Moneylife Events
Retirement planning: Here’s how to effectively manage your investments

At a Moneylife Foundation event, Debashis Basu, editor, Moneylife, explained how one can invest in a mix of financial products for retirement and other goals

 

The second part of Moneylife Foundation’s event titled—‘Back to Basics: Investing & Insurance’, Debashis Basu, editor, Moneylife, educated the audience on the various asset classes and how one can allocate their savings in each to save effectively for retirement. Most savers are clueless when it comes to financial savings. They earn an income, they spend, and whatever is saved is kept in bank fixed deposits. There is virtually no savings plan. If such a habit continues, Mr Basu cautioned, that one would end up with much less money for all future goals such as buying a house, child’s education, etc. and even retirement. Mr Basu, in his presentation, spelt out the various ways in which one can be smart with money and presented to the audience the best way in which one can invest safely. 
 
The best way to start investing safely is by planning your finances, he said. Mr Basu took the audience through how they can plan their investments for different goals. The best investment lesson is to be cautious and avoid making mistakes and losing capital. However, too many investors are lured by the image of big financial brands or glib talk of sales staff hawking their products. Mr Basu explained the various asset classes and the risks they carry. These included stocks, mutual funds, gold and realty. He explained the difference between investment products and speculative investments and then took the audience through a clear understanding of the impact of inflation on their savings and how it erodes the value of their nest egg.
 
Stocks and equity funds are the best assets available for creating long-term wealth. The best way to invest in stocks is through regular investing in equity funds. He pointed out how much one should invest in equities and fixed income products. There are various fixed income products available, but one should choose those that deliver tax-efficient returns.
 
On gold, Mr Basu said that the metal is a precious but speculative investment and it cannot be valued since it does not pay interest or dividend. The price of gold is only derived by what others are willing to pay for it on a given day. If you buy gold betting on guaranteed returns based on previous price trends, you may be in for a nasty surprise. This has been Moneylife’s stand for over three years and the recent crash in gold prices demonstrated the risk it carries.
 
He also pointed out that all talk about realty returns were based on anecdotes rather than hard data, which is simply not available in a uniform, standardised form over a long period. Mr Basu said that people must differentiate between a house that one buys to live in (which can also appreciate significantly) and realty as an investment, which will be bought and sold. Realty carries high transaction costs in terms of stamp duty, transfer charges and taxes. This leads to significant erosion in returns.
 
He warned against mixing investment with insurance through products like unit linked insurance plans (ULIPs). These investments involve huge costs and there is no long-term data readily available on the fund management performance. However, there are better investment products available at lower costs that can be used for investment.
 
Examples were shown on how one could use the power of compounding to their benefit. “The best way to invest smartly is to start as early as possible and save as much as possible”, said Mr Basu. 
 

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The New Health Insurance Regulations and how they benefit you
In the first part of the Moneylife Foundation event titled, “Back to Basics: Investing and Insurance”, Gaurang Damani tackled the latest developments and changes in the health insurance regulations. Mr Damani has worked for long to help customers get a more customer friendly insurance environment. Numerous PILs filed by him have helped in getting pro-consumer clauses into the regulations.
 
He began by discussing how the process of getting a health insurance policy can itself cause considerable stress. The various tests, clauses and compliances. All this is of course after the stage of having to go through the innumerable products on offer.
 
He said that in the new Health Insurance Regulations (Regulations of 2013), there are some salient features related to Premiums, Senior Citizens, Policy issuance guidelines, claims and TPAs, among other things.
 
He pointed out that under the new regulations, the premium cannot be increased arbitrarily after a claim is made and especially in multi-year policies. He said that the “loadings of premium on renewal shall have to apply across the policy portfolio and cannot depend upon an individual's policy experience.” For multi-year policies on the other hand, the premium would be fixed for at least a block of 3 years.
 
For senior citizens, who have often been soft targets for the sales force of insurers, the new regulations specify an entry date of 65 and clarify that there cannot be any exit date. “The regulations also say that the insurers and the TPAs both will have to set up separate grievance cells for senior citizens.”
 
“As for portability of policy, it can be done upto 45 days before the maturity of the policy and even the cumulative bonus would be portable. On the other hand, the free-look period has been set at 15 days from the policy date and the free-look period only applies to policies with a term longer than a year,” Damani said, speaking about the policy issuance guidelines in the new Regulations.
 
Some other important points that Damani made, were that no policy can be withdrawn without IRDA approval and that without the consent of the policy-holder, the insurer or its intermediaries could not force the person to shift his or her policy. 
 
“One of the most important parts of the new regulations is that the TPA's powers have been greatly clarified. The TPA will have no power in rejecting claims and the TPAs function in forwarding claim papers has also been made stricter.” He added that, “As per the instructions of the Insurer, the claim is being settled/ denied .....” is the text the letter regarding the claim should have, laying the responsibility of the claim with the insurer and not the TPA.
 
Mr Damani also covered other issues and advice related to health insurance. He explained that it was important for the insured to keep an eye on his bed-charges as allowed under the policy and keep within the limits prescribed. He said that Co-pay was an important concept and it implied a specific amount that has to be borne by the policyholder.
 
Finally, on the issue of dispute resolution he said, “grievances must be acknowledged by the Insurer in 3 working days and resolved in 15 working days. For claims-related complaints, consumers can write to the Grievance cell of the Insurer and if there is no response, then write to [email protected] or call toll-free at 155255 or on www.igms.irda.gov.in or mail. For claims disputes of less than Rs20 lakh or any disputes regarding premiums; non-issue of insurance documents, the complaint can be made in writing by the customer himself (no lawyer is required), within 1 year of dispute, to the Office of the Ombudsman.”
 

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Nifty, Sensex in no-man's land – Weekly closing report
The S&P BSE Sensex closed the week that ended on 9th January at 27,458 (down 430 points or 1.54%), while the CNX Nifty ended at 8,285 (down 111 points or 1.32%). In the previous week we had mentioned that Nifty may hit 8,500 over the coming week.
 
This week although trading on Nifty began on a negative note by the end of the week, on Thursday and Friday, the benchmark regained strength.
 
On Monday it began on a positive note but was pulled lower after hitting the day’s high bringing to a halt the six days of consecutive gains. Nifty closed at 8,378 (down 17 points or 0.20%). The pessimism of Asian counterparts and the Greek concerns played negatively on the market sentiments.
 
At the two day “Retreat for Banks and Financial Institutions” called “Gyan Sangam” held on 2 January 2015 and 3 January 2015, PSBs suggested that eventually the government should reduce its stake in PSBs to less than 51%. It also suggested that the government should transfer the government's stake in PSBs to a bank investment company.
 
As we anticipated on Monday Nifty was pulled lower on Tuesday. Nifty closed at 8,127 (down 251 points or 3.00%). The two days of loss wiped off all the gains made in the six days of rise ending 2 January 2015. The market moved lower as the oil prices sank to 5 and half year lows and worries over excess supply increased.
 
The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 51.1 in December 2014, from 52.6 in November 2014.
 
On Wednesday the Nifty witnessed a highly volatile session and closed in the red again. Nifty closed at 8,102 (down 25 points or 0.31%).The Department of Financial Services, Ministry of Finance, issued a circular to the chief executive officers of all public sector banks, financial institutions and insurance companies assuring them of non-interference in matters of commercial decisions, transfers, and postings.
 
Nifty reacted in line to the positive performance of the Asian indices on Thursday. As we anticipated, the Nifty bounced back and closed at 8,235 (up 133 points or 1.64%).
 
The Indian economy is moving on the right track with efforts to fast track reforms, raising prospects of pickup in growth from 5.4% in FY15 to 7% by fiscal year 2017, says a Macquarie report.
 
On Friday the Nifty remained in the green for most of the session. The trend was weaker at the beginning of the session and gaining strength by the end of the session. Nifty closed at 8,285 (up 50 points or 0.61%). Infosys yesterday posted its December 2014 quarter result which was better than the estimates.
 
The government is likely to exempt state-run firms ONGC and Oil India from payment of fuel subsidy during the remainder of the FY2014-15 due to a steep decline in global oil rates to around US $50 per barrel.
 
Among the Nifty stocks, the top five stocks for the week were Hindustan Unilever (14%); Kotak Mahindra Bank (7%); BPCL (5%); Asian Paints (5%) and Maruti Suzuki (3%); while the top five losers were NMDC (-8%); BHEL (-7%); Sesa Sterlite (-7%); Punjab National Bank (-6%) and ICICI Bank (-6%).
 
Of the 1,492 companies on the NSE, 517 companies closed in the green, 949 companies closed in the red while 26 companies closed flat.
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 

 

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