Hornmerchant's BLOG

Recently, someone asked me a few questions about term life insurance in a specific situation. I’ve summarised our discussion below because many people have similar doubts, and the conversation highlights some useful general insights on how to think about life insurance. Questions I am a senior executive at an MNC, 58 years old, with an official retirement age of 65. I am purchasing an apartment worth ₹3 crore and taking a home loan of ₹2 crore, which the bank has approved with a 7-year tenure. The bank manager is insisting that I purchase a term life insurance policy linked to the home loan. My questions are: Is such home-loan-linked term insurance mandatory? Should I buy a term plan at this age, considering the high premium and the fact that my existing investments & assets are sufficient to cover the loan if something happens to me? Answers 1. Is home-loan-linked term insurance mandatory? Generally, it is not mandatory , and often not advisable to buy the bundled home-lo...

Chit funds have long been a part of India’s informal financial ecosystem. Blending aspects of savings and borrowing, these schemes are often woven into the social fabric of small towns, urban neighbourhoods, and even office circles. On the surface, chit funds seem like a convenient, flexible, and even trustworthy way to manage finances. But beneath this familiarity lies a significant risk—especially when the chit fund is unregulated , privately managed, and operated outside the bounds of formal finance. Investors lured by the promise of higher returns may find themselves caught in a web of defaults, mismanagement, and financial ruin. This article outlines the key dangers of investing in such schemes and why cautious, informed decision-making is essential. Understanding How Chit Funds Work A chit fund is a type of rotating savings and credit association (ROSCA). A group of people contribute a fixed amount of money every month. At periodic intervals, one member receives the total...

There are two types of self-serving Insurance intermediaries – Online Portals and Insurance “Salesmen”. Each of these are broadly of two types again. Two types of Online Portals are – Aggregators, earning referral fees and Brokers earning commissions. Online portals are too focused on conversions and quick sales than understanding the customer needs, educating the customer etc.; well online portals are not built for that kind of high-touch & personalized engagements. Then, two types of Salesmen are – Sales Staff of Banks or Sales Executives, earning incentives, lured by pay hikes/promotions and Individual Insurance agents earning commissions, lured by foreign trips etc. These salesmen too are too focused on achieving their personal sales numbers than what is best for the customers. A disclaimer to clear any smallest doubt – No, I don’t mean all of them are same; not all are bad. Then there are media houses, bloggers, vloggers, influencers earning th r ough ads or/and referral f...

Sometimes, few (very few) clients ask me why I don't give them transaction access to their investments with me. They feel, it's their investment (money) and they have birthright to have transaction access to their investments. They feel, like their bank gives them internet & mobile banking, debit card, cheque etc and enables them to freely operate their account as they wish, I should also give full transaction access to their invesments. Few (very few) other clients feel, I should "co-create" their investment portfolio taking into account their understanding & assessment of geo politics & its impact on economy & market, their views on the 'trends' in the market, their view on how the pandemic is going to play out and impacts the economy & different sectors and so on. They feel this 'obviously' because of their vast experience of 2+ years in stock market, they have made great returns and found a knack of investing in the market. F...

Most people think one should write a will (do estate planning) when they are old. Almost everyone thinks they should write a will when they are rich or have lot of assets. "The best time to write a will is just a day or a moment before one dies! But we don't know when we die. We may die anytime. So we should write the will right now!!" I read or heard the above, the first time, few years ago. I felt it is so simple and strong statement. I started my work on my will right from that moment. It took sometime to understand finer details and way to do it and more than anything else overcome the myths I had (like anyone else) about will writing. Covid-19 is reminding us the above quote in a harsh way. Lakhs of people getting infected, Tens of thousands scrambling for life and thousands of people succumbing every day - with no discrimination of age, gender, net worth etc. We all have lost some or the other in our circles (family members, relatives, friends and/or colleagues). I ...

Yesterday, stock market regulator SEBI has issued a new circular regarding multicap funds. According to the circular, in short, SEBI has mandated all Multi-Cap Equity funds to (re)allocate minimum 25% to each of Large Cap, Mid Cap and Small Cap categories of stocks, in less than 6 months time from now. At present multicap funds have much smaller allocations to mid caps and minuscule allocation to small cap stocks. This news has created a buzz in the market.  For sure this will result in lot of money moving from large caps to mid caps and small caps. Small caps will have higher inflows as multi cap fund hold very little small cap for now. So much sudden (over less than 6 months) flow in small cap stocks is a windfall. Small cap stocks category may not have that much depth to absorb so much sudden influx of money without causing unreasonable stock price appreciation, which makes the entire category more riskier. On the other hand, this should correct last 3 years  market anoma...

Covid is spreading fast. I wish you, your family and loved ones be safe & healthy. We need to exercise high caution and try hard to prevent getting infected, by following good hygiene and social distancing practices. However, we also need to be financially prepared to handle the situation, if unfortunately we are infected. Covid treatment in private hospitals is costing 10-20 lakhs, depending on type of hospital and type of hospitalization (i.e., Isolation/Ventilator/ ICU). If a person in a family is infected, more often than not, whole or multiple members of the family will be infected consequently. If such infections turn out to be of moderate to high severity, hospitalization will be required. If that happens, mostly, most of us will not be able to afford private hospital expenses, out of our savings. If we spend so much, then we will become bankrupt. There will be no option but to go with Govt. provided free facilities. You know the state of those facilities as you ...

Imagine you are a sole breadwinner in the family (well, that's the case in most families in India). You haven't unfortunately made provision for emergency fund and don't have a health insurance (well, again that's the case for most Indians). You fall sick...severly sick, requiring several months of rest (personally, I have the experience of falling sick for 6+ months when I was college student) You start taking treatment & rest and don't go to work. One month passes; you manage it somehow. 2nd month your income will be severely hit or you won't get salary. You have to manage family expenses as well as cost of your treatment. You have no option but to sell your long term assets or borrow. You do one of them. By 3rd month, fortunately you start recovering. You feel much better. But you aren't cured fully yet. You mostly need another 4-6 weeks rest to fully recover.  But you are desperate to get back to work. You feel you can't afford to rest w...

There are people who say “This Time is Different” like the very same ‘boy who cried wolf’. At the same time, because it has become a cliché, there are many other people who cry “this time also is NOT any different”.   Well, that too has become a cliché! Sometimes, ignoring the cries of wolf impact them more than the ones who cry.   Many a times some wicked individuals make fake calls to scare people of ‘bomb threat’ at public places. Ignoring those calls, unlike the boy crying wolf, it is dangerous and risky of the public rather than the person faking it. The problem becomes too difficult for the people to comprehend, when both sides of the people crying foul and the people denying it are made of learned individuals and subject matter experts. Most often than not, in today’s complex world, we are exposed to such situations. Ongoing ‘Novel Corona Virus’ / ‘Covid-19’ is the same case. There are mainly two major impacts it is creating. One, the health (physiologica...