10 Investing Thumb Rules

10 investing thumb rules

 

Back of the envelope calculations may not be accurate to the last decimal but they give you a fair idea of what you are looking for.

 

Here are some immutable financial rules that can help you with quick estimates.

 

Use them to get a grip on your finances and make informed investment decisions.

 

How fast will your money grow

Rule of 72: This tells you in how much time your money will double. Divide 72 by the interest rate you are compounding your money with and you will arrive at the number of years it will take to double in value.

If the interest rate is 9%, then your money will double in:

(72/9=8) 8 years

 

Rule of 114: Use this to estimate how long it will take to triple your money. It works the same way as the rule of 72.

Divide 114 by the interest rate to know in how many years Rs 10,000 will become Rs 30,000.

 

Rule of 44: Similarly, this tells you in how much time your investment will quadruple in value.

For instance, if the interest rate is 12%, Rs 10,000 becomes Rs 40,000 in 12 years.

 

How fast will your corpus erode

Rule of 70: This is a useful rule for predicting your future buying power. Divide 70 by the current inflation to know how fast the value of your investment will get reduced to half its present value.

 

This is especially useful for retirement planning, as it affects the way you set up your monthly withdrawals. However, do remember that inflation varies from time to time.

 

Inflation of 7% will reduce the value of your money to half in

(70/7 = 10) 10 years

 

The other rules

The 10, 5, 3 Rule: This is a neat little rule that states that you can expect returns of 10% from equities, 5% from bonds and 3% on liquid cash and cash-like accounts.

 

Pay yourself first rule: Right from your first salary, put away a little for your retirement. Experts say 10% of your income should go into this. It is important to increase the amount as your income rises over the years.

 

100 minus your age rule: This rule is used for asset allocation. Subtract your age from 100 to find out how much of your portfolio should be allocated to equities.

 

The emergency fund rule: Put away at least 3-6 months' worth of expenses in a liquid savings account to ensure it is available at a short notice.

 

If every month you invest Rs 5,000 in a plan that grows 8.5% annually and increase your investment by 10% every year, after 30 years, you will have Rs 2.5 crore.

 

4% withdrawal rule: How much should I withdraw during retirement? We often use the 4% rule to protect the principle and determine how much one can take from the retirement savings.

 

If every month you withdraw, Rs 50,000, you need a corpus of Rs 1 crore to sustain monthly withdrawals for the next 25 years if the corpus earns 9% and inflation is 6%.

 

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Employee Provident Fund Interest rate ?

Employees' Provident Fund Interest rate:
The rate of interest is fixed by the Central Government in consultation with the Central Board of trustees, Employees' Provident Fund every year during March/April. The interest is credited to the members account on monthly running balance with effect from the last day in each year. The rate of interest for the year 1998-99 has been notified as 12%. The rate of interest for 99-2000 w.e.f. 1.7.'99 was 11% on monthly balances. 2000-2001 CBT recommended 10.25% to be notified by the Government. 
Benefits:
A) A member of the provident fund can withdraw full amount at the credit in the fund on retirement from service after attaining the age of 55 year. Full amount in provident fund can also be withdraw by the member under the following circumstance:

·         A member who has not attained the age of 55 year at the time of termination of service.

·         A member is retired on account of permanent and total disablement due to bodily or mental infirmity.

·         On migration from India for permanent settlement abroad or for taking employment abroad.

·         In the case of mass or individual retrenchment.

B) In the case of the following contingencies, the payment of provident fund be made after complementing a continuous period of not less than two months immediately preceding the date on which the application for withdrawal is made by the member:

·         Where employees of close establishment are transferred to other establishment, which is not covered under the Act:

·         Where a member is discharged and is given retrenchment compensation under the Industrial Dispute Act, 1947.

Withdrawal before retirement:
A member can withdraw upto 90% of the amount of provident fund at credit after attaining the age of 54 years or within one year before actual retirement on superannuation whichever is later. Claim application in form 19 may be submitted to the concerned Provident Fund Office.
Accumulations of a deceased member:
Amount of Provident Fund at the credit of the deceased member is payable to nominees/ legal heirs. Claim application in form 20 may be submitted to the concerned Provident Fund Office.
Transfer of Provident Fund account:
Transfer of Provident Fund account from one region to other, from Exempted Provident Fund Trust to Unexampled Fund in a region and vice-versa can be done as per Scheme. Transfer Application in form 13 may be submitted to the concerned Provident Fund Office.
Nomination:
The member of Provident Fund shall make a declaration in Form 2, a nomination conferring the right to receive the amount that may stand to the credit in the fund in the event of death. The member may furnish the particulars concerning himself and his family. These particulars furnished by the member of Provident Fund in Form 2 will help the Organization in the building up the data bank for use in event of death of the member.
Annual Statement of account:
As soon as possible and after the close of each period of currency of contribution, annual statements of accounts will de sent to each member through of the factory or other establishment where the member was last employed. The statement of accounts in the fund will show the opening balance at the beginning of the period, amount contribution during the year, the total amount of interest credited at the end of the period or any withdrawal during the period and the closing balance at the end of the period. Member should satisfy themselves as to the correctness f the annual statement of accounts and any error should be brought through employer to the notice of the correctness Provident Fund Office within 6 months of the receipt of the statement.

RE: How Employee Provident Fund works...

Excluded Employee:
"Exclude Employee" as defined under pare 2(f) of the Employees' Provident Fund Scheme means an employee who having been a member of the fund has withdraw the full amount of accumulation in the fund on retirement from service after attaining the age of 55 years; Or An employee, whose pay exceeds Rs. Five Thousand per month at the time, otherwise entitled to become a member of the fund.

Explanation:
'Pay' includes basic wages with dearness allowance, retaining allowance, (if any) and cash value of food concessions admissible thereon.

Employee Provident Fund Scheme:
Employees' Provident Fund Scheme takes care of following needs of the members:
(i)   Retirement                                (ii) Medical Care                       (iii) Housing
(iv) Family obligation                        (v) Education of Children
(vi) Financing of Insurance Polices

How the Employees' Provident Fund Scheme works:
As per amendment-dated 22.9.1997 in the Act, both the employees and employer contribute to the fund at the rate of 12% of the basic wages, dearness allowance and retaining allowance, if any, payable to employees per month. The rate of contribution is 10% in the case of following establishments:

• Any covered establishment with less then 20 employees, for establishments cover prior to 22.9.97.
• Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction,
• Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and
• Any establishment engaged in manufacturing of  (a) jute  (b) Breed  (d) coir  and  (e)  Guar gum Industries/ Factories. The contribution under the Employees' Provident Fund Scheme by the employee and employer will be as under with effect from 22.9.1997.    

How Employee Provident Fund works...

How the Employees' Provident Fund Scheme works:
As per amendment-dated 22.9.1997 in the Act, both the employees and employer contribute to the fund at the rate of 12% of the basic wages, dearness allowance and retaining allowance, if any, payable to employees per month. The rate of contribution is 10% in the case of following establishments:

·         Any covered establishment with less then 20 employees, for establishments cover prior to 22.9.97.

·         Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction,

·         Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and

·         Any establishment engaged in manufacturing of  (a) jute  (b) Breed  (d) coir  and  (e)  Guar gum Industries/ Factories. The contribution under the Employees' Provident Fund Scheme by the employee and employer will be as under with effect from 22.9.1997.  

 

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Checking Public Provident Fund (PPF) Status Online

PPF or Public Provident Fund is a public growth scheme under which people can contribute a part of their income and claim a income tax rebate. PPF scheme was introduced by the Government of India in 1968 with the aim to include more and more individuals to the scheme and get profit. Public provident fund scheme is normally of 15 years but can be extended for 1 or more terms of 5 years while the individual holds the rights to terminate the PPF funds at any time. Here I have made a small list of FAQs (Frequently Asked Questions) to help you in understanding the PPF system better.

Q. How much can I invest?
Ans : Any Indian individual can invest a minimum of Rs. 500 per annum and up to a maximum of Rs.70000 per annum.
Q. What interest rate will be applied to my investment?
Ans : Indian Government awards a 8% interest rate to your investment, which gets added to your account on 31st March of every financial year. The invest amount is calculated based on the minimum amount that exists in your account between 5th March and 31st of March.
Q. What are the tax benefits?
And : The total interest that you accumulate from your investment on every 31st March will be completely tax free, under section 88 of IT Act. Additionally any amount that is to be credited is also fully exempted from wealth tax.

Q. Is there any loan facility?

And : Yes, you can take loans from your PPF account but a maximum of 25% of the total balance at the end of 1st financial year from 3rd to 6th year can be taken. You can take as many loans as you want but you need to close any active loans first.
Q. How can I withdraw money from my PPF account?
And : You may not withdraw any amount from your PPF amount within first 5 years. From the 6th year onwards, you can withdraw money from your account but this is limited to once per year. If your account is 15 or more years old, you can withdraw up to 60% of the balance.
Q. How to check my PPF (Public Provident Fund) account status?
And : You may contact your bank or post office branch to know the current status of your PPF account. If your bank provides online banking, you can request them to link your PPF account to your existing online banking account. Once they merge the accounts, you can view, check your account status and pay PPF loans online.

http://www.solidblogger.com/check-public-provident-fund-ppf-status-online/

http://www.solidblogger.com/check-public-provident-fund-ppf-status-online/

 

Regards,

_____________________________________________________

 

Sreenivasa Rao Kilaru / Capgemini
Financial Services Strategic Business Unit
Hyderabad, TDI Practise,

Phone: +9140 66526000 Extn. : 4028571 Mobile: +91 9160666689 / www.capgemini.com

 Together. Free your energies
________________________________________________________

 

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How to withdraw PF amount/PF withdrawal

Indian Government has passed a law, well known as the Employee provident Fund scheme, according to which both the employee and the employer contributes at 12% of their wages, DA and retaining allowance to the fund, every month. This fund gets added to the employee’s EPF account (Employee Provident Fund) and the whole amount is given to him during various occasions such as retirement, medical expenditures, housing costs, family obligations, education of children or own, paying insurance policies etc.

The employee ends up paying to his EPF every month while the interest rate on his investment is calculated in the months of March/April every year. The applied interest rate gets fixed by the ruling Government of India in consultation with Central board of trustees and other concerned members. The EPF fund amount increases every year with the interest sum and deposited amount.

EPF - Employee Provident Fund

Checking EPF Fund Status

The concerned department passes a statement of EPF account to the contributing employees. The statement contains all the necessary informations such as the opening balance, amount contributed in the current financial year, total interest amount earned in the current year, withdrawn amount from the fund (if applicable) etc.

Withdrawing EPF Funds

EPF fund has been designed to help employees with some financial benefits upon his retirement. One contributing employee can withdraw his deposited amount completely, once he retires from his service at the age of 55 years.

However, there are few options and ways where the employee can withdraw EPF funds before retirement. One can withdraw any amount of up to 90% of the accrued amount if she is or more than 54 years old. On the other hand, one member is entitled to withdraw the full amount if (i) he leaves India and settles abroad or (ii) member retires from his job before reaching the 55 years age limit or (iii) if a person retires because of mental infirmity or in case of individual or mass retrenchment.

If you had applied for EPF fund withdrawal, you can check your application status here. You can also check your Provident Fund (PPF) status online.

How to track PF status

PF Officer location

Locate an EPFO Officer:

Please click here: http://www.epfindia.com/offsearch.asp

Sometime we need to know the location of officer who processed our request. When an officer change location in h emiddle of our application it will create big mess.

EPEF Office Locator

PF Office – Hyderabad

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Chennai

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Coimbatore

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Tiruvanathapuram

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Mysore

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Bangalore

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Tambaram

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Noida

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Bandra

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Calcutta

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Pune

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Delhi

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Mumbai

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Patna

Please click here: http://www.epfindia.com/jurisdiction.asp

PF Office – Gorgon

Please click here: http://www.epfindia.com/jurisdiction.asp

Know Your PF Transfer /Withdrawal Status Online

                It was a pain for all of us to know the status of PF transfer /withdrawal once it is initiated. We had to wait for a long time and there would not be any clue of whether transfer would happen or not. But now we have got a chance to see PF Transfer/Withdrawl status online.

                The Indian government has created a web site where we can check the details regarding our PF transfer /withdrawal. All we have to know is our PF account number given in our previous office.

Click here to know your PF withdrawal/transfer status.

Click Here: http://www.epfindia.com/indiaepf/loginnew.aspx

       Select the state and the exact place where you were working previously. Provide the establishment code which is available in your PF account number.

                   For example if your PF account number is TN/12345/2003, then your establishment code is 12345.

                   Once you provide this establishment code in the appropriate place, the name of your previous employer appears below the column which confirms that you have entered the establishment code correctly.

                   Finally provide your employee id of your previous company and then click the "Get Claim Status" to know the status of your PF transfer /withdrawal.

java.rmi.ServerException: RemoteException occurred in server thread

I have installed an application in IBM Web sphere. I want to use few application specific jars. So I added the jars in my application root folder and I added in MANIFEST.MF also.

 

But still I am getting the following error:

java.rmi.ServerException: RemoteException occurred in server thread; nested exception is: 

              java.rmi.RemoteException: ; nested exception is: 

              java.lang.NoClassDefFoundError: com.eistream.utilities.expression.op.OpVoid

              at com.ibm.CORBA.iiop.UtilDelegateImpl.mapSystemException(UtilDelegateImpl.java:235)

              at com.ibm.CORBA.iiop.UtilDelegateImpl.wrapException(UtilDelegateImpl.java:743)

              at javax.rmi.CORBA.Util.wrapException(Util.java:296)

.

.

.

What may be the reason, please help me.

 

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Data got commited in another/same session, cannot update row

Always get - Data got commited in another/same session, cannot update row

 

When I delete a row from Sql Developer tool I am getting the following error:

 

Query: DELETE FROM "SONORA"."PI_GENERIC_CAPTURE" WHERE ROWID = 'AAADg9AAFAAAAPIAAC' AND ORA_ROWSCN = '1136534' and ( "ASSIGNEEID" is null or "ASSIGNEEID" is not null )

 

One error saving changes to table "SONORA"."PI_GENERIC_CAPTURE":

Row 1: Data got commited in another/same session, cannot delete row.

Possible Solutions:

1.       Log off sql server and restart it.

2.        Go to Tools -> Preferences -> Database -> Object viewer

 

 

China is going face big Challenge: Inflation

A stopped clock is right twice a day, but it can’t tell time rest of the day. This is worth bearing in mind when looking at the Chinese economy this year. For much of the last decade, some have have predicted imminent doom and gloom for China. Like a stopped clock, they have said the same thing for some time.

Meanwhile, China has continued to go from strength to strength. Its economy has soared. Its influence has grown. Asia has benefited. The question that needs to be asked is whether this is the year that problems in China will emerge. Is this the time when the stopped clock is right?

China’s risks are different from those in the West, where debt problems persist. Across Asia, inflationary pressures are rising and policy needs to be tightened. The challenge for China is that in recent years, it has tied itself too closely to US monetary policy. In doing so, it has kept interest rates lower than necessary and its currency weak. Resolving these issues is vital and is underway.

The US and China both need to set monetary and fiscal policies to suit their domestic needs. The US is doing this. Last year’s second round of quantitative easing, or QE2, was justified, despite the criticism it received outside the US. Facing deflation, the Fed needed to do more.

The government has followed with a huge fiscal boost over the new year. The net effect is the US economy will grow strongly this year, particularly in the first half.

The stimulus has reignited fears about US government debt, but the reality is the US had no choice. A staggering 43 million Americans now receive food stamps, indicating the scale of poverty. Chances are US policy will work to ensure growth, if not to solve all the country’s problems.

All of this highlights the need for Asian policymakers to follow the US. Not by copying US policy, but by setting monetary policy to suit their own domestic needs. The challenge is especially daunting for China. The longer it takes China to tighten policy, the greater its eventual problem.

Last year saw the authorities impose a loan quota. But concerns about growth prevented them from tightening enough. This year, there is no reason to hold back as growth looks set to be strong, boosted by the 12th Five-Year Plan.

Although China’s policy tools worked well during the global crisis, there are risks now. First, the growing size of the economy and of the private sector makes it harder to control the economy from Beijing. Second, there is a need to rebalance the economy away from investment, towards consumption. While investment always sounds good, it is now so high in relation to GDP that not all of it may be worthwhile.

Third, China’s vulnerability arises from its underdeveloped financial sector. Thus, as income rises, there are limited options for investing household savings: into low interest-bearing bank accounts, into equities where governance concerns persist, or into real estate where prices are already sky-high in many cities. This makes the economy prone to bubbles.

China needs to avoid the lethal combination of cheap money, one-way expectations and leverage. A few years ago, the talk in the US was about the ‘Greenspan put’, that interest rates were kept low to support the equity market. China can’t fall into the same trap with property.

All this raises the risk of a near-term setback in China. Rising food prices and wages add to the urgency. Either the authorities don’t address problems sufficiently, delaying the day of reckoning, or, more likely, they tighten policy sharply.

This tightening will entail more loan quotas, rising reserve ratios, sharply higher interest rates, property taxes in some regions and, possibly, steeper currency appreciation than the market expects.

The authorities would not want to derail the economy. But if there was a setback where growth suffered, it would have global ramifications, hitting commodities and trade, among others. Of course, if there was a growth setback, the stopped clockers would say they were right, and there would be speculation about China’s growth being a bubble. That would be wrong.

A slowdown in growth would probably be temporary. It would show the business cycle exists in China, and while the economic trend is up, there will be setbacks along the way. These would provide a buying opportunity and not a reason to doubt the economy’s rise. China’s growth is for real. It is not a bubble economy, but it is an economy prone to bubbles. There is a big difference.

In recent years, the markets have discounted the bad news in the US and finally taken seriously the flaws in the euro area. The near-term risks facing China, like many countries across Asia, need to be taken seriously.

Yet, they also need to be kept in context, as they are unlikely to alter the longer-term positive outlook for growth. In our view, the world economy is in a super-cycle: a sustained period of high economic growth, lasting a generation or more.

The global economy is twice the size it was a decade ago and is already above its pre-recession peak. A central feature of this super-cycle is the shift in the balance of economic and financial power, from the West to the East, led by China.

This was highlighted at the recent Obama-Hu summit in Washington. Soon after becoming president, Obama changed US relationship with China. His predecessor, George W Bush, had a strategic economic dialogue with China. Obama turned it into a strategic ‘and’ economic dialogue. This was significant as it emphasized the relationship’s twin aspects.

As the US recovery has disappointed, there has been less of the strategic and more of the economic dimension of the relationship.

Although the US is the far larger economy, the relationship increasingly resembles one of equals. In modern times, the economic importance of China to the world economy has never been greater. It is vital for the world, for Asia, as well as for China that it addresses its inflation challenges now. This is no time to wait.

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Priyanka Chopra to pay Rs 6 crore to Income Tax.

Actress Priyanka Chopra and photographer Atul Kasbekar will pay income tax on some undisclosed transactions. Priyanka will pay tax on Rs 6 crore of cash transactions and Kasbekar on a Rs 4-crore gift, a senior income-tax official said.

Income-tax officials raided them and actress Katrina Kaif on January 24. Katrina did not evade tax, the official said.

I-T officials said Priyanka had declared all investments and assets but the tax is charged on the cash payments made.

Tax officials found papers from her mother Madhu Chopra's office mentioning details of Priyanka's cash payments in these investments.

Kasbekar, who owns a celebrity management company, Bling, received a gift. This is exempt from tax only if a relative presents it. A relative is defined in the Income Tax Act.

''We will not spare anyone, that's the message we wanted to convey,'' said an income tax official. On Wednesday, Priyanka's spokesperson said: ''We will cooperate fully with the investigations and will abide by all requirements of the authorities as and when required.''

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Gold drops on economic optimism as safe haven muted

Gold prices dropped 0.5 percent on Wednesday after an encouraging US private-sector jobs report and relative stability in the Middle East -- despite protests in Egypt -- diverted interest to higher-risk assets and away from bullion.

Gold extended initial losses after data showed US private employers added more jobs than expected in January, the 12th consecutive month that companies took on staff. The news dented safe-haven demand.

Economic optimism in the United States and Europe boosted riskier investments such as equities at the expense of gold. On Tuesday, the Dow Jones industrial average closed above 12,000, hitting its highest level since June 2008. US stocks, however, eased on Wednesday.

"The sell-off seemed to illustrate that people had lost faith in gold and could see much better places to invest," said Peter Hillyard , an analyst at ANZ Bank.

"(But) I don't think people want to sell it. They are fearful about what is going to happen in the Middle East, and what really is going on in the markets," he said.

Spot gold fell 0.5 percent to $1,334.40 an ounce by 3:04 pm EST (2004 GMT).

US gold futures for April delivery settled down $8.2 an ounce at $1,332.10. Volume was lower than usual for a third day in a row -- nearly 50 percent below its 30-day moving average.

Open interest in COMEX gold futures continued to decline. Exchange data showed it fell 800 lots to about 463,000 contracts, the lowest level since March 2010.

The largest gold exchange-traded fund, the SPDR Gold Trust, saw its second-largest monthly outflow ever in January. The iShares Silver Trust, the main silver ETF, said its holdings fell by the most ever in a single month.

Gold's appeal as an alternative investment faded as stock markets outside of the United States eked out gains as the latest data added to evidence of a sustained global economic recovery, even as escalating violence in Egypt and lofty oil prices painted a disturbing backdrop.

With confidence in the economic recovery growing and concern over euro zone sovereign debt abating, gold may lose some of its appeal as a safe haven, analysts say, though support remains.

Citi analysts said in a note that their gold price outlook is skewed to the downside with signs of the past three years' risk-trade dissipating and as confidence is seemingly restored in developed market economies.

EGYPT LENDS SUPPORT

Concern over unrest in Egypt and the prospect that it could spread into the wider Middle East is continuing to put a floor on prices, though it is prompting little new buying, analysts said.

Supporters of President Hosni Mubarak threw petrol bombs, wielded sticks and charged on horses and camels as they fiercely attacked demonstrators in Cairo on Wednesday after the army told protesters to clear the streets.

Mubarak's announcement that he would not stand in elections scheduled for September angered protesters who want an immediate end to his 30-year rule.

"Political turmoil in Egypt couldn't have come at a better time for gold," said UBS in a note. "With demand from China, the largest physical consumer of late, slowing into the Lunar New Year, geopolitical risk has provided a new support.

"Not that events in Egypt have injected a premium into the gold price -- they have not -- but they have kept more weak longs from liquidating and induced some short-covering."

Silver dropped 0.5 percent to $28.34 an ounce. Silver's failure to breach key support at its 55-day moving average suggests its recent rise was corrective and another leg down is likely, Citi said. A breach of key support at $26.38 an ounce opens the way for $25 and a possible test at the 200-day moving average, it said.

Palladium touched its highest point in nearly a decade after upbeat car sales numbers. Most of the palladium supply is used in catalytic converters.

Platinum gained 0.2 percent to $1,829.24 an ounce. Palladium shed 0.9 percent to $812.22 after matching a price last hit in March 2001, $825.50.

Should you go for pre-approved home loans?

Should you go for pre-approved home loans?

For a house-hunter , next to zeroing in on the dream home, obtaining a home loan is the toughest hurdle that he or she has to cross. How would you like it if you have the loan in your pocket even before you approach the developer to negotiate?

Banks and housing finance companies are now offering home-seekers pre-approved home loans or loans for property that have not been identified. While it sounds like an inviting proposition, there may be some not-so-exciting features that you should need to be aware of.

The working:

The procedure for a pre-approved loan is largely similar to a regular home loan application — you need to submit the documents asked for to the bank along with the processing fee.

These will include — depending on whether the applicant is a salaried individual , self-employed professional or entrepreneur — identity and residence proofs, the latest salary slip, Form 16, past six months’ bank statement, past three years’ income-tax returns (self and business) as well as profit/loss statements and balance sheet, certificate and proof of business existence and so on. However, a desirable income level is not the only criterion.

Your repayment capacity, too, is a critical parameter. “We take into account the loan-seeker’s income-toobligation ratio. Hypothetically, if the applicant’s income is Rs 1 lakh, his total repayment outgo should not be more than Rs 55,000-60 ,000,” explains Kamlesh Rao, executive vice-president , retail assets, Kotak Mahindra Bank.

Passing lender's diligence test

Even after your loan is sanctioned, the disbursal will take place only after you identify a property that passes the lender’s due diligence test. “There is no typical period within which the loanseeker is required to avail of the disbursement. However, we keep the file open for six months and if the applicant does not act within this period, we send reminders to the individual,” informs an HDFC spokesperson. The validity period varies with each bank.

For instance, State Bank of India, which has been publicising this facility of late, requires the borrower to identify the property within 60 days for the sanction to be valid. “Interest rate, though, cannot be locked-in — the rate prevalent at the time of disbursal will be the effective rate,” says the HDFC spokesperson. Adds Kotak Mahindra’s Rao: “In the case of a sanction, the validity could range from 1-3 months.

We, at Kotak, prefer a period of one month.” While the interest rate may change at the time of disbursal, the spread over the bank’s base rate will not be altered for the borrower, unless a significant period of time has elapsed.

  

Benefits for the borrowers:

Buying a property typically involves a mountain of paperwork — with the builder and, later, with the lender. Availing of a pre-approved loan would mean that at least one part of it is taken care of. “The borrower’s creditworthiness is established already and this helps in negotiating on rates with the builders.

Secondly, your total transaction turnaround time comes down,” explains Rao. Also, banks provide advice to home-seekers on properties that may meet their criteria. Moreover, lenders have tie-ups with builders for various projects. “In the event of the borrower (with a preapproved home loan) finding it difficult to make a decision, the bank may direct him/her to the right kind of project. Thus, if both the loan as well as the project is pre-approved , the processing procedure will be much shorter,” he adds.

So, if you have identified a good deal which is dependent on how soon you arrange for funds, a pre-approved home loan will come in handy. “For the borrower , the key advantage is that he knows his eligibility. Some builders acknowledge those with pre-approved home loans as serious buyers, and this may strengthen your bargaining power when you sit across the table to negotiate,” reasons the HDFC spokesperson. Such schemes also merit consideration in case the bank’s procedure of disbursing the loan is likely to be a long drawn out one.

  

Tread cautiously:

However, bear in mind that it is certainly not a win-win situation always. What you stand to lose if you decide to defer your purchase or avail of a loan from another lender is the processing charge. “The processing fee is not refunded under any circumstance.

In case of HDFC, it is 0.5% of the loan amount or Rs 10,000, whichever is lower,” informs the HDFC spokesperson. “We retain 0.25% of the loan amount or Rs 5,000,” says Rao. Therefore, you need to factor in the uncertainty regarding the actual disbursement while signing up for such loans. Even if you do make the decision within the prescribed cut-off date, the disbursal may be stalled in case the bank does not find the property to be suitable.

  

Finalise the property before proceeding with loan-related paperwork

"I don't see much value in such schemes, unless you are unsure of the amount of loan that you may be eligible for," says Harsh Roongta, CEO of Apnapaisa .com. "The processing fee may have to be forgone in such cases. If no processing fee is levied, you can consider going ahead.”

In short, though these schemes score high on utility, they may not be suited for all. You could consider these schemes if you are comfortable with the prevailing rate of interest, the amount required for down payment is in place and you have already narrowed downyoursearch to a particular locality , the size as well as the kind of apartment and the developer. If you are starting from scratch, it would be probably safer to finalise the property before proceeding with the loan-related paperwork.

Save 1Lakh in 30 days?

Be prepared to show investment proofs

The only cold comfort for Humayun, if at all, is that he is not alone. Millions of taxpayers across the country compress their entire year’s tax planning into one month.

For salaried taxpayers, the tax-saving season kicks off when they get a note from the accounts division on how much they need to invest. With it comes the warning: give proof of investments or get ready for a hefty tax deduction at source (TDS).

“That’s the time when undisciplined investors start running around like headless chicken,” says a financial planner.

In the rush to invest before the deadline, taxpayers often make fundamental investing mistakes, which they rue for years to come.

Gurgaon-based software professional Ashwin Arora knows the perils of just-in-time tax planning. Three years ago, he was working with a large global consulting firm that gave him less than two weeks to show proof of his investments.

“My company asked for proof by the end of the calendar year and I had only my provident fund contribution to show,” he says. So, Arora promptly invested Rs 33,000 in three tax-planning mutual funds at one go. This was just a few days before the markets went into a tailspin in 2008.

“The three funds are good performers but my investments are still in the red,” he says glumly. Small investors should not put large amounts as a lump sum in equities. It’s best to stagger the investment in monthly SIPs.

Person: Ashwin Arora, 28 Gurgaon
Investment: Rs 33,000 in three ELSS funds
His mistake: With tax-saving deadline staring, invested a lump sum in three funds, all of which are running in losses.

Focus on returns instead of tax-saving benefits

More importantly, experts say tax planning should be a part of the individual’s overall financial plan.

In other words, the investment choices should not be governed by the potential returns they offer but by their ability to fit into the asset allocation of the individual.

“One should choose the option depending on one’s risk appetite and asset allocation,” says Pankaaj Maalde, a financial planner working with Mumbai-based Sykes & Ray Financial Planners.

Invest in the Public Provident Fund (PPF) if you need long-term debt in your portfolio. Go for NSCs, fixed deposits and infrastructure bonds if you want medium-term debt. Buy ELSS funds if you want equity exposure. And take an insurance policy if you require life cover.

The best way to assess the suitability of an investment option is to look at it without the tax-saving benefits. “The tax benefits should be seen as the icing on the cake, not the cake itself,” says PV Subramanyam, financial trainer with Iris. Simply put, the tax deductions under Section 80C are only incentives provided by the government to encourage savings.

Do you need an insurance cover? Would you buy an insurance policy if there was no tax incentive? If your answer to both the questions is yes, go ahead and buy a policy.

Similarly, ask yourself if you need to invest in equity funds. Or in fixed deposits. Once you are able to define your needs, you will be able to choose the right option.

These cardinal rules of investing are quickly forgotten in the rush to meet the investing deadlines set by employers. Who has the time to sit down and weigh the choices when time is running out.

Be wary of the insurance cover you get

Delhi-based Jasneet Bedi is 31 years old, earns a six-figure salary and is aware of the potential of equities to create wealth. But when it comes to her tax savings, she just puts Rs 70,000 in her PPF account.

“I have been wanting to invest in ELSS funds but never have the time to sit down and research which is the best scheme,” she says.

What she doesn’t realise is that she is losing out on a terrific opportunity to create wealth by combining her tax investments with financial planning. Had she done that, the ELSS option would have been more compelling than PPF. Or it could be a good complement to the PPF.

Like her, many taxpayers find it infinitely easier and less tasking to believe the friendly broker and sign where he has marked ‘x’ on the application form.

Others are led by non-financial reasons to opt for unsuitable options.

Kolkata-based sales executive Debarati Ghosh invested in a Ulip three years ago because a friend was selling it. “He even gave me Rs 8,000 in cash in the first year on my investment of Rs 50,000,” she says. Her Ulip has done fairly well and the fund value has grown to almost Rs 2 lakh. But Ghosh also realises that had she opted for an ELSS scheme, she would have earned much higher returns.

Person: Debarati Ghosh, 30, Kolkata
Invested: Rs 50,000 in Ulip
Life cover:Rs 2.5 lakh
Utility: Nil. The life cover is too small.
Her mistake: In a hurry to save tax, didn’t check if the product suited her.

Many of us are guilty of such friendly mistakes. Two years ago, Arora bought a Ulip on the advice of a broker even though he didn’t have any financial dependants. He’s paying Rs 16,000 a year for a life cover of Rs 3.2 lakh and has vowed not to buy a unit-linked plan ever again. “I made a mistake, but have to continue with it otherwise I will end up paying heavy surrender charges,” he says.

Life cover should suit your requirement

Often, the friendly adviser is not acting in the best interests of his client. Humayun’s chartered accountant did not point out that he needn’t have bought the insurance policies. The tuition fees of his two daughters would have sufficed.

Mumbai-based businessman Rohit Ruia has endowment insurance policies that give him a cover of Rs 2 crore for an annual premium of Rs 2 lakh. Though this was sufficient for his needs and he didn’t require any more tax-saving investments, his broker sold him a Ulip six years ago.

“This portfolio suggests that all the investments were ad hoc and done in a hurry without giving a thought,” says Kartik Jhaveri, director of Transcend Consulting, a Mumbai-based financial planning firm.

Person: Rohit Ruia, 35, Mumbai
Invested: Rs 2 lakh in endowment policies and Rs 50,000 in a Ulip
His mistake: Bought additional life insurance cover he didn’t need

Chandigarh-based Dhiraj Gupta has also made the same mistake but he has learnt how to make the most of it. He bought an endowment insurance policy when he started working around nine years ago and pays Rs 35,000 a year for a life cover of Rs 7.5 lakh. “I know I made a mistake but terminating the policy now will not serve any purpose. So I treat the premium as an allocation to debt in my financial portfolio,” he says. For life insurance, he has bought a term plan that covers him for Rs 70 lakh.

Six steps to help you avoid investment blunders

Formulate a plan

At the beginning of the financial year, chalk out how much you intend to invest in different asset classes.

Then spread out this amount across the next 10-12 months.

Choose correctly

Invest in a tax-saving option on the basis of your overall financial planning.

Choose an investment only if it helps you meet a certain financial goal (retirement, child’s education, insurance cover).

Automate your investments

Set up an ECS mandate for your investments in ELSS, Ulips and other options.

This will ensure that even if you forget to invest every month, your bank will not.

Avoid long-term plans

Don’t buy insurance products in a hurry. These are long-term products and one needs time to assess and compare the features.

Do not commit yourself to multi-year payments.

Know your deductions

Take into account deductions such as tuition fees of children and home loan repayment while calculating how much you need to save under Section 80C.

Many taxpayers don’t even know how much they have contributed to the Provident Fund during the year.

Avoid health cover only to save tax

Everybody needs health insurance. That’s why the government gives you a deduction for the premium.

Don’t see this as a tax-saving idea.

Buy a plan only after careful consideration of its features and clauses.

IBM to offer USD 1,000 stocks to staff

Technology giant IBM today said it will give USD 1,000 worth of shares to its over one lakh employees in India as part of its centennial celebrations.

IBM, which will celebrate a hundred years of existence on June 16 this year, will give each of its employees globally a USD 1,000 stock bonus.

"IBM employees globally, except those at the executive level, will receive USD 1,000 in stock bonuses," an IBM India spokesperson said.

He, however, declined to comment on IBM''s India headcount, since the company does not disclose country-level employee numbers.

However, industry analysts peg the strength of the company''s India-based workforce at over one lakh. IBM has four lakh employees globally.

"The company is still working on the eligibility criteria for the bonus. However, one of the criteria is that the person has to be an employee (full-timers and part-timers included) of IBM or its wholly-owned subsidiaries before December 31, 2010," he said.

Eligible IBM employees will be offered ''restrictive stock units'' (RSU), under which the employee will be promised returns on the stocks awarded without actually owning them.

This means that at a stock value of USD 159 (on January 28), the USD 1,000 stock bonus will translate into 6-7 stock units.

Also, since these stock incentives will not vest until 2015, anybody quitting the company before June 16, 2015, will no longer be eligible to receive shares.

IBM reported revenues of about USD 100 billion and record free cash flow of USD 16.3 billion in 2010.

Banking, Finance: Ready for the job from Day 1.

THE recession in 2008 is a distant memory and the stock markets have almost reached their previous record high valuations. Financial sector is right now back from the brink, though global indicators are still far from satisfactory. But everybody agrees the worst is behind us.

So is the job market hot? Well, recruiters look at a combination of factors like articulated communication, presentation skills, overall personality, and the candidate’s basic knowledge of the industry.

They also test networking abilities and negotiation skills before inviting them on-board. For prepared candidates, opportunities do exist. But the million dollar question is - why is that after two years of a gruelling PGDM programme, are students still not ready to start work right away?

Are you job-ready?

“Not quite ready” is a common refrain. The course curriculum followed by academic institution provides the required knowledge inputs in management subjects like finance, marketing or HR. “ What it lacks is a vocational or industry focus,” says Judhajit Das, Chief Human Resources, ICICI Prudential Life Insurance Company.

Krish Lakshmikant, a leading headhunter seconds. The students do not apply their minds sufficiently and are just not ready to roll up their sleeves. The while collar AC room job mentality still persists he says. And corporations invest in costly training structures to get them job ready.

Fresh hires at Yes Bank undergo formal and intensive 5-week induction/ on-board programme. “We give them insight into company’s philosophy, culture, into our diverse business verticals and structure”, says Deodutta. Post that, the recruits are given on-the-job training and are exposed to 4-5 key support functions right at the inception stage. Similar induction programmes are conducted in Insurance and financial services sector too.

Where is the moolah?

In the insurance and banking sectors, entry-level salaries for MBAs range between Rs 5-8 lakhs per annum. Capital markets pay Rs 2.5 lakh or more for a sales and marketing function.

The entry-level salary band starts at Rs 1.5 lakhs per annum, varying city-to-city and the B-School the students come from. The highest salary in 2009 was Rs. 18 lakhs , while the average was Rs.10.20 lakhs, says Dr. Anupam Rastogi, Senior Prof. (Finance & Economics), NMIMS.

Skilled employees start higher, and the salaries are more if a professional exam has been cleared by a candidate. “Typically associate actuaries earn Rs. 20,00,000 plus pa and fellow actuaries Rs. 40,00,000 plus pa,” says Rajendra Shah, managing director, DS Actuarial Education Services.

Sounds like music to your ears? Then BFSI is your symphony indeed!

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