Vinod Desai's Blog, page 3

Economists Have Predicted a Recession For Each Year The Last 10 Years

With 2019 coming to an end, and talks of recession in 2020, I wanted to bring forward something for purely an educational purpose. This is especially relevant for beginners and also for those who try to time the market.

The fact is, Economists have predicted a recession for each year, since the last 10 years.

Here’s a look at 10 years of ‘Recession is coming warnings



[image error]

2010

[image error]

2011

[image error]

2012

[image error]

2013

[image error]

2014

[image error]

2015

[image error]

2016

[image error]

2017

[image error]

2018

[image error]

2019

But what actually happened in these 10 years?



US witnessed one of the best bull runs in its history since World War II, with an astounding 468% gain for the S&P 500.India’s own SENSEX shot up by around 350%.







But here’s where the predictions get worse

Absolutely no economist saw the 2007-2008 financial crisis coming.

Housing crisis in the US set in around June 2006. The first trigger of the crisis came sometime around May of 2007. The markets started to crash by September 2007.

If you try and look for predictions before June 2006 of the financial crisis just around the corner, you’ll find none.

The first public prediction came from Nouriel Roubini, an economics professor, in August 2006. You can read that article here. But by then the housing crisis had already set in. And as the article also says, absolutely no other economist agreed with him.

Here’s a quote from the article.

While many economists share Roubini’s concerns about imbalances in the global economy and in the U.S. housing sector, he stands nearly alone in predicting a recession next year.

– August 2006

There are several articles about Raghuram Rajan having predicted the crisis. But he merely argued that a disaster “might loom”. This was in a paper in 2005. But considering how its possible to find a warning of a recession for any year, its indeed possible for someone to be right sometime.

So what’s the takeaway?

Absolutely no one can predict a market recession.

The only time economists and financial pundits have all the answers, is after an event has already occurred.

There are plenty of articles online about Yield Curve Inversion being a good predictor, but even that has been wrong twice.

How do you invest when there’s always a ‘recession is coming’ warning?

There will always be noise. And indeed a market correction or a slowdown can start anytime. So stick to the basics. Here’s a simple checklist.

Any money which is dear to you in the next five years should be in a debt product. Even the humble FD is fine for that. When it comes to equity investing, always diversify. Stick to Mutual Funds. (Only Direct Mutual Funds. And if you don’t believe in Fund Managers, take up Index Fund investing.)Don’t stop your SIPs. If the markets do correct, or if a full blown financial recession does occur, an SIP will bear even better results in the long run. Always stay well insured. Pick up a term life insurance policy and a good health insurance policy.

There are zero guarantees in equity investing in the short term. But over a long run, equities always provide inflation beating returns. Take a look at the chart in this post to see a comparison of past returns from various asset classes.

Happy Moneyplanting.

Vinod

The post Economists Have Predicted a Recession For Each Year The Last 10 Years appeared first on The Moneyplanting Program on Employee Financial Wellness | Vinod Desai.

A Recession is Coming. Every Year Since The Past 10 Years.

With 2019 coming to an end, and talks of recession in 2020, I wanted to bring forward something for purely an educational purpose. This is especially relevant for beginners and also for those who try to time the market.

The fact is, Economists have predicted a recession for each year, since the last 10 years.

HERE’S A LOOK AT 10 Years of ‘RECESSION IS COMING’ warnings[image error]

2010

[image error]

2011

[image error]

2012

[image error]

2013

[image error]

2014

[image error]

2015

[image error]

2016

[image error]

2017

[image error]

2018

[image error]

2019

But what actually happened in thEse 10 years?

US witnessed one of the best bull runs in its history since World War II, with an astounding 468% gain for the S&P 500.

BUT HERE’S WHERE these predictions GET WORSE

Absolutely no economist saw the 2007-2008 financial crisis coming.

Housing crisis in the US set in around June 2006.The first trigger of the financial crisis came sometime around May of 2007.The markets continued to go up until September 2007.

If you try and look for predictions before June 2006 of the financial crisis just around the corner, you’ll find none.

The first public prediction came from Nouriel Roubini, an economics professor, in August 2006. You can read that article here. But by then the housing crisis had already set in. And as the article also says, absolutely no other economist agreed with him.

Here’s a quote from the article.

While many economists share Roubini’s concerns about imbalances in the global economy and in the U.S. housing sector, he stands nearly alone in predicting a recession next year.

There are several articles about Raghuram Rajan having predicted the crisis. But he merely argued that a disaster “might loom”. This was in a paper in 2005. But considering how its possible to find a warning of a recession for any year, its indeed possible for someone to be right sometime.

SO WHAT’S THE TAKEAWAY?

Absolutely no one can predict a market recession.

The only time economists and financial pundits have all the answers, is after an event has already occurred.

There are plenty of articles online about Yield Curve Inversion being a good predictor, but even that has been wrong twice.

HOW DO YOU INVEST WHEN THERE’S ALWAYS A ‘RECESSION IS COMING’ WARNING?

There will always be noise. And indeed a market correction or a slowdown can start anytime. So stick to the basics. Here’s a simple checklist.

Any money which is dear to you in the next five years should be in a debt product. Even the humble FD is fine for that.When it comes to equity investing, always diversify. Stick to Mutual Funds. (Only Direct Mutual Funds. And if you don’t believe in Fund Managers, take up Index Fund investing.)Don’t stop your SIPs. If the markets do correct, or if a full blown financial recession does occur, an SIP will bear even better results in the long run.Always stay well insured. Pick up a term life insurance policy and a good health insurance policy.

There are zero guarantees in equity investing in the short term. But over a long run, equities always provide inflation beating returns. Take a look at the chart in this post to see a comparison of past returns from various asset classes.

Keen on understanding finances better?[image error]

Try this book. It teaches everything that every individual needs to know about investing and essential finances. Don’t let the lack of reviews deter you. It was only launched last month. But it’s the successor to my older and now outdated, but highly rated book – Grownups Are Just Kids With Money.

Happy Moneyplanting.

Vinod

The post A Recession is Coming. Every Year Since The Past 10 Years. appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

Review of Scripbox, Review of FundsIndia. Why Free isn’t Free

This isn’t a review of Scripbox or a review of FundsIndia alone. But about every such mutual fund distribution platform out there. There are several. The problem with all such platforms, is three fold.

These platforms are middlemen of sorts. Distributors in other words. And they get a cut of your wealth when you invest through them. This is in the form of commissions.Most users of these mutual fund investing websites don’t realize the presence of such commissions. And almost no users are aware of how these seemingly small commissions severely affect wealth in the long term.

So here’s a simple F.A.Q.

I’ve written it keeping beginners in mind. Feel free to skip the questions you think you already know the answers of.

What are commissions? And why the fuss?

Commissions are what are paid to a salesman upon a sale. It’s usually a percentage of the sale. It’s a kickback of sorts. Every industry has commissions. Without commissions, no one would have the incentive to to sell anything aggressively.

Since commissions are usually paid as a percentage, the more a salesman sells, the more he/she makes.

So what’s the problem with middlemen being paid commissions?

Sellers become greedy. And they often resort to mis-selling. And some spread mis-information.

If I’m a salesmen who has 3 products to sell, I’ll obviously try and sell the product which gives me the biggest commission; even if the product isn’t right for you. That’s clearly a conflict of interest right?

Let’s break that down.

If I’m a salesmen of Product A, which gives me pays me higher commissions than Product B, I’ll try my best to not educate you about Product B. Similarly, if there is a Product C which pays me no commissions at all, I’ll try my best to never ever educate you about Product C, irrespective of how great it is for you. Because selling it to you does nothing for me. If you specifically insist on Product C, I’ll simply mention all the downsides of Product C, with the hope that you decide against it.

In the far chance that I do declare that I make commissions on my sales, I’ll tell you that the commission is a very very small percentage. I’ll make it seem negligible, inconsequential.

‘It’s less than 1%!’

‘It’s just 1.2%. At max.’

These commissions only appear small. Because you’ll be surprised to know how much wealth they eat away.

Review of Scripbox; Review of FundsIndia (Contd.)



Do financial products have commissions as well?

Of course. Financial products especially are riddled with commissions. Harvard business school even did a study of the rampant mis-selling which happens in Indian financial space. A lot of highly educated Indians fall for mis-selling every year.

The problem of commissions is especially damaging when it comes to investing. Because it’s your hard earned wealth working for someone else, without your being aware.

So there are commissions in mutual funds too?

Yep. Why do you suppose a lot of such mutual fund websites allow you to use their services for free? They earn more in commissions, than what you’d ever be willing to pay them.

But nothing comes for free. If something’s free, it’s just wise for you to be suspicious of it.

But yes, mutual funds have commissions as well.

In FY 2018-19, mutual fund middlemen (distributors/advisors) made a jaw dropping 8500 Crores in commissions. The problem of commissions in mutual funds has become so bad, that in an unprecedented move last year, SEBI, went to the extent of warning mutual fund companies about the excessive commissions being paid to distributors. If you haven’t heard of SEBI, it’s a regulatory body which looks after investor’s interests.







So is there a direct, no-commission way to invest in mutual funds?

Yes. Since 2013. Every mutual fund has a direct, commission-free variant. It’s called a Direct plan of mutual fund, or Direct mutual fund for short. It invests in exactly the same way. But it gives you much higher returns.

As a matter of fact, Direct funds far outperform their Regular counterparts year after year. And it just makes sense that you earn more from them, because mutual fund companies don’t have to pay commissions to middlemen on Direct plans.

Review of Scripbox; Review of FundsIndia (Contd.)



How do I know if my mutual fund investing site is working on commissions?

It’s mandatory for the industry to disclose commissions being paid to distributors. So, AMFI discloses these commissions every year.

Here’s a link to the list. If you find your financial advisor, financial educator or investing platform on that list, he she or it is certainly a middleman. Bear in mind that many of them could be registered with a name which is different from their brand name. But you’ll be able to find that information on their website.

I get it. But Scripbox and Fundsindia tell me it’s a very small percentage. So does it really matter?

Fair question.

Let’s look at the difference in 5 year returns of a Direct fund and a Regular(commission-based) fund, for some of the current equity mutual funds.

[image error]

You can look these return numbers yourself online. All data is taken from VR.

Now assume you were investing 15,000/- every month for 15 years. Here’s the difference those small percentages would’ve made in each of those funds.

[image error]

Pay attention to the last column in the table.

Those small percentages seem small still?

Now, I know of several individuals who invest more than 1Lac per month via SIPs into mutual funds. The amount of wealth lost to commissions for such individuals can easily run into crores.

Review of Scripbox; Review of FundsIndia (Contd.)



But Scripbox and Fundsindia and other such sites help pick mutual funds. How can I know that information otherwise?

For one,

Blindly going by such recommendation is a bad idea anyway. Why? Because without learning the fundamentals of equity and mutual funds, there’s a chance any recommendation could take you completely by surprise. No mutual fund consistently performs the best. Several fall from grace, several rise from the depths each year. An investment recommendation based on past returns of a fund doesn’t really work. Why? Equities just don’t behave that way. They will always be unpredictable. Most recommendation algorithms work on past performance data. And past performance provides no guarantees of future performance.

Secondly,

It is now easier than ever to find a mutual fund which suits your goals. For example, a visit to ValueResearch and Morningstar is all it takes to see the top performing funds in any category. Click here to see how easy it is to do that.There are plenty of direct mutual fund sites which also provide such recommendations. Kuvera, Unovest, ETMoney, Zerodha Coin and others not only allow you to invest in direct mutual funds, but also provide such recommendations. All AMC’s native websites, and a consortium led portal like MFUOnline let you invest in Direct funds for free. And they’ll always be free.

Considering all this, how does it make sense to give away so much of your wealth to middlemen?

Losing such huge amounts of wealth, for a skill you can learn relatively easily, makes no sense at all. These platforms might scare you stating that DIY investing is bad, but that doesn’t mean the unpredictability of equities goes away if you do otherwise. You’ll have to learn about the fundamentals anyway.

If you want to learn the skill, you can pick up a good book on investing, or attend a workshop. Just ensure its not run by a middleman. And the easiest way to do that, is to check if they also educate about direct mutual funds and other commission-free products.

Review of Scripbox; Review of FundsIndia (Contd.)







The final take: Review of Scripbox, Review of FundsIndia



Should you use them to invest?

Closing remarks: Review of Scripbox, review of FundsIndia – and how much you lose by using them

The truth is that if you’d like your money to work for you, you need to wean yourself off commission-based products, and move to commission-free products. Even among mutual funds there are products like index funds and ETFs which reduce your overheads even more – but that topic’s for another day.

You’re first step is to realize the impact of commissions. Because the amount of wealth you could lose to them, is non-trivial. So spend a couple of months getting a good understanding of equities and mutual funds. Eventually, you’ll be able to pick and chose the right mutual funds yourself.

[ Get posts like these delivered to your inbox once a week. No ads. Ever. ]

Attend a live program and understand finances better



[image error]

The Moneyplanting Program is conducted as a corporate training program and is available through your employer.

Check with your HR for upcoming scheduled sessions.

Happy Moneyplanting.

The post Review of Scripbox, Review of FundsIndia. Why Free isn’t Free appeared first on The Moneyplanting Program on Employee Financial Wellness | Vinod Desai.

Review of Scripbox, Review of FundsIndia -And Why Free is Expensive

This isn’t a review of Scripbox or a review of FundsIndia alone. But about every such mutual fund distribution platform out there. There are several. The problem with all such platforms, is three fold.

These platforms are middlemen of sorts. Distributors in other words. And they get a cut of your wealth when you invest through them. This is in the form of commissions.Most users of these mutual fund investing websites don’t realize the presence of such commissions. And almost no users are aware of how these seemingly small commissions severely affect wealth in the long term.

So here’s a simple F.A.Q.

I’ve written it keeping beginners in mind. Feel free to skip the questions you think you already know the answers of.

What are commissions? And why the fuss?

Commissions are what are paid to a salesman upon a sale. It’s usually a percentage of the sale. It’s a kickback of sorts. Every industry has commissions. Without commissions, no one would have the incentive to to sell anything aggressively.

Since commissions are usually paid as a percentage, the more a salesman sells, the more he/she makes.

So what’s the problem with middlemen being paid commissions?

Sellers become greedy. And they often resort to mis-selling. And some spread mis-information.

If I’m a salesmen who has 3 products to sell, I’ll obviously try and sell the product which gives me the biggest commission; even if the product isn’t right for you. That’s clearly a conflict of interest right?

Let’s break that down.

If I’m a salesmen of Product A, which gives me pays me higher commissions than Product B, I’ll try my best to not educate you about Product B. Similarly, if there is a Product C which pays me no commissions at all, I’ll try my best to never ever educate you about Product C, irrespective of how great it is for you. Because selling it to you does nothing for me. If you specifically insist on Product C, I’ll simply mention all the downsides of Product C, with the hope that you decide against it.

In the far chance that I do declare that I make commissions on my sales, I’ll tell you that the commission is a very very small percentage. I’ll make it seem negligible, inconsequential.

‘It’s less than 1%!’

‘It’s just 1.2%. At max.’

These commissions only appear small. Because you’ll be surprised to know how much wealth they eat away.

Review of Scripbox; Review of FundsIndia (Contd.)



Do financial products have commissions as well?

Of course. Financial products especially are riddled with commissions. Harvard business school even did a study of the rampant mis-selling which happens in Indian financial space. A lot of highly educated Indians fall for mis-selling every year.

The problem of commissions is especially damaging when it comes to investing. Because it’s your hard earned wealth working for someone else, without your being aware.

So there are commissions in mutual funds too?

Yep. Why do you suppose a lot of such mutual fund websites allow you to use their services for free? They earn more in commissions, than what you’d ever be willing to pay them.

But nothing comes for free. If something’s free, it’s just wise for you to be suspicious of it.

But yes, mutual funds have commissions as well.

In FY 2018-19, mutual fund middlemen (distributors/advisors) made a jaw dropping 8500 Crores in commissions. The problem of commissions in mutual funds has become so bad, that in an unprecedented move last year, SEBI, went to the extent of warning mutual fund companies about the excessive commissions being paid to distributors. If you haven’t heard of SEBI, it’s a regulatory body which looks after investor’s interests.







So is there a direct, no-commission way to invest in mutual funds?

Yes. Since 2013. Every mutual fund has a direct, commission-free variant. It’s called a Direct plan of mutual fund, or Direct mutual fund for short. It invests in exactly the same way. But it gives you much higher returns.

As a matter of fact, Direct funds far outperform their Regular counterparts year after year. And it just makes sense that you earn more from them, because mutual fund companies don’t have to pay commissions to middlemen on Direct plans.

Review of Scripbox; Review of FundsIndia (Contd.)



How do I know if my mutual fund investing site is working on commissions?

It’s mandatory for the industry to disclose commissions being paid to distributors. So, AMFI discloses these commissions every year.

Here’s a link to the list. If you find your financial advisor, financial educator or investing platform on that list, he she or it is certainly a middleman. Bear in mind that many of them could be registered with a name which is different from their brand name. But you’ll be able to find that information on their website.

I get it. But Scripbox and Fundsindia tell me it’s a very small percentage. So does it really matter?

Fair question.

Let’s look at the difference in 5 year returns of a Direct fund and a Regular(commission-based) fund, for some of the current equity mutual funds.

[image error]

You can look these return numbers yourself online. All data is taken from VR.

Now assume you were investing 15,000/- every month for 15 years. Here’s the difference those small percentages would’ve made in each of those funds.

[image error]

Pay attention to the last column in the table.

Those small percentages seem small still?

Now, I know of several individuals who invest more than 1Lac per month via SIPs into mutual funds. The amount of wealth lost to commissions for such individuals can easily run into crores.

Review of Scripbox; Review of FundsIndia (Contd.)



But Scripbox and Fundsindia and other such sites help pick mutual funds. How can I know that information otherwise?

For one,

Blindly going by such recommendation is a bad idea anyway. Why? Because without learning the fundamentals of equity and mutual funds, there’s a chance any recommendation could take you completely by surprise. No mutual fund consistently performs the best. Several fall from grace, several rise from the depths each year. An investment recommendation based on past returns of a fund doesn’t really work. Why? Equities just don’t behave that way. They will always be unpredictable. Most recommendation algorithms work on past performance data. And past performance provides no guarantees of future performance.

Secondly,

It is now easier than ever to find a mutual fund which suits your goals. For example, a visit to ValueResearch and Morningstar is all it takes to see the top performing funds in any category. Click here to see how easy it is to do that.There are plenty of direct mutual fund sites which also provide such recommendations. Kuvera, Unovest, ETMoney, Zerodha Coin and others not only allow you to invest in direct mutual funds, but also provide such recommendations. All AMC’s native websites, and a consortium led portal like MFUOnline let you invest in Direct funds for free. And they’ll always be free.

Considering all this, how does it make sense to give away so much of your wealth to middlemen?

Losing such huge amounts of wealth, for a skill you can learn relatively easily, makes no sense at all. These platforms might scare you stating that DIY investing is bad, but that doesn’t mean the unpredictability of equities goes away if you do otherwise. You’ll have to learn about the fundamentals anyway.

If you want to learn the skill, you can pick up a good book on investing, or attend a workshop. Just ensure its not run by a middleman. And the easiest way to do that, is to check if they also educate about direct mutual funds and other commission-free products.

Review of Scripbox; Review of FundsIndia (Contd.)







The final take: Review of Scripbox, Review of FundsIndia



Should you use them to invest?

Closing remarks: Review of Scripbox, review of FundsIndia – and how much you lose by using them

The truth is that if you’d like your money to work for you, you need to wean yourself off commission-based products, and move to commission-free products. Even among mutual funds there are products like index funds and ETFs which reduce your overheads even more – but that topic’s for another day.

You’re first step is to realize the impact of commissions. Because the amount of wealth you could lose to them, is non-trivial. So spend a couple of months getting a good understanding of equities and mutual funds. Eventually, you’ll be able to pick and chose the right mutual funds yourself.

Understand finances better



[image error]

The Moneyplanting Program teaches everything that every adult needs to know about investing. It is conducted as a corporate training program. Check with your HR regarding upcoming sessions.

Happy Moneyplanting.

The post Review of Scripbox, Review of FundsIndia -And Why Free is Expensive appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

Review of Scripbox, review of FundsIndia – and how much you lose by using them

Strictly speaking, this isn’t a review of Scripbox or a review of FundsIndia alone. But about every such mutual fund distribution platform out there. There are several. The problem with all such platforms, is three fold.

These platforms are middlemen of sorts. Distributors in other words. And they get a cut of your wealth when you invest through them. This is in the form of commissions.Most users of these mutual fund investing websites don’t realize the presence of such commissions.And almost no users are aware of how these seemingly small commissions severely affect wealth in the long term.

So here’s a simple F.A.Q.

I’ve written it keeping beginners in mind. Feel free to skip the questions you think you already know the answers of.

WHAT are commissions? and why the fuss?

Commissions are what are paid to a salesman upon a sale. It’s usually a percentage of the sale. It’s a kickback of sorts. Every industry has commissions. Without commissions, no one would have the incentive to to sell anything aggressively.

Since commissions are usually paid as a percentage, the more a salesman sells, the more he/she makes.

So what’s the problem with middlemen being paid commissions?

Sellers become greedy. And they often resort to mis-selling. And some spread mis-information.

If I’m a salesmen who has 3 products to sell, I’ll obviously try and sell the product which gives me the biggest commission; even if the product isn’t right for you. That’s clearly a conflict of interest right?

Let’s break that down.

If I’m a salesmen of Product A, which gives me pays me higher commissions than Product B, I’ll try my best to not educate you about Product B.Similarly, if there is a Product C which pays me no commissions at all, I’ll try my best to never ever educate you about Product C, irrespective of how great it is for you. Because selling it to you does nothing for me.If you specifically insist on Product C, I’ll simply mention all the downsides of Product C, with the hope that you decide against it.

In the far chance that I do declare that I make commissions on my sales, I’ll tell you that the commission is a very very small percentage. I’ll make it seem negligible, inconsequential.

‘It’s less than 1%!’

‘It’s just 1.2%. At max.’

These commissions only appear small. Because you’ll be surprised to know how much wealth they eat away.

Review of Scripbox; Review of FundsIndia (Contd.)Do financial products have commissions as well?

Of course. Financial products especially are riddled with commissions. Harvard business school even did a study of the rampant mis-selling which happens in Indian financial space. A lot of highly educated Indians fall for mis-selling every year.

The problem of commissions is especially damaging when it comes to investing. Because it’s your hard earned wealth working for someone else, without your being aware.

So there are commissions in mutual funds too?

Yep. Why do you suppose a lot of such mutual fund websites allow you to use their services for free? They earn more in commissions, than what you’d ever be willing to pay them.

But nothing comes for free. If something’s free, it’s just wise for you to be suspicious of it.

But yes, mutual funds have commissions as well.

In FY 2018-19, mutual fund middlemen (distributors/advisors) made a jaw dropping 8500 Crores in commissions.The problem of commissions in mutual funds has become so bad, that in an unprecedented move last year, SEBI, went to the extent of warning mutual fund companies about the excessive commissions being paid to distributors. If you haven’t heard of SEBI, it’s a regulatory body which looks after investor’s interests.So is there a DIRECT, NO-commission way to invest in mutual funds?

Yes. Since 2013. Every mutual fund has a direct, commission-free variant. It’s called a Direct plan of mutual fund, or Direct mutual fund for short. It invests in exactly the same way. But it gives you much higher returns.

As a matter of fact, Direct funds far outperform their Regular counterparts year after year. And it just makes sense that you earn more from them, because mutual fund companies don’t have to pay commissions to middlemen on Direct plans.

Review of Scripbox; Review of FundsIndia (Contd.)How do I know if my mutual fund investing website is working on commissions?

It’s mandatory for the industry to disclose commissions being paid to distributors. So, AMFI discloses these commissions every year.

Here’s a link to the list. If you find your financial advisor, financial educator or investing platform on that list, he she or it is certainly a middleman. Bear in mind that many of them could be registered with a name which is different from their brand name. But you’ll be able to find that information on their website.

I get it. But SCRIPBOX AND FUNDSINDIA tell me it’s a very small percentage. So does it really matter?

Fair question.

Let’s look at the difference in 5 year returns of a Direct fund and a Regular(commission-based) fund, for some of the current equity mutual funds.

[image error]

You can look these return numbers yourself online. All data is taken from VR.

Now assume you were investing 15,000/- every month for 15 years. Here’s the difference those small percentages would’ve made in each of those funds.

[image error]

Pay attention to the last column in the table.

Those small percentages seem small still?

Now, I know of several individuals who invest more than 50,000 per month via SIPs into mutual funds. The amount of wealth lost to commissions for such individuals can easily run into crores.

Review of Scripbox; Review of FundsIndia (Contd.)But Scripbox and FUNDSINDIA AND other such sites help pick mutual funds. How can i know that information otherwise?

For one,

Blindly going by such recommendation is a bad idea anyway. Why? Because without learning the fundamentals of equity and mutual funds, there’s a chance any recommendation could take you completely by surprise.No mutual fund consistently performs the best. Several fall from grace, several rise from the depths each year.An investment recommendation based on past returns of a fund doesn’t really work. Why? Equities just don’t behave that way. They will always be unpredictable. Most recommendation algorithms work on past performance data. And past performance provides no guarantees of future performance.

Secondly,

It is now easier than ever to find a mutual fund which suits your goals. For example, a quick visit to ValueResearch is all it takes to see the top performing funds in any category. Click here to see how easy it is to do that.There are plenty of direct fund investment platforms which also provide such recommendations. Kuvera, Unovest, ETMoney, Zerodha Coin and others not only allow you to invest in direct mutual funds, but also provide such recommendations.All AMC’s native websites, and a consortium led portal like MFUOnline let you invest in Direct funds for free. And they’ll always be free.

Considering all this, how does it make sense to give away so much of your wealth to middlemen?

Losing such huge amounts of wealth, for a skill you can learn relatively easily, makes no sense at all. These platforms might scare you stating that DIY investing is bad, but that doesn’t mean the unpredictability of equities goes away if you do otherwise. You’ll have to learn about the fundamentals anyway.

If you want to learn the skill, you can pick up a good book on investing, or attend a workshop. Just make sure its not run by a middleman. And the easiest way to do that, is to check if they also educate about direct mutual funds.

Review of Scripbox; Review of FundsIndia (Contd.)The final takeReview of Scripbox, Review of FundsIndia: Should you use them to invest?

Closing remarks: Review of Scripbox, review of FundsIndia – and how much you lose by using them

The plain truth is that if you’d like your money to work for you, you need to wean yourself off commission-based products, and move to commission-free products. Even among mutual funds there are products like index funds and ETFs which reduce your overheads even more – but that topic’s for another day.

You’re first step is to realize the impact of commissions. Because the amount of wealth you could lose to them, is non-trivial. So spend a couple of months getting a good understanding of equities and mutual funds. Eventually, you’ll be able to pick and chose the right mutual funds yourself.

Happy Moneyplanting.

The post Review of Scripbox, review of FundsIndia – and how much you lose by using them appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

Investing in a ULIP? Avoid them at all costs

Skinny: This post is for those who plan to invest in a ULIP. Even if you haven’t come across someone selling you a ULIP, I’d recommend reading along. The post assumes that you’re familiar with some basic financial terminology. If not, try picking up a copy of this book here.

WHAT IS A ULIP?

A ULIP is an insurance+investment product. They were designed from the get go to strip wealth off of hard-working individuals. In case of senior citizens, they were also used as an effective way to siphon away their life’s savings.

I’m not being too harsh.

Take a look at these headlines. They’re all about ULIPS.

ULIPS were widely marketed, heavily missold, and their complicated structure meant that agents could easily bury clients in a sea of jargon, numbers and timeframes.

There were only one set of folks for who ULIPS created tremendous wealth — to the one’s selling it. This group includes insurance agents, bank’s relationship managers, financial advisors and insurance companies.

WHY THIS POST NOW?

One of the program attendees mentioned having invested in a ULIP a year ago. She was also missold stating:

That a ULIP is exactly like a mutual fund.But it was better, because it also provided an insurance cover. And that she wasn’t paying premiums but SIP installments.

Calling ULIP premiums as SIPs, and stating that ULIPs are exactly like mutual funds, is clearly one of the newer misselling tricks which agents are employing. But that comes as no surprise since ULIPS were always, always mis-sold.

A quick google search of the phrase ‘ULIP mis-selling’ will show these results.

[image error]







WHAT IS A ULIP ANYWAY?

ULIP is an abbreviation for ‘Unit Linked Insurance Policy‘.

Let’s break that phrase down.

Why the words ‘Unit Linked’?

Because unlike a traditional life insurance policy, where you are assured a certain percentage of return (typically around 4-6%), in ULIPS you are allotted units which are market-linked. The growth of your investment depends on the growth of these units. These units are linked to Equity or Debt.

What happens when you invest in a ULIP?

Technically, you get both an insurance cover, and an investment return, in a single product which can also help you save taxes. This 3 for 1 combo might sound like a good thing. But it isn’t.

When it comes to investing or financial planning, insurance and investment should never be mixed. This statement is true for any investment+insurance product; not just ULIPS. That includes a myriad of other investment+insurance products with different names.

Whole life insurance plansPension plansMoneyback plansChildren’s plansWomen’s plansEndowment plans

The industry comes up with new and creative ways year after year to sell these terrible products.

INVESTING IN A ULIP MAKES NO SENSE

Because when you mix your insurance and investment needs, you get the worst of both worlds.

This has been stated plenty of times both in the book and in the program.

INSTEAD OF INVESTING IN A ULIP

You’ll get better results if you Invest a portion of it to buy a term insurance life policy. Because that would provide a far higher insurance cover than a ULIP. A ULIP typical provides around 10 times of your annual premium as insurance cover. So for a policy where you’re investing 50,000/- a year, you get an insurance cover of a measly 5,00,000/-.

Is 5,00,000/- enough for your dependents to live comfortably for a decade? Absolutely not. But that is what a life insurance cover is supposed to do. It’s supposed to provide a financial cushion to let your family get things back in order.

Your life insurance cover should be at least 10-20 times your annual income. And if you’re a 30 year individual in reasonable health, you can pick up a term insurance life cover of 1 Crore Rupees, for 8000/- to 10,000/- Rupees a year. (A year, yes)

Invest the rest via an SIP into an equity mutual fund. The remaining 40,000/- to 42,000/- can then be invested into a multi-cap fund, via an SIP. Because that will provide far higher growth than a ULIP. And in you don’t want to expose all of it to equities, you could pick an equity-aggressive fund instead.

Here’s a slide from the program. It assumes a conservative return from a multi-cap fund over a 5 year period.

[image error]







MORE REASONS WHY YOU SHOULDN’T INVEST IN A ULIP



1. The lack of flexibility

Your money in open-ended mutual funds is never locked up(unless in the case of tax-saving mutual funds). But most ULIPS lock your money up for 5 whole years. There are absolutely no withdrawals allowed during these initial years.

Mutual funds on the other hand allow complete flexibility. If a fund from one AMC goes on to perform poorly in comparison to its peers for several years, you can switch to another fund, from another AMC.

2. The myriad charges

ULIPS still have a massive list of fees and charges. Besides the premium allocation charge which could be as high as 6% in the first year. If you do a quick search of ULIP charges you’ll see at least 8 to 11 different kind of fees which are levied.

A ULIP agent will tell you a myriad of options that you could exercise – that you could top-up insurance, change investing strategy, surrender, withdraw, change premium payment frequency etc. But most of those can’t be done for free.

Because of all these charges, the amount of money that actually ends up working for you – is often lesser than what you are investing. The rest works for the middlemen – the insurance agents and the distributors. These middlemen continue to speak positively about ULIPs and often write about them in news paper articles. They after all, have a lot to gain from selling them.

3. The lack of transparency

The transparency in mutual funds in shockingly high. You can find out a fund’s performance history since its launch, changes in its fund management, a list of the stocks and papers a fund invests in, changes in its stock and asset portfolio etc.

Most ULIPS on other hand provide very little or no transparency. Every ULIP product is different from another, and any attempt to compare two policies is an exercise in vain.

4. ULIPS are complicated AF

ULIPS certainly aren’t simple products which are easy to understand. They’re far more complicated than what a term insurance and mutual fund can ever be. Nothing is straightforward and every action is accompanied by charges, or timeline constraints.

Most folks end up committing and investing in a ULIP, because they expect a financial product to be complicated. The truth however is that all the good financial instruments, are shockingly simple.

A recent ULIP advertises itself as ‘Non-Participating, individual, regular & limited premium Unit-Linked endowment plan’ and provide 8 different types of investing strategies.

Do they expect someone who knows little about finances to understand that? Of course they don’t. That’s what makes it easier to sell them. There’s plenty of jargon, and plenty of conditions on every option available to confuse even an otherwise keen individual.

WHAT CAN YOU DO IF YOU HAVE ALREADY INVESTED IN A ULIP?

Since you’re reading this blog, I am going to assume that you’re keen to learn about finances, and if not now, you’ll soon know enough about mutual funds and other critical financial fundamentals.

In which case, I can safely say that if you are investing for the long term, you are better off exiting the policy as soon as possible. You may have to bear losses by doing so, and its likely that what you’ll end up getting an amount lesser than what you’ve put in.

But doing so will at least ensure your future investments go towards highly efficient products like term life insurance policies and mutual funds. You’ll end up having a better insurance cover, your money will be able to grow at a better rate, and you’ll have better flexibility to invest based on your needs and goals.

The cost of not exiting a ULIP, is that you’ll continue to put your money in a sub-par, commission-loaded product for several more years – may be even decades.

HOW CAN YOU GO ABOUT EXITING YOUR ULIP?



If you’ve just started to invest in a ULIP

All policies are mandated to provide a free-look period. This is usually about 15 to 30 days. Within this timeframe, you can cancel your ULIP and recover whatever’s been paid.

If you’re beyond the free-look period

I can right away guarantee that this won’t be easy. Your agent will try and convince you to continue the policy in every which way possible. Because when you don’t pay premiums, he/she stands to lose a lot. This problem often becomes much more difficult to handle when you’ve been sold the policy by a friend or a distant member.

Once you’ve overcome that, you may have to study your ULIP offer document in painful detail, call their customer service helpline several times, and may even have to visit their office in person. You’ll basically need to look for the least damaging way to exit the policy. You’ll either surrender it, or convert it to a ‘paid up’ policy.

Bear in mind again that all of this assumes that you’ll soon pick up a term life insurance policy and go on to invest in well rated mutual funds. Value Research is a good place to start that search.

HELP THOSE WHO MIGHT INVEST IN A ULIP

The folks who typically invest in a ULIP are also typically prime targets of high-commission product peddling insurance agents. These are:

Folks who’ve just started earning (since they’ll invest in anything which will help them save taxes), & Senior citizens and elders (because its far too easy to get them to trust you).

So the best thing you could do today is send a link to this post to anyone in your circles who could be susceptible. Share it on your feed, and you’ll do a lot more good. Whatever the way, please warn them. You can help dozens, if not hundreds from making similarly grave financial mistakes.

[ Get posts like these delivered to your inbox. No ads. Ever. ]

Until the next time.

Vinod

The post Investing in a ULIP? Avoid them at all costs appeared first on The Moneyplanting Program on Employee Financial Wellness | Vinod Desai.

ULIP and other insurance+return products should be avoided at all costs

Even if you haven’t invested in a ULIP, I’d recommend reading along. The post assumes that you’re familiar with basic financial terminology. If not, order a copy of the book Smart Money Moves. It teaches a lifetime of valuable learning, for the price of a bad pizza meal. It’s the follow up to the highly rated Grownups Are Just Kids With Money.

If you’re not big on reading, you can attend the upcoming live edition of The Moneyplanting Program.

What is a ULIP?

A ULIP is an insurance+investment products. They were designed from the get go to strip wealth off of hard-working individuals. In case of senior citizens, they were also used as an effective way to siphon away their life’s savings.

I’m not being too harsh.

Take a look at these headlines. They’re all about ULIPS.

[image error][image error][image error][image error][image error]

ULIPS were widely marketed, heavily mis-sold, and their complicated structure meant that agents could easily bury clients in a sea of jargon, numbers and timeframes.

There were only one set of folks for who ULIPS created tremendous wealth. The one’s selling it. This group includes insurance agents, bank’s relationship managers, financial advisors and insurance companies.

So why this post now?

One of the program attendees mentioned having signed up for a ULIP a year ago. She was also mis-sold stating.

That a ULIP is exactly like a mutual fund.But it was better, because it also provided an insurance cover. And that she wasn’t paying premiums but SIP installments.

Calling ULIP premiums as SIPs, and stating that ULIPs are exactly like mutual funds, is clearly one of the newer mis-selling tricks which agents are employing. But that comes as no surprise since ULIPS were always, always mis-sold.

A quick google search of the phrase ULIP mis-selling will show these results.

[image error]



What’s a ULIP anyway?

It’s an abbreviation for ‘Unit Linked Insurance Policy‘. Let’s break that phrase down.

Why the words Unit Linked?

Because unlike a traditional life insurance policy, where you are assured a certain percentage of return (typically around 4-6%), in ULIPS you are allotted units which are market-linked. The growth of your investment depends on the growth of these units. These units are linked to Equity or Debt.

What does A ULIP provide?

It provides a mix of both insurance and investment.

That might sound like a good thing(You’re getting both in the same product after all). But it isn’t.

When it comes to investing or financial planning, insurance and investment should never be mixed. This statement is true for any investment+insurance product; not just ULIPS. That includes a myriad of other investment+insurance products with different names.

Whole life insurance plansPension plansMoneyback plansChildren’s plansWomen’s plansEndowment plans

The industry comes up with new and creative ways year after year to sell these terrible products.

Investing in them makes no sense

Because when you mix your insurance and investment needs, you get the worst of both worlds.

– everybody who knows about finances

This has been stated plenty of times both in the book and in the program.

Instead of investing in a ULIP, you’ll get better results if you:

Invest a portion of it to buy a term insurance life policy. Because that would provide a far higher insurance cover than a ULIP. A ULIP typical provides around 10 times of your annual premium as insurance cover. So for a policy where you’re investing 50,000/- a year, you get an insurance cover of a measly 5,00,000/-.

Is 5,00,000/- enough for your dependents to live comfortably for a decade? Absolutely not. But that is what a life insurance cover is supposed to do. It’s supposed to provide a financial cushion to let your family get things back in order.

Your life insurance cover should be at least 10-20 times your annual income. And if you’re a 30 year individual in reasonable health, you can pick up a term insurance life cover of 1 Crore Rupees, for 8000/- to 10,000/- Rupees a year. (A year, yes)

Invest the rest via an SIP into an equity mutual fund. The remaining 40,000/- to 42,000/- can then be invested into a multi-cap fund, via an SIP. Because that will provide far higher growth than a ULIP. And in you don’t want to expose all of it to equities, you could pick an equity-aggressive fund instead.

Here’s a slide from the program. It assumes a conservative return from a multi-cap fund over a 5 year period.

[image error]



What else is wrong with ULIPS?



The lack of flexibility

Your money in open-ended mutual funds is never locked up(unless in the case of tax-saving mutual funds). But most ULIPS lock your money up for 5 whole years. There are absolutely no withdrawals allowed during these initial years.

Mutual funds on the other hand allow complete flexibility. If a fund from one AMC goes on to perform poorly in comparison to its peers for several years, you can switch to another fund, from another AMC.

The charges

ULIPS still have a massive list of fees and charges. Besides the premium allocation charge which could be as high as 6% in the first year. If you do a quick search of ULIP charges you’ll see at least 8 to 11 different kind of fees which are levied. The ones who continue to speak positively about ULIPs, are either the ones who’ve created the product or are the ones selling it. And they have a lot to gain from selling.

A ULIP agent will tell you a myriad of options that you could exercise – that you could top-up insurance, change investing strategy, surrender, withdraw, change premium payment frequency etc. But most of those can’t be done for free.

Because of all these charges, the amount of money that actually ends up working for you – is often lesser than what you are investing. The rest works for the middlemen – the insurance agents and the distributors.

The lack of transparency

The transparency in mutual funds in shockingly high. You can find out a fund’s performance history since its launch, changes in its fund management, a list of the stocks an equity fund invests in, changes in its stock and asset portfolio etc.

Most ULIPS on other hand provide very little or no transparency. Every ULIP product is different from another, and any attempt to compare two policies is an exercise in vain.

ULIPS are complicated AF

It isn’t that ULIPS are simple products which are easy to understand. They’re far more complicated than what a term insurance and mutual fund can ever be. Nothing is straightforward and every action is accompanied by a fee, or a timeline constraint.

But people fall for them because they expect a financial product to be complicated. The truth however is that all the good financial instruments, are shockingly simple.

A recent ULIP advertises itself as ‘Non-Participating, individual, regular & limited premium Unit-Linked endowment plan’ and provide 8 different types of investing strategies.

Do they expect someone who knows little about finances to understand that? Of course they don’t. That’s what makes it easier to sell them. There’s plenty of jargon, and plenty of conditions on every option available to confuse even an otherwise keen individual.

What can you do if you’ve already invested in a ULIP?

Since you’re reading this blog, I am going to assume that you’re keen to learn about finances, and if not now, you’ll soon know enough about mutual funds and other critical financial fundamentals.

In which case, I can safely say that if you are investing for the long term, you are better off exiting the policy as soon as possible. You may have to bear losses by doing so, and its likely that what you’ll end up getting an amount lesser than what you’ve put in.

But doing so will at least ensure your future investments go towards highly efficient products like term life insurance policies and mutual funds. You’ll end up having a better insurance cover, your money will be able to grow at a better rate, and you’ll have better flexibility to invest based on your needs and goals.

The cost of not exiting a ULIP, is that you’ll continue to put your money in a sub-par, commission-loaded product for several more years – may be even decades.

How can you go about exiting your ULIP?



If you’ve just signed up for a ULIP

All policies are mandated to provide a free-look period. This is usually about 15 to 30 days. Within this timeframe, you can cancel your ULIP and recover whatever’s been paid.

If you’re beyond the free-look period

I can right away guarantee that this won’t be easy. Your agent will try and convince you to continue the policy in every which way possible. Because when you don’t pay premiums, he/she stands to lose a lot. You may have to study your ULIP offer document in painful detail, call their customer service helpline several times, and may even have to visit their office in person. You’ll basically need to look for the least damaging way to exit the policy. You’ll either surrender it, or convert it to a ‘paid up’ policy.

Bear in mind again that all of this assumes that you’ll soon pick up a term life insurance policy and go on to invest in well rated mutual funds. Value Research is a good place to start that search.

Here’s how you can do a good deed today.

The prime targets of high-commission product peddling insurance agents are young folks (since they’ll invest in anything which will help them save taxes), and elder parents and grandparents (because its far too easy to get them to trust you).

So the best thing you could do is send a link to this post to anyone in your circles who could be susceptible. Share it on your feed, and you’ll do a lot more good. You can help dozens, if not hundreds from making similarly grave financial mistakes.

Until the next time, Happy Moneyplanting.

P.S: I’ve started reading Haikus.

O snail
Climb Mount Fuji,
But slowly, slowly!

Kobayashi Isa

The post ULIP and other insurance+return products should be avoided at all costs appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

ULIP and other insurance+return products should be avoided at all costs. Their tax-benefits are only a bait.

Even if you haven’t invested in a ULIP, I’d recommend reading along. The post assumes that you’re familiar with basic financial terminology. If not, order a copy of the book Smart Money Moves. It teaches a lifetime of valuable learning, for the price of a bad pizza meal. It’s the follow up to the highly rated Grownups Are Just Kids With Money.

If you’re not big on reading, you can attend the upcoming live edition of The Moneyplanting Program.

What is a ULIP?

A ULIP is an insurance+investment products. They were designed from the get go to strip wealth off of hard-working individuals. In case of senior citizens, they were also used as an effective way to siphon away their life’s savings.

I’m not being too harsh.

Take a look at these headlines. They’re all about ULIPS.

[image error][image error][image error][image error][image error]

ULIPS were widely marketed, heavily mis-sold, and their complicated structure meant that agents could easily bury clients in a sea of jargon, numbers and timeframes.

There were only one set of folks for who ULIPS created tremendous wealth. The one’s selling it. This group includes insurance agents, bank’s relationship managers, financial advisors and insurance companies.

So why this post now?

One of the program attendees mentioned having signed up for a ULIP a year ago. She was also mis-sold stating.

That a ULIP is exactly like a mutual fund.But it was better, because it also provided an insurance cover.And that she wasn’t paying premiums but SIP installments.

Calling ULIP premiums as SIPs, and stating that ULIPs are exactly like mutual funds, is clearly one of the newer mis-selling tricks which agents are employing. But that comes as no surprise since ULIPS were always, always mis-sold.

A quick google search of the phrase ULIP mis-selling will show these results.

[image error]What’s a ULIP ANYWAY?

It’s an abbreviation for ‘Unit Linked Insurance Policy‘. Let’s break that phrase down.

Why the words Unit Linked?

Because unlike a traditional life insurance policy, where you are assured a certain percentage of return (typically around 4-6%), in ULIPS you are allotted units which are market-linked. The growth of your investment depends on the growth of these units. These units are linked to Equity or Debt.

What does A ULIP provide?

It provides a mix of both insurance and investment.

That might sound like a good thing(You’re getting both in the same product after all). But it isn’t.

When it comes to investing or financial planning, insurance and investment should never be mixed. This statement is true for any investment+insurance product; not just ULIPS. That includes a myriad of other investment+insurance products with different names.

Whole life insurance plansPension plansMoneyback plansChildren’s plansWomen’s plansEndowment plans

The industry comes up with new and creative ways year after year to sell these terrible products.

Investing in them makes no sense

Because when you mix your insurance and investment needs, you get the worst of both worlds.

– everybody who knows about finances

This has been stated plenty of times both in the book and in the program.

Instead of investing in a ULIP, you’ll get better results if YOu:

Invest a portion of it to buy a term insurance life policy. Because that would provide a far higher insurance cover than a ULIP. A ULIP typical provides around 10 times of your annual premium as insurance cover. So for a policy where you’re investing 50,000/- a year, you get an insurance cover of a measly 5,00,000/-.

Is 5,00,000/- enough for your dependents to live comfortably for a decade? Absolutely not. But that is what a life insurance cover is supposed to do. It’s supposed to provide a financial cushion to let your family get things back in order.

Your life insurance cover should be at least 10-20 times your annual income. And if you’re a 30 year individual in reasonable health, you can pick up a term insurance life cover of 1 Crore Rupees, for 8000/- to 10,000/- Rupees a year. (A year, yes)

Invest the rest via an SIP into an equity mutual fund. The remaining 40,000/- to 42,000/- can then be invested into a multi-cap fund, via an SIP. Because that will provide far higher growth than a ULIP. And in you don’t want to expose all of it to equities, you could pick an equity-aggressive fund instead.

Here’s a slide from the program. It assumes a conservative return from a multi-cap fund over a 5 year period.

[image error]What else is wrong with ULIPS?The lack of flexibility

Your money in open-ended mutual funds is never locked up(unless in the case of tax-saving mutual funds). But most ULIPS lock your money up for 5 whole years. There are absolutely no withdrawals allowed during these initial years.

Mutual funds on the other hand allow complete flexibility. If a fund from one AMC goes on to perform poorly in comparison to its peers for several years, you can switch to another fund, from another AMC.

The charges

ULIPS still have a massive list of fees and charges. Besides the premium allocation charge which could be as high as 6% in the first year, this post on Policybazaar lists 11 different kind of fees which are levied. This is no way a recommendation of Policybazaar and its articles. They are also insurance middlemen and have a lot to gain from selling products.

A ULIP agent will tell you a myriad of options that you could exercise – that you could top-up insurance, change investing strategy, surrender, withdraw, change premium payment frequency etc. But most of those can’t be done for free.

Because of all these charges, the amount of money that actually ends up working for you – is often lesser than what you are investing. The rest works for the middlemen – the insurance agents and the distributors.

The lack of transparency

The transparency in mutual funds in shockingly high. You can find out a fund’s performance history since its launch, changes in its fund management, a list of the stocks an equity fund invests in, changes in its stock and asset portfolio etc.

Most ULIPS on other hand provide very little or no transparency. Every ULIP product is different from another, and any attempt to compare two policies is an exercise in vain.

ULIPS are complicated AF

It isn’t that ULIPS are simple products which are easy to understand. They’re far more complicated than what a term insurance and mutual fund can ever be. Nothing is straightforward and every action is accompanied by a fee, or a timeline constraint.

But people fall for them because they expect a financial product to be complicated. The truth however is that all the good financial instruments, are shockingly simple.

A recent ULIP advertises itself as ‘Non-Participating, individual, regular & limited premium Unit-Linked endowment plan’ and provide 8 different types of investing strategies.

Do they expect someone who knows little about finances to understand that? Of course they don’t. That’s what makes it easier to sell them. There’s plenty of jargon, and plenty of conditions on every option available to confuse even an otherwise keen individual.

What can you do if you’ve already invested in A ULIP?

Since you’re reading this blog, I am going to assume that you’re keen to learn about finances, and if not now, you’ll soon know enough about mutual funds and other critical financial fundamentals.

In which case, I can safely say that if you are investing for the long term, you are better off exiting the policy as soon as possible. You may have to bear losses by doing so, and its likely that what you’ll end up getting an amount lesser than what you’ve put in.

But doing so will at least ensure your future investments go towards highly efficient products like term life insurance policies and mutual funds. You’ll end up having a better insurance cover, your money will be able to grow at a better rate, and you’ll have better flexibility to invest based on your needs and goals.

The cost of not exiting a ULIP, is that you’ll continue to put your money in a sub-par, commission-loaded product for several more years – may be even decades.

How can you go about exiting your ULIP?If you’ve just signed up for a ULIP

All policies are mandated to provide a free-look period. This is usually about 15 to 30 days. Within this timeframe, you can cancel your ULIP and recover whatever’s been paid.

If you’re beyond the free-look period

I can right away guarantee that this won’t be easy. Your agent will try and convince you to continue the policy in every which way possible. Because when you don’t pay premiums, he/she stands to lose a lot. You may have to study your ULIP offer document in painful detail, call their customer service helpline several times, and may even have to visit their office in person. You’ll basically need to look for the least damaging way to exit the policy. You’ll either surrender it, or convert it to a ‘paid up’ policy.

Bear in mind again that all of this assumes that you’ll soon pick up a term life insurance policy and go on to invest in well rated mutual funds. Value Research is a good place to start that search.

Here’s how you can do a good deed today.

The prime targets of high-commission product peddling insurance agents are young folks (since they’ll invest in anything which will help them save taxes), and elder parents and grandparents (because its far too easy to get them to trust you).

So the best thing you could do is send a link to this post to anyone in your circles who could be susceptible. Share it on your feed, and you’ll do a lot more good. You can help dozens, if not hundreds from making similarly grave financial mistakes.

Until the next time, Happy Moneyplanting.

P.S: I’ve started reading Haikus.

O snail
Climb Mount Fuji,
But slowly, slowly!

Kobayashi Isa

The post ULIP and other insurance+return products should be avoided at all costs. Their tax-benefits are only a bait. appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

The New Book on Financial Wellness, Launch Event And Youtube Videos

After almost a year of work, my third and latest book on financial wellness and money fundamentals is now out.

Great. What’s it called?

It’s titled ‘Smart Money Moves’.

Agreed. The name isn’t as creative as my previous works, but the team’s hoping the simple title will communicate the message better and make the book seem more approachable.

The book is published by Jaico Publishers from Mumbai – the same folks who are responsible for bringing out works like The Monk Who Sold His Ferrari, Chanakya and such.

why did A NEW book need to be written?

I could’ve just released the third edition of ‘Grownups Are Just Kids With Money’. So why start from scratch with a whole new title?

Because the last one wasn’t by Jaico Publishers. Jaico has phenomenal reach and a great distribution network. They can ensure the work reaches every nook and cranny of India. And for a topic as critical, and a book as unbiased, it was only fair that it reached a wider audience.

What’s different about this book?

Besides being up-to-date with the latest budgetary changes, it also includes some fringe topics which are useful to the readers – things like stock investing strategies, the dangers of MLMs and Pyramid schemes, ways to create a second source of income and so on.

Is this your best work yet?

Absolutely. I was rather proud of ‘Grownups Are Just Kids With Money’ when it came out. But this new book takes the cake. Because it truly is E.V.E.R.Y.T.H.I.N.G I wish I was taught about money when I had first started earning; in short end-to-end financial wellness in one single source.

This book will always stay updated and relevant. There are no plans to stop until it becomes a de-facto gift standard of sorts; something every parent gifts their children as soon as they get out of college.

when will the new book start shipping?

First copies will start shipping on October 2nd.

Where can I pre-order it?

Pre-orders are now open on Amazon.

[image error] Smart Money Moves – New Self-Help Book on Personal Finances by Author Vinod Desai – The Moneyplanting ProgramGO TO amazon IndiaDoes pre-ordering help?

You’ll just get the book early. But on the other side it helps the book a lot. It helps publishers plan logistics, and the book gets better rankings on Amazon. And that makes the book standout, which then helps it reach more people. So if you’d like to support my work do pre-order. As an author, I barely make 10% in royalties. So I have little incentive to sell you a copy. But on the other hand, every reader of the book stand a chance to gather a lifetime of valuable learning, for the prize of a pizza meal.

Will there be a book launch event?

No. We decided against it yesterday.

Most authors love having a book launch event. It’s a significant body of work after all; something which will live long after the author’s gone. So it’s fair to want one.

But launch events are just not that effective anymore. So we’ve decided that all marketing expenditure be instead routed to avenues that provide better RoI. Micro-influencer campaigns, Amazon ads, book giveaways, book reading clubs, libraries, corporate bulk order promotions and such.

I will however come down for a cup of coffee and book signing at a cafe in Bangalore around the end of October. If you’d like to drop in for a chat and get your copy signed, do come by.

I don’t like reading books. How can I still learn this skill?

You can look for an upcoming weekend program here.

REGISTER FOR THE EVENTI’d like to stay in touch about your work. what’s the best way to do that?

The best way is to sign up for alerts on my blog here. You can follow me on LinkedIn here, but I don’t post there often.

Is there a plan to create youtube videos on financial wellness?

Nope. Being social takes a lot of work. Being in front of camera, even more so. And I’m a semi-hermit of sorts. That is why book writing fits me well. It’s one of the most solitary activities I could’ve taken up.

I do however thoroughly enjoy teaching in small groups. There’s something extremely rewarding about it. And I also believe this topic cannot be taught in bits and pieces. This focussed teaching helps me make sure no one goes back without learning all the fundamentals of this life-critical skill.

This was a long Post. Don’t you think its time to end it?

Right you are lad. Off I go.

Happy Moneyplanting.

The post The New Book on Financial Wellness, Launch Event And Youtube Videos appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.

Why Term Insurance Is Such An Important Aspect of Financial Wellbeing

This post talks about the important role of life insurance – especially ‘term insurance’ policies in financial wellbeing. If you already have a term insurance cover, feel free to to skip the post

There’s been a spate of awfully early demises covered in the media lately. Perfectly healthy young men and women, barely in their 40s have succumbed to cardiac arrests, other to undiagnosed illnesses.

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Two close friends of mine, both in their mid-30s surprised me two weeks ago, when they both mentioned that they didn’t have a term life insurance cover.

One even went,

‘Why? Why do I need term insurance?’

My jaw dropped

They both have dependents. And their net-worth is certainly not high enough for them to not need life insurance. One among the two has an MBA from a prestigious college, and had recently signed up for a Demat account, since he wanted to dabble in stocks. The other often spoke about how he too was well-invested in mutual funds (and at one time in Bitcoins), and about how he had the basics of personal finances covered.

So for all these years, I never once suspected that they wouldn’t have life insurance cover. It’s the most fundamental must-have of financial planning after all.

The good news is that, after an animated discussion that night, both of them now have term life insurance on their mind, and are one step closer to getting their lives covered.

Untimely deaths and sudden demises, like the ones from the slideshow here, should help you understand how important it is to have life coverage. Things you’ve taken for granted, like the fact that you’ve assumed that you will wake up tomorrow, can shock your family and friends in painful ways. You’ll be gone, and will have little to worry of course. Your dependents will instead be left to deal with both an emotional and a financial aftermath. And the financial aftermath could’ve been easily prevented.

The possibility of a loss of life needs to be dealt with as much practicality, as life itself.

No doubt that a life insurance cover can’t reduce the emotional upheaval which comes with a such an event. But it can eliminate the financial distress, so your family can concentrate on picking up the pieces and getting life back to a state of normalcy.

But that isn’t the KeY point here.

The bigger point is that financials aside, in case you’ve been living in an extended period of misery, either due to having taken on mountains of financial liability purely due to social pressures, or due to a relationship gone irrevocably wrong, you need to take a moment and decide on a new course of action. Life can be too short for us to allow space for a prolonged, self-inflicted misery. And if it is in your hands to change things, you should.

You need to work towards becoming a happier, more content individual.

Based on how your life is currently, ask yourself as to what your thoughts would be, if you somehow found yourselves breathing your last breaths.

Would you say to yourself,

‘ I’ve lived a good life. I’ve been kind to those around me and they’ve been kind to me . I’ve been reasonably happy and content . And I’ve loved and been given plenty of it.‘

Or would you say,

‘ I wish I had the courage to change things. ‘

There is very little point in living stressfully, unhappily, for years and years on end; especially when the circumstances can be changed. So if there’s something within your means that you can change, make a plan and start working towards it with a strong intent. In due time, the universe will come together to make your intentions come true.

Because that is the way the universe is designed.

I realized I had paraphrased Paul Coelho. Here’s the original quote.

When you want something, all the universe conspires in helping you to achieve it.

Paul Coelho

Have a good day.

Vinod

P.S: Term insurances and other such important aspects get a lot of emphasis in both the book and the The Moneyplanting Program, which teaches critical aspects of financial health.

[image error][image error]To know when the next live session of the program is occurring, click here.To know more about employee financial wellness programs, click here.

The post Why Term Insurance Is Such An Important Aspect of Financial Wellbeing appeared first on The Moneyplanting Program on Financial Wellness | Vinod Desai.