The Art of Giving

March 27, 2011 admin Financial Literacy, Philanthropy

Publication: Business Standard; Mumbai  Date: March 27, 2011                  

How to ensure that your money is used for the right cause.

With great wealth comes great responsibility. This is because money, if utilised appropriately, has the power to do many great things. Hence, wealth creators have an unsaid responsibility of utilising a portion of their wealth for the betterment of society. This act of promoting the welfare of society is called philanthropy. However, you don’t have to be a billionaire to start your philanthropic activities. And there is more than one way to go about it.

REASONS FOR GIVING:
There is a long-held belief that having wealth comes with a responsibility towards the less fortunate. Other reasons why people decide to do philanthropy: To address business or social obligations, to address social problems, to teach sound financial and human values to children, to give some purpose to their lives or to influence public and private policies.

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Simple measures in difficult times

February 27, 2011 admin Financial Literacy

Publication: Business Standard;   Date:Feb 27 2011;                  

The Five questions you need to ask the advisor, or yourself, that will help you tread over current uncertainties

The present year has been a roller coaster ride for investors. Equity markets are turning more volatile each day. Within the first two months, the Sensex has moved between 17,200 and 20,500. There seems to be no respite from this, as oil prices are moving up due to unrest in the Arab world. They recently touched $120 a barrel, a 30-month high.

Commodities and debt are on an upward spiral. Gold and silver made lifetime highs by crossing the Rs 21,000 per 10 grams and Rs 50,000 a kilogram. State Bank of India recently launched high coupon 10-year (9.75 per cent) and 15-year (9.3 per cent) bonds. There are expectations that interest rates could inch up further. This means that interest rates on loans will go up as well.

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Tax saviours

February 1, 2011 admin Uncategorized

Publication: Complete Wellbeing; Staywell; Section: Wealth; Issue: February 2011

Handy tax saving options you can use if you haven’t yet planned your investments

Come January and a lot of taxpaying individuals suddenly wake up and start looking for tax saving options. This is primarily because of the tax saving proofs that they need to submit to avoid a higher tax deduction at source.

In this rush, people generally end up taking a hasty and myopic view of tax planning as their only agenda is to save tax. I have seen people ending up with a plethora of life insurance policies, pension plans, mutual funds, tax saving deposits and so on.

In the end, most land up with expensive products, low post-tax income and products that they do not even require. However, there is no need to rush through the entire process if one starts off early, typically in the first week of the financial year in April. Yes you read it right. The best time to start off your tax planning exercise would be in the first week of April itself.

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INVESTMENT OPTIONS IN THE NEW YEAR

January 9, 2011 admin Financial Literacy

Publication: Business Standard;   Date: Jan. 9, 2011       

Some simple strategies to keep your money working for you

Most asset classes, whether equity, real estate or gold had a great going in 2010. However, a closer look will show that all these asset classes did go through ups and downs during the year. Even as investors may get worried over periods of uncertainty, one can expect volatility to give ample opportunities to maximise profits in 2011.

The equity markets gave a 17 per cent return in an extremely choppy fashion. The index moved in the 18,000 and 16,000 band in the first seven months of the year. The second half saw a clear uptrend that took the markets to the 21,000 level by Diwali. Even commodities made news last year. Gold was stuck in a range of Rs 16,000-16,800 per 10 grams for an extended period till May 2010 and then moved in the Rs 17,000-18,500 per 10 grams range for the next few months. It » Read more..

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Master The Art Of Facing Losses With Dignity – Amar Pandit

January 6, 2011 admin Financial Planning

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.

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Use Mental Accounting To Your Advantage: Amar Pandit

November 26, 2010 admin Financial Planning

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.

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

November 4, 2010 admin Financial Planning

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..

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Baby steps for accountability

October 17, 2010 admin Uncategorized

Publication: Business Standard, Mumbai; Date: October 17, 2010

Allowing children to handle money from an early age helps inculcate financial discipline

The best way to teach kids about money is to let them handle it early on. That’s why pocket money can be a powerful way to teach kids the basic utility of money, savings, prudent spending, budgeting, record keeping and accountability.

Parents have different opinions on when to give children pocket money. Some say not before the age of 12-14. A few say they were not given pocket money till they went to college. On the other hand, some have been very generous with their kids, starting at the age of seven-eight; yet others give out more money than their kids require.

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Don’t rush to prepay your housing loan: Amar Pandit

October 14, 2010 admin Financial Planning

Publication: The Economic Times Mumbai; Date: Oct 14, 2010; Section: Personal Finance; Page: 14

RECENTLY, I met a very savvy businesswoman who had just received a windfall and she was in a tearing hurry to prepay her loan taken at a very attractive rate of interest. Her income is extremely high and EMIs were comfortable and technically there was no rush to prepay the loan. However, there was an emotional urge to pay off the loan. When I inquired further, I realised that she might require some funds in the next 18 months. I told her that she had already paid a lot of interest in the first two years and considering her financial need, she should really think whether it makes sense to prepay the loan.

She didn’t have a clear answer to it. I went on to demonstrate how her loan repayment is scheduled.

The interest paid per year is 5.36 lakh. That means at flat rate of interest it works out to be 5.36%. This is excluding the tax benefits that she would have received on the interest payments. In her case, the entire interest can be claimed as expense. This translates into a savings of 53.63 lakhx0.309 (tax rate) = 16.57 lakh. Hence, the actual interest payout post tax benefits will be 53.63 lakh – 16.57 lakh = 37.06 lakh. This means that 3.7 lakh will be the interest paid per year on a 1-crore loan and hence, the interest rate paid per year works out to be 3.7%. If she is able to pay more than 3.7% on this loan she should retain the loan.

Now, if one invests 1 crore for a period of 10 years, the number » Read more..

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Traditional insurance plans remain an expensive option: Amar Pandit

September 15, 2010 admin Life Insurance
Publication: The Economic Times Mumbai; Date: Sep 15, 2010; Section: Personal Finance; Page: 16

THERE is a lot of hue and cry from life insurance companies that unit- linked insurance plans (Ulips) are set to lose their charm. I don’t think so, as Ulips will still continue to pay lucrative commissions for the first five years. However, competition seems to be forcing insurance companies to launch traditional life insurance products, as there is no cap on the cost of these products and it will allow life insurance companies to pay very high commissions. Yet again, the life insurance industry seems to be missing the point and the focus will be on products where there will be a higher commission payout.

So what are traditional plans? There are six types of traditional plans: endowment plan, money-back plan, whole-life plan, pension plan, children’s plan and term plan. Except for the term plan, the others are available in Ulips as well. Traditional plans are insurance policies where the policyholder has no control or choice over where the investments will be made, whereas in a Ulip a policyholder has around five to six choices based on different combinations of equity, debt and cash. » Read more..

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