Saturday, June 21, 2014

Can I Become a Crorepati with my Current Salary?

Have you ever though about becoming Rich? Right from the day we first learnt about money, one thing that keeps flashing in our minds is to become a billionaire or at least a millionaire. In Indian Terms - We all dream of becoming a "Crorepati". One of the most frequent questions that most people ask me is "Can I Become a Crorepati with my Current Salary?"

Let us pause for a moment here. You know how much you earn each month. Could you think for a minute and tell me do you think you can retire as a Crorepati with your current salary?

Did you Think - No, I dont think so...

Am sorry my friend, you can very well and I REPEAT very well become a Crorepati with just your current salary. Are you thinking how? Well, the purpose of this article is to explain you just how...

Becoming A CrorePati - Turn your Dream to Reality!!!

Before we go any further, let me tell you the secret to becoming a crorepati. It is simple and effective and it is called:

"Investing Regularly"...

I hope you werent expecting any magic overnight rich-man schemes from me. I am not someone to advise on such get-rich-quick schemes and in 99.999999999% cases such schemes will result in you losing your money. So, better to take the proven approach.

Can Investing Regularly Really Make Me a Crorepati?


Look at the table below. We are starting off with as little as Rs. 5,000/- per month and we have calculated how many years you need to invest in order to become a "Crorepati".

As you can see that you can become a Crorepati much sooner by selecting Investment Options that give 15% than by choosing Options that give you just 6% or 8%.

Where to Invest?

This is a tricky question. Where you invest depends on your risk appetite and your ability to absorb risks. So, simply saying, there is no single investment choice that is suitable for all. What if I Told you that you could Become a Crorepati and Save LOTS of Income Tax at the same time? Would you be Interested in such a proposition?

Yes, it is quite possible. Towards the end of last year I had published a book titled "Your Complete Guide to Indian Income Tax and Retiring as a Crorepati" which would be just right for you. The books covered all the info you need know about Indian Income Tax and on top of that we have formulated an Investment Strategy that selects instruments that provide you both tax benefits and capital appreciation. The book also explains strategy to maintain optimal asset allocation based on your risk taking ability, how to handle maturity proceeds and closes off with the list of best Investment Options like Mutual Funds and Fixed Deposits right now.

 Free Preview: Your Complete Guide to Indian Income Tax and Retiring as a Crorepati_Preview.pdf

Let us say you are someone in the 30% Tax Bracket, by saving 1 lakh per annum by saving Rs. 7,500/- per month you can reduce your tax liability by Rs. 30,000/- each year and shorten the time until you become a Crorepati by many years if you Invest this 30,000/- as well.

What are you waiting for?

A Sneak Preview of this book is available for you below. If you are interested, feel free to click the "Buy Now" button and purchase the pdf copy by paying via credit card.

If you want to check out the latest offer price of the book - please see here: Books by this Author

Friday, June 13, 2014

Annuities - Good or Bad?

Annuities are one of the popular investment options these days especially for people who are on the verge of retirement or who are already retired. With the product becoming more and more popular, I am pretty sure someone in your family may be considering signing up for one of these. The purpose of this article is to explain to you, what an Annuity Is and whether it is a good choice for Investment...

What is an Annuity?

An annuity is nothing but a lump-sum investment, which gives a regular income to the investor for the rest of his life.

Annuitiies can be of two types:

  •    Immediate Annuity - The Scheme starts paying out the regular income right from the first month
  •    Deferred Annuity - The Scheme starts paying out the regular income after you achieve a certain age or after completion of a certain vesting period


Who can Offer/Sell Annuity Schemes in India?

As of now, only Insurance Companies can offer Annuity Schemes in India. Almost all banks, financial institutions and financial advisors are approved to sell or distribute these products.

Is Annuity Something I sign-up Individually?

Actually No. Most Pension Plans that are being sold these days have some clause or the other which mandates that you sign-up for an Annuity Scheme using at least a certain set % of your corpus. For ex: The NPS Scheme mandates that you signup for an Annuity with atleast 40% of your final corpus. Most Pension Plans floated by Insurance Co.'s expect you to Invest at least 60-70% of your final corpus into an Annuity Scheme. Whats worse is that, you have to sign-up for an Annuity that is offered by the same Insurance Co only. You cannot take the money outside.

Is Annuity a Good Option?

Though Annuity might look like a good option, I personally feel that there are better options that are available in the market. You might be wondering - WHY. The Sad Truth is, the person who is selling you this annuity WILL NOT tell you the below points.

Reason No. 1: Low Rate of Returns

Most Annuities in India Offer Rate of Returns that is lesser than 8% per year. 8% is the Max and is offered only by a few Select schemes. Almost all the others fall in the 7-7.5% range. In fact there are Annuity Schemes that offer as low as 5% or 6% per year returns

Reason No. 2: Service Tax - Eats your Returns 

Annuities are subject to Service Tax. The current prevailing service tax % is 3.09%. So, if you Invest Rs. 10 lakhs in an Annuity Scheme, Rs. 30,900/- goes out as Service Tax and only the rest gets Invested effectively. This effectively brings down your yield or profits by at least 0.25%.

For a 10 lakh Investment, @ 8% Returns the Interest you will earn in one year will be Rs 80,000/- whereas if you consider the Service Tax outflow, you will only earn Rs. 77,528/-. You are losing Rs. 2,472/- worth of Interest just because you have invested in Annuities...

Reason No. 3: Income Tax - Eats your Returns Even More

The Income you earn every month through these Annuity Schemes are FULLY TAXABLE. In fact, this amount is not even eligible for Standard Deduction. So, whatever Annuity Income you earn is FULLY AND TOTALLY TAXABLE.

Now Go Back and Re-Think, Are Annuities Good Options?


For New Investors:

If you are someone who is yet to signup for an Annuity Scheme or a Pension Scheme that Mandates you to Invest a certain % of your final corpus into an Annuity, Think multiple times before you decide. The effective rate of returns, after considering the taxes will be much lower than what you think it would be.

My Recommendation - Stay Away. 

For Existing Investors of Annuity Schemes:

If you are already signed up for an Annuity Scheme, there is not much you can do. Try to manage your taxes properly so that you pay as-little income tax as possible on your eventual Annuity Income

For Existing Investors of Pension Schemes - That Mandate Annuity Subscription

If you are already signed up for a Pension Plan that Mandates you to Invest a certain % of your final corpus into an Annuity firstly, try to make partial withdrawals before the eventual maturity date (without paying any penalties/fees). Secondly, invest only the bare minimum % into the annuity and divert the rest into a better investment option.

What are the Alternates?

There are 2 possible Alternates that can offer much better returns than Annuities. They are:
a. Bank FD's (Select Monthly Interest Payout Option)
b. Monthly Income Plans

Happy Investing!!!

Monday, June 9, 2014

What to Expect from the Indian Stock Market - In the Coming Weeks

The past 2 months have been really crazy for the Indian stock market. The Sensex and Nifty have have gone up by almost 20% this year. In fact, exploding is an understatement. Both Sensex and Nifty are in all-time highs. The purpose of this article is to understand what to expect from the Indian Stock Market in the Coming Weeks...

The BULL Run - Reason

There are two main reasons why the Market is going through such an incredible BULL RUN.

Reason 1 - Foreign Investors: Foreign Investors have pumped in close to USD 7.7 billion since Jan 2014. Most of the money from Foreign Investors usually gets invested in Large Caps and Blue Chips but this year, they are preferring smaller Co.'s too. Hence the 30-40% raise in the BSE Small Cap and BSE Mid Cap Indices.

Reason 2 - Positive Investor Sentiment: Even before the election results were announced, investor sentiment was very positive under the hope & belief that Mr. Modi will win. With his land-slide victor, the sentiment has gone up even further and hence the positive momentum...

Is this Bull Run Fueled By Fundamentals?

A Company stock usually goes up if the company is doing good business, posting profits and declaring dividends. These are called the "FUNDAMENTAL REASONS". However, this bull-run is not fuelled by Fundamentals. This Bull Run is fueled by positive investor sentiment and high expectations from the Ruling Modi Government.

Can I Back-Up my Previous Statement?

Of Course I Can. Do you think I will make such a HUGE statement like this without proof?

Lets look at some of the companies that have posted double digit gains (In Stock Price) in the past 2 months:

  • Suzlon Energy - 110% 
  • Unitech - 93% 
  • Sintex Industries - 118% 
  • GTL Infra - 105% 
  • JK Lakshmi Cement - 95% 
  • IVRCL - 99% 
  • MTNL - 96% 

Does this surprise you? All of these companies have been in Dire Financial Conditions over the past year or more. In fact, most of these companies have failed to post profits over the past few quarters consecutively. So, If you can see the stock price of a company that has failed to post profits, go up by 100% in 2 months, do you think the Bull Run is backed by Fundamentals?

More Proof...

Lets look at the other end of the spectrum. Below are a few companies that have actually lost in value (In Stock Price) over the past couple of months:

  • Dr. Reddys Labs - 15% 
  • Infosys - 6% 
  • TCS - 5% 
  • ITC - 4.5% 
  • Sun Pharma - 4% 
  • HCL - 3% 

What do you see here? These are top performing companies that have consistently posted profits every year. In spite of this their stock prices have gone down. If you compare the fundamentals between the companies in this list and the previous list (of double digit gainers), you will be confused even more. Am I right?

What to Expect Next...

The next few weeks are critical to the Stock Market. The positive Investor sentiment will not last forever. After a couple of months the hype will subside and people will start looking at the results from the Modi Government. Though I have a positive feeling about the performance of the government, the expectations from the public is just too high.

On top of this, lets consider this scenario: Lets say the next quarterly results for Unitech or Suzlon comes up and they both fail to post profits. What do you think will happen? All Investors who bought its stocks during this bull run will DUMP the stock and its price will FALL SHARPLY.

In all probabilities, we can expect a sharp stock market correction in the next couple of months.

What To Do Now!!! 

Personally I would like to remind you that, dont get tempted by the double digit raise in stock prices of companies which lack fundamental reasonings. Sure, they can give you great profits in the short-run if you are lucky. However, this will not go ahead forever. It would be better if you stick to the basics and choose companies that have sound fundamentals and have the ability to post consistent profits year after year.

You will not Repent your Decision of Choosing High Quality Companies.

Happy Investing!!

Disclaimer: All the Statistics in this article were calculated based on data gathered from the Internet. Though every effort has been made to ensure accuracy of the info, the author does not guarantee it or accept liability for the same. 

Friday, June 6, 2014

The 2014 FIFA Football World Cup

This year, Brazil is going to host the FIFA worldcup event. Football is arguably the most popular sport in world and the next 6 weeks are the pinnacle of the sport. You may be wondering what I am doing writing about the football worldcup - right?

Actually, an event like the world cup has a huge economic impact on the country that is hosting and the purpose of this article is to highlight the key financial aspects of the worldcup and the impact of the event on Brazil's economy...

First Things First - The Prize Money

Let us start off with the Prize Money which the teams will WIN.

Winner - USD 35 Million
Runner Up - USD 25 Million
Third Place - USD 22 Million
Fourth Place - USD 20 Million
For the 4 Teams that get Eliminated in the Quarterfinals - USD 14 Million
For the 8 Teams that got Eliminated in the Round of 16 - USD 9 Million
For the 16 Teams that got Eliminated at the Group Stage - USD 8 Million

That is over 350 million dollars worth prize money...

Investments From the Host Nation 

Hosting an event of the magnitude of the worldcup could require huge investments from the country hosting it. Brazil is expected to spend close to 10 Billion US Dollars to host this marquee event. The Investments from Brazil fall into 4 main categories:
a. Infrastructure Facilities
b. Stadiums and
c. Security
d. Tax Sops for FIFA

Infrastructure Facilities:

As part of hosting this worldcup, Brazil is expected to spend close to USD 3 Billion on improving the Infrastructure facilities in the cities where the matches are being hosted. This includes revamp of the Airports, Rail system, Roads, Subways and other public transportation facilities.


A total of 12 stadiums in Brazil would be hosting the 64 football matches this season. Brazil has spent close to USD 4 Billion on Stadium Works. This cost goes into construction of 5 new stadiums plus refurbishing the other stadiums as well. In order to host events that expect the kind of crowds that a football worldcup brings, these stadiums required extensive revamps and hence the expenditure.

Security Measures: 

The Brazilian government is planning to spend around USD 900 million for Security related expenses. They have declared that the tournament will be "one of the most protected sports events in history".

Tax Sops for FIFA:

FIFA is expected to spend a total of USD 2 Billion to conduct this event and Brazil has offered extensive tax sops and benefits to them in order to facilitate this event. Though the actual figures in terms of tax sops is unknwon, this number is also expected to be huge.

Revenue Generation

Now that we know that billions of dollars are being invested in order to run this event, this article would be incomplete if we dont cover the parts where Brazil and FIFA are going to earn a Revenue, isnt it?

Ticketing Revenue

FIFA forecasts a total of 3,334,524 tickets for the entire tournament. Tickets that are as cheap as 30 Brazilian Reals (Approx. USD 12) and as costly as USD 990 are available for sale. Tickets went on sale on 20th August 2013 and was overbooked within the first 24 hours. As demand exceeded supply, FIFA staged a random draw to allocate tickets with a total of 889,305 tickets being allocated. 71.5% of these were sold to Brazilian residents with the highest number of overseas sales being to those from the United States.

A further 220,000 tickets issued on a first come, first served basis sold out within seven hours of being placed on sale in November 2013. Following the final draw in December 2013, a second phase of ticket sales began and concluded the following month, attracting over 3.5 million applications. Any remaining tickets were then made available on a first-come, first-served basis from March 2014 onward and can also be purchased in person at designated FIFA ticketing centres.

TV Licensing Deals & Revenue

The TV Licensing Deals and Revenue generated out of that would run to billions of dollars. In Singapore, I will mostly be spending approx. 50 dollars for viewing this tournament and fans worldwide will be be shelling out a lot of money to watch this event.

Economic Impact on Brazil

Approximately 3 Million Overseas Fans are expected to visit Brazil during this 5-6 week period to watch the worldcup. Thats a lot of people - isnt it? Imagine the impact this would have on the tourism industry in Brazil. Airports, Hotels, Resorts and almost every hospitable place in the cities that are hosting the event are going to be full. Billions of dollars worth of funds from abroad would get infused in Brazil's economy which would be beneficial for local businesses as well as the country as a whole.

From a purely economic point of view the direct impact of the World Cup is relatively small, given the size of the Brazilian economy. If we take the recently concluded Winter Olympics in Sochi, Russia as a benchmark, Brazil could be actually overspending. Obviously those who are directly concerned with the event will always stress the positive impact, for example the benefits for the country’s image. Brazil’s longtime dream of returning the World Cup to South America after a 36-year hiatus is about to become a reality so, I dont think they would mind if they actually end up overspending. But in general, experience shows that the costs are higher than the economic benefits when such events are hosted...

Some final worlds: Fans around the world are eager to watch this event. Events such as the football world cup have a big short-term impact on the countries economy and this is what Brazil will be go through over the next couple of months...

Happy Footballing friends!!!

Wednesday, June 4, 2014

Tough Times Ahead for Infosys

Exactly 1 year ago, on 3rd June 2013, I published an article titled "Can Mr Murthy work his magic with Infosys this time too?". Infosys, arguably India's most well-known IT company was going through a tough time and its founder Mr. Narayanamurthy had come back to help revive the giant from the downward slope. I was pretty optimistic about this move at that time and the article would've reflected my views heavily. Investors liked this move and the share price appreciated by over 30% between June last year and April this year. However, over the past 1 year, things have changed drastically. A week ago, one of the people who were considered the top contenders for the CEO Post resigned. This was one among the many high-profile exits from Infy and the stock market did not react kindly. The stock price tanked close to 10% in just 2 days and even now it is extremely volatile...

Before We Start: A number of top executives have resigned from Infosys over the past 1 year. Most of these people would've been prime candidates for the CEO Post of Infosys but sadly all of them have left for some reason or the other. How Infosys recovers from this shock is entirely upto Mr. NRN. The purpose of this article is to highlight the key exits that happened and to give you an idea of what we can expect from Infy as a company & from its stock as well from an Investors Perspective...

The List of Top Exits:

A total of 9 top executives from India alone have resigned over the past 1 year from Infosys. In fact, this has actually come as excellent news for IT Organizations worldwide. Great Leaders are extremely hard to find and when that happens, do you think top execs from a company like Infosys would be out in the market for long? Almost all of them have taken up high profile roles with other companies. See the table below:

Note: N/A refers to - Not Available at the moment. I couldnt find info on the internet about where they are heading to.


One or two top execs leaving the company is something all organizations go through however, 9 top guys in one year? That brings us to the billion dollar question - Why did all of them resign and that too within such a short span of time? This is something only those people who resigned can answer accurately.

I have a couple of theories though:

Theory 1: Almost all these guys were in the running to the elusive CEO Post of Infosys and trust me, each one of them had the credentials to make a viable bid to take over that role. However, when things did not work out the way they wanted, maybe they felt it was time to move on...

Theory 2: Over the past 2 years, Infosys as a company has implemented a new Management Strategy. Maybe this management rejig backfired and thats why these guys left...

Again, I might be wrong here because these are just theories. But, with so many top level execs leaving the company in such a short span of time, there has to be some compelling reason.

The Search for the Next CEO

As of now, Infosys as an organization is reeling from tremendous pressure. Attrition is at an all time high, top execs have left the company and even Mr. NRN's magic seems to be fading away. The last ditch hope for the company is the appointment of the new CEO who is going to take over the company. News websites claim that the next person to be appointed as the CEO could be the first person outside of the founding members to take up this role...

What Next - For the Company Stock?

Presently the Infosys stock is trading at around Rs. 3000/- per share which is close to 20% off its high of Rs. 3832/- per share on March 6th, 2014. The fact that, the price of the stock has actually come down by 20% over the past 2 months when the stock market has gone up to never-before heights clearly outlines the market sentiment. People are scared and there is not much visibility about the the future prospects of the company.

So, the volatility is going to continue. If this new CEO is a polarizing figure who can revive the investor confidence, the stock price will immediately go-up. However, if the new name doesnt live up to market expectations, the price of the stock could go down even further.

So, What To-Do?

Dips in stock price is usually a good opportunity for long-term investors esp. for companys that have a great the track record. But, a clear decision on whether the stock price will go up or down cannot be taken until this new CEO is appointed. So, personally I would recommend the Wait and Watch approach. If you are currently holding Infy shares and are sitting on a Profit, go ahead and sell a portion of your investments and then hold on to the rest. If you feel Infy as a company is extraordinary and this current dip is an amazing buy opportunity, thats fine. Just remember to distribute your purchase across at least 4-5 trading sessions so that you can average out your investment price.

Happy Investing!!!

Disclaimer: All the info in this article were gathered from the Internet. Though due care has been taken to ensure that the information provided in this article is correct, the author does not guarantee the accuracy of the same. 

Sunday, June 1, 2014

RBI Brings Cheer for Citizens!!!

The Reserve Bank of India has brought a lot of cheer for citizens of India. Of late, banks are being advised to implement newer regulations that would help the common man. The purpose of this article is to highlight a couple of those developments in the past few weeks...

No More - Pre-Payment Penalty for Floating Rate Loans

Yes, you read it right. The RBI has instructed all banks to abolish pre-payment penalties for all Floating Rate Loans. Banks charge up to 2% of the oustanding loan amount (Principal) as penalty on customers who close their loans ahead of time. Both Home Loans, Auto Loans, Personal Loans and Education Loans that are repaid with a floating rate of interest have been brought into this ruling.

What this means for you?

As customers, one of the biggest roadblocks towards closing loans is this prepayment penalty. Home Loans and Auto Loans are usually in lakhs and 2% of the loan to be paid as penalty would have a deep dent on our pockets. For a 10 lakh loan, we have to pay Rs. 20,000/- just as a penalty for repaying the loan ahead of time. However, with this new ruling, we dont have to pay huge sums of money to repay our loans. This is Awesome News as customers..

What this means for the Bank?

A banks main source of income is the interest the loan customer repays as part of the loan agreement. Banks usually plan their future income based on loan repayments and if you repay your loan ahead of time, they lose a lot of money that they might end up earning in future. So, they charge customers these kind of penalties to prevent them from closing off loans.

With the RBI Abolishing the prepayment penalties, banks would have to rethink their loan strategies to ensure that their future income doesnt get affected. At the end of the day the bank has to do what is best for their business and make sure they remain profitable. To know more about how banks work and how they are an integral part of our economy, you should check out my new book titled "The Most Comprehensive Financial Guide for Women". To check out a free preview of the first few pages of the book - "click here"

No More - Penalties for Not Maintaining Minimum Balance for Dormant Accounts 

The Reserve Bank of India has recently asked banks not to levy penalty for non-maintenance of minimum balances in any inoperative account. According to the RBI, a savings bank account is treated as inoperative/dormant if there are no transactions in the account for over a period of two years. Most Banks charge penalties if a dormant account does not have enough funds in the account.

The RBI has now proposed that, banks should limit services available on dormant accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level. This way, RBI wants to minimize penalties that are charged on customers.

What this means for you?

As customers, there are situations where we may end up in a position where we cannot operate our account. For ex: we may have to visit a foreign country due to official purposes and end up staying there for many years. During this period, our account back in India may end up with insufficient balance or inoperative. Banks charge hefty fines on customers who dont maintain sufficient balance in their accounts and customers end up paying that money for reviving their account to normalcy. With this new regulation, these penalties will go down significantly.

What this means for the Bank?

Any service that a bank offers its customers comes at a price. Banks usually expect customers to maintain a minimum balance so that they can utilize those funds to offset the charges they incur in order to provide services to customers at discounted prices. When a customer fails to do this, banks resort to penalizing the customer and in fact these fines & penalties form a decent chunk of their annual income. With this new regulation, they may have to rethink their fees & charges so that they can continue to make a profit...

Some last words:

As customers, these new regulations will bring a lot of cheer, esp. the one about prepayment penalties. So, lets hope RBI brings in more such news that would help out the common man...

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