http://economictimes.indiatimes.com/Personal_Finance/Insurance/Insurance_news/UTI_may_stop_Ulip_sale_after_cos_agree_to_keep_MFs_out/articleshow/3495777.cms

Unit linked insurance plans (ULIPs) are today being sold both by life insurance companies as well as mutual funds. ULIPs offer insurance and investment in one product as compared to general products sold by mutual funds that offers only the investment avenue.

At mutual funds, these policies are being sold by agents who do not have the license to sell insurance. This leads to miss-selling as they lack in the product knowledge on insurance, as they haven’t passed the required IRDA exam. (Asset management company folk have to pass the AMFI exam, not the IRDA one). So, the Life Insurance Council has opposed mutual fund companies selling ULIPs. The group selling of ULIP and mutual funds is going against life insurance companies’ business.

The protest by the Life Insurance Council against this practice will protect customer interest and will help the life insurance companies in respect of product development.

Here is a story about Islamic organizations terming health insurance policies as illegal and issuing a fatwa asking Muslims to keep away from them.

http://economictimes.indiatimes.com/Personal_Finance/Insurance/Health_Insuarance_illegal_Islamic_body/articleshow/2930737.cms

This has raised a doubt in my mind as to how Islam cannot allow taking health insurance. I have a valid reason. At the time of Holy Prophet (s.aw.s) whenever there was any war, soldiers used to cover themselves with armor to protect them. In my opinion the Holy Prophet (s.a.w.s) has shown that one has the right to protect one self against any uncertain event. No matter that the ultimate protection lies in God’s hands.

In the same vein, whether your health cover will help you or not is ultimately in God’s hands; but it IS your responsibility to make sure that you are adequately protected.

The point I want to make is, please provide proper daleel (proof) why it has been declared illegal so that if I am wrong I may correct myself. If possible, quote Quranic ayat and tradition or precedent supporting it.

The Consumer Unity & Trust society (CUTS) has failed in convincing the Reserve Bank of India to pull down credit card interest rates.
(http://economictimes.indiatimes.com/ET_Debates/Cap_credit_card_interest_rates/articleshow/3473126.cms)

You would think that the CUTS would get some sense knocked into its stubborn head after repeated failures. After all, it has been at this for over five years. And even it they are fighting the good fight on our (the credit card consumers) behalf, the complaints are not going to go away. Neither are the problems. Whether interest rates go down or not, we ARE paying those interest amounts, month after month.

And let’s face it, no amount of sound logic is going to convince any of us who are inveterate spenders to slow down and maybe, you know,..spend less.

So, this will be just an exercise in questionable logic.

Do you wonder why when you just have Rs. 10000 to spend in a month, you end up spending twice that? How is that even possible?

Today is your lucky day.

Your income defines your shopping budget. Let say your monthly income is Rs. 25000; after expenses, let’s say you have Rs. 10000 free and clear. This is spending money, folks! Here comes the catch - Your shopping budget is actually twice that Rs. 10000! How? You know you can back Rs. 10000 worth of shopping on your credit card with this spending money. But when you are swiping that card, you know that you have a fifty day grace period before you gotta pay it back with interest. Guess what, your next pay will come in by then and with it comes another Rs. 10000 of spending money. So you are simply spending that money right now. Neat, eh?

Now, how do you do this smartly, so that you don’t default or end up paying exorbitant interest on all this?

Let’s say your credit card statement comes on the 5th of every month, and the due date of payment is the 25th of that month. Now, if you buy something on the 6th of the month, that purchase is listed only in next month’s statement. Which means, provided you pay up by every due date, you can blow the spending money of this month as well as the next month AND pay zero interest on the amount swiped on the card.

You are welcome.

Is the person who has overextended credit a candidate for sympathy if he means well? He wants to pay back the outstanding amounts against his multiple credit cards, but what if he has just been fired from his job and cannot make his multiple credit card payments? Do you castigate him, telling him that he made the bed, he must lie in it? If that is so, does your lack of sympathy extend beyond the fact that recovery agents came to his house when he wasn’t at home and threatened his wife and child?

If you are the sympathetic kind (especially if you also have been in a similar jam) would you:

1. Tell the man that recovery agents are not allowed use force on borrowers or speak indecently to him or his family?
2. Tell the man that if he doesn’t want to speak to the recovery agent, the agent has to respect his wishes and withdraw?
3. Point out to him the RBI stipulation that “The bank and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the debtors’ family members, referees, and friends, making threatening and anonymous calls or making false and misleading representations.“?
4. Point him to the Banking Ombudsman site www.bankingombudsman.rbi.org.in where he can lodge a complaint?
5. Point out to him that his best option would be pay off the entire amount. And then give him tips on how to do it - apply for a loan against property, stocks, insurance policy, or jewelry? But that he should try his best not to go for a settlement?
6. That there are credit counseling agencies, such as ICICI bank’s Disha, that exist for the very purpose of helping people like him?
7. All of the above
8. None of the above

Here are some credit counseling agencies:

• Abhay (Bank of India), 61 A, Sadanand, 1st Floor, Above Bank of India Branch, Gokhale Road (north), Dadar (West), Mumbai- 4000 028. Call 022-24221843.
• Disha (ICICI Bank), Prince Apartments, Ground Floor, Karani Lane, Ghatkopar (West), Mumbai 4000 028. Call 65971815/86/87. Visit www.dishfc.org
• Union Mitra (Union Bank of India), Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai- 400021. Call 022-22896502.

Answers:
Correct answer - Option 7
Incorrect answer - Any other option or combination of options
So incorrect that it scares me! - Option 8

http://economictimes.indiatimes.com/Personal_Finance/Insurance/ Life_cos_say_cover_sale_by_MFs_affect_distribution_infrastructure/rssarticleshow/3405002.cms
The above story is about life insurance companies expressing concern on sale of insurance cover by mutual funds.

The insurance industry is strongly opposing this move. Life Insurance Council chief executive SB Mathur said: “Insurance companies are spending hundreds of crores on training agents to sell insurance. If mutual fund distributors are allowed to sell insurance without adequate training, the sanctity of the training would be lost.”

Mr SB Mathur’s self-righteous indignation is pathetic as well as misleading.

Even after spending hundreds of crores on product training, insurance agents are not selling the insurance products in the right spirit. Today unit-linked plans (ULIP) are the hottest product in the market. The reason is not because it is the best. It is one of the most miss-sold products in the market due to the high commissions offered to agents who sell ULIPs. Many cases have been found out were people go to banks to buy mutual funds and end up taking a ULIP Plan in the name of mutual funds. Insurance products are not marketed; they are sold.

Do you know that largest number of complaints registered with Banking Ombudsman is of credit cards?

According to the Reserve Bank of India (RBI) Annual Report, the number of complaints in the year 2006-2007 increased by 22% from the year 2005-06. In 2005-06 the number of complaints received were 31,732 which increased to 38,638 in 2006 -07 mainly due to rise in credit card complaints.

The nature of complaints ranged from levying of late payment fee, levying of excessive charges and issuing of unsolicited credit cards etc.

Do you think that only banks are responsible for the rise in number of complaints? Certainly not; we as card holders are equally responsible for it.

We as credit card holders are not even aware of different terms used by credit card issuers and how the charges are calculated still remains a mystery. You need to read to understand the terms and conditions thoroughly but calculation of interest on your credit card and how it is levied is most important factor which you need to learn on priority.

This will empower you to know that how much you need to pay actually. . If you learn this, it will help you immensely as you will know not only the right amount but also the right payment procedure which is not quite practical otherwise.

In credit card terms, interest rate is known as extended credits or revolving interest rate.

Revolving interest is charged to the card holder when he/she fails to pay the entire due amount on the card before the due date.

Look at the example below to get an idea how the interest rate is calculated:

X made purchases on his credit card - a TV for Rs. 10,000 on 01 March 08 and jewelry worth Rs. 5000 on 10th March 08 - both at an interest rate of 3.2% per month. The table below highlights how the interest rate is calculated on these purchases:

This table above explains that interest rates are calculated on daily basis on balance outstanding from transaction date. That means if you don’t pay your entire due amount before the due date interest gets calculated from the very day till the due date. The unpaid amount is also levied interest from the due date till the next billing date - that is for 10 days as per the above table. Now the question arises that on what basis/formula the above interest rates are taken into consideration, the days are calculated.

Here it is:

Outstanding amount x Annual interest rate x No. of days/365

Interesting point here - interest rate is applicable only when you do not pay the entire due before the due date.

Benefits of knowing the interest calculation:

• You may realize that you are paying more than you spend.
• You may avoid unnecessary purchase.
• You may plan your finance better.
• You may pay your due on time or at least before the due date.

Start organizing your money …… NOW!!!!

We are all familiar with the words “Money Attracts Money.” Let me relate a small incident in reference to the statement. There was a small boy working with a businessperson. He once overhead a conversation where his boss mentioned the above statement. The boy was very excited. The day he got his salary, he chose a five hundred rupee note, slipped it into the boss’s locker and pulled it out. The same note came out. Nothing more, nothing less. He tried for the second time, but the same result. The third time he tried, his note was stuck into the locker. The boss meanwhile was observing this entire scene unknown to the boy. As soon as the boy knew, he had been caught, he was very apologetic, and explained that he was only checking out the statement and now realized that it did not hold true. To this, his boss explained that it indeed was true, because, BIG MONEY, PULLS SMALL MONEY. His (the boss’s) big money had attracted the small money into the locker. Therefore, the question now arises- how does one create this BIG MONEY.

People can be broadly classified into three categories:

• Those that EARN and SAVE
• Those that EARN and CONSUME ALL
• Those that EARN and TAKE ON LIABILITIES TO CONSUME MORE THAN THEY EARN

While the going is good, no one wants to visualize or worry about the future, or rather, one can say, one does not want to think that the good times will ever end. The third category of the people is the ones in the most dangerous situation. One feels, that lifestyles have improved, economy has improved, but is it really so? It is most probably, we are spending today, what we would have earned over a period of 10-20 years. We are earning and clearing liabilities. Moreover, liabilities are taken but no insurance to cover the liabilities. THE QUESTION ONE NEEDS TO ASK HERE IS NOT ‘Who will clear the liability IF you die or are permanently disabled?’ This is a very important question but a glaring one that should be corrected. The ‘IF’ in the question should be ‘WHEN’. The ‘IF’ is majorly used as an excuse, for putting off the commitment towards buying a life cover, towards saving. Procrastination becomes a habit. How does one then save, for the future? For retirement? For the big money?

Retirement being the period when there will be no EARNINGS, but 365 days and many more of EXPENSES. Has one made a conscious effort to save for this golden period? Only money saved today and invested will grow and attract more money that can be used for this golden period of life. In fact, life insurance policies are sold, more for retirement provision than life insurance cover. Not that they provide one with inflation-adjusted returns, but they ensure that one is committed to saving a fixed amount every year to reach the target. No other instrument ensures compulsory saving. Surveys reveal that no one has ever consciously saved in a bank for 20 years at a continuous stretch!

Contradictory it may sound, but life insurance and retirement planning go hand in hand. The best thing to save for RETIREMENT is SELF RESPECT and the best way to SAVE is through LIFE INSURANCE. Investment planning is the tool that enables one to achieve one’s various financial goals including retirement. With each passing day, personal finances grow more complex, and with each passing day, an individual has less time to develop a personal financial plan. Therefore, the only way to do is to allow a Certified Financial Planner to handle it. It is only

Beware! Where is the market headed towards? No one can predict anything.

In such a scenario, What about my planning? Some people say, keep your insurance and investments separate. I do not agree with them. There are plans available today, like with Max New York Life, you have the “Life Invest” plan.

A wonderful plan that takes care of you from childhood to your age of 75 years. The first year deductions are nominal and very minimal in the following years. There are persistency units available from 9th year onwards and every 3 yrs from then on. This recovers all the first year as well as following year deductions. Actually, if you stay invested for a long tenure, your policy works deduction free.

A higher sum assured is recommended for younger age group, specially professionals, wherein the ideal payment term would be 10 years. From age 60 onwards, it can work like a retirement plan as well, till the age of 75. Thereafter, lump sum money is available to be utilized for the rest of your life.

When young, serves the purpose of insurance, giving high cover and later works as a retirement plan for old age. In between withdrawals are also possible even before age 60 is attained. So, take a look at this one before taking any decisions!!!!

Even with the falling markets of today, the NAV is around 21and about three years the fund is about to complete I.e. from NAV 10 to 21 today! Keep in mind the current market scenario!!!!

In my last article I had mentioned that there are several methods, or styles, to investing profitably in the equity markets.

Let me start with suggesting that you, the potential investor, spend some time analysing your investments. If one were to assume that your money is indeed “hard earned”, would it not be unfortunate if is easily lost?

Most professional advisors compare their performance to benchmarks, which are indices. For example, if a fund generated returns of 20%, while its benchmark’s returns were 15%, this “outperformance” of the index by 5% is called an ‘Alpha’. This is a good measure to evaluate fund performance, provided the benchmark is reliable. If reliable, it would be a good measure to evaluate even personal portfolios returns.

The BSE Sensitivity Index of 30 shares is the most popular Indian stock market index. If one were to track this over 5 year periods, starting in 1992 (this is the year of the infamous Harshad Mehta boom, which is a relevant beginning simply because this is the first time there was retail participation in the capital markets), we would find that pre-2003 (the start of the latest boom), the index returned less than bank FDs. Even if we go from 1992 to the current date, the index returns are disappointing. This should indicate that equities are a poor long term investment, but are actually among the best options!

In fact, a well diversified portfolio, built over time and given a few years, at reasonable valuations (PE of close to 10, certainly lower than the Sensex’s long term average of 14 times) will outperform the benchmark or almost any other investment. The great Warren Buffet, however, considers that “wide diversification is only required when investors do not understand what they are doing”. If you know, and you need to know, why you make an investment, you should also have guts to invest plenty in it. Again, quoting Mr. Buffet, “Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful.””

Diversification or concentration of portfolios can be achieved through investments in mutual funds. Concentration is through sectoral or thematic funds. Concentration is good only if you are an expert and can time your entry and, more importantly, your exits. Avoid being carried away by the noise. Most fund managers consider themselves to be God’s Greatest Gift to Investments (GGGI) in a bull market. However, when they crash with the markets they are quick to point to outperformance, if any, on the index, i.e. “The index has fallen 30%, but I have been brilliant and have lost only 25% of your money”. I have not met any investor who hands out money to be lost, whatever the market conditions. My advice is to ignore the froth from the fund managers, or brokers. If you are convinced the market is cheap, put in all your money. In an uncertain market do an SIP. But when the market seems overvalued sell. (By the way, have you ever heard a fund manager advice you to sell, or redeem your units in a bull market?) A crash always follows a euphoric bubble. Cash is supreme in bad times. It is a good feeling, and also very profitable to buy when the market is down 70%!!

Is this a good time to invest? Yes and no. An important lesson from Joseph Kennedy, almost a century old, is to sell when the shoe-shine boy gives stock tips. I believe this is true today. When the taxi driver is thrilled to take you to the share bazaar and asks for stock tips en route, the stranger at the party gives you sure shot stock bets and the daily newspaper has headlines of the local housewives club betting their grocery money on stocks – GET OUT. This is the best signal to sell your shares.

And buying? This would be when that party animal with best buys stops partying, the Big Bull has jumped off the 13th Floor and there is a funereal feeling at Dalal Street. Buy when the mention of a good company has people grit their teeth and give you dirty looks. And, of course, the index has a low, mouth watering PE!

One of my own gurus told me never to confuse the market with stocks. “The market is irrelevant”, he said, “buy the right stocks and you will always make money.” If you have his stock picking skills, which I do not, this article is not for you. If you are one of the simple folk, hoping to beat inflation and make a little money on your savings, the market at over 18 PE all this week (18.80 on Nifty on September 4, 2008) remains expensive. Look then for gems that might become multi-baggers.

Otherwise hang on to your precious cash. A better day to buy will dawn, when PEs are closer to 10 than 20. Get into SIP mode then. Market corrections can be both deep and long. Losing opportunity (interest cost of your money) is about as unfortunate as losing capital.

Naveen Fernandes is a Certified Financial Planner and Vice-president, Orbis Financial Corporation Ltd, Mumbai. Orbis Financial is a SEBI-approved custodian.

Tax is the most terrifying word for one who needs to pay it. There are many provisions in the IT act by which you can plan and minimize your taxes. One of the provisions through which one can reduce tax liability is by taking deductible from gross income to the maximum limit of Rs.100000 under Section 80C of the Income Tax Act. This can done by investing into life insurance policies, PPF, equity-linked saving schemes etc.

So where to invest to get deduction under Section 80C?

Let’s look at some basics and then we would be in a position to compare them:

An Endowment Policy is a traditional policy which has a risk cover policy for a specified period. At the end of the policy tenure the maturity benefit is paid off. The maturity benefit in this regards is the sum assured and the bonus accumulated during the term of the policy.

A term policy as the name suggests covers the risk for the particular term selected. It is the cheapest of all the life insurance policy, as it is the purest form of insurance the premium collected will not include any investment element in to it.

Public provident fund (PPF) there is a lock in period of 15 years with a minimum amount of Rs.500 and maximum of Rs.70,000 to be invested every year. PPF earns 8.00% p.a.

Equity linked savings schemes (ELSS) are basically a tax saving tool; which safeguards an investor from the short term volatility of the market. As it has a lock–in–period of 3 years. It is a high risk, high return investment. The asset allocation of an ELSS would ideally be 90–98% equity exposure and the balance may be in money market or government security. This makes an.

In an endowment policy the liquidity is blocked for the tenure of the policy and you miss out on the opportunity of booming economic conditions. One more negative which is associated with the endowment policy is that the bonus which is declared in the financial year is not compounded and investor is paid only the actual amount of bonus received in the subsequent financial year at the time of maturity. In case you surrender your policy you get a surrender value after paying a certain surrender charges for it.

On the other hand if you purchase a term policy along with a PPF or a term policy along with ELSS you will get a better return on your investment as compared to an endowment policy.

Let us understand with an example. If you take an endowment policy with a sum assured of say Rs.10 lakhs for tenure of 20 years. The annual premium payable would be Rs.47,000. If you buy a simple term life insurance policy for the same sum assured i.e. Rs.10 lakhs for 20 years the annual premium payable would be Rs.2920. The balance of the premium i.e.Rs.44,080 (47,000 - 2920) if invested yearly in PPF for 20 years at 8%p.a. the accumulated amount would be Rs.20,17,187. In other case if you invest the difference of the premium i.e. Rs.44,080 on a yearly basis in ELSS which gives you a compounded annualized growth rate of 12.00% p.a. the accumulated amount would be Rs.31,76,072.

A risk-averse investor should look in for a term insurance along with a PPF option. A risk-liking investor should look in for a term insurance along with an ELSS option since ELSS is more aggressive - its inclination is mainly into equity investments which yield better returns in a longer tenure, beating inflation.