Skip to main content

Investment Planning - From Me To You

Any investment planning must guard against the unforeseen, particularly when it pertains to your better half. Take stock of the must-do list



JOHN Lennon, one of the founding members of The Beatles, once noted in his album, Double Fantasy, that life is what happens to you while you’re busy making other plans. Perhaps, Lennon wouldn’t have given a second thought to what he said. But, life certainly did. Some years later, he was shot dead by Mark David Chapman, for whom Lennon had autographed a copy of Double Fantasy earlier that same night. Lennon has left a treasure of melodies for his admirers but some of us aren’t that lucky. Any eventuality, may not only affect your family emotionally but financially as well. Specially, for your spouse, who can be in dire straits if you haven’t planned for such a situation. Here’s a low down on what to keep in mind while building a financial reserve for your better half.



TILL THERE WAS YOU



Financial planners hold the view that before you make any plan for investments, you should ensure appropriate risk management, which includes not only life insurance and health insurance but household and accidental disability insurance as well. But when it comes to your spouse, you’ve to start with some broad classifications such as is the spouse working, existing assets portfolio and ownership structure, intelligence quotient (IQ), emotional quotient (EQ) and age and financial literacy. Experts believe that the question you should ask is, can you live without your spouse’s income? Accordingly, you must leave an amount needed for living expenses and critical financial goals such as child education and marriage.



NOT A SECOND TIME



You may have pondered over planning your portfolio, but remember that an ideal allocation for your spouse reserve is decided on factors such as lifestyle, risk appetite and requirement on retirement (if your spouse is working). There cannot be a standard formula for investments as it varies from person to person and it’s better if decided by a qualified financial planner. Take an example of a single earner, aged around 35 years, with a monthly income of Rs 50,000. Now, this sole earner needs immediate cover of Rs 1 crore. Reason: if in case of an early death, the spouse needs around the same amount, setting aside personal expenses. So, Rs 1 crore, if invested in any debt fund giving a yield of 8%, will give around Rs 66,000 per month. While the spouse can spend around Rs 45,000-50,000 per month for personal expenses, the rest could be invested to counter inflation in future. Hence, this person should cover himself and his family with adequate health cover and disability cover for himself.



A quick review of your insurance policy should be done first. Make sure you have adequate insurance coverage to make up for the loss of income. Instead of taking one big policy, it is better to have insurance policies maturing at different points of time.



If you’re young, you can look to lock in the investment in less liquid investment. And as you grow, you can start liquidating them and investing in liquid assets. It is important to note that insurance should be ideally kept separate from investments and the core investment should never be influenced by considerations of tax planning.



WILL IT, WILL YOU



Making a Will is an important task in your life. You should make a Will, which protects the interests of your spouse till she survives and should be well defined. It’s also pertinent that the spouse should be well informed regarding your Will, otherwise litigation and other problems can occur. Ideally you must share all information about the Will with the spouse. However, exceptions can be considered in cases of below average EQ and financial literacy. In such cases, you must exercise utmost foresight to devise mechanisms for efficient execution of the Will without the spouse being shortchanged.



If your spouse is working, the reserves can be common but they should ride on multiple objective driven vehicles similar to an SPV (special purpose vehicle). Experts feel that while you may build a common reserve from your incomes, it should be divided across SPVs that will help you achieve different objectives of your life. Cautions: You may have a common reserve but contribution of both should be identifiable and it should not be used for creating personal assets.



Financial planners feel that the purpose of such a reserve can span across objectives such as retirement/ pension, child’s education, healthcare and travel. It is, however, recommended that you should form a separate fund for each of these objectives.



The financial plan must be reviewed periodically to have the correct evaluation for timely adjustments in portfolio diversification and asset allocation. For instance, as you retire, your regular expenses should reduce by around 20% but other expenses increase such as travelling and hobbies. Financial planners say that you should not take major financial decisions in the wake of a loss. Put the lump sum amount aside for a while, preferably in a liquid fund or savings or fixed deposit account for three months. Don’t feel obligated to do something with it right away. After all, it takes time to fill that emotional gap.

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now