How To Become Rich In India

How To Become Rich In India
by Divya Nair 12/07/2016

Like everyone, you too want to become rich. Sure, people who have ancestral property can become billionaires easily. But even a middle-class salaried individual like you can also be rich if you make your money work for you right. Have you ever thought had you been practicing the following points, how much money you would have made by now? Here are 6 ways to becoming rich in India -

Living Within Your Means

This means managing debt and learning to budget. This may be a stepping stone to achieve your financial goals, successfully accumulate money and grow wealthy. The biggest trap stopping people to save money is multi-national companies luring them to buy things they might not even need. Learning to live within our means leads to a freer life. Whereas, debt can be a burden. We need to learn to save first and spend second.

Creating An Emergency Fund

Keeping an emergency fund is always a good financial move as you may always need money for your day to day expenses. You can park some part of your savings in liquid funds. As the name suggests, they are completely liquid which means you can withdraw money anytime. Keeping some part of your savings in bank account might also be a considerable option.

Making Money From Stock Market

Investments in stock market offers good returns. However, stock market is a volatile space where no one can predict exact return or loss. Key to consistently making money in stock market is to have a long-term horizon for investments, have an investment plan, and have the discipline to stick to it.

Mutual Fund Investments

Risk-averse investors who find it difficult to dedicate time to study stock market can take the mutual fund route to invest in stocks. By carefully choosing the best mutual fund, an investor gets the benefit of diversification and liquidity as some of the mutual fund schemes are highly liquid and advantage of professional management. Through mutual funds, one does not have to put in a lump sum amount, instead he/she can start off with as low as Rs 1,000/month via SIP. Mutual funds can offer returns of around 12%-15%.

Rebalancing Portfolio

Rebalancing investment portfolio means realigning the weightage of a set of assets in a portfolio. The process of rebalancing involves periodically selling or buying assets in a portfolio so that the targeted level of asset allocation is maintained. For instance, an investor may decide that his investment mix should be 50% growth stocks, 20% value stocks and 30% bonds. But over time, asset classes vary in performance. In a year’s time or so, the portfolio balance starts shifting as one asset overperforms and another underperforms.

Becoming A Venture Capitalist

In an urge to double their profits, venture capitalists or angel investors provide capital to startup companies. For instance, many angel investors in the United States had invested their money in shares of Facebook, when the popular social networking website was relatively new in the industry. Now, these stocks worth millions and billions of valuation.

Conclusion - Sure creating wealth is not a cake walk. Becoming wealthy is the result of many attributes such as saving discipline, patience, investing surplus funds smartly and readjusting portfolio periodically. Adhering to these methods to get rich would certainly help you accumulate wealth in the long run.

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Best Ways To Build Retirement Corpus

Best Ways To Build Retirement Corpus
by Divya Nair 11/08/2016

As the regular income stream dries up as you draw near to your retirement, it is critical that you build a retirement corpus sufficient to cater to your expenses post retirement. Each individual has different expenses and family circumstances. Therefore, the amount of money needed post-retirement varies from person to person. This is where the importance of planning a retirement corpus comes into the picture. In the following pointers, we have tried to indicate some of the best possible ways a person can ensure a comfortable retirement.

Estimate Post-Retirement Expenses

The hard fact about life is regular income stops, but expenses don’t. Major retirement expenses include monthly household expenses, medical expenses, vacations or family visits etc. What will one spend would depend on the kind of lifestyle he/she leads post-retirement. Future expenses must be carefully projected so that the arrangements can be made while the person is still working.

Balance Between Spending & Savings

Typical human tendency is to spend more during early years. This needs to be attended as soon as we start earning. Whatever is your income, every young person should learn to live within his/her means in order to avoid unnecessary spending.

Keep An Eye On Effect Of Inflation

Inflation greatly effects retirement planning. To get fixed returns when retired, people usually invest money for long-term. But inflation keeps increasing, and we don’t make much money in reality. A person should invest in such a manner that he/she is able to hedge against the effects of inflation. One can invest in inflation protected schemes and funds, equities and mutual funds (since the returns are historically more than 12%).

Inflation rate 6% 7% 8%
Years to retire 30 40 30 40 30 40
Present monthly expenses (Rs.) 50,000          
Future Value of monthly expenses ( Rs lakh) 2.9 5.1 3.8 7.5 5.0 10.9
Corpus required at retirement age (in Rs. cr.) 5.3 9.5 7.6 15.0 11.0 23.8

Invest Smartly

As said above, people should identify the best possible investment avenues to plan build a fair corpus of their retirement. There are several financial assets where one can put in money regularly till retirement. Let’s have a look at some of the ideal assets to invest money to get fixed returns during retirement:

Investment Assets PPF Mutual Funds NPS EPF
Why Invest Protection of capital and accumulated interest on PPF is guaranteed by the government, thus completely safe. Managed by asset management companies (AMCs), which channelize people's money into collective investments in equity, debt and other financial products managed by investment experts. National Pension System is a voluntary, defined contribution retirement savings scheme designed to enable subscribers to systematically save during their working life. It is the most popular retirement saving instrument in India. Investors should opt for EPF transfer whenever there is change of job. This lets investors reap the benefits of guaranteed returns along with power f compounding.
Risk Carries interest & rate risk Though, managed by expert fund managers, they still face market-specific risks. Fund performance depends on fund manager and the asset class choice Carries interest rate risk
Taxation Comes under exempt-exempt-exempt (EEE) category Long-term capital gains on equity funds are tax-free This product is EET (exempt-exempt-taxable) Offers deduction up to 1 lakh limit under section 80C
Returns 8.7% 14-15% 8-11% 8.75%

But before you decide where all you can invest your money, it is important that you determine your risk appetite first. Risk appetite is the amount of risk an investor is willing to take while investing. An investor’s risk profile can be conservative, moderate, moderately aggressive or aggressive. Investors should ideally go for those particular financial tools that suit their overall investment risk profile.

Conclusion - Whatsoever your financial position is at present, you should be able to live financially independent when you retire. Therefore, planning your retirement from financial point of view is crucial and an integral part of financial planning.

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10 things you should know about Rs. 500 and Rs. 1,000 discontinuation

10 things you should know about Rs. 500 and Rs. 1,000 discontinuation
by Nutan Gupta 11/09/2016

In an attempt to curb black money and corruption, Prime Minister Narendra Modi in an unscheduled meeting announced demonetisation of of Rs. 500 and Rs. 1,000 currency notes with effect from midnight of November 8th 2016. In March 2016, around 88% of the total currency consisted of Rs. 500 and Rs. 1,000 notes. Naturally, this move has created a lot of panic among the people of India.

Here’s where and when you can exchange/deposit your money...

Process Limit Where Time-Frame
Exchange Rs. 4,000 Bank and Post Office 10th Nov to 24th Nov, 2016
Exchange More than Rs. 4,000 Any Personal Bank or any Post Office 25th Nov to 30th Dec, 2016
Deposit No Limit Banks and Post-Office 10th Nov to 30th Dec, 2016
Deposit No Limit RBI specified offices 31st Dec to 31st March, 2017

Here are 10 things you should know about the discontinuation of Rs. 500 and Rs. 1,000 currency notes:

  • All the residents of India who are holding currency notes of Rs. 500 and Rs. 1,000 have the option to deposit their cash in bank accounts or post office by 30th December 2016.

  • One can exchange old notes of Rs. 500 and Rs. 1,000 at any bank, post office, by showing a valid ID proof. However, the limit for this is Rs. 4,000 upto 24th November, 2016.

  • There would be no restrictions on online transactions, cheque, debit/credit card or any other plastic money transactions.

  • New notes of Rs. 500 and Rs. 2,000 would be brought into circulation from November 10, 2016.

  • People who are unable to deposit the old currency notes by 30th December, 2016 for some reason, have the option to change them by 31st March, 2017 by presenting a valid ID proof.

  • The old currency notes will be valid for transactions related to railway booking, air ticket booking, bus ticket counters and government hospitals till the midnight of November 11 and 12, 2016.

  • ATMs to remain shut on November 9 and 10, 2016.

  • The withdrawal limit for cash against cheque has been set to Rs. 10,000 per day and Rs. 20,000 per week upto 24th November. The limits shall be reviewed post this.

  • After the ATMs are functional, one can withdraw upto a maximum of Rs. 2,000 per card per day upto 18th November, 2016. The limit will be raised to Rs. 4,000 per day per card from 19th November, 2016.

  • People who do not have a bank account can open an account by approaching the bank with necessary documents needed for fulfilling the KYC formalities.

Please Note: You can refer to www.rbi.org.in for further information and the website of the Government of India (www.finmin.nic.in). You may also approach the control room of RBI by email or contact them on 022 22602201/022 22602944.

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Why should you opt for zero depreciation Car insurance?

Why should you opt for zero depreciation Car insurance?
by Nutan Gupta 11/09/2016

A zero depreciation cover provides for the complete coverage of the vehicle without any deductions.

Rahul Jha, who works as a general manager in a Mumbai-based firm got furious with the insurance company when he had to shell out Rs. 18,000 from his pocket towards his car repair.

Without Zero Depreciation Cover With Zero Depreciation Cover
Total Expense towards car repair 60000 60000
Assumed rate of depreciation 30% 30%
Amount beared by insurance company {60,000-(60,000*30%*)} 42000 60000
Expense from own pocket 18000 (60000*30%) NIL

Rahul incurred a total expense of Rs. 60,000 towards repairing his car, however the insurance company reimbursed him only Rs. 42,000 after deducting a depreciation of 30%. Had Rahul opted for a zero depreciation policy, he would have easily saved Rs. 18,000.

Who should buy a Zero Depreciation Car Insurance?

- People with luxury cars
- People living in accident prone areas
- If you worry about small bumps and dents
- If you have a car with expensive spare parts

What role does zero depreciation play when you make a claim?

When you make a claim with a basic car insurance policy, the insurance company does not factor in the actual cost and reimburses just the depreciated value of the car parts replaced. A zero depreciation car insurance extends to the repairing costs of fibre, glass, rubber parts and plastic. The premium for a zero depreciation car insurance is slightly higher than the premium of a normal car insurance, but the insured is entitled to a 100% re-imbursement in case he makes a claim.

A zero depreciation car insurance rider can be bought if you have purchased a new vehicle, or for a vehicle not older than three years. So, if your car is more than three years old, you will have to buy a normal car insurance.

In order to ensure that people do not make meaningless claims, a zero depreciation car insurance comes with a restriction on the number of claims that you can make annually. This varies from one insurance company to other.

A zero depreciation car Insurance does not cover few conditions:

  • Wear and tear

  • Damage to uninsured items like accessories and bi-fuel/gas kit, tyres

  • Damage due to uninsured peril

  • Damage due to mechanical breakdown

Opting for a zero depreciation car insurance can save you from burning a big hole in your pocket in case of an accident. It is always wise to buy a zero depreciation car insurance to protect your vehicle from all threats and damages.

Buy Car Insurance Now!

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The impact of Trump Win on India

The impact of Trump Win on India
by Prakarsh Gagdani 11/10/2016

Bucking media opposition, popular perception and Hillary Clinton’s campaign, Donald Trump has emerged as the 45th president of the United States of America. With Trump in the White House now, his agendas which formed basis for his win will have implications on India. These would result from his New Tax Plan, plans to bring jobs back to America, the Energy plan and his views on terrorism.

The most prominent impact would be felt by the India IT companies as major portion of these companies’ revenues come from the outsourcing and onsite business.

Impact on the Indian Information Technology (IT) Companies

According to Trump the H-1B visas grant and outsourcing IT processes are reducing employment opportunities to US as this leads to onsite jobs being transferred to non-US workforce and processes being transferred to IT hubs like India. This is a clear threat for the Indian IT companies and will impact their financial performance. The IT revenue streams most sensitive to Trump’s policies would be the Onsite revenues and outsourcing revenue.

Below mentioned are some of the IT companies that may be adversely impacted by Trump’s win.

Revenue contribution from the United States (US)

Source: Company Reports
Company FY16 (%)
Infosys Ltd 63%
HCL Technologies Ltd 58%
Tata Consultancy Services Ltd (TCS) 54%
Wipro Ltd 53%
Tech Mahindra Ltd 48%
  • Infosys Ltd Infosys is the second largest IT Company in India. Geographically, it derives 63% of the revenue from North America. Infosys earns 56% of the revenue from the onsite business.

  • HCL Technologies Ltd HCL Tech is the fifth largest IT Company in India with over 450 clients. Recently, the company acquired Geometric software. HCL derives 58% of its total revenue from the US market.

  • Tata Consultancy Services Ltd- TCS is Asia's largest IT services provider and is amongst the top 10 technology firms in the world. It derives 54% of its revenue from the US market. A major headcount of the company works on visa.

  • Wipro Ltd- Wipro is the fourth largest IT player in the country derives 53% of its revenue from US and ~50% of the revenue comes from onsite projects.

  • Tech Mahindra Ltd- Tech Mahindra is a part of the USD 16 billion Mahindra Group. Almost ~62% of the revenue comes from onsite projects. US contributes 48% to the total revenue of the company.

Impact on the Indian Equity Market

The above chart shows that Sensex declined ~6.5% to 25,902 lows in the early morning trade on 9th November, 2016 from the previous close of 27,591 factoring in the unexpected Discontinuance of high denomination INR notes and the uncertainty around the US Presidential Elections. It recovered from the lows in the late morning trading session. Sensex continued the surge once Donald Trump was elected as the President of the United States. The Sensex today opened at 27,605, 350 points or 1.2% above yesterdays’ close.

In the short term, Trump’s win will instigate uncertainty over the emerging market economies until pursuit of his agendas and their very implementation brings further clarity. This will pave way for changes in the US economic environment and accordingly, have ripple effects on global financial markets. Indian Markets for now, with clarity on the Election results, will see the focus shift towards the domestic sphere.

In the long term, we may see our domestic markets surge higher on grounds of stronger macro fundamentals compared to other emerging markets. Furthermore, after assessing the political situation, if the Fed Hikes rates in December 2016 it may result in a temporary outflow of FII funds from Indian Markets. However, in India, the current scenario of declining inflation in conjunction with the replacement process of high denomination INR notes is expected to ease inflation further. Resultantly, RBI may further cut Interest Rates which will support growth prospects going ahead. Thereby, Trump’s win may have short term ripples on the Indian Markets in line with other emerging economies. But, in the long run, Indian markets are expected to contemplate more on improving domestic fundamental dynamics.

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Housewives!! Best Time to put your Hidden Savings to Work!

Housewives!! Best Time to put your Hidden Savings to Work!
by Nutan Gupta 11/10/2016

Attention! All the husbands in India are the happiest people since the last two days. After the news broke out that the denominations of Rs. 500 and Rs. 1,000 will no longer be considered as a legal tender, husbands can finally get to know about all the money their wives have hidden from them and saved over the years. Now, this is something very special about India. No matter what your age is, Indian women have this habit of saving money, not in bank accounts or mutual funds, but in their cupboards!

As soon as we saw this announcement on the television, the first question that my father asked my mother was, ‘Kitne paise hai humare cupboard mein?’. Though all of this may sound funny, the truth is that all this money will now be infused into the banking system or will be invested in the right direction.

The Government has clarified that it will take a note of deposits in bank accounts over Rs. 2.5 lakh. Any deposits lower than Rs. 2.5 lakh will not come into scrutiny. So, women who have up to Rs. 2.5 lakh of savings have an option to deposit their money in the bank. However, women who have saved over the years and have more than Rs. 2.5 lakh will have to divert their money in the right direction. This money can be invested in equity mutual funds and liquid funds. Equity mutual funds depend upon the performance of the equity market. In the past, equity mutual funds have given returns of 12-14%. Liquid funds are debt mutual funds that invest in very short-term instruments — commercial papers, treasury bills, certificates of deposit, and so on for a tenure of 91 days. The return given by liquid funds is 7-8%. On the other hand, a savings bank account gives a return of 4%. Clearly, there is not point parking your money in the savings account. It is always better to park your money where you get a good rate of return.

Its time that housewives move over the traditional way of saving money in their cupboards and make their money earn some good return for them in a smarter way!