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.
(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.
In the world of mutual funds, there are various kinds of categories for different requirements and risk appetite. One of the categories I want to talk about today is the “Balanced Advantage” Category.
What are Balanced Advantage Mutual funds?
In one line, a balanced advantage fund dynamically shifts between equity and debt depending on the market valuations. What it means is that when the markets are over heated and high, the fund decreases its exposure to equity and move the money into debt, so that if the markets fall, the down side is protected.
This strategy significantly reduces the volatility of the fund compared to an equity fund and at the same time, the returns potential also comes down.
A lot of funds in this category also name their funds as “Dynamic Asset Allocation Fund” rather than “Balanced Advantage”
Some of the examples of the funds in this category are
ICICI Prudential Balanced Advantage Fund
Motilal Oswal Most Focused Dynamic Equity Fund
Aditya Birla Balanced Advanced Fund
Kotak Balanced Advantage Fund
Reliance Balanced Advantage Fund
HDFC Balanced Advantage Fund
How does a Balanced Advantage Mutual fund work?
A balanced advantage fund uses a predefined algorithm and based on Market PE or P/BV or some other internal indicator to determine if markets are on the higher side or lower side and then based on that they keep increasing or decreasing the equity exposure.
To explain you more about this, I will take an example of how the ICICI Prudential Balanced Advantage fund which was the first fund of this type in the mutual fund Industry and very successful in that category.
Disclaimer : I am taking the example of ICICI balanced mutual fund only because it’s the biggest in the category and quite old one in Industry and we have some data to show. It’s not a recommendation to buy. We have some equally good funds from other AMC’s also.
Below you can see how the equity exposure has changed over time from Apr 2010 – Sept 2014. You can see that equity exposure increases when Sensex levels go down and vice versa.
Limits downside and upside
The main benefit of Balanced Advantage funds is that it controls and extreme upside or downside. So you will not see very deep losses, but at the same time, you will also not see very high profits.
However, the balanced advantage funds will provide decent market returns (but not comparable to pure equity funds)
Even in the flat markets, you can see that the balanced advantage category has generated positive returns by taking advantage of the volatility.
Who should invest in Balanced Advantage (or Dynamic Asset Allocation) funds?
Now the big question is – Which kind of investors should invest in Balanced Advantage fund and When?
Who should invest?
It’s mainly for those investors whose focus is on reducing the risk, but at the same time enjoying better returns than Fixed Deposits. The fund value will still be volatile, but the intensity will not be as high as a pure equity fund. From Returns point, it will give decent return of 2-3% above FD returns, but that is all you should expect over a long term.
When to Invest?
As you have seen that the equity exposure is already controlled by the fund itself, you can actually invest anytime you want. There is no need to time the market, because the fund itself times the market internally. There are no issues if you want to put lump sum or SIP.
Who should not invest?
An investor who wants higher return potential and can take the higher volatility, should not be ideally investing in these funds. However, if you are unsure of the markets levels and want to play safe, you can invest lump sum in balanced advantage fund and then setup a STP (Systematic transfer plan) to an equity fund. This will reduce the risk to some extent.
Important: Don’t confuse this category of funds with “Balanced Funds”. Balanced Funds are those mutual funds that have a mix of equity and debt in their portfolio with equity exposure of around 65-70% and rest Debt.
A good choice for Retired Investors
I think these kinds of mutual funds are a very good choice for retired investors who want returns better than the fixed instruments and at the same time, can’t handle too much volatility in their portfolio. So some part of their portfolio can surely be invested in balanced advantage or dynamic asset allocation funds (same thing, but different name)
If you want to invest in balanced advantage mutual funds, you can contact the Jagoinvestor team to know the process and get a well-designed portfolio.
Let me know if you have any questions regarding this fund of a mutual fund? Was it clear enough?
We are happy to announce, that our next full-day workshop in Bangalore is scheduled for 16th Sept 2018 (Sunday).
We invite you to come and participate with your friends and family. It is an opportunity for you to block one full day for your financial life where you get a chance to work on your financial life. We do not teach tricks and tips to build wealth, but in fact we help you to discover your own personal process of creating wealth.
Why we do these kinds of offline event/workshops?
We do these events because they make a positive difference in people’s financial life. The conversations we do, create an impact on people’s thinking and they are able to re-invent themselves as an investor. The event is not about financial products and numbers, it is about learning and mastering the principles of wealth creation. It is about learning realizing your past mistakes and about creating a powerful future for yourself.
Register for Bangalore workshop on 16th Sept 2018 (SUNDAY)
Ticket Type
Pricing
Ticket Link
Single Ticket (Early Bird)
(First 10 tickets only)
Let us share our survey findings (Survey was done on 10000+ Investors)
We did a survey with more than 10,000 investors some time back and here are the results of the survey.
The survey is LOUD and CLEAR – It’s time to re-invent
The theme of our workshop is going to be re-invention, you will get a chance to examine your financial life and will explore ways to re-invent your financial future.
The results from survey seem alarming and the best gift we can to the investor’s community is our workshop Your real wealth is your clear mind as once the mind is clear all the good decisions will happen on its own, the workshop will leave you with a clear mind and with new openings of action.
Our Vision to do Workshop in different cities and organizations
This year we intend to do the workshop in maximum cities and in more and more organizations. The content and design of workshop are powerful and we want the workshop conversation to touch more lives. If you want to do a workshop in your city or in your organization you can share your details in the below Google form, we will get in touch with you at the earliest.
It’s time to add Jagoinvestor workshop to your financial journey
It has been a few years now conducting “Design your financial life” workshop and each time it has been a very fulfilling experience for us. It is a wonderful space to be in, in which the group learns and starts to fall in love with the process of wealth creation.
This time we want more and more couples to participate so that they can get on the same page when it comes to personal finance. It is extremely important that the husband and wife both take an equal interest when it comes to money management. We are offering a special discount to those who want to come with their partner. (You can even come with your parents, siblings or friends and can claim the discount)
The workshop we conduct is highly interactive, it has lots of activities and fun exercises which help you to discover your relationship with money. The sessions are interactive and very easy to grasp for any kind of investor, beginner or advanced. In short, there is something for everyone in this workshop.
If you have never participated in any personal finance workshop let this one be your first experience. If you have any questions you can write in the comments section or you can email on [email protected]
When you go for fill up petrol or diesel in your car/bike, you have an option to fill the normal fuel or high-performance fuel often termed as Speed, Power, Xtra mile, Turbojet or Hi-speed etc in the Indian Petrol pumps.
Today, I will share with you a kind of fraud/scam which is going on in petrol pumps on the name of these high-performance fuels and you will also learn if it’s really useful to use this high-cost version of petrol/diesel in your vehicle or not!
Because I educate you on the topic, I want to start with the cheating part first, which happens on the petrol pump!. The reason I am calling it a scam is because it is done with the intention of cheating the customer to make higher profits.
Petrol pumps give you “High-performance fuel” without asking you
Some days back I went to a petrol pump to fill petrol in my car. I kept my eyes wide open and made sure that the meter shows ZERO (read about zero meter scam on petrol pumps here), and no distraction is there and no one scams me.
As I was about to leave, I realized that the nozzle used to fill petrol was kept in the section which said “Speed”. When I enquired if they have filled the high-performance fuel in my car, the answer was YES.
When did I ask WHY? , they said that I should have mentioned that I wanted normal petrol.
So now you know the scam here..
Its common sense that by default petrol pumps should be giving us normal petrol and only if the customer wants/agrees, they should fill high performance/cost fuel. But here, they had made the costly fuel as the default choice and without even telling you they fill costly petrol/diesel in your car/bike.
A customer never pays much attention to which fuel was given to them and assumes that its normal/cheapest version of fuel.
There are many other scams which happen at petrol pumps, but I think is a much bigger scam, because this is so subtle, that almost everyone falls for it (without even knowing about it). Just think about it, even if 5% of people are scammed into buying high-performance fuels, it’s millions of litres and millions of extra revenue/profits for petrol pumps/companies.
What is High-performance fuel?
It’s very important to understand what exactly is high-performance petrol or diesel, to understand the whole game.
Branded high-performance fuels like SPEED and POWER are normal petrol with an extra additive/detergents added into it. These additives enhance theoOctane ratings for petrol.
The Octane rating is the petrol’s capacity to burn at higher compression ratios without knocking. Every engine has a unique compression rating and hence based on the compression rating, the manufacturers suggest the exact type of fuel to be used for the car.
99.99% cars/bikes in India have engines which only and only require normal petrol/diesel because its octane value is the same which is required by the engine of these cars.
In fact, you will be surprised to know that car manufacturer such as Maruti, Hyundai, Tata, Toyota, Ford, Skoda, Mercedes, BMW etc. strongly discourage the use of premium fuels in their cars and in fact its also written clearly in the car manual book too. This thread discusses everything about high octane and fuel performance if you want to learn about the topic.
If you also talk to qualified service engineers at the service stations, they also recommend using the normal fuel instead of these high performance versions.
Problems of using high performance fuel in normal car
Can you believe that use of high octane petrol (the costly high performance fuel) actually cause problems in the engine, instead of helping the engine?
If you use petrol which is having a higher octane level than what is recommended, then because of extra additives in the petrol, it is only going to cause unwanted settlement of these additives in the engine – no added benefits in terms of mileage/performance.
If you use petrol having lesser octane than recommended, the petrol will knock and cause damage to engine. Further, the anti-knock sensor will cause the engine to slow-down and the timing of the engine will be wrong causing decreased mileage.
The normal petrol which is available in the market is actually fit for the engines in most of the cars sold in India.
Some car owners have reported excessive exhaust smoke after using premium diesel. A few others have complained of damage to components in the fuel delivery system, including the fuel injection pump and fuel injectors. Modern common-rail diesel engines operate within fine tolerances.
Your motor was engineered to consume regular diesel only. In the worst case scenario, you might end up with damaged mechanicals due to premium diesel. In the best case, you won’t gain anything. With premium diesel, you have a lot to lose, and nothing to gain.
Video about High-Performance Fuel vs Normal fuel
I want to especially see this video by Mr Amit Khare of fame Ask Carguru Channel, which is an excellent source of all kind of information and knowledge about automobiles in India. A few months back, when I was watching this video, it was new learning for me and I decided that I will write an article about this soon on this blog.
The video is in Hindi and I am a fan of Mr Amit because of his simple language and engaging style of talking. Do listen to the following video for sure.
Why do petrol pumps sell high-performance fuel?
In one word – “High Profits”
Remember, that Petroleum companies and Petrol pumps both are “for-profit” businesses. They are there to make money and they will do all the things which increase their profitability. The petrol and diesel prices are regulated in India and no petroleum companies can decide the price of fuel on its own.
However, they can always decide the price of enhanced fuel because it’s their own formula and they are free to price it. Petrol pumps also get better margins when they sell high-performance fuels.
High-performance fuels can cost anywhere from 3-4% higher than normal fuels. In some cases, very high-performance fuels can be even 20% costly.
At the time of writing this article, the price of petrol/ltr in Mumbai was like this
Normal Petrol: ₹ 84.67
: ₹ 87.48
: ₹ 105.01
Which means that by selling high-performance fuels, the profits which these companies profit margins can literally shoot up by a big percentage. No wonder why they never share the secret.
When should you fill high-performance fuels in your car?
Very simple, if you have a car/bike which has a high-performance high-compression engine such as BMW / AUDI and superbike’s, then you can use those costly fuels and they will actually perform better also, but otherwise you should just stick to normal fuel only.
Do let us know if you liked this article and if it helped you to break your myth about high-performance fuels. Also if you have anything to add into this article, do let us know in the comments section.
A few days back, I was sitting with financial planning in our Pune Office and we did a very detailed discussion on his financial life. We looked at various parameters and did basic number-crunching which gave a deeper understanding to this client about financial status.
The first step was to record all his financial details in one place and that exercise alone took more than 40 min because it’s a task in itself to just bring all the financial details in one place.
For the next 2 hours, the husband and wife were totally into discussing some of the aspects of their financial life which they had never thought of or never dealt in detail. It was a wonderful experience in itself.
2000+ Families have gone through the process
My team has done this same exercise with more than 2,000 families to date across the world (Indian residents and NRI’s). Most of these discussions have happened online and few of them have happened face to face. But overall, what matters is the interest and dedication of the client and not the medium of communication.
While we were doing this exercise with the client, I thought that there are many things which are so common among the clients we deal with. I can see a lot of things which get repeated all the time and there is a pattern with the majority of the cases.
So I thought why not share some of common observations and I made a list of 10 points which is true for almost 80-90% of the clients we have dealt till now.
These 10 points will give you a good idea of how a typical financial planning case looks like and you can also check if these points are true for you or not.
Let me put these points now one by one.
1. No idea of their exact expenses
One thing which is most common is that most of the people do not have much idea of their own expenses and how much they are spending in different categories. Now you will feel – “How is it possible, that a person does not know their own expenses?”
The point is that most of the people have a very vague idea of how much they are spending on various categories because most of the people do not note down and follow a stringent budget. People have a high-level idea for everything, but once they put down all the numbers – They get surprised on their own expenses and feel like – “Ohh .. I spend so much!!, Never realized that”
2. The legacy of LIC policies
Almost everyone who comes to us for financial planning always has 2-3 LIC policies which were taken long back for tax saving purpose. If not for tax saving purposes, it was bought by their parents and they are now continuing it and paying the premium.
They have a high-level idea of the Sum Assured and when it’s maturing and hardly a few people recall the exact policy name.
3. People are Surprised
When we do the detailed analysis and show where they stand in their financial life (backed by data and proper reasoning), most of the people are surprised on how bad or how good they are doing.
Mostly we all are so consumed in our life that we never realize the status of our finances. We have a very fuzzy understanding if things are going bad or good.
Some of the people realize that they are worrying too much, where as they are well placed and are on right track (very few people are like that) and majority of people realize after meeting us that they have underestimated how bad they are in their financial life and its HIGH time they need to quickly take action.
4. Confused on how much they would need to retire today
When we discuss their retirement planning, almost everyone fails to reach a number which will be enough for them to retire today.
Just think about it.
If I ask you today that assume you retire today and you have to spend another 30-40 yrs of your life without any debt or EMI burden and no commitment like children related expenses. Assume you are 60 yr old today, and now need a big amount to live your life till you die, how much money would you need?
Just think about this for yourself and you will realize that it’s a tough question to answer. Will it be Rs 2 crore? 5 crore? 10 crore?
5. No clear Financial Goals in life
Most of the investors we see are mostly living in present and dealing with financial goals as and when they arrive. They know they would need “lots of money” in the future. But almost no one has properly planned for their financial goals.
One of the couples we met recently wanted to plan for their kid’s related goals. The wife was clear that the education was the biggest goal, but the husband was confused if they should also plan for the Marriage goal or not.
6. Decisions are taken based on “Instant Gratification”
We see that almost everyone has taken lots of decision-based on “instant gratification” or “the short term benefit” . Someone called from the bank and said they will save tax on a product, and they buy it.
The gold prices were rising and it “felt” right decision at that moment, so they bought lots of gold and not from the last 4 yrs gold has given a 0% return.
Like this, we see that decision is not carefully thought of with all pros and cons, but rather a very narrow approach.
7. “I could have done much much better” – The feeling of Regret
Every 1 out of 2 people we dealt with told us that they regret what they have done with their finances in the past and they wish if they could have done things differently.
More than doing “right things” , these people have done many “wrong things” and that has a higher impact (in a negative sense) in their financial lives.
8. The biggest part of Net worth is the House on loan
Almost always the house was the biggest part of the net worth, not the mutual funds, or stocks or fixed deposits .. I think it’s because we mostly deal with middle class or upper-middle-class salaried investors and the house is generally there in the portfolio.
Almost everyone had a big home loan.
9. Too many financial products
Another common issue which we see in most of the cases is that they have too many financial products. Many Fixed Deposits, many LIC policies, too many mutual funds (if any), various policies.
These people are more of product collectors who have added something new in their financial life each year when the tax season comes or whenever they had surplus money.
This is one reason that their financial lives get very complex.
10. Unable to meet Financial goals with current resources
When we check if these investors will be able to achieve their financial goals or not. We find that most of the people are not going to reach their goals easily .. and in some cases, they are seriously short of money and are in very bad shape.
It’s like a disaster waiting to happen. Investors are already in the age range of 40-45 yrs. They have some portfolio, but looking at their financial goals, it feels like they will be able to reach just 30-40% of it ..
We are happy to announce, our next full-day workshop in Mumbai is scheduled on 22nd July 2018 (Sunday). Generally, we give 30-35 days for people to register but this time the gap is less and so check your schedule at the earliest and book your seat.
The workshop is an opportunity for investors to work on their financial life. We will share all that we have learned about personal finance with all participants. The workshop is only for the action takers and it will start the moment you will register.
Register for Mumbai workshop on 22nd May 2018 (SUNDAY)
Ticket Type
Pricing
Ticket Link
Single Ticket (Early Bird)
(First 10 tickets only)
How do you know if the workshop is meant for people like you? Put your hand on your heart and get honest with yourself. Read the following points and see if these points are true for you.
If you find personal finance boring (like my wife)
If you convince others and yourself that personal finance is not your cup of tea
You hate numbers and are a big-time avoider when it comes to money management
You are PhD when it comes to procrastination
You want to get into action but you don’t know from where to start
You are confused with what to do and what not to do because of the overall bombardment of information on the name of investor education
You really want to move beyond planning and want to learn how to design your financial life.
You want to make 2018 your BEST FINANCIAL YEAR
The New Structure of the workshop
Step 1 : Book your Seat – The first step is to book your seat by paying the fees
Step 2: Financial Health checkup – Once you register, a certified planner will give you a welcome call and start the detailed financial health checkup with you
Step 3: Participate in Full Day workshop – After the financial health checkup you will be more clear on where you stand in your financial life. Its time to attend our full day workshop
Step 4: Get 2 Financial counseling calls – Finally after the workshop, you get personalized attention from us and you get 2 financial counselling calls to make sure you complete your pending important financial life actions.
Last Pune workshop experience
We had a total of 93 participants in our last Pune workshop (it was held on 20th May 2018) and the experience was amazing. We got an opportunity to learn and share with investors and clients from Pune. Our entire team travelled from Ahmedabad to be a part of the event.
We all had one intention, helping participants in creating an awesome financial life forwarding them in taking actions in their financial life. All the participants were able to identify 5 core actions in their financial life and we as a team helped them in completing those actions.
Why the workshop is now more action-oriented?
It is because the only ACTION produces wealth. We started with a day workshop but now after working with a
few hundred investors we realized that the one-day event needs something more to it. Our intention is not to get a fee from investors, we want their full commitment and we want them to produce some amazing results in their financial life.
The workshop is strictly for investors and not for advisors or finance professionals. If any advisor/IFA/CFP is found to be registering for the workshop, he/she will not be allowed to participate.
If you have never participated in any personal finance workshop let this one be your first experience. If you have any questions you can write in the comments section or you can email on [email protected]
Do you think corporate fixed deposits are as safe as bank Fixed Deposits? Has come agent convinced you that you will get 2-3% higher returns from corporate fixed deposits without any risk?
If that’s the case, you need to be educated a little more about corporate fixed deposits. I will talk about 5 major things every investor should know before they put their hard-earned money in corporate fixed deposits.
What are Corporate Fixed Deposits?
Corporate Fixed Deposits are deposits that are issued by private and public companies, which work very much like bank fixed deposits. There is an interest rate offered and there is a maturity duration for the company deposit. You can either opt for a cumulative option (where your interest is added in deposits) or you can opt for a non-cumulative option, where you are paid the interest after every fixed duration.
A lot of agents get a good commission for selling these corporate fixed deposits to their clients. Nothing bad in that as such, but you need to be clear about some important and critical points related to company fixed deposits.
Let’s start…
Higher the return, higher the chances of Default
In almost all cases, the corporate fixed deposits offer quite higher returns compared to a bank deposit. If bank deposits rates are 7 %, you will see that company deposits floating in markets are providing your returns in the range of 8-14%.
Always ask the basic question – “Why is a company providing higher returns?”
The logic is very simple, a company needs money for expansion or for some project and to fund that project, they can either take a loan from a bank or raise money from other measures and for that they will have to pay very high interest.
So they float corporate fixed deposits where normal investors like you and me can invest in their deposits and earn higher returns.
But, because you get higher returns, there is also high risk involved in corporate deposits. You never know how the company will do in the next few months or years. You never know how the project of a company turns out and if it’s going to make a profit or loss.
In short, after a few years, when its time for maturity – what will happen if the company’s financial health is not good? Will they repay the money on time? Will they repay the money at all?
In one of the recent examples, a lot of investors had put their money in DSK group fixed deposits
A lot of senior citizens are lured into parking their hard-earned money into many shady fixed deposits offered by small or medium-sized company fixed deposits by showing them high returns.
Below is a heart breaking case study of a 78 yr old person who had put all his gratuity and PF money into DSK Kulkarni FD (a very big real estate group in Maharashtra). When his FD maturity came, he was told that he should renew it for another 6 months as its tough to repay right now. The video below is in Marathi, but you will understand some words and will be able to make out what is being said!
So please understand that when you are investing in corporate fixed deposits, there are good chances that if it’s offering very high returns, there is a lot of risks involved in that. You cant get higher return just like that.
Many big companies also offer corporate fixed deposits, but then the interest offered is quite lower and looks reasonable. However the risk is still there unlike a bank FD.
Every company fixed deposits are rated by agencies like ICRA, Crisil, CARE etc and they give a rating to the FD. These ratings are a measure of the company’s ability to pay the interest as well as principal to its investors. A high rating means no or very low probability of default.
Corporate FD’s are not regulated by banking rules
Note that unlike bank fixed deposits, corporate fixed deposits are not regulated directly by RBI regulations. All the deposits under corporate deposits are governed by provisions of 73 to 76A of the Companies Act 2013 (erstwhile section 58-A of The Companies Act 1956).
If the company is not paying you on time, you cant do much in that other than following up with the company. However, Fixed Deposits of Corporates are secured borrowing, so in case of winding up of business, secured borrowings are given preference over equity shareholders in terms of repayment.
Some important points related to Corporate Fixed Deposits
TDS is deducted @10% if the yearly interest is more than Rs 5,000
Premature closure of company FD is not possible for 3-6 months
Pre-closure of company FD is not a straight forward process, it’s cumbersome and involves too many documents
Still, want to invest in Corporate Fixed Deposit?
If you still want to go ahead and invest in a company fixed deposits, please take care of the following points.
Make sure that the company is paying regular dividends to its share holders
The balance sheet of companies is showing profits at least for 3 yrs in a row
Make sure its an at least a 5 yr of company
Make sure they are offering realistic returns (2-3% more than a bank FD). Do not fall for those companies which are offering very very high returns
Make sure these companies are listed on the stock exchange
Make sure that they have got a high rating from CRISIL like (AAA or AA or A at least)
We are happy to announce, that our next full-day workshop in Pune is scheduled on 20th May 2018 (Sunday).
We invite you to come and participate with your friends and family. It is an opportunity for you to block one full day for your financial life where you get a chance to work on your financial life. We do not teach tricks and tips to build wealth, but in fact we help you to discover your own personal process of creating wealth.
Why we do these kinds of offline event/workshops?
We do these events because they make a positive difference in people’s financial life. The conversations we do, create an impact on people’s thinking and they are able to re-invent themselves as an investor. The event is not about financial products and numbers, it is about learning and mastering the principles of wealth creation. It is about learning realizing your past mistakes and about creating a powerful future for yourself.
Register for Pune workshop on 20th May 2018 (SUNDAY)
Ticket Type
Pricing
Ticket Link
Single Ticket (Early Bird)
(First 10 tickets only)
We have also created a facebook event for this workshop. Do click on Interested if you want to join it.
Why should you come to the workshop?
You will learn how to improve your financial life with your current set of resources and income.
You will learn how to plan for your financial life goals
You will interact and learn from other’s people’s financial life
You will dedicate one full day to get better with money management
You will learn to add new dimensions to your financial life
To understand that personal finance can also be fun
To give a whole new direction to your financial life
Let us share our survey findings (Survey was done on 10000+ Investors)
We did a survey with more than 10,000 investors some time back and here are the results of the survey.
The survey is LOUD and CLEAR – It’s time to re-invent
The theme of our workshop is going to be re-invention, you will get a chance to examine your financial life and will explore ways to re-invent your financial future.
The results from survey seem alarming and the best gift we can to the investor’s community is our workshop Your real wealth is your clear mind as once the mind is clear all the good decisions will happen on its own, the workshop will leave you with a clear mind and with new openings of action.
Our Vision to do Workshop in different cities and organizations
This year we intend to do the workshop in maximum cities and in more and more organizations. The content and design of workshop are powerful and we want the workshop conversation to touch more lives. If you want to do a workshop in your city or in your organization you can share your details in the below Google form, we will get in touch with you at the earliest.
It’s time to add Jagoinvestor workshop to your financial journey
It has been a few years now conducting “Design your financial life” workshop and each time it has been a very fulfilling experience for us. It is a wonderful space to be in, in which the group learns and starts to fall in love with the process of wealth creation.
This time we want more and more couples to participate so that they can get on the same page when it comes to personal finance. It is extremely important that the husband and wife both take an equal interest when it comes to money management. We are offering a special discount to those who want to come with their partner. (You can even come with your parents, siblings or friends and can claim the discount)
The workshop we conduct is highly interactive, it has lots of activities and fun exercises that help you to discover your relationship with money. The sessions are interactive and very easy to grasp for any kind of investor, beginner or advanced. In short, there is something for everyone in this workshop.
Super Bonus Launch of Finscore Tool
We will be launching our newly designed scoring system with all our workshop participants. The scoring system is going to be a game-changer for many investors. It has taken around 6-7 years for us to design the whole system and we are all set to raise the curtain. We are so happy to share our scoring system with the investor’s community, it is simple, easy and extremely powerful in nature. It is more like a technology to live a good financial life.
After the workshop, participants can sign-up for our paid service to get complete access to the tool. We will give free financial health check-up access to all participants so that they can check up their scores.
The workshop is strictly for investors and not for advisors or finance professionals. If any advisor/IFA/CFP is found to be registering for the workshop, he/she will not be allowed to participate.
If you have never participated in any personal finance workshop let this one be your first experience. If you have any questions you can write in the comments section or you can email on [email protected]
Do you avoid various actions in financial life which are often suggested as the “right decisions”?
There are countless articles and videos these days which tell you that it’s important to have sufficient life insurance and health insurance. One should start investing very early in life so that they can create some good wealth to take care of their future.
Like these, there are various things that are mostly the building blocks of a good financial life. But often investors avoid taking those decisions. The biggest reason why it happens is that we are all lazy investors who focus on NOW rather than FUTURE.
If it’s not creating trouble for us right now at this moment, we keep postponing it and underestimate the trouble it can give us in the long future. In short, the future trouble or problems we will face is imaginary at this moment.
So today I thought I will talk about the impact of these decisions and how it can trouble you in the future. Let’s start
Mistake #1 – Not buying a health Insurance
Today I will not talk about what will happen if you buy health insurance, but I will talk about what CAN happen if you do not buy health insurance.
At one point in our life, when we start our career, we have ZERO wealth. There is no money in the bank account and we struggle too much to start saving. Our salaries are less and we have just started our career.
Our salaries are not much when we start our jobs, but our expenses start building up. Rent, groceries, Petrol, eating out and whatnot.
After a few years, suddenly we realize that we are just living paycheck to paycheck and we are not saving any money. Years pass by, but you have nothing worth calling “Portfolio”.
In fact, it might happen that you are in credit card debt now and you are wondering if you will ever be able to retire RICH!
Then comes, a point in life when you realize that it’s enough and now you need to start saving money for the future no matter what. Enough is enough.
You start your first investments
Somehow you start your first Recurring deposit or SIP in mutual funds. You start with a basic Rs 2,000 per month. A few months pass and you are happy to see that you have some savings now at your end.
You are excited and want to make sure you do not break this newborn habit. A few years pass by and you have done it! .. Congrats, you managed Rs 5 lacs in your portfolio. It took some years and lots of commitment to reach there.
You feel like a winner and you now truly understand the joy of having a big amount lying in your bank account. What a relief and feeling of safety it provides.
You are even more committed to save now you plan to reach the target of Rs 10 lacs with the next 2 yrs.
You are happy and life is all good.
Then the bad day happens
Then one day, while going to the office, some Rowdy Rathore in a Bolero who is trying to race his car with some unknown person hits your bike while you were on your way to the office. It’s a major accident. You can imagine some other medical emergency in a family if you do not like this example.
The hospital bill comes to Rs 6.3 lacs. There was a surgery done to make sure you survive and you were in a good hospital for 12 days.
You had to take out all your money from the bank or mutual funds and additionally, you have borrowed from your relatives/friends or swiped your credit card to complete the bill payment.
After a few months, you are back to life. But your financial life is back to square one. Your wealth is eroded. You did not protect your wealth from medical emergencies.
You did not take health insurance
We do not think like this about health insurance. We never see health insurance as a financial product that helps us to protect wealth. Buying health insurance is all about transferring the risk of paying the hospital bills to someone else. Health insurance does not protect your health. It can’t.
Remember, starting your savings and investments is easy (not that easy), and consistently doing it for many years it very tough.
Those investors who do not take health insurance over-focus on what is NOT GOING TO HAPPEN. They say things like
What if I never get hospitalized?
What is I drive carefully and never get into an accident
I exercise and eat healthily, why do I need any health insurance?
My company provides health insurance, so why do I need additional health insurance
I will waste my premium if I don’t get hospitalized for next 30 yrs
Sorry, but you need to focus on WHAT IF IT HAPPENS, rather than what if it does not happen.
Note that a health insurance product gives you a protection cover of a big amount every year. So if you buy health insurance with cover of Rs 10 lacs sum assured.
Click here to buy health insurance from our Trusted Partner (special collaboration with Jagoinvestor)
What you are accepting by not buying health insurance?
So finally, as a conclusion – When you do not buy health insurance, you are saying that I am ready to pay the entire hospital bill out of my wealth, every time it happens. I will take the risk of getting my wealth eroded by medical issues.
Mistake #2 – Not saving enough money for future
The next thing I want to talk about is not saving enough money for the future.
You have a nice car, you eat out often and you are able to take care of all your house hold expenses right now. You also take short vacations often. This is all well and fine if you are saving enough for the future. But if your expenses are almost equal to your expenses, remember that one day will come when your income is going to stop permanently.
That will happen when you reach around 60 yrs. And you will probably live for another 30 -40 yrs (wish a long life to you)
But if you do not have enough wealth created by that time, the journey ahead will not be filled with fun. Imagine you retire with just 5 yrs worth of expenses in your bank account.
How cool is that?
How will you feel to find yourself in a situation where you know that you require 100 units of money each money to live a comfortable life which you desired, but your wealth is only capable of providing your with just 40 units of money each month? Or 8 units?
You will have to choose between a vacation and food on the table. Forget food on the table, you will have to choose between “cheaper” vs. “what you like” each time you think of what to cook for dinner.
You will have to decide each time if you want to travel by air or sleeper class on a train (I love both options)
You might have to make excuses each time your friend circle plan a holiday trip
You might have to constantly worry if a restaurant bill will be too much?
It might sound very dramatic right now hearing all this, but the truth is that the future is imaginary and it’s tough to plan for it. I am not saying that you should create enormous wealth by compromising today, but all I am saying that you should be well aware of how your decision of not saving enough today will impact your future.
A little financial planning helps
Most of the people who come to us for financial planning are already late in investing. We can’t fix it fully, nor do we give them false promises that they will retire as a millionaire. But we make sure that they make the best of the years ahead.
We make sure that whatever suggestions we make to them for their wealth creation aligns with what they want in life ahead. We plan for their goals and create a decent strategy to reaching those goals.
Saving money right now does not give you any joy or benefit right now. Saving for the future also means cutting down on something today hence we don’t do it. Saving for future means.
Cutting some part of your shopping today
Cutting down on your eating out today
Compromising a bit on your entertainment today
Buying fewer gadgets today
Buying fewer clothes today (please raise hands, if your closet has something which is not used since last year)
What you are accepting by not saving enough for the future?
So finally, as a conclusion – When you do not save enough for your future, you are saying that I am ready to be dependent partially or fully on others for money and my day to day expenses. I am ready for a lifestyle which might be very different from today. I am ready to live a life which will come with daily struggle and stress about money.
Mistake #3 – Not having a term plan
Accidents are called accidents because they are not planned nor they are expected to happen.
Why are we so over confident that nothing can happen to us and bad things happen only to others?
We all have recently heard about the Kamala mills fire news. Almost a dozen people lost their lives in that fire. One couple who lost their lives were actually sleeping when their friends asked them to join the birthday celebration of some other friends. They woke up and went there, but never to return.
Life is LONG
Life is very long and your loved one needs a lot of money to live comfortably. We need to make sure that we cover this risk by taking a sufficient term plan for which we need to pay a very small premium.
A family whose expenses is around 50-60k per month needs close to 2 crores of life insurance.
If you leave behind a family who is weak financially, you are leaving them with the risk of being dependent on others for their survival. While you can’t prevent the emotional loss, neither you can minimize it. You can surely take action today to minimize the financial impact.
If you have enough wealth and assets which will help them financially in the future, then it’s totally fine to not buy a term plan. But if you are someone who has no assets or wealth, you need to make an arrangement for the worst case. There is a famous saying – “You don’t buy a term plan because you will due, but because your family will live”
Answer this: In your absence (and the money you bring on the table)
How will the next 30 yrs of household expenses come from?
Who will fund for your kids education
Who will repay your debt?
Who will pay for all the desires your family has?
Where will they turn up to when they need money in cases of emergencies?
What you are accepting by not buying sufficient life insurance (assuming you don’t have enough wealth)?
So finally, as a conclusion – When you do buy sufficient life insurance for your family, you are saying that you are ready to let your family face lifelong financial suffering. Your kids and spouse + parents might be suddenly forced to live below the standard of living they are used to. Your kids might not get the same quality of education which would have been possible if you were there.
Mistake #4 – Over investing in Fixed Deposits/PPF
For some people, fixed deposits are the only way to invest their money. It’s a safe and secure way of investing. Our parents did it and there is a visible problem when you invest all your money in fixed deposits or saving bank account (or PPF or Post office schemes)
After all, you park your money in FD/Saving bank and it grows in value over time. What’s the issue in that?
The biggest problem is that your investments do not beat and outgrow inflation over the long term. You get a feeling that your investments are increasing, but your purchasing power does not increase. Its goes hand in hand with inflation.
So if you were able to buy 1 loaf of bread earlier, even today you will be able to buy the same 1 loaf of bread with the money you had invested in FD.
Your life style will remain the same over the years because your money is just growing as per inflation. To counter this, you need to invest your money in something which counters inflation, like equity. It can be stocks or equity mutual funds.
Here is an example
Imagine this, Rs 1 lac invested in Fixed deposits 30 yrs (year 1987) back is worth Rs 11.3 lacs today (the year 2018). Don’t jump out of excitement. 11.3 lacs today is worth Rs 1 lac 30 yrs back in real terms.
Whereas, if one had invested the same Rs 1 lac into Sensex 30 yrs back, it would be worth 83 lacs today, that’s close to 7-8 times than FD
Consider two friends who were 30 yrs old in 1987. They were fresh into jobs and started their career. One invested 1 0 lac into FD for his retirement and other one invested 10 lacs one time in Sensex.
One retires with 1.1 crores in hand and other one with 8.3 crores. One of them will get a monthly pension of 7-8 times compared to the other one. Just image the difference between them and how they will feel about it.
What you are accepting by investing only in Fixed income asset class (like FD, PPF, Post Office)
So finally, as a conclusion – When you only put your money in fixed income instruments all your life, and refrain from equity asset class, you are accepting that you will take the safe and secure path which has no growth element in it. You are ready to retire the middle class itself. You are consciously accepting that instead of 8X money, you are ok with 1X money because you are not ready to take the risk.
Mistake #5 – Taking too much debt in your life
There are two kinds of investors – One who buy things in life mostly with their saved money, and other one buys most of the things with their future income – i.e. LOAN
When we start our career, we have no idea what a devil is this credit card or a personal loan. It’s as simple as BUY NOW and PAY LATER. How bad it can be after all?
We feel we are in control of ourselves self and we will take rational decisions when it will come to money. We think we are not going to make stupid decisions. But only after years, we realize that the game is not so simple.
Once you depend too much on loans and credit cards, it becomes your way of life. You keep shopping and buying things you desire on debt, thinking that you will pay it later.
It’s all about falling for instant gratification and there are millions of people in India who are deep into debt. There are people who have bought cars which does not justify their pay package, and many people have home loans which are much bigger that what they can truly afford.
You will be the slave of MONEY
The biggest problem with this approach is that you become a slave of money. You have promised to pay all your future income, which is uncertain and which is not even earned.
You will be now going to your job to earn money, not by choice but a compulsion. Also, you are going to take less risk in life because you can’t afford to take much risk anyways now. If you do not like your boss, you need to keep quite because there is a sword of EMI hanging. What if you do not get an appraisal? What if you lose your job?
Also, you will be compromising with your wealth creation, because you have already consumed most of your future income through loans. Whatever you earn has to go in servicing your EMI’s and current expenses. There will always be less money for future goals, and this thought will keep on haunting you.
Here is a small 6 min short film on the debt trap which happens by use of credit card. It’s quite a simple short film but gives the message
Do not spend the money you don’t have
We all take a few loans in life and that has become the way of life, which is ok. I am not the person who advocates the concept of “Never take any loan” . But surely you need to control it and define the boundaries. If you get into the debt trap, it will be very tough to get out of it.
There are few signals which will tell you that you are too much dependent on debt, they are
More than 50% of your income per month goes into EMI
Your loan outstanding is more than 4 times your yearly income
You have more than 2 credit cards
You have a revolving credit card from last many years
You have too small savings even though you have worked for many years
What you are accepting by taking too much debt
So finally, as a conclusion – When you start depending too much on debt and overdo it, you are accepting that you will be working for money out of compulsion to repay it back. You agree to be constantly living under pressure and feeling frustrated about your debt. You agree to be living a life where you will not be able to take much risk and do what you wish for because you have EMI’s to take care about.
Do let us know how many mistakes are you committing right now in your life? Was this article useful for you?
Do you know that, when your employer contributes to EPF then a larger portion of it goes to EPS (Employee Pension Scheme)? In this article, I will elaborate to you what is EPS, how it works and also the process of getting its certificate to claim your pension.
What is the EPS scheme?
EPS i.e. Employee’s Pension Scheme is actually part of EPF itself, which means it is applicable for all the employees who are contributing towards EPF. This scheme offers a guaranteed and secured pension to the employee after retirement. A nominee can also get the benefit of pension under this scheme after the death of the employee.
Both employee and the employer contribute equally i.e. 12% of employee’s monthly salary towards employees EPF. However, the 12% which the employer provides, out of that 8.33% goes towards EPS and only remaining 3.67% goes to your EPF.
Features of EPS:
The minimum pension amount that you get is Rs.1000 per month.
The employee can avail of the pension benefit after retirement or once he attains 58 years of his age.
The employee can defer his EPS up to the age of 60. In this case, he will get an increase of 4% on his EPS balance for every deferred year.
Widow/ widower and children (up to 25 years of age) of the deceased employee will also get the benefit of this pension scheme.
In case the widow/ widower opts for remarriage then, only the children will receive the pension until they attain the age of 25 years.
If the child is disabled then, he is eligible to receive the pension for his entire life.
To claim your pension you need to get the EPS certificate from EPFO.
Who can get EPS certificate?
Every employee who has been registered under EPFO can get EPS certificate for claiming his pension. The EPS balance can be either withdrawn after retirement or it can be claimed as pension by opting EPS certificate depending on the tenure of service and the age of the member. So, to elaborate this, I have given some examples below (The length of the service is rounded off to one year if the number of months served is more than 6)
A person working for 9 yrs. and 6 months (will be considered as 10 yrs.) but less than the age of 58yrs can either apply for the scheme certificate or can withdraw the money from EPS.
A person who has attained the age of 58 yrs. but has completed only 7 yrs. of service then he can either apply for a scheme certificate or can also withdraw.
A person who has done more than 10 years of service has to apply for a scheme certificate. He cannot withdraw money from the EPS account.
What is EPS Certificate?
EPS Certificate is a certificate issued by the Employees Provident Fund Organization (EPFO), Ministry of Labour, and Government of India, stating the details of service of the Provident Fund member. The EPS Scheme Certificate shows the service details of the employee, i.e. the number of years he has served and the family details of an employee, i.e. the member of the family who is eligible to get a pension in case of death of the member. As the EPS Scheme Certificate has all the details regarding the service of a member of EPFO, it serves as an authentic record of service.
This is how EPS Certificate looks like:
How to apply for EPS Scheme Certificate?
Once you are leaving the job, then you have to fill the Form 10C. In the form 10C, there are options either to withdraw EPS or apply for EPS Scheme Certificate. Once you chose the options to issue EPS Scheme Certificate, then your employer sends the same to EPFO and then EPFO will issue you an EPS Scheme Certificate. If your all inputs are correct, then EPFO will issue you the EPS Scheme Certificate within a month or so.
This is how Form 10C looks like:
I hope this article has helped you in understanding every detail about EPS and its certificate. Let me know if you have any queries or doubts in the comment section.
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