Archive for Financial Planning

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

The Right Way

For quite a few years now, our team has been asking people, this question: How do you take financial decisions ??

The responses have been wide-ranging. Most people adopt a very ad-hoc approach. If they have liquidity and money in the bank, they end up buying investments from the first sales-person walking in to sell a product. What they do not realize is that adhoc actions will only lead to random results. Others research the ‘product’ that they are thinking of buying and think that they are doing the right thing. But even they have got it wrong. » Read more..











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 ( 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

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..

The World is your Playground

If you wish to gain from global economic trends, international markets offer lucrative investment options.

In 2007, when the Indian economy and markets were both soaring, I witnessed the CEO of a fund house trying to peddle the idea of international investing at an investor’s forum. The poor gentleman was scoffed at. But investing in international markets enables you to diversify against the risk of being invested solely in your home market. By being diversified across segments, your portfolio benefits irrespective of which segment does well.

Hence, I recommend that high net worth investors dedicate at least 10 – 20 per cent of their equity portfolio to foreign markets. Besides, the central bank too has now liberalized rules and allows individuals to invest up to $200,000 [Rs 1.11 crore] abroad, annually. » Read more..

Money: Costly Moves

Even the financially well-off are not immune to making these money mistakes- Amar Pandit


You may have heard of the Pareto principle [also known as the 80-20 rule]: it says that for many phenomena, 80 per cent of the effect arises from 20 per cent of the causes. Even your small investment mistakes too have that impact on your overall finances. My promise to you is that if you take care of the five points discussed below, a good deal of your financial planning related problems will get taken care of.

No written plan or strategy

The first thing you need is to prepare a written financial plan to give concreteness to your plans and ensure that you don’t deviate from the course.

Since most individual investors lack the knowledge for preparing a detailed plan, it is best to approach a trained financial planner to get this work done. The financial planner will ask you to fill up a detailed questionnaire to gauge your risk appetite, your current financial situation and your goals among other things. It is on the basis of this information that the plan is prepared. When your plan is unclear, you end up investing wrong. If your portfolio of wrong investments is big and a lot of time has gone by, undoing these mistakes becomes costly and difficult.

A correlated mistake is to buy the flavour-of-the-day product. When the equity markets are doing well, the launch of NFOs [new fund offers], sector funds, and IPOs [initial public offerings] becomes frequent. The investor is lured into buying these high-risk products that he can well do without. Then the bull run ends, the value of these investments crashes, and the investor regrets his impulsive purchases.

So, get a basic portfolio in place with a select number of correct products and then stay the course. » Read more..

Staying Financially Prepared for a Child with Special Needs

Regular MoneyChat readers will know that we’ve featured some great advice from financial planner Chitra Iyer, who also happens to be on our expert panel.

Today, we bring you a pertinent story with advice on preparing financially for a disabled child. Chitra is not only an experienced planner but also the mother of Shravan, a special-needs child with Autism. While trying to deal with the challenges of being a care-giver, she reached out for support and joined the Forum for Autism, where she’s the trustee today.

Autism includes a spectrum of developmental disorders that affect individuals to varying degrees. ”At any point of time, we have between 300 to 400 registered members. But over the last 10 years, we have touched over 5000 families,” says Iyer. Forum for Autism conducts informative workshops for parents around the year. “Our annual meet typically attracts some 300-odd attendants from various parts of Maharashtra, Goa, M.P and other states,” she adds. » Read more..

Master The Art Of Facing Losses With Dignity – Amar Pandit

Publication: The Economic Times Mumbai; Date: Jan 6, 2011; Section: Personal Finance; Page: 14;

THERE is much to be admired about us homo sapiens. We are capable of passionate work, creative ideas and tireless effort — all of which are results of good choices. Yet, when one looks at the investment landscape, the choices which majority of the people make have not been very inspiring. One such phenomenon ‘mental accounting’ was high-lighted last week. This week we will look at ‘loss aversion’.

Have you ever watched a movie in a theatre that you felt was complete nonsense and a waste of time? Did you ever walk out of the theatre? Very few people will because they have paid . 200 per ticket. This is a classic example of lossaversion. In this behavioural bias, our feelings or biases towards loss can force us to make irrational choices.

» Read more..

Use Mental Accounting To Your Advantage: Amar Pandit

Publication: The Economic Times Mumbai; Date: Nov 26, 2010; Section: Personal Finance; Page: 12

RECENTLY we witnessed a Kaun Banega Crorepati (KBC) episode where the participant who had won 1 crore went for the 5-crore question. He had a lifeline and had already become a crorepati, yet decided to go for the kill. Sadly, he got the answer wrong and went home with just 3.2 lakh. It is disappointing to see a person who made 1 crore losing it the next moment because of the decision that he took. Not just this gentleman, there are many others on the show who fell prey to the phenomenon of ‘mental accounting’.

Mental accounting is nothing but the way we decide to treat money differently because of its source. Just because the money was earned in 15 minutes, the participant decided to treat it differently. I am certain they would not bet a tenth of that amount on the same question if the money had come from their paycheque or profession. Not just KBC, mental accounting is at work everyday in almost every financial decision we make. It makes us mentally segregate money into different accounts — such as savings, EMIs, eating-out money, vacation money, gift money or even gambling money.

» Read more..

Steady Investments Can Beat The Market By A Mile: Amar Pandit

Publication: The Economic Times Mumbai; Date: Nov 4, 2010; Section: Personal Finance; Page: 18

GUESSING the index seems to be like an exciting pastime for most investors. They look at the index as some sacrosanct indicator to decide whether they should buy a stock. “Sensex is back to 20000 and I feel something wrong is going to happen again,” said one learned acquaintance. “The markets are overvalued and I will invest when it corrects,” said another gentleman who did not even invest when the market was at 8000, thinking it will go down to 6000.

I asked many people who have been investing since 2005, “Do you remember the index levels in the year 2005?” Almost everyone replied in the negative. In 2005, the Sensex was between 6103 and 9397. I remember in 2005 a lot of people called even 6600 as a high level. One client had even said, “Let’s wait till 5000.” But guess what: he does not even recall the 2005 level remotely. This is because people have made fantastic returns over five years and it’s no longer important whether you invested at 6500 or 7000 or at 7500.

Here is why index levels should not be a real determinant of your investing decision: » Read more..