Have moved to a new address: www.letssimplifymoney.com

Thank you for your continued support and readership to Letssimplifymoney. From today, I am moving to my own home in cyberspace www.letssimplifymoney.com. This will help me to run the blog on the WordPress.org platform, which is far more convenient and powerful as compared to a .com one.

I look forward to your continued readership and support. Thank you and keep in touch.

Looking to invest online? Check out www.fundsindia.com

Many a times, we procrastinate planning for our long-term goals and making investments in the right investments. Sometimes it might be due to lack of knowledge about the product or not knowing how to purchase it. Also, most of the times, one big fear faced by people and which keeps them from investing is the amount of paper-work required….after all, in this stress filed life, who has all the time to do it?

Welcome to the world of online investing! With the growth of technology, now you need not fill up lengthy forms for each transaction….if you are net savvy, you can open an online account and start your investment plan right-away….so no more dependence on agents, chasing them for your fund statements….

In this review, I am writing about Funds India, which has made a mark in helping investors invest online in a safe and convenient manner, in a short span of time. I am a registered user of Funds India and find me and some of my friends have found it pretty convenient to invest and keep track of my investments and this has given me the inspiration to write a review of this platform.

About Funds India

The Funds India platform is an initiative of Wealth India Financial Services Private Limited (WIFS). It was started in 2008 by two entrepreneurs – Mr. Srikanth and Mr. Chandra. Both have decades of experience in the financial services industry in India and abroad. They are backed by a wonderful team of efficient and experienced professionals with technology and domain expertise. The company is located in Chennai.

(Text courtesy www.fundsindia.com)

Services on offer

Funds India’ online platform allows you to invest in not only mutual funds, but also a whole range of other products like corporate deposits, online equity trading, bonds etc. It also provides a way to track the performance of various schemes basis which

What are the costs involved?

Funds India does not charge any fees to the investors. There are no registration charges, no account-opening fees, no transaction charges, no SIP charges, and no charges for any value added services. Also, SEBI has announced that mutual fund investments will not be subject to entry-load starting August 1, 2009. So, now all mutual fund investments made through Funds India will incur zero entry loads. In case of mutual funds, our source of revenue would be the so-called ‘trail fees’. This is not something that we charge our investors explicitly. These are paid out of the annual fund management fees that every mutual fund already charges.

Advantages of investing through Funds India

Investing online through Funds India has some of the following advantages:

• Transactions at a click of a button: Investing online requires one time paper work in terms of visiting the designated CVL point of service for completing KYC, and filling up the mandatory forms for opening the account. Post that, your Funds India account is linked to your specified bank account and all investments, redemptions, SWP, STP etc. can be done online…that means no need to go to the investor services centre, or chase the mutual fund agent for these activities…

• Single mandate for multiple SIPs: Instead of executing separate bank mandate for each scheme you wished to invest in, you can now setup one bank mandate for multiple SIPs across fund houses. Also, one can set up a portfolio of schemes with percentage allotment of money and manage it as a single SIP. That is, with one bank mandate (Rs 5000 each month for example) you can invest across as many funds SIPs as you want (say, 5 SIPs of Rs 1000). 

• Common login/folio for entire family’s Investments: With Funds India, one can invest, manage and view the investments of family members i.e. spouse, kids and parents in a consolidated manner using a common login id.
• Innovative SIP formats: In addition to plain-old way of investing through SIPs (you execute a bank ECS of a specified amount) Funds India also allows to invest in some innovative ways like Alert SIP, Flexi SIP, Trigger SIP etc. However, in my personal view, instead of unavoidable circumstances, one should prefer sticking to the plain vanilla SIP as that gives the true benefit of rupee-cost averaging.
• Integrated investment platform: This is a very important service differentiator of Funds India Vis a Vis other players in this space. As against offering only mutual funds, Funds India is an integrated platform for equities; delivery based online trading, corporate deposits, insurance etc.

• Free advisory service and planning tools: Funds India team has experts who answer the investment queries and financial planning tools, which help in deciding how much to invest for the goal.

Some commonly asked questions:

Here are some of the commonly asked questions that I am reproducing as an extract from the Funds India website. For a full list of FAQs, please check the link: http://www.fundsindia.com/content/jsp/corporate/faq.do

• What if Funds India closes tomorrow? What about my investments?

At the outset, we are a well-founded company with a sound business model and excellent financial backing. We will be here to serve our customers for a long time to come. However, we can also re-iterate that all the investments – mutual funds, equities, NPS, deposits – made via Funds India are made entirely in the name of the investor. These investments will be fully and freely available for direct access by the investor at any time should something happen to us. As an investor, you do not need to worry on this count.

• How secure are my investments with Funds India?

Funds India services are hosted in a top-security, tier-4 data centre outside India. The data is stored in a continuously replicated model and is also backed up daily. Network communication with the browsers is protected with 128-bit encryption using a Thawte issued security certificate.

• What banks are you partnered with?

At present, a total of 31 banks have partnered with Funds India.  If you have an account with one of our banking partners, the investment process would be seamless for you. On the other hand, if you don’t, it would still be possible to invest with Funds India. In this case, once you finalize an investment through our website, you can do an electronic fund transfer (NEFT/RTGS) specifying your user id and transaction to our ICICI bank account to enable us to fulfil your transaction.

• I have mutual fund investments in a variety of schemes already? How can I consolidate them for viewing in Funds India?

You can do this by transferring them to your Funds India account.

• Does Funds India have branches?

Funds India is a purely online investment platform at this time.

• How do I verify my mutual fund investments with Funds India?

Funds India provides you with the folio number of your investment that is on the records of the mutual fund houses and their back-offices. You can use this number to contact either the fund house or their back office to verify your investment. If your investment is with a CAMS (one of the back office services) supported mutual fund house, you can use their mail-back service (available on their website) to verify your investment.

Related:  For more on the process of CAMS active statement, check out: http://letssimplifymoney.wordpress.com/2012/03/15/cams-active-statement-a-free-and-easy-way-to-organise-your-mutual-fund-investments/

How to open an account In Funds India?  

The process of opening an account with Funds India is a very smooth experience, as it has proved for me. It has been explained as follows, on its website:

1. Login to Funds India website and create an online account: Enter basic details like name, e-mail ID, PAN no. – Funds India will generate a pre-filled application form. The pre-filled application form also contains a pre-filled KYC form
2. Simultaneously, visit any of the certified CVL points of service and complete KYC. Check out the procedure for doing  the same at http://letssimplifymoney.wordpress.com/2012/03/29/take-the-first-step-in-mutual-fund-investing-get-your-kyc-done/
3. Send the signed application form along with the supporting documents to Funds India, Chennai. (note that there is also a facility of drop off points near to you)
4. Funds India processes the signed application form and required documents and activate the account, post which you can start investing!

(Note: The views expressed are purely personal and do not represent the views of any entity or individual)

Hope this post gives you some helpful insights in the convenient world of online investing. Will you explore online mode of investing? What challenges do you face? Do share in comments section, or write me an e-mail at Abhinav.gulechha@gmail.com

Take the first step in mutual fund investing: Get your KYC done!

Today I will take up the topic of complying with KYC while investing in mutual funds and how one can go about getting it done with minimum effort.

What is KYC?

KYC stands for Know your Customer. Securities and Exchange Board of India (SEBI) has issued Guidelines under The Prevention of Money Laundering Act, 2002 (“PMLA”) according to which, investors can invest in mutual funds only if he/she is KYC compliant.

The purpose/ logic behind the requirement of KYC is ensure that unscrupulous elements do not misuse the financial system by laundering the illegal money

Is KYC necessary for investing in mutual funds?

Yes. Effective January 1, 2011, KYC is required to be completed for all the investors, for any investment in mutual funds, irrespective of the amount, for carrying out the transactions such as new/ additional purchase, switch transactions, new SIP/ STP/ DTP registrations etc.

For this purpose, all mutual funds have tied up with CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd. (CDSL). Accordingly, CVL, on behalf of all mutual funds carries out the process of KYC and issue the acknowledgement to the investor.

KYC is a one time activity for the investors. Once their status is updated as KYC compliant in CVL database, they can invest in any number of times in different schemes of different mutual fund companies without hassle of going through this formality again. Only thing required will be to attach a copy of CVL acknowledgement with every fresh application.

This facility is available absolutely FREE OF COST to the investors.

How to go about it?

• First run an enquiry on whether you are KYC compliant (Check out link; http://www.cvlindia.com/inquiry_kyc01.asp and enter your PAN no).
• In case the result is “Invalid data”, know that you need to get KYC done.
• Download the KYC application form from CVL site (http://www.cvlindia.com/include/pdf/KYCIndividual.pdf)
• Fill the form as per instructions and attach the prescribed documents (i.e. identity proof, address proof, and 1 photograph)
• Submit the form at the designated CVL Points of Service (POS). For an All India list of such POS, check out link: http://www.cvlindia.com/downloads01.html
• Basis verification of form and supporting documents, CVL will issue an acknowledgement. This acknowledgement is your proof of having completed KYC. You will have to attach it with the application form.

Eligible list of document

Identity Proof:

• PAN (this is the only document that is accepted as ID proof, except in some cases like SIP investments < Rs. 50,000, Central/ state Govt. entities, financial institutions, UN entities, Sikkim residents)

Address proof:

• Passport
• Voters Identity Card
• Ration Card
• Registered Lease or Sale Agreement of residence
• Flat maintenance bill
• Insurance copy
• Utility bill like telephone, electricity or gas bill (should not be more than 3 months old)
• Bank Account Statement/Passbook – Not more than 3 months old
• Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts.
• Proof of address issued by any of the following: Bank Managers/ Gazetted officers/ Elected MLAs / Docs. Issued by Govt. authority

Some important points to note

• CVL is very particular on the exact match of the name and address details in the application form vis-a-vis the copy of proof provided. For e.g. in case the address in form is “D-202, Rock Castle CHS….” and the address as per proof is “D-202, Lock Castle CHS….” the application will be rejected. Hence, ensure that you write down exact address as given in address proof, in the form.
• Documents should be self-attested and accompanied with originals for verification.
• If correspondence & permanent address are different, then proofs for both have to be submitted.
• There is a new regulatory update w.e.f. January 1, 2012, whereby you also have to submit the first investment cheque at time of undergoing KYC, so take your cheque book with you also when you visit the POS:)

(Note: The views expressed are personal and do not represent the views of any other entity or organisation)

Hope this post was useful to you. If you want to start the new financial year with a systematic investing plan in mutual funds, get your KYC done right away. In case you encounter any problems/ need any clarity, do revert in comments section below, or send me a e-mail at Abhinav.gulechha@gmail.com. All the very best!

Financial Planning Tips for Self-Employed / Business Persons

Check out this excellent post from FPG India on Financial Planning Tips for Self-Employed / Business Persons.

Keep your long term financial goals intact: Build your contingency fund

Hi. In some of my past posts I had picked up Insurance as a topic, and the need of getting the right covers to protect the future of you and your loved ones. Read:

Things to check out before buying health insurance

3 Critical Mistakes to avoid while buying life insurance

In this post, I am picking up a slightly different but a very important topic i.e. contingency fund

Why do I need it?

While through the right insurance, you transfer the financial impact of risks from your plate to the insurance company, there are definitely some risks for which insurance cover is not available.

Let us understand this with the help of 2 examples:

• Job loss: The recession of 2008 made us come to this stark realisation, that whatever be the level of performance, and the designation we are on, job loss can happen. Now, at least Insurance companies in India do not cover for this contingency.
• Sudden medical expenses (which are not covered by Medi claim or critical illness): you will have to pay this from your own pocket.

What if I don’t build it?

In case you do not proactively build a contingency fund, following can be the possible implications:

• You might derail your financial plan for your long term financial goals (i.e. you might redeem your long-term investments in equity mutual funds when the market is low, at a high loss)..
• You might end up using your credit card and therefore land up in credit card debt, which involves a very high interest rate (somewhere around 36-40% p.a.)
• An embarrassing situation where you might have to ask for financial help from your friends/ relatives etc.

What is a contingency fund?

Contingency fund is a specific amount depending on your need and requirement, that’s to be set aside in liquid instruments, so that it can be redeemed quickly in case of an emergency.

How much of it do I need?

Yes, this is a very important question. Contingency fund has to be of a right amount, and has to be reviewed periodically (at least one in a year) to ensure that it is not excessively low/high.

While advising some of my friends on this aspect, I generally find either a very low or a very high amount set aside as contingency fund. While a very low amount may not be sufficient to meet the expenses in case of a contingency, a very high amount unnecessarily locks funds into low-return instruments.

Following factors are important to determine the amount of contingency fund:

• Whether both partners are working, or it is a single income family (in case of latter, higher funds will be required)
• Whether the family has covered itself by taking proper insurance (in such a case, requirement will be less)
• Is the income stream regular or off-and-on? (e.g. an entrepreneur will need to maintain a higher fund than a salaried person)
• Most importantly, by building what amount of fund does the family can sleep peacefully (after all, its all that mattersJ)

From a financial planning perspective, ideally a contingency fund should be between three months to six months of one’s fixed monthly obligations (FMI).

Let us understand with the help of an example.

Suresh and Neeta are a working couple. Their monthly expenses are Rs. 25,000 and EMIs for home loan is Rs. 20,000 and a car loan is Rs. 5,000. They have Rs. 50, 000 in bank fixed deposit and Rs. 1,00,000 in equity mutual funds. They wish to build a contingency fund worth of 3 months of their fixed monthly obligations.

In their case, fixed monthly obligation (FMI) is Rs. (25,000 + 20,000 + 5,000) = Rs. 50,000.

Their contingency fund has to be equivalent to 3 months’ FMI, hence Rs. 50,000 * 3 = Rs. 1,50,000. Hence, Suresh and Neeta should maintain a contingency fund worth Rs. 1.5 lacs at all times in short-term instruments.

Now, since the family already maintains Rs. 50,000 as fixed deposit, which is a liquid investment, the shortfall that has to be plugged is Rs. (1,50,000-50,000) = Rs. 1,00,000.

Note that it has to be reviewed every year basis that date’s financial position.

Where should I park the contingency fund?

Contingency fund should be parked in an avenue where the money can be retrieved in the shortest possible time and with minimum paperwork/ formalities, as you would agree that there is no sense in building a contingency fund, and then not being able to access the funds when the need arises.

However, at the same time, there is no sense keeping this money idle in bank account earning interest @ 4 %, as there are avenues where you can earn better interest income from these funds.

Following avenues can be explored:

a)     Opening a fixed deposit with a  bank

b)     Invest in liquid mutual funds (Check out the exit loads: go for ones with zero exit load)

c)     Keeping funds in your savings bank account and activating a sweep-in sweep out facility to earn a higher return

Some questions on how to build a contingency fund

In all probable scenario, when you assess your existing liquid funds vis-a-vis contingency fund, there might be a shortfall. Now, after realising how important a contingency fund is, you might be in a fix.

Qn. 1: I am investing for long-term through SIPs for my financial goals. Should I discontinue those investments to create a contingency fund?

Ans: Yes, if the contingency fund is very less, it makes sense to skip some SIPs and invest in liquid instruments.

Qn. 2: After taking care of monthly expenses and scheduled investments, I am left with practically nothing, to create a contingency fund. What should I do?

Ans: Relook at your investment plan and make changes, if required. Set a monthly investment target to create a contingency fund .

Qn. no. 3: I have 2 credit cards with a combined limit of Rs. 2,00,000. Do I need to separately create a contingency fund?

Ans:  Don’t ever think credit card can ever replace a self-created contingency fund. I have seen families land themselves in a mess of debt, going by this presumption.  Create your own fund. It’s my personal opinion, if you love your credit card, forget about financial planning:)

Reading resources:

http://articles.economictimes.indiatimes.com/2011-10-24/news/30316578_1_cash-bank-account-savings-bank/4

Action Points for you this week

Below is a 4 point action plan for you this week:

• Sit with your partner and assess the amount you as a family need as a contingency fund.
• In case you have sufficient cash/ liquid funds equalling to such amount, don’t procrastinate and tag them as contingency fund. If you have cash lying idle in bank account, Invest in one of the suggested instruments right-away to gain higher returns.
• In case you do not have the suggested cash to create a contingency fund now, activate a monthly recurring deposit from your bank account. Till then, keep your other investing plans on hold!

Hope this post was useful to you. Looking forward to reading your thoughts, experiences, and any difficulties in he ‘comments’ section.

CAMS Active Statement: A FREE and easy way to organise your mutual fund investments

One of my close friends Rahul is an avid long-term investor, and he has realised the value of picking good equity mutual funds and staying invested in them for the long-term. He has made various mutual fund investments from time to time. However, by the time of filing tax returns come, he finds great pain in digging out when and where he had made these investments.

Just recently, over a cup of tea, when we were discussing on some of his queries on financial planning, he shared the issue with me. And I wished he had told that to me before.

Chennai based Computer Age Management Services (CAMS), which manages the back-end operations activity for several mutual funds, offers a facility named as CAMS Active Statement. Any investor who has his holdings in CAMS, Karvy and FTAMIL serviced Mutual Funds can avail of this facility.

If you have registered an email address in your folios across Funds serviced by CAMS, Karvy and FTAMIL, you can use this to obtain a consolidated PDF Account Statement at your registered email address.

The process is as follows:

a)     Go to CAMS website (https://www.camsonline.com/invmailback/ConsAcstmtMBreq.aspx)

b)     Enter the following details:

1. Statement type (Summary/ Detailed ),
2. Period of statement (you can choose financial year wise, or a specific period as well),
3. E-Mail ID (the one you mention while signing up for mutual funds)
4. Password (CAMS will use this password to protect the statement. Please remember it as you will have to enter it to open the PDF)

You’re done! CAMS shall deliver the statement to the specified e-mail ID in real-time (latest by the same day)

This facility is really helpful during times when you need to know the status of your MF investments e.g. at the time of tax return filing, need for redemption,  filling financial details at the time of getting a financial plan made, etc.

However, following things need to be remembered:

• The consolidation is not at an industry level. Those mutual funds that are out of CAMS network will not be covered in this statement.
• You need to ensure that same e-mail ID is given across mutual funds. If not, it is advisable to speak to concerned mutual fund houses and update your e-mail address in their records (will cause some pain, but is worth as a one-time exercise!)

Your action for this week:

• Try downloading the CAMS online statement
• Check the statement for your asset allocation and to date portfolio returns. (In case of any non-performing funds you note, this may give you an action point to replace them with better funds)

Hope this post was useful to you. Do share your experience in managing your mutual fund investments, and any other/ better ways you use and can suggest.

Things to check out before buying health insurance

One evening, I met Vaibhav, one of my friends over a cup of tea. He was looking particularly confused. On seeking some detail, he told me that he was looking for a health cover for his family and all the terminologies in various product brochures is making him all the more confused. As we delved deep, we came to a consensus as to the following things that one should check out when buying a health insurance plan:

Life Long renewal: This is the most important feature and your first filter while selecting a health insurer. The insurer should stand by you forever. Mostly what insurance companies do is that they offer you cover only till say 65 years but what about after that? When at 65, you venture out in the market; it is extremely difficult to obtain cover. Hence, it makes sense to go for insurers that offer lifelong cover. Presently, only some companies like Apollo Munich, Star Health and Max Bupa offer life-long renewal as a feature in their policies.

Coverage: Health insurance is not as simple as life insurance, in the sense that there are various complicated coverage, which is very difficult for even experts to understand. Hence, it is not always a wise idea to select the cheapest plan. One should shortlist 2-3 good products basis the filter mentioned above, and then benchmark the coverage offered by each plan, before taking a final decision. Moreover, insurers have begun covering day care procedures also. However, it is important to check in detail the type and comprehensiveness of coverage.

Hospital Network: Generally every insurer has a preferred partner network (PPN) of hospitals, where you can get cashless mediclaim and quick settlement. Also, some insurers impose “co-pay” obligation in case treatment is taken from a non-network hospital. “Co-pay” means that in a particular event where co-pay is prescribed as 20%, the policyholder shall have to shell out 20% of expenses from his/her own pocket and rest will be re-imbursed by Insurer. You should particularly check whether there is a wide coverage of hospitals in the PPN list. Also, it is advisable to avoid plans where co-pay is applicable.

Room caps, Sub-limits and Waiting Periods: Every insurance plan have pre-defined room-caps and sub-limits for certain expenses. Also, most insurers prescribe a waiting period for pre-existing and other diseases/ It may be noted that the plan which has the least or no sub-limits or caps and less waiting periods for pre-existing and specified diseases are the best. For e.g. as compared to a plan which offers no sub-limits for a particular coverage, as compared to an insurer which has limit of 15% of sum assured, the former is anytime better.

Underwriting process:  It is always advisable to buy health insurance from companies that have strong underwriting processes at the application stage itself. In such cases, the companies do their evaluation and call for required tests, to satisfy itself whether they can cover you or not. Companies like Apollo and Max Bupa fall in this category. This approach is far better than companies who perform these checks at the claims stage. Generally the public sector companies fall in the second category.

Disclosure of family’s complete medical history: As this is applicable for life, it’s applicable for health insurance as well. Be ruthlessly honest while furnishing past medical history details and personally fill those detail in the proposal form. This will ensure that the claim does not get rejected because of inadequate disclosure of medical history.

Hope you liked this post and it was useful to you in some way. Can you share some  other points one should keep in mind while buying health insurance?