Easing into retirement by reducing liabilities

Make your retirement the happiest phase of your life with systematic planning and a few decisive moves today.

Every person who works hard all their lives does so with the expectation of retiring in style. They wish to ease into the last years of their lives in comfort and peace, secure in the knowledge that they’ve done everything they could for the good of their loved ones.

But wishing for a peaceful retirement and actually getting it are two different things. It takes a lot of planning and hard work to be able to retire with grace and dignity. And the time to put in the work is now, while you are still employed and have a regular income. You can follow this simple guide for retiring with complete fiscal security.

Think of retirement as a journey, not a destination.

Many people think of retirement as a phase where one’s active life ceases and one of rest and relaxation begins. But you can fashion your retirement the way you want – you can be as active or as laid back as you wish! It can be a phase of true contentment, as you rediscover and explore the things that matter the most to you. You did not have the time to indulge your hobbies the way you would have liked for several years – retirement gives you the opportunity to travel, make new acquaintances, take up a sport or hobby, be by yourself… the world is your oyster, and it’s time to make it yours!

5 pitfalls to avoid in the home loan application

Following are the common areas of error that you are likely to make when applying for a home loan – and how to avoid them.

As if buying a house in an escalating property market wasn’t difficult enough, you also need to navigate the home loan process carefully. Though home loans have been suitably simplified by leading housing finance companies, some parts of the process can prove to be veritable landmines. These errors can prove costly in the long run, and even result in the loan application being rejected. We list these areas of potential trouble and enumerate how you can avoid them:

1. Not having enough money at your disposal for a range of payments.

Most first-time home buyers are aware that they require some amount of money to make a down payment on the house. The down payment is normally split into two components: The token or booking amount, and the first installment on the house. But you also need to have sufficient money at your disposal to pay the following costs, which will not be paid from your home loan:

• Stamp duty costs 
• Registration fees
• Lawyers’ and broker fees
• Money to pay towards placing an advertisement in the paper asking for claimants to the property to come forward (this cost is split between the seller and buyer)
• Home loan application fees
• Lender’s evaluation and processing fees
• Stamp duty on the loan agreement
• Pre-EMI money (before the first EMI is deducted)
• Society/developer transfer fees
• Society membership fees

Find out all these costs and set aside the money accordingly – or you may come up short!

How to plan early for a relaxed life post working years?

Benjamin Franklin once said "Failing to plan is planning to fail" and it sounds so obvious for one of the most important part of our lives - RETIREMENT. Proper retirement planning considering your current standard of living, your assets and liabilities and the impact of inflation on them, will help you enjoy a relaxed life post your working years.

Use a retirement calculator to estimate the amount you would need to invest now to lead a comfortable life post-retirement. Once this amount is known you can buy a retirement policy from an established insurance provider. Today more than a dozen insurance companies offer retirement &  pension plans with several benefits / flexibility ranging from single premium pension plans to regular annual premiums, lump sum payment to annuity payouts or a combination of both and many others.

3 Margin Types that every derivative trader must understand

If you are a derivative trader in Indian stock Markets specially an Option writer (Call and put sellers) or futures trader, you must understand various types of margin imposed by your broker. Failing to maintain adequate margin can lead to very high penalty beside ad hoc squaring-off existing positions to trim the size of your overall positions.

SPAN margin

The initial margin required for the positions is computed online and on an intraday basis, using a software called SPAN (Standard Portfolio Analysis of Risk). Sellers of options (both call and put) and holders of futures (both long and short), where the potential losses could be high, are required to have sufficient margin in their accounts. The SPAN system uses strike prices, risk-free interest rates, changes in prices of the underlying securities, changes in volatility and time-value to calculate the worst possible move in the security. For the exchanges, SPAN margin covers almost the entire risk for the day, minimizing the systemic risk due to margin pressures.

Kotak Free Intraday Trading – What you should know?

In this age of disruptions companies are differentiating themselves by offering products and service to creates sticky customers. Across customer facing industries there are companies which are taking on competition by offering more value for the buck. As a consumer, online retail & telecom comes at the top of the mind where disruption has brought bonanza for customers.

There are disruptions happening across financial services industry as well. Brokerage industry, for instance, is facing disruptions from discount brokers and off course full service brokers are responding with innovative offerings. One such recent offering is FreeIntraday Trading (FIT) from Kotak Securities which has waived off brokerage on non-delivery based trades for retail clients.

So how significant is this?

Considering the fact that an average intraday self-trader spends 220 rupees on brokerage per day and approx. 5000 per month only on cash segment, the savings are significant if you add-up the total intraday brokerage paid in all segments put together (cash, futures, options).

6 Important Things to Know About Fixed Deposits

Fixed deposits at banks are one of most convenient, safe and hassle-free investment instruments that also provide reasonable returns. With the advent of online banking these days, you can open FD online within few seconds and clicks.  The tenures in fixed deposits are fixed and usually provide higher return on higher duration. For example, a one-year deposit might fetch 6% per annum return while a 5-year deposit might fetch 7% per annum return depending upon the financial institution. Following are some of the key things to know about fixed deposits:

1.  The rate of return on fixed deposits is fixed. Unlike other high-risk investments like stocks, mutual funds, and debt funds, FD Interest rates aren’t dependent on fluctuating market rates.

2.   All banks provide flexible tenures to choose from. You can open an FD account for as low as 6 months to a maximum of 5 years.

3.   You can avail loan against your Fixed Deposits. Some banks provide up to 90% of the total FD value as personal loan. Unlike other unsecured personal loans, you get lower interest rates when you secure your loan with your FD as collateral.

4.   You can choose between cumulative and non-cumulative options. In cumulative fixed deposit option, interest is accumulated over the tenure of the FD and is paid only at the time of maturity. This helps you in getting a lump-sum amount on maturity. You can use a simple FD Calculator to know the amount you will receive on maturity. A non-cumulative FD works on the opposite principle. In these fixed deposits, the interest payments are made to the investor in a periodical, steady, and timely fashion. This makes it the most sought-after investment option by retired investors, or those who seek frequent cash flow.

Debit vs Credit cards – Which one is better for you?

While shopping you have the option of paying either through your credit card or your debit card. Though the difference might not appear, but there is a huge difference the way payment is processed behind the scene.

Paying through Debit card is almost like paying cash and is usually without transaction charges. Payment though debit cards is also instant. On the other hand credit card transaction requires a signature, and is processed by the credit card company. The funds may or may not be immediately deducted from your bank account, depending on how the retailer handles their transactions. Some stores "batch" their credit transactions and send them at the end of the day. Unlike debit cards, to the merchant, processing a transaction as credit usually involves a credit card transaction fee to the major issuers, like Visa and Mastercard. 

Credit cards are mostly a better option while shopping online because of host of offers provided by issuer banks such as interest free EMI, zero transaction charges and higher reward points. It is also relatively safe as you are never liable for unauthorized charges, unlike debit transactions, which are the same as cash. It is advised to use your credit card while purchasing a flight ticket as many companies offer air miles for purchasing the tickets through credit card.

6 Benefits of Buying Term Insurance Online

People are increasingly getting aware of advantages & disadvantages of various life insurance products available in the market and carefully assess their personal needs before buying one. This is primarily happening in urban India because of variety of factors coming together such as easy access to internet, loads of educational content on blogs & forums and variety of products offered by many insurance companies.

One such theme which is widely getting popular these days is term insurance plan which, unlike conventional insurance schemes (endowment, money back etc. ), provides pure protection  and is solely taken with the intention of protecting the dependents in the family. There are many benefits of taking a good term insurance policy but the main benefit that comes with it is large coverage at affordable cost. Since term insurance is a pure protection product, companies are able to provide very competitive rates.

While the amount of suitable coverage varies from person to person based on their need, in general I recommend a sum assured of 10 to 12 times of one’s annual income. So if one is earning INR 5 lacs per year, the ideal term insurance he / she should take is INR 50 to 60 lacs. Off course the more the better but the premium also increases with the increase in sum assured and might not be suitable for the earning profile. You can use a term insurance calculator to check the premiums of various sum assured levels and decide what is best for you.  Here are the 6 benefits of buying a term insurance online:

1. High coverage at affordable premium: Term insurance plans provide a very high life insurance coverage vis-à-vis conventional insurance plans. For example for 30 year old person a typical endowment insurance policy with coverage of INR 50 lacs for 25 years would roughly cost INR 2 lacs in premium per annum while a typical term policy of same sum assured and tenure would cost less than INR 10000 per annum. Off course endowment policy provide some return on premiums invested but if the objective is pure protection and your investments are planned elsewhere, term insurance is the best option.

Model Portfolio Update

Updating Portfolio after 5 long months. As expected lot of stocks have become attractive for investment / trading and hence a sizable portion of cash got utilized in buying some undervalued names. 

updated portfolio here: http://www.investorzclub.com/2013/03/amit-agarwals-model-portfolio.html

Long term return of various asset classes

Equities, gold, silver, diamond

Top 5 Largest One Day Drop in Dow Jones

Dow Jones witnessed largest single day fall of around 1200 points on Feb 2015 in its history which have wiped out many un-hedged short volatility traders who were making money easily since 2015. Sharp fall leads to sharp hike in volatility which feed on itself and leads to further decline in stock prices. After prolonged bull market of nearly 10 years, markets are finally showing signs of correction. Here are some of the biggest one day correction in dow jones in terms of absolute points. Off Course the biggest correction in terms of percentage was in 1987.

NSC or Tax Saver FD – Where should you Invest?

When it comes to tax planning there are variety of investment instruments yielding different returns, depending on the risk you are willing to take and the flexibility you desire from the instrument. As you know ELSS is a great investment avenue from tax planning perspective as it yields market based return.  which could be sometimes very high but is also subjected to volatility. This particular instrument is good for young professionals who have time by their side. Young investors are also able to withstand volatility better than elderly professionals as markets beat all other asset classes on a 10-year time period by a wide margin.

But if you are risk averse then Tax Saver Fixed Deposits, National Saving Certificates & Public Provident Fund are the popular choices in India. FD Interest Rates are generally lowest among these three but FDs offer quarterly compounding which results in somewhat similar yields. PPFs are similar to EPFs, with relatively lesser benefits, but available to all citizens of India irrespective of their profession. Since EPF or Employee Provident Fund is available to most salaried individuals, they can choose between Tax Saver FDs & NSCs for further investments from tax-saving point of view. In this article we will explore the similarities and differences between these two instruments.

Bitcoin bubble burst

Carnage in crypto currencies. Whats going on? Stay cautious. Stay on cash.

How to approach stock market and what to expect?

A must must watch video for all my dear readers who can understand Hindi. This video can change the way you approach stock markets and set your expectations right. Having the right expectation is the key ingredient for long term success in any business including stock market which is nothing but a business of businesses.

NSE NIFTY Yearly Return 1996 - 2017

Nse Nifty 50 index return from 1996 to 2017

6 do's of trading

So well put together by Rayner Teo...

Trick to pay your loans quickly

By increasing your payment towards EMI by just 5%, which is roughly the consumer inflation in India for past few years, the loan can be repaid in half the original time. A very good strategy to get rid of debt quickly.

Should You Buy AEGON iINVEST INSURANCE PLAN?

I have not been a great admirer of market linked Insurance Plans, popularly known as ULIPs, primarily because of the amount of premium allocation being done by most insurance companies towards buying the units of the Unit Linked Plans.

In most of the old ULIP plans buyers have paid hefty percentage of their premium towards commission and marketing resulting in fewer unit purchased and thus poor return on their invested capital over the period. This happened primarily because of lighter regulation and less awareness about the product. Agents promised hefty returns and buyers in general didn’t question how? But with increased awareness and much tighter regulation these days, one can again look at some ULIP plans from trusted insurance companies which are offering even 100% allocation.

Taxes in Indian Stock Market

Taxes on trades and gains in Indian Stock Market.

Logic Kya Hai

I was horrified to see a Dominos guy escaping a near death experience recently at a busy intersection in Kolkata when he tried to pass between two public buses racing each other for passengers. There is no doubt this is a common phenomenon across all major cities where number of bikers face life risks on busy roads specially the delivery guys who are always pushed to deliver food or products asap. No doubt pizza tastes better when its hot but at what cost? #LogicKyaHai. Pushing the delivery guys to deliver fast risking their lives seems ridiculous and as buyers we all have to play a role in changing this system.

Top 6 oldest posts on InvestorZclub

InvestorZclub was started about 7 years ago and has since then gained reasonable popularity with ~1000 Facebook followers and 3000+ feed and email subscribers. Since initial days the sole objective of the blog was to make stock investors informed, aware and empowered with posts ranging from direct stock analysis to explaining the working of stocks markets and timeless wisdom from some of the greatest investors.

Here are the top 6 posts which were published in the first year of this blog.  

How is the price of a stock determined  - 23rd Oct 2010

Warren Buffett Investment Criteria - 17th Nov 2010

The Potential Multibagger  - 23rd Nov 2010

14 Timeless Wisdom from Rakesh Jhunjhunwala  - 7th May 2011

DDM Stock Picking Strategy that works wonders  - 24th May 2011

Ting Ting Tding  - 27th May 2011

Also Read: Top 5 articles on InvestorZclub in 2014

Portfolio Update - 13th Nov 2017

Significant portfolio Update. Booked 22% gain on overall portfolio in just 3 months. Zero credit to my stock picking skills as such sharp appreciation was never expected on portfolio level and it all happened due to benign liquidity environment. 

Please check the updated portfolio for more details:

Find your trading edge

The most essential ingredient in trading is an edge.  All successful traders have it and in no way one can succeed in stock markets without this.

Why rich are successful in spite of repeated failures

Few good ideas are all you need.  So don't fret over the opportunities lost while learning.

Red Flags in Reliance Industries Q2 FY 2018 Result

While analysts are cheering trying to justify why Reliance Industries stock price should get re-rated, I found the balance sheet which was with the result release to be quite scary. I have encircled the items which seems to be looking not good for the shareholders:

Current Asset to Current Liabilities, which measure the liquidity position of a company stood at 0.58 in Sep 2017 vs 0.62 in March 2017. Any figure which is less than 1 is not very healthy. It is approaching half which in my view is a cause of worry.

Very Low Interest Payout: Non current and current financial liabilities (including trade payable) put together is roughly 3.99 lakh crores while the interest outgo in the second quarter of FY-18 was only 2272 crores which is just 0.57% for 3 months. No body gets loan at less than 2.3% per annum. So the interest outgo is bound to go up very significantly in coming years when the interest capitalization is stopped and the trade payable(> 84000 crores) are paid / reduced.

The Short Sellers

The Short Sellers in Stock Markets these days.. 

How to choose between Fixed Deposits and Equity for investments?

Stocks Vs Fixed Deposits - Which one is better for you?

If your Investment horizon is  less than 3 years, fixed deposits are better investments than equities as cyclicality might create huge volatility in stock prices in short term while if you have surplus that you can set aside for more than 5 years, diversified equity portfolio or Index ETF such as Nifty BeeS are much better choice as per the performance of different asset classes over the last century.

How Good and Bad Credit Affects the Credit Score?

Credit is an integral part of life today in the form of rolling credit when we swipe our credit cards or in the form on various loans that we may take from time to time. Gone are the days when credit was supposed to be a bad thing. Earlier generations shied away from taking loans and borrowing was frowned upon. This is changed in the past few decades, now loans are no longer a dirty word; getting loans is simpler, and there are multiple avenues available for people who are seeking credit. Credit per se is not bad and any stigma that may have been attached to it has been removed in the last few years but the way the borrower treats credit makes it good or bad. 

Is Credit Good or Bad?

As stated above the way credit is treated makes it good or bad and there is no good credit or bad credit per se. So how does the borrower’s treatment make credit good or bad?

All loans are extended with an understanding that the borrower will repay then in a timely fashion as per the agreed terms and conditions. This essentially means that the borrower needs to pay the EMIs on time every month and in case of credit cards pay the amount due on or before the due date. Not doing so means that the borrower has defaulted on the payment thus apart from attracting a penalty charges and interest there is a negative impact on the credit score too. Repayment history is the biggest contributor to the score calculation and all delays in paying EMIs and credit card dues are reported to the rating agency thereby affecting the credit score negatively for a considerable time.

Is Canada a Better Investment Haven in Troubled Times?

The Canadian dollar is enjoying an imperious run of form of late. Between 1 May 2017 and 7 August 2017, theCAD/USD has appreciated by 7.8923% – a remarkable achievement. The loonie (CAD) has rebounded sharply in recent months, owing to the improved performance of the Canadian economy. The S&P/TSX compositeindex is currently down 0.59% for the year to date, with a 52-week trading range of 14,319.11 on the low end, and 15,943.09 on the high-end.

However, over the past 1 month the index has moved from 15,105.29 (July 10, 2017) to its current level of 15,197.84 (August 10, 2017). The slight appreciation is reflective of current trends in the Canadian economy. Consider that the 1-year return of the S&P/TSX composite index is 5.93%, spurred in large part by the uptick in commodityprices like crude oil, gold, natural gas, coal, and the like.

Canada is a commodity-rich country, with some of the largest crude oil deposits in the world. Currently, Brent crude oil is trading at $53.24 per barrel, and WTI crude oil is inching closer to the $50 per barrel level at $49.85. As oil prices rise, the Canadian economy strengthens. As Canada’s chief export, crude oil has a large part to play in the performance of the CAD. Rising prices boost the value of oil companies on the S&P/TSX composite index. This in turn raises confidence in the Canadian economy.

Portfolio Update - Aug 2017

Model Equity Portfolio update after almost 4 months. Fully utilized cash to buy some good quality blue chip names for the portfolio. Please check the updated portfolio for details:

http://www.investorzclub.com/2013/03/amit-agarwals-model-portfolio.html

Know About Tax Saving Options This Year (FY 2017 - 18)

Taxes form a good part of your total expenses, and anyway who likes to pay lot of taxes. But the truth is, our government allows tax saving on certain investments to bring about the saving habit. Especially for a longer horizon of three to five years or more.

Thus, there are taxsaving investments which you will be using to save tax this financial year. Similarly, some of these investments also remain tax exempt even at maturity. Thus, all investments are divided in the following three categories:

• ETT: Investment reduces tax but any accrued interest is taxed in future years including the gain at maturity.
• EET: These will offer tax reduction in the year you invest, any interest accrued in future is exempt but the maturity value is taxed.
• EEE: These are completely exempt investments, that is, your invested amount is exempt, interest accrued is exempt and maturity value is also exempt.

Since EEE investments are most tax efficient let’s cover these first.

Can a Personal Loan be Used to Pay Off Student Loan Debt?

One can argue that student loans are the worst, and they could be right. Unlike home loans or auto loans which are usually availed by well-settled and financially strong individuals, student loans are to be repaid by young professionals who have just started their carrier. Needless to say, they are often live on a shoe-string budget and have to put a cap on all kinds of expenses to pay off the student loan debt. So, the question is- can a personal loan be used for paying it off?

It makes sense, right? Since a personal loan can be used for any “personal” reason, why not repaying student loan debt? In most cases, you are right in believing the same. However, it’s important look at the idea from all perspectives.

The Bird’s-Eye View

The most important reason why you would want to take a personal loan to pay off student loan debt is to enjoy a better interest rate. If that’s not the case, you don’t have much to earn from the deal.

You want to reduce your EMIs and hence the financial pressure. Replacing a high-interest loan with a low-interest one is one way to go. However, if you are not able to get a personal loan with a lower interest rate then there is no point in applying for it even. You also need to see if the interest rate difference is enough, to say the least.

Valuation in Nutshell - By Aswath Damodaran

Yes Bank: The Growth Machine

Having acquired the banking license by RBI in 2004, Yes bank exited FY-17 with over 1000 branches and a balance sheet size of over 2 trillion rupees. Its net worth has gone up over 2650% in past decade from INR 800 crores in 2007 to 22000 crores in FY-17. The bank has created tremendous amount of wealth for its investors since its listing, as the stock has appreciated more than 3500% since its IPO price. Yes Bank issued its maiden shares to public in 2005 at 45 rupees.

So what’s the secret behind such success? Probably, right branding and technology focus has played a key role in the kind of growth the bank has achieved. From the beginning itself, the bank has invested heavily in brand building. In 2013, it signed a 5-year sponsorship deal with IPL and the association seems to have paid off handsomely as it has given significant visibility to the brand and acceptance among Indian people. For IPL 2017, the bank was an associate sponsor. 

The bank is investing heavily in technology backbone and demand of the newer generation customers who prefer net banking over branch banking. Yes bank has specifically focused on making its web and app based customer interfaces simple and powerful. The bank also launched the star banking facility recently where the customer can reach the bank by just dialing **2265 (Star Bank) which is a generic number and very easy to remember. This kind of dialing facility is already popular in western countries and is expected to catch up in India as well. 

Yes bank has increased its focus on retail banking recently and has exited FY 2017 with over 1000 branches & 1785 ATMs and a target to achieve 2500 branches by 2020. With larger footprint the bank is poised to get increasingly higher share of low cost deposits and also diversified credit portfolio of home loans, personal loan, credit cards and other retail credits which are relatively far safer than lumpy corporate loans. Considering the capital position, technology backing and ambitious plans, the bank has significant room to grow further and create wealth for all stakeholders in coming years.

Be the climbing Wolf

Get charged up with this very energetic video. I found it really motivational.

Portfolio Update - April 2017

After 4 months of sitting on 100% cash, good opportunities seems to be emerging in some stocks. Sold all the liquid investments and bought few stocks that seems attractive for medium term investments. Please check the update portfolio for further details:

http://www.investorzclub.com/2013/03/amit-agarwals-model-portfolio.html

How to use UPI for a hassle free money transfer instantly

Unified Payment Interface or UPI is a joint initiative by National Payments Corporation of India’s (NPCI), Reserve Bank of India (RBI) and Indian Banks Association (IBA) to enable secure and extremely easy way to transfer money between bank accounts. It’s a payment mechanism which allows instant money transfer without the bank details. Instead of bank account number and IFSC code, a virtual payment address (VPA) is used here. To use this payment Mechanism one needs to download the bank specific app, such as Axis Pay, on their mobile phone and create a VPA which will be linked to their bank accounts.

A virtual payment address is an identifier that can be uniquely mapped to an individual account. It can be thought of like an email ID for your money that your bank uses to transfer money and make payments.

Important candlestick patterns at a glance

Japanese Candlestick charting has almost become a defacto standard for studying price history of stocks / bonds / gold etc as each candle packs in a lot of useful information regarding the action on a particular day. However a series of candles together gives clearer picture in terms of the direction of the asset class. Following are some of the most important patterns that expert traders use to position themselves. 

George Soros on Volatility

Portfolio Update Dec 2016

BIG changes done to the portfolio considering the recent events and macro headwinds lined up. Please check the updated portfolio for details.

I am sure many of you will have questions after this portfolio change and I will be happy to answer them. You can post your query in the comment section of this post.

http://www.investorzclub.com/2013/03/amit-agarwals-model-portfolio.html