My economic value towards my family can be calculated in a number of ways. Taking my future earning potential and calculating the present value of that comes to Rs 40 lacs approx. However on the basis of the present monthly expenses and the amount required to maintain that lifestyle should come to Rs 25 Lacs approximately.
For a normal endowment insurance policy of Rs 25 lacs, one has to pay more than Rs 100000. But I have a basic cover of Rs 13.5 lacs and accident cover of another 11.50 lacs by paying a premium of roughly Rs 16000 only. And all of them are LIC policies. Surprised? Here's the list of my policies a/w premium and the type of policy.
1. Basic cover Rs 3 lac, Accident cover Rs 3 lac, Bima Kiran: a term assurance plan with premium back plus extended cover after maturity, Prem: Rs 3000
2. Basic cover Rs 4 lac, Accident cover Rs 2 lac, Jeevan Griha: Triple cover insurance, Prem: Rs 4500.
3. Basic cover Rs 5 lac, Accident Rs 5 lac, Anmol Jeevan, Pure term assurance,no maturity value, Prem: Rs 2300.
4. Basic cover Rs 1 lac, Accident Rs 1 lac, Endowment, Prem: Rs 2600.
5. Basic cover Rs 50K, Accident Rs 50K, Money back, Prem: 3600.
Obviously my decision on the policy mentioned in serial 4 & 5 is a wrong one. I could have insure myself for another 10-15 lacs from that amount. However assuming that the only way I'll go away from this world is an accident, a cover of Rs 25 lacs should suffice.
As you age, the premium of the term assurance policies increase drastically. So I don't know how much I've to pay for the same term policy I had taken 5 years back. Hopefully I had my timing right. Ideally the time of taking an Insurance cover would be when you start a family of your own.
But this blog helped me in reviewing my Insurance. I feel that I don't need another insurance advisor. But wait, my mortgage loan is not insured. Maybe time to get a mortgage insurance and an advisor should get a call from me!
Health & Wellness, Self Improvement, Self Development, Relationships, Mental Health, Wealth Management, Money Management
Thursday, November 2, 2006
Mutual fund selections
I have selected four Mutual Fund schemes out of the 600 odd MF schemes in the country. Infact it was motivated in parts by reading Value Research, by the booklet AMFI promptly sent to me, by my friend and the attractive returns being posted by the MFs.
I have gone for the "Diversified Equity" and one "hybrid" MFs with aggressive growth targets and my selections are as under: SBI Magnum Global, HDFC Prudence Growth, Sundaram Select and Reliance Vision. I have taken the SIP route to even out the market volatility and have opted for four different dates in a month for the SIP to be debited. I will be investing Rs X for the next 12 months and then review my MF decision.
SBI Magnum Global was launched in 1994 and has given an impressive performance of approx. 100% growth over last one year. The returns % age since launch is 16%. It is an aggressive equity fund and aims at moving from one hot area to another nimbly and staying where the quickest growth lies.
Sanjay Sinha is the fund manager. Value research MFI has to say the following for the fund: This fund has been the greatest beneficiary of the mid cap rally. Be ready to take a lot of risk here. Don't be surprised if you get only small and mid cap stocks in your portfolio.
Though the NAV of the fund is Rs 38.83, the purchase price for me was Rs 39.70. So for the Rs 10000 I invested I was given 251.889 units and the market value stands at Rs 9780.85. So Rs 219.15 goes into my entry load, the amount I pay them upfront for managing my funds.
Time for the fund managers to take over and really deserve that money(load for me, carrot for them). I wish them luck, though it's in my own self interest!
The other three funds will be reviewed one by one later.
I have gone for the "Diversified Equity" and one "hybrid" MFs with aggressive growth targets and my selections are as under: SBI Magnum Global, HDFC Prudence Growth, Sundaram Select and Reliance Vision. I have taken the SIP route to even out the market volatility and have opted for four different dates in a month for the SIP to be debited. I will be investing Rs X for the next 12 months and then review my MF decision.
SBI Magnum Global was launched in 1994 and has given an impressive performance of approx. 100% growth over last one year. The returns % age since launch is 16%. It is an aggressive equity fund and aims at moving from one hot area to another nimbly and staying where the quickest growth lies.
Sanjay Sinha is the fund manager. Value research MFI has to say the following for the fund: This fund has been the greatest beneficiary of the mid cap rally. Be ready to take a lot of risk here. Don't be surprised if you get only small and mid cap stocks in your portfolio.
Though the NAV of the fund is Rs 38.83, the purchase price for me was Rs 39.70. So for the Rs 10000 I invested I was given 251.889 units and the market value stands at Rs 9780.85. So Rs 219.15 goes into my entry load, the amount I pay them upfront for managing my funds.
Time for the fund managers to take over and really deserve that money(load for me, carrot for them). I wish them luck, though it's in my own self interest!
The other three funds will be reviewed one by one later.
Wednesday, November 1, 2006
Monetary policy review
I wrote about the linkage between Economics and Finance earlier. Time to understand it further in view of the review by RBI, our Central Bank.
In its quarterly review of the monetary policy, RBI has enhanced the repo rate by 25 basis points while keeping the bank rate, CRR constant. The repo rate is the rate at which RBI lends to the banks. It is aimed at moderating the stupendous retail credit growth. (The household credit has increased from Rs 31000 crore (approx.) in FY2001 to more than Rs 181000 crore in FY 2006).
But since other rates are constant and there are avenues of raising money thro' External Commercial borrowing(which has been enhanced by $250 Million), experts from the industry do not expect a rate hike for individuals.
Taking tiny steps towards capital account convertibility, the Governor has relaxed remittance rules and allowed retention of entire foreign earnings. Now an individual can remit $ 50000 per year for foreign land or shares*
Foreign exchange earners who could retain 50% foreign exchange can now retain the full 100%.
Signs of confidence along with caution.
In its quarterly review of the monetary policy, RBI has enhanced the repo rate by 25 basis points while keeping the bank rate, CRR constant. The repo rate is the rate at which RBI lends to the banks. It is aimed at moderating the stupendous retail credit growth. (The household credit has increased from Rs 31000 crore (approx.) in FY2001 to more than Rs 181000 crore in FY 2006).
But since other rates are constant and there are avenues of raising money thro' External Commercial borrowing(which has been enhanced by $250 Million), experts from the industry do not expect a rate hike for individuals.
Taking tiny steps towards capital account convertibility, the Governor has relaxed remittance rules and allowed retention of entire foreign earnings. Now an individual can remit $ 50000 per year for foreign land or shares*
Foreign exchange earners who could retain 50% foreign exchange can now retain the full 100%.
Signs of confidence along with caution.
Money makes Money(MMM)
Here's a post by FMF on Millionaire's investing style. Makes a lot of sense. The key take away for me is to "IGNORE the NOISE"
Nearly all (95 percent) of the millionaires we surveyed own stocks; most have 20 percent or more of their wealth in publicly traded stocks. Yet you would be wrong to assume that those millionaires actively trade their stocks. Most don't follow the ups and downs of the market day by day. Most don't call their stock brokers each morning to ask how the London market did. Most don't trade stocks in response to daily headlines in the financial media.
In other words, these people are in it for the long haul. They know that over a long period of time, the stock market will go up (or at least it has historically, so the odds are it will continue to do so). As such, they consistently invest monies into the market, ignore the noise, and watch their portfolios climb.
And the best example of MMM is Rakesh Jhunjunwala who's assets grew by 74 crores(!!) over a period of 4 months on an almost static stock portfolio.
Nearly all (95 percent) of the millionaires we surveyed own stocks; most have 20 percent or more of their wealth in publicly traded stocks. Yet you would be wrong to assume that those millionaires actively trade their stocks. Most don't follow the ups and downs of the market day by day. Most don't call their stock brokers each morning to ask how the London market did. Most don't trade stocks in response to daily headlines in the financial media.
In other words, these people are in it for the long haul. They know that over a long period of time, the stock market will go up (or at least it has historically, so the odds are it will continue to do so). As such, they consistently invest monies into the market, ignore the noise, and watch their portfolios climb.
And the best example of MMM is Rakesh Jhunjunwala who's assets grew by 74 crores(!!) over a period of 4 months on an almost static stock portfolio.
Financial analysis made difficult
Here's a blog from Ramit which articulates my idea of reading Analyst reports. The analyst reports also burden you with an information overload. And it pressurizes your thinking, taking you away from enjoying the process of investing.
I wd think that one should start with looking for the right questions first and then look for answers. Instead of a template based analyst report.
Even Warren Buffet says and I quote :
I wd think that one should start with looking for the right questions first and then look for answers. Instead of a template based analyst report.
Even Warren Buffet says and I quote :
"Almost everything we learn is from public documents.... We do not find it particularly helpful to talk to managements.... The numbers tell us a lot more than the managements. We don't give a hoot about anyone's projections. We don't want even want to hear about it."
He had even greater scorn for analysts: "I don't read any analyst reports. If I read one, it's because the funny pages weren't available. I don't know why anyone does it."
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