Monday, June 11, 2007

Financial Literacy for me, you and your friends

I need to go through a financial literacy programme and I am making that effort. So do you, dude.

I've hated finance. Maybe because I was not able to understand the jargons and the maths. But I guess ignoring personal finance worsens the situation. And the only way to get maximum out of your personal finance is to look it into its eye and grapple with it. You will come out stronger.

If you think it's too early for you to bother, let me tell you that the first principle of investing is to start early and see the magic of compounding. College grads, fresh MBAs and guys under 25, the smart thing to do is to start now.

Do you think that you have mastered the basics but are not able to use it to your advantage, it's time to put your thinking cap on and review your strategies. Learn from your failures. Often we tend to get stricken by some deadly internal enemies which Kartik Jhaveri details here.

Some of you guys would be rich enough not to be bothered about these mundane things. But have you ever given a thought that you are in a position to contribute to the nation's economy by being more efficient about your finances. Wealth has the unique ability to create more wealth. Are you using that power?

Before I move on, let me articulate the background to this financial literacy programme that I am so smitten about. The following facts and questions keep on humming in my mind:
  1. Equities give the best returns and you are putting your money in a professionally managed corporate organisation. Compare this with your insurance products which give much lesser returns and your money is invested in the Government which is inefficient with your money, to say the least.
  2. However the total AUM under Mutual Funds is about Rs 3.5 lakh crores while LIC alone manages funds worth more than Rs 6 lakh crore. Yes it's true that LIC has been there for over 50 years and has a huge distribution reach. But it has hardly tapped the huge insurance potential that India has.
  3. Financial experts scoff at ULIP saying that it's very expensive compared to Mutual Funds. But LIC collected more than Rs 25000 crore in 2006-07 and it's total fund under ULIP is approx 40000 crore which is more than UTI's AUM of approx 39000 crore (since existence)

All this and more points to widespread financial illiteracy at all levels. Be it college grads, software geeks, MBAs, Engineers, even CFA/Economists( they are experts at business finance or government finance) and even Financial advisors (they rarely have a holistic view), everyone needs to be literate about his personal finances.

And there are over 700 mutual funds, 5000 stocks, 300 insurance policies and hundreds of other financial products to choose from!!

Interested! And the literacy programme that I have in mind will have the following details:

  • Financial planning basics.
  • Financial markets.
  • Financial products like Mutual Funds, Stocks.
  • Research reports, Financial analysis, technical analysis.
  • Insurance : Basics, Company review, product review.
  • ETF : Basics, Company review, product review.
  • Bonds : Basics, Company review, product review.
  • Tax Planning : Basics, product review.
  • Retirement Planning : Basics, product review.
  • Children's education. : Basics, Company review, product review.
  • Calculators :Budgeting, Networth, Loan, Asset allocator, Risk analyser,etc.

Any suggestions. And if you are interested why don't you subscribe to my RSS feed or by email. And tell your friends too. I'll cover them one at a time. [ I need to learn them and then only I can share it with you :) ]

Btw, if your eyebrows are tensed up and you are thinking why I am making so much effort working on this financial literacy programme, I'll tell you my secret. It's for the website I dream of every day and night!! The site launches in August'07.

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