constant practice.

Now you have all the information needed to create the New Year financial resolution. So go ahead and create one for you and your family.

Financial Resolutions for 2012 is a post from riyaz.net.



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It was just another day that a new client came to us for financial planning. He wanted to know if he had planned well for his family financial goals. As a general procedure, I suggested that a study would help me come out with a comprehensive financial planning to meet his goals.

Explaining the Financial Planning Concept

I told him that financial planning lies in addressing 4 important areas namely, risk management, wealth creation, wealth preservation and wealth transfer. It is an ongoing process throughout life. Financial spring cleaning done regularly helped to stay focused and keep track of your finances.

It is best to understand that financial spring cleaning involves collecting and assimilating data. This included various investments, present financial situation of the client. Then an appropriate plan was prepared and reviewed regularly considering changes. It is best to get a financial plan prepared by a certified financial planner or advisor who has the expertise, education and ethics and believes the plan would work for you.

Analyzing Life Insurance

My collection of data told me that my client had more insurance coverage on his wife and dependent children than on him. In addition he had been sold certain unit linked plans by his investment consultant. These ULIP’s were disguised like profitable part of his overall portfolio.

So the first thing that I emphasized to him was to increase the term insurance coverage on him, so that his family was secure in his absence caused by sudden death. This was essential considering that he was the sole earning member of his family and still had various financial commitments before his children settled down.

Online term policies with nominal premium rates would be best for the purpose. I then told him that buying ULIPs are not good investments because of its heavy front loaded charges and under performance. As a part of portfolio revamp, i suggested to the client that he surrender certain policies and take up more of online term coverage on him.

Evaluating Health Insurance Requirements

Client already had a general health insurance policy for him and his family. I also suggested that he should take additional health insurance coverage in the form of critical insurance. An additional critical insurance coverage would provide for income in case of critical illness eventualities.

Examining Other Investments

Stocks and MFs

A closer review of his investments in stocks, mutual funds and other portfolios convinced me that my client had gone wrong in many of his investments. I was surprised to find that he had been misguided to invest in penny stock and closed ended NFOs of mutual funds. These stocks and mutual funds were not just risky but also lacked adequate liquidity and profitability to cater to long term inflation.

PMS

His portfolio management that was done by 2 portfolio managers lacked consistency that was vital for growth. They had repeatedly bought and sold stocks of big stocks like Larsen & Toubro, Tech Mahindra and Siemens just to book minimal profit and paid high costs on entry, taxes, brokerage and exit.

It was also seen that my client had an unwieldy portfolio that consisted of certain stocks that were bought on momentary emotions. In addition both his portfolio managers were buying similar stocks and mutual funds that made for laying all eggs in a basket. In addition to lack of diversity in stocks, they had sold off more profitable funds to invest in least known. I suggested that he invest more in diversified large cap and mid cap funds.

Fixed Income Investments

We suggested moving of fixed deposits that earned just 6.5% post tax to fixed maturity plans that yielded 8.75% post tax. We also suggested that he increase his contribution to Public Provident Fund and in the senior citizen account of his parents.

Client Reaction

My client understood very well that his broker had not suggested investments taking into consideration his financial goals, risk tolerance and return expectations. We also rendered the service was to help our client create a cash flow management strategy. This would help him ensure surplus funds were appropriately invested in a diversified way.

To conclude once the first step was taken to embark on his new journey to a strong financial backing, we advised him to keep himself well informed about financial planning with knowledge from various sources. Finally he understood that it was worth taking help in financial spring cleaning due to the rich long term gains that would accrue to him.

Have You Done Your Financial Spring Cleaning? is a post from riyaz.net.



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Potential Problems Related to Your Spending Habits

You are finding it difficult to repay your debts

Potential Problem: You decided to splurge in on your salary and went ahead purchasing everything you ever wanted on monthly installments and did rest of the shopping on your credit card. A few months later, you come to terms with reality not being able to service all your debts.

Possible Solution: You must take into consideration the fact that all your loans combined should not go beyond 30-40% of your salary. It is imperative that you bore this fact in your mind before taking any new debt.

You find yourself in a tight financial corner every next month

Potential Problem: You spent a little too much on your vacation and are now feeling the pinch for not being able to pay up for the insurance premiums that you are required to pay the next month.

Possible Solution: In order to deal with such a situation, you need to monitor your accounting constantly on a monthly as well as annual basis to see how the cash flow is. This will help you to manage your cash flow in an effective manner.

You are unable to determine what you really need and whether you can afford it

Potential Problem: You probably got a little too excited when received your bonus amount and made up your mind to purchase a big and brand new refrigerator or an advanced split air-conditioner to tackle the summer heat or a car to swing along the countryside. But, what you failed to assess initially was whether you would be able to meet up with the increased electricity or petrol bills generated in your monthly budget.

Possible Solution: You can deal with such problems by planning well-ahead and deciding firmly on entities you regard as relevant to your needs. You need to assess before you buy whether the recurring expenses of the equipment you’re going to buy in fits into your monthly budget.

Potential Problems Related to Your Investment Habits

You are unable to contemplate or relate to the product you’re in possession with

Potential Problem: You have decided to invest in the real estate sector after seeing your peers make good returns, especially when the prices were rising. However, nobody explained to you the fact that your money could get bottled-up in there in the absence of a good deal. In the same way, you may have five insurance policies but not enough life insurance coverage.

Possible Solution: It is important that you know the purpose of buying a financial product is it will help you solve your financial problem. Not all products in the market will solve your required needs. By setting yourself goals, you will be able to zero in on the perfect asset choice.

When you need money, your portfolio is in negative

Potential Problem: You worked hard and even managed to save up regularly cutting away all your unwarranted costs. Yet, when you come close to meet your goal (say buying a property), you realize that your portfolio doesn’t support your need.

Possible Solution: Before deciding to go in for the kill, you need to choose your assets wisely keeping your goals in mind. For example, it is quite risky to keep all you money in equity in case you are aiming for a short-term goal. As a result, your capital may get exposed in the event of the market falling.

You focus your investments in only one asset category

Potential Problem: You made huge returns from the stock market last year. So you decide to concentrate your investments only in stock market. You have suffered in the 2008 crisis or 2000 technology bubble burst and incurred major losses and are quite suspicious if things would work out; and decide to stick just to debt investments. It must be noted that neither of the strategies will pay off.

Possible Solution: You may decide to go by your insticnt, but it is not always advisable to blindly invest everything you’ve got in a single asset class. In order to reduce the risk factor and still be on the charts, you are required to broaden your time horizon of investment. Also you need to diversify across various asset classes to reduce risk.

You have understood how to be proactive on your financial problems. Unimplemented knowledge is a burden. Our problem is not ignorance but inaction. You can be different from others by being alert to your financial problems well in advance.

How to Be Proactive on Your Potential Financial Problems? is a post from riyaz.net.



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Misselling

These kinds of investment decision making will make you fall prey for misselling. As you are not interested in doing the homework and if someone comes with a long chart and calculations for 20 years, then you may find it interesting and end up buying products like ULIPs. When you realize that you have invested in a mediocre product, you will blame the agent or broker and not yourself and your wrong decision making approach.

Market Moods

When you just want to act, your investment decisions will swing based on the market moods. If the stock markets are highly volatile and it is comes down day by day then you may think that instead of investing in stock market investing in debt funds are fixed deposits are safe and wise. If the stock market goes up and everyone is investing in the market including your driver, then you may think it is opt to invest in shares or equity funds. So in this case you will never buy low and sell high. In fact you end up buying at peak and avoiding the market when the share prices are low.

Aggressive Trading

Blindly, some investors believe that by doing aggressive trades in shares and derivatives are the quick way to make money in the stock market. They enjoy their higher degree of involvement with the stock market. They feel very happy about the few successes in the stock market which give them comfort in accepting many losses. They don’t go back and calculate how much they have made or lost in a trade; what is the total profit or loss they have made in a particular year. These investors will learn very old lessons of investment after losing a huge amount of their hard earned money.

Wealth Creation Secret

The mistake investors do is they don’t understand the basic investment principles. They simply try to make some investment decisions. How can these investment decisions be right? Very difficult. As an investor, you need to understand the investment principles. Then based on the investment principles, you need to take the investment decisions. These investment decisions will be right for sure. Without right investment principles, right investment decisions become impossible. Without right investment decisions, long term wealth creation is just a day dream.

Sound Investment Principles

Asset Allocation

Depending upon your financial goals, you need to arrive at the required rate of return from your investments. You need to decide what kind of allocation needs to be given to different kind of investment avenues (like Fd, Debt funds, Equity Funds, Gold ETF..) in order to achieve the required rate of return. Once decided, don’t change this asset allocation ratio depending upon the market movement.

Risk Vs Safety

Whatever the long term savings you have got you can invest in risky assets like equity funds. You will be adequately rewarded for taking risk in the long run. Whatever the short term savings you have got you can park it in FDs or debt funds.

Investing your long term money in safe avenues will be a destruction to create long term wealth. You will not be able to beat inflation. Similarly investing your short term money in risky investments is also dangerous.

Fundamental Factors

The returns an investment generates will be based on its fundamental factors. Analysing fundamental factors only will lead to a long term success. There is a lot of difference between taking one right investment decision by fluke and taking right investment decisions regularly by analyzing the fundamental factors.

These investment principles are very simple and straight forward. At the same time these principles are very authentic and profound. The magic formula for creating long term wealth is “Sound Investment Principles + Right Investment Decisions = Long Term Wealth”.

Principles of Wealth Creation is a post from riyaz.net.



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Mahesh believed that Lekha was no good at finances and was just home bound. He also believed that he had to support her, but had no moral obligation to reveal anything else to her. Lekha was shocked to know that Mahesh was deep in debt. She was sensible and thrifty and thought they would soon lead a comfortable life, but her dreams were shattered and she was forced to sell all the jewelry and some of the household things that her parents had given her in marriage. They found that affording the rent of their flat was also too much, so they had to move to a smaller flat.

Lekha was happy for she knew at least now and could keep a track of Mahesh’s finances, but she lost faith in Mahesh as he hid vital financial information from her and decided that she had to start earning also to feel financially secure in their relationship. Mahesh’s financial infidelity has broken the very foundation of their marital life that is based in trust, confidence and open discussion of all vital issues.

Financial infidelity could go further in various other respects like the case of Ankit that hid vital information about the salary he earned and the increments he got, the loans he took, and the number of credit cards he used. He died of a severe cardiac arrest at the tender age of 32, and this was a shock not only to his wife and children, but also to his parents and in-laws.

Ankit’s wife Anila believed that he had taken sufficient insurance to protect the family in case of his death. She also believed that he had enough savings. But Ankit a poor money manger had huge credit card dues, as he had borrowed for family expenses. Also he had a sizable amount of car loan and home loan. He had the habit of paying only the minimum due on credit cards. Besides he had defaulted payment of premium on some policies.

Anila was shocked and disposed off their flat and car to close the loans. She was left with very little from the insurance Ankit had. She only wished that Ankit had told her everything so that she could have set aside enough for the family and not had to send their son Amit to a government school and have no finances for his future education.

Recognize When There is Financial Infidelity

Mutual Trust

As the couple ties the knot and takes the marriage oath, it seems so pleasant, but I would say trust and respect for each other need to be for life. The break of trust and respect in major financial matters amounts to financial infidelity. I would say that transparency in marital relationships is very important and could help save situations that are irrevocable.

Financial Openness

This applies to revealing the number of bank accounts a partner has and the nature of transactions made. You need to have an open discussion with your spouse on the financial matter like the number of credit cards you have, loans you borrow, investments you make, tax you pay…

Family Support

You need to inform all your family members and dependents about your financial and debt status. Then you will be able to take decisions with much more clarity. Moreover, if your family members know about your debt, they will also change their spending habits and support you in getting out of debt faster

Equal Weight

You could definitely be not guilty of financial infidelity if both your partner and you consider that equal weight should be given to both views in financial affairs. This is also necessary for the strong foundation of your relationship and family.

Spirit of Compromise

It is true that mutual trust and respect coupled with compromise can do a lot to remove financial infidelity and save the extreme situation that we have seen in the case of Mahesh’s and Ankit’s family. A spirit of compromise could definitely save financial infidelities that have their roots in selfishness on the part of one of the partners. This also apples to relationships that is emotionally vulnerable with one partner feeling inferior or being terrorized emotionally.

Lastly I am sure you would all refrain from the guilt of financial infidelity that could not just ruin the financial position of families and their overall peace, but could also cause certain devastating relationship issues that could not heal even in a lifetime.

Are You Guilty Of Financial Infidelity With Your Partner? is a post from riyaz.net.



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Increased life expectancy has lead to the increase in the costs of living and medical expenses. This makes it difficult for many senior citizens that lack a regular income to live a life of dignity. Reverse mortgage is the solution introduced by the Union Government of India in 2007 helps senior citizens.

Understanding the Concept of Reverse Mortgage Better

Reverse mortgage is the opposite of a conventional housing loan that needs to be paid back with interest over a period of time. Reverse mortgage helps senior citizens having a residential property to receive a regular income against its mortgage. The borrower and his/her spouse are allowed to stay in the place of residence until both die, aiding the living of a dignified life by senior citizens.

Workings of Reverse Mortgage

A senior citizen couple should necessarily own a flat or house. Then they can pledge the property for a monetary value agreed upon by the bank. The value is generally fixed considering the present property values, demand and also the condition of the property. The bank starts periodic payment as a loan that is decided after consideration of margin of interest costs and price fluctuations in the property. It is an ideal solution for senior citizens that have residential property, but no finances for regular day to day expenses and medical aid. The borrower’s interest in the property decreases once the reverse mortgage EMI begin.

Guidelines for Reverse Mortgage

The guidelines set by the Reserve Bank of India state:

• The maximum amount of the loan given generally as EMIs cannot exceed 60% of the property value. In addition the minimum period of the mortgage is 10 years, and maximum 15 years. However some banks have been recently offering tenure of about 20 years.
• The borrower can avail of the loan in parts every month, every quarter, every year or in a lump sum.
• The lender/bank would revaluate the property once in 5 years. If the value of the property has increased, the borrower has the option to ask for an increase in the amount of loan. He can also ask for the additional amount to be given in a lump sum.
• The installments or lump sum received in a reverse mortgage is a loan and not an income. Hence no tax is payable on it. However he has to pay capital gains tax when the property is taken for the borrower for the repayment of the loan on the mortgage.
• The interest paid on the reverse mortgage could be floating (fluctuating) or fixed, with this rate depending largely on the interest rates prevailing in the market.

Eligibility for Reverse Mortgage

A senior citizen can avail of reverse mortgage on his/her house or property when:

• He/she is above the age of 60 and his spouse that is a co-applicant is above 58 years of age.
• The property is the permanent residence of the individuals and is self-occupied. The property should be self-acquired and located in India. The title should be clear of the borrower’s ownership.
• It is mandatory for the property to be free of encumbrances and it should have a minimum life of about 20 years.

Settlement of Reverse Mortgage

• The reverse mortgage loan is payable on the death of the last surviving life partner. It could also become payable when the borrower sells off his/her property. In such cases the bank gives the choice to the heirs to settle the loan with accumulated interest. Otherwise the bank arranges to recover the same with the sale of the residential property.
• Any extra amount that remains after the loan with interest and expenses has been settled is passed on to the legal heirs. If the sales proceeds are much less than the loan, the bank. In case of losses that could occur due to wrong estimation by the bank is borne by them.
• The loan could be foreclosed when the borrower has not continuously stayed in the house for a year or has failed to pay property taxes or insure the house. The loan is also foreclosed when the borrower turning bankrupt, donates or abandons his property. In addition renting a part of the house, adding an extra name to the ownership could all affect the lender’s interests and lead to foreclosure of the mortgage. Government statutory provisions could also require it.

Some other highlights of reverse mortgage include the borrower’s option to prepay the loan with interest. Also one or both spouses could outlive the period of the tenure. Then the bank will stop payment of monthly installment. They will however wait for the both the borrowers to die before settlement. Reverse mortgage involve long, tedious, difficult and complicated procedures. In addition they have no provisions for increase in monthly payouts.

Lastly reverse mortgage has failed to gain much popularity in India, with marketing strategies being inadequate. The reason is also that many banks are fixing the maximum limit of loan. The resentment among the heirs and family sentiments are also some of the other reasons. It is true however that reverse mortgage is the solution for financial sufficiency in lives of most senior citizens.

A Layman’s Guide to Reverse Mortgage is a post from riyaz.net.



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Myths About Insurance

MYTH 1: LIFE INSURANCE IS A WASTE OF MONEY

Life insurance is bought to protect ourselves from the contingency of untimely death. It would take care of the living expenses of your family if you die young. Life insurance is an investment that is more of a safety mechanism; it is to provide financial security to the dependents. Term policies that cover the risk of untimely death are cheap and most ideal for providing life coverage.

MYTH 2: LIFE INSURANCE IS FOR SAVING TAXES

This could probably be a selling point for agents. But tax-saving is one of the many benefits life insurance offers. The main benefit is the provision of finances in case of the death of the policy holder. Taxes can be saved with other tax-saving instruments like mutual funds, tax-saving bonds and government bonds, post-office savings schemes and Public Provident Fund ( PPF). Paying a premium to cover the full financial needs of the family in case of the death of the breadearner is very important. The cover should be for about 7 to 10 times the annual income of the bread-earner.

MYTH 3: THE VERY YOUNG DON’T NEED LIFE INSURANCE

This is a wrong notion. The common notion that people die when they are old may be true to a large extent. But having the risk of death covered is definitely better than leaving dependants financially bereft in case of an untimely death. Besides, it is smart to take benefit of the lower premium rates offered to the young. Also, you may find it difficult to take life insurance when you are old due to higher premium rates or being refused because of ill-health.

MYTH 4: LIFE, MEDICAL COVERS ARE PROVIDED BY EMPLOYERS

These covers are available only until you are in a particular company or till retirement. Also, life insurance provided by employers may not adequately cover the living expenses of your family in case of your untimely death. It is advisable to buy medical insurance when you are young, as fresh medical insurance taken just prior to retirement could be refused on medical grounds. Critical illness policies help meet additional living expenses of the family in case of a critical illness.

MYTH 5: ULIPS FOR A LIMITED PERIOD SEEM ATTRACTIVE

In most cases, this is more of a sales gimmick. Most insurance products are so designed that the major costs are incurred in the first few years and deducted from the premium. There are charges that the company wishes to recover over the entire tenure of the policy. So very less is actually invested in units. It is, therefore, best to look at unit-linked insurance plans with an open mind and consider a commitment of periodic investment for the whole tenure of the insurance policy. Paying for a longer tenure could result in a more profitable proposition.

MYTH 6: IT’S BEST TO BUY A POLICY IN THE NAME OF A MINOR

This emotional sentiment selling point has helped many to sell insurance. Also, the premium paid on child policies may be much less than on a policy for an adult wanting the same coverage. A life insurance policy is taken to make good the loss of income to the family, so taking a policy with the child as a beneficiary or nominee may be a smarter thing to do.

MYTH 7: PLEASING RELATIVES/ASSOCIATES IS IMPORTANT

Avoid taking policies just for the sake of satisfying your friends and relatives who are insurance agents. Also, you need to avoid taking policies just to maintain relationship with business associates like bankers. Insurance policies need to be taken based on your need. These days, online term insurance plans are 50% cheaper when compared with term policies taken through agents or brokers.

Having understood these myths I am sure dear friends you would make insurance a very valuable and useful proposition for you.

7 Insurance Myths Debunked is a post from riyaz.net.



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The need for no financial planning is complemented with the myth especially among the young that their retirement is far away and they could easily plan for it just a few years in advance. To further complement this myth that our ancestors would leave behind estate and property for us to enjoy with a will.

Well dear friends financial planning can never be overlooked as finances invested well today could provide for good financial resources in future. It is true that a person who helps himself succeeds best in having financial stability in life. Have a look at the myths of financial planning:

Financial Planning Myths

1. “I have life insurance to protect them in case of my death.”

My heartiest congratulations for taking up insurance policies to protect your family needs in case of your death. But the question is do you have adequate insurance to look after your family needs for a lifetime. In addition it is worth considering if you have enough to look after your children’s education and marriage needs considering the rate of inflation. Also it is worth considering if your family would be financially secure if they have to repay loans taken by you after your death.

2. “I just make both ends meet, where is the need to go in for financial planning?”

You may be right, but if I were to tell you that we all need to provide for financial contingencies would you say financial planning is unnecessary? So all of us have to plan to make the hard-earned money to work for us, and this applies more so single income families. Financial planning makes sense not only to repay loans taken but also to get continuous supply of money for our needs. So we need to have a strict look at our expenses and find ways to minimize them. A small example could be to forego a pack of cigarette a day to save and invest in viable investment scheme.

3. “My financial planning is done as I have invested in different schemes.”

I appreciate you for taking the first step towards financial sufficiency, however believe me this is just the first step to the 1000 miles towards lifelong financial stability.

Are all your investments really supporting your financial goals or not? Is the schemes in which you have invested is really performing or not? Is the maturity value from the schemes is sufficient to meet the goals or not?

A financial need analysis to cover various short term and long term needs could be best accomplished with a financial expert’s advice on financial planning.

4. “Youth is to enjoy, retirement is far away. It will look after itself.”

Let us face this myth headlong with analyzing that retirement is not a contingency, but a necessity that is to be provided for right from the time one starts earning. It is advisable and much easier to start saving when young, as savings become difficult with additional expenses.
Saving for retirement starting from youth through retirement plans seems much easier when the amount to be put aside for the corpus is much less every year and it is also possible to save through various investment avenues. Starting to invest for retirement when young gives one the advantages of compounding of savings. This would also help take care of inflationary tendencies.

5. “I have enough health insurance, and my company gives me coverage too.”

Being covered with health insurance and medical expenses at work is great, but this would not cover all your health expenses. It is always good to take additional coverage and provide for unforeseen contingencies like critical illness that would not only involve expenses on treatment, but also on maintaining the lifestyle of the family till one is ready to go to work.

Being young does not prevent you or any of your family members from getting a critical illness with the present lifestyle. With fresh insurance coverage over the age of 45 being tough it is best to save for this period.

6. “I do not have to worry as I will inherit from my parents as my children will inherit from me.”

Inheritance has neither been a cake-walk, and a will is very important for inheritance. Financial planning involves the making of a will to avoid disputes between the heirs. Making a will is not about how big your property or estate is, it is more about necessarily making a will about the inheritance.

Financial planning is not just the forte of finance professionals alone, but is judicious and smart planning of finances for a lifetime. Lastly financial planning is not an end but a means to an end of financial stability and security.

6 Financial Planning Myths Demystified is a post from riyaz.net.



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“Models work when they are appropriate for the particular circumstance, but some of the best investment judgments over time have come when people recognized that models derived in other periods were broken or not directly relevant.” – Abby Joseph Cohen

Investing in mutual funds seems interesting, with number of websites, TV and other finance and wealth magazines publishing various information. However it is a challenging task and involves knowledge regarding the shares and securities market and various laws that govern mutual funds is necessary before investing in them. Understanding the principle of mutual funds; the investment of the money of a large number of investors in stocks, bonds and money market instruments that are managed by managers makes one feel relieved. However it is best for you as an investor to make a right choice of the mutual fund that suits your need.

Choosing the Right Mutual Fund

Investment Objective & Time Horizon

The objective of the fund or the use to which the funds would be put to would be a vital deciding factor. Mutual funds investing in stocks would suit those that are ready to take more risks; stocks means more exposure to the volatile market though higher returns. The length of time that one has to wait to get reasonable returns also plays a vital role. So it is best to read the offer document or fund brochure carefully before making the decision.

Liquidity

In addition whether a fund is an open-ended or close ended one points out to how liquid your investment is. Open-ended funds are preferable to close ended ones as they can be converted to cash more easily than close ended ones that involve waiting for a period of time. Historically open ended funds have performed better than closed ended funds.

Diversification

It pays to check for diversification in mutual funds, for an optimum diversification makes for a good choice. Opting for a diversification over 8 to 10 securities would be more risky than going in for diversification of 20 to 30 stocks. The diversification of stocks over 80 to 100 securities may mean difficulty of management to the fund manager. In addition making sure to ensure that there is a balanced diversification helps.

Fund Performance

After getting comfortable with the fund’s objective, it becomes equally important to know and analyze the fund’s performance. This involves looking at the fund’s short term and long term performance and comparing it with larger market indices or benchmarks like BSE Sensex and NSE Nifty. A higher market index over a longer period indicates better funds, however past performances in case of mutual funds can never be a guarantee of future returns and can serve only as an indicator.

Level of Risk

The level of risk involved would be another important indicator, with higher returns available only at higher risk levels. Would you like to go for a low risk debt fund or to go for a moderate risk balanced fund or a high risk equity fund? Look before you leap.

Volatility & Consistency

Next it is to be understood that any two funds giving the same return are not necessarily the same, as one fund could be more subject to market ups and downs than the other. Volatile nature of funds is more a standard deviation meaning more risk involved. In the same category of funds, an investor needs to choose funds performing consistently.

Fund management

The management of the fund plays an important role in deciding the best mutual fund for you, with professionalism being very important. The experience of the fund manager and the number of years he/she has been associated with the fund matters. With a new manager and frequent turnover are not good for investors.

Charges

Things seem pleasant in mutual funds; however the charges like entry load, exit load, administrative charges and fund management charges on an annual basis are to be carefully looked into. It is significant to note that these charges cannot exceed 2.5% of the fund’s assets. Most funds have uniform charges, however hidden charges need to be looked into and carefully analyzed

To conclude mutual funds may be the best investments as they can be done in small amounts as compared to other types of investment and carry a comparatively lower risk. But your ultimate success in the form of good returns can only be assured with following these steps of smart mutual investment planning.

How to Choose the Right Mutual Fund is a post from riyaz.net.



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Fireworks and Diwali

I have always enjoyed fireworks, both as a child as well as a parent and found that mine as well as my children’s safety and comfort lay in obeyed certain rules while handling fireworks. This included avoiding loose and flowing clothes and wearing appropriate footwear, goggles and protection for the ears. Next noisy crackers caused hearing, ENT and nervous problems, with smoke causing ENT and allergic problems. This made me come to the conclusion that we need to enjoy crackers and fireworks, but were excesses were to be avoided.

Safety applies to all Diwali, as it does to other aspects of life with our requiring reading and following instructions on the boxes. Next keeping of a bucket of water handy to put off fires and keeping numbers of fire stations proves handy. In addition vigilance and safety of children while using fireworks is to be adhered to, with keeping fireworks out of reach from children when not in use. My dear friends now is the right time to view the great co-relation between crackers/fireworks and financial planning.

Grasp the Financial Planning Lessons Diwali Teaches Us

Modern science with its developments have been able to render us some very useful lessons like noise pollution that could affect not only infants, the old, and those with nervous, heart and psychiatric problems, but also cause slow declining abilities in many others.

This applies to noisy stocks also; this noise pollution in the form of everyone talking about hot stocks and best next issue. This information could also affect us with its full impact. This insider information may at times prove very dangerous if acted upon. We have observed many investors not only being be charged with fines and/jail, but it has been harmful to financial professionals as well. Next if they are rumors the financial harm could be too large to recoup and rejuvenate easily and quickly. It is worth understanding also that some information could be stale and if acted upon cause indigestions of the worst order.

The next most close and interesting co-relation of fireworks and the colorful nature of the festival Diwali are being prepared for emergencies, with this meaning keeping water and the numbers of the nearby fire stations handy. This applies to also using long sparklers and incense sticks, avoiding the use of metal and glass containers and using fireworks in open grounds.

It is true that emergencies and contingencies are a part of everyone’s life and being a wise and smart financial planner requires not only planning for emergencies, but also for contingencies in the form of death. Finances in the form of term insurance could provide for the stable lifestyle of your loving family on death. Health insurance and critical health insurance plans would provide for health and critical illness coverage and stable lifestyle in such contingencies. The youth could benefit also with investing surplus funds on land in remote places and allow it to appreciate. Creating contingency funds could act as emergency fire extinguishers.

I appreciate those who have listened to the experienced regarding wearing appropriate clothing, footwear and other safety accessories while enjoying fireworks. Financial planning for a lifetime also requires certain measures.

Understand that investing is different from financial planning for a lifetime. Financial planning requires clear understanding of the risks and returns available on the different investments like shares, mutual funds and fixed deposits in companies and banks So you need to draft a clear risk management strategies in while constructing your portfolio.

Storing of fireworks out of reach of children properly requires as much innovation as children are very smart to fool parents now-a-days and get into accidents and dangers. Parents need to be smart and creative to find out what works and what doesn’t. The same thing dear chums apply to safety and security of our investments.

Safety and appropriate storage of our precious investments in the form of shares, mutual funds, land and flat documents, gold and gold ETF, insurance and other investments lies in storing them in separate places in lockers at home/banks and other places. In addition to storage, the information regarding where we have stored these documents should be a family information and secret for safety.

Finally, we were taught by wise parents to not make our own fireworks, as it is not our expertise. Similarly a financial expert is the best person to advice us on financial planning for a lifetime. Finding and engaging a financial planner would be best to create and make changes in your financial planning according to your life’s changing circumstances.

Powerful Financial Lessons from Diwali – The Festival of Lights is a post from riyaz.net.



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Constitution of India

Though we are independent, we were not having our own constitution. Without constitution it is difficult to take the right decisions for growth.  So we needed our own constitution which will be the principles and guidelines, based on which we will be able to take the right decisions at the right time. Constitution also deals with the procedures and methodology of taking decisions.

Republic Day

The Constitution of India came into effect on 26^th Jan 1950 which we call it as Republic Day. Since 1950 we were able to continuously grow with the guidance from our Constitution. Without an effective constitution, this exponential growth could have become impossible.

Amendments

So far we have made 96 amendments in our constitution in the last 62 years. Amendments make the constitution more dynamic and implementable in the changing times.

Becoming Financially Independent

You will be financially dependent on your parents till you complete education. Once you get a job you will become financially independent. You can take your own financial and investment decisions. You may want to financially grow and achieve financial goals like buying a car, buying a property, children education and marriage, and having a comfortable retirement.

Financial Constitution

Do you have your own financial constitution? That is you need to have a set of financial principles guiding you to take the right financial and investment decisions.  Without these guiding principles it is difficult for one to financially grow and achieve financial goals.  This financial constitution or financial plan details the step by step procedures and methodologies of taking sound financial and investment decisions.

A Case Study

Rahul would like to retire in 25 years. He would like to have (when retiring) investments which can generate lifelong, the equivalent of Rs. 50, 000 per month and additional Rs. 2 lacs per annum at today’s costs.

A Mediocre Approach

Rahul may choose invest now and then. He may contribute Rs.3000 in one month, Rs. 15,000 in another month. He may skip investments at times. So his financial picture will not be very clear. He will not know how much he will be accumulating when retiring. He will have insecurity throughout.

Financial Planning Approach

Financial planning approach has got some principles and guidelines. These principles and guidelines are like a light house for a ship. They give you the right direction at any point in time.

Investment Principles and Guidelines in Financial Planning Approach

1. A good investment need to generate a decent inflation adjusted return.
2. Not investing in risky avenues like stock market is also riskier.
3. When doing trading, you are not investing.
4. Asset allocation is a proven strategy to reduce the overall risk of the portfolio. Periodically rebalancing the assets will enhance the potential of wealth creation.

In the financial planning approach, the situation will be detailed with more facts. As you have well established procedures and methodologies in financial planning, you will be able to do a sound plan and course of action to be taken to achieve the financial goals.

If Rahul is able to invest Rs. 49, 738 per month, he will be able to accumulate the retirement corpus easily.

Alternatively Rahul can start with Rs. 22,000 per month, and increase the contribution every year by 10%. Even in this method he will be able to accumulate enough towards his retirement.

Amendments Vs Review

Financial planning reviews are what amendments to a constitution. When there is a change or deviation from our original plan, we need to do a review to control the change. The reviews of financial plan accommodate the changes and deviations and make the whole plan achievable.

As we celebrate the Republic Day of our country, its a good idea create your own financial constitution or a financial plan for a better prosperity. Long live Republic!

Financial Planning Lessons from the Republic Day is a post from riyaz.net.



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Term insurance policies that resemble motor/house insurance are not subject to the law of indemnity as damage due to human life cannot be measured. Taken for a specified period when financial obligations have to be met, no money is generally paid back if death does not occur in the period.

A Bird’s Eye View of Term Insurance Policies

• Term policies are cheaper as they cover only the risk of death happening within a specified period. In addition the premium charged depending on the age of the person insured and time of coverage required with medical examination being compulsory in most of the cases.
• With very competitive premium rates being the present scenario of the insurance sector, it is found that most companies encourage insurers to take a much higher coverage for extended period of time even up to 35 years or 65 years of age. This accounts for popularity of these policies for people with long term financial commitments.
• Term life policies can be bought very easily either online or through life advisors that market and service these policies. You would benefit buying term insurance policies online as this does away with the expenses of agents/life advisors commission. This accounts for discount in premium.
• In addition a check of the insurer’s ‘claim settlement’ ratio or the percentage of claims settled by the insurer of the total received would help, with this available on the IRDA website.
• Once death occurs and claim is to be settled this is done in a lump-sum to the nominees or beneficiaries. This depends on the terms of the policy that the insured has taken, with the settlement free of tax payments.
• Term plans suit young earning members with dependents, with the low premium allowing them with additional funds to invest in lucrative    equity-linked savings schemes that provide tax breaks

Different Deciding Factors about Term Life Insurance

• Term insurance serves as the best life cover for large amounts and extended terms to meet your family’s financial commitments if you are not there. Insurance experts suggest about 12 times your annual income added to your total liability less investment in various assets.
• It is important to note that liabilities include loans taken for house/ personal/ vehicles/and other obligations.
• You should also consider amounts required for the education and marriage of your children, healthcare needs for your spouse and dependents and other amounts that would be required to maintain a reasonable lifestyle.
• Term life insurance policies are mainly meant for earning members of the family, whose financial commitments have to be meant on his/her death. It is however not meant for the young, unmarried working people that have no dependents or financial commitments.
• Term plans are best taken for amounts that consider not only the present financial needs, but also inflation, increase in salaries and lifestyle needs. The premium could rise with age and with increase in the amount of insurance taken and with riders/ additional benefits like personal accident insurance and critical illness coverage.
• Insurance contracts being contracts of utmost good faith require revealing of material facts that would influence its acceptance. This could include your existing health conditions, family history and details of other insurance contracts that have been rejected in past.  Undergoing a medical examination if necessary may help reduce chances of claims being rejected in future.
• Term policies are best taken in blocks and increased or decreased according to need. Reviewing insurance needs every 3 to 5 years is ideal to adjust insurance needs.  Taking insurance in blocks provides for flexibility to discontinue some in case of decreased financial obligations with time.

Finally take care to ensure that you have read and understood all the information to the best of your knowledge and disclosed the correct material facts like age, income and present health status. In addition carefully go through the signed proposal form and policy document and inform the insurance company in case of discrepancies within 15 days of issue of policy.

A Complete and Comprehensive Checklist for Buying Term Life Insurance is a post from riyaz.net.



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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

This quotation made me think that this is what children that were taught to be financially smart turned out as adults. This next made me feel that it was just not important to send children to school to learn how to count and write, but as parents to teach them about the value of certain aspects in life. With consumerism overtaking the economy even in developing countries of the world like India, many youngsters are having easy accessibility to credit cards and EMI’s, making our children realize the difference between a real want and need would make them financially smart for a lifetime.

Hence smart parents should assume a vital role to render useful lessons of financial management to their children. Smart parents would not only render useful finance lessons, but would also be a prominent example and take effective feedback by making their children a partner in their financial decisions.

Let’s look at how we can make parenting to raise children, who are financially smart, an interesting and enjoyable experience.

Have a look at these aspects in inculcating learning about personal finance:

Simple Living

My grandfather has always been a part of my learning principles of smart financial management and I respect him for what he always told us as children, “Simple living and high thinking are the essence of life. We should be able to live with minimum wants if we wish to have an umbrella over us for a lifetime.” He was a standing example or what he preached, making me feel we could make our children lead better lives if we rendered these lessons to our children and practiced it ourselves to set an example.

Setting Financial Priorities

Setting priorities in our children such as ‘having basic necessities of life like food, clothing, and shelter were more essential than fancy and fashionable articles’ would surely help. The habits built at the cradle carry on to the death bed. This applies in educating our children about the clear demarcation between wants versus needs.

Setting up financial priorities in children could start off with teaching them budgeting that is appropriate to their age. Inculcating the habit of budgeting in our children would start off with working together with them and making a child friendly budget. Young children are very happy to have budgets prepared with bright colors, graphs and other visuals. A joint effort would make them feel a part of it and be ready to cooperate and learn.

Goal Oriented

My observation of financially smart adults made me understand that they believed in saving for a goal. So we need to involve our older children by involving them in budgeting for costlier possessions like car, a house, new furniture or probably saving for a sound education or marriage. It is true that even younger children need to be encouraged to save for small fancy needs like probably going for a movie, an evening having pizza or that remote control toy or Barbie doll. Their achievement would give them a sense of fulfillment that could make them feel motivated and focused to save for bigger goals.

Rewards

Motivation has always been the keyword to progress, so praise and rewards could also make a great impact on children learning and implementing financially smart objectives. In addition teaching our children of how to survive and earn would help. So suggesting alternative ways to earn, like helping in the cleaning of the car, helping younger siblings with homework, running errands like shopping for essential or helping in small household chores in an age appropriate manner would surely help.

Banking

“Putting your savings in the bank would help you earn more money to meet your financial goals,”

is what most financially smart parents would have instilled in their children right from childhood. A savings bank account started with parents being a guardian would help overlook their children’s spending habits and guide them.

Financial Learning

In addition instilling a habit of reading articles and reviews on finance have helped many financially smart children to save for their future once they started earning.

Stocks, shares and other financially appreciating instruments are best taught to older children, with involving them in real life examples of your investments helping a lot. Next is to introduce them to credit cards and loans. When they should be taken and when they should be avoided need to be taught well in advance.

Experience makes principles of smart financial planning more deep. So allowing our children to borrow money from us and repay it back with/without interest makes them realize the impact of loans.

Lastly do realize that each child is made in a different way with different spending and savings traits. Identifying each child’s financial habits early in life would help us to guide them tactfully without being imposing on them. I have known of children who have learnt better by their falls in financial decisions, so just rest assured that experience sometimes renders the best lessons for a healthy financial life.

Parenting To Raise Financially Smart Children is a post from riyaz.net.



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But how many investors have REALLY got these kinds of returns?

In this context knowing about the study conducted by Dalbar to determine how the investment behavior and decisions impacted the overall investment performance would be advisable. Dalbar, Inc. is a US based leading financial services market research firm. They have done comparative study on the returns of S&P 500 Index and the returns of the investors for a 20 year period ending 31-12-2010.

The study revealed the following two important facts.

• The average return of the S&P 500 during this 20 year period is 9.14%.
• The average return of the equity investor during the same period is only 3.27%

When the market is delivering so much, why is that the investor is making out less? What are all the factors contributing for this gap in the market returns and the investor returns?

Though the market is delivering returns, investors were not able to benefit. Why is it so? What went wrong?  It is because of the nature or character of the investor.

Agriculture is getting affected by nature, either because of excess rain or no rain.  But we found out a system to fight against this nature. We built dams. So whenever there is excess rain, dams retain water to save agriculture and whenever there is no rain, it releases water to help agriculture.

Similarly investors are supposed to find and build a dam against their nature and behaviour towards stock market investing in order to get better returns.

What are the natures or behaviors of an investor that blocks him from getting the market return?

Fear

When stocks suffer large losses for a sustained period, the overall market can become more fearful of sustaining further losses. At that point in time everyone will come with their own logic, reasoning, and statistical evidence on the chances of further losses. Fear stands for “False Evidence Appearing Real”.

Greed

Most of us have a desire to acquire as much wealth as possible in the shortest amount of time.  This get-rich-quick mentality makes it hard to maintain gains and keep to a strict investment plan over the long term.

An Investment Portfolio based on Ones Personality

Basing investment portfolios on one’s personal likes and dislikes are the first of the powerful influences. It is like investing in cars and fancy gadgets just because you love them. Investing on shares just because you think they are smart or flashy is ambiguous, for they could sink in the long run. It is better instead to invest in profitable ventures that pay in the long run. It is true; our investment fancies make us pay a heavy price.

Follow the flock policy

The follow the flock for fear of being the black sheep policy makes you as an investor to believe in following others in the share markets. The pitfalls of group behavior lead us to buying high and selling less.

It also leads to unbalanced investment emotions of black or white (wrong or right) with no shades of objectivity and rationality. Buying high and selling low has made many investors suffer heavy losses in the long run.

A Look at Positive Investment Behavior

It is good to be investment smart with humility and reasonable aspirations that makes achievement of financial goals a reality. I have never known of any high return investments that did not have high risks.

Patience over a lifetime and being able to assume stress helps in aiming for long term positive returns and contributes to assuming less financial stress after retirement.

Positive investment behavior requires balanced moods, one of neither elation nor panic. Neither selling in a panic due to share market positions or adverse world or country conditions is advisable, nor is a reaction of extreme financial prosperity, both can destroy a lifetime of healthy investment. A long-term investor needs to realize that neither despairing nor elation of situations in civilization proves worthy for long term financial portfolios.

Why Investors are Not Making Returns in the Stock Market? is a post from riyaz.net.



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IPO or Initial Public Offering

It is advisable to understand that investing in IPO could prove risky with unfavorable market situations and sentiments and when the fundamentals of the company and industry are weak. It is best to go by facts, avoid being influenced by rumors and have a closer look at the past performances also.

Understanding the Concept of Investing in IPO does Require a Clear Look into these Factors:

• It is not wise to believe rumors and success stories of IPO at face value, for investing in IPO is not easily learnt and there could be some misconceptions. So it is best to venture into IPO only after you have learnt the art of investing your hard earned money in them.
• It is wrong to be overwhelmed with hearing general statements that some IPO are attractively priced. You would be smarter comparing the price earnings ratio that helps get the relationship between the stock price and the company’s earnings and comparing it with those of competitive companies.
• Beware of being under the misconception that investing in IPO could give you great gains on listing. It has been noticed by both amateur as well as experienced investors that sometimes high losses are also made. It would be safer and secure not gambling in the shares of new issues.
• It is good to experiment with new products in the market. But I would say that it is not smart to have this attitude with shares and invest in IPO. Investing is about getting effective and safe returns on the hard earned money that you put into shares, so it would be smarter putting your money to work in index stocks that have been in the market for a long time and have survived the volatile economic market for long.
• Beware of being influenced by the favorable feeling and trend in the investment market to borrow money from financial institutions of brokerage companies for getting higher allotment of shares. It is sometimes very difficult to judge the trend of the market especially as an amateur and this could make you end up in huge losses coupled with the repayment of the loan with interest.
• Some assume that investing in IPO would surely bring about gains in the long run. However I would suggest that you would definitely be much better off investing in good listed shares that have a proven record, though they sell at a higher price. However you may invest with sufficient information of the IPO, but could not always be sure that the listing will not bring down the issue price.

So it is best to be prudent and informative before investing in IPO.

Factors that have a Bearing on Analyzing Investments in IPO:

• It is first important to know that companies are required to file their Draft Red Herring Prospectus (DRHP) with SEBI while floating an IPO. Analyzing this document would give you financial and other information about the company. The highest percentage of shares held by institutional investors, banks and financial institutions could be a positive indicator to invest in IPO.
• Draft Red Herring Prospectus (DRHP) would also provide other important information and indicators like the quality of management. The quality of management like their work experience, their past history or work experience, qualifications and projects handled would help in the decision to analyze IPO.
• Another factor having a bearing is strong promoter backing. Big companies like Tata and Birla bring about credibility and also add a premium to the price of IPO. The ownership by the government and public sector undertakings are also an indicator of high level of safety of returns.
• The other major, though not the only indicator though is grading, with a higher grading being good. However also could be false as seen with the IPO of Vasvani Industries that had a 2/5 grading. Similarly high graded companies like Galaxy Surfactants with a CRISIL rating of 4/5 withdrew its IPO. So it is best to understand that even some good companies withdraw their IPO due to poor public sentiments and difficulty experienced in raising funds in the market.
• The objective for raising funds would prove to be an important indicator to its profitability and time for return. Finding out this objective looking at various factors like the businesses past performance, future growth prospects, potential rate of return and profitability. In addition it is best to avoid investing in businesses that you cannot understand.
• Last, but most important a periodic review would help you understand how your investment in IPO are faring and help effect follow-up. However it is advisable to avoid taking hasty decisions to sell, as some IPO have underperformed initially but has given consistent returns in the long run. But prompt follow-up action would be required in case of IPO that lose very badly or are fundamentally wrongly invested.

To conclude investing in IPO is best kept to the minimum as they involve a high level of research and uncertainty. However if they are selectively chosen they would help avoid investments with bad performance.

Factors to Consider Before Investing In IPO is a post from riyaz.net.



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