Which is the best capital protection investment plan?

Protecting your capital, a BIG task, Isn't it? You have your higher studies planned, EMI to take care of and a huge college fees for your children awaiting to empty your purse in couple of years. And, of course, unwanted emergencies like health issues and uncertainty at work which can lead to unexpected personal finance problems.

The usual way Investors protect the capital:

Normally, in two different situations, the investors look into protecting the capital by preserving it.
1. When the asset prices are too volatile
2. When risk is alleged to be high with any particular product

In these scenarios, the investors hide inside their shell to safeguard their hard earned money rather lose it by trying to invest in high risk instruments. After looking at the capital that doesn't grow due to fear of losing it, the investors seek advice from the experts for options.

Are bank FDs the safest and the best mode of protecting your capital?

The answer is 'yes' and 'no'. When you invest in bank FDs, your money is safe. But, the investors get confused when they struggle to beat inflation with the return they get from bank FDs. Normally, bank FDs offer you an interest of about 8.75%-9.25%. After you pay taxes on the interest earned, you earn returns approximately at 7%. Did you know for the last five years, the inflation rate is at 7.5%? It makes your investment value as same as what you invested initially. You gain nothing extra here.

Understand how these safest capital protection mutual fund schemes work?

You wanting an upside with bank FDs and seeking risk free protection is a clear paradox, you can't have a cake and eat it too.
You need to understand things clearly. Say For example, you are investing 30 lakhs in a fixed deposit. You are amazed at the statistics comparing capital protection mutual fund schemes over bank FDs given by the banker who sells these, right?
From your capital protection mutual fund scheme investments, the bank earns a huge sum of approximately 1 lakh as a fee and the banker earns an incentive. This is the reason banks broadcast and advertise extraordinary about their high risk averse HNIs over other capital protection plans. Remember, you gain no hot revenues which does any good to your portfolio.

So, what is the best alternative capital protection plan if not bank FDs?

Well, you have liquid funds to choose from mutual funds. The bankers will not advocate such plans as they incur low fees for them. These fixed mutual liquid funds are the best alternative to your 'so called safe' plans in name of bank FDs. There are debt funds that offer low risk products such as capital protection funds and FMPs(Fixed maturity plans).

How does the capital protection funds work?

Understanding how capital protection mutual fund schemes works is not a rocket science. Let me explain it simply. When you choose capital protection mutual fund scheme, 80% of your investment goes into fixed income securities and the remaining 20% is invested in equity funds. This arrangement makes sure your capital is safe as the 80% invested in FDs are kept until the tenure of the scheme. You gain an excess return on your capital through the 20% invested in equity products. A point to remember here is the risk associated with this small portion when the market is volatile. If you are ready to take a little risk with 20% of investing your capital in equities during a volatile market, then go for this scheme.

How does the FMPs work?

The fixed maturity plans gain returns as they are invested in bonds and held until maturity. Your capital is invested in couple of certificates which trade at 9.5% or more. These investments are held until the period of maturity. After deducting the incurred expenses, the investors get a return at the rate of approximately 9%. This is slightly higher than other short term funds or liquid funds.

Ok, how do these investment products differ from bank FDs?

Safer Investment Option - Well, I can't say this as a difference, but these mutual fund models offer the same level of protection as the bank FDs since these are invested for a fixed period. But, the key difference is the multiple options you get here.

* If you want to invest your capital for a shorter period, FMPs offer options to invest for minimum 30days onwards and available even for 3 years.

Works best at all times -If you want to protect your capital when the bond yields are high, safely invest in FMPs.

Save on Tax with long term capital gains:

You pay taxes of about 20% with indexation and 10% without indexation from long term capital debt funds gain. This helps in adjusting the buying price in accordance with inflation and you get an edge from your taxes on interest over normal FDs.

Alternatives to Capital Protection Funds:

Capital protection funds invest 80% in debt and 20% in equity. You can do this on your own. That is you can invest 80% of your money in FD or FMP or debt fund and invest the balance 20% in equity funds.

Mostly, the capital protection funds have high expense ratio.
So instead of investing in capital protection funds, you can create your own capital protection asset allocation combination.

Remember, you need to make the investments to work for you, not to the banks. Plan well and save your hard earned capital!

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

How healthy your personal finance management is?

Like how we take care of our physical health through periodic check-ups, inspecting the financial health from time to time is very important. We tend to look at what we eat, how we keep our lifestyle in order to have a healthy life.
In the same way, having a disciplined way of managing your portfolio will safeguard your future spending, earning and saving.
Personal finance management helps to plan our future appropriately. Read ahead to understand how one can analyse their personal finance strength with some easy to do ways.

Monitor Budget Vs actuals:

I have seen families starting their monthly expenses after budgeting. They allocate a particular amount for each fixed expense like rent, education fees, petrol, commuting, etc., But, if you ask me how many of them check at the end of the month whether the money they spent on each task matches with what they budgeted. My answer is 'not so positive'.
Yes, it is very important to check, compare and monitor the budget with the money spent actually. This exercise will help you in,
Identifying the current and future cash flow
Achieving your finance goals by managing cash outflow very well

This can be achieved by simply, but unfailingly following two steps.

 Organize personal finance records properly
 Fix a period to monitor and compare the budget with the actuals

Formulate Proper Financial Plan: 
Attaining financial goal is like a journey. Planning is necessary if you want to travel from one destination to another even within a city. Because planning gives us proper,safer and easier route to reach our
destination. Likewise, planning is necessary in order to reach your financial goals which include but not limited to retirement benefit, healthcare etc.

Focus on identifying short term & long term financial goals and list some key factors like,

Your current financial position
Think about the current cash flow and list down all sources of income
Estimation of amount and time required to achieve your short term & long term financial goals
Measure the financial securities that you have in hand like current assets
Consider possibilities of future financial expenses and emergencies like medical treatment, marriage, child education, etc

Group them to make a considerable financial plan to secure your future.

Monitoring Your Finance Activities:

After making financial plans, the most powerful process in personal finance management is supervising or monitoring the activities.

Monitoring your financial activities will help to

Identify new sources of income (extra income)
Identify unwanted cash outflows such as impulsive buying or extra vacation
Control and strengthen your financial securities
Identify the best ways to spend your income
Finding proper ways to save your money
Identify the sources of new investments
Identifying financial trouble:

Identifying risk is an essential part in personal finance management.

"Risk is much more about what you don't know than what you think you might be able to control."- The Wall Street Journal

Couple of things where trouble/risk can occur:

Extra penalty towards late payment fees such as rentals, maintenance, electricity bill payments, telephone and cable charges etc.
Exceeded credit card limit and late payment of credit card bills leads penalty and excess interest
Not keeping minimum balance in bank accounts.
Unnecessary credit card usage

Managing Financial Crises: 

Many times, financial urgencies like illness, loss of job, family changes, long term disability, legal problem cause finance crisis.

Follow some basic rules to manage such situation:

Always maintain contingency reserve to manage emergencies
Take health insurance, accident & disability insurance and critical illness insurance policies which can support you long term 
Use credit cards as a trump card, only during emergencies

Handling un-managable debt or bankruptcy:

Understanding the tactics to handle un-avoidable debt is very important in personal finance management. Not able to manage debt go to the extent of suicide. In case of insolvency, reach out for expert's guidance instead of taking any foolish step. There are legitimate ways that can help manage bankruptcy or unavoidable debt.

Most important advice given by Warren Buffet is "Don't put all the eggs in one basket". Follow the key points given in this write-up and make a wonderful plan to strengthen your finances. Believe me, luxury follows those who plan well and keep their finances a healthy one.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Financial Advisor In Richmond

The site at atlasfg.com has all the information you need for a financial advisor in Richmond or a financial planner in Richmond. Everyone who is trying to get the best results for their finances needs to make sure that they are going to have someone who will help them with everything that they are trying to do. That usually means that you are going to have someone who is going to help you with all your investments, and you need to be sure that you are going to be able to change your life with extra money that you are making from these investments. 

The investments that you make with the financial advisor in Richmond or The Fee only Financial planner in Richmond are going to be very good because that is going to point you in the direction of an investment that really makes sense for you. Every person has to make their own investment decisions, but you will have someone on your side who actually knows what they are doing. You will have all that you need when it is time to get these things done, and then you can make changes any time that you need. There are a lot of things people might choose to do, and they have to be sure they are working with someone who will help make the changes easily.

Your first step is going to have to be with someone who knows the stock market, and you have to check and see what they can do for you. They will teach you a lot about your money, and they can share with you some things that will make it a lot easier for you to make money. They can help you with stocks, property and other investments that might work for you, and it will be really fun for you to work with someone who knows all of this.

The people that do this every day are going to have access to a lot of things that will make your life better, and you should start thinking about how you are going to have a chance to get help that really means something to you. Your own work can be done a lot easier because you are speaking to someone who will help you make money on investments, and they will handle all your accounts so that you do not have to worry about it. It is so much simpler for you to do this when you are working with the right person, and you should start thinking about how you are going to get results from the things that you are doing. Everyone who is working hard on these things will make more money with an advisor.

Gaining an insight into job responsibilities of a Chief Financial Officer

The CFO is a corporate officer responsible for handling finances of an organisation. From financial planning and record-keeping to financial reporting to higher management, he manages all this and more. He supervises the financial unit and operates as the chief financial spokesperson of the company. 

The typical day-to-day job responsibilities of a Chief Financial Officer may vary. However, the three basic areas include the following.

Accounting and reporting

The Chief Financial Officer is responsible for maintaining accurate financial records and preparing financial reports on a company's financial status. When working for a small company, the CFO handles basic accounting duties and generates monthly and annual financial reports. Contrary to this, his duties shift toward analysis and management while working in a larger corporation. The actual accounting and reporting is carried out by the divisions and the CFO reviews them to analyse the corporation's financial status. CFOs working in larger organisations usually submit an annual financial report to the board of directors of the organisation. 

Management and budgeting

In a smaller company, the CFO handles matters such as cash flow, salaries, budgeting, and investments. His other job responsibilities include signing employee paychecks. On the contrary, the CFO plays more of an administrative role in terms of management and budgeting in a larger corporation. He decides on pay scales and allocates resources on the basis of reports from division manager. CFOs often seek opportunities for capital investment for their organisations.

Strategy and planning

In all types and sizes of companies, Chief Financial Officers are partnering with CEOs as well as corporate boards to assist with long-term strategic planning. They assess productivity and look for opportunities to develop areas of efficiency in order to improve profitability. They are consulted for their knowledge of markets, funding sources, as well as general economic outlook to help organisations with wise decision making when it comes to analysing risks and allocating resources. 

The qualification for a CFO can vary according to the organisation. Given that they have to undertake financial management responsibilities, most of them are expected to have training as well as experience in accounting or finance. Larger organisations require a CFO to have MBA and/or advanced degree in finance, accounting or economics.

In a nut shell, the Chief Financial Officer has an important responsibility to help organisations and companies to grow. Simply put, he keeps a company going strong.

Proactive CFOs offers both CFO and virtual CFO services to improve financial performance of businesses. The professionals help the business owners to achieve efficiency in operations and set and monitor key performance indicators.

Golden rules to borrowing a personal loan today

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.

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.

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.