Saturday, December 31, 2011

Happy New Year 2012

Wish you all a very happy new year 2012.

Have a good health and may all your wishes come true.

Always have a goal and work towards it. It should be specific and also measurable. Otherwise, it becomes a wish.

Goals for 2012:
(1) Maintain personal health.
(2) Learn new things in varied topics through khanacademy, wikipedia and investopedia.
(3) Spend enough time with the family.
(4) Manage time more effectively.

What are your goals for the year 2012?

Friday, December 23, 2011

De-regulation of Savings Bank interest rate

RBI has de-regulated the savings bank interest rates. It really means that now any bank can give any interest rate in the savings bank account.

Because of this, banks are reacting in different ways. Using this in positive manner and giving more interest for the customers to attract more depositors and others increasing the rates to avoid people moving away from them and few others doing nothing.

Yes Bank - Raised the interest rate from 4% to 6% and recently to 7% now.
For those having amount less than 1 Lakh, it is 6% and more than that it is 7%.

Kotak Bank - Raised the interest rate from 4% to 6%
For those having amount less than 1 Lakh it is 5.5% and more than that it is 6%. They also have the sweep in account, which is nothing to do with this RBI step.

HDFC Bank - Introduced many charges. Particularly Rs. 500/- for closing down your account.

Most other banks (ICICI, Axis, SBI) - Hasn't done anything. Remains with the 4%.

First, It is not recommended to just move your savings bank account for few higher basis points interest. It just doesn't make any sense. Also, I don't find any reason for people having large amount of money sitting idle in the savings bank, except if its absolute need in the short term and you don't think of the interest rates at that time.

Already, the FD rates are de-regulated and almost all banks are having close rates. The scenario here will be no different soon. Also, you don't have any clue on when the raised interest rates on the banks will be reduced again. They have the right!

Given almost all banks also have the sweep-in account (automatically moves part of the savings bank account above a threshold automatically into a FD), it is of little importance that these interest rates are de-regulated.

Tuesday, December 6, 2011

New Pension Scheme - More details

To know what is NPS and basic introductory details on the same, go to the previous post using the link given here.

Okay. I will be getting more than (at least risk-free?) 8% always right?
Simply, What are the benefits and returns in NPS?
Short Answer. No. There are many Pension Fund Management companies which will be managing your money on your behalf to get you returns for your Pension. It is again your choice to select the Pension Fund Management Companies. Based on the choice of the fund (Auto-Choice/Active Choice),
                    the returns has historically varied from 4% -26%.

But this cannot guarantee this will always give positive returns, as it have some equity exposure (for Active Choice, Asset Class E). But in the long run certainly, equities tend to outperform the debt and is always better.

Remember this rule: If you invest more in NPS, you will end up having less charges as the charges are more or less static per year and the Fund Management charge is very less.

Charges - NPS

Compare the Fund Management charge with the index fund's Fund Management charge of 1.35%.
The Maintenance cost is similar to the demat account maintenance cost. In addition to above, demat charges will be applicable.

You can choose to have the 80% of the complete amount as the annuity and 20% in the fund as the lump-sum amount at the end of 60 or 70 as per your choice. The last year can be extended after due consideration and it is 70 years as of writing this article.

If you are not able to pay the minimum in any of the year, you have to pay an additional Rs.100/- as penalty to renew the account and the account becomes dormant otherwise.

The above details are completely for the Tier-I NPS account. This is the primary pension account introduced by NPS. This is of course illiquid. 

If one has Active Tier-I NPS account and want to use the NPS account for the short term as well, he can use the Tier-II NPS account.

For opening Tier-II NPS account, there should be Tier-I active NPS account.
Minimum while opening: Rs. 1000/-
Minimum per instance: Rs. 250/-
Minimum Account Balance at the end of FY: Rs. 2000/-
At-least one contributions in a year.

This Tier-II is a voluntary savings attached with Tier-I and not mandatory.

Saturday, December 3, 2011

New Pension Scheme

New Pension Scheme is introduced by the Govt. of India to provide pension for all the salaried and self-employed citizens of India. This has several useful features and benefits backed by the Government of India.

How to open an NPS Account? What is the procedure?
There are many POPs (Point of Presence). Almost all the public banks and some of the private banks are involved in here. You can ask the procedure through the toll free number before going there. All the State Banks, Muthoot and private banks like Axis bank, ICICI bank are some of the famous POPs available.

Go to the nearest POP.
Get your address proof and Id proof along with you. (PAN card and Ration card works best)
If ration card is not available, get your telephone bill.
Minimum Investment: Rs.6000 in a year. In installments, at least Rs. 500/- in a month.

What are the advantages of NPS?
* Primarily to have the planning for your retirement pension, if you are salaried/self-employed.
* Good lock-in period. You will be able to touch it only at 60 years. (Is it an advantage? sometimes, it might work against you. After all, you are saving for your future and you need this!)
* Very less charges and good tax benefits.

How is my money allocated in NPS?
Okay. All is fine. I am going to get it only after 20-30 years. Where will my money get invested...
NPS provides two approaches to the amount invested in it. They are .,

  1. Active Choice 
  2. Auto Choice - Lifecycle Fund
If you are not choosing anything, automatically your investment will fall under the Auto Choice. Auto Choice will have reduce the equity exposure as the age increases and at the age of 60, there will be almost zero equity exposure.

The returns for the past two years are in the range from 4% - 26% according to the fund selected. Following funds are available for selection. It also depends on what choice you make (How much equity exposure and how is the market at that time)

Max. equity exposure allowed is only 50% at any point of time and it would also track only the index fund of BSE or NSE according to the fund selected.

Next post will have some more details of NPS.

One Minute Manager - Sharing and Review

One Minute Manager is all about finding the manager with perfect managing and leading skills and the 'secrets' behind his managing style in his own words.

The first and important secret:
- Setting Goals - One Minute Goals
It is important to know what the person really is behind to know whether he is performing well. In the marketing world, it is targets set. In the programming world, it is the success of the project or the component that the client want within the deadline. It is important to set the goals upfront in all the means in a broad way to understand what are the requirements of him/her in this role as a responsibility.

The Second and Third Secret go hand in hand.
- One Minute Praising (Second Secret)
This involves catching people doing something RIGHT towards their assigned task. Once they find, praise them honestly and give your opinion as how important he is to your organization. This praising re-assure him to do well in future. Make sure not to praise him for the same achievement again. This will make him do more to get the praising from the manager he is trying to emulate.

- One Minute Reprimand (Third Secret)
So, what would you do when you find something going wrong. Analyse the situation and identify the root cause of the problem. After solving the hot problem in front, Reprimand the person who caused the situation. Being honest with people around you accept this behavior and wouldn't want to be a person to be reprimanded next time. Reprimanding is a skill and it is best understood only if you practice well. It should be done immediately after the issue and the person involved in it  (instead of waiting for the review, which happens once/twice a year) and assure him about his importance in the company and what you think of him in the end. The final assurance is to make sure that you are against his behavior (which caused this issue) and not him as a person. The final assurance should also be in a such a way that he should trust his skills and make sure that kind of issue shouldn't happen again.

A review of the same book can be seen here as well.

This is one of the best management books available and is well worth the read.