This is so common...

Colleague: I want to invest 5000 Rs
Me: That's good. Is this monthly amount you wish to invest?

Colleague: Uh...not sure
Me: Do you have any investments for your future?

Colleague: No
Me: I can recommend you some blogs and help if you want

Colleague: No...just help me in investing 5000 Rs into stocks
Me: Stocks? Why stocks? You have enough knowledge? Even if you want to start, start with Mutual funds

Colleague: No, I want to make money. I have heard my friend's friend made a lot of money buying stocks
Me: I don't thats a good idea. Ok.. which stock you have in mind?

Colleague: Any stock less than 3 Rs. So I can make money.
Me: Penny stocks is a very bad idea. You may get lucky but its a very very bad idea.

Colleague: (not convinced) But I have seen my friend's friend make a lot of money
Me: Do you know him?

After a lot of discussion, he left.
Am sure he won't come back to me....wonder how to educate such folks.......
I really want to help them...

Why analysts discourage long term...

I was seeing a popular hindi news channel in which folks call and ask stock queries.
So this person calls and here is the conversation:

Caller: Hi, I have bought ICICI bank for long term. Please tell me prospects.
Analyst: Is it long term?

Caller: Yes
Analyst: hmm...so you mean 10-12 months?

Caller: Long term actually
Analyst: ok...so 10-12 months correct?

Caller: (convinced that long term is 10-12 months)....Yes...
Analyst: I would say sell now and buy back if it falls 20 Rs or so. You should get that opportunity

Caller: ok

Huh? You just turned someone who wants to invest long term into a trader.

People to need understand that by continuous selling and buying, only brokerages make a lot of money.
Have the conviction...buy good quality stocks (if you must - I'd rather suggest mutual funds) and hold till you really need money...

Blogs I follow

Finance, money, savings and investments are vast areas and every day is a new learning experience.
There are blogs I follow and know that these have immense wealth of knowledge for anyone who desires to learn.

Listing them down with some description and hope that they help you in your journey of finance and investments as they have to me.

http://subramoney.com
My first online teacher. Not a day passes without me not checking the posts.
Subra sir, you may not be aware of the lives you have changed (directly/indirectly).

http://freefincal.com
Most comprehensive calculators that one can think of.
A site no one can leave without bookmarking.

http://asanideasforwealth.wordpress.com/
Treasure chest

http://www.jagoinvestor.com/
Manish's blog. Another awesome treasure chest.

http://safalniveshak.com/
Very nice blog with some thought provoking ideas.

http://www.stableinvestor.com/
Another site that one must never ever miss out on.

http://basunivesh.com/
Review of LIC policies and other financial options

http://bemoneyaware.com/blog/
Very nice site for financial awareness

As I said before, every day is a new learning experience.
If you have any sites which you think are worth following, kindly do let me know.....together we learn and help others to learn.

Thanks.

How much corpus do we need to retire?

When folks read articles, its mostly on planning for retirement and products to invest in for building a retirement corpus.

However, one should know the products one can invest in when he/she retires.
This will help us to understand the amount we may need for the corpus and accordingly plan backwards.

What are the products we have for generating monthly income when we are in retirement or going to retire:

Fixed Deposit

• This is something which is the first option everyone thinks of.
• Do note that interest is falling yearly and if you are in your 30's, no one knows what the interest rate will be when you are in the 50's.

Senior Citizen Savings Scheme (SCSS) Account

• This is an initiative available via Post Office.
• At the present, the interest rate is 9.2% per annum.
• Implies, if you have 1 crore to deposit, you can get 92L per annum (76K per month)

More details on SCSS can be seen here.

Post office monthly income scheme (POMIS)

• This is an initiative available via Post Office.
• At the present, the interest rate is 8.4% per annum.
• Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs in joint account.
• Thus, if the same rate prevails, expect 75600 per annum (6300 per month).

More details on SCSS can be seen here.

Annuities
Read here for more details on annuities

MIP (Monthly income plans)

• MIPs are offered by mutual fund companies.
• One can invest in these for monthly income (though dividend payout or the quantum is not guaranteed).
• At the present moment:

• HDFC MIP LTP (Monthly dividend) provides a dividend of 0.07 Rs (approx) for a unit costing 14.5 Rs (approx).
• Dividend link
• So if one invests 1 crore in this fund, he/she will get 10000000/14.5 = 689655 units.
• Monthly dividend at 0.07 Rs would be 48000 for 1 crore.
• If one invests in a liquid fund, the amount would be calculated as follows:
• HDFC Liquid fund (Monthly dividend) provides a dividend of 0.05 Rs (approx) for a unit costing 10.5 Rs (approx).
• Dividend link
• So if one invests 1 crore in this fund, he/she will get 10000000/10.5 = 952380 units.
• Monthly dividend at 0.05 Rs would be 47619 for 1 crore.

There are some more like FMPs (Fixed maturity plans) which invest in fixed income securities and NSC etc.

Read here for more details.

Recurring deposits (RD)
RD's can be used to plan for retirement. Look at this article for more details.
However, we can use RD to get monthly pension as well. Look at this article for more details.

Annuity on retirement....Super Annuation and/or NPS etc

All/Some of us in our companies have superannuation funds.
Some of us plan to put money in NPS and want to generate funds for retirement.

However, we need to know how much pension can we get from annuity.

If we see the following link from LIC, we can see that for a 50 year old, for option 1, an individual will get 653 Rs pension for 1 Lakh Rs.

Implies one will get 65300 Rs if we put in a corpus of 1crore.

If you are a 30 year old, kindly note that you need to plan for amassing 1crore till you are 50 years and also hope that LIC does not reduce this annuity value rate :)

Articles that may help:
How to make a pension using RD

SCSS (Senior Citizen Savings Scheme) Account

SCSS (Senior Citizen Savings Scheme) Account

What is it?
This is an account that one can open in the Post Office.
As the name suggests, its for Senior citizens.

Current interest rate is 9.2%

Max amount that can be invested in 1 account: 15L
Min amount: 1000 Rs
Maturity: 5 years
Can I have more than 1 account: Yes, but max in one account is 15L
Nomination available: Yes
Transferrable: Yes
Can it be extended: Yes (for 3 years)
TDS deducted: Yes

Note: Interest is paid quarterly.

So for 15L deposited, at a rate of 9.2%, the interest for the year is 1.38L (34500 paid quarterly).
So if you have 4 accounts (15L*4 = 60L), you will get 1.38L quarterly.

You can use this as a pension for yourself.

Will this be the interest when I am 60?
Good question, I am certain it won't be. Depending on your age, this scheme may not even be around at that time :)

Thoughts?

Monthly Income scheme from the Post Office (POMIS)

We have a monthly income scheme from the post office.

Interest rate: 8.4% pa (payable monthly)
Maximum Investment: 4.5L (individual) and 9L (joint)
Nomination facility: Available
Transferable: Yes
Can I open multiple accounts: Yes but sum of all can't exceed the max amount mentioned above.
Maturity Period: 5 years

So, here one can get a monthly income of (4.5L * 8.4/100 = 37800/12 =) 3150 Rs
For 9L, it will be 3150 * 2 = 6300 Rs

One can use this option in many ways:

• Get the monthly income and use to buy an SIP in a fund
• Get the monthly income and use it to make an RD (monthly investment amount)

 Let me know if you ca think of some other ways on the same.