Term insurance vs endowment plan

Term insurance, as the name itself explains, is for a specific period of time, and has the lowest possible premium among all the other insurance plans available. You can select the length of the term for which you want the coverage right from one year up to 35 years.

Premiums of this policy are fixed and it does not increase during the term period of your policy. In case of sudden death, your dependents receive the cover amount that is mentioned in the term life insurance agreement signed by you at the time you got yourself insured.

In case the individual assured survives the term of policy, no claim is paid to the assured.Endowment insurance is another type of life insurance policy.

An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on death of the insured.

The author is the founder of Rupeeinvest.com and has written Investment Planning: Turn Your Money Into Wealth. This book covers the details of investment avenues like shares, mutual funds, bonds, bank deposits, pension schemes, real estate, commodities, tax saving schemes, etc whose knowledge is essential for everyone to make our money grow and secure our financial future. This book also covers details about Insurance Planning, Retirement Planning and Children's Future Planning.

Source (Economic Times)

Financial Planning for Self Employed & Businessman

Self-employed or starting own business is becoming a  popular option due to growing opportunities. Internet has played a big role in creating large number of opportunities in almost all sectors- from healthcare to financials.

As a self-employed or businessman you are deprived of numerous advantages available to the salaried class. Regular paycheck, retirement benefits like PF, Superannuation and many others. There are advantages too like car and other asset expenses which are not available to salaried individuals. But the benefit of regular income and savings exceeds any other benefits. Hence, any adverse situation can lead to ride a huge debt which can crush your self-employment aspiration and can force you in a serious debt management mode.

To avoid crippling debt and common mistakes, a proper financial plan is needed which can help you in managing your finances personally and professionally. Following are the financial factors which should be considered and included in the financial plan before you start journey to become self-employed:

Emergency Fund: As a self-employed or a businessman ups and down will be a common phenomenon. There will be months when you will have sufficient income rolling in while in some months income will be hard to come by. How frequent it happens will depend on the nature of the business. To avoid running out of cash during hard times, create a six month provisioning or emergency fund. This will help in meeting regular expenses thus protecting you from falling in any kind of debt management.

Budgeting: Separating personal financial planning from business planning is very important. Create a budget for both. This will help in keeping track of expenses incurred in your business and personal capacity. Self-employed who starts with a proprietor concern, tend to do expenses for both from the same bank account. This creates problem as reconciling accounts for your business becomes difficult and personal expenses go overboard. Manage separate account for both. This will help in managing expenses within limits you have prescribed.

Pay Yourself: Since your income will not be regular and debt will pile off if there are hard months, pay yourself first. This will help in generating a regular income and keeping a check on the expenses. Decide a regular salary cut from your business income which will help you in saving for yourself.

Goal Identification: Identifying your goals is the key of achieving your financial wellbeing.In personal financial planning every individual have some common financial goals like children’s planning, retirement, buying a house or a car etc. It’s necessary that you identify your business goals and plan accordingly. This will help you in making necessary changes which might occur due to change in circumstances related to your business.

Source(Your pocket Money)

National Stock Exchange of India Limited and NBSE to start financial literacy course in Nagaland

In a move to promote financial literacy in Northeastern state of Nagaland, National Stock Exchange of India Limited (NSE) and the Nagaland Board of Secondary Education (NBSE) will start financial literacy course for the students of Class IX.

More than 60 schools under NBSE have registered with the Board to make the course compulsory for all students of class IX. Already 5150 students have registered for the course already.

NSE has already conducted a teachers training program at Kohima for the schools taking up this course. Yitachu, Minister of School Education and SCERT said, "We need to take such programme to rural areas so that urban and rural divide is bridged faster."

The curriculum will cover income & expenditure, importance of savings, elementary knowledge about banking system, basics of financial planning, money management, setting financial goals etc. Students will have to complete the course within a maximum time of 25 hours.

The objective of this initiative is to help students grow the habit of savings from young ages and to develop financial and investment capabilities.

Chitra Ramkrishna, MD & CEO, NSE said, "Such programs are helping students to develop a life skill. Finance is indeed a fundamental skill and such programs help to understand how to manage disposable income etc."

Source(Economic Times)

Bankruptcy code: Banks to gain but down the line

The Bankrupcy Code has been cleared by Parliament and the news pushed up banking stocks on Thursday. Not that investors need to hurry and buy these scrips, as the proposed Code is unlikely to improve lenders’ asset quality in the near term.

First, though, the positives. The Code will consolidate the existing laws on liquidation and sick units, creating a new institutional set-up of insolvency professionals (IPs), IP agencies, information utilities and a bankruptcy board. More important and first of a kind, a time limit of 180 days (extendable by 90 days), within which the resolution has to be completed.

Also, as any financial or operational creditor may initiate the insolvency resolution process, the Code vests more powers with banks to stringently monitor their clients. It will also see professionals engaging with the management of distressed companies, to in turn be supervised by a regulator. As with the changed Companies Act, unpaid employees and secured creditors will get priority for payout in a liquidation. Analysts at Nomura say the Code is a big positive for the banking sector.

“As it gives banks a legal path for recovering their dues in a time-bound manner, it should make lenders more confident in lending and borrowers more accountable,” they feel. Others agree but feel the time involved in implementing this Code could delay such benefits. “It will take at least a year to create the infrastructure to implement it. Therefore, it is unlikely that the benefit is felt any time soon in the asset quality of banks,” says Pankaj Agarwal of Ambit Capital.

Therefore, FY17 could also be a year of elevated asset quality pressures. Also, analysts at Religare feel, delays could stem from want of accurate or timely information and inefficient adjudicatory mechanisms. The research house remains negative on the banking sector and says it might take three to five years for issues to resolve under the Code.

With these finer aspects, the Code for now is more a sentiment booster, though it could after implementation have a significant bearing on the asset quality of banks.

Source(Economic Times)

MFs big participants in recent IPOs

Domestic mutual funds (MFs) have taken lead over other institutional investors when it comes to participation in Initial Public Offerings (IPOs) of shares. Fund managers have subscribed to shares in anchor book in almost all of the recent IPOs, data show.

Anchor investors are institutional (big-money) investors that are invited to buy shares ahead of the IPO to provide confidence to potential IPO investors. There is a reserved quota for anchor investor buying. Anchor investors cannot sell their shares for 30 days from the date of allotment; other IPO investors are allowed to sell on the listing day.

MFs have picked as much as 100 per cent of shares in the anchor quota in Precision Camshafts IPO. In absolute terms, they have subscribed to Rs 1,060 crore worth of shares out of the available Rs 1,800 crore in the anchor segment (see table). The rest of the shares were lapped up by insurance companies and Foreign Institutional Investors (FIIs). Besides participating in the anchor segment, MFs have also participated in the rest of the IPO process by buying shares.

It is worth noting that the total investment by fund houses in IPOs is a third of the total net investment made by equity mutual fund schemes so far this calendar year. The year 2016 has so far witnessed a lukewarm investment of Rs 3,200 crore by fund houses in stocks.

Fund houses most active in making investments in new share issuances include SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential AMC, Birla Sun Life Mutual Fund, Sundaram Mutual Fund, UTI Mutual Fund, and Reliance Mutual Fund.

"We are seeing the IPO market starting to open up. A lot of sectors are not represented in the market. Diagnostics, hospital and small-bank-to-be companies are coming up with IPOs. These are probably still growth sectors and are opportunities to participate in. Especially in a market like India, you will see a lot of emerging sectors coming in and if the companies do well, the stocks tend to do much better than the broader markets," said Mahesh Patil, co-chief investment officer at Birla Sun Life Mutual Fund.

IPOs like that of Precision Camshafts, Teamlease Services, Ujjivan Financial Services, Equitas Holdings, and Thyrocare Technologies were the most invested by fund houses. In Precision, mutual funds took away almost everything available for anchor investors. Equitas Holdings was the second-most invested as fund houses took 68 per cent of the issued shares reserved for anchor investors. In case of Teamlease and Quick Heal, the figures stood at 67 and 66 per cent, respectively. HealthCare Global Enterprises was the poorest in terms of MFs' participation, at merely 14 per cent.

Source(Economic Times)

Dividend disclosure policy may be made mandatory

Upping the corporate governance ante, capital market regulator Securities and Exchange Board of India (Sebi) plans to make dividend disclosure policy compulsory for listed companies. The move is aimed at helping ordinary shareholders understand how much dividend they can expect from a company.

At present, it is not mandatory under any regulations for companies to declare dividends or to even have a policy, although a handful of companies have voluntary formulated such a policy.

Sebi has no plans to force any company to pay dividends, but would set broad policy terms for companies, said sources. The regulator wants companies to disclose circumstances and financial parameters under which they can or cannot pay dividends. Also, Sebi would ask companies to state what they intend to do with their retained earnings if they don't wish to pay dividends, people with knowledge of the development said."Declaration of dividend is the prerogative and business decision of the management. Such decision is typically dependent on a number of contingent factors. The management may have justifiable reasons for holding cash or deferring distribution,"

Although expecting a dividend is within the rights of minority shareholders, it is also justified for a company to retain cash by not paying dividend in order to re-plough it into the business or create a war chest for potential acquisitions.

Sebi, at present, mandates companies to disclose a dividend policy at the time of an initial public offering . The regulator wants such a policy to be part of companies' annual report.

"Asking companies to have a dividend policy is a good idea, but it remains to be seen how effective it would be. A lot of companies might make generic disclosures, which may not have much significance," said Shriram Subramanian, founder and managing director,

"Sebi requiring listed companies to mandatorily institute a dividend distribution policy will not necessarily result in enhanced investor protection. In all probability, it will just result in adoption of broadly drafted policies, wherein the management will ultimately retain its discretion to declare dividends depending on business exigencies,"

Source (Business Today)

Public sector bank officers seek more teeth to recover advances

Officers' association of various public sectors banks(PSBs) under the banner of All India Nationalised Bank Officers' Federation (AlNBOF) has stressed on the strengthening of the legal system to recover the money advanced from the willful defaulters.

"The NPA ( non performing assets) is mounting.The existing legal system is not sufficient to take effective steps for recovery, so the banks need some strengthening"Data shows that Rs 2,25,000 crores worth assets are NPA.

He said that majority of the infrastructure projects have been financed by the PSBs in the country.

"The banks are not facing the capital crisis.The capital is sufficiently available but it is blocked towards the bad debts for funding the infrastructure projects and other portfolios, which should otherwise have been allocated from the budget by the government. So it is the duty of the government to infuse capital"Against the demand of Rs 2 lakh crores capital infusion, the government has allocated Rs 25,000 crore infusion in last budget. We are demanding to infuse the balance amount to strengthen the PSBsThe banker's body claimed that public sector banks have paid Rs 64,000 crore as dividend, Rs 1.35 lakh crore as income tax since nationalization of the banks while the government has infused only Rs 60,000 crore till 2014.

"We are opposing the government's move to reduce their stake in public sector lenders. The contribution of the PSBs for the upliftment of the nation cannot be undermined as all the government schemes are implemented by them and they accounts for about 65 per cent market share"

Source(Business  Standard)