“Always listen to experts Advice and don’t be Greedy for Profit by following others blindly”

Scenario 1

Power of Speed

Speed of Horse -88 km/h

Speed of Lion -81 Km/h

When we compare Running Speed of Horse and Lion both are approximately equal. So if we go for a racing in a track then can we choose a Lion with a Jockey? In a same manner for Hunting in the Jungle can a Horse, substitute to a Lion?

Scenario 2

Skill of Running

Marathon World records (42.195 kilometres) -Eliud Kipchoge 2 hr: 01 Min: 39 Sec

World record in 100m sprint hold by Usain Bolt with 9.58 seconds

Above information shows how both are skilled in their Running skill. If Eliud Kipchoge (a marathon player) runs in A 100 Meters Sprint then can he succeed? In the same way Can Usain Bolt survive in Marathon of 42.195 Km?

Answer for both the above scenario is everyone is skilled in their respective field with great skill and agility and when they will change their Track they won’t survive in the real world and achievement of Goal is not possible.

In the Same manner In case of Investment Advice or Wealth Management Advice a Certified Financial Planner with knowledge of Finance can advise you better manner from others. Like a Doctor for Health Advise, A engineer for Mechanical or Technical Advice, An Advocate for Legal Advice, An Architecture for Construction Designing, And an actuary Science professional about Risk associated with Insurance and finance.

So always select correct professional person as per your requirements.

So Moral of the Story is:

1-Always take Expert Advise:-

In case of Investment a Professional like-A Fund Manager and Financial Advisor qualified with CA,MBA,CFA with Knowledge of Security Market, Banking Products, Portfolio Management, Inflation, Real Returns, Risk Management, Investment Banking Knowledge can guide you with all prospective which others can’t do.

Also a Financial Planner is a person who can guide you about your Risk management, Tax Saving, Wealth Management, Long Term Investment benefits, Retirement Planning and monthly earning after Retirement for smooth management of retirement life.

2-Don’t follow blindly Traditional Advise of your seniors,Relatives,Office Boss or Friends those are not aware anything about Investment.

If you ask your colleague and your friends about Insurance they might be Suggest you about LIC for 15 or 20 years maturity periods just like Colgate for toothpaste, Mortein for mosquito repellent coils and Maggi for instant noodles but not advising about TERM Insurance which will Cover you up till 60 or 70 years with much more Life cover as compare to Life Insurance at a very less cost per year.

If you ask your colleague and your Manager (except a Finance Profession person who don’t know about Investment or Financial Management) about Investment even they will suggest you about LIC or any Insurance or Bank Fixed Deposit. This is like just like Colgate for toothpaste.

If you ask your colleague and your Manager (except a Finance Profession person who don’t know about Investment or Financial Management) about Share Market they will say their story how they Made Gain or made Big loss in their Trading without knowing about anything about that company and Trading on the basis of Business News from News paper or TV, getting Tips from Brokerage house Selling person without doing research on company strength/business model.

So your friend’s bad experience or Wrong decision related with Investment might be not happen same with you.

So before taking your friends Advise or an advise from the self styled/Half Knowledge Investors about their experience ask him/her did they ever knew about below parameters before they picked any stock or investment!!!!

Example:-

PE ratio = market price per share / earnings per share,

Beta, IRR, Business Cycle

Balance sheet Items (Cash reserve, Debt, Net Debt, Credit ratings of the company)

Cost of Capital, CAR (in case of Banking Company)

If can’t put effort on above financial Analysis of any company then you are not in a correct path in Investment and don’t blame market for your loss.

So to avoid this kind of mistake please take advice from a Financial Professional/Wealth Advisor.

***Remember one Principle-If you want success and Profit in your Investment then you have to Research and gather Knowledge about Financial Products/Instruments. Without proper Knowledge you might be get profit in short Term but the Loss you get make you cry for Longer Term.

Financial Literacy in India: Why is Financial Literacy in India Poor & impact on your Financial Planning?

76% Indians not financially literate, says S&P survey

“The rich get richer, while the poor get poorer”, is an analogy that we’ve only heard too often, without giving a second thought to why. When you think about it, it all boils down to financial literacy. But before we go into the ins and outs of the subject,

WHAT IS FINANCIAL LITERACY?

Financial Literacy is the ability to understand basic financial concepts and the possession of knowledge and skills required to make informed and effective financial planning, decisions using the available financial resources. It is about knowing how to generate, spend, invest and save money. It is the ability to manage your finances well by making the optimum use of the available financial products and resources to give you maximum benefit.

Lack of basic financial knowledge results in poor investments and financial decisions. That’s why most people invest in short-term plans and physical assets to accomplish their personal goals which give lesser benefits.

The survey found that 76 per cent of Indian adults do not adequately understand key financial concepts, including risk diversification, inflation and compounded interest.

Check your Financial literacy parameters:

Are you able to understand basic financial concepts like compound interest, credit scores, mutual funds etc?

Are you able to make effective financial decisions?

Do you know the best ways to generate cash flow?

Are you able to make effective financial planning?

Are you able to manage your personal finances well?

Are you aware of the most profitable savings techniques?

Do you have enough savings for your difficult days?

Do you live a debt-free life?

Do you know the best investment options for gaining maximum profit?

Do you have the solutions for your financial problems?

Now, if you are not able to find satisfactory answers to these questions, then you definitely need to educate yourself on financial concepts as soon as possible. The lack of knowledge on financial literacy may lead to making poor financial decisions that can have serious impacts on your financial well-being. Hence, it is high time we understood our finances well and did better financial planning and investments for a smooth financial life.

Why is Financial Literacy Important?

It helps in improving the financial knowledge of individuals. It brings clarity on basic financial concepts and principles such as compound interest, debt management, financial planning etc. It enables you to manage your personal finances efficiently. It helps in making appropriate financial decisions about investing, saving, insurance, managing debts, buying a house, child education, retirement planning etc.

It helps individuals to achieve financial stability and financial freedom. It helps in understanding the difference between assets and liabilities. It helps in developing the skill sets required for better financial planning and managing your money.

It provides in-depth knowledge on financial education and strategies which are indispensable for achieving financial growth and success. It helps you in generating, managing, saving, spending and investing money. It enables you to be debt free by inculcating financial knowledge and debt strategies.

Benefits of financial literacy.

When we lack the ability to maintain a viable financial plan, it’s important to look for guidance from experts. This is where a financial planner comes to the scenario.

The key to your financial plan is to meet your financial goals and bring prosperity to your life. But as any financial planner will tell you wealth creation and savings are the foundations of a good financial plan. Sound financial planning means managing your income well enough to meet your needs and dreams as well as creating wealth for your future with a comfortable cushion for any emergency.

ING (Dutch multinational banking and financial services corporation headquartered in Amsterdam) survey found that the basic Indian ethos to save and invest in real estate and gold. However, growing dependence on credit cards and access to a variety of personal loans as well as a heavy EMI burden is affecting the success of the financial plan of the salaried classes.

While savings, investment, wealth creation and debt reduction is central to a good financial plan, you need to keep track of developments, invest early and manage your finances. You could manage your finances personally or by using the services of a financial planner.

The key is constant financial learning and making the knowledge work for you. And most importantly the need of the hour is inculcate financial literacy early. The younger you are when you invest and prioritize financial planning basics, the wealthier you will be. The mantra is “invest early, invest well” after all! Financial literacy must be part of school and college curriculum.

76% Indians not financially literate, says S&P survey

According to a global survey, India is home to almost 20% of the world's population, however, 76% of its adult population is not even aware of the basic financial concepts. The survey reports that Financial Literacy in India has been signification poor compared to the rest of the world.

As much as 76 per cent of Indians do not understand key financial concepts like inflation and interest rate, lower than the worldwide average, a S&P Ratings Services survey said today.

Standard & Poor’s Ratings Services Global Financial Literacy Survey said in Asia, Singapore is home to the highest percentage of financially literate adults (59 per cent), followed by Hong Kong and Japan (both at 43 per cent). Less than a third of adults in China (28 per cent) are financially literate.

The material gap between men and women existed in almost every country. Worldwide, there is a five-point gender gap with 65 per cent of men not being financially literate compared with 70 per cent of women, the survey said.

In India, the gap was wider with 73 per cent of men and 80 per cent of women not being financially literate.

According to the survey, 57 per cent of adults in US and 67 per cent in UK are financially literate.

Only 14 per cent of Indian adults correctly answered the question on risk diversification. Conversely, 56 per cent answered the inflation question correctly.

About 39 per cent of adults who have a formal loan are financially literate, while more than a quarter (27 per cent) of formal borrowers were found to be not financially literate. Only about half of the participants (51 per cent) understood compound interest.

Financial Planning also Guide you how to avoid below Financial Malpractice:

We should stay away from below Activities as a Wise individuals:

Scams, Frauds and Ponzi Schemes a. Free tips b. Insider trading c. Money laundering d. Phishing mail about winning a lottery e. Price rigging f. Dabba trading g. Bogus companies h. Multi level marketing i. Schemes not regulated by anyone j. Real Estate frauds k. Banking and credit card scams l. Preventive measures from getting duped.

Why you shouldn’t Buy Mutual fund from Banks?

What happens when you walk into your bank’s branch and ask for mutual funds to invest in? You would expect your banker to sell you the scheme that is best suited to your needs, after proper risk profiling. The reality is that many banks may well be offering schemes that belong to their own group or those of subsidiary fund houses.

Public-sector banks/private Banks are particularly fond of their own groups’ funds.

Mis-selling by banks due to challenging targets before staff: RBI

https://m.economictimes.com/banking/huge-incentives-to-staff-has-led-to-mis-selling-rbi/amp_articleshow/59844876.cms

The Reserve Bank of India (RBI) has said that challenging targets set for employees, incentives to the staff, and lack of training are the reasons for mis-selling of third party investment products by banks, a statement said. Drawing attention to a large number of complaints on mis-selling, Deputy Governor S.S. Mundra said, "The underlying reasons were the challenging targets set for employees, incentive linked quotas, lack of training and fast rotation of frontline staff."

Disadvantages or why not from Bank:

1) No Expertise of Mutual Fund:

Banks don't generally specialize in investing since they are more about savings, day-to-day financial transactions and loans.

Very often, an investment advisor or Bank Employee at a bank gets paid or get Commission for every customer he puts into one of the bank’s mutual funds or own bank’s Mutual Funds. He is a salesman earning a commission. While such a person may give you inadequate advice, you should know that you are not being given all the options you would have by researching mutual funds yourself.

2) No options or alternatives are available:

As employees are selling the Mutual fund of a bank they always insist to investor to buy their own bank’s MF even if it wouldn’t perform good since years and never tell you the truth because of pressure of monthly sales target achievement.

Like, SBI Bank employee sales SBI MF or PNB Employee sales PNB MF even if these companies schemes not performing well.

3) Conflict of Interest:

As employees are working on the same Bank who is providing them Salary and Bonus they are always trying to sell their Subsidiary or own companies Mutual Fund to full fill their sales Target even if these funds are not giving good return.

Like; Bank of Boroda Mutual Fund,SBI Mutual Fund etc.,

“Ideally, investors should have four-five different schemes from more than one fund house to have diversification. But, here banks try and sell schemes of only the in-house fund, which is purely mis-selling and conflict of interest…”

The Bottom Line

Don’t confuse convenience with wise investing. Though it may be easy to buy mutual funds through your bank, you owe it to yourself to understand the funds, including their holdings and their risks.