FINANCIAL GOALS

All about Financial Goals

Q. How to set financial goals

List your goals between needs and wants. Prioritize the essential and non-essential goals. Then, ascertain the present value of goals. Factor the increase in cost due to inflation, the number of years and then arrive at a future value. Excel sheet and financial calculators may help.

Setting Financial goals

è Why You need goals- Without a set goal in mind, you will not have a decent plan worth carrying out.

è Set the deadline- Decide how soon you want to reach your goal. This affects how much you should invest and the returns you need

è Assign a figure- Every goal needs to have a fixed quantity of money assigned to it like Rs 3L for US trip or Rs 10Cr corpus by the age of 60.

è Where do you stand: You have fixed the idea of your future; now, look at your present- how much money do you have already? How much more you can save?

è Chart your path:Now that you have your start and end points, decide how you will go about with achieving the goal by figuring out your monthly, annual investments as well as assets.

è Is this achievable:It could happen that your goal may require more investing than you are capable of. Think of alternative ways of achieving this dream, or else your goal may not be realitically possible.

To be successful in financial goals, it is necessary to write down goals. Written goals are more successful than unwritten goals. 

Q. What factors should I consider while understanding my risk taking ability?

A. The following factors are to be considered a) Life stage factors like age and number of dependents b) Income and Loans/ Liabilities. C) Time duration of your goals d) Job or career stability e) Awareness of the upsides and downside of the investments

Q How do I time my investment?

A. For an individual investor, the time in market is important and not the timing. Stick to investment discipline. Ups and downs cycle are inevitable in the equity market. So make the investments work for your money. Don’t get emotional SIP would be a good choice. 

Q What after setting the goal? How do I get above investing?

A. Decide on the lump sum or monthly amount of investment that you would like to set aside. Consider investing in MFs for their professional fund management, transparency and to beat inflation. They also offer wide options to reach your various goals. Take the help of financial advisors to complete the investment process.  A periodic review would help you stay the course and reach the destination in time. 

How to Diversify Your Investments –Go for variety, not quantity

When it comes to investing, savvy money managers advise that you spread your money around -- that is, "diversify" your investments. Diversification protects you from losing all your assets in a market swoon. The sharp decline in stock prices in recent years are proof enough that putting all your eggs in one basket is a risky strategy.

But in order to diversify correctly, you need to know what kinds of investments to buy, how much money to put into each one, and how to diversify within a particular investment category.

Investments in each of these different asset categories do different things for you.

• Stocks help your portfolio grow.
• Bonds bring in income.
• Real estate provides both a hedge against inflation and low "correlation" to stocks -- in other words, it may rise when stocks fall.
• International investments provide growth and help maintain buying power in an increasing globalized world.
• Cash gives you and your portfolio security and stability.

Diversify Within Investment Categories

Once you've diversified by putting your assets into different categories, you need to diversify again. It's not enough to buy one stock, for instance, you need to have a lot of different types of stocks in that portion of your portfolio. That protects you from being ravaged when a single industry -- say, financial services or health care -- takes it on the chin.

Balancing Risk and Return

Though diversification protects you from devastating losses, it also costs you in average annual returns. That's because risk and reward go hand-in-hand in the financial markets. So anything that reduces your risk will also reduce your return.

Give yourself permission to take a little risk, unless you're close enough to retirement that the additional security is particularly valuable. 

Is your financial freedom at risk?

Financial freedom means you are able to do what you enjoy without worrying about how it might impact your finances.

Give yourself points on the following basis for the questions listed below and then add up the total score from all the questions given below:

a)    1 point b) 2 points c) 3 points d) 4 points

Q1 How much health insurance do you have?

a)    Don’t have health insurance

b)    Less than Rs 2Lakh

c)    Between 2L to 5L

d)    Over Rs 5L

Q2. How much life insurance cover do you have?

a)    Don’t have life insurance

b)    Less Than 24 months income

c)    Equal to 2-4 years income.

d)     Over 4 year income.

Q3. Have you ever withdrawn from your PF,PPF and other retirement options?

a)    Several Times

b)    A Few times earlier

c)    Just once on an emergency

d)    Never Withdrawn

Q4. How much of your income do you save for retirement?

a)    Haven’t started yet

b)    Less than 10%

c)    10%-15%

d)    Over 15%

Q5. If faced with financial emergency, you will ….

a)    Sell some assets

b)    Take a loan

c)    Liquidate investments

d)    Withdraw from contingency fund

Q6. How much of your income goes into EMIs?

a)    Over 50%

b)    30%-50%

c)    10%-30%

d)    Less than 10%

Q7. Have you rolled over your credit card bill in the past 12 months?

a)    More than 5-6 times

b)    2-3 times

c)    Just once

d)    Never

Q8. What kind of share do you prefer to invest in ?

a)    Penny stocks that can be bought in thousands

b)    Low priced small caps

c)    Mid caps that are quoting at reasonable prices.

d)    Blue chip companies even if they are high priced

Q9. When investing in bonds and FDs, what is most important?

a)    The rates of interest offered.

b)     There is no TDS

c)    Reputation of issuing company

d)    Credit rating of issuing company

Q10. Which of these do you use for online transaction?

a)    Cyber café or public device

b)    Acquaintances computer

c)    Office computer

d)    Own Computer, own network

Please find the evaluation of the scores given below:

Score Card

Over 36 points

You have ensured financial freedom by taking the right steps that will cushion against losses.

     28-35 points

You are doing well and have a good chance to be financially free if a few corrective steps are taken

     20-27 points

You could lose your financial freedom if you don’t act now. Start saving more and avoid reckless spending.

     Below 20 points

You are not financially free and can stay enslaved if you don’t drastically change your spending habit

Based on the scores, you must take appropriate steps and plan the financial goals to be financially free, else it would impact your finances not only in near future but also in long run and during contingencies.

Saving Vs Investment

Saving Vs Investment

Although savings and investment can be used for meeting various expenses in life, there are some major differences between them. Here's throwing light on some of them.

Come month end, and it is time to decide what you want to do with the money leftover after paying off all the expenses. You would typically have two options: you can either save it or invest it. Many people wrongly assume that both the concepts are same. However, there are some major differences between the two. Let us understand these two concepts in detail.

Meaning

Saving money means keeping aside a part of your income regularly in order to deal with unexpected expenses. Investment means putting your saved money in various products in order to earn returns and grow your wealth.

Time

Savings are usually used to meet your short term needs. People save in order to deal with emergency situations and meet unexpected expenses. However, investment generally entails a longer horizon of six months or more. It is designed to provide returns and grow your money over a period of time.

Risk and reward

Another difference between savings and investment is the risk they bear and returns they offer. While savings stored in a safety vault are very safe, they will not generate any returns over the years. Even if money is kept in a savings account, it will provide a negligible rate of return. On the other hand, money invested in various products like stocks, mutual funds, gold, etc. is subject to more risks, but has the potential to grow over time. If invested wisely, your money can grow manifold over years.

Liquidity

When it comes to liquidity, your savings are the most liquid assets, as they can be accessed at any time. However, this is not the case with investments. It takes a few days for the money to reach your bank account after you decide to sell your investments.

So having known the difference between savings and investment, it is important that ever person judiciously goes for investment to generate wealth for long run and have savings also to meet contingencies and short term needs

MAKE IN INDIA TO MADE IN INDIA

Indian economy   was a primarily an agrian economy during the post independence stage with over 60% contribution to GDP of the country.  Today, the service sector contributes 53 % of the Gross Value added whereas manufacturing is at 30%.  The share of service sector has grown rapidly in India whereas as manufacturing sector has had low growth.  In line with this, the GoI has launched the “Make in India” Initiative to boost the manufacturing growth in the country as well as to create India a manufacturing hub in the world.  No doubt, with such initiatives, India can soon be global power in the coming years. 

 

Modi government has been big on promises, but short on delivery is the constant allegation since it has come to power in 2014.  In beginning of 2016, consumer demand is low, rupee is at a 30 month low, the industrial output has fallen by 1.3%, rural economy is in a distress for 2^nd year in a row with monsoon failure, NPAs of PSBs paint a scary picture.  A debt overriding and rising NPAs mean that even if there is demand, banks may not be too willing to lend. (Stressed loans in infrastructure sector)  All these are worrying signs. 

For make in India mission to be successful, the GoI needs to make its roots very strong. We need to have a very strong infrastructure in place in terms of good road connectivity, transportation and competitive prices which will reduce the lead time of transport and reduce the costs. We also need to focus on industrial relations, productivity and quality of goods produced as India is having complex labour rules. This is one of the points where we are behind the other countries.  At the same time, the various government department and state governments also have to come in alignment with this initiative.  On one hand the centre is pushing for make in India whereas on other hand you have Income-Tax department sending notices to Vodafone or a red tape in various channels of clearance. To start a company in India for investors, they need to get over 100 approvals from different agencies and this is a very tedious process. This can be aligned in to singly point of clearance in alignment in state in which the companies would like to invest.  Also the issue of Land acquisition needs to be carefully handled and arranged for investors. It takes a great amount of time and effort to have land to be used by companies. The point is that once the government takes care of all the root cause issues in the system, there is no doubt that we would see huge actual spike in investments rather than promises.  Cheap labour with young population is an added advantage to the country along with growth in economy. 

I also believe along with the government, we the citizens can also play a crucial role in Make in India initiative.  We can do our small bit in terms of buying made in India products.  We still look whether the product is manufacture in China, korea, US or any other country. This will also ensure that the money spent is within the country instead of it being sent abroad. 

India can produce high quality products at low cost,. It has the potential and ability. We need to be more consistent and passionate with work. Eg Mangalyan, submarine, 

India needs to invest a lot in R&D facility.  With the combined efforts of the government and we the people, there is no doubt that Make in India wish will be realised as Made in India. 

The world economy is witnessing another slow down and rapid decrease in Chinas growth. India couldnt have asked for a better time and opporutunity. India must savour the moment and push the make in India to made in India and be the global manufacturing hub. Our country stands to benefit greatly if the dream turns to a reality. Hope for the best.

Jai Hind.

INDIAS ENEMY

India is a country which is strategically located in world map enjoys adavantage in maritime with southern peninsula, Himalaya in north which protects the country from cold Arctic winds, rich natural resources, population, history and culture. There is no other country in the world which is as diverse as India is. 

Over the past few days, I have been trying to understand who India’s enemy is. Before I move to tell you who it is, let us try to understand few things from a human body’s perspective.  

We know how the human body works. When our internal flow is strong, we are very fit and running fine. But when an external factor comes in contact with us, we get pain, wound or fracture in body.   Our death can be caused due to internal issues such as not taking care of body in form of health, stress and many other factors. 

 Similar is the case with our country. What I feel is that our neighbours be it China, Pakistan or any other country is not our enemy. These countries can be easily tackled with provided our internal systems are very strong. The reason is that both the countries are able to take advantage of India, because they know whatever they do, India will not react as internally it is not strong and bold enough to tackle them.

Answering the above question, which you would have guessed by now. Our country’s real enemy is we the people only (internal).  See what is happening in JNU or Haryana, UP or take any part of India.  Most of the attacks could have been avoided if we all are together and do not allow anyone to penetrate in to our country. 26/11 could have been avoided if some people did not support them. We get to see violence/ riots happening in different parts of country for reservation status or to spread uneasiness or on false rumour, political motive and various other reasons. Sometimes our politicians just see as if nothing happened..  They wake up in parliament, noise is made and the house is then adjourned for a period or indefinitely until consensus is raised.    Most of them are problem creator rather than problem solver. Why they all can’t come together, form a consensus and solve the problem. It’s time to grow up and go to the next level.  Even the common man is involved in many such issues. We have the insurgency in our country who are fed up with the governments functioning.  We also quite often see strikes in different parts of country on matters not of importance but for the want of few people.  At border, corruption sometimes takes place so that people can slide into the country. 

All the above issues suggest that our real enemy is not China or Pakistan, but internally within us. If we as a nation need to grow, it is of prime importance that we take care of ourselves in the same way we take care of our body.  We  as a nation have to internally address each of the problems, solve them and strengthen our country just like our body.  This will then destroy India’s enemy and there will be no country in the world which can take on India.

“Hope is like a cloud, but it comes true when it rains”

In the era of 21^st century, when the world is going downward, it is India’s turn to capitalise on its growth. We as countrymen have a key role to play.