Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

It takes less effort, less time, less experience and less specialized knowledge to get good returns from equity mutual funds than it does from directly trading in equities. There are several benefits of investing through mutual funds instead of directly investing in stocks. Mutual funds combine the savings of a large number of investors and manage it as a single pool of money . So, instead of investors worrying about which stock or bond to invest in, professional fund managers do the job. Equities are complex and stocks you can buy come in a bewildering array of sectors, industries, size, financial structure, promoter track record, competitive scenarios and a lot more. When you invest in a fund from a good fund house, there is a full-fledged research department to keep tabs on all this; and there's an experienced full-time fund manager who has years --often decades -- of track record of making equity investments . Moreover, his track record is publicly known and thor...

It may seem like a problem you'd love to have: Getting a huge windfall and not knowing what to do with it. Frankly, it could be anything – a Diwali bonus, an inheritance, an insurance settlement, the sale of a home or business, or even winning a lottery. What you should not do is squander it all on a reckless spending spree. Here are a few ways you can handle that bonus wisely.  1) Start an emergency fund Use this money to start, or supplement, an emergency fund. In life, you should expect the unexpected – job loss, sudden medical expenses, unforeseen emergencies. Having a reserve for a rainy day is a very good idea. Without an emergency fund, you are more vulnerable to sudden life changes.  Most financial planners recommend setting aside 4 - 6 months' worth of living expenses in an emergency fund . If you take the liberal view of living expenses when deciding how much to stash away, your emergency kitty likely will last a little longer. 2) Clear expensive debt ...

You no longer have to depend on active income to meet your lifestyle expenses . Retiring early may seem ideal but it has its issues. You need to make substantial savings during your working life to provide for retirement. You also have to find productive activities in order to keep yourself engaged.Therefore, early retirement may not be as good as it appears to be. So, why not aim at achieving financial freedom instead ? Financial freedom is the state where your passive income is enough to take care of your lifestyle. By passive income, we mean interest on fixed deposits, rental income on your real estate investments, dividends and realised capital appreciation on equity investments .You could achieve financial freedom at age 50. But achieving financial freedom does not necessarily mean you should stop working.Working after you achieve your financial freedom has its benefits.   For one, you do not have to withdraw money from your retirement savings to meet your living exp...

With markets in a steady rally for over 12 months everyone seems to be happy. AMCs and distributors are seeing good inflows. Investors seem to be in jolly mood too owing to the general market sentiment and they are being told with a sense of urgency that "now" is the time to invest. But in the upbeat scenario there a few mistakes that every investor must avoid at any cost. Of the common mistakes made by investors in mutual funds, these few are repeated over and over again. The good thing is, they can be easily identified and avoided, to ensure investors don't turn out to be their own enemies! Classic mistake #1: No goals linked to investments The fundamental mistake anyone can make while investing in mutual funds is to buy a fund for any other reason than the fact that it suits their requirement. This automatically leads to the need to first identify one’s financial goals. Depending on our life stage and financial background we would have short, medium and long term goals...

It didn’t need much deliberation for me to choose the title of this article; straight from the gut, if you’d like to call it.  Before I proceed, let’s get one thing clear. We are not talking of getting rich through a lottery or inheriting huge wealth here. We are talking of:  Simple investing practices that delay gratification so that you and your family may enjoy it to the fullest later Having your financial goals fulfilled comfortably Retiring in comfort, and  Taking dream vacations without having to count every penny  When we choose conservative investment options, become apprehensive about investing more in a superior yielding asset class (example equities), dread losing money, and fear far too much about ending up poor, we are simply denying ourselves a chance to become rich.  Here are some of the common fears we have about investing in a seemingly ‘risky’ asset class such as equity, along with reasons on why your fears may not be justified: I...

Discuss finances jointly It's important for both partners to be on the same page when it comes to money matters. One needs to keep the other informed about insurance policies, mutual funds and other investments. Ensure you assign your spouse as nominee in all investments. Avoid splurging With two incomes and enough disposable money, one might be tempted to buy the latest gadget or upgrade to a bigger car, but do not be impulsive. Buy only what you actually need and can afford. Buy a car that fits your budget. Your car loan EMI should not exceed 10% of your monthly net take home pay. Ensure that you have made your savings before you spend your salary Don't ignore retirement It's easy to lose track of retirement planning when you are young. Put away at least 10% of your income for retirement savings. Go for equity funds because you have time on your side. The ultra cautious can go for the PPF, though the returns will not be spectacular Set up an emergency fund Always b...

F irst income always brings in a sense of joy and freedom. This joy is shared most of the times by buying gifts for near and dear ones. Beyond that it becomes a routine spending affair. In the current days of flourishing e-commerce it is very easy to empty the wallets on everything that you need and want! It is the wisdom of the ages that anything in excess is not good. So neither too much spending nor too much saving is going to get you in your happy space eventually. A balance needs to be arrived between the two. For most youngsters this can be a daunting task. A simple mantra is to adopt an ‘Earn-Save-Spend’ habit , as against the easier and tempting ‘Earn-Spend-Save’ habit. Be disciplined to save at least 10% of what is earned. This can increase depending on personal circumstances. For a 22 year old earning Rs.20,000 a month this amounts to a saving of Rs.2,000 a month. This saving invested in an instrument giving about 12% return will grow to Rs.1.84 crore by the time he ...