Your Truth and My Truth !!

Mr. Mehta : XYZ is a fantastic fund. It has given me 21% returns p.a.

Mr. Khanna : What are you saying ? I have the same fund, but it has given me only 5% returns. Bank Recurring Deposit (RD) would have been better.

Mehta : How long have you been invested in it ?

Khanna : I invested in it 5 months back.

Mehta : So 5% in 5 months is almost 12% annualised Dude.

Khanna : What is the meaning of annualised return ?

Mehta : For example, you have 2 products A and B. A gives you 8% return in 6 months and B gives 10% returns in 12 months. Which is better ?

Khanna : Obviously A.

Mehta : Why so ?

Khanna : Because if A has given 8% return in 6 months , after 12 months the return would be around 16%.

Mehta : Great. So basically what you have done is standardized the return period to 12 months for both the products, so that you can compare. This is what we call annualised return.


Khanna : Wow. Thanks. Now I understand it better. 12% looks good. But it is still less than 21% as you say. Whats that about.

Mehta : Have you done a lumpsum investment or doing a monthly SIP ?

Khanna : I am investing some amount every month since last 5 months ?

Mehta : So that makes your average holding period only 2.5 Months.

Khanna  (Confused) : Whats this “Average Holding Period” now ?

Mehta : When you started your SIP 5 months back, your first instalment got 5 months time to grow, your second instalment got 4 months and so on. Your last instalment is not even a month old now.

Khanna : Correct.

Mehta : So if you take an average, your total investment has an approximate holding period of 2.5 Months.  Now, when you annualise it, it becomes almost 24% p.a.

Khanna : Wow, Finally I have beaten you.

Mehta (Smiling ) : See this is the problem. Before some time, the fund was bad as your returns were “appearing” to be lower than mine. Now, that your returns are proved to be higher than mine, then the fund is not great. Its you who have beaten me.

Khanna : I was just kidding.

Mehta : I know. My Point was, we say that we want to know the truth. But we don’t really take some efforts to understand the truth. We take things the way they are presented to us. This is where your truth becomes different than my truth.

Khanna : But truth is still a truth right.

Mehta : This is like a half glass water story. You say its half full, I say its half empty. Whats the truth ? Both are truth. Its how we look at it. In this example, we had same fund but still the different perception about returns gave us different opinion about it. There could be cases, wherein 2 people invest in same fund but with different mindset and profile, may  get different returns. It is very person specific.

Khanna : One last question. How do you really calculate all this average holding period, annualised returns etc when your portfolio grows large ? Its difficult, time consuming and cant be sure of being correct.

Mehta : My Financial Advisor does it for me. And now I have even stopped bothering too much about the annualised returns also. I know in short term it can fluctuate. But in the long term, if it helps me achieve my goals, how does the short term fluctuations matter ?

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author)







Demonetisation and You !!

Writing about the hottest topic could be a difficult job. Many things are already being “analysed” and discussed all around.

Since this space is among the favourite platform of its readers for Personal Finance, I will try and keep away from talking about the politicisation of this move. As usual, we will stick to the WIIFM (Whats in it For Me ?) principle.

We have just picked up some asset classes and we will see how do they get impacted in the short term and in the long term due to Demonetisation.

  1. Debt

Short Term: In the Short term, cash liquidity has dried up from the market, whereas banks seem to be flooded with Cash (mostly old currency). This currency can (hopefully) be used by banks as CRR when they give it to RBI.

This will bring down the immediate liquidity requirement of the banks which will push them to reduce interest rates on FDs.

Loan becoming cheaper in the short term could be difficult as they ideally need to use the new currency for disbursement to people waiting to withdraw.

Long Term: In the Long term, when most of the cash holdings (I am sure most of us would agree that all cash still wont come in banking system) are in banking system, we could see loans becoming cheaper.

Strategy : This could mean lower interest rates will be offered across various fixed income instruments like FD, PPF, G Sec, Post Office etc. A fall in interest rates could very well benefit investments in Debt Funds. Thus, whoever is willing to invest from a 1-3 years time frame, can start looking at Debt funds.

  1. Forex / USD

Short Term: Some big cash hoarders (whether black or white) are also trying to convert their old currency into USD or other Foreign currencies. This has pushed up demand for dollar and thus we are seeing the dollar appreciating. Among other factors, an anticipation of hike in Fed rates is also putting pressure on FIIs to sell which is again pushing up demand for dollar. Thus, we could see dollar continuing to appreciate in short term.

Long Term: Assuming that a substantial chunk of cash (in Indian Rupee) will be destroyed as we see lot of incidences of people burning old currency etc, we can again see a bounce bank in rupee to some extent. Fundamentally, as long as there is a difference in inflation rates of India and US, the rupee will continue to depreciate by 4-5% p.a. so as to keep our exports competitive. But the additional fall which we see in the short term, might get reversed to some extent in the medium to long term.

Strategy: Those planning to “invest” in dollars need to be cautious or be happy with a 4% p.a. kind of returns.

  1. Gold:

Short Term: Similar to dollars, some cash hoarders queued up to buy gold and the prices started rocketing. However, there have been fear propagated (both genuine and fake) that Gold also might get traced and could be a cause for trouble for those holding Gold in unreasonable quantities.

Long Term: There seem no other fundamental reasons for Gold to rally at an unreasonable rate. In fact, those who are buying Gold at 40-50% premium could be stuck with it as the spike might subside in the medium to long term.

Strategy: Gold can continue to be a 10% part in your portfolio. Also, from a long term perspective, you should be regularly investing in Gold irrespective of the price levels. Timing the Gold prices can go both in favour or against you. Better to be a regular investor with a long term view.

  1. Real Estate:

Short Term: Real Estate is usually believed to be the favourite “parking space” of black money hoarders. There are possibilities that Real Estate sales start happening in this period (till 30th December) wherein hoarders of black money hastily buy properties, thinking that this will help them to get rid of the black money held in old currency. This could cost them a premium as the sellers also know their weakness.

Long Term: With lot of money coming into the system and black money reducing to a great extent, the artificial demand of Real Estate will dry up. The natural demand will prevail which may not yield ultra-high returns (as seen few years back). In fact, those buying real estate in haste in the short term, will be stuck with it for quite some time. They can just psychologically console themselves that they saved some tax and penalty.

Strategy: Don’t buy useless properties to dump black money. Few years later, you will realise that to save 40-50% tax, you bought a property at an unreasonable price, and you might take years to get rid of it. Instead, paying tax could turn out to be a better option. For future, you can start investing in instruments which give you good returns and still don’t increase your tax liability.

Those with genuine white money, can wait for some time as we could see a 30-40% drop in property prices.

  1. Equity:

Short Term: In Short term, there could be confusion and panic which could mean negative returns / flat returns in equities. Also, due to dynamic changes happening, any news can see overreaction by the markets. Even fundamentally, consumer spending can be lower due to lower availability of cash. This could impact the quarterly results of the companies in short term.

Long Term: In Long term, we can expect more rationalisation of taxes which could increase corporate profitability. Also, the additional taxes mopped up due to demonetisation could either be used for higher infrastructure spending or to lower the taxes (hopefully). This would mean more post-tax money with the people resulting more money being invested in equities.

Strategy: Equities anyways shouldn’t be used for short term investments. Those with long term time horizon, can start investing in equities. If one doesn’t have an expertise for equities, seeking professional help would be helpful.

  1. Cash (in Indian New Currency):

Short Term: There could be a natural question that why shouldn’t I hold a lot of cash (in new currency) rather than investing it here and there. In the short term, you may not have this option very easily as it will take some time for the new currency to circulate in abundance.

Long Term: This Demonetisation could be a wake up call for those who are traditionally habituated to hoard lot of cash. We never know if after 3-4 years, the new note of Rs. 2,000 might also be declared invalid (I don’t have any authorised news about this. Its just my own hunch looking at the paper quality of the new note, that it is not made to last too long). In that case, your entire exercise could be prove futile.

Strategy: Cash anyways keep losing its value due to inflation. We need to just keep a bare minimum cash needed for our household expenses (plus a little amount for emergencies). But just piling up cash is going to be a big pain as we move towards a more transparent and cashless economy.

Overall, Demonetisation could be big game changer for the Indian Economy. Whether the game changes for our good or bad, depends on how wisely we take our investment decisions.

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

Disclaimer: The above points and suggestions are personal opinion of the author. They may differ in application from person to person. Please consult your financial advisor before making any investment decisions.







Can Google Answer all your Questions ?

Recently Google Celebrated its 18th birthday and most of us realised that it existed long time before many of us started using it.

In fact, most of us have replaced the word “search” with “Google”. Now-a-days, We don’t say, “I searched for it on net”. Instead we say “I googled it”.

While I have a huge respect for Google as a company as well as its efficiency to help you research, off late I have realised that most of us need to use sanity and prudence while using google.

Difference between Data, Information, Knowledge and Wisdom

Lets first understand the pyramid of Data, Information, Knowledge and Wisdom.

wisdom-knowledge-information-data-pyramid15 wkid

The pictures also shows an example of how Data, information, Knowledge and Wisdom are different from each other and can be derived from one to another.

Now, as long as we use Google for data searching or information searching, it should be fine as we can convert this to knowledge and wisdom.

To those with higher degree of understanding, may also sparingly use it for knowledge. But if we start googling for wisdom, we will be doomed for disaster.

Wisdom, by definition, is the ability to take decision based on knowledge (which may be derived after a detailed study of information on data) but also requires human skills.

These days, we have interesting examples of Google searches.

Imagine someone searching on Google “How to commit suicide?”

Google might throw up all the ways to commit suicide, but is it going to ask you “Why do you want to commit suicide?” or console / motivate you for not committing suicide?

How does Google Search Work?

Google Search works on a basic principle of string matching. It looks for keywords put in the search bar and then matches them with the content of websites across the globe. While this is a commendable feature, at times it can misguide people if they don’t use their brains.

For example, someone types “Best Country in the world” , Google wouldn’t know which country is best in the world (nor it wants to know). All it does is, lists down all the webpages where this phrase “Best Country in the world” has appeared.

So someone looking to find an answer to this query may be either disappointed or misinformed. And this isn’t Google’s fault. It is our fault that we are not asking the right question.

How should you use Google?

As mentioned above, Google can be used for data or information searching. For example, you know that some Dr. Tukaram Jadhav (hypothetical character) is a good child specialist in Dadar. But you don’t have his contact number or address. Now you can go to Google and search for his name, so that it helps you in finding his contact details (Hopefully Dr. Jadhav has uploaded his details such that Google can find them). This data can be directly used.

In case you don’t know his name, and you are looking for a child specialist in Dadar, you can do a google search “Good Child Specialist in Dadar”. Now, don’t you think the results here will be less “ready to use” than the earlier?

Out of the few names thrown by Google, you will have to do additional analysis of the qualifications, experience, references etc of the names of doctors popped up. So this data needs to be used with additional level of offline intelligence.

I hope none of us would directly like to ask Google, “My Child is having fever. What to do?”

If someone is doing that, let me tell you, this can be a disaster. You would require a qualified professional who takes into account your child’s age, weight, height and several other things.

Some telecom companies have advertised internet to be the “Sea of Knowledge and Wisdom”. But its their own vested interest to make people buy data plans. Lets understand that internet is a “Sea of Data and Information” and we still need higher skills to be able to use this data and information to convert into knowledge and wisdom. (Not to forget, these data can also be incorrect at times. So one needs to be sure of the source. In case of error, you cant get away by saying, “I got it from Google”).

Can Google Personalise the “advice”?

The first mistake would be to expect that Google can advise you.

But as we have all types of people in this world, lets say someone actually tries to seek advice from Google. You ask it to show the ‘best’ route from point A to B. It will show you the shortest route based on data available (i.e. distance, traffic etc). However, does Google know that you are planning to take a 12 seater mini-bus from that route and the narrow road wont accommodate your mini-bus ?

Likewise there could be various cases, wherein a combination of online data and offline intelligence needs to be used rather than blindly trusting and following what Google advises.

Beware of “Google-enabled Professionals”

There are some people who have just “become” professionals by googling. While a professional also needs to keep himself updated through the internet, there needs to be strong foundation on which the knowledge updation can be done.

Imagine you going to a doctor who has just learnt everything just by googling or watching videos on the YouTube. Or flying with a pilot who hasn’t undergone any training; Rather he has just read on the internet “How to fly an aircraft?”

While the internet (or Google) is a great tool to connect with the world, let it not take away our sanity.

Key Takeaways :

  1. Understand the difference between Data, Information, Knowledge and Wisdom.
  2. Use Google for searching data and information only. Keep Knowledge and Wisdom queries for professionals.
  3. Verify Data and information thrown by Google. Check the source.
  4. Google just matches strings or phrases to provide links. There is no “intelligence” or “due diligence” done by Google on the validity.
  5. Google cant give you personalised advice. Offline intelligence would be needed.
  6. For critical and long term issues, deal with known, verified and qualified professionals ; And not with “Google-enabled Professionals”

We look forward to your valuable comments and feedback.

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The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author)








Let’s Learn to Co-exist!!

I remember an old incidence when I was staying in a hostel. On my day one, when I moved into my room, it was occupied by only one person in a 3-seater room. His stuff was lying all over the room.

When I started claiming my space, he became pretty uncomfortable. For once he thought I am causing trouble to him. But after some time, things became smooth. We had similar experience, when our 3rd roommate moved in. But having undergone a similar experience earlier, we handled it better this time and became good roommates and friends. We just had to accept the fact that there is enough space for all 3 of us.

Now, this is what pretty much happening around us. I will discuss a few examples below to make it clear.

First example is the burning issue between Auto drivers and Ola / Uber. If I were to analyse the Transport Infrastructure of Mumbai (I am currently sticking to Mumbai as this is where I practically see things happening), we would realise that all the Transport Infrastructure of Mumbai put together (Local Trains, Metro, Autos, Taxis, Private cars, BEST Buses etc.) still falls short to carry the entire load of Mumbai, especially in the peak hours. This means that there is a definite need for more infrastructures to support the commutation needs of Mumbaikars (and visitors).

However, all these years, Road transport was “dominated” by the Auto drivers. They could choose where they want to go and where they don’t want to go (Although they are not legally allowed to refuse). So they assumed that this space totally belongs to them. All of a sudden, they got swept by these App-based taxi services. They thought that this is injustice as it is going to “Kill” their business.

Honestly speaking, we still have lot of Mumbaikars (including myself), who might choose an Auto rickshaw over an app-based taxi (provided it agrees to come). So, the Auto-rickshaws still have enough on their plate, in spite of some commuters getting served by app-based taxis. But this resistance to co-existence is costing them. The day they go on strike, the app-based taxis get even more business.

So the day they accept co-existence, they will understand, that there is enough business for every transport carrier. App-based taxis are just adding some convenience to the customer and not really “Killing” their business. Competition can just take away their arrogance, not food.


Another example is the hot story of Jio Launch. The day Jio was launched, the shares of the competitors tanked. I don’t know if people noticed, that even the shares of the company who owns Jio, also saw a downfall in price.

The wider perception was, now Jio would eat away all the market as it has come up with so many freebies, which competitors may not be able to offer.

Let’s understand this in light of co-existence. Be it Telecom industry, Airline industry or any other industry, there are times when lot of players perceive that this is the booming industry and they enter. After some time, the dust settles, the weak players either quit or are bought by stronger players and consolidation takes place. It is very unlikely that a single player has “all” the market share.

So my take on this is, people have started analysing if Jio could be a better choice for them. At the same time, the competitors are working out to come up with competitive plans so that they can at least retain their customers (if not expand). So not “Everyone” will move to Jio for sure.

Moreover, we have more than 1 billion mobile subscribers in India. The first question is, can Jio (or any telecom player) serve 1 Billion subscribers smoothly??

If your answer is no, then there is definitely a place for co-existence. The weakest players might quit or merge with stronger. And the stronger will prevail. Obviously they will have to come out with innovative strategies to show their strength. So we will be left with some strong players who can co-exist.

Towards Conclusion I want to share a picture with you. This picture is becoming popular in social media. This is a picture of a village called Ranbodi. The people in this village have accepted the co-existence of a tigress and thus, the Tigress also doesn’t harm them back. While this can be one of the very extreme examples, but it gives us some food for thought.


Human mind assumes supremacy over the territory around him. And when somebody else tries to share the territory, it becomes uncomfortable and starts resisting. We have to train our minds to learn this Principle of coexistence which can resolve many “issues” that are just in the mind.

While our mind is forcing us to make it “You OR Me”, let’s make it accept that it can be “You AND Me”.

Saurabh Profile PicWe look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author)









Are we ready for the price??


salon bangkok pricing.pngThere’s a very famous quote

“Everyone wants to go to heaven, but nobody wants to die”.

The underlying meaning of this quote is, we all want benefits, but we are not really prepared to pay the price.


Price doesn’t necessarily mean the monetary compensation. It basically means your part to be played to get the desired results. (If I have to say that in the words of The Geeta, we all want the “Phal” , but are we ready to do the “Karma”).


  • Most of us want to lose weight and have that toned body. But the price for the same is, get up early, exercise and have balanced diet. Are we ready for this price?


  • Most of us want our parents / spouses / kids to earn lot of money. But that would mean they would have lesser time to spend with us. Are we ready for this price?


  • Some of us want to score well in exams. But that would mean to give up some desires and spend some more time preparing. Are we ready for this price?


  • Some of us (those who run a business), want to have an efficient team who work so efficiently that there is very little left to do for the business owner. But that would require appropriate hiring, grooming and training of the team so that they become efficient. This would require the business owner to spend more time, money and energy on them. Are we ready for this price?


  • Most of us want to create wealth for retirement as well as to achieve other goals. But that would mean sacrificing some of the desires today, setting aside some amount regularly and investing it appropriately. If we lack the skills, we might be required to hire a professional who does this for us. Are we ready for this price?


  • Most of us want to upgrade our skills. But that would mean investing some time in reading, getting trained to upgrade our skills. It might not be too entertaining, but could benefit in long term. Are we ready for this price?


  • Most of us want to have good friends who are always there to help us. But that would mean we invest some time and energy in fostering good relationships and being there when our friends need us. Are we ready for this price?


In a nutshell, we can say that, most of us are looking for the benefits without being prepared to put in the efforts.  Remember, almost every facility / pleasure / achievement comes at a price. If we are really willing to avail the benefit, lets be ready to pay the price.


We look forward to your valuable comments and feedback.


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The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author)









BREXIT : How Does it impact my Investments ?


Sunil : Hey Aakash, did you hear the news about BREXIT ?

Aakash : What is BREXIT, Bro ?

Sunil : ‘Brexit’ stands for Britain Exit wherein the British voters chose to withdraw from the European Union (EU) in a historic poll on June 23, 2016.

Aakash : Ok. So how does it matter to us ?

Sunil : Ohh, you dont know ?? The Sensex tanked by almost 1000 points that day. Later it closed 600 points down.

Aakash : Wow !! Doesnt that look like an opportunity to invest ?

Sunil : You are always on a different tangent. What about the flipside of BREXIT ?

Aakash : Thats what I am asking. What is the flipside of BREXIT for us ?

Sunil : Well , am not too sure !! But if everyone is worried, there must be something bad in it for us.

Aakash : This is where we display our herd mentality. Rather than understanding a situation, we follow the crowd. Only to know that the reality was exactly the opposite.

Sunil : So what should we do now ?

Aakash : Now you are asking the right question. When we have a investment plan, duly monitored by our advisor, we need not worry about these short term factors. Ultimately, we are concerned with whatever wealth we create, right ?

Sunil : So you mean to say, these global factors dont matter at all ?

Aakash : They do have some temporary impact due to sentiments. For example, after 9/11, there were many who thought that things are finished now and there will be no growth.

But our investments have grown more than 10 times from that time, because we kept investing.

Today, India is the fastest growing economy in the world, and thereby the favorite place for the world to invest. In a way, we can say that (to some extent) these turbulence should be seen as an opportunity than threats.

I am not saying that whether BREXIT will happen or not happen. I am also not saying that BREXIT wont affect the global economy.

All I am saying is, when it is outside the purview of our expertise and we have parked our investments with the expert, we should let the expert do his job and relax !!

Sunil : Thanks Aakash. I still dont understand too much of BREXIT. But now I know, how much I should be worried about it.


We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author)

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Prof. Saurabh Bajaj










Roller coaster or an aircraft?


In A Roller Coaster, the starting point and ending point is the same.

In Aircraft, your starting point is a different city / country than your destination at end of the journey.


In A Roller Coaster, your purpose is to have fun in the ups and downs. You don’t aim to reach anywhere other than from where you started.

In an Aircraft, you are not too bothered about the journey. All that matters to you is to reach your destination (preferably in stipulated time).


If you sleep in a roller coaster, you miss the fun as the purpose is to enjoy the ups and downs.

In an aircraft, you can sleep, watch movies, listen to music, talk to your co-passenger. In short, do anything other than worrying about the ups and downs of the journey.


Now, lets look at this analogy vis-à-vis intraday trading and long term investing.

Intra-day trading is like a roller coaster ride. People don’t really reach anywhere but do it for a kick. They just keep watching the markets and get thrilled about the ups and downs.


Long term investing is like boarding an Aircraft. Someone will board an aircraft because he wants to reach a destination. For him, the ups and downs in the journey are immaterial as long as he reaches his destination. So he will start an investment and then not keep worrying about it. As long as a trained pilot (investment manager) is taking care of his flight (investments), he doesn’t bother about the ups and downs.

(Imagine a hyper passenger who keeps disturbing the pilot about how to drive or about the coming obstacles!! It may result in an unwarranted crash )

Its now upto us to decide. Whether we want to reach a destination (retirement) , or we want to ride for fun. Our investment choice and investment behaviour will depend on this decision.

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on if you have any questions.

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(The views mentioned in the article are personal opinion of the author)








5 Reasons why you drain your finances when you hit 60s

Retirement pic

“One should never get old!!” said Mr. Khanna in a disappointed voice. “Everything finishes by the time you reach 60. Its better if people have shorter lives.”

“Why are you saying like that Mr. Khanna?” asked Mr. Desai. “When you reach 60s, you can retire from work and enjoy life. Yes, if you have developed some diseases then that’s a different matter”

The four colleagues, Mr. Khanna, Mr. Desai, Mr. Mehta and Mr. Ghosh were sitting in their office canteen having evening tea. All were about to retire in the next 3 months.

Mr. Khanna continued: “By the grace of God, I don’t have any illnesses till date. But I was just speaking to our accounts department and learnt that after retirement I will be getting my PF of just Rs. 16 Lakhs. Now, when I put this in a bank FD at even 9.5%, I would get a monthly income of just Rs. 12,600 something. Now, how do I survive with such kind of low income?”

Mr. Ghosh: I have exactly similar problem. My PF is Rs. 17 Lakhs.

Mr. Mehta: But our PF amount should be close to Rs. 35 Lakhs, isn’t it ?

Mr. Khanna: Yes, but I took a loan against my PF few years back. This loan was taken to fund my daughter’s marriage. This resulted in reduced corpus for retirement.

Mr. Ghosh: So did I. I took a loan for my son’s education. Now I am left with a very small amount for retirement.

Mr. Desai: But you would have made some other investments, right?

Mr. Ghosh: I bought a few endowment policies for my retirement and for son’s education in 1989. I had taken a policy with sum assured of Rs. 2 Lakhs for my retirement and sum assured of Rs. 1 Lakh for my son’s higher education. In those days, 2 Lakhs was a big amount. However, this wasn’t sufficient for his higher education. His college fees itself was Rs. 20 Lakhs. Thus, I had to take loan against PF and against my endowment policy too.

My endowment policy will mature now and the maturity amount is almost Rs. 4.1 Lakhs (with accumulated “Bonus”). Out of this, Rs.3.8 Lakhs will be repaid towards the loan and I will get just Rs. 30,000 for my retirement.

Mr. Desai: What about you, Mr. Khanna?

Mr. Khanna: My story is even worse. I took 2 endowment policies for my retirement, one policy for daughter’s marriage and one money back plan. As per my capacity, I was paying a pretty high premium for all these 4 policies. Thus, didn’t have much scope to save anything else. Similar to Mr. Ghosh’s case, my retirement policies vanished in my daughter’s marriage. Policy for my daughter and my retirement policies put together fetched just Rs. 4 lakhs. Thus, I had to take a loan against my PF for her marriage.

I am just thankful to God, that the groom family didn’t ask for a dowry. Or else, I would still be under a heavy loan.

Mr. Mehta : Then how come you spent Rs. 21 Lakhs in your daughter’s wedding ??

Mr. Khanna : In our community, it is mandatory to have a grand wedding ceremony Mr. Desai. Every person who attended the wedding said that it was one of the best weddings. Doesn’t a father dream that he celebrates his daughter’s wedding in the best possible way?”

Mr. Desai : Well, may be. But the question is, if that was your aspiration, why didn’t you plan for it properly? How can a grand wedding ceremony be a justified expense at the cost of your retirement?? Tomorrow the same people will attend some other wedding and say the same words. Then what ??

(Mr. Khanna had no answer to this)

Mr. Mehta: And, what about your money back policy? Why did you take that?

Mr. Khanna: That policy paid me “some” money every fifth year which I utilised for usual expenses like house repairs etc. I think it was a big mistake too.

Mr. Mehta : In that manner, I did one thing wise. But don’t know if the other thing went wrong.

Mr. Khanna : Let me guess, you didn’t  take a loan on PF.

Mr. Mehta : Actually I did. But good thing is, I didn’t blow off too much money in daughter’s marriage. I got her married in a very simple manner. But I took up a loan to buy a plot for my retirement. Someone told me that real estate is the best investment for retirement and so I did that.

Mr. Ghosh : You lucky man. So now why are you worried?

Mr. Mehta : Problem is, from last 12-14 months, some unauthorised slums have encroached the plot. Since the plot is somewhat in a far flung area, I was not able to visit it regularly. One fine day I came to know that the encroachment has happened. I have lodged a police complaint but nothing has happened till date. Even if I file a case in court, I don’t know how will I fund my retirement till the date of judgment (assuming that the judgment happens in my favour). I also have one ancestral property. But due to this slowdown in Real Estate market, I am not able to sell that as well.

Also, as I had these 2 properties, I didn’t buy any policies or did any other savings etc. I just lived life kingsize. Gave everything that my wife, kids asked for. I didn’t save anything separately for retirement, thinking that this plot will solely fund my retirement. I now realise that I should have planned much more seriously for my retirement.


Mr. Desai : So what you understand here is that, there are 5 primary reasons why we run out of money by the time we reach our sixties.

  1. Blowing money in children’s marriage: Although it’s a great day in a father’s life, it is no excuse to blow off unreasonable amount just to “oblige” the society. We are responsible for our retirements and we need to save for it. If at all a “grand wedding ceremony” is a necessary goal, plan for it separately in growth assets.
  2. Not availing educational loan for children’s higher education: Once we have funded children’s school and college education, we should let them get an educational loan. They can get a loan for education and have a lifetime to repay, but we can’t get a loan for retirement. Again, if at all, we want to fund our children’s higher education, we can’t dip into retirement money. It needs to be planned separately ever since the child is born.
  3. Investing in traditional products: Some of us save a part of the income but “invest” it in traditional products like endowment plans, money back plans etc. These traditional products fail to give good returns. In fact, we get negative inflation-adjusted returns from them. We need to invest in growth products which will give higher returns than inflation so that we can create a sustainable corpus for retirement.
  4. No Diversification: Some of us put all our life savings in one real estate project thinking that it will help us survive our retirement. However, something goes wrong with that project and we are left in limbo. We need to have a diversified portfolio so that we can minimise our risks and maximise our returns.
  5. Not Saving for retirement: Some of us believe in living life king size. No doubt we should enjoy our life and also fulfil needs of our family. When I say needs, I am putting “wants” and “demands” aside and will fulfill them very judiciously. This is because, when you run out of money while approaching sixties, each unnecessary expensive toy given to your kid will start pinching you.

It is our utmost responsibility to save and invest at least 15% of our income solely for our retirement.

There has been a trend of old age parents being deserted by their children as they cannot financially support them. But if we want to curb this problem, the first step is to start saving and investing for our retirement. So this is not only a social issue, but a case of lack of planning.

Tomorrow, when our children grow up, they will have enough liabilities including household expenses, home loans, children’s education, self-retirement etc. Let’s ensure that OUR lack of planning doesn’t mess up THEIR finances.

Last but not the least. Retire from Work, not from Life.

P.S : The above article is written by Prof. Saurabh Bajaj and was first published on

Author: Prof. Saurabh Bajaj is CEO with Nidhi Investments, Mumbai. He has been actively involved in writing for investor awareness since last 6 years. His articles have a readership from 64 countries across the globe. He may be reached at for any queries.







6 Infuriating Tax Queries Answered

We are all usually surrounded by lot of questions related to investments, taxation, finance etc. In this article, we have handpicked 6 questions which are important and applicable to most of us.


1. How are tax rebates calculated for payment and prepayment of a home loan?

Those who have availed a home loan usually have this typical problem in the initial years. The rebate under Section 80C is not available to the extent of amount repaid as principle repayment. Mr. Suresh (name changed) has started paying an EMI of Rs. 25,000 p.m. and thinks that his 80C is taken care because he is paying Rs. 3 Lakhs towards home loan. However, his principle repayment could be in the range of Rs. 30,000-40,000. Thus, balance 80C needs to be taken care.

Another example, out of the total 80C limit of Rs. 1.5 Lakhs, lets say your PF deduction already takes care of Rs. 48,000 and your insurance payments are around Rs. 30,000, then you are already good for Rs. 78,000 as far as tax saving is concerned. So from the rebate point of view, you may pay a lumpsum of Rs. 72,000 towards home loan prepayment. But if you are paying more than that you may not get tax benefits for the additional amount.

So, before you prepay your home loan, calculate whether the additional amount you intend to pay will fetch any tax benefits.

2. When do I need the help of a CA?

This query could be in everyone’s mind. A CA is someone perceived to be performing audits for corporates. However, there are CA firms who undertake tax consulting for individual tax payers too. Are his services necessary for individuals? Well, this depends from person to person. If you have decent knowledge about taxation matters and can take care of your ITR filing without requiring a second opinion, you can do without a CA.

However, those who are either less knowledgeable about taxation matters or less confident without a second opinion should avail the services of a CA for routine ITR filings and for other taxation queries.

Also, if you have a business which needs to be audited, then you would definitely require help of a CA.

3. What are the big tax breaks apart from 80C?

Apart from 80C, there are a few more tax breaks which might be worth taking a look at:

Section 80D: This section deals with premium paid towards health insurance. The limit has been enhanced from Rs. 15,000 to Rs. 25,000 and Rs. 30,000 p.a. for someone paying premium for senior citizen parents.

Section 80E: This section deals with the interest paid for educational loan. However, the loan has to be availed by the individual himself. For example, you cannot avail this benefit for payment of interest for loan availed by your children.

Section 80CCG: This section is mostly unknown to many because of its restrictions. This section allows you to invest up to Rs.50,000 in products eligible for RGESS (Rajiv Gandhi Equity Savings Scheme). When you invest Rs. 50,000 you get a deduction for Rs. 25,000 subject to fulfilment of 3 conditions:

1: Your annual income is less than Rs. 12 Lakhs

2: You have a demat account

3: You have not traded in equity markets before investing in RGESS.

Section 80DDB: This is towards the expenses made for a dependent’s treatment fo

r specified diseases. The maximum deduction available is Rs. 40,000 (and Rs. 60,000 if the patient is a senior citizen). If some amount of the expenses is reimbursed by medical insurance, it needs to be reduced.

Section 54EC: This is available if you have sold a property and have some capital gains. You can invest upto Rs. 50 Lakhs in one financial year to save tax on capital gains.

4. When I will be audited?

If you are a business person then you will be audited u/s 44AD if you meet any one of below conditions:

A] Your turnover for the FY is more than Rs. 1 crore

B] Your turnover is less than Rs. 1 crore but your profit is less than 8% of turnover.

If you are a professional (CA / Doctor / Lawyer) and your receipts are more than Rs. 25 Lakhs, then you will be audited.

5. When will I get previous years’ refund?

This is again a question that most people are worried about. Income tax department is in the process of streamlining the systems so that refunds are processed in not more than 120 days. However, there are few precautions that we need to take:

A] File your ITR on time. Delayed filing results in delayed refunds.

B] If you are not using digital signature, don’t forget to send the signed copy of ITR V within 120 days of filing.

C] Fill up your bank details with utmost care.

6. What’s the main difference between new ITR forms as compared to older ones?

  • Introduction of EVC (Electronic Verification Code) prevents sending hard copy ITRV
  • Super Senior citizen can file ITR in paper form
  • Detailed listing of all bank accounts held during the FY, details about your foreign travel, foreign assets, domestic assets etc. (ITR 2A for those having foreign assets).

P.S : The above article is written by Prof. Saurabh Bajaj and was first published on

Author: Prof. Saurabh Bajaj is CEO with Nidhi Investments, Mumbai. He has been actively involved in writing for investor awareness since last 5 years. His articles have a readership from 64 countries across the globe. He may be reached at for any queries.







The Little-known Secret of How Metros buy Insurance

Insurance sales start surging in January of every year and peaks in March. So, are more accidents happening during this period? More people getting hospitalized? Or, a sudden realization in the new year that one needs life cover?

It’s Option D – none of the above. The reason is painfully simple – tax saving! So, what’s driving this sudden rush to buy insurance – is there an inherent need or is it just the gift of gab of that persistent insurance agent whom you met the other day?


We have taken four case studies from the four Metros of India to understand what kind of insurance are people from these metros opting for and what’s their motive to go for a particular insurance product.

New Delhi: Last minute scramble

Mr. Abhishek Khurana, 34, is a Mechanical Engineer working with an automobile company. His family consists of his wife Ranjita, 32, homemaker, and a 3-year-old son.

When we spoke to him, Khurana had no idea about the exact life risk cover he had. A few airy calculations later, he revealed that he had some 21 traditional policies and he was paying around Rs. 50,000 premium p.a. towards them.

Most of his policies had been purchased during the December-to-March period every year, initially when his “family agent” would drop in to coax a policy or two out of him and later when he started receiving HR mails at work to submit tax-saving proof.

The above example shows that the motivation to buy life insurance was solely for tax saving. Lack of awareness and an attitude of postponing things until the last minute rendered him an under-insured person. According to his income, he should have had a life risk cover of at least Rs. 1 Crore, whereas his cover barely crossed Rs. 10 Lakhs.

Kolkata: Keep your enemies closer

Mr. Bimal Gupta, 36, is a Commerce graduate having his own garments business in Kolkata. His family consists of his wife, Ragini, 33 a homemaker and a 5 year old daughter.

His father Mr. Deenbandhu Gupta, has always invested in insurance policies. The same has been largely followed by all his elder brothers.

However, Gupta realised that insurance policies were a very low-yield investment and was not very keen on “investing” in insurance. He has taken a term cover for himself and one child plan for his daughter, investing his remaining money in PPF.

“Here in Kolkata, after the Saradha scam and few more similar stories, we have lost faith in private players,” says Gupta. He trusts only Government companies. His term plan and child plan are also from LIC. “I am aware that cheaper term plans are available, but I don’t trust private insurance companies. Thus, I have taken a lower cover so that I can afford the premium.”

Here, insurance was purchased for the right motive, but due to prevalent business climate, apprehensions and affordability issues, Gupta is under-insured.

Chennai: Love thy neighbor

Mr. Venugopal Iyer, 44, runs a small restaurant in Chennai. His wife, Saraswati, 41, is a part-time school teacher. They have a 13-year-old daughter and a 10-year-old son.

Mr. Iyer is extremely busy in his business and has no time to look at his books of accounts. His only motive to buy insurance was to oblige Saraswati’s friend, Anuradha, who had started an insurance agency as a “pass-time” activity. Today, Iyer is sitting on around 12 policies in his name, 10 policies in wife’s name, 2 policies each in his daughter’s and son’s names. He has no clue what policies he has bought. Nor does he expect any of these policies to secure his future or cover his life risk. Whenever Anuradha is not able to meet her targets, she drops into Iyer’s place and wangles a couple of policies from him.

Another quirk about Iyer is that he is mighty apprehensive about paying taxes and thus files ITR only to the extent of having nil tax liability.

This has also prevented him from availing a sufficient life risk cover for himself. He earns around Rs. 10-15 Lakhs a year, but due to under-reporting of income, he is not eligible to buy a life risk cover of Rs. 1 Crore. Although he knows what a term plan is, he is yet to agree that the trade-off is worth it.

So, here, the motive to buy insurance is to oblige or to “maintain relations”. He doesn’t have enough life risk cover, defeating the basic purpose of life insurance.

Mumbai: Bank on the banker

Last, but not the least, lets see what typically happens in Mumbai, the financial capital of the country. Mr. Yogesh Deshpande, 47, is a highly accomplished professor serving in a leading engineering college in Mumbai. His wife, Sulochana, 42, is a homemaker and occasionally takes hobby classes. They have two sons – elder son Namit who is 21 years old and younger son Rajat who is 18 years old.

Deshpande only believes in investing in bank FDs and places complete faith in his banker.

On more instances than one, he visited his bank to open an FD only to have his banker successfully sell him a ULIP. The banker’s pitch was simple: “this (ULIP) is ‘almost’ like an FD but with higher returns, plus insurance, plus tax saving.” Only after receiving his policy document did Deshpande realize to his horror that almost 30-40% of his investment had been wiped off under various heads of “charges”.

After realising his mistake, he decided not to buy any more policies from his banker. But when his wife wanted to avail locker facility, the banker said that only “limited” lockers were available, and that he would give the lockers only to those who bought an endowment plan from him. The Deshpande couple knew that they were being given a raw deal, yet went ahead so that they could get a locker.

In this case, the purpose of buying insurance was an unwillingness to resist selling pressure from a service provider.

In the above examples, what’s intriguing is, insurance was neither pitched nor perceived as a product to cover risk. It was either to save tax or to maintain relations or to make an “investment”. Even in cases where the investor was willing to buy insurance for all the right reasons, monetary constraints sometimes reined him in.

Key takeaways from these case studies:

  1. Life insurance is to cover your life risk. Thus, ideally it should be 10-12 times your annual income at a minimum.
  2. Term plan is the best cover you should buy for life risk. This way you get sufficient cover at a low premium.
  3. Tax saving is an additional incentive provided to encourage you to cover your life risk and to secure your dependents. Even if your tax saving is done, do not skip term plan.
  4. Private insurers are also well regulated by IRDAI. Thus, you need not restrict your term plan choices just to PSU insurers. Private insurers with good claim settlement ratio could be a good choice.
  5. Insurance agents’ “targets” are their headache and not yours. Do not stake your future (and your dependents’) just to oblige your agent. Buy it from him only when you genuinely need it.
  6. Similarly, your banker cannot “force” you to buy a policy to give you a locker or a loan. Although this practice is prevalent, please be informed that this is illegal and unethical. You have every right to lodge a complaint against this behaviour.

Know your rights. And know your responsibilities. Above all, know that you need life insurance to provide life cover, not to save taxes or oblige someone.

P.S : The above article is written by Prof. Saurabh Bajaj and was first published on

Author: Prof. Saurabh Bajaj is CEO with Nidhi Investments, Mumbai. He has been actively involved in writing for investor awareness since last 5 years. His articles have a readership from 64 countries across the globe.