What you must not forget to do when you get your dividend!

The eight wonder of the world is compound interest . It is the one mathematical formula applied to real life that can make you immensely wealthy.

This is exactly the reason why we buy mutual funds which are growth oriented, because at  15% growth per annum , your initial investment doubles in 5 yrs . It becomes 4 times in 10 and 8 times in 15!

Now how do we really consider this in our stocks which give us dividend and fixed deposits which give us interest post maturity?

The basic point of compound interest is that the growth is re invested back in the business. Without re investment there is no compounding factor.

With that understanding we need to take action on our dividends and our interest rates of our fixed deposits.

We HAVE to invest it back.  Buy new shares in the company with your dividend amount.

It is as simple as that. 

However what usually happens is that the money comes into your account, you see a credit in your account.. think how small it is.. ignore it and continue with your life.

When you do that... you have missed the opportunity of compounding.

In case of fixed deposit.. the money with principal and interest comes back into your account and most likely you keep the interest and re invest the principal back in... money not really needed but spent or left at 3.5% per annum returns.

So make note of this rule.. its a must

If you get dividends.. re invest it immediately into new shares of the same company.

If you get interest from your fd.. re invest the principal and interest into a new fd!

Its simplefinancialsense

Invest Zero to get Tax benefits under Sec 80C

Yes- Invest Zero- meaning nothing additional from your cashflow to make full use of your Rs 1.5L of Tax saving investments.


Its an interesting concept- applicable to both PPF as well as an Equity Linked Saving Scheme ( ELSS).

The ELSS is a scheme where one can invest towards the tax saving limit- but the funds are locked in for the next three years. At the end of three years from the time of investment, one can redeem the units tax free ( since equity investments for more than 1 year are tax free). If one has invested via a monthly SIP- then the withdrawal of the units also would need to monthly as the time of three years is met.

Now, very simply- one can withdraw the amount and re- invest into the ELSS again showing that a new investment has been made and hence no "additional" funds need to be utilized to obtain the tax benefits.  The good thing is that there is no Entry load into these ELSS funds- which means - what comes out and fully go in!

This of course has a very significant impact on you cash flow which can then be utilized towards repayment of home loan EMI etc.

The similar strategy can be followed on PPF- though the rules are a bit different. One can only take out a % of the overall amount 3-4 yrs prior.

Please remember- the above example is a cash flow initiative- there is a significant downside to the savings angle when you keep taking out from your "investment " kitty.

Its a give and take and a useful strategy towards Cash Flow..

what you do with it - its your choice.

that's why this is simplefinancialsense.

 

How to and where to update AADHAAR number with all financial instruments.

The government is pushing very hard to ensure all financial transactions are linked. I do think that this will help identifying areas where there is clearly tax and irregularities made by people.This will definitely help in reducing the black economy in the Indian market.

 The most recent information is to update the AADHAAR number in all banks by Dec 31st 2017 and for mobile phones it is by March 31st 2018.

While I appreciate the effort by the government, it is a lot of pain for the individual investors - a lot of effort. Imagine the number of things we need to link our AADHAAR number to.

1. All bank accounts - even if they are in operative.
2. All mutual funds- - imagine the number of funds one needs to go to add the linkage.
3. Insurance- LIC or any other-- all needs to be linked to the AADHAAR
4. Demat accounts
5. Credit cards if they are not from the same bank that you bank with.


it is a significant effort - and does require clean up of your accounts and financials-- better that you do it as soon as possible vs waiting for Dec .


For mutual funds - most of the MFs are covered by either KARVY or CAMS. The great thing is that these two are helping you only update in one place and all of the MFs managed by them get updated at the same time. Of course some of them like franklin templeton, sundaram still need to updated separately  because they are not managed by KARVY or CAMS.

Below are the quick links for you to go and update your aadhaar number

*CAMS -* http://www.camsonline.com/InvestorServices/COL_Aadhar.aspx

 *SUNDARAM -* https://www.sundarambnpparibasfs.in/web/service/aadhaar/

 *KARVY -*  _For Individuals-_ https://www.karvymfs.com/karvy/Aadhaarlinking.aspx

 _For Non-Individuals -_ 

https://www.karvymfs.com/karvy/Non-IndividualAdhrlinking.aspx

 *FRANKLIN TEMPLETON -* https://accounts.franklintempletonindia.com/guest/#/customerservices/updateaadhaar/accountdetails

 

While you are updating , it will be good for you to have the following handy with you ( each link has something different in terms of requirement)

 

1. Access to your email where you have the statemements coming. These are required when you get the confirmation

2. PAN numbers

3. Your / your family members date of birth

4. Bank account from which the money is going.

5. Access to your phone which is linked to your MF- the OTP will come there.

 

For insurance- one can do these in two ways.

 

1. If you have access , you can quickly add on the AADHAAR number- I was surprised that LIC enabled this to happen.. its quite easy.

2. Call up the customer service helpline and add the number.

3. Send the documents to the customer service- either vide email or through the post.

 

 

As you can see- time is ticking away- its best to get started and get it done asap-- Dec 31st is not far off...

 

Don't procrastinate- it will be more difficult to get the restrictions removed post the due date.. do it now.. its simplefinancialsense!

 

 

 

 

Using an app and get a discount

There are many new websites that have come up as payment gateways . They have been trying to get their brands noticed and are trying to get more and More people to come and use their services .

The more the people who are using them, the more the opportunity for them to sell them new stuff... Customers is key.

You saw it with Facebook, with WhatsApp and with the billions of $ that WhatsApp made when it was bought over... The main reason .. The number of people using it .

So to bring in more customers , these payment websites are raining discounts to attract customers. Let it be a paytm, a payzapp or even a free charge. One can get upto a Rs 50 discount to use these websites and pay your bills.

It's interesting to see how some of these are changing their usage and bringing in new use cases . The new paytm website is using advertisement media to talk about paying the taxi driver using their app.

Sometime back I had bought  a phone from olx. And what the person did was ask me to transfer money into their Airtel money wallet. ...

So, things will change, the phone will become your purse ... All things point to that trend. Its time to get onto the bandwagon and use these websites to also get some discounts towards the bill.

Break down your payment and get these discounts ... If your cell phone bill is rs 1000, break it into two and get rs 100/ back... Making a nice 10% discount into your account ..

Go ahead.. Use these websites ..

It's simplefinancialsense

Happy to receive comments from you all to understand your experiences .. Both positive and negative... Share ... Others will benefit from you..

Industrial houses have cheated us of our money

Today i saw a programme on cbc awaaz which had Mr Ajit Dayal talking about his views on the economy. There was one point which hit me quite hard and although i am not sure if i agree or disagree with him, i think i want to share it with my readers.

What Mr Dayal says is that we have actually flittered away our resources to industrial houses. The industrial houses basically got all of the resources - land, mining rights, spectrum- all at very cheap prices. Now the industrial houses basically to make abnormal profits had to invest in capex . So they invested and hence hired people in large numbers , and put money in their pockets. This lead to india growing at 9% .

Now according to him, we basically transferred then wealth from us ( indian citizens) to these industrial houses- who in turn returned a little back to us, in terms of salaries and jobs.

Now one can look at the way once the reforms happened, how these industrial houses have grown in terms of wealth.. Exponentially!!

This he says is not sustainable. Now these industrial houses basically buy a lot of luxury goods and stuff from outside of india , hence driving heavier consumption for those countries.

Its an interesting point of view which cannot be ignored. Its not simplifyable - but complex

What do you think?

Companies spends 11k crore on your dime

11,000 cr is what airtel spent on advertisements with the new " har friend.." theme. Amazing that they are spending so much money and then saying that they need to increase costs because of the reserve price that the government is auctioning.

Its an interesting concept of telecom companies, first increase expenses by spending such amazing amounts of money.. Then pass it onto consumers and blame the government.

That is why i prefer multi level marketing companies, where we can drive these costs down of advertising.

There was a recent article in the economictimes about amway india becoming a billion $ company in the next few years from its 2400 crores as of today.

These MLM companies are the disruptive business models that will change or is actually changing the way people will buy. In fact a lot of the internet based companies in india- flipkart.com , zovi.com, jabong.com - all in some way or the other actually use the MLM concept of taking away the middleman and brining things cheaper to the consumer.


As i have always said, it makes a lot of sense to go with disruptive technologies as they emerge.

Come join the bandwagon- its simplefinancialsense!!!

Owning your own insurance company

What if you had the opportunity to be your own insurance broker and earn all the money that the broker makes off you - would you be interested? What if i told you that you can make 25% on the premium that hyou pay for your car, or for the life insurance thath you buy from the nearby broker??

Yes, looks like i have gotten your attention.

Today, with rising prices , it is important for people to reducej the spends to ensure they save as much as they saved before . Such reduction can only happen if one takes the initiative with LOW RISK.

Its true. One can become ones own insurance company thanks to the multitude of opportunites that are now available with direct marketing companies.

Why give money to someone else??

Its an interesting revenue stream.. If you are interested- send me an email

Simplefinancialsense

Free mobiles from the government

What an interesting concept - the recent newspaper articles are all focussing around the fact that the congress government is thinking of giving free mobiles to everyone in the country.. And ratching up a spend of rs 7000 crores.

At a time when the fiscal deficit of the country is balooning up and india is under threat of a rating downgrade - this is a complete retroactive step.

The growth in Indias economy has been downgraded to less than 6% ... When it was growing at a healthy 9% . The reforms and growth engines have actually stopped moving- almost coming back to a state of intertia ( reducing intertia is always so difficult).

Even in the IT industry , india has started losing the battle- large headwinds on most of the companies- the increments given this year is going to be quite low- companies like infosys have actually frozen all payhikes this year.

In this scenario, here are a couple of thoughts.
1. Be risk averse- very risk averse... In money and also in terms of your professional career. This is not the time to shift jobs to smaller companies. If you get an opportunity with a larger brand - then go for it.

2. Move away from equities- stay in debt for the next few months.
3. If investing in a house- be very careful and check the builders reputation.
4. Think of building skills which enhance your portfolio- ones which can help you stay relevant. Going back and doing a commodity job is a complete no no.

Its going to be interesting times.. With drought, a decelerating economy and no signs of a rate cut.

Stay focussed

HOME LOANS at HDFC

I am right now at the hdfc branch in delhi trying to get my disbursement for my home loan.

The good thing is that the process at the lender is quite streamlined . You come in, get a number when you fill up a slip and then the waiting happens.

Being a process guy, i feel that hdfc should have a quicker process for existing customers who are coming in for a quick disbursement. I mean my time with the banker will be less than 4 mins and my waiting time will be around 2.5 hrs. It also upsets me that i need to wait for so long.

The information is provided beforehand about what i am there for.. Which enables this kind of break-up to happen.

I also dont see new technologies being used. It should be easy reduction in costs for all of this to be done online and the money transferred to the builders account in a jiffy.. Without the need to travel.

Lots of saving potential for the bank- will improve their bottomline quite significantly

hope someone from hdfc is listening.. Free consulting advice which would cost them more than a million $

simplefinancialsense

Check the bill for Vodafone

It's a big disappointment with Vodafone cellphone.

I remember the Tata docomo advertisement where the answer for everything is "puchke batata hoon" ( will ask and tell ).

I had a similar experience with Vodafone when I called up " Happy to Help".

Here is what i realized.

1. The policy is don't give all the information unless asked

All that they told me was my plan was a 150rs plan. They did not add on the fact that they were adding costs for Vodafone live- which btw i don't use at all and charging me another 200/-
When you ask the breakup of the bill- it's only high level . It doesn't matter if you are using the feature or not - it's part of the basic plan.

2. If there is a cancellation- heaven help you.
All providers ; have used Airtel and Vodafone : dont want you to leave. So they make sure that it becomes impossible to move out- make things so difficult that you never want to get back in again

3. Service agreements which no one reads. It seems that the initial deposit that you give for your connection is non refundable if you try an close the connection in less than 6 months. It's in the agreement - they tell you

It's a sad state with Vodafone..


So what's the point - check the bill- everytime. Do not trust your provider to be fair . They are not in that game

Simplefinancialsense

RBI deregularises savings interest rate- what should we do?

Some time back I had written about the fact that the RBI was thinking about making the savings bank interest rates to be linked to Market realities.

Yesterday in it's third quarter review they have made it a reality. Now no longer would you need to earn a measly 3% rate of interest on your spare funds, which banks use to lend out money at 12%!

As soon as the news came out yes bank raised the sb interest rates to 6%!
today we had a big advertisement in the TOI financial pages

As soon as this news hit the markets the smaller banks shares zoomed while the larger banks like hdfc, sbi all fell by 2-3%. The reason being that they have a lot of people who keep money in an sb account and hence their costs of fund are much lower.

So what do we do now?

Clearly we need to go to the banks which will give us the highest return on our deposits.example YES bank.

However things will not be as rosy as they seem. We will need to continue to monitor the sb rates since they are Market linked.

Banks may just give you a higher interest rate to lure you to become their customer, but may change them and make them lower later- it's not that easy to keep changing banks!

Also in some countries because of the credit being excess ( us , Canada) banks are actually charging money to customers for keep money in their saving accounts - far fetched thought for people in India and in an economy that is facing high inflation risks.


Right now- move to the banks that give you a higher rate.
older posts:
http://simplefinancialsense.blogspot.com/2010/06/optimize-your-sb-accounts.html
http://simplefinancialsense.blogspot.com/2010/06/optimize-your-sb-accounts.html
http://simplefinancialsense.blogspot.com/2010/02/free-interest-your-money-doubled.html
Smart investing
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Investing abroad... understand currency risks

If you have been investing abroad, either in the stock market or in the housing market, one should really sit down to understand currency trends and currency risks.

Lets take an example

If you bought a stock at 1$ in the US a few months ago, you would have spent 47Rs ( assuming at that time 1 USD= 47Rs).

Today that stock is worth $ 1.2- so you feel happy that you have gained 20% .

This is true- but not completely!

That is because you are comparing it with the USD, but have not taken into consideration the currency exchange rate.

Let us assume that the USD is now 1: 45.

so the money you have actually earned is Rs 54 which is a 15% gain and not a 20%.

Now if the exchange rate was 1: 48- then your portfolio value would have been Rs 57.6 which means a growth of 23%

Now- we cannot control the exchange rate fluctuations, but we should understand it-- especially when it is volatile and understand what direction it will take and the impact on your savings!


Happy investing!

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Get a discount- invest it!

I have said before in many of my earlier posts to always ask if we can get a discount on the stuff that we buy ( my sister is an expert on this- she searches the web , gets discounts from retailers). We will at most times find that we will get the same good at a lower price- IF we ask for it.

However, what we do with the "savings" is what is important!

Usually what ends up happening is that we "save" the money and then leave it to be used somewhere else. Our psychology lends itself to the thought that we are still under budget for the month and we will use it somewhere else.

Here is a quick tip- one that i am trying to implement.

"Take the money out from your pocket or bank balance. Use the money  "saved" and put it into a nice SIP , a stock, a fixed deposit that you think will grow in the long term.. Any place that you can invest it in is a great place."

These small savings will grow into large ones over time!

Here is a quick calculation.

Suppose you save 500 Rs a month using the "ask for a discount" technique. That is equivalent to 6000Rs an annum. Assuming that you invest this 6000Rs over a period of 20 years at an interest rate of 10%, you will have accumulated around Rs 3,83,000!!

Not a  bad earning for just asking.
( you can use this calculator to get your own calculations done - LINK)
All we need to do is to track it ( like we do our expenses and put it into a savings bucket!) and then Invest it!!

Do this for every discount that you get --- hotel stays, taxi drops, vegetables, books -- just anything!!

I am adding this to my retirement account!!


Some earlier posts on similiar topics

http://simplefinancialsense.blogspot.com/2011/01/getting-discount-on-your-travel-bills.html
http://simplefinancialsense.blogspot.com/2010/10/earn-free-5000-rs.html
http://simplefinancialsense.blogspot.com/2010/03/make-money-read-emails-and-network.html
http://simplefinancialsense.blogspot.com/2009/09/lost-coins.html


Happy investing

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PPF In April 2011 Vs March 2012

March has gone and has taken all the tax fever away. All of us were running around to ensure we max our tax saving investments.

The year has turned and a new financial year has started. Most people will wait for March 2012 to make investment in tax saving instruments like PPF.

But this post is about why it makes sense to invest today in April and not in coming March.

Its basic. PPF is a great investment vehicle- not only to save tax. The interest earned is a handsome 9% and is totally Tax free. So if you invest now in April, you get the full 9% interest rates for the year. Usually people get their bonuses in March Salary and they spend it all in april and then try and run around to save later on.

Automate your finances - especially the "Pay yourself first" concept.

Get going and invest in PPF right away-- dont wait till march!

Happy investing!

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Make 15% Tax free investments at Low Risk

There are a lot of such opportunities out in the market which we should be evaluating and trying to invest in- of course one needs to ensure that the risk associated with these is appropriate.

One such great opportunity is the Titan Gold Harvest scheme for buying gold jewellery.

Basically you put in a SIP for greater than 3000 Rs/ month ( in multiples of 500 ) for 11 months and you get one month of SIP free.

So lets assume you put in 3000Rs per month. So in 11 months you would have invested 33,000Rs. In the 12th month, you would get 3000Rs added from titan- which means that you now have an overall amount of Rs 36,000 with them.

The benefit is quite clear for everyone to see. If you caculate the interest rate on a monthly basis - you will be getting 15.6% annualized returns- Tax free.

Great isnt it?

Now you can use this money to buy jewellary from Titan. One cannot purchase gold coins ( pure gold , but anything else is possible, gold, platinum, diamonds!)

Whats in it for Titan? Yes, this is a great question. But what this does for titan is that
1. it gets them confirmed sales for their jewellery- so its great for their business. The more people they have on this- the better it is for them! Hence you will always see their salespeople trying to push customers to go for this .
2. They also get funding for their business from their customers! Nowdays usually the cost of funding from banks is around 20%. So this is a great way for them to get cheaper funds!

My thoughts for this- go ahead- Gold is always a great investment and should form 5%-10% of your investment portfolio. This is also a great way to keep your wife happy or if you are saving for your daugters wedding!

Happy investing!!
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Older posts
http://simplefinancialsense.blogspot.com/2010/10/secret-of-20-risk-free-returns.html

Getting a discount on your travel bills.

Going directly to the hotels and getting prices from them logically makes a lot of sense. You cut down the intermediate and therefore save more money.

Right?

Wrong!

While there are no two ways about the logic in my eyes- but reality is quite different. Going through a travel agent makes more sense if the travel agent gives you a discount- upto a certain point this reality is correct.

Actually speaking there is a trick that we have just learned this week on how to negotiate with travel agents.

Travel agents because of the fact that they gaurentee a certain business to hotels and airlines get bulk discounts from them. Now, they have the option to pass on these discounts to their customers if they do desire to.

The issue is that they have no desire to do so unless pushed. Every discount that they pass onto people actually burns a hole in their pocket - so we need to do something to try and get them to pass on a discount.

The way to do so? Negotiate directly with the hotel and get a discount- what this does is that this gives you a bargaining position with the travel agent to try and negotiate further down. Now , be aware that the hotel will not give you the same discount they give to the travel agent- they will give a lower one. So the best deal you can get is if you can negotiate further down with the travel agent.

Why will the travel agent give you an equivalent or a lower discount- here are a couple of reasons.

1. The travel agent needs to fulfil his quota with the hotel- so your business is important to them

2. Sometimes the travel agent gets additional discount for volume business. So if you are going to them in a group- your business is even more valuable for them.

3. If the travel is offseason- it helps even more

In a recent travel booking , we were able to get a 17% discount over the list rates of the hotel .. an additional 5% discount from the travel agent over the 12% the hotel was willing to give us... a good 2000 Rs saving during the negotiation.

Use this next time you plan to travel. Now , I have not tried doing this for airplane tickets- i dont think it will work with them- but at least in travel trips and hotel bookings, this learning will help you get some side pocket money.

Happy Investing.
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Breaking the Old fixed Deposits- part 2

I just now went through an article from the economic times talking just about the last post i had on this ( not bad i say to myself- i seem to be ahead of the curve in thinking some of these things). Here's is my older post

-- LINK

here is the link from the ET
http://economictimes.indiatimes.com/personal-finance/fixed-deposits/why-you-should-not-pull-out-your-fd/articleshow/7240752.cms

Basically here's my two cents on this.

1. Negotiate the penalty on the breaking on the interest rates- get it reduced as much as possible
2. Some of the banks may not charge anything since you plan to deposit it back with them itself.


So go ahead- find out what makes sense for you.


Happy investing!!
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Online Shopping site

One of the trends in the market is going online to shop , and hence save additional money ( hey its a financial blog right!)

Online shopping sites are blooming by the dozen. Having tried out a few of them, i would like to share a few of my experiences. Here are some Key tips.

1. Always verify if the product is second hand or first hand -- especially on websites like ebay.in
2. Verify how the payment will be made- on delivery or right upfront.
3. Check the return back policy- especially if there is something wrong about the product- who bears the cost of sending back the product.


While doing the surfing i have found a few sites that i think are good...

1. fashionand you.

It has a good range of products, a lot of them branded ones. They are today having a sale on reebok goods at upto 77% discount, sometime back they had some good sales on blackberrys and in the new year they had a Rs 11 sale-- to celebrate the 2011 new year!!
2. Dealsnyou
Here, the deals are sent daily- one can get it on their emails or cellphones and quite good deals on food and other activities..


So go ahead and join. Here is the link once again..

fashionand you
Deals and you

Go ahead.. enjoy some neat discounts.

( Become a follower of the blog or subcribe to posts using the links on the right) .

Killing Airfares

Nowdays it almost seems as if it is out of reach of a middle class person to travel by flight. The return flight from Bangalore to Mumbai costed me Rs 17000.

I recall days when the flight to delhi from bangalore costed only 7000Rs ( return fare).

so what should we be doing to manage these high prices?

1. Surf all websites- trip advisor, makemytrip.com,cleartrip.com,yatra.com
2. Plan travel in advance. At least from a week to one month- you will find that the flight rates are almost 50% lower
3. Use your miles to travel. Whatever you have collected- please use them.


Travelling by air is very comfortable ( not really in bangalore since the airport is like 2 hrs from where i live) and saves time. But there is a cut off-- where time saving and value cross. You need to define that cut off and use the tips i have given you to reduce the flight fares

Happy Investing.
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Forex card- Is it worth it

Whole travelling to the US i use the HDFC forex card. It is the preffered means of carrying foreign exchange by my company also.

However , I am not happy with the product and when i compare it with American express travellers cheques. Here are my views


Pros

• This is like a credit card, small enough to keep in your pocket
• HDFC Bank is quite prompt in getting these to you
• One can easily return the card and the money is put back into your account quite promptly
• One can withdraw the money when ever required from any VISA ATM

Cons

• This is not like a credit card. There is a cost of $2.5 for every transaction made- NO MATTER what the amount you with draw.
• The charges above are also not constant- I tried taking out money from one bank- and they charged me 5$!! it was pure cheating.
• Some ATMs have a limit to the amount you can withdraw. So , if you want to take out say 600$, the ATM may allow you to take out only 500$ at one time and hence you now need to pay twice the withdrawal charges.

To me, the cons of taking out money- really pinch me. I mean, its my money- and they are charging me to take it out ( of course things like this is all common in the US- there is no free lunch)

I would prefer to use travellers cheques or carry cash!

Comments welcome
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