by Rajnikanth | Feb 10, 2021 | Blog
“If life were predictable it would cease to be life, and be without flavor.” – Eleanor Roosevelt Life is uncertain and is subject to various kinds of risks ranging from death, destruction, disability, etc., often resulting in financial losses. We might not be born with the expertise to deal with uncertainties, but the best we can do is to be prepared to deal with the risks associated with the uncertainties. Insurance is considered as one of the best ways to reduce such risks as it enables two parties, viz the insurance company (which shall thereafter be known as the Insurer) to enter into a legal agreement with individuals (who shall thereafter be known as the insured). The concept of insurance is quite primitive. According to the Insurance Regulatory and Development Authority of India (IRDAI), this concept has been mentioned in the writings of Manu, Yagnavalkya, and Kautilya. Their books Manusmrithi, Dharmasastra, and Arthasastra discuss the concept of pooling resources to be re-distributed in times of calamities. This was probably an earlier version of modern-day insurance. What is Life Insurance? In legal terms, life insurance is a contract between an insured and an insurer in which, the insurer promises to pay a pre-decided sum of money to the insured on the occurrence of certain unfortunate incidents (death of the insured person in this case) or upon completing a certain period as previously decided by the two parties involved. Importance of Life Insurance Keeps your family financially secure: The most important features of life insurance come from the purpose it serves. Life insurance companies offer compensation to the nominee in the form...
by Anukrishnan T S | Feb 1, 2021 | Blog
“Do not save what is left after spending; instead spend what is left after saving.” ― Warren Buffett It is said that well begun is half done, the same is the case with educating children on the importance of savings. With ‘n’ number of brands competing with each other to acquire more customers daily, we need to save for our future while maintaining our standard of living. As childhood is an age where one can easily be influenced by advertisements and other forms of marketing, we must educate the children on savings and inculcate saving habits in them from a very young age. Let us now look at why we need to educate children on the importance of savings. i. It makes them aware of financial security: Educating children on the importance of saving at a very young age makes them aware of financial security and learn saving habits. This awareness will help in ensuring that they have sufficient cash in hand throughout. The future is always uncertain and having enough savings will help you meet the ends even during the most difficult of times. ii. It gives them options to generate additional income, by starting additional ventures apart from their regular profession: Gone are the days when people were in the habit of sticking to just one profession. As opportunities rose across various domains, people also started engaging in part-time jobs or a venture of their own to generate additional income. Having read this, the very first question that arises in our mind would be: Where do they get adequate funds to invest in a new venture? This...
by Noufal Latheef | Jan 29, 2021 | Blog
Covid-19 has been creating phenomenal impacts on our lives like never before and the recent mutations have forced the European and Gulf countries to close their borders. Taking a quick look at what we have experienced over the last couple of months will help us understand how much hospital expenses an infected person incurs especially when one’s health becomes critical. The cost incurred by us not just includes the hospital expenses, but also the income lost while we’re away from work (loss of pay). When it comes to the duration of leave, what differentiates this leave from other types of leaves are the mandatory quarantine norms one has to adhere to. The tendency for reduction in one’s income occurring as a result of his request for a less strenuous role or reduced number of working hours (once he or she is back at work) makes things even more difficult. A typical health insurance plan comes at a reasonable premium functioning on an indemnity basis compensating the insured only in case of hospitalization. On the other hand, insurance for a critical illness like covid enables us to bring life to normalcy by paying us a lump sum amount irrespective of the size of the hospital bill. A coronavirus health insurance policy covers all the expenses incurred by a policyholder irrespective of the kind of ailment detected in the person. What adds to the woes is the reluctance on part of the people to take covid insurance, despite being aware of the rate at which the spread is taking place. There are a variety of insurance plans that can relieve you...
by Suvin David | Jan 4, 2021 | Blog
Financial goals are those that you strive to achieve with your hard earned money. While there are financial goals that most people set every year, we are highlighting a few financial goals that we feel every one should keep in mind by the time they approach the big 4 – 0. When you hit 40, you have little time to lose. Its usually the time when most people are already half way into their earning careers, have a family to take care of, parents have retired, and when commitments like children’s education, home loan/ personal loan repayment need to be managed. So what does the financial to-do list look like when you are 40? managed. So what does the financial to-do list look like when you are 40? 1. Securing A Home For Yourself Owning a home is ranked as one of the highly ranked goals for almost every Indian. Given a preference of renting or owning a home, most are likely to choose the latter without batting an eyelid. And rightly so, as owning a home ensures security and at the same time you have an appreciating asset in hand. While owning a home is a financial goal most people set in their 30s, if you have hit 40 and you are yet to own a home, now is a good time to ensure this financial milestone is met. Buying a home using a home loan ensures that you have a longer time frame to pay the dues and it also ensures tax benefits as well. 2. Build An Emergency Fund Life’s emergencies spring upon us at any...
by Josin Jacob | Dec 15, 2020 | Blog
A year after the economic crisis of 1991, Foreign Institutional Investors (FIIs) were first allowed in Indian markets in September 1992. In the initial 4-5 years, the FIIs were investing in the equity segment alone, and it was from 1996-97 onwards that FIIs started investing in the debt market. The two reasons why FIIs cash inflow happens is when the existing money in the global market is guided to our markets as they see a better growth opportunity or it can be preceded by enormous liquidity available in the market due to the change in fed policy or stimulus from developed economies. In 1998 -99 for the first time, we had a negative flow in FIIs, due to the Asian currency crisis. A net outflow of 1,584 crore rupee from our capital market caused the Nifty 50 index to form bearish candles from May 1998 as it crashed 35% to 800 in December from its high of 1,247 in April 1998. Though by March of 1999 it made up to 1078 by recovering 60%. In the following year, the markets witnessed an unprecedented cash flow of 10,112 crore rupees out of which 9,670cr flowed to the equity market. By the end of the FY 2000, the market had rallied to new highs of 1818. Post the Asian currency crisis, investors looked to outside the Asian Tiger countries of Hong Kong, Singapore, South Korea, and Taiwan and this highly favored India as it was an emerging economy. After surviving the dotcom burst India had seen another massive FIIs cash inflow in the succeeding years which remained consistent from 2003-04 to...
by Josin Jacob | Dec 15, 2020 | Blog
The term ‘Helicopter Money’ was coined and introduced by American economist Friedman in the year 1969 in his popular essay, “ Optimum Quantity of Money”. But it was Ben Bernanke, former Federal Reserve chairman who popularized it in 2002 through his Quantitative Easing program. Milton Freidman used the term to signify “Unexpectedly dumping money onto a struggling economy with the intention to shake it out of a deep slump”. Through such kind of a policy, a central bank directly increases the money supply and via the government, distributes the new cash to the population with the aim of boosting demand and inflation. This term ‘helicopter money’ could be described as a quantitative easing policy, where currency notes are increased and more money is pumped into the market. However, Helicopter Money is an unconventional monetary policy usually used to bring a sinking economy back on track. It is usually employed in low-interest-rate environments when an economy’s growth remains weak. It is then executed by quickly increasing the money supply which can be enacted as monetary policy by a bank, or as fiscal policy by a government through massive tax cuts or spending programs, including relief programs like the stimulus checks paid to American households during the COVID19 pandemic. Apart from implementing the concept of helicopter money, central banks can also use quantitative easing to increase the money supply and lower interest rates by purchasing government or other financial securities from the market through open market operations and thereby trying to spike the economic growth. Unlike with helicopter money that involves the distribution of printed money to the public, which will...
by Benil Dani Alexander | Dec 10, 2020 | Blog
“An investment in knowledge pays the best interest.” – Benjamin Franklin When I was small, I had a small piggy bank in which I used to regularly set aside a little amount that I received as pocket money from my family. The sense of savings was simple back then for the younger me, giving me a security blanket for all the things I wanted to buy. As I got older, I got to know that its not as simple as I thought it would be – the concepts of savings, investments, loans – are quite complex and to deal with it I have to be more equipped. However after being in the financial services industry for the last decade, I can confidently say that there is a guiding light that can equip us all with a better earning potential and secure our financial future – financial literacy! Coming from a 100% literate state like Kerala, where most people rely on the traditional ways of investments, its not shocking that statistics reveal that less than 5% of the population here is financially literate. This is what got me passionate about the concept of financial literacy and to be a torchbearer for the same! Garnering financial skill sets early on is crucial for making informed financial decisions and ensuring long-term financial success. By being financially literate we can easily understand the various financial products we can invest in by calculating the risk return trade off we are taking for each. It will also enrich us to make better judgments, as we will have better understanding of the economic changes happening around...
by Anukrishnan T S | Dec 10, 2020 | Blog
Since independence, India has relied on various methods to tackle poverty –from providing basic public services like health care and education to distributing pensions and subsidies. However, the scale of poverty has weighed heavily on the country, which has lead the Indian government to look at alternative and ambitious ways to overcome it. The concept of Universal Basic Income (UBI) was first introduced in the 2016-17 Economic Survey as a feasible solution to overcome poverty. Since then this revolutionary program has gained renewed attention as economists have vouched for it as a way to overcome technological unemployment and improve upon the existing welfare programs. The idea of UBI is to provide periodic and unconditional cash payments to all citizens. Two pilot studies were undertaken in West Delhi and Madhya Pradesh to examine the impact of monthly payments on some of the poorest and most vulnerable sections. Preliminary findings showed there have been numerous improvements in health, productivity, and financial stability in the recipients of the cash transfers. Supporters of the UBI include prominent economists like Guy Standing who emphasize that UBI has far-reaching consequences that include the emancipatory value that extends beyond its monetary value. And contrary to the Indian Public Distribution System (IPDS), which has a higher cost to implement with storage and transportation of subsidized goods, UBI provides no strings attached basic income to the recipients. Critics worry that the UBI structure will undermine the already fragile social security structure and encourage workers to drop out from the labor force. Though there are supporters and critics of the UBI, the government should proceed with caution and ensure...
by Ajith C J | Dec 1, 2020 | Blog
According to Investopedia, “Trading psychology refers to the emotions and mental state that help to dictate success or failure in trading securities. Trading psychology represents various aspects of an individual’s character and behaviors that influence their trading actions.” Apart from knowledge, experience, and skills, it’s well researched that emotions play a great role in managing trades and making money. Some of the common emotions that are associated and drive trading psychology include – fear, greed, hope, and regret. Containing emotions, thinking quickly, and exercising discipline come under the purview of trading psychology. Lets now look at some of the frequently faced emotions that affect trading: 1. FEAR The Dictionary definition of fear is “a distressing emotion aroused by impending danger, evil, pain, etc. whether the threat is real or imagined; the feeling or condition of being afraid.” It’s important thus to focus on whether the threat is real or imagined. Most often in trading, the threat is imagined, and it leads the trader to make sub-optimal decisions. Traders thus need to understand what fear is and the different types of fears experienced while trading. Some of the common trading fears include: Fear of the unknown: It’s not easy to predict the losses that you may have to take or if the prices will swing in your favor. The best way to counter this fear especially for new traders is to be equipped with as much knowledge as possible about the markets by both taking courses as well as reading good trading books. Fear of losses: Humans are afraid of losing and will go to great lengths to avoid losses. Though in order to avoid losses, traders often hesitate to cut losses or execute trades when the time comes. Rationally...
by Noufal Latheef | Dec 1, 2020 | Blog
Having a home to call your own is an individual’s dream. Investing in real estate offers numerous benefits – while ensuring that you find a home for your family, it also serves as a good investment option. The rapidly falling interest rates makes taking bank loans as an ideal solution for individuals to finally make the dream of owning a home a reality. Here, it’s important to understand the introduction of the Marginal Cost of Funds based Lending Rates (MCLR) system with effect from April 1, 2016, by the Reserve Bank of India (RBI). Under the MCLR, RBI asked all banks to follow the marginal cost of funds method to arrive at their benchmark-lending rate. In MCLR, actual loan pricing will be based on this benchmark depending on the credit standing of the customer and the existing relationship with the bank. In contrast, home loans taken before April 1, 2016, were based on RPLR (Retail Prime Lending Rate), which was arbitrarily decided by banks. It is the benchmark on which the banks price their loans to customers and is based on the average cost of funds of the bank. The problem with the RPLR is that it is not very flexible and hence does not move with the shifts in the RBI repo rates. This largely defeats the entire purpose of RBI rate cuts since these rate cuts do not get transmitted to the end borrower. For home loan borrowers who have taken loans before 2016, it’s important to move to the MCLR system to truly benefit from the falling interest rates. Two steps that customers need to ensure to move their loans to the MCLR system include: 1. Write a letter to the bank informing them...
