Knowledge Series 1 - SIPs : The Basix of Investments

Hi,

Good Morning!

I have noticed that there is quite a good awareness about Term Plans yet people are concerned about getting the money back.
My previous post should have cleared all your doubts and must have created a significant interest for Term Plans.

Today we will move ahead with our third important ingredient of Financial Planning :  SIP – Systematic Investment Plan.

An SIP – Systematic Investment Plan is any investment made systematically via month on month basis for a long term. This investment serves as a key ingredient of financial planning and helps us accumulate wealth through our monthly savings. The future value is supposed to yield us quite handsome returns. 

An SIP can be classified in two types on the basis of risk:

1) Market linked: Any SIP made in an instrument that invests into stock market is risk oriented and may yield you quite handsomely depending on the market performance. This can be done via Mutual Funds and Unit Linked Insurance Plans.

2) Non market linked: Any SIP made in an instrument that does not invest into stock market and tends to provide limited but safe returns without any risk. This can be done via a Recurring Deposit at a Bank or a Post Office or an Endowment Insurance Plan in monthly mode. Returns are same but an Endowment Insurance Plan gives more benefits like tax saving, insurance cover and Tax-free returns at the end of the term.

The benefits of each kind of SIP is as per the risk profile of the investment made.
For example, investing in high risk instruments like equity shall yield you multifold and on the same side carries similar amount of downside risk also.
But if an average return of 15% per annum is considered, an investment of Rs. 5000/- per month (Annually Rs. 60,000/-) for 20 years (total amount invested is Rs. 12 lac) yields Rs. 75,79,775/-.

That’s a multifold yield, isn’t it?

Similarly, a Non market linked SIP shall yield at around 8% per annum, and the amount comes out to be Rs. 29,64,736/- in 20 years.
A little conservative, but good for those not interested in taking high risks.

Moreover, if it’s an insurance SIP, it’s a Triple Benefit scheme. You get tax exemption on investment made, you get insurance cover accordingly and finally, the returns are totally tax-free. Far better than a Recurring Deposit!

But one important thing to keep in mind is that, “Never put all your eggs in the same basket”.

So diversify your SIPs properly as per your risk taking capacity and always plan for long term investments.

If you are not sure about your risk taking capacity, contact me at gauravkabra@gmail.com to advise you for it.

Happy Investing!

Knowledge Series I - Truth about Term Insurance

Out of the three ingredients, today i am detailing you about the second one:


Term Insurance


A Term Insurance Policy is an insurance that provides purely risk cover. You are charged only for the mortality(risk) charges and hence the premium is way too low than any other kind of life insurance. In case of an unfortunate event like demise of the insured, the beneficiary gets the entire amount by the insurance company. Since the premium is very low, one can take high amount of risk cover.


Benefits:
a) High Sum Assured on very low cost.
b) ECS mode available for yearly renewal.
c) Single policy of the earning member can protect entire family’s future.
d) Riders available for Critical Illness, Accidental Death and Permanent Disability.
e) Tax  benefit U/S 80C on the amount of premium paid.


I would like to share a simple comparison that’ll clarify you why to buy something which is not going to yield you anything till you are alive.


If you need an insurance of 1 crore, how much premium do think you will need to pay yearly?


Normally, Insurance companies provide 15 to 20 times cover of your yearly premium. 


So even if we take higher multiple, i.e., 20 times, you’ll need to pay Rs. 5 lac as yearly premium to take this amount of cover.


What if you get this 1 crore cover in just 15k-20k per annum?


You are saving upon Rs. 4,80,000/- per annum. Now invest in the best instruments to get maximum benefit in long term rather than investing this huge amount in just insurance and getting a yield of just 6%-8% p.a.


An example:


Age: 30
Risk Cover: 1 crore
Category: Non-Smoker
Premium Range: Rs. 9,000/- to Rs. 20,000/-


Imagine investing 5 lac p.a. @ 8% p.a. in insurance and 4.80 lac p.a. @11% p.a. in other instruments (like Mutual Funds, FDs etc)


Rs. 5 lac for 20 yrs (total 1 crore invested)
@8% p.a. yield for 20 yrs :- 2.5 crores (compounded yield)


Rs. 4.80 lac for 20 yrs (total 96 lacs invested)
@11% p.a. yield for 20 yrs :- 3.5 crores (compounded yield)




Now the question is, how much risk cover do you need?


For this, you need to calculate your Human Life Value. Contact our financial consultants to find out your exact insurance requirements.


For any query, mail me at gauravkabra@gmail.com


Happy Investing!

Knowledge Series I - Health Insurance unleashed

In my previous post, i have briefed about the 3 vitals of financial planning.

Today, I wish to bring one of those vitals of financial planning to your notice in detail:

Health Insurance (Medi-claim policy)

Let me detail you about the importance of Health Insurance in our life.

A health Policy (a family floater) is an insurance that covers your entire family for any hospitalization that occurs due to an unforeseen disease or accident.

In the current scenario of the environment and traffic, we are highly prone to accidents and diseases; and any kind of hospitalization wipes out major amount of our savings.

A health policy takes care of these expenses and saves any unforeseen/unplanned medical expense.

Benefits:

a)      Covers hospitalization and all expenses related to that hospitalization.

b)      Little yearly premium.

c)       No-claim benefit at the end of the year.

d)      Cashless facilities at networked hospitals.

e)      Entire family can be covered in single policy.

f))     Least paperwork.

g)      Some Insurers also cover maternity after 2 years.

h)      Tax benefit U/S 80D on the amount of premium paid.

Health Insurance is also available for individuals with a family floater and is known as Individual Health Insurance Plan.

Please find below a quote of a Family Floater for you to analyze the yearly cost for the same.

Age: 31 years

Family size: 2 adults and 1 child

Risk Cover: 5 lac

Plan: Family Floater

Premium range: Rs. 7736 to Rs. 16598

(Premium depends on company to company as different companies offer few different features)

FAQs:

1: Does it cover previous diseases?

Ans: No, Insurance is always for the risk that might occur in future, so previous sufferings or diseases are not covered.

2: Does it cover maternity?

Ans: Some insurers cover maternity but only after completion of 2 years of your continuous policy cover and have paid the premium for the third year.

3: Is there a capping on expense on any disease?

Ans: No, there is no capping on any disease expense.

4: Is it all cashless?

Ans: Yes, it is all cashless in all the networked hospitals. Other than networked hospitals, the bills will be reimbursed on submission of originals.

5: Any tax benefit?

Ans: The premium paid shall be deductible from your income  Under Section 80 D and shall be exempt from income tax as per current Taxation laws.

Please feel free to comment and query. I'd be glad to reply to your queries and happiest to see your comments.

Knowledge Series I - Vital ingrediants of Financial Planning

We at Knowledge Series continuously aspire to educate our clients and everyone in touch regarding planning of their finances.
This should definitely help you attain your financial goals and keep your family’s bright future safe.


Today, I wish to bring 3 vitals of financial planning to your notice.
1) Health Policy (Medi-claim policy)
2) Term Insurance (Pure Risk Cover)
3) SIP


Let me detail you about the importance of these 3 vitals in our life.


A health Policy (a family floater) is an insurance that covers your entire family for any hospitalization that occurs due to an unforeseen disease or accident.
In the current scenario of the environment and traffic, we are highly prone to accidents and diseases; and any kind of hospitalization shall wipe out major amount of our savings. 
A health policy takes care of these expenses and saves any unforeseen/unplanned medical expense.


Benefits:
a) Covers hospitalization and all expenses related to that hospitalization.
b) Little yearly premium.
c) No-claim benefit at the end of the year.
d) Cashless facilities at networked hospitals.
e) Entire family can be covered in single policy.
f) Least paperwork.
g) Tax benefit U/S 80D on the amount of premium paid.




A Term Insurance Policy is an insurance that provides purely risk cover. You are charged only for the mortality(risk) charges and hence the premium is way too low than any other kind of life insurance. In case of any unfortunate event like demise of the insured, the beneficiary get the entire amount by the insurance company. Since the premium is very low, one can take high amount of risk cover.


Benefits:
a) High Sum Assured on very low cost.
b) ECS mode available for yearly renewal.
c) Single policy of the earning member can protect entire family’s future.
d) Tax  benefit U/S 80C on the amount of premium paid.




An SIP – Systematic Investment Plan is any investment made systematically via month on month basis for a long term. This investment serves as a key ingredient of financial planning and helps us accumulate wealth through our monthly savings. The future value is supposed to yield us quite handsome returns. 
An SIP can be classified in two types on the basis of risk:
1) Market linked: Any SIP made in an instrument that invests into stock market is risk oriented and may yield you quite handsomely depending on the market performance. This can be done via Mutual Funds and Unit Linked Insurance Plans.
2) Non market linked: Any SIP made in an instrument that does not invest into stock market and tends to provide limited but safe returns without any risk. This can be done via a Recurring Deposit at a Bank or a Post Office or an Endowment Insurance Plan in monthly mode. Returns are same but an Endowment Insurance Plan gives more benefits like tax saving, insurance cover and Tax-free returns at the end of the term.


The above 3 points states the most vital organs of anybody’s financial summary and covers most of our financial needs.


Hope this little knowledge shared with you shall help you improvise upon your impeccable financial plan.


Happy Investing!

Knowledge Series

Dear Investor,

Welcome to the Knowledge Series.

Knowledge Series is meant to educate investors and guide them for the best Financial Planning products available in the market.

Please comment to let us know if you like the content and also if in case if you need some information or analysis about some product.

Happy Investing!