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Interest rates may be on an upwards trend, for now. But it is difficult to predict when the situation may reverse. Many feel that interest rates, over the following years and decades, will only go down. In such a scenario, retail fixed income investors are in a bind.

Debt mutual funds were emerging as good options, but there have been instances where debt funds had to write-off exposure, leading to sharp losses in the short-term. This is why it may be a good time for retail investors to consider investments in Government Securities (G-Secs) as this is the safest investment option available.

Since they carry a sovereign guarantee, G-Secs are virtually credit risk-free and are also available for longer investment duration of up to 40 years. DNA Money brings you details of how you can invest in be a direct G-Sec investor.

Platforms to buy from

Lack of awareness is the primary reason why retail investors have not warmed up to buying G-Secs directly. There is a misconception that direct investment requires lots of money, in lakhs. The fact is you can invest in G-Secs with as low as Rs 10,000. IDBI Bank in 2012 launched IDBI Samriddhi, India’s first online retail G-Sec portal. By 2016, the bank inaugurated its G-Sec investment facility through ATM for retail investors. Axis Bank too has some time ago launched the facility for customers to buy G-Secs directly from Reserve Bank of India. ICICI Securities is one of the first online brokers to offer this investment opportunity through the ICICI Direct platform since May 2018. More recently, discount broker Zerodha launched its service in October 2018. On November 19, National Stock Exchange of India (NSE) announced the launch of its new mobile app and web-based platform ‘NSE goBID’ for retail investors to buy G-Secs.

Using a demat account retail investors can invest in treasury bills (T-Bills) of 91 days, 182 days and 364 days and various government bonds/securities from one year to almost 40 years. In most cases, investment can be done almost every week after a one-time registration. The minimum investment is Rs 10,000 in most cases. After you buy a G-Sec, it is credited within five to seven working days. In case of banks and brokers, you need to be a customer to be able to use their platform to invest. Interest in these government instruments is paid to the bank account linked to demat account.

How to buy

The broker gives the investor access to non-competitive bidding window that exchanges open every week for G-Secs. Once you apply from your account, funds will be deducted from your (investor’s) trading balance. “Bids for T-Bills are collected from Monday to Tuesday and for bonds from Tuesday to Thursday. G-Secs will be credited to your demat upon successful allotment and all interest payments will be credited to their bank account,” says Nithin Kamath- Founder &amp; CEO, Zerodha.

Retail investors will be allowed to bid in the auctions of dated G-Secs and T-Bills, as may be notified from time to time. “Here, the allotment to the non-competitive segment will be at the weighted average price of all allotments to competitive bidders. It enables medium and small investors to participate in the auction process without taking the price risk in auction,” says Anupam Guha, Head Private Wealth, ICICI Securities.

In case of Axis Bank, one can participate in the non-competitive bidding by filling the application form and undertaking from the investor, the bank website says. After successful acquisition of the security, the customer can keep the security in his name in the CSGL (Constituent Subsidiary General Ledger Account) account of Axis Bank in RBI, or, get his/her security credited to existing demat account with a depository participant. IDBI Bank’s Samriddhi portal is available from 10:00 AM TO 2:00 PM on all business days except Saturday and Sunday, according to its website.

Charges and commission

In terms of costs, ICICI Securities charges 0.06% on allotment value + GST, while Axis Bank charges 6 paise per Rs 100 as commission. Zerodha’s brokerage charge is Rs 6 per Rs 10,000 investment. IDBI Bank’s website says it does not charge any service charge or brokerage.

G-Sec advantage

There are advantages of investing in G-Secs. Guha says: “G-Secs come with a sovereign guarantee which no other instrument can offer, thereby minimising the credit risk, as compared to other debt investment options. In the current scenario, a 10-year G-Sec is offering Yield-To-Maturity of around 7.75%-7.8%, while a 364-Day T-bill is offering an yield in the range of 7.15%-7.2%. Notably, the retail bank Fixed Deposit rates in one-year tenor are around 7%, where TDS is also deducted. While G-Secs and T-bills are taxable in the hands of investor, TDS is not deducted at source. This gives an opportunity for the investor to plan his taxation at the end of the year.”

According to Kamath, G-Secs are cheaper compared to short-term mutual funds and this makes them an attractive investment choice.

Tenure of T-Bills are available in 91 days, 182 days and 364 days. T-Bills are zero coupon bonds and issued at discount, where the investor gets face value on maturity. Allotment price of the T-Bill is arrived through auction. “Tenure of G-Sec ranges from two to 30 years depending on what RBI brings for auction. Interest is paid on half yearly basis as per the respective coupon of the bonds. Allotment yield or price of G-Sec is arrived through auction. If the investor holds the securities to maturity, the yield at which the instrument was allotted is what he/she stands to make,” added Guha.

How to exit

Exit options are also important to consider. Exchanges are planning to list these securities on their platform just like stocks in the future. “So far, secondary market exists or selling before the bond matures is not easy, especially for retail investors with smaller investments. However, Zerodha will facilitate a buyback if investors are unable to sell these bonds,” says Kamath.

As of now, these instruments are targeted towards buy and hold investors who are invest in FDs for a regular income stream.

This article was published in DNA as '<a href="https://www.dnaindia.com/personal-finance/report-buy-sovereign-bonds-directly-earn-high-yields-2687622">Buy sovereign bonds directly, earn high yields'</a>

Interest rates may be on an&nbsp;upwards trend, for now. But it is difficult to predict when the situation may reverse. Many feel that interest rates, over the following years and decades, will only go down.

&nbsp;


Buying sovereign bonds? All you need is a demat account

In the last few years, property developers have been marketing ‘senior living’ projects to attract ‘seniors’ - who are aged 55+ and are looking to live independently in a peer environment. Senior living projects are retirement homes, with facilities to cater to the needs of old age. DNA Money spoke with experts to understand how one should select a senior living project given the one-time and recurring costs and range of arrangements. 
 
A home after retirement 
Senior housing options are ideal for seniors who have no major health issues and can take care of themselves. According to ANAROCK, such projects usually provide a variety of facilities for recreation and socialising, including clubhouse, health club or gym, facility management services, squarely focused on the needs of the elderly. This is not assisted living, where the homes are for adults who need some or considerable assistance to live their daily lives.

As per ANAROCK data, there are currently around 4,500 senior living units available in the market, and more than 2,000 units are in different stages of construction. Approximately 10 new projects are slated to come up over the next few years.

Senior living is seen as a growing trend in cities such as Coimbatore, Puducherry, Goa and Dehradun, which have traditionally been retirement cities. Most of the existing and planned senior living projects are essentially located in satellite towns of major metros like Bengaluru, Pune, Chennai and Delhi, and non-metros including Kochi, Jaipur, Bhopal, Coimbatore, Rishikesh, Goa and Mathura.

“In Bangalore, a unit of 600-1,450 square feet will have a ticket size of Rs 13-90 lakh. Food charges could be Rs 15,000. Monthly maintenance could Rs 2-7 per square feet. In NCR, a 800-1,600 square feet unit will have a ticket size of Rs 23-58 lakh, with Rs 12,000 food charges and monthly maintenance of Rs 3-9 per square feet. At the pan-India level, there is maximum supply in the budget range of Rs 35-45 lakh. Certainly, senior living as presented in India is far from unaffordable, as it is in many of the more developed countries,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

Plan your finances 
Given the costs, financial advisors say that one has to financially plan for living in senior projects. If you require Rs 25,000 per month and assuming 5% annual increase, you will require Rs 3 lakh this year, Rs 3.15 lakh in the next year and so on. “This means besides the unit cost, you will require a regular stream of earnings for monthly expenses. So, you should have such earnings from bank deposits or you can do a systematic withdrawal plan with mutual funds. There are other government schemes also where you can get a fixed payout. Do remember that other costs like hospitalisation/medical insurance and medicines, etc are also real costs that you would have to pay from your own. So, having a large enough corpus is important,” says Anil Rego, CEO, Right Horizons.

Location and facilities 
At its base, senior living is not so much about development as it is about providing a specialised service. But, due care has to be given so that senior-focused customisation and facilities are there. 
Arvind Nandan, executive director research, Knight Frank India lists four factors to keep in mind. First, location is key. “Senior living facilities are catching on in India as our geriatric population increases. When one chooses a facility today, two key aspects location and the facilitates available have to be kept in mind. Most senior living facilities are located away from cities. Ideally, the location of should be easily accessible via different modes of transport to ensure regular familial connect and quick transportation in an emergency,” says Nandan.

Since most cities are saturated, peripheries of most large cities are also attracting senior living projects because of the less cluttered surroundings suitable for a retired lifestyle, as well as the availability of large tracts of land. But you need to check if the location is too far. “If you have to travel a lot or spend money on cab just to visit the bank branch twice a month, think again,” says Naresh Verma, who recently opted out of such a project in the outskirts of Noida.

The second aspect is facilities, especially healthcare. “In India, geriatric healthcare is already a challenge and being equipped with good hospitals and healthcare centres is a non-negotiable factor for any senior living establishment. Therefore, while choosing a senior living facility, always pick one that offers good healthcare facilities including hospitals, pharmaceutical and drug stores,” says Knight Frank’s Nandan. 
Another important aspect is the infrastructure and access provided to the homes/quarters. You should ensure that the accommodation is easily accessible via ramps, elevators, etc. The place should provide for proper laundry and nourishment services, Nandan adds.

Unlike in other countries, India does not have a concept of long stay rentals and senior living spaces have to be bought like any other regular property and is therefore subject to inheritance. “Hence, check the builder’s reputation, the land policy under which the land is acquired, legal due diligence cooperative housing society norms that are to be followed,” says Nandan.

This article was first publised in DNA as <a href="https://www.dnaindia.com/personal-finance/report-factor-in-expenses-at-senior-living-homes-2687058">'Factor in expenses at senior living homes'</a>

In the last few years, property developers have been marketing ‘senior living’ projects to attract ‘seniors’ - who are aged 55+ and are looking to live independently in a peer environment.


Looking for retirement home? You could lose money, don't make these mistakes

Despite corporate earnings coming in-line with expectations amid key macro challenges like weak rupee, elevated bond yields and crude prices, brokerages have downgraded their earnings estimates from Nifty. This may be a signal that it will take a lot more on the earnings front to excite markets.

In Q2, net sales of 40 non-BFSI (banking, financial services and insurance), out of Nifty 50 companies, grew 26.8% year on year, whereas net profit grew 10.9%. Net interest income (NII) of 10 BFSI (out of Nifty 50 companies), grew by 16.5% YoY, whereas net profit grew by 3.9%.

In the BFSI segment, Bajaj Finance was yet again the best performer in NII terms (for the third consecutive quarter). In net profit terms, Axis Bank was the best performer with a profit after tax growth of 82.6%, owing to lower provisions.

In the non-BFSI segment, the best-performing companies are Reliance Industries (in net sales terms) and Coal India (in net profit terms). Bharti Airtel was the worst performer in terms of net sales and Tata Motors (which reported a loss on the back of challenges faced by its subsidiary Jaguar Land Rover in the UK) was the worst performer in terms of net profit, for the second consecutive quarter.

Excluding corporate banks, Nifty profit growth in Q2 came in at 12.8%. Nifty Ebitda margin (excluding financials, OMCs) contracted 40 basis points YoY to 20.7%. 66% of Nifty universe posted in-line or higher-than-estimated profit after tax. As much as 78% of Nifty universe posted in-line or higher-than-estimated Ebitda.

But downgrades in earnings estimates continue. “In comparison to estimates provided in Q1FY19 result insights, the Nifty EPS estimates are revised downward by about 4.0% for CY18, 1.9% for CY19 and 1.1% for CY20. Further, Sensex EPS estimates are trimmed by 6.5% for CY18, 2.7% for CY19 and 0.8% for FY20,” says Jagannadham Thunuguntla, senior VP, head of research, Centrum Wealth Management.

In fact, there are more downgrades than upgrades in FY19. “Earnings downgrades overweigh upgrades by a factor of more than two times. Eight out of the 50 Nifty companies saw upgrades ( &gt; 3%) in FY19 EPS, while 20 companies saw EPS downgrades,” says Gautam Duggad, head of research, Motilal Oswal Financial.

He said Motilal Oswal’s FY19/20 Nifty EPS estimates have been cut by 4.4%/2.9% to Rs 515/655 (prior: Rs 539/674). “We expect Nifty EPS to grow 13.1% in FY19. Nearly 70% of the earnings cut is driven by Tata Motors, IOC, Reliance and ONGC,” he said.

Some brokerages are still optimistic even though they too have lowered their estimates. “For the past two years, we have been forecasting a turn in earnings which hasn’t happened, creating deep scepticism whether the eight-year long earnings recession is over. While we have trimmed our F2019 and F2020 Sensex EPS by 1% to reflect Q2 results, revenue growth is a sign that we are headed for a strong H2,” says Morgan Stanley.

Given the current market scenario, the earnings suggest a gradual recovery setting in; however, sustenance of the same would be a key parameter, along with the demand scenario during the pre-election period. “H2FY19 growth may also not enthuse markets, as the base effect wears off and the impact of tight liquidity is felt. Our Nifty scenarios&nbsp; - base case of 9,500 for Mar-19 and upside/downside scenarios of 11,100/8,300 - imply unattractive risk-reward,” says Gautam Chhaochharia, analyst, UBS Securities India.

This story first appeared in DNA Money: <a href="https://www.dnaindia.com/business/report-nifty-earnings-estimates-cut-despite-good-q2-show-2687055">Nifty earnings estimates cut despite good Q2 show</a>

&nbsp;

Excluding corporate banks, Nifty profit growth in Q2 came in at 12.8%. Nifty Ebitda margin (excluding financials, OMCs) contracted 40 basis points YoY to 20.7%. 66% of Nifty universe posted in-line or higher-than-estimated profit after tax. As much as 78% of Nifty universe posted in-line or higher-than-estimated Ebitda.


Stock market: Brokerages optimistic, but lower their estimates from Nifty earnings 

'For sale: Wedding Dress. Worn once by mistake,' read an ad. But alas! Not all mistakes can be corrected if it is an expensive wedding.&nbsp; The wedding season peaks from late October to early December each year. With couples and families going the whole hog when it comes marriage ceremonies, weddings are easily one of the biggest financial events in our lives.

It is time for celebration, unbridled fun and hope of a beautiful future together. But, Uncertainties have a way of spoiling things. Just like for your health, car, home and accident, a wedding can also be insured. As Indians warm up to the idea of destination weddings and marriages costing a bomb abroad, discerning customers are going for wedding insurance in droves. DNA Money spoke to industry experts on wedding insurance and its nitty gritties.

Marriage money 
Conservative estimates put the size of the wedding market in India at Rs 1 lakh crore. Weddings require serious financial muscle. A Matrimony.com survey reveals that over 20% of females plan to spend Rs 10-20 lakh and 6% respondents said they are going to spend Rs 20-40 lakh on the wedding. These numbers go up significantly if we are talking about destination weddings and overseas weddings.

Risks like the cancellation of wedding &amp; postponement due to fire and allied perils, damage to property (venue of a wedding), a personal accident of family members, and third-party liability bodily injury/property damage at the time wedding event etc. can turn your world upside down.

Watch this Zee Business video here:

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" scrolling="no" src="https://www.youtube.com/embed/NpIrk1JdRlg" width="100%"></iframe>

Naturally, wedding insurance is finding takers today. "Yes, awareness about wedding insurance is increasing. Insurance agents are helping increase awareness. We have also observed that various wedding planner companies have started offering insurance protection as part of their wedding packages. We are seeing a rise in wedding package policy by 4-5% year on year, sum insured is in range of Rs 25 lakh to Rs 1 crore," says Easwara Narayanan, chief operating officer, Future Generali India Insurance.

Wedding insurance is usually taken in cases when the overall budget of the wedding goes beyond Rs 25 lakh. Overseas wedding insurance is in demand due to the high cost of wedding, sum insured often ranges between Rs 1 crore to Rs 7 crore, adds Narayanan.

"Wedding insurance currently in India is widely opted by High Net worth Individual (HNI) and celebrities as the wedding bills in such cases are high. With large people opting for destination weddings, the sum insured opted by these customers are on the rise," remarks ICICI Lombard chief of underwriting claims and reinsurance Sanjay Datta.

With a large portion of Indian customers opting for destination weddings, there is a huge spur in abroad destinations. "Travel companies have come out with special packages to help customers plan their destination weddings. The wedding expenses in such cases are comparatively higher than compared to weddings in India. Average sum insured for weddings abroad are 30-50% higher compared to Indian destinations," points out Datta.

Insurance IQ 
It is important to understand how wedding insurance works if a claim happens. For instance, there is a cancellation or postponement of the wedding ceremony due to fire &amp; allied perils including earthquake at the venue, or burglary &amp; theft at the venue. Or, a wedding was cancelled due to sudden failure of the named persons (usually bride, groom) to appear for the wedding due to death, personal injury, or illness resulting in hospitalisation a few days prior to the printed declared wedding date.

During such times, wedding insurance may cover expenses like advances for marriage hall, cooks, catering, purohits/pandits, beauticians, decorators, travel/accommodation reserved for bride/ bridegroom/ guests, music parties, photos/ videography, entertainment programs transport, or flowers. Mrin Agarwal, founder at Finsafe and co-founder at Womantra, says: "The policy does not cover cancellation/ postponement if one of the parties changes their mind, or there is bandh/civil unrest."

Kidnapping of the named person leading to wedding cancellation is also not an admissible claim.

Given the large expenditure incurred on printing cards, advances paid to the caterer, hotel, airline bookings, etc it is advisable to take a wedding cover, recommends Agarwal.

Bhupesh Kumar, head – strategic accounts &amp; executive vice president, Global Insurance Brokers wants consumers to understand that wedding insurance usually helps to protect financial loss of proven additional costs or expenses reasonably incurred which are non-recoverable and in case wedding gets cancelled/ abandoned. "The claims can arise due to set damage, adverse weather conditions, riot/strike/civil commotion in destination city of the wedding being scheduled," he adds.

Direct physical loss/ damage caused to property insured due to standard fire and allied perils including earthquake, burglary and theft is covered. At that time, the claim amount will depend on the sum insured basis cost of decoration and shamiana, hired sets, jewellery, precious metals and stones, appliances etc. Valuation certificates, bills may be needed for jewellery, precious metals, and stones to be covered.

Narayanan of Future Generali India Insurance says wedding insurance etc., has not received the desired level of penetration in India. "Wedding in India is considered to be an auspicious occasion and people would not like to even remotely associate it with misfortune. Such mindsets generally disappear over time when the value proposition is clearly established," he reasoned.

ICICI Lombard's Datta says so far claims reporting has largely been stable over a long period.

Do note that wedding insurance coverage may not include losses/cancellations due to expected seasonal rains, storms, due to disputes between bride, groom, family, friends etc., loss or theft from unattended venues or vehicles, loss of money in the insured premises where such money was stored other than in a safe or strong room etc.

EXPENSIVE VOWS 
Rs 1L cr – Size of the wedding market in India, as per conservative estimates&nbsp;&nbsp; 
4-5% – Rise in wedding package insurance policies seen year on year&nbsp;&nbsp; 
30-50% – Higher is the average sum insured for weddings abroad over local&nbsp;

This story was first published in DNA Money. Here is the link:&nbsp;<a href="https://www.dnaindia.com/personal-finance/report-band-baaja-baraat-insurance-2684697">Band, Baaja, &amp; Baraat insurance</a>

'For sale: Wedding Dress. Worn once by mistake,' read an ad. But alas! Not all mistakes can be corrected if it is an expensive wedding.&nbsp;&nbsp;


Wedding insurance finds many takers; here are the reasons

Investors are looking at 2075 with hope and trepidation in equal measure. While the outcome of state elections and ultimately the Lok Sabha 2019 polls are anxiety points, domestic economic growth and corporate earnings are showing green shoots after a long time.

Most of the top experts at brokerages project the benchmark Nifty to gain 14-21% and hit 12000-12800 by next Diwali, while just one struck a cautious note with a target of 10250 (a 2% drop from the current level), indicates a DNA Money survey.

From a portfolio perspective, investors should consider a balanced approach with about half money in stocks while the rest should be judiciously distributed across debt and gold while cash may act as a tactical instrument, experts suggested.

In terms of Nifty target, any level above 11700 will mark a new high. V K Sharma, head - PCG and capital markets group, HDFC Securities, is the most bullish with a 12800 target as he feels all the negatives are priced in. He expects Nifty earnings to grow by 20% next fiscal.

Pankaj Pandey, head of research ICICIdirect, agrees that the worst may be behind in the banking space.

“We value Nifty/Sensex at 18.5 times FY20E earnings, resulting in one year forward target of 12300 (Nifty)/39500 (Sensex),” he said.

A lot depends on how the markets react to elections. Amnish Aggarwal, head of research at Prabhudas Lilladher said Nifty is likely to be around 12600, much above earlier high of 11700, if the economy does not deteriorate further and India gets a stable government after 2019 elections.

“Banking system has seen a significant cleanup and earnings trajectory has been moving up. Earnings will be a positive trigger for the market. The challenges for the market will emanate from the political front.

Elections will cause volatility and market multiples could shrink,” points out Naveen Kulkarni, head of research, Reliance Securities.

The lone bear in all this Vinod Nair, head of research, Geojit Financial Services. His Nifty target of 10250 indicates that at best market will be flat with a downward bias.

“Currently, we have one year forward base-target of 10250 for Nifty50, which is reduced from 10400 in Q1FY19. This is based on 12.5% earnings growth in FY19 and 15% earnings growth in FY20, which is lower than the market forecast of 15% and 22%, respectively. In the last two quarters, the market has reduced the earnings growth for FY19 from 20% to 15%, while we have reduced from 15% to 12.5%.&nbsp;

Our reduction is based on H1FY19 numbers which are likely to be in a range of 5% to 10% as per the actual result of Q1FY19 and on-going Q2FY19.”

Arun Thukral, MD and CEO, Axis Securities, feels that liquidity evaporation in global markets to the ensuing quantitative tightening, disruption due to a disorderly exit of Britain from EU and fractured mandate in general elections 2019 are the three major risks for the Indian Equity markets over next one year.

DNA Money first published <a href="https://www.dnaindia.com/business/report-samvat-2075-most-experts-predict-new-highs-for-nifty-but-want-you-to-keep-a-date-with-debt-too-2683697">this</a> article on 8th November, 2018.

Nifty may gain 14-21%, hit 12000-12800 by next Diwali; upcoming elections and&nbsp;macro economicInvestors are looking at 2075 with hope and trepidation in equal measure. While the outcome of state elections and ultimately the Lok Sabha 2019 polls are anxiety points, domestic economic growth and corporate earnings are showing green shoots after a long time.&nbsp;numbers will be key, according to experts.


In Samvat 2075, how much will Nifty gain? Index may soar 14-21% by next Diwali

Typically, the thought of retirement crosses one’s mind when one enters the 40s. The most important question is how much would one need after retirement. It is very difficult to have an idea of how much money you would need after 30 years. Random figures of Rs 50 lakh and Rs 1 crore is often bandied about, but are they enough?

Based on an inflation rate of 5% per year, in 20 years time, the estimated value of your Rs 1 crore money in today’s terms might be Rs 38 lakh only.

DNA Money spoke to personal finance experts and wealth managers to know the right approach.

“The question of ideal ‘retirement corpus’ is baffling and any underestimation of the same during the accumulation stage can lead to horrific results. Before calculating the ‘nest egg’ (retirement corpus) one should analyse present earnings and realistically project where one wishes to be in future,” says Abhijit Bhave, CEO, Karvy PrivateWealth.

A simple thumb rule to calculate the “retirement corpus” is to compound present annual expenses by an inflation rate of approximately 5% for the number of years left for retirement and then multiplying this for the number of years one expects to live after retirement. For example, assuming the present age is 30 years and the retirement age is 60, one would compound for 30 years (that is, remaining years till retirement). “And then this needs to be multiplied for at least 20 years (assuming a life expectancy of 80),” says Bhave.

The first step to build a sufficient retirement corpus is to separate retirement planning goals from all other short/medium-term goals like buying a car, children’s’ education, family vacations, etc.The segregation of retirement goal from every other-other goal ensures undivided attention on building the retirement corpus. In short “do not dip into retirement savings before you retire”.

Start investments early in life, that is, as soon as one starts earning, and simultaneously lay the roadmap for retirement planning. Involving family, that is, sitting with spouse and children during the retirement planning stage is important as any financial decisions are undertaken will have a far-reaching impact on the entire family.

“All younger couples are recommended to have a high exposure to equity during the accumulation phase while gradually moving towards higher debt allocation as the time of retirement approaches. During the accumulation stage suggested asset allocation towards equity/debt could be 50-75% equity and 25-50% debt, after considering individual risk profiles,” says Bhave.

Methodical approach

The retirement corpus is best an estimate and its calculation should factor in all possible expenses one will incur post-retirement. In that sense the retirement corpus should be revised or updated regularly to make it as realistic as possible, says Rahul Jain, head, Personal Wealth Advisory, Edelweiss.

Since the basis of retirement corpus is expenses, the calculation of retirement corpus should start with current expenses.

Jain uses an example to help investors understand. Sanjay is 40 years of age and plans to retire at 60. His life expectancy is assumed to be 90 years. His current expenses (household, lifestyle, insurance premium, etc) is Rs 50,000 per month. This is the expense between Sanjay and his spouse. “Let us calculate his retirement corpus: current annual expenses: Rs 6 lakh, assumed inflation: 7% per annum, estimated expense at retirement (after 20 years): Rs 23 lakh. Rate of return he expects to earn post-retirement: 6% per annum (assumed post-tax). So, the present value of post-retirement expenses (60-90 years): Rs 8 crore.

There are some common pitfalls of retirement corpus calculation. Firstly, the rate of inflation needs to be close to the actuals,&nbsp;Jain thinks the number should be closer to our long-term average CPI of around 8% per anum.

Second is the rate of return post-retirement. “Assuming one would park his entire retirement corpus into bank Fixed Deposits to fetch regular income, this rate can be around 7-8% pre-tax. Post-tax one it works out to 5-6% per annum,” Jain explains.

Thirdly, one should not forget to factor in and revise the medical expenses post-retirement. One should definitely budget in the medical insurance premium.

Fourth, life expectancy should be taken on the higher side. “Very often people take a smaller age. This makes the retirement corpus required small, hence, this approach should be avoided. Plan for higher life expectancy,’ advises Jain.

Taxation aspect

Annuity, FD, Senior Citizens Savings Scheme, etc, are all taxable as income.

“One needs to look at whether the product in question is subjected to tax or not. If it is subject to tax, we need to see whether it would be subjected to capital gains or income tax. Normally capital gains tax treatment is more favourable,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories. An efficient vehicle for a person in the upper tax brackets would be tax-free bonds, PPF, FMPs.

Source: DNA Money

Typically, the thought of retirement crosses one’s mind when one enters the 40s. The most important question is how much would one need after retirement.


Rs.1 cr for retirement? Won’t last for 30 years

The second-hand car market in India alone is worth Rs 1 lakh crore and it is estimated that for every new car that is sold there is at least one used car that finds a buyer. With the festival season in full swing, many financial institutions and car dealers are readying offers for second-hand car purchases.

Along with improving used car quality, increasing reliability, shorter ownership of new cars and the rise of organised players in this space have made used cars a viable option. But all this doesn't mean that you should blindly trust everything. DNA Money talks to experts to find out three important things when buying a used car.

Car due diligence 
The market for used cars in India is undergoing a surge of change. As per a report by CRISIL, almost two in every three cars sold in the country today are used cars. Volume wise, there are more than 3 million used cars sold in India every year. This culminates into a favourably used car- new car sale ratio.

One reason is the change in the way cars are sold and purchased. There is a swift rise in automobile portals where buying and selling have now become easy. From virtual test drives, purchasing cars online and checking car reviews, have drastically shaped the automobile industry.

Watch this Zee Business video here:

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" scrolling="no" src="https://www.youtube.com/embed/yEILx-cZo6Q" width="100%"></iframe>

But potential used car buyers must do the due diligence. They can either do it on their own or use an expert. Shubh Bansal, co-founder and chief of marketing, Truebil says: Today, there is a welcoming change in the attitude of Indian customers. This has opened up huge prospects for the used car market, which is still untapped to a large extent. We provide free car inspection, quick sell guarantee, speedy paper transfer, used car loan assistance, insurance renewal support, warranty service and emergency roadside assistance to the car purchases made through our portal."

Second-hand cars require higher maintenance cost than new cars. So, why do buyers prefer second-hand cars? There are several reasons why this is happening. The first is that the car quality in India is improving, increasing reliability even when driven over longer periods. "So, a slightly older car is no longer considered a risk. At the same time, ownership cycles are shortening, from six to eight years five years back, to around four years now," says Navin Chandani, chief business development officer, BankBazaar.com The rising number of organised players in this space and the easy credit availability for used cars is making used cars a viable option for those who are looking to buy that first car or even a second family car.

The message is very clear. Buy not too old cars and from reliable players only. Don't go for seemingly attractive deals from people you don't really know.

Used car insurance 
If someone wants to do an apple-to-apple comparison, the same cannot be done as the Insured Declared Value (IDV) value of a second-hand car will be different as compared to that of a brand new car and hence, the premium of a second-hand car will definitely be lower.

While buying a previously owned car, one can change the insurance policy ownership and not necessarily get a new one. "It is important to look for following points while transferring the ownership of the insurance policy- check whether an insurance claim has been made in the past as this will tell you if any repairs have been made to the car; check for the expiry date of the policy, check the type of insurance by which the vehicle is covered," says Tarun Mathur, chief business officer - general insurance, Policybazaar.com.

If the previous owner did not have an active policy then you need to apply for a new one. Moreover, if there is an active insurance policy, you can get it transferred to your name. Doing so is a cumbersome process. First, you have to apply for policy transfer with the insurer. Then insurer will charge for the rest of the policy tenure on a pro-rata basis, after adding the No Claim Bonus if any, given to the previous owner of the car.

"Also, the drawback of transferring the policy is that when the current policy tenure is over, you will not be offered any NCB on the immediate renewal of the endorsed policy. This is because you are only eligible for any NCB on your motor policy whose tenure is of 12 months. Any policy less than 12 months period does not yield any NCB discount for the policyholder on subsequent renewal. Hence, it is strongly recommended to go for a new policy for your second-hand car from any insurer instead of transferring the current policy to your name," says Mathur.

Shop around for loans 
The boost in the used car market in India has led to banking and non-banking financial companies to offer unique loan products for used cars. From getting loans up to 100 % of the value of select used cars to flexi EMI options, consumers can choose loan options based on their financial capabilities.

"The loan tenure can go as high as five to seven years in some cases. Financial companies are today offering services that are fast, accessible and transparent," says Vivek Chopra, chief product officer, Tata Capital Financial Services.

"There is no telling whether the dealer will beat your bank's rate or vice versa. In most cases, the dealer's rates are marked up from the bank's rates. So you would be paying as much or even more than what the bank would charge. So look at all available options, be they banks, non-banking finance companies (NBFCs), or dealers, and select the most appropriate one in terms of interest, tenor, prepayment, processing fees, etc," says Chandani.

While the process for applying for a car loan remains the same, there are a few differences when it comes to mapping the borrowing cost for second-hand car loans vis-a-vis new car loans. Most banks and NBFCs offer up to 90-100 % of the loan amount for a new car, as the cost is higher than a used car. For a used car, the loan amount is usually only 70-80%, or even as low as 50% of the cost of the car, Chopra added.

Also, the interest rate of a used-car loan is higher than that of a new-car loan by approximately 2 to 5 %, depending on the customer's risk profile and the loan amount.

IN DRIVER’S SEAT 
* 3 million – Number of used cars sold in India every year&nbsp;&nbsp; 
* 50-80% – Loan as a percentage of cost for used cars&nbsp;&nbsp; 
* 2-5% – Higher is the loan rate used-car is ove the new-car

Source: DNA Money

The second-hand car market in India alone is worth Rs 1 lakh crore and it is estimated that for every new car that is sold there is at least one used car that finds a buyer.&nbsp;


Buying a second-hand car? Things to keep in mind

You must have heard at least a hundred times that Systematic Investment Plans (SIPs) are better than lumpsum investments when it comes to returns. Here is the thing - SIP returns are not always better than lumpsum investments. SIP-ping is many things, but not a guarantee for better returns. Not convinced? Let’s look at figures to prove it.

The one-year SIP returns of 97% of equity funds are actually lower than lumpsum investments done one year ago in the same funds. Did you say, one year is too short a period? Well, three-year SIP returns of 87% of equity funds are also lower than lumpsum investments done three years ago in the same funds. The trend also holds when it comes to five years. DNA Money spoke to fund experts to understand what is happening and what’s the future.

SIP pe charcha

Indians have woken up to SIP like never before. It’s like a new brand of tea that everybody wants to taste. Agreed, SIPs have certain inherent advantages.

One, they allow you to invest a fixed amount in a mutual fund scheme periodically at fixed intervals. That works well if you don’t have a lumpsum investment.

Two, the SIP installment could be as little as Rs 500 per month. Ordinarily, you can’t buy even one share of some great quality firms. But a Rs 500 SIP theoretically allows you to participate in the same stocks that legends like Rakesh Jhunjhunwala invest in.

Three, SIPs allow rupee cost averaging, which means your average cost is low because you keep on buying units at a far more regular frequency. Hence, you accumulate more units at a lower cost on an average.

Plus, it brings in discipline and you do not worry about timing the market. Naturally, the number of mutual fund SIP accounts has raced to 2.44 crore and is regularly bringing in over Rs 7,000 crore money every month for the MF industry.

Lumpsum investment usually works for those who regularly track the markets, are able to predict market movements and time their investments accordingly. More importantly, lumpsum investments is a choice only for those who have large investible surpluses.

“For most investors, SIPs is a more realistic option. It also enforces regular and disciplined investing from your monthly income. It also does away with the need for market tracking or timing, which is difficult for majority of retail investors and, hence, not advisable. By entering the market in smaller amounts, SIPs allow the investor to benefit from market upsides as well average their investment cost during market corrections,” said Manish Kothari, director &amp; head of mutual funds, Paisabazaar.com.

Optimal tool, but not for returns

We looked at hundreds of equity funds to see how SIP returns (done on the first of every month) shape up against lumpsum investments at different periods. The lead in favour of lumpsum strategy is quite big in many cases, with lumpsum returns 10-20% points higher than SIP across one year. Overall, one-year lumpsum returns in 353 of 364 funds are higher than SIP strategy. The gap is not a one-year phenomenon.

Those who had done SIP for three years can see the same trend. In many equity funds, lumpsum investments have given 5-10% points more than SIPs in three years. Overall, the lumpsum strategy has won in 282 of 326 funds in three-year time period. In the last five-year period, lumpsum strategy in 261 of 283 funds has beaten SIP returns.

Experts feel much depends on the period that one takes to compare. “For example 2011-15, the five-year period would have seen SIP do significantly better than lumpsum, as the volatility in-between was well-captured in an SIP. The larger point here is that SIP is not meant to be a tool to generate superior returns to lumpsum,” said Vidya Bala, head, mutual fund research, FundsIndia.

In a rising market, lumpsum investments in mutual funds register higher returns than SIPs. Lumpsum investment is a one-time investment, whereas SIPs involve periodical investment at monthly or quarterly intervals. “Hence, the cost of purchase of a lumpsum investment in a rising market would always be lower than the average cost of SIP. As equity markets have registered significant gains over the last five years, lumpsum investments have generated higher returns than the SIPs,” explained Kothari.

Give more years to SIP

Some experts feel that the concept of SIP is for the long term. When they say long term in equities, they mean seven to 10 years of investments. Abhinav Angirish, founder, Investonline.in says: “SIPs work on averages. If you are a SIP investor for five years, it means on an average, you are invested for a period of 2.5 years, which is anyways not enough. There is no point even discussing one year of SIP, as it a very small period.”

Many SIPs helped buy MF units over the higher end of the curve. “SIPs are to overcome steep market fluctuations (either side) and generate moderate returns blended with disciplined investing. Over the last 15 years, equity SIPs have given an average of 20% IRR, which are more than any other asset class,” argued Angirish.

SIP investors with a long-term horizon would surely benefit from market correction. SIPs will buy them units at lower Net Asset Values, which will reduce their investment cost and thereby, generate higher returns, in the long run, said Kothari.

The SIP strategy cuts chances of losses far more consistently. “No doubt over 10-year periods or more lumpsum should and does outperform. However, in shorter time frames of three, five, seven years and so on the volatility between two points are better captured by SIP. Why take these periods? Because chances of equity delivering negative point-to-point returns exists. But in a SIP this is far diminished and in fact nil over a five-year period or more,” said out Bala.

The very idea of SIP is not to time the market. Hence, instead of worrying about when the averaging will happen, investors should focus on the savings needed to reach their goal.

Source: DNA Money

Those who had done SIP for three years can see the same trend. In many equity funds, lumpsum investments have given 5-10% points more than SIPs in three years. Overall, the lumpsum strategy has won in 282 of 326 funds in three-year time period. In the last five-year period, lumpsum strategy in 261 of 283 funds has beaten SIP returns.


SIP vs lumpsum investments: Which one is a better option? Read here to know

A raft of liquidity measures unveiled by the government and Reserve Bank of India (RBI) recently will soon face a stress test.&nbsp;In one of the most challenging months in recent times, commercial papers (CPs) worth Rs 1.52 lakh crore from financial companies are set to mature in November with more than 10% of the chunk slated for&nbsp; today. This one month alone will see almost 55% of the outstanding CPs slated for maturity, making it very important to track and monitor.

Liquidity is a critical indicator of banking, financial services and insurance (BFSI) sector’s performance over the next few months. The current tightness in liquidity and systemic risk aversion, triggered by IL&amp;FS’s default, and outflows from debt mutual funds, have big implications for non-banking financial companies (NBFCs), which will be in a deep soup if they are unable to properly anticipate funding supply challenges, said market experts.

Commercial paper (CP) is an unsecured money market instrument, with a maturity period of between seven and 365 days. To shore up funding for growth, NBFCs and housing finance companies (HFCs) have come to rely heavily on CPs. In fact, reliance on this instrument has risen more than fourfold for NBFCs (to Rs 1.7 lakh crore) and tenfold for HFCs (to Rs 1 lakh crore). Out of this, 90-95% are due for repricing in the next few months.&nbsp;

Today, November 5, will be a big day for CP maturity as close to 40 financial companies will see CPs worth nearly Rs 16,000 crore maturing. The biggest include Dewan Housing Finance (Rs 1,150 crore), Indiabulls Housing Finance (Rs 1,025 crore), HDFC (Rs 800 crore), Tata Motors Finance (Rs 750 crore), Cholamandalam Investment &amp; Finance (Rs 600 crore), PNB Housing Finance (Rs 600 crore) and L&amp;T Housing Finance (Rs 550 crore), according to Edelweiss Research data.

The total Rs 1.52 lakh crore figure for CP maturity may indicate Rs 5,000 crore each day on an average, but there are more days like November 5 when quite a high number of maturities are slated to take place. While November 1 and 2 were scheduled for Rs 6,000-8,000 crore CP maturities each day, November 12, 19, 26 and 30 each will see between Rs 10,000 crore to Rs 23,000 crore worth of CP maturities. In December 2018, CP maturities worth over Rs 75,000 crore are scheduled, taking the total figure for November-December 2018 to well over Rs 2.2 lakh crore.

A bigger concern lately has been the liquidity shortage in the NBFC sector on rising markets-based borrowing costs and liquidity in the system moving from benign to tight.

NBFCs have seen much higher percentage of system credit growth over the past few years, so a slowdown would hurt macro growth and possibly discretionary consumption. “Our base case remains that this is a liquidity squeeze and not systematic risk, though the negative feedback loop causing the latter merits tracking. We expect RBI to neutralise the liquidity squeeze, but think that an ‘easy money’ period is not coming back in a hurry,” wrote Gautam Chhaochharia, analyst, and Tanvee Gupta Jain, economist, UBS Securities India in an investor note.

During the past 15 days (October 15-29), CPs of financial services companies (NBFCs/HFCs /investment companies, etc) worth Rs 46,400 were up for maturity. Against this, new issuances amounting to Rs 24,100 crore hit the primary market, indicating an average rollover/refinancing of about 50%. If the situation stabilises, many debt market experts expect rollovers to regain 50-60% of the normal rate. Some money market managers are hopeful that support in the form of bank buyout or onward lending, inflows into liquid funds, and RBI’s open market operations may lower the risk-related to the maturity. 
&nbsp; 
Source: DNA Money

Liquidity is a critical indicator of banking, financial services and insurance (BFSI) sector’s performance over the next few months. The current tightness in liquidity and systemic risk aversion, triggered by IL&amp;FS’s default, and outflows from debt mutual funds, have big implications for non-banking financial companies (NBFCs), which will be in a deep soup if they are unable to properly anticipate funding supply challenges, said market experts.


RBI, Govt to face liquidity crunch as commercial papers worth Rs 1.52L crore are set to mature 

The ability of US businesses to reach 95 per cent of the world's customers through US Internet services hangs in a balance. The Internet Association (IA) has red-flagged trade restrictions in India to the Office of the United States Trade Representative (USTR), the government agency responsible for developing and recommending trade policy to the president of the United States.

Digital trade accounts for more than 50% of all US services exports — it exports $86.5 billion of products and services through digital trade every year.

IA's complaint is that many policies create market access barriers for doing business in India.This comes just a day after India's ranking jumped up 23 places in the World Bank list to take up the 77th spot in global Ease of Doing Business rankings.

Submissions by the lobby highlight 'forced' data localization policies and 'barriers' to mobile payments. They also list 'blocking' of FDI, 'unbalanced' copyright and liability frameworks, 'discriminatory' tax regime, duties on electronic submissions and 'restrictions' on US cloud service providers.

The recent push by some countries, notably India, Indonesia, and South Africa, to end the World Trade Organization's moratorium on duties on electronic transmission would have a detrimental impact on how the Internet connects and adds value to the world and expand the Internet's role as a key driver of US exports, job creation, and economic development by making digital trade a top priority in the 2019 NTE Report and its trade agenda.

The submission, part of a 64-page report, has gone to the Trade Policy Staff Committee for consideration as the Office of the USTR prepares the 2019 National Trade Estimate Report (NTE).

"The Ministry of Commerce formed a think tank (or committee) to frame the E-Commerce Policy for India, a draft of which was released in July 2018," the US lobby said. "The think tank did not have any representation of foreign companies. India-promoted companies such as Snapdeal, Paytm and Ola Cabs were represented and aim(ed) to make the policy favourable to Indian companies to protect their interests."

Some of the proposed clauses included provisions to enable founders to retain control of companies they have minority stakes in, mandatory disclosure of source codes to the government under domestic law, discouraging FDI in the sector through over-regulation. There's a global race to set rules for the digital economy.

Flaying the draft Data Protection bill that seeks to define principles and parameters for the Indian data economy, the American Internet firms' lobby said: "...in a number of respects, the Bill is far more restrictive than the EU's recently enacted GDPR, which is widely considered to be the most comprehensive regulation in the data protection sphere."

IA has problems with the way the Bill defined 'sensitive personal data' to include financial data and passwords (in conflict with global best practices on privacy), and definition of a 'child' to include anyone under 18 years old. "IA strongly encourages US agencies to engage with their Indian counterparts to address these concerns and develop a privacy framework that is more consistent with global norms," the submission said, a copy of which has been accessed by DNA Money.

The association also claims that several steps are in deep conflict with global best practices on data governance and data localization, and which present severe market access barriers to US firms."IA is deeply concerned with the Reserve Bank of India's directive requiring data related to payment transactions be stored only in India," it said. "The directive does not clarify whether the data can be accessed from or transferred outside the country, even if a copy is kept in India."

Other proposed prescriptive requirements on data localization include a draft cloud computing policy requiring local storage of data, draft national e-commerce policy framework and draft Data Protection Bill. "These would harm a wide range of US exporters and damage India's domestic digital economy," says AI, "For example, the Data Protection Bill would require companies to store a copy of all "personal data" in India, while subjecting "sensitive" personal data to even stricter requirements and mandating that "critical" personal data can only be processed within India. These definitions of personal data all remain very unclear."

IA has even claimed that mandating local storage of data "will not facilitate access" to it by law enforcement. It suggested that both nations engage bilateral and multilateral instruments to make data-sharing work in the cloud era without resorting to localization measures. "IA strongly urges inclusion of removal of data localization requirements in the RBI directive, the data protection bill, the e-commerce policy, the cloud computing policy," the lobby said.

IA also criticized competition norms. "...there may be more that the CCI can do to protect the confidential information of investigated parties and third parties. Improper disclosure of information and information leaks can have a detrimental impact on the investigatory process and the standing of the agency," it noted.

IN A NUTSHELL 
&nbsp;

What is Internet Association?&nbsp; 
A US industry trade group founded by companies including Google, Amazon, eBay and Facebook.

Why is it important? 
IA represents the interests of the unified voice of the Internet economy. Its members are the drivers of America’s digital trade surplus of $196 billion.

Why attack India? 
IA has red-flagged barriers firms face in doing business or competing on an even playing field in India such as the data protection regime, data flow restrictions, competition regulations, mobile payment barriers, etc.

Others on the radar&nbsp; 
Nations creating the most barriers for IA include the EU, Indonesia, China, and Vietnam.

How does IA control the digital world? 
The Silicon Valley either houses or has strong links to more than 50% of the top digital companies by market capitalization. They control what we see, read, view and discuss on the digital world. Beyond direct lobbying spending, it exerts influence on policymakers and citizens through soft power techniques such funding think tanks, research bodies and trade associations who influence the government or civil society.

Source: DNA

IA's complaint is that many policies create market access barriers for doing business in India.This comes just a day after India's ranking jumped up 23 places in the World Bank list to take up the 77th spot in global Ease of Doing Business rankings.


US digital lobby comprising Facebook, Google, Amazon says India has too many barriers for trade 

The Insurance Regulatory and Development Authority of India (Irdai) has recently come out with proposed changes for linked and non-linked life insurance policies. These changes, if implemented, would mark a key transformation in how life insurance products impact policyholders. The proposed norms stipulate minimum death benefit for regular premium plans, guaranteed surrender value, partial withdrawal for linked pension products, and others. DNA Money spoke with experts to decode the changes for you. Read on.

Minimum death benefit 
It has been proposed that the minimum death benefit would be seven times the annual income for regular premium products and 1.25 times for single premium products for all ages. Currently, for a person below 45 years, the minimum death benefit is 10 times the annual income. For those above 45 years, the same is seven times the annual salary, to be eligible under Section 80C to avail tax benefits.

“The proposal will benefit the policyholder if implemented. The amount of investment that the policyholder makes should be invested in the market and help in building a corpus and not get deducted for mortality charges,” says Santosh Agarwal, associate director, and cluster head- life insurance, Policybazaar.com. Higher the assured death benefit, higher is the mortality charge.

Guaranteed surrender value 
The new norms say that non-linked policies will acquire guaranteed surrender value after two years. Currently it is three consecutive years. For traditional products, particularly for longer payment term policies, a surrender value will now be available to customers earlier during the policy, notes Anuj Mathur, MD &amp; CEO, Canara HSBC Oriental Bank of Commerce Life Insurance.

“Earlier, because of non-payment of premium, if a customer wanted to surrender within three years of the policy inception, she/he was getting no guaranteed surrender value. At least now the customer will get some guaranteed surrender value if policy is surrendered after two instead of three years of policy inception,” argues Anand Prabhudesai, co-founder, Turtlemint.

Pension product commutation 
For pension products, it has been proposed that customers must be allowed to withdraw up to 60% of the policy sum assured, while those with market-linked pension products can partially withdraw their corpus. Presently, under any specified pension product, policyholders are allowed to withdraw only 1/3rd of the total amount as lumpsum, while 2/3rd of the amount is automatically annuitised.

“Now, you will be allowed to withdraw 60% of the amount which brings it at par with National Pension System. Under market-linked pension products, allowing customers to withdraw a sum at specified intervals within the policy term also offers flexibility,” says Agarwal.

The suggestions put forth for pension products, including removal of minimum vesting and 60% commutation, will further help customers invest better towards creating their retirement corpus, says Saisrinivas Dhulipala, appointed actuary, Bajaj Allianz Life Insurance.

Revival period 
It has also been proposed that the revival period be extended to five years from the current two years in respect of non-linked products. For instance, if you hold a policy for 15 years and you have paid the premium for just five years, you were earlier allowed to reinstate the policy up to two years (from the last premium paid) by paying the premium along with a specified rate of interest.

The proposed five-years window for reviving a policy will help to reduce the lapse percentage ratio, which is good for both insurance companies and consumers to reinstate the policy and continue the protection and benefit of the said product, says Prabhudesai.

Settlement option period 
The proposed norms say that the settlement option period be extended till 10 years or original policy term, whichever is lower. Under a settlement option, the maturity amount entitled to a life insurance policyholder is paid in structured periodic installments.

Subhendu Bal, appointed actuary, SBI Life Insurance explains that at present the period of settlement is usually not extended beyond a period of five years from the date of maturity. For Unit Linked Insurance Products (Ulips), the settlement option provides periodical payments to avoid the possibility of market fluctuations affecting the maturity value at the time of maturity.

Under the proposed change, the time period will provide additional flexibility to the policyholder to stay invested for longer, facilitate systematic withdrawal of corpus and also take care of cash flow needs for a longer duration, such as post-retirement income, recurring medical expenses, school fees for children, etc, says Bal. 
Also, the Irdai draft says that switches will be allowed during the settlement period, which is not allowed at present. “This was preventing the customer from switching the money even if there was investment risk. The proposed norm will allow the customer to manage market volatility by switching the fund value during the settlement period,” points out Bal.

Variable products 
The category of linked variable insurance products may be removed as linked product structure addresses the requirements in a better manner. The provisions relating to non-linked variable insurance products are also proposed to be simplified.

New design freedom 
It has been proposed to relax minimum policy terms for individual and group terms insurance products. It has also been proposed to cap premium allocation charges for Ulips at 12.5%.

Source: DNA Money

It has been proposed that the minimum death benefit would be seven times the annual income for regular premium products and 1.25 times for single premium products for all ages. Currently, for a person below 45 years, the minimum death benefit is 10 times the annual income.&nbsp;


Have life insurance policy? Good news, your troubles may be over

Gone are the days when a private sector employee could hope to retire from his/her job. Lay-offs are becoming routine these days. The telecom sector is expected to shed thousands of jobs soon. Most of the aviation sector too is in the doldrums. IT companies are firing senior employees as they seek to lower cost by hiring more junior level personnel. Lay- offs are a reality today.

While a job loss may deal a hefty punch to our personal finance, it is not the end of the world. Your life, goals, and needs will remain even if you don’t have a job. DNA Money lists six survival hacks for the job-loss period in case you encounter one.

1. Know your emergency number

If your employer gives you a severance package, that too goes into your emergency fund. What’s an emergency fund? This is a secret stash of money meant for rainy days. All of us have an emergency number on our phone. Similarly, all of us should have an emergency fund. No, its not your usual savings account money. You don’t take out money from the emergency fund. The emergency fund is a corpus of money that will last you for the entire duration of the crisis. Multiply your monthly budget by 12 and that’s your emergency number.

For example, if your monthly budget is Rs 65,000, the emergency number is Rs 65,000 X 12 = Rs 7,80,000. In the worst come worst situation, you are 12 months away from finding a new job. Do remember that if you have any unsecured debt like credit card, try to pay them off as quickly as possible. These are high-cost credit (36-42% annual interest). “If you can’t repay in full, try to lower it as far as possible. Find out if you can transfer the expensive loan to a cheaper loan. The goal is to minimise outflow till you have a steady income again,” says cost accountant Prateek Gupta.

2. Liquidate non-essential assets

We buy, collect and acquire things. Letting them go can be a painful experience. But there are many non-essential assets in our households that can be monetised. Just like your previous employer did some spring-cleaning by letting some employees go, you too need to take the decision of letting go of non-essential things. It could be a second car. It could be items you hardly use. It could be even some non-essential gold jewellery.

“When you lose your job, it is unlikely in today’s scenario that you are getting a job soon at the same salary packet. Mid-level professionals with good experience are at most risk. So, it is important to sell off non-essential stuff and monetise them. The money you realise should go into survival/emergency fund,” says Tarun Chugh, a financial planner.

3. Become Uncle Scrooge

Scrooge McDuck, a creation of Walt Disney, is an elderly Pekin duck with a yellow-orange bill, legs, and feet. And, he is a miser. If you are staring at job loss or are already without a job, becoming Uncle Scrooge is no crime. Being tight-fisted about money is always a virtue. Assess every single rupee spent before spending it.

“Of course, there is a lifestyle that many of us become used to. That lifestyle is for good times. When you are king of bad times, spend nothing. Take a cheaper mobile, broadband and utility plan. Do away completely with eating out and staying out. No shopping. No travelling. Stop hanging out with people who usually spend a lot. These are big and tough decisions, but you have to take them,” says Rita Maria, who lost her job as an air-hostess.

4. Essential insurance stays, rest go

Many people save money and invest in insurance-cum-investment plans. When you are unemployed, those investments can’t happen. Do not use the credit card to pay for such insurance premiums. You can always revive the policy at a later date by paying the outstanding premium and late fee, if any. Don’t buy any job loss insurance cover, etc. Those are not usable in cases where the employee resigns (most employers today ask you to resign, they don’t fire you). Only stick to life and health insurance policies. Accidents and sickness don’t know you are unemployed. They will strike when they have to. The only cover against such events is life and health policies. Employee health covers do not cover laid-off staff, so you should have one of your own. If you lose your life, the life insurance cover will ensure some money for your dependents. If you or somebody else in the family is sick, health policy will pay most of those expenses.

“In case if you have no dependents, you can stop life insurance too. But health insurance is non-negotiable. A health insurance policy is like real cash. My father had a bypass surgery when I was out of job for four months, and the insurance policy paid Rs 4 lakh out of the Rs 4.5 lakh hospital bill,” recalls Akshay Gupta, a media professional.

5. Keep long-term savings for last

Do not withdraw long-term money like tax-savings mutual funds, provident fund, and Public Provident Fund. Using them should be the last option. If you have a good enough emergency corpus and you become tight-fisted, you will never need to dip into your long-term savings. Such money is usually for long-term goals like a child’s education, marriage, and retirement.

“I had faced the dilemma of whether or not to dip into my house loan downpayment corpus. This was when I lost my job in the Middle-East. When I came back to India, I was out of job for seven months. Eventually, I reasoned that a home loan downpayment corpus by itself was not worth anything. I had to take a loan to be able to use the downpayment option,” says IT engineer Selva Raja.

6. Don’t start business with all your capital

Without a full-time income source, it will be tough times. But, one should not spend your money/capital to start some business. If you are in your 40s-50s, starting a business sounds like a great idea. But, running a successful business is no child’s play.

Watch this Zee Business video

<iframe allow="autoplay; encrypted-media" allowfullscreen="" frameborder="0" height="315" scrolling="no" src="https://www.youtube.com/embed/iM2Wv3jHxVQ" width="100%"></iframe>

“Many clients often make the mistake of starting some food-related business. Many venture into areas they don’t know a thing about. That is why they lose the money. The lesson comes at a great cost, that is, money lost. Try to get a job. Devote all your energies in getting a recurring monthly income. A business is like tossing a coin. Instead of wasting money on business proposals, maybe you could add to your existing skills to become more employable,” advises Nitin Khosla, a financial advisor. Getting a small job where you get paid for part-time work is a better option. Any form of income is welcome.

Source: DNA Money

Many people save money and invest in insurance-cum-investment plans. When you are unemployed, those investments can’t happen. Do not use the credit card to pay for such insurance premiums.&nbsp;


How to survive job loss; 6 easy money-wise tips to beat lay-off blues

Corporate executives today are under attack from the #MeToo movement, as sexual harassment and sexual assault charges spread virally on social media. Celebrities, artists, politicians, journalists, there is not one profession that has not been affected.

The movement attempts to demonstrate the widespread prevalence of sexual assault and harassment, especially in the workplace. Naturally, allegations fly thick and fast. Given the all-pervasive nature of social media, judgements are passed within seconds, and often the alleged oppressors do not have a chance to defend themselves. Corporate reputations are at stake. Plus, there could be financial repercussions. So, does a Directors &amp; Officers Insurance policy or D&amp;O Insurance policy help in the wake of a sexual harassment charge?

Dial L for Liability 
Typically, a D&amp;O cover applies to former, present and future members of the board of directors and the management comprising officers and employees in a managerial or supervisory capacity. The policy normally covers the parent company and, if opted for, subsidiaries. Usually, the policy is designed to operate on an unnamed basis covering all directors / officers and employees of the policyholder.&nbsp;

Typically, the insurance premium amount is determined by a number of factors, namely the limit of indemnity (say Rs 10 crore), past claim settlement, whether the company is listed or unlisted, and financials. Not just big firms, even small and medium-sized enterprises or SMEs are these taking such policies.

Sushant Sarin, executive vice-president, Tata AIG General Insurance says an allegation of a wrongful act such as sexual misconduct, made directly or through social media against a director, officer or employee (d.o.e) of a company, will trigger the D&amp;O Policy. “When such director, officer or employee defends himself/herself and incurs legal cost and expenses towards the same, these will get paid under the D&amp;O policy,” says Sarin.

Sexual misconduct by a company executive or employee can result in legal claims. These claims often are not only against the accused but also against the company itself. The individual(s) against whom allegations are made can find themselves the subject of criminal proceedings as a result of his actions. Other senior executives may also be dragged in this, if they are alleged to have turned a blind eye, or if they have failed to follow set procedures or properly act on complaints.

When a sexual harassment charge is filed and publicly discussed, the policy enables the director, officer or employee to engage the best defence to protect himself/herself against an allegation, especially if the same is unfounded, baseless or malicious. In case of an actual misdemeanour, if damages have to be paid to the wronged, this too would be covered under the policy, points out Sarin.

What does liability insurance cover 
A liability insurance policy can come in form of different variants. They can be covers like a right to defend, coverage for retired directors, employment practice liability, damage to reputation, defence cost, severability, etc. So, how do they work when a sexual harassment charge is filed? Easwara Narayanan, COO of Future Generali India Insurance explains that ‘The right to defend’ condition under D&amp;O policy would mean that in case of wrongful allegations against directors, while the Insured (Directors) have a choice to defend themselves by taking consent from the insurer, the Insurer has a right to take over defence.

The employment practice liability cover protects directors in case of claim against directors on account of wrongful termination, harassment of employees and other employment related malpractices.

The potential for reputational damage caused by sexual misconduct allegations is big. “Damage to reputation costs provides for the cost of hiring public relation services for rebuilding the brand of company and safeguarding the reputation of related directors,” says Narayanan. So, when a trigger event occurs, a crisis management extension of the policy will typically pay for those related costs. This facility is useful if the accusation is wrong.

The D&amp;O policy indemnification is primarily on defence costs. Apart from defense costs, it allows costs of investigations and insurable compensations awarded by court of law.

“Allegations of sexual harassment made against directors by employees is part of employment practice liability cover under D&amp;O policy. Apart from employment practice liability cover, policy also covers similar allegation from third party,” says Narayanan.

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Grey area 
Some legal experts say that in order to trigger coverage under a D&amp;O policy, the wrongful act should have occurred whilst the person was acting in the course and scope of his or her employment. So, if the alleged misconduct occurred outside of working hours, that can be a grey area. For example, if an employee alleges harassment in a bar, on a Sunday evening during a social event, the insurance company may question whether the manager was on the job during this social event, to determine whether the policy coverage applies.

Source: DNA Money

Sexual misconduct by a company executive or employee can result in legal claims. These claims often are not only against the accused but also against the company itself. The individual(s) against whom allegations are made can find themselves the subject of criminal proceedings as a result of his actions.


#MeToo: Can insurance save executives in sexual harassment cases? Find out

IT firms Infosys and TCS have slashed their exposure to liquid mutual funds in September quarter amid fears of liquidity crisis in the non-banking finance companies (NBFC) sector, in which liquid MFs have significant investments.&nbsp;

In its current investments, TCS cut its mutual fund units exposure by about 20% to Rs 4,926 crore at the end of September 2018 compared to Rs 6,370 crore at the end of June 2018. Infosys held investment in liquid MF units worth Rs 870 crore at the end of September 2018, over 43% lower than Rs 1,535 crore held in liquid MF units on June 30.&nbsp;

Infosys appears to have favoured parking money in banks over liquid MFs. The Bengaluru-headquartered IT giant upped its exposure to deposit accounts in banks to Rs 9,972 crore at the end of September 30, an over 40% jump over Rs 7,036 crore held in deposit accounts across different banks at the end of June 30, according to financial data shared by Infosys. TCS upped its exposure to banks’ current accounts with Rs 5,322 crore at the end of September 2018 compared to Rs 3,911 crore in the same basket in June-end.&nbsp;

While not commenting directly on Infosys’s activity, Vidya Bala, head of mutual fund research, FundsIndia, said the exodus from liquid and ultra-short funds suggests that corporate/institutional investors have been spooked by a potential liquidity tightening situation in NBFCs. “NBFC commercial papers less than 180 days accounted for a fifth of debt MF holdings. However, FD rates do not match the returns of debt MFs. Hence it may likely be a flight to perceived safety,” she said.&nbsp;

In its investor concall with analysts on October 16, Infosys CFO Ranganath Mavinakere said yield on cash for the September quarter was 7.53% as compared to 7.2% last quarter.&nbsp;

Infosys also reduced its deposits kept with non-banking financial institutions. It had Rs 5,911 crore (Rs 4311 crore in HDFC and Rs 1,600 crore in LIC Housing Finance) at the end of September 30 compared to Rs 7,472 crore (Rs 6,272 crore in HDFC and Rs 1,200 crore in LIC Housing Finance) as on June 30.

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According to Infosys, the credit risk on cash and cash equivalents is limited as it generally invests in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating firms. Investments primarily include liquid mutual fund units, fixed maturity plan securities, quoted government bonds.

Source: DNA Money

IT firms Infosys and TCS have slashed their exposure to liquid mutual funds in September quarter amid fears of liquidity crisis in the non-banking finance companies (NBFC) sector, in which liquid MFs have significant investments.


Don't lose your money! Know this Infosys, TCS investing lesson

The gig economy is here in India. With many millennials tending to switch jobs quickly and past the typical nine-to five ‘job’ shifts, both individuals and corporates are moving to the gig economy. Gigs, today, are as relevant as any other type of employment. Indian freelancers hold 24% share of the global online gig economy, as per a report, titled,“Future Of Jobs In India: A 2022 Perspective”, published by EY, jointly with Nasscom and Ficci.

But doing gigs comes with its own share of issues when it comes to managing money. Irregular and lumpy nature of income and lack of clarity of future prospects haunt those doing gigs for a living, in a world where our costs are monthly in nature. DNA Money spoke to experts to help you create a blueprint for financial well-being for these ‘gigsters’.

Gig working spreads 
For working professionals, gig economy offers opportunities to take many jobs at a time said Abhishek Agarwal, senior vice president (global delivery), The Judge Group.

“Also, as the nuclear family culture is growing rapidly in metros and Tier-1 cities, it is difficult for young couples to take care of their children on permanent job positions. Gig economy allows them to maintain the work-life-family balance without compromising financial security,” he remarked.

Financial plan 
For those doing gigs to survive in this world, making a financial plan is extremely important. The first step is to make a budget. To do this, start by tracking all your expenses, as accurately as you can, for three months. “This includes all your overheads—travel, internet, equipment. The next step is to know your average monthly income. As a freelancer, you may not get monthly paychecks. Your payments may be cleared at the end of a project or against specific deliverables. So, you need to have a clear idea about where the income comes from, the temporary one-time assignments and long-term ones. This will help you plan a more realistic budget,” advises Adhil Shetty, CEO,&nbsp;BankBazaar.com.

While irregular income can make budgeting and regular saving complicated, you can start small and have multiple regular small savings plan like Systematic Investment Plans (SIPs), based on your average monthly earnings. It doesn’t matter if you start with as little as Rs 500. The point is to be regular.

“Also allocate money for different saving goals. For example, in addition to all your normal day-to-day expenses, allocate a fixed amount for longer-term savings and another fixed amount for short-term savings that can also contribute to unexpected small costs. You should also plan for one-time investments when you get some big payments,” says Shetty.

Don’t forget loan, insurance 
Gig workers require loans and insurance too. But getting them may not be easy. Rachit Chawla, CEO, Finway says that for taking home or personal loan, banks require at least six to 12 months of income history for the full-time employed worker, as well as the gig-economy worker. “Unlike full-time workers, gig employees find it a challenge to prove the stability of their income as they often work on short-term contracts, on part-time basis. They must explain the reason behind working less than full-time and give proof of income, tax returns, financial statements up to 12 months and debt and expense records along with the proof of assets.”

It is advised to clear the debt record, if any, before applying for the loan to avoid being questioned why the loan is not repaid during the specified time. Self-employed persons may also be asked to produce latest Income Tax Return (ITR) along with the computation of income, balance sheet (B/S) and Profit &amp; Loss (P&amp;L) for the last two years certified by a Chartered Accountant.

Normal insurance products where premiums are paid semi-annually or annually may not always be a right fit for gig economy workers. Single premium policies are better-suited. However, having term insurance and health insurance covers is a must. Those doing gigs for a living should save money and pay for their term and healthy policies. 
Taxing times

Amar Pandit, CFA, founder of HappynessFactory.in, says that the gig model provides flexibility to structure your taxes from an income perspective.

“Tax benefits are the same as that of a consultant (primarily the ability to reduce your direct expenses from your income thereby reducing taxable income). However, the key deciding point here should never be tax structuring, but the opportunity to do things that you wish to do. Having said that, while you can reduce your taxes by claiming relevant business expenses, your compliance (GST Registration, filing returns, and other elements such as TDS, etc) will also go up significantly. This is also a function of the quantum of your income whether it is above Rs 10 lakh or so,” says Pandit. Though there are certain tax benefits, these can be easily negated by the administrative and compliance burden.

Thus, it is important that there is a significant tax benefit, if all you are looking at is saving tax. The goal of tax planning should never be to just save tax, but to maximise post-tax income.

A freelancer does have several tax benefits. For instance, all expenses related to your freelance work that you bear in the financial year can be claimed as deductions. These include electricity bills, phone bills and any travel expenses incurred for your work.

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“Moreover, you can claim depreciation against assets like mobiles, cameras, computers, laptops, instruments, or other equipment to furnish your day-to-day work provided you have the receipts for their purchase,” says Shetty.

Source: DNA Money

For those doing gigs to survive in this world, making a financial plan is extremely important. The first step is to make a budget. To do this, start by tracking all your expenses, as accurately as you can, for three months. “This includes all your overheads—travel, internet, equipment. The next step is to know your average monthly income.


Kumar Shankar Roy