Issue VII - Aug. 2005     Planned your Retirement? Its never late. Do it now With each passing day you are inching closer to your retirement, time to sit back and relax and retirement blues are catching up already. You ponder over how you have spent the golden years of your life nurturing your children’s dreams, their aspirations in life. Your little ones have now grown up into mature adults, are independent, successful in their chosen career paths. A sense of fear envelopes you when thoughts of those future medical bills, your tax liabilities, tackling the rising inflation circle in your mind. Thought of Retirement planning? As time passes your responsibilities towards your family would have been fulfilled but again, you would need funds all the same or may be even more. Most of the individuals do not plan their retirement years well in advance and it is only later in life that they realize their folly. Retirement planning must come early in life. And it must receive equal importance if not more to your family’s growing needs. So how should you go about planning your retirement in order that you are financially independent even though you may not be working to earn a living then. When do you plan to hang up your boots? Firstly decide - at what age you expect to retire? Is it 50, 55 or 60 years? And what is your present age? Are you around 20 - 25 years? How many years of work life do you have before you actually hang up your boots? You may have been a stock market player and perhaps pocketed some gains. Equities win hands down in the long run. But if unfortunately there have been losses do not lose heart. At a young age it is easier for you to make good the loss. Besides your gains can only multiply if invested rightly. Heard of the magic of compounding? How much do you think you will need then? Determine the approximate amount you will require at your expected retiring age after taking into account your needs and desires. And remember to factor in inflation. Know that around 20 years from now the value of your investments will erode considerably. The amount of money that is sufficient today to run your household may turn out to be a paltry sum tomorrow - reason why you need to consider inflation too. And yes, can you forget taxes? As age advances you may prefer to play it safe. While stocks do offer high returns you may chose not to invest a sizeable amount in them considering the risk it entails. But at the same time what’s the harm if you have a few bucks rolling in with limited risk through mutual funds. Sounds interesting isn’t it? Check out how mutual funds can help you get stock market related returns at minimum risk. Given a thought to insurance ? Depending on the goals you have set for yourself and your family you need to earmark an amount towards insurance each year. Be it accidents, critical illnesses - these may strike anytime taking a toll on your monthly finances pushing you to compromise on various comforts of your family. Buying adequate insurance can help your tide over such contingencies with ease. Unlike the past, today you have a choice of insurance products to choose from on the basis of the goals you have chalked out. Pension and Annuities Talk of Retirement and your mind conjures up images of a bespectacled old man relaxing in his rocking chair enjoying his regular pension benefit. What is pension? Insurance companies have been offering a choice of pension products to choose from. These entail regular lumpsum payments to the insurance company for a certain number of years during the initial period. And on vesting you can expect to receive an annuity. This would mean withdrawing a part amount (around 33 percent of the total corpus) tax free while with the balance you could buy an annuity from any life insurance company. Annuities are just the reverse of insurance products. While in case of insurance you pay a small amount as premium and get a lump sum on maturity or on death of the insured, in case of annuities you pay a lump sum till the vesting age and have a regular stream of payments flowing as pension till you are alive. There are various options available that will allow you return of purchase price as also offering a lumpsum to your spouse after your death. Check out how annuities can help you during your retirement years.                                                                                                                                          TOP | BACK All about Home loans and how to avail them ‘Home is where the heart is’ sums up in short how emotionally touching or painful it could be not having one. Though rental accommodations do provide you a roof over your head, they not only add to your monthly expenditure, get you house hunting after a brief period but the security factor is also nil. Owning a house is like a dream come true. The joy, the happiness that you             derive out of living within those four walls of your house - that you call                    your home is immense. Considering all this you plan to buy a house.         But then with realestate prices going up its not that easy. And                    ultimately you finally decide to go for a Home loan. A home loan is the finance that you are provided with to purchase property by housing finance companies at a certain interest rate. A Home loan is offered for various purposes. It can be for purchasing a home, Home Extension, Home Improvement, Land purchase, Home conversion, renovation etc. Check out which one fits your needs. But how much loan am I eligible for? The quantum of loan that you are eligible for depends on your net income, your repayment capacity after taking into account, your age, assets and liabilities. In the normal case around 60 times your net monthly income will be sanctioned. Your spouse can also chip in as your co-applicant to club income and further increase the loan amount. This will also help you in your taxation aspects as tax benefits will be available to both. Check out - the documents you would need to apply for a housing loan Common (for salaried as well as self-employed borrowers) Proof of Age Proof of Residence Photograph Bank Statements for the past six months For salaried borrowers Latest salary slip or statement Form 16 For self-employed borrowers Income Tax returns for the last 3 years Balance sheet for the last 3 years P&L accounts for the last 3 years Tax challan for the last 3 years Flat and house Sales affidavit/ letter of allotment in case of society or association of persons Original vendor's sale deed Original sale agreement I-T clearance as the case may be Encumbrance certificate Continued in the next edition...                                                                                                                                          TOP | BACK “ As we write this, the Net Asset Value of SBI Magnum Contra Fund is Rs 17.61. Why is the NAV so low if the fund scores well on all rankings (second for a five-year return, third for a three-year return and second for a two and one year return)? This is especially apparent if you compare it with other similar funds like Templeton Prima with an NAV of around Rs 125 or so. How do you explain this discrepancy? How can a fund that has apparently done so well have such a low NAV? Do they distribute very high dividends?”                                                                                                                                                 - Anil Understand the fund first Magnum Contra is a diversified equity fund that takes a contrarian view to investing. A normal diversified equity fund is one that invests in the stocks of various companies of different sectors. Ditto for Magnum Contra. However, as the name suggests, it will follow a contrarian view to investing. This means the fund manager will deliberately bypass the most popular stocks that everyone is chasing. Kotak Contra is another example. The fund manager in both cases will focus on stocks that have strong fundamentals but are trading at a significant discount to their intrinsic value. In layman's terms, a stock whose share price is, say, Rs 15 right now but has the potential to be Rs 100 over a period of time. And, it still does not feature in the "favourite list" of other stock pickers. In other words, the fund managers of such funds will invest in out-of-fashion sound companies. These will be stocks that are strong on fundamentals but whose value is not yet recognized by the market. To put it very simply, it is like buying umbrellas in the winter to sell them in the monsoons. If the fund manager makes some good picks, the returns could be phenomenal. Based on the type of stocks that the fund manager will invest in, this fund will appear unattractive in the short-term. Over the long run, you could reap some great returns. Do note, it may take a long time to deliver attractive returns. Therefore, you should invest in the fund if you have the patience and are willing to block your money for some time. Also, it will not be right to compare the returns to just any other diversified equity fund. Since this one will invest only in contrarian stocks, it is wise to compare its performance with other such funds. Source: Value Research                                                                                                                                        TOP | BACK Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to webmaster@insuregain.com