Category Archives: Blog

Miss to Mrs : What else to do when changing title

Life changes after marriage and for many women along with a change of life also comes a change of name. Miss. T Bhargava, a Mumbai based Lawyer, is engaged and is about to get married in a few months to Mr. B Sharma, a Medical professional. Says Miss. T Bhargava, “First I was wondering if I should replace my surname Bhargava with Mr. B’s surname Sharma after marriage or not. But then I thought I should change it, after all it’s a sign of unity, and also it’s cool.” While this 20-something will go for the traditional and most popular choice, these days many women choose to retain their last name, and some add their husband’s last name to it: heard of Aishwarya Rai Bachhan? This dilemma most women face when getting married or recently married.

To change or not to change the last name is a very personal decision, but if like Miss. T, you do plan to change your name, you will need to get legal and financial documents updated accordingly. Here’s a quick guide to what you should do once you decide to change your name.

 

Change of name and marriage certificate

There are two ways to change your name. One is to apply for name changed in the state government gazette. If your name change is due to marriage, you can also apply for a marriage certificate at the office of the registrar of marriage.

Keep in mind that it usually takes a month or two for the marriage certificate to reach you. Marriage certificate is the proof of registration of the marriage and a document that helps you get your new name updated across other financial and legal documents.

Though the time to get the certificate is almost the same, the process varies for marriages under the Hindu Marriage Act and the Special Marriage Act. As per the official portal of the Indian government, www.India.gov.in, “The Hindu Marriage Act provides for registration of an already solemnized marriage. The Act does not provide for solemnization of a marriage by the registrar. The Special Marriage Act provides for solemnization of a marriage as well as registration by a marriage officer.” Since the process varies slightly across states, we suggest you find out about the process in your state to apply for the certificate.

 

Permanent account number (PAN)

The next step is to ensure that you get a change of surname on your PAN card. These days it’s almost impossible to do any financial transactions without giving a copy of the PAN card.

“When there is a change of surname post marriage, you need to update your PAN card. The procedure is simple. It’s similar to applying for a new card; the only difference is that you will need to provide your old card number to the authorities. Your new PAN card will carry the old number, but with a new name.”

Keep in mind that you will have to submit your marriage certificate or a copy of the official government gazette, while applying for name change in the PAN card. Even a copy of a joint (with spouse) notarized affidavit will do, to get the PAN updated. Ensure that you inform your employer, chartered accountant and financial adviser about the change in the PAN card name so that your income-tax papers could get updated accordingly.

 

Banking relationships

The next step is to get all your banking relationships up-to-date with your new name. “In case of a woman needing name change after marriage, a marriage certificate is required to be produced for effecting the same in bank records. Banks as per their internal guidelines may seek additional documentation to authenticate the request.”

Generally, the marriage certificate and the joint notarized affidavit from a notary get the job of name change done in banks. When you visit the bank branch, remember to update the change of address along with the name change request. Here, the bank may ask you for your husband’s address proof as well such as a copy of his passport.
“Once your bank statements have your new name and new address, it more or less works as an address proof.”

As far as the affidavit goes, it needs to state the maiden surname, the new changed surname, your photograph and signature as well as your husband’s signature. Usually this notarized affidavit and marriage certificate are needed to change surname on other documents. But keep in mind that getting a change of name at a bank is faster than getting it changed on the passport.

 

Credit report

Do ensure that you get the new surname on all your deposit accounts as well as any loan accounts. As far as credit report goes, this is one document where you get a respite from updating your name on your own. “Any changes in customer database, including name and address, get refreshed every month for all loan customers by the bank to Credit Information Bureau (India) Ltd.”

 

Passport

If you already have a passport and need to update your post-marriage new surname, you will have to apply for a re-issue of passport and not a fresh passport. Though the application process remains the same, the documents you will need to get a reissued passport due to name change will be different.

For instance, along with marriage certificate, you will have to submit the old passport in original with a self-attested photocopy and a copy of the husband’s passport.

 

Other documents

Other documents where you will need to update your new surname are driving license, voter’s identity card and the likes. “As far as insurance policies go, if you are a nominee, ensure that the correct name is mentioned. You don’t want your old name mentioned as a nominee when you have already changed to a new name. That will only increase problems in the future.”

Also, with a new surname and a possibly new address, you will need to get you know-your-client information updated; name change across other financial investments, such as mutual funds and shares will follow.

“If it’s a property that you own, get the name change updated. Say you own a house, inform the society about the change of surname.”

Ensure there is uniformity in all your financial documents. Of course it’s not as easy as it sounds and you probably have to spend a month or so to get all this done. But it’s best done sooner than later to avoid problems in the future. And if you are a man who wants to take your wife’s surname along with yours, the process still remains the same.

For both the situations, connect to me and I am happy to help ☺

 

Fiscal Health and Mental Wealth

Isn’t it curious how the word valuable means different things in different contexts? 

This past month of the lockdown has made me reflect on what truly is valuable to me. Some of you may have done the same too. 

I have thought about what brings meaning and purpose to my life, my vision which translates to having goals and desired pathways to reach those goals. And I have even reflected on my consumer behavior. What would I buy and why, have I saved enough for a rainy day, have I invested wisely? Has my perspective changed in the last month (and more) since the lockdown? I realized that the lockdown actually made me recognize the feedback loop between financial planning and mental & physical health. 

Let me take a step back and go back to the basics. 

There are some key values that our parents teach us, especially in a country like India, where parents are the main socializing agents and where joint families still exist. Here are some key credos my parents lived by, role-played for us, and taught us about: 

  1. You have to be independent and stand on your own feet. Financially foremost.
  2.  “Jitni chaadar lambi ho, utney hee pair phailaaney chahiye.” (“Stretch your legs only as much as the length of your blanket.” In other words, live within your means.)
  3.  Always keep some money hidden away in a section of your wallet. Keep it as a reserve and use ONLY in case of an emergency.
  4.  We (parents) repeat, you have to be self-reliant & resilient in every way.
  5. Take care of your health proactively.

I reflect back to these credos and realize how these became a core part of me growing up. And from thereon follows the link between financial, mental, and physical well-being. My parents taught me well. 

I learnt to live within my means and continue to save enough from my earnings in case a crisis ever hits. We’ve invested our earnings wisely to reap some dividends. But perhaps my most proactive investment is in my overall mental and physical health. 

This is also my most important investment for several reasons:

a) Being optimistic, calm even in the face of crises, being goal-driven, resilient, self-efficacious, proactive, and collaborative makes me function at my best personally and professionally.

b) Being in good physical health (thanks to being a marathoner) keeps me energized through the day so that I can focus on all the tasks at hand, and that further reaffirms my mental grit and strength.

c) Being healthy further prevents frequent visits to the hospital and extra expenses of procedures, medicines, and other treatments. I save prudently on big healthcare costs. 

And so, money gets invested where it acts as a buffer when the going may get tough or for when I eventually retire. I try to live well within my means, and keep my lifestyle modest. My only indulgence is travel and we try to plan that well making sure our investments and savings don’t get affected. I am grateful for all that I have, and everything that continues to come my way. 

The lockdown brought home a point my parents have always known: Thoda hai, thodey ki zaroorat hai/Zindagi phir bhi yahan khoobsoorat hai (“There is little, little is what I need / life here is beautiful still.”) 

During this current crisis, the seas have gotten turbulent and rough, the boat was rocked, but I could adjust the sails to manage the tough course. That much was in my control. 

But I recognize that what the lockdown did also was throw people off track and cause immense stress. 

But what exactly do I mean by stress? It’s important to understand and highlight that in order to illustrate the feedback loop (which I’ll come to in just a minute). 

Stress is a nonspecific reaction in our bodies in response to a real or imagined threat. It’s manifested physically (such as aches and pains, difficulty sleeping, nausea, loss of appetite etc.), mentally (difficulties in concentration, decision making, memory), emotionally (feeling tense, anxious, worried, sad, irritable, angry), and behaviorally (e.g., absenteeism from work, crying, shouting, blaming). 

In these unprecedented times with the covid-19 outbreak and its imposed lockdown, life has brought to a grinding halt to what once was routine and normal. 

Our basic physiological needs of food, water, shelter, and breathing have been under threat like we have never known before in our lifetimes. Our comfort of feeling safe and secure has also been compromised where our financial resources, vocational status, health, and social stability are under question. Yes, I am referring to Maslow’s hierarchy of needs which still holds true even in 2020, 77 years after it was first published. 

Maslow’s hierarchy of needs

When these needs are unmet or inadequately met, stress results. 

“The fear of the unknown” is a fundamental fear underlying our anxieties. 

It’s fanned by the absence of clarity in the information that the media spews out, barring the numbers of rising covid cases nationally. When will the lockdown end? What will happen to our jobs? Will I even get a salary this month? What if I get laid off? What about my savings and investments? The uncertainties and the absence of a path ahead fuels our fear. Financial insecurities are looming large and we may not have kept aside enough to tide by the months of expenses that will continue to show up: EMIs, utility bills, school fees, salaries of staff, groceries, etc. 

And thus begins the downward spiral, triggering stress that manifests physically and emotionally. 

People with unhealthy coping mechanisms such as resorting to alcohol and drug use or emotional eating are more prone to sedentary behaviors such as being on the web or surfing TV mindlessly. 

Our physical health takes a turn for the worse which then directly influences our financial health. This vicious feedback loop results in a financial drain by increasing medical expenses, reduced productivity at work, being depressed and anxious, all of which pose significant obstacles in making sound financial decisions, to think proactively, to anticipate and plan the future, to take charge of life, to problem solve. 

The stress further rises, and we decide to cut corners to avoid unnecessary expenditure. The first thing to take a hit is healthcare. We avoid consultations with doctors, necessary diagnostic tests, required treatments, because of the high cost involved. The spiral deepens, with a person now being financially, physically, mentally, and emotionally depleted. 

“If only I had saved and invested wisely.” “How will I make all these regular monthly payments and manage my expenses?” “I see debt looming large.” “I now see the flaw in my foolhardy outlook of “live for the moment, don’t save.” “What will I do now to deal with this?” 

And sometimes, despite our best efforts, our most prudent decisions also backfire because of factors beyond our control. (Remember “investments are subject to market risks?”) 

The stress further builds up and the vicious cycle further spirals out of control. Till we decide to break the chain and contain its devastating effects. 

So how exactly can we do that?

The first place to begin is to manage one’s emotions and become emotionally resilient. We can never think through a problem when our mind is racing, overwhelmed, and we feel hopeless and helpless. We have to garner the strength to think through calmly, to take informed decisions, to be proactive in managing our overall well-being: emotionally, physically, vocationally, socially, financially, to name the important domains. 

Being resilient means having a vision, a reasonable plan for the future taking in mind that life may throw a googly at any point. It means being proactive, being able to bounce back from adversity, being able to problem solve. 

How can we improve our financial behaviors? Can I reflect on the areas I spend on, and how I can be mindful of resource allocation? How can I invest and save wisely? 

The answers I have will seem commonsensical, but that’s precisely why they will work. 

They stem from planning emphatically and empathetically for one’s future, by creating a budget that allows for expenses and savings, by consulting a financial advisor and other experts who can guide you, and most importantly, by engaging in health promoting behaviors to steer towards the wellness spectrum rather than doing nothing and inching towards illness and pathology. 

The illustration below will clearly show you where your financial resources will end up being depleted, barring, of course, diseases and illnesses that are not linked to dysfunctional lifestyle choices. 

Illness-Wellness Continuum

Here’s the bottom line. What happens in the markets, in the external world, in the eyes of other people—none of these is in your control. 

You are in your control, though. And that is the biggest insight I can share with you. 

You have to reflect on the way you have crafted your lifestyle choices and its plan till now. Has it taken all dimensions of well-being in consideration? We often think wellness is only the absence of disease, and being physically and mentally fit. The fact of the matter is, it is interrelated across seven dimensions: Physical, Emotional, Intellectual, Spiritual, Social, Vocational, & Environmental. 

Striving towards paying attention to where the balance is tipping over, assuming responsibility for our own self to know the causes and consequences of our own behaviors, being proactive, forward moving, and taking deliberate action where needed is where our focus needs to be. 

The covid-19 pandemic has shown us a mirror. What we choose to do now with what the reflection is showing us, is upto us. Move…onward and upward. And connect the dots between our fiscal, physical and mental well-being. That way, your mental wealth will not be subjected to market risks.

 

Author Bio

Dr. Divya Parashar, a Clinical & Rehabilitation Psychologist with over 20 years of experience. She has co-authored a book titled “Move: Get Fit in 15 Weeks,” and her work has also been published in peer reviewed journals.

Critical Illness Insurance – Cover & Benefits

In midst of lockdown getting bored one of my close friends called up to check with me if Critical Illness cover is same as Mediclaim. She had heard one of her colleagues mentioning it. It got me thinking…
Majority of us tend to confuse critical illness policy with a Mediclaim policy or we are not aware of this product.

Mediclaim policy reimburses the hospitalization bill, whereas the critical illness policy pays out a lump sum amount (sum assured) on the diagnosis of critical illnesses covered under the policy. In short Critical Insurance policy are fixed benefit plans where lumpsum is paid to the policy holder in case of diagnosis of critical illness irrespective of hospital expenses.
Medical treatment costs are getting expensive and medical inflation is often quoted in double digits. A simple Mediclaim policy is not enough to cover expenses relating to major diseases.

Some people may argue against Critical Illness cover but we must note that our sedentary lifestyles and stressful lives are giving rise to all kinds of illnesses, most of them critical in nature. Not only the number of people diagnosed with critical illness are increasing, the age at which people are being diagnosed is decreasing.

Features of Critical Insurance Plans:

  • Coverage is provided for up to 36 major critical illnesses. This may vary from one insurance provider to another
  • Lumpsum payment -the insurer provides the lump sum payment for the treatment of covered illnesses
  • Easy claim processing
  • Usually the coverage is provided after the end of the waiting period
  • Part of the lump sum can be used as income replacement

Critical illness cover offered has two options – Standalone policy and critical illness rider. A standalone policy is a plan that provides comprehensive coverage for critical illnesses. The critical illness rider is an optional add-on feature you buy along with your health insurance policy or life insurance policy. Both standalone policy and rider provides coverage against critical illnesses. The choice between the two depends on one’s requirements, budget and family health history.

Difference between standalone policy and critical rider:

*Standalone CI can be bought from Life insurance/General insurance. In our experience Separate CI plans of life insurance companies are highly complex, restrictive and have several conditions attached to them. Getting a CI plan from a non-life insurance company or a health insurance company may therefore be a better option. A standalone policy offers more flexibility in choosing the sum insured and larger covers as compared to riders.

How to select Critical Illness cover?

  1. List of critical illness covered-You must aim to but policy which covers maximum number of critical illnesses. There is no harm in consulting with your Family doctor. Being your family Doctor, he/she will be well versed with your family and your health history.
  2. Size of the cover-Carefully mull over the average expense of treating critical illnesses when evaluating the size of the cover. Factor in inflation. Take a higher cover if possible.
  3. Look for higher renewability-Compare different critical illness insurance plans and consider the policies that offer higher renewability.
  4. Look for tenure and sum insured- Look for policy that offers longer tenures and higher sum insured
  5. Look if there’s cap on claims-Most critical insurance plans have a cap on claim amounts depending on what ailments are you making a claim for. Look for a policy that offers generous cap on claim amounts.
  6. Survival clause-Most critical illness policies have a clause that the policy holder must survive for a specific number of days post the diagnosis of the illness in order to make a claim. So, look out for a policy that involves minimum number of days that the insured needs from the day of diagnosis.
  7. Check out the waiting period-Typically there is a waiting period for pre-existing illness to be covered by the policy. Look out for a policy that offers minimum waiting period.
  8. Take a careful look at the policy details. It’s important to read through the exclusions mentioned in the policy document and as mentioned earlier consult your family doctor on the policy language/coverage/waiting period.

Thinking about critical illness? Want to know more about critical illness or how it can be useful for you during this emergency time. Feel free to write us on contact@sbsfin.com

STRIKE A BALANCE BETWEEN WANTS AND NEEDS FOR A HEALTHY FINANCIAL LIFE

When chalking out a monthly or quarterly budget, it’s important to consider what you spend your money on. Financial planning begins with how you spend your money “wisely” and for a healthy financial life or to achieve financial dreams, it’s important to strike a balance between your “wants” and “needs”. But what are these wants and needs? Is everyone’s perception of wants and needs the same? Does it vary from person to person?

Define needs & wants

All your expenses and spending activities happen broadly under two categories – your needs and your wants.

Your needs are something which you can’t do away with. These are essential things that you cannot go any significant period of time without. Can you skip paying your monthly utility bills or skip “grocery shopping” or not spend on “fuel” and “transportation”. Certainly not! These are the things you have to take care first and only then comes other things which you can do without.

Whereas your wants are “non-essentials” which you wish to have but they are not above your needs. A want is essentially something that enhances your life and that you’d like to have, but that you can easily get away without having. Buying that latest phone in the market, splurging on shopping, having a car – you can certainly live without spending on these!

Now, wants and needs vary from person to person. Some people’s Wants can be a Need for others and vice versa. For example, a professional who has a car and used it for many years may think of upgrading it into a better model. Conversely, someone who admires a certain car model and would like to buy as a first-ever car purchase, such spending would be a want. It all depends on your lifestyle. And many a time it depends on your financial capabilities. When you accumulate a lot of money, you may buy things that you want apart from the things that are needed on a daily basis.

What goes in the needs bucket and wants a bucket

Before you start building a budget, it’s crucial to understand what really fits into each of these categories, and objectively evaluate your spending habits.

Your rent or home loan EMI payment is absolutely a need. Your basic groceries, transportation to and from work, clothing, and utilities like water, electricity, food fuel, etc. have to be taken care of every month. Healthcare and insurance are also important needs. A household runs on these basics and 50% (approx) of your earnings goes in taking care of all this.

However, make sure your needs and wants don’t overlap. Here’s how:

  • While food certainly qualifies as a need, a fancy Saturday dinner is considered splurging and fall
    into the “want” column.
  • Grocery shopping is a must but buying more expensive brands at the grocery store, or buying multiple utensils with same function goes into wants category.
  • Clothes, too, are a need, but they can quickly fall into the want category if you’re splurging on expensive brands or buying outfits you’re only going to wear a couple of times.
  • If you’re spending far too much on rent or EMI on home loan in order to live in a larger home or better housing society may also be considered as a “want”.

Clearly there are plenty of thin lines between needs and wants. Ultimately, it’s up to you to decide what falls into which category. The whole motive and intention should be to avoid falling into the trap of overspending on wants under the disguise of filling basic needs. If you cross the line, you will end up spoiling your financial health. Although it’s fine to occasionally spoil yourself, but making it a habit could result in long-term financial issues.

How to Balance between Wants and Needs?

By following the 50-30-20 rule, you can simplify your budget. It gets easier that way. Which means 50% of your budget/spends should go towards your needs and 30% of your budget/spends should go towards your wants. The remaining 20% should not be spent at all and should directly go for your savings. The trick is to strike a balance in these limits and automatically your financial balance will fall into place.

Also, it might seem that minimizing your spending on wants is the foremost rule. But in reality, the objective is to reach a healthier balance within your spending habits. Just because you classify an expense as a want doesn’t mean that you shouldn’t be spending money on it. As long as you’re properly managing your budget, you can meet your needs while still enjoying your wants and uplifting your lifestyle.

Eat out certain on certain weekends, go on vacation but budgeted one, go on shopping but not occasion based – chalk out your wants and they won’t look like a burden. If you find that you aren’t allocating your budget in a healthy way, move things around. The aim should be to spend/save money for your needs and then take care of your wants. Once you prioritize all your expenses/goals in these categories, planning your finances becomes easy!

First things first – properly classify your needs and wants according to your financial health and monthly earnings. Secondly don’t overspend on your wants (remember they are luxury). Thirdly regularly review your spending and properly allocate money for needs and wants in a budget-healthy way. And lastly, to better handle your financial health you may need a financial doctor aka a financial advisor who can help you build a financial plan.

When budgeting, a financial advisor optimizes your financial plans to make sure you’re still on track for long-term goals like owning a house or retirement. Finding the right financial advisor that fits your needs doesn’t have to be hard. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started with one. In case you need a professional touch, feel free to write to us.

Importance of Investing with a personal finance expert

Personal finance, as the name suggests, is the process of managing the finances of you and your family. This process includes all the elements related to cash management, such as earning enough income, regulating your expenses, saving enough cash every month, investing in the proper channels, and protecting your funds. Also termed as a budget or financial plan that helps you secure a worry-free and safe future.

How investing with a personal finance expert would help?

10 Powerful reasons why financial planning with a personal finance expert – will get you where you want to be.

  • Income: It’s possible to manage income effectively. You need to calculate how much you make on an annual basis, which is inclusive of salaries, bonuses, pensions, and dividends. Once you have an exact figure, you can divide this amount into expenses, savings, and investments. A personal finance expert can help you derive the income and further plan the spend.
  • Spend management: The next element on the personal finance roadmap is calculating your expenses, which can include purchasing all the consumable products on a monthly basis. You can make payments either through cash or credit. Some of the vital areas where we spend money include rent, loan EMIs, mortgage payments, taxes, food, entertainment and travel, and credit card EMIs. Note, if the difference between your income and expenses is negative, you have a deficit. As a result, you should be able to properly manage your expenses so that you can follow good personal finance management.
  • Savings: Savings includes the cash left after deducting expenses from income. You save cash for future investments or spends. One of the most critical areas of personal finance, savings includes real cash, savings or checking bank accounts, and money market securities. An increase in cash flow allow you to consider investments to improve your overall financial well-being.
  • Family Security: One of the foremost and most accepted reason behind personal finance is ensuring the financial security of your loved ones. The various options like insurance coverage, pension plans and policies in place ensure financial wellbeing for your family.
  • Investment: Investments mean buying assets that you expect to generate a better rate of return in the near future. Some investments are risky; so you should analyze the market trends properly before making a decision. People usually invest in stocks, bonds, mutual funds, real estate, private companies, commodities, and art. Investing is a complex process and we would recommend you to seek the advice of professionals when you need to analyze the difference between risk and rewards.
    Investing with a personal finance expert will help you with your personal circumstances, objectives and risk tolerance. She ensures you do the right types of investments to fit your needs, lifestyle, and goals.
  • Lifestyle Management: The savings created in good times always prove beneficial in difficult times. For example, you can make sure there is enough liquidity and insurance coverage in case of a circumstance when you become unable to work or take a sabbatical or even if you need a break in general.
  • Financial Understanding: Investing with a personal finance expert will help you set measurable financial goals, you will understand the reason and impact of the same and at the same times you can assess and indulge into reviewing results. This gives you a whole new approach to financial understanding and makes you even more ready for a life of abundance.
  • Assets: A personal finance expert ensures that you have assets beyond the requisites. And she will help you evaluate and choose assets that never become a liability. The experts help in determining the real value of assets as well as they make you aware of hidden costs and expenses attached to settling/ cancelling or transfer of assets. She ensures that your assets never become a burden in future.
  • Protection: Personal protection includes all those products that protect you and your family when there is an unforeseen, adverse event. These plans comprise of life insurance, health insurance, and estate planning. Even this element of personal finance requires you to seek professional expertise and right futuristic decisions.
  • Timely & Ongoing Advice: Having a personal finance expert keeps you grounded and helps in achieving all financial goals for each life stage. Your financial expert can always provide truthful advices, transparent assessment and calculated risks to keep the losses a bay.

For an all-inclusive personal finance plan, you can take tips from personal bankers and investment advisors. They will understand your requirements and long-term goals and make a customized plan to secure your present as well as the future. The planning process is divided into assessment, goals, plan development, execution, monitoring, and reassessment.

Things to consider while hiring an advisor for personal finance in India

When you wish to employ the services of an expert who would guide you through the whole process of personal financial management, you can take the advice of a personal banker, wealth manager, investment advisor, insurance advisor, tax advisor, estate planner, financial planner, or insurance broker. Once you are clear about the categories of advisors and the jobs they specialize in, check online and from previous clients if they are reputable enough. You should hire only the ones who have authentic credentials. You should also be clear about their charges and compensation structure. Area-wise online searches are another great way to arrive at the best professionals in your vicinity.

If you understand all the aspects of personal finance, it is just a matter of time before you can start with your journey. You should remember that personal finance management is one of the key elements of ensuring a secure and happy future.

If you seek a personal finance assessment, feel free to connect our expert onboard here. You can also write to us on contact@sbsfin.com

This Festive Season, dig in to Gold ETFs

Gold has always had a special significance amongst Indians for varied reasons such as for its auspicious sentiments, high emotional quotient, for its high perceived value. It’s even considered as a gifting option – reinforcing closeness of relationships. In India, people buy gold all season but during special occasions like weddings, festivals or special events, it becomes a mandate.

Barring the auspicious significance, for long Gold has been one of our go-to investment products. Gold continues
to command long term value, considered as a safe haven, a hedge against inflation; asset allocation,etc. Investment in gold could be in the physical form such as jewellery, gold coins or bars but one of the most popular involves buying shares of gold exchange-traded funds (gold ETFs) i.e. owning it in paper form.

Advantages of investing in gold ETF

  • ETFs, give investors a chance to own small amounts of many different investments within a single fund – letting them get diversified exposure to gold without having to invest huge sums of money.
  • Owning gold in physical-form such as jewelry, gold coins or bars comes at a huge cost, given the making charges, storing costs, jeweler margin, etc., whereas owning it in paper form like gold exchange-traded funds (gold ETFs) comes at a price closer to the actual price of gold.
  • The transparency in pricing is another advantage. The price at which it is bought is probably the closest to the actual price of gold.

How to invest in gold ETFs

Like any other company stock, Gold ETFs trade on the cash market of the National Stock Exchange. It can be bought and sold continuously at market prices. If you wish to invest in gold ETF, all you need is a trading account with a share broker and a demat account. Like any other stock investment, you can either invest in lumpsum or at regular intervals through systematic investment plans. Here’s how you can invest using these simple steps:

Step 1: Open an online trading and demat account with a stock broker
Step 2: Log in to the website of the broker’s online trading portal using your login ID and password.
Step 3: Choose the Gold ETF you want to invest in
Step 4: Place the buy order for the purchase of a specified number of Gold ETF units
Step 5: Web system debits your bank account (Fund transfer through linked savings account)
Step 6: Units are credited to your demat account on trade day + 2nd day

Things to know before one invests in gold ETFs

Know the fund type – There are broadly two main types of gold ETFs. The first kind focuses on the commodity aspects of gold, seeking to track the price changes of the gold itself. The other focuses on investing in the companies that specialize in gold i.e. mining stocks, which directly extract the yellow metal from their mining assets; and gold streaming stocks, which provide financing to gold miners in exchange for the right to purchase a set amount of a mines gold production at a discounted price.
Know the charges – Primarily two kinds of costs are associated with investments – expense ratio for managing the fund, and broker costs considered during buying and selling units.
Know the right Gold ETF for you – There are about twelve Gold ETFs in the market. It is best to opt for funds with lower tracking error and higher trading volumes. Unlike other investments, there is no lock-in of funds, so buying and selling can happen during trading hours. It is advisable to avoid partial withdrawals or early exits, and for best results, link your investments to a long term goal.
Know the Taxation – Short-term capital gains on units held for less than 36 months will be added to investors income and taxed as per the applicable slab rate. Long term capital gains on units held for more than 36 months will be taxed at 20% after providing for indexation.

There’s no one perfect ETF for every gold investor, but different ETFs will appeal to each investor differently, depending on their preferences and long term goals. You can start by holding not more than 10 percent of gold in your portfolio. Once prices dip, you can consider allocating more to the asset else sell when allocation towards gold in your portfolio goes up.

Investment Portfolio Review – How, Why & When?

As an investor, you might have often put in a lot of effort to build an investment portfolio. But have you considered reviewing it at periodic intervals? This step is vital when designing and implementing a strict portfolio strategy. You must adhere to a regular review schedule.

In order to save money and invest it profitably, you must analyse your plan periodically. Only then, you can know about the hidden opportunities for improvement, in order to reap greater financial rewards.

What is an investment portfolio review?

Investment portfolio review comprises breaking down and analyzing your investment portfolio with an aim to better investor’s needs, preferences. It helps one to increase the probability of him meeting his set goals. It also enables one to meet the objectives of a given investment mandate, by shedding light on historical asset class performance, inflation and other related factors.

Why is an investment portfolio review necessary?

Let us help answer this question by citing an example. For example, you need to approach an investment advisor or asset management company and request them to give you a detailed portfolio analysis. The professional will first check the holdings included in the portfolio. He shall also analyze if such holdings include assets that have a high possibility of maintaining low volatility, price fluctuations, and enough liquidity to covert the assets cash when required. He will calculate the amount of investment income in the form of dividends or interest. This expert will then tell you about measures to take so that your capital does not undergo any losses.

How to perform an investment portfolio analysis?

You need to examine your investment portfolio on an aggregate basis while comparing its status to other benchmark portfolios. Some of the elements that you must consider are the total number of portfolio components, the price-to-earnings ratio, the dividend yield, and the estimated growth rate. This is then tallied against a stock market index.

The next step is to weigh the elements in relation to each other. You should understand how these different components affect each asset individually. It should cover all related ventures such as investments in a small business or real estate spends. Lastly, analyze all the portfolio components as stand-alone investments. Understand why you own a certain element, what are your after-tax cash flows, and should you continue holding your stake.

Once you have conducted all these steps, your investment portfolio review is complete. It is an important risk management tool, wherein you know which asset to buy, which asset to keep, and how to increase your financial wealth.

When should you do an investment portfolio review?

An investment portfolio review should be done when you wish to add value to your financial plan. Usually conducted on an annual basis, this activity can be carried out at the end of the financial year before you file for your taxes. It helps you to analyze the transaction costs involved, along with taxes and setting the allocation tolerance bands.

While going for asset allocation strategies, you can go for either long-term or tactical methods — which are implemented at regular intervals. At the start of a financial year, you get better visibility of your revised cash flows, tax-rule, and regulatory, changes. Hence, this is the perfect time to review your investment portfolio.

Conclusion

During your review, here are some results to look out for. Suppose you observe a trend of poor performance over the last couple of years, you should know that it is time to take a different approach. Again, analyze stocks or bonds that have been reasons for such bad performance.
Lastly, whatever step you take, do not allow emotions to affect your decisions. Create an investment policy statement with guidelines that you are sure you shall follow in the long run. Only then, your entire exercise will be worthwhile.

Wondering about your investment portfolio review?? Want to know more about reviewing your portfolio. Feel free to write us on contact@sbsfin.com