Monday, January 8, 2018

10 Lesser Known Facts about Your Mediclaim Policy

In India, almost all working people have mediclaim policies be it group mediclaim insurance or private mediclaim insurance. However, do all they know the basic of this mediclaim insurance policy?

Read these answers to most frequently asked questions about mediclaim insurance and decide it for you!

1)    Change of hospitals:

Change in hospitals while under treatment is permitted only under some circumstances and those are 1) in case of better treatments 2) approved by TPA on the merits of the case and as per policy terms and conditions.

So why not check the network of the hospitals provided by your mediclaim company for the best before hospitalization?

2)    Benefits of sticking to one Insurer Company:

 a) If you are suffering from any pre-existing disease at the time of commencement of the mediclaim policy then complications of that disease will be covered only after 3 or 4 years of the commencement date.

b) If you stick to your mediclaim policy for more than one year or so, company may offer you bonus or give discount in premium.

c) After two years of mediclaim insurance commencement, you may get free health check-ups for every second year. Or you may get health services and product of market value up to 10% of your last paid premium.

3)    NRI and Health insurance in India:

Yes, NRI can take mediclaim policy in India, only after submitting residence proof and other required documents. Cost of the treatment will be set against Indian parameter and premium has to be paid according to Indian actuaries. The applicant needs to come to India for the treatment, as he will not be compensated for it in his foreign country.

4)    Documentation- before and After:

a)     Whenever you go to buy any mediclaim insurance policy then agent or company will tell you about the things they are covering to the lengths but none of them will tell you about the exclusions and there lies the hitch. So before buying any mediclaim  insurance, check about its exclusions thoroughly.

b)    After insuring yourself please always keep your all documents up to date. If you have, any pre-existing disease then its all history as it is (do not misplace a single prescription also)

    c) In case of planned surgery, intimate it to your mediclaim company in advance and take preauthorization of it from the mediclaim company. So at the time of actual surgery, you need not submit any document.

5)    Accidental insurance:

If you are opting accidental insurance as rider to your mediclaim insurance policy then it will cover a very less amount in the case of accident or hospitalization due to accident.

So it is wise to opt for independent accidental insurance but do check all the exclusion before opting for it.

6)    If it is working couple then are they double insured?

 Yes they are! If you have group mediclaim insurance of Rs.2 lakhs and your spouse has it of 2 lakhs too then you both will be insured for Rs.4 lakhs.  So if either of you met with an accident or hospitalized due to some sickness, and the expenses are about 2.5 lakhs, then you can claim 2 lakhs from your company and remaining 50000 from your spouse’s.

7)    Cashless hospitalization:

You may be disallowed of cashless hospitalization if
a) Information about the treatment you submitted is insufficient to confirm the coverage
b) TPA is not in timely receipt of the request for the pre-authorization. In such case, you need to bear the expenses first and then send claim for reimbursement.
c) If hospital in which you are required to take treatment is not on the panel of the company

8)    Domiciliary hospitalization:

Is the case where treatment is required for more than 3 days but patient cannot be taken to hospital and confined to home. It will be permitted only under 2 circumstances: 1) patient is unable to move to hospital.2) Hospital is unable to accommodate the patient.

Cover for such treatment is depending upon mediclaim Company’s policy and you need to check it before opting for the mediclaim insurance.

9) Mediclaim Vs Critical insurance

Mediclaim is to cover the hospitalization expenses. Mediclaim covers even the hospitalization due to critical illness. But critical illness insurance is to cover the reduction or decrease in your earning capacity due to critical illness insurance. That’s why you will be paid the full sum assured in critical illness insurance regardless of the hospital bills.

10) Can I change the TPA?

TPA helps to settle the claims arising from mediclaim polices. They are also in charge for providing the cash less facility. TPA is appointed by the insurance company. If you are not satisfied by the services of your TPA, then you can’t change the TPA without changing your mediclaim insurance company.

Mediclaim is one of the risk management tools. If you are not covered with mediclaim, your wealth may erode just like that if there is a hospitalization. By taking a mediclaim policy you are actually protecting your wealth.

The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company.  

Tuesday, December 12, 2017

All you wanted to know about the Guidelines for Purchase and Sale of Property by NRIs and Repatriation of Sale Proceeds

It is not that complicated for Non-Resident Indians (NRI) to buy or sell immovable property in India and remittance of sale proceeds, but there are certain rules and regulations to be followed during such transactions.  The Reserve Bank of India governs them and they fall under the purview of the Foreign Exchange Management Act (FEMA). In this article we will cover the rules regarding purchase and sale of property by NRIs and repatriation of sale proceeds respectively under separate headings.
Purchase of Property by NRIs
An NRI or a Person of Indian Origin (PIO) is legally entitled to buy residential and commercial properties in India without prior permission from RBI and there is no restriction on the number of immovable properties they can buy. The only stipulation is that the purchase amount must be paid in Indian Rupees through normal banking channels, or through NRI bank accounts under FEMA and RBI regulations.
NRIs and PIOs can also legally inherit property from a person resident in India and can hold it. They cannot buy agricultural land, plantation property or farm house. However, they can inherit such property from a person resident of India and can hold it.
Sale of Property by NRIs
An NRI can sell their residential or commercial property in India that they have bought or inherited to a person resident in India, NRI or a PIO. However, in case of selling agricultural land, plantation property or farm house, the property must be sold to a person who is a resident in India. After the selling comes the repatriation of sale proceeds to the country of residence. And here you have to follow certain guidelines laid down by RBI under FEMA.
Repatriation of sale proceeds of the property by NRIs, bought as a resident of India
If you are selling the property bought before moving abroad that is while you were a resident of India, then sale proceeds must be credited to the NRO account. You are entitled to repatriate up to USD 1 million including all other capital transactions per financial year (April-March), given you have paid all your tax dues.  Repatriation is restricted to sale of two residential properties only.
You can do this repatriation if you held the property for at least 10 years. If you have kept the property for less than 10 years, you can’t repatriate the money immediately. You need to keep the money in your NRO account till it completes 10 year period and then you can transfer.
For example, you are selling a property after holding it for 8 years. Then you need to keep the sale proceeds in NRO account for 2 years. After this 2 year period you can repatriate.
Repatriation of sale proceeds of the property by NRIs bought as a Non-resident of India
The sale proceeds of the property purchased after you become an NRI can be remitted outside India only after certain conditions are met:
The property must be purchased in compliance with the foreign exchange laws prevalent at the time of the purchase.
The repatriation cannot exceed the amount of foreign exchange remitted by the NRI to India via normal banking channels for the purchase of the said property.
The remittance cannot exceed the funds paid through Foreign Currency Non Resident (FCNR) Account in buying the property.
The repatriation cannot exceed the amount of loan repayment made using foreign inward remittance or debit to Non Resident External (NRE) or FCNR accounts.
The remittance cannot exceed the amount paid through NRE account at the time of purchase. 
In all cases, the amount of sale proceeds must be credited to NRO account and only then up to USD 1 million per financial year can be repatriated. Such repatriation is allowed for only two properties.
‘Waiting for 10 years to complete for repatriation’ doesn’t apply for properties bought buy NRIs from their foreign money.
Repatriation of sale proceeds of inherited property by NRIs
NRIs or PIOs are allowed to repatriate the sale proceeds of immovable property inherited from a person resident in India given they produce documentary evidence in support of their inheritance and necessary tax clearance certificates from the Income-Tax authority. The amount should not exceed USD 1 million per financial year.
Taxation on sale of property by NRIs
If NRIs sell the property after three years from date of purchase, they will incur long term capital gains of 20%. The gains are calculated as difference between indexed cost of purchase and sale value.
Indexed cost of purchase is the cost of purchase adjusted to inflation. In case of inherited property, the date and cost of purchase for the purpose of calculating the period of holding and cost of purchase is taken to be the date and cost to original owner. As per laws, NRIs are subject to a TDS of 20%.
If they sell the property within three years from the date of purchase, they are liable for short term capital gains of a TDS of 30% irrespective of tax slab. Short term capital gains are calculated as difference between the sale value and cost of purchase. No indexation benefit is applicable on short term capital gains.
Tax Exemption  on sale of Property by NRIs
Definitely, NRIs are eligible for tax exemption in certain instance. If they sell their property after three years of purchase and reinvest the sale proceeds into another residential property within two years of sale, gains will be exempt to the extent of the cost of new property.
Another instance of exemption is investment in capital gain bonds. If NRIs sell their property after three years of purchase and reinvest the proceeds in bonds of National Highways Authority of India and Rural Electrification Corp. of India within six months of sale, they will be exempt from paying capital gains tax. The bonds are going to be locked in for a period of three years.
The above mentioned facts are to illustrate the due procedure involved with purchase and sale of property by NRIs and repatriation of sale proceeds. It is advisable to consult a professional to look into finer details of such transactions.
Buying a property could be your dream. To achieve all your financial dreams an easy way out is to create a workable financial plan. If you are looking out to create a financial plan for yourself, then you may want to check our financial planning process.

Do You Mainly Depend Upon Past Performance before You Invest?

While investing in stocks, bonds and mutual funds, past performance becomes a strong input in making investment decisions. Question, should keep on relying on it excessively or there are other indicators available to investors, on which they can rely on to make investment decisions.
While looking at past performance look at the future too...
However, for a lay investor, it will not be easy, as the famous economist, John Keynes had said, in the long run we are dead. As investment in stocks and mutual funds are normally long term, investors may use this indicator too to support their past performance data.
Past Performance is one of the factors to be considered before taking the investment decision and past performance is not the only factor to be considered. Are you relying mainly or only on the past performance?  It is like looking at the rear view mirror and driving. You are headed towards a fatal accident.
What are all the other factors to be considered before looking at the past performance?
Diversify your portfolio...
There is an old saying. Never put all your eggs in one basket. In today’s risk management language it is called concentration risk. In fact in banks, concentration risk is considered one of the most important credit risk factors for the bank. Reserve Bank of India, as a policy measure, have recommended banks to strictly follow exposure norms, i.e., not to lend a borrower or a group of borrower or in a particular industry or business or financial instrument or geographical location beyond a certain percentage of the capital of the bank.
Investors may take an important lesson from this guidance of the Reserve Bank while deciding on the composition of their investment portfolio. To spread the investment in to different segments of business, industry, types of instruments, and then may invest.
Have a judicious mix of equity, debt and precious metal in your portfolio...
If you are less than 40 years, you may have a mix of portfolio, where equity would be say 50%, Debt 30% precious metals and other investment 20%. As you advance in age the equity portion will reduce and others should increase. In India, the returns on equities in the last 40 years have outstripped far higher compared to all other investment options. But, please remember, return on equity should be always expected in the long run.
Factor in time diversification... 
Market or business cycles vary from industry to industry, business to business. Also business cycles should be also factored in to for long term.. Longer the time period we take and more businesses or industries we diversify, the peaks and lows of business cycle even out.
Investors would definitely argue, if we only invest in the long run, what about short term fund requirements. For short term investment bank FDs, and income funds are the best instruments. For income funds you may check the duration of the income funds, and match the duration of the income fund with your investment time horizon.
Say if your investment time horizon is 1 year you may choose an income fund with duration of approximately 1 year.
You need to diversify your investments across different time horizons like long term, medium term, short term, and ultra short term. So that your portfolio will participate in different stock market cycles and interest rate cycles and generate better return by reducing the overall risk.  To neutralise the over dependence on past performance of your stocks/ bonds/ mutual funds, the above options will be helpful to give a good return on your investments while minimsing the associated risks.
The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company.   

Tuesday, November 28, 2017

Corporate Avatars by Disha - Book Review

In this book ‘Corporate Avatars’, Disha talks about more than 38 quirky characters who you will meet at work. She offers 3 or 4 valuable tips to deal with each type. She also offers a funny solution if none of the tips works.  The book is not preachy and offers valuable tips in a humorous tone.

Some of the quirky characters Disha describes are Mr. Maggi Noodles who wants everything to be done so fast, in 2 minutes that is. Then there is Mr. Meeting who convenes long fruitless meetings for anything and everything.  Ms. Process, who will not move her little finger even if a small step in the process is not followed, even if we are going to lose lakhs because of the delay. Ms. Short Skirts who sets everyone’s heart racing because of her bare-it-all attires.  Then there is Mr. Aloof who abhors interaction with fellow human beings and wants even the simplest of talks to be communicated over e-mail. “It was as if humans where his biggest problem on earth,’ says Disha.  Mr. Indisciplined, who worked odd and late hours and expected everyone to stay back late to get work done with him.

Disha starts every character analysis with a small and funny quote. Here are few samples.

Ms. Gossip Monger – “I love imagining stuff which does not exist. It takes me away from the mundane realities of the world.”

Mr. Email Expert – “Born to spam others”

Mr. Netaji – “I love playing political games. I could not join the Indian government. So, here I am.”

Mr. White Liar –  “If lying was a job, I would be a billionaire.”

The Lovebirds – “ Do we come to office to work? I thought I came to meet him, and he came to meet me.”

Mr. Male Chauvinist – “The woman at work are killing our economies.”

The main tips are for you to read, ponder over, and apply. You will enjoy reading the book. 

The book runs to 197 pages and is available on Amazon India for Rs.210 now. The book is published by Jaico Publishing House. Disha is an alumni of IIM Calcutta and has worked with Paytm, Yatra, and Mentor Graphics. She is at present with Amazon India. You can write to her at

A sample funny final tip given for Mr. Busy -

Final Tip : When Nothing Else Works: Every time he writes an email at 2 am, set an auto-reply saying, " I am presently lost in dreams of you and will only be able to reply when I reach office." 

How relevant are the “Mutual Fund Ratings”?

Today, you, a mutual fund investor are overwhelmed with the plethora of mutual fund schemes. More so when you find that schemes from different fund houses come with similar flavours. It becomes extremely difficult for you actually to sift the bad ones from the good ones. Then what do you do?
You take help of rating of mutual funds issued by various mutual fund rating agencies, such as Morningstar, Value Research and ICRA. CARE and CRISIL also rank mutual fund schemes. But is ‘mutual fund ratings’ the final parameter to be taken in to consideration for investment?
What is Mutual Fund Rating?
Mutual fund rating agencies generally rate mutual funds based on the fund's past performance, the fund manager's skill, risk- and cost-adjusted returns, and performance consistency.
These mutual fund ratings are designed to help investors quickly identify mutual funds to consider purchasing for their investment portfolios.
Do better mutual fund ratings mean better returns?
Mutual fund ratings by themselves do not guarantee better returns in the future. However, over a period of time better rated mutual funds do perform better than the lower rated ones. But there are always exceptions. Sometimes, lower rated mutual fund schemes may outperform higher rated ones. The chances of a 5 star rated mutual fund going out of rating is very low compared to a 1-2 star rated one.
Mutual Fund Ratings: A Backward-looking Mechanism
Mutual fund ratings are intended to be a starting point for further research and are not buy or sell recommendations. However, these mutual fund rating suffer one severe limitation that they are a backward-looking assessment mechanism, which does not reflect the rating agency's opinion of the future potential of a fund.
Mutual Fund Rating agencies also suggest that their mutual fund ratings look backwards and since past performance is no guarantee for the future, they should be considered only as a filtering mechanism in the process of selecting a mutual fund.
Mutual Fund Ratings and Financial Goals:
Mutual fund ratings are generic. As an investor you should not invest in all top rated funds. We don’t go to a pharmacy and ask for the best medicines. We need to choose medicine based on our requirement.
Similarly, you need to choose mutual fund categories which will help you meet your financial goals. Then in that category of mutual funds, you can look out for top rated mutual funds.
Choosing a suitable category of mutual fund (equity diversified, balanced, income) should take precedence over the search for mutual fund rating. The mutual fund rating would be of no use if one chooses an inappropriate category in the first place.
Beyond Mutual Fund Ratings:
Experts in the field say that mutual fund rating alone cannot be used as a tool for decision-making while investing in a mutual fund.
One must also look at the ,
·         Ability and stability of the fund house,
·         Track Record and Retention of the fund manager
·         Strong internal investment process
·         Integrity of the mutual fund house.
Mutual fund ratings serve as a foundation for you on which to base your search, but should not be used as a benchmark. You have to exercise more due diligence to select the right mutual fund.
The mutual fund ratings primarily help avoid the lousy funds as indicated by the lower mutual fund ratings. You should not, therefore, take a short sighted view on mutual fund ratings and take into consideration other important factors like consistent performance, expenses, fund manager's track record and experience as well as the fund house reputation.
The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company. 

Monday, November 27, 2017

How the Investor can maximize VALUE of his Investments?

What would it be like if we tried to click the mouse pointer on an icon and the icon kept shifting position? It would definitely irritate and frustrate us. Similarly “value” is something which can behave like the irritant icon. In the financial world which “value” is “true value” for a particular investment can be difficult if not impossible to determine. This is because the parameters based on which evaluation is being made may shift, throwing up a different figure each time.
So what is “value” ? It is generally believed that the value of a stock is built around the organization’s patents, brand, fixed assets like land and building, financial resources, human capital, financial resources, growth potential or ability to produce earnings and cash flow. Many would be of the opinion that it is the organization’s ability to produce consistent earnings over a period of time. At the other end of the spectrum would be something called “liquidation value”, which in simple terms would be the short-term assets which are pegged at a higher value, after meeting all liabilities than the market quoted capitalization.
Back in the 1950s’ people were interested about the information pertaining to business enterprises which were on the verge of liquidation as the prices tended to move north when such an eventuality presented itself. “Worth more dead than alive” was a rhetoric which was popularly used to describe such opportunities. However it is important to note that the ‘value of today’ may be different from what it was yesterday and could vary with the “price of tomorrow”.
It boils down to the fact that it is of paramount importance to the investor to get his assessments right, as that is where the crux of the matter lies. A conclusive assessment of the stock value which the investor loosely believes in is far better than an inconclusive or incorrect opinion on valuation which is firmly believed and implemented. 
The Relationship between Price and Value
It is always true to say that “value for money” is derived from acquiring an article or making an investment when the utility derived from the object (article or investment) is greater than the price paid for it. This analogy may be further extended to state that “Investment success doesn’t come from buying good things but rather buying them well”.
Identifying Opportunities for Value Investments
Investment markets are of a nature which creates opportunities from people who buy and sell emotionally and from people who trade in the market instead of investing in the market. That’s why Warren Buffet quoted that ‘ Stock market is designed to transfer money from Active to the Patient. It is important to note that the investor needs to make a concerted attempt towards understanding the mind and motives of other investors. It can provide enriching knowledge and experience required for sustained profitability in the financial world.
On the flip side, investing aimlessly would be like chasing a mirage. An oasis which seems to exist but actually may or may not be there. It leads to a situation where the investor will either gain a windfall or  incur stupendous losses. It can be safely concluded that – buying something at less than its intrinsic value is what it is all about in the investment market.
Adding Value
No prediction is cent percent foolproof unless proved so in the long run. The full risk in a portfolio can only be understood threadbare until hindsight is visible and by then perhaps the worst is over anyway. It is always a good policy to weigh the management performance against the market volatility to have a fair estimate of the investment opportunity when such a possibility presents itself.
Value Investing Skills
What kind of result a person can expect if he masters the value investing skills? Here is a matrix which has been used by Howard Marks to compare the priorities and expected outcome of two different investors and an assessment of their respective prospects:

Aggressive Investor
Defensive Investor
Without Skill
Records high gains when the market is on an upswing and looses heavily when the market moves down.
Does not lose much when the market moves down but does not gain much either when the market moves up.
With Skill
Records high gains when the market moves up but does not lose as much when the market moves down.
Does not lose much when the market moves down but does record good gains when the market moves up.

Tips to become a better Investor
So what does the investor do to assess value of an investment which he or she has made or proposes to make in the future? Well, if we may emulate Warren Buffet, the best thing to do is to gather as much relevant information as possible. Buffet, is known to read the Wall Street Journal, New York Times, Washington Post besides the business section of the Los Angeles Times, Chicago Tribune, Fortune, Forbes and Business Week.
1.     Read the business section of your daily newspaper with particular attention to news on companies whose stock you hold or propose to hold.
2.     Gather a fair idea of the different economic parameters which have an effect on stock price- petroleum prices, GDP figures, ratings by international rating agencies etc.
3.     Fix your own parameters as regards your risk taking ability, the amount of investment to be made and other investment priorities.
The above should hold every investor in good stead on a long term basis. 
The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company

Sunday, November 26, 2017

The Corporate Jungle by Seema Raghunath - Book Review

Read ‘The Corporate Jungle’ by Seema Raghunath.  She starts of the book with an introduction that clearly says corporate politics exists in all organizations. She asks us not to be na├»ve and not to think that if we are apolitical, others around us will also be apolitical. It would become like the story of the ostrich with its head in the sand and thinking the world is also blind.

As she has called the book ‘The Corporate Jungle’, she talks about nine character types in offices and maps each with the name of an animal.  So she talks about Lions, Bears, Cats, Chameleons and more.  She starts of each type with a long list of bullet point characteristics about that type of animal/employee and later explains their behavior in detail. She also talks about nine political strategies followed to reduce and destroy people.

Say for example, the Lions abhor camps and won’t stoop to make godfathers. They rely on their merit and want to be king of small kingdoms. The Bear who is highly intelligent and loudmouthed and doesn’t mince words while talking to someone. The Bears burn all bridges without any care.  The under qualified and under-skilled Suckerfish who attaches them to a speedy shark in office. The timid Morphs who think a hundred times before voicing their opinions. The aggressive Jaguars who have the deadly combination of courage and charisma.

While talking about the weak Cats, she quotes a few lines that show how a cat is unlike other smart animals. This almost sums up how people fall for political ploys and how smart people behave. “The Cat is not the smart Lion who can see through people and their motives to plan course correction way ahead. They fall into traps all the time, eventually ending up complaining, whining and bickering about their luck, time, bosses, work, and just about anything that happens in life. Cats make bad judgements. They take things at face value, believing what people say. Smart people judge or assess people or situations based on a thorough study of facts collected from various sources: from meetings, conversations, reviews, reports, and networking. Smart people also read people, read between lines, connect the dots and heighten intuition to arrive at what they sense. This does not come easy for cats. They find it hard to fathom the sublime. They don’t go looking for patterns or changes in people and environment. Their predictive indexing is therefore poor, which is why they find themselves in tough spots. They end up doing things no one else wanted to do, roles that were redundant.”

Seema introduces a political strategy in between the animal types. There is the mustard gas strategy that includes running a co-worker down, harming his image by spreading canards, exaggerated version of events, conversations and situations, twisting facts and misrepresenting small disagreements. There are more strategies like the Lip Service Strategy and Isolation strategy. Seema reiterates the fact seen in many books that the protagonist of ill will, denies and never agrees to any participation in a political strategy. So confront them with facts.

The book speaks to your heart and to your mind. The language is lucid and clear. Seema has been an executive coach and HR consultant with around 20 years of work experience. On the personal front she overcame the gloom of dyslexia with her writing. She blogs at The book will be a good guide for fresh as well as experienced employees to be aware of the various negative undercurrents in an organization. The book has 207 pages and at present costs Rs. 227 on Amazon India.  

Wednesday, November 22, 2017

How to Invest in Gold in India?

What is the best way to invest in gold in India? What are all the different ways to invest in gold? How can I / we invest in gold? What are all the various gold investment options available to Indian Investors?
Let us discuss in detail about how to buy gold for investment purpose.
Gold as an Investment Option
Before proceeding further let us answer a basic question in our mind. Why to invest in gold? Should I invest in gold? Is gold a good investment option?
It is your hard earned money. So you need to answer these questions before investing in gold. Why do people invest in Gold? What are all the benefits of investing in gold?
There are 2 primary reasons why you need to invest in gold.
·        Investing money in gold is worth because it is a hedge against inflation. Over a period of time, the return on gold investment is in line with the rate of inflation.
·        It is worth investing in gold for a one more very valid reason. That is gold is negatively correlated to equity investments. Say for example 2007 onwards, the equity markets started performing poorly whereas the gold has performed well. So having gold as an investment option in your portfolio mix will help you reduce the overall volatility of your portfolio.
The above 2 points could have given some answers to your question “Is buying gold a good investment?”
Return on Gold Investment
Is it profitable to invest in gold?
This investment proved remarkable from 2006 to 2011.During that time span Gold has given average return of 29% per annum which was any day better than other investment options.
However, the long term average return on gold investment is less than 10% p.a.
As one can say technically or ironically but history always repeats itself. Therefore, we may once again observe the similar less than 10% appreciation pattern in gold prices in near future.
Still, if you want to invest in Gold and cannot resist yourself from the temptation then these are few tips on how to invest in gold correctly!
1)    Jewellery buying
Our age-old and traditional way of investment is jewellery buying where one can buy gold ornaments, bars or coins. However, it has its own disadvantages, total buying cost involves heavy making charges (it can be 10 to 20% of total cost).However, when you try to sell the same piece to same jeweler, he will buy it below market rates and deduct those making charges from the total price of your jewel.
2)    Investment in Gold coins and bars
Investment in gold coins and bars is also a better option over jewel buying. You need to decide on ‘Where to buy gold coins or bars?”. You should buy gold bars and coins only from jeweler. Banks also sell gold coins or bars. Then why do we advocate for buying god bars and coins from jewelers? To answer this question you ask yourself “How to sell gold coins or bars?” or “Where to sell gold coins in India?”
Banks sell gold coins and bars, but they cannot buy it back. Whereas, the jewelers can buy back the gold coins from you.
How to invest in Physical Gold? The point 1) and 2) could have proved that it is better to invest in the physical gold by way of gold coins or bars sold by the jewelers. In the next points 3) and 4) we will discuss about the paper gold investment options in India.
3)    Gold ETF:
What is Gold Exchange Traded Fund? Gold exchange traded fund is a type of mutual fund which in turn invests in gold and the units of this mutual fund scheme is listed in the stock exchange.
How to invest in Gold ETFs in India? You need to buy Gold ETFs from the stock exchange by way of opening a demat account and trading account. You have to pay brokerage fee (which is generally between 0.25% to 0.5%) for buying and selling of these Gold ETFs. You will have to further pay 0.5 to 1 % charges as fund management charges.  
4)    Gold Fund of Funds:
What is Gold Fund? Gold fund is a Fund of Fund which will invest in Gold ETFs on behalf of you. Best part here is that you do not require holding any demat a/c here. 
Then how to invest in Gold Mutual Funds? Just like investing in other mutual fund schemes. As this is like any other mutual fund scheme, SIP investment in gold is possible through these gold funds.
Still buying Gold fund of fund is little expensive option, as you have to pay
1) Annual management charges for the underlying Gold ETF
2) Annual management charges of Gold FOF Scheme .
Gold ETFs Vs Gold Mutual Funds
With Gold ETFs, you need to open demat account and pay broking charges. With Gold Mutual Funds, you need to bear the additional charges charged by the Gold Fund of Fund.
If you are buying in less quantity then gold mutual funds may be suitable. If you are buying in more quantity then you can negotiate for the lesser brokerage charges from your stock broker, hence gold ETF may be suitable.
5)    Equity based Gold Funds:
Here these funds are directly not investing in Gold but investing in the companies, which are related to the mining, extracting and marketing of the Gold. Besides, its performance is purely dependent upon the performance of the fund house and the equities they are investing.
In the other 4 options, your investment performance will be directly linked to the price movement in gold.
However, investment in these funds is suitable for investors with high-risk appetite.
·        As these are equity-based funds, equity risk is there.
·        There are no listed companies in India associated with Gold. Therefore, these funds trade in international market and quiet susceptible to currency-risk apart from gold-risk and equity based risk.
Therefore after assessing or weighing pros and cons of each gold investment option, one can conclude that Gold ETFs and Gold Funds are safest, profitable and most preferred options among the various alternatives.
How much to invest in Gold?
5% to 10% of your over assets can be invested in gold. If you invest more in gold, remember in the long term return on gold investment is less than 10% p.a.
Is it right time to invest in gold?
Many times I have faced questions similar to “When to invest in gold?” or “Should I invest in gold now?” There is no right or wrong time to invest in gold. You need to invest in gold for long term ( 5+yrs). It is better to stagger your investments over a period of time to average out the cost of purchase.
How to start investing in Gold online?
You can start investing in gold online either by investing in gold ETF or by investing in gold funds. Gold funds can also be bought online just like investing in other mutual funds online.
The above compilation on different methods of investing in gold could have given you more clarity about investing in gold. Clarity is power when comes to taking investment decisions.
The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company. 

Monday, November 20, 2017

All You wanted to know about Personal Loans

There was a time when borrowing used to be considered as almost a sin. Whereas today, you name an incident a loan is available for you from not one but many resources. Whether you want to get married, go for a vacation, celebrate a festival – ‘Personal loan’: your loyal and honest companion will be with you 24*7! 
Personal loans are attractive:
It is very simple and easy to get this loan. This loan is unsecured loan, it means you do not have to give any guarantee to acquire this loan. As it requires very few documents to process the loan, documentation is simple. After you put in the request and fulfill the eligibility criteria, you are in receipt of the money within a week or two. 
You generally get 1-5 year’s time to repay the loan. You need not give anything (movable, immovable assets) as a security to process this loan.
If this is the case then why any financial institution will give away a loan like this? Why they will try to benefit their customers at the cost of their own risk? Alternatively, there is something in between the lines, which we need to pay attention to..., let us see.
Basics of Personal Loan:
First, let us know about the documents mandatory to apply for the personal loan. And these include
●      Pan card, passport or driving license as identity proof.
●      You can submit passport, ration card , electricity / telephone bill, Gas Bill, Bank statement as a residence proof.
●      If you are working then you need to give your salary slip, form 16 and 6-months’ bank statement. And for a person who is self-employed needs to submit his 2-3 years’ accounts statement/IT returns as proof of income.
Remember when you give such proofs to the organization while applying for the personal loan .You are actually giving them a blueprint of your wealth condition. So don’t be under the impression that bank is asking for no documents from you.
Coming to the Interest Rates:
As banks claims it to be, loan with no end-use restrictions and no-security. Interest rates charged upon Personal are extremely high. They can range between 16 to 30 % annually. More to that, interest rates differ from bank to bank and person to person.
For salaried person if interest rate is ‘X’ then for the same personal loan it can be ‘X+1 or 2%’ for self-employed person.  For government employee interest rates may go down further. So depending upon your repaying capacity and bank’s willingness to lend you can negotiate for the better rates. You can even offer your Equities, M.F. and insurance policies as security to bank which will increase your credibility and may decrease interest rates.
Other charges:
Interest, of course, is the most significant of the costs. But that doesn’t mean you should ignore the other charges. These would typically include:
●    A fee which is charged for complete procedure. This processing fee is non-refundable if your loan is approved and partially refundable if your loan is rejected. It can be between 0.5% to 3% of the loan amount.
●    If you prepay your loan then bank might lose out on interest money acquired on your personal loan .Hence penalty is charged on the prepayment of the loan .And this can be up to the 5% of your loan amount.
●    Not only that bank might charge you for the things like documentation, late fee, duplicate statement, service tax etc. 
A personal loan can be proved beneficial in certain conditions. How? Let us explore that too.
Examples of Right usage of Personal Loan:
●    Setting a debt which has higher interest rates: Say, you borrow Rs 1 lakh from a moneylender for your sister's wedding of which interest rate is 2.5% per month. So practically, you will pay Rs. 30,000 as interest to your lender while loan amount will be the same. In such a case, you can take a personal loan to repay the loan to moneylender. A loan of Rs 1 lakh for two years at 18% a year means an equated monthly installment of Rs 4,992. After two years, you would have not only paid off the entire loan, you would have paid only Rs 19,818 as interest, much less than the Rs 30,000 you would have paid the money lender as interest for one year.
●    Paying off a large credit card balance: A personal loan can also be used to pay off a substantial credit card balance that is being rolled over for months. Paying just the minimum amount on the card bill will not help you as the interest is charged over the total bill amount and is very high, usually 2.5-3% a month. It's better to divert the money to paying the EMI of a personal loan. You could save 16-30% depending on the rate of interest you are able to get on the loan.
So you can always opt for personal loan when you are in dire necessities mentioned above but with a caution that” Personal loan is injurious to your financial health”!!!!!!  
The author is Ramalingam K, CFP CM is the Chief Financial Planner at, a leading Financial Planning and Wealth Management company.