Yes, there’s a better way to spend your Diwali bonus!

Security beats uncertainty. Light triumphs darkness. Hope prevails over fear. And that is the reason for this season. We at Right Horizons are inspired by the human propensity for security and peace. Investments, when done right, are made up of such timeless themes.

Calendar 2020 has made trivial pursuits seem all too trivial. Savings, investments, and security are taking center stage. 

Here are 5 learning on how to navigate this bear market.

  • The science of security: Invest in what counts

Security is both a feeling and a reality. And the two are not the same. To guarantee security for real, it is important to gauge the market flows and sentiment. Lights, clothes, and other festive gifts are all cute. And holidays aren’t happening until we have a vaccine that works. What is comfortable is rarely profitable in investing. Don’t you think sparking off a new plan with your Diwali bonus might do some good? Invest your time into doing a financial plan if you have not done it already. This would be the best Diwali gift for you and your family.

  • The better way: Pay yourself first

If you stripped investments of the jargon, it’s pretty simple. Like Warren Buffet maintains: Pay yourself first. This may mean taking time off for a meaningful chat with your mutual fund’s planner and educating yourself first. If you’re already savvy, go on right ahead to invest in plans that resonate with your goals. Try your hand at debt and equity mutual funds, and if you have a larger capital, look at other options like portfolio management schemes. 

  • The death of decision anxiety: Asset allocation

Global studies have shown that asset allocation has a higher impact on portfolio performance. This removes the decision anxiety of shopping and gives you a more balanced, risk-free, and data-driven approach to spending your disposable income.  There are multiple competitive discounts on gold. Make your Dhanteras-Diwali extra special this year. Start investing in gold funds, especially if you’re expecting to plan for your children’s weddings.

  • Lifestyle changes are welcome: Investing as a way of life

In the wake of the pandemic, everyone is forced to make massive lifestyle changes. Pumping up your existing investments is a great way to use your bonus or even lower expenses on account of the pandemic impact. It could be as simple as boosting your SIP to reach your investment goals faster.

  • The reason for the season: Legacy and dynamic themes

You’ve revisited your portfolio and re-shuffled your investments. Given the global atmosphere, you can also add more value to your gifting choices. It’s time to show your loved ones that you care, more so if they’re far away. Pass your learnings on to your children and pay it forward. And remind them of the reason for this season: light, love, and life. 

Go on, make the right choice. We’ve got you. Both you and yours.

5 Healthy financial practices post-COVID

New rules for the new world order
What’s the easiest, most certain way to achieve your financial goals even in uncertain times?
Healthy financial habits.

Any goal you want to achieve is reachable through a few key habits with a little bit of time. It’s really that simple. Here are a few of these practices that you can include in your financial habits.

1. Leverage the gig economy.
On-demand contract work and the gig economy was possible even before the pandemic. But the paradigm shift in corporate culture has caused several companies to transform almost overnight. Gig economy workers have the benefits of earning money on their terms. The flight to digital and remote models of working have opened up opportunities to

2. Review expenses and savings
Even if salary budgets have been slashed, the virus outbreak has influenced consumer expenses in every industry (think cuts in expenses like fuel, travel, entertainment, shopping, dining outdoors, etc). Spending behaviors are settling into a new normal with a shift to value and essentials. You may also try to further optimize your cash flows and treat the margins as impact savings.

3. Reprice or refinance your home loans
Interest rates have also taken a plunge over the last few months. If one has home loans, check your rates of interest, and approach your bank for lowered rates. It is an opportune time for homeowners to review monthly cash outlays and ease up financial strains. You may either refinance (i.e., take a loan with another bank with lower rates of interest) or reprice (switch to a more competitive loan plan with the same bank), depending on which works for you best.

4. Review your financial plan
You may use the time to also re-visit your financial plan. Take an inventory of all your assets and liabilities and check for optimal diversification. Re-evaluate your choices. See if you have financial plans that can balance out your risks and guarantee safer and more secure returns. Re-shuffle your investments. Consult a professional if it helps.

5. Review your insurance covers
COVID-19 is a wake-up call. Very low medical covers in the past have fallen woefully short considering the number of days one is likely to be hospitalized if tested positive and serious. Check for the family floater plan of Rs 10L/25L/50L. The good news is that incremental premium is much lower for these. Protection instruments like health and life insurances can leave your savings scot-free while retaining your family’s lifestyle and long-term financial goals without disruption.

As local and global communities re-orient themselves to the new norm at a time such as this, you can re-organize your finances. The proverbial rainy day is here, and if you’ve made it this far, you can secure the future for you and your family. Even amid a pandemic, you can identify the new rules of financial planning and optimize.

Choose wisely – Annuity options for retirement

ideal retirement image

The hard-earned retirement corpus secured in accounts such as the NPS, PPF, and/or the EPF is the final nest egg for public or private sector individuals who retire after a few decades of continuous service. While certain central government retirees are eligible for pension and lumpsum fund benefits, almost all the private sector employees are not entitled to a pension from their employers and have to fall back on lumpsum (defined contribution plan) corpuses.

As a result, the post-retirement monthly expenditures of the family, most often, depends on corpus inwards from such accounts. There are two important considerations for such corpus inward for individuals – Safety and return on such corpus since this impacts the amount of derived pension on the same for the rest of the life.

Upon retirement, most individuals rely on traditional plans such as a combination of fixed deposits, Sr Citizen savings Schemes and/or plain vanilla Savings accounts to create cash flows for longer duration and this raises several risks of the safety of corpus, interest rate risk and thereby risk of variability of periodic cash flows and the possibility of hardships during retirement years.

Annuities – Should be the first choice for retirement corpus

Annuities should be the preferred choice for retired individuals; however, this product is not very popular due to lack of awareness, perceived lower rate of returns and liquidity issues. Annuities offer the best hedge against the variability of cash flows, against interest rate risks and consistent cash flows for most of the living life.

Today annuities offer a wide range of choices which were not available 5-10 years ago. Flexibility, market comparable rate of return, and wide range of options are available from over half dozen annuity service providers. Besides this, regulations and oversight of annuity providers make this product extremely safe as compared to other market-linked products.

A quick glance of the variety of options from annuity service providers is summarized as below.

Table 1: Choose the option wisely
Annuity for life Annuity for life with return of purchase price on death Annuity payable for life with 100% annuity payable to spouse on death of annuitant Annuity for life with a provision for 100% of the annuity payable to the spouse of the annuitant for life on death of the annuitant, with return of purchase price on the death of last survivor Annuity payments would be made to the annuitant and his/ her spouse throughout their lifetime. Thereafter, these pay-outs would be made to the subscriber’s mother and after her, to the father. On death of the father, the purchase price would be refunded to the annuitant’s child/ nominee.
Source: NPSTRUST.org.in

 

Which option makes sense?

This depends upon a variety of factor and the retired individual’s objective, dependents, and other personal factors. For instance, for couples with no dependents the easiest choice would be to choose option 1: Annuity for life. Here, they are likely to enjoy higher cash flows or put in lower corpus to enjoy required cash flows. The standard of living could be higher for such couples since this option pays the highest pension as compared with other plans across annuity service providers. Options #2 and #3 might suit retired couple with legal heir (children / grandchildren) where they might want to gift such corpus earned.

Option #4 & #5 could severely impact the current cash flow for the retired individual since the objective is to return the corpus. Unless there is adequate liquidity and other assets these options defeat the very purpose of buying an annuity and therefore can be avoided.

NOT a Contagion – Impact of the FT Debt Debacle

Introduction
Last week, Franklin Templeton India funds, in the debt category, went into freeze with investors in 6 of the large schemes locked out of redemptions and any sort of movement till further notice. This has come at a distressing time of CoVID19 crises where incomes of individuals, businesses, and MSME’s have been severely impacted. The investors in these funds are severely impacted due to their dependence on these funds for their immediate or medium-term cash flows and now above all the safety of their monies. In some cases, it could be most of the savings/corpus that has been put to work. The investment rationale for most investors in these funds have been
1. The general safety of such category of funds
2. Getting regular incomes on their investment
3. General faith in the system and/or
4. Established product type.
While this might be the case, in good times or bad the onus of safety of investors’ fund lies with himself and the rule of “Caveat Emptor” or “Buyer Beware” always prevails. This is true for any investment or generally parting of monies from an investor to a third person.
The FT Debt Debacle
The situation with Franklin Templeton funds could have happened with any other AMC given the dislocation in the financial markets and the positioning of the funds in the current market environment.
For starters, Franklin debt funds were positioned to deliver higher returns as compared with competition and thereby were invested into marginally higher risk than the general markets. This strategy works well under most circumstances given that liquidity and funds flows keep investors and borrowers from accessing / rolling over monies quickly.
Secondly, the line between swimming in the middle of the pool to the deep end of the pool is often non-existent (not even blurred). This results in asset managers taking marginally higher risk without any commensurate return benefit. This is obvious in hindsight and might appear rationale during normal times. Both for investors and asset managers. In the case of FT funds, most investments were in risky papers without commensurate returns.
Thirdly, the diversification in asset managers strategy on funds ought to save the day. Unfortunately, the asset manager had not differentiated between its medium-term funds and ultra-short-term funds, using the same strategy across these funds. Clearly, the investor has been taken for a royal ride here, for no fault of his.
Finally, most of us are guilty of being slightly complacent when things are going to get rough. The first indication of the FT issue was evident when in a couple of these funds’ exposure to Vodafone and Yes Bank papers were side pocketed in 2019. Prudence dictates that the troubled ship be abandoned before the stampede begins.

How are we impacted, and are we prepared?
The current CoVID19 pandemic has been mild so far and there are numerous reasons – including on-time assessment and steps taken, higher immunity, sunshine factor, etc. There is much literature on the topic in the public domain. The financial impact is still yet to come to full-blown proportions but can be assessed individually by each one of us. The individual and collective response to the situation is developing in nature and as weeks go by, the complete impact of the same would be evident.
There is a great economic impact on several direct sectors such as tourism and aviation, transportation and logistics, and MSME’s. Stage II of the financial contagion (Risk Aversion) is being felt across businesses and individuals alike. The central bank (RBI) and capital market regulator (The SEBI) has so far responded to the situation like other peers across the globe. Stage III of complete liquidity freeze and volume collapse is unlikely to happen soon in India given the evolving situation and talks about normalcy returning in a phased manner soon. The systemic liquidity so far has been managed; however, the deeper impact could be felt if the situation lasts longer than everyone is prepared for.
Most of the participants are barely prepared for such emergency situations which is all-pervasive and systemic. And yet some sectors/participants are better than those who are severely impacted. Staples, non-durables, and certain services have been relatively smooth, so far. The lessons from the current episode for individuals and institutions should be to be prepared for a war-like situation for 4-6 months during any market cycle. This means putting up safety nets around – Liquidity, business/income continuity, risk management, back-up plan (secondary work-related stuff), and communication. For instance, unscheduled maintenance for industries, skill upgrade for workforce or individuals, and strategic planning for normalcy. All these and more should be a part of any individual or business plan when there is still time.
Conclusion
From an individual perspective, investors who are now stuck into the current frozen FT debt funds; the following things are necessary.
1. Access your liquidity conditions and work on a plan to sort it out. There is a great likelihood that your money would be returned soon
2. Ask questions around your investment methods and know why you ended up in the current situation. If only a small portion of your overall investment is in these funds, you have already done a good job.
3. No, there is NO reason to panic and start pulling out of every conceivable investment, since that way you could be creating a chain reaction and worse you will end up jeopardizing your objective (goals) and your return profile

For those who have no exposure to FT funds frozen or have FT equity funds, it might be a good time to reassess your exposure. While that might be the case, if your liquidity profile, asset allocation and goal planning is mapped, there is little concern for you. There is no point in losing sleep over things in which everyone is in the same boat and you are well prepared than others. Chances are you will come out stronger than most.

FAQs on EMI Moratorium – Most questions answered

The EMI Holiday package announced by RBI on account of CoVID19 has raised many questions with respect to applicability, coverage, eligibility, and impact.   We answer the basic questions through the FAQs that are put together which cover most of the doubts regarding these. 

  • Is moratorium compulsory or optional; what loans are it applicable to?

The moratorium is optional both for the borrower and the financial institution(lender).  ie The lender can choose to offer this option to its clients. The borrower can also choose to avail of the option if it is offered by the lender from whom the loan is taken.  

This is applicable for all kinds of credit facilities such as retail loans, Home Loans, Business Loans, Cards and Farmer Loans, term loans, and working capital loans of any size and duration and applicable both for individuals and businesses.

  • What is meant by moratorium?

A moratorium is temporary postponement of payment of interest/ principal/installments (and is not a waiver) for the period from Mar 01, 2020, to May 31, 2020. Interest will continue to be payable on all amount(s) for which payment is being postponed pursuant to the Moratorium.

  • For what period can the moratorium be granted?

A moratorium may be granted up to a period of three months for all amounts falling due between Mar 01 and May 31, 2020.

  • Is the moratorium on principal or interest or both?

The moratorium can be offered for below payments due during the moratorium period:

  1. Principal and/or interest component
  2. Bullet repayment
  3. Equated Monthly Instalments ( EMIs)
  4. Credit Card dues
  • Will the interest accrue during the moratorium period?

Yes, lenders will charge interest during the moratorium period as per the relevant terms and conditions of the loan agreement between the lender and borrower/s.   

  • How can you opt for the moratorium?

For most PSU lenders, there is blanket access to the moratorium, and it applies to all loans irrespective of size/category/sector. For private lenders, it would be prudent to get in touch with the respective client relationship manager/branch/phone banking/mobile banking/internet banking etc. and communicate your preference since this is NOT a default option and needs to be availed categorically. Failing which, there is a chance that the deduction of EMI would go through on the scheduled date set.

  • What is the interest charging mechanism for retail term loans such as Home Loans, Personal Loans, Consumer Durable Loans, Two-Wheeler Loans, Auto Loans?

The accrued interest would be added to the principal amount which will increase the residual tenure of the loan except in cases where extension of tenure is not possible in which case the EMI amount will increase. Please refer to the terms and conditions in the loan agreement for further details.

Illustration: Mr Ravi availed of a home mortgage on Mar 01, 2020 amounting to Rs one crore with a loan tenure of 240 months at an interest rate of 7.5%. If Mr. Ravi wants to avail of a moratorium of installment of Rs 89,972 which is due on Apr 01, 2020, then the interest for the month of March amounting to Rs 75,000 will be added to the principal amount and the outstanding principal amount on Apr 01, 2020, will become Rs 10,075,000. The interest will be computed on an outstanding principal. Similarly, the interest for the month of April which is payable on May 01, 2020, of Rs 75,562 will be added to the opening principal on May 01, 2020, which will be Rs 10,150,562. The interest will again be computed on the outstanding principal. In this case Mr Ravi’s tenure will increase from 240 months to 250 months considering the unchanged rate of interest and installment amount during this period.  To reduce this, Mr Ravi can choose to prepay part of the loan when normalcy returns to his cash flows, based on the prepayment clauses in his agreement.

  • How will interest be charged and recovered for SME / MSME / Businesses which use cash credit/ overdraft facilities? 

The accrued interest will be due and payable immediately after the end of the moratorium, and interest keeps accruing for this moratorium period.

  • Will there be late payment charges/ default interest/ additional interest for the deferred installments during the moratorium period?

No late payment charges/ default interest/ additional interest shall be levied during the moratorium period has to be charged during this period as specified by RBI.

  • Can the borrower make payments in between the Moratorium period?

This option to defer payments on loans is a relief granted to borrowers due to disruption caused due to the unprecedented outbreak of COVID-19. However, the borrower has the option to continue scheduled payments during this moratorium; or avail of the benefit of the Moratorium.

  • Will the seeking of Moratorium by the borrower have an impact on their credit/bureau score?

The moratorium on payments will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies (CICs)/credit bureau by the Bank. Hence, there will be no adverse impact on the credit history of the borrowers. This is specifically for this moratorium period only.

  • If the borrowers have enough balance in the accounts and installment is due, will the lender debit the EMI during this period?

Yes, if you have NOT opted in for the moratorium, then the normal EMI dates would apply and the deduction would occur as per the loan schedule.  It may be noted that some banks are offering moratorium as a default, hence, it is advisable to check with the communication from the bank. However, if one has opted for the moratorium, then the EMI would not be deducted even if there is sufficient balance for the EMI. 

  • Does the borrower need to submit any documents for availing this Moratorium? 

For PSU lenders the default option is the borrowers would get this moratorium irrespective of which category he belongs to. For borrowers of private lenders, the borrowers would get instructions from his/her respective lender on what needs to be done. Currently, the paperwork is limited to communicating the choice of option to the lender via – email /phone banking/internet banking or branch banking.

  • Does it make sense to continue to pay the EMIs rather than availing of the moratorium? 

Yes, if there is NO pressing need or shortage of cash flow then it makes sense to continue to pay as per schedule. This way you save on the additional interest that would be charged on the amount outstanding.

  • What happens to payments due and made or defaulted in March 2020 

If the payment has been made during the 1st March 2020 – 31st March 2020 period, then the borrower will effectively get two months of the moratorium period. If there has been a default due to cash flow issues or any other reason, then you would now get protection against any penalty/charges that might be due or have been deducted. And effectively such borrower would get the 3-month moratorium period. 

  • What happens to loans/credit facility started in March or April 2020?

The borrowers of all classes, old and new are eligible to avail of this moratorium; however, different lenders might have different rules, so it might be good to check with your lender on their policy with respect to the same.

  • If the borrower has multiple borrowing facilities within the same lender of different lenders, can he/she get a blanket moratorium? 

The borrower needs to specifically select and mention every facility that he/she has availed from the lender or in case of multiple lenders, then the borrower will need to communicate/opt with all such lenders.

EMI Loan Calculator and Impact Assessment

How to spend your month-end happily?

Have you ever reached the end of the month with almost nothing in your pocket and bank account? If so, you’re not alone. In fact, many Indians, often with large families, are living pay cheque-to-pay cheque. It can be one of the hardest cycles to break. Below are some tips on how to spend your month end happily and without worries.

Know Your Exact Budget

The biggest trick to help you spend less than you earn is to know exactly what you are earning and exactly where are you spending. It sounds simple, but

How do I retire early


Let me give you an example of myself. I had a goal of retiring from corporate life and getting into the entrepreneurship mode at the age of 35. However, I was able to do this almost 5 years earlier. I will share with you what actually helped me achieve this goal of mine.

Talk to our certified “Senior financial planning advisors and wealth managers”.

* – Firstly, you need to outline your goal clearly. Many people I know do not end up achieving their goal is because they have a moving target.
* – Secondly, you need to have a clear game plan for the same. Ideally, you should do a financial plan and then decide on a practical time frame for retiring.
* – Thirdly, be disciplined as you work towards your goal. This is actually the most boring phase and needs to be followed though over many years. Hence, tracking on how you are doing Vs your goal is an important factor towards achieving your goal.
* – You need to be able to find the right mix of aggression to be able to achieve your goal early, but also be cautious so as not to lose you returns.

Talk to our certified “Senior financial planning advisors and wealth managers”.

Call us +91 98453 99780

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How much of term cover should I take?


What is the ideal term cover to be financially secure? Watch Anil Rego, Founder & CEO of Right Horizons Financial Services, highlight how much term cover one should take and why.

– Human Eye Value
– Replace your income stream
– At a minimum, take care of expenses of family.
– Corpus can be deposited or invested by the family and live off of it due to inflation
– Can reduce to the extent of liquid assets.
– 50,000 per month will require 3.5 Lakhs.

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The Ultimate Secret Of FINANCIAL PLANNING

We all knows the game called Kahn Banger Crorepati 

Show Host – Amithab bachan !  

And crorepati cheque has taken by only one women in India I.e Binita Jain

She won final cheque in episode and is planning to utilise the winning amount to set up a dental clinic for her son.

Do You know KBC ?

KBC( Kaun Banega Carorepati)   was launched for the first time in July,2000. It is a  show which provides  healthy entertainment and also helps in enhancing knowledge. 

Every one loves to be their in hot seat and try to ans all the Questions and get the big cheque from the hands of film star

Now let u also know this one more person who withdrawn Rs 2.3Cr   with a small investment like 1 lakh now his bank got 230 times more from what he just invested.


Market: 2k18 “The year gone by”..

2018 was one of the most difficult year for investors as benchmark Nifty gave only 3.2% whereas broader markets like Mid cap and Small caps where down by 15.3% and 23.6% each  respectively. Only Bankex, FMCG and IT are closed on a positive note, while rest all indices closed lower. The markets also witnessed major events like NPA clean-up, NBFC re-financing issues, RBI Governor exit, that could fundamentally change the structure of the economy. It is however important to highlight that the government proactively acted on the above issues.

Where do we stand today:

Data throws up a mixed bag when we look at valuations and compare it with December 2007, closer to the previous market peak.  On Price/Earnings for Nifty 50, we are valued similar to the last peak at 26.6 in Dec 07 Vs 26.4 in Dec 18, but when we look at other valuation parameters like Market Cap/GDP, we are much lower.

As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”

//(GDP & GNP Definition and the difference

GDP is the total market value of goods and services produced within the borders of a country.

GNP is the total market value of goods and services produced by the residents of a country, even if they’re living abroad. So, if a U.S. resident earns money from an investment overseas, that value would be included in GNP (but not GDP).

Further, markets have steep falls when they run up significantly and the economy is overheated.  Despite the fact that markets have moved up over the last couple of years, this is much muted compared to what you normally see in a bull market.  Economic parameters are also muted.

Various Indicators- Current Vs Dec 07

US Markets take a tumble

US markets have seen a large correction since October 2018 with the DowJones was down by 18.8% before recovering some of the losses. Though the US markets have been one of the best performers, we are relatively bearish on US stocks vis-à-vis Indian stocks. In the case of the US, both market and economic performances have been strong over the past few years and we believe US stocks/ESOPs could be impacted over the next year.