Today banks have ventured into other financial products, besides the traditional banking. This includes insurance as well. So you are now in a dilemma whether to buy insurance from your bank or an insurance agent. Well, here are the pros and cons of both the methods.

Pros:

• Convenience: Your bank offers you lot of convenience like minimal paperwork and direct debit as they have all your personal data, and access to your bank account. This is not possible with an insurance agent.
• Consolidated portfolio: You can get a consolidated overview of your portfolio, including your savings account, loans, insurance and investments. This helps you get a clearer picture of your finances, which is not possible with an insurance agent.
• Customized products: Nowadays, insurance companies are offering insurance products specifically designed for the bank’s customers. This will help you get a good deal. You will not get any such deal with an insurance agent.

Cons:

• No personalized service: The bank will not come over to your door to fill the forms and collect payment. It will just set up a direct debit on your account and it is your responsibility to ensure that there are sufficient funds in your account.
• Lack of trust: There is a good rapport between you and your insurance agent. This is not possible in case of the bank.
• Poor range of options: Many banks offer limited range of insurance products. But an insurance agent can offer you a wide array of products.

So weigh the pos and cons of both the alternatives before buying your insurance.

Raju is an engineering graduate working in an MNC. He earns Rs 50,000 a month. His company has given him a platinum credit card that allows him to spend as much as he desires. Raju takes full benefit of this card and spends all his monthly income on clothes, mobiles and eating out. He has totally ignored the concept of investing.

So if you are in this situation, here is how to invest if you are in your 20s.

• Buy a health insurance: Today health care has become expensive. A simple visit to a doctor can set you back by as much as Rs 500. Hospitalization, medicines, medical examinations have all gone up. This is where having a good health insurance helps. Besides paying for any health expenses, you’ll also save money on premium, if you start early. It also gives you tax benefit under section 80-D.
• Invest in equity mutual funds: Equities are the best bet to make money and become wealthy over a long haul. Also earlier you start you can get more by investing smaller amounts due to the power of compounding. Moreover in your young age, you have higher risk appetite, thus allowing you to go for aggressive investments. But a word of caution: DON’T GAMBLE OR SPECULATE.
• Buy your own home: Earlier you buy your home, sooner you’ll find you have exhausted repaying the loan. E.g. if you take a home loan of 20 years, when you are 25, you’ll find you are debt-free by the time you reach 45. This means you’ll be debt-free by the time you retire.

These are some of the useful investment option for people in their 20s. follow them and you’ll grow healthy and wealthy in your old age.

The face of banks has undergone massive change. Unlike the days of the old, today they offer not only the traditional banking services but also other features like financial planning, investment advice etc. While it tends to make you think that these services are free, they do come at a cost. Here are some hidden fees that not many are aware of.

1. Minimum balance charge: Your bank’s sales executive may have sweet-talked you into opening an account with them. But see what happens what happens if you fail to minimum balance. You’ll be slapped be minimum balance charge ranging from Rs 20 to Rs 750.

2. Chequebook: Use cheques over a specific no and you’ll end up paying for the excess usage. These fees range from Rs 50 to Rs 200 for each chequebook.

3. Closing the account: Try closing the account within 6 months of opening and you end up paying even for saying adieu. The charges range from s 50 to Rs 200

4. Certificates: Ask the bank to give you any documents like attestations or certificates, you will be charged Rs 50 to Rs 250 for it.

5. Bounced cheque: If your cheque bounces, you end up paing anything from Rs 50 to Rs 500 for it.

6. Cash transaction at your non-home branches: While banks claim to offer you any branch banking, try banking in any branch that is not your home branch, you’ll end up paying charges for it.

7. ATM: Try withdrawing cash at other banks’ ATMs, you’ll have to pay Rs 10 to Rs 100 for each transaction, after the initial 5 free transactions are over.

8. Account statement: Normally one statement is sent free every quarter. But if you want more than that, you will end up having to pay Rs 50 to Rs 500 for each statement.

9. Debit card charges: Banks have started offering debit cards which are chargeable in place of ATM cards which were free. The cost ranges from Rs 100 to Rs 500 per annum.

10. NEFT/RTGS charges: Banks have now started levying charges for using NEFT/RTGS. This means if you use this service 10 times and the bank charges you Rs 10 per transaction, then you end up paying Rs 100 a month.

Besides there are numerous charges like DD charges, outstation cheque clearing charges etc. So think carefully before using any of the conveniences offered by the banks.

Today Indian mutual fund industry has become highly competitive. Many fund houses have entered the fray and have started offering many mutual fund schemes with innovative schemes. This is sure to confuse many investors. So how do you go about selecting the right mutual fund for your investment?

Here are some tips to help you select the right mutual fund.

• What is your age? Younger people can take more risk as they have a long earning life in front of them. Older you get, lesser the risk you need to get. So it is advisable for youth to invest a bulk of their investment corpus in equity mutual funds, while older people can opt for debt or balanced funds.
• Are you a senior citizen looking for a monthly income? If yes, then opt for monthly income plans from mutual funds. While the income from these plans is not guaranteed, it is sure to help you earn income.
• Do you have some spare cash that you need to use for some other purpose after some time? Then opt for liquid funds. They will let you redeem your money within 24 hours, while fetching you returns higher than your bank account.
• Do you want high returns but don’t want to risk associated with equities? Then opt for gold funds. These funds simply track the prices of gold and there is nobody actively managing the fund. While the returns from these funds cannot beat those from equities, they surely offer returns higher than a normal bank deposits and also offer protection in case the stock markets crash.
• Do you love taking risks? If yes, then go for mutual funds specializing in mid and small caps as these tend to be very aggressive. While they can give you superlative returns they can also be detrimental to your wealth in short-term. If not, choose large cap funds that invest only in the leading companies.

To get the best returns on your money, divide your portfolio between equity, debt and gold funds. In case of equity funds, invest 20-30% in small and mid-cap funds and allocate the rest to large-cap funds. This will give you both the security and high returns.

We all know that from amongst the various asset classes, equities have managed to give the highest returns. This makes stock markets very attractive to those looking to make money. However not many have managed to become rich in stock markets. This is because they don’t know the secrets of becoming wealthy in stock markets.

So if you are wondering what they are, here is what you should know to become successful in stocks.

• Understand the macroeconomic and industry outlook. E.g. if RBI decides to increase the interest rates on loans, those sectors that are impacted by rate hike such as automobiles, realty and banks will be affected. Similarly recession in US will affect IT and export sectors. You should be aware of these developments. Many people tend to overlook these aspects and instead concentrate on the stock prices.
• Find out the quality of management and promoter reputation. The company you are investing in should have progressive management and the promoters should have clean background. This will help prevent scams like Satyam and Enron.
• Find out if the company pays dividend regularly. It implies the company is profit making and has sufficient cash to tide over the tough economic conditions. However don’t make this the sole reason to ignore those stocks that don’t pay dividends as the company may be very strong financially like Bharti Airtel.
• Read the company’s financial reports. It will give you an idea of the way in which the company plans to move. You will also get an idea of the company’s past performance and can catch any anomalies in the company’s performance immediately.
• Find out about the company’s financial ratios. Ratios like PE, ROE, RONW give you an idea whether it is worth investing in the company. You will also understand how the company is performing vis-à-vis its peers.

However this is just the beginning. Once you have invested in the stock, you need to monitor its performance closely to prevent nasty surprises.

Today it has become common place for insurance companies to target unsuspecting customers with their pension plans. However not many of these gullible customers know that pension plans from insurance companies. Here is why.

• While your investment fetches you tax deduction, you end up paying tax on the amount you receive as the pension.
• High charges means just a small portion of your money actually invested.
• You cannot withdraw the money even if your investment performs poorly.

So how should you invest your money to build a sizeable nest egg for retirement?

Here are some tips.

• Diversify your investments across PPF, bank FDs, debt and equity mutual funds initially. Then as you near retirement age, transfer your equity investments to debt instruments for capital safety and to get regular income. Start by invesing 80% of your portfolio in equities, then make it 50% when you reach mid-40s and then keep 20% in equities when you are a couple of years away from retirement.
• If possible, invest in a property to get a good rental income after retirement.
• But under no circumstances should you touch these funds. This is particularly true for equity funds, which will give you compounded annual growth rate of at least 15%.
• While safety of your capital, don’t shy away from taking some risks. Invest in companies like Tata companies, HDFC and Infy to get good returns on your capital without risking your capital.

Today stock markets are at an all-time high. The companies are reporting rise in their profits and are giving out hefty dividends. Yet why are investors not making any money? Why are only a few investors getting richer?

Well, here are the reasons why this happens. Avoid these mistakes and see a rise in your wealth.

• Concentrating a lot on growth: A company may have taken a lot of debts in order to fuel its growth. But its profits may be sinking. This means the company is in big trouble when the recession strikes or when the interest rates go up, as it can make it difficult for the company to meet its obligations. Instead it would be better if the investors pay attention to the company’s financial statements to avert their losses.
• Overconfidence: Many people tend to adopt the same approach to stock investing as mutual funds. They buy more of poor-performing stocks if the stock price goes down, as they would do with a mutual fund. But while mutual fund is a collection of different stocks, direct stock investing involves only one stock. So if the stock is performing poorly, sell it and move on to better performing stock.
• Concentrated portfolio: When a particular sector is doing well, people tend to accumulate more of the companies included in the sector and ignoring others. Similarly if small and mid-caps are doing well, people tend to accumulate more of them and ignore others. This lop-sided portfolio will end up ruining your wealth.
• Excess activity: Different analysts and brokers have different opinions about the stocks in your portfolio. While one broker recommends you sell stock A, another will tell you to buy the same stock. The result – balance sheets of the brokerages go on increasing. And of course, it is from your pocket.

No wonder with all these mistakes, people don’t make any wealth in the markets. Stop these mistakes and watch your wealth soar.

You must be familiar with financial products that claim you just need to invest a sum for a certain period and then see it double at the end of the term. While it is easy to think you have earned a return of 50%, it is not so. This is because your money gets compounded each year at a certain percentage of return.

E.g. if you are investing 10,000 for 10 years and are getting back 30,000 at the end of the term, your effective rate is 11.61% compounded annually.

This concept is known as the time value of money.

It says that money available currently is more valuable than the equivalent sum later on because of its earning potential.

So the Rs 30,000 available with you presently is far more than Rs 30,000 available to you in the future.

Why is this important? Whenever you have money, you can either choose to spend it or invest it. If you opt to invest it, you should ensure you earn much more than its present value. This is why it is important to keep your investments for long-term. This will help you earn better returns.

Indian stocks are the most expensive now. The stocks are trading at 34% premium to the region according to Citi investment research. Indian stocks are trading at 17.6 times expected earnings compared to a Chinese stocks that trade at 12.7 times expected earnings.

Inflation is the real problem in India. Everything is expensive starting from food to real estate. Companies are not able to pass the higher expenses to the consumer; so their profit margin is shrinking.

It is almost impossible for the Indian stock market to keep going up especially with this kind of valuation. It’s the time to watch your stock holdings and make sure you diversify your investments.

Sometime back, international or global funds were a rage. Many investors were heavily seduced by these funds. This is because they could get international exposure at a nominal sum. They did not have to get RBI permission to invest abroad. They did not have to face the hassle of foreign currency conversion as the fund house took care of all these formalities.

However it was observed that these funds underperformed local mutual funds. In fact, in many instances, investors have seen the value of their investment eroding. Why is that? Why did these funds fail to deliver?

Well, here are some of the of the reasons while global funds failed to deliver.

• As global funds invest their corpus abroad, effect of economic crisis in the country in which they have invested, will end up eroding the value of the investment.
• Foreign currency exchange will affect the value of the investment. If the foreign currency is stronger than Indian rupee, the value of your investment will increase and vice versa.
• Taxation will differ from country to country. Taxes will affect the value of your investment. Besides you’ll end up paying taxes in India as well, since unlike normal mutual funds, these funds are taxable.

So what should you do? Well, as far as possible, avoid these funds. However if you choose to do so, just invest a small portion (not more than 5%) in such funds. But this should be done only after building up a robust portfolio of domestic funds. This will help you withstand the shocks in the international markets