To Limit Spending, Limit Your Exposure to Advertising

One of the things we’ve noticed in our family is that the more advertising we see, the more stuff we are likely to want. This is especially true with our children. We try to minimize the amount of advertising they are exposed to, which helps to alleviate some of the “I wants”. It is tricky, though because advertisers are always trying to woo our kids.

One of the ways we attempt to keep marketing material away from the children is to minimize their tv time and their exposure to commercials. We have a rule in our house, “when the commercials come on; the tv goes off”. They are trained to shut the tv off for a few minutes while the commercials play and then turn it back on when the show they are watching resumes. We are usually close by to enforce this rule. The kids have limits on the shows they are allowed to watch as well as the length of time per day.

Another way we minimize their exposure to advertising is by throwing out all the toy catalogues and magazines that are sent their way. American Girl is one of the worst offenders. We have never purchased anything from them, but somehow they got our daughter’s name. They faithfully send her their latest catalogue so she can see all the dolls she must have, at the cost of $100 or more per doll. Yikes! Now we sort through our mail before bringing it into the house and toss any catalogues or sales flyers directed at the kids.

For myself, I don’t browse catalogues or stores where I know I will be tempted with impulse purchases. I have come to recognize that merely removing these things from my line of vision helps me to see more clearly our goal of saving money and living within our means. When I am feeling particularly emotional, I avoid advertising like the plague — no TV, magazines, online shopping, etc.

Now we don’t tune out all advertising. That would be impossible to do. However, we find that by keeping it too low levels, everyone in the family is not focused on the next “thing they have to have”.

Where should you invest before Diwali?

The tendency of the Indians to invest more during auspicious occasions is undeniable. Diwali is coming soon and the financial market is already getting prepared for the same. But before jumping into the decision, you must know where you should invest from your side. Many people tend to invest emotionally in various risky options. But this Diwali, there will be nothing like such hasted decision if you follow some simple tricks.

You must know some important facets of the financial market to have an effective investment. These are the following –

  • Analyze the market value
  • Know the market conditions before investing
  • Estimate your budget
  • Judge your need for investment
  • Do not invest emotionally
  • Be updated to the conditions of finance sectors

Some important sectors of investment you must know this Diwali

These are some most popular and important sectors of investments one can opt for this Diwali. But, it is always advised to know the risk factors before investing in any of these.

Investment in Precious Metals

Generally, common people try to invest in buying some costly metal items during the Diwali season.  These are gold, silver, and platinum. But the market value of these metals varies in every Diwali. So, it is better not to invest more than 8 percent of your total budget. Moreover, the price of platinum and gold always remains on the higher side. So, it might not be easy for everyone to afford such precious items.

Mutual Funds

Some people want to invest in mutual funds in Diwali. Undoubtedly, mutual funds are growing rapidly in Indian economies. Most of the young generations prefer to invest in mutual funds in a large amount. It will not only give you more return but also provide an instant lift to your finances. But mutual funds are always subjected to market risks. So always consult with a financial advisor before investing in mutual funds.

Equities

The trading window becomes wider during the Diwali season. The effects are seen not only in Indian exchanges but also in some international stocks. But it does not ascertain you about getting a risk-free benefit from it. The liquidity level in the market fluctuates during Diwali. So, there will be some percentage of risks when you invest in Equities.

Real estate investments

Many people try to invest in real estate during Diwali and Dhanteras. But some of them do not care about the rest of the savings left after such a huge investment. Real estate investments need plans. You should not choose it over small investment options. It is suggested that after years of savings and planning one should invest in real estate. This is not a short term investment plan. So, be wise while deciding on investments in such criteria.

Fixed deposits

Invest in fixed deposits (FDs) to avoid financial risks. This is the most favorite option for middle-class people. But you must know about the maturity period before investing. If you are not comfortable with longer maturity periods, then avoid.

Bonds

Financial bonds are making an impressive base in the market. People expect a good return after investment. And bonds assure a safe investment plan. On this Diwali, invest in bonds if you are searching for a safer option.

NSC (National Savings Certificates)

Post Office investments are also beneficial for clients or investors. These are risk-free options for beginner investors. It will also a good return to you after a certain time.  You can also get the benefit of Income Tax under 80C.

PPF (Public Provident Fund)

If you are already in any service, you should opt for PPF in this Diwali.  Though PPF runs in a span of fifteen years it is a risk-free choice for all service holders. Invest in PPF as soon as possible you start your service career. You will also be able to save Taxes as a result. But you cannot invest more than 1.5 lakhs in a financial year.

So, here are some applicable ideas on investments you can follow in this Diwali to get the most out of it.  Choose the most appropriate one for getting a regular benefit from your investment.

Are you saving enough for the future?

Savings for life have become tricky as well as mandatory now a day. In the modern world, the risk of investment has increased. Besides, the need for investment has also risen. The diversity of options concerning savings is bringing you on the edge of threat regarding savings. So, you must know the correct way to save enough for the future. Here you will get to know about the details of it.

These are the strategical steps to guide you towards the appropriate way to save more.

Estimate your need

It is important to know what do you need to invest in to live a brimful of life. Moreover, an estimation of the expenditure should be framed to balance your life with income. The idea of saving more comes from the idea of buying less. So, cutting off unnecessary luxuries from a daily life might change your financial goals.

Search for the best insurances

In the 21st Century, investment comes with insurance. It might seem that investing in insurance will make you compel to provide premiums regularly. But the insurance in which you are investing today will revert more benefits tomorrow. Besides, it will ensure a secured life. Insurances are of many types as in health insurance, life insurance, automobile insurance, and home insurance and so on. But you will have to judge which one is most necessary for you right now.

Get the best mutual funds

Recently, mutual funds are taking the lion’s share in savings for the young generation. Mutual funds might be a bit riskier than other investment options. But, it returns more benefits than the other rivals available in the finance market.

Check your savings status at a certain interval

Always check your status of savings at a certain interval of time. It will assure you a review of the strategies. If you find the status is not much healthy and cash flow rate is higher, you must check the strategies once again. Go through the bank details, returns from ITR, insurance premiums and so on for getting a detailed scenario of the same.

Check the status of loans

There are many types of loans available in the finance market in today’s world. Education loans, home loans, car loan and many more are there. Most of the people need to get the support of financial loans to grab a firm base of financially robust life. But, when you feel that you need to start with a new loan check the status of other loans.

Home loans generally run for a longer period as the amount tends to be bigger than other loans. If you see that you are almost near to fulfill the home loan, try to complete the cycle with savings amount. It will save amounts of interest.

If you have kids, you might get support from the education loan. Most of the higher studies need a higher amount of money. If you plan for it from the beginning of your family life, you can save the interests of education loans.

The verdict is if you need a loan on an urgent basis, then only go for it. Otherwise, plan for house building, education for kids and other expenditures from the very beginning of your life. It will help you to save more money for your older age.

Take a smart retirement plan

Retirement plans are nothing but pension plans. It will provide you an assured sum at a certain interval of the period after your retirement. It will determine a fixed income even after your retirement.  Proper planning during your service period is necessary to choose a smart retirement plan. It is necessary to invest in such financial plans when you are earning sufficiently.  The policy you are selecting must be fulfilling your estimated needs after retirement.

A small outline to save more

  • Always start it early. It means that think about savings from the very beginning of your service life.
  • Compare the investment plans before investing in any
  • Do not be biased to any certain criteria while choosing an investment plan.
  • Save more with fixing small targets
  • Save it more frequently in a small amount of sum.

If you are already following these strategies for a better future then it is perfectly alright. Otherwise, it is time to think about your plans and savings once again.

Realistic and Simple ways to save money for buying your dream home

Having a home of your own is one of the greatest achievements in an ordinary person’s life.

Well, somewhere we all are fascinated about buying our dream home at our dream location. Isn’t it? Whenever any of the interior decor posts on social media comes in front of you, we silently think I wish I could have it or could afford it, but we got stuck when money comes into the role and why not?

Afterall considerable investment is required to buy a home, but don’t worry, I have the realistic and simple ways to save and grow money which will surely help you to buy home within a few years.

However, I would suggest you before you begin saving, you first have to know how much you’ll need to save. Plan to sit down with a mortgage lender who will let you know how much of a mortgage you can qualify for.

So, be proactive, and here are the Best Ways to Save Money for Buying a House:

  • Invest In Mutual Fund SIPs or FDs

You must have heard and seen many times about invest in Mutual funds and get your money double. Many of you doubt that we will lose our money, but it is not valid.

In the present time, Mutual fund SIPs are a reliable and easy way to generate money from your invested capital. One can set apart a portion of their income and invest it towards Mutual Fund investments through Systematic Investment Plan. This will help you to make Home Loan down payment quickly as your ultimate goal.

You can understand it with an example like if you start investing Rs. Fifteen thousand a month in SIP, with a reasonable return of 12%, you can build sufficient fund of around Rs.12.40 lakhs in just five years.

Similarly, Fixed Deposits (FDs) also help you to build a good wealth within a few years.

  • Start early savings

It is a fact “when it comes to saving money for investments, the earlier you start, the better it is for you.” Therefore, It is always recommended to start saving in your 20s itself

If you start investing while you are still in your 20s, you can enjoy the power of compounding to multiply your savings, thus having sufficient funds by the time you plan to purchase a home. This will help you in making your home loan EMIs, thereby reducing your Home Loan burden.

Your early strong financial position will also help the bank to put trust in you and will ensure approval of your Home Loan application.

  • Cut down unnecessary expenses

For reducing the unnecessary costs, the first step is always to make monthly expenditure budget. A budget doesn’t stop you from spending money, but it will help you to figure out where your money is going so you can check out and cut off the expenses which are not required.

  • Create a second income for yourself

It’s the era of Digital India with many proven ways of earning money with the help of a laptop and the Internet; you can quickly start earning and saving. Start doing side hustles, utilize your time, and make more money. There are many side incomes you can generate like if you work as a writer, you could do freelance writing on the side, if you work as an accountant you could help people with their tax returns, or you can also work with someone on a commission basis.

Keep exploring beyond your imagination as there are many sites which provide you assignments or side projects to generate passive income.

  • Lower the Rent You Are Currently Paying and Save The Difference

If you are living in a rented property which has higher rent you can look for another cheap rented property and save the difference of rent. Currently, it does not seem to be nice but what you can do is to invest that difference amount in FDs, MFs or Gold, etc. which will help you to generate another income source from the savings.

“Buying a house is a massive investment; some of us call it a lifetime investment. You have to look for every aspect.”

Investment Evaluation Ratios for Stock Investors

Stock market investment is different from acquiring a business. Investors are interested more in the reasonableness of the stock market valuation of their shares.

Finance Minsters Package Washed Out

A few days ago, traders and investors in the stock market were waiting for a package from the Finance Minister to boost the Indian markets. The financial package did come, and that day, we witnessed a rally of 600 points on the BSE Sensex. The budget proposals of taxing the FPI and additional surcharge were removed. However, after a three-day rally, we are again back to square one.

The slowdown in the world economy and also our unemployment problems, inflation, and more importantly, the fall of the rupee against the US dollar has taken a toll on the stock markets.

The United States President, Donald Trump, is changing his statements every day on a trade war. The date of imposing additional duty and percentage etc. on China and other countries has changed many times. This has resulted in no confidence in the market.

We have one other significant threat of war with Pakistan, which has created a lot of nervousness in the market. The negative factors are more compared to the positive ones. This is the reason for more downside risks against the upside in the Indian stock markets.

In the recent sessions, the precious metals and commodities markets have given better returns compared to the stock markets. The auto sector is in the doldrums, and the finance minister said no more packages would be offered for the auto industry. Tata Motors went down below Rs.110, and leading car manufacturer Maruti asked 10000 workers to leave.  The shares of TVS Motors, which were doing reasonably better also went down from Rs. 380 to Rs. 350.

Not just the auto sector, even the biscuit giants like Parle and Brittania expressed concern about their sales projections.

In the package, the Finance Minister also seemed to ignore the NBFC companies, and no bailout was announced. Dewan Housing went down by 80%, and the company is facing difficulty in paying quarterly interest. Indiabulls Housing Finance is falling every day.

One hope for the economy is that the RBI gave a vast amount to the government  as dividends, which was much higher than expected. How amount will be utilized is not announced, the finance minister even told at the press conference that it is not decided on where these funds will be used.

The monsoon this year has been erratic, with some regions received excess rainfall, which is likely to destroy the crops. The inflation is expected to go up, and the GDP has come in at 5%, much below the market expectations of 5.7%.

On Thursday the NIFTY went below the psychological mark of 11000. However, it did recover on Friday to a certain extent. Considering that the GDP numbers were disappointing and no good news coming from the Finance ministry, expect the stock markets to continue with the current bearish scenario.

Time to Accumulate India

The mega economic cycle that started in 2003 is well and genuinely reaching an end (from the looks of it).

2003 was a critical time in history –
1. The US had entered Iraq and was pouring money into two wars
2. China was added into WTO
3. Enron, 9/11, Worldcom, Dotcom and Asian crisis had ensured the bottom was well and truly made
4. Banks were giving away cheap loans to the subprime customer to create MBS

The global cycle turned, and we started probably the most significant wealth creation cycle in human history. From 2003 to 2019, the world trade multiplied several times. The world has been the most peaceful ever in these 15odd years with no major wars or conflicts (other than the Middle East but that too has been contained)

We saw some blips, but the recovery was fast and almost V shape (2008,2012 and a few more here and there).

2019 appears like the end of this cycle –

1. Trade wars are hitting global trade numbers
2. EU is breaking apart without a deal
3. China is facing a debt problem along with an over capacity
4. India is slowing down considerably
5. The next growth theme is missing

Maybe we will have to wait out just like between 1997-2003 before another cycle can start.

However, let us take a moment to see what India achieved in this cycle. There are these stories of how Bangladesh and Vietnam are doing so well, and India is not. It is almost painful to see such news articles. In this cycle, India jumped from $400B to $2.8T country. The kind of investment in infra and tech is mind-boggling. Yes, the problem remains, but it is no time to sell India. It is probably time to accumulate India.

Gold Investing

Gold investing is growing in popularity every day. Why is gold such a hot investment? Why has the price of gold risen so drastically in the last few years? And what is the real reason that so many investors are buying gold in various forms right now? This article attempts to answer those questions and provide a starting point for further research on the topic of gold investing in general.

First, you should understand that many investors do not purchase gold to earn a profit. The traditional buy low and sell high concept holds for many short term gold investors, but this is not the real reason for gold’s popularity today as an investment. This may surprise you and may fly in the face of your understanding of gold investment.

The truth is that gold investing is an excellent hedge against other investments. Gold is heavily connected to currency, particularly the dollar, and provides a hedge against other investments. Traditionally, when the dollar goes down the price of gold increases. When the dollar goes down, it simply takes more of them to buy an ounce of gold, the value of gold hasn’t increased, the dollar has lost value.

The rise and fall in gold prices have less to do with supply and demand than it does with its value in comparison to other assets and currency.

Gold serves as viable protection against the collapse of financial markets and the stability of the paper currency. This collapse can be caused by economic problems like recessions and depression or due to government instability as well as many other factors occurring in various markets. Gold investments also protect against inflation. Just as outlined above, it takes more paper currency to buy products and goods during times of inflation; gold offers a buffer against that.

Possession of physical gold is the best investment in terms of providing a hedge against falling currency values, recession, inflation, and economic turmoil. While a variety of other methods of gold investment exist today including futures contracts, electronic funds, investment in gold mining stocks and others, these are all essentially paper contracts that do not hold the same security and value as a hedge as physical gold possession, and in fact may be as volatile and unpredictable as currency trading is today.

Avoid Banking Stocks – Buy Sectorial Funds Instead

Why you should be careful while buying a bank stock and prefer to buy only sectoral mutual funds.

Yes, I know HDFC is the best stock ever. A perpetual multi-bagger. But check this post.

Banks are a beast. This is one industry that makes money out of money, is highly regulated and yet they break the rules often, and is super complicated. Banks make money by four main ways –
1. Loans
2. Trading of securities
3. Taking deposits
4. Commissions
Almost all the other sources of revenues are some variant of the above.

So why not to buy banking stock?

A lot of people confuse banking stocks with other stocks; PE ratio, customer service quality, management quality, and blah blah. But remember, a bank must be judged only on its balance sheet and never on its income statement. Because reading the balance sheet of a bank is tough, I always ask people not to invest in bank stocks.

Why balance sheet only?

There are several reasons, and the main ones are-
a. Provisions- Bank knows that they won’t get their money back on most of the loans they give away. So they make provisions from their income every year to cover those losses. A bank can “manage provisions “ any year to alter its income statement significantly. This means there can be a huge profit when the bank is F****d

b. HFT- Banks keep Held-For-Trading bonds on their balance sheet. Every time interest rate and inflation moves, the value of this line item changes. Any decrease in this line item will mean the bank will have cut its exposure, and that will significantly affect the bank’s performance

c. Concentration Risk- A bank may be conservative, but its books may be focussed on one particular sector or division. Like HDFC is heavy on retail banking or IDFC on infra sector. This Concentration in exposure is good till the time is good, then the tide turns, the bank is destroyed.

Eventually, ratios like profit ratios, PE, PEG, EBITDA, Margins don’t work. We investors are wired to look for profit and YoY growth. We don’t have understanding or time to analyze the balance sheet plus the terminology is entirely different in banking.

Best is to buy the Banking Index fund or sector fund as a Fund manager will understand these things better. The guru mantra is – If you don’t understand the business, don’t invest in it.

HDFC –

I am very concerned about HDFC. It has continued to rise without a stop in the last 10yrs. It may be the first instance in the world where an FI has not been affected by industry-wise rout, mostly because banks are linked to each other and when one goes down, it takes the other one with it. Betting against history is too big a risk. Either HDFC is a black swan event or iska time bhi aayega!

Don’t ever think that retail banking moves the needle in the banking industry. Very few banks have a retail portfolio that can move the needle. HDFC and ICICI are two major ones. We know what happened to ICICI. The Subprime crisis was a typical case of a bank going overboard on one asset class. Banks were not foolish to give loans to anyone. They gave subprime loans so that they can make Mortgage-Back-Securities (MBS) and sell it off. The expectations were MBS gains will offset defaults in subprime lending. Unfortunately, they ended up multiplying their exposure to MBS without understating the base of the security, so the income statement kept looking wonderful while the balance sheet was destroyed. And then one day the music stopped

Primary Reasons to Investing in Stocks

Stock is the share of ownership of to company. When you buy stocks, you became a co-owner of the company you purchased. Stocks are being bought and sold in a stock exchange or stock market wherein there you will buy and sell shares. You should have a stockbroker prior you can buy or sell stocks in a stock market. There you will enroll an online stock trading account so that you can buy or sell stocks personally.

I encountered the word “stock” six years ago when I worked in a manufacturing firm in the Philippines. It was provided to me by the company because it is one of the privileges of all the workers. The number of stocks disposed to meet depends on the job function. That stock aid is without a doubt a big help for my loved ones and me in terms of our financial demands in those time.

Investing in stock is a good investment you can ever make if you only learn when and how to invest in stocks. You should also have knowledge, discipline, and perseverance in managing your portfolio in order to have an excellent profit from stocks. Remember that you can only lose money in stocks in two actions: when you buy and sell it.

In addition, one good thing about investing in stock is that it will give you higher earnings in the long term than other investment methods available presently. Long term investing in stocks means you will buy shares regularly to selected stocks greater than five years.

In the Philippines, blue chips are those stocks comprised in PSE Composite Index (PSEi). According to on the fac tots from PSE and BSP, the shares invested in blue chips will give you a 14% average annual total return according to on the past behavior of Philippine stock market from January 1989 to August 2009.

Moreover, for the last 20 years, investing in stocks gives you higher average annual total profit compared to Treasury bills (T-Bills) and savings account with 11.0% and 2.3% average annual total returns, respectively.

Therefore, investing in stocks, particularly blue-chip stocks, is the best technique to earn a more significant profit in stocks.