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Sunday, September 8, 2013
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Nilesh Harde
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تسجيل الدخول إنشاء مدونة إلكترونيةالمدونة اإللكترونية التالية» المزيد
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
1 of 10 06-01-2015 22:25
Posted by Nilesh Harde at 2:09 AM No comments:
Please send your suggestions and issues found to my E-mail address
nilesh.harde@gmail.com.
Friday, February 8, 2013
Posted by Nilesh Harde at 12:25 AM No comments:
Avoid these common mistakesMost retail investors plan to grow their savings via investments, but most of them fail to grow
the investments to their full potential. You can blame this on the common mistakes that retail
investors make during the investment period. Here are some of them:
Lack of planning: Investments are made indiscriminately across asset classes, overlooking
the investment objective or risk appetite. A strong investment or financial plan addresses the
goals or objectives to be achieved after a specific period of time. Here, if one is not well-versed
with the nuances of financial planning, he/she should consult a financial planner.
Lack of diversification: Often, investors put money only in one asset class, thereby losing
the opportunity to benefit from better performing asset classes. For instance, in India, portfolios
of most retail investors are locked in bank fixed deposits (FDs) instead of having a mix of
mutual funds and FDs. The table here shows a diversified mutual fund portfolio of equity, debt
and gold that provides higher returns than bank FDs over a 10-year period.
Impact of inflation: Investors often ignore the effect of rising prices or inflation on their
portfolio. This is especially important in a highgrowth and high-inflation economy such as India.
For instance, if a bank FD gives 8% returns in a year when the inflation rate is 7% (average),
the real rate of return for the investor is just 1% (8%-7%), which is insignificant. Investors can
beat inflation only by investing in diversified products across the asset class spectrum.
Not starting early: The adage 'early bird catches the worm' holds true in case of investing
also. If a person starts investing early, he/she will be able to reap the benefits of compounding
of returns to the maximum. For instance, Rs 1 lakh invested at the age of 35 years at the rate
10% per annum would grow to Rs 6.73 lakh in 20 years (55 years). However, the same
amount if invested at the age of 25 at the same rate of interest would have grown to Rs 17.45
lakh. This is three times the growth seen from the money invested 10 years later. This is
nothing but the power of compounding, which works to the advantage of those who start
saving early.
Timing the market: Financial markets tend to move in cycles — equities have a far shorter
cycle compared to debt or other asset classes. A big mistake that investors make, especially in
equities, is trying to time the market. However, the risk of loss is very high if calculations go
wrong.
Investments based on tax planning: As the financial year-end draws near, tax benefits
overshadow pragmatic investment needs. Investors do not invest based on any goal or plan
but only to save on tax. Investors must align their tax-saving investments according to their
long-term investment plan. For instance, for young and relatively risk-averse investors, equity-
linked savings schemes are a better alternative than debt instruments as equities have
outperformed debt over the long term.
Lack of review and rebalancing: Retail investors fail to review and rebalance their
portfolios. They should track their investments at regular intervals to gauge the performance.
Further, portfolios must be rebalanced to match the pre-defined asset allocation. Reviewing
also helps to weed out non-performers in the portfolio.
Lack of insurance: Insurance, both life and medical/health, should be an integral part of an
investor’s financial planning. This is because exigencies come unannounced and could be
costly. A term plan may be preferred to an endowment or a money-back plan.
Thursday, January 31, 2013
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
2 of 10 06-01-2015 22:25
Health Insurance - Why you should have apersonal accident cover?
For less than 1,000 a year, you can get a 5 lakh cover against death and
disability due to a mishap.
You need a life insurance policy to cover the risk of death and a health
insurance policy as a cushion against hospitalisation expenses. While
most readers are bound to be familiar with these essential covers,
very few would have heard of the personal accident cover. Personal
accident schemes cover the policyholder against death or disability
due to an accident. All general insurance companies offer these
policies, but it’s very unlikely that an agent will try to sell you one.
These low-priced policies are not very popular because the agent
earns barely 20-30 as commission from selling such a policy.
However, you should buy a personal accident policy because it plugs
an important hole in your insurance portfolio. Firstly, it will provide
financial support to the policyholder if he is disabled after an accident.
Secondly, the magnitude of the mishap doesn’t matter; even minor
ones like falling off a bicycle and breaking an arm, or fracturing a leg
while playing football are covered by the policy.
If you thought term insurance policies were cheap, wait till you find
out about the premium rates of a personal accident policy. For as little
as 225 a year, you can get a cover of 5 lakh. The daily cost works out
to about 60 paise. However, this is the rate for a basic cover from a
PSU insurer and will only cover death and permanent disability. If you
want enhanced protection, you will have to shell out more (see
graphic).
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
3 of 10 06-01-2015 22:25
Bundle it with other covers
One way to get the agent interested is to buy it along with your
health or motor insurance. “Since agents get very low commissions,
they usually try to bundle the personal accident cover with some
other insurance product. However, this doesn’t mean that you will pay
a lower premium, though some companies may give you a discount,”
says Sanjay Datta, head of underwriting and claims, ICICI Lombard
General Insurance. A basic personal accident cover against death and
permanent total disability is already built into a motor insurance
policy. You can enhance the cover by paying extra.
PSU insurers offer a maximum cover of 5 lakh under a personal
accident plan. Private insurance companies offer a higher cover and a
wider range of benefits, but the premium rates are higher too. You
can take a cover of up to 8 times your annual salary. Apart from the
basic death and permanent disability cover, you can buy additional
protection against partial and temporary disability, even loss of
livelihood. “A personal accident policy covers the buyer against costs
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
4 of 10 06-01-2015 22:25
Posted by Nilesh Harde at 2:27 AM No comments:
that can shatter him financially,” says Subrahmanyam B, senior
vice-president, health & commercial lines, Bharti AXA General
Insurance.
Understand terms & conditions
It’s important to understand the terms and conditions clearly before
you buy a policy. For example, hospitalisation benefit can be availed
of only if the policyholder is admitted within seven days of the
accident and is hospitalised for at least 24 hours. A fractured leg is a
temporary disability, and if you have taken a cover against it, your
policy will pay a weekly sum of 5,000 for up to two years. However,
this weekly cash benefit is paid only if you are unable to go to work
and the payment starts only 60 days after the accident. One also has
to submit proof, including a doctor’s certificate for the disability that
prevents one from attending work.
Also, be very clear about the definition of disability. When a
Delhi-based policyholder lost his index finger in a car accident, the
hospital gave him a certificate of 15% disability. Yet, the life insurance
company denied his claim because he had a cover against total
disability. “The policy
document defines the loss of hand as total disability. The loss of one
digit, even though it was the index finger, was not covered,” he says.
Permanent total disability is defined as total loss of sight in both eyes,
or total loss of use, or dismemberment of both hands or legs, or one
hand and one leg. Losing one eye is a
permanent, but not total, disability. Ask the insurance company or
agent to explain the exclusions clearly to you.
You may also have a group cover
Most companies offer personal accident insurance to their employees
through a group cover. However, this is a very basic cover and may
not offer the benefits offered by a standalone policy. “I recommend an
individual policy only if one can afford it and if his company’s cover is
insufficient,” says Jayant Pai, head, marketing, Parag Parikh Financial
Advisory Services.
You can also buy an accident cover with a rider along with a life
insurance policy. However, these riders come with strings attached
and don’t offer certain covers. “Since life insurance companies cannot
offer anything but life cover, you will not be covered against other
damages, such as hospitalisation expenses,” says Sanjay Tiwari,
vicepresident, strategy and product, HDFC Life. “Riders can never be
as comprehensive as a standalone policy,” he adds.
A plain vanilla personal accident cover is not very expensive, but it
can come handy in case of a mishap. Selfemployed professionals who
travel a lot during the course of their work will find this especially
useful. Buy one right away so that there is nothing left to chance in
your insurance portfolio.
Tuesday, September 11, 2012
Cashless health insurance
The facility of cashless claims in health insurance tries to remove the
problems associated with se�ling hospital bills and making lump-sum
payments for hospitalisa�on. The facility can be availed of only if the hospital,
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
5 of 10 06-01-2015 22:25
Posted by Nilesh Harde at 9:30 PM No comments:
where the pa�ent is to be treated, figures among the hospitals approved by
the insurer. The list of network hospitals can be obtained from the TPA
(third-party administrator) either from its website or by calling its toll-free
number. The details of TPA are available in the health insurance policy.
Informing the hospital
The hospital needs to be informed at the �me of admission that the
pa�ent is covered under cashless health insurance policy and the insurance
card needs to be submi�ed at the admission desk for this purpose.
Pre-authorisa�on form
The form is available with the hospital and has to include the
approximate hospitalisa�on cost based on an es�mate from the admission
desk. If the hospitalisa�on is planned, it is advisable to finish the
pre-authorisa�on procedure beforehand.
Process
On receiving the pre-authorisa�on form, theTPA checks the policy
limits, eligibility and riders applicable in order to accept or reject the claim.
A�er approval, the TPA sends an ini�al authorisa�on by fax to the hospital.
Se�lement
At the �me of discharge, the insured has to sign the discharge form
and all the bills and forms, which are sent by the hospital to the TPA for
authorisa�on. If this authorised amount is less than the hospital bill, the
difference needs to be paid by the policyholder to the hospital.
Points to note
· Even if a pre-authorisa�on request is denied by the TPA, the insured
can go ahead with treatment, se�le the bills and then apply to the
insurer for a possible reimbursement.
· In case of an emergency hospitalisa�on, the pre-authorisa�on form
has to be faxed to the TPA in the dura�on specified.
Non-medical bills and expenses not covered must be se�led directly by the
insured before discharge.
When to exit your mutual fund
Five situations which may warrant redemption of your fund units.
People spend a lot of time trying to identify the right mutual fund to invest in. While
choosing a good scheme is important, knowing when to exit is as crucial. This is
because even though you may be holding the right mix of mutual funds at a given point
in time, you may want to alter the holding pattern by disposing of some funds in the
future. How do you decide when to do this? Here are five situations where you may
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
6 of 10 06-01-2015 22:25
Posted by Nilesh Harde at 9:28 PM No comments:
need to consider getting rid of your investment.
Consistent underperformance
Gross underperformance of any scheme is the first signal for you to consider
moving out. However, don’t dump a fund based on the performance over a short span of
time. Move out only if it continues to perform poorly over three to four quarters.
Remember to compare the scheme’s performance with that of its benchmark or category,
not with a fund belonging to another category.
Exit of a capable fund manager
A change in the fund manager should normally not be reason enough to dump
your fund. Even if a star manager leaves a fund house, it should not make you press the
panic button. Instead, keep a watchful eye on the new fund manager for some time.
Track his investment style, churning frequency, stock selection, asset allocation strategy,
etc. If you are satisfied with his approach, stay put. If the fund house has a robust
investment processes in place, the fund is likely to do well regardless of who is steering
it.
Change in scheme a�ributes
Investors should typically opt for a fund only if its objectives or investment
mandate are aligned with their needs. So if you suddenly find that your fund has
deviated from its stated objective or revised its investment mandate, you should consider
exiting it. Over time, some fund managers take investment calls that do not match the
stated objective of the scheme. If this happens too often, it’s time to get rid of the fund.
Besides, whenever there is a change in the fundamental attributes of a scheme, the fund
house is required to provide the investors an exit window, wherein those who wish to
move out can do so without incurring any exit load.
Achievement of an inves�ng goal
Financial planners advise that you should invest with a goal in mind. Once your
investment reaches the targeted amount, you should redeem it. There’s no point in
continuing with the investment for you will be exposing your investment to further risk.
Don’t get greedy and wait for the fund to go that extra mile.
Rebalancing of the por�olio
Asset allocation is the key to success in investing. It ensures that your portfolio
does not deviate from its original path, putting your goals at risk. So if you find that
your equity allocation has grown beyond comfortable levels, consider redeeming the
funds. A change in life stages would be another reason to change you asset allocation
and consider switching to a fund that matches your needs. As you near retirement, you
might want to consider more conservative funds.
Tuesday, April 17, 2012
Health Insurance - Does a floater cover
Financial Planning, Mutual Fund and Insurance http://mfa-nilesh-harde.blogspot.com/
7 of 10 06-01-2015 22:25
work?
Does a floater cover work?Such an insurance plan is a good option when the family is
young, but it may not prove cost-efficient if there is an older
person to be insured or when the children are grown up.
One of the biggest dilemmas faced by health insurance buyers is whether
they should go for individual policies or a floating cover for the entire family. In
an individual policy, the cost of the cover is generally lower compared with a
floating plan. However, in the case of the latter, a higher cover is available to all
members of the family since each member can avail of the combined cover. The
logic is simple. There is a low probability that more than one or two family
members will require hospitalization in a year. It is a calculated risk which
reduces the cost of the cover substantially.
Floaters work best in case of young families. The premium is low because it
is linked to the age of the eldest member in the plan. “A family floater cover is
advisable when the oldest member is less than 45 years old,” says Neeraj
Basur, chief financial officer, Max Bupa Health Insurance. For 34-year-old
Rakesh Somani, it is an ideal choice for insuring his family (see picture). “Since
we are a young family and our healthcare costs are not too high, a floater plan
of 5 lakh should be sufficient for us,” he says.
Costly for older families
However, the same may not be true for an older family, where the eldest
member is more than 45 years old and the children are grown up. In such a
case, individual policies may work out to be cheaper (see graphic). The same is
true if you want to insure an elderly member of the family. The premium can be
prohibitive when you include a senior citizen (above 60) in the floater plan. For
instance, a 3 lakh floater cover for a family of four, where the eldest member is
35 years old, will cost less than 9,000 a year. However, if you add senior citizen
parents (65 and 60 years), the premium jumps to 52,500. “When older family
members have to be covered, it is better to buy separate plans for them,” says
Gaurav D Garg, managing director & CEO, Tata AIG General Insurance.
Individual covers of 3 lakh each for the two senior citizens would cost about
30,000 ( 18,000 for the 65-year-old man and 12,000 for the 60-year-old woman).
This still works out cheaper than a combined floater for the entire six-member
family.
Go for individual cover after 45
Taking an individual plan could also be an option when the eldest member of the
family crosses 45 years. He can take a standalone policy for himself, while the
rest of the family is covered under a floater plan. Insurers allow members to
branch out and take individual policies when the plan comes up for renewal.
This is also useful when a dependent child grows up and starts earning. He may
need to buy a separate health insurance plan for his own family.
Check if your insurer will carry forward the benefits accumulated by the
individual in the floater plan when he shifts to the individual cover. This is
important since there is a 3-4 month cooling off period for all claims as well as a
2-3 year waiting period before pre-existing diseases are covered by health
insurance companies.
Top-up plans are cheaper
The health insurance provided by employers usually includes floater plans that
cover the employee and his dependants. It is not advisable to depend entirely
on such a cover because if you change jobs or stop working, your family may be
rendered uninsured. If you think buying a fresh insurance plan is very
expensive, go for a top up health cover. Top-up policies cover medical expenses
beyond a certain threshold. Suppose an individual has an insurance cover of 3
lakh from his employer and takes an additional top-up cover of 5 lakh, with a
deductible of 3 lakh. If he is hospitalised for an illness and the bill comes to 7
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8 of 10 06-01-2015 22:25
Posted by Nilesh Harde at 9:45 AM No comments:
lakh, his employer’s cover will pay for the initial 3 lakh and his top-up policy will
pay the remaining 4 lakh. The deductible in the top-up covers brings down their
cost substantially. Since almost 85-90% of the claims are below 3 lakh, the risk
for insurance companies is minimal. Therefore, a top-up plan is 40-60% cheaper
compared with a full-fledged cover. If a regular cover of 3 lakh costs 3,500, a
top-up cover of 5 lakh with a 3 lakh deductible will cost only 1,600.
Source: The Economic Times Wealth April 16, 2012
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Source: The Economic Times Wealth April 16, 2012
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