Media News and Reality

Posted on by
1

Let me share two news in the media with respect to the Insurance services industry.

  1. LIC will bring out an online policy purchase option.
  2. IRDA will allow agents to sell/promote policies from more than one Insurer.
Just now I received a query about LIC’s online policy. And a friend wanted me to write on the pros and cons of the second news.
As far as I know, LIC doesn’t have online policy purchase yet. The IRDA circular or notification is also not there.
The Reality
My understanding is this: Some journalist would have asked this question from a Top Management guy in the IRDA/LIC on the sides of a seminar/conference/press conference and the top management would have used such words as “likely to do this” or “not ruling out this”
The enterprising correspondent would have his/her own interpretations and this turns into news.
Ofcourse, I may be wrong too. LIC may come out with an online policy purchase option soon and IRDA also notifies the above mentioned news.
But I have been listening about this for quite some time. According to some resources, LIC has been working on bringing out such an online facility since 2 years. My question is why would it be so difficult for such a resourceful Corporation to build something that should not take more than 2-3 months and take so much time?
Even the regulation about Agents should not take more than 3 months. Let us wait and watch.
My Understanding:
My understanding of the two issues is this. While the online direct sales channel of LIC and giving more choice to Agents appears forward looking and customer friendly, in reality they would be opposed tooth and nail inside the corridors of IRDA and LIC.
LIC and other Insurers would confront IRDA with their cost of getting an Agent and training them. Why would LIC share it’s 13.50 lakh agents with it’s competitors.
Interestingly these 13.50 lakh agents would not like LIC on the issue of bringing out the online sales channel.
In any case, let’s wait and watch.

Coming Soon! RupeeCamp "Financial Planning Workshop". "Join us"

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!

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

Investing in Low Risk Mutual Funds to avoid Choppy Markets

Posted on by
1

This is a guest post by Karan Batra.Karan is a Chartered Accountant and lives in New Delhi.

When Recession came in the year 2008, many of us didn’t even know what Recession was and how it could impact the economy. Slowly and steadily everyone realised that the Recession has actually stepped in and the world won’t grow and the same pace as it did earlier.

It’s been a few years since the Recession came in 2008 and it till date the Stock Markets have not turned stable but are still volatile. Highly Volatile markets are the most risky as you never know at what stage to enter as they keep increasing and decreasing at a very rapid pace.

Despite the fact that Mutual funds are safe as compared to investing directly in Shares, but even the Mutual funds seem to have been caught in the ambit of Recession with the NAV’s decreasing constantly. In such circumstances, it is highly advisable to invest in low risk mutual funds such as debt oriented funds (e.g. Monthly Income Plans abbreviated as MIP’s and Gold Exchange Traded funds or Gold ETF’s)

As the fate of the economy still uncertain, it is highly advisable to have such Low Risk Mutual funds in your debt portfolio as Debt Oriented Mutual Funds are low on risk as compared to Equity Oriented Mutual Funds. And in the debt category, short term bonds and ultra short term bonds are even safer.

Despite the presence of such instruments in the market, many investors have either liquidated their investments or are planning to do so, in order to have a portfolio that is more of cash. Though it is not a bad strategy considering the way things have been of late, always remember that your gains would be limited to the Interest the bank can offer you in case you opt for liquid investments like Fixed Deposits. Adjusting for Inflation and taxes, it doesn’t cut a fetching picture at all with your real returns plunging into the negative territory.

Selecting the right Investment

If you are open to taking a significant amount of risk for capital appreciation, equity and equity related mutual funds are your best bet. That means if you are investing in equity MF’s through the systematic investment plan (SIP) route for your long term objectives, do not discontinue the existing SIP’s.

However, if you are conservative and think that the safety of capital is paramount, but still want returns better than what fixed deposits can offer, debt MF’s is the right fund for you. You can diversify across debt paper of varied maturity periods which will ensure safety of capital as well as optimum returns.

Selecting the right fund according to your risk appetitive is a very important aspect of investing as you yourself are going to enjoy the profits earned.

This article has been authored by CA Karan Batra who is a finance and tax blogger on http://www.charteredclub.com

 

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

Weekly Links on Money

Posted on by
Reply

Here are some useful and interesting posts that I enjoyed reading this week.

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

Become a Financial Coach like Gary Kirsten

Posted on by
Reply

Here’s an article on financial planning and coaching that resonates with me and wanted to share with you. Link to the full article

Related link on Kirsten

——tells the story of Gary Kirsten’s role in coaching the Indian cricket team to world cup glory.

“A couple of years ago Gary, who had retired from professional cricket, got the call of a lifetime: an invitation to coach the Indian cricket team. Gary recruited mental conditioning coach Paddy Upton and the two headed off for India.

“At his first meeting with the team, Gary stands before the most talented group of cricketers in the world and gives them his vision. They stare back at him, stony-faced.

“Afterwards, Gary turns to Paddy and says: ‘Paddy, how do you think that went?’ And like a good coach, Paddy replies: ‘Gary, how do you think that went?’ Gary says: ‘I didn’t hit the spot.’ Paddy says: ‘Let’s work on your presentation.’ He proceeds to coach Gary in a different method of coaching. You’ve got to be humble and to draw people out.

“After lunch, Gary takes another shot at it. He starts by asking the cricketers questions: ‘We’ve noticed you have a 50-percent win ratio across all forms of the game. What are you doing to make that happen? And what do you enjoy doing?’

“Suddenly the energy lifts. Players engage and share what works for them. After tea, Gary reflected back to the team what they had shared.”

O’Mahony says Kirsten and Upton gave themselves a year to get to know the players as individuals. Their goal was to help each player realise his potential as a person first rather than as a player first.

“We believe this is the correct process for financial planners – stop talking and listen, think about what the client has said and then offer advice,” O’Mahony says.

Do we have such financial planners….err..Coach that you have come across?

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

The Wall Street Dirty Business of Insider Trading

Posted on by
Reply

You must read this story on NewYorker about Wall Street crimes. A bit long, but a gripping story. Worth making a movie!

Excerpts:

In the language of hedge funds, Galleon’s strategy was to “arbitrage reality” with the consensus on the Street—to find information about a given company that diverged from Wall Street’s view, allowing Galleon to cash in when the company’s stock price rose or fell. At Galleon, this was known as “getting an edge.” The analyst or portfolio manager with the best read on a company was called the “axe” on that stock. The surest way to become the axe was to have a source who passed on information about a company’s earnings, upcoming deals, and other confidential matters.

The ultimate edge was insider trading—the acquisition of nonpublic information about a company—and Rajaratnam was the king axe. At Galleon’s daily 8:30 A.M. meeting, he always had more information than his employees and didn’t hesitate to let them know it. By the mid-aughts, hedge funds accounted for nearly half of all stock trades, and there was ferocious competition for wealthy investors and the business of investment banks.

Lightly regulated and nearly opaque, hedge funds played a central role in the creation of credit-default swaps and other financial exotica that led to the economic collapse of 2008.

Rajaratnam’s goal was to be running a ten-billion-dollar fund by the end of 2009. In seducing Kumar, he made a valuable addition to the network that he had built up over the years.

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

Financial Experts: Post from the Past

Posted on by
2

I heard an expert on TV 4 years back and posted on my blog about my understanding of the language used. Here’s the verbatim expert speak. (I have changed the name of the company to ABC*:

ABC* is on a roll since the beginning of the second quarter of the current fiscal year. The stock witnessed sharp volatility in the last few days, though it gave up most of its gains. Technically, the stock is showing signs of good movement in the short term, but I think with a long term perspective, there are better bets available in the market.

I thought I understood that. But did I? Please help me what did the “expert” mean by those simple sentences. Let me try to deconstruct those simple lines…..

  1. On a roll: I think this stock is rocking, buy!
  2. since the beginning of the second quarter of the current fiscal year: Oh, it is a recent phenomena and what happened before that, we don’t know. Doubt!
  3. sharp volatility: looks scary.
  4. gave up most of its gains: Bad, I have to rethink whether the stock is rocking!
  5. showing signs of good movement: Good, after all it’s a Buy recommendation after all.
  6. with a long term, there are better bets: Doubt again about the stock.

The expert has done his job. He has told me nothing and still is called an “expert”. Moreover the leading daily also warns you that they are not responsible for your decisions.

I still can’t understand this language. Looks like I have made no progress in the last 4 years with this kind of language.

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save

The Three Rules of Investments

Posted on by
2

Sounds simple. But have you followed the simple rules ever! :)

Excerpted from my website and was written 4 years ago. The link

Excerpts: Three rules of investment:

  1. Invest early
  2. Invest regularly
  3. Invest for long term and not short term

Invest Early :

The sooner you start the better. Start investing in small amounts, continuously for a long time, money grows due to the power of compounding. If you start investing when you are single you will be able to save maximum. The best policy is to start saving from the moment you begin earning.

Invest Regularly :

Develop the habit of adding to your recurring deposit / systematic investment plan of mutual fund / deferred annuity account on a regular basis, perhaps monthly or quarterly. By investing regularly with SIP of mutual funds you take advantage of a strategy called rupee-cost averaging. Regular investing, however, does not ensure a profit or protect against loss in declining market scenario.

Invest for Long Term and Not Short Term :

If you decide that your money can work for you over a long period of time, then better compounding works. Consider this: Rs 1,000 invested at 8% earns Rs. 80. Left to compound, the original Rs.1,000, plus accumulated interest, will earn Rs.160 in the 10th year, Rs.507 in the 25th year, and Rs.1,609 in the 40th year — returns of 16%, 51%, and 161%, respectively, on the initial Rs.1,000.

Blogger PostLinkedInTwitterYahoo BuzzFriendFeedFacebookEmailShare/Save