Ranjan Varma

Changing the way we learn and manage our money

Dozen Rules For An Economist To Remember

January 20th, 2010 by Ranjan No comments »

I receive a newsletter from Sundaram BNP Paribas Asset Management Company and it’s worth reading. I guess you need to invest in their funds to get that newsletter.

I found the “Rosenberg Dozen” in that newsletter and I am sharing that with you.

David Rosenberg, Chief Economist at Gluskin Sheff, has the following economist’s dozen of rules :

In order for an economic forecast to be relevant, it must be combined with a market call.
Never be a slave to data, they are no substitute for astute observation of the big picture.
The consensus rarely gets it right and almost always errs on the side of optimism – except at the bottom.
Fall in love with your partner, not your forecast.
No two cycles are ever the same.
Never hide behind your model.
Always seek out corroborating evidence.
Have respect for what the markets are telling you.
Be constantly aware with your forecast horizon – many clients live in the short run.
Of all the market forecasters, Mr. Bond gets it right most often.
Highlight the risks to your forecast.
Get the (US) consumer right and everything will take care of itself.

Interesting, No?

Welcome back! Join me on this journey to improving our financial IQ and sharing what we know. Updates at RSS feed or Email. And spread the word please Thank You!

Coming Soon! A Personal Finance Workshop & Software "RupeeManager". Stay tuned

No comments »

Posted in Financial Awareness, Miscellaneous

How to Sell ULIPs to Unsuspecting Customers

January 19th, 2010 by Ranjan 1 comment »

Recently, I was an unannounced visitor to my Aunt’s place where a bunch of people were explaining a financial product. It turned out that the people were Branch Head and Advisor of a private insurance company and they were selling a ULIP.

My Aunt is a successful Doctor and seeing me, she immediately offloaded her burden of understanding the product to me.

Even though I hate ULIPs, I pretended to be another uninformed customer. I listened to their articulate description of the benefits, their customer service policies, their ethics, etc. They said that the product will no longer be available after a week and they were interested in getting a good deal for their valued/high networth clients!

Impressed, but I did have a question for them. What were the charges?

The Branch Manager continued his rhetoric. Unlike other insurance companies they charge 0% premium allocation charge, he thundered.

He gave me the pamphlet detailing other charges like policy administration charges, surrender charges, etc.

I was intrigued by the 0% premium allocation charges and which normally ranges from 15-40% for other companies. I looked deeper for the fine print and here’s what I found.

The policy administration charge which is normally Rs 60-100 for other companies was given in %age. The pamphlet said that for a premium band upto Rs 25000/-, it would be 2.50% per month of the ATP.

ATP, I came to know was Annual Target Premium.

What it meant was that 2.5*12=30% would be shaved off your investment as policy administration charge.

So the marketing savvy private insurance company has been innovative in redesigning their product so that the noise about the premium allocation charge is addressed. And at the same time, adding back the charges in a new form!!

Interesting, No? That’s why you need to be alert all the time. Do read Manish’s Top 10 tricks of mis-selling.

1 comment »

Posted in Financial Awareness, Insurance, ULIP

The Iceberg Theory of Money Management

November 26th, 2009 by Ranjan 2 comments »

I have seen smart people make stupid money mistakes.

I see smart marketers of our financial institutions hiding more than they reveal. Ofcourse they have all the financial jargons to their support.

I have also seen seemingly dumb guys making a pot of gold for themselves.

I have wondered why people avoid money management before.

But this post is about the visible and the hidden components of money management. In other words, the iceberg theory of money management.

Iceberg Theory of Money Management

As I said, knowledgeable people make financial mistakes too. This happens because despite knowledge they may not have the right skills or the attitude towards money management. Other characteristics like confidence, values they have learnt from their parents, fear of numbers,etc.

The Visible:We can see our knowledge level as well as our skills level. It’s about reading up blogs, dailies, magazines and upgrading your knowledge. Also about keeping your records tidily, operating the accounts like the demat, broking accounts, etc.

The bad news is that the visible part is only 10-15% of what it takes to manage your money.

The Hidden: My take is that 85-90% of your money management depends on your attitude and other characteristics. Like there’s laziness, greed for extraordinary returns, fear of numbers, fearing the markets, etc.

Some of us are benefitted with the values we have learnt from our parents/influencers. For some, the parent/influencer effect is a handicap.

Conclusion: Money management expertise has four components. 1. Knowledge 2. Skills 3. Attitude 4. Characteristics like confidence, values.

Just reading up a blog/magazine won’t help you with your money management. You need to be aware of your attitude and various other self concepts, values to make improved financial decisions.

Update: Ideasmithy has another example of the Iceberg model in her post Just Chemistry. She writes:

Good sex is a little more complicated – a combination of attraction, talent and emotions. The first, we’ve already established is plentiful. The second, talent, is slightly harder to come by. Yet, like some slightly expensive things, with some effort, it can be discovered and earned.

But the last, emotions, that’s the tricky bit. Emotions are that vital ingredient, the salt in a receipe.

I guess, attraction is the visible part & talent and emotions is the hidden elements. What do you say?

Do you agree? Disagree?

2 comments »

Posted in Financial Awareness, Investing gyaan

Indibloggies Award: Vote Please

November 25th, 2009 by Ranjan 1 comment »

India’s first (established 2003) and very own desi blog awards, the Indibloggies are publicly-chosen awards conferred on bloggers from India.

A jury sifts through the numerous blogs that are openly nominated by the fellow bloggers, to contend for the title of the Best Indiblog in each of the 17 categories. An open vote is then conducted to pick out the winning blog from the nominations.

This Blog has been nominated in the Best New Indiblog category. It feels special to be nominated and will be really thrilling to win the award.

I write this blog to share what I know with my readers. I attribute the nomination to my readers as they have always motivated me to blog. And I guess, it’s you who should decide the winner too!

Do hop on to the voting page and give me a vote.

Please Vote

I am also happy to see some very interesting blogs on the nomination list that I follow and I also request you to vote for some of them. They are:
Gauravonomics under Business category
The Ideasmithy under Personal category
Digital Inspiration under Technology category
Domain Maximus under Humorous category
Vimoh’s Twitter page under Microblog category

Please Vote. Thanks

1 comment »

Posted in Miscellaneous

Advantages of Investing Through SIP

November 25th, 2009 by Ranjan 2 comments »

A recent Economic Times report throws up some interesting trivia. India’s top equity diversified funds have returned 16% to 18% in the last 3 years.

However, SIP (systematic investment plan) investors would have earned returns in the range of 25% to 28% during the same period. That too by investing in the same funds!

So what makes all the difference is this – lump sum investors would have invested at only one level of the market. In this case, it would be 13,680 on the Sensex as on November 23, 2006. Their investments would then have subsequently gone through a rollercoaster ride of dips and surges.

For SIP investors though, they would have invested at regular intervals during this entire period. This would have ensured that they took advantage of the low market levels each time the markets went down. Thus automatically and effortlessly doing something even fund managers could not do!