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Old 28th September 2011, 14:45   #421
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Smile Re: Are most of us living on the edge? time to plan up things for the future.

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Originally Posted by mb_jg View Post
Guys, need some desperate help in investing. I have some liquid cash that I need to invest for my 3yr old boy. My dilemma is that I do not want to get into the recurring premiums cycle, so am looking for something similar to a single premium policy, NSC, or PPF.
The only liability I have is a home loan for which I shell out Rs.17,193 a month @ fixed interest rate of 9.50% p.a for the entire 20yrs tenure.
I don't have an appetite for high risk, so am preferably looking for something that's very safe.
Please help!
You haven't mentioned the time duration for which you want to invest. If it is short term then I would suggest the FD, you cant get any better ROI's than now. If it is for long term then would suggest to invest in Mutual funds esp Hybrid ones. For eg HDFC Children Gift Sav which is a 5 star rated fund and has good returns record. The risk is average and the returns are high. Either invest lumpsum or start SIP.
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Old 28th September 2011, 14:52   #422
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Default Re: Are most of us living on the edge? time to plan up things for the future.

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Originally Posted by ghodlur View Post
You haven't mentioned the time duration for which you want to invest. If it is short term then I would suggest the FD, you cant get any better ROI's than now. If it is for long term then would suggest to invest in Mutual funds esp Hybrid ones. For eg HDFC Children Gift Sav which is a 5 star rated fund and has good returns record. The risk is average and the returns are high. Either invest lumpsum or start SIP.
I wanted to invest it for 15yrs. I am ok with investing a lumpsum & then recycling the qtrly returns from an SIP.
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Old 9th October 2011, 13:34   #423
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Default Re: Are most of us living on the edge? time to plan up things for the future.

Well, first of all let me begin with thanking PramodKumar for starting this incredibly useful thread.

Here's my story:

I completed my higher secondary in 1997 in Delhi (got a compartment in computer science for which I reappeared and barely cleared it). By that time, all the engineering admissions and DU college admissions were finished. So it meant a waste of an year. At this stage I was really unsure of what to choose for a career. Started preparing for engineering entrances but didn't manage to clear any in 1998. At this stage, I took up BCA from IGNOU (correspondence). Have to say, IGNOU really makes you toil endlessly. After a good 5 years, I finally managed to clear it (simultaneously was doing some computer course from Aptech).

During these 7 years (1997 - 2004), my life was hell. My father constantly would keep cursing me for not finding a way to get a job. I would have surely snapped if not for my mother. She was a constant source of motivation. I tried in a few call centers but failed to get through. I tried various other marketing, data entry, field jobs but they were target based and I didn't see a career in them. I was really confused and was following blind advices coming from every Tom Dick and Harry.

During my stint at Aptech, I discovered an interest towards software development. So after completing my graduation, I approached a small startup firm. They refused to pay me anything, saying that I am a fresher, but promised to give me an experience certificate whenever I chose to quit that job. I served there for a year before moving to Bangalore in August 2005. Here I joined another startup and worked for Rs. 5000 a month for nearly 2 years (I was glad that I am actually getting paid something). Now with almost 3 years of work experience, I decided to quit and joined a Fortune 500 firm in Bangalore at an annual package of 3.5 lakhs per annum. My joy knew no bounds, I had never seen a salary like that before. Till this time, I had zero savings (what can you save from 5k a month in Bangalore!).

Now, when I started getting more money in my hands, my lifestyle changed drastically. I left the rickety boys hostel at JC Road and moved into a much expensive accomodation near CMH Road, Indiranagar. Got a few credit cards and started spending recklessly. If I could save some money over a period of time, I used to blow it away on useless weekend getaways with my roommates.

Some 8 months down the line working for this new firm, I again had zero savings. At this point, my parents started planning to get me married and were on a lookout for a suitable girl. I panicked as I was just not ready for a family, and had no savings at all. I conveyed the same to my parents and they told me that the best way to get a sense of responsibility into my head was to get me married. I was under huge pressure.

I started looking for another job now since I felt the need of more money to start a family. Soon I found one which gave me a good 40% hike over my salary, so I quit my current job within a year and joined this new firm.

It was just about 5 months of working in this new firm when I got married (fortunately to a working woman who had a steady job). One month later, I was laid off without notice from my job due to recession (this was October 2008). I was shattered. Just a few thousands in savings from my new job plus some amount which my wife had saved over a period of time.

It took me another couple of weeks to find a job (I was not offered any hikes but fortunately, the same salary as before). This was the time, I finally realized the importance of saving. A year down the line, me and my wife saved the maximum we could and purchased a home (I am glad I took the plunge since prices then were low, I would not be in a position to buy a home at the current price levels almost anywhere in Bangalore). All my savings since then have gone into the loan prepayment.

Just a month ago I started SIPs (2k each) into 8 mutual funds (after watching those "saving ka naya tareeka" ads on television). I thought atleast it will force me to save something every month.

Today, touchwood, I am leading a decent life. I got all my useless credit cards cancelled, except a couple which I find to be handy. I have no other loans except my current home loan.

So, for people who are starting their careers - be wise and respect your money. Save every penny you can without being a miser.

A few tips:

- Use your Sodexo meal passes every month (wherever possible) before touching your cash.

- Invest in a good credit card which gives you regular cashbacks. Of course, needless to say, pay your bills in full on time.

- Try your best to clear as many debts/loans as possible over a period of time. Set goals for the same.

- Get married. Believe me, it's a sureshot way of curbing unnecessary spending.

- Create a mutual fund portfolio and start with SIPs. You will appreciate this decision of yours after some 5 - 7 years.
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Old 10th October 2011, 15:58   #424
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Default Re: Investment Opportunities for a Fresher

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Originally Posted by Saanil View Post
I am a 22 year old, fresh out of an engineering college. I have got a job as a junior analyst (Equity Research) in an investment bank as a part of campus placements. Since this is my first job after college I am pretty excited to earn money. I realised how tough it is to earn money and how hard one has to work to earn money. A few days back I got my first salary and I was thrilled to see so much money in my account. I just wanted to know is there something I can do with my money - probably make some investments. I do not think Share market might be good for me because I hardly understand the fine nuances of it. I just do not want to keep the money idle in my account. A friend of mine suggested making a FD of it. I just wanted some suggestions from Bhpians. Is it too early for me to think about such things? Or should I wait for my account balance to grow to some minimum level and them think about such things.
Hi Saanil,

Congrats on your job and its wonderful that you are thinking about investing at the beginning of your career itself.

Here is what I suggest (with the money you save):

Open a PPF account and put 10% of your money in that

Let another 10% be in your savings account.

with the rest 80%, start SIP into one or two equity mutual funds - you can choose essentially any 5 star fund mentioned in the valuresearchonline.com: The Leading Value Research Online Site on the Net - I recommend Quantum long term equity and HDFC top 200.

Keep investing and forget about market fluctuations etc etc.
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Old 10th October 2011, 19:27   #425
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Default Re: Are most of us living on the edge? time to plan up things for the future.

29 pages of real life stories kept me glued to this thread. It was quite interesting to go through it.

I found a common notion here that ULIPS are bad.
Off late I did read a lot into insurance thing and sat with calculator and I figured out a few things about ULIPS.

Are they best plans? No way I would ever say that. ULIPS do not offer a one stop solution for all needs. But they can be used to great advantage.

I bought my first insurance when I was 21. My very close relative then was insisting on my buying a JEEVANSHREE plan that had guaranteed some 75 or 90 Rs bonus on 1000 Rs Sum Assured at the maturity. Glitch was that the minimum premium was 25000 Rs. Him being not so finance guy (a doctor) I thought of talking to a few finance sort of guys. They told me never to mix investment and insurance. At the end I decided to buy what is called a bouquet of policies. I am still paying a premium of 22k for 10 Lac sum assured, half of it is MoneyBack with Accidental Death and Disbursement.

This year that relative got his wife admitted to MD course, banking heavily on returns from the policy (due to mature next year, 15 years term). I have got only 10 K money back so far, another 5k would come nextbyear.
So the relative managed to get returns and cover by paying mere 3K more per year. So mixing insurance and investment can be worth if done judiciously.

Few year thereafter I realized that most of my cover would be over by the time I would be 36 as term was 15 yrs. If I need to buy new cover at 36 age it would be costly too. There I realized one big drawback of term plans that if taken at early age, it fails to cover working life span.

So I decided to get a new cover. The need was compounded as my income grew since the purchase of first policy. This time I decided to try TATA AIG. Had friend who was agent of theirs. We tried to get an illustration and couldnot. On detailed numerous phonecalls he told me for Merchant Navy personnel, TermPlan with ADD (popularly known as rider) can't be issued. It was a shock since this never happened with LIC. So worryingly I called another friend who had just joined LIC as Developement Officer about this and my policy. He upon looking into the system told me that my policy doesn't indicate that I am a seaman which means if something happens to me on-board I would be denied the claim because I did not disclose to them that I was a seaman. It definitely was my fault as I wasn't vigilant enough when I bought the policy.

Thereon I decided to study the whole thing in more detailed way. It was then I figured out that If we keep investing in ULIP for the entire term, it actually is more cost effective than buying a mutual fund.
Also the span is quite long (I am deliberately avoiding the TERM word as used by insurers as it often confuses with Term as in Term plan).
The best tool an ULIP gives an investor is a switch, whereby an investor is allowed to rotate the money within different schemes run by the same insurer. For example you can switch your investment from mid cap fund of the insurer's AMC to say Large Cap equity or say small cap equity fund or even pure debt fund. Tata Aig offers such 12 switches free per year and rest each switch at Rs 100 per switch. I know 99.99% ULIP holders do not use swithces but no one stops them if they want to. This is like selling abnd buying mutual fund 12 times a year without entry load, exit load and STT.

ULIPS lost their name because of the agents which rather sold it as an instrument to double or triple the money fast and that one needs to pay money only for three years.
The truth is that the illustration itself shows only 6% and 10% return YOY and 3 yrs ( now 5 years) is the minimum time one needs to pay premium not the maximum.

Hope it wasn't too boring for you all.

I might have mentioned TATA AIG couple of times but I have no links with them except I hold the policy issued by them. Other insurers too have equal and better products and I am still studying them. I am a seaman by profession and not an insurance agent (nor is my wife)

Rgds.
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Old 11th October 2011, 19:46   #426
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Default Re: Are most of us living on the edge? time to plan up things for the future.

Did you check with ULIPs if they support the Insurance part of the policy if they know you are a seaman?

Also do consider that if the amount spent on ULIPs was used to invest in MFs, the returns would probably be higher, this of course assuming you make a good choice with MFs.

Also, the TERM insurance can be bought for even 25 years if not more, besides you are assuming that death would happen only in later years of one's life, if that was the case you wouldn't need an insurance you could simply save/invest enough till the risk age begins.
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Old 11th October 2011, 20:24   #427
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Default Re: Are most of us living on the edge? time to plan up things for the future.

Also despite paying huge commissions to the agents in ULIPS you are tied to the funds managed by the same fund house which may not be the best performing fund in the market. Hence the "freedom" to switch is only symbolic. One can't just expect 2 equity funds to deliver similar returns simply because they both are equity funds, a lot depends on the fund manager and fund management and fund house.
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Old 12th October 2011, 15:35   #428
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Default Re: Are most of us living on the edge? time to plan up things for the future.

What percentage of annual earnings/ income should we be saving each year?
e.g. 50%? 30%?
So, income == (total inflow of money) - Taxes

Here income is the money after all tax deductions which you cannot avoid.
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Old 12th October 2011, 15:42   #429
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Default Re: Are most of us living on the edge? time to plan up things for the future.

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Originally Posted by S_U_N View Post
What percentage of annual earnings/ income should we be saving each year?
e.g. 50%? 30%?
So, income == (total inflow of money) - Taxes

Here income is the money after all tax deductions which you cannot avoid.
Every individual has their own financial committments ( investments and expenses included) and according to me it should be a minimum of 15% and if possible should stretch to even 50% of your income.

I know folks who are on both sides of this % range personally.

I somehow manage to save roughly between 40%-50% of my annual income if there are no contingencies for that financial year.

Bottomline, save as much as you can without compromising on your lifestyle
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Old 24th October 2011, 16:05   #430
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Default Re: Are most of us living on the edge? time to plan up things for the future.

Quote:
Originally Posted by Saanil
I still have decent amount of money left in my account. I just do not want to keep the money idle in my account. A friend of mine suggested making a FD of it. I just wanted some suggestions from Bhpians. Is it too early for me to think about such things? Or should I wait for my account balance to grow to some minimum level and them think about such things.
You can never be too early to save. As chennai-indian suggested, start a PPF a/c at the earliest possible. With PPF, the key is to start early, since the maturity is 15years (ofcourse you can borrow/withdraw much before that) and PPF gives you the power of compounding interest. Think of PPF as a nest-egg for future - just invest whatever you can into it each year with max being 70K. Investment in PPF will also qualify for tax-deduction for you.

When you are starting earning, Recurring Deposits (RD) are a good way to inculcate financial discipline by ensuring that you save a fixed amount every month. Today, you can create RDs online and also have Standing Instructions given online. PSU banks offer better interest - eg. SBT. The RD interest is the same as that of FD for the same period of investment.

If you still have cash left, an FD is not a bad idea, given that banks are offering good interest rates today. Eg. a 500day FD with SBT will get you 10%.

Regarding equity/MF etc, I would suggest you learn up before investing - dont just put money into these because someone told you to. Do your homework before investing. These offer much better returns, but also need your attention and due diligence.
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Old 24th October 2011, 21:00   #431
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Default Re: Are most of us living on the edge? time to plan up things for the future.

I feel having huge insurance premia to pay is an overload by itself. I'd suggest PPF, FD, Gold (whatever people may say, it appreciates too well to be ignored) and property if possible. With the volatile world we live in; another terror strike in W.Europe/US can cause serious repercussions in the stock market: more hyped and high risk if you really can't follow your investment on a regular basis. Take 'term' insurance to cover the earning member of the household first and let it be substantial. . Biggest "dud" investment would be to mod/change cars on a whim.

Last edited by Technocrat : 24th October 2011 at 23:38. Reason: Removed uneven Highlighting of text. thanks
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Old 24th October 2011, 22:34   #432
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Default Re: Are most of us living on the edge? time to plan up things for the future.

A simple rule to follow can be :

Of the 100 rupees you earn:
- Keep 20 for long term (housing loan, Retirements plans, child policy etc).
- Keep 20 for short term (MF/Stocks/SIP etc)
- Another 20 for personal expenditure
- Keep 40 as liquid (FD and not it savings bank)

Above is just a crude division. Break-ups can change based on times and situations. For
example immediately at the start of one's career, one may not have a long term commitment.
So he/she can look at using that fraction into other break-ups.


Some Notes:

The catch is, many people believe once a home loan is over, long term commitments are complete. Its not so,
One should continue to keep that break-up alive, Apart from home loans there can be other long term investment options as well.
The trick is to balance properly.

Most cases young people take huge home loans and pay almost 50-70% of their salary towards EMI.
This may be a skewed break-up. But if that comes with the understanding that situation would improve with increase of salary,
then its fine as the break-up should even out. This is also important from an increasing family responsibility aspect.

A home loan taken for 15 years should typically be targeted to be paid back 8-9 years at max.
This way I have roughly noticed, one gets less effected by interest rates (at the same time gaining the value EMI payment period).
Obviously paying ASAP is better, but I would prefer giving some priority to keeping that break-up alive,
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Old 25th October 2011, 00:29   #433
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Default Re: Are most of us living on the edge? time to plan up things for the future.

Quote:
Technocrat
Did you check with ULIPs if they support the Insurance part of the policy if they know you are a seaman?
Sure I did. They sent me a separate marine preofession questionnaire which was quite exhaustive. There were even questions about the P&I club covers that the ship has, the type of cargoes carried, kind of training undergone.

Quote:
Technocrat
Also do consider that if the amount spent on ULIPs was used to invest in MFs, the returns would probably be higher, this of course assuming you make a good choice with MFs.
Also, the TERM insurance can be bought for even 25 years if not more, besides you are assuming that death would happen only in later years of one's life, if that was the case you wouldn't need an insurance you could simply save/invest enough till the risk age begins.
Probably returns would be higher if money is managed well. But ULIP comes with something like a protection read Sum Assured if something happens relieving one of ifs and buts.

I was wondering where did I assume that death happens in later years. I re read my own post but couldn't figure out how and where. If the text implies so then my words might be wrong. The whole need of insurance is based on the premise that anything can happen anytime. I do believe in it.

Even in early death cases ULIPS would compensate the losses to survivors pretty handsome. I am not aware if term plans offer as much risk cover as ULIPS some of which offer upto 60 times annual premium.

As I said earlier that ULIPS are no way best plans. My point is that they are not as bad as they are marketed.

Rgds.
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Old 25th October 2011, 06:08   #434
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Default Re: Are most of us living on the edge? time to plan up things for the future.

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Originally Posted by sindabad.sailor View Post

Even in early death cases ULIPS would compensate the losses to survivors pretty handsome. I am not aware if term plans offer as much risk cover as ULIPS some of which offer upto 60 times annual premium.
It would be far far more in Term Plans. I think atleast 200 times or more.

Quote:
Originally Posted by sindabad.sailor View Post
As I said earlier that ULIPS are no way best plans. My point is that they are not as bad as they are marketed.

Rgds.
Actually, they are marketed very well. And they aren't as good as they are marketed.

ULIPs benefit the company, not the customer. Period. There is no argument about this.

Instead of ULIP, if you go for Term Insurance & put the difference in premium into even a PPF account, you will benefit far more.
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Old 25th October 2011, 09:08   #435
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Default Re: Are most of us living on the edge? time to plan up things for the future.

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Originally Posted by Oxy View Post
Here's my story:

So, for people who are starting their careers - be wise and respect your money. Save every penny you can without being a miser.

A few tips:


- Invest in a good credit card which gives you regular cashbacks. Of course, needless to say, pay your bills in full on time.

- Try your best to clear as many debts/loans as possible over a period of time. Set goals for the same.

- Get married. Believe me, it's a sureshot way of curbing unnecessary spending.

- Create a mutual fund portfolio and start with SIPs. You will appreciate this decision of yours after some 5 - 7 years.
Fantastic!!! Very honest staright-from-your-heart post, I appreciate your honesty.

A few points :
1) Have atleast a term plan as soon as one gets a job. There are few companies who offer term return on premium, but they are having relatively high premiums for that. But first have a term plan.
How it goes :
Basic necessacity : Term plan
One step ahead : Health insurance. Trust me, it really helps.
Next level : Life insurance with more returns and SA.

Before spending on any of the insurance plans, etc. make sure you have the above insurance plans.


2) Savings. As mentioned, try to save as much as you can, but not at the cost of your health, etc. I have seen individuals save on food, etc. like eating in not so clean places, looking for cheaper food junctions, etc. Best avoided. Remember, for anybody ( mainly for those who are middle class ) health = wealth. This ( i.e. health ) is the only thing which would fetch you money for long.
Never save money on food, etc. Prefer healthy foods which suite your body. I have many friends who have suffered a great deal by just messing up on food.

3) SIP. Its correct to invest once you have reasonable income from which you have ability to save a bit, start planning for SIP. It helps a great deal specially when it comes to education for kids.

4) Marriage. I tend to disagree, but it varies from individual to individual. My perception are going to change here for sure.

5) Last but not the least. Never ever get caught in the get quick money deals from others or even the stock market. Its a calculated risk bet avoided when income is just about sufficient. I'm not against investment, but dont jump onto playing into this market.
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