Announcing the Winner of the April Book Giveaway

by Vinaya HS on April 15, 2013

in Finance

It’s never an easy task to judge and pick “one” winner for the book giveaway contests. Each entry is usually brilliant and insightful in its own right. So, I often — and as in this case too — let the computer pick a winner for me. And, the winner of the April Book Giveaway for a copy of the book “Beginner’s Guide to Investing with Confidence” is reader Sharan.

Congratulations Sharan! I will email you with the details.

Thanks everyone for participating.


The Privilege of Making Unwanted Investments

by Vinaya HS on April 8, 2013

in Finance

ICICI Bank’s Privilege Banking is awesome! If you’re “privileged” enough to have it, you can simply walk into any Branch, push a couple of buttons on the quirky token dispensing machine (an entirely optional step), and walk right up to the Privilege Banking Counter and get your work done while the rest of the “non-privileged” world waits for their token to show up on a TV screen/monitor.

The “privilege” of course comes with its own set of “grab-my-hard-earned-money” sales pitches and schemes.

The other day, I was at the said Privilege Banking Counter depositing a slightly high-value check (the proceeds from the sale of the Swift and which was already destined to pay off a bridge loan). One look at the amount on the check led to a barrage of questions from the guy manning the Privilege Banking Counter.

  • Sir, is this your annual bonus check?

  • Are you looking to make some investments?

  • Instead of closing your [bridge] loan, why don’t you earn a higher interest by making some investments?

  • Sir, are you sure that you do not want to earn a higher interest? [All the while looking at me as if I were quite foolish at declining the investment offer.]


Simple but firm NOs. Out of there in an instant.

Just experienced the “privilege” of making unwanted investments.

Have you?


Education. Marriage. Retirement.

by Vinaya HS on April 7, 2013

in Finance

Over the past year, I’ve tried to keep tabs on the financial goals that people generally seem to have (as claimed in case studies, interviews, money makeovers, etc. published in leading personal finance publications). So, here’s the trend that I see. Most people seem to have the following set of financial goals –

  • Daughter’s Education in A years

  • Daughter’s Marriage in B years

  • Son’s Education in C years

  • Son’s Marriage in D years

  • Retirement in Z years

The sums of money to be saved as the “Marriage Corpus” are indeed mind-blowing (I’ve always seen 7 and 8 figure sums here!). That’s a whole bunch of ERE-money if you ask me. And Z is usually far far greater than A/B/C/D.

Oh, and there’s also the occasional –

  • Foreign Trip in 5 to 7 years

What do you think?

PS: I’m not in this stage yet — so, I might come back here years later and claim that these are my financial goals too. :-)

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Reader Priya asks –

I stumbled upon your site today while searching for ideas to choose a good term plan, given that there are an array of products available online and offline. I understand that with your analysis, AEGON Religare iTerm Plan is the better of the plans in the market. I also understand that its premiums are the lowest too.

But I read another article where the claim settlement ratio was given a lot of importance along with the premium amount. So, now I am really confused since AEGON Religare does not seem to be settling claims as much as it should. I would like to know your point of view on this front.

Image of Beginner's Guide to Investing with Confidence book
While I certainly have my own set of thoughts on this topic, I’d like to throw open the floor to you and hear what you have to say (given that the key performance indicator of Claim Settlement Ratio seems to cause a lot of debate and headaches). The most well thought through response wins a copy of the brand new book “Beginner’s Guide to Investing with Confidence” from Value Research.

Deadline for your responses is next Friday (April 12, 2013) morning. I’ll pick a winner then but I will be sharing my thoughts and arguments to your responses through the week.



It’s been close to 3-months now since I last wrote — it’s the usual “life just got busy” excuse and I pick-up all the blame for letting things slip. We’ve also just entered a brand-new financial year and I wish each of you a prosperous year ahead. Lot’s of stuff did happen in between including some new investments and having to let go of the Swift in lieu for what I personally think is its perfect replacement. More on that in the coming weeks — I promise!

But first, guess what nudged me over the edge and back here?

A “Unit Account Statement” for LIC’s Market Plus scheme that turned-up in the post box. Now this happens to be one of D’s legacy mis-investments and upon opening the statement we discovered to our horror that a secret [off-market?] Rs 20 was being happily deducted each month under the guise of “Admin Charges.” I guess this has been happening each month since the investment was first made quite a number of years back. Don’t even ask me about it’s Market Value — it’s deeper than the Titanic’s depth of sink!

There’s a whole bunch of other columns for various other off-market charges — which thankfully were zero in our statement.

Here’s a sample –

  • Allocation Charges

  • Mortality Exp/FY Renw(*) [WTH?]

  • Accident Charges [WTH? I hope I'm not charged for meeting with an accident!]

  • Switching Charges

  • Ser Tax Rsk Prm Chrgs [WTH?]

It’s time to cut the flab including another mis-investment — Money Plus!


A Super Useful Mutual Fund Taxation Cheat Sheet

by Vinaya HS on January 7, 2013

in Finance

Stumbled upon this really handy mutual fund taxation reference sheet (2012 — 2013).

I also took the liberty of creating this easy-to-print PDF version.


Capital Multiplier…Really?

by Vinaya HS on January 4, 2013

in Finance

A colleague asked for my opinion about a certain Capital Multiplier Plan that he’d been investing in since a few years. I looked up the plan and the details turned out to be as scary as a horror show. A few samples –

[From the brochure]

This plan is best suited for you…

– If you are looking for an investment plan for your child and want a flexible money-back plan that gives you the power to decide the amount and time of withdrawals.

– If you are planning for your retirement and require a plan that allows you to withdraw any amount as per your need and at the same time invest your money prudently to get you bonuses on the balance in your account.

– If you think that from time to time you will have extra cash, which you would like to invest in an instrument which is safe and which will get you attractive returns.

Quite hilarious — an investment that can solve all financial problems in your life.

And how does the capital get multiplied?

There would be sales and administration expense charges of 3.5% and 1% respectively.

There you go. The capital multiplication isn’t meant for you at all.


Perhaps “Capital Divider Plan” would be a more appropriate name? After all, your hard-earned capital is being divided amongst the insurance company and the insurance agent.

High charges. Low insurance cover. Overly complicated features. All toxic ingredients.


A Quick Primer on ERE

by Vinaya HS on January 3, 2013

in Finance

A reader wrote in asking for a quick refresher on the concept of ERE. Thought it’d be a mighty good idea to write on this topic at the start of the new year — so, you now have the entire year to work on it. I create this quick PowerPoint to illustrate the key points –

Note: Here’s the link to download the slides.


Using IIFCL Tax Free Bonds for ERE

by Vinaya HS on January 1, 2013

in Finance

So, here’s an interesting comparison that I did between using IIFCL’s Tax Free Bonds and one of my Regular Bank Fixed Deposits for my ERE strategy (I know it’s very very tax inefficient and I’ve been meaning to move away from these — this broad “let my investments become more tax efficient” theme in general being the primary goal for 2013 and hence this post on New Year’s Day).

Using IIFCL Tax Free Bonds for ERE

Note: I’d already locked-in into this fixed deposit rate very early in 2012 and hence the higher interest rate. But see the end of this post for a more realistic comparison were you to start today.

When you hit ERE, you’d typically expect to begin with by being in the 20% tax bracket (you’ll most certainly want to take a break from everything) and then ideally move into the 30% tax bracket (because ERE does not mean that you completely stop working, just that you do much much more of what you like and more money is always a welcome thing). This leads to some interesting observations –

  • In the 20% tax bracket, there’s a slight difference between the Regular Bank Deposit and the Tax Free Bond. But astute readers would have already caught that this difference is per lac invested and so the higher your sum invested the more significant would be the difference.

  • In the 30% tax bracket, there’s a huge difference between the Regular Bank Deposit and the Tax Free Bond. This is true of my situation today and it pains whenever I pay advance tax on such income (like I did last month).

But were you to start today, here’s what the situation would look like. Fixed Deposit rates have already come down a fair bit and that worsens the situation.

Using IIFCL Tax Free Bonds for ERE

Since there are a few more tax free bonds set to hit the market this quarter, it’d perhaps be a good idea to invest equal chunks across couple of these issues just so that the proverbial eggs are all not in the same basket. More on this line of thought and my “let my investments become more tax efficient” strategies in upcoming posts.

And before I completely forget, a Prosperous 2013 to you all.


A Reference AEGON Religare iTerm Plan Quote

by Vinaya HS on December 31, 2012

in Finance

A reader of this blog shared an actual quotation that they received for the AEGON Religare iTerm Planhere’s my review of this online term life insurance plan. The reader also gave me permission to publish this here so that it’d help serve as a reference for other readers.

Image of AEGON Religare iTerm Quote Breakup

Rs 13,600 per annum for a cover of Rs 15,000,000 (1.5 crore) is pretty grab-worthy in my opinion.


Has Anyone Actually Seen Their EPF ePassbook?

by Vinaya HS on December 28, 2012

in Finance

Again, having read all the wonderful PR about the Employee Provident Fund Organization’s (EPFO) wonderful ePassbook Service, I thought I should download mine before the year ends.

But, I think I am quite unlucky this December. First, I couldn’t make an iWish and now I’m unable to access my EPF ePassbook. Here’s the exact error that I see –

Your request date. 11/09/2012 for e-Passbook for account number ABMNO00123450000000123 (a dummy account number and not my real one) is under process. You shall be intimated on SMS when the same is available.

Another project terminated. It’s almost two months and I haven’t received that SMS.

Leads me to ask the following –

  • Has anyone of you actually seen your EPF ePassbook? I’d love to know.

  • The folks who write those wonderful personal finance articles in the media, do they actually sit down and actually try what they’re writing about?

What do you think?


This post was updated on December 25, 2012

By chance, I happened to read in a financial newspaper that the Bharti AXA Life eProtect Online Term Plan had some updated terms and conditions. Previously, I’d said that I like the simple and no-frills approach of this plan. I take that statement back now because in an attempt to extend the maximum age at maturity parameter, Bharti AXA has managed to kind of mess-up the plan and has made at more confusing. Take a look at the new terms –

Image of Bharti AXA Life eProtect Illustration Updated

I tried to interpret the meaning of the term “To Age XY” but couldn’t. What’s the difference between “Entry Age 50 + Policy Term 10-Years” vs. “Entry Age 50 + Policy Term ‘To Age 60′”? I tried to download the product brochure but the file seems to be corrupted. Not a good experience at all and does nothing to get to the top spot.

The original post below was published on July 18, 2012.

So finally, I am coming around to reviewing online term life insurance plans. I’ve lost track of how many requests I have received through Capital Advisor over the past few months asking for my thoughts and perspectives on purchasing term life insurance plans online. I’ve also been meaning to buy one for myself from quite some time now, but you know the whole ere-thing has me totally consumed reading up on strategies and ways and means.

I thought I’d keep my reviews a bit different by simply jotting down quick notes on whatever plans I happen to review. Each quick note will compare an online term plan against the one from the previous quick note and then pick my choice from the two. That way I hope to emerge with the one online term plan that looks like the best bet.

I’d be delighted if you could participate in this process by offering your own thoughts, perspectives, and experiences as well as suggesting other online term plans that you’d like reviewed in subsequent quick notes.

So here’s the first one inspired by an email ad that I received for the Bharti AXA Life eProtect online term plan.

Quick Notes on Bharti AXA Life eProtect

  • Maximum age at maturity is 60. But the maximum policy term is only 30 years. So, if you’re some bits below 30, you will be left uncovered (!) for a few years before you retire (taking the traditional retirement approach and when you’d typically not need life insurance anymore due to your retirement corpus kicking in).

  • I like the Family Care Benefit clause that promises an initial payout of Rs 1 lac within 2-business days of claim submission. Immediate cash is always useful in such situations.

  • I also like the simple and no-frills approach of this plan. For a 30-30-1 plan (30-year old buying a 30-year plan for Rs 1 crore cover), the indicated premium is Rs 7,300 excluding service tax.

  • I’m also comfortable with the Bharti AXA brand but this is extremely subjective and also subject to bias. You might have experienced otherwise. But when in doubt, simply go by your gut feel and you will do fine. I’ll also stick my limb out and say that all those arguments about claim ratios and payouts shouldn’t bother you if you’re honest when filling up the forms. Plus with IRDA cleaning-up it’s own act and that of the industry, things would only get better.

That takes us off to a good start.


I’d be delighted if you could participate in this process by offering your own thoughts, perspectives, and experiences as well as suggesting other online term plans that you’d like reviewed in subsequent quick notes.

I’ll pick the next one based on your comments.

Note: To help you to keep up with new term plan reviews, to go back and refer to past reviews, and to share all of this content with your friends, I’ve created the following easy to remember link — So, go ahead, bookmark and share.


iWish I Could Actually Create My iWish Account

by Vinaya HS on December 25, 2012

in Finance

Merry Christmas folks and as promised Capital Advisor is back!

So, having read all the PR about ICICI Bank’s iWish flexible Recurring Deposit product, I thought I’d go and setup an iWish account and goal for myself. Project terminated then and there because –

Image of Capital Advisor trying to create an iWish account

“We’re experiencing some delays setting up your account. Please try logging in again later.” I doubt if most users would go back and try again later. You certainly wouldn’t want to see a “We’re experiencing some delays in giving back your iWish goal money. Please try logging in again later.” when your iWish goal matures, would you?

But if you’re lucky enough to successfully get past the account creation stage, I think it’s a good way to save for purchases/expenses that you expect to make/incur within the next 6- to 12-months. But do note that interest rates offered jump-up significantly even in the space of a month (for example: 7.50% @ 12-months vs. 8.75% @ 13-months at the time of this writing). So, if you’re looking at a 12-month goal, it’s certainly advisable to make that a 13-month goal and earn that extra interest.

And taking a trip down memory lane, when I was at my first job and wished to buy everything under the sun (a bike, a mobile phone, an SLR, etc.), I’d simply hand over a random amount of cash each month to my mom and when I wanted to actually make the purchase the correct amount of cash would be put back in my hand. Simply the best bank in the world.

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Back to the World of Personal Finance!

by Vinaya HS on December 24, 2012

in Finance

I’ve no idea how the past couple of months went by! In between helping D get her entrepreneurial venture Just Jhumka off the ground, work-related travel, and personal travel, time literally became a blur. But the learning has been priceless and I’m really looking forward to sharing all of that knowledge with you.

Which means I’m now back to the world of personal finance and more great content on Capital Advisor.

Thanks for your patience.


Here’s the link and it’s good only for the next 20-hours or so.

I recommend that you take an hour off your schedule and watch it.

I’m doing that right now.

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The Capital Advisor Tribe

by Vinaya HS on November 28, 2012

in Finance

I was itching to write that title.

It’s been a while since I posted — yet again due to travel, this time a planned one — and by the time I got back there were some super-awesome comments on some of the recent posts.

First up, reader Ashwin introduced me to the concept of a “Restore Clause” in a health insurance policy (read the comments on that post for details). And as with any fancy-sounding marketing verbiage there’s more to it than meets the eye. Simply put, health insurance companies explain the terms and conditions of their restore clauses in gobbledygook. You simply can’t figure out what you’re getting into.

Next up, reader Madhu introduced me to the Reliance ATM Card (read-up details on this concept here and here).

I was hooked in an instant because –

  • The underlying primary mutual fund schemes have returned around 7% per annum.

  • No-fee cash withdrawal at any domestic ATM. No limit on the number of free transactions.
  • International cash withdrawal at Rs 69 + Service Tax. I recently paid Rs 125 + Service Tax for withdrawing cash from my Bank’s debit card. Ouch!

I like it a lot on first glance and if I like it some more I’ll give it a shot.

Quite some learning there.

Hats off to the Capital Advisor Tribe. You guys rock!

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I was really happy reading each one of your responses to the October Book Giveaway. There were both “practical” and “philosophical” thoughts among the responses. Since each response was perfectly correct within its context I had a really hard time deciding upon a winner.

Therefore, I let the computer pick a winner for me.

And…the computer picked reader Srinivas.

Congratulations, Srinivas! I will email you separately for your mailing address.

Again, a BIG thanks to everyone else who participated. I wish I could pick each one you to be the winner.


So, I came across this life insurance plan that provides the twin benefit of comprehensive protection and guaranteed additions [on the cumulative premium] of up to 10%. I was really intrigued. On the face of it, a 10% guaranteed addition each year on the cumulative premium is something that you just can’t scoff at and ignore — it’s as good as earning a 10% rate of return on your money. But when it’s a life insurance company extending such an offer, there has to be some magic in the math.

And indeed there is!

Take a look at the below illustrations for an idea of the kind of money the life insurance company would make off you. Even if the life insurance company’s rate of return on your money was exactly 10%, they’d still be walking away with a sizable stash while you’d be left with some chump change.

Analysis at 10% rate of return –

(Click on the image for a larger version.)

Image of analysis at 10% rate of return

Analysis at 15% rate of return –

(Click on the image for a larger version.)

And with some good investment strategies, if the life insurance company’s rate of return on your money was 15%, they’d run all the way to the Bank with huge gobs of money while you’d be left wondering what happened in those 20 years.

Image of analysis at 15% rate of return

But then again, you don’t get to see this part of the calculation in the Sales Brochure do you?


A reader from Bhopal asks,

One basic question that has persisted with me ever since I started earning was how much money should you normally keep in your savings bank account? I mean what is the thumb rule or the threshold above which the money should be invested or siphoned. I would be thankful to you if you are able to guide me on this.

An excellent question. One for which there are many answers depending upon how financially disciplined you are.

But to begin with, let’s look at some possible scenarios where you’d typically need to have money available in your savings account –

  • Money that you’d need in case of day-to-day emergencies.

  • Money that you’d need for expected/planned short-term expenses (purchases within the next couple of months, some upcoming annual bills, etc.).

  • Money that you’d need for “short-term opportunistic investments” — if you’re into that sort of thing.

So, in a worst-case situation, you’d need to have as much money available in your savings account as is needed by you to cover the above situations. That’s one side of the equation where you believe that you always need to have “withdraw-able hard cash” to cover these situations, in which case your savings account would have a fat balance. On the other side, you can pretty much tide over most of these situations if you simply have access to a “credit card,” in which case your savings account can be pretty lean.

So, the answer to the reader’s questions is — “It depends on your personal approach to managing your personal finances.” And where there is a “depends,” there cannot be a rule of thumb.

The same answer applies even if you’re only talking about an “emergency fund.” You cannot have a general rule of thumb for the size of your emergency fund. I believe this conclusion comes about from two posts that I’d written earlier this year — the first: a simple framework for managing personal finance risks and the second: emergency funds and where to save or invest them. The two posts in isolation would lead you to believe that there is a general rule of thumb when actually there isn’t.

But place the two together and several interesting perspectives and insights arise –


Risk Likelihood Impact

For example — If you have several passive sources of income, you’d laugh at the very mention or notion of an emergency fund. Then, if both you and your spouse are employed, one person can very well tide things over until things return to normalcy. But if you don’t have a Plan B, then you’d better well have a fat balance lying around in your savings account.

So, ultimately, the answer to the reader’s question is — “As much as would let you sleep peacefully at night.”

What do you think?


Tweets on 2012-10-26

by Vinaya HS on October 26, 2012

in Finance

From a blog where each post pushes my imagination beyond its limits

To take a very simple example, when you are living off volatile cash flows and managing “personal” and “business” investments dynamically in a mixed way, all those retirement planning calculators are useless. You have to be constantly be deciding whether a cash surplus goes into your retirement account, or whether you’d be better off investing it in growing your business in some way. What’s a better bet? An insight you have about Netflix stock, or an idea for an app you can work on? In the paycheck world, you never have to choose between those sorts of options. They are generally sealed off from each other.

Now that D is into her last couple of weeks of “steady paycheck” work and into her first few weeks of “volatile cash flow” entrepreneurial venture, I think we’ll have a real good opportunity to understand this to the hilt. More on this in the promised upcoming series.

PS — If you want to read a book that tests the very boundaries of your imagination, here’s one. Expensive but is of exceptional quality. Think of it as an investment in furthering yourself.