THE CHANGING RETIREMENT LANDSCAPE

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Retirement landscape has changed radically over the last several years, There was a time, when maximum workforce was into government sector & one could count on a pension. Those days, retirement planning meant figuring out how to use your free time, not calculating rates of return and thinking new ways to invest.

Nowadays retirement planning must span the entirety of your adult life. It is not just something you figure out while cleaning out your desk the day you turn in your keys and say goodbye to work life.

Indians are warming up to the idea of retirement planning in the past decade or so. To live a smooth life after retirement, one needs to carefully strategize their retirement planning. Longer life expectancy is already on steep rise. Today, an Indian individual aged 65 years and living in a metro, has a 50% chance of surviving till age 85 and 25% chance till age 92. Better healthcare and medical help is a prime reason why our generation will live longer.

Further, we are fast moving towards a pension-less society. If you are not in government services, you seriously need to worry about income during retirement.

The joint families are now getting broken into Nuclear family setups. Today, more families are choosing the nuclear way of living and this also reflects in the post retirement living patterns of most individuals. A smaller family size entails more overheads per member of the family.

Ambitious goals for kids education is also hurting the retirement kitty of majority of investors. It is almost becoming a norm to send kids overseas for higher education. In year 2017, more than 400,000 Indian students went abroad for higher studies. Although this is nowhere near China, but there is no doubt that Indian parents will catchup in the years to come. According to a study, conducted by HSBC, 71% of middle and upper middle class parents admitted that they are willing to acquire debt for their child’s better education. For them, Child Education goal comes before their own financial security during retirement.

Most people approaching retirement or in retirement know that they must balance their retirement income with their retirement expenses. The tricky part that is often not addressed is guaranteeing the retirement income and safeguarding against unforeseen circumstances.

There are some incredibly serious issues in play when it comes to a securing your retirement life. Retirement is not as simple as working, saving and then living off of those savings. For people either preparing for retirement or already retired, there are a number of factors that need to be considered.

For example:

  • Do you know how long you or your spouse will live?
  • Are you sure the economy will behave as you think?
  • Have you factored inflation and swings in financial markets into your retirement plan?
  • Will government schemes like PPF, EPF, MIS, Pension Scheme remain as they are today?
  • Are you sure you will not have to spare a big amount from your Retirement kitty towards financing your kids Marriage, Education or Business.
  • Are you sure your Mediclaim policy will cover every illnesses you develop and will last for repeated hospitalization and other medical expenses?

Well there are many financial choices designed for retirement Planning, here is a list of some of the most common retirement investment tools available.

NPS: NPS is a retirement-focused investment scheme. It does not give an option to deploy the entire corpus in any other investment avenue as per choice. A retiree may want to deploy the amount across investment avenues such as SCSS, post office monthly income scheme, mutual funds, bank fixed deposits, etc., and across maturities for better liquidity. By opening an NPS account, this flexibility is lost.

Bank Fixed deposit: This is an investment option for an investor who is looking at fixed and assured regular income. Also, the returns from FDs are guaranteed and the FD itself can be used as collateral for loans. FDs should be looked at more as a savings product than an investment product. Net of tax, the real return from fixed deposits tends to be lower than inflation at most times. Hence, calling it a savings product is perhaps more appropriate.

Gold: Many proponents of gold suggest it is a good hedge against rising prices. It’s not entirely correct statement. Gold is better hedge against crisis rather than against inflation. As retirement solution, gold is more like an insurance than a sure-shot investment. Gold is likely to head higher for the most pedestrian of reason: Supply and Demand. It is not wise to take a pedestrian approach when it comes to retirement portfolio.

Mutual Funds: The main advantage of mutual funds is that you don’t have to buy an annuity, as is the case with the NPS or pension plans from insurance companies. Instead, you can opt for a systematic withdrawal plan to meet your regular cash flow needs. Since a part of the withdrawal is your principal, it will be more tax-efficient as well.

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise  Magazine ( June 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

FINANCIAL PITFALLS TO AVOID

Investor: Is this a right time to book profits? Market is at its peak.

Advisor: Well, we have a long-term plan, that we are following & you have more than 15 years until you need to start drawing on that money. So, I think we should stay the course & not make too much of market highs & lows.

Investor: Well……….. Okay.

Few months down the line.

Market in the downward path / with few hiccups in the market.

Investor: Market is on decline, maybe I should cash the funds before my gains get diminished more.

Advisor: First of all, let me remind you that we have more than 15 years till your planned retirement age. The economy looks good & your portfolio is well positioned & balanced with your set goals. There is no reason to change the course unless your life goals are changed. If that’s not the case, I would suggest to stay the course & not be distracted by what is happening daily in the equity market.

Investor: No, there is no change in set goals time horizon. I think you are right. Let’s stay the course.

This sample test conversation provide us with a small glimpse at the psychological pitfalls, greed & fear related to market we all face while engaging financial planning/ investment. Our brains regularly set little traps for us, sometime decision taken in emotional haste have very real cost associated with them. There’s a great quote from Sir John Templeton, which he says: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” In other words, when it comes to investing, it can often pay to know which way the herd is heading. There will always be time when even the best of us will get enticed by these trap holes.

Here are some of financial pitfalls we need to avoid:

(A) Underestimating the income required post retirement :

Majority of people have no clue about the approximate income they would need to live a financially independent life post retirement. A vague assumption is what people work around which if too high can be un-achievable and if too low can lead to financial crisis later in life. Every individual has different needs and following any general rules can be misleading. Retirees tend to spend on different things and considering their lifestyle, the income needed post-retirement needs to be calculated. This can then translate into annual or monthly savings figures.

(B) Avoid Get Rich Quick Mentality:

Market is for building long-term wealth where you run a marathon, not a sprint. Stories of people becoming rich in short span may be true to some extent but then you have to consider after how many years of experience and hard work did he manage to find way to investing that works for his way of investing. There are lots of people who may have made a fortune overnight but then it is not just one of fortune that makes them what they are but a systematic wealth-building plan that truly made them that money.

(C) Not planning for healthcare:

In today’s fast-paced life, keeping good health is often a tedious task. With numerous ailments and medical conditions that come with the old age, treatment costs will burn a hole in your pocket, forcing you to break your savings early or avail monetary help around. To avoid such circumstances, it is recommended to avail a health insurance plan that will take care of uncalled medical expenses and hospitalization during your old age.

(D) Shying away from seeking professional help:

Many of us feel shy discussing our finances with an unknown person. Yet we unconsciously or consciously/ get influenced by media reports, relatives & friends. By seeking help of an expert, whose sole job is to take care of investment portfolios, we could avoid the biggest financial pitfalls.

So, all in all, Financial success relies equally on planning & discipline as much as on investment return. Sticking to sound investment plan carved with the help of an expert & controlling the emotions, whether it is greed or fear, and also not blindly following market sentiments is crucial to successful investing strategy.

 

Article published in Wealthy & Wise  Magazine ( June 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

When Wife is the Lone Survivor

Worldwide, older women end up living in financial stress a lot more than older men. In US, women comprise three-fourth of seniors who are considered poor. There is no official data for India. But, since life expectancy of women is more than men, one can easily correlate with US data.

It has been proven that women have higher life expectancy than men. This means that while planning for retirement, women will have to plan for a longer period. In case a woman is fully dependent on her husband and is not financially aware, she can get into trouble after the husband passes away. So, whether a woman is planning her retirement alone, or with her husband, the number of years post retirement is an important aspect of retirement planning.

 

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It is common to see women give up their careers or take up lesser-paying jobs to take care of the children, maintain work life balance etc. The percentage of women doing this is high in India when compared to western countries. This means women will have to save more in a short period to fulfill their needs. So, they should start planning for retirement and stick to a plan right from the beginning of their careers. That is the time when there are limited responsibilities and so can save sizeable amounts.

In all families, Rich or Poor, Urban or Rural, women tend to avoid taking financial & investment decisions. Not only women generally earn less, but they also work for fewer years because they usually take time off for child care. On an average, they spend about seven years away from work, which means they are not saving anything during this period.

The lack of financial awareness among women makes them financially vulnerable while their Husbands are no more. They will either get too defensive about investment or will leave too many decisions for outsiders. Both the approaches have their drawbacks.

What do you need to do to avoid a Situation like this?

  • Make women of the home party to all financial decisions
  • Ensure that all assets are jointly held
  • No Loans shall remain outstanding for which the spouse has to repay.
  • A WILL, and a financial emergency kit (list of important documents, contact details, procedures etc.,) should be in the know of your spouse.

Apart from keeping in mind these moot points, Every couple should discuss the contingency plan with their advisor. The continuity of cash flows, just in case one of the spouses were to go, is perhaps the most important aspect of retirement planning. At SAKSHAM WEALTH, we are always available to discuss the finer nuances of your financial planning.

 

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise  Magazine ( June 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

 

The Shinning Dilemma : Should gold be a part of my portfolio ?

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India is one of the largest consumers of gold in the world, and our love for gold has never really taken a backseat. From using gold as a means of adornment or an investment instrument, or even both, we have always held it in our portfolio. But, the moot question is “ should it be the primary option in our portfolio or should we even consider it as an good investment”.

Now before any discussion on gold, let us first know a little about this fascinating metal. In plain simple term, it is a chemical element with the symbol Au and an atomic number of 79.” It is a dense, soft & shiny metal.

It is being speculated that nearly all the gold on earth came from meteorite that bombarded the earth 20 million years after it formed. So, technically gold might be an “ALIEN OBJECT”. Ever since its discovery, it has hypnotized kings, provoked wars, and broken families. For centuries, it was used as a form of currency. The first use of gold as money occurred around 700 B.C., when Lydian merchants produced the first coins.

Traditionally, gold has been viewed as a ‘safe haven’, especially in India. Indians are the biggest consumers of gold and usually invest heavily in gold coins and jewellery. But it would not be wrong to say that the logic to put gold as the primary choice for investment in your financial planning is wrong & flawed.

Now, time for the big question, Is Gold a good investment option?

Gold as an investment on the one hand works as a hedge against inflation, a weakening dollar, and stock market disaster. On the other hand, it doesn’t produces any income like dividend or interest and also there is no implicit guarantee that gold will increase in its value.

As Warren Buffet has said ”Gold has no intrinsic value than for jewellery and some industrial use, and it produces no income. Over the long term Gold performance has no match for diversified portfolio of stocks and bonds

Pros of Investing in Gold

  • High Liquidity and Universality of gold makes it a favoured choice for investors across the globe: It can be easily converted into cash anywhere in the world.
  • The value of gold rises during inflation as it remains more stable than cash or any other assests thus it provides hedge against inflation .
  • Adding different investment instrument also bring down the risk percentage of entire portfolio. Gold often moves inversely to stock market and currency values thus it provides an effective way to diversify the portfolio.

 

Cons of Investing in Gold

  • Increase in gold value coincided with currency devaluation: Many economists argue that gold only increases in value when inflation is strong. As a result, gold doesn’t offer adequate return in other markets.
  • Investment in stocks and bonds provides income in form of dividend or interests. However, the only return you can make on gold is when the value increases and you decide to sell it.
  • Need physical storage and insurance: if one chooses to buy physical gold, it needs to be stored and insured as well.

Ways to invest in Gold

  • Bullions or Gold Jewellery: One can hold physical quantity of Gold, which can be sold later. It feels good to have gold in possession but you need to pay charges to store it and getting it insured and also there is making cost linked with it.
  • Gold ETF: It is similar to making a direct investment in gold, but here the investor buys a proportionate ownership in the collective vault instead of buying the physical gold The investor need to have Demat account.
  • Gold Mutual Funds: The investment is made not in gold but in the companies involved in mining the gold . No need for Demat account to invest.

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Gold doesn’t produce anything (like a company) On the contrary, it needs to be (mined), stored and guarded and this is something that produces cost. So where does its value come from? At the end of the day, gold has its worth because enough people believe that it’s worth something. The value of gold has always been driven by the fear that other asset classes will lose their value.

One thing that needs to be kept in mind when investing in gold is that one has to be invested for the long term and not short term. Gold is a cyclical investment, therefore, to expect the metal to be always high-performing will not be right. So, if you are not looking for immediate results and are a patient long term investor, gold should be a part of your investment portfolio.

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (May 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

BILLIONAIRE MINDSET – Efficiency of Capital

Every penny saved is a penny earned”. Well said. But what if the penny saved was worth a Pound, if well deployed. Let’s discuss.

According to Steve Siebold, author of “How Rich People Think”, the World Class is mentally attuned to making more money. On the contrary, according to Steve, the Middle Class are enslaved by worries of inflation, uncertainties and losses. The ‘World Class’ habitually thinks long term, while the ‘Middle Class’ habitually thinks short term.

Ever wonder, why across the 250 years of Stock Exchange history in USA, merely 5% – 6% of participants have made profitable portfolios, while the rest come to try their luck and earn losses, thereafter calling stock markets as nothing short of casinos.  A simple explanation to this phenomenon is that the winning 5% knows that they are actually investing in the businesses with proper research and professional advise, whereas, the losing 95% buys stocks with a lottery mindset.  Some may win the lottery, but not all !!  When economic corrections take place, the masses get into fearful mode and start selling their investments for short term survival. In such periods, the Billionaire Mindset investors operates out of abundance and exploit the situation for their long term  benefit.

There’s a well documented cognitive bias called (Dunning–Kruger effect) which states that novices tend to be overly confident of their abilities. This causes vicious cycles in investing, leading to losses.  A professional investor is less confident of his abilities to make profit in comparison to a naïve investor. As you know the field more, you will gradually start seeing the risky side of investments. The confidence level will keep dipping until you move towards becoming an Expert. But then too, you will never become over-confident.

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“Efficient use of Capital” is tough and is very well adhered by the Billionaire Mindset investor. They pursue this art by working along with experts. That’s why they are rich, and not the other way around.

But the “Attitude of cost cutting” is ubiquitous and easy. I mean cutting down costs every now and then, which the masses are always busy doing. That’s how Big Bazaar kind of stores survive solely on “Sabse Sasta – Sabse Acchha” slogan. Last month, it was beyond me as to why more than a hundred women from well to do families will stand in long ques outside Meena Bazaar outlet, even before the store opened in the morning, at MG Road Gurgaon. On probing, I could gather that this is an annual phenomenon and there is a flat 50% discount on offer. I can tell you for sure, none of them would have stood in a que outside ATMs during the demonetization phase. Another thing I can tell you is that all the ladies would have spent much more eventually under the perception that they are buying cheap. All in all, Meena Bazaar would be the happiest to receive so much cash in their bank within a fortnight, something that would have taken a six month or more. If Meena Bazaar was a listed stock, I would have considered buying that stock as investment. Consumerism is on the rise and there will be many more such opportunities in the future. I would like to benefit as a capitalist from the excess consumerism.  I know people who have travelled overseas incurring expenses beyond their means, with help of borrowings, just because they could find cheap air tickets and hotels. Ever wonder, why such discounts are not offered on investment options?

Who says investment options are not offered on discounts? Daily newspapers call them bloodbaths in stock markets, recession in real estate, and rusting in Gold.  God bless the newspapers and news channels, they scream terror and shoo away the masses / retail investors in no time. The investors with ‘Billionaire Mindset’ walks in and receive red carpet welcome to buy stuff no one is buying, even at half the price. And what happens when the markets recover, the rich become richer!!   

So, while the masses were busy clipping discount coupons, the Billionaire Mindset investor was busy analyzing which business will benefit from such consumption and at what price to own them.

The Billionaire Mindset Investor is well aware of his consumption and investment needs and will not buy anything just because everyone else is buying or that it is on SALE. He/She prefers to live on a budget and uses his/her money wisely. But, he/she seeks quality in everything, even if it is relatively pricier. Yes, this is a concept of VALUE. He/She seeks VALUE and not the PRICE.

The Billionaire Mindset investor understands his/her own mental and physical limitations and therefore prefer to work with teams and mentors. He will pay for quality jobs that are important for his success but are not his core competence. You see, he doesn’t want to compromise on the quality of output at the cost of savings pennies. On the contrary, an average thinker focuses too much on discounts or cost savings, instead of BUDGETING. Such is the tendency to save cost that masses are compromising on health.  Self-medication has become a wide spread disorder across the world. The self-help content on internet is further aggravating the issue. Ask any doctor, and he will not stop giving examples where situations have gone out of control.

Since the Billionaire Mindset investor seeks quality in everything, he is conscious about his health in his food habits, work habits, and exercise habits. Annual health checkups are routine for him/her. However, the average thinker is binging on low cost burgers, pizzas, coke etc., and you can actually forget about health checkups. All because, the food is inviting, cost is low and everyone is doing it, so how can it be wrong. Annual health checkups are avoided as they will either yield to further medical costs or will lead to nothing (if the report is all OK). But actually they will blame the paucity of time for avoidance of medical checkups. According to Dunner – Kruger, a novice cum average thinker has less of an idea about his own abilities or the abilities of the others. This keeps them away from rising higher up in the social or economic rank. They are generally suspicious of the intent and abilities of the other guys whose help is needed for ascending the social and economic ladders.

The Rich becomes Rich by efficient deployment of capital and not by cutting corners from the essential. It is all in the mind. Any wish to become billionaire without the right mindset will not long way. Changing one’s mindset is not easy, and is not for all. But, this will be the single biggest factor that will take you to your dreams.

I hope you enjoyed reading!
Feel free to write back.
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Sameer Rastogi – 98 911 98 999

Health management is the biggest wealth management

Mahatma Gandhi once famously said, “It is health that is real wealth and not pieces of gold and silver.” In today’s world where health-related issues are growing on a daily basis, it becomes highly difficult to protect this aspect of your “WEALTH”. If we are healthy, we find ourselves in the right frame of mind to tackle any hurdles that may be thrown in our way. However, just like life that has its ups and downs, our health too is not always predictable. We may make healthy choices every day, follow a good diet and exercise regularly, but may still find ourselves falling sick once in a while. Living a healthy life and ensuring protection against unwanted medical emergencies, which in turn creates a big dent in our savings, is fast becoming more and more difficult.

Having a health insurance is an important and cost effective method of protecting us against unexpected health issues and providing us with more control over our health care. It is important to choose the right health insurance policy to ensure that you get the required treatment when you need it, where you need it. One thing most of us forget is that health insurance is not an investment tool but is a protection for an unknown risk on your health.

Now choosing suitable policy from over 180 health cover policies offered by almost 20-odd health insurance companies is no simple gig. Most of us only compare the premium prices and opt for a health insurance policy that provides maximum coverage for minimum premium. But, apart from premium prices, we need to look at a few other important specifications also before selecting a health cover. Sub-limits, exclusions, waiting period, loading, no-claim bonus, network of hospitals, coverage of alternate medicine treatment, claim settlement ratio among others are few that comes immediately in my mind. We usually just examine broader specifications of the policy without going into finer details. Take for example, how many of us check if our health policy has ambulance or room rate restrictions. We may have a perception that we have bought the best policy. Reality could be much different though when compared diligently.

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We should always question as to why an X policy is costlier than a Y policy ! Sometimes, it may just be due to company specific guidelines regarding their underwriting norms and risk modeling. Other times, the premium cost goes up due to certain additional benefits being offered, for example, air ambulance facility, a bigger look-in-period or higher hospital cash. Before subscribing to a policy, one needs to fully understand the benefits one actually needs.

Few factors that play a crucial role in selection of a suitable mediclaim policy:

  • Efficiency of claims process: Claim settlement time and claim settlement ratio should be one of the most important factors to be be considered. Higher the settlement ratio and faster the settlement time is, generally means that the insurance provider is doing a good job with genuine claims.
  • Co-payment:Co-payment mandates that the policyholder will bear a pre-defined percentage of the claim amount and the insurance company will settle the rest. This is a common clause with most group health insurance policies (your employer provided policy). While you may find an insurance plan to be cheap, it may not offer you compete coverage if it comes with a co-payment clause.
  • Day-care procedures:Day-care procedures are not covered in many health insurance plans. Moreover, to make a medical claim, hospitalization for at least 24 hours is mandatory. Thanks to numerous innovations in technology, today, many procedures do not require hospitalization beyond 24 hours. Thus, it is best to opt for a plan that covers maximum number of day-care procedures.
  • Network hospitals:Check the list of network hospitals and see if it includes the facilities that you often visit. It is also an important factor to consider if you travel or move cities, because your health insurance should travel with you. It is worth mentioning here that the cashless facilities can only be availed in network hospitals.
  • Pre/Post Hospitalization: Medical expenses incurred before and/or after hospitalization are called Pre/Post hospitalization expenses. During hospitalization, some part of the treatment extends beyond the hospitalization. Follow-up visits to the doctor, medicines to be taken or follow-up investigations to be done fall under the category of post-hospitalization expenses. Only those expenses relevant to the ailment for which the person has been hospitalized shall be considered under Pre & Post-hospitalization expenses.
  • No claim bonus: Many insurance companies offer a no-claim bonus, in case the policyholder has not lodged any claim during a particular policy year. In such a case, either the sum insured increases or the premium decreases or both. Each policy can vary widely as to how they reward the policyholders for not availing any claim during a particular period.
  • Free preventive medical checkupLook for a health insurance policy that entitles policyholders to a free medical check-up. The tests/checkup has no bearing on the premium when policies come up for renewal. This is a win-win feature as it helps in timely prevention of bigger disorders to the policyholders and saves big amounts of probable claims to insurance companies.
  • Lifetime Renewal: With progress in age, the requirement for medical coverage increases more than proportionately. A health insurance policy that covers you for whole life without any conditions is the best feature you can have. Obviously, this may lead to slightly more premiums for such policies.

The cost of medical care is ever increasing due to inflation and advancements in medical technology. At the same time the longevity is improving thus forcing us to consume more medical care. Picking a right health cover plan for our family requires correct guidance & good research. So, just like any investment we make, gauging the correct amount to put in medical care policy is critical.

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (April 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

The Terrible, Horrible, Terminal, Apocalyptic Indian Bank Scam

Just the other day, when I took an Uber for airport commute, I picked up a conversation with the cab driver about his saving habits.  During the course, he abruptly asked, “Sir, I have an account with Punjab National Bank.  After this Nirav Modi scam, is my money safe in the bank? I have heard rumors that PNB will start putting restrictions on withdrawals. If someday, the bank closes down, what will happen to my money.”

Over last few months, this has been a typical question being raised generally. I received calls from my clients asking for clarification about the safety of their money or their friends / relatives money kept at PNB.

The informed set of investors would want to understand the implications of FRDI Bill. FRDI stands for Financial Resolution Deposit Insurance but has become synonymous with Fear Running Deep Inside. A casual search on YouTube about FRDI will yield a generous 25-30 videos full of warning in Hindi, Telugu, Tamil and Kannada. Most videos will tell you that the crony politics, shady banking and capitalist nexus, will soon usurp your money,

Banking fiascos are not new in India or elsewhere in the west. Recent being PNB scam which jolted the nation on the whole from political class to labor class. One interesting thing about PNB in particular, which many of us may not be aware of, is that PNB was the first Indian bank to be purely funded with Indian capital during the British era. The bank, which had the privilege of maintaining accounts of Mahatma Gandhi, Jawaharlal Nehru, Lal Bahadur Shastri & many more distinguished personalities, is nowadays in the headlines for all the wrong reasons.

Bank frauds & crisis have been part of Indian financial history for as long as one remembers. Do you know the year 2017 was the 150th anniversary of failure of Presidency Bank of Bombay (PBB)?  In 1860 the British started relying hugely on Bombay cotton markets, as supplies from the USA was on decline due to the civil war. In this situation PBB began to issue loans recklessly against shares of private companies and even on just personal security. Then, as the civil war ended, the euphoria in the Indian cotton market turned to panic. These events lead to closure of the bank. Fast-forward to 20th century there were bad loan crises in 1970s, 1980s and 1990s. You name the decade, which didn’t see bank frauds one-way or another. There were stock market scams in 1992 and 2001, arising out of fraudulent banking. And now, joining in this ever-growing list of scams, are scandals like PNB-Nirav Modi, Rotomac scandal, ICICi-Axis scandal, NPA’s, etc.

One response to recent scams has been to point fingers at public sector banks, and suggest that privatization would create the right incentives. Since PSBs are at the receiving end of an enormous amount of flak on account of NPAs, it’s worth mentioning that Gross NPAs as a proportion of total loans at State Bank of India (SBI), the largest bank in India, stood at 10.35 per cent in the quarter ended December 31, 2017. At the second largest bank, the private sector, ICICI Bank, NPAs on the same date stood at 7.82 per cent, just two percentage points lower. Yet, nobody pointed out any managerial incompetence at ICICI Bank until Videcon – Nupower issue came up. We need to understand that these problems are not isolated to just public sector banks but spread across whole banking system.

There has been so much noise amidst recent scams that banking system might be going towards total breakdown. What we forget is that, Indian banks might be mismanaged and under-capitalized, but the government of India will always be firmly behind them in case of any crisis. Account holders with these banks are a massive voter class. Therefore, eventually, political prudence will prevail over fiscal prudence and the bank will be saved. So, there is no need to panic. What we really need is clarity in solving these banking flaws. Having said that, they should also be mindful that these events are getting far more common than imagined & government should work upon to make safer and efficient banking system to service the needs of a growing economy.

The needs of the hour are, better banking supervision, better reporting and better security integration. The average Indian consumer should take some solace from our country’s banking history as they have resolved fair number of scams and crises in the past. Therefore, this too shall pass !

 

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (April 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

Education inflation is the real deal, start planning for it

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We constantly keep close eyes on soaring prices of groceries, petrol & consumer inflation rates but there is another kind of inflation that has a much sharper impact on savings & go mostly unnoticed which is “Education Inflation”.

Inflation is growing at more than 10 percent every year in the education sector. It is extremely important that you plan well for your children’s higher education.

Inflation is growing at more than 10 percent every year in the education sector. It is extremely important that you plan well for your children’s higher education.

For example,

– The fees in IIT for Rs. 50000 per year in 2008. It increased to Rs. 90,000 in 2013. Currently it more than Rs. 2,00,000.

– IIM-A increased the fees from Rs. 18.5 lakh in 2017 to Rs. 19.5 lakh in 2018.

The National Sample Survey’s Office (NSSO) showed that 70 percent of students and their parents preferred private institutions to government-based ones. The gross enrolment ratio (GER) is a metric that expresses total enrolment in terms of percentage in educational institutions; it is calculated for the age group, 18-23. The GER for higher education in India is close to 26 percent; it is 44 percent in China and 86 percent in USA.

The college quantity scenario is widely out of proportion in India. There are only 6 colleges in Bihar per lakh students while small UT like Puducherry has 60 colleges/ lakhs of student. The all-India average is 25 colleges per lakh students. Secondary education Schools in India may have grown exponentially, but the higher education sector has failed to keep up the pace with it. Which has created a large gap in India’s higher education sector.

For instance, over 130 plus new IB high schools alone should have been added in the last decade to get the student/college ratio right. That figure is only for business schools, what about shortage of Engineering colleges, Medical or a basic graduation colleges. Out of the existing ones, how many good colleges can you think of? I will bet you can count them on your fingertips.

In the past 15 years, one of the biggest shifts that have occurred in peoples’ financial goals is the craze to send their kids abroad for higher education. It has been triggered, in recent years, by a number of factors: more international exposure, severe domestic competition for premium Universities.

Today, students from different countries travel across the world to other countries to pursue their higher studies. Making a career abroad not only helps them to improve their educational experiences but also takes their career to new heights.

When it comes to study abroad it seems a costly affair for parents to finance their children’s higher education. These could be tuition fees, travelling expenses, hostel accommodation, book materials fees, health issues and much more.

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Cost is important. Given our country’s relative inflation, interest rates and current account balance, it is unlikely that the Indian rupee will strengthen to a level that the exchange rate (against the US dollar and the pound) becomes favorable for us, at least in the foreseeable future. Overseas education is going to remain expensive for rupee owners and earners for some time to come.

Some parents mostly invest in land or property, hoping to sell when a need arises. However, these immovable assets at the time of need might not fetch the amount of money one hopes for. It is risky to depend solely on this mode of investment alone.

As with any savings goal, it’s best to start investing early. First, set your goal: Figure out how much you may need to save for each child based on his/her age

One must evaluate children’s future needs, and then start working on them. Begin the process of saving and investing early. This enables to create adequate resources for the fulfillment of kids desires and ambitions.

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Sameer Rastogi,

+91-9891198999

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (April 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

Welcome to the future: Buddy companion robot

Most of us who have seen Star Wars must be familiar with C-3P0 or R2-D2, friendly robots running toe to toe with Han Solo. We all at some point of time have dreamt of adopting/owning those kinds of robots. Now those dreams can be turned into reality, presenting “BUDDY” by Blue frog Robotics.

At its core, this is a friendly companion robot. It entertains and educates, makes video calls and even sends messages to family and friends. It is the revolutionary companion robot that improves your everyday life. The maker of Buddy Rudolphe Hasselvander says “It’s been a long time dream of mine to bring a companion robot to mass market. BUDDY is the manifestation of this dream: a friendly robot that helps with day-to-day life but also boasts the latest in robotics technology”.

The robot is mounted upon three motorized wheels that allow him to move around and turn autonomously. He can move at up to speed of 2.5 Km/hr. It is 22 in (56 cm) tall and weighs 5 kg (11 lb), controlled by an 8-in tablet that also acts as his face and an interface, has 16 GB of local data storage and a battery life of 8-10 hours, as well as built-in Wi-Fi and Bluetooth Low Energy connectivity.

Buddy can take care of younger, older, and less mobile people by providing companionship and help with day-to-day activities. When users are away from home.

Buddy can patrol the premises and detect any fires, floods, burglars or other unusual activity. It can also play games, such as hide-and-seek with kids and test them on their homework. He also acts as a means of introducing children to robotics and the digital world.

Currently the company has stopped preorders, but one can check its availability on https://adoptbuddy.com/en/. When it was available it was priced at around $549(Rs. 35,000 approx.) fairly low price for this unique robot.

Abhay Gupta,

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (March 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/

 

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Out of pocket medical spending in retirement can ruin finance

Healthcare costs in retirement can be staggering. You are older, your body is more vulnerable and prone to disease and medical expenses increase every year. Even though your Mediclaim policy may provide coverage, still you may have to spend out-of-pocket health care costs.

Many retirees are not prepared for the high-cost of medical care in retirement, when they are no longer part of a company plan. And, too many people believe that their Mediclaim policies shall see them through their lifetime.

Well the truth lies somewhere else. Actually, your Mediclaim policies will fall way short of your medical expenses.

When people ask me, how much Mediclaim coverage is sufficient, then for a Retiree, I suggest, at least Rs 30 lakhs. Unfortunately, most of the insurers decline such high coverage at this age, or it costs a bomb!

Anyways, even if they get coverage for this amount, still it will fall short. Lets understand with the help of this illustration:

If you retire at age 58, with an assumption that you may require Rs 30 lakhs as medical expenses over the remaining life, you chose to take Mediclaim coverage accordingly.

Considering that Medical costs dramatically outpace inflation (as in the past), with 12% annual cost rise, the similar medical facilities shall cost you:

  • Rs 93.17 lakhs when you are 68 yrs. old 

  • Rs 2.05 Crores when you are 75 yrs. old 

  • Rs 6.39 Crores when you are 85 yrs. old 


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Are the figures above shaking the ground underneath for you? The figures mentioned above are based on genuine assumptions based on recent 10 years averages. Your Mediclaim policies cannot match the inflation that increases medical costs. 
The cost of medical care has outpaced inflation for the past 20 years. These increases are expected to continue in the years ahead. Some industry surveys predict that costs will rise as much as 15 percent annually. These growths will double the cost of retiree health care in just five years. Furthermore, health spending as a share of after-tax income will rise dramatically. In US, in 2000, health care spending for older married couples was 16 percent of their total income.

According to the Center for Retirement Research, that number is expected to increase to:

29 percent in 2020. 


– 35 percent in 2030. 


Why is healthcare getting more expensive? There is a good reason & a bad reason. The good reason is about medical advancements that is helping you live longer. The bad reason is that many more new types of disease and disorders are affecting the health.

The medical profession is making some astonishing findings and treatments. These developments promise a remarkably long and hopefully good quality of life for the aged – but they will be increasingly expensive.

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Sameer Rastogi,

SAKSHAM WEALTH Solutions Pvt. Ltd.

Article published in Wealthy & Wise (March 2018 Issue)

To read more articles  http://sakshamgroup.com/new/wealthy-wise/