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How to keep things on track during the pandemic?

A handy checklist for your reference.

DO’s

  • Increase liquidity – Enhance your emergency funds to double the amount
  • Reduce extra expenses – the lockdown is making us online shopaholics. The general tendency is such that the need for gratification is finding solace in spending online.
  • Use surplus time to build a financial plan
  • Take calculated risks
  • Take a health insurance and a term plan

DON’Ts

  • Take your job for granted
  • Break your emergency fund to trade in the stock markets for short term returns
  • Assume that endowment plans / LIC policies are sufficient life insurance
  • Think that all risks are bad and that one should not take any risk whatsoever
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5 Lessons of Financial Prosperity Inspired by Lord Ganesha

Lord Ganesha, also known as Ganpati is believed to be the God of wisdom, a symbol of happiness, prosperity, knowledge and remover of obstacles. Adored by his devotees, there is a lot of inspiration that we can take about financial planning from the Lord himself.

Here are 5 lessons of financial prosperity from Ganpati Bappa.

Listen out and loud 

The Lord’s big elephant ears signify how it’s important to have your ears wide open at all times, pay attention to all the information coming your way, absorb all the knowledge and filter out what’s not necessary. Lord Ganesha is also known to be worshiped for beginning new ventures. Therefore, by taking a cue from there, you can start saving and investing money early, ideally as soon as you begin to generate income. As investors, there can be an overload of knowledge and information that comes your way. However, making the right decisions at the right time with the help of sound knowledge and guidance of financial advisors, by listening to them carefully can be a big step forward in your financial planning journey.

 

Think big to achieve bigger

The Lord’s huge elephant head signifies that one should always think big. From a financial planning perspective, it’s important to identify goals and categorize your investments accordingly. Thinking big about your future is a way to secure it better, by knowing what you want to invest for and thereby identifying your short, medium and long term goals. Goals can be met when they are prioritized well. In order to do this, it’s also important to keep your thirst for financial knowledge alive. Lord Ganesha symbolizes wisdom and intellect, which gives us the inspiration to be financially literate and understand the various investment options that can be suitable for our goals and give us good returns in the short or long term, as planned by us. While thinking big, it’s also important to realize the magic of compounding which is earning interest over interest and generating more wealth over a longer period of time. Secure yourself by taking advantage of this and working towards the bigger picture.

 

Concentrate and stay focused

Although bestowed with a big head, the Lord has very small eyes which signify that in all the big plans that we take on, it’s very important to concentrate and be detail oriented. With attention to the minutest of details, this feature of the Lord inspires us to understand the nitty-gritty of our planned investments, the pros and cons involved in each of them and therefore, be mindful of how we plot this journey for ourselves. Even after making that commitment, it reminds us to stay focused and be consistent with it to ensure that we don’t deviate from our plans and disturb the financial planning process for ourselves. Not to forget, the focus also enables us to be protected and prepare ourselves for monetary turbulences, which should be paid just as much heed as we do to any of our other investments.

 

Trunk-like patience to adapt in all conditions

The Lord’s trunk symbolizes the virtue of patience that we must all possess as it’s unlikely that things always go as planned. Having a foresight towards this and ensuring that we can adapt to new circumstances as per the changes or new developments, is an inspiration for us to take. The long trunk also signifies that the Lord can sniff out danger or negativity, which is why he’s referred to as the remover of obstacles. This teaches us the lesson to be vigilant towards our investments and not be lured towards lucrative offers and those that promise anything big in a short span of time. To sense the unrealistic and frivolous nature of any such investments and steer away from it, being aware of market conditions and the risk involved in the investments that we choose to make, is an important lesson to bear in mind.

 

 

Strong tusk power to fork out bad investments

The Lord’s strong tusks are a reminder to us to have the strength to take the right decisions and eliminate any negative influences that there might be. Building your perceptions after critical analysis is a way to attain that sense and strength to fork out poorly performing investments that hold back the potential of the portfolio.

 

The lessons above lead to financial security in the future, well represented by the laddoo in the Lord’s hand which signifies that the fruit to patience, focus, perseverance and good thinking always results in something sweet. On this Ganesh Chaturthi, let us acknowledge Bappa’s lessons that we can follow for life and work towards a safer and wiser path of savings and investments. Best wishes from CAGRfunds to everyone on this auspicious occasion. Ganapati Bappa Morya.

 

 

 

 

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Financial Frenemies – what you need to know.

Friendship Day marks the celebration of the relationship we’ve shared with our friends, old and new. It’s a journey we cherish and hope to continue for a lifetime. Just as we trust these long lasting friendships to have our backs when we need them the most, there’s another critical aspect of our lives that we need to give a lot of thought to – our money management. Savings and investments are not habits that come naturally to everyone. These are lessons we learn along the way as we grow up, start earning and are told to take care of our finances. Yes, it’s for the very same reason that we make friends for – to have something of our own and more so, enough of it to fall back on when the need arises.

If you are new to financial planning and don’t understand how to invest, what to invest in and other related queries, it’s best to consult a financial planning advisor who can guide you well with this. While family members are advisors for life, it’s helpful to seek guidance from an expert who can provide clarity to you in your journey. Amongst the plethora of investment options available in the market, it’s important to know which ones suit you the most and invest accordingly. There are various choices which may seem very obvious or the most recommended however, it’s important to do your research and understand if they are really worth investing or consider other avenues.

It’s easy to fall prey to plans or people who promise high returns with low risks. While such plans do exist, they may not necessarily be real or lucrative offers in the first place. Speak Asia and Stock Guru are two such examples of dubious schemes in 2011 and 2012 respectively, wherein very high returns aka promising to double in a span of 6 months, proved to be a red flag in itself. Ankur Sachdeva from Delhi invested Rs. 11.6 lakhs in Stock Guru in 2012. He was initially skeptical and invested Rs. 2 lakhs in the scheme. When he received Rs. 40,000 back in the first month, he invested Rs. 10 lakhs more to never have got back anything in return. A very basic principle to bear in mind while investing in any scheme is to check if it has been verified by some regulatory authority such as SEBI. Reading the fine print is cumbersome in most cases so make sure to have a lot of questions for your advisor. Anything or anyone promising unbelievable returns in a short duration should ideally not be trusted. Anything that is too good to be true is never true.

Life insurance is another vehicle which is mistaken for investment because of its triple benefits of a cover for life, long term savings and tax benefits. Endowment plans are the most traditional and very often considered to be the safest forms of investments. However, these policies not only give sub-optimal returns of 4-6%, but also force the policyholder into a multi-year commitment. While there is a way out, which is to surrender the policy if you have paid the premiums for a minimum number of years, you are sure to face a loss when you do so. These investments not only prevent investing in other lucrative avenues but also don’t give returns which do justice to such long term commitments. Not to forget, very long lock-in periods which means that you could end up investing for as long as 20-30 years where the interest is only accumulated, not compounded.

As an investor, it’s also very important to be cautious of falling prey to trading. The thrill is a given with quick high returns that trading gives however, very often most of the investors have no idea of what business the company is in or why is it that the price of a stock is going up or down. Let us look at a simple scenario. Say for example Mr. A believes that the price of Stock X is likely to go up by 10% today and hence he buys at Rs. 100. X indeed rises to Rs. 110 and Mr. A sells it off to Mr. B who also buys it with a belief that the price will rise further. X further rises to Rs. 118 and Mr. B sells it off to Mr. C. Obviously, Mr. C also wants to make money and believes that the upward movement will continue. He therefore sells it off to Mr. D at Rs. 128. This continues till that moment when the cycle breaks. The last man standing ends up making a loss. As stated above, in this cycle, there is a high probability that none of the players have any idea why the price is behaving the way it is and even the fact that someone will eventually pay a price in anticipation of the price rising further. Trading is a risky activity and is under no circumstances a medium of creating wealth. While a lot of people have made money with trading, there is no guarantee that you will be one of them.

While there are several such financial frenemies out there that can misguide investors, it’s best to start with professional help and take things in your hands in a couple of years of learning the ropes. Our expert advice is to first identify your financial goals, investment horizon and risk appetite to know how, where and how much to invest. Mutual funds are a great way to start with through SIP as they can always be tailored to your needs whether, short, mid or long term. Having a mixed portfolio also ensures that not all your eggs are put in the same basket. After all, there is no greater wealth in this world than peace of mind. So, befriend the savings habit and trust us with all your financial planning needs. Wishing you all a happy & financially prudent friendship day!

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Do health insurance plans cover maternity expenses?

Maternity health insurance

“Maternity Plans” are not really separate plans. It is a feature which may be covered under normal health plans. However, only a few health plans offer maternity cover as part of their normal health plans.

Key features of maternity cover are as follows:

  • There is usually a separate waiting period for maternity coverage – This means that any claims with respect to maternity will be catered to only after the maternity specific waiting period is over
  • Almost all plans have an upper cap on the amount of expenses that will be covered – Usually the coverage ranges from INR 25000 – 50000 per delivery. The reason most policies have an upper cap is because the number of claims for maternity is likely to be very high. The purpose of Health Insurance is to protect you from any sudden outflow of funds due to a medical emergency. The occurrence of maternity is almost certain and hence a limit on the same is warranted
  • Pre – maternity costs are generally not covered – Most plans which offer maternity coverage generally do not cover any expenses that are incurred towards consultancies and tests
  • New born coverage – Generally, the new born baby is covered till the end of policy year

Should you buy a health plan only because it provides maternity coverage?

Maternity should ideally be treated as a bonus option. The overall decision behind buying a health plan should ideally be the key features which are relevant for any kind of hospitalization. Imagine a plan providing good maternity coverage but having a claim settlement ratio of 70%. Therefore, choosing a plan just because it provides maternity coverage may not be the best decision to take.

However, in case you have a choice between two equally good plans with one of them providing maternity coverage with or without some extra premium, then it might make sense to take the plan with the maternity clause. Especially, if you are planning a kid in next few years.

Want to discuss more on maternity plans? Write to us on contact@cagrfunds.com.

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