Category: General

Here are a set of 4 questions and answers asked to me on “Ask a question section” . These questions are on the topics on Insurance , Stock market and Futures and Options , ULIPs and Motivation. You can also look at other Questions and sections part here at Part 1 and Part 2

Question 1 # by Vishnu

I am 25, single and my parents are my only dependants. My Dad is aged 65 and mother is aged 55. I have a Group Health Insurance Plan from my company which is given as a part of my compensation package. The insurance cover is for 4 lakhs (2 lakhs for self, one lakh each for my mother and father).

Given the features of the plan and my current need, the coverage of 4 lakhs is sufficient. But, I don’t have any other health insurance plan. Should I go for an additional plan, personally? I also assume that I would be given similar health policies in all my future jobs.

Answer

This is often a question in people mind , you say 4 lacs cover is sufficient , what if you had 10 dependents ?

Then each one would have 1-2 lacs cover and would you say 10-20 lacs is sufficient , what you must see is how much is “each person” cover, For you , its 2 laks , and for your parents its 1 lakh , now this logically , what is chances of you getting any health issue than your parents who are old (55+)

So the real situation nails down to this . Parents has 1 lakh of cover each and they are Old (probability of health issue drastically high compared to you) .

Now there is another issue , which is psychological , people think that chances of bad things happening to them is low than others , which is totally baseless . God forbid , but suppose there is some surgery or any health issue , you can imagine how much does it cost these days .. Lakhs of rupees .

Conclusion :

U should seriously consider covering your parents, Because of old age your will face some issue getting health cover now, also the premiums will be high (good enough), now its you who have to decide if you want to save those premiums (which can go waste, as some logical people declare) or pay the high cost of Hospitalization or Surgery or whatever when it comes, but save those premium . your call 🙂

Question 2 # by Taranprit Singh

I am beginner in this stock world and doing trading just for earn money, money and only money. I can say I am doing good in intraday trading of equities. Now I want to enter in future and options but the problem is I have ZERO knowledge about them, so please it’s my humble request to give proper guide for the same by which I can understand FNO easily.

Answer

I want to congratulate if you are making money in markets with intraday, Keep it up. But !! if its just 1 week or 1 month that you have made money then wait, It can be because of luck or market may not have shown its real face to you.

I would suggest you to keep trading for 1 yr and see all the faces of markets, believe me, 1 yr is minimum time you should trade to see if you can do it consistently 🙂 . Take the greed out of your mind to make lakhs and crores using F&O. I am experienced enough to say that it would kill you badly if you jump into it.

I would suggest you this.

• Keep trading the way you are doing and see if you can do it consistenely for 6 months
• Once you succeed in that, then keep trading and slowly learn F&O, buy books and read on Net, practice a lot.
• Paper trade F&O trades , don’t jump into it with money
• Once you succeed, then do some real money trades with small money, Grow slowly 🙂

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Question 3 # by (Name not allowed to Disclose)

Have taken a new Aviva Lifeline,whole life plan(its still in free look period),i want your opinion abt it… details, Annual premium: Rs.25,000 Premium Policy Term:20years Policy term 72years (i m 28 years – 100 years policy max years) Invested Amt(for 20 years) Rs.5,00,000 Expected Return at 6% is Rs.8,00,000(at the end of 20 years) is this plan good from normal middle class person(of salary of Rs.15,000 per month) point of view?

Answer

Lets not ask a question “Is it good or Bad”, let us ask a question, Can we do better than this ourselves with simple things.

Equity Returns over long term have been more than 17%. Good Mutual funds over 10 yr of history have returned somewhere around 20%. If we think about future and assume even 12% return over long term, Your investment of 25k per year will become 20 lacs after 20 yrs.

>>> 25000 * (1.12)*(1.12 ** 20 -1)/.12
2017468.

If you think aggressively and assume 15%, it would be 29 lacs after 20 yrs

>>> 25000 * (1.15)*(1.15 ** 20 -1)/.15
2945253

At 6% , it comes out to be 9.7 lacs
>>> 25000 * (1.06)*(1.06 ** 20 -1)/.06
974818.

Learn the Calculation in this Video

The reason why you were told 8 lacs is because of the charges and may be some mortality charges for penny insurance you might get there. Check it yourself.

Even if you take a term insurance of 30 lacs yourself now, it will not be more than 10k per year, remaining 15k you can invest in 2-3 good mutual funds for long term. at the end of 20 yrs, you will have at least 12 lacs assuming 12% return. Apply logic and maths and that’s it, you are your own financial planner 🙂

So my suggestion : Break this policy before the free look up period, and take what you get back, the amount spent on medical exam if any will be deducted.

Question 4 # by Vikas

I am 35 and haven’t had much opportunity to invest till 33 yrs. Now I have invested some funds in MFs (DSP Equity, Magnum Contra, DSP TIGER, HDFC Prudence and Sundarm Tax Saver).

I don’t have an established career and have taken any suitable opportunity that came along my way. Off late, I am jobless but have strong desire to start something independently of my own. However that “something” is what I am searching for.

I have to start small with no doubt due my financial restraints, but I know I have special liking for computer related jobs, exports, something creative like handicrafts etc.

Could you please suggest some books or articles or links or your own opinion how to translate this ” virtual something” in my mind to “real something”. I am absolutely sure if i strike the right chord, nobody can stop me, I have worked so hard for others in my regular job so I don’t see why I cant put my “everything” to get that elusive “something” 🙂

Answer

Great .. All the mutual funds u have are nice ones and keep continuing in them . Regarding converting your “virtual something” into “real something”, I have this to say confidence in yourself is amazing and worth appreciation.

To find out what you want to do, you may have to try out various things which may fail in start, but you need to have enough reserve of confidence to tell yourself that you will get it someday. “Making mistakes is a privilege which Unsuccessful people don’t get in life”, I said this one day to my friend and realized what a nice quote I made 🙂 .

“Believe in it.”

Most of the people are doing jobs which they hate or cant excel at, just because they don’t have that guts to start some thing on their own or change their jobs, you are much ahead of them, congrats on that.

Meet new people , try some ideas and make a list things “which you don’t want to for sure”. Prune out the things you don’t like. That would be a better way for finding what you want to do.

“One important thing”  –

We many times think that just because we have lot of confidence and desire to do something on our own will make u succeed, but there are something which have no substitute like Hardwork, spending time reading about what we like, Jagoinvestor was not build in a day, or a month, It needs work and patience and confidence that it will succeed.

There have been instances when I wrote 20 posts in a row after doing so much reading and hardwork, writing in night, but there was no comment which said “Nice job”, that is kind of heart breaking sometimes and makes you feel that “You are going no where”.

But what you need is the “belief” that things will turn out well at the end, just do your karma and results will come, and when they don’t come, just get out and accept it and be ready to move one just like it happens in Trading or Relationship. Its all the same thing at the end.

I did Trading in Markets (options) and failed like anything.

I am still learning and my confidence and belief in myself does not allow me to quit. Best of luck to you in trying to find your way. Don’t get underestimated by the failures . Failures will come and they will teach you more than your success .

Its only the times when you feel like quiting is the time when you really need to keep up yourself. “Difference between Coal and Diamond is that Diamond takes a little extra pressure”, So don’t let that extra pressure make you quit 🙂

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This is second post for answers to Questions asked to me in “Ask a Question” Section . The First Part of Question Answer section is Here . This section has questions and answers related to topics like GOLD , Real Estate , Term Insurance , Mutual Funds , “hiding Information from Insurance Company” . See the questions ans answers below .

Question 1#

I have a requirement of physical gold after 1 year or so. I just got back some money from an old investment. Is it ideal to buy the gold now at this price. Or do I make an FD for 1 year so that I can buy later. What do you see the price of the gold in another year’s time.

Answer

GOLD is near its support levels , so i am not sure if its a good idea to buy it for short term . Its hard to say what will be in a years time frame ,but if its just 1 yr , better to put money in FD and buy gold later .

Other alternative i would suggest is buy it every quarter with 25% money each time .

Question 2#

Have one general question… I was reading “Rich dad Poor dad recently”.. Some interesting concepts but was not sure how it will applicable to indian scenarios.

1. Kiyosaki tell’s that Real estate is the safest way for wealth. But in India (especially in Chennai and Blore), it is not only the value of land we need to worry about but also the reliability of the land owner (Same land is being sold for multiple people), Fake papers, Even if everything is alright some political party/Gunda can stick a flag and claim the land.

2.Is it feasible to have a separate business on top of our regular job?

3.Or should just mind our job and invest our money wisely (Stocks/MF e.t.c) What are your thoughts?

Answer

1. Real Estate is the safest way for wealth , I don’t agree with it .. Real Estate is a good Investment over long term , and you can get benefited in short term also , but for long term , i still recommend Equity. Regarding the reliability of land ownership , that risk is always there , but you can minimize it by taking precautionary measures from your side and by “not acting” foolish and greedy like many people do .

2. Regarding Second business on top of business , yes you can . but if your current job agreement says that you cant , then you cant , because you have agreed with them by signing the documents 🙂 . However I don’t see any issue in regular jobs . Go ahead .

3. There is no one answer to it .. There are other things than making money .. If you like you job just be with it and enjoy , you can side by side do good investing too . But you like investments as a career you can enter the field and have full time job in that .

Question 3#

Hi , after a study of analysis , i am planning to take term insurance policy of 50 Lacks but am facing difficulty to choose which one is better, as i see LIC Amulya jevan premium is 17k per year,(35 years)-50 lacs Bajaj Allianz Life – New Risk Care is 13.5 k (40 years)-50 lacks and also having some accidental,critical benefits.

Please suggest me,can i take single policy of 50 lacks or split into 25lacs, 25 lacs, and to safe side choose either LIC only or any another company like bajaj, kotak ,etc for same tenure who ever offering less premium need to take??

Answer

Well.. you have done 95% of the job by choosing to take term insurance , now to Find the best one is just 5% , because in a way its not too important .. I like SBI and Religare .. you can go with others also .

Term Insurance is a simple product and all companies have it with almost same rules , so the best one is the one with least cost most of the time 🙂 . Riders are your choice , you pay extra if you take them , they are not free.

Divide the policy in 2 atleast , If you are too emotional with LIC , you can have it as one of the insurers .. But there is no issues like Public or private companies.. read my article on this .

Question 4#

I invested in some mutual funds through SIP in FY 2007-2008. My current balanace in these mutuals funds is:- Fidelity India Special Situations Fund – Rs 10000 Fidelity Tax Advantage Fund – Rs 24000 SBI Magnum Global Fund – Rs 10000 DSP Black Rock Fund – Rs 24000 I must admit that I had no idea about mutual funds and invested as advised by a friend who was an agent in a Investment company.

Till early 2008 , all was looking good and the value (combined) was approx. 12000 more than Cost value (if I remember correctly). But now for the past 1 year the value of these funds(combined) is less than the cost value and currently I am at a loss by 7500.

I am not sure what should I do about these funds. Should I withdraw my money? or should let them be as they are in hope that their value will increase someday? Many Thanks for your help

Answer

DSP Blackrock Fund : EXCELLENT funds, Keep it, increase the exposure
SBI Magnum Global Fund : RISKY and seems to be fine (its a midcap fund), decrease the exposure
Fidelity Tax Advantage Fund : Good, Continue
Fidelity India Special Situations Fund : Its a new fund , STOP this and take some old Winner 🙂

You entered at bad time, dont worry its normal .. Review your Mutual funds (you may use my suggestions if you want, Take your call, i am not responsible) and prune out the bad ones and continue with the good one, Equity performance very good if you keep continuing investments and give it some enough time to it to perform.

Equity have risk and hence you are going through the time when you should be calm and control your “mind” which is concentrating too much on Losses 🙂 .

Question 5#

I have LIC Jeevan Amulya Plan for 30 lakhs @ premium of 7.5k. During enrollment, I had a medical checkup including blood test. My policy was confirmed after a month, i.e. after positive medical test result. During medical checkup, there was a document given asking questions about existing health problems.

I had a minor surgery during my childhood (age of 5) and a tonsill surgery at the age of 15. But, I missed to mention those.

Now, when I read some case studies in personal finance articles, I see that hiding such information will create problems later during insurance claim. What should I do now? Should I inform the LIC about the same? Or, do I need to stop the insurance and start afresh giving correct information? Please suggest.

Answer

You should inform them about this as soon as possible , Premium of Life Insurance depends on the Risk involved and Right now , The company is charging premium based on your information , If later they come to know that this information was hidden from them , the claim can be rejected and It will be a right thing from companies point of view , You should inform about this , Your Premium May or may not be revised . Even if its revised , its ok .. 🙂 .

That’s a fair thing

No point in stopping this policy and taking a new one, because any ways you will declare this to other insurance provider. Only in one case you will benefit, if new insurance provider has the premium less than LIC, which i think many will have, do your investigation.

Please leave your comments on this section, If you have some question, please post it HERE

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You might have noticed that I started “Ask a Question” Section on my blog where anyone can ask any query to me, I will try my best to answer the questions, but please don’t expect instant reply. I am sharing the answers here for some questions asked by readers, this will help others to gain more knowledge about stuff.

Question 1:

Hi,
I am new learner in derivatives trading !
any good web site to understand in detail , and my very specific question is when to be in Futures and when to trade in Options !
many thanks,
Umesh

Answer

There is no single website for understanding this. You have to search different sites for different things. What I would suggest is clear your basics by reading some books and some articles on web. and then trade your self. Download my ebook: https://manish.pucsd.googlepages.com/A_Small_Guide_For_Newcomers_In_Stock.pdf and follow it.

Regarding choosing between Futures and Options, The best answer what excites you? Futures or Options? I like Options, so i trade options (not doing it from some weeks). Basically Options are more leveraged products than futures. Options are more difficult than futures.

There are different strategies in Options which can be applied at different times. Don’t trade derivatives if you are not able to trade equities successfully. move gradually from Equities to Derivatives. Don’t jump directly to Derivatives.

Question 2 :

If I have to choose ONLY ONE equity mutual fund for a time horizon of 10 years – which ONLY ONE fund should I choose ? What about DSP TOP 100 EQUITY FUND ? Is there any better than this fund? – RAJIV

Answer

Ok, this is tricky. The one i would suggest is “Sundaram Tax Saver”. Now comes the best part. If you had asked me this question before 5 yrs, The answer would have been “SBI Magnum or HDFC taxsaver” and answer will keep on changing, There are different cycles in mutual funds life cycle, The best mutual fund today may not be the best all life.

So the best time frame you should look at is 3-4 yrs and then evaluate back and shift money in another mutual fund as per the situation.

For now take Sundaram, invest through SIP and maintain your asset allocation. Look at the comparison I did between SBI and Sundaram here : https://www.jagoinvestor.com/2009/01/95-of-salaried-people-are-rushing-to.html

DSP top 100 equity is an excellent fund , This should be good enough to invest in , Don’t look for the best mutual fund, there is nothing like that. It depends on your risk profile and other factors if it suits you or not.

Question 3 :

Me and my wife both are working in MNC’s. We both are in the age of 27 and don’t have any kid yet. We both also don’t have any dependent. We both are getting cumulative 8 lakhs medical cover from our company. I read a lot of places that it is good to have your own medical policy. Can you please suggest that should I buy and medical policy for me ? and if Yes ..what should be the criteria. – Manu

Answer

8 lack is a good cover . But i think it would be 4 lacks each , not 8 lacks for one person . even 4 lacs is good for one person . The reason why extra health cover is advised is because

– You can loose job or move to another job and may be “without Health cover” for the gap which is not a good thing.

– Health cover does not mean “everything you can think of related to health”, There are many things which group health cover wont cover, dig out more on that. See what is the most important thing for you and your wife and if your Company covers that or not. It wont hurt to take a good Family Floater cover for 4-5 lacs for you people, it would be 8-9k per year . Cover your self well..

There is nothing like the best policy, its not “the policy which suits your requirement”, the policy which is best for me, can not be best for you.

You may also want to look at a term cover for a small amount (20-30 lacs), I know you people are not financially dependent, but i am sure it would help if there is loss of income because of some unfortunate event.

Question 4 :

My question are

1) If I have invested in a ULIP for more than 3 years as of now, is it better to continue on that ULIP? I think the commission, other charges etc are negligibly small after three years of policy . Any amount I invest from now on will be invested in equity markets. Please let me know your thoughts
2) In case of term insurance policies, money that my dependents get is taxable or not ?(of course if I die during policy tenure) 🙁
3) I read in one of your blog post that it is better to split life insurance into two or three companies to that it will give us a flexibility to stop one or two later at some point of time. In case of my death , will my dependents get claims/money from all my policy ?
4) If I have health policy in different company , can i claim the refund from all policy or just one . Will those be taxable?

– Aby

Answer

Find the answers in line.

1) If I have invested in a ULIP for more than 3 years as of now, is it better to continue on that ULIP? I think the commission, other charges etc are negligibly small after three years of policy. Any amount I invest from now on will be invested in equity markets. Please let me know your thoughts

For this you need to see what is the current situation of your total fund value . For last 1.5 yrs markets have done very badly , so there would be significant change in fund value compared to normal years . Other charges are not always negligible after 3 yrs of policy . I think you can either link your ULIP with your long term goals , or start a SIP from now onwards .

2) In case of term insurance policies, money that my dependents get is taxable or not?(of course if I die during policy tenure) 🙁

Its not Taxable , however when they invest that money somewhere and when they start getting yearly income from that , then that yearly income will be taxable .

3) I read in one of your blog post that it is better to split life insurance into two or three companies to that it will give us a flexibility to stop one or two later at some point of time. In case of my death, will my dependents get claims/money from all my policy?

Yes, your family will, get money from all your policy, If you take Insurance of 30 lacs , 20 lacs and 25 lacs from different insurers, they will get it from everyone , so total will be 75 lacs .

However , you can not use this to your advantage and take crores of policies, because insurers ask for your previous policies and if they think that your insurance has crossed the limit which you should have , then they will refuse the insurance to you .

4) If I have health policy in different company, can i claim the refund from all policy or just one. Will those be taxable?

No, You can only get the refund upto the expenses occurred. So if you have taken Health insurance from more than 1 insurers , they will share the cost between themselves in the ratio of sum assured (this is basic rule , there can be some different rule here and there) .

So if you take Health insurance for 5 lacs and 10 lacs , and your expenses are 3 lacs which you want to claim , you will get 1 lac from 1st insurer and 2 lacs from 2nd. The amount is not taxable , because its not something extra you are getting, its just the same amount you have spent and getting it back . So for you its 0 profit 0 loss .

Question 5 :

Sir.,

Thanks for this service.i am working as a agent for mutual funds. From today onwards there is no ENTRY LOAD so no commission. yesterdays conclusion from our trade is to request(!) the same amount from the customers.
Is it possible to receive cash favor directly from clients?

Some clients are happy with our service, and some were not at all !!!

– Srinivas

Answer

So what if 2.25% entry load is scrapped. Clients are ready to pay for quality advice and good service. If you advice them well and help them take good decisions for there investments, I am sure clients wont mind paying you 2.25% commission (even more than that) . You should take this in positive way .

I hope you are AMFI registered and have good grip on Mutual funds and how to choose best one which suits your clients needs. I hope you are not just choosing the “top 5′ from some rating website (though its fine sometimes) . Research your clients needs and suggest them good mutual funds and let them understand why it suits them .

Trust is what they should have with you. Once they trust you and your advice, this IRDA rule of 2.25% thing will make no sense to you and other agents.

As I said earlier, This may look like a Disaster to you, but its your chance to start all over again and make things work for you , adapt to changes 🙂 .

Do let me know if you like this section or not.

Please note, that the question and answer are made public only after confirming it with the requester, If you want that your question and answer are not shared, that’s fine with me.

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