Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

When you reach your early 40s, you are approaching the mid-point of your career. You already worked for about twenty years, assuming you began your career in your early 20s and you have about 20 years to reach your retirement age. This stage of your life is very important both from a career and financial planning perspective for the following reasons:- By the time you are in your early 40s, you are likely to be in middle management or senior management role. Your income, therefore, likely to be much higher than the earlier stages of your career. With higher disposable incomes you should be able to save more. This is the stage of your life, when you are more settled both from a career and family lifestyle standpoints. The lifestyle, you have in your forties, is most likely what you want to have for the rest of your life. We aspire for more improvement in our life, but a cutback in lifestyle is usually very difficult for us . While people today have much more mobility in their car

We have all made mistakes in past and most likely would also make mistakes in future. Making mistakes is not crime but is something human in nature.However, we must learn from past mistakes and failure to do so is most undesirable. When it comes to personal finance decisions, the best way of learning is by analyzing the opportunity cost for our bad decisions. Opportunity Cost: But before we start, let us first understand what is 'opportunity cost'. The opportunity cost can be understood as the cost of doing any action measured in value terms of the best alternative that is not chosen or is foregone. a sacrifice value of the second best choice available to someone who has picked among multiple choices Opportunity cost is a key concept in economics, and is used in decision making where there are scare resources to be optimally utilized. The concept can be applied beyond financial costs: you may apply it for lost time, pleasure or any other resource that provides

Don't check the value of your long-term investments on a daily basis Don't stop your SIPs in equity funds Don't try to wait for a market correction to begin investing Don't ignore fixed income if you think there's opportunity in equities, every asset class has its own value Don't begin putting money in equities till you have adequate insurance and reasonable emergency funds Don't overlook tax-saving investments, money saved is money earned Don't ignore equities if you're retired, it's the best way to beat inflation Don't put your money in unit linked insurance plans and such, it's not your duty to make the insurance sellers rich Don't think of gold as an investment, buy it only for consumption Don't invest in sectoral or thematic funds, diversification earns more rewards Don't dabble in stocks directly if you don't have the time, knowledge or understanding of the markets Don't blindly follow everything list

For what is supposed to be a simple (and simplifying) idea, there are way too many misconceptions about the SIP (Systematic Investment Plan) way of investing.  In general, those who have a punter's approach to investing carry over that approach to SIPs, trying to stop and start SIPs by timing the markets. Back in 2010, I remember investors claiming that SIPs were no good, and that they had barely broken over the preceding years. Generally, these were people who had stopped their SIPs after the crash of 2008, and then restarted after the recovery in 2009. The basic idea behind SIP is that while the general direction of an equity investment is upwards, it is not possible to reliably predict the actual fluctuations that it may undergo as part of its general trend. Instead of trying to time one's investments, one should regularly invest a constant amount. As time goes by and the investment's Net Asset  Value  (NAV) or market price fluctuates, this will automatically ensure that

It not only allows you to invest at regular intervals but also enhances returns as the cash is invested in liquid funds, which generally offers better returns than savings bank account. As a mutual fund investor, what do you do when you have large sum in bank account and equity markets become attractive day by day, a scenario that we are going through for almost last three months? Some of you may want to write a cheque immediately. The wiser lot will opt for a systematic investment plan (SIP) to benefit from ongoing volatility but the bit smarter lot opt for systematic transfer plan (STP).  STP allows an investor to invest lump sum amount in a scheme and periodically transfer a fixed or variable sum into another scheme . It is quite similar to SIP which is more widely known and popular of the two among the mutual fund investors. While in a SIP you invest a specified amount in a scheme at pre-specified intervals and the investment amount for every SIP tranche comes directly from you

All of us must have some debt investments .  Some of us would like to know answer to the below questions.   “I live frugally, and save all the money that I can in Fixed Deposits, Public/Employee Provident Fund, and National Savings Certificates. When do you think will I get rich?"  the answer to this is: 1. Debt instruments preserve your money:  Yes, and they preserve it exactly as it was! Your money does not grow in a debt instrument. 2. The ‘interest’ that you get in a debt instrument is equal to, or less than inflation:  Over a long period of time, the interest is equal to inflation, that is all. That means the money is preserved, if at all. 3. The interest that you receive, howsoever meagre, is taxed at regular rates:  So, if you are a tax payer, a small part of the interest received is lost to taxation. In fact the bank may deduct about 10 per cent tax, and the balance tax will have to be paid by you as an advance tax. 4. The impact of the taxation is so bad that comp

§   Buy life cover of 6-8 times your annual income §   Buy health cover of at least Rs 5 lakh for full family §   Save at least 10% of your income for retirement §   Keep contingency fund to sustain 3-6 months' expenses §   Start saving for kids' education when they are born §   Take personal accident, disability cover of at least Rs 25 lakh §   Your EMIs should not exceed 40% of your take home income §   Insure home and other assets against damage and theft §   Earmark savings for specific financial goals §   Increase savings in line with rise in income §   Establish a diversified portfolio and asset allocation §   Rebalance your portfolio at least once a year §   Don't go after extraordinary returns §   Match investment horizon with asset class §   Differentiate your wants from your needs §   Ensure timely and regular repayment of loans   §   Avoid investments that offer extraordinary returns §   Understand features of insurance polici