Where should a woman invest?

IF Carrie Bradshaw (played by Sarah Jessica Parker, in the popular HBO television series, Sex And The City), is your idol, this is just what you need to read.

Like her, you are young, footloose and fancy-free, making enough money to have a great life and thoroughly enjoying your independence. Perhaps you will think about helping your family later. But, right now, if you are doing any investing, it is only because of taxes.

You are not interested in building wealth and creating assets because you will probably do that once you settle down with the man of your dreams.

A piece of advice: don’t elope when you find him because it may not be as romantic as it sounds. All family support systems may be cut off besides a possible partial or total erosion of all savings, not to mention emotional stress after the short-lived excitement.

This is, no doubt, a financially lucrative phase made all the more enticing due to lack of commitments and complete freedom to spend your money the way you wish. But you cannot possibly spend it all because, remember, your financial resources are your strength. They will help you be independent.

So don’t swipe that card like a maniac, or you will feel your financial strength ebbing away.

What does a modern day woman do to handle her financial life? How do you invest your money? Here are a few tips:

i. Put 90 per cent of your earnings into wealth generating instruments such as shares and equity mutual funds. Since women are not traders by nature and have the patience to see the fruits of investments, they can make most of this avenue. But understand a bit about risk management first.

ii. Place about 10 per cent of your proposed savings into bank deposits or similar. Unlike single men, a woman should never be broke.

iii. Invest in life insurance prudently, and only if you have dependents on your income.

iv. Stay away from fixed investments such as Fixed Deposits, Public Provident Fund, National Savings Certificates, etc. Your goal is to build wealth, say, by the time you are married, which may be about three to 10 years away. These instruments will not serve your medium term purpose.

v. If you are looking to get married, do ask questions to gauge how your prospective partner manages money and, more important, how he saves.

vi. Women are born with a softer streak so excessive gifting/helping is second nature. But avoid going overboard here.

vii. Beware of women-oriented offers/products such as credit cards, insurance and the like. They may be expensive or regular products repackaged.

Doing the above will take you no more than a week. So stop that partying for a week. With your finances sorted out, the party will not stop for the rest of your life. With or without your husband.

Author: Kartik Jhaveri
Source: Wealth, MoneyControl

Get VCs to part with their money

BUDDING entrepreneurs may have several questions relating to the big F: funding.

For starters, get the basics right on how to woo a venture capitalist.

How important is a good presentation of an idea apart from having a good idea? How should I prepare before presenting my idea to a Venture Capitalist?
- Samir Jain, Bangalore

The presentation is a very important aspect of selling anything, including a good idea, to anyone, including a VC. It’s extremely important to be able to clearly articulate the value proposition of your company without getting lost in management and technical jargon.

In VC presentations you are unlikely to get more than 30 to 40 minutes in the first meeting to make your case. DON’T go with 50 slides — VCs have short attention spans! What this means is that you have to make an impression in the first short meeting. This can only happen if you have a crystal clear understanding of the market, the opportunities, and the value proposition.

If you cannot explain what your company is all about in a few short crisp sentences, you’ve lost the attention of the VC. This also means that you should be a great communicator. Practice!

Ideally, you should have no more than 20 slides (including the cover and ‘thank you’ slides) to cover the team, market, offering, value proposition, revenue model, and financial plan. If there’s an interest, you can share more information or use back-up slides to respond to questions.

You should demonstrate focus in your idea and in your execution plan. Practice with a few “friendly” VCs. The way to identify such friendly VCs is through networking and reference checks. Talk to entrepreneurs who you know, advisors, angels , industry groups such as TiE and Nasscom, attend entrepreneurial events etc to get connected and then over time build a relationship with them before approaching them.

Take inputs from the advisory board. What’s this? Well, it is important to consider setting up an Advisory Board one that has senior, experienced people from the relevant industry who can help you with strategy, hiring, customer contacts, governance, financing etc.

Talk to experts, those who are from the industry and those who’ve “been there, done that”. Research the industry and market in which you wish to play. Find the names of the folks you wish to connect with and then you try and reach out through multiple avenues as in the case of reaching out to VCs. This could be critical!

There is no shortcut. There is also no magic formula. The key is preparation and in knowing your market, the offering and in communicating the essence of the value in a crisp and clear manner.

How do I reach out to VCs?
- Mary Joseph, Chennai
Once the specifics have been thought through in detail, then you need to reach out to VCs. But how does one reach a VC?

As usual, there are good ways and bad ways. A bad way is an approach that shows you are ill-prepared or that you have not researched the background of the VC adequately as indicated earlier in this article.

As you’ve probably guessed by now, sending in a well-researched business plan consequent to a referral is a good way. A VC receives many plans from various sources. So, to get any attention, a referral is probably the best way.

A referral also implies that some kind of quality check has been done. So how does one get a referral? One way is to use the good offices of the Advisory Board (a group of people with relevant industry experience and expertise who can be a sounding board, help in hiring, strategy, customer connections, etc. They also provide air cover of credibility to a young start-up) or some other trusted intermediary.

In cases where a cold contact just has to be done, the Executive Summary should be sent in, first. This is a two to three page document that captures the profiles of the key team members, the market need or opportunity , the uniqueness of the offering , the business model, revenue projections, and some info on how much money is being sought and for what purpose.

This should be a well-written, professional and crisp document. If this is of interest, the VC will probably call you for a meeting. Go well prepared for the discussion. As the old saying goes, “you won’t get a second chance to make a first impression”!

Approaching a VC should be the job of the CEO. The CEO makes the elevator pitch, the main presentations and answers all the key questions about the company, the market, the positioning of the company, the road-map etc.

It is a good idea to meet the VCs with the key team members in tow as it gives the VC a good perspective of the dynamics and competencies in the management team. Make sure the team members are well prepared. For example, the marketing person should be able to answer questions about the market, positioning, customer/prospects, pricing etc.

Author: Sanjay Anandraman
Source: Wealth, MoneyControl

Buy mutual funds, cheap

IT pays to buy mutual funds directly from the fund house. Here’s why.

You save money on the ‘entry load’, a deduction made by the mutual fund company from your invested amount and used to pay the agent’s commission.

If you choose not to use the services of an agent, you can save anything between 2 to 6 per cent of your invested amount.

For instance, if you want to invest Rs 10,000, earlier (three months ago when you could not buy mutual funds directly from the company but only through its agent), the fund house would have deducted around Rs 200 (for the agent) and made a net investment of Rs 9,800 on your behalf.

But now, if you choose to invest directly from the mutual fund house, Rs 10,000 will be invested. There are three ways to buy a mutual fund, directly.

1: Head to the nearest office of the mutual fund house.

Visit the office, fill up the form, submit the documents and voila, you have saved 2 per cent. Remember that your bank and the mutual fund house, even if they belong to the same group, are separate entities.

For instance, if you want to invest in a mutual fund scheme from SBI Mutual Funds, you cannot go to the nearest branch of the State Bank of India. In this case, the State Bank of India will act as an agent for SBI Mutual Funds, and you will not save on the entry load.

Instead, head to the nearest SBI Mutual Fund office.

2. Drop in at a collection centre or investor service office.

Applications submitted to the collection centre or investor service centre will not attract entry load. If the fund house does not have an office, collection centre or investor service office in the city, you could courier your form. If the cost of the courier is the same as the entry load, it would make sense to hire an agent and save yourself the trouble.

3: Buy them online.

If you are Internet-savvy, online shopping is the way to go. Buy the mutual fund of your choice by visiting the web site of that particular fund house. Fill up your personal and investment details as asked in the application form and quote your Permanent Account Number (PAN) (this is mandatory).

You can pay through your bank account debit card, if that fund house has tied up with your bank. In case your bank does not feature in list of tie-ups, don’t worry.

There’s always Plan B:Choose to make the payment through a cheque or demand draft. In this case, you need to courier the same.

If you opt for a Systematic Investment Plan (SIP), choose the Electronic Clearance Scheme (ECS). Some fund houses do not offer SIP investments, online. In this case, you will need to visit a branch to do the same.

Top documents

When buying mutual funds you need to submit these:

• Application form
• Cheque, demand draft (depending on mode of purchase)
• Copy of PAN card attested, by an officer at the mutual fund office, your financial advisor, your bank manager, any gazetted officer/notary or judicial authority.

Agent or direct purchase: what’s best for me?

“This move is controversial but progressive. It will empower retail investors. But it makes sense to those who do not want advice and service from their agents,” says Dhirendra Kumar, CEO of Value Research.

This means that if you are a savvy investor and do not need the advice of an agent to know which fund is best for you, the direct route is a blessing. However, if you need that little bit of help, it’s always better to choose an agent and invest in the right fund.

There’s no point trying to save a few rupees if you end up making a bad investment. Also remember, that an agent will take care of all the paper work and will also be around if you need help with redeeming your investment. So, choose the route that works the best for you.

Author: Kapildeo Singh
Source:  Wealth, Moneycontrol

Smart ways to avoid wealth tax!!

THERE is a game that can tell you what is on people’s minds.

You say a word (say, ‘woman’), and give the other person a second to respond to it with the first word that comes to his mind. Some would say ‘beautiful’. Some might say ‘painful’, and so on.

Now let’s say the word is ‘tax’. What comes to your mind? Ten to one, it would be ‘avoid at all cost’.

And it would be a good answer. If you avoid tax legally, that is. Here are some ways you can do it.

As an individual tax payer or a Hindu Undivided Family, if your net wealth is over Rs 15 lakh (Rs 1.5 million), you can avail of exemptions on your assets. You can reduce your wealth tax to zero.

The easiest way is through property. To get maximum benefits, ensure that every adult family member purchases one immovable property in his/her own name.

Here’s why

i. Let’s say you are planning to buy a bungalow for Rs 80 lakh (Rs 8 million). Your wealth tax liability would be zero since, as per provisions in the Wealth Tax Act, 1957, one property is fully exempt from the purview of wealth tax.

So it would make sense to buy one property per adult in a family to reap the best of this provision.

ii. All commercial properties are fully exempt from the purview of wealth tax. So if you are holding commercial property — let’s say a shop, an office space or a factory building — don’t worry. You can own as many commercial properties as you like in your own name without having to worry about paying wealth tax.

iii. The Wealth Tax Act also says that all residential properties given on rent for over 300 days a year are exempt from wealth tax.

iv. What’s more, Section 5 of the Wealth Tax Act says the exemption for house property extends to vacant land up to 500 square metres (about 5,381 square feet).

It is not difficult to avoid tax legally. This is a double benefit because real estate is a highly appreciable asset.

Now you know what you will say if someone says ‘tax’ to respond to: Profit!

Author: Subhash Lakhotia
Source: Wealth, MoneyControl

Six tips when the markets fall flat

LIFE is full of simple rules that you should follow. Basics like ‘Do Not Covet Thy Neighbours Wife’ are not only good for your physical well being but also your soul. To these and other simple rules I’d like to add one more: Never forget that what goes up, must come down.

This rule, I believe is the cornerstone of a successful and contented life. If you suddenly find yourself flush with funds or your popularity within your friends has suddenly risen because you got photographed in the party section of the morning newspaper, don’t pop the bubbly too soon because nothing lasts forever.

And certainly not a bull run in the stock market! A sudden rise may have you smiling from ear to ear but you can be sure that the decline will soon follow. So here are six tips for a sliding market.

1. Hear no evil
First, forget about rationalising and explaining (or listening to other people explain) why stocks are falling. It’s a pointless exercise at best, and misleading at worst.

2. Remember the bad times
Second, file the painful experience away as a worthwhile reminder of the riskiness of stocks, and draw on that memory during the next market boom when optimistic market seers tell you that stocks are really not risky (Remember Sensex 25,000).

3. Don’t wait it out
If you believe, based on your preferred market measure, that stocks have over corrected, don’t wait for the correction to end. Investors who wait for final and complete confirmation that the market has turned around invariably miss the bulk of the turnaround. I was investing in 1997 through 2006 – it had nothing to do with the equity markets. It was a conviction that long-term monies should be in equities. So, if I have long-term money, it goes into equity, other wise it goes into a money market mutual fund.

4. Be contraian
Recognise that even if you are right about the market overcompensating for past mistakes, there will be months of pain before the gain. Being a contrarian is easy on paper but much tougher in practice.

5. Change of perspective
Markets will go up and go down – you cannot change that. You can change the way you look at it. When you have money you will invest, when you need money you will sell. There is no call to action based on ‘what the market will do’. So that does not matter.

6. Get real!
Finally, console yourself with the recognition that the professional portfolio managers and the market experts you see on television are staring into tele-prompters not crystal balls.

These six simple tip should keep you afloat even if things go from bad to worse. And when they do, here is another rule for you to remember : No Matter How Bad things are, remember they can always get worse! And on that happy note, I shall bid you goodbye.

Author: P. V. Subramanyam
Source: Wealth, MoneyControl

How banks make you poorer!!

BANKS today offer a slew of services to the customer, which only seem to increase by the day. However, remember this: there’s no such thing as a free lunch. Let’s take stock of what you pay to avail of services for a typical savings bank account.

1. Non-maintenance of minimum balance
You must maintain a stipulated minimum balance in your account (Rs 1,000 for a nationalised bank, Rs 5000 for a private bank).

If you fail to maintain this average quarterly minimum balance, you attract a bank charge of Rs 750-1,500 respectively. You could also face fines for cash transactions at branches and ATMs.

2. Cheque book charges
Most nationalised banks provide chequebooks free as per your requirement. Many private ones, on the other hand, charge you Rs 50-200 per chequebook, if you use up more than 2-3 per quarter.

3. Account closure charges
Some banks charge Rs 50-200 if the account is closed before six months elapse.

Must read: Salary account: Naive outside, knotty inside

4. Charges for certificates
Unlike most nationalised banks, private banks charge Rs 50-Rs 250 for documents such as balance certificate, interest certificate, address confirmation, signature attestation, photo attestation.

5. Cheque return charges
Nationalised banks fine you Rs 50-Rs 200 in case of cheque return (due to insufficient funds, signature mismatch etc) but private ones charge you Rs 100-Rs 500.

6. Cash transaction at other branches
In case of a cash transaction at a branch other than where your account is opened, 1-3 transactions are free per quarter. Beyond that, be prepared to be charged at the rate of Rs 5 per for every Rs 1000 transacted.

7. ATM charges
If you use the ATM of another back for balance enquiry or cash, you could be charged anything from Rs 10-100 per transaction.

8. Account statement
RBI directs that all banks must send free quarterly statements to their customers. Should you require more statements (in case of loss etc), you may have to pay Rs 50-500 per statement.

9. ATM or Debit Card fees
Most banks offer ATM cards free of cost but some do charge their customers for debit cards. For example, ICICI Bank provides a combo ATM/ Debit card, for which it charges Rs 99 per annum.

Over and above these, there are several other charges, such as outstation clearing charge (Rs 50- 500), pay order/ demand draft charge (based on amount), standing instruction charges, home cash delivery charges, old records retrieval charges, activation of dormant account charge etc.

Note: Visit the bank’s web site or any of the branches, for a copy of these expenses. It is mandatory for every bank to give it to you.

Author: Ketul H Shah
Source: Wealth, MoneyControl