Home Loan : To Prepay or Not to Prepay ?

There are a lot of Articles written on the Topic of Home Loan prepayment or Invest on various blogs, however still this is one of the most common Question asked in Personal Finance Forums.

Let us try to simplify the same from our end with the following example.

Abhishek buys a House by taking a Loan of Rs. 40 Lacs, the Interest rate payable is 8.5 % pa, the tenure is 20 years.

In this case the EMI works out to Rs. 34,713 so Total payment is Rs. 34,713 X 240 = Rs. 83,31,120

So if Abhishek services the Loan for full Tenure of 20 years he is paying an Interest of Rs. 43,31,120.

lets Assume somehow Abhishek gets Rs. 40 Lacs, and now wants a solution - to close the loan and save the interest or invest the money and service the loan for full tenure.

What do you think ? What should Abhishek do ?

1. If he pays off the loan he is able to save Rs. 43,31,120
2. If he invests this Amount and is able to earn a return of 4 % he will be able to earn Rs. 47,64,493 in 20 years
3. If he invests this Amount and is able to earn a return of 6 % he will be able to earn Rs. 88,28,542 in 20 years
4. If he invests this Amount and is able to earn a return of 8 % he will be able to earn Rs. 1,46,43,829 in 20 years
5. If he invests this Amount and is able to earn a return of 10 % he will be able to earn Rs. 2,29,10,000 in 20 years

So on the basis of the above calculations you can decide what you need to do

KISS (Keep It Super Simple)

• Which Stock should I Buy ?
• Which Mutual Fund Scheme should I Buy ?
• Which Children's Plan should I Buy ?
• Which Pension Plan should I Buy ?

These are the Common Questions mostly asked by people, now what actually are the right Answers for these Questions ?

Lets try to have a look at the above Questions from a different point of view,

Don't you feel these Questions are same like some one asking 'Which Vehicle should I Buy ?'

Now what can be a right answer for the same ? What will you suggest ? or will you need some more information to answer this question ?

I feel you need some more information like,

• Why he needs a Vehicle, for his daily commute to Work or Weekend Travel with Family ?
• How many Average Kms he is expected to Travel Daily / Monthly
• What is his Budget

Now at least you can workout something based on this additional information.

In the same way additional Information is required

• Why you need to Buy Stock, Mutual Fund Scheme, Children's Plan, Pension Plan ?
• How much Amount you need to Accumulate and by when ?
• How much you can save every Month / Year for Accumulating the respective Amount ?

Once you have this additional information you can workout what Product to select which will help you to Accumulate the required Amount in the respective Time in a Optimum way.

So just KISS, Keep It Super Simple.

How to generate the Best Returns from Equity Investment

Everybody is fascinated by the Idea of earning the best return on his Investments.

How many do really get success in this ?
Which Investment helps you to generate the best return ?
Who actually is responsible for generating the best return on your Investment Portfolio ?

What do you think ?

You, You are the one !
Yes, You are the one who is responsible for generating the best return on your Investment Portfolio.

It is your Understanding that will help you generate the best return.
It is your Money Management that will help you generate the best return.
It is your Strategy that will help you generate the best return.

How ?
Lets understand with an example.

A, B, C & D are good friends, they decide to Invest Rs. 1 Lakh each in a Diversified Equity Mutual Fund to earn best return.

In a few days 'A' has some emergency and decides to withdraw his Invested Amount, there was no much movement in the value, but he has to pay the exit load and hence he gets back less Money than the Amount actually Invested.

The next year the economy is not doing well and hence the Investment value drops to Rs. 75,000, Now 'B' is disturbed by seeing his Investment value drop down to Rs. 75,000, Even though he does not need the money he decides to withdraw his Investment due to fear of further reduction in value, and hence faces a loss of Rs. 25,000

After couple of years the economy recovers and the businesses start to flourish, the Investment value rises to Rs. 1,50,000, here 'C' withdraws his Investment and enjoys a gain of Rs. 50,000

'D' is still continuing his Investment since he does not need the money now.

What do you conclude from the above example ?

Who is responsible for generating the best return on your Investment Portfolio ?

Action Plan - 2017

Hello Friends, How are you all ?

The 1st month of the year, January 2017 is completed, All of you must have finalized your Resolutions and already made an Action Plan for the same.

What Action Plan have you made for Simplifying your Financial Life in 2017 ? now what do we mean by Simplifying, Simplifying simply means keeping things simple.

As per my observation most of the People are busy finding the Best Instruments for their Savings and Investments, they are very fascinated by High Returns, and in this process they complicate their Financial Life.

Just observe our Life

• We get up in the morning
• Answer Nature's call
• Meditate
• Exercise
• Take a Bath
• Have Break Fast
• Go to our respective Jobs (Office/College/School etc.)
• Have Lunch
• After Working Hours come back Home
• Spend time with Family
• Have Snacks
• Have Dinner
• Go to Sleep

Now isn't this a normal Simple Lifestyle we have, is there any complication, (of course some of the activities may be in different sequence for some people)

In the same way can't our Financial Life be Simple, How ?

• Decide how much Money we require for our respective Financial Goals 
• Estimate what will be the Future value of these Goals at the Time required
• Estimate how much we need to Save / Invest per month to achieve the estimated Target
• Start Saving / Investing the respective Amount per month
• Once a year Review the situation of both the Goals and the accumulated amount

To start with just put your Money in Simple Products like Recurring Deposit with Bank or Post Office, Bank Fixed Deposits, Liquid Funds of Mutual Funds.

Simultaneously start learning about the various other options like Debt, Equity, Gold, Real Estate, understand how they work, how you can optimize your returns using the mix of these options.

Don't commit your Money to any Product or Instrument that you don't properly understand, Don't fall for anything that promises higher returns.

Keep things Short and Simple.

Thank you

Chandan Singh Padiyar

Happy New Year - 2014

Professional Financial Services for Couples and Individuals

Importance of Insurance in our Lives

Do we really Value the importance of Insurance, or just keep on piling number of Policies just for the sake of Tax Saving and believing that we have done so called Financial Planning.

The meaning of Insurance as provided in the Dictionary is  ‘A contract to provide compensation for loss, damage, or death.’ Or we can say a safeguard against loss or failure.

We should understand that Insurance is not an Investment, but its purely an Expenditure.

So lets see what are the different kind of Insurance available and useful for us.

1.  Life Insurance

2.  Health Insurance

i.Medical Insurance

ii.Daily Cash

3.  Personal Accident

You need Life Insurance to cover the Risk of Death of the earning member of the Family.

Health Insurance is required as a cushion against Hospitalisation Expenses.

Personal Accident Insurance covers the policy holder against death or disability due to an accident.

If you don’t have the right amount Insurance cover, then it will create a big dent in your Family’s Financial situation even if you have a handsome Investment Portfolio.