Prajna Capital - An Investment Guide

The earlier you begin investing, the higher will be your returns through your lifetime Traditionally, the domestic market has a high level of household savings. It is advisable to start saving and investing in carefully-selected investment instruments as soon as possible in your earning years. There are many investment options available in the market and sometimes it is quite confusing for new investors to select the right investment instruments to invest their hard-earned money in. Each investment instrument is designed to serve a definite objective and therefore, a fresh investor should take professional help to choose the right options, based on his requirements. It is very important for investors to identify various requirements and lock into a well-designed investment portfolio. Here are some parameters you can consider while chalking out an investment plan: Identify need First of all, identify the broad requirements of funds in the short term (for example, support ...

This article has some tips to help you choose a policy that suits you well While choosing an insurance policy, the first step is choosing the insurance company. The factors that you need to look at are the promoters, customer service, performance track record and the product portfolio. The next step is to understand your own financial needs, taking into account the life stage, risk profile, dependants, disposable income and liabilities. This will help you identify your protection and savings needs. The amount of insurance required is a factor of your future earning capacity, your assets, and your liabilities. Insurance is not static and needs to be reviewed at different stages in life, depending on the changes in those factors. The amount of insurance required changes with factors like income of the family, assets and liabilities of the family, size of the family and the number of dependants in the family, the stage of life of the dependants - birth, education, marriage, and so ...

THOUSANDS of life insurance policies lapse for a variety of reasons every year. Policyholders may not pay the renewal premium either because of a change in their financial circumstances or because they discover later that the policy was mis-sold to them and it does not meet their requirements. They may also inadvertently skip renewals because of a job transfer. While lapsed policies result in a loss for policyholders, they are also a drag on the books of life insurance companies, contrary to popular perception. This is why life insurers often make special efforts to revive lapsed policies. THE PROCEDURE Typically, a policy can be revived within six months of its lapsing through a simple revival. If the lapse has occurred more than six months ago, a personal health declaration needs to be submitted. The policy is then revived subject to underwriting decisions. Additional medicals may be triggered depending on underwriting decision. The policy can be revived within one, two or five y...

Here are some tips to help you choose the ideal insurance policy that meets your needs Numerous insurance products such as children's education plans, life insurance plans with huge death benefits, and accident insurance covers are marketed aggressively. Often, people aren't aware of the actual insurance coverage. They jump onto the bandwagon, without reading the fine print. Tax payers make hasty last-minute insurance purchases to avail tax benefits under Section 80C. Though you may be saving a small amount of tax money, you could be stuck to a worthless policy for long years. Here are a few points to ponder over while buying an insurance policy: Insurance is not investment Insurance products are designed to provide protection . A term cover usually offers insurance protection but no benefit in case the insured survives the term of the policy. A unit-linked insurance policy ( ULIP ) on the other hand provides dual benefits of insurance protection and a flexible in...

This explains how some popular insurance schemes work to help you choose one Anyone above 18 years of age, who is eligible to enter into a contract, can go for an insurance policy. Subject to certain conditions, a policy can be taken on the life of a spouse or child too. Here are some popular policies: 1) Whole life policy These are the simplest of policies. You pay a fixed premium every year based on your age and other factors. The insured earns interest on the policy's cash value as the years roll by and his beneficiaries get a fixed benefit after he dies. The premium is the same even in later years as it was when the policy was taken. Whole life insurance policies are valuable as they provide long-term cover and accumulate cash values that can be used for emergencies or to meet specific objectives. The surrender value gives you an extra source of retirement money if you need it. 2) Endowment policy An endowment life insurance policy is designed primarily to provide a benefi...

You need to choose your insurance based on need and not just to meet tax deduction needs. Life involves facing risks all the time. Everyone faces risks to life, health and belongings. The question you need to ask yourself is whether you have a back-up plan in the event of the unexpected happening to you. Insurance is the perfect answer. Insurance provides protection against the risk of financial loss. While there is growing acceptance that insurance is vital, often there is confusion on what kind of insurance one needs to take, and how much insurance is adequate. There are three broad categories of risks for which a person would require insurance. Personal risk - unemployment, death, disability, illness or accident which could affect the income-producing ability of an individual is one. Property risk - something that may result in loss or damage of an individual's personal property such as fire, theft, flood, earthquake etc is the second. Liability risk - something that exposes a p...

The insurance market is flooded with many policies and schemes. While each has its own benefit, not all are needed. Insurance is possibly the best financial tool to protect yourself as well as your valuables from unforeseen circumstances. In fact, you owe it to your family to get the best cover you can afford. However, while it pays to be smart about insuring your family and your valuables, it is even wiser to make out which policies are truly worthwhile, and which ones are redundant. You need to know that while each cover has its own benefits, not all of them are needed in normal circumstances. Also, there are lots of insurance policies that use scare tactics to lure you in, and have premiums that are overpriced. And paying too much for protection can be a financial strain in itself. Therefore, you need to be selective in choice. Insurance is the best known form of financial protection to guard against major uncertainties or vagaries of nature. As a thumb rule, a person needs to have ...

If safety of your funds is what matters to you, try guaranteed life insurance products which offer assured returns too. Lets check out the benefits: IT’S a lesson that most people learn pretty early these days — there are no guarantees in life. Almost everything is a 50:50 game and to survive, you need to be ready for those days when the odds are weighed against you. But the irritation is much greater when the uncertainty involves money. With the stock markets still volatile, frustration and despair are becoming the predominant sentiment. Faced with the need to rekindle feelings of safety and security , life insurance companies have launched guaranteed insurance products. SWEET TREATS Guaranteed return plans are what one would call a two-in-one treat . On one hand, they offer what a normal life-insurance policy would in terms of covering you against unforeseen incidents like death. In addition, they also ensure that you are entitled to a fixed sum of money at the end of the maturity p...

IN an age when shares can be purchased at the click of a mouse, filling a life insurance proposal continues to be a major chore. More often that not it is the insurance agent who, in his eagerness to sell, fills in the details on behalf of the insured. What the proposer doesn’t realise is that such a casual approach can make a crucial difference when it comes to pricing, and in ensuring that claims are not prejudiced. Unlike other transactions, insurance is based on faith. Since the insurance company cannot verify every bit of information, it accepts in good faith whatever details the proposer provides. The flip side is that this gives the company the right to reject claims if there is non-disclosure of a fact that is material to the pricing of premium. If there is a vague or incomplete entry in the proposal, the underwriter may play it safe and bracket the insured in a higher risk category. This is more applicable in case of policies where there is a high sum insured. Tak...

HEALTH, THOUGH important, is by far the most neglected aspect when it comes to health expenses. Notwithstanding the rising medical expenses - thanks to the hectic lifestyle - not many people in the country today have adequate insurance covers. While the public may not be concerned, government ensures that citizens protect themselves and their dear ones with adequate medical cover by giving tax breaks on expenses incurred for getting health insured. Premium paid up to Rs 15,000 on a medical insurance policy is exempted from tax under section 80D of the Income Tax Act. A tax-payer paying premium toward insurance cover of dependant parents shall be entitled to an additional tax benefit of up to Rs 15,000. If the parents are senior citizens, then this limit gets enhanced to Rs 20,000. Thus, the maximum tax benefit that a taxpayer can now avail by insuring the health of his/her entire family (including dependant parents) is Rs 30,000 or Rs 35,000 as the case may be. MEDICAL EXPENSES S...

An increase in the disposable income of Indians has led to an upswing in the lifestyle of people. A growing need for insurance has also been observed, as more families are dependent on only one earning member. There are two types of life insurance – 1) Term plans - which are the simplest and cheapest form of risk cover, and savings based plans, where one can expect returns after a period. 2) The number of savings based plans have recently been on the increase. People are viewing it as an investment instrument; like market-based Unit Linked Insurance Plans ( ULIP ) as equivalent to another Mutual Fund. But it is not entirely their fault. Insurance Advisers are 'misguiding' them into buying these savings based plans as investments with an added benefit of risk cover, instead of the other way round. However, consumers need to keep in mind that most of these plans are beneficial (both risk-cover as well as returns wise) only in the long term, though most insurance agents push them ...

There are some fund houses that offer a life insurance benefit if you opt for a systematic investment plan in their schemes. It was initiated by DSPML Mutual Fund in 2005 with the name of Super SIP. Some other players like Birla Sun Life Mutual Fund, Kotak Mutual Fund and Reliance Mutual Fund have come out with the same concept. You will have to look into the details to see which one suits you. For instance, here are some questions you can ask as a guideline. Is there a minimum amount that has to be invested in the SIP? Must the SIP be of a certain tenure? Are all equity schemes of AMC, eligible or is it offered only on certain schemes? Will the insured amount be given to the nominee or be used to continue with the SIP so that the investment plan continues? Will all the insurance expenses be borne by the AMC? Is there any age limit to avail of this scheme? Now coming to your second question; yes, if you switch your units from one scheme to Equity Linked Saving Scheme ( ELSS ) of the sa...

It is advisable to start investing early in life towards a retirement plan. Here are some tips: Retirement planning should be an essential element of everyone's financial planning. Individuals should start planning for their retirement funds as early as possible in their life. If we look at the way our society is shaping (increase in average lifespan, nuclear families etc), it becomes even more important to plan carefully so that you are totally independent in your golden years. Planning for retirement is a comprehensive process for determining how much money you will need at the time of retirement. Some people feel that retirement planning is important when you cross 40 years of age. It then becomes difficult to build a good corpus within the next few years and eventually these people end up investing in risky investment instruments. They invest their hard-earned money in risky stocks, where the returns are generally not certain. There are many insurance instruments available in...

MANY of us like to believe that we have a robust financial portfolio that would take care of our future. Interestingly, the plan would work only if funding the plan is regular. What happens if the funding suddenly stops? When it comes to investing in insurance, many of us mistreat it as a pure tax-saving tool. With the advent of ULIP and many innovative products in the market, thanks to privatisation of the industry, insurance is also being looked at as an ‘investment’ option that is expected to pay dividends/ returns, along with securing one’s future. Irrespective of our motivation to buy insurance, we often grope in the dark to determine the right approach for buying insurance products and assessing if we have an adequate insurance cover. NEED-BASED APPROACH Life insurance has moved from protecting life to protecting lifestyle . Today, there is a choice of innovative products that meet financial needs at each of one’s life stages — be it marriage when one assumes responsibility to pr...

How many of you would use a mobile phone predominantly as a calculator? I guess, not many. In fact, you would be wondering if there would be anyone in this world who would answer in the affirmative to this question. Now, if I were to offer a phone without SMS or address book facility, but with a scientific calculator functionality attached, would you still buy it? Not really. Surprisingly, in the world of financial products and services, it is not the case. Assume the margin for the distributor in selling calculator-enabled mobiles were 10 times that of selling plain vanilla mobiles phones. What would he do in such a case? Most likely, he would only sell phones that had a calculator feature attached — whether or not the customer wanted it. He would wax eloquent about the advanced nature of the calculation facility. Only if a knowledgeable customer insists, would he even show him / her the ‘simple’ phone. An unwary customer would be subjected to a barrage of ‘features’ and ‘benefits’, w...

Indians find life insurance the most suitable retirement planning tool, followed by bank deposits. As much as 75% of the working population and 55% of retired respondents in the country cited life insurance as their primary retirement plan tool. Indians are pretty clear that they do not want to take risks as far as their retirement planning is goes. Therefore, life insurance and bank deposits, which virtually do not have any financial risks, are the most popular. However, two Indians out of 10 find high-risk, high-return products more appealing. This annual study was launched in 2004. This year’s research compares findings in 26 countries that were surveyed. The research has India as a first-time participant. Respondents from Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad and Pune included both working and retired population in equal proportion. As many as 839 persons were interviewed in India, about 400 retired and another 400 working. This is an extract of the study...

What's special about March? Lots of things, actually. But from a tax point of view, it will be that time of the year when a lot of you will actually start figuring what your tax saving avenues should be. Little wonder that mutual funds report the highest inflows into equity linked savings schemes ( ELSS ) and life insurance companies record their highest sales in the first three months of the calendar year. Guilty as charged? Well, here's some help. Here's the first part of our special section dedicated to tax saving. We start right now with the absolute basics. You would have noticed that the tax department is more partial to women and specially, senior citizens. But those rates are the maximum you would have to pay if you did absolutely no tax planning. The very first step that you have to follow is to figure out what Section 80C (of the I ncome Tax Act ) is and how you can use it for your benefit. Any individual, irrespective of how much s/he earns, can reduce his taxab...

We are at the end of this financial year. Some tips in case your tax planning isn’t complete The financial year 2007-08 is coming to an end in the next couple of weeks. This is the last chance for investors who have not planned their tax savings this year to invest and save taxes. There are certain investments and expenses that are exempt from income tax under the Income Tax Act. Investors can review their tax planning and see if they missed out on something good. This can lead to a 33 percent savings on the amount invested through the reduction in their tax liability. Here are some ways for an individual to reduce tax: Tax rebate under Section 80C Section 80C of the Indian Income Tax Act allows income tax exemptions to individuals on certain investments and expenditures. The maximum exemption allowed under this section is Rs 1 lakh. Investors can invest Rs 1 lakh in one or more of these instruments to avail tax rebates under Section 80C: Provident fund or public provident fund ( PPF ...

In this section an attempt is made to analyze and highlight the implications of Budget on common man under various heading. Home is where many tax saving options still dwell Buy a home, go for joint ownership if you are two salaried persons, buy a second property, or even sell the existing one...if you plan well, there are various options to save tax on hard-earned money THE Indian economy has been witnessing a boom in the recent past. However, rising property prices and growing interest burden on home loans are worrying buyers. The Budget has not offered any relief, but you can still make ample use of the existing provisions to save substantially on property investments. Here’s how…. BUYING A HOUSE Owning a house is not just a dream but a necessity, and there are several tax benefits as well. However, when buying a house, you would do well to consider the following. (a) It’s always advisable to go in for a housing loan. Interest paid on home loans can be deducted from your taxable in...

Why Do I Need Life Insurance? You need Life Insurance because typically the need for income continues for those who are financially dependent on you, but there is no guarantee of your ability to earn consistently and for the rest of your life. Life insurance can help you safeguard the financial needs of your family. This need has become even more important due to steady disintegration of the prevalent joint family system, and emergence of nuclear families. The need to protect your family's ever growing needs is why you need Life Insurance. Life insurance is designed to protect you and your family against financial uncertainties that may result due to unfortunate demise or illness. You can also view it as a comprehensive financial instrument – as a part of your financial planning offering you savings & investment facilities along with cover against financial loss. By choosing the right policy as per your needs i.e. customized solutions, you will be able to plan for a secure futu...