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Motivate others for FP

Posted by VRIDHI on 24/01/2014

A Professional Financial Plan can Help You Change your Outlook towards Money!

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If you are a person who says “I Love Money” then contact us today!

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Stay Connected with VRIDHI

Posted by VRIDHI on 15/07/2013

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MFF – 140330 – 20:20 Hrs

Posted by VRIDHI on 30/03/2014

140330 – Firstly, we will be very clear to you. We are not politicians and hence the efforts will be to keep this article politics free. But since we are writing it in thick of the election season, politics may have a mention, but only where absolutely necessary. We may like it or not like it but we cannot run away from it , especially when our value of investments move with the developments taking there.

The financial year close is around the corner and the investors who were stuck in the large cap stocks have recovered a sizeable part of their paper losses. Those stuck in the midcap and the smallcap stocks have still a long way to go.

The market has consistently moved upwards, after the four state election results backed by a certain wave. Those denying it, chant it atleast 1000 times a day, but still there is no wave as such for them. #IndianStockMarkets expects a strong #BJP led #Opposition led #Modi led government taking over at the center which can bring the economy back on track by ending the policy paralysis seen in the last 3+ years. Hence 16/May/2014 may be a Make or Break day for the markets.

Whatever may be the reason for the upmove, we at VRIDHI since very long, much prior to the state elections have been saying that the #Sensex may hit the 22000-22500 levels (you can read the previous articles under the MarketFastFood and PrintArticles categories).

Our prediction was in contrary to most analysts, who were advising investors to stay away from markets. Sensex moved absolutely as per the expectations and had a good struggle crossing the 22000 mark and now is between our mentioned rage of 22000-22500 levels. See the picture below.

So having reached the above levels what should one do? Though we are overall bullish on the markets, the primary trend remains to be bullish, one thing’s very clear… the time of easy money has run out, and those wanting to earn from here will have to tread cautiously as there may be good amount of volatility, sector rotations and stock specific moves. Hence either do a good homework before buying anything or seek professional help from people like us at VRIDHI.

The short term focus of the markets will be only on the politics front. The market will move only on three type of results expectations 1.BJP led NDA loosing. 2.NDA having an average win and forming govt. with support from others. 3.A Strong NDA and Modi becoming the PM. The market might move differently in each situation, which we will discuss in next write up.

The market is focusing only on NDA since it is the only formation which has declared a PM candidate and Modi alone is talking about Development. All others seem to be fighting elections not for their win but to for Modi’s defeat. Everyone else wants a hung parliament so that a miracle can happen and they can dream of becoming PM.

Market wants development to happen, the country wants development. Only then we can dream of becoming super power as per the dreams of Abdul Kalam. We as a country have huge potential but literally have wasted last few years doing nothing. High inflation, Rupee depreciation, High interest rates, Low growth, High fiscal deficit, Bad external affairs, Weird tax notices etc have made everyone’s life miserable.

The markets have started rallying since FII’s have started coming in expecting all these to change, and thus we may see volatility based on the results.

But markets don’t move only on election results, in the long term they finally have to move based on company performance and fundamentals and hence dips should be used to buy more into portfolios. Any cut in interest rates will see more foreign funds coming into the country. Immediately after elections we will start focusing on Monsoon.

Market is likely to keep us busy… very busy for next 45 days. We along with politics will have Quarterly and Annual results of all companies coming in. We like Banking sector since long and can expect a move of 20% to 30% move on the Bankex from the present levels of 14585 over next 18 months.

Hence we remain bullish, but with caution right now.

We wish to see each investor, who is coming to create wealth in the market to make money! This does not apply to traders but those wanting to create wealth and beat the inflation Stay connected with us through various means. Click the link for all modes possible: http://vridhi.co.in/2013/07/15/stay-connected-with-vridhi/

At Investors Service – Always

VIVEK KARWA, Certified Financial Planner and Wealth Creator

Email: vk@vridhi.co.in

Contact Details: http://vridhi.co.in/contact-us/

***

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Make the Best use of your Initial Salaries

Posted by VRIDHI on 17/03/2014

Here are seven ways to get the most out of your first few salaries

Vivina Vishwanathan, Mint 17/3/14

source: http://www.livemint.com/Money/LS7iJWqBtJXJI3TFabzV8N/Make-the-best-use-of-your-initial-salaries.html

Life changes once you start earning. There’s money in hand, but also more responsibilities. Priyanka Khurana, 23, will join BSE Ltd in Mumbai as a management trainee in June. So, now that she will be earning for the first time, has she decided what to do with her pay? “First, I will splurge on my brother; I will take him for a rock concert. Then, I will leave a part of my salary in my bank account,” said Khurana. Any investments? “I will figure out something a couple of months later,” came the reply.

Shubhshree Mathur, also 23, and a junior fashion designer in Jaipur, who started working in September 2013. “My mother’s birthday was around the time I got my first pay. I bought gold jewellery for her,” said Mathur. Investments? No, came the answer.

Financial planners say you should start investing as early as possible. What better than the first paychecks? Here are seven things you must (not could) do with your first few salaries.

Pay off education loan

Many of you who are just out of college may have education loans to take care of. This should be your first target, and start paying off this loan using money from your first salary itself so that you can close the debt as soon as possible. “You should start paying your loan as soon as possible. You also get a tax benefit on education loan under section 80E of the Income tax Act,” said Surya Bhatia, a Delhi-based financial planner. The entire interest that you pay is tax deductible. A default on the education loan can be an expensive mistake as it will affect your credit score, which will in turn harm your chances of getting loans from banks in the future.

Keep track of expenses

With income comes expenses. This could be rent, phone bills, equated monthly instalments (EMIs), and many more. It’s important to keep a track of these. Besides helping you understand your cash outflow, it also helps you keep a tab on unwanted expenditure.

The best and the simplest thing to do is write down whatever you spend in a notebook or on an excel sheet. Keeping a record will tell you what you spend on, how much you spend, and how often—it’s a simple analysis and the best way to find out where you are going overboard.

Study financial products

This is one kind of study that will stay with your throughout your life. After expenses, whatever surplus remains should be invested and saved. Unfortunately, not much importance is given to financial literacy in our schools and colleges. How to save, how to manage money, how to invest, which products are in the market, what these products mean and other such topics are not part of basic or higher education.

But now that you are on a threshold, it’s best to get familiar with financial products. “You don’t have to do any financial course or get in touch with any financial planner. You can find the basics of investments on Internet, financial blogs or books and newspapers,” said Suresh Sadagopan, a Mumbai-based financial planner.

Considering that people who have just started earning are very young, their risk appetite will be high. Hence, you can look at investing aggressively. “But there is another argument that people so young lack experience and may not be able to deal with volatility. So you need to understand your risk appetite first,” said Srikanth Meenakshi, co-founder and chief operations officer, Fundsindia.com. Questionnaires to help you along are readily available on many financial portals. You could also start reading about or watching videos on products such as mutual funds, fixed income products, equity, debt, and the others.

Save for small goals

Just because it may be some time before you are able to understand products doesn’t mean that you can’t start saving. Don’t wait and plan for the right time. Simply because that never happens. Start immediately with whatever you have.

Saving for small goals like buying a laptop, camera, mobile phone or a vacation, will automatically put you into the habit. But don’t put yourself on too tight a budget; you will get demotivated and stop saving. Instead start saving small amounts.

Also, avoid getting into a debt trap. “If you want to buy something, start saving for it and then buy the product. Don’t buy with a credit card or with EMIs as it is very easy to get into a debt trap,” said Anil Rego, a Bangalore-based financial planner.

You can start investing in liquid mutual funds for short-term goals. If you are in the lowest tax bracket, you can start with recurring deposits to get into the habit of saving.

Buy an insurance plan

The general misconception is that with an insurance policy, you should look at the amount you will get in hand after, say, 20-25 years. Many get overwhelmed by the amount that an insurance agent quotes as premium. Firstly, you need to understand what insurance means. Insurance helps you protect your assets in case of unforeseen events. Say, your parents are financially dependent on you; then you should take a life insurance policy. Go for a term plan—it gives high cover at a low price as it only pays your nominees in case of your death, and doesn’t return any money if you survive the policy. Buying a term plan online makes it even cheaper. The premium you pay qualifies for tax benefit under section 80C.

If you don’t have any dependants, you don’t have to bother about a life insurance policy right now. But you should definitely look for health insurance, even if your organization gives you health cover. “You should consider taking at least a Rs.3 lakh health cover. This won’t cost more thanRs.4,000 per annum,” said Sadagopan. And, again, there is a tax incentive on this up to Rs.15,000 under section 80D of the Income-tax Act.

Keep 10% for long term

You may be 20 or 21 or 25 years old today. But you will be 60 or 70 years old after what seems like many years. And you may have retired by then. So, you will need a retirement corpus to survive the years that you will not be working. What you save from when you are in your 20s till the time you retire, is what helps take care of your retirement period. To build this corpus, you need to keep aside at least 10% of your income for this long-term goal. The earlier you start investing, the lesser you need to invest. You can start with simple products such as Employees’ Provident Fund and Public Provident Fund.

Reward yourself

Of course, you have to be responsible and handle money judiciously. But this doesn’t mean you can’t have fun. Pamper yourself whenever you reach a goal or have extra money to splurge. Rewarding yourself for self-discipline makes setting a financial goal more fun.

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Good Savers but Bad Investors

Posted by VRIDHI on 09/03/2014

Traditionally our money management matters have been handled by 3 sets of people, besides ourselves

Deepali Sen, Mint 21/2/2014

source: http://www.livemint.com/Money/bESDJ6wZFUE1bVAguBecQI/Good-savers-but-bad-investors.html

All Indians are doctors just as all of us are financial planners. Well, one can safely replace “all” with “nearly all”. We improvise on generic medication when our family members are hit by minor medical ailments. Similarly, we assume that money management is mostly about choosing investment products, which, in turn, is all about tracking past performance of these products; something that can be easily done. It is common to see people following financial advice originally meant for their friends (which could have been given by an investment adviser), not halting to ponder that this advice could be pertinent to their friend but may be altogether inappropriate for oneself.

My experience suggests that while most of us set aside a decent portion from our income as savings, we put most of our money in risk-averse products. We are good savers, but not good investors. The good news is that we follow this Hindi quote in spirit, chaadar ke bahar pair nahin nikalna chahiye (stay within your means); the bad news is that we think that containing risk is the best way to grow our money. Our fixation with guaranteed returns is high, owing to which we end up earning sub-standard returns on our investments. Inflation robs more from us than our investments earn for us. The balance between risk and return is sorely lacking. It gets tough to understand that risk and returns are two sides of the same coin. At times, the biggest risk we take is the risk of sub-optimal returns.

Our financial planning matters have mostly revolved around keeping aside surplus money in a “fictitious box”. Money from this box gets used for various needs and goals as and when they come knocking at our doors. This box could contain fixed deposits (FDs), illiquid and low-return fetching insurance policies, some long-term bonds, investments in Public Provident Fund and Post Office Monthly Income Scheme, and some stocks that were considered bluechip at the time of purchase. Other than these financial assets, we would have also bought physical gold and land or residential property.

Traditionally our money management matters have been handled by three sets of people, besides ourselves. The first being the insurance agent, who is more often than not our dad’s friend or a friend’s acquaintance, followed by an investment adviser, who either works independently or is associated with a bank, and the third character is the loan processing officer.

We are obviously the most involved as we have the complete know-how of the dynamics of our cash flows, our goals and our behavioural relationship with money. However, we aren’t organized enough to have our needs listed down, quantified, prioritized and effectively matched with the respective source of funds. We are the hub to which these spokes attach.

The first person, the insurance agent suggests child plans for our kid’s education, annuity plans for our retirement, money back policies for our various goals, or maybe a unit-linked plan to capture the incumbent growth in the equity markets. These products are suggested with an eye on the concessions available under various sections of the Income-tax Act and the fact that we could be getting some chunk of money after a block of certain years. Usually we end up paying hefty premiums for illiquid and low-return products. And, with the sum assured being low, we stay under-insured.

The second character, the investment adviser, concerns herself with allocating surplus funds in various products such as stocks, mutual funds (mostly equity-oriented), bonds and FDs. If two clients approach her for planning two very different goals such as kid’s higher education five years down the road and purchase of a bigger car a year later, she is likely to suggest similar products to both of them. She is driven more by the current contest or campaign running within the firm than by the end use of the investments thus made. Also, since she does not have complete information regarding a client’s assets, liabilities, cash flows, and goals and responsibilities, her advice is blinkered and limited to her piece of mosaic without drawing a holistic picture.

The third player is the loan processing agent. She processes our income documents to let us know our maximum loan eligibility amount and more often than not we end up taking the full loan amount as per the approval. We do not stop to do an analysis on whether we are earning (on our investments) more than what we are paying as interest (on home loan). This objective assessment aside, we are keen on retaining the status quo on our investments as it is convenient to us.

The flaw with this disjointed kind of financial planning lies in the fact that these three outside characters do not meaningfully interact with each other, because of which planning is piecemeal, superficial and ends up creating pockets of inefficiencies. For example, a client of mine had an outstanding home loan of Rs.50 lakh at an interest rate of 13%, and he also had Rs.15 lakh invested in FDs of one-year tenor earning an interest of 8.5% per annum. In effect, he was paying 13% and earning 8.5% per annum, a net depletion every year.

Our life is to a large extent what we make it out to be. So let’s resolve to organize our financial lives. I firmly believe in this quote by American evangelist Billy Graham, “If a person gets his attitude towards money straight, it will help straighten out almost every other area in his life.”

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45000 Crs Ponzi Scheme Unearthed

Posted by VRIDHI on 02/03/2014

CBI unearths mammoth Rs 45,000-crore ponzi scheme, real-estate companies PACL, PGF involved in Delhi scam

Financial Express, 28/2/14

After preliminary analysis of documents the agency came to know of the enormity of the scam.

source: http://www.financialexpress.com/news/cbi-unearths-mammoth-rs-45000crore-ponzi-scheme-realestate-companies-pacl-pgf-involved-in-delhi-scam/1230003/0

CBI today claimed the documents recovered by it during searches at the premises of Delhi-based business groups PACL and PGF show they allegedly used ponzi scheme to cheat nearly five crore investors of Rs 45,000 rpt Rs 45,000 crore.

In its case against PACL and PGF, CBI has named PGF Director Nirmal Singh Bhangoo and PACL Director Sukhdev Singh besides six other directors of the companies.

The groups had allegedly raised investments from over five crore gullible investors through collective investment scheme under the garb of sale and development of agricultural land, CBI spokesperson said here today.

She said that after preliminary analysis of documents the agency came to know of the enormity of the scam.

In Ponzi schemes, returns are given to investors from the money collected from other depositors in a pyramid-like structure.

"Initial investigation by CBI has revealed an alleged scam to the tune of Rs 45,000 crores in a case relating to an alleged fraud by Delhi-based private company and others through raising investments…through collective investment scheme under the garb of sale and development of agricultural land," CBI said.

PACL and PGF did not respond to emails sent seeking their comments.

The sources said CBI at first did not realise the gravity of the scam and it was only when some laptops were opened they came to know that their earlier estimates about the size of the scam were just a tip of the iceberg.

CBI sources said the agency had carried out an inquiry, on the orders of the Supreme Court, into allegations that the companies had collected crores of rupees through deposits from public at large through their ponzi scheme promising land.

CBI sources said that during the searches it has recovered documents which show benami properties worth crore in India and abroad. The investments made by the company in a hotel in Gold Coast, Australia, have also come under the scanner of CBI.

The spokesperson said CBI has found prima-facie evidence which shows that PGF, having an office in Pashchim Vihar in West Delhi, has raised investments by issuing bogus land allotment letters to induce the investors.

"It was revealed that PGF, on being directed by the High Court of Punjab and Haryana to wind up the scheme and refund the money to the investors, a similar fraudulent scheme was operated under the name of PACL with office at Barakhamba Road," CBI alleged.

It is alleged that funds collected from new investors of PACL were used to repay the earlier investors of PGF to stave off criminal prosecution.

The agency has carried out searches at the offices of PGF and PACL at their offices in New Delhi, Chandigarh, Mohali, Ropar and Jaipur.

CBI sources said the accused persons have been called to appear for questioning even as a preliminary round of interrogation has been done by the sleuths.

"Funds have been raised by the two companies through a vast network of lakhs of commission agents spread all over the country who were being paid hefty commissions for luring the investors," the spokesperson said.

The searches were conducted at the premises of Directors Harcharan Singh, Chandra Bhushan Dhillon, Prem Chand, Gurmeet Singh, Subrato Bhattacharya among others.

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Basics of Investing from Warren Buffett

Posted by VRIDHI on 28/02/2014

The veteran investor’s advice to his company’s shareholders remains the same—buy and hold

Rajesh Kumar, Mint 28/2/2014

source: www.livemint.com/Money/FNwddIdIAeX00tfIJjOwbN/Basics-of-investing-from-Warren-Buffett.html

The annual letter to the shareholders by Warren Buffett, one of the most successful investors of all time, is an eagerly awaited event in the world of investing. Every word from this “Sage of Omaha” is followed by investors across the world. This time was no different. An excerpt of his annual letter was published by the Fortune magazine on its website on 24 February and is being discussed all over the world.

Warren Buffett, according to the Forbes, had a net worth of $58.5 billion as on September 2013. Buffett is chairman and chief executive officer of Berkshire Hathaway Inc. The company and its subsidiaries are in diverse businesses including insurance and re-insurance, finance and manufacturing.

The published excerpt is basically an essay on fundamentals of investing, which can be followed by all investors to maximize gains in the long term. The basic essence of the essay is that it does not require a great deal of expertise to be a successful investor. However, it does require a great amount of patience and the ability to ride through business cycles. Buffett this time illustrated examples of his two real estate deals to drive home the point that one needs to identify a good investment idea and then hold on to it for the long term to reap gains.

Here are five key takeaways from his essay that investors can use while putting in their money.

Keep it simple

In order to get reasonably good returns, you don’t need to be an expert in the asset class that you are investing in. In order to explain this, Buffett uses the example of a farm that he bought in 1986. He had very little idea about farm operations. But with the help from his son, he did a quick calculation on how much the farm will yield and what will be the operating cost. Around 28 years down the line, the output of the farm has gone up three times and its value has gone up five times. The basic argument is that you need to “keep things simple and don’t swing for the fences”.

Focus on productivity

Buffett argues that you need to understand the future earning potential of the asset that you are buying. If you are not able to do that, just move on. The idea here is that you must understand the business or the asset that you are buying. Buffet and his partner, Charlie Munger, evaluate businesses in the same way irrespective of whether they are buying a small stake in the business or the entire company.

Avoid predicting price changes

Thinking about price changes is speculation. Also, Buffett argues that something that has appreciated in the recent past should not be your reason for buying. People tend to buy when prices have run up quite a bit and sell when it has already fallen. Investors, in fact, should be doing exactly the opposite. “A climate of fear is your friend when investing; a euphoric world is your enemy,” Buffett wrote.

Avoid constantly tracking stock prices

Buffett’s style of investing is that once you have bought an asset, you should not be worried about its price every day. This is what normally happens in real estate investments. People don’t go out to buy and sell every day. However in the stock market, since prices are available on a real-time basis, there is temptation among investors to do something which should be avoided. Says Buffet: “If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.”

Don’t waste time on macroeconomic and market predictions

Listening to market predictions and macroeconomic opinions, according to Buffett, is of no use in investing. The message is that once you have bought a good asset, you should hold it for the long term. There will be economic and business cycles in between but a good asset, bought at a reasonable valuation, will give you good returns in the long run.

Buffet further says that if you are a non-professional and cannot pick stocks, you still have an option of investing in stocks. All you need is a diversified portfolio of good businesses which you can easily own through index funds. “The goal of the non-professional should not be to pick winners—neither he nor his “helpers” can do that—but should rather be to own a cross-section of businesses that in aggregate are bound to do well,” he argues.

Most of the things that Buffett talked about in his essay are not new for people who follow the principles of value investing. Says Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services Ltd, “It is the reiteration of what he has said before, which is basically buy and hold works.”

Experts argue that investors should buy good companies and hold it for the long term. In case you find it difficult to identify stocks, you can simply invest through an index fund which is also cost effective in terms of management fee. The idea is to own businesses which will do well and create wealth over time.

Also visit: www.VRIDHItraining.com

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