Investing in the Stock Market

Who doesn’t want their capital to grow! There are many ways through which people spend their hard-earned money to get the benefit of interest regarding money. Investing in stock market is one of the efficient way for any individual or institution to boost up the monetary fund, but unfortunately very few of us have interest in share market investment despite it being discussed on a regular basis on different channels on TV. But still, people have much confusion about stock market investment. So, here we are going to give a basic idea about stock markets, which, I think, would be a very helpful tool for the beginners to invest their money in the right place.

Let us clarify some fundamental queries:

1): what is a stock market?

To explain in short, stock market is a registered exchange where public limited companies can enlist their names for share transaction with the public by following some terms and conditions. By investing in the listed companies, the shareholder gets a legal ownership by sharing profit, loss or dividend by the enterprise.

2): HOW CAN WE INVEST IN A SHARE FOR THE FIRST TIME?

Before investing in stock market, anyone has to clear up certain things, such as---

•    Must possess a PAN Card---- It is the Permanent Account Number which is the core requirement for any investment.

•    Should open a D-MAT account and trading Account---D-Mat account is to hold the shares and trading account is to buy and sell the shares.

•    Should contact a broker. ---

A well-reputed share broker will handle all the transactions and guides you, as we cannot make the deal ourselves.

•   To choose the Depository Participant ---- A depository participant is needed as he will act as an intermediary between the depository and the investor. In India, NSDL and CDSL are the two depository participants. They will hold all the shares you bought and release the shares you sold.

3): DIFFERENT WAYS OF INVESTMENTS: Other than the above basic requirements, you have to decide how and where you will invest.

Investing in a share is mainly of three types:

1) Long-term Investment which is based on fundamentals.

2) Short term or very short-term Investment which is based on charts and historical.

3) Speculating Investment which is based on future options calls (It gives the investor the right to buy share in future date) and puts (The right to sell but not obligation to sell the share).

An investor should keep an eye on one thing to maximise his gain because different themes have different motives.

SAFE BUYING OF A STOCK: FEW TIPS.

• When nobody intends to buy shares in the market, then buy a good company at a lower bottom price and sell it on when price goes high.

 • Purchase the industry leader i.e., Hindustan Leaver in FMCG sector.

• Look for the future industry like solar companies, electric car companies, commerce companies etc.

 • Always restrict the total number of stocks to 15 and monitor daily.

•   Watch our society trends i.e., today air conditioner is a necessity so that AC companies will perform better in future.

 Inspect the balance sheet of invested companies.

•    Never follow the crowd.

•    Hold on your shares, don’t rush for profits.

•  Buy as soon as a stock makes new high after a normal reaction.

•    Trade only the active stocks (Daily Traded Stocks).

•   Never buy a stock just because it has fallen from a great   high nor sell it because it is high priced.

•     Prepare a chart of the invested companies for the price movement in a bar chart and identify the resistance and breakout/breakdown of a share in the pattern on a daily basis.

Last but not the least, partially take the profit out from the investment and reinvest it in a new theme regularly.

So friends! Go through the above information and begin to think rationally. Investment in the stock market can make a big difference in your capital gain, so make up your mind for a fruitful investment plan in the stock market.

I

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Making a Will

We all are too busy in our lives to create assets. But this is just one aspect of our financial planning. The other part, that is equally important, is to have a wealth succession plan. It is critical to decide on what happens to your accumulated wealth after you are gone. This planning is important to ensure transfer of your wealth in the way you decide and to the people you choose, and most importantly, to avoid any unnecessary legal situations arising from lack on clarity on this aspect.

The most suitable way to ensure that the final allocation of your wealth happens according to your wishes, is to prepare a Will Deed. A will, in general, means a desire. In legal terms, a Will Deed is a legal declaration of the intention of a testator with respect to his property, which he desires to be carried into effect after his death. Anyone who is above 21 years of age in India can make a Will Deed. It can be made on a plain paper. Although, you have a choice of making it on a stamp paper as well. It is advisable to write your will in your own hand writing as the same can be verified later in case of any doubts raised by family and relatives. A Will Deed is not only about distribution of wealth; it can also offer responsibilities.

In case a person dies without preparing any WILL in India, his wealth will be distributed as per law of succession based on the religion of the deceased. In such cases, most of the times, there are many complications with the distribution of the assets of the deceased person. The family may have to face a financial turmoil in the absence of a Will, whilst recording the assets and liabilities, in case the details are not shared by the deceased person while alive. Preparing a Will also benefits the person who is writing it as he is forced to list all his investments and assets. 

A complete Will Deed contains a lot of information: 

First part, must be a declaration from you stating your name, age, address, etc. and that you are in your full senses and free from any kind of pressures. Also, you must assign an Executor, who administers your Will after your death, and directs the manner in which it is to be distributed to the beneficiaries that you specify. Next part must provide the details of your assets and their current values, for example, your house, land, fixed deposits, shares etc owned by you. Next step is to assign all the assets to the desired person, and in your wishful proportion, after you are gone. In case you are willing to give your assets to a minor, you must appoint a custodian of your assets till the minor reaches an adult age. The last step is to sign the will. You must go through all the points covered in the Will Deed very carefully. It is important that you get the signatures of two witnesses as well, certifying that you've signed the Will Deed in their presence. These witnesses can be your friends, colleagues or neighbors but definitely not any of the direct beneficiaries of the Will.

Hence, the need and power of a Will Deed must not be underestimated and every adult person should understand his responsibility of making a detailed Will, so that his movable and immovable assets can be distributed after his death, in a legal and hassle-free manner as per his wish.

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Managing your Household Budget

Money trouble is the common thing in most of the middle-income group families today. It’s truly a big task to handle the household expenses in balanced and precise manner. If the budget is not maintained then, it can be a reason of financial crisis.

When it comes to creating a household budget, it takes adequate time and right decision in order to control the money and save it for other essential needs so as you may not be compelled to cut your essential expenses at the month end.

All you need to set your priority expenses and reduce the unnecessary expenses and this can be noted down either using a notebook or digital form as per your comfortability. The manual calculation may have errors and requires additional efforts. Hence, for flexibility, you can take recourse of budgeting software, financial websites or applications.

 Now, here is step by step guide to creating your household budget so that you do not need to suffer at the month end:

Record All Sources Of Income

It will take a chunk of time to calculate your total earning for instance, what you and your spouse earn. Be sure that you are jotting all your income sources including paychecks and every source of incoming money.

This initial step can help you out to manage your finances in an effective way so as your incoming amount must not be less than your outgoing amount.

Track All Your Expenses

It would be a good idea if you track your expenses category wise. So, divide your expenses into some categories:

Non-Adjustable Expenses

You cannot ignore your fixed expenses such as your monthly bills including your mortgage, rent, electricity, water, gas, telephone or mobile, DTH, and Internet bills etc. It also includes your kids’ education expenses such as monthly fee, activity or event fee, bus fee or lifestyle expenses because kids grow rapidly.

Adjustable Expenses

Adjustable expenses are those expenses that you cannot remove from your routine life but you can adjust in case you run out from money at the end of the month. Some of them are groceries, daily care, fun & entertainment.

Debt Payments

Your debts are your responsibility and you cannot move your eyes from your debts. Usually, you are needed to pay minimum instalment(s). Such debts can be loans or interests, EMI or credit card payments, insurance premium etc.

How To Cut Down Your Unnecessary Expenses?

In order to cut down your unnecessary expenses, you need to decide a fixed amount that how much to spend on dining out, shopping, and entertainment. Here are few tips that can be implemented to maintain your household budget:

·         Take a firm determination that you may not spend more than the decided amount of your fun and entertainment.

·         Rather than buying prepared and instant grocery items you can simply buy raw groceries and can cook at your home.

·         Be sure that you do not spend in costly cosmetics and unnecessary personal care products that can spoil your budget.

Through this saving, you can build your emergency fund and can fulfill your emergency requirements such as medical expenses, traveling expenses or shopping for loved ones marriage etc.

Thus, once you write down your income source aside and your expenses and debts on the other side, you may get an idea to create the right household budget. So, It all incumbent on you what your priority expenses are or where to spend or where to cut from in order to sustain your perfect household budget.

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Setting Financial Goals and Budgeting

Travelling to any place would require a pre-requisite knowledge of the destination details. Likewise, when it comes to money, it is very important that one knows where exactly one wants to end up in terms of the amount of money they want to have and the reason they want to have it and to create a budget around it. To do this, one needs to set financial goals to achieve the objectives that one has set. There are basically three types of financial goals namely

·         Short term goals

·         Mid -term goals

·         Long term goals

Short term goals are those that might require from a month or two to a complete year to reach while mid- term goals, require a minimum of one to five years to achieve completion. Long term goals require five years and above for the same. Once the listing of the goals is done, a specific deadline needs to be established for each corresponding task. Accordingly, these tasks can be later integrated into the corresponding monthly budget. For example:

·         Short term goals – One can easily pay off a sum of 20000 using a credit card in say 3 to 6 months

·         Mid-term goals – One can invest in the savings for a 5 Lakh vehicle in 2 to 3 years.

·         Long term goals – Develop some savings  plan for a  1 crore corpus for retirement

Since all of us are not financially savvy, one needs to be practically knowledgeable about certain matters that we need to know and which will help us in realizing our goals. In this regard, it may be advisable to refer to major finance portals like the Economic Times, LiveMint, and Outlook Money, etc. for expert financial advice, tax breaks and various financial instruments available in the market.

ATTACH BUDGET TO YOUR GOALS

Setting up financial goals is the first step. This is practically done by everybody. However putting together a budget and then sticking to a specific budget criteria is a completely different task. Listed below are some tips which will come in handy while assigning a budget to your financing goals:

·         Make sure that you separate your high interest finance accounts from that of the low ones. Instead of leaving a lot of money idle in Savings Accounts, deploy some in  fixed or recurring deposits, if at all you want to keep a reasonable amount in the bank,

·         Minimize your expenditures and cut down wherever necessary. This does not imply that you become a miser and live a meager living to achieve these financial goals. It is just that if you minimize your extra expenses by buying what is actually needed rather than wanted, you could  save that and invest it to fetch better returns.

·         Financial goals are the key requirements for an overall financial health. The only difference that sets you apart from those rich successful people is the money management mechanism that you follow and the discipline that you exercise in following it.

While making money is important, making it last and in fact making it multiply will be a key element in ultimately determining whether you are able to achieve your financial goals or not. 

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Understanding Payment Banks

Recently India has opened up a new category of Financial Institutions called Payment Banks and it is good to understand them and how they function. A Payments bank is a differentiated bank that will undertake only certain restricted banking functions that the Banking Regulation Act of 1949 allows.It is just like any other bank but operating on a very lower scale without involving any credit risk. In simple words, we can say that the banks which carry out almost all the operations which traditional banks perform except advance loans and issuing credit cards.

The activities which payments banks are supposed to carry out are acceptance of deposits, payments and remittance services, internet banking and function as business correspondent of other banks. At present, payments banks are allowed to collect deposit up to Rs. 1 lac per individual. Although several entities have received the license to start a payments bank, at the time of writing, Airtel and India Posts have started payment banking operations. Payments banks are a new concept for making banking accessible for people who are staying in small towns and villages by integrating with already established distribution networks. They are expected to boost small scale businesses established in areas with low or null banking facilities.

The main objective of payments bank is to widen the spread of payment and financial services to small business, low-income households, and migrant labor workforce in secured technology-driven environment. Even though having the status of a bank the payments banks have some limitations with compare to traditional banks. Also, as every coin has two sides likewise payments banks have its own pros & cons.

Let's see what facilities these banks offer & don't offer. Like all other banks payments banks can take deposits from Indian residents but the maximum amount per person is restricted to Rs. 1 Lac. The payments banks pays interest on those deposits which is usually higher than other traditional banks. These deposits must be invested either in Government Bonds or to be deposited with commercial banks.

With payments banks customer can open only current and saving accounts. There is no restriction on any income level or minimum mandatory balance. Advances Loans & Issuing Credit Cards services are not allowed to perform to payments banks. Payments banks are allowed to issue ATM and debit cards. These cards can also be used to withdraw money from other traditional banks' ATMs.

Like other traditional banks payment bank offers option of online bill payment but in more convenient way. An individual can do cashless transactions as payments banks also offers net & phone banking facilities. Money can be transferred from a payments bank account to other account using NEFT, IMPS and RTGS mechanisms. Compared to traditional banks, the cost of transfer is much less. Payments banks can distribute only risk-free simple financial product like insurance and mutual fund units. Forex service is also available at these banks. In addition, they perform as a bank correspondent of other banks.

Payments banks cater to the banking needs of low-income households, small businesses, the unorganized sectors of the economy. The start-up capital required opening a payments bank is much lower than that of a full-service bank. However, they must fulfill some other criteria like percentage of rural branches, minimum reserve requirement and promoter's holding to get the full license of a payments bank. These banks are not allowed to have subsidiaries or to perform non-banking activities. They must have highly efficient Customer Grievance Cells. They must also distinguish themselves carrying the phrase payments bank always with their name.

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The crippling debt of credit card debts

                            

Credit card debt is like bringing back inflation. While using your credit card wisely can help you to build your credit score, misusing your credit cards can actually hurt your credit!!! The young generation has most fallen into the credit card trap. When you spend with cash, you are able to physically see exactly how much you’re spending. When you spend with credit, it's easy to overspend because no money actually changes hands, and you don't really feel the effects of spending. With several cards in pockets and not paying bills on time creates the main source of a problem. Most Indians fall into a debt trap without even realizing it. After not paying for months, credit debts seem inexplicably larger than the previous month.

You are a young professional with money to spend. You have several credit cards. You pamper your partner with an impressive buying spree. When the bills start arriving, you scramble to pay them before due dates. Month after month, your balances inexplicably seem larger than last months. This is the scenario that confronts many Indians. Credit card usage is relatively new to the vast majority of Indians. Higher disposable incomes have introduced credit cards to more people.

Buy now, pay later - a bait all of us have been lured by sometime or the other. Even more exciting are shopping schemes that allow you to pay in EMIs that are 10 times lower than the MRP of the product you buy. These schemes make our shopping trips easy, but there is a point where they tip from convenience to compulsion. 

So, the next time you see an easy loan deal, think twice. Things that look too good to be true are often just that. You must have heard of the quote “Rather go to bed supper less than rising is debt”, by Sir Benjamin Franklin. This famous quote just gives an indication of the extent of troubles that one might invite, if the debt is not managed properly. A squeaky clean borrowing record has become important today as CIBIL, the credit bureau tracks all loan defaults and delays and each such episode will damage your credit score and hamper your opportunities to get loans and other financial assistance from banks. If you are not disciplined, the new loan will only add to your problems instead of solving them. The loan against property will provide a lot of liquidity, but if the money is used to buy a new car or go on a holiday, you will be digging a deeper hole for yourself.

 Debt traps caused by credit card overspend happen because of the ‘minimum due’ each month. With the economic boom, the rising middle class flocked to credit cards. But in the past six months, credit card default has risen between 50 and 70 percent. As concern about student debt rises, promotional relationships between schools and banks have sounded alarm bells. You may have come through this before but it does not get simpler than this. Follow a simple exercise for a month- track ALL your expenses. Note it down on your phone or at home. When you do this, you will realize where your money is going. Then curtail on the things that you don’t need. Be smart! Don’t let this creeping debt cripple you!

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Reverse Mortgage - Making Money off your home

The reverse mortgage is “a loan agreement in which a homeowner relinquishes equity in their home in exchange for regular payments”. It is similar to a housing loan except that in a housing loan the borrower pays a fixed EMI to the lending bank, while in a reverse mortgage the lender pays the borrower a fixed sum of money on a monthly/quarterly basis, the total payment being equal to the value of the properties and the interest on the amount of loan. After the death of the borrower, the housing company sale the property to recover the amount paid out along with interest at a similar rate.

Reverse mortgage as a product is fairly new to India. In India, the scheme of “reverse mortgage” has been introduced in 2007 by Ministry of Finance to help senior citizens owning a house but having insufficient income to meet their needs. The regulator of monetary policy in India,the Reserve Bank of India has decided the guidelines for lending and eligibility criteria for the borrowers who wants to avail such loans. Dewan Housing Finance Corporation Ltd. was the first institution in the country to introduce reverse mortgage product in the name and style of “Saksham”. Since then, most banks/lending institutions have come up with their own reverse mortgage products. These banks are State Bank of India, Punjab National Bank, Bank of Baroda, Central Bank of India, Union Bank of India, LlC Housing Finance, Indian Bank, Andhra Bank, Corporation Bank and Canara Bank.

The process is simple. If you are an owner of house fulfilling all the criteria mentioned above and have applied for the reverse mortgage loan, then the banks will decide the monetary value of your home based on various factors which drive the market. Based on this monetary value of your home banks will give maximum 60% to the monetary value of your home. The interest rate for such loans can either fixed or floating, depending upon the mutual agreement between the borrower and lender. The borrower has the option to receive the periodic payments on monthly, quarterly basis or in a lump sum. With each installment, the borrower loses the equity in his/her house. These loans are provided for the period of minimum 10 to 15 years, though some banks also offer a period of 20 years. Even if the borrower outlives the tenure, he has the full right to stay in the house. In this case, the loan settlement will be done after the death of the borrower.

The amount received by a borrower is a loan and not his income, so such income through the reverse mortgage is not liable to tax until the borrower transfers the ownership of mortgaged home to repay the loan. Lastly, under the reverse mortgage there is no loss of ownership of the house and all the same time a regular income is arranged at periodic interval, depending upon the mode of disbursement desired.  

But reverse mortgage has failed to gain much popularity in India because of poor marketing strategies and lack of knowledge about it. The reason is the resentment among the heirs and family sentiments. Lengthy pronouncements, announcements and assertions aside, this endeavor only has a morally positive contribution for the general public. And as we see Reverse Mortgage gaining respect by the hour, it’s all the more reason to be optimistic.

Reverse mortgage loan is not new concept. It was introduced way back in 1961, in USA and since then it has been playing the vital role of helping senior citizens in creating required income in their need of an hour. Moreover, we have lost the days when parents used to live with their children until their death. Even if your children want to live with their parents, it might be not possible due to their commitment towards their careers and other roles in life. Some parents have their children settled in foreign countries and they don't want to relocate here. Moreover, we are in the era where everyone wants to have independent lives and sometimes parents also don't want to become a burden to their children. In all such scenarios reverse mortgage is your best option available.

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