Archive for Financial Literacy

Financial Planning For A Single, Employed Woman With No Liabilities

Presenting a beautifully written, informative article“Financial Planning For A Single, Employed Woman With No Liabilities by Nita Menezes, our Associate Director & Head of The Celebrity Practice.

We hope you find it useful and share it with people you care about. Looking forward to your feedback.

Click on the below mentioned link to read the article: Financial Planning For A Single, Employed Woman With No Liabilities

Ukraine Crisis

 

 

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20 things you probably don’t know about the Russian incursion into the Ukraine
Our hearts and prayers go out to the people of Ukraine, as they undergo both an internal political crisis and what appears to be military intervention from Russia. For people of a certain age, the current events, with tanks rolling across the Russian border into a neighboring nation that wants to exercise its freedom, it feels a bit like the Cold War days all over again.

Whenever we see troop movements and fires raging in the streets of a capitol city the size of Chicago, our instinct is to assume the worst and move our money to the sidelines. But is this really the best strategy? Some commentators see any market downturn as a buying opportunity, since stocks are going on sale simply because of unfounded fear of economic aftershocks.

Here are some facts that you might not know about what has, hitherto, been a relatively quiet new member of the world economic community. » Read more..

Bitcoins: Investment or Bust?

You may have been hearing lately about an alternative currency known as bitcoins, and the stories tend to be bizarre. Like, for example, the person who traded in his computer for a newer model and later realized (too late, as it turned out) that the hard drive contained $7.5 million worth of bitcoin currency in an encrypted “wallet.” Or the recent heist of bitcoins with an estimated value of $100 million from an illegal online drug sales website whose ripped-off drug lord customers are the kind of people who are not averse to having people killed with far less provocation. This person is now driving around with a hard drive whose electrical impulses are worth more than seven and a half tons of marihuana or a million grams of cocaine. These estimates are based on recent prices from Silk Road, another prominent bitcoin marketplace that was shut down by the FBI a few weeks ago because, thanks to the anonymity of bitcoin currency, it had managed to do an estimated $1.2 billion in virtually untraceable sales of heroin, ecstasy, marihuana, cocaine, firearms, ammunition and computer hacking services to prominent members of the criminal underground.

For the uninitiated, Bitcoins are a relatively new digital currency. The actual coins are, of course, not coins at all; they are essentially records in a digital archive stored on servers throughout the web, in the form of digital signatures, timestamps, wallets and public keys, all created in open-source computer code in a way that is designed to foil hackers. Because a Bitcoin transaction doesn’t involve banking or transaction fees, some economists think that they represent an early version of what all currencies will look like in the future. » Read more..

The Big 5 Money Questions- How well can you answer them ?

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We are all looking to build a financial masterpiece for our lives. Things may not be perfect today, but perfection is what we are all in pursuit of. But where do we start, and how do we get ahead? Questions are the answers.

In his best-selling book The Behavior Gap, Carl Richards defines a framework using the ’5 big questions’ to plan your financial masterpiece. » Read more..

Slow And Steady Capital

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All of us grew up reading and thoroughly believing the moral of the ‘Hare & Tortoise’ story. But then we all grew up and ‘life’ happened. Sadly, ‘Slow and Steady’ soon got replaced by ‘Fast and Crazy’ as the new winning mantra.

For the past 50 years, Fast Food has taken the world by storm – and literally so. This, despite the obvious ill effects. It is therefore refreshing to note how the “Slow Food” movement has caught on and also that slow food is the new good food.Promoted as an alternative to fast food, it strives to preserve traditional and regional cuisine and encourages farming of plants, seeds and livestock characteristic of the local ecosystem… (Wikipedia) » Read more..

PERCEPTION v/s REALITY

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Of all the ‘laymen’ explanations on inflation that I have read over the years, this has been the most interesting. In a 2008 article, master investor, Ajit Dayal, explains inflation in simple samosa terms.

In 1980, it probably cost you Re 1 to buy one samosa. Today, it costs you Rs 10. Has the samosa become 10 times larger over the past 27 years? Not at all. The fact is that Indian rupee has lost value over the past 27 years so the samosawallah wants more of your rupee to sell you the same samosa.
He wants 10 times the rupees for that same samosa. Or look at the price of your house. In 1980, it cost Rs 200 to buy one square foot of property in Cuffe Parade, Bombay. Today, it costs Rs. 40,000 per square foot. That is an increase of 200 times! Money, obviously, buys less these days. Paper money has lost value. That is what is called “inflation”.
Inflation is the blind spot, that causes most investment accidents. It is the costly overlook due to which investors often miss the mark. By a mile. Consider this. All planning and budgeting have a very long-term outlook: be it college education for our kids, retirement allocation for you and your spouse, or planning for contingency health-care expenses. They will occur many years in the future. All the more reason to constantly and correctly adjust for inflation.
Some investors forget to adjust for inflation – probably in the hope of the perpetuity 1-rupee Samosa offer. Others take an arbitrary estimate of inflation, while most use the government released inflation numbers (WPI / CPI, etc.)
The point is also that the rate of inflation for a particular commodity / service, cannot be an arbitrary number. For example think about the following in terms of their costs today compared to 10-years ago:
  1. A vacation abroad ?? Leisure inflation – anywhere around 15-20%
  2. A movie ticket ?? Entertainment inflation – anywhere around 16-18%
  3. A knee-replacement procedure ?? Healthcare inflation - anywhere around      12-15%
  4. An MBA Degree ?? Education inflation – upwards of 10-12%
  5. The cost of Petrol !!! Fuel inflation – upwards of 8-10% and so on …
Now if you were applying an arbitrary number of say a 7.72% (some WPI data) you can see how far off would you be if any of the above (the knee-replacement as a medical contingency goal, of-course) was a long-term goal. Since your guess is as good as mine, the idea is to improve the guessing process.
As Carl Richards (behaviorgap.com) writes:
For almost every other financial goal that is years away, it’s important to understand that things will change. No matter how much time we spend creating a plan it can’t capture everything about our future reality. All we’re trying to do is make the best guess we can and move on. If you understand that these are guesses (very important guesses), then you can give yourself permission to not obsess over them. Make the best guess you can with the information you have, and then commit to revisit it often enough to make course corrections long before you veer too far off course.
The other wonderful thing that will happen is that often we find out that even though our perception of our future financial needs was not even close to reality, we gain a sense of control that helps us focus on living our lives NOW. In many cases, we learn that we do have enough money and time to meet our goals. It might not even be a situation of needing to grit our teeth and save more, but we never know until we take the time to plan!
So the idea for the month is to keep your eye on the cost of the samosa (being a foodie I know I am risking ridicule by saying this but so be it).
  • Plan and put down your goals on a piece of paper.
  • Get obsessed with your goals.
  • Keep a hawkish eye on the cost of your goal year on year.
  • Be agile and course correct so that there are no nasty surprises when the goals do come up.
Did you find this piece helpful? We thrive on your feedback and are always eager to hear and learn from you. Look forward to your comments.
Team MFA

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Leonardo da Vinci said “Simplicity is the ultimate sophistication.”

Complexity is often overrated. It is the simple things that are also the most effective. In almost every facet of our lives – including financial planning. It is our belief that the simpler we make this subject, the less threatening and overwhelming will it seem to us. This way, investors will be able to get done much more than they currently are able to do and reach their closely cherished goals minus the stress. » Read more..

Buy Low | Sell High = Dumb

“Buy Low – Sell High.”
 
Is one investment advice which is: Clichéd, Misunderstood, Abused.
 
Abused. Because I can quote reams of data and statistic on how investors behave quite the opposite. Be it any asset class, be it any corner of the world, investors pump in money when the market tops and push the panic button and exit when it tanks. 
 
Abused. Because it says low – yet we wait for lowest. It says high – and we wait for highest. Timing the market is typical bad investor behavior. A Behavior Gap.
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We met a prospective Client last week, who was anxious and indecisive. “I am too worried to take any decision right now. The markets are too volatile. Let’s wait for markets to ‘clear up’ and then go ahead with things.”
 
But what does cleared up mean? Does it mean when people are less fearful? Does it mean when the news reports are positive? Does it mean when our friends are investing again?
 
Keeping all of these signs in mind, do you you think the market will move higher or lower when things clear up? » Read more..

Goals v/s Everything Else

Reaching Your Goals

Reaching Your Goals – for more of Carl’s insightful sketches on Behavioral Finance visit www.behaviorgap.com

Begin with the “WHY?”

Ask yourself these questions:  Why are you earning, why are you saving, why are you investing??

I highly doubt you said, “So I can beat the SENSEX.”

What you probably said was something like, “So I can send my kids to college,” or “So I can retire early,” or “So I can take a trip around the world.”

And yet some investors’ actions seem to suggest they’re focused on something else: beating the market. » Read more..

It Takes Two to Tango

Shared values, co-operation, careful planning and meticulous execution are some of the elements that can help married couples achieve financial success.

Ritu is a dentist with a flourishing private practice while her husband Ajay is an executive with one of India’s top manufacturing conglomerates. With earnings of above Rs 3 lakh per month flowing into their combined kitty, one would imagine that this couple would have no financial worries. Alas, a close look at their finances told a sad tale of overspending, sporadic rather than regular investment, disastrous product choices, and inadequate insurance. Here are tips that could set this couple, and many other affluent ones, on the road to financial prosperity.

Shared financial values and goals.  Money is a touchy subject. Most couples tend to avoid discussing it transparently. This results in sub-optimal outcomes vis-à-vis achievement of financial goals and, in some cases, even becomes an impediment to marital bliss.

A lot of times, two people come into a marriage with different money-related values: one may be a cautious spender while the other may spend as if there is no tomorrow; one may be dedicated to saving and investing to meet financial goals, while the other might live just for the day and believe that the future will somehow take care of itself.

Shortly after marriage, once the couple has got to know each other fairly well, they should have an exchange regarding their money-related values. In due course, they should evolve a common minimum programme, comprising financial goals that they hope to achieve and a roadmap for achieving it. » Read more..