Misselling or Misbuying – What’s your case ?

Misselling is a very common word used these days by everyone. It’s been projected in such a way for the last few years that people have started feeling all agents and companies are engaged in looting the public. But maybe there’s another angle to this and maybe we need think a bit & answer a big question – Is it misselling or misbuying?

  • “I was mis-sold a financial product”
  • “Agent made me buy this crap and now he is not agreeing to it”
  • “My trusted friend mis-sold me idiotic policy promising high returns”

What is Misbuying ?

The first question we need to ask is – How can some one sell you something if you do not want to buy it? Can anyone come to you and put a gun on your head and make you buy? If that happens, I think anyone is bound to agree that it was mis-selling. However, when someone buys a financial product without proper research; or without understanding what they are buying, I would say its more of “mis-buying”. By no means do I want to say that agents and companies are not at fault. If you have not understood the product and bought it, just because some one said some thing verbally or showed you some fancy chart, you need to question it first, inquire about it before buying it and understand the whole dynamics which govern the financial product.

Misselling – What about Investor’s trust ?

While its true that a customer has to do his own research and study, we cant say that companies and the product sellers are not at fault . What about “trust” from the customers who feel that companies will take care of trust part being into business, but most of the times, companies don’t accept the fault on their side by stressing on “Buyer’s Beware” points.

Misselling vs Misbuying

Seth Godin has a very crisp point to make on that.

“Buyer beware”

Really? Is that really the attitude you want your audience to take? That they should be wary of what you say and what you offer and what you promise?

How about “buyer trust”?

How do you deal with customer disappointment or buyer remorse? It’s the difference between “tough luck, you should have read the fine print” and “oh no! How can we help?” If people know you will always make it right, they will beware less and trust more. What do you have to do to create trust? How much would it cost and how often can you produce it?

Dr Kishan has made a very beautiful comment on this topic .

Dear Manish,

What I concluded after my and others’ experiences is that thieves dont come in the dark always. They are not always dressed in masks and armed with lock breakers etc. We can encounter thieves even in broad daylight dressed in finest of clothes with most charming smiles on their faces, so much so that even most intelligent people can fall prey to them.

We all lock our houses when we go out daily, because we dont know when the thieves may come. We all lock our cars when we park them, so as to protect from theft. These “locks” can be bought in the market for some price and applied on the doors.

But there are some other “locks” which can only be acquired by getting knowledge. This cannot be bought from market for some money. And getting this lock is a life long process which entails a lot of effort. This “LOCK” is required for protecting our hard earned money. Or else the charming and well dressed “thieves” shall rob us in broad daylight. This is KALYUG. And thus everyone will rob us if we are not cautious. We can very well say we were ignorant but it is our fault. Not locking a house and expecting there shall be no thieves is not the order of the day in today’s world.

Why dont we educate ourselves against this robbery

Reasons are many- lack of time, lack of access to knowledge, lack of knack of understanding the concepts of money, lack of interest etc. But I think spending some time and taking some effort to save our hard earned money is really required or else money will just slip like sand slips out of our hand.

What I feel strongly

There is no mis-selling, there is only MIS-BUYING. After all its ME who had put the signature on the application form I can blame nobody absolutely nobody for that signature.

Sorry if I sounded too harsh

Time Spent before and after making the decision

Nandish some makes an interesting comment on this, he says – People spend too much energy and time after buying the product , and not at the time of buying it .

If you see your past behavior – You might have spent very less time in buying a product and maximum time worrying and cribbing about the product later . However all you need to do is spend some more time at the time of buying and nothing later. All their life Indian investors take decisions on the basis of trust and relationships. They ignore their financial lives and how they deal with it, but at some point in time, we need to understand that world is changing, our country is changing and the whole dynamics of personal finance are changing. We now, need to take responsibility of what we are doing and make our own decisions.

What do you think about this concept of misbuying or misselling ? How much is it a fault of the buyer and how much of seller ?

Can your assets support your for next 30 yrs ? Download this Calculator and Find Out !

If you have Rs 50 lacs with you and you want to generate some consistent income for next many years, how many years you can generate income? Think about it! Put some very high level calculations in your mind and try to come up with some numbers! . Will it be able to generate a lac of monthly income for next 10 years or not? Will it be able to generate Rs 30,000 of inflation adjusted income every year for next 30 years or not? Will it be able to generate Rs 30,000 of income increasing at 5% each year for next 100 years or not?

Still wondering ? 

Lets discuss a very basic problem which many people face in financial life. A lot of people at times have a big lump sum amount like 20 lacs, 50 lacs or say a crore! Now they want to know how much income can be generated using that big amount which can be used by their family. This can happen in many situations like following

1. When a person wants to make sure that he wants some kind of passive income out of a big chunk of money

2. A person might have got retired and now he wants to create a pension for himself using the big amount of money he/she has saved

3.  A person wants to leave his job and because of uncertain future , he wants to utilize a big sum to generate a certain cash flow in future

4. You might want to find out how much of life insurance you should take so that your family can start getting monthly income by making a fixed deposit out of the money.

So lets take case of Rs 50 lacs ?

Coming back to our example – Let’s talk about Rs 50 lacs. How much monthly income can it generate? And for how many years? This will depend on three things.

  • How much inflation you are considering
  • How much return on the investment you are considering
  • How much monthly income your want to generate per month

Here are some of the permutations and combinations assuming different values for Inflation , Return on investment and monthly expenses needed and a corpus of Rs 50 lacs in hand.

How long the money will last

How to Calculate this ?

You can calculate this in many ways , but one of the ways you can do is by calculating it in excel sheet. We have this calculator on our upcoming Jagoinvestor Wealth Club product (our paid product) . You can download this calculator and play with different numbers and plan out for yourself.  The calculator shows the answer along with the graph of the wealth and how it grows or shrinks over the years.

Download the Calculator Now

Was the calculator helpful for you? What other kind of tools you would like to have and to what level ? You can start using this calculator and see what is your net worth and how much monthly income can you generate at this moment if you leave your job and in case you are not able to bring money to home due to some issue.

Worst 5 yr period in Stock markets – Are you happy with your Investments ?

Most of the people are worried about their Mutual funds, ULIPs and direct stocks returns. In the last 5 yrs, Stock Markets have been so bad that literally no mutual fund has given a good return in last 3-5 yrs , except few. I recently saw a reader asking this question

I have been going through SIP returns for last 5 years of some best recommended mutual funds and found that the returns were less than the Bank FD rates or at par… What is the use of investing in risky mutual funds if they cannot deliver returns better than Bank FDs in long run… I suppose they are high risk low return investments… please enlighten..

Your investment return is function of underlying Asset Class

A very simple, but not an easy thing is to digest that it’s not the investment product, which is doing bad, but the underlying asset class. Take the same example of mutual funds, ULIP or Index Funds. Its not the “fund”, but the stocks which they are invested in, that are doing badly. Stock markets in India have seen one of their worst 5 year periods (2007 – 2012). In my book “Jagoinvestor”, there’s one chapter on equity and debt, where I take last 30 yrs of history and show how in the long term, equity has given good returns and as the tenure increases, the returns get stabler and better .

So because stock markets have given bad results in the near term, its natural that the investment product which uses those stocks will also give similarly bad returns. So your fund might have just done its job of picking stocks as per their mandate, but the underlying stocks have done so badly that the mutual funds really can’t do anything here. What really you need to look at, is if the mutual funds have beaten its benchmark or not . If not, that’s when the issue is with the fund.

When did you exactly buy matters?

Yes, the last 5 years returns have been really bad!. No investor would be happy with these returns. However, did you notice that your opinion will be strongly biased, based on the tenure you have been holding the stocks or mutual funds? Some one who had bought near the peak of 2007, will surely say – “Stock market is the worst investments, never believe someone who says they are good.”  A person who had bought stocks in 2002 and had sold in 2007 , would say – “Stock markets are great” and someone who bought in 2002 and is still holding would also say – “Overall they are good. Ups and downs are always there.”

Let me show you some numbers. I took past 10 years of monthly NIFTY data starting from Sept 2002 to Sept 2012. Then I divided it into two halves, so there is  the first 5 years (Sept 2002 – Sept 2007) and the next 5 years (Sept 2007 – Sept 2012) . Here are the results of the returns based on the Index values.

Nifty Returns from 2002 - 2012

First 5 yrs

You will see that the first 5 yrs  were a really golden period, which gave close to 35-40% for lump sum as well as SIP investments. Someone who had been invested in this period would know how amazing the returns were.

Next 5 yrs

If you have been lying in this group, you must be complaining and surely your investments have not done well. You are disappointed and you have lost your wealth. But sadly it’s only because you are in this group.

Total 10 yrs

If you see the returns in this period ,you will see that the lump sum returns are 19% and even SIP return have been around 13% , which is a respectable rate of return. Most of the returns were eaten up due to the last 5 years, but even with those 5 years counted, the returns are good enough. At least better than PPF or FD returns and that too tax free .

Nifty Returns from 2002 - 2012

Stock Markets vs your Investments Return

“Equity gives good returns in long term” is a statement which is nothing but a probability linked statement , It means “most likely, equity will give good returns in long term”  It’s purely a function of time and your consistency in investing. While 5 years can be seen as a long term tenure, there can still be 5 years tenures where the returns are not that good and you might get bad or negative returns. Also note that it’s not your investment product, but the underlying asset is behaving wrong. So rather than complain about the fund, better complain about the stock markets .

What was your biggest take away from this article ?

Health Insurance Inflation in India – Have you planned for next 30 yrs ?

Lets talk about Health Insurance Inflation today ! . When you decide upon buying a health insurance policy, one of the pertinent questions that crops in your mind is the coverage amount – how much health insurance to buy? One of our readers Saket made an interesting comment on health care inflation, and how a decent cover today might look so small in distant future and raised the issue of “renewal” of policies by companies.

The Health Insuranec companies, eargerly selling policies to younger age group (mostly), are actually giving them a false sense of security about their twilight years. No doubt, the current policy will be good for next 5 years, but not later than that because of the health insurance inflation. So this sense of security has a shelf life of max 5 years. After that my fate will lie in the hands of insurer-whether it finds my policy upgrade worthy or not. Considering a most conservative healthcare inflation rate of 15% , a humble 3L coverage requirement as on date for a 38 yr old would translate into a whopping Rs 130 Lakhs ‘Final Amount’ at the age of 65 , the calculation is fairly simple – 3,00,000*(1+.15)**27 =130 lacs

Health Care Inflation In India
Coming to the question, we can now clearly see that decision of taking health insurance in current moment depends on two points. which are

a) Health insurance is a super looooonnng term investment, which you would need most in your old age, beyond say 60 years of age.

b) It’s common knowledge that Hospital costs are increasingly rising, gradually becoming unaffordable, to the common man.

How much is enough to financially support your family’s healthcare needs, ensuring you have a peaceful retirement life. Let us take this up, step-by-step.

Costs of common surgeries & Hospital Costs In India

The cost of some major surgeries in hospitals across India has gone up in recent years. Going by these numbers, assuming only one surgery is required during a year, per member; a sum insured of Rs. 3-4 Lakhs should be good enough for the year 2012. Major supply deficit with respect to healthcare infrastructure – hospital beds, doctors and nurses, increase in cost of medical equipment’s, land has resulted in an increasing trend of health insurance inflation. Here are the 2012 costs for surgeries, compared with costs in 2007.


Sr. No Treatment 2012 Cost 2007 Cost Increase
1 Cataract 24,000 16,000 50%
2 Angiography 22,000 14,000 57%
3 Coronary Artery By pass Graft (CAGB) 2,35,000 1,65,000 42%
4 Appendectomy 42,000 28,000 50%
5 Heamorrhoidectomy (Piles) 35,000 21,000 60%
6 Cholecystectomy (Gall Bladder removal) 52,000 32,000 63%
7 TURP (Prostate Surgery) 62,000 37,000 68%
8 Angioplasty (PTCA) with 2 stents 2,45,000 1,55,000 58%


The costs of common surgeries have increased by 50-60% in 5 years! This means healthcare costs have increased by 9-10% year-on-year, since the last 5 years. We spoke to Sudhir Sarnobat, CEO at Medimanage. Here’s what he had to say

“The average annual health insurance inflation would be at 5%, if you look at 30 years duration. The hospitals do not increase their tariffs every year. Generally, they increase it by around 15-20% every 2-3 years. This would effectively come to 5% CAGR.” “India is currently having Supply Deficit when it comes to Hospital Beds. But we are seeing a good amount of capacity increase in beds in last 7-10 years which should continue to grow. On the other hand, our population is stabilizing. In 15 years, the equations should change & ease pressure on prices.

India is a developing economy and from credible reports, will continue to be on growth path for next 10 years. After that once the wealth distribution is even, we would see stabilization of inflation (world over that’s been the phenomenon, look at US Medical Inflation for last 5-7 years, it is 4%)” Sudhir added.

Some reports on Hospital infrastructure talk of a major crisis in the making in the Healthcare Industry, due to overflowing demand, coupled with very slow growth in the poor hospital bed to patient and doctor to patient ratio in India, primarily due to deprived participation from the Govt. A Tower Watson Report pegs healthcare inflation in India at 13% for the year 2012.

In my opinion, while costs are bound to rise due to the slow growth in the ratios, on a 30 year horizon they have to plateau somewhere. Looking at this, I suggest, let’s take the inflation year-on-year for the next 10 years at 12%, and then average 5% for the remaining 20 years.

Health Insurance Inflation and Future Costs

Factoring healthcare inflation on Rs. 4 Lakhs of costs expected today, in 10 years, @ 12% inflation, the sum insured requirement would increase to Rs. 12 Lakhs, per member. In 20 years @ 5% inflation, to Rs. 20 Lakhs, and in 30 years to 33 Lakhs. For calculation of floater coverage, take 50% ad hoc for every adult member and 10% for every child, and here’s the kind of cover you will need, for some of the family combinations.

Health Insurance Inflation for Family Floater Policies

So a family of 2 – Self and Spouse will need a cover of Rs. 50 Lakhs year-on-year every year, from the age of 60. This is a huge sum, and looks unaffordable to most of us. So, what does one do? A middle class guy would either have to “afford”, “plan” or “pray” be able to afford such astronomical expenses. Let’s see how we can plan to pay such healthcare expenses.

Solution to the problem

Look at the Present Value of Rs. 50 Lakhs at 10% inflation on 30 years, it calculates to just Rs. 3 Lakhs. So though the problem looks big, it definitely can be resolved by the power of financial planning. Here are the steps we recommend you to create a fool proof plan for your healthcare expenses.

a) Commit yourself to healthy living: Yes, it’s very awkward for a Health Insurance services company, asking you to commit to health, but then we believe that Healthy living is the best form of Health Insurance. Healthy living would of course mean Regular Exercise, Healthy nutrition and No ill-habits. Such lifestyle will simply help avoid huge hospitals bills. Read an excellent article on Health SIP by Nandish.

(b) Given point (a) is a way of life for you, you now need to create a Long term and Short term financial plan, for the unavoidable healthcare expenses, like hereditary ailments (Diabetes, Thyroid), age related (like knee replacement), or infectious diseases (like Malaria), or even diseases like Cancer (which still have many unknown causes. Perfectly healthy people have got cancer, in spite of no ill habits).

Note, if you cannot commit to point (a), your needs for long term and short term funds increases multi-fold, to cover healthcare expenses.

How do you create such fund?

Here’s what I recommend should be your step-by-step health insurance investment plan.

  • Buy Health Insurance, preferably one which covers you for lifetime, and provides a no claim bonus, for the sum insured of Rs. 5 Lakhs individual or Rs. 7-8 Lakhs Floater. If you are buying plans, with Restore options, then the sum insured could be lower at around Rs. 5 Lakhs.
  • Take a good top-up plan, which takes your cover to a floater of Rs. 10-15 Lakhs for the entire family.
  • Invest in a Rs. 5-10 Lakhs critical Illness plan, which covers maximum no. of ailments, especially for the earning members of the family. This will help you get lump sum payment for critical ailments, and compensate for any loss of earnings. You can also explore the option of a more comprehensive benefit plan with your health insurance advisor, with products like Tata AIG Wellsurance, Aegon Religare iHealth, which provide lump sum benefits for large no. of surgeries, in addition to the Critical Illness benefit.
  • Plan a Healthcare Contingency fund, for Rs. 15 Lakhs for individual, and Rs. 25 Lakhs for a family of 4, maturing at age 60. A contribution of Rs. 15000 per annum at 10% return will accumulate Rs. 25 Lakhs in 30 years.

So what’s the total investment for your healthcare financial plan?

Here is the approximate outgo you would incur.


Type of Plan Sum Insured Tenure Costs
Health Insurance Rs 5 lacs 30 yrs Premium Rs 6,000
Top up Plan 5 Deductible/15 SI 30 yrs Premium Rs 5,000
Critical Illness Plan Rs. 5 Lakhs/20 Illness 30 yrs Premium Rs 3,000
Healthcare Contingency Rs 25 lacs 30 yrs Investment Rs. 15000

The plan above is indicative and would have to be customized depending on some of the following factors

  • No. of members you want to cover
  • Their age
  • Their health condition
  • Family history of critical ailments like
  • The city where claims are expected
  • The type of hospitals, rooms you prefer.
  • Your lifestyle.

What do you think about health insurance inflation and your thoughts on renewal decision by the companies. Do you think creating your own health care corpus is a better idea rather than depending on health insurance policies?

8 things I learned by quitting my full time job

Haven’t we all faced this at one time or the other? The pain of staying in your job getting worse than the pain of leaving your job ? If the answer is yes, this article is for you.

I am writing this article after Sunil asked a related question on leaving a job and starting a business on his own in our questions and answers forum. He wanted to discuss few things before he can start a business by quitting his day job.

Hello Guys,

Looking at the market conditions in Indian IT Market, it is obvious that anything can happen at any given point of time… I have interest from starting to set up a business (small scale) and have a cushion to my career…. I need few ideas from learned people like you in starting up a business (with at least 3-4 lacs).

I would really appreciate your feedback and comments.

In this article, we will discuss a few things about leaving a regular job and starting on your own,  developing  business idea which you’ve had from long time.

Why this topic on a personal finance blog ?

Truly speaking, this is related to your financial life. A lot of people have extra ordinary aspirations and desires in life. They want to travel around the world, they want to own millions and want to have an ability to spend whatever amount they want on anything in life, but deep down they know, that it would not be easy to achieve everything they want from a regular 9-5 job.

A lot of people get into a job which they feel would be suitable for them, only to realize it later only after few years, that they have made such a big mistake in their life. But we have so much to accomplish , children education , their future, the desire and pressure to give them the best in life, parents , spouse , their dreams and their wants in life.

People who are not happy at their job, they just bury themselves under responsibilities and for entire life, keep on dragging in their current profession and job. However this not a story of everyone, a lot of people love their jobs and are really content and satisfied with what they are doing.

I had recently done a survey on how people are frustrated in their current work and some more information. Here are the full results. please go through it and look how do you fit in there.


What about those who are not satisfied in their jobs and career? I had earlier written that your financial life is directly related to your career . If you are not doing great in your career, it will impact your earnings, and hence directly impact your financial goals and the wealth you will generate in life.

So you need to decide if you want to move on and do something on your own as soon as possible, be it  for emotional satisfaction or more monitory satisfaction. Unless you are happy in your work, you cant focus on wealth creation.

My Story of leaving a job and starting on my own

Some people get shock of their life, when they hear that I was a software guy once in my life.

Let me share with you, how I was once a very good student in Computer Science and then became a dull/boring/worthless/unproductive software guy and finally took charge of my career and went on to change my domain to Personal Finance and even wrote a Personal Finance Book (Read 65+ amazing review on flipkart)


My Story

I was working in Yahoo at Bangalore in a nice software job, I was considered a good student at my post graduation days but only I know what I was really capable of (like you do) .

I was good at many things like Algorithms, data structures and problem solving skills, but really sucked at others;  Networks, Operating Systems and System related things. Somehow I managed to muddled through, but I still don’t understand them even today 🙂

Yahoo hired me (thanks to them) for the job which demanded exactly all those things out of me, which in my wildest dreams I never wanted to work on. I was devastated and saw my end in the first month of my job. But I had to continue the job, because of my financial commitments.

Each day the expectations in my job grew way beyond my performance, and it made sure my guilt and dissatisfaction increase at a compounded rate. I could see clearly that I am working for money only, I was not able to see myself anywhere in next 3-5 yrs, The frustration of going office without any motive and passion was really killing from inside. I was very sure and clear at that point of time, that my affair with software field has come to an end.

I had to take some extreme step.

How Jagoinvestor came into existence

I had always learned things in my life by teaching others. I was good at personal finance from start of my life and always believed it to be such a easy thing and wondered why people complicate it without any reason. This passion of personal finance and love for teaching gave birth to Jagoinvestor.

I was spending my 80% time at office towards Jagoinvestor (10% time went for lunch). Things moved at a really good speed and I was really passionate about what I was doing and loved it. I suddenly realized that this is my passion, this is something I am passionate about, this was something which was not making any money for me at that point of time, but I could have paid to do it myself.

This was something I woke for each day, Jagoinvestor was something I lived for, It was something which negated my stress and frustration as Software engineer. For next 1-2 yrs, It got bigger and bigger and I was known as an expert 🙂

I was a trusted person on personal finance which was not my field by education, but I was not even considered for something related to software field even though my education and career was based on that. I never cared.

Leaving Job

I and Nandish met in between and we could see how we both could take it to next level. By the end of 3.5 yrs at Yahoo, we were generating some money from Jagoinvestor, but it was not consistent. I knew it can never be consistent flow of money in business, at least in starting years.

I gathered my courage and the belief that we will succeed. I owe so much to Nandish who motivated me and coached me on this aspect, which helped in decision making of quitting my job.

It was not easy ! I had spent so much time and (little) effort in computer science, My parents had put lot of struggle and money on it, and after all I had spent 3 yrs on Computer Science, how could it go for a waste ? How could I leave a well paying job which everybody dreams of and become a blogger ? What will my relatives think , What will my own family think ? What will my future-in-law’s think (SE vs Blogger) .

There was pressure – but I was sure I was not a pressure cooker, I knew I could not risk my entire life. There was not a perfect moment to “quit my job” and I knew there will never be, on the last day of 2010, just few months before my marriage, I left my job and took the next bus to Pune from Bangalore to start the new year and new journey in life, without thinking much what’s ahead.

There were thoughts like “Am I making a right decision ?” , “Will it really be the way I am thinking?” etc , but I also knew deep down that, if I don’t do it now, it would never happen.

Now, after a year and a half  of leaving my job, I can say not even a single day have I remembered or missed my job (except the unlimited sweets and the rasam-rice), though I loved the company. Each day has been a wait to open my laptop and enjoy writing articles and help people in their queries. My Work life is now 100 times better than what it was before leaving the job.

That’s my short story 🙂

So whats next ?

You don’t always have to build  a multi-million dollar start up or create an empire! If you are not happy in your current job, then you just need to move to some other sector or start some business.

Nandish always says that people are so much attached to their current job that they believe that’s their destiny and life now. They don’t even get a thought that their purpose of life might be something else, if they are good at their current job, there might be something where you are awesome .

Just because you didn’t accidentally got into some profession or some company does not mean it owns you or your entire career. You can still move . If you were asked that you will never be able to work in the same sector/profession again because “god” has ordered it , what would be the next thing you will fit in ? What will interest you and you might want to give it a try (share with us)



8 things I learned by quitting my full time job

Based on my little experience and whatever I had learnt from others, here are some of the sharing for someone who is considering to leave a job and start on his own. These tips are not extra ordinary tips, they are more of a reminder to you rather than teaching something.

If you consider all these points in your planning, then the chances of getting successful would increase. Neither of the below points are perfect, nor it will be applicable to every one. These are just some observations from my side.

1. Start the background work now

Most of the people wait for the last moment till things get ugly and each day is a nightmare at job. If you are very clear that you want to head out on your own someday, start the background work right now in this moment.

Whatever you want to do, learn the game of that while you are in job, start understanding dynamics of the business you want to get into, now. The job to business transition is really a tough thing to do. It takes time, it takes effort, it takes dedication.

2. See if you can do something parallelly

It’s not always possible, but if there is any way you can run your business or start something on the side, it would really increase your confidence.

The chances of this happening is higher, if you can find a right business partner. For most of the people who work in big companies, the best thing could be to talk about it with few friends in the office group itself, who also share same kind of vision and passion. 

Here is a sharing from a jagoinvestor reader on how he worked with his colleague’s after office hours and successfully started his own company soon despite having a home loan and kids to feed

Me and my friend developers who have high passion on starting up a company, we both are married and both have kids of less than 1 yr. We worked after office hours to make the setup and finally we started our company this new year officially quitting.

We made a huge savings to run for next whole year in the same life style and to pay home loans. If we have not taken home loan we would have jumped a little earlier, how ever I see it in a positive way, it keeps us pushing like a fire under belly, we have to do that little extra and that deadline of payments are always there and a huge sum I have taken two house loans including one in joint .

3. Create the buffer

One of the biggest deterrent for starting on your own is “what if things go wrong” kind of questions. This happens mostly if you are weak on your buffer amount. The buffer is nothing, but your emergency fund, in-case things don’t work out for initial few months or 1-2 yrs . It should pay for your basic expenses at-least, if not luxuries.

The larger a buffer you can create, the better it is and it will happen only if you start now at this moment, otherwise not. I would say a 3 yrs buffer is a good number, but most of the people are ok with 1 yr buffer too. If your current expenses are 40,000 per month, you would need 5 lacs per year (40,000 X 12) is what you need for 1 yr and 15 lacs as your 3 yrs buffer.

See how you can generate 5 lacs as first milestone and then 15 lacs. Note that your buffer is inversely proportional to your confidence and how ready you are for your new venture, and a direct function of how ready you are overall.

4. Double income will help

Software guys have this advantage like no one else, a lot of them are DINKS (double income no kids), husband and wife both are earning good money. This situation is ideal for those who want to give it a try. While one person can earn and make sure things are on track, the other person can give his/her shot on entrepreneurship.

If things go wrong, you still have something to fall back upon. I see this situation as “one is earning the money and the other is burning the money”, but at the end it’s more easy than a single earner case. So now if you are about to get married and want to leave a job and start on your own in next few years, you know you will have to give more preference to someone who is earning money. That’s a choice you need to make.

5. Get rid of liabilities

If you already have some kind of liability, like a home loan, it really becomes a pain to even think about leaving a job. You might have to postpone your decision, but don’t bury it . Yes, you have a liability, but once you complete that liability you will have your own home, & that would be a great support mentally. You know in the worst case you have something to fall back on.

Also another advantage would be that once you complete your home loan, you will have one expense less (rent) to pay in life and as you still have many years left to take the jump, its an ideal situation to plan. When you know there are many years in job, you can give your maximum time in planning, getting ready and if possible “increase” the size of your buffer!

6. Imagine the worst case and find ways to deal with it 

This is the biggest reason why most people do not budge from their jobs and keep dragging. The worst case scenario really scares them to death. In the book  How to stop worrying and Start living, the author Dale Carnegie says that one can reduce the worry by mentally accepting the whole worst case scenario, and really write it down and then see what will be his actions at that point of time.

Imagine you are a software guy. What is the worst case which can happen if you take a calculated risk of leaving the job and starting something on your own after lot of planning? 

This is what I can think of – You will blow all your buffer you have created, your venture will not work out and you will lose some months or years – what next?  Worst case, you will have to get back to a job. It will be tough, you will face difficulty to get back to the same level of salary. In worst case, you will start lower than what you earn today, but that’s what is the cost you will have to pay for the desire of starting on your own.

7.  Don’t quit the job !

Just because you are reading this article does not mean you start feeling that you also want to leave your job and start your own venture. No ! .. We are just talking about those, who are “dragging” , they are unsatisfied with their jobs and want to do something else in life.

Its perfectly fine if you are just in your job and move on with the same thing for life. A quite lot of people really excel at their work and earn really big bucks, its all about your love for the work and how far you can go with it, you can always move to next job, go abroad and earn more money.

So not quitting a job is also an option. You need to think about it, evaluate the pain and pleasure attached to both the options and choose what you want to do. There is nothing right or wrong decision, its only “your decision”.

8. Make it as a project

When we get on call – Me and Nandish sometimes talk about the concept of Dreams vs Project. You complete your office work because its a Project, you complete your college practicals and exams because it’s a project, and you also prepare and present a presentation at work because its kind of a “project.”

You fail at getting up early in morning and exercise because its a Dream, not a project, you are not able to save enough to pay down-payment of house as planned, because its a Dream, not a project.

In much the same way, most people do not achieve the transition of leaving the job and starting their venture because its a dream, not a project. If you want to understand more about the difference between Dream vs Project, listen to this 12 min’s audio

Idea’s for starting a new venture

A big challenge in leaving the job and starting on your own is “what will be the next venture?” It leaves an open question in many minds and people are not able to take the decision. We can all collectively share some idea’s on what kind of small or big business can be done with small and big capital .

You must have one good idea to share , Please share it will all and I will publish the list of all idea’s on this same article once they start floating.

Real Life Sharing’s about how they feel at current job ?

Experience 1

Following the herd culture ,i.e, after 12th doing engineering and then software job irrespective of one’s branch and now life looks like to be more of a mechanical where everyday you do mundane things and on top of it some crap , foolish and utterly junk lowly intellectual managers govern your appraisal and hike.

I want to get rid of this junk industry where human emotions get dissolved in thin air and people are moving towards making themselves machine oriented trying to achieve efficiency of typical machine with elusive numbers.

Experience 2

I am working with a pvt limited Bank.Though the Bank is employee friendly and has a great future but I feel my vertical is very boring and stagnant.My supervisors are very rude and insult me in front of everyone.My job has no challenge and stagnant.Though my knowledge is better than other colleagues but I am given job of a doc executive.

With no knowledge involve in it.I wanna go 2 other dept.but my supervisors are not allowing me for that.It makes me helpless.My productivity is getting decreases but I ve not lost hope may be in future I ll get a better work related 2 my knowledge.

Experience 3

Not much to share. Not just enjoying my job. Its not satisfying. Its not what I wanted to do in my life. i’m a bank Manager now, but don’t really feel so, being in one of the largest pvt sector banks. There is a lot of gap between what is written in offer letter and what is being offered us to do daily in office.

The number of hours we give to office, is just too much. Usually more than 11 hours a day, all through the year. What I and most of the colleagues believe that, if we give this much dedication and passion to some venture of our own, then we can reach pinnacle of success on our own.

Why should we give so much to another company? Will it give us a justified share of its profit if we give so much to the company. NEVER.

Experience 4

Basically, i am a drummer and interested in the Music domain. By chance or by mistake i have come to this bloody Software Industry, which is full of diplomacy and politics, which is never suited to my type! So planning to be back with my musical nature and rocking mode.

Experience 5

I am a post graduate degree holder in Mechanical Engineering (Research) from IIT Madras . I was chosen by one of the biggest software companies from campus for my employment. I am being employed in the IT outsourcing division. Company recruits were bragging at the time of placement.

I am doing some type of maintenance and enhancement work of some client’s mainframe software which up to a certain extent is challenging due to the analytical and logical skills involved. My current job does not leverage my scientific and mathematical knowledge acquired during my studies and that feeling keeps me dissatisfied in my current job.

I did not take a honest and serious effort in moving out from the situation as I got very much comfortable with the current position and also due to other family commitments. A 2-3 year onsite work opportunity is looming and I am hoping of saving a corpus and proceed for a career change.

Can you relate to the above cases ? Is your story very much on same lines ?

How did you find this article ? Do you think it was valuable for you ? Are you in that situation where you want to leave the job and start something on your own ? Share your experience or views with all of us .

6 changes in mutual funds done by SEBI recently – Good or bad ?

Recently, SEBI has made some of the biggest changes in mutual fund regulations to revive the mutual fund industry.  Some of the measures which are made are said to be helping AMCs and distributors more than investors. We will look at 6 major changes done in the meeting and the full detailed circular will come in few days.

Mutual Funds changes by SEBI

1. Higher expense Ratio allowed

Do you know that close to 45% of mutual funds money comes just from Mumbai? Around 87% of AUM in mutual funds comes from top 15 cities in India, which means that only a minuscule 13% of the mutual funds money belongs to small cities in India. Penetration in other parts of country is very, very small and not encouraging. Now SEBI has proposed to increase the Expense ratio by 30 basis points (0.3%) if the mutual funds are able to increase their reach to smaller towns in India and increase their contribution to 30% . In short, if a mutual funds is able to get more than 30% of its AUM from other than top 15 cities in India, they can charge a 30 basis points expense ratio higher than its current expense ratio. Lower contribution means proportionately lower expense ratios.

The big effect, is that now there will be higher expense ratio for everyone. So inflow from smaller cities will affect investors from bigger cities. Investors from big cities will have to bear the burden of increased expense ratio.

2. No internal limits in Expense Ratio

A very big change which goes in favor of AMCs is the removal of internal limits on the expense ratio and for what it can be used. Earlier there was a limit on the AMC to charge up to 2.5% expense ratio (up to 100 crores AUM), but it was allowed to charge only 1.25% as Fund Management Charge and 0.5% as distribution charges. The rest was taken as their profits.  So earlier suppose a Mutual Fund charged 2.25% as the expense ratio, then they compulsorily had to allocate 1.25% as Fund Management Charge and 0.5% for distribution.

But now, that sum limit has been removed and mutual funds are allowed to allocate expenses the way they want. This means you can now see more advertisements, more commissions to the distributors and more aggressive selling. While this is a very big change which will make AMCs happy, they will still have to keep a check on the expense ratio because of competition from other AMCs.

3. Putting Exit Loads back into the scheme

You must be wondering what happened to exit loads earlier, where did it go? When a investor got out of a mutual funds , he was charged an exit load if he quit before 1 year. That money was not transferred back to mutual fund, nor was it the profit of the mutual fund. It was actually transferred to a separate fund, which was used for sales, distribution and marketing. But now, when a investors exits prematurely, the entire exit load money will be credited back to the scheme account and will not be treated as AMC profit. However an equal amount (capped at 20 basis points) can be included in expense ratio back to compensate the AMC loss due to outgoing investors, which means that overall, for the investors on one hand,  the AUM gets increased (NAV increased marginally because of exit load money coming back to them), while at the same time they’re paying more in expense ratios, so the net effect of this would be, no gain no loss to both the parties.

4. Direct Plans with lower expense ratio

SEBI has directed that for each mutual fund, there has to be a equivalent Direct Plan with a lower expense ratio. So for every mutual fund XYZ, now you will see XYZ and XYZ-Direct options. So XYZ will come with higher expense ratio, and XYZ-Direct will have lower expense ratio. Many people who research mutual funds and like to buy it on their own directly from AMC by passing agents and other online distributors, this option will be cheaper and makes sense. However, many distributors are not happy with this move and think this will “kill” their business, all because investors will then just invest into the direct options.

Note, SEBI has not yet clarified by how much lower, the expense ratio of the Direct plans will be and if it will be mandatory for each and every plan or just some categories. We’ll need to wait for the final circular, to find out.

5. Financial Advisers and Distributors separation

Very soon, financial advisor regulation will come into effect. This means, now there will be some minimum qualification, registration and guidelines for financial advisers. They will have to register with SEBI and a separate body of regulators will soon be created for this. A financial advisor is a professional who advises his clients on investments for a “fee.” The important distinction being, he wont be able to earn any money from commissions by selling financial products. If a person wants to sell financial products and earn commissions out of it, then he will not be able to “advise” the clients. But CA, MBA, and several other professionals are kept out of this rule and even mutual fund agents who have a valid ARN code are kept out of this rule because their basic advice is seen as the extention of their work. There is still more clarity required on this, so don’t conclude anything yet.

What does it mean finally ?

If you are wondering what it means overall in single sentence, then it means increased costs (expense ratio) and lower returns for investors, but it may not be that bad as you think. Dhirendra Kumar of Valueresearchonline feels that the expense ratio increase will be in range of 0.1% to 0.4% range.

All in all, investors could see a 0.1 to 0.4 per cent increase in the fee that they effectively pay to have their funds managed. Any increase ends up reducing the returns that funds generate but all in all, this has been a deftly managed round of reforms that could get a decent bang for the buck.

Lets see all the changes and what effect it had finally on different aspects


Criteria Before Now
Expense Ratio Charged Maximum 2.5% allowed (depending on the AUM) Now additional 30 basis points is allowed if the fresh inflow’s from smaller towns
Internal Limits on Expense Ratio Internal Limits of 1.25% for Fund Management Charges, 0.5% for distribution costs No internal limits now
Where did Exit Load go ? Earliar it went to a seperate fund used for marketing and sales Will be added back to Scheme AUM, but will not benefit investors because of equivalent increase in expense ratio (limited to 20 basis points)
Direct Scheme of Mutual Funds Earliar there was no distinction between a investment made by agent or directly with AMC A new category called “Direct” will be introduced which will have a lower expense ratio.
Service Tax Borne by AMC Borne by Investors
Distinction between Adviser and Distributor There was no distinction earlier The regulations are now coming in . Advisor and Distributer will be separated.


What do you think about these changes ? Which changes do you think are in favor of investors and which are against them. How will this affect your investments in mutual funds in coming months and years ? Are you happy about these changes ?

NEFT and RTGS – A detailed Guide

Lets try to understand what is NEFT and RTGS and what is the difference between them. NEFT and RTGS are two main mechanisms to transfer money from one bank to another bank in India. Transferring money between two accounts in same bank is pretty straight forword and its a internal matter of the bank, it does not have to deal with other banks and their protocols, however when one bank wants to send the money to another bank in India, there is a defined mechanism it has to be done and hence NEFT and RTGS comes into picture. Both these systems are maintained by Reserve Bank of India. Lets understand both of these

NEFT – National Electronic Fund Transfer

NEFT full form is National Electronic Fund Transfer, and its a system of transfer between two banks on net settlement basis. Which means that each individual transfer from one account to another account is not settled or processed at that same moment, its done in batches . A lot of transactions are settled in one go in each batches. Presently, NEFT services are available from 8:00 am to 6:30 pm on weekdays (Mon – Fri) and from 8:00 am – 12:30 pm on Saturday.

Any NEFT Transfer done between 8 am – 5 pm generally gets settled on the same day, but if you deposit the money after 5 pm, then that will be settled the next working day. In case of Saturday, any money deposited between 8 am – 12 noon can be expected to reach the beneficiary account the same day.

NEFT Transfer Example

For example lets say Ajay has ICICI Bank account and Robert has a bank account in HDFC bank , Now Ajay deposits Rs 10,000 in Vijay account through NEFT transfer at 10:30 am . The money will be then taken out from Ajay’s ICICI Account and will be sent to Vijay’s HDFC bank the same day, then HDFC bank will credit Vijay’s bank account. In case money can not be transferred to the target account (beneficiary account) , the money will be credited back to the source branch within 2 hours of the batch in which it was processed.

RTGS – Real Time Gross Settlement

RTGS full form is Real Time Gross Settlement and its a system of money transfer between two banks in real time basis, which means the moment one bank account transfer the money to another bank account, its settled at that time itself on real time basis between the banks, but the beneficiary bank has to make the final settlement to the bank account within two hours of getting the money. RTGS is the fastest possible money transfer between two banks in India through a secure channel.

Let me give an example, lets say Ajay has a SBI Bank account and Vijay has an Axis Bank account, Ajay transfers Rs 5 lacs to Vijay’s account  through RTGS transfer, SBI bank instantly transfers Rs 5 lac to Axis Bank, now Axis bank has 2 more hours to deposit it in Vijay’s account . Hence in worst case even with RTGS transfer there can be delay of 2 hours.

NEFT and RTGS Timings

NEFT and RTGS Charges

NEFT and RTGS transfer charges depends on the Bank. RBI has guidelines for the maximum fees which can be charged, but it finally depends on the bank in question. Note that NEFT and RTGS charges, varies depending on the amount transferred and the timings when its done. While NEFT charges depends purely on the amount transfered, RTGS charges depends on the amount transferred as well as the timings of the day when its done . A RTGS transfer early will cost a little less charges. Note that, Service tax is also applicable to the charges. Below are the charges shows for NEFT and RTGS for retail banking (not for institutional banking)
NEFT and RTGS Charges

Information required to make an RTGS & NEFT payment?

For making a payment through NEFT/RTGS, following information has to be furnished.

  • Amount to be remitted
  • Remitting customer’s account number which is to be debited.
  • Name of the beneficiary bank.
  • Name of the beneficiary.
  • Account number of the beneficiary.
  • IFSC code of the destination bank branch
Note : MICR code is generally not required for NEFT or RTGS transfer

Points to Note

  • Each Bank has their own NEFT and RTGS application form, which you can download from their website
  • RBI declared holidays each year when you cant do NEFT and RTGS fund transfer transactions, see 2012 list
  • To find out different bank branches which are enabled for NEFT and RTGS transactions, you can see this RBI list

Difference Between NEFT and RTGS

Finally let me list down all the differences between NEFT and RTGS in a table, so its easy for you to understand the conclude finally.


Criteria NEFT RTGS (Retail)
Settlement Done in batches (Slower) Real time (Faster)
Full Form National Electronic Fund Transfer Real Time Gross Settlement
Timings on Mon – Fri 8:00 am – 6:30 pm 9:00 am – 4:30 pm
Timings on Saturday 8:00 am – 12:30 pm 9:00 am – 1:30 pm
Minimum amount of money transfer limit No Minimum 2 lacs
Maximum amount of money transfer limit No Limit No Limit
When does the Credit Happen in beneficiary account Happens in the hourly batch Between Banks Real time between Banks
Maximum Charges as per RBI Upto 10,000 – Rs 2.5
from 10,001 – 1 lac – Rs 5
from 1 – 2 lacs – Rs 15
Above 2 lacs – Rs 25
Rs 25-30 (Upto 2 – 5 lacs)
Rs 50-55 (Above 5 lacs)
(Lower charges for first half of day)
Suitable for Small Money Transfer Large Money Transfer

Are you now clear about the difference between NEFT and RTGS and their transfer charges?