Kavitha Menon's Blog

Peer groups include family, work colleagues, friends etc who influence our decisions with respect to several aspects of our lives. It is natural behavior to conform to general norms followed by these groups. Unfortunately pressure to conform to peer group norms can cause severe damage to financial wealth. Common money mistakes that one makes due to peer pressure can be avoided if you can recognize them and taken corrective and preventive action. I have enumerated such mistakes that investors make due to peer pressure. 1) Making money decisions to maintain status in society: Here's an example of a client who was born into a rich business family, lived in South Mumbai and had a roaring family business. In his mid forties a family dispute broke up the entire business and he found himself left with no assets and no business. He had no means of starting afresh and had taken heavy private loans at ridiculously high rates of interest to fund high living expe...

As parents retire and age, adult children have the additional responsibility of looking after their physical, emotional and financial well-being. Care for parents, whether independent or dependant, includes three important areas Medical Care Investment and Income Management and Estate Planning I have expanded briefly on these areas. Medical Care  Everyone goes through a stage which requires long term medical care of parents. One needs to plan on financial aspects of such care. In the good old days of joint families, at least physical care was never an issue as miscellaneous aunts and siblings could take care of the elderly. In the absence of such a support structure, it is necessary to plan in advance for a scenario where one of your parents would require long term medical care. The cost of care includes not only actual medical expenses but also the cost of lost hours of work and the cost of arranging external arrangements like appointing full time nurse, infrastructure ...

While making financial plans, young couples are eager to start saving for their children's future and this is often on their top priority list. They want to be ready when their child will need financial assistance to purse expensive higher study courses. With a little bit of planning they can secure their child's future with the following three step process. Investment Planning: Step one of the process involves knowing firstly how much you will need to save and secondly which instruments are right. How much to save  - Lets say an engineering degree will cost approx Rs.10 lakhs (including cost of tuition, books etc) while an Masters abroad can cost another 20-25 lakhs today. A similar course, 15 years from now, at a 10 % rate of inflation will cost Rs.41 lakhs and Rs. 83 lakhs respectively. Use this calculator given below to find out how much you will need to save for your child's future. Download Calculator [xls]. Choice of investment vehicle  - It is a known f...

K We all love the idea of home away from home. Away from the pollution and fast life of the city, a vacation home seems to be a perfectly romantic way to spend a weekend every now and then. But are they really good investments? To evaluate a vacation home as an investment option, consider the following Liquidity  - Vacation homes are tough to sell. The developer from whom you may be planning to or already purchased the apartment can use several marketing tools like advertising in national dailies, attractive brochures and events to market his homes. You on the other hand have no such resources except utilizing the services of a broker. Think in terms of future demand or rental demand and the investment prospect looks less rosy. Transportation  - A back breaking, nerve wreaking joyride is not something you would look forward to after a hard week at work .Your location needs to have good roads or other means of transportation like railways that will take you there without s...

First time property buyers face the dilemma of whether it would be more prudent for them to buy property or continue living on rent. Indeed it is cheaper to rent a house for a lesser amount than the EMI. You could invest this difference between the rent you pay and the EMI, let it grow and later on buy a house. On the link below is a calculator that allows you to compare the two options and see which one is beneficial for you. https://www.ppfas.com/research/ereports/week/110711/rent-vs-buy-calculator.xls . For most young couples buying a house will always be the better of the two options even if it means paying EMIs over long periods of time. The benefits of owning your home are -You are investing in a growing asset -Your income will eventually increase and accommodate the EMIs far more easily than they appear to in the beginning of the loan period -Finding new apartments to rent every two to three years is time consuming .The inconvenience caused to family specially when there...

My client was concerned. After five years of systematically investing in equity funds his IRR or annualized return was a mere 7%. He isn't sure if investments in equity mutual funds are right for him anymore. Many investors started off with SIPs in equity under the notion that they are entitled to a 20-25% return on a compounded basis and anything below this is too poor. Despite years of market experience behind us , investors seem to have very unreal expectations from equity investments . Unfortunately many also tend to shy away from equity investments when  such expectations are not met . Equities are the best long term assets to invest in provided you are clear about the time frame of investments, expected returns , portfolio quality and lastly whether your financial situation allows for such long term investments. Being Realistic about the Time frame -  Every analyst or fund manager would tell us that we need to give a minimum 3 to 5 years while investing ...

Financial do's and don'ts before you turn entrepreneur Planning to turn entrepreneur? You have got to be prepared for a period of sporadic to zero income - a world apart from the comfortable space of monthly pay cheques. Financial planning will take care of the crucial transition period in which monthly credits to your bank account will stop. Here are some important dos before taking that long break. 1. Maintain a fund equivalent to the period for which you believe your business will not bring in positive cash flows.  To do this you will have to make a budget and plan expenses on both the personal front as well as for your business. Only then can you define a time frame in which the business will start making enough to meet expenses. Add a margin of a few months' expenses to make it safer. If you are planning a break of say two years, you need to maintain at least two years worth of basic expenses in a liquid fund. A Systematic Withdrawal from this fund that will tak...