Not buying (or delaying) Term Insurance because of over-confidence

Posted on September 27, 2019September 30, 2019 by Jagoinvestor

There are many investors who do not buy (or delay) term insurance plan, because they feel that nothing will happen to them.

Some feel they can’t die due to illness, because they take care of their health.
Some feel they will never die in an accident, because they drive their vehicles carefully.
Some feel they will never die, because they eat healthy.
Some feel they will not die because they keep an eye around them for all the risks.

I don’t know why people feel that they are “special” and bad things happen in only other’s life.

Do you think that those people who die suddenly because of some reason, were not confident that it will not happen to them in unexpected manner? “Accidents” are called accidents because they are unplanned and out of your control. So thinking that nothing will happen to you accidently itself is technically wrong thinking.

No one plans their death or any major accident. Life is so uncertain and external risks are so huge that statistically a certain percentage of people will die a sudden death due to various reasons.

That’s the sad truth of life.

Let me tell you two real life incidents where someone I knew personally died in an unexpected manner!

20 years back, we got a sad news one day that one of our relative died while taking bath. How? He suffered sudden brain hemorrhage and died. He was lying down on floor, when family broke the door. Do you think the guy in question ever thought that this can happen to him?
6 yrs back, someone I knew personally died because he got sucked into a daldal (mud puddle). He never realized that he is getting there as he was moving casually into that region and in no time he was stuck. He was there for taking a picture of his wife from distance & he got sucked in slowly while he was crying for help. Who can imagine or guess if something like that can ever happen?

At some point in our life, we all get casual and do things which have high risk. If we don’t do it, someone around us does not which can impact us. As humans, we have tendency to terribly under estimate the bad things which can happen to us. We feel that “accidents” and “unlucky incidents” happens in other lives.

If you really want to know how unexpected life can be, then I want you to watch out this following youtube video (just few seconds) before I start this article

https://www.youtube.com/watch?v=BxGBf6XsAio

Emotional and Financial Impact on Family

Death is not an issue for the person who dies because that person does not exist later to face the consequences. It’s the dependents, who face the heat – emotionally and financially.

Emotional suffering however huge, finally fades away over time slowly. Over years, life gets back on track. However financial impact is huge on the family, if a sufficient life insurance was not taken by the bread winner. Financial impact also completely changes the lives of family members and creates big issues.

It can leave the family with questions like

How will we pay back the home loan?
Will we have to sell the house?
How will we send children to school?
Who will give us money for many years?
Will we have to sell house belongings?
Will our children have to start working after their school?
How will we take care of old parents?
Who will earn now in family?

Think about this!

I have seen lots of investors not taking the decision of buying life insurance very seriously. They delay the decision, cut down on the sum assured feeling what’s the need to “waste” the premium and worst of all, close an existing term plan because now they feel “Nothing happened in last 6 yrs, I wasted so much of premium” ..

And then the most unexpected incidents happen ! … Sudden death due to a health issue or accident!

Rains in Pune in last 2 days

From last week, Pune is witnessing heavy rains and two days back there was an overflow in a lake within city which literally created havoc in one part of the city. One of the society wall fell and 5 people died because of that. I wonder if these 5 people ever wondered if they will die like this?

(Source : Hindustan Times)

Let me tell you another incident from Pune rains

One guy was returning late in night in his car when this over flow happened and while he was going through a tunnel, the water from the other side came because of the overflow (like you must have seen in a scene from titanic). The car got washed away and after few hours, the guy death body was recovered. He did not even get time to react and do anything as his seat belt was on and he could not do much in response of that terrible accident.

Imagine this guy, and ask yourself if he had ever thought that this could have happened to him?

We need to accept that shit happens! . Many things are beyond our control. We can only minimize the impact or risk, but can never eliminate it.

7 real life incidents which will lower your over-confidence !

Here is a small compilation of few real life incidents, where people have died because of various unexpected reasons which was beyond their control almost all the time. Please imagine yourself and ask if by any chance, it’s possible that you could have been at their place?

Pune man saw wife disappear in flooded stream (Link)

We all were trying to get out of the house when suddenly the heavy flow of water came and in that Jyotsana was washed away right in front of my eyes. I could not get hold of her or save her; afterwards, we found her body nearby.”

7 school children die in Kenya as school building collapses (link)

“We were in class reading and we heard pupils and teachers screaming, and the class started collapsing and then a stone hit me on the mouth,” 10-year-old survivor Tracy Oduor told the AP. “When we got out of the gate, we heard that pupils were dead. I feel so sad.”

Spine surgeon & driver killed in accident on Mumbai-Pune Expressway (Link)

The car had stopped on the roadside to get a punctured tyre changed. When the driver was changing the tyre of the car a speeding private bus coming from Mumbai rammed into the driver and Dr Khurjekar, killing them on the spot.

A person died while taking selfie with elephant (Link)

A 30-year-old man was trampled to death by an elephant at the Bannerghatta Biological Park on Tuesday, after he and his friends sneaked into the park to take selfies with the elephant.

14 dead, several injured in massive fire at Mumbai’s Kamala Mills (Link)

The fire broke out shortly after midnight on the third floor of the four-storied building on Senapati Bapat Marg. The majority of those killed were women attending a birthday party at a rooftop restaurant.

Illegal banner claims another life, 23-year-old dies after hoarding falls on her (Link)

An illegal banner which was installed by an AIADMK functionary for a family function fell on Subhashree, making her fall to the road. Meanwhile, a lorry which right behind her on the road ran over her.

28-yr-old engineer dies after sharp kite string slits his throat in Delhi (Link)

A 28-year-old civil engineer was killed and at least half a dozen others, including a retired defence forces officer, were injured after being allegedly hit by sharp kite strings (manjha) in separate incidents during Independence Day and Raksha Bandhan celebrations on Thursday.

Please take Life Insurance

So the point is clear!

In case your family members are financially dependent on you, and you do not have sufficient assets with you, please buy sufficient life insurance (only a term plan) as soon as possible and secure their future. Do not over estimate your ability to avoid accidents. You have far less control over these things than you think.

If you are confused on which term plan to buy, I can help you along with my team. We will connect you to right platform to buy the term plan which will also give your family claim support in future. Just email us at [email protected] and we will get back to you!

Do share any incident or real life story related to this topic in comments section below.

How much money would it take for you to feel “Rich”?

Posted on August 22, 2019August 22, 2019 by Jagoinvestor

“How much money would it take for you to feel “Rich”?”

I recently came across this interesting question on my Facebook timeline and the answers given by people were very interesting. I thought of sharing it with you all and discuss this insightful and interesting point with you all.

feeling wealthy and rich

I want to become RICH and I am sure even you want to become one. We all have different definition of “being rich”.

Below are some of the unique and interesting answers which were given on the question – ““How much money would it take for you to feel “Rich”?

Read these answers carefully and it will tell you a lot on what is a person’s belief system about money and wealth. Here they are !

My dad gave me 200 rupees when I was going to work for the first time back in 2005, I’m rich till I have 200 bucks in my pocket
Once I have no loan
All the money my boss has
When I own my private jet..
Money can’t buy Richness… It has to be in your nature..
Fifty thousand a month
As long as it pays the Bill and afford my material needs and few luxury to some extent
10 crore per month
Answer depends upon ones needs or greed
Fill 10 x10 x10 room with 1000 doller note
1 crore per month
only my husband, He with me I feel rich
One roti with dal fry
Only mother and father nothing else no money required
1 Rs. more than Bill gates
At least 1 lakh to spend per month. No taxes either.
Modiji hain na… we all will be rich very soon!
Just a safe place giving shelter to me in any condition with a bowl of rice to eat with chickens from the farm and a cigarette to smoke before switching off to bed
So much money that I could feed all the people on earth who have no food n clothes n no shelter… I want that much money..

Had Fun?

I am sure you must have enjoyed reading various answers mentioned above. While they all look fun and crazy answers, deep down they are telling how these people see money and what is their relationship with money.

The answers tells us something about them as a person and how they see MONEY in their life. Based on the answers, I can see 3 ways people think about “Feeling Rich”

Category #1 – Attached to an absolute numbers

People who have given answers like “10 crore per month” and “Once I have no loan” are thinking purely from a absolute number in mind. They are currently having some particular income or net worth, and they feel that once they reach a new height called Y, it would be a great situation to be in. They will then feel “RICH”

This kind of belief system builds when one is looking at money as a tool to acquire things in life. You know you need some particular amount of money to buy a house, go on a vacation, buy a car and meet your day to day expenses, and you look at a number which is surely enough to buy those things. I feel this is a very natural definition of “RICH” and most of the people start this way!

Category #2 – Comparing with Others

There are investors who feel rich not at absolute level, but in comparison with others in society. So answers like 1 Rs. more than Bill gates” and “All the money my boss has” tells that the person mainly wants to have more than someone else. Its not about his requirement or desires, but how he/she feels in contrasts with others.

I think this is quite dangerous, because there will always be someone wealthier and happier than you and even if you have enough resources in life, you may feel miserable looking at others. Surely not something I would recommend.

Category #3 – Not giving money any importance

There are some answers like “Money can’t buy Richness… It has to be in your nature..” and “only my husband, He with me I feel rich” and even “Only mother and father nothing else no money required”

I personally have mixed reaction to these kind of answers. At one level, It feel great and really good that a person places more importance to relationships, values and memories. Money is a human created thing and there is really no limit to greed. Its good that a person givens answers which shows their detachment with money and shows that their happiness is not entirely dependent on money.

However, now at a different level, these answers also look to me a little unthoughtful. Money is surely a reality in life. I am not saying that you acquire obscene amount of money, but people around you (if not you) want to live a convenient and decent lifestyle. Just saying that “No money is required to feel rich” is not everyone’s cup of tea.

You might be a person who don’t need money to he happy and feel rich, but what about your spouse, your kids and your parents? Do they also feel that way?

A common man who has to pay rent, pay school fees of children, put ration in home and do all sort of real life expenses. One can’t deny the fact that money is required in life for most of the things.

So keep a balance between both the things. Every thing has a role in life. Money is not important, but important in life and its quite easy to make these statements when you have enough food at home and your future is sort of taken care.

Can there be a 4th Category?

I am not sure if there can be other categories or not. I was not able to think beyond 3 categories myself. Can you think of more?

Btw – Can you answer me (and to yourself) the same question – “How much money would it take for you to feel Rich?”

Can you share your answer in the comments section?

We attended Berkshire Hathway AGM (9 learnings from Warren Buffet inside)

Posted on June 6, 2019November 18, 2019 by Jagoinvestor

On 4th of May 2019, I (Nandish Desai) got an opportunity to attend the Annual General Meet of Berkshire Hathway, hosted by Warren Buffet and Charlie Munger (I also attended the AGM last year)

As a student of wealth, it was a great learning experience for me and I would like to share my learning and insights with all of you. I will not get into companies he named or into the numbers or statistics; I want to keep it simple so that you can pick a few insights for your personal growth.

Here are some of the pictures from the AGM meet.

Background of AGM

Every 4th of May in the city called Omaha warren buffet holds the Annual General meet of his company Berkshire Hathway. It is a global event where more than 30-40 k people travel from all over the world to attend the same. It is more like a celebration where people come to hear his view and to learn from his school of thought. Currently, one single stock of Berkshire Hathway is approximately around 3,00,000 USD ( or maybe more)

9 Lessons learned from the sharing of Warren Buffet

I am putting 9 points I learned from Warren Buffet which I made out of what he spoke in the AGM.

#1 – On Happiness: This one was an eye-opener for me. Most of us equate money with Happiness whereas Buffet made a point, happiness is not a place to reach rather it is a place to come from or operate from. If you are not happy with your current net-worth you won’t be happy by adding a few more lakh or crore to your net worth. He is asking us to focus on things that make us happy in the right now moment.

#2 – On Workability: The bold statement made for investors was very profound, “ All you need is to do is figure out what works and just do it”. Every investor has to discover his or her own process of investing. During the journey keep your eye on what is working for you. For example, in the area of health if going to the gym is working then go to the gym every day, and if yoga fits in your schedule then do yoga regularly. The focus is on bringing workability and staying engaged with the sport called wealth creation. There can be various ways to build wealth, you need to figure out what works for you.

#3 – On Building Competencies: Warren insisted on building and expanding one’s personal competencies. He insisted on investing in one’s own self more than anything else. The future belongs to masters and not to incompetent individuals. He also gave some examples of professionals you will never approach just because you doubt their competency level. You can do your own SWOT Analysis, find your strengths, weaknesses and it will help you to explore newer opportunities and will help you to eliminate weaknesses.

#4 – On Human Behavior: There are many books written on warren buffet and his investment style, however, he insists on reading people more than books. The real insights about human behavior can only be learned when you sit with someone and have a deeper conversation. Every human being is like a book filled with experiences and he invites everyone to spend more time with other beings.

#5 – On Investments: Price has the power to make or break any investment decision. When you buy expensive it can turn any deal into a bad deal. Maybe he was pointing towards buying when markets are low and having a hold strategy. Once a stock is bought, you can’t reverse or do anything if the price falls down.

#6 – On Making Investment Mistakes: Warren was generous enough to admit some of his mistakes on a public platform. In the world of investments, you are bound to make mistakes and going wrong is part of the game. Berkshire Hathway was a late entrant in the technology front and they admitted the same. They are slowly moving out of their old school of thought to match with the new shift happening out in the world.

#7 – On Succession plan: Some Questions in the AGM also came around his succession plan and asking to hand over the stage completely to his team of managers. As a person sitting in the audience I felt, it is a bit hard for Warren to leave the limelight but in next 1-2 years his managers will lead the AGM and will find space on the stage rather than sitting in the first few rows of the AGM

#8 – Big NO to IPO: He advised investors to stay away from hot IPO’s that float into the market. His logic is very clear, these companies may have huge growth potential but they have yet not shown or generated profits. There are few companies he named as well who show growth potential but the numbers they are generating are not sufficient for him to make any investment decision.

#9 – Focus on the BIG picture: He used a very interesting metaphor of owning a stock with owning a farm. By simply owning a farm and watching your farm every day won’t yield you any returns. One has to work hard on the farm to deliver the output. Similarly, by watching the stock price every day won’t serve you, the stock price will grow only when the company delivers performance over a period of time. He is again asking you to buy the right stock or equity or fund and hold for a longer time. Some people check the NAV very often, now it is not a good practice at all (stop watching your farm).

Off the stage, things learned from Mr. Ramdeo Agarwal

Ramdeo Agarwal the co-founder of Motilal Oswal has been attending the AGM from the last many years, he looks up Warren as his Guru and he makes a point every year to attend AGM without fail. In an informal set-up, we got a chance to hear his past AGM Experiences, I also met his first PMS client, some fund managers from the US and Singapore.

Signature on One Dollar Note

Mr. Ramdeo shared that at the start when the crowd was small warren use to sign on a dollar for his shareholders. The queue started to expand in the subsequent years and slowly the tradition of giving signature stopped. He still carries the one-dollar note with him when he met Warren for the first time.

He personally checks the arrangements: Even to date, Warren visits the AGM venue one day in advance to check the arrangements. It shows how committed he is to details and giving a pleasant experience to people attending the AGM.

What I learned personally from the event:

Operating from a vision: I and Manish Chauhan, we started jagoinvestor with a vision of spreading financial awareness. The event helped me to ground more powerfully with our life’s vision and mission.
Life Force: Both Warren and his partner are 87+ of Age and they are full of energy and enthusiasm. This is because they see age as a number, they hold their life force high and that keeps them going. Take good care of yourself, exercise regularly, eat well and keep the enthusiasm scale on a high note.
Statue of Compounding: If you look at the wealth graph of warren buffet it has compounded after he crossed the age of 55. Compounding really works, equity markets are sensitive by nature but when you hold good funds or stocks it compounds and helps you to produce wealth. I placed my net worth on paper and I created a game for the next 30 years.
Keep Re-inventing: Warren and his team are constantly re-inventing their approach and style. They are now stepping into companies that are more technology-based. It was an important lesson for me as well, the way we run jagoinvestor and its operations we will continue to re-invent every year. It will be a ritual for us to meet once in a year to introspect and to explore the unknown territories.
Investors meet in a stadium: Yes, it is a dream to fill the entire stadium with investors. It is a dream I saw while I was in the AGM, Questions that kept hitting me were, what can I and Manish do or be to attract people to a stadium. What kind of financial discipline we will have to cultivate to inspire the investor’s community? What kind of content we will have to produce to create space in people’s hearts? The AGM gave me a dream bigger than who we are.
Power of Partnership: I saw Warren and Charlie on stage, two people working on a common mission and both having a very different style. I would like to create the same Magic with my partner Manish Chauhan. We both have qualities distinct from each other, our styles are different and together it helps us to create magic. In the AGM I could learn that partnership creates magic. We need to partner at a deeper level with each other, with our team, business partners, clients, readers, and other interested parties.

My recommendation

The next financial year if you get a chance to listen to the AGM, they show the event live on yahoo finance or if you are in the US I highly recommend you attend the AGM. It is a great space to be in, people get together to celebrate wealth.

I was accompanied this time with some Big time investors, fund managers and the co-founder of Motilal Oswal Group and I see Mr. Ramdeo Agarwal as one of my mentors. He is amazing to be around, spending time with him was a great learning experience.

During the Trip, I made many friends, met many interesting personalities, overall it was a life-altering experience for me.

Our upcoming sessions in Hyderabad and Chennai

One more point – I am going to share some of my learning’s in our two upcoming sessions in Hyderabad (29th June) and Chennai (30th June), if you are in any of these cities, do book your seats for our 3-4 sessions.

How much money is enough for you?

Posted on April 29, 2019November 4, 2019 by Jagoinvestor

Do you know how much money is there in this world?

It’s $36.8 trillion (or 2569 Lakh Crores)

What if you get all this money? Imagine you wake up one day and your bank balance shows 2569 Lakh Crores. However, you also find that you are the only person left on this earth while every other person is missing.

All the malls, all the shops, all the movie theaters, all the entertainment parks, all the jewelry shops, all the real estate, all the fruits and restaurants and everything you can imagine is intact. It’s all available there.

how much money is enough

So what can you do with all that money with you?

The answer is NOTHING.

You can’t do anything, because you can only exchange money with something and if you already have everything available on earth lying there and already available to you, the money just loses its role completely. That 2569 Lakh Crores with you is nothing but trash.

Coming back to our life, at the start we do not have much and money is something which can help us get access to lots of things in life. However, we move from having “Nothing” to “Something” to “Good enough” to “A lot” and then slowly “Almost everything we wanted”

In this transition over years, the importance of money comes down in our life. We already have most of the things we can wish for. You already have a house, a car, nice furniture, a second home, great vacations, eating out, etc. etc.

The Race of Earning Money

While money is very important in life, we are conditioned to think from our childhood that money is the solution to everything in life. We are subconsciously in this race of earning more and more money without setting a target. More is always better it seems.

Note that.

There is a limited amount of food you can eat in this world
There is a limited number of vacations you will take
There is a limited number of houses you can live in
There is a limited number of cars you can drive
There is a limited number of things you need to have a great life

How much money do you need?

5 crores, 10 crores, 50 crores?

I strongly suggest that you need to target a number or a range after careful thought and then let that number define your speed. There has to be a number which is ENOUGH for you.

You will be able to lead a very good, desired lifestyle in that much money.

Trust me you will eat the same thing and dress quite in the same manner if you have 10 crores or 50 crores. Rakesh Jhunjunwala or Mukesh Ambani eats the same thing as you do.

running after money

It should not happen that you keep acquiring wealth in life, and later it turns out to be nothing more than trash.

The Dalai Lama when asked, what surprised him most about humanity, he said:

“Man.
Because he sacrifices his health in order to make money.
Then he sacrifices money to recuperate his health.
And then he is so anxious about the future that he does not enjoy the present;
the result being that he does not live in the present or the future;
he lives as if he is never going to die, and then dies having never really lived.”

So what is the role of money in your life?

You need to define how much money you are targeting to acquire in your life. How much money is enough for you? Are you in a mindless race, acquiring all the money you can imagine and later, think where did my 60 yrs go? Or you are going to define the range which you want to acquire?

Something like “10 crores” is good enough for me once I retire. This is important because whatever time you give to earn money can potentially go somewhere else.

If you are working later hours for money, and coming home at 11:00 pm at night, then it means that you can’t wake up early and go for an exercise.
If you are working in some other city away from your family to earn a better income, it means you can’t spend that much time with your loved ones
If you are away from home during festivals so that you can earn/work extra, that means you are not going to spend that particular time with your family.
If you are not attending a wedding for your close friend, because you don’t want to lose those 6 days of a pay cut, that means that you will have that money, but then you will not have that memory of your friend’s wedding
If you are not taking your family to a nice vacation, then you will have that money in the bank, but you won’t have something to talk about years later when your kids grow.

Just like these examples above, there are multiple instances in life, where we have to decide between using our money and exchanging it with something.

Your Target = 1000 times your monthly Expenses

A simple calculation tells us that when a person accumulates around 400-500 times of their monthly expenses, they have enough to last for another 30 yrs.

This means that if you have monthly expenses of Rs 1 lacs per month, then 4-5 crores is a reasonable corpus for you. Let’s take 1000 times? So for a person, 10 crores if enough to last his lifetime (a very high-level calculation tells us that). In the same way, you should know what amount you are targeting for yourself.

So make sure you are clear about the importance of money in your life. While we have seen that a lot of people are not working hard enough to achieve all their financial goals targets, we see that a lot of people are putting too much emphasis on earning money and spending all their limited time into the race of earning money. While earning money is not bad in itself, make sure you know how much you need in life?

Question for you

I would like to know from you – “How far are you from your target?”. Do you think money has a bigger role to play in our happiness or a smaller role? Please comment below

Note: Note that I am not saying money is not important. I understand and acknowledge that money brings peace of mind, a sense of security and makes us powerful in away. I am only trying to give a perspective about the role of money in life. I am not saying that earning more money is bad or good. So in case you have hate comment, please read the article once again fully and point of the para or line which you want to debate on.

How much tax benefit can be claimed u/s 80D? (Rules + Limits)

Posted on April 15, 2019November 16, 2019 by Jagoinvestor

Are you clear about the tax-saving which you can do when you pay health insurance premiums every year? You will be glad to hear that it’s over and above sec 80C.

Yes, it comes under a separate section called section 80D!

What is section 80D?

Health Insurance policies have become very famous in the last 10 yrs and to encourage it, the govt gives tax benefit when you pay the premium for yourself, your family or your parents

Section 80D defines all the rules and limits related to health insurance premium payment and tax saving.

what is section 80D of Income Tax Act, 1961

How much can you claim under section 80D?

One can claim a deduction of premium amount on health insurance of self + family (spouse + dependent children below 18 yrs.) and parents. If one pays a health insurance premium of his brother or sister then he/she will not be able to claim a tax deduction. To make it more clear, I have mentioned the list of people who will come under this benefit –

Self
Spouse
Dependent Children (below 18 yrs.)
Parents

How much you can claim Tax benefit u/s 80D?

You can claim a maximum Rs. 25000 of the deduction for premium paid on health insurance of you, your spouse and children (under the age of 18 yrs.), if you are below 60 years
The same amount of Rs. 25000 you can claim for deduction of premium that you pay for your parents (father+mother).

And if the age of you or your parents is above 60 years then the limit will increase to Rs. 50,000/- in each case. In the above limits, exemption of Rs. 5000 for yearly health check is included.

For getting a clear understanding of the calculation part you can refer the info-graphic given below.

these are the tax benefits u/s 80D

image on 80D exemption limit

Let us now understand this through some examples –

Case 1 – Ram (35 yrs.) with a spouse and 1 kid + parents (mother 55 yrs. and father 57 yrs.)

In case 1, Ram pays a yearly premium of Rs 15000 (for self+spouse+1 kid) and Rs 34000 (both parents). So now let us see how much exemption Ram can claim u/s 8oD.

As self + family exemption limit is Rs 25000 and Parents exemption limit is Rs 25000. Then Ram can claim exemption of Rs 40,000 (15000 + 25000) u/s 80D.

Case 2 – Rakesh (48 yrs.) with a spouse and 2 kids + parents ( father 75 yrs.)

In case 2, Rakesh pays a yearly premium of Rs 32000 (for a self+spouse+2 kids), Rs 63000 (for father) and Rs 8000 (preventive medical check-up). So now let us see how much exemption Rakesh can claim u/s 80D.

As self + family exemption limit is Rs 25000 and parent (senior citizen) exemption limit is Rs 50,000. So, Rakesh can claim exemption of Rs 75,000 (25000 self + 50,000 parent). As Rakesh has already exhausted his self exemption limit so he won’t be able to claim his preventive medical check because preventive medical check is already included in the self exemption limit.

2 Benefits into 1

I think getting tax deductions on health insurance is a wonderful thing. Health Insurance in itself is a very important financial product most people should buy and you are also getting some tax benefits on it. So, do buy health insurance for yourself, your family and parents to protect your wealth and save tax.

Let us know your views in the comment section about this article.

Should you buy 2nd house as an investment? (28 min video discussion)

Posted on April 2, 2019November 4, 2019 by Jagoinvestor

I along with my teammate Sagar, recorded a 28 min video discussion related to this topic – “Should you buy 2nd house as an investment?” yesterday. We talked about various pros and cons which are often missed by those investors who are thinking of buying the second house for investment. Watch the video below

What we discussed in this video?

When does it makes sense to buy a 2nd house?
How does it impact your cashflows and stress level?
Why are investors so attached and attracted to buying “Real Estate”?
What are the real-life issues which investors face after buying the 2nd house?
Is it an emotional decision or a financial decision?
Why buying just 1 hour is enough for 95% of investors?
Why illiquidity is a big issue with buying a 2nd house?
How 2nd house can create a good second income, and in which cases?

Do let us know if you have any comments after watching the video!

Don’t keep too much money in your saving bank account – Here are 2 strong reasons !

Posted on February 21, 2019November 4, 2019 by Jagoinvestor

Today I want to talk about a mistake which we are all guilty of at some point of our life – “Keeping too much money in saving bank account”

I can understand how confident and great we feel when we know that we have a big amount in our savings bank account and if required we can just walk to the ATM and get the money within minutes. Nothing can beat that feeling !, however, there are some downsides to it too.

Should you keep too much money in your saving bank account or not?

I want to talk about 2 problems (one small and one big) associated with keeping too much money in your bank account today.

You must be thinking, how can keeping money in my account be a problem? After all, more money into account is a good thing – RIGHT?

Let’s see

Problem #1 (small problem) – Negative Real Return

Let’s talk about the small issue first.

The money in your savings bank account earns a small interest of just 3.5% per year (in most of cases). Inflation is around 7-8% on average and if you consider that, you are actually earning a negative real return (real return = return – taxes – inflation).

So your purchasing power is only diminishing over time. What you can buy in the future is less than what you can buy today!. If the excess amount you keep in your saving account is very small, then you can dismiss what I said because the excess money in a way serves as your emergency fund, but when you keep big amounts, its an issue.

Impact of inflation on returns

Don’t keep too much money in savings accounts

I have seen investors keeping a very large amount in savings accounts for a very long period of time.

We recently saw the data of one of our client, and he was having 90 Lacs in his saving bank account from the last 4 yrs. He had sold his house because he wanted to purchase a new house, but then he did not finalize the new house for a long time and never invested that money for better returns. It just did not hit his mind! (not taking any action is so EASY)

So he earned just 3.5% on that 90 lacs for 4 yrs, which is around 13.2 lacs of interest (without considering taxes). If only he had put that in a liquid mutual fund or a fixed deposit, he would have earned 26.2 lacs as interest (without considering taxes again).

Which means that he said NO, to that potential extra 13 lacs by just leaving that big amount in his saving bank account.

Now in your case, the quantum of potential loss will be only to the extent of the money you have in your account.

A lot of us, don’t keep 90 lacs in saving bank account (do we even have that much networth?), but its not very uncommon, to see large amount like 3 lacs, or 8 lacs lying in saving bank for many months just because the investors does not calculate the potential loss, or is just lethargic of breaking the status quo (I think, this is the real issue)

What you can do to solve this issue?

The simple approach you can take is, that apart from 4-6 months of your monthly expenses, you can park rest of the money at least in short term debt mutual funds (earns around 8% per annum, with better taxation than a FD) and deploy the rest amount as per your financial goals in other avenues and let it go out of your bank account and your sight.

The 6 months’ worth of emergency fund can be broken into 2 parts, where you can keep one part in saving account and other parts into a liquid fund (earns 6.5-7% and available in 24 hours notice). This is a far better arrangement compared to just leaving all the money in saving bank account.

Problem #2 (Big problem) – That excess money gets SPENT unconsciously

I don’t see many people talking about this 2nd point often and its related to behavioral finance. This is a very big topic, which deserves a whole book, but I will try to cover it quickly here.

Money is like water, it finds its own direction, if you don’t give it one!

Our mind works in a very different manner when we have money lying in front of us. Supply creates its own demand is one of the principles of economics and very much applicable to money. If you have money in a savings account, you can be sure that your mind will come up with every possible reason to spend it.

So if money is lying around in your saving bank account, which can be easily accessed then,

Your TV will look old enough to you and your mind would like to upgrade it for a bigger one
That Amazon Cart will automatically have those unwanted items which you really don’t need (but you feel you need it)
You will feel that you can easily afford to give a bigger and fancier gift when you are invited to a marriage
Those swiggy / uber eats orders will never stop
The next vacation will feel within the reach somehow
The eating out will often happen

In short, your spendings will increase sub-consciously

The human mind is very interesting. You always feel that you are in control of your spendings, but research on this topic has shown that we humans are our own enemy. It’s extremely tough to be in control and think rationally about spending’s especially when you have the excess supply of money.

Your environment and which kind of situation you are in, mostly decides how you will behave and think, not rationally! (you need to exercise right? Did you wake up in the morning and go for the jog if that’s the rational thing to do?)

Let money go out of your bank account automatically each month

The beautiful thing about a recurring deposit or SIP is that it takes away a part of your money out of your sight and makes it tough for you to access it. It creates wealth for you because your manual intervention is not involved in it. You are not taking manual decision each month if you want to save it or not. I don’t claim that manual investing is superior or not, but it looks great on paper, but not in reality.

If you are struggling to save each month, I think 90% of the reason is that you might be trying to do it manually, thinking – “I will save something for sure if I am left with it at the end of the month” . Trust me it will not happen.

Pay yourself first equation

We have had clients, who tell us that they are surprised after 2-3 yrs when they accumulate so much wealth, which happened only because they started a SIP and nothing else changed in their life. It’s a structure that automatically helped them in their wealth creation. Its the battle half won when you want to create long term wealth for meeting your financial goals.

Paytm, Amazon Pay and Cashbacks!

Have you observed that the money you add in your paytm wallet, Amazon Pay or similar wallets gets spent without guilt and so fast. The moment you add it in Paytm or other wallets, you look at that money in a very different way. It’s now “available” for spending (that’s called mental accounting). Well, this is a topic in itself, but I wanted to just make a point that when money is not visible, you think about it totally differently.

Listen to the below podcast to learn more about behavioral finance (its an audio uploaded on youtube) which I did along with Siddhartha K Garg.

You become a bit careless with money and don’t think too much when you have Rs 2,34,965 in your bank account compared to say when you have Rs 12,500.

What you can do to solve this issue?

Here are a few things you can do.

Start your SIP / Recurring deposit 2-3 days after your salary date for your financial goals.
Keep minimal amount in your saving bank account (unless is needed in next few days).
Open a Liquid mutual fund folio, just to transfer the extra cash, and whenever you need it, you can redeem it and get the money in 24 hours
Don’t keep more than 6 months of expenses in your liquid mutual fund.
Try to use cash, if possible and add only small amounts in online wallets.
Artificially create the “Low account balance” especially, when your spouse or you yourself are a shopaholic
Do your financial goals planning and be aware of the future targets to achieve, it will help to know if you are lagging behind in reaching your financial goals
Try to forcefully lock your money in financial products just to win over your ‘lack of self-control’

These were two common problems with having too much money in saving bank account or by any other means. It’s always a great thing to let money get locked somewhere (only that part which is not needed for long term).

What are your views about his topic? Do you agree with what I said?

How to unlink Aadhaar from Bank, Digital Wallet & Other Service Providers?

Posted on January 3, 2019November 16, 2019 by Jagoinvestor

Good News!!

The Supreme Court has ruled that citizens of India do not have to link their aadhar number to a range of services such as bank account, mobile sim, digital wallet (paytm), passport, etc. However, the Supreme Court has said that biometric ID is mandatory for accessing social welfare schemes and subsidies such as, LPG subsidy, Jan Dhan Yojana, etc.

aadhar card linking

Last year a lot of stress was there for having an Aadhar card and urgently linking the aadhar to avail public and private sector services. That panic state in the country made us link our aadhar with a bank account, sim card, investments (KYC updation) and whatnot.

After all, there so many questions were raised on the basis of the Right to Privacy and Right to avail the basic services which should not be stopped on the question of not having aadhar card number.

There were so many news such as,

After all these, the verdict of Aadhar not mandatory has been passed.

So, now it is a good news for those you never had an aadhar and never got it linked with anything. However, for those who have linked the aadhar with their private accounts and are concern about their private information getting hacked, may delink the aadhar.

Process of Un-linking

Now, the question arises is it so easy to delink? Do I again need to stand in the queues at post office and banks for hours for delinking my aadhar? The answer is NO. Because, Aadhar delinking is optional and not mandatory. If you feel insure that your private information may get leaked than you should delink your aadhar number.

Below given are the processes of delinking aadhar from Post Offices, Bank, Digital Wallet, and Mobile operator.

1. How to unlink aadhar from Bank Account

Before proceeding to unlink Aadhaar from Bank, first, make sure that your Bank Account is not linked for any DBT (Direct Benefit Transfer). If you unlink the Aadhaar with the bank which is linked for DBT (like Gas subsidy), then you may not receive the DBT money in your account. Hence, try to unlink Aadhaar from bank cautiously. Following are the steps for delinking aadhar from bank.

Visit your branch
Ask customer service to give you Aadhaar De-Link Form.
Submit the de-link form
Within 48 hours your Aadhaar details will be de-linked from your bank account.
Cross-check after 48 hours whether it has been de-linked or not.

2. How to unlink aadhar from Post Office Account

For delinking aadhar card number from post office accounts, you just need to submit a form of delinking of Aadhar Number. This is how Indian post office payment bank de-link form looks like.

how to delink aadhar from post office schemes

3. How to unlink aadhar from digital wallets such as Paytm, Mobikwik, Freecharge

Call the customer care and ask for the procedure to de-link.
You will receive an e-mail to attach a soft copy of your Aadhaar.
After sending the e-mail, you will receive a reply stating that within 72 hours (depends from company to company) your Aadhaar will be de-linked.
Cross check again after 72 hours with the customer care.

4.How to unlink aadhar from sim card companies such as jio, Vodafone, idea, etc.

Call the customer care and request for unlinking aadhar.
You may be asked to send an e-mail with a request to de-link your Aadhaar details.
Once you send it, then they will send you the confirmed message of unlinking Aadhaar.

There might be some difference in the process of delinking for every service provider. Because as of now there are no standard rules set up for delinking. So, you may directly contact the customer care of the service provider and they will guide you on the exact process.

Please feel free to comment on how fruitful this article was.

Joint Home Loans – The Pros, Cons and Myths!

Posted on November 15, 2018November 18, 2019 by Jagoinvestor

Buying a house isn’t easy today if you are living in a metro city like Mumbai, Pune, or Delhi. It’s nearly impossible to pay the full price of a house unless you have massive savings or an existing real estate that you can resell. This is the reason why most people take home loans, or rather joint home loans.

joint home loan

What is a Joint Home Loan?

As the name implies, a joint home loan is a home loan that you take with another person, who is usually your spouse or a sibling. There are many reasons why people avail of joint home loans instead of standard home loans, one of which is bad credit.

Let’s understand why.

No matter what kind of loan you apply for, the lenders always check your credit report to assess your creditworthiness. This a standard practice to reduce the risk of non-performing assets. So, if your credit report looks fine which means that you don’t have a history of late payments, loan defaults, etc. and your credit score is high, then you can avail a loan easily.

However, if that’s not the case, not all hope is lost as an alternative option exists! That’s when you can get a co-borrower to take a home loan with you. If their credit score is good, then it can balance yours and make it easier to get your loan approved.

People also take joint home loans when they aren’t capable of repaying the full amount on their own. By dividing the loan’s burden with their spouse or a family member through a joint home loan, the debt can be repaid easily. Now that you know what a joint home loan is, let’s take a look at some of the major pros and cons of the same.

Pros of Joint Home Loan

The chances of getting a home loan at attractive interest rates are much higher in a joint home loan compared to the regular home loan.
You can get larger amounts in a joint home loan that can help you afford an expensive property.
As per the income tax regulations, joint home loans allow both co-borrowers to claim tax benefits under Section 80C. They each can deduct up to 2 lakh INR from the interest amount and 1.5 lakh INR from the principal amount from their taxable incomes.
If you are unable to get a home loan due to poor credit score, then a joint home loan can be your best bet.

Cons of Joint Home Loan

If your co-borrower in unable or simply refuses to pay the EMIs, then your credit report apart from theirs is affected.
Joint home loans can raise all kinds of legal problems if the co-borrowers are married to each other and get separated by divorce even as home loan remains to be repaid. If the property is registered in the name of one co-borrower, then after the loan has been fully repaid, he/she will become the rightful owner even if the other co-borrower has also paid their share of the EMIs.

Common Myths About Joint Home Loans

A joint home loan is a massive financial obligation. Apart from the huge EMIs that are particular to these loans, the tenures are not lesser than 15 to 20 years which means you pay the EMIs for a large portion of your life. Thus, it’s a good idea to do extensive research before you finally start submitting applications for a joint loan.

It would help if you also were wary of some of the most common myths about joint home loans that mislead borrowers:

Myth #1: A Co-Applicant is Required Just for “Formality.”

A co-applicant is as much responsible for a loan’s repayment as the primary borrower. In other words, signing on the dotted line imposes legal and financial obligations which is why it’s strongly recommended that both co-applicants read the fine print and ask as many questions as they need until they have a good understanding of the agreement they are about to enter into.

Myth #2: Only One Co-Borrower Can Receive Tax Benefits

People think that in joint loans, only one of the co-borrowers can receive tax benefits. However, this is further from the truth as both co-borrowers are equally entitled to these benefits. This means that you and your co-borrower both get to enjoy lower individual taxable incomes. That said, you must know about Section 24 of the Income Tax Act which sheds light on taxation in joint loans.

As per Income Tax guidelines, a co-borrower can claim tax benefits only if he/she is also a joint owner of the property. This clarification is important because many times, people take joint loans to increase the loan amount and make the process easier. However, merely being a co-borrower doesn’t make you eligible for the tax benefits. You must have ownership rights over the property as well.

Myth #3: Roping in a Co-Applicant is a Sure Shot Way of Getting a Home Loan

It’s true that it’s easier to get a home loan with a co-applicant compared to when you apply just by yourself. However, there is no guarantee that you will get approved for a loan. This is because home loans are highly risky for the lenders, even if they are secured against the homes they are availed for.

So, a co-applicant can’t help with the application if they don’t contribute to your “creditworthiness”. In other words, a co-applicant can make it easier to get a home loan only if their credit score is high and their income big enough to cover the EMIs.

Failing to Prepare is Preparing to Fail!

Joint home loans have their pros and cons as explained above. However, there are many other factors that you must consider including the interest rates, income, financial projections for the future, and buying a new home vs. an old home. After all, once you borrow money from a bank, there is no turning back. So, take your time and pick the right loan at the right time. Good luck!

His journey from 0 to 1000 crore (What you can learn from Master Equity Investor?)

Posted on November 10, 2018November 18, 2019 by Jagoinvestor

The article is close to my heart.

In the article, there are no tips and tricks on how to make 1,000 crores overnight. The article is about engaging with some powerful questions and not trying to find an immediate answer to create wealth.

The article is not about creating crores, it is about shifting your focus from markets to learning from the master investors- All I want is a shift in your mindset. Markets will continue to rock, your only job is to work on your mindset to create massive wealth.

How Investors should think when markets correct?

Right now a lot of investors, advisors and mutual fund companies are focusing only on the market volatility, Fall in NAV, portfolio return, some think markets are like a bloodbath, some are in the mood of stopping their SIP, some are in the mood of redeeming money, sharp corrections, on the other side mutual fund companies and advisors are asking investors to stay patient with their investments and encouraging them to invest more.

In short, some are positive and some are extremely negative about the situation we are into.

But……

There is very little focus on how master investors think when markets correct. There is very little focus on inspiring the wealth creation journey of master investors. There is very little focus on how successful or master investors behave and act during market turbulence. We all start from zero and it is important to think and observe winning or master investors as we continue to walk on our journey of wealth creation.

Wealth Creation Journey of Mr. Ramdeo Agarwal

In the personal finance world, I have many teachers, there are many master investors from whom I continue to learn and get inspiration from. I am always like Eklavya, who keeps learning from different teachers from a distance and I will always continue to learn and absorb the maximum I can.

Mr. Ramdeo Agarwal is the Co-founder of Motilal Oswal group of companies, his journey of wealth creation transformed after meeting his mentor Warren Buffet. I never miss to read his wealth creation studies and there is not a single YouTube video I have missed in which he has featured.

I got an opportunity to be in the same room with Mr. Ramdeo Agarwal Ji in the US, my friends took a picture with him but I did not. I was having thoughts like, let me first do something amazing in life, let me create immense wealth using equity as a vehicle, let me help others to get wealthy by educating them on equity investments.

I should perform as a student first and earn the privilege of sharing a photo with him.

The POWER Questions I engage with about my teacher ( Mr. Ramdeo Agarwal Ji) are?

How does he (Mr. Ramdeo Agarwal) create wealth?
How does he maintain his conviction in the equity market?
How he stays on the court, no matter where the markets are?
How does he build his business empire around equities?
How does he stay so consistent with his investments?
How does he deal with losses in his portfolio?
How does he feel when he makes huge profits?
How does he stay committed to the process of wealth creation?
How does he practice the power of compounding in his day to day life?

Initially, I was busy to get answers to the above questions but after hearing and reading about Mr. Ramdeo Agarwal and his style of investing I came to know that the real secret is not in getting the answers, the real secret is in staying engaged with the questions, it is about staying engaged with the journey of wealth creation. It is about having your own investment philosophy, it is about allowing the power of compounding to do its work.

It is about finding your own process of wealth creation and keep refining it. It is about doing something over and over and over and over again and if something does not work for you, you make changes in your process and continue to move forward in your journey of wealth creation.

Most newbie investors feel and think that master investors have something SPECIAL in them, they do something special to create wealth, they have some special knowledge or special skills. In reality, the only thing special about them is they do not look for ANYTHING special. They master consistency, repetition and stay focused on their path. They won’t allow any kind of outside noise to deviate them from their journey of wealth creation.

I invite you to read the pdf if you have read it before I invite you to read it once again. The PDF is old by now his personal net worth must have crossed a few more thousand crores. While you read to keep the above questions in front of you, do not look for special qualities or some special information from the pdf. From time to time we will continue to share other master investors from whom we can learn and inspire from.

Teacher and His Meditation Student:

Lastly, I want to leave you with a conversation, a student had with his meditation teacher.

A student went to his meditation teacher and said, “My meditation is horrible! I feel so distracted, or my legs ache, or I’m constantly falling asleep. It’s just horrible!”

“It will pass,” the teacher said matter-of-factly.

A week later, the student came back to his teacher. “My meditation is wonderful! I feel so aware, so peaceful, and so alive! It’s just wonderful!’

“It will pass,” the teacher replied matter-of-factly.

The market correction will pass away!

You have the power to create massive wealth

You really have the power to create massive wealth, almost everyone starts from zero or from a scratch and on one fine day they become an inspiration for others. Choose to be an inspiration to others, the article is not about Mr. Ramdeo Agarwal Ji, or how much money he has made.

It is about learning from the master investors and taking your financial journey to the next level. Create your financial journey more meaningful, stick to your mission of wealth creation and if that’s the game you will never bother where the markets are going. You will see every situation as an opportunity to create wealth.

Invitation: Check your Financial Health score?

(Check if you are capable to build Rs.1000 crore net-worth or not?)

Invitation to Check your Financial Health Score: During Diwali everyone gets HIT by the euphoria of shopping and buying new stuff, we invite you to check your financial Health score this Diwali, all you need to do is leave your details in the below link and my team will help you to check your financial Health score out of 100. After checking the score you will gain clarity on areas which are not working and areas which call for your immediate attention.