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 ...

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...

I was giving a lecture to final year MBA students. I asked them, what are the ways of earning money. Obviously they had lot of answers. But I asked why don't they think of money earning money? They obviously guessed that I was talking about 'investing' and they agreed, yes, that's also a way. Then I asked "between you and your money who will earn more money, say after 10-15 years from now?" Everyone said, they themselves will be earning more than their money, obviously as I guessed. Leave alone students, most people, including parents of many of the students, even with decades of work experience have a situation that they earn more than their money. So, most people 'vouch for the fact' that they are better earners than their money. That's because they worked hard for money and never let their money work hard for them! I can give you many examples. Many bankers working hard for banks save their money in Bank Deposits than buying shares of t...

It is well established that separation of 'Financial Advice' and 'Financial Product Sales' is a great idea to avoid conflict of interest. Mixing both, that means advice from a product seller, may not always be unbiased. Paying fees for advice only, (where adviser gets paid by the client only and won't earn any commission or remuneration for the products he /she recommends) indeed is a great idea logically. Sometimes (rather most of the times!) we humans don't behave logically. I see three types of people: Majority - reactive people,  who need to be chased to do get them buy and renew their Insurance policies or start and keep the SIP going;  Minority - people who get the financial plan and advice by paying fees and then get too busy with their work that it keeps them postponing the implementation of plan / advice for eternity;   Rarity - proactive people who plan and implement meticulously. Financial Advisers add little value to the rare proactiv...

Few days ago I’ve posted a short article titled “ Lifeand Health Insurance – The Right Way to Look At ” . You may also relate this to the post “ Use,Abuse and Misuse of  Life Insurance ” This one may be considered a continuation and slight detailing about Life Insurance, with extension to Personal Accident Insurance. With the above articles you know, you should buy Term Life Insurance. While buying the term insurance most policies offer riders. Riders are ‘Add-ons’ that can be bought along with base cover. Riders offered may differ one to other insurer and plan. Most common are ‘Accidental Death Benefit’, ‘Accidental Disability’ and ‘Critical Illness’. Before I elaborate on the riders, let me describe amount the optimum cover for base life cover. There are methods of calculating the exact amount of Life Cover you need – The Income Replacement Method and Human Life Value (HLV). These methods may be a bit complicated for layman. For simplicity, you may use thumb-rule met...

An argument I have to frequently counter about insurance is based on “Cost-Benefit” analysis. Well, no person would mention their argument to in that exact phrase but they mean that. That means they argue, compared to the claim (sum insured) amount I may get and the premium I am being charged for that is far lesser. So why should not I take that insurance / feature, though it costs slightly more. This argument is faced in situations like buying an add-on / rider with the main policy, buying for longer tenure / term, too much (features) for too less (price / premium). My advice is understand and anchor on to what you NEED. Consider the options available. For illustration, say, following for offer: P-1 [Primary Offer], a product (policy) that just satisfies your needs with reasonable pricing and there are competing products.  A-1 [First alternative / competing product]: charges slightly more and offers some add-on’s which are not needed / not so much useful to you.  ...

During my discussion about Term life Insurance, I am asked frequently, why not take it for very long term to cover the older ages also, say till age 75. It is obvious, why people think like that. And because most people think like that, it becomes opportunity for the Insurance Industry! Nowadays few companies have started offering term insurance policies that never expire…means life time (Age 100) cover!!! People think the probability of death is high during older ages than younger age and hence if they cover themselves during those ages, their nominees (children) will get benefited! It’s like passing on the inheritance / estate to next generation!! I would say this thought process is both misuse and abuse of Insurance. Insurance is appropriate neither for passing on wealth (misuse) nor getting insurance cover when you don’t need it (abuse). Firstly, an insurance (any kind of insurance) is always your B-Plan (Back-up Plan). There is a room for B-Plan only when you have A-Plan (Act...

Firstly, an insurance (any kind of insurance) is always your B-Plan (Back-up Plan). There is a room for B-Plan only when you have A-Plan (Actual / Primary Plan). B-Plan is for use when A-Plan for some reason doesn’t work or fails. So, obviously there can’t be B-Plan if there is no A-Plan in first place or if the A-Plan is successfully executed. Let me elaborate to tell what I mean. You have so many financial goals and responsibilities towards your family – Funding your Children’s  education & career, Getting your daughter married, Owning a house for your family, Ensuring post retirement income for spouse (& yourself) etc. The A-Plan to achieve these goals is work, earn and save & invest.  So, if you work for several long years or till your retirement, you are going to work / execute A-Plan. But, what if fate doesn’t allow that and some accident hits to leave you dead or disabled? Your future income will no more be available to the family. Then what about those...

Step-1 : Become serious about your finances. Get answers to your basic questions on the internet. Get a very basic info about financial planning and investment options available. 'Discuss' with your elders, seniors and friends (beware: don't take 'ADVICE' from them, just have a discussion to start to get the feeling and views of managing finances. Your father or brother indeed is your well wisher, but may not be a subject matter expert. Everyone can sing a song but not every one is a professional singer, just like not every person who can hit the cricket ball in the street cricket is a professional cricketer). Also ask them if they have some financial advisors. Discuss with financial advisor/s you come across and decide who you feel you most helpful and knowledgeble. Take the next steps in consultation of that advisor. Step-2 : Creating an Emergency Reserve Fund of at least your 3 months Salary is your First Objective, as soon you start earning. This should t...