Saturday, October 5, 2013

Prajna Capital

Prajna Capital

Don’t be under insured with life cover

Posted: 05 Oct 2013 06:40 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 



How much life insurance do you need?

How can you predict future expenses and provide accordingly?

 While the thumb rule is your life insurance cover should be 10 times your annual income, it is not that simple. There are several factors you must keep in mind while calculating how much life cover you should take.

It is known that Indians are under- insured. According to a report by Life Insurance Council, the insurance penetration in India — the percentage of premium to GDP — was 3.2 per cent in FY13, while life insurance density, the ratio of premium to population or premium per capita, was ₹ 2,687 ($ 43). This is an indication of the average size of the premiums paid.

The problem is that we insure our cars but don't insure our lives. Only a handful of persons are optimally insured. Life insurance is something you should include in your financial planning.

You can calculate how much life cover you need using the human life value (HLV) method. Here, you look at the present value of your future income or the discounted value of future income.

Let us look at how you can calculate the life cover needed for a family.

You need to consider the expenses of dependents and calculate the corpus required for the balance living years of the spouse (based on inflation - adjusted return).

Children's education is a big expense.

Assuming you have two children, you can roughly project ₹ 70 lakh for the educational expense for both. This will include primary and higher education.

The next big expense is marriage.

You might need about ₹ 20 lakh for marriage- related expenses on both. Loans are also a major expense. Suppose you have a loan of ₹ 50 lakh. You have to provide for that, too, in your life cover. All this adds to ₹ 1.4 crore.

Then, you have to provide for future expenses of the surviving spouse. Remember to factor in inflation while calculating future expenses.

After adding all these, you need to deduct the value of any financial assets such as fixed deposits, Employees Provident Fund, Public Provident Fund, mutual funds and so on. Other assets such as a second property can be deducted. However, assets such as jewellery and vehicles should not be included, as these are consumption assets.

Similarly, if the spouse is working and contributing to the family expenses, then the cover can be reduced to that extent.

Since insurance is a risk cover, it should be balanced with adequate savings through other investment avenues, points out Kiran Kumar Kavikondala, director, WealthRays Group. Too much of insurance cover without adequate savings will be of no help either. A corpus needs to be developed when an individual is alive, as one should live rich rather than die rich.

The amount of cover will also depend on the number of dependents.

If, for instance, you have children and ageing parents who are dependent on you, then you require more cover than someone whose parents have their own source of income.

Also, if you have taken your policy at an early age, you must upgrade it depending on events in your life such as marriage, children, when you buy a home, and so on.

Life insurance needs, rather than risk- related needs, should be reviewed periodically (just the way we review investments). One should review ones HLV every few years to ensure one is not over- or underinsured.

The logic is simple: increase your cover when your responsibilities or liabilities go up and reduce your cover as and when your asset base goes up or goals or loans get fulfilled or closed.

This can be done by upgrading your existing policy or taking an additional policy.

It is always better to avail permissible features in your existing product and customise it to suit your needs but there is a limitation to this exercise. So, to suit life- stage needs, one will definitely have to look at new plans while taking benefits from existing plans in one's portfolio.

Do not make the mistake of discontinuing or surrendering your existing cover before you get the new one, as there could be health issues due to which the underwriter might not be willing to provide the cover or could mark up the premium to substantiate the risk. There are certain products where one can opt for a 'step up' or a 'step down' option. That is, the sum assured will increase or decrease as per the option opted.

The earlier one takes the policy, the lower the premium. As you age, the premium increases for the same cover. Age is directly proportional to insurance premium. Premium increases with age, so the earlier the better to take an insurance cover to save on premium.

Apart from pure- term policies, there are products that offer decreasing cover. These are also term plans but specifically linked to goals. Many banks and housing finance companies insist the borrower must take such a policy as a pre- condition to approving the loan.

In the event of the policyholder's death, the money from such policies can be used only for repaying the loan. As the loan outstanding decreases ( as and when the borrower repays it), the sum assured decreases.

It is advisable to take such policies if you have a home loan, which is a long- term loan. But remember that if you plan to prepay your home loan early, then don't take the policy for a very long time

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Will you get your pension?

Posted: 05 Oct 2013 05:08 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

His employers have put in nearly 85,000 in a scheme on his behalf but Prashant Jangale does not know how, when or what he will get in return. The Mumbai-based marketing professional is not aware that as a member of the Employees' Provident Fund (EPF), he is eligible for a monthly pension for life after he turns 58. After him, his wife will receive pension for life.


Jangale is not alone. Almost 59% of the respondents to an online survey conducted last month by economictimes. com were unaware that private-sector employees covered by the EPF are also eligible for lifelong pension. More than 30% of these respondents have contributed 65,000-1 lakh to the Employees' Pension Scheme (EPS) till now.


The amount flowing into the EPS every month is so small that most don't even notice the deduction. It is 8.33% of the employer's contribution to the EPF on behalf of the employee, with a cap of 6,500 a year. Even so, the monthly contribution of 541 has the potential to amass a huge sum over the long term. Even at a modest interest rate of 8%, this tiny amount can burgeon into 12.41 lakh in 35 years.


Sadly, this is not what happens to your contribution to the scheme. The amount just flows into a pension pool without earning any interest for you. If you have completed at least 10 years of service, you start getting pension from this pool after you turn 58. The pension amount is based on the number of years you had contributed to the scheme and your basic pay at the time of retirement. Here again there is a cap of 6,500. If you were in service for over 20 years, you get 2 bonus years as well.


This is not as cool as it may sound. Our calculations show that someone who joins at the age of 23 will get a pittance of 3,250 as monthly pension when he retires at 58. Instead of the EPS, if the money is put into an option that earns 8% it would grow to 12.41 lakh in 35 years. If annuitised at the current rates offered by the Life Insurance Corporation, this amount would generate a lifelong monthly pension of 8 242  


In other words, the EPS is giving out lesser pension than what your contribution could have earned. You must take into account that the EPS also gives life insurance cover and other benefits like pension to widows and children. These benefits come from the same pool into which everybody is contributing.


Ticking time bomb


The low returns is a minor problem compared to the crisis looming in the horizon. The defined benefit model is not sustainable. Things are not looking too bad right now because there are more contributors than beneficiaries. In 2011-12, for instance, the EPS received contributions worth 14,768 crore and paid out benefits worth 7,859 crore. The scheme's corpus increased 14% to 1,83,429 crore during the year.


But this situation would change in the coming years as India's demographic dividend transforms into a geriatric nightmare. In 2012, only 8% of the Indian population was above 60 years. Studies have estimated that this figure would rise to 12.4% by 2026 and to 19.1% by 2050. With every passing year, the pool of pensioners will become larger even as the number of contributors will rise at a slower pace.


That's not all. Life expectancy too is on the rise. The average Indian lives up to 68.4 years. In urban centres, life expectancy is higher by about 5 years. By 2030, the average urban Indian would be living till the age of 80, putting more pressure on the pension payments. This also means that by the time GenX gets a farewell party at office, the EPS might have gone bust.


Panel's recommendations rejected


Three years ago, an expert panel had suggested that the EPS be replaced with a provident fund-cum-annuity combo under which contributions would flow into individual accounts. Each member was to have two accounts—one for the Provident Fund and the other for the pension. The panel suggested that the balance in the pension account be used to buy an annuity for the individual when he retires. However, most of the modifications suggested by the expert committee were rejected by the CBT.

However, there are some positive points about the EPS as well. For instance, it offers the option of early pension to people who may have turned entrepreneurs or retired early. They can opt for pension after 50 but will have to forego 4% for every year before they turn 58. There is no option for early pension under the NPS.


Also, the EPS allows withdrawals if you have not completed 10 years of service. However, once a person has completed 10 years he can't withdraw and will have to wait till he turns 58 for the pension to start flowing.


Digging a deeper hole


The EPFO is now considering raising the contribution limit from 6,500 a year to 10,000 a year and giving a minimum pension of 1,000 a month. Both measures have the potential to dig a deeper hole for the EPS. Raising the limit would cause the pension outgo to shoot up. Retirees who contributed the lower amount of 6,500 a year would be eligible for pension based on the higher limit of 10,000. The last time the limit was raised from 5,000 to 6,500 in 2002, the scheme notched up a deficit of 10,000 crore. This time, a formula must be worked out to adjust the pension accordingly. The minimum pension limit will also put pressure on the scheme as lower income workers are cross subsidised by other members.


Already there are signs that all is not well. In the past 15 years, the scheme has slipped into the red. Experts estimate that it now has a deficit of almost 54,000 crore. Of course, this is a noptional deficit based on the pension payable to the existing members. However, the EPFO has disputed these estimates, saying that they are not statistically robust. "The valuations computed the pension liability by extrapolating the age and income data of 5% subscribers whose details were available with us. We have now provided data on 70-75% of the subscribers to the actuaries. Their valuation report, which is expected soon, will give a more realistic assessment of where the EPS stands," says Central Provident Fund Commissioner Krishan Kumar Jalan.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Checklist for buying new property

Posted: 05 Oct 2013 03:59 AM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

Real estate always remains one of the most sought after investments for most people despite tough economic situations, rising interest rates etc. When people look at consolidating wealth and diversifying, then it is usually real estate in the form of a house, flat, commercial space or a plot.



Here are a few tips to help you if you are one of such investors:

 

• Accessibility of the property is of paramount importance. Easy accessibility or inconvenience will affect the resale value and rental value of the property.

 

• Connectivity is the next critical thing. The property should be well connected to schools, colleges, markets, hospitals, bus stations/local transport, hotels and refreshment centres etc.

 

• Adequate road access is a must. This is especially important when looking at properties located in remote areas or at the outskirts. Buyers should be careful and understand the road development plans from the municipality/government authorities rather than merely trusting the developer or promoter of the property.

 

• Also check with the government bodies if the property comes under future road widening plans or if it has been constructed in a government land allotted for road. This will help to avoid hassles during road widening or any similar activity which the government decides to undertake at a later date.

 

• You should know the utilities that are available in the property at the time of purchase. Some of the basic utilities which should be available are electricity, water, cooking gas, telephone and cable connections. Other aspects like easy availability of domestic help are also factors that influence the rental value of the house.

 

• Boundaries and the neighbourhood of the property should be thoroughly checked. It should not be near a factory or a mine or a high tension cable as this is likely to cause noise pollution and health related issues. One must also look at the sewage treatment and water polluting bodies in the area as well. Many a fine property is completely spoiled by the smell of drain water from the open canal or rotting garbage from a collection centre nearby.

 

• In case of a plot, you should find out if there are any restrictions in construction, which might not meet with your requirements (Eg. Only Duplex, similar exteriors, commercial/non- commercial, Floor Area Ratio (FAR) etc.). Often the developer may conveniently forget to tell you of such restrictions.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

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