Tag Archives: Circle Wealth Advisors

Thursday Trivia ~ Who is a Wealth Manager?

A few years back when I started my career in Wealth Management, it was extremely difficult to convey what I actually did. Things haven’t much improved even as we are in the mid of 2020. The problem in India is due to lack of financial literacy, alternate careers in managing wealth haven’t picked up. And as every optimist would hope for a better tomorrow, we hope too that people realize the importance of hiring an expert to create or manage their wealth.

A major trouble that we encounter is trust deficit towards wealth managers or financial advisors. 

Traditionally, brokers were thought of as experts who will help a person create wealth. Even today, after tonnes of research / studies showing how holding an investment for a long term creates significant wealth, affection towards making a quick buck doesn’t seem to go away.

Hence, to understand who is a wealth manager, we should first look at who is not a wealth manager. 

  • Broker

A broker earns his bread and butter through commissions. And these commissions are a result of constant ‘buy / sell’ transactions of securities. Hence, the alignment of interest for a broker is to over-trade on an investment account.

It’s not that a broker tends to have bad intentions towards managing money. But he isn’t getting money for simply buying a share that doubles in price, unless he sells that share too. And who knows, that share might just triple from there too. All of us have a few regrets of not holding on to a share that just went right up after we sold.

  • Chartered Accountant

A chartered accountant is specialized in audit and tax. Hence, his perspective towards investment is to help save taxes. The problem is that a person can’t get super rich by saving taxes. It’s a false assumption. A chartered accountant is never pro-active with their client’s life. They usually enter at a post mortem stage. As a professional, their role doesn’t allow them to create a financial plan for their clients and see whether the goals will be achieved in timely manner. They can merely suggest which investment product is safe.

If you invest in a 7% RBI Bond and lock your money for the next 10 years, then truly you haven’t beaten your own lifestyle inflation. At 7% (assuming cumulative interest and not simple interest), your money will double. At simple interest, interest amount will be paid out to you and only principle will return. But in that time, a Toyota Innova that you wish to buy will more than double in price and come with unbeatable features. And yet, the money parked in RBI Bonds will not be enough.

Due to this narrow perspective, they don’t usually help in achieving a long term goal of children’s education or marriage.

  • Life Insurance Agent

Life Insurance Agents are still the first people who get approached while thinking about investments. For most people it makes sense because they come once a year, take the premium and promise to double the money in next 20-25 years (depending on the policy). And they provide insurance too, so if something happened to you, money is coming back.

Their interest is merely selling an insurance product. They are biased towards the company that they represent. And don’t offer complete wealth management solutions to their clients. 

It was a great choice during the 1990s and early 2000s when wealth management as a profession wasn’t evolved. For a risk averse generation of the 70s and 80s, they’ve created a good deal of wealth by offering them insurance, post office investment products, fixed deposits, etc. 

Back in those days, interest rates were high too. Which have now started to come down significantly. Double digit interest rates on investments are now a distant dream. As a result of increased sophistication in financial services, an Life Insurance Agent is not as effective. He may help you save taxes, but wealth creation simply doesn’t happen.

  • Relative / Friend

If you read business newspapers regularly, then you are well aware of so many scams that happen every now and then. Other newspapers too cover some internal fights in the family or between brothers that have resulted a massive wealth destruction for shareholders.

In such times, we naturally bend towards our friend or relative that has made some money by investing in stock markets. We go to them for gaining some information on which stock to buy that will double or triple. In some risk averse people, they invest in safe companies they consider won’t be shut down. YES BANK was one example that most people thought was safe. What happened after that is a story that needs a separate article.

The problem here is that our friend and relative don’t have a complete access to the way we are looking after our money. Despite their best intentions, we tend to put only around 1-2% of our investment amount. Even if that particular stock triples in value, our overall portfolio doesn’t change a bit. Hence, we still are on the starting point.

  • Mutual Fund Distributor

A mutual fund distributor is like a broker. His interest is in selling mutual funds that offer him highest commissions. It’s not tailor made to suit a person’s risk taking appetite. Investors too get lured into higher returns offered without understanding its impact on wealth creation or destruction in some cases.

Hence, in all the above examples, we understand that it’s not that these professional has a bad intention. They are just limited to their own knowledge and perspectives. It’s like your local grocery store who has good intentions but has limited band-with of products and services. The local grocery store won’t have a sophisticated infrastructure like Amazon, D-Mart, etc. Hence, as a customer, your choices will be limited to his capacity.

Same is the case in financial services. I’m sure, your mind will now be running a question that who really is a wealth manager then? And what does he bring to the table that is so different from the ones listed above? Also, how does he make money and the biggest one – can I trust him?

So who is a Wealth Manager?

Wealth Managers have specialized understanding about the unique financial challenges and decisions faced by high net worth clients. If you’re a high net worth family or individual, you want a wealth manager. You have unique needs when it comes to money. You will face complex questions that most people do not face. You will need help with things other people don’t even have to think about. 

These areas of specialisation generally include:

  • Strategic Goal planning
  • Tax accounting 
  • Retirement planning
  • Legal planning
  • Estate planning
  • Risk management
  • Trust services
  • Banking services
  • Philanthropic planning

In our case, we do not consider these additional services optional. For most of our high net worth clients, these do become essential services at some point in their life, and the process of navigating the issues that arise in each of these categories is complex that needs a special attention.

Wealth managers wear multiple hats. On any given day, they might be an investment planner, a consultant, an advisor giving counsel about a big decision, a data-cruncher, a retirement planner, a fixer of someone else’s costly mistakes, a locator of resources and specialized expertise, or a financial trouble-shooter who looks at the client’s financial situation and finds ways to refine and improve it.

In other words, the wealth manager reduces the complexity of life that their clients would otherwise have to grapple with on their own. The wealth manager helps you not have to worry.

Investment Management

It’s a subset of wealth management. Yet highly misunderstood. As most people think it’s searching the next best investment product or which mutual fund is good. But it’s not so. Investment management involves a lot of work that starts from selecting the right securities in the portfolio to exiting them.

  • Security selection or portfolio creation

The first part is to create a portfolio of securities that include mutual funds, bonds, equity through a portfolio management service provider, etc. The portfolio so created is unique to the financial goals and risk appetite of the investor. 

  • Monitoring of security

Creating a portfolio isn’t enough. A lot of time is invested in constantly monitoring the securities. Since, a lot of events happen around the world may or may not have a direct impact to the securities in the portfolio. When China devalued its currency in 2016, Indian markets started falling, IL&FS and DHFL showed signs of troubles – our equity markets went through a very tough time, most recent event is coronavirus and lockdown.

In such times, a wealth manager tends to take proactive calls with the portfolio that result in protecting the portfolio and eventual wealth creation.

  • Rebalancing the portfolio 

There are some events in an investor’s life, where his finances get altered. It can range from a huge bonus or promotion to some additional unforeseen expenditure or job loss. In such cases, an investor’s profile changes and the portfolio needs to be rebalanced to suit the right risk appetite.

  • Exit

Buy and Hold is a good strategy to have. Also, it makes equal sense to exit a security in the portfolio when it’s useful life is over. A wealth manager is never married to the security he adds to the client’s portfolio. For him, it’s a tool for wealth creation.

How does a Wealth Manager make money?

Wealth managers tend to charge fees directly to their clients. The general ballpark figure for most wealth managers’ fees is about 1% of their client’s invested assets. The idea here is to have a complete alignment of interest with their clients.

So when they charge fees or in other words earn their income from their clients then they would like to work for them. If they would be dependent on commissions like a broker, life insurance agent or a mutual fund distributor is, then they would simply look to offer an investment product with high commissions. Even if it doesn’t result in any wealth creation.

And lastly, how do you TRUST your Wealth Manager?

It’s difficult to trust a person who sells you services that can’t be valued immediately. It’s not like buying a new software or an app. Managing wealth is an intangible thing. Value and returns are parked in the future. It’s difficult to estimate whether you’re overpaying or under-paying!


The simplest way out is to look for whether your wealth manager simply talks or he walks the walk too. So if your wealth manager starts a conversation about an investment product in your portfolio rather than your life, then he surely shouldn’t be trusted. A wealth manager is more interested in your life than any investment product.

Thumb rule here is to have a look at his own financial plan, retirement plan, statements of financial investments, etc. If he is consuming the same financial product which he intends to put in your portfolio, then you can be rest assured that he too has skin in the game. And he won’t take any foolish decision which might hamper his portfolio and reputation at the same time.

Other aspects to look out for are his professional education, experience in the industry, expertise and most importantly alignment of interest. Once you have all these elements in place, then just enjoy the ride because your retirement destination is closer than it appears currently. 

– Jinay Savla

Thursday Trivia ~ 7 Stepping Stones towards Estate Planning

We tend to have an inbuilt strength that some of us have never realized. One often makes use of that strength completely unaware of it. That strength is the power of giving a life related advise. And the best part is we tend to give a right advice when it comes to someone else but don’t follow it in our own lives. The reason is best known to each individual but that’s not the point of today’s article.

Today’s article is based on Estate Planning. It relates to handing over one’s asset to the next generation. So my dear reader, now you know why I started with ‘power of giving advice’ as an inbuilt strength. Whenever we hear about some property dispute, the very first thing we say, it Mr. X had written everything in his will or planned how to distribute his wealth then his children won’t be fighting in the court. It’s true but have we done it for ourselves? The answer is always No – because most parents are over-confident that their children won’t fight in the court for property. There is love and bond between them. So did Mr. X think before passing away.

We constantly hear about its importance but never quite practically do it. One particular reason that pops up in our interactions with investors is that Estate Planning is long and tedious. So here are 7 ways to make the process less tedious.


  • Keep paperwork in order

When we go for a long drive, the most important part is to check whether our vehicle is in good shape. Right from fuel to oil to tire pressure, every tiny detail is of significant importance. Other way to look at it is, a sum of these tiny details tend to provide a pleasure filled long drive.

Imagine, going for a long drive from Mumbai to Ahmedabad with tire problems, low oil and fuel issues. That constant worry won’t provide a peaceful journey.

In a similar light, when we speak about wealth creation or achieving our financial goals, these tiny details hidden inside our paperwork is of utmost importance. The reason one is constantly worried is because they don’t know how their money is spread out. Worst is when one person dies and the second generation has absolutely no clue.

Hence, it’s important to vet the paperwork. Make sure the investments are in joint names (preferred), nomination is appropriate, they are filed properly, so on and so forth. Infact, in our last Thursday Trivia ~ 5 Things to do during Lockdown, we have given 1st priority to reorganise paperwork. If you’ve not done it so far, then we request you to get it done.

  • Check for any Unpaid Premiums or Discontinued Policies

One thing that always stands out while organizing paperwork is lapsed or discontinued policies for which premiums weren’t paid. Along with some discontinued SIPs of a mutual fund of which we don’t remember the name.

Yes, it’s a disappointing feeling of missing that due date of payment. Reason for which cannot be ascertained now. Yet, it makes a very important case for us so that we set reminders in our smart phones next time.

  • Check for Investments that are Matured but no Redeemed

Sometimes going through investment paperwork might bring out a bunch of surprises. My personal experience was a mutual fund that my father bought back in 2000s and I got to redeem it in 2018 at a clear 8 times return. We didn’t even know these mutual fund existed before. There were some physical share certificates too. Upon demat of these shares, we found that bonuses were given by a few companies which meant our investment value was much more than we had anticipated.

Also, there were a few physical share certificates which were good for nothing. One often finds light and dark while going through previous investment certificates.

A friend of mine had an interesting case. He found an old PPF account of his father, which hadn’t been redeemed or closed even after the active contributions were stopped and lock-in period of 15 years was over. Uncle told me that he completely forgot about it as my friend was able to take care of household expenses. However, the family was in need of funds to purchase a new home and this PPF money came in handy. His loan amount reduced by half and after 2 years, he repaid the loan fully.

Hence, its prudent to check for any PPF account, fixed deposits, recurring deposits, mutual funds, etc.

  • Pool all the Investments under a single umbrella

So while going through these shocks and surprises, it’s important to create a single umbrella for these investments. If there are multiple broking accounts, it’s worthwhile to bring them under a single broking account. Similar is the case with insurance and mutual funds.

This activity should be done with the help of a financial advisor. You should ask him to create a single window to view your financial investments. When you have that single window, then thinking about estate planning becomes a lot simpler. Because now you know where all the eggs are and how to distribute them becomes an easier decision to make.

  • Create 1 page Wealth Report

Estate planning is not just about financial investments alone. It also two major asset classes in physical investment space – Gold and Real Estate / Property.

1 page report offers a single window to look at your complete wealth. This enhances the ability to make decisions on passing on wealth to the next generation.

In Indian households, real estate is where most of the money is parked. It constitutes around 40% to 60% or in some cases even 80% of their total wealth. Hence, distribution amongst children becomes a problem. 

An uncle of mine had 4 daughters and a 2BHK house in South Bombay was his only property with some pension coming from his years in Government service. After he passed away, 4 daughters have been fighting for possession of the house. They have thought about selling it but expectation of money is different. So nobody in his right mind is even coming to see that property. So now the property is there but none of these daughters can enjoy that wealth. 

So what should have been a solution to this? Of course, uncle should have written a will stating the terms and conditions on how to sell and who will get what. That’s exactly the next point in this article.

  • Write a Will

1-page wealth report allows a person to then decide how to pass it on to the next generation. Divide it equally or not, is a decision that can be taken with complete conviction.

There are multiple formats under which a person can write a will. Also, it’s better to get a No Objection Certificate from the beneficiaries to the will and get it notarized so that the next generation won’t spend time in court fighting out for your hard earned assets.

One should also try and impart their value system of life through a will. The words should be carefully chosen as they will be an important communication to the next generation. Try to request the next generation to take good care of wealth bequeathed to them and never compromise on ethics to gain quick money.

“Dishonest wealth will dwindle, but what is earned through hard work will be multiplied.” – Bible 13:11

  • Give a portion of Wealth for Charity

One important part of Estate Planning should be charity. It’s our moral obligation to give back something to the society that helped us live a meaningful life. Sharing our wealth with those who are less fortunate often gives us a deeper satisfaction.

Just like Chankya said, “Money earned must be kept circulating and put to some good use. Just like the water of a pond having an inflow and outflow system is clean. On the other hand, Water-logged ponds collect dirt in them.”

To conclude, it’s important to spend time sharpening your axe before going to cut a tree. Same applies to organizing paperwork. A good amount of time is spent in bringing information under a single umbrella. After that, next steps are relatively easy. Hence, don’t be lazy with your paperwork.

If you need any assistance for your estate planning, please reach out to us. We will be happy to be in service.

– Jinay Savla

Thursday Trivia ~ Trust the Process

Last week, I came across a fabulous resignation letter of Sam Hinkie who served as the general manager of the National Basketball Association’s (NBA) Philadelphia 76ers from 2013 to 2016. He has also consulted for several National Football League teams. A resignation letter that I would love to re-read from time to time.

I’m sure your first thought would be that writer has gone nuts! How can a resignation letter be wonderful? The words Resignation and Wonderful simply don’t match each other. 

The reason is his cross-pollination of ideas from the world of investment. Hinkie goes on to quote Howard Marks, Seth Klarman, Charlie Munger, Warren Buffet to name a few. He has somehow taken the best out of them and applied in running a basketball team. A sports person taking ideas from investment world has been an unheard event to me. If you have come across anyone who cross pollinates ideas then please write about them in the comment section below, we would love to hear more about them.

“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.” — Charlie Munger

A brief history of Sam Hinkie and Philadephia 76ers


The 76ers hired Sam Hinkie in May 2013. The team’s owners, led by private equity investors, chose him for his analytics acumen. They figured Hinkie, a Stanford MBA, could Moneyball the 76ers to greatness. When Hinkie interviewed for the job, he made it clear to the owners that he thought they were “a long way away” from winning big. The cupboard was bare of talent, and if they wanted to win a championship in the long term, their best way forward would involve a lot of losing in the short term.

Here’s his thinking: Historically, in the National Basketball Association (NBA), the teams that win championships rely on star players such as Michael Jordan and Lebron James. Hinkie believed the surest way for the 76ers to get a star of that caliber was to have a high pick in the amateur draft (the annual process through which newly eligible players are selected by the NBA’s 32 teams). The highest draft picks are awarded to the worst teams, and if the 76ers were bad enough for long enough, he argued, they would eventually get a great player. It would take patience though.

Hinkie warned his bosses, the team, and its fans that the short term would be painful, and it most certainly was. Almost immediately upon Hinkie’s hiring, the team began “tanking”—the sports term for losing on purpose. Hinkie traded the team’s best players and made no attempts to acquire players that would make it better.

Over the next three years, the 76ers were horrible. They lost more games than any other team, and broke the NBA’s record for consecutive games lost. It all culminated in the third season when the team won only 10 of 82 games, making it the second worst NBA team of all time. One prominent sports writer called the team an “abomination,” and another an “atrocity“. Observers called for the NBA to intervene and have Hinkie replaced with a manager who wouldn’t tank. The team’s attendance and tv ratings were among the lowest in the league.

But even at the worst depths of history-making failure, many of the team’s hardcore fans were steadfast in their support of Hinkie. Unlike his predecessors, Hinkie offered a concrete plan based on quantitative analysis. The team was an embarrassment on the court, but they were getting talented young players with high draft picks who might some day become stars.

“[Before Hinkie, the 76ers] just had mediocre teams playing mediocre basketball, being incredible boring… and having no plan,” said Michael Levin, a lifelong 76ers fan and host of the popular 76ers podcast The Rights to Ricky Sanchez. Levin was immediately enamored of Hinkie, he told Quartz. He was happy that the team was finally ”thinking long-term at expense of any short-terms gains.”

In April 2016, Hinkie stepped down. “Given all the changes to our organization, I no longer have the confidence that I can make good decisions on behalf of investors in the Sixers….” Hinkie wrote in his 13-page resignation letter to the 76ers board. The resignation letter served as a defense of his decision-making, as well as a kind of philosophical treatise that includes references to Elon Musk, cognitive science, the physicist James Clerk Maxwell, and Jeff Bezos’s 10,000 year clock. The letter cemented Hinkie’s reputation as a mad genius or a fool—all depending on your point of view.

By January 2017, it finally became clear that Hinkie was right all along. The 76ers have won more than half of their games over the last month. The team’s talented young players are blossoming, and it is in a strong position to acquire more excellent players going forward.

Most emblematic of Hinkie’s success is the emerging stardom of the 76ers’ agile giant Joel Embiid. Hinkie drafted the 7-foot Cameroonian in 2014 even though he had a broken bone in his foot that would not allow him to play for six months. Embiid was a player of immense talent, and because the 76ers were not worried about winning in the short term, the injury did not deter Hinkie from drafting him. 

Correlation to our Investment Process

As many of our readers are aware that we follow a strict quant driven approach for our investing our client’s money in mutual funds. We call it Dynamic P/E Asset Allocation Strategy. It’s purely process oriented that takes away any emotional input for buying or selling any mutual funds.

The key objective of our strategy is to provide risk adjusted returns compared to Nifty. This attribute can be seen in the lower standard deviation and better sharpe ratio in our portfolio. Standard deviation can be construed as a measure of risk in the portfolio and sharpe ratio is return generated by per unit risk taken.

Having a standard deviation of 7.74 which is significantly lesser than Nifty’s standard deviation of 13.45 has resulted in lower volatility in the portfolio. That has created a peaceful investment journey!


Just like the process of Sam Hinkie when he intentionally tanked the team down for creating a winning team, our quant model too asks us to invest in equity when market is sliding down. We have to see red in our equity portfolio for a little while as the market bottoms out. This is the whole purpose of our quant model to take rational investment decisions by looking at numbers and not falling for emotions such as fear and greed.

We are not an expert at catching the bottom of the market. Our process is not for timing the stock market accurately either. Nobody can do that all the time. 

Even the greatest investor – Warren Buffet cannot. Even Isaac Newton once famously quoted “I can calculate the motion of heavenly bodies, but not the madness of people” while talking about his inability to time the market correctly.

There many quant models out there who successfully outperform their respective benchmarks. We are comfortable with our current quant model that has enabled us to manage risk in the portfolio as well as outperform Nifty. 

That’s why we echo the words of Sam Hinkie – Trust The Process!

– Jinay Savla

Disclaimer: The intention of this blog is not to advertise about our portfolio allocation strategy or ourselves as superior financial advisors. The intention here is to create a faith in Process or System that every Investor must follow in every market condition. Just by falling into emotions and taking wrong decisions will do more bad for an investor than good. Once again, Trust The Process!

Thursday Trivia ~ 5 New Year Resolutions for Creating Wealth and Managing Finances

Resolution 1: Create a budget for life

When it comes to finances, life can be viewed as cash flowing in—and out. Saving and investing during your working years, if you stick with it, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Creating your own budget and net worth statement can help you build your road map and stay on track. Here are steps that can help:

  • Create a budget and pay yourself first. At a minimum, be sure to have a high-level budget with three things: how much you’re taking in after taxes, how much you’re spending, and how much you’re saving. If you’re not sure where your money is going, track your spending using a spreadsheet or an online budgeting tool for 30 days. Determine how much money you need to cover your fixed monthly expenses, such as your mortgage and other living expenses, and how much you’d like to put away for other goals. For retirement, our rule of thumb is to save 10–15% of pre-tax income, including any contribution from an employer, starting in your 20s. If you delay, the amount you may need to save goes up. Add 10% for every decade you delay saving for retirement. Once you commit to an amount, consider ways you can save automatically. Research shows that saving is easier when you “pay yourself first.” 
  • Calculate your personal net worth annually. It doesn’t have to be complicated. Make a list of your assets (what you own) and subtract your liabilities (what you owe). Subtract the liabilities from the assets to determine your net worth. Don’t panic if your net worth declines during tough market periods. What’s important is to see a general upward trend over your earning years. 
  • Project the cost of essential big-ticket items. If you have a big expense in the near term, like children education or house rennovation, allocate your savings and treat that money as spent. If you know that you’ll need the money within a few years, keep it in relatively liquid, relatively safe investments like short-term deposits or money market funds. If you choose to invest in a FD, make sure the term ends by the time you need the cash. If you have more than a few years, invest wisely, based on your time horizon.
  • Prepare for emergencies. We suggest creating an emergency fund with three to six months’ worth of essential living expenses, set aside in a savings account. The emergency fund can help you cover unexpected-but-necessary expenses without having to sell more volatile investments.

Resolution 2: Manage your debt

Debt as we have been saying can be seggragated into good loan or bad loan. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset, such as a home. However, problems arise when debt becomes the master, not the other way around. Here are 3 things that I want to discuss which one should resolve to manage debt.

  • Keep your total debt load manageable. Don’t confuse what you can borrow with what you should borrow. Keep the monthly costs of owning a home which includes principal, interest and insurance below 30% of your pre-tax income and your total monthly debt payments including credit cards and auto loans and below 35% of your pre-tax income.
  • Eliminate high-cost consumer debt. Try to pay off credit card debt and avoid borrowing to buy depreciating assets, such as cars and mobile phones. The cost of consumer debt adds up quickly if you carry a balance. Consider consolidating your debt in a low-rate loan or liquidating some of your assets to generate cash. You can also check with your bank if any to up is available on your home loan. Set a realistic budget and have a planned schedule to pay back your loans.
  • Keep a check on your credit score. CIBIL allows you to generate a free credit score report every year. You can search for free credit report and find the link for CIBIL’s website. Resolve to generate this report and keep a track of your score. Any outstanding credit card balance which is pending due to dispute will also show up here. Its important that you settle all these outstanding balances. Outstanding dues lead to detoriation of credit score which will impact your ability to borrow in future. 
  • One Time Settlement of outstanding dues. Once you have settled the disputes and repaid all outstanding, make sure to receive a no due confirmation from the lender.

Resolution 3: Optimize your portfolio

We all aim for getting better returns on our investment. But research shows timing of markets is difficult and can be counter-productive. Also this urge of making higher return forces you to keeping looking for new products and take bigger risk. So create a plan that will help you stay disciplined in all kinds of markets. Follow your plan and adjust it as needed. 

What are the ideas to help one stay focused on their goals.

  • Focus first and foremost on your overall investment mix. After committing to a savings plan, how you invest is your next most important decision. Have a targeted asset allocation that you’re comfortable with, even in a down market. Make sure it’s in sync with your long-term goals, risk tolerance and time frame. The longer your time horizon is, the more time you’ll have to benefit from up or down markets. I cannot stress enough on this point. Its very simple but difficult to implement. Resolve that one should invest looking at the future goals. 
  • Diversify across and within asset classes. Diversification reduces risks and is a critical factor in helping you reach your goals. Mutual funds and exchange-traded funds (ETFs) are great ways to own a diversified basket of securities in just about any asset class.
  • Consider taxes. Invest in relatively tax-efficient investments, like debt mutual funds instead of Fixed Deposits. If you trade frequently, do consider that transaction cost and taxes do eat up into your investment returns. Various tax benefits are available on certain investments, but as pointed earlier invest with future goal in mind and not only for saving tax. 
  • Monitor and rebalance your portfolio as needed. Evaluate your portfolio’s performance at least once a year using the right benchmarks. Remember, the long-term progress that you make toward your goals is more important than short-term portfolio performance. As you approach a savings goal, such as the beginning of a child’s education or retirement, begin to reduce investment risk, if appropriate, so you don’t have to sell more volatile investments, such as stocks, when you need them.

Resolution 4: Prepare for the unexpected

Risk is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises—an illness, job loss, disability, death, natural disasters. If you don’t have enough assets to self-insure against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often, but are expensive to manage yourself when they do. So let me lay out the guidelines that can help you prepare for life’s unexpected moments.

  • Protect against large medical expenses with health insurance. Select a health insurance policy that matches your needs in areas such as coverage, deductibles, co-payments and choice of medical providers. I think this is a no brainer and more and more people are aware about it and are ready to allocated money for covering this risk.  
  • Purchase life insurance if you have dependents or other obligations. If you have minor children or you have large liabilities, you need life insurance. Consider having a low-cost term life policy. These days policy is available to age of 80 or even 85 which is more than enough. Also make sure not to mix investment with insurance and go only for pure term cover. 
  • Protect your earning power with add on insurance covers. Generally these covers get ignored because of lack of awareness. 2 covers that one must look at is Personal accident or a disability cover and a critical illness cover. These covers come in handy when these particular risks play out help one retain his earnings in scenarios where one might get incapacitated. 
  • Protect your physical assets with property insurance. Check your homeowners and auto insurance policies to make sure your coverage and deductibles are still right for you. Review your homeowner’s policy to see what’s covered and what’s not. Talk to your agent about flood or fire insurance if either is a concern for your area. 

If you’re tech-savvy, consider storing inventories and important documents on a portable hard drive. It’s also a good idea to have copies of birth certificates, passports, wills, trust documents and insurance policies in a small, secure “evacuation box” the fireproof, waterproof kind you can lock is best, that you can grab in a hurry in case you have to evacuate immediately. Make sure your trusted loved ones know about this file as well, in case they need it.

Resolution 5: Protect your estate

An estate plan may seem like something only for the wealthy. But, there are simple steps everyone should take. Without proper nominations, a will and other basic steps, the fate of your assets or that of your children may be decided by the court. Taxes and fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones.

  • Review your nominations, especially in PF account, pension plans and life insurance. The nomination is your first line of defense, to make your wishes for assets known, and ensure that it gets transfered to whom you want, quickly. Keep information on nomination up-to-date to ensure the proceeds of life insurance policies and retirement accounts are consistent with your wishes, your will and other documents
  • Update or prepare your will. A will isn’t just about transferring assets. It can provide for your dependents’ support and care, and help you avoid the costs and delays associated with dying without one. Keep in mind that what’s written in a will is considered the ultimate wish and will override the nominations in various assets, so make sure all documents are consistent and reflect your desires. When writing a will, we recommend working with an experienced lawyer or estate planning attorney.
  • Coordinate joint holding with the rest of your estate plan. Designation of someone as a joint holder of your property or any other investments, can affect the ultimate disposition of your assets. Talk to a lawyer to make sure they reflect your wishes, and are consistent with will you are writing.
  • Consider creating a revocable family trust. This is especially important if your estate is large and complex, and you want to spell out how your assets should be used in detail. A family trust may not be needed for smaller estates where nominations, joint holding and a will can be sufficient. But talk with a qualified financial planner. 
  • Take care of important estate documents. Make sure a trusted and competent family member or close friend knows the location of your important estate documents.

Budget 2019 – Snapshot for an Investor!

As a taxpayer, our interest in the budget is usually limited to the changes in the tax slab that we belong to. If there is any significant change on it, then we communicate it as a good or bad budget.

However, a budget is more than that.

There are other aspects in the economy that substantially impact our wealth creation which are covered under the budget. And as investors, we should prudently take an interest in understanding it’s impact. Of course, we will speak about tax reforms in this article too and we shall cover other aspects that will directly impact your wealth in the long term.

  1. Aadhar now interchangeable with PAN cards for Tax filing

Slowly, Government seems to be in the mood of saying a good bye to PAN cards. Why? Because they were easily made before. People used to make multiple PAN cards for tax evasion purposes. This had become a rampant exercise.

Mandating Aadhar number for filing of tax returns is a welcome move for tax collection.

  1. Aadhar card for NRIs

Earlier Non Resident Indians had to stay for 180 days in India in a year which would classify them as Resident Indian citizens. Only then their Aadhar card could be generated. However, this has now been done away with.

NRI can simply make their Aadhar card and no need to wait for 180 days.

  1. Tax collection increased by whopping 78% during last 5 years

After Piyush Goyal thanked all the tax payers in this year’s Interim Budget speech, so did Mrs. Nirmala Sitharaman. We are glad that finally someone understood a taxpayer’s effort in national development.

There has been an Increase in tax collection by 78% from ₹6.4 lakh crore in 2013-14 to ₹11.4 lakh crore in 2018-19.

This is good news as Governments start to collect more taxes, they are more comfortable to widen their tax base in the future. So good times to come!

  1. Increase in Minimum Public Shareholding of Listed Companies from 25% to 35%

It’s a good thing as more shares will be available in the market for investors to buy. Will also provide for more liquidity in the market. It will further boost investing in times to come.

  1. Social Stock Exchange for Voluntary and Social Organizations

It’s a boost to the social organizations to receive more funds for the amazing work they do. Also, they will become more transparent as the stock exchange has certain listing requirements that ask them to present their Revenue statement and Balance Sheets.

  1. Recapitalization of Public Sector Banks by Rs. 70,000/- crores during the year.

Public Sector Banks have been in the focus since 2013 now. After years of irresponsible lending, they had been asked to disclose their Non-Performing Assets with the structure provided by the RBI.

To make them healthy again, a slurry of measures have been taken. Insolvency and Bankruptcy Code has been opened up where banks can get into litigation with such NPAs. Upto Rs. 4 lakh crores have been recovered till date. 6 PSU Banks were put into Prompt Corrective Action framework where RBI basically asked them to clean up their act before lending again. Now these Banks have come out of that framework and healthy to lend again.

Also, there were mergers of bad PSU banks with good PSU banks. This has brought down to PSU bank number to 8 in total.

Flow of credit from these banks have been at 13.8% for the last year. Which is good but we need to increase it to around 18% before any visible impact can be seen.

  1. Door Step Banking and Online Loans

With the use of technology, loans will be disbursed quickly. Will benefit middle class the most.

  1. Housing Sector

Post IL&FS and DHFL crisis, RBI will now overlook the Housing sector. Earlier National Housing Board (NHB) had been entrusted with that responsibility.

  1. Affordable Housing

Enhanced interest deduction up to ₹3.5 lakh for purchase of an affordable house. This will give a breather to the middle class.

  1. Disinvestment

Disinvestment target for the year has been kept to Rs. 1 lakh 50 thousand crores.

Re-initiate sale of Air India. This is much needed before it drains out tax payers money.

Strategic sale in Central Public Sector Enterprises (CPSEs) in which Government holds 51% or more will see a strategic disinvestment on case by case basis.

More retail investors participation is encouraged by issuing CPSE ETFs in ELSS segment. ELSS is a tax saving option for investors. It will be seen how these CPSEs perform and create wealth for ELSS holders rather than simply being a tax saving option.

  1. The Big Infrastructure Push

Rs. 100 lakh crores to be invested in Infrastructure sector of India over the next 5 years. This doesn’t mean every company in this sector will start to generate returns immediately. An investor must remember that most of these companies are under huge debt obligations which needs to paid out first before creating profits for shareholders.

  1. Bond Markets

Retail investors will be encouraged to invest in Treasury Bills through stock exchanges. This is a welcome move!

Finance Ministry will work with RBI and SEBI to allow stock exchanges to use Triple A rated Bonds as collateral. This move will definitely add some liquidity with stressed housing finance companies. Flow of money will improve.

Bond and CDS Markets will be notified for an Infrastructure focus investments.

  1. Boost to Electric Vehicles

Rs. 1.5 lakhs of deduction provided on taking loans for electric vehicles.

  1. Change in Securities Transaction Tax in Options

Something to cheer for options market. Earlier, STT was levied on the Option price which used to make it costly.

Now, STT will be levied on the difference in Option Price and Strike Price. Will bring the cost down substantially for an option trader.

  1. Petrol and Diesel to get costly by Rs. 1 cess per liter

Hopefully, crude prices will come down in the future and this impact will not be felt.

  1. Hike in customs duty on Gold and Precious Metals from 10% to 12.5%
  2. Nominal excise duty on crude and tobacco products.
  3. Hike in surcharge of taxable income

Income from Rs. 2 crores to Rs. 5 crores – 3% effective tax hike

Income above Rs. 5 crores – 7% effective tax hike

  1. 2% TDS on cash withdrawal of more than Rs. 1 crores in a year.
  2. In case of Buy Back by listed companies, additional tax of 20% to be imposed. As is the case with unlisted companies currently.


It’s a decent budget with not much visible changes. Although the reforms carried out in the housing and banking sector will help the middle class of India in a big way. Not to mention the Infrastructure push by the Government which is need of the hour, this will give our next generation a great place to live in.

The overall budget proposals are good, how they will be implemented in the future is something every Indian citizen should keep an eye on.

– Jinay Savla

Disclaimer : The article has been prepared based on our first reading of the Budget 2019. A reader should not consider taking any action based on the same.