Life Cycle Stage – Financial Needs – Choice of Investment

This is the fourth in the series of Financial literacy series. Previous ones here: 1, 2, 3.

Age of an investor, family situation and health are important determinants of financial goals. Also financial goals and plans depend on the income, expenditures & cash flow requirements of an individual.

For the purpose of ideal financial planning, investors can be segmented according to certain stage in their life cycle

Stage I : Ages: 20 to 30 (Unmarried, Young Professionals)
Stage II : Ages 30-45 (Married, With or Without Kids)
Stage III : Ages 45-55 (Pre Retirement)
Stage IV : Ages >55 (Retirement)

Let's start with the first stage: Life Cycle Stage I : Ages: 20 to 30 (Unmarried, Young Professionals)

• Continuing higher education or just started working
• May or may not own home
• May or may not have dependents

Financial Needs Are Immediate & Short Term

• May still have some support from parents
• May be saving towards future family needs - say buying home
• May be paying off education loans
• Likes to spend money

Ability to Invest :

• Limited due to higher spending

Choice Of Investments :

• Liquid plans & short term investments.
• Some exposure to equity and pension products,
• Term Insurance plan

The second stage comes in another post!

Financial Literacy Series: Functions of Financial Markets

I kicked off a series on financial literacy by setting a backgrounder and something on financial systems .

The term `financial market’ refers to the means through which buyers and sellers are brought together to transact the financial products. The Major Functions Performed by the Financial Markets
o Price Discovery
o Liquidity
o Lower Transaction Costs

Price Discovery

Financial markets provide a centralized place for trading in financial products. This `place’ need not be physical. It may be virtual such as the online trading system of the National Stock Exchange. This feature enables the prospective buyers and sellers to discover the going price and take appropriate decisions.

Liquidity

Financial markets also provide a mechanism for the investors to sell their financial assets. For example, if an investor wishes to sell his shares, the equity markets offer an easy exit.

Lower Transaction Costs

Financial markets save a market player the cost of locating counterparty to his transactions. The counterparty can be readily found by going to the appropriate market.

We will discuss Financial Market Segments in the next post. Crossposted on my website's Learning Centre and Blog

How do you get in touch with your Advisor?

How do you get in touch with an Advisor when you need one? Depend on your friendly neighbourhood guy who is more of a family friend?

I have realised that my friendly neighbourhood finance advisor does not have the knowledge of all financial products and at best he gets work done in his/her area of insurance, mutual funds, stocks or some other financial product. And the knowledgeable financial planner are too hard to find. Media tells me to take my own decisions based on my own risk appetite and financial goals. So the ball is back in my court.

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

Internet enables information sharing in a powerful manner and is a medium where we can help each other in matters of personal finance. That brings me to the thing I have done!!

Take a look at this one. This is to be launched in August but I’m giving you a preview!!

Financial Advisors Directory: We invite professional and net savvy advisors to register and provide the information needs. This one is a first in India to the best of my knowledge…..

Suggestions are welcome.

My Squidoo Lens on Personal Finance

Squidoo is the world's most popular site for people who want to build a page about their passions. Highlight books, blogs, vids, online shops and/or just spread the word about your stuff.
So that's what I did today. Made a lens about Personal Finance. Go, take a look.

And Seth Godin is the man behind this amazing squidoo!! It's fast, free, and supereasy. So if you have something to talk about, why don't you build a lens for yourself too. It also makes sense for the SEO guys to have your blog/site talked about at a high PageRank site. Go, help yourself.

India News Box: Interview with the Chief Web Architect

Avinash runs a popular blog on technical trade calls on Nifty 100 and I was a bit surprised to see him launch a news aggregator. But Avinash is an avid news reader and thought that the news aggregator would be useful for like minded people. And he learnt PHP from scratch to pursue this hobby/interest/utility!!

I asked Avinash about his efforts/thoughts on what he and his wife Tejaswini have taken up as an exciting project and am thankful for his prompt and candid replies. Thanks Avinash. (Btw, I'm referring you as the CWA: Chief Web Architect)

1. What is IndiaNewsBox?
IndiaNewsBox is a hyper aggregation service which aims at delivering news in a manner that it gives a comprehensive view of whats happening. The idea is to cover 9 major sources of news/views on subjects ranging from India General , Technology , Business .. to Tech Blogs ...so that a reader gets the comprehensive picture of news. In addition we have also added services like online near real time charting for stocks etc etc because we believe it is also extension of the news service which we provide.

2. Why'd you name it that?
Name !! Its good that you asked this question .. Umm actually i wanted to name it in a manner that it sounded different like my earlier blog SmellTheCheeseBlog.com and then i chanced upon the name called as GaramGaram and then started to design my site ... Once i had almost completed design i found that GaramGaram.com domain was no longer available for usage as it was booked by someone !!

As i was getting the website template developed by a professional I had to change the name then and there so IndiaNewsBox.com was born .. Not much thought went into it !! :)

In fact I never used the website template developed by the professional instead i got my wife to design one for me from scratch !

3. Where did the idea come from? What is the research you have done on the business model? Or do you just see this as a hobby?
I got this idea while i was trying to improve my SmellTheCheeseBlog.com to incorporate news into the blog. I felt that if ever there existed a service which could aggregate news from my favorite news sources in a single page it would be great ! !

I am an avid news reader and would visit two to three news websites to catch up with news . Thus i thought that if i come up with a news service like this then it would be useful for others .

So I created a prototype and asked for the opinion of a few friends . Based on their feedback I developed a UI along with my wife (who happened to be a web designer at that point of time :))

The research part of this site has happened over the last few months as I am evolving the product to cover more and more things based on user feedback
a) We added Live charting for NSE stocks
b) We are covering 18 of India's Best blogs
c) Regional Language coverage

The business model was quite simple as I did some research on the net and figured that if you are able to get 1000-2000 visitors / day on your site it is quite lucrative, meaning you can earn 300-400 US$ / month based on advertising. So I figured that it would not be difficult to achieve the target over an year (as this is not my full time job)

4. I guess you have some success from your stock calls on your blog? Do you have the same response on this NewsBox? Or better?
Yes Ranjan , I did manage to get a good response to my blog which gave the stock calls and that's why I was able to set IndiaNewsBox service . But i must admit the the business models for both the projects are different !!

SmellTheCheeseBlog.com is dependent on users giving money after making profits in their stock trades . While IndiaNewsBox is based on advertising revenue . I think i would be able to make decent amount of money only when I achieve the scale of 2000 visitors / day.

5. How did you actually build IndiaNewsBox(how much did it cost, where do you host, what did you need to do in terms of paperwork, coding, finding people, etc)?
This is the interesting part of the IndiaNewsBox story because the total cost of setting up of IndiaNewsBox is really zero !! . Meaning i did not spend any money at developing and coding this site as most of the webdesign is done by me wife (who was a web designer earlier) and the coding part has been done by me !! In fact most of the coding has been done with PHP and i had to learn PHP from scratch in order to develop this site.

So we are only a team of two people (me and my wife Tejaswini) who are working on this project.

Now coming to the hosting part it costs me 12 $ a month to host on Yahoo hosting . This hosting is pretty easy to manage . So all i need to break even in my site is to recover the cost of hosting .

Which am managing to do every month since am up and running :)

6. What are your goals with INB? I mean the number of page views daily and the revenue targets.
My Goal with this website is pretty basic meaning i would like to achieve page view of 4000-5000 / day which translates into atleast 1500-2000 visitors / day within the next 3 months . Once we achieve this scale then we will remodel the site to add new features like email delivery of news , customized IndiaNewsBox.com etc etc .

So initial goal is to reach 2000 visitors/day!! Long term goal is to make the portal to get 100000 page views / day ( moneycontrol.com has this now) . I believe that this is possible if we constantly react to user feedback and adapt ourselves.

Currently we are having traffic of 200-300 visitors resulting is around 500 page views and we are making revenues of 40-50 US $ / month !! Which is not much as it is not even equal to my one day salary but as things progress and we scale up we will make decent money ..

As they say its always difficult to make the first million and billions will follow later . The same holds in the web domain its difficult to get then first 1000 and then hopefully we will get our million visits soon !

7. How do you market INB?
We don't do any marketing , we have only done some search engine optimization so that we receive visits from Google . This gets us 10-20 new visitors / day . Some of the stick on and thus we are able to build a steady stream of visitors over the past 2-3 months ..

8. What would you say to a person who wants to do something entrepreneurial?
Entrepreneurship !! I think one needs to understand that being an entrepreneur is not that easy as it sounds and it needs huge sacrifices and energy to be spend . So before you start please think through of all the good things which you may have to give up when you take up and entrepreneurship !!

9. How much weightage/importance do you give to finding the funds vis a vis the idea?
I believe that execution is more important than the idea itself because ideas are available in dozens !! But its the execution and the promotions which make or break a product !

Funds .. If the funds are essential for implementing your vision then I would give it more importance than the idea part of it !

Those were some very candid and useful answers from a guy who is taking small steps to build a small business. It also explains the limitless opportunities available on the web. I wish Avinash and Tejaswini the very best. Once again I'm reminded of one of my favourite quotes:

Whatever you can do, or dream you can, begin it.
Boldness has genius, power and magic in it.