Wednesday, 30 March 2016

How Different Color Affects Our Spending

Last week we celebrated HOLI, the festival of colors. Colors are very important in life or else the life will be like a Black & White TV of 80s. Colors impact all part of life and they have lot of psychological impact on human’s brain. Our various decisions are impacted based the colors. At the mall, we can spot nearly every shade of the rainbow on signs, labels, doors, shopping bags—you name it and its there. They are not just put for the hack of it but those colors have been strategically placed to influence our spending. Various studies shows that people subconsciously associate specific colors with specific social or cultural messages. Knowing this, retailers carefully select the colors they use in an effort to get us to loosen our purse strings. Let’s understand how different shades affect your purchasing habits.
Black
Black is associated with power, elegance, formality, death, evil, and mystery. Black is a mysterious color associated with fear and the unknown (black holes). It usually has a negative connotation (blacklist, black humor, 'black death'). However Black is also the signature color of sophistication or royalty (the black party-wear), it dominates high-end makeup packaging and can even make inexpensive blushes and lipsticks seem more upscale.

 
White
White is associated with light, goodness, innocence, purity, and virginity. It is considered to be the color of perfection. White means safety, purity, and cleanliness. As opposed to black, white usually has a positive connotation. In branding, white suggests simplicity and purity. (Seventy-five percent of top skin-care brands are packaged in white.) It also stands for modernity and honesty, which may be why Apple swears by it.
Red
Red is the color of fire and blood, so it is associated with energy, war, danger, strength, power, determination as well as passion, desire, and love. Red is a very emotionally intense color. It enhances human metabolism, increases respiration rate, and raises blood pressure. Although plenty of shops embrace this color (and still find financial success), market experts warn that, just like a stop sign, a red placard can make consumers hit the brakes. It serves as an alarm, triggering a more careful consideration of our outlays.
Pink
Pink, a delicate color that means sweet, nice, playful, cute, romantic, charming, feminine, and tenderness, is associated with bubble gum, flowers, babies, little girls, cotton candy, and sweetness. The color pink is the color of universal love of oneself and of others. This is the favorite color of ladies especially the young girls.  It has calming effects, according to research published in the Journal of Orthomolecular Psychiatry. Scientists found that seeing pink slows people’s endocrine systems and tranquilizes tense muscles. How that might influence your wallet: Feeling relaxed may make it less painful to part with cash.
Orange
It is associated with joy, sunshine, and the tropics. Orange represents enthusiasm, fascination, happiness, creativity, determination, attraction, success, encouragement, and stimulation. To the human eye, orange is a very hot color, so it gives the sensation of heat. Nevertheless, orange is not as aggressive as red. The color is associated with equality and affordability, which is why you’ll find it at stores offering good value, like Big bazaar etc.
Green
Green, the color of life, renewal, nature, and energy, is associated with meanings of growth, harmony, freshness, safety, fertility, and environment. Green is also traditionally associated with money, finances, banking, ambition, greed, jealousy, and wall-street. This is the color of people who have eco-friendly and environment preservation in mind. Shoppers keep this color to impress eco-minded clients. However please keep this in mind that: Just because an item is green doesn’t mean that it’s environmentally friendly.
Blue
Almost everyone (especially men) likes blue. Blue is the color of the sky and sea. It is often associated with depth and stability. It symbolizes trust, loyalty, wisdom, confidence, intelligence, faith, truth, and heaven. Blue is considered beneficial to the mind and body. It slows human metabolism and produces a calming effect. No wonder it signifies trust and dependability and is a favorite logo color for financial institutions to assure its customers for safety. Blue also improves customer loyalty: Patrons are more likely to return to stores with blue color schemes than to those with orange color schemes, according to a 2003 study published in the Journal of Business Research.
 
Burgundy
Burgundy is a deep shade of red. It is named after Burgundy wine. This wine is named after the Burgundy region of France. This color reminds us of all things rich and refined (just like red wine), so don’t be surprised if a dress in this color costs more than a white one in a similar style. Its prismatic cousin, brown, has similar connotations of luxury.
 
Violet
Purple combines the calm stability of blue and the fierce energy of red. The color purple is often associated with royalty, nobility, luxury, power, and ambition. Purple also represents meanings of wealth, extravagance, creativity, wisdom, dignity, grandeur, devotion, peace, pride, mystery, independence, and magic. Purple reigns in the beauty industry, especially in the category of anti-aging products. When people see it, they think of royalty. Consequently, a purple box may help persuade us that the product has special properties and is worth a princely sum.
 Yellow
It's associated with joy, happiness, intellect, and energy. Yellow produces a warming effect, arouses cheerfulness, stimulates mental activity, and generates muscle energy. Yellow is often associated with food. Bright, pure yellow is an attention getter, which is the reason taxicabs are painted this color. A mainstay at fast-food restaurants, yellow evokes energy and increases appetite, perhaps explaining why your stomach may start to growl when you pass those golden arches.


Friday, 25 March 2016

Residential or Commercial Property – Where to invest

People when buy property as an investment always face this dilemma – whether buying a residential property would be better or purchasing a commercial property would be a good idea. However the decision is not only based on the buyers' preference but on lot of other things too. Some of the factors that influence this decision include :

a) Money Involved – The cost of commercial property are usually higher than residential properties. So, if you want to earn some really good rental income on these properties, it is necessary that the commercial property is central located of a business zone. Otherwise, the only possibility is to own a small area of shop or individual office in any semi – commercial zone. On other hand, with the same amount, you can buy a better rental income fetching residential property.

b) Lease duration – The lease duration in case of commercial property is usually around for 3-5 years whereas the residential property have mostly an annual contract. The clause of annual rent increment is made a part of the contract at the time of signing it in commercial property. However, the residential properties mostly do not enjoy this flexibility. Thus, many times we see that the residential property are unoccupied for months till a buyer is ready to pay the new rent. However, it is more easier to rent a residential property versus commercial one. The simple reason being excessive demand for any kind of residential property.

c) Other costs involved- In a commercial property the rate of maintenance is higher for per unit. Also, the recently introduced property tax could also prove to be a dampener. In some cases, the tenant is asked to bear a percentage of these expenses. Also, usually tenant would well maintain the property as it is also his place of business operation. In residential property, all some to big expenses related to home appliances and furnishings are borne by owner. The tenant may or may not chip in his contribution unless specifically mentioned in contract.

d) Rental YieldThe rental yield on most of residential properties fall in the range of 3-4%. However, the yield of commercial properties can be as high as 9%. Thus, it is easier if you looking to pay off your loan on property. Although, the loan value would be only up to 60% of the asset value.

e) Economic Market- A commercial property demand surges in a economic boom. It has positive correlation with country's growth. People usually prefer starting a new territory of business with rented property to gauge the market response. However, with the slow down of market, the prices of commercial market slip further fast then residential properties. On other hand, the residential properties are always in demand although the rental yield could fluctuate.

Hence, we can summarize saying that property investment is never a standalone decision. It depends on many factors including capital available, location of property, purpose of buying a property or even the economic condition of the nation. If you are looking to simply buy a property for capital appreciation with small investment it is better to look at residential property. If you intend to buy a property with huge regular income for a longer term, with low management, it is better to look at commercial properties.

Friday, 18 March 2016

Create your own Family office

Multiple responsibilities, different roles in limited time takes up most of our mind space leaving little time for taking up something new. Higher posts comes with more responsibilities at work. So, when it is actually time to give attention to your earned money, we remain busy we tend to neglect it. So, is it fair to leave our money unattended and let is rot in a bank account? Identifying this lacuna, the concept of Family Office was initiated.Family Office is nothing but a firm that helps in daily administration and management of the funds of a super wealthy family. It can be from paying your utility bills, your children school fees, managing your home expenses, planning your vacation, buying a stake in any company,making purchase of fine art as investment,estate planning or even planning your taxes. In short, it a group of people especially hired for managing your wealth ,headed by Chief Financial Officer, with intention to preserve it, grow it and pass it on to next generation.

Till now, it is only the wealthiest lot of people, who use this kind of service. Also, it still has to gain momentum in India, in western countries, this concept is already flourishing. India has a handful family offices for the creme dela creme. Like Premji Invest takes care of Azim Premji's wealth, Catamaran Ventures for Narayan Murthy of Infosys.

But the main intention of our discussion today is who all actually needs this kind of services? Who needs services of experts to manage their lives? A probable list could go like as follows
Kind of People
Probable Reasons
Senior Citizens/ Retired Individuals
Unstable Health, Limited knowledge of new technologies
Wealth received in Inheritance
Lack of knowledge, disinterest, habituated to easy access to everything.
Single Parent
Limited time, Limited knowledge of probable requirements for children
Single Women
Majorly disinterest in money matters, high spending.
Anyone else who prefers to focus on his/her work
Prefer expert services for their requirements at a small price.

So,how can we create a concept of similar to family office for this kind of people by applying any of the following:

a) Set up an automated payment channel for all our expenses like home bills, utility bills, monthly investments or reminders for other expenses.
b) Appoint an Investment officer to take care of all investments.
c) Get an Accountant to oversee bank accounts and taxes.
d) Appoint a Financial Planner to plan your goal requirements and oversee your taxes, investments and in future, estate plan.

Thus, family office is nothing but a service, which lets you have complete focus on your business or service, while they care of your personal wealth.

However, this comes with a word of caution as money belongs to us,so timely review is also necessary to see if the arrangement is really working for us.

Friday, 11 March 2016

Pension Society- a need for tomorrow

After the budget announcement there was a loud noise made against the taxation of partial EPF proceeds on withdrawal.Although, this decision stands revoked now by the finance ministry, lets understand what is the logic behind the earlier proposal made and how it would have impacted the EPF subscribers.

The announcement:
At the time of withdrawal, 60% of money contributed to an EPF account after April 1 2016 would be made subject to tax, unless it was re-invested in an annuity. Also, only the interest earned was to be taxed and not the entire corpus. This proposal would apply to those drawing salary over Rs 15,000 pm.The number of subscribers to be affected by this announcement were very low. Also, the contribution made by employer towards EPF more than Rs.1.5 lakhs in a year would also be taxed in hands of employee.

The intention :
To create a pension society, to reduce the dependency of non working population on the working class. This is in line with our growing older population and increase in social spending in our national budget. The government wanted people to save for their old age. Hence, the annuity was made as the option. This would ensure that a person gets guaranteed amount every month after retirement.

Our verdict:
The taxation on EPF proceeds was a positive step but made in a rush. It didn't prepare proper ground for people to relish the fact that the intention of government is to create self dependency. As per current sources of finance ministry, out of 37 million subscribers of EPF, only 7 million have salary more than Rs 15000 pm. Also, currently out of employers 12% share to PF only 8.33% is sent out for pension. Thus, to accentuate this saving in pension it was intended to have made compulsory savings in an annuity kind of pension product. Also, it could bring parity to the other existing retirement product of National Pension Scheme, where an individual is partially taxed at retirement. But since it gave exposure in equity the returns expected on it are better than regular pension. 
 
India’s retirement system ranks last in the 2015 Melbourne Mercer Global Pension Index (MMGPI) report. The index value of India stands at 40.3 based on review of reduction in household savings. This index compares around 25 economies on 40 indicators under sub indices of sustainability,acuracy and integrity. To improve our situation,we need to make the pension market more competitive, what we need is more annuity like products. Currently, we just have handful insurers selling to us expensive pension products. Having a narrow approach to the intended benefit is not befitted for a tension free retirement.

Friday, 4 March 2016

ELSS - An attractive investment avenue

Among the various tax saving products which gain popularity and achieve maximum sale in last financial quarter is the Equity Linked Saving Scheme (ELSS). ELSS is like any regular open ended equity mutual fund with an additional feature of tax saving under sec 80C of IT ACT 1961. However, unlike other equity funds it has a lock in period of three years.

Some of attractive features which makes it an interesting product for investment is :
  • Only investment avenue in 80C with an exposure in equities except the market linked ULIPS.
  • As compared to other tax saving avenues, it has lowest lock in period.
  • The investment in ELSS can be made both in SIPs or in lump sum mode as per our suitability.
  • The returns also vary and can be high over conventional debt and small saving schemes.
  • If the senior citizen falls under taxable income slab, he can invest his money in ELSS dividend mode. Although this could depend on his risk appetite.

The selection of ELSS scheme should be based on past performance of at least 3 years of scheme. (matching to its lock in period). Also, if an investment is made in any NFO it is wise to check the past performance of the fund manager and the corpus managed by him.

As on 2 March 2016, the following ELSS are the top performing funds
Fund Name
3 year return
5 year retun
Net asset value (Rs in crore)
Axis Long Term Equity Fund
24.91%
18.45%
6886
Birla Sun Life Tax Relief 96
20.75%
12.68%
1928
Reliance Tax Saver Fund
20.18%
14.42%
4289

Although, financial planning does not advise last minute investments, we shared the above information to make mistake of wrong investment less grave.For any other information contact us at saarthifp@gmail.com