Wednesday, November 10, 2010

Why Medical Insurance ?

Why Medical Insurance ? This is a typical question many of us have those who are covered by their companies they are employed in.
Well, first lets talk from the Tax savings. Whatever premium that you are paying for covering you and your family upto 35000/- INR is deductible from your taxable income. Please note, this is over and above your 100,000 that you are saving under section 80ccc. So thats again a saving also.

Now, the actual reason as to why one should take a medical insurance.
The days are gone, when medical treatment was affordable with your own savings. One definintely needs Insurance.
Those who are covered under insurance by your companies, please note that this is only until you work for them. The day you quit or retire, the insurance stops. So lets say that you retire at 60, do you really think a Insurance company will give you a health insurance, especially when you are at a age you would be needing it the most. So the best would be to take an insurance now itself when its easy for you.

ICICI has a good product which invests your money into an ULIP and that actually covers you till 75 if i am not wrong. There are many companies who are having wonderful health plans. My suggestion would be to go and get you and your family covered and also save some tax

Sunday, November 7, 2010

Too many liabilities

Today as I was going through my various liabilities, I was wondering how to go about clearing them all.
I have an outstanding Housing Loan, a Car Loan and then 2 credit card bills to be cleared. Ofcourse I am able to pay my EMI's for the car and housing loan without any issues, but then getting them closed earlier is always something one has in mind.

Now if one looks at the various interest rates, its no brainer that one has to clear off the credit card bills first. They attract anything betweem 2% to 3.5% per month , that is around 24% to 36% an year, while your housing loan interest rate would be around 8-10% and the car around 10.

If you have more than 1 credit card bill to be cleared and not possible to clear all, clear the one with the least payment due. Remember that if you get rid of interest payment on one it will be better than having on both.
Then comes the priority of the other credit cards. Once all the credit cards are done, then shift to the other liabilities. I would normally leave the home loan as it is , if you have a car loan also to clear. Its because, on home loan you still have the tax benefits attached , while that for the car loan its not. On completion of the car loan move to the home loan. Having said that, in many of the banks part payment of car loans is not allowed. In such cases, it would somehow make sense to clear a little of home loan itself, and leave the car loan to get completed on its own, or wait for it to reduce till it becomes small enough to pay the entire amount.

From my experience, SBI car loans allow part payments. They do have rules that you cannot pay any amount in the first year.

At times I am in a dilemma, as to whether to clear the home/car loan or keep the money invested since I would need the money incase of emergency or new expenses. Thats always been a tough call for me to handle. I try and calculate how much is needed for my emergency, and once reaching that, I repay some of the loans and invest some into instruments, which give higher rate of interest than the interest rate of the loan.  This point would vary from person to person and everyone should take a call depending on one's family requirements and emergencies, since at the end of the day, home and car loans are the cheapest compared to a personal loan.

Saturday, November 6, 2010

Sensex at 21000

On the Diwali day, during Mahurat trading session sensex touched an all time high and now is at 21004 level.
Now this is a great news, but at the same time one needs to be pretty sure as to whether to enter the markets at these levels or no. Many TV channels would give you different perspectives of the same. But one needs to remember that at the end of the day its your money.

From my perspective, one shouldnt enter the markets now atleast for a week or so. See whats the trend in the market especially in the next week and only then should take a call.
If one really wants to invest, then chose the solid stocks like TCS, Titan SBI etc which are very strong. Or can chose the Mutual Fund route. I would opt ONLY for the Mutual Fund at these level.

Happy investing and happy Diwali

Friday, November 5, 2010

Infrastructure Bonds

One of the safest forms of investments is in the Bonds. But now a days there are bonds which are issued from private players also. Now these have minimum of 5 years of lock in period. and a good rate of Interest. You can get anything between 7.5 to 8 % of interest. Again you can chose for annual payment of interest or can go for cumulative which means that your interest is again invested as principle.
And the most important part if that you can get Tax Benefits. And now for the most important point, this investment is Tax Beneficial over and above your 1 lakh invested through section 80ccc[ which is Insurance, NSC, PF , Housing Loan Principle paid etc].

The maximum amount for which you can get the tax benefit is for 20,000/-  Currently L&T has an investment for these bonds open. Though I assume there will be more coming in soon. I would definitely recommend this for investment.

Where do I start from ?

Everyone wonders, where does one start to invest. Well there is never a good time. If you havent been doing it early, then NOW is the right time. Start with small amount. If you dont know the meaning of small amount as such, then see the difference between your monthly income and expenses. Whatever remains is the only amount you have. Now if that amount is very less, then you should try and save atleast 1000 per month. Cut your expense wherever needed, but then you dont have any other choice. Keep this amount separately in a different account if possible. Once you accumulate anything above 5000 INR, then put it into an FD.
Well this is the simplest and the safest form of investing you can do without any harm done and least risk. But again the returns too will be dependent on the prevailing interest rates.

For higher returns you would need to venture into Equity markets. Now again in Equity you can chose to play safe by giving your money to a Fund manager and he will invest properly on your behalf. But off course, whether you have a profit or a lot, he will charge you for his services.
The different options that you to invest into equity are

  1. Directly into the Stock Market
  2. Investing into Mutual Funds
  3. Investing into Equity through Insurance related schemes.
These are the high level ones and can be dealt in detail in each one of them

So if you are looking at investing into stock market then get yourself an Demat account opened. 
Again for mutual funds you may need a demat account but for some you may get them in physical form itself.

ULIP's  gives you the flexibility to invest into equity, with the benefit of an Insurance cover and Tax Benefits. For the insurance there are many many plans and schemes. Just call an agent and get yourself familiarised with the same.

Another safe option would be to invest in Gold. Now Gold can be bought in physical form or in the ETF's which are like shares in demat form. This gives you the flexibility to just have the details without having the botheration of safekeeping of Gold. And can be bought and sold easily. Most importantly, even if you have less money , with which no one will be able to give you a small amount of Gold, ETF can do the job for you.

Keep saving, Keep investing. Just remember to save a little everyday, and that would help you a lot in the long run. 
For example, just by skipping one coffee at any coffee outlet you would be saving 60/- per day. Which would amount to 1800 per month and approx 20000 an year. Good enough to have a nice Insurance plan to cover you and your family just at the cost of coffee. 
Have a nice day