The Truth about Inflation

In the September issue of ‘Gokulam Kadir’ (A DinaThanthi Publication), my interview on ‘the truth about inflation’ has been published.

Please see the page numbers 28 & 29 of the magazine for reading the above article. It is not possible for me to attach the PDF file along with this article. Kindly bear with me for the inconvenience.

Please read the article and feel free to share your feedback.

My Contribution-Nanayam Vikatan- Issue dated 31.01.09

 

I’m pleased to share with you my contribution in the current issue of Nanayam Vikatan. Please refer to the page number 72 of this issue.

 

I’ve answered queries from 2 readers.

 

The first query pertains to building wealth for his daughter’s wedding (who is currently one year old) & his retirement after 20 years.

 

I’m a strong advocate of long term SIP for wealth building. This man is capable of saving Rs.2000/- per month regularly and I’ve recommended him to choose any 2 schemes out of the recommendations provided by me and go for a 20 year SIP. This would help him to meet his goals of daughter’s marriage and retirement.

 

For the common man, SIP is the best tool to create sustainable long term wealth through stock markets. I’ve written about this in detail in my earlier article ‘ How to become a Crorepathi’ and I’ve provided the link below for your easy reference

 

http://wisewealthadvisors.wordpress.com/2008/11/26/how-to-become-a-crorepathi/

 

The second query is an interesting one. He wants to know whether it is better to go for a mutual fund scheme or a pension plan offered by an Insurance company for building / investing the pension corpus. For the purpose of building the corpus, I would suggest the mutual fund route over pension plans offered by Insurance companies as the latter have higher charges which would eat away your savings. As one gets closer (say 5 years+) to retirement, he should start moving the corpus from the equity to debt schemes. This is nothing but revision in his asset allocation pattern as he moves closer to his retirement age. Once he reaches the age of retirement, he can invest the corpus in single premium annuity plans of Insurance companies. Single premium plans usually have significantly lower charges over the long term deferred annuity plans. Also it is not necessary to invest the entire corpus in insurance annuity but also consider other options like Senior Citizen savings scheme, Post Office MIS etc.

 

Please review and share your thoughts.

 

My Contribution -Nanayam Vikatan – Current Issue

I’m pleased to share with you my answer provided for a reader’s query in the current issue (December 15th 2008) of ‘Nanayam Vikatan’.

 

Incidentally, I was pleasantly surprised to learn that ‘Nanayam Vikatan’ (NV) is the largest selling Personal Finance magazine despite its geographic and linguistic limitations.

 

Normally, NV team gives me a real case study for which I provide a detailed solution, which is communicated separately to the reader.

 

Due to space constraints, only a part of the query and a small part of the answer actually gets published in the magazine.

 

The case given to me this time is a pathetic one. This person has been blessed with a girl baby after 16 years of marriage, after countless treatments and loads of prayers. Unfortunately, the child has been born with a hole in the heart and is scheduled for a major surgery next month costing  few lakhs. Though his salary is not high (earning Rs.12,000/- per month), he has accumulated close to Rs.15 Lakhs totally in the last 3 decades of his career, by doing creative design job for export companies on a freelance basis in addition to his routine job.

 

A ‘friend’ of him, who is also an insurance agent made him to invest in ULIPs, his entire life savings into 10 different plans. This has happened during the course of last 3 years. The agent has earned few lakhs as premium by exploiting this man’s ignorance and our reader’s net worth is now miniscule of what it was due to heavy distribution commission, admin charges, mortality charges and  present market conditions.

 

He is now having money just enough to cover the cost of surgery scheduled for next month. I’ve provided a detailed solution as to when he should come out of the ULIPs, how much to invest in Debt & how much in equity, taking term cover & Medical insurance cover, investing small amounts regularly through SIPs for his daughter’s future etc.

 

It is never advisable to mix Investment and Insurance. I’m planning to mail and post in our website soon the perils of mixing investment and insurance. As Warren Buffet has said, Investment is simple, but not easy.  Likewise, insurance decision is not very tough but people due to their ignorance and intermediaries due to their excessive greed (desire for swank cars, MDRT status, vacation in different countries, exotic gifts, gold bars, extraordinary commission……. the list is too big to include here) sell insurance as an investment product. When we take a fire insurance, we never want our buildings to catch fire so that we can get return, When we take a medical cover, we never want to fall ill so that we can get return BUT when it comes to Life, we want a return for survival ! Strange paradox, which is present only in Indian Psyche and not in developed worlds. In developed countries, terms covers are the most preferred product whereas in India your agent would turn a deaf ear, if you ask about term insurance.

 

As mentioned above, I’m planning to post by next week how your insurance advisors earn more than or equal to  what you earn not only in ULIPs but even in many traditional plans. I know that some of my friends in the insurance advisory field may not be happy with what I’m going to write but as a client you need to know the truth. Also remember that in any financial product, if your intermediary earns more or equal to what you earn, there is a tremendous flaw in the very structure of the product. From  now on, make it a point to ask your advisor, how much he would earn in first three years and how much from 4th year onwards, when he or she sells you an insurance product.  Also ask for the total costs (total amount charged by insurance company other including payouts made to agents). When they ask you not to worry about that as the insurance company is the one who is paying them and not you, tell them very clearly that it is out of your premium, they get that money and so you’ve every right to know that.

 

 

(Please refer to Page# 66 in the issue dated 15/12/08 for above Q&A. I would also like to thank ‘Nanayam Vikatan’ for providing regular opportunity to contribute in their magazine)