All posts by Utkarsh

Solution designer with Firstsource solutions. A post grad in Networks and IT Infrastructure. Technology enthusiast, blogger, webdesigner, Network security aspirant and in love with electronics and gadgets. This blog is an attempt to share what I find interesting... almost anything @Mtaram on twitter and

Child Plan: Is that REALLY worth for your kids?

I am reminded of a Tamil saying, “Experience what it is to build a house, and get a child married”, probably that is the reason why wise parents invest to meet the long term financial obligations like education and marriage cost of their children. In addition the rising inflation rate also calls for starting savings early in a child’s life. However it would be advisable to know, evaluate and compare various means of savings. This could also enlighten you about how “child plans” need not be the only method.


Disadvantages of a Readymade “Child Plan”

v  “Child plans” with insurance resemble unit linked insurance plans, starting early in a child’s life and ending only when the child attains maturity.  The amount of money invested in these plans is insignificant considering an in-built insurance component, and other charges like premium allocation charges that are the commission paid to distributors. This could lead to low return in the initial stages and additional losses on leaving before completion of the tenure.


v  Most of the “Child plans” in the industry comes with a catchy name to capitalize the “Child sentiment” in us.


v  We need a different medicine for a kid and adult. But do we necessarily need a different type of investment options for securing a kid’s future. Think.


Alternatives for Child Plan:


v  It is to be noted that other investment products like Public Provident Fund, National Savings Certificate, National Savings Scheme, RBI bonds, post office deposits and instruments and mutual funds that serve the purpose of savings and increasing of capital value apply equally well to investment for a child’s future.

v  Mutual funds are available in a wide range to satisfy all appetites for risks. In addition there are mutual funds that are designed for meeting long term financial obligations of children.  One could also invest in funds with a right balance between debt and equity that promise better capital growth than child plans. It is also possible to go in for systematic investment plan that offers the opportunities of taking advantages of price differences and gaining in the long run.

v  It is true that systematic investment plans or SIP help save entry cost and build a habit of regular savings for capital growth to meet children’s financial obligations. It is also possible to avail of tax benefits as such funds are taxed only on maturity and a major child’s income would be taxed separately. I am sure you would agree that this would help saving unnecessary expenses and cuts in investing in child plans.

v  PPF or Public Provident Fund is also good as mutual funds, with opening a PPF account for a 20-year period in a child’s name helping to meet long time financial obligations of children.  It has been stipulated that an annual investment of just Rs.70000 would leave you with almost Rs.32lac as a result of the compounding effect. It is difficult for a “child plan” with insurance component and upfront charges to offer you such a great return without taking much of risk.


An Ideal Mix:


  • Instead of going for a “Readymade Child Plan”, one can customize their Investment Plan for their child with a combination of Term insurance, PPF and equity diversified funds.
  • If tax saving is your motive one can consider ELSS funds instead of a regular equity fund.
  • It gives you similar tax benefit like a child plan. You get 80 C benefits for your investments. Also the returns are also tax free.
  • At the same time, the charges are very very minimum and negligible when compared to “readymade child plans”.
  • You can increase or decrease your contribution every year depending upon your financial situation.


So whenever, you think of child plan think of a customized investment plan for your kid’s future with a mix of 2 or 3 investment options instead of  readymade product with a tag “Child Plan”.  I am sure you would agree that readymade child plans prove to be not ideal instruments to save. The wisest line of thought would be a mix of diversified investments that gives good return with low charges.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

A Financial Checklist While Switching Jobs

“Careful planning is the key to safe and swift travel.” ULYSSES

This very much applies to the many especially young executives who look for lucrative and better job opportunities. But careful planning and following a financial checklist before one change a job can give them all the benefits of the change and more.

For the smooth transition from one job to the other you need to carefully attend to the points discussed in the below checklist.

1) Old Salary Account

Opening of a new salary account and the non-maintenance of the old accounts should be carefully considered. Most companies would require one to open a new salary account in the bank advised by them. This would leave one with an extra account to be maintained. The old account, which you have opened when you were in your earlier company, would after 3 months lose the benefit of zero balance of a salary account.

It would also seem unmanageable since regular operation of the account and maintenance of minimum balance may be difficult. Lack of regular maintenance and minimum balance could also invite penalty charges. In case of a non-operation for over 2 years the account could become dormant or inoperative, inviting additional yearly charges as a penalty and extra charges if average quarterly balance goes below the minimum amount that is set by the bank.

If your old salary account is linked to various investments (like Mutual funds, shares…) and loans, you may want to update the new salary account with the respective investment company and financial institutions.

2) EPF

A careful consideration has to be made regarding how to deal with Employees Provident Fund Corpus. Switching jobs suggests 2 ways of dealing with Employees Provident Fund Corpus. You could either transfer your existing account to the new employer or close the old account and open a new account.

However withdrawing the corpus and opening a new account could be time consuming taking between 3-6 months. In addition, you would be left with a smaller retirement corpus because you would lose on the advantages of the corpus compounding. You would also have to pay taxes if it is withdrawn before 5 years. So just transferring the corpus would give you better tax benefit and retirement benefit. This task is best left to the human resources department of both the old and new employers.

3) Health Insurance

You need to check up the features and benefits of the health insurance provided by your new employer. You need to compare these with the health insurance provided by your previous employer.

Especially you need to look into the features like the coverage amount, whether the coverage is on floating basis or individual basis, the total number of dependents covered, the list of hospitals for cash less facility.

One more important point to check is the availability of the health cover during the notification period. Notification period is the period between one submits the resignation letter and one gets actually relieved from the job. Normally it is 3 months period. Some employers don’t provide health cover to employees who are in the notification period. So before entering into the notification period, one needs to make alternative arrangement before entering into the notification period.


4) Tax Computation


Tax liability and exemptions form an important consideration while switching jobs. Most employers would be computing employees’ tax liability after taking into consideration the basic exemption limit of Rs.1.8lac and also the exemption availed under Section 80C.


So there is a possibility that your previous employer and present employer may give you these exemptions for the same financial year.  Making a job switch in the middle of the year involves making sure that the deductions and exemptions regarding tax liability are made only once.


Always report the income earned from your previous employer for that financial year to your new employer. This would avoid duplication; thereby making sure one is not taxed twice or given twice the benefit and having to pay the lump sum taxes later.


If you are not intimating your income from the previous employment to the current employer, then you may need to pay some penalty for non-payment of advance tax or TDS.



It proves essential to collect the Form 16 from ones past employer as a proof that one has received the tax benefits and paid the tax liabilities.

5) Retirals:


If you have worked for more than 5 years, then depends on the terms of your employment you will be eligible for gratuity, superannuation and other similar retirement benefits. Some schemes can be carried over to the next company and some other schemes need to be encashed when exiting a company. You need to pay attention to the details of these schemes before quitting your job.


How very true it is, “Planning is bringing the future into the present so that you can do something about it now” Hence following all the steps of the financial checklist while switching jobs would make sure your journey from one job to another is smooth and trouble-free.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at


Unusual Gift Ideas, crackers, gold coins, and jewels are the items which come to our mind when we think about Diwali gifts. Let me unbundle some unusual gift ideas for this Diwali here.


Gift ideas for children:


1)         Piggy bank:

This may not be a great idea. But can be done in a different fashion. That is you gift a piggy bank to a child with 90 one rupee coins. Set a target for the child to make it to Rs.100 in a month. This motivates the child to save Rs.10 extra to make it Rs.100. Like wise you can set a target for a year. Also announce some bonus when the child achieves a particular target. Say when it reaches Rs.1000 give the child a bonus of Rs.100. Idea is not only to gift the piggy bank and to encourage and motivate to save.


2)         Savings account for kids:

Open a savings account for the gift. It gives a great feeling to the gift, when the kid gets a bank account in his/her own name. Whatever cash gifts, the kid gets for Diwali, Christmas, New Year, birthday and other special occasion can be deposited in this account. Whenever, the account balance crosses a particular limit say Rs.10000 or Rs.25000 can be withdrawn and invested in mutual funds or FDs in the kids name.


This creates awareness among the kid about savings and investments. You are laying strong foundation on personal finance management for your kid.


3) Board Games:

There is a board game known as Trade or Business. Game like this will be of very helpful to the kids in understanding the value of money, buying assets, spending less, saving more, investing and the like.


There are also so many online games like this. These games can teach the complete money management in fun-filled way.


4)       Mutual Fund SIP:

You can start a mutual fund SIP in the name of the child. You contribute only for the first month installment and ask your kid to pay out of his or her pocket money for the subsequent installments. This way you will teach your kid about the stock market nuances also.


Gift ideas for the spouse:


1)         Life style Assurance:

How your spouse will feel when you give a gift that assures the present lifestyle forever. You are here today earning and providing a lifestyle to your family. If you retire, can the same lifestyle be maintained? If any mishappening to you in between, can the same lifestyle be maintained by your family?


To protect the lifestyle of your family after your retirement, you need to do a detailed retirement plan. I am not advocating here about unit linked pension plan. No. I am talking about a comprehensive retirement plan.


To protect the lifestyle of your family from your premature death, take a pure term insurance plan. I am not talking about ULIPs here. Pure term insurance plan. Calculate in detail your human life value and then cover that amount of value with a term insurance policy.


Professional financial planners will be of assistance to you in drawing a retirement plan as well as finding your human life value.


2)         Gold ETF:

If you are planning to gift gold coin to your spouse, think about gifting Gold ETFs. Easy to buy and sell. No need to safeguard.


Gift ideas for parents:


1) Monthly Income:

Your parents at the old age they need monthly income. Gift them an investment option which gives a monthly income to them. You can get monthly income by investing in FDs, POMIS, mutual fund MIPs and the like. Your parents may not be depending on you, but still then, this extra cash flow out of your investment gift will make them enjoy their life more at the old age.


2)Health Insurance:

Most of the insurance companies are ready to cover senior citizens with an extra premium or with a co-payment option. Co-payment is, when a claim comes the insurance company will pay some predetermined percentage of the claim and balance will be co-paid by the claimant.

Gifting the mediclaim policy for your parents will relive them from paying their hospital bills which are unavoidable things at the old age.



Gift ideas for servants:

Gifting a mediclaim policy to your maid servant is a good idea. They may not be thought about that and they could have thought that those things are costly. Along with the mediclaim policy, you can add accidental insurance for your driver.


It is really very difficult to find good servants these days. Even if you find one, it is really very difficult to retain them. If you pay the renewal premium on behalf of them every year, they will be very loyal to you. They will think twice, before quitting the job with you.


Gift ideas for friends:

You can choose to gift some good personal finance book for your friend or colleague. Instead of sending them e-cards, you can surprise them by emailing a personal finance article with your Diwali wishes. Even this article itself can be mailed to your near and dear instead of an e-greeting.


Gift ideas for others:

Instead of gifting money or gold, it is a good idea to gift bluechip company shares. Even a single share can be gifted. As it is a gift, people sentimentally will not sell them immediately and keep it for long term. A single share can grow with bonuses over a period of time.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at


5 Steps to Select Financial Advisor

Preparing to start the choice:

Satish grew concerned about how to manage his personal finance investments and asked his uncle, who is a very successful investor, if he knew a good financial advisor. His uncle knows a few each specializing in a particular type of financial consultation, and asked him about the type of consultation he required.

Then his uncle went to tell him that his first task lay in identifying his financial objective, whether he needed financial advice for goals like long-term financial portfolio, or tax planning, or providing for the higher education and marriage of his children. Uncle went on to tell him there were more than 50 type of specialists specializing in aspects like stocks, insurance, mutual funds, postal savings, financial planning, taxation and real estate and told him the five steps to select the best financial advisor.


1) Meeting and reviewing different financial advisors:

Once your financial objective and goals are set, your choice of a specialist would depend on whether you want one for your savings plans, tax advice and preparation, stock and equity portfolios, investment strategies, personal budgeting and debt management, retirement planning, estate planning, or insurance advice.

A search on the internet and referrals from friends, colleagues and relatives could help you find some appropriate financial advisors to look into your concern. Make sure that when the financial advisor suggests suitable financial plans, he also assures you to look into its maintenance, updating and implementation with periodic reviews of reports and correspondence.

2) Details about the financial advisor’s educational qualifications, certifications, and experience:

As all other dealings financial dealings too require the qualifications, certification and experience. So it is best to know and verify the advisor’s educational qualifications, certifications and experience. It pays to verify required certifications, like being licensed by IRDA to do insurance business and by by AMFI to deal in mutual funds in India. The extra qualifications like CFP add more value.


In addition, the professional’s experience in the nature of business, and with sizable experience dealing with recession times plays a vital role in the choice of a financial advisor. The investment advisor’s past professional positions and his reasons for change will be able to tell how efficient he is, with a positive switch of revealing his good expertise.


3) Information of clients he has dealt with along with references:

I would say it is in your interest to not rely just on the positive talk of a financial advisor, and beware of his trying to belittle your ideas. Asking for a reference helps verifying his authenticity, honesty, integrity, and empathy and whether he specializes in the similar nature of business you expect of him. I would say if you are young, you would not benefit from a financial advisor dealing mainly in retirement and senior citizen plans.

Interviewing a number of clients would give you the best idea if the financial advisor can be relied upon confidently to meet your financial goals and objectives. In addition to this you may verify the testimonials given to him by his clients.


4. Verify his past records to judge his present and future behavior:

I would rather rely on written words like past documents than what he professes, and would say that a financial advisor’s past performance indicated well his present and future actions. I would also make sure that any disciplinary action for professional and ethic violation has been taken. I would also avoid financial advisors claiming very high performance, as they would highly risk my money.


5) The rate and method of compensation for services:

Now comes, the final stage of discussing and knowing your financial advisor’s compensation. Financial advisors have varied compensation methods for their services, charges could be hourly, a flat monthly fee, a percentage on the assets managed, and a commission on the financial products managed or could be based on the number of transactions.  Others could be a combination of 2 or more methods.

A word of caution in dealing with financial advisors charging on number of trades, or getting commission from the investment company, these fees or commissions can be profit motivated with no empathy to client needs.

You could always suggest changes in the fee structure, if not accepted you could always find a reasonable financial advisor to sign a compensation agreement with him.

The final note:

My best wishes for good financial dealings with financial advisors, but a word of caution, are ‘be selective, diligent and patient to understand well the philosophy of your investment and never be shy to ask questions and clarify doubts’.


(Ramalingam K, an MBA (Finance) and Certified Financial Planner, is founder & director of Holistic Investment Planners (P) Ltd (

9 ways to be credit smart

Credit cards have turned into an integral part of modern living as they facilitating making purchases and paying bills without carrying cash. They make life easy and help maintain a record of our expenses and help us dispute charges for undelivered and defective things. In addition they enable us to earn reward points. However credit cards could make you overspend and get into debt. There are 9 ways that could help you to be credit card smart.

One can be very smart in playing a game only when he knows the rules of the game very well and follows the same diligently. Similarly to be smart with your credit card you need to know the rules of the credit card usage. Let me unbundle the same for you.

1) Do not have many credit cards:

It is true that credit cards definitely help in emergencies and facilitate payments. But having too many credit cards could tempt us to overspend and get into credit card debt that could be difficult to recover from. In addition it is best to avail of reward points on one credit card, so that you could encash the points more quickly.


2) Cultivate and maintain an emergency fund:

Most of us believe that credit cards can definitely help in medical and unexpected emergencies, but it is unwise to consider it as a general rule. A much better alternative would be regular setting aside money as an emergency fund for such unexpected emergencies. This will prevent getting into credit card debt.


3) Repayment capacity should determine credit card spending:

It is right that using credit cards in place of cash helps. But this applies to purchases that we can afford only and also repay immediately. Spending more than what you can repay is highly undesirable and could get you into credit card debt.


4) Avoid cash advance withdrawals:

It is best to live within your means and avoid making cash advance withdrawals even in emergencies. This is the worst thing you can do with a credit card. Having a smart spending plan will help you in not falling this trap


5) Avoid bank transfers without valid reasons:

Being credit card smart requires avoiding making balance transfers from one credit card to the other. This will avoid payment of balance transfer fees and getting into further credit card debt that could turn vicious. However transfer of bank transfers like taking advantage of lower interest rates could prove fruitful.


6) Make full payments in time:

Being credit card smart requires you arranging for payment within a month or next billing date. Delay in repayment and minimum payment could affect your credit standing and make you also liable to pay high rates of interest that you could not afford. Not carrying any balance forward would relieve you of stress of getting into credit card debt.


7) Understand the credit card agreement fully:

Being credit card smart requires understanding fully the agreement and other terms and conditions for use of the credit card. This includes understanding transaction fees levied, interest rates, and when increased rates for credit would be charged. This would help take precautions to avoid getting into increased debt on credit cards.


8) Recognize the signs of credit card debt:

Many consider a credit card a boon and fail to realize that they are getting into credit card debt. It is best to understand and recognize signs like skipping a credit bill to pay another, avoiding credit card payment statements, and charging more than your repayment capacity by purchasing luxuries. Failing to cultivate and maintain an emergency fund could also be a cause. Once you recognize these signs you can turn credit card smart.

9) Never lend your credit card:

Being credit smart requires not trusting others with your credit card even if they promise to pay back in time. It is unwise because you will be responsible for the debt and charges. It is quite possible that credit card companies did not allot them a credit card because of certain adverse circumstances.


The last word:

I am sure you will agree that credit cards can be a boon only when you are credit card smart.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at


Smart Ways to Achieve Financial Goals

Where will you be FINANCIALLY five years from today?

The financial secret of moving from where you are and where you want to be?

Would you like to know the financial secret behind moving from where you are and where you want to be? Try to answer this question. “Where will you be financially five years from now? 10 years from now…? 20 years from now…?”

You may get answers like “I will be financially stronger”, “I want to be financially better”. Are these answers specific? If you don’t know where you want to go exactly, there is no focus. When there is no focus; there will be lot of distraction. Distraction either leads to mediocrity or destruction.

How to refrain yourself heading towards mediocrity or destruction? You need to set Specific, Measurable, Achievable, Realistic and Time bound Financial Goals. That is S.M.A.R.T. Financial goals.

Let me take you through step by step to set SMART Financial goals.

1)    List down Financial Goals:
Write down all your financial goals like buying a house, kid’s education, Vacation, Retirement and so on. You may wonder why this mechanical act of writing financial goals is so important. You can be thinking something without actually realizing what that something is. It is intangible and so it is not clearly defined in your mind.

When you start putting that thought into words and you try expressing it, an amazing thing begins to happen. By creating it in words, that abstract thought now takes on body, shape, form, substance. It is no longer just a thought. It becomes something which motivates you, or creates a gut feeling inside.

Your dream becomes a goal the moment you write it down. Say one of your dreams is to buy a house. You dream about it a lot. But the moment you started writing it down, your mind will ask yourself “when, where, how many square feet, how many bedrooms?”  This writing gives clarity to your goal and it forces your mind to find out the ways and means to achieve the goal.

2)    Categorize and Prioritize:

You need to categorise your financial goals based on the timeframe. Generally the financial goals less than 3 years are short term financial goals. The goals to be achieved in the next 4 to 7 years are medium term goals and the financial goals to be achieved after 7 years are long term goals. This categorization will help you in building a roadmap to achieve your goals and also in selecting the right investment products.

Your daughter’s wedding would be more important to you than the international vacation.  Buying a house is more important than buying a farm house. This prioritization will help you in creating a better financial plan. Suppose if you are in deficit, you know which financial goal need to be compromised and which are all the financial goals you want o achieve irrespective of the deficit.

3)    Fixing a target date:

Fixing a target date for your financial goals may look like a dump idea. How do I know in advance the date of buying my house, the date of my daughter’s wedding? But if you are not fixing it, then you will not be financially prepared for that. If you are financially prepared and the goal event is not taking place at that time and getting postponed for some reasons, you will not have any financial worries. You will be financially ready from thereafter with on enough money to meet that goal.

Fixing a target date will psychologically influence your thought process to work on that goal. Also the moment you fix the target date your mind starts running a countdown. Only when you know that after how many years from now you want to achieve the goal, you will be able to make a financial plan.

4)    Estimating the cost:

First you need to estimate the cost as of today. If you are planning to save for your daughter’s wedding which is expected to take place after 10 years, first you need to calculate the cost of the wedding in today’s prices. Then you need to adjust it for inflation of 10 years. Now you will have the future value of your target.

5)    How much to save?
Once you have found out the future value of the goal, you can easily decide on how much you need to invest in order to reach the targeted future value. Initially you may only be able to contribute less. But year after year you can increase this contribution based on your increment/promotion/income growth.

So you need to take into account the expected growth rate on your salary or business/professional income in calculating how much to save towards each and every financial goal.

6)    Budget the savings:

As you know by now exactly how much to save towards each and every goal, you need to accommodate these savings in your budget. If you do this year after year, then you can see all your financial goals becoming reality.

The difference between a goal and a dream is the written word. I am confident that you will come to find that financial goal setting works and that it will soon become a way of life for you.
Start setting your financial goals today.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Mutual Funds Mythbuster is working for a mutual fund house. They have recently came out with an NFO (new fund offer). The day on which the fund house announced its maiden NAV (net asset value), he received lot of calls from investors asking why the NAV is at below par. They thought something was wrong.

Then Rahul went on clarifying them that though both an equity fund and a stock extend market-related returns, there are some key differences between the two. If you have similar misconceptions about equity funds and stocks, this article will demystify all those misconceptions.


New Fund Offerings:

A new fund offer is not likely to generate amazing returns as can be the case with an initial public offering from a company.

This is because the NAV reflects the market value of the stocks held by the fund on any day. Because a fund holds several stocks in its portfolio, the NAV can only reflect the combined returns on the portfolio between the NFO date and the date of first NAV.

The first NAV declared by a fund can, at times, be lower than the par value of investment. A lower NAV does not mean a cheaper fund: Just because a New Fund is issued at Rs 10, it does not mean it has a chance of giving better returns than an existing fund that has a higher NAV.

Whether the scheme in which you are planning to invest has an NAV of Rs.15 or Rs.150 does not matter at all.


There is a difference between the price of a listed security and the NAV of a mutual fund scheme. Listed security has a price, determined by the demand and supply of the security. Whereas the unit’s NAV of the scheme has a value determined mathematically, by the prices of the securities in the portfolio. If the portfolio appreciates by 10% Rs.15 NAV will become RS.16.5 and Rs.150 AV will become Rs.165. So in whatever the NAV you invest your investment will fetch you 10% return.

So instead of concentrating on LOW NAV and more number of units, it is worthwhile to consider other factors (performance track record, fund management, volatility) that determine the portfolio return.

A fund with higher NAV may give higher returns than a lower NAV fund, if its stocks did better in the markets.

Funds Vs Stocks

Point of distinction Equity Fund Stocks
Level of Risk High Highest
Entry/Exit cost No Entry Load; But there will be Exit load. Advisory fee may be applicable. Demat a\c and Brokerage charges
Options Options available like dividend payout, dividend reinvestment, growth. No such options
Minimum Investment Min investment is usually Rs.5000. Even one share can be bought.
Measuring Performance Returns Vs Benchmark Net Profit margins/EPS
Sub-division Classified based on stocks in which it invests. (Diversified, Midcap, sectoral, thematic) Classified as per the industry in which it operates.(FMCG, IT, PSU, METAL)
Pricing Based on the price of the underlying securities Based on the demand and supply of the particular stock


Dividends are not extra returns:


Immediately, after the dividend payment of dividend the NAV of the fund will fall to the extent of the dividend payment. Let us illustrate.


Fund’s cum dividend NAV is Rs.25. Proposed dividend is 50%. You are investing Rs.1 Lac and you will not get Rs.50000 as dividend. It is only Rs.20000 (50% on the face value Rs.10 is Rs.5 per unit) as the unit price is Rs.25 you will get 4000 units. Rs.5 dividend * 4000 units=Rs.20000.


And this dividend is not an additional gain or income. After payment of dividend the NAV of the scheme will fall to the extent of the payment and distribution taxes (if applicable). Now your nav will become Rs.20 and your investment value will be Rs.80000 (4000 units * Rs.20 NAV).


In a nutshell,


Investment amount   Rs.1,00,000

Dividend amount     Rs.  20,000

Present Value      Rs.  80,000


It is nothing but investing Rs.80000 after dividend distribution at NAV Rs.20.


So investing in a scheme because it is declaring dividend in the near future is meaningless.

Usually a company with a liberal dividend policy may enjoy greater investor interest in the stock market. The same is not applicable to an equity-oriented mutual fund.


Investing more number of funds is not actual diversification. It may reduce your return.


Owning several mutual funds doesn’t necessarily broaden your holdings. It will be a mistake to buy the same securities over and over again in different funds with different names. You tend to believe they’re diversified. But it is not real diversification.


There are only very few funds which are performing consistently. Instead of investing in few funds, if someone chooses to invest in more number of funds (because he intends to diversify) he may be forced to choose some average performing schemes also. As a result his returns will be diluted. The step taken by the investor to diversify his investment is not leading to diversification but to dilution of return.


Thus ideally your portfolio should not have more than four-five funds.

NO tax for churning:

When we buy shares and sell them within a year we are accountable for short term capital gain tax at the rate of 15%.

But mutual funds provide the benefit of churning of stocks with no tax implications. A fund which churns its portfolio within a year is exempt from tax because it only redistributes these profits to investors.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at


5 Stock Market Blunders

Lets Start Having A Look:

The present share market dip accompanied by a climate of pessimism in the share market calls for not just shrewdness in share dealing, but also for avoiding the 5 common blunders that I find most long term investors make during a share market fall. It is true that your precious savings needs to be protected and to grow, that makes me quote Ayn Rand, “Wealth is the product of man’s capacity to think”, so let us think and avoid those 5 common blunders.


Unveiling the 5 common blunders to avoid in stock market fall:

Being influenced with short term share market losses:


I have always advised young investors investing for long term capital gains to not panic if the value of their shares came down rapidly in just a year. It is not advisable to sell them to avoid further dips. A strong unchangable fact about the share market is that it is subject to ups and downs. The price of the shares would rise all of a sudden, and selling would only make it difficult to recoup your portfolio to meet your long term financial goals. The share market is like a voting machine in the short run and weighing machine in the long run, hence long term capital creation requires buying shares in an advantageous share market.


Short selling to make profits:

Short selling shares at a higher price, in the hopes to replace them by buying at a lower price proved risky for many investors. They all have soon realized that it was always better to have a cotton shirt on their back rather than aspire and fail in getting a silk shirt and have no shirt at all.


People believe that investment experts and large stock broking houses will be able to predict the market. If we watch and follow them we will be able to make quick bucks in short selling and F&O trading. Is that so? If there are investment experts who will be able to correctly predict the market they will not be writing or giving interviews about it in the media. They will be silently investing and making money without revealing their secret.

Most of the big names in the stock broking sector were opening more new branches in the upcountry side during the second half of 2007 (when the market was moving closer to 20,000 levels), expecting the market to go up further and hence their businesses will grow. But within six months, market had collapsed.

In the second half of the 2008 these companies decided to wind up their newer branches in the upcountry as they were expecting further downside. But again within next six months market started their recovery.


Never enter into shorting deals during a share market fall, but to hold on and invest more if you can make good returns in future.


Buying Penny Stocks of unknown companies in place of shares of reputed companies:

Market has fallen. You can invest now. Many investors fall prey for the idea of investing in penny stocks. You may think that you will get more number of shares when you buy penny stocks. Because you will get a very few stocks for the same amount if you choose to invest in large or midcap companies.


It is a universal advice that investing in thriving longstanding companies rather than, a less known company would guarantee you a good return in the long run. You should avoid investing a large sum in unknown penny stocks. It is always advisable to take calculated risks and not blind risks. By investing in a penny stock you are taking a blind risk which all successful investors avoid consciously.

Waiting for shares prices to fall further before buying:

When the market falls, that is a perfect time to start investing. Don’t wait for the markets to bottom out. It is difficult to identify the bottom and invest. By the time you recognize, that is the bottom level, the market could have bounced back.


Share market commentaries in the media always confuse us. When the market was at 20000 levels during Dec 2007, everyone in the media is predicting and analyzing the possibility of the market reaching 30,000 levels.  But markets crashed subsequently. When they came down to 8600 level during Nov 2008 , everyone in the media is predicting analyzing the possibility of market going down further to 3,000 levels. But markets bounced back.


The prudent and smart investors understood this and started investing when the markets started falling. They have staggered their investments over a period of time. They followed simple strategies like systematic investment plan and systematic transfer plan.

I wanted high returns, but cannot see my capital fluctuating:

Some young and middle aged investors invest in high return portfolios with a lot of midcap exposure, and realize that their portfolios have fallen 15 to 20% with a share market fall in just 3 to 4 months. Their panic and decision to sell their shares for reinvesting the same in fixed return investments like Bank deposits or company deposits is wrong, and I would have advised them to just wait. Their present loss and reinvesting in fixed deposits would take them longer to recoup the capital and make sizable returns. The solution lies in sticking on to the share portfolio and be intelligent to buy more shares for long term wealth creation.


The final word:

My final word of advice for long term investors is to never allow emotions or short term fluctuations to alter their investment decision, and to always buy in a falling share market. I am sure a rational decision accompanied by safe dealings can make your long term financial goals a reality.


The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

3 ways to save money

Let’s begin learning:

The safest way to double your money is to fold it over once and put it in your pocket. ~ Kin Hubbard

Kin Hubbard is right in saying that if we do not spend money unnecessarily we would be able to save money and double it. However most of us like to spend and would find it difficult to not spend at all. We feel that it could stress us further.

Accepting the3 financial challenges could help you in controlling unnecessary spending. Once you control and avoid unnecessary spending you can save more and invest more. So you can achieve your financial goals easier and earlier.

Here are the challenges:

A Day Away from spending

The challenge of not spending for a day could be difficult, but could help save and render some important life lessons. It is true as most of us have regular daily expenses on coffee, tea, lunch, and snack at regular intervals and fuel to travel to and from work.

Effective planning with implementation of this challenge involves ensuring that your fuel tank is full on the earlier day. Then setting the coffee vending machine the night before could ensure you refreshing brewed coffee to enjoy before you leave for work. Similarly, carrying homemade lunch and healthy snacks like salads, nuts, seed and snack bars could help you eat healthy and save money.

It is not as difficult as it appears. Once you start practicing it, it becomes part of your habit like fasting. It opens new ideas to you on saving on daily routine expenses.

A Week Away from Credit Cards

We all tend to spend a lot on small and big purchases with using the credit card. Credit card tends to make us spend excessively on unwanted purchases.

Buying things on cash would only make us spend on things that we absolutely consider necessary. It is found that sometimes postponing the purchase and preferring to pay cash could make us realize that the need was just momentary.

During the week away from credit card, you will be able to understand some of your spending pattern. You will come to know on what items you make impulsive buying and on what items you make need based buying.

As you are using cash to buy and not plastic money, you may want to negotiate the price. This develops your negotiation skills.

It is also true that buying unnecessary things with credit cards causes financial stress and spoiling of important life relationships. So avoiding credit card for a week could make you a need based buyer and better negotiator.

A Month Away from Eating Out

The last challenge of not dining out for a month could be difficult for many today. This is difficult but you would realize on implementation that it saves you a lot of money that is usually spent eating out in restaurants and cafeterias.

Avoiding eating in restaurants would not only create huge savings, but also would help you avoid excesses in foods. In addition eating out only on special occasions as a family would help you enjoy the food. It would make the family realize the value of spending money lavishly.

When we have a kid around one year old, we won’t offer any outside food. We will pack the home made food or snacks for the kid. You can follow the same for the grownups.

Again this is not as difficult as you think. Think of having a homemade food as a family in a park or beach. This will bring a different experience and enjoyment to your family. This will give you new ideas on having more fun with lesser money.

A Final Note

All these challenges do not mean that you should not spend at all on dining out or on getting good things of life. It only means you should spend the right amount of money for the right reasons. This self-control would not only help you save more but also in preparing you psychologically for a consumerism

I am sure you would learn a lot with these spending challenges once you try them.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

When to sell Mutual Funds

Start making the decision:

It is vital for an investor, to have long-term investment plans. But he needs to constantly verify if these funds are helping him to achieve his financial objectives. You, as an investor need to keep track of how your investments in mutual funds are growing. Also you need to make sure that you do not suffer huge losses due to non-performance.

As an investor you need to learn not only when to buy but also when to sell a mutual fund. Learning the principles of when to sell a mutual fund helps weed off investment in unprofitable mutual funds and build up a desirable and profitable portfolio of mutual fund investments.

Look at situations to sell mutual funds:

Chronic Under-performer:

Investor should stay invested for long tern in a risky asset class like equity. You should wait patiently for a minimum period of 5 years to watch your investments grow. Making comparisons between similar funds proves futile.

However you should make a note if your fund is continuously under performing. Comparing each of your funds with the respective fund benchmark index for various periods like 2 years, 3years and 5 years helps. You may need to move out of a continuous under performer and move in to a continuous performer.

Changes in objectives of your mutual fund:

Next, an investor like you, investing with definite financial objectives with allocation to different sectors and market capitalization may feel uneasy and suspicious with the change in the fund’s objectives that exposed you to greater risk or risk in other sectors also.

Fund takeovers, change of ownership and mergers change the level of risk in a mutual fund portfolio. So you as an investor may find your need, not met and may want to sell the fund. This was the reason why many investors, who invested in UTI Mastergrowth Fund, sold their funds when it changed to UTI Top 100 Fund.

Repositioning of a fund:

Though the fund has got an investment objective to invest in various market caps, so far the fund may be investing only in midcaps and positioned in the market as a large cap fund. But later, the fund may reposition the same fund as a multi cap fund and start investing in large cap stocks also. This change may not be a suitable one for an aggressive investor.

So as an investor, you need to be careful in watching the funds after investing. That too when a fund changes its positioning, you need to keep a close track of the same to prevent your investments from any adverse effect.

Appreciation in investment attained:

It is quite possible that your investment could have been shrewd and calculated and achieved the targeted appreciation ahead of time. I congratulate you, but would like to tell you that greediness may also make you lose on that foresighted gain. Selling off your fund in full or part and investing in safer avenues like debt funds, fixed maturity plans and fixed deposits of companies and in banks would safeguard your money yet give you some small return.

Say you wanted to accumulate Rs.10 lacs for the higher education of your daughter/son in 5 years time. Your investments have appreciated to 10 lacs at the end of 4 year itself. It is better to change it immediately to safe and non-risky investments. If you leave the investments in the same fund, it may come down in value because of the subsequent market fall.

So when the goal value has been reached, one needs to protect the appreciation by moving out from the existing risky investments and moving in to a safer investment.

I am sure you would have understood these principles of when to sell a mutual fund. This will assist you in taking better investment decisions and achieving your financial goals.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at