Your new year investment resolutions!

New Year brings with it new beginnings and optimism. A lot of people like to usher in the New Year with resolutions that they eventually end up breaking. Many of these New Year resolutions revolve around personal finance since financial well being is an important aspect of life. A lot of people usually fail to maintain such New Year financial resolutions because they over complicate their resolutions making them hard to maintain.


Before making your resolutions for 2014, the most important thing you should do is to review your current financial status. Here is a quick check for making a simple and achievable New Year resolution for anyone irrespective of earnings and expenditure. Apart from improving the overall financial health, this can help you take smarter financial decisions in the long term.

Review your investment portfolio: Reviewing one’s investment portfolio by the end of the year is one of the best steps for taking a good investment related resolution. While reviewing the overall investment portfolio, one must ask some basic questions as to how risky the investment portfolio is and explore the adjustments where required. If you are single and have started working only recently, you can afford a riskier portfolio compared to married people with families. One thing that is common while evaluating your personal investment portfolio for the year is to always maintain a balance between long term goals and any emergency requirements for a rainy day.

Pay off Debt: Paying off old debt is one of the best ways to usher in the New Year. Budgeting and paying off old debt might not be as difficult as it may appear and only require a principled approach. One can set up accounts to automatically deduct monthly expenses. Get out of the old debt trap to increase the chances of improving your financial health in the coming year.

The best approach is to start by paying off the debt with higher interest rates like credit card des and personal loans. If you have some surplus cash, you may also consider paying off loans as pre payment instead of paying EMIs. The best way to resolve pension debts is to keep a lookout for better interest options in the market to reduce the total term of the home loan thereby saving on the interest cost.  You can use the additional pay outs you received this year like bonus, incentives, LTA etc for paying off unwanted debts.

Invest in an Emergency Fund: In this day and age of increasing inflation, sudden job loss or a sudden illness of any family members can damage your finances. Therefore, it is imperative to consider investing in an emergency fund. Most financial experts are of the view that such emergency funds which also known as contingency fund, must hold finances that can sustain the dependent members of the family for a minimum period of six months. If you have not given due though to have an active emergency fund, make plans to start it this New Year. Make regular investments in your emergency fund which can gradually help you a build a corpus that is liquid with the ability to earn handsome returns.

Protect your family’s Financial Future: Protecting your family’s financial future is an essential step that needs to be a part of each financial resolution. A lot of people explore life insurance but totally ignore medical insurance for dependants and immediate family members. If you are one of those who have neglected medical insurance of your dependants, plan for a good package by this New Year.

For people seeking life insurance as an investment, one needs to understand that life insurance helps your dependants in case you are not around. Considering insurance purely as an investment vehicle is a bad financial decision that must be changed.

Improve Credit Scores: Another great New Year resolution is to improve your overall credit score (CIBIL). Many people are stuck with bad credit score due to their own financial mismanagement. Take a call before this New Year to cut out on unwanted credit cards and loans so that you do not end up spoiling your credit score in the coming year. If you are planning to avail some loans in the coming months, make sure that you keep a minimum gap of six months between the two loan applications. Pay your loans and credit cards on time avoiding late payments.

courtesy : Bank Bazar

Small saving schemes to earn you higher returns

Small Savings Higher Returns

In times of high prices, here’s something to cheer small savers.The government recently increased interest rates on a range of popular post office saving schemes, a move that will not only make these instruments more rewarding for millions of small investors who depend on them, but also make more cash available to a government running low on funds this year.

While middle class Indians rely on small investment options offered at post offices for social security, the government depends on this pool of money, also called the National Small Savings Fund (NSSF), to part finance its budget. While post office savings accounts (POSA) will fetch 4% annually, up from 3.5%, the monthly income scheme (MIS) and the public provident fund (PPF) will earn an interest of 8.2% and 8.6% respectively, up from the present 8%.

But don’t invest just yet – the new rates will be effective from December 1, 2011. The government, however, decided to discontinue the Kisan Vikas Patra (KVP) and lowered the maturity period for MIS and national savings certificate (NSC) to five years from the existing six years. It also introduced a new instrument – the 10-year-maturity NSC – offering 8.7%.

The annual investment ceiling in PPF savings has been increased to Rs 1 lakh from the present limitof Rs 70,000, but made loans against PPF costlier, doubling the interest to 2% a year. The postal department runs small savings schemes that are a major source of borrowings by the government. These had been losing sheen with the attractive interest rates on offer on bank deposits.


India: Post Office savings scheme to give more returns now

Your investments in the small savings scheme — post office savings scheme, National Savings Certificate, and public provident fund – will soon start earning higher interest rates that are benchmarked to market rates.

The annual interest rate available on these schemes is at present below what an investor can get from bank deposits of comparable maturity.

The government has announced a complete overhaul of the small savings scheme that has benchmarked rates of interest on these schemes to government securities, introduced a 10-year national savings certificate (NSC), increased the ceiling for public provident fund deposits to one lakh rupees every year and discontinued the Kisan Vikas Patra.

The new rules will kick in when the government issues a notification.

The decisions are based on the recommendations by a high level expert panel headed by former deputy governor of the RBI, Shaymla Gopinath.

As per the memorandum issued by the finance ministry, returns on small savings instruments will be linked to government securities of similar maturities, pushing up the current rates on all instruments by 0.2%- 1.3%.

Interest rates on postal savings will go up to 4% from 3.5% at present.

In addition, the maturity period of monthly investment schemes and national savings certificates will be reduced form six to five years.

The ceiling on annual contributions to the public provident funds will also be raised to 1 lakh from 70,000.

The reforms will address the distortion caused by the small savings schemes in the overall interest rate structure of the economy. Depending on the market rates, these schemes either saw a large inflow of the big outflow, affecting the flows into banks in particular.

When market rates are low, the high interest rates on small savings become a kind of subsidy to the investors.

In the event, as is the case now, when interest rates on these schemes are below the market rates they see a big outflow, affecting the government’s fiscal management, as funds from these schemes are used by state governments and the centre.

With bank deposits yielding more than 9% per annum, there has been a net outflow from the small savings schemes, which are administered by the National Small Savings Fund (NSSF), in the current year.

This has forced the government to increase market borrowings by 52,800 crores over its budgeted fiscal target.

The benchmarking of interest rates on small savings schemes will end this distortion, and also cut the volatility in inflows into these schemes.

To reduce the cost of administration of the scheme, the government has also decided to lower the commission charged by agents that sell these schemes.

As per the memorandum, the payment of agency commission on all schemes, except the Mahila Pradhan Kshetriya Bachat Yojana, will be either discontinued or reduced by at least 0.5%. Women agents will continue to receive 4%


Tips to protect your credit and debit cards from fraud

Convenience banking has, undoubtedly, come a long way. Most individuals have made the journey from ATMs to internet andmobile banking with consummate ease. However, most of them are still concerned about the risks involved in these new-age banking channels. The sentiment is shared by the Damodaran committee on customer service in banks, set up by the Reserve Bank of India (RBI), to study the problems and concerns faced by bank customers.

The committee has identified various issues such as hacking of bank accounts, cloning of cards, etc, and has asked banks to step up security measures to minimise such frauds. Even otherwise, you can transact on these channels as banks already have redressal mechanisms for such problems in place. Here are some of the common problems faced by banking customers and what you can do if you become a victim.

Problem: You are in possession of the card, but it gets swiped in a remote location for a transaction not initiated by you.

Solution: This is possible if your card has been ‘skimmed’ and a ‘counterfeit’ card is generated for use by fraudsters. More sophisticated credit card issuers intimate customers about transactions through an SMS alert and this is how the customer gets the first information about the misuse of his card. The customer should immediately contact the customer care/service centre of the card issuer and block the card from further misuse. Then ask the bank to do a fullfledged investigation into the modus operandi of the transaction, which can then be the basis for a resolution.

“Transactions at point-of-sale (PoS) terminals can be disputed by the customer if the ‘charge slip’ is not signed by the card holder or if the signature does not match,” says Sanjeev Patel, executive vice-president & head, direct banking channels, HDFC bank.

If the investigation reveals that the customer was in possession of the card but was not present in the remote location at the time of the transaction, then the bank initiates an insurance recovery for the disputed transactions.

“The interest of the customer is always kept in mind and in case of any ambiguity, customers’ past trends and track record are considered to give the customer the benefit of doubt,” said IndusInd Bank in an official statement. “Such transactions based on customer notification is marked as disputed transactions till the issue is resolved. The customer is not liable to pay for these transactions till the bank completes its investigation and initiates liaison for recovery through insurance,” the bank said.

Problem: Identity theft through phishing, pharming

Solution: The customer should immediately report the incident to the bank and request for suspension of services (netbanking, cards, etc) depending on the details that have been compromised by the customer. The customer should also change the relevant passwords to ensure no further damage is done.

A customer should be careful about the computer being used for online transactions. “Even home computers are not free from key logging virus and other malwares. In fact, children often download games, music or movies. Any virus can get downloaded through these free downloads and put your computer at risk,” says Vinoo Thomas, technical product manager, McAfee Labs. “Hence, you should either educate your children abou the possible implications of such risks or use a personal laptop, which is kept free of such downloads and viruses,” says Thomas.

Banks, on their part, monitor usage to detect unusual transactions, in addition to putting in place a host of measures to circumvent frauds. “Measures are also taken to avoid account takeovers. These include virtual keypad to log in to prevent capture of key strokes and automatic logout on more than certain minutes of idling on the system. Also demographic details are not displayed in clear online and updation of the same is allowed only after an additional factor of authentication,” says Gowri Mukherjee, head, digital business, Citi India. “We also regularly monitor the transaction activity on customer accounts, which triggers alerts if any unusual transactions are done. This is done for all channels, not just the online channel.”

“Each of the systems provided by ECS also has basic checks in terms of number and value of transactions allowed in a period per card or per account or per terminal where the card is used. This feature may help in case an alarmingly high number of transactions happen in a very short time,” says Bhavin Mody, senior product manager, ElectraCard Services, a payment processing company.

Problem: Non-dispensation cash from the ATM

Solution: Such scenarios can be primarily attributed to hardware malfunction, network connectivity issues, bad quality of currency bills or the customer forgetting to pick up the notes.

“This typically happens in case the communication link fails at the moment of cash dispensation by the machine. In such cases, the customer needs to retain the ATM slip which gives the time of transaction and report the incident to the respective customer care centre. Most banks reconcile ATM cash periodically and such unaccounted cash are credited back to the respective customer’s account post internal review,” said IndusInd Bank.

“The customer should report such cases immediately to the bank so that corrective actions can be taken and money refunded to the customer. The banks have various processes/system functionality features in place to investigate such cases and address them,” Patel of HDFC Bank says. Also, the RBI has asked banks to compensate customers in case of any delay in reversing the erroneous debits.

Problem: Frauds occurring due to capture of your card information at ATMs/online

Solution: If you thought that you need to be watchful only while swiping cards at merchant outlets, think again.

Scamsters today are using sophisticated means to obtain information on your card’s magnetic stripe to clone cards, apart from capturing your ATM PIN when you key it in at kiosks.

“In the online space, India is now the safest country for e-commerce, with the implementation of second factor authentication. Such misuse has now shifted to the ATM network. It is easier to commit such frauds at ATMs, due to the closed space than at POS terminals. After capturing the information, cards can be counterfeited to be misused,” says Uttam Nayak, group country manager, India and South Asia, Visa. At your end, you need to make sure that you keep the keypad covered while entering your PIN to prevent any camera device from capturing the PIN you enter.

Problem: Giving into tempting offers

Solution: The solution is to simply be aware of the kind of frauds taking place. “Recently, an incident was reported where customers were encouraged to swipe at a POS terminal located in a departmental store for a small amount in return for freebies worth much more. They were unaware that a device was recording the card-related sensitive information offline,” says Nayak of Visa. To avoid falling prey to such dubious schemes, it is best to stay away from offers that seem to good to be true, because they are likely to be.

courtesy: ET

Smart Tips to manage your money

Check your expenses and adhere to your budget

People tend to forget that good times don’t last forever. If you spend lavishly during good times and continue the trend without adapting to changes in circumstances, very soon you will land in financial trouble. Hence to ensure you lead a consistent lifestyle, always draw out a budget and ensure you stick to it religiously. E.g. if you have allocated Rs 500 per month towards your entertainment expenses, don’t spend a rupee more than Rs. 500. It will not only help you handle your finances better but will develop your willpower by delaying instant gratification.

Don’t rely on future income

Depending on future income in order to spend today, is one of the biggest mistakes we make. This has been evident during a job crisis, where youth racked up a huge credit card debt and took heavy loans. But when the salary cuts and job losses occurred, they were unable to pay off their debt. E.g. if your monthly income is Rs. 20,000 always ensure you spend well within Rs. 20,000 as pay cut or job loss may land you in trouble.

Reduce your debt

Got a bonus? Then pay off any loans that you have taken. If you have multiple loans, first pay off the loans with the highest interest rate, then the one with second highest rate and so on. E.g. if you have a credit card debt, personal loan and home loan, first clear off the credit card debt, then personal loan and finally home loan. For this you will have to plan out your debts and then go on following it systematically and steadily. It will not only save you money but will also give you mental peace.

Opt for strategic asset allocation

Though experts have consistently stated the importance of asset allocation, many investors tend to overlook this fact and invest only in the hottest asset. But remember market conditions do change and what is hot today may be out in the cold later on for a long time. So ensure you divide your portfolio amongst stocks, bonds, gold and real estate to get the maximum returns from your portfolio. Though your portfolio may under perform for some time, it will end up protecting you when the things get rough.

Keep emergency cash

You never know when a crisis can strike your family. Death, disease or job loss can end up upsetting your investments. You might be forced to sell your investments though they have not been given you any profits. Hence it is advisable to keep at least 3-6 months of your household expenses aside as emergency cash.

Sort out Your Finances

Agreed, keeping tabs on and handling your finances closely, may not sound like an interesting job, but it is a necessity. However you can reduce the boredom by putting a system in place. Once it is done, you can spend a few hours a month on this job. E.g. on Sunday, you can spend 1-2 hours to find out how your investments are performing, reading up any news concerning them or talking with your financial planner about the performance of your investments.

Plan in advance

One of the reasons many people land in financial mess is that they don’t plan their finances ahead. So it is imperative to plan your finances properly. Find out your current position, where you intend to go and set up a feasible plan to achieve your objectives. Unforeseeable events may occur and make you stray away from your plan for a short time, but ensure you get back on track at the earliest. Always remain focused and keep a watch on your progress. E.g. you are saving to buy a home and have started investing for the same. But 6 months after you started investing, you lose your job. If that happens, stop your investment, get a new job and again restart your investment.

Invest systematically and gradually

The biggest problem is that most people don’t bother saving till it is quite late. So they don’t have any money to fall back on in case of emergency. Hence it is essential to start small, but regularly and then increase the amounts later on. E.g. you can start a SIP, in which a particular sum is debited from your bank account and invested in a mutual fund. Or you can open a recurring deposit, which acts like a SIP, initiated by the bank. All this will occur automatically, so you have no excuse not to save.

Be in charge of your investments

The markets have crashed, the realty is down in dumps. What do you do? Sell off? Wrong. Unfortunately, this is what most investors do. In this situation, it is advisable to hold on to your portfolio as selling will just end up causing you financial loss. Instead increase your emergency cash reserves and periodically review your asset allocation of your portfolio.

Set a realistic outlook

The days of stocks giving a return of over 40% are over. While it is possible some of them may give you those types of returns, it is setting yourself up for disappointment if you keep your outlook very high. Instead keep a practical outlook of earning 12-15% returns from your investments.


Computerized Trading Agents Do Beat Humans in Foreign Exchange Markets

Robot trading agents, which already dominate the foreign exchange markets, have now been definitively shown to beat human traders at the same game.Results presented at a conference July 22 showed beyond doubt that computerized trading agents, using the Adaptive Aggressiveness (AA) strategy developed at the University of Southampton in 2008, can beat both human traders and robot traders using any other strategy.The new results were obtained after a re-run of the well-known IBM experiment (2001) where human traders competed against state-of-the-art computerised trading agents — and lost.

Ten years on, experiments carried out by Marco De Lucas and Professor Dave Cliff of the University of Bristol have shown that AA is now the leading strategy, able to beat both robot traders and humans.

The academics presented their findings at the International Joint Conference on Artificial Intelligence (IJCAI 2011), held in Barcelona.

Dr Krishnan Vytelingum, who designed the AA strategy along with Professor Dave Cliff and Professor Nick Jennings at the University of Southampton in 2008, commented: “Robot traders can analyse far larger datasets than human traders. They crunch the data faster and more efficiently and act on it faster. Robot trading is becoming more and more prominent in financial markets and currently dominates the foreign exchange market with 70 per cent of trade going through robot traders.”

Its better to invest in Fixed Deposit

In Hindu mythology, Bhasmasura was a demon who, after praying to Lord Shiva, received a boon that anyone whose head he touched with his hand would immediately turn into ashes (bhasma). Shiva granted this request, but Bhasmasura , the ungrateful demon that he was, attempted to touch the head of Shiva with his hand. Shiva fled and somehow managed to reach Lord Vishnu for help.

Lord Vishnu took up the disguise of Mohini, a beautiful dancer, and appeared in front of Bhasmasura. Mohini was so exceedingly beautiful that Bhasmasura immediately fell in love with her. Bhasmasura asked Mohini to marry him. She told him that she was very fond of dancing, and would marry him only if he could match her moves identically. Bhasmasura agreed and they started dancing.

Bhasmasura matched the disguised Vishnu’s move for move. Smartly then, Mohini struck a pose where her hand was placed on top of her own head. As Bhasmasura imitated her, he was tricked into touching his own head, and immediately turned into ashes. So, how is a mythological story connected to a common man like you and me?

Think about Bhasmasura as the equally deadly, moneyburning inflation. Like Shiva who granted the boon to Bhasmasura, who gives inflation the power to rise? You and me! Inflation is the result of more money chasing fewer goods, leading to a demand and supply disparity. All of us, with our new-age salaries are spending more than ever, leading to a rise in prices and thus a rise in inflation. This inflation eats away our purchasing power. So, all that you can buy for . 10,000 today will cost more tomorrow.

Inflation eats away a major part of the returns that your investment generates. So, if your fixed deposit (FD) gives a return of 8% and the rate of inflation is 8%, you are actually earning nothing on your investment. Then, how can we defeat this Bhasmasura named Inflation? Shiva turned to Vishnu for help, whom do we turn to for safety? Vishnu in our case is equity /stocks of the same companies that make these goods that we are buying. Let us see how. Say, you love the soaps manufactured by a particular company and so does everyone else you know. The more people buy that soap, the higher the profits for that company.

These profits the company shares with its shareholders in the form of dividend. By buying even a single share of that company, you can take home a part of this profit. Look at a bank, if it is offering good rates for lending and deposits and more and more people are flocking to it, chances are that it might generate handsome profits. Buying shares of this bank will ensure a share in profits for you by means of dividend.

Inflation currently stands at around 8% (March 2011 inflation forecast as per RBI is 8%), whereas equities have typically given 18-20 % returns in the long term. Even if you take inflation at 6%, 20 years from now something that costs .Rs10,000 today will cost Rs 32,071! If you invest the same Rs 10,000 in a fixed deposit at 8%, 20 years from now it will be Rs 46,610. Wait, before you run to the bank, just hold on for a minute while we deduct taxes from those returns. If you fall in the highest tax bracket of 30%, the figure of Rs 46,610 shrinks to Rs 29,736 – less than what inflation did to prices .

So while you thought you will beat inflation, in reality, you lose your capital. Now, if you choose to invest this Rs 10,000 in equities today, 20 years from now that money could turn to Rs 1.63 lakh, even at a conservative 15% return! Very few investment options have the capacity to generate such inflation-crushing returns . And this is the Mohini avatar that will help you kill the Bhasmasura of inflation.