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Your Wealth Wisher has a new Admin …!!!

By in Miscellaneous | 4 comments

Dear Reader, “Creation is only the projection into form of that, which already exists.” in itself is a destined platform to help you make informed decision on personal finance matters, but after a break… we resume with a difference… I Madhupam Krishna, with the blessings of Radhey Sharma, announce the change of guard at your favorite blog Thank You Radhey… Radhey is the person who started “wealthwisher” and has made it huge. He describe himself as an “ordinary guy with no superhuman skills”, but when I look, what he has created it’s certainly an unhuman task. I thank you from bottom of my heart for trusting me to take your creation ahead. “A gift is pure when it is given from the heart to the right person at the right time and at the right place, and when we expect nothing in return”- BhagwadGeeta All I can say at this moment is, you have handed me this at a very right time and right place. Thanks again. I am very proud to continue the legacy Radhey leaves behind. I look forward to lead “wealthwisher” as Icontinue to execute our commonphilosophyto spread awareness in asset management, retirement, risk-protection and other personal finance discipline. About Me I always see around that “we’re under-saved, we’re under-insured and we’re under-advised. These three issues has plagued the entire cycle of Savings and Investments with Risk protection. I have always felt that I can do something about these issues. I have been sticking-to-guns, in personal finance industry for around last 14 years and like vanvasa, it’s been a multi-disciplined journey. I have sold and supervised sales both as intermediary and manufacturer of personal finance product. Have worked/working with MNCs and super-houses belonging to Indian Capitalists. I have seen times when product was sold and times when things were pushed below throat… it’s a long journey to unfold. If you want to check milestones, please search on Linkedin With full gratitude to Radhey, I am starting what I love to do… I need your patronage… wish me guys… Madhupam Disclaimer: I work for a firm which is manufacturer in personal finance product. I hereby declare that all my ideas/posts have no connection to my employer and in no way be connected to their philosophy and business. Blogging is my personal endeavor, hence all things mentioned on this blog are my personal wisdom and...

The magic of power of compounding [infographic]

By in Financial Planning | 7 comments

The magic of power of compounding has been explained innumerable times by personal finance experts all over the world. Albert Einstein has very famously quoted the below on this concept – “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” And it cannot be farther from the truth. Understanding the concept will help you make smart decisions early on in your life. There is not much fun in clearing the concepts when you are say, 5 years away from a big financial goal that you want to achieve and for which you have no money today. You should have started saving early on in life based on goal based investing concepts and the credit of the fact that it will work is based on the wonderful concept of power of compounding. The problem with our education system is that they teach you right but they don’t necessarily teach you the practical aspects of what you learn. There is a concept of 70:20:10 of learning in a person’s life. It says that 10% of a persons learning is based on things he learns in his classroom – our schools that is. 20% of a person’s learning comes through mentoring. And 70% of the learning comes from learning on the job. Now imagine applying that to personal finance. They teach the power of compounding to you in school but you seldom get mentors who will sit down with you and tell you to start saving early on in life, say from your very first salary. And if you have to learn on the job, then you must have already lost your shirt in the stock market in the process. So if you reading this, and I would consider you lucky if you are less than 30 years of age as you have the biggest advantage of time on your hands to make most of the power of compounding, my humble request is to read this and talk to someone who can tell you practically how to implement the concept of power of compounding in your life. The power of compounding explained Imagine you love mangoes. Imagine that one day a fairy tale appears and gives you a mango seed. She tells you, you have two choices what to do with this seed. The first is to simply throw it away and forget about it as after all it is a darn seed left over by someone who ate the bloody mango. The second is to sow the seed with the expectation that the seed grows into a tree and produces some darn good mangoes; you then get to eat mangoes and plant more seeds resulting into more mangoes. The problem is that the latter option will take a long time, a really long time. And with investors looking for instant gratification, the option might not be a huge sales hit. Some of you reading this will go with option one while others will go for option two. If you think back and contemplate, the second option is one that will make your future full of mangoes which you and possibly your family can feast on while the first one is a lost opportunity. Compounding works similarly, just replace the mango seed with rupees. Let me explain. You have some money on you, don’t you ? Let us call it the principal. Let us also say that the principal, aka the seed, generates a small amount of money called interest when you save it and invest it in an investment avenue – this is akin to generating more mangoes in the future when you plant the seed you have today instead of putting the seed in the dustbin. Imagine you keep on planting all the seeds that the future mangoes generate and you build a darn good farm of mango plants. That will we worth a lot in monetary terms. You have effectively built a huge mango farm from a single seed. Let’s cut to the chase in monetary terms. You have UnHappy Singh, OK Singh and Happy Singh. UnHappy Sing invests one time Rs 30,000 for 30 years which earns him  12% interest each year. The catch is that this is simple interest is money will be earning. OK Singh, invests 1/3rd of what UnHappy Singh puts in for the same duration and this earns the same interest, the catch here again it that the money is earning compounding interest each year. The results are amazing, although OK Singh invested a lot less (one third) of what UnHappy Singh put in, he ended up with twice the amount (Rs 2,99,599) that UnHappy Singh received (Rs 1,38,000). That is the magic of power of compounding as against simple interest. In fact, if you add a small amount of money each month to your initial investment and make this a recurring monthly investment, the results are mind boggling – you shall see that in the graphics below in a bit. For now, check the graph below to show the figures. And if you want to see how the money is growing each year by simple versus compound interest, check below. FV = Future Value. Let’s pause for some learning from Wiki. Interest is a fee paid by a borrower of assets to the owner as a form of compensation for...

How to invest your money wisely [infographic]

By in Financial Planning | 1 comment

Are you a new beginner to investing and wanting to understand how to invest your money wisely in India or anywhere in the world ? Or is it that you have put your neck deep into the underbelly of the stock markets, have burned your fingers and are looking to start afresh ? Whatever be the case, wise investing is something which can turn any amateur investor into a successful one. So while the big mouthed people talk about making a killing on the stock market and real estate, you can sit on the sidelines and listen and laugh, because you know that they are going to have their page 3 of recognition only till the boom lasts but when the tide turns, only then will the world know who is swimming naked (heard that somewhere before !). If you are a wise investor, you will have the last laugh. Here is how. Read the below detailed guide on how to invest your money wisely – this is more than handful in these times of economic distress when from 2008 – 2013 the returns from all investment classes have been pathetic, when India’s GDP has just been predicted to grow below 5% and the rupee has wet the roof in-spite of so many diapers on it. How to invest your money wisely anywhere in the world Use rules of thumb to start First things first, your knowledge on personal finance is going to take a while to become top notch so don’t aim for perfection to start with, aim for progress. Start with thumb-rules on what to do with your income. Many financial planners might rubbish this but remember progress is your aim, not perfection at the moment. Use these personal finance rules of thumb to distributing your income wisely between spending and saving. Remember it is easier said than done, but saving early on in life is very very tough when you have just got out of college and you want to spend on those beautiful things in life that you planned while you burned the midnight oil. But saving money early in your life matters. If you understand and adsorb this in your mind, half the battle is already won. Start with the thumbrules. Avoid bad debt Don’t get carried away and run into bad debt. So if you love credit cards and personal loans, it would be better if you love anything else except these. Both have been the single most reason for early savers to go down the drain. A huge debt will leave little money for you to save. And if you are paying the minimum on your credit card, God bless you. You need to avoid credit card debts and say no to personal loans. But the cause of bad debt is really the failure of investors, new or old, to differentiate between needs and wants. And discretionary and non discretionary expenses. Of all the clients that I have had, controlling expenses has been the biggest challenge always. Including mine ! You can become an expert on how to invest your money wisely but if you rake up bad loans, you will be anything but wise. Plan where you will spend your money I am of the firm belief that 99% of Indian households do not do budgeting. If you do not know what to track against, how will you ever control it ? What will be your benchmark ? So the first logical step is to assess your financial situation (and remember if you are a beginner you do not know what to assess !) and follow that up with budgeting. This is one of the most basic and often missed steps in financial planning – master this and you would have taken a significant step to know how to invest your money wisely. Budgeting is simply telling yourself that you are planning to spend your money for the next 1 year into some categories as below : Transportation (Auto EMI, Fuel, Cabs, Maintenance) Home (Groceries, Rent,Furniture, Maintenance, Misc Supplies) Utilities (Gas, Phone, Internet, Cable TV, Electricity etc) Heath (Doctor’s fees, Medicines etc) Entertainment (Eating out, movies, hobbies, music, vacation) Others (Gifts, Clothes, Donations) Then you track your actuals and see how you did against what you had planned earlier and make amends. Also, remember to save first, spend later. This is one of my favorites. Most of investors do it the other way round, they spend first and save whatever is left. However, the opposite is what should actually happen. That way, you will always end up spending on items you necessarily need and in the process save as well. Understand how much risk you can take Understanding how much risk you can take now is one of the most important step in understanding how to invest your money wisely. Risk depends on a lot of factors. Your age, where you work, how many people are dependent on you for their livelihood and what are the liabilities you have are some of the parameters. Your asset allocation is the holy grail to your investment philosophy and understanding how much risk you can take in life is a key part to that. Stick to your asset allocation and your risk matrix at all times. You will be safe than sorry. List down your financial goals Write down what you want o achieve...

5 personal finance lessons from Spirit : Stallion of the Cimarron movie

By in Miscellaneous | 1 comment

I must have watched the movie Spirit : Stallion of the Cimarron at least 15 times now. If you think what is so different about that, let me tell you it was in the last 3 months. Not to mention the fact that it is a kiddo movie. I rate it as one of the best movies ever, obviously for a host of reasons. While I watched the movie, I tried to compare it with what personal finance lessons investors could take away from the movie as far as personal finance is concerned. Here I try to put down 5 key lessons that investors can apply in their investing life from this amazing movie. Simple yet powerful personal finance lessons from a horse 1. Listen to your investment advisor/financial planner The movie is about a stallion who is very different from the other horses in his herd. Since he is very brave, he ends up leading the pack. One night, he sees a shimmering light at the far end of the terrain and wants to step out to explore. His mom warns him not to. But Spirit is so curious that he does not listen. What follows is a heart wrenching bravado story that changes his life forever and puts you at the edge of your seat. Had Spirit listened to his mother, he would not have endured the pain he went through. That relates to investors who do not follow the advice given by their investment advisors or financial planners. Among the clients that I have had, there are some that don’t necessarily want to listen to the advice irrespective of the scary situation they are in. They think a planner’s job is to fix their money problems and I constantly keep telling them that their mindset change is what will make the difference apart from executing what is being told to them. Some listen, some don’t. Those that don’t, go through the same hardships that Spirit went through and then learn their personal finance lessons. 2. Be brave When human beings capture Spirit and put him into a cavalry without food or water, he almost breaks down. But then he comes back so strongly that he breaks people’s bones and gets the other horses to escape before he himself escapes, only to be followed and hunted numerous times in the movie. There is another instance when Spirit realizes that human beings are headed to his homeland where they will endanger the other horses of his herd. He unleashes such a catastrophic devastation that the entire railroad  gets wiped out. In the world of investing, people often play around with financial products that they never understand. And so when they lose their money, they vow never to use that financial product again. The classic example is that of the stock markets where direct stock investing is something which the biggest Dalal Street experts can never predict but investors trade without understand anything only to lose money. And then they say they will never invest in stocks. Little do they know that equity is the only investment class that can generate the highest returns for you over a long period of time. This is a very important lesson of personal finance and investing. You never know how strong you are, until being strong is the only choice you have. Investors need to be brave to make money for themselves. If they burn their hands, they need to use that learning to make their tomorrow more successful. 3. Lie low when the tide is rough and be patient This is a very important message that comes out from the movie constantly. Spirit is captured or chased or troubled so many times that he has no choice but to just wait for the right time to come to escape or fight back. There in an instance when a Colonel tames Spirit after Spirit has thrown off many horsemen off his back. Frustrated at being tamed and unable to throw the Colonel off his back, Spirit is frustrated and just puts his head down for sometime. The Colonel begins to brag about how many horses he has tamed and the very next moment Spirit has him flung high and far before he begins to escape. The point here is that when the going gets tough and your investments are in the rut, there is really no need to panic. If you follow goal based investing, all you need to do is lie low when the tide is rough. So while India’s economy seems to have faltered now and the rupee is plunging each week against the dollar, you should not be making major changes to your investment approach. If you have used asset allocation as the basis of your investment, just follow it and you will come out with flying colors in the end. Sometimes, the best thing to do is to do nothing but just wait to win. Personal finance lessons that you need to learn in your lifetime are as simple as that. 4. Let go Are you married to your investments ? If you bought some stocks or mutual funds that have turned out to be duds, do you buy more to average out your cost of purchase. That is like throwing good money after bad. It is important to let go and sell them. You would be better...

The Indian economy, Rupee and investors [infographics]

By in Banking | 4 comments

So much has been written about the crashing rupee and India’s economy that this article almost looks like beating a dead horse to me but I will still beat it. It really is all old news now that India is in the doldrums – nothing seems to be working at the moment – from a minister who was credited with turning around India’s economy way back in 1991 to hurting it significantly while being the prime minister, nothing is working. The reason behind the Indian currency plunging to record lows has been many – from low economic growth and foreign fund outflows, a large current account deficit (CAD) [approx 5% of gross domestic product] to the US dollar gaining strength at the back of hopes of the US economy reviving. All measures by the RBI and the government have failed to stabilize the sliding rupee. Simply put, the falling rupee is an implication of the fact that investors are pulling out money as they envisage that their returns will be enhanced if they take their money elsewhere. And that is the bad news for India. And we investors. Here is a nice time line on the fall of the rupee from CIEL. The collateral damage Equities To begin with, equity markets will be volatile. The declining rupee is lowering the earnings of the Indian companies which is resulting in lower stock prices. Companies that earn through exports will have a net fall in gains no doubt. The IT and pharma sectors are probably laughing their way to the banks. But if you happen to be employed with a company that will see its profits eroded, don’t expect a hike in 2013. And that will hurt – according to Murphy’s laws, no hike in wages is almost always assisted with high inflation (the high prices of onions should ring a bell and tear here). A 1% rupee fall adds 20-25 basis points, or bps, to wholesale price inflation or WPI. Households will have less to save and invest. Your goal based investing might go for a toss momentarily, be advised. Loan rates The lending rates are going up for sure as most of the banks have announced a hike in their base rates. Base rate is the minimum rate at which banks can lend money to consumers like you and me. Those with floating home loan rates are going to feel the pinch that is going to hurt as this will lead to increased tenor or increased EMIs. Check whether you can increase the tenor first, if not, then it’s got to be the latter – you then need to juggle around your finances to ensure you can cater to the increment. If you are a new borrower, you might want to defer your purchases – this looks like a simple advice but the deferment needs to rally happen for a year or so – I don’t envisage rates going down in the short term. But if you have no choice, go for floating loan rates so that you can ride on the advantage when the rates come down. Readers of TheWealthWisher already know that credit card and personal loans are borrowings that you should stay miles away from so I am not going to lecture on that for the moment. Spending abroad If you are planning to study abroad or vacation abroad, you must have been hit hard. A year back, anything you bought in one dollar might have cost you Rs 55, today that is Rs 66 approx. So you are paying more to have a vacation, study or buy anything from outside India. As far as NRIs are concerned, the news is not all that bad. Interest rate limit of NRE deposits with maturity of 3 years + has been jacked up. The FCNR deposit rate has been  increased by 1% as well. To cash on to these rates, NRIs can look to lock into these deposits. The double advantage here is that with a higher exchange rate, the overall returns would be meaty. Not to mention the fact that there is no income-tax or wealth tax applicable on the interest earned from NRE and FCNR (B) deposits. The annual remittance limit for NRIs was reduced from $2 lakh to $75,000 in a financial year. And if you want to  remit for the purchase of property, just forget it for now. Gold The government has cracked down on gold as well. Import duty on gold stands at 10% and the government has said that Gold importers must retain 20% of the imported gold and in order to import more, they need to export 75% of the gold so retained. India and China account for 60% of global gold demand so you can imagine the government and economists are sure Indians will be consuming more gold in the second half of the year when festivals like Diwali and marriages come along. Debt & Equity As far as equities go, they were meant for the long term so you should not fret at all. If you see red colors all over your stock or mutual fund portfolio, there is no need to panic. You need to keep faith in long term investing most now. Read Money Today’s take on the future of some stocks and how the markets might pan out. If you want to invest in debt funds, go...

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