How to select your financial advisor

Selecting the right financial advisor is the key to successful investment. But the major problem facing everybody is how to select the right one. Well, here are the steps you can use to find the right financial advisor for yourself.

  • Check out different financial advisors. Visit different financial advisors
  • Get details about their experience, clientele, qualifications and the number of years in the industry.
  • Ask for references from all of them and talk to them
  • Find out the charges for the services
  • Find out how accessible he is.
  • Find out how frequently he plans to revaluate your financial plan. Once a year is better.

How banks make money out of you?

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.

Tips to earn additional side income

In today’s world, everyone needs additional source of income to meet rising costs. While your salary will pay majority of your expenses, having additional income does help.

Now you must be wondering how to earn extra income. Well, then here are some good tips to earn additional income

  • Interest: Do you have an FD with a company or bank? Or you may be holding a recurring deposit with bank or post office.  Then you can opt for receipt of interest, which you can use as extra income.
  • Dividends: If you hold shares or mutual fund units and have opted for dividend option, this can be your source of income.
  • Rent: Renting out your home or car can fetch you rent, which can be a source of additional income.
  • Residual income: Are you an insurance agent or in networking marketing? The commissions you earn will become your residual income. Even if you are not working, you can continue to get income.
  • Selling on ebay: Ebay lets people sell items and earn revenue. This can be done either as a part-time or full-time business.
  • Part-time work: Do you love preparing food items or handicrafts? If so, you can sell them and earn a good income. You can also take tuitions as a source of your part-time income.

 

Besides this, any lottery winnings, inheritance, etc will also contribute to your monthly income.

Precautions to be followed when investing in company FDs

Many people find company deposits lucrative due to the higher rate they pay on the FDs as compared to bank FDs. However this high return also comes with high risk. The major risk in case of a company FD is that if the company is unable to repay your money, you end up losing it. But in case of banks, your money is safe as the bank FDs are insured up to Rs. 1 lakh. So in case the bank becomes insolvent, you are sure to get your money back.

So how do you protect yourself when investing in company FDs? For one, opt for bank FDs having a credit rating of at least A+. These ratings are given by rating agencies like ICRA and CRISIL. A+ ratings implies the FD is safe.

Find out the company’s record in making repayment on time. Check the company promoters’ record. E.g. it is always better to opt for FDs from companies like Tata and L&T. Stay away from companies with unknown promoters, even though they may be offering higher rate of interest.

Follow these tips to ensure your money in company FD is safe.

How Safe is Your Bank’s Fixed Deposit?

“Bank Fixed Deposits (FDs) are the safest investment option.” This is a common refrain we hear from our parents, friends and financial advisors. But is it really true? Are bank FDs really as safe as they are made out to be?

The answer – No. While FDs don’t face the volatility risk, unlike stocks, they do have inflation risk and liquidity risk. Let us se what each of these risks entails.

Inflation risk: Inflation is the increase in cost of living. Higher rate of inflation erodes the value of your money, as you need more money to buy the same quantity of items.  Normally the interest rates offered by the banks are lesser than the rate of inflation. E.g. the current rate on bank FDs is around 7-8%. But the current inflation rate is over 10%. So the returns from the FDs are not enough to cover the inflation, thus eroding the value of your investment.

Liquidity risk: FDs up to Rs 1 lakh are insured by Deposit Insurance and Credit Guarantee Corporation. Any amount over this limit is not insured. So if the bank sinks, you end up losing the balance amount. As many people tend to deposit their money in smaller banks, which are at the risk of crashing, they face a higher risk of losing their money.

While these are two major risks, there are other drawbacks like tax and higher lock-in period. You need to understand these risks before you opt for bank FDs. Also ensure you invest in these deposits for short-term as the rates are highest during that period.

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