Naari- Nothing But the Best!!!

To understand the facts of women’s participation in personal finances and to study their behavior towards financial decisions, Saarthi Financial Planners conducted a small survey fortnight before the Women’s day. The findings of this survey were varied and we can easily say that women are slowly developing liking for the “Money Matters”. 

The Sample Size

 The sample survey (110 participants) was conducted via the social media and conventional emails. It covered the views of all women from ages 25 – 70 years. The participants were from all across all occupational background – including Information Technology, Chartered Accountants, Lawyers, Teachers, Home Bakers, Designers, Pyschologist and even Medical Practitioners. They formulated the largest mass of the survey at 45%. The home makers were the second largest group at 22%. There is a small section (15%) of women working as freelancer (i.e. work from home / contractual working) at their flexible hours. Beyond this, there were growing numbers of professional ventures helmed by women –majorly in food and education industry. 

The Survey Findings 

a)    Out of the total participants, only 62% of the participants had a monthly budget to manage the house. For the remaining participants, few never felt a need to have a budget.

b)   A startling 75% of participants need help of their partners, colleagues or parents to plan their daily household financial decisions.  

c)    Out of 78%, income earning women only 58% contribute for household expenses. Less than 10% of women prefer to save their income separately beyond their family goals.

d)   Investment decisions are made by 58% of participants by discussing with their partners. Around 21% of women make investment decisions individually. Around 15% of women don’t invest due to lack of separate funds, lack of time or knowledge.

e)   Capital Market products (Mutual funds, Direct Shares) are growing popularity with 41% of women having it as preferred investment. Real Estate and insurance have also caught fancy as attractive investment options.

f)     Out of total participants, 75% are confident of managing the home finances independently in case of any adverse situations. 

g)    About 68% of women prefer to buy small gifts for self over splurging money on self.

h)   For mostly all participants, Financial Freedom is related to free will to spend money without any restriction or probation and being happy.   

We, at Saarthi Financial Planners, have been regularly speaking about the need for women participation in the financial decisions. The survey results highlight that women shy away from taking individual financial decisions. Although, consultation with family is good practice but learning to make individual decisions is necessary. Also, the survey highlights a very crucial point that women are good savers but bad investors. (They don’t grab good investing opportunities). They take their decisions emotionally and procrastinate when it comes to decisions. 

Thank You,

Ami Shah

Saarthi Financial Planners

A beginner’s guide to commodity markets

The wheat used to make our chapatti, the cotton we wear in our clothes, the gold used in our jewellery, the fuel that runs our cars, etc; are all traded across the world in major exchanges. Outside the equity fanatic world exists’ a small but powerful community, which earns a good amount of money by trading in these items. Earlier it was more done in need based form or barter as we can term it. But now it has taken a huge gigantic shape and size. This market is commonly referred as commodities markets.

A humble beginning – Gap between demand & supply

In India organized form of commodity trading market started in 1875, when traders came together in Bombay Cotton Trade Association. It later got converted into Bombay Cotton Exchange Ltd. Later on oilseeds, castor seeds, groundnuts, spices and materials like jute etc joined the commodities market.

With the beginning of economic liberalization, importance of organized commodity trading had gained momentum. Commodities markets are governed by the Forward Contracts (Regulation) Act, 1952. It is a division of the Ministry of Consumer Affairs, Food and Public Distribution. As early as 2002 (ten years after liberalization), there were around 20 commodity exchanges in India, trading in 42 commodities.

What is commodity market?

A commodity market is a highly volatile and risky derivative market. It deals in future pricing trends of the underlying commodities. The Commodity index constituted on NSE is not same as the commodity market. These offer immense potential to become a separate asset class for real taking investors, arbitrageurs and speculators.

Where do commodities markets invest our money?

The exchanges deal in agricultural products, metals including precious metals and energy resources. Some of commonly traded items:

Agricultural	Industrial Metals	Precious Metal	Energy
Coffee	Copper	Gold	Crude Oil
Sugar	Lead	Platinum	Natural Gas
Cocoa	Zinc	Palladium
Maize	Tin	Silver
Rough rice	Aluminium
Soybean	Nickel
Wheat
Sunflower Oil
Barley
Dal

               (Source – Kotak Commodities)

How we begin commodity trading?

1)  Choose your broker

You can begin trading in commodities by registering with brokers who are affiliated in either one of the national commodity exchange market in India:

1)   National Commodity and Derivative Exchange –

 http://www.ncdex.com/Index.aspx

2)   Multi Commodity Exchange of India Ltd - https://www.mcxindia.com/

3)   National Multi Commodity Exchange of India Ltd - http://www.nmce.com/

These exchange facilitate trading and settlement in commodity markets. Globally, to deal in precious metals we have to register or fid a broker for NYMEX, LME or COMEX. A complete list of brokers can be made on respective websites.

2)  Deposit Margin Money

Margins are of two types, the initial margin and the maintenance margin. They vary with commodities and exchanges usually the initial margin ranges from 5-10% of the contract value.

The maintenance margin is mostly lower than the initial margin. They depend on the movement achieved in the customer’s account depending on his mark to market position. If there is any profit there is an option to withdraw any extra funds from his margin account. However, if the account falls below the minimum requirement the investor needs to top up his account to the minimum. The trading can begin with as low as Rs.5000.

3)  Read about the commodity movements

Read financial newspapers for information on spot prices and for relevant news and articles on most commodities. Weather and other government policies also play a major role in these products, so keep an eye on them too. Brokers also provide research and analysis support. Beyond this for precious metals and energy resources global news are very significant impact makers.

So once the above is done, you just need to attach your bank account to the broker trading account and create a demat account for commodity trading like equity. The charges and brokerage would be made available by brokers at the time of signing of contract.

Commodity trading is most done as speculative trading so the preferred mode of settlement is cash but if you want to take delivery on expiry of contract, the exchanges do have warehouses. So, in that case you need to preserve the warehouse receipts. In case of physical delivery, you might be charged sales tax. 

Where can I go in case of any complaint or default in contract?

The FMC maintains details about the exchange administration and seek timely intervention to inspect the books of brokers. In case of any misappropriation or foul practices are found or if the exchanges themselves fail to take action, the FMC would step ahead.  If there is any default in settlement by either party in contract, then the exchanges maintain sufficient funds to protect the investor from any loss. 

So go ahead and take a plunge, in the really interesting world of commodity trading.”Aate dal ka bhav pata chal jayega”, I mean it literally.

Regards,

Saarthi Financial Planners

Ae Dil hai Mushkil...

So we begin our Diwali break, hearing umpteen numbers of times, the songs of latest Bollywood romantic drama (if I may say so) and undivided paternal love. It's all about relations and love. Love makes someone jump from cliffs, mountains and for some sing from bridges. Why can't we do normal things in love? Why do we do want best for our family-best school, best car, holiday or even best life partner? Each and every decision we make for these things are done with lot of contemplation and advise from our previous experiences. We sometimes know what we are doing is wrong but yet do it, because we think there is no harm in trying it. So be it shopping online for your Diwali clothes or buying your 1st I-phone from a stranger on OLX. We are ready to take a chance. What is the motivation here? Is it money savings or comfort of home to buy from or is it the previous bitter experience that makes us try new paths?

Kya Ye Sahi Nahi…..

Why are we not willing to get this flexibility in our personal finances? Why do we still want to invest in fixed deposits even when the interest rates are falling? Why do we feel socially low to take a loan instead of breaking our built assets? What stops us from trying mutual funds now if we once lost our money in it?  Why is real estate transactions still are our favorite? Why do we not ask questions to our banks on loan rates? We bargain all our deals, why do we not bargain on brokerage rates? We download myntra, amazon app but why can't we follow some budget on Google sheets?  When your insurance agent sends you new investment plan why don't you ask him his commission rate IRDA mandates all agents and brokers to make public such information. When was the last time you checked how your bank interest is calculated?  Do you know how many charges your bank levies on you? You have every right to go and ask the breakup of your utility bills?

Why so many small things are just are left unanswered by us as just another moment delay? Every moment a fraction of time lost can give a loss more than millions of rupees together.  So let us together pledge on this New Year to leave back all our laziness, useless explanation and give back to our family - the best they deserve. 

Plan for your family financial goals bring them happiness and security together. Let Saarthi be a part of your planning. Contact us today for your customized financial plan at saarthifp@gmail.com. 

Wishing You a very Happy New Year

Regards 

Saarthi Financial Planners 

Marginal Cost of Funds Lending rate ... Is it a big deal or what?

Today we would discuss about the Marginal Cost of Fund based Lending Rate - MCLR rate and whether it is better then the previously used base rate by bank rate. Also, is it advised to shift the existing loan to MCLR rate, which is applicable from 1^st April 2016.

What is MCLR rate?

MCLR is the new internal benchmark lending rate which is adopted by the lending banks on the floating loans provided by them. Every bank is suppose to declare minimum MCLR rates during a year. These rates would largely be affected by change in repo rate announced by RBI and pass on the benefit of lowering of interest rates to customers. It would largely affect the floating loan products and not touch the fixed rate products of the bank.

This benchmark rate is calculated on four basic parameters (from the perspective of the bank):

1. Marginal Cost of funds – it is basically the difference between the cost of obtaining funds from RBI i.e. Repo rate and cost of lending loans to the customers.
2. Cost of maintaining CRR- Every bank needs to maintain a certain liquid reserves with RBI as a safety net for their customers. The RBI doesn't provide any interest on these funds. Thus, the cost of this reserve is to be adjusted in the expenses of the bank, which gradually passes on to the customers.
3. Operating costs – it is the cost of running a bank like any other entity. It is zeroed down to per customer or per 100 rupee loan.
4. Tenure of loan – the longer the duration of loan, higher is the interest charged by the bank. It is more economical in terms of running a bank as it reduces the overall cost.

Why this change in benchmark rate?

1. More clarity in terms of lending rate ,unlike in base rate where every bank could fix its own borrowing rate.
2. Previously under the base rate system, banks only occasionally changed the base rate. The corresponding reduction in their base rate was only after huge change in repo rates . Under MCLR, banks are obliged to readjust interest rate regularly.
3. Under MCLR, the cost of lending is a major component affecting the new rates and so, the banks cannot charge a huge spread.
4. Also, now no longer can any bank add the concept of minimum return to its cost burdening the lender.

Will it affect the home loan EMIs?

Under the new system, all fresh loans bought after 1^st April 2016, is definitely following this methodology for calculating the EMI. Even the old or existing loans as on that date can move their loan to this new system if desired. Under the MCLR regime, the rate gets revised at a fixed predefined date. So, if a particular contract mentions that the interest rate would be revised and accordingly, even the EMI of the loan. However, if the interest follows an uptrend, it could mean an increase in the monthly installments.

Our opinion

MCLR is effective for short term lending, however in long tenure the lending would remain largely unaffected. So, although MCLR is boon for optimistic people believing in interest downtrend, it is not a one way road for the loan takers.

Regards

Saarthi Financial Planners