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I had been struggling to put up a database of financial products on my personal finance website. It had to be a database where you can filter, view details and link to the relevant urls. And then I needed to put it on my Joomla site. The good news is that I have finally been able to do the thing! Take a look!
The database needs to be filled up and that will take time. But I am waiting for your suggestions on what information that you would like in the database.
My excitement at being able to do it is immense (Tweet)
Here are some sane voices that I enjoyed reading on the Financial Crisis. I’m sure you’ll enjoy too.
from The Indian Investor’s Blog by Deepak Shenoy
from Marginal Revolution by Tyler Cowen
Yudishthira answers that the most amazing thing is that even though every day one sees countless living beings that are old and dying but no one can imagine him/herself as old or taking that last journey!
That’s why people have a natural tendency to avoid financial planning
Pension and annuity are generally associated with security and stability in the sunset years.
A stable annuity is definitely desirable in retirement. Who wants money/ cash-flow worries when one would rather sit back and relax? But, are pension plans the best avenue for retirement planning? Probably not, as we shall see here.
Pension plans from insurance companies
Pension plans are generally offered by insurance companies. These may be traditional products or unit-linked insurance plans.
The points to ponder over in such plans are as follows:
• Pension plans from insurance companies have high cost structures, which impacts the corpus growth.
• In traditional pension plans, the insurers have guidelines on where they could invest. This is both good and bad - good because it brings in stability and dependability to the corpus and bad because such avenues generally tend to give low returns.
• At retirement, pension plans tend to distribute about 5.5-7% (as on date) of the corpus as pensions. This again is lower than what a person would be able to earn otherwise. Indeed, this is a double handicap - the corpus tends to grow slowly during accumulation phase and tends to earn lower than market rates in the distribution phase.
• Once the pension starts, the corpus cannot be taken back even if one wants to. At vesting, one could withdraw at the most 33%. So, even if there is some very good avenue for investment, the investor is stuck.
• Pension annuities are treated as income and are thus taxable. All other insurance proceeds, apart from the pension annuities, are treated as tax-free. This is probably one of the most important drawbacks. Like I asked in the beginning, who wants to pay tax in retirement, after having done that all life long?
The important points to note in these plans are as follows:
• While they do not suffer from most of the handicaps that afflict pension plans, the income is not tax-free even in their case. Under the options available, one could either claim long-term capital gains on the amount received at maturity or opt for dividend distribution where the mutual fund (MF) pays the tax (amounting to 14.16%) and the distributed income is tax-free in the investor?s hands. Either way, there?s no wishing away tax entirely.
• Both these pension plans invest up to 40% in equities and the rest in debt securities. It may not be desirable to have such a conservative portfolio, especially if the investor has over 10 years to retirement.
• One would be better served by being more aggressive in the accumulation phase and progressively pare exposure to equities and MFs as he comes closer to the retirement date.
Does one have any other option?
There are all kinds of investment products available. Here?s what one should keep in mind:
• One could use a judicious mix of equity, MF, Public Provident Fund, fixed deposit (FD) and fixed maturity plan (FMP), etc to build the corpus in the growth phase.
• Before retirement, the investments can be deployed in avenues like FDs, senior citizens? scheme, Post Office Monthly Income Scheme, MF investments with a systematic withdrawal option, FMPs in the dividend distribution mode and monthly income plans, etc to get periodic returns.
• Also, rental income could be an avenue in retirement. Even reverse mortgage could be considered in appropriate cases.
• A good advisor could plan a proper portfolio, which takes care of the liquidity requirements, risk containment and reasonable return concerns.
Remember, you can have a comfortable retirement without pension, and still have no tension
The writer is a certified financial planner who runs Ladder 7 Financial Advisories and can be reached atladder7@gmail.com
Indians may take the ‘a penny saved is a penny earned,’ maxim seriously, but a 9 per cent robust growth rate, saw an increasing number of them spending more than before. According to the Reserve Bank of India’s annual report, though net household savings in ab solute term went up by 8.18 per cent to 5,26,033 crore in 2007-08, as a percentage of gross domestic product (GDP) it is estimated to have fallen by 50 basis points (100 basis points equals one per cent) to 11.2 per cent during 2007-08. The reason: a robust growth of about 9 per cent boosting GDP during the year.
Investments in shares, debentures and mutual funds have seen a healthy growth last year. It also highlighted growing investor preference for riskier but high-yielding investment instruments compared to bank deposits.
The report said that investments in stocks, debentures and mutual funds grew by nearly 51 per cent to Rs 77,073 crore during 2007-08. In terms of share in the household savings it constitutes 10.5 per cent against 6.6 per cent at the end of previous year.
“The flow of household investments into mutual funds and growth in number of accounts with the industry in 2007-08 reflects this trend,” said AP Kurian, chairman, Association of Mutual Funds of India (AMFI).
However, growth is marginal when pegged to GDP—1.6 per cent against 1.2 per cent in 200607.
This growth is also not phenomenal when compared to global standards. “In the US, mutual fund corpus size is equal to over 70 per cent of the US GDP,” Kurian added.
Among the other components of household financial assets, assets in cash and investments in insurance, provident and pension funds went up by 21 per cent and 1.72 per cent respectively. But deposits (including bank, nonbank and trade debt) fell by about Rs 10,000 crore to Rs 4,15,245 crore, while claims on government became negative at Rs 27,042, against a positive figure of Rs 40,627 for the previous year, the central bank’s report said.
Ideasmoney shares an interesting story about a friend on Saving/Investing Regularly
It’s a story about a guy who got a car ( worth almost 7 Lakhs) out of just 70,000 which he invested a decade ago and left with some good money too!!On the contrary lets look at a person who buys a car on EMI. he pays almost 15% as interest. By making money work for you ..you tend to gain in the long run. But this requires tremendous patience and a systematic approach.
Check out the full story
Financial infidelity is a pretty wide umbrella term, including any situation where anything less than the full truth about your money situation is shared with your partner. This not only includes outright lies (from the big ones down to little white lies), but also deception by omission and deception by misdirection as well. In short, any time you actively manipulate information to give your spouse a false impression of your personal financial situation, you’re committing financial infidelity, and since it is an act of dishonesty, it interferes with the trust in your relationship.
Ranjan's Blog Personal Finance 2.01
