Tuesday, November 15, 2016


http://www.livemint.com/Money/13xZyCNBoTLLm0NEZBnK6H/We-found-peace-of-mind-with-respect-to-our-money.html

One of my clients got featured in Mint news paper.
Proud to share the story of Mr. Manikantan and Ms. Lakshmi, who has been my financial planning client for several years now. The changes in their life occurred because they were not only open to listen to me as a Planner but also implemented all the recommendations with utmost meticulousness! 


I am happy to have them as my clients...and look forward to a stronger client planner relationship going forward!

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We found peace of mind with respect to our money

Gurgaon-based Manikantan and Lakshmi share their story on how they found a practical approach towards money with the help of their financial planner

Priyanka Parashar/Mint
Priyanka Parashar/Mint
Name: Manikantan Raman
Age: 40
Profession: Project leader with a multinational company
Name: Lakshmi Devi
Age: 39
Profession: Homemaker
City: Gurgaon
Financial planner: Shilpi Johri, certified financial planner and founder, Arthashastra Consulting
Manikantan Raman and Lakshmi Devi found a practical approach towards money with the help of their financial planner.
The block
When Manikantan and Lakshmi tied the knot in 2001, they decided to account for every paisa they earned or spent. Manikantan started investing wherever his peers were investing but didn’t find the growth satisfactory. He then started investing in mutual funds through online finance advisories but that lacked a personal touch. After 5-6 years, the couple finally decided to seek a financial adviser’s help.
The goals
“Our main problem was that we didn’t have fixed goals. I was inspired by the wealth of people like Warren Buffett, but didn’t know how to create wealth of my own,” said Manikantan. “The first thing Shilpi (Johri; the couple’s financial planner) did was to segregate our short- , medium- and long-term goals. Also, despite my being the sole earning member, she made sure both I and Lakshmi were part of all discussions. This is the personal touch that was lacking all those years,” he added.
Lakshmi agrees that being part of the discussions has helped her understand the family’s finances better.
The couple wrote down all their goals, right from owning a car and buying a house, to having enough insurance, planning for the education of their son Roshan (13), and retirement.
Course correction
Manikantan said Shilpi made him more practical about his investments. “It was just before the market meltdown of 2008. I had a lot of mutual fund investments. I was waiting for this to grow further but she advised me to redeem. I did that and made a handsome profit, which I used to make the down payment of our house in Chennai. This made me realise that she was seriously working towards making my wealth grow,” he recalled.
The couple now consults Shilpi even for small financial decisions. “She didn’t just make us curb our expenses; she also helped us fulfil dreams. I wanted to buy a Honda City but thought I couldn’t afford it and was about to buy a Hyundai Santro. But she made sure I could buy my dream car,” said Manikantan.
Key advice
Manikantan was asked to buy a good sum of insurance via term plans, and health insurance with appropriate top-ups.
The couple now regularly reviews investments. For example, Roshan wants to study medicine and they had already built a major portion of this corpus. Since this goal is just 5 years away, they were advised to move the investments to less volatile instruments.
“The best thing to come out of this association is that I am at peace with money matters and know that if something happens to me, my family would be able to maintain the same life style as they have now,” said Manikantan.

Wednesday, November 9, 2016

Should you take market predictions seriously?


In last 12 hours two big nations of the world had seen surprise turn of events!

Within couple of hours of the announcement by our dear PM Modi, 85% Indian currency lost its value and was declared illegal. And the various reactions over social media tells that No one, absolutely No one, including banks, government offices, politicians and media houses had any clue about it. The experts who are generally believed to be able to forecast any big changes in the economic, political and social environment of the country, are keeping silent. Suddenly market predictions have swung from one direction to other.

For example, real estate prices were predicted to rise in later part of the year 2016 and starting 2017 by a major daily newspaper. As per them the prediction was based on data and opinions by experienced experts. Now after the ban on high value currency notes which were supposedly main constituent of black money, the prediction is just the opposite!

It is an open secret that in in India, real estate market is majorly funded by unaccounted for cash. After the money hoarded cash has become useless for any transaction including real estate. Now the prediction is that real estate prices will crash because there will be lesser demand. Of course same experts will predict differently now.

Similarly, In United States of America, till the morning mostly media houses were predicting 80% chance of Ms. Hillary Clinton to be the next president of their country. But we all know what happened. With in next couple of hours wave turned and in a surprising turn of events, Mr. Donald Trump became 45th president of USA. Over 50 newspaper were endorsing Ms. Clinton till last week. Looking at the face of experts throughout the poll analysis today, we can clearly say that no one saw this coming.

There have been many such events in the past where predictions have gone wrong…and it keeps on happening. It happens because despite whatever data crunching we do, there can be surprise events to shake the very basis of the prediction. Like who knew rs. 500 and rs. 1000 note which we were using till yesterday will be a mere piece of paper from today.

Hence let us ask ourselves…If we should take the market predictions seriously?

Instead of asking ‘should I buy gold because gold prices will go down’? or ‘Should I sell my property because real estate market will crash’? Ask ‘Should I buy gold because I want it as part of my asset allocation’ or say ‘I want to sell my property because I need money’.


Now that Mr. Trump is going to be the president, there is a lot of apprehension about forthcoming immigration policies and H1B visas. Amid all this confusion, experts will again start their predictions. But no one knows for sure as to what the future has in store. So instead of listening to random advice from various sources, focus should be on strengthening your position at your work place. Focus on what your visa paper says. Uncertainty, anyways is part of the jobs in the private sector and looking for alternatives should be done regularly.

First and foremost define your needs, set the timelines and then react.

React when you are ready!
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Monday, June 27, 2016

Brexit…Is it an alarm against Immigration?



After much anticipation Brexit has happened!

Amid various reactions, one was noteworthy. It is the reaction of US presidential candidate Mr. Donald Trump. He called it as ‘Anger in response to High Immigration, which is a worldwide phenomenon now.’

His remark cannot be ignored as the campaign to leave EU (European Union) had heavily argued against Immigration. EU law guarantees that citizens of one EU country have the right to travel, live, and take jobs in other EU countries. As a result, majorly after the downturn of 2008, hundreds of thousands of East European migrated to Britain for job.

It did impact the native working population of the country. Increase in number of people ready to work at lower wages, depressed the wage market in the country. Leave campaign also argued about growing strain on scarce public services and changing social atmosphere of the country.

Though the ‘Leave Campaign’ won by a thin margin of 4%, It, does bring an end to the era of Free Movement in UK (United Kingdom) from its neighbour countries.

The same pinch of migration is felt in other countries as well and we can hear voices against immigration now. Surprisingly, they are the same countries who brought forward the concept of ‘Free trade’ and ‘Free movement’ to the world. Which we know today as ‘Globlisation’!

Globalisation, became popular as it was win-win for most of the countries. The ever growing production due to industrial revolution and new innovations due to technological revolution needed newer consumers. The developed world offered products and technology and developing world offered consumers and skilled workforce. The companies started setting up their offices and shops across geographies. People were encouraged to fill these offices and move to the respective work location. Cheaper and faster travel options facilitated the movement.

Recent years have also seen increasing number of students travelling to get higher education in different parts of the globe.

People who moved to locations like US and UK from countries like India and China were impressed by the ease of life and freedom to explore their professional aspirations in these countries. And a lot of them preferred to extend their stay and permanently settle down in their adopting countries.

The arrangement has been working well for past 50 years. As per a study, there are around 191million immigrants worldwide as of now and out which more than 50% are in US and Europe alone.

The arrangement worked well as long as local population in these countries perceived the low cost skilled workers as an extra pair of hands working to enhance their economy. Immigrants also tried to assimilate in the adopting country and were ready to make more sacrifices than the local population to make a place for themselves, as any new comer would do.

But as cited as one of the reasons of Brexit, it depressed the wage market for everyone. Lack of compensation that could meet increasing living standard supplemented with lack of job opportunities is making local population unhappy in these countries. And we can hear growing sentiments against immigration.

It is a matter of time before we can see a change in ‘Free movement’! The question remains ‘will the governments of the countries effected by high immigration become protectionist and increase the entry barriers’?

But it will not be easy for them to do so as the younger population who can easily be termed as ‘internet population’ see world differently than older population. It was evident in case of Brexit as well. As per analysis of voting pattern on the referendum, majority of younger population voted to remain as part of EU. Contrary to traditional approach of ‘I am comfortable only among similar social set up as mine’…Internet population is open to experiment. They have friends across the world, they explore work opportunities across boundaries and love to globetrotter. They do not do it because of lack of opportunities in their respective countries but because of change in their outlook which sees world as one big family!

Whatever may be the policies in coming years, we cannot completely close our eyes to the rising concern over migration.

Indian diaspora constitute sizeable immigration population across the world. Last 20-25 years have witnessed an escalation in Indians travelling and settling abroad. Those who did not go are open to send their children if need be. Brexit, which was campaigned as the case against immigration is an alarming bell for Indians who want to explore possibilities of migration or have already migrated. There is an unease among them.

There are questions like:  Will I get Visa (Indians need visa to travel to most of the countries particularly developed countries like US, UK, Canada, Germany, Japan)?
Will my visa get extended?
Will my citizenship application be approved?
Will I be allowed to stay and apply for job after finishing my expensive education in these countries?
Should I shift my family out of India…how will they be accepted by natives?

Till the questions remain unanswered, let us be prepared for either kind of outcome. Here are some quick action items to keep alive your connections back home in case you need to come back home.

1.    Re-Connecting with India:

Your friends, college mates, relatives will be source of first hand knowledge about the various developments in the country. They will be your support system if you wish or need to come back.

2.    Understanding work culture in India:

Like any developing country, Money is a scarce resource in India and hence Indian companies are cost sensitive. Also being justifying its traditional roots, work culture in Indian companies is dominated by hierarchical organization structure.  Along with it, In India, personal side of a person is given equal importance as its professional excellence, hence there is overplay of emotions in decision making. These three aspects make work culture in India unique.

3.    Exploring job opportunities in India:


India is fighting hard to get back its original ancient sheen of being one of the most sought after countries in the world. Various initiatives like Skill India, Make in India, Startup India are aimed at creating job opportunities across all type of workforce.

4.    Investing in India:


India the fastest growing major economy of the world. The high expectations are based on the sound fundamentals of India’s growth and steps taken by government to ensure it. Like various continuous Infrastructure projects like complete electrification of the country, modernization of ports, railways, defence many more. Government is ensuring uninterrupted progress through steps like FDI liberalization.

There are and will be short term setbacks like plummeting stock prices of some of the companies whose business like IT services companies, Auto and component companies who export to UK. But as per Government’s assurance India is insulated from such events and there will be no

major effect. Although it has revised the GDP growth projection to 7.3% from 7.6%.

In such an atmosphere where India is a bright spot, investing in India can be explored.

There are various encouraging options for NRIs like Tax free Fixed deposits in their NRE and FCNR accounts which give 4% to 9% returns depending upon the tenure and bank. Equity Mutual funds which gave average returns as high as 12% to 15% depending upon period, market conditions, portfolio, fund manager etc. (Past performance is NO indicator of future performance), Real Estate, ETFs (exchange traded funds) etc.

(Disclaimer: You are advised to do your own research before investing in any of the instruments, returns in the article are indicative only.)
You can spread your investments across various asset classes to balance positive and negative impacts.

Being an Immigrant is a challenge! You can leave the home country behind but leaving the culture of the home country is difficult. It becomes more difficult if you belong to a country like India where family ties are very strong back home. Whatever are your circumstances and aspirations New India under the leadership of our dear PM Modi is providing opportunities to all.


And of course You are always Welcome back Home! 

Tuesday, May 24, 2016

Is property really a sacred investment?


Buying a property has never been easier than it has been for past two deacades. Easy availability of cheap home loans from various private and public sector banks have made it possible to buy their dream home in the initial stages of their career.
Builders bought cheap agricultural land in tier I and tier II cities and many high rise buildings and malls started mushrooming in the country.
'Buying property' is considered 'sacred' in our country and is really 'close to heart' investment option for many. It is the same psychology which has been used by the builders to make profits.
They started several projects simultaneously using money from one project into the other. And investors were happy owning notional property in some of these buildings. Some of the investors even went to extent of taking loan and paying instalments demanded.
But every thing has been in thin air... With No real property handover and No real return on investment!
When the builders could not sell anymore 'notional property ' ... The result was 'stalled projects' for many many years. And the 'dream home' became a 'dream only' for many!!
In this historic verdict below redresal commission understood the plight and gave a verdict in favour of consumer...in our country 'a small fish infront of big fish ie. Builder' !!
So the question is 'is property really sacred? And should we block our money into something whose papers we will keep in locker and brag infront of friends and relatives when in reality we are not using it?

Monday, February 29, 2016

Time to Re-look at your Retirement Planning!


Time to re look at your Retirement Planning!
 
Out of various ways of saving and investing the retirement corpus, the popular ones are EPF (Employee Provident Fund), PPF (Public Provident Fund), newly launched NPS (National Pension Scheme and Pension plans by Life insurance companies.

Recent announcements including announcements in the #Budget2016 will bring upon the need to rejig your retirement portfolio. Here are some important changes being done:

1.     EPF (Employee Provident Fund):

Till now-

1.      Full withdrawal of EPF corpus was allowed when a person was changing or leaving the job.
2.      Age of retirement, at which a person could withdraw the full amount was 55 years. The full corpus was Tax free.
3.      Any withdrawal before 5 years was taxable as per the individual’s tax bracket. But the withdrawal after 5 years was Tax free.


Current changes-

1.      Only partial withdrawal restricted to the share of employee’s own contribution and the interest there upon is allowed.
2.      The age of retirement has been changed from 55years to 58 years.
3.      One major change is in taxability of the corpus. In his speech today, Finance minister said that in order to bring uniformity in the pension aka retirement schemes;

he said ‘In case of superannuation funds and recognised provident fund schemes  including EPF, the same norm of 40% of the corpus to be tax-free will apply in respect of corpus created out of contributions made after 1st April 2016.

Which will mean that rest 60%  of the corpus will be taxable at the time of withdrawal.

Points to ponder upon-

1.      Discontinuation of employment can happen due to many reasons. Some are voluntary like, taking a sabbatical, starting own venture or further studies. Also some reasons are non-voluntary like, health conditions, disabilities or layoffs.

Contribution to EPF by the employer is part of CTC (cost to the company) or the overall compensation package of the individual. By blocking this amount till retirement, an individual will face the forced liquidity crunch at the time of need.

2.     Many individuals fall in the highest Tax bracket by the time they retire. As per current proposal, 60% of their corpus will be taxable as per the tax bracket then.

Retirement is the time when people lose the regular income. A lumpsum corpus help them plan income for their non-earning years. Getting 30% less amount at that time will certainly disappoint people.     


2.     NPS (National Pension Scheme):

Till now-

It was mandatory to use 40% of the corpus to buy annuity. Rest 60% could be withdrawal as Lump sum.
And both annuity and lumpsum withdrawal were taxable as per the individual’s tax bracket.


Current changes-

As per Finance minister’s speech today, he said ‘I propose to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of the National Pension Scheme.

Which will mean: 40% for buying annuity which will be taxable as per the tax bracket of the individual. 40% will be tax free corpus. And rest 20% will be taxable, again as per the individual’s tax bracket.

Points to ponder upon-

NPS could not attract individuals as an investment vehicle despite extra Rs 50,000/- tax deduction. The reasons were several.

Firstly, the returns from NPS are not guaranteed and they work like any other mutual fund, which carry market risk.

Secondly, no withdrawal is allowed from the scheme before retirement, hence liquidity is compromised.

Thirdly, NPS force to buy annuity at the time of retirement which means inability to use money as per your own requirements.

Lastly it was fully taxable (annuity + lumpsum) means less income in hand at the time of retirement.

Merely decreasing the Tax liability to some extent does not take away the remaining apprehensions about the scheme.


3.     PPF and other Pension plans:

No change has been announced regarding these schemes.

On one hand Government is trying to make NPS attractive, on the other hand the current measures have stolen away the sheen of EPF.

Changes to Embrace:

In the current scenario it is imperative to bring some changes in the retirement planning.

1.      Do not depend upon one product/scheme alone. Diversify your retirement portfolio among various available schemes.

2.      Make use of PPF as part of retirement planning (at least as of now it is the only product which is tax exempt).

3.      Do not plan your big ticket expenditure like house down payments, seed capital for startups etc depending upon your EPF. Get the actual in hand amount calculated before you plan any use of it.

4.      In case of change of job, transfer your EPF and do not with draw it.

5.      If you are comfortable and your situation allows you to take market risk, choose direct Mutual funds over NPS. They will ensure both liquidity and tax free income.

Government may be trying to bring uniformity among the products, but the usefulness of these products is becoming questionable now!
Personal finance till so far it was all about meager income, low consumerism, guaranteed jobs and hardly any investment options. The entire scenario has changed now, both Globally and Locally. Complexity, agility and no guarantees call for dedicated discussions on the intricacies of the personal finance and role it plays in people’s lives.

 A time when demographic dividend is hailed as an important aspect of the economic growth, making people unhappy and stressed will only make them less productive!