There comes a time in your life, where you will need to opt for borrowed funds in order placate your financial requirements. While there are plenty of options available in the market, loans are the ideal option for most cases.
If you have varied financial requirements, then the personal loan is the ideal choice. Through this loan, you can satisfy multiple financial requirements, without any restrictions. Additionally, you can use the personal loan EMI calculator to calculate the ideal loan amount that will suit your needs.
However, when it comes to borrowing funds, there are certain factors you will need to keep in mind. Although borrowing of funds will offer you plenty of benefits, one would also need to keep track of the repayment measures for it. Borrowing of funds come with certain golden, rules, which is given below.
1. Don't borrow an amount that you cannot afford
This is one of the major rules of borrowing funds through a personal loan. A loan should provide you with a relief to your financial woes and not add to it. You must not live beyond your means. Opt for a loan amount that you ca easily repay. The thumb rule for borrowing these funds, especially for this EMI's should not exceed 10% of your net monthly income. Use the personal loan EMI calculator to ensure that you get the ideal loan amount you can afford in this case.
2. Opt for a tenure that is as short as possible
The tenure of the loan affects the value of the EMI's. in this case, the longer the tenure of the loan, the lower is the EMI. This fact will surely make it tempting for those who would want to go for a 20 to 30 long tenure. However, in this case, your interest rates will rise, making you pay for a loan amount that is more than you can afford. Additionally, this will increase your debt to asset ratio, thus reducing your chances to apply for another loan application. Use a personal loan EMI calculator to calculate the ideal loan tenure that will suit your requirements.
3. Ensure you make timely and regular repayments
Opting for a loan would also include repaying the borrowed fund. Whether it is a short-term debt, you must ensure that you do not miss your payments. A delay or missing a repayment will impact your credit profile. This, in turn, will hinder your chances of taking a loan later on in your life.
4. Avoid excessive splurging and investing
Once you borrow funds, you will need to take the means to repay it back. Therefore, you should ensure that you avoid splurging the funds unnecessarily. Additionally, you must not use these funds to invest in other options. This is because the risks on the returns can be high. Additionally, an even safer option such as termed deposits may not offer you the ideal return on investments to match the interest rates on the loan.
Monday, 15 August 2016
Investment banking for beginners: All you need to know
To put it simply, investment bankers are the middlemen between investors and bankers when it comes to stock. An investment banker performs a number of services that help both the investors and the company in question. This is why they are so important to the financial market. Here are some things they do:
1. Buy and re-sell stock
This form of investment banking does not follow the traditional manner. These investment banks purchase stock from companies who have just had their IPO (initial public offering). In the next step, these companies sell it in the market at a higher price to what they had previously bought it for. This is a major risk, but due to their expertise, they are usually successful at it. Some of the largest corporations in the world are investment banks including JP Morgan, Morgan Stanley, Deutsche Bank, Barclays, and others.
2. Providing advice to clients
The clients of an investment banker include corporations, pension funds, hedge funds, the government of its country and other large financial institutions. Investment banks provide advice as to what is the ideal step that should be done. The Chinese wall is a concept where there is a discord between the advisory and trading divisions of the bank. It is crucial that they maintain their independence otherwise they will not be giving appropriate advice to their clients.
3. Help find investors for debt financing
Debt financing is a way of raising capital for projects through corporate bonds. Corporate bonds are much harder to come about, as compared to government bonds. Therefore, investment bankers are needed to find a client for these corporate bonds.
4. Financing large projects
Traditional banks are usually much smaller than investment banks. This is due to the fact that they do not undertake projects as big as investment banks do. The only way that large projects get funded besides an IPO and selling stocks is through an investment bank. This is why they are so crucial for the functioning of the economy.
5. Asset management and brokerage service
Finally, investment banks also help regular investors. This is because they take money from a client and use it to help those clients make more money. This is done in two main ways. The first is that they select stocks. The second is that they secure mutual funds for their clients as well.
As you can see, investment banking is crucial for the economy and this is the reason why becoming an investment banker is such a lucrative proposition.
1. Buy and re-sell stock
This form of investment banking does not follow the traditional manner. These investment banks purchase stock from companies who have just had their IPO (initial public offering). In the next step, these companies sell it in the market at a higher price to what they had previously bought it for. This is a major risk, but due to their expertise, they are usually successful at it. Some of the largest corporations in the world are investment banks including JP Morgan, Morgan Stanley, Deutsche Bank, Barclays, and others.
2. Providing advice to clients
The clients of an investment banker include corporations, pension funds, hedge funds, the government of its country and other large financial institutions. Investment banks provide advice as to what is the ideal step that should be done. The Chinese wall is a concept where there is a discord between the advisory and trading divisions of the bank. It is crucial that they maintain their independence otherwise they will not be giving appropriate advice to their clients.
3. Help find investors for debt financing
Debt financing is a way of raising capital for projects through corporate bonds. Corporate bonds are much harder to come about, as compared to government bonds. Therefore, investment bankers are needed to find a client for these corporate bonds.
4. Financing large projects
Traditional banks are usually much smaller than investment banks. This is due to the fact that they do not undertake projects as big as investment banks do. The only way that large projects get funded besides an IPO and selling stocks is through an investment bank. This is why they are so crucial for the functioning of the economy.
5. Asset management and brokerage service
Finally, investment banks also help regular investors. This is because they take money from a client and use it to help those clients make more money. This is done in two main ways. The first is that they select stocks. The second is that they secure mutual funds for their clients as well.
As you can see, investment banking is crucial for the economy and this is the reason why becoming an investment banker is such a lucrative proposition.
What are the exclusive benefits to private banking?
There is a lot of benefits to investing in certain investment options such as banks. However, some financial institutes also offer certain investment options, such as private banking. However, private banking is not available for everyone. It is a suite of special services offered to rich people or in bank jargon high net worth individuals. What is regarded as an HWNI is said to be over 1.5 crores in assets? As you would expect, there a multitude of advantages to private banking they include the following:
1. Privacy
This is perhaps the biggest advantage of private banking. As the word suggests, private banking would imply privacy. A major disadvantage of anonymous dealings is that many illegal dealings also take place. Also, such deals take place that competitors cannot offer, and thus, it is even more important to keep the transaction private.
2. One-on-one service
One-on-one service is another critical benefit of private banking. Private banking allows a customer to go directly to a banker without going through the customer relations staff first. This is especially important when wealth management or investment decisions of high importance need to be made. Therefore, unique solutions to the client's situation can be thought out.
3. Discounted services
It may seem unfair but if you opt for private banking you can get discounted services as well. Among the discounted services, tax preparation and planning, traveler's checks and corporate checking are included. It has even been said that services such as real estate management can be addressed. All of these services are processed without any hassles for the customer because of the fact that they are highly prioritized as well.
4. Very high returns
This is the biggest advantage of the private banking setup. It leads to an average rate of return on investments of 7 to 13 percent. However, it can be as high as 30 percent annually. However, it is crucial to note that the main reason for this is the fact that only private bankers have access to high-return investment opportunities. The biggest example of these is hedge funds.
However, it is also worth noting that private banking also has a lot of disadvantages, including the facts that recruiting and training staff for this type of banking is very difficult and expensive. Secondly, there are regulatory restrictions and finally, it also takes a lot of time and effort and money to explain the analyses to the client. However, the advantages do outweigh the disadvantages, therefore making it one of the ideal investment options.
1. Privacy
This is perhaps the biggest advantage of private banking. As the word suggests, private banking would imply privacy. A major disadvantage of anonymous dealings is that many illegal dealings also take place. Also, such deals take place that competitors cannot offer, and thus, it is even more important to keep the transaction private.
2. One-on-one service
One-on-one service is another critical benefit of private banking. Private banking allows a customer to go directly to a banker without going through the customer relations staff first. This is especially important when wealth management or investment decisions of high importance need to be made. Therefore, unique solutions to the client's situation can be thought out.
3. Discounted services
It may seem unfair but if you opt for private banking you can get discounted services as well. Among the discounted services, tax preparation and planning, traveler's checks and corporate checking are included. It has even been said that services such as real estate management can be addressed. All of these services are processed without any hassles for the customer because of the fact that they are highly prioritized as well.
4. Very high returns
This is the biggest advantage of the private banking setup. It leads to an average rate of return on investments of 7 to 13 percent. However, it can be as high as 30 percent annually. However, it is crucial to note that the main reason for this is the fact that only private bankers have access to high-return investment opportunities. The biggest example of these is hedge funds.
However, it is also worth noting that private banking also has a lot of disadvantages, including the facts that recruiting and training staff for this type of banking is very difficult and expensive. Secondly, there are regulatory restrictions and finally, it also takes a lot of time and effort and money to explain the analyses to the client. However, the advantages do outweigh the disadvantages, therefore making it one of the ideal investment options.
Saturday, 6 August 2016
My Thinking on CPF Life
Reading the speculations about CPF Life Escalating Plan and CPF Lifetime Retirement Investment Scheme (LRIS), I know for sure what is my choice now. Things may change, but for now, it is quite certain.
My choice? CPF Life Standard Plan and no CPF Lifetime Retirement Investment Scheme (LRIS).
CPF Life Escalating Plan is for people who "suspect" they can outlive 87 years old - The highly possible age to break even the CPF Life Standard Plan. Knowing my track records of falling sick easily and childhood medical conditions, I doubt I need to "worry" about living over that age. There is another good method to guesstimate your lifespan. Look at your parents, grandparents and great-grandparents' ages. My father is still healthy at 61 but have some medical conditions. My grandparents didn't reached 85 years old for sure.
Having said that, the differences are marginal between various plans. It will not be deadly if you choose the "wrong" plan. We are just playing with probabilities.
How about CPF Lifetime Retirement Investment Scheme? Seriously, I don't want to talk about it until more details have been shared by CPF Board. I would take the 4-5% guaranteed interest from CPF SA as I would have enough risk from personal portfolio, which I have more control over. CPF is like a survival fund, more certainty is good, and it is already packaged with a lot of questions marks.
Tuesday, 2 August 2016
5 Technologies That Can Change Stock Markets Forever
Disturbance in digital system has been making the financial markets more apparent, reachable and efficient. Besides this it also tends to help the regulators in getting an improved insight on the risks which the applicants may seem to undertake. The following technologies could transform the financial markets in the forthcoming days:
Artificial intelligence and natural language processing
Several of the financial companies are adopting algorithms in doing the tasks which humans have been performing for years. Mechanism learning systems have been enhanced considerably and with expanding processor potentials at lower cost, these systems are made available for larger usage. The techniques for artificial intelligence enable the system to learn from user connections as well as patterns without the need of being openly programmed for the same.
Machine learning together with other artificial intelligence technologies, in the past few years, has provided us with self-driving cars, real-world speech recognition, chess champions as well as more related as well as realistic web-searches. With regards to financial markets, we have software analysing voice patterns of recorded calls at investment banks, brokerages and on the client side too which could instantly distinguish irregularities and frauds, It can also look at keywords, decode conversational encryption of information and achieve difficult searches on the recordings.
Robo Advisers
From the present situation, there could be probabilities that we would be seeing the last few Wolves of Wall Street and Dalal Street and moving ahead we may have only robots of Wall Street and Dalal Street. Though the systems hasprogressed in grasping the monetary goals, risk profiles together with the other complex details of investment to come up with personalised investment portfolio, it could alter funds, book profits or square off position depending on self-learning processes. The platform could be either for web-based and/or smartphone based, thus enabling easy access or adapt.This is said to be self-operated without the need of the user talking to a live person. Compared to a human advisor who tends to charge a portfolio management fee, the services here are rendered at no recurring expense.
Quantum `sealed envelope’
Outrages centred on information theft have often been a nightmare for performers in financial markets. Till now, hackers have somehow achieved to stay ahead of security programs as well as passwords though it could change very soon. A team of researchers inGeneva, Singapore, Cambridge and Waterloo and Ontario had utilised the breakthroughspeculative work co-authored by Dr Adrian Kent from University of Cambridge’s Department of Applied Mathematics and Theoretical Physics in providing `unconditionally guaranteed’ security as well as purity of message transferred from any two points on earth. Earlier trials using these digital `sealed envelopes’ is said to be successful and if all goes well, the monetary markets would be entirelysecured against any threat of statistics invasion.
Bitcoin and Blockchain technologies
The distributed ledger, Blockchain technology after the virtual currency Bitcoin, tends to record the financial transaction of any digital interaction in secured, transparent, traceable and in an efficient manner. So it is appropriate in providing a universal virtual currency as well as for digital accounting and auditing financial transaction of any kind. The possibility of Blockchain technology is understood from the fact that 30 of the largest banks in the world had recently formed a global consortium to research, design and build Blockchain solutions further. Besides this, the Reserve Bank of India – RBI that had issued a cautionary note in 2013, against Bitcoin had changed its stance. The Indian central bank is now of the belief that the Blockchain technology could be helpful in the prevention of counterfeiting currency as well as financial transactions.
Big data and analytics
Financial markets tend to generate enormous amount of data each second. Storing and analysing these details on real time basis could be critical. With a combination of private as well as public cloud tends to resolve the issue of storage as well as real-time access to this multitude of data at reasonable charges. Big data analytics tend to make it likely to highlight correlations which seem incredible for humans to locate. For instance, envisage a situation where 90% of orders that are positioned on NSE and BSE through high-frequency algorithmic dealing platforms tend to abruptly get cancelled within a span of less than 30 seconds.
A human may never have known such trends with so much accuracy; RBI had highlighted this trend last year and alerted the market regarding it. Such kind of analysis could never be done without leveraging technology for big data scrutiny. There could also be software which could analyse thousands of social media feeds regarding the sentiments and news of a company and could try to forecast future as well as probable sentiments regarding the company. These visions could change the way institutional as well as retail investor trade in the market. Though some of these technologies could be in its initial stage of development and may need substantial enhancement together with market interest, the base has been set for digital alteration.
Are Teachers Middle Class?
The July 3 issue of Bloomberg Businessweek had an interview with President Obama. It was quite interesting, and I found myself surprised to be agreeing with a number of things the so-called ‘anti-business President’ had to say about business in America. One comment he made, though, really seemed way off base so I did some digging into the facts. The President was quoted as saying:
"Think about how difficult it is right now for young, idealistic person who wants to go into teaching to figure out how they're going to live middle class life as a teacher. There's no job that's more important to our economy than having really good teachers in the classroom, but right now, the way our economy is structured, it's very hard for young people to make that decision unless the parents are subsidizing them in a fairly significant way."
Coming from a family where both my parents were teachers, with my own college degree in teaching, and a number of very close friends and their spouses being teachers, I thought I had a pretty good handle on what that life is like. And while not the path to untold riches, teaching for everyone close to me has been the path to a comfortable middle class career. So I got to questioning ‘Is my perception of being a teacher and/or being middle class skewed?’
The data I found says no. According to the US Bureau of Labor Statistics, the national average of annual salary for teachers in middle and high school is about $54,000, with surprisingly elementary teachers averaging $60,000. Here in Wisconsin, information available from the Department of Public Instruction said that the average salary for a teacher in 2011-12 was around $55,000.
So teachers in my geographic area earn about as much as the national average. But are they middle class? CNN Money has a calculator that addresses that question by assuming that ‘middle class’ means incomes being between 1/3 less than and two times more than the median income in the county.
I live and work in Dane County, and when I plugged that into the CNN calculator I came up with middle class being defined as annual income between $40,418 and $120,652, which must mean that the median income here is about $60,000 per year. The income listed is for a three person household, which I assume to be two adults and one child, although I couldn’t find any definition of a ‘three person household’ anywhere.
That data means that a household in my area with one employed teacher is on the low end of middle class, and if there were two teachers in that household they are on the upper end of middle class.
Make no mistake – this has nothing at all to do with whether teachers are over or under paid, or any argument whatsoever along those lines. Most teachers I know are passionate, dedicated professionals and deserve their entire community’s gratitude.
It’s just that the idea of it being ‘difficult to figure out how to live a middle class life as a teacher’ doesn’t hold water to me. I always felt that growing up decades ago in a one income teaching household - my Mom stopped teaching to raise us kids - that we were solidly middle class; and the data above shows that a typical teaching household is middle class today, and perhaps even on the upper end of that.
This is an interesting topic to us, since one of the ideals we value at Trinity Financial Planning is that that objective, holistic financial advice should be available to anyone who seeks it regardless of how many zeroes are in their net worth. Let us know what you think about whether teaching can provide for a middle class living.
Saturday, 30 July 2016
Wastage In Your Life
If you think I am exaggerating, why not you try going through your entire house, items by items, and chances are, you will start to realised that you have accumulated many things that you have no chance of using. There are things that you think you will be using "one day". Trust me, most things that you have not used for past 1 year, will remained unused for another 1 decade or more. Likely, you would have forgotten that you have those things. I suspect there are expired food/condiments/herbs/ingredients somewhere in your kitchen too!
If you respect your space, each unused item is a cost. Yes, you can classified these under logistic and mental cost. That is how warehousing charge you! By mental cost, I was referring to the memory space that you used to remind yourself that you have those things in your...don't know where! Of course, if you are very sure that you need it "one day" and it will still be in good quality, then by all mean keep it.
So, am I advocating you to throw most excessive items away? Definitely not. Memories are worth keeping. Don't throw away your memories and only to realise you have lost your life.
There are other form of wastage too. If you have paid a premium for extra quality that you will never use, that is also a wastage too. For example, you spent $10 buying that "branded" chicken rice where you can get another similar taste nearby for just $3. The $7 is a waste.
If I may anyhow estimate that 50% of our things and expenses are wastage, you may need a lot lesser than you think. That means, if you are spending $30,000 a year, you actually only need $15,000 to live the same lifestyle that you are enjoying now!
By being a minimalist, I have kept my cost low. I reminded myself that whatever i am going to buy, it must add value to my family. Simplicity and clean space are the combination for the most wonderful design. Look at how iphone is created. Clean, with only minimal buttons. Every aspect is being considered to the most simple form. (Anyway, I used Samsung rather than iphone). I simply cannot stand cluttering. I enjoy looking at clean space. It gives me inner peace and the belief that I have more rooms for more awesome things to come.
(Not my house, just giving you a visual reference)
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