**Our Goal:** We make all effort to earn money. We work 24x7, bargain, turn every stone, review, and even take others’ support to juice that extra buck. Really do we do the same while investing? Do we really care …? Naaah… we invest as our advisor said.
**Your expectation:** You want to be millionaire, so your advisor/CA/Friend/Agent also; How he can be faithful to you? He is loyal to his earnings only. Don’t expect him to think for you, it is only you who exactly assess and utilize your finance.
**Objective:** At the end; we will arrange our wealth-basket in an informative table and pie charts, which will record and display our fund allocation and its variation from the ideal allocation.
**Basic Approach
**We can divide our finances in three class
**Asset **MF, FD, ELSS, POSS, gold, silver, currency & House.
**Loan **EMI of All Loans like Personal, Car, Credit card, vacation, House Loan.
**Cover **Insurance(Life, Household, mediclaim, critical illness, hospitalization etc)
**Paper work
**Here we start.
Pie chart gives instant picture for your investments.
Use Excel and prepare a table(Name, Fund, nature, Risk profile, Return Expected, Certificate No, inception date, Next Due, Maturity date, Contact details, are the a few columns)
Use formulas to segregate sum total of Asset, loan, cover & their proportion in a small table. Then prepare pie charts(Ideal fund Allocation, Current Allocation, Fund return, Risk profile)
After Reading till now; Please take writing pad. I don’t mind if you open excel sheet right now and classify your money flow.
**Class Analysis
**There is nothing right or wrong investment, they are respectively categorized within class, and One must prioritize his basket for his requirement.
**Asset
Most useful word after love which creates music in your life & shows your success, prudence money.
House/Land **you got you first salary after deducting tax! Gr8!… Get a house as early possible, it will make you responsible, save taxes, increases strength, and quality in portfolio. If Churned wisely, it shields daily changing tax laws and bank rates. Don’t become house owner but utilize it as an asset class. Don’t get second house, instead go for land purchase with 10 years low rate loan from bank. Save your quality cash.
**Post office saving scheme **If you are middle aged/Retired(Taxed/non Taxed) then use it first, the best is POMIS-steady income, NSC-Tax saving, KVP-Liquidity. No risk, very good return.
**ELSS **It is ULIP killer in u/s 80 Era. it creates good investments asset class just below to house/real estate.
**Mutual Fund **If you are not in tax net & young then use it first. Most talked class; go for long term, SIP and diversified equity for batter return. But it is easier said than done, SIP is itching every month and corpus get bigger slowly, BUT it is most powerful way(it can’t be described; can be realized only). STP is better way to invest.(it wouldn’t protect your capital but works on fluctuations)
**PPF **This must be your first tax saving tool, open account in SBI/Post office at native(you may change cities but native is fixed) put as much as possible in first year, regularly invest. its inherent profits starts after seven years but it is tremendous in tax savings, stability and safety.
**Gold/Silver **Metal is always of metal-man(Gold-smith) so don’t go for ornaments, always buy biscuit(coins have making charges, so seller insist for coins), don’t go to bank(these culprit don’t buyback), I do not find Diamond/Platinum worthy and easy to utilize so it’s up to you.
**Loan
Loan is Always bad! Not necessarily; All business works on fund raising(Taking loan) and utilize for capacity expansions etc. Prefer a good Loan over a bad Loan.
**Directly approach to bank, Try to reduce upfront fee, brokerage, baksheesh(Tip); Utilize their target pressure in your favor.
“Beggars are not choosers”. You will get loan if you show your strength, prosperity, capacity, and refusal to take it.
**House Loan **Good Loan, in terms of tax benefits, keep check on Interest rate w.r.t. PPF rates. If it is going more than PPF Rates, then consider part payment. Do not prepay more than your tax limit in one year. If want to slash totally then keep some principle due which must run up to one year EMI otherwise penalty levied on whole principle.
**Personal loan **It is only good when money is utilized in increasing the quality, strength of portfolio and earn more ROI then its acquisition cost otherwise don’t go.
**Car Loan **it is a bad loan but necessary evil, if going for a car. Don’t invest quality cash. work hard to get a skinned offer from lender. Try for all possible discounts.
**Credit card **Worst Loan but very easy. A Strict No, No. never roll your credit. Use your credit card as your cash. Better to put same amount aside while using Card. It will discipline your spending.
**EMI Shopping **Don’t tempt. It is a facility not the reason to purchase.
**Vacation Loan **Combat with provider for cheapest deal, don’t panic for a deal. If it is worthy, it will finalized; if doesn’t, even batter will come.
**Cover
If I live for 80 years or if I die today, in both cases I must ensure sufficient wealth to my beloved.
**I came across a lot *‘thumb rules’* from many reputed advisors.
Your insurance must be_(6 to 25) times of your annual income*
*This rule is not for you but for your advisor and depends on your capacity & his commission.(Rs. 4 lac Annual income needs Rs. 1 crore insurance; 30 yrs male, 35 yrs term rate is 45000/- a year. You will get nothing back, Tell me are you able to afford?). Go for adequate cover based on your liabilities with lowest premium.
ULIP are good blend investment and Insurance.*
*It was good in u/s 88 era; may be good in future but not suited in today’s tax laws & market. No blended plan is good in any class unless it suits your need like plug & socket.
Insurance for child/Spouse*
*What a Joke! they don’t earn, why to insure them? – No answer. They are beneficiary not insured.
Very good offer especially for you*
*Don’t go by offers, offers always contains advertisement cost and it is you who have to pay it.
**Life Cover **If I die today my family must not suffer, so it must cover entire loans/current liability or at least 75% of loans so rest of portfolio can sustain impact. Mediclaim and Critical Illness is must
**Household cover **A must if your house having large part in your set. Go for all inclusive, longer term policy. In my experience private insurer always take the cream of pie. They will insure you in shiny days but refuse in cloudy, settlements also having inherent hurdles.
**Precautions while investing
**dont ask for discount. There is nothing like free lunch.
Take several views before making it. Never jump on conclusion immediately.
Be versatile and ready to listen each buzz… but rely only on your calculations.